M. HANNAH LAUCK, District Judge.
This matter comes before the Court on Defendant Kenneth Rees's Motion to Transfer Case Under 28 U.S.C. § 1412 ("Rees's Motion to Transfer"), (ECF No. 92), and Defendant GPL Servicing's ("GPL") Motion to Transfer Case Under 28 U.S.C. § 1412 ("GPL's Motion to Transfer"), (ECF No. 111). All responses and replies have been filed. The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. Accordingly, all matters are ripe for disposition. The Court exercises jurisdiction pursuant to 28 U.S.C. § 1331.
In their four-count class complaint, Plaintiffs challenge an allegedly predatory lending scheme developed and implemented by Defendants. According to Plaintiffs, in an effort to circumvent Virginia and federal lending laws, Rees contacted members of two Native American tribes—the Chippewa Cree Tribe and the Otoe-Missouria Tribe (collectively, the "Tribes")—in order to establish "rent-a-tribe" enterprises.
All named plaintiffs are residents of Virginia who obtained loans online from Plain Green, LLC ("Plain Green") or Great Plains, LLC ("Great Plains"). Defendants' identities and relationships are slightly complex, but, according to Plaintiffs, "although Plain Green and Great Plains held themselves out as the actual lenders of these internet payday loans, Defendants marketed, funded, collected the loans, and controlled the day-to-day operations and major business decisions of Plain Green and Great Plains." (Id. ¶ 48.) Plaintiffs assert that Rees and others created Defendant Think Finance, Inc., ("Think Finance") "to locate, arrange[,] and funnel the lending capital to the Tribes." (Id. ¶ 14.) According to Plaintiffs, Think Finance "procured the investment capital for Plain Green and Great Plains," and "initially performed the application processing, underwriting, and customer service support for the loans." (Id.)
Defendants Think Finance SPV, LLC ("Think Finance SPV"), TC Decision Sciences, LLC ("TC Decision"), TC Loan Services, LLC ("TC Loan"), and Tailwind Marketing, LLC ("Tailwind Marketing") are all limited liability companies with principal places of business at the same address in Texas. Plaintiffs allege that each of these companies either performed some role in the lending scheme or served as a holding company for one of the other companies in an attempt to avoid liability. Specifically, Plaintiffs claim that, after several lawsuits, Rees conveyed all of Think Finance's assets and responsibilities to Think Finance SPV "in an effort to avoid liability for the illegal loans made to consumers." (Id.)
Tailwind Marketing was the "marketing and solicitation arm to disguise the involvement of Rees and Think Finance." (Id. ¶ 52.) Tailwind Marketing received $100 for every borrower provided to Plain Green and Great Plains. Plaintiffs assert that "this money ended up back in the pocket of Rees through his ownership interest in Tailwind." (Id. ¶ 55.) TC Loan was "the controlling member of Tailwind Marketing," and, according to Plaintiffs, its purpose was to "insulate Defendants from liability by adding an extra layer of corporate protection to the misconduct of Tailwind Marketing." (Id. ¶ 17.)
TC Decision was the "website operator and software administrator for Plain Green and Great Plains," and "handled customer service responsibilities, such as communications with consumers under the guise of Plain Green and Great Plains." (Id. ¶¶ 56-57.) TC Decision was paid five dollars per month for each active account with Plain Green and Great Plains. This money, too, "ended up back in the pocket of Rees through his ownership interest in TC Decision." (Id. ¶ 58.)
Defendant GPL Servicing ("GPL") is a corporation incorporated under the laws of the Cayman Islands. (Compl. ¶ 19.) Plaintiffs aver that all loans were assigned to GPL "within two days . . . for the purpose of servicing and collection." (Id. ¶ 19.) All payments for loans from Plain Green or Great Plains were made to GPL. Plaintiffs allege upon information and belief that Rees, Think Finance, "and several other individuals" own GPL and "incorporated the collection arm of the operation in the Cayman Islands in further attempts to avoid legal liability." (Id.)
Plaintiffs contend that Rees "was the architect of the lending scheme, participated in the day-to-day operations of the scheme, and controlled the businesses." (Id. ¶ 97.) According to Plaintiffs, Rees "established the plan and strategy" to create each of the defendant companies, and "established their role in the making, marketing, and collection" of the high-interest online loans. (Id. ¶ 30.) Further, Plaintiffs assert that "[a]s chief executive officer of Think Finance and the sole member of several other affiliated entities, Rees intentionally directed and personally participated in the creation, management, and operations of the tribal lending enterprises." (Id. ¶ 31.)
Each of Plaintiffs' loans ranged in amounts from $300 to $3,000, and had interest rates from 118% to 448% and higher.
Plaintiffs assert the following four class claims, each against all Defendants:
For Counts One and Two, Plaintiffs seek to certify a class that includes "[a]ll Virginia residents who executed a loan with Plain Green or Great Plains where the loan was originated and/or any payment was made on or after May 19, 2013." (Id. ¶¶ 107,120.) For Count Three, Plaintiffs seek to certify a class of "[a]ll Virginia residents who executed a loan with Plain Green or Great Plains where any interest was paid," and a subclass consisting of "[a]ll Virginia residents who executed a loan with Plain Green or Great Plains where any interest was paid on or after May 17, 2015" (Id. ¶ 129 (emphases added).) Finally, for Count Four, Plaintiffs seek to certify a class of "[a]ll persons who . . . executed a loan with Plain Green or Great Plains [] when they resided or were located in Virginia, [] which contained an interest rate greater than 12%" and a subclass consisting of "[a]ll persons who . . . executed a loan with Plain Green or Great Plains [] when they resided or were located in Virginia, [] which contained a choice-of-law provision, arbitration provision, or forum selection clause similar or identical to Plaintiffs[']." (Id. ¶ 139 (emphases added).)
Plaintiffs filed their Complaint on May 19, 2017. After several extensions of time, the defendants filed a slew of motions seeking the dismissal, stay, or transfer of the entire action. Defendants Think Finance, Think Finance SPV, TC Decision, TC Loan, and Tailwind Marketing (collectively, the "Think Finance Defendants") and Rees each filed a Motion to Compel Arbitration, (ECF Nos. 16, 26), a Motion to Dismiss for Failure to Join Indispensable Parties, (ECF Nos. 18, 28), a Motion to Dismiss for Lack of Jurisdiction and Failure to State a Claim, (ECF Nos. 20, 22), and a Motion to Transfer or Stay Pursuant to the First-to-File Rule, (ECF Nos. 30, 24).
On October 25, 2017, the Think Finance Defendants filed a Suggestion of Bankruptcy. (ECF No. 87.) The Think Finance Defendants stated that, on October 23, 2017, they had each "filed voluntary petitions for relief pursuant to chapter 11 of Title 11
In the month of February 2018, the parties again filed numerous motions. (See ECF Nos. 89, 92, 94, 98, 100, 106, 111, 121.) Most relevant here, Rees and GPL each filed a Motion to Transfer Pursuant to 28 U.S.C. § 1412.
The Court will first address Rees's and GPL's Motions to Transfer Pursuant to 28 U.S.C. § 1412 (collectively, the "Motions to Transfer") because the Motions to Transfer could affect the relevance of many other motions. The Court finds that § 1412 applies in this case because Plaintiffs' claims against Rees and GPL are "related to" the Think Finance Defendants' pending petitions for bankruptcy. Further, despite the significant progress of this case and Virginia's strong interest in protecting its citizens from conduct such as that alleged in the Complaint, the Court concludes that transfer of this case to the Northern District of Texas is in the interest of justice.
Rees filed his Motion to Transfer one week before GPL filed its similar motion. Rees requests this Court to transfer this action to the United States District Court for the Northern District of Texas (the "Texas District Court"), "where that court will refer the action to the Bankruptcy Court," to be consolidated with the Think Finance Defendants' pending bankruptcy petition.
Rees further argues that transfer is appropriate because Plaintiffs' allegations against the Think Finance Defendants "are inextricably intertwined" with Plaintiffs' allegations against Rees, and because Plaintiffs' "theory of liability as against Rees [in this case] is the same as that as against Think Finance in the Bankruptcy Court." (Id. at 4, 5.) Finally, Rees contends that "a predecessor-in-interest to Debtor Think Finance, LLC[,] and Rees are parties to a Director Indemnification Agreement," and because of this agreement, all of Rees's legal fees, liability, or settlement "may ultimately end up back in front of the Bankruptcy Court for the purposes of indemnification and advancement." (Id. at 6, 7.) According to Rees, the indemnification agreement alone makes this case sufficiently "related to" the Bankruptcy Case to necessitate transfer.
In response, Plaintiffs contend that Rees's arguments regarding the indemnification agreements do not establish that this case is sufficiently "related to" the Bankruptcy Case to justify transfer to the Bankruptcy Court. (Pis.' Resp. Rees Mot. Transfer 5-6, ECF No. 110.) Plaintiffs further assert that, even if the matters sufficiently relate, neither the interest of justice nor the convenience of the parties favors transfer to the Bankruptcy Court.
First, Plaintiffs argue that the transfer Rees requests "does not guarantee that the case finds its way into bankruptcy court." (Id. at 6.) Plaintiffs argue that, because Rees requests a transfer to the district court, this case would only ultimately land in the Bankruptcy Court after a subsequent transfer from the district court. Further, Plaintiffs aver that judicial efficiency favors keeping the case in this Court. In support, Plaintiffs state that: (1) the Think Finance Defendants have moved to dismiss the Plaintiffs' adversary complaint in the Bankruptcy Court, so there is no certainty that this case would even be decided on the merits in that court; (2) the parties have briefed numerous motions and conducted voluminous discovery in this case, which would be disrupted by a transfer; and, (3) a transfer threatens to disrupt Plaintiffs' motion for class certification already filed in the Bankruptcy Court because "Rees will no doubt expect to have some role in the bankruptcy court's decision" of that motion. (Id. at 8-10.) Plaintiffs also argue that Virginia's interest in enforcing its citizens' rights and Plaintiffs' entitlement to deference to their choice of Virginia as a forum weigh against transferring the case. Finally, Plaintiffs contend that Rees has offered no evidence demonstrating that the convenience of the parties weighs in favor of a transfer, and assert that Plaintiffs would suffer inconvenience if the Court transferred the case.
One week later, GPL also moved the Court to transfer this action to the Texas District Court pursuant to 28 U.S.C. § 1412. GPL largely joins Rees's arguments in support of transfer under § 1412. GPL also attaches a copy of a "Guaranty and Security Agreement" (the "GSA") to which it and the Think Finance Defendants are parties. GPL contends that, pursuant to the GSA, GPL is entitled to indemnification from Think Finance and Think Finance SPV. Therefore, GPL argues that transfer under § 1412 is appropriate because this case sufficiently relates to the Bankruptcy Case and transfer serves the interest of justice and the convenience of the parties.
Plaintiffs advance different arguments in response to GPL's Motion to Transfer than they did in response to Rees's Motion to Transfer. Most notably, Plaintiffs argue for the first time
In the alternative, if the Court finds that § 1412 does apply here, Plaintiffs assert that GPL has not established that this case is sufficiently "related to" the Bankruptcy Case to warrant a transfer. Plaintiffs also argue that GPL has not established that the case could have been brought in the Northern District of Texas, a finding the Court must necessarily make to order transfer.
Before evaluating whether any factors weigh in favor of a transfer, the Court first addresses Plaintiffs' argument that § 1412 does not apply here because this case is not a bankruptcy matter brought "under title 11." Plaintiffs posit that § 1412 does not apply because "§ 1412 unambiguously indicates that transfer under § 1412 only applies to bankruptcy cases." (Pis.' Resp. GPL Sec. 1412 Mot. Transfer 5.) Because "Plaintiffs' claims against Defendants were brought under RICO and Virginia law, and Plaintiffs do not assert any claims under the Bankruptcy Code. . . ., this is not `a case or proceeding under title 11,' and thus, § 1412 is simply not applicable." (Pis.' Resp. GPL Sec. 1412 Mot. Transfer 5.) Defendants maintain that § 1412 applies instead.
Nationally, no appellate court has directly decided the issue,
The leading case within the Fourth Circuit, Dunlap v. Friedman's, Inc., laid a strong analytical foundation when finding that § 1412, not § 1404, applied. 331 B.R. 674 (S.D.W. Va. 2005). Other courts have appropriately followed. In Dunlap, United States District Judge John T. Copenhaver, Jr., examined whether 28 U.S.C. § 1412 or 28 U.S.C. § 1404 applied to a class action complaint which, like this case, alleged state law violations, not violations arising under bankruptcy. 331 B.R. at 676. While acknowledging that district courts had split on "the choice between section 1412 and 1404(a) for change-of-venue purposes," id. at 677, the Dunlap court evaluated the decision reached by the leading bankruptcy treatise, the nature of bankruptcy proceedings, and the context of § 1412 within the transfer statutes as a whole before determining that § 1412 applied to the transfer considered, id. at 677-80.
First, Dunlap quoted with approval the conclusion from Collier on Bankruptcy that § 1412 governs changes of venue for both cases under title 11 and civil proceedings "`arising in or related to cases under title 11 [,]' and stating further [that] `[a] few courts treat related claims and causes of action somewhat differently for change of venue purposes, a conclusion not to be recommended.'" Id. at 677 (quoting Collier on Bankruptcy, 4.04[1] (15th ed. rev. 2005)).
As to the nature of bankruptcy proceedings, the Dunlap court recognized the so-called "home court" presumption.
Finally, a thorough contextual analysis of the choice-of-venue statute that governed before § 1412, as well as an evaluation of § 1412 in conjunction with 28 U.S.C. § 1409 (enacted at the same time) convincingly undergirded Dunlap's determination that § 1412 "is the appropriate statute for venue transfer purposes" in the case.
Likely because of its thorough analysis, many cases within the Fourth Circuit addressing transfer of actions under § 1412 specifically rely upon the Dunlap decision when reaching the same result. See, e.g., Huntington Natl Bank v. Hard Rock Expl, Inc., No. 1:16cv48, 2018 WL 935435, at *2 (N.D.W. Va. Feb. 16, 2018) (citing Dunlap for the premise that § 1412 "is the appropriate statute for venue transfer purposes in a related-to bankruptcy action" (quotation marks and alterations omitted)); Hilton, 532 B.R. at 273 (identifying Dunlap as "the leading case" in the debate about whether § 1404 or § 1412 governs transfer of actions "related to" a ankruptcy proceeding); Brown v. Wells Fargo, N/A, 463 B.R. 332, 337 (M.D.N.C. 2011) ("Though the Fourth Circuit has yet to weigh in on whether § 1404 or § 1412 should govern transfer of cases `related to' bankruptcy, the Southern District of West Virginia thoughtfully analyzed the issue in Dunlap v. Friedman's, Inc., 331 B.R. 674 (S.D.W. Va. 2005)."); Coffey Creek Assocs Ltd. v. Guardian Prot. Svcs., Inc., No. 3:09cv295, 2010 WL 184902, at *2 (W.D.N.C. May 7, 2010) (noting that Dunlap "includes a detailed analysis of the choice between the § 1404 and § 1412 change of venue statutes"). And, despite Plaintiffs' criticism of the Dunlap court's reliance on "previous enactments of the statute and its legislative history," (Pis.' Resp. GPL Sec. 1412 Mot. Transfer 10), the Court finds no cases—and Plaintiffs cite to none— either within the Fourth Circuit or outside it, that similarly take issue with the reasoning in Dunlap. To the contrary, as noted above, numerous cases rely on the Dunlap decision and describe its analysis as detailed, thorough, and thoughtful.
In Hilton, a 2015 case within this district, the Honorable T.S. Ellis, III, Senior United States District Judge, identified that the debate continued in the "much-litigated question in the district courts, which appear to be divided on the issue" of whether § 1412 governs "related-to" actions. 532 B.R. at 272. In addition to relying on Dunlap to explain why § 1412 should apply, the Hilton decision noted that "the leading bankruptcy law treatise, Collier on Bankruptcy . . . reaches the same conclusion" as Dunlap. Id. at 273. Ten years of litigation since Dunlap had not altered Collier's position as to the applicable transfer statute. The Hilton court also relied on the "sensible principle that the court in which a bankruptcy proceeding is pending should be, if possible, the proper venue for all related litigation." Id. at 273 n.11.
This final observation is correct. In Piccinin, the only Fourth Circuit case addressing § 1412, the court assumed that § 1412 applied to cases "related to" bankruptcy proceedings. That court stated in dicta that § 1412 would govern a district court's authority to transfer all "cases related to the bankruptcy proceedings''' other than "personal injury tort claims against a debtor in Chapter 11 proceedings." 788 F.2d at 1011 (emphasis added). Thus, while it did not decide the issue, the Fourth Circuit presumed that § 1412 governed bankruptcy cases and all cases "related to the bankruptcy proceedings." Id. (emphasis added).
This Court agrees with the thorough analysis of courts finding that § 1412 governs in situations like this one, and understands why no federal district court in the Fourth Circuit has found otherwise. For the reasons articulated above, the language of § 1412, properly considered in the context of the statute as a whole, makes clear that § 1412 must apply to all cases "related to" bankruptcy proceedings. The next question, therefore, is whether Plaintiffs' claims against Rees and GPL are "related to" the Bankruptcy Case. The Court concludes that they are.
No party disputes the legal standard that governs the Court's determination of whether a case or claim is "related to" a bankruptcy proceeding.
New Horizon of NY LLC v. Jacobs, 231 F.3d 143, 151 (quoting Celotex Corp. v. Edwards, 514 U.S. 300, 308 n.6 (1995)). Importantly, this test "does not require certain or likely alteration of the debtor's rights, liabilities, options[,] or freedom of action, nor does it require certain or likely impact upon the handling and administration of the bankruptcy estate. The possibility of such alteration or impact is sufficient" for a case to be "related to" a bankruptcy case. In re Celotex Corp., 124 F.3d at 626 (citing Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). This broad interpretation of "related to" is consistent with congressional intent in enacting § 1334 "to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate." Celotex, 514 U.S. at 308 (internal quotation marks and citation omitted); see also New Horizon, 231 F.3d at 150.
The parties diverge when applying the standard to the facts of this case. GPL and Rees both argue that when a party has an indemnification claim against a bankruptcy debtor for the judgment in a separate litigation, the separate litigation "would necessarily affect the [bankruptcy] estate," making it "related to" the bankruptcy case.
Plaintiffs argue that "potential indemnification rights" are not always sufficient to make a controversy "related to" a bankruptcy case. They further assert that "Defendants provide no explanation or proof of the effect of Think Finance's contractual obligation on the bankruptcy estate." (Pis.' Resp. GPL Mot. Transfer 14.) Plaintiffs aver that neither GPL nor Rees has "established that they are currently creditors to the Think Finance Bankruptcy Proceeding," and, regardless, any duty Think Finance has to indemnify either GPL or Rees "for future litigation" would not constitute a claim that could impact the Bankruptcy Case. (Id.) In short, because "Defendants have not established whether they have a prepetition claim against Think Finance in the Bankruptcy Proceeding for either contribution or indemnification," Plaintiffs contend that both GPL and Rees have failed to establish that this case is "related to" the Bankruptcy Case, and transfer under § 1412 is inappropriate. (Id. at 15.)
Rees attaches a Director Indemnification Agreement (the "Rees Indemnification Agreement") to his Motion to Transfer. The Rees Indemnification Agreement, dated September 1, 2005, is between Rees and PayDay One Holdings, Inc., ("PayDay One"). Rees states that PayDay One is a "predecessor-in-interest to Debtor Think Finance," and that the Rees Indemnification Agreement "obligates Think Finance to `indemnify, defend, and hold harmless'" Rees for losses including civil expenses, liabilities, or judgments. (Rees Mem. Supp. Mot. Transfer 6 (quoting Rees Indemnification Agr. ¶ 2).) Rees also points to a provision of the Rees Indemnification Agreement entitling Rees to the "advancement . . . of any and all Expenses relating to any Indemnifiable Claim paid or incurred by" Rees. (Id. at 6 (quoting Rees Indemnification Agr. ¶ 3).) Accordingly, Rees argues that, under the Rees Indemnification Agreement, Think Finance, a debtor in the Bankruptcy Case, is contractually obligated to indemnify Rees for "all legal fees [he incurs], as well as any liability or settlement" in this case, making this action "related to" the Bankruptcy Case. (Id. at 7.)
The Rees mdemnification Agreement contains three provisions and three definitions particularly relevant to Rees's assertion that Think Finance is contractually liable to indemnify him for his expenses defending this suit, and for any liability he incurs in this suit. First, paragraph two of the Rees Indemnification Agreement states, in relevant part:
(Rees Indemnification Agr. ¶ 2.) Second, paragraph three provides that "[Rees] shall have the right to advancement by the Company prior to the final disposition of any Indemnifiable Claim of any and all Expenses relating to any Indemnifiable Claim paid or incurred by [Rees] or which [Rees] determines are reasonably likely to be paid or incurred by [Rees]." (Id. ¶ 3.) Finally, paragraph fifteen states that "[t]his Agreement shall be binding upon and inure to the benefit of the Company and any successor to the Company, . . . (and such successor will thereafter be deemed the `Company' for purposes of this Agreement), but shall not otherwise be assignable or delegatable by the Company." (Id. ¶ 15.)
The Rees Indemnification Agreement defines a "Claim" as, inter alia, "any threatened, asserted, pending or completed claim, demand, action, suit or proceeding, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law." (Id. at (f).) And defines an "Indemnifiable Claim" as:
(Id. at (i).) Finally, "Expenses" are defined as "attorneys' and experts' fees and expenses and all other costs and expenses paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in (including on appeal), any Claim." (Id. at (h).)
In this case, Plaintiffs' claims against Rees depend on his involvement with the Think Finance Defendants. Plaintiffs allege that "[d]uring the pertinent times, Rees was the architect of the lending scheme, participated in the day-to-day operations of the scheme, and controlled the businesses" (Compl. ¶ 97 (emphasis added).) Plaintiffs claim, inter alia, that Rees "formed and used [the Think Finance Defendants and GPL] to engage in unfair, deceptive, and abusive acts that harmed Plaintiffs and the class members." (Id. ¶ 98.) They assert that Rees "directly and actively managed the activities" of the Think Finance Defendants and GPL, and that he "participated and knew of the actions of Think Finance in Virginia, which are the subject of this lawsuit." (Id. ¶¶ 101-02.)
Plaintiffs' allegations against Rees in this case are premised, at least in part, on actions he took "in his . . . capacity as a director, officer, employee or agent of the Think Finance Defendants. Accordingly, this action against Rees is likely covered by the Rees Indemnification Agreement, making it "related to" the Bankruptcy Case. At the least, the "outcome in th[is] civil case * could conceivably have an[] effect on the'" Bankruptcy Case because Think Finance would likely be required to indemnify Rees of any liability in this case, thereby altering its liabilities.
GPL attaches to its Motion to Transfer the GSA, an agreement dated April 2, 2013, between GPL, all the Think Finance Defendants, and several other parties. Under the GSA, Think Finance and Think Finance SPV are required to indemnify GPL for
(GSA ¶ 16(b).) Furthermore, GPL states that it has "filed counterclaims in an adversary proceeding in the Bankruptcy Court and . . . filed 24 proofs of claim seeking indemnification (among other things) from the debtors." (GPL Reply Supp. Mot. Transfer 2.) GPL attaches a copy of the First Amended Answer it filed jointly with other defendants in an adversary proceeding against the Think Finance Defendants in the Bankruptcy Court. In that Answer, GPL and the other defendants filed five counterclaims, one of which seeks a declaratory judgment that "[u]nder Sections 9(a) and 16(b) of the GSA, Counter-Plaintiffs are entitled to their attorneys' fees and expenses incurred in connection with, among other things, this bankruptcy, this adversary proceeding, and the Lawsuits." (Answer ¶ 123, ECF No. 127-1.) "Lawsuits" as defined in GPL's answer, includes "five separate actions . . . brought against Victory Park, GPL[], and/or Think Finance in Pennsylvania, Virginia, Florida, Vermont, and Montana" between April and November 2017, which includes this case. (Id. ¶ 58.)
The contractual requirement in the GSA that at least two of the Think Finance Defendants indemnify GPL for losses incurred during litigation alone likely would suffice to make this case "related to" the Bankruptcy Case. See Integra, 92 F. Supp. 3d at 473 ("Even where none of the parties in the district court action are debtors in the bankruptcy proceeding, the action may be `related to' the bankruptcy proceeding if the bankruptcy debtor has an indemnification agreement with the defendant in the district court action." (citing Power Plant Entm't Casino Resort Ind, LLC v. Mangano, 484 B.R. 290, 295 (Bankr. D. Md. 2012)).). However, GPL's counterclaim for indemnification against at least two of the Think Finance Defendants in the Bankruptcy Court even more clearly establishes that the "outcome in th[is] civil case 'could conceivably have anfj effect on the'" Bankruptcy Case. New Horizon, 231 F.3d at 151. Accordingly, Plaintiffs' claims against GPL are "related to" the Bankruptcy Case.
Under § 1412, transfer is appropriate either in the interest of justice or for the convenience of the parties—a court need not find that both prongs are met to order a transfer. See 28 U.S.C. § 1412; see also Hilton, 532 B.R. at 274 ("[Section] 1412 is a disjunctive provision, allowing for transfer in the interest of justice or for the convenience of the parties. . . ."). The Court finds that the interest of justice strongly favors transferring this action to the Bankruptcy Court.
"The "`interest of justice'" component of § 1412 is a broad and flexible standard which must be applied on a case-by-case basis.'" Hilton, 532 B.R. at 274 (quoting In re Manville Forest Prods., Corp., 896F.2d 1384, 1391 (2d Cir. 1990)). In evaluating whether the interest of justice weighs in favor of transfer under § 1412, courts look to several factors, including: (1) the economic and efficient administration of the bankruptcy estate; (2) the so-called "home court" rule—the presumption that the district hearing the bankruptcy case is the proper venue for related actions; (3) judicial efficiency; (4) the ability to receive a fair trial; (5) the state's interest in having the controversy decided within its borders; (6) the enforceability of any judgment; and, (7) the plaintiffs original choice of forum. Id; see also Coffey Creek, 2010 WL 1849023, at *5 (listing the same factors). All factors do not receive equal weight, however, and the most important factor is "the economic and efficient administration of the estate." Dunlap, 331 B.R. at 680. "The party seeking transfer has the burden of showing by a preponderance of the evidence that either the interest of justice or the convenience of the parties would be served by the requested transfer." Yolo, 2018 WL 576316, at *2 (citing Garlock Sealing Techs., LLC v. Waters & Kraus, LLP, No. 3:14-cv-130, 2015 WL 1022291, at *1 (W.D.N.C. Mar. 9, 2015)).
In this case, the first, second, and third factors weigh heavily in favor of transfer, the fourth and sixth factors are neutral, and the fifth and seventh factors favor keeping the action in this Court. The balance, overall, strongly counsels in favor of transferring this case.
First and most importantly, the economic and efficient administration of the bankruptcy estate—factor one—will be served by transferring this case to be consolidated with the Bankruptcy Case. Plaintiffs have filed a class action adversary proceeding against the Think Finance Defendants in the Bankruptcy Court based on many of the same alleged facts as the Plaintiffs' Complaint in this Court. Resolving the claims against Rees and GPL in this Court therefore would involve many of the same legal and factual determinations as will be necessary to resolve Plaintiffs' claims against the Think Finance Defendants in the Bankruptcy Court. And, given the indemnification agreements that Rees and GPL both have with Think Finance, which require certain of the Think Finance Defendants to indemnify Rees and GPL for the costs of litigation, litigating the same facts and legal contentions in this Court and in the Bankruptcy Court will result in duplicative legal costs, which would be paid from the bankruptcy estate. Moreover, if the Court kept this action here, Rees and GPL would need to litigate the substance of Plaintiffs' claims in this Court and separately litigate the issue of indemnification in Bankruptcy Court, also resulting in duplicative legal costs that would be paid from the bankruptcy estate. Accordingly, transferring this case so that it may be tried together with the similar claims in the Bankruptcy Court will promote the economic and efficient administration of the bankruptcy estate.
The presumption in favor of trying cases "related to" a bankruptcy proceeding in the court in which the bankruptcy is pending obviously favors transferring this case to the Northern District of Texas. The Court already has determined that Plaintiffs' claims against Rees and GPL are "related to" the Bankruptcy Case, and that case pends in the Northern District of Texas. Accordingly, the second factor weighs in favor of transferring this case.
Third, "judicial efficiency is served by litigating the same legal issue only once." See Hilton, 532 B.R. at 274. Plaintiffs' claims against the Think Finance Defendants, Rees, and GPL are based on Plaintiffs' contention that the loans made to Plaintiffs violated Virginia law. And two of Plaintiffs' four claims depend on their allegation that all defendants "worked together for the common purpose of making and collecting the usurious loans through the enterprises of Plain Green and Great Plain." (Compl. ¶ 29.) Thus, each of these issues will have to be resolved in this case and in the Bankruptcy Court. Judicial efficiency favors a single court making those determinations one time, rather than multiple courts ruling on the issues at different times.
Both the fifth and seventh factors assessing the interest of justice, however, weigh in favor of keeping the case in this Court. Plaintiffs chose this forum, and Virginia clearly has an interest in protecting its citizens from conduct like that alleged in the Complaint. However, a plaintiffs choice of forum is not entitled to as much deference when analyzing transfer under § 1412 as when analyzing transfer under 28 U.S.C. § 1404. See, e.g., Tapia v. Davol, Inc., 562 B.R. 765, 768 (S.D. Cal. 2016) (discussing § 1404 and § 1412 and stating that "`the former provision [§ 1404] affords deference to the plaintiffs choice of forum whereas the latter provision [§ 1412] carries a presumption in favor of the court in which the debtor's bankruptcy case is pending'" (quoting Reid-Ashman Mfg., Inc. v. Swanson Semiconductor Serv., LLC, No. C-06-693 JCS, 2008 WL 425638, at * 1 (N.D. Cal. Feb. 14, 2008))). And, although Virginia has a clear interest in providing a forum for its citizens to challenge the sort of conduct alleged in the Complaint, that interest cannot outweigh the other relevant considerations.
The "important considerations of economic and efficient administration of the bankruptcy estate, the interest of judicial efficiency, and the home court's presumptive suitability "decidedly favor" transferring this case to the Northern District of Texas. See Dunlap, 531 B.R. at 681. Virginia's interest in having this controversy decided here, and deference to Plaintiffs' original choice of forum do not outweigh those three factors, so the Court finds that the interest of justice weighs in favor of transferring this case to the District Court for the Northern District of Texas.
For the foregoing reasons, the Court will grant the Rees Motion to Transfer and the GPL Motion to Transfer. The Court will transfer this action to the Northern District of Texas.
Petrovich, Heather L., Comment, Circumventing State Consumer Protection Laws: Tribal Immunity and Internet Payday Lending, 91 N.C.L. Rev. 326, 342 (2012) (footnotes omitted).
Furthermore, the United States Court of Appeals for the Third Circuit has also held that § 1412 would govern nonbankruptcy cases "related to" bankruptcy proceedings. Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1212 (3d Cir. 1991) ("Where a civil proceeding already pending in one district court becomes "related to" a chapter 13 case subsequently filed in another district court, the proper method for transferring the related proceeding to the bankruptcy court hearing the chapter 13 case is to seek a change of venue in the nonbankruptcy forum pursuant to 28 U.S.C. § 1412. . . ."). In so holding, however, the Third Circuit did not undertake detailed analysis, and did not appear to be faced with arguments like those before the Court.
It is correct that statutory interpretation, in trying "to determine congressional intent," Dole v. United Steelworkers of Am., 494 U.S. 26, 35 (1990), must "begin, as always, with the language of the statutory text . . . [and i]n the absence of a definition from Congress, [the Court] accord[s] words in a statute their ordinary, contemporary, common meaning." United States v. Midgett, 198 F.3d 143, 145-46 (4th Cir. 1999) (internal citation and quotation marks omitted). But the Dunlap court recognized that "[t]he plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997). A court must therefore look to the statute as a whole in determining the meaning of individual words because "the meaning of statutory language, plain or not, depends on context." King v. St. Vincent's Hosp, 502 U.S. 215, 221 (1991); see also Dole, 494 U.S. at 35 ("[I]n expounding a statute, we are not guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy.") (internal citation and quotation marks omitted).
Thus, evaluating the statute in the appropriate context, the Dunlap court correctly found that § 1412 clearly applies not only to bankruptcy cases, but to other civil cases "related to" bankruptcy cases. See Dunlap, 331 B.R. at 680 ("Because section 1409(a) uses the term 'proceeding' to include an action `related to a case under title 11[,]' it lends strong credence to the notion that the word `proceeding[,]' as used in section 1412, should be accorded the same breadth. If not, one is left to speculate what the term `proceeding' actually means in section 1412.").
The Court has also identified four cases that come to the same conclusion without relying on Dunlap's detailed analysis. Yolo Capital, Inc. v. Normand, No. l:17-cv-180, 2018 WL 576316, at *2 (W.D.N.C. Jan. 26, 2018) ("Section 1412 applies to the transfer of cases under Title 11 as well as cases `arising under title 11, or arising in or related to cases under title 11.'") (quoting 1 Alan N. Resnick & Henry J. Sommer, Collier on Bankruptcy ¶ 4.05 [1] (16th ed. 2017))); Titus v. Smith, No. 3:12cv21, 2012 WL 2255498, at *6 (N.D.W. Va. June 15, 2012) (transferring, pursuant to § 1412, plaintiffs action asserting claims of false imprisonment and intentional infliction of emotional distress to the court in which plaintiffs bankruptcy case was pending); J.O. Flowe Grading Co., LLC v. Martin, No. 1:09cv6, 2009 WL 10688285, at *5 (M.D.N.C. Nov. 18, 2009) (transferring, pursuant to § 1412, plaintiffs action asserting various tort claims to the court in which the defendant's bankruptcy proceeding was pending); Blanton v. IMNFin. Corp., No. 1:00cv873, 260 B.R. 257 (M.D.N.C. 2001) (transferring, pursuant to § 1412, plaintiffs' action asserting breach of contract claims to the court in which the defendant's bankruptcy proceeding was pending).
As discussed above, the Court agrees with the other district courts holding that § 1412 applies to actions "related to" cases under title 11. Those cases naturally rely on the interpretation of "related to" in the context of § 1334(b), and the Court sees no reason not to do so as well.
Of course, a mere overlap in factual allegations alone cannot establish that an action is "related to" a bankruptcy proceeding, as the Fourth Circuit has defined that term. See New Horizon, 231 F.3d at 151 (stating that "the `mere fact that there may be common issues of fact between a civil proceeding and a controversy involving a bankruptcy estate does not'" make the matter "related to" the bankruptcy case) (quoting Pacor, 743 F.2d at 994)). GPL's and Rees's strongest arguments that Plaintiffs' claims against them are "related to" the Bankruptcy Case center on the indemnification agreements each defendant has with the Think Finance Defendants. Accordingly, the Court addresses those contentions in detail.
The Court acknowledges the diligent work the parties have put into this case. However, the Think Finance Defendants' bankruptcy petitions constitute a material change that the Court cannot ignore. The strong preference for deciding all issues "related to" a bankruptcy in the district in which the bankruptcy pends counsels strongly in favor of transferring this case to the Northern District of Texas.
Furthermore, the work the parties have done thus far would not be lost, and would contribute to the remaining issues being decided expeditiously. However, judicial economy is not served by two courts deciding the same issues, nor would it be served by all the parties litigating many of the same factual issues simultaneously here and in the Bankruptcy Court. The extensive factual overlap in the allegations before this Court and the Bankruptcy Court and the indemnification agreements between Rees and GPL and the Think Finance Defendants, virtually mandate that this Court serve efficiency via transfer so that the Bankruptcy Court can decide the remaining issues.