Before bankruptcy, trucker Yellow Corp. had sued its union and its Kansas union locals in district court in Kansas, alleging breach of the union contract. After filing a chapter 11 petition in Delaware, the trucker filed a motion in the Kansas district court aiming to transfer venue of the suit to the Delaware bankruptcy court.
District Judge Julie A. Robinson of Wichita, Kansas, denied the venue motion under both of the possibly applicable venue statues. When contemplating her October 12 opinion, keep in mind that Judge Robinson had been a bankruptcy judge in Kansas from 1994 to 2001 and was a judge on the Tenth Circuit Bankruptcy Appellate Panel from 1994 until her elevation to the district court in 2001.
The Union, the Strike and the Lawsuit
Yellow was the country’s largest unionized less-than-truckload trucking carrier. In July, Yellow sued the union and three Kansas locals in Judge Robinson’s district court, alleging breach of the union contract. Yellow immediately sought a temporary restraining order to bar the union from striking. Judge Robinson denied the TRO from the bench, finding that she had no authority to bar a strike.
About two weeks later, Yellow filed a liquidating chapter 11 petition in Delaware. In first day motions, Yellow (now a debtor) claimed that its financial collapse was due to the union’s strike and breach of the union contract, Judge Robinson said.
Also before bankruptcy, the union filed a motion to dismiss in Judge Robinson’s court. As it turned out, the hearing date was after the chapter 11 filing. In the meantime, the debtor had filed the motion with Judge Robinson to transfer venue to the district court in Delaware for reference to the bankruptcy court. The debtor put the dismissal motion on ice until after Judge Robinson ruled on the venue motion.
Venue Issues
Ordinarily in bankruptcy, residence and domicile don’t much matter when it comes to venue, because bankruptcy provides nationwide service of process. In the case of a venue motion in a pending lawsuit, such considerations can matter.
Yellow and most of its subsidiaries are Delaware corporations. However, the international union is headquartered in Washington, D.C.
The three union locals, the other defendants, are located in Kansas, have no bargaining units in Delaware and have no officers in Delaware.
The debtor brought the venue motion under 28 U.S.C. § 1412. It provides that 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.” [Emphasis added.]
The union argued that the proper measure for venue transfer was 28 U.S.C. § 1404(a). “For the convenience of parties and witnesses, in the interest of justice,” the section provides that “a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” [Emphasis added.]
Judge Robinson said that the courts are divided on which of the two sections applies in the circumstances presented to her.
1412 Doesn’t Apply
The union argued that Section 1412 does not apply because the suit, pending before bankruptcy in district court in Kansas, was not “a case or proceeding under title 11.” Rather, the union said, the suit was merely “related to” the bankruptcy.
Judge Robinson said that the Tenth Circuit has not chosen between the two statutes in similar situations and that “there is a split of district-court authority.” She said that some district courts, including one in Kansas, believe that “under title 11” encompasses “related to” cases.
Quoting a decision by Bankruptcy Judge Michael E. Wiles of New York, Judge Robinson said that “another line of cases strictly construes” Section 1412 “and finds that ‘under title 11’ means ‘the main bankruptcy case itself, . . . [or] causes of action that are created by the Bankruptcy Code itself.’” Multibank, Inc. v. Access Global Cap. LLC, 594 B.R. 618, 622 (S.D.N.Y. 2018).
Saying that Bankruptcy Judge Wiles “convincingly explained” the differing applications of the two statutes, Judge Robinson found “no language in the statute indicating it applies to cases or proceedings ‘related to’ a case or proceeding under title 11. In contrast, other bankruptcy provisions do include references to cases ‘related to’ proceedings under the Bankruptcy Code.”
Judge Robinson therefore held that “the statute’s plain meaning, as informed by referencing the language itself, and its context, convinces this Court that § 1412 does not apply to cases that are merely ‘related to’ a case or proceeding under title 11 of the Bankruptcy Code.”
1404(a) Does Apply
With Section 1412 inapplicable, Judge Robinson said she “must apply” Section 1404(a).
Quick to the point, Judge Robinson said that Section 1404(a) was not available to transfer venue because the debtor could not have sued the union in Delaware before bankruptcy in view of the venue regulations in the Labor Management Relations Act. She therefore found no reason to consider the “convenience” or “fairness” factors under Section 1404(a).
Belt and Suspenders
For the sake of argument, Judge Robinson examined the factors under Section 1412 for transferring venue if it were applicable.
With regard to the interests of justice, Judge Robinson said she was given no evidence that the cost of litigating in Delaware would be less than in Kansas. Furthermore, the issues in the union suit “are not essential to administering the bankruptcy case,” she said. Moreover, she found “no indication that the Delaware bankruptcy court has any specific expertise in the labor law issues presented by this case.”
In contrast, Judge Robinson said that she had held a hearing and denied the debtor’s motion for an injunction and had studied opposing papers on the union’s motion to dismiss. “Thus,” she said, “the Court finds that the home court’s lack of familiarity with the substantive issues in this case weighs against transfer.”
Had she considered the venue motion under Section 1412, Judge Robinson said she would have denied “the motion because Plaintiffs have failed to show by a preponderance of the evidence that transfer is warranted in the interest of justice or for the convenience of the parties.”
Summing up, Judge Robinson said that the venue motion “must be denied” under Section 1404(a) because the suit could not have been brought in Delaware. If Section 1412 were applicable, she also would have denied the motion.
Observations
For contrary authority, see Domain Protection LLC v. Sea Wasp LLC, 18-01578, 2018 BL 410810, 2018 US Dist Lexis 189932, 2018 WL 5809298 (N.D. Tex. Nov. 6, 2018). To read ABI’s report, click here. For authority lining up with Judge Robinson, see Consumer Financial Protection Bureau v. Think Finance LLC, 17-127, 2018 BL 40181, 2018 WL 734661 (D. Mont. Feb. 6, 2018). To read ABI’s report, click here.
Before bankruptcy, trucker Yellow Corp. had sued its union and its Kansas union locals in district court in Kansas, alleging breach of the union contract. After filing a chapter 11 petition in Delaware, the trucker filed a motion in the Kansas district court aiming to transfer venue of the suit to the Delaware bankruptcy court.
District Judge Julie A. Robinson of Wichita, Kansas, denied the venue motion under both of the possibly applicable venue statues. When contemplating her October 12 opinion, keep in mind that Judge Robinson had been a bankruptcy judge in Kansas from 1994 to 2001 and was a judge on the Tenth Circuit Bankruptcy Appellate Panel from 1994 until her elevation to the district court in 2001.