Opinion
Civil Action No: 01-2997, Section: "R"(1)
November 13, 2001
ORDER AND REASONS
Before the Court is defendant Dale Wamstad's motion to transfer venue of this action to the United States Bankruptcy Court for the Southern District of Mississippi. For the following reasons, the Court grants defendant's motion.
I BACKGROUND
On November 3, 1995, plaintiff Lena Rumore filed an action in state court asserting fraud and seeking to set aside a November 6, 1992 consent judgment she entered into with defendant Dale Wamstad, her former spouse. She also sought monetary damages. In March 2001, Wamstad learned that on April 10, 2000, plaintiff and her then husband Don J. Waddell filed a joint voluntary petition for chapter 7 bankruptcy in the United States Bankruptcy Court for the Southern District of Mississippi ("Bankruptcy case"). Rumore admits that she did not disclose the existence of the state court litigation in her bankruptcy schedules, but claims that the omission was inadvertent. (Def.'s Mot. for Change of Venue, Ex. 1, Ex. 3.) She received a discharge on August 4, 2000, and the Bankruptcy case was closed on August 8, 2000 with no distribution to creditors. ( Id., Ex. 2.)
On September 11, 2001, defendant filed a motion to reopen the Bankruptcy case on the basis that plaintiff failed to disclose the existence of the state court case, which the Bankruptcy Court granted on September 18, 2001. On October 1, 2001, defendant removed the state court case to this Court, pursuant to 28 U.S.C. § 1452 and 1334. Defendant now seeks to transfer the case to the United States Bankruptcy Court for the Southern District of Mississippi, where the reopened Bankruptcy case is currently pending.
Although plaintiff does not contest federal jurisdiction, she objects to the transfer to the Mississippi Bankruptcy court on the basis of forum non conveniens. She asks that the case instead be transferred to the Bankruptcy Court for the Eastern District of Louisiana.
II. Discussion
A. Jurisdiction
Before the Court may determine the venue question, it must first determine whether it has subject matter jurisdiction over this case. In re Canion, 196 F.3d 579, 585 (5th Cir. 1999) ("Federal courts must be assured of their subject matter jurisdiction at all times."); In re Bass, 171 F.3d 1016, 1021 (5th Cir. 1999) ("Federal courts . . . may question [jurisdiction] sua sponte at any stage of judicial proceedings").
The Court notes that neither party challenges this Court's jurisdiction. Parties, however, cannot confer subject matter jurisdiction on federal courts. See Sosna v. Iowa, 419 U.S. 393, 95 S.Ct. 553 (1975).
District courts have bankruptcy jurisdiction over four types of matters: (1) cases under title 11; (2) proceedings arising under title 11; (3) proceedings "arising in" a case under title 11; and (4) proceedings `related to' a case under title 11. See 28 U.S.C. § 1334. The first category refers to the bankruptcy petition itself, which is not before the Court. See In re Wood, 825 F.2d 90, 92 (5th Cir. 1987). As to the remaining three categories, the Fifth Circuit has determined that it is unnecessary to distinguish among the three as long as the matter is at least `related to' the bankruptcy. The Fifth Circuit — reasoned that these three `references operate conjunctively to define the scope of jurisdiction.' Id. at 93.
28 U.S.C. § 1334 provides:
(a) Except as provided in subsection (b) of this section, the district court shall have original and exclusive jurisdiction of all cases under title 11.
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original' but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.
A matter is related to the bankruptcy when `the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.' Id. (citing Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). More specifically, "`[a]n action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankruptcy estate.'" In re Bass, 171 F.3d 1016, 1022 (5th Cir. 1999) (quoting In re Walker v. Cadle Co., 51 F.3d 562, 569 (5th Cir. 1995)); see also Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.E (1995).
Jurisdiction is satisfied if plaintiff's cause of action could affect her bankruptcy proceeding. See In re Wood, 825 F.2d at 94 ("Although we acknowledge the possibility that this suit may ultimately have no effect on the bankruptcy, we cannot conclude on the facts before us, that it will have no conceivable effect.') (emphasis in original). It is undisputed that plaintiff filed this cause of action before she petitioned for bankruptcy and that the case was open at the time she filled out her bankruptcy schedules. Accordingly, at the time plaintiff filed for bankruptcy, her pre-petition cause of action for fraud may have become property of the bankruptcy estate. Cf. In re Wischan, 77 F.3d 875, 877 (5th Cir. 1996) (finding pre-petition personal injury cause of action to be property of estate). If plaintiff prevails in this litigation, her estate could be enriched, which would have an impact on the allocation of her property among her creditors. Accordingly, the Court has "related to" jurisdiction of this case under 28 U.S.C. § 1334 and finds that defendant's removal under 28 U.S.C. § 1452 was proper.
B. Venue
Both plaintiff and defendant have assumed that 28 U.S.C. § 1412 applies to the current dispute over venue. 28 U.S.C. § 1412 authorizes transfer of cases under Chapter 11 and provides:
A district court may transfer a case or proceeding under title 11 to a district court for another district, in the interest of justice or for the convenience of the parties.
The plain meaning of this statute dictates that in order to transfer under this statute, the district court first must have jurisdiction of a case under Title 11. The language of the statute contains no reference to "related" proceedings.
Section 1412 replaced section 1475, which was repealed as part of the Bankruptcy Reform Act of 1978, and had provided: "A bankruptcy court may transfer a case under title 11 or a proceeding arising under or related to such a case to a bankruptcy court for another district, in the interest of justice and for the convenience of the parties." 28 U.S.C. § 1475 (emphasis added). Since section 1412 does not contain the phrase, "or related to," most courts have found that motions to transfer actions "related to" title 11 cases should be governed by section 1404, the general change of venue provision. See e.g., Tultex Corp. v. Freeze Kids, L.L.C., 252 B.R. 32 (S.D.N Y 2000); Mi Fuel Co., Inc. v. Jackson, 257 B.R. 600, 623 (N.D. Ok. 2000); In re Jackson, 1998 WL 778057, *2 (N.D. Ill. 1998). This Court agrees with that interpretation of the section 1412 and finds that the bankruptcy venue statute only permits transfer of cases or proceedings "under Title 11."
Here, defendant asserts that this case is a core proceeding arising "under Title 11." The Fifth Circuit articulated the standard for "core proceeding" in In re Wood:
A proceeding is core under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of bankruptcy case.825 F.2d 90, 97 (5th Cir. 1987). This case does not meet this test. Plaintiff's suit seeks to invalidate a consent judgment regarding distribution of marital property based on state law principles of fraud. The suit is not based on any right created by federal bankruptcy law, nor could it arise only in the context of bankruptcy. Had there been no bankruptcy, this suit could have continued to proceed in state court. Therefore, this case, like the state law contract and tort suit in In re Wood, is a non-core proceeding. See id. Accordingly, this Court will analyze the motion to transfer under section 1404.
The Court analyzes whether this case arises "under title 11" or is "related to" title 11 for the limited purpose of determining whether transfer of venue should be governed by section 1404 or section 1412. The Court expresses no opinion on whether this case is a "core proceeding" for section 157 purposes. The Court recognizes that the bankruptcy judge has the authority to determine whether a proceeding is "core" or related to" the bankruptcy case, under 28 U.S.C. § 157 (b)(3).
The applicable statute, 28 U.S.C. § 1404, provides:
(a) For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.28 U.S.C. § 1404.
The defendant bears the burden of demonstrating why the case should be transferred to an alternate forum. See Time, Inc. v. Manning, 366 F.2d 690, 698 (5th Cir. 1966). First, the defendant must demonstrate that the transferee forum is one in which the action could have commenced originally. See Hoffman v. Blaski, 363 U.S. 335, 343-44, 80 S.Ct. 1084, 1089-90 (1960). The court generally determines "where the action might have been brought" as of the time the action was filed in the transferor court. See Liaw Su Teng v. Skaarup Shipping Corp., 743 F.2d 1140, 1148 (5th Cir. 1984), overruled on other grounds by In re Air Crash Disaster Near New Orleans, 821 F.2d 1147 (5th Cir. 1987). The transferee forum must be one in which personal jurisdiction and venue would be satisfied as to the defendant. See id. (citing 15
WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE § 3845).
Second, defendant must next show that a transfer of venue will serve the convenience of the parties and the interests of justice. The decision to transfer a pending case ultimately falls within the district court's sound discretion. See Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 809 (1964); Peteet v. Dow Chemical Co., 868 F.2d 1428 (5th Cir. 1989); Jarvis v. Christian College v. Exxon Corp., 845 F.2d 523, 528 (5th Cir. 1988). In deciding a transfer motion, the district court considers the private and public interest factors articulated by the Supreme Court in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843 (1947). Private factors relate to the convenience of the litigants and include (1) the plaintiff's choice of forum; (2) the relative ease of access to sources of proof; (3) the cost of obtaining attendance of witnesses and other trial expenses; (4) the place of the alleged wrong; and (5) the possibility of delay and prejudice if transfer is granted. See id. The public interest factors include (1) the administrative difficulties resulting from court congestion; (2) the relationship to the litigation of the community from which jurors will be drawn; (3) the local interest in having localized controversies decided at home; (4) and choice of law issues. See id. Unless the balance of factors strongly favors the movant, the district court will not disturb a plaintiff's choice of forum. See In re McDonnell-Douglas Corp., 647 F.2d at 517 (citing Gulf Oil Co. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839 (1947)); Contimental Ins. Co., 2000 WL 777909, at *1; Billiot v. G B Marine, Inc., 1990 WL 43916, at *2 (E.D. La. Apr. 9, 1990).
In this case, venue in the Southern District of Mississippi is proper under 28 U.S.C. § 1391 (b) because defendant has consented to suit in the Southern District of Mississippi. The remaining question is whether convenience and justice require that the case be transferred.
28 U.S.C. § 1391 (b) states:
A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.
Presumptively, civil adversary proceedings should be venued with the underlying bankruptcy case. See Larami Ltd. v. Yes! Entertainment Corp., 244 B.R. 56, 62 (D. N.J. 2000) (citations omitted); In re Foxmeyer Corp., 217 B.R. 511, 515 (N.D. Tex. 1997) (citations omitted). The Mississippi bankruptcy court needs to determine whether this cause of action should be included as property of the estate or whether it is exempt. See Consolidated Lewis Investment Corp. v. First National Bank of Jefferson Parish, 74 B.R. 648, 650 (E.D. La. 1987) (finding interest of justice best served by allowing bankruptcy court in which bankruptcy case was pending opportunity to review all lawsuits with nexus to debtor's bankruptcy). The "interests of justice" will be served by the efficient administration of the bankruptcy estate. In addition, the Court notes that debtor failed to disclose the existence of the pending litigation in her bankruptcy schedules — an egregious breach of duty. See In re Coastal Plains, Inc., 179 F.3d 197, 208 (5th Cir. 1999). The Mississippi bankruptcy court is the best equipped to determine the consequences for that failure to disclose.
In addition, neither plaintiff nor witnesses will be overly inconvenienced by transferring this case. Biloxi is a mere 90 miles from New Orleans. In fact, since Rumore's bankruptcy case has been reopened, it would be more convement for her to litigate both cases in the same forum.
Against these considerations, plaintiff argues that this action should stay within Louisiana because Louisiana has a strong interest in adjudicating this state law case since it falls within Louisiana's domestic relations doctrine which governs the distribution of marital assets. Additionally, plaintiff suggests that a Mississippi court is less equipped to adjudicate a pure question of Louisiana law than a Louisiana federal court. While this factor does weigh in favor of keeping the case in Louisiana, there is no reason to believe that the Southern District of Mississippi would inadequately protect Louisiana's interests. The Court is confident in the abilities of the Bankruptcy Judge in the Southern District of Mississippi.
In balancing these factors, the Court finds that defendant has met his burden of showing that it is in the interest of justice and the convenience of the parties that this case be transferred to the Southern District of Mississippi in light of the substantial benefits to be gained by having the bankruptcy court hear cases related to the bankruptcy. Defendant's motion to transfer venue is granted.