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Venue Transfer Warranted for Action “Related to” SDNY Bankruptcy

By Alexander Beeby posted 09-26-2021 13:52

Contributing Editor: Alexander J. Beeby, Larkin Hoffman Daly & Lindgren Ltd.

In Lehman Bros. Holdings Inc. v. Lendingtree, LLC, No. 20-cv-1351 (SRN/HB), 2021 WL 1087695, slip op. (D. Minn. Mar. 22, 2021), Judge Nelson determined that the case should be transferred to the SDNY bankruptcy court because it relates to a bankruptcy case in that jurisdiction.

This action stems from two bankruptcies—neither of which were venued in Minnesota. The plaintiff had filed a 2008 chapter ll case in the Southern District of New York and, in that case, a 2016 adversary proceeding, for indemnification, against a nonparty. That nonparty, in turn, filed a 2019 chapter 11 case in the Northern District of California, which was subsequently converted to chapter 7. The plaintiff and the nonparty’s trustee settled the plaintiff’s claim in the nonparty’s chapter 7 case, providing the plaintiff an allowed claim of $13 million. The plaintiff filed the action relevant here in the United States District Court for Minnesota against the defendants alleging that the allowed claim is also enforceable against the defendants.

The defendants challenged personal jurisdiction and venue, and the district court focused on the venue issue. The plaintiff argued that venue was proper because the cause of action arose, in part, from the sale of certain loans originating in Minnesota and that the similarity of this lawsuit with another recent case in this district added convenience to this venue. The defendants claimed that Minnesota lacked personal jurisdiction and that only a small portion of the loans in question originated in Minnesota. The defendants argued that, even if venue was proper in Minnesota, it should be discretionarily transferred to the Western District for North Carolina, where the defendant has its principal place of business and where much of the relevant evidence is located. The plaintiff countered that, if transfer was necessary, the case should be transferred to New York, where its chapter 11 case is venued.

After finding that venue might be proper in Minnesota, it concluded that discretionary transfer to New York was warranted. In doing so, the district court first discussed the relationship between transfer analysis under 28 U.S.C. § 1404(a) “[f]or the convenience of parties and witnesses, in the interest of justice” and transfer analysis under 28 U.S.C. § 1412 for transfer of bankruptcy cases or proceedings. The district court concluded that § 1412 applied because the case met the Eighth Circuit’s “conceivable effect” test, but also agreed “that the analysis would be essentially the same under § 1404(a).” The court then concluded that, due in large part to the relationship to the plaintiff’s bankruptcy case, the interests of justice weighed heavily in favor of transfer to the SDNY, whereas the convenience of the parties weighed neutrally between WDNC and SDNY.

Co-Editors in Chief
Alexander J. Beeby, Larkin Hoffman Daly & Lindgren Ltd.
Kesha Tanabe, Tanabe Law