In a very easy to follow opinion issued October 21, 2011, Judge Sontchi of the Delaware Bankruptcy Court denied a motion to dismiss an avoidance action for improper venue or, in the alternative, to transfer venue of the action. Judge Sontchi’s opinion is available here (the “Opinion”). The Opinion provides an excellent framework for all preference defendants to analyze how applicable this defense may be in actions brought against them. The following posts have addressed issues of venue:
Decision in NWL Holdings, Inc., Limits the Ability of Defendants to Transfer Preference Actions Decision in DBSI Inc., Reminds Us that District Courts have Personal Jurisdiction Throughout the United States Decision in DHP Holdings Considers Forum Selection Clause in Deciding Whether to Grant Motion to Change Venue
In 2009, Visteon and its affiliates filed for bankruptcy. In May 2011, Visteon filed a preference and fraudulent transfer action against Governor Business Solutions, Inc. (“GBSI”). GBSI then filed a motion to dismiss the action to dismiss for improper venue, or to change the venue. Opinion at *2. The Opinion was written in response to GBSI’s motion.
Judge Sontchi’s Opinion
Judge Sontchi very quickly eliminated the possibility of granting the motion to dismiss, citing 28 U.S.C. § 1409 and HLI Creditor Trust v. Keller Rigging Constr., Inc. (In re Hayes Lemmerz Int’l Inc.), 312 B.R. 44, 45 (Bankr. D. Del. 2004) for the principle that “[A] proceeding arising under title 11 or arising in or related to a case under title 11 may be commenced in the district court in which such case is pending.” Opinion at *3. He then moved to a point by point discussion of the twelve-factor test established by the Third Circuit, as provided by Hayes Lemmerz, 312 B.R. at 46. These same twelve factors were considered by Judge Walrath in the NWL Holdings decision, which is discussed in the first blog post linked above.
Judge Sontchi spent the majority of the Opinion analyzing each of the following 12 factors:
- plaintiff’s choice of forum;
- defendant’s forum preference;
- whether the claim arose elsewhere;
- the location of books and records and/or the possibility of viewing premises if applicable;
- the convenience of the parties as indicated by their relative physical and financial condition;
- the convenience of the witnesses, but only to the extent that the witnesses may actually be unavailable for trial in one of the fora;
- the enforceability of the judgment;
- practical considerations that would make the trial easy, expeditious, or inexpensive;
- the relative administrative difficulty in the two fora resulting from congestion of the courts’ dockets;
- the public policies of the fora;
- the familiarity of the judge with applicable state law; and
- the local interest in deciding local controversies at home.
Judge Sontchi determined that the majority of factors in this instance weigh in favor of keeping the action in Delaware. Opinion at *9. He thus denied the entirety of GBSI’s motion.
As Judge Sontchi concluded, “a plaintiff’s choice of venue should only be disturbed when the balance weighs heavily in favor of the defendant’s motion to transfer.” Opinion at *9. While it is not clear how much difference is required to “weigh heavily in favor” of granting a motion to transfer, it is important to remember that “deference is given to the plaintiff’s choice of forum.” Opinion at *9. Thus, if a motion to transfer venue is your only hope of avoiding a preference claim, it may be worthwhile to consider settling.