As if by Magic, Section 1412 Transforms an Improper Venue into a Proper Venue

Venue ping pong is a proper method for putting a case in the improper district, according to Bankruptcy Judge Nicholas W. Whittenburg.

Sitting in Chattanooga, Tenn., Judge Whittenburg’s courthouse is the closest bankruptcy court for many debtors who live in northern Alabama and northern Georgia.

A couple residing in northern Georgia filed their joint chapter 7 petition with Judge Whittenburg in the Eastern District of Tennessee. He said that the decision to file in the wrong district is “common” for debtors who desire a shorter commute to the nearest bankruptcy court. 

Although the case was filed in the improper district, “that defect is frequently not an issue because no party objects to venue, and when no party objects to venue, any venue defect is deemed waived,” Judge Whittenburg said, citing 28 U.S.C. § 1406(b).

In the case before Judge Whittenburg creditors did object, asking for dismissal because the case had been filed in an improper venue.

Judge Whittenburg agreed that venue was improper. Instead of dismissing, he transferred venue to the Northern District of Georgia under 28 U.S.C. § 1408. Once in Georgia, the debtors filed a motion under 28 U.S.C. § 1412 for a transfer of venue back to Chattanooga.

In its entirety, Section 1412 says, “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.”

Sitting in Rome, Ga., Bankruptcy Judge Paul W. Bonapfel transferred venue back to Chattanooga. The creditors filed a motion for rehearing, which Judge Bonapfel denied.

Back in Chattanooga, the creditors once again filed a motion to dismiss for improper venue. Judge Whittenburg denied the motion.

In his opinion on May 24, Judge Whittenburg explained why a venue that was improper can magically become a proper venue immune from dismissal or transfer.

The creditors’ principal authority was Thompson v. Greenwood, 507 F.3d 416 (6th Cir. 2007). They argued that Thompson requires transfer or dismissal if the case is in the improper district. According to Judge Whittenburg, that’s not what it means.

Judge Whittenburg said that Thompson did not say “whether an improperly venued bankruptcy case can be transferred to a proper venue and then be transferred back to what was initially an improper venue.” Rather, he said that Thompson only means “that cases filed in an improper venue in the first instance must be dismissed or transferred to a proper venue. Id. at 422.” It “never reached the second step [retransfer from the proper district back to the improper district] because that issue did not exist in that case.”

With the original transfer from Tennessee to Georgia, Judge Whittenburg said that “the venue defect was cured.”

“Once the case was in the proper venue,” Judge Whittenburg said, “that court was free to transfer the case to any other district. See 28 U.S.C. § 1412. A court of proper venue is not limited by any consideration of where the case was initially filed.”

Judge Whittenburg said that Section 1412 contains no reference to where the case was filed. He denied the motion to dismiss or change venue, holding:

[A] case that is filed in an improper venue may have that defect cured by transfer to a proper venue, and then, the case can be transferred to any other district, including where it was filed initially. Venue of this case now properly lies in this court.