D. SIMS CRAWFORD, United States Bankruptcy Judge.
This matter came before the Court on the Motion to Transfer Venue to the United States District Court for the Southern District of California (the "Motion to Transfer") filed by defendant Vestavia Hills Ltd. d/b/a Mount Royal Towers ("Vestavia Hills") (doc. 2), the Motion to Remand and/or for Abstention (the "Motion to Remand") filed by plaintiff Commonwealth Assisted Living, LLC, Series E ("Commonwealth") (doc. 4), Commonwealth's objection to the Motion to Transfer (doc. 9), and Vestavia Hills's response to the Motion to Remand. (Doc. 10.) A hearing on these matters was held on February 19, 2020. Appearing in person at the hearing were Marc P. Solomon, Hanna Lahr and Richard J. Brockman, attorneys for Commonwealth; and Andrew P. Campbell and John Harrison Hagood, attorneys for Vestavia Hills. Appearing by telephone for the hearing were James P. Hill, attorney for Vestavia Hills; and William A. Smelko, attorney for Judith A. Chance and Karen L. McElliott in the chapter 11 bankruptcy.
This Court has jurisdiction to hear the removed cause of action pursuant to 28 U.S.C. §§ 1334(b), 151, and 157(a) and the United States District Court for the Northern District of Alabama's General Order Of Reference Dated July 16, 1984, As Amended July 17, 1984 (the "amended General Order of Reference"). This is a core proceeding arising in a case under title 11 of the United States Code as defined in 28 U.S.C. § 157(b)(1) and (2)(A).
This case was referred here from the United States District Court for the Northern District of Alabama (the "District Court"). It is a breach of contract and declaratory judgment action that was originally commenced by Commonwealth in the circuit court of Jefferson County, Alabama (the "State Court Action"), where it was litigated for some thirteen-plus months before its removal to District Court. (Doc. 1, Ex. A.) Upon removal to the District Court, the parties moved to invoke the amended General Order of Reference and the case was referred here. (Doc. 1, Supp. 11.) Essentially, the case is about the attempted sale of Mount Royal Towers, a senior living community in Vestavia Hills, Alabama.
This is not the first time these parties have landed in federal court with disputes over the sale of Mount Royal Towers. Not long after Commonwealth commenced the State Court Action on November 21, 2018, Vestavia Hills filed a lawsuit in District Court on December 17, 2018. (Doc. 4, Ex. 3 at 4, 6.) Like the State Court Action, the District Court action related to the attempted sale of Mount Royal Towers and sought declaratory judgment as well as damages for breach of contract and fraudulent misrepresentation claims. (Id. at 2, 6.) Because the State Court Action was already pending with substantially the same issues and parties, Commonwealth moved the District Court to abstain under the Colorado River doctrine, which "addresses the circumstances in which federal courts should abstain from exercising jurisdiction because a parallel lawsuit is proceeding in one or more state courts."
Meanwhile, the State Court Action proceeded, and the parties engaged in discovery. According to Commonwealth, and it
The State Court Action proceeded in the normal course until January 3, 2020, when Vestavia Hills filed for chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of California (the "California Bankruptcy Court"). (Doc. 10 at ¶17.) Vestavia Hills and Commonwealth separately notified the state court of the bankruptcy and, in so doing, argued for different applications of the automatic stay. (See Doc. 4 at ¶¶ 10, 11; see also Doc. 10 at ¶¶ 18, 19.) Vestavia Hills urged that the automatic stay applied to the individual guarantor defendants, not just the debtor. (Doc. 4 at ¶11.) Commonwealth contended otherwise; countering that while the automatic stay applied to the debtor, it did not stay the continuation of actions against any non-debtor defendants. (Doc. 4 at ¶ 11; Doc. 10 at ¶ 19.) The day after the state court stayed the case against Vestavia Hills only, the case was removed to District Court and was ultimately referred here, the Alabama Bankruptcy Court. (Doc. 4 at ¶ 13.)
The property at the center of this dispute is known as Mount Royal Towers, and it includes a 147-bed independent living facility, a 98-bed licensed assisted living facility, a 129-bed licensed specialty care assisted living facility for memory care, and a 143-bed skilled nursing facility, located together near Birmingham, Alabama. (Doc. 4 at ¶ 2.) When Vestavia Hills's loan with its lender, Wells Fargo, matured in December 2017, Vestavia Hills could not refinance or extend the note covering Mount Royal Towers; consequently, Mount Royal Towers was put up for sale. (Doc. 4, Ex. 3 at 2.) On March 29, 2018, Commonwealth and Vestavia Hills entered into an agreement for Commonwealth to purchase Mount Royal Towers. (Id. at 2.) Certain licenses and approvals were required (by the State of Alabama and other agencies) for the operation and management of Mount Royal Towers, and those "operating approvals" were conditions precedent to closing. (Id. at 3.) The parties executed nine amendments to the agreement which extended both the dates for obtaining outside approvals and the closing dates. (Id.) Ultimately, however, the sale did not close. The parties dispute why the closing never materialized and their disagreement forms the basis of the current litigation.
Commonwealth filed suit on November 21, 2018, in the circuit court of Jefferson County, Alabama, against Vestavia Hills and the individual guarantors of the Purchase Agreement for Mount Royal Towers.
Three days after Commonwealth's counsel sent local counsel for Vestavia Hills a copy of the state court summons and complaint, on December 17, 2018, Vestavia Hills filed suit against Commonwealth in the United States District Court for the Northern District of Alabama. (Doc. 4, Ex. 3 at 6.) There, United States Magistrate Judge England, who heard the case at the District Court, granted Commonwealth's motion to abstain and stayed the federal action. (See generally, Doc. 4. Ex. 3.) Judge England found that several factors supported abstention under Colorado River; namely, the potential for piecemeal litigation (likelihood of overlapping, duplicative discovery as well as the potential for conflicting rulings) and the progress already made in the State Court Action. (Id. at 8-10.) The District Court found other factors also weighed in favor of abstention including the reactive nature of the filing of the District Court action and the fact that certain defendants actively avoided service. (Id. at 7-12.) Notwithstanding the "virtually unflagging obligation" of federal courts to exercise jurisdiction, the District Court found that sufficiently exceptional circumstances existed to warrant abstention. (Id. at 12.)
In response to Vestavia Hills's post-bankruptcy removal of the State Court Action to District Court, Commonwealth filed the instant Motion to Remand and/or for Abstention. (Doc. 4.) Commonwealth perceives the removal as the "latest attempt to move this proceeding out of the State Court and/or delay the State Court case from moving forward." (Id. at 3.) Moreover, it argues that equitable considerations warrant remand and, if not remand, factors exist requiring mandatory and permissive abstention. (Id. at 4.)
On the other hand, Vestavia Hills, as the removing defendants, assert "related to" jurisdiction and that the removed case is a core, and non-core, matter. (Doc. 1 at ¶¶ 9-17.) With its removal action, Vestavia Hills avails itself of 28 U.S.C. §§ 1334 and 1452 to land here, the "local" or "conduit" bankruptcy court in the Northern District of Alabama. (See Doc. 2.) Pending also is Vestavia Hills's Motion to Transfer Venue to the United States District Court for the Southern District of California. (Doc. 2.) In that motion, Vestavia Hills anticipates that, upon transfer, the case will be referred to the California Bankruptcy Court, otherwise known as the "home" bankruptcy court, where the debtor's chapter 11 bankruptcy case is pending.
Vestavia Hills argues that because the instant action is related to the chapter 11 case pending before the California Bankruptcy Court, it should be transferred in the interest of justice and in deference to the "home court presumption," which presumes that cases related to bankruptcy proceedings should be litigated in the
As it relates to Vestavia Hills's pending chapter 11 bankruptcy case, several motions have been filed and some are already set for hearing before the California Bankruptcy Court.
A threshold determination for this Court to make is whether removal by Vestavia Hills was procedurally proper and, if so, whether this Court has subject-matter jurisdiction. Beyond these determinations, this Court must also decide the sequence in which the pending transfer and remand/abstention motions should be resolved; a decision that ultimately controls which court — this Court or the California Bankruptcy Court — will decide the issues of remand and abstention.
Section 1452(a) of Title 28 of the United States Code provides for the removal of claims related to bankruptcy cases. It states that "[a] party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, to the district court for the district where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under 1334 of this title." 28 U.S.C. § 1452(a). Here, there is no dispute as to the timeliness of removal, nor is any procedural defect alleged.
For a court of law, to have jurisdiction is to have the authority to "adjudicate the legal dispute before it." See Reynolds v. Behrman (In re Atherotech, Inc.), 582 B.R. 251, 256 (Bankr. N.D. Ala. 2017). And in the context of bankruptcy jurisprudence,
In its removal notice, Vestavia Hills contends that the "Removed Case is a case related to the Bankruptcy Case" because of potential indemnification liability, Commonwealth's alleged prospective ownership interest in property of the estate, and the existence of claims in the removed case the outcome of which "will directly alter Vestavia Hills's rights and liabilities as a Chapter 11 debtor and impact the handling and administration of the Bankruptcy Case." (Doc. 1 at 4-6.) The test for determining whether "related to" jurisdiction exists is a liberal one. Continental Nat'l Bank of Miami v. Sanchez (In re Toledo), 170 F.3d 1340, 1345 (11th Cir. 1999) ("In Lemco Gypsum, this Court adopted the following liberal test from Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir.1984), for determining jurisdiction over an adversary proceeding."). It is articulated in the Eleventh Circuit's In re Lemco Gypsum
In re Toledo, 170 F.3d at 1345; Lemco Gypsum, 910 F.2d at 788 (quoting Pacor, 743 F.2d at 994); see also Celotex Corp. v. Edwards, 514 U.S. 300, 308 n. 6, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995) (expressing approval of the Pacor test). Importantly, the "Eleventh Circuit later added that `[t]he key word in the Lemco Gypsum test is `conceivable,' which makes the jurisdictional grant very broad.'" Retirement Systems of Alabama v. J.P. Morgan Chase & Co., 285 B.R. 519, 526 (M.D. Ala. 2002), citing In re Toledo, 170 F.3d 1340, 1345 (11th Cir.1999).
Under the facts and circumstances of this case, this Court concludes that, under the very broad jurisdictional grant of "related to" jurisdiction, it is at least conceivable that the removed case is related to Vestavia Hills's chapter 11 bankruptcy case. The primary asset of that bankruptcy case is the same asset that is at the center of the dispute between these two parties in the removed litigation. Indeed, Commonwealth's state court complaint, which is the operative complaint of the removed litigation, demands specific performance; namely, for Vestavia Hills to convey Mount Royal Towers, the principal asset of the chapter 11 bankruptcy estate, to Commonwealth. (Doc. 1, Ex. A at 15-16.) In this regard, the State Court Action is a proceeding against the debtor's property — even though it does not have to be in order to fall within the broad sweep of "related to" jurisdiction under the Lemco Gypsum test. Lemco Gypsum, 910 F.2d at 788 (finding that for "related to jurisdiction" to exist "the proceeding need not necessarily be against the debtor or the debtor's property."). It is conceivable, therefore, that the outcome of the removed litigation could "alter, positively or negatively, the debtor's rights, liabilities, options, or freedom of action or could influence the administration of the bankrupt estate." El Paso E&P Co., L.P. v. CMV Joint Venture, No. 7:09-cv-1621-RDP, 2010 WL 11579728, at *1, *3 (N.D. Ala. 2010) (quoting Edge Petroleum Operating Co. v. GPR Holdings, L.L.C., 483 F.3d 292, 298 (5th Cir. 2007)).
Commonwealth's complaint also demands an award of reasonable attorneys' fees, expenses and costs, compensatory damages, lost profits, special damages, and a declaration determining the rights and liabilities with respect to the Purchase Agreement. (Doc. 1, Ex. A at 16-20.) The state court complaint expressly seeks a determination of "rights" and "liabilities." (Id.) As such, it is at least conceivable that "a finding against Debtor would alter its rights, liabilities, options, and freedom of action and impact the administration of its bankruptcy estate." Rayonier Wood Products, L.L.C. v. Scanware, Inc. (In re Scanware, Inc.), 411 B.R. 889, 895-96 (Bankr. S.D. Ga. 2009) (emphasis added). Indeed, "[e]ven when there is a possibility that a suit may ultimately have no effect on the estate, this possibility is not enough to conclude that there would be no conceivable effect." In re Houston Regional Sports Network, L.P., No. 13-35998, A.P. No. 13-03325, 2014 WL 2159534, at *4 (Bankr. S.D. Tex. 2014), citing In re Wood, 825 F.2d 90, 94 (5th Cir. 1987).
"Courts are divided about the sequence for ruling on competing motions to transfer or remand." In re Scanware, Inc., 411 B.R. at 895-96 (internal citations omitted). One line of cases holds that "the bankruptcy court to which the state court lawsuit is removed (`the local bankruptcy court') has the right to decide a pending motion to abstain or remand before determining whether venue is proper in the home bankruptcy court." In re Scanware, 411 B.R. at 896 (quoting Frelin v. Oakwood Homes Corp., 292 B.R. 369, 380 (Bankr. E.D. Ark. 2003) (collecting cases)). This approach was taken by the court in Scanware. In that case, which involved a debtor who was "not an operating business, its principal place of business was shut down prepetition," and a contract with a very distinct Georgia choice of law provision, the local (Georgia) bankruptcy court decided the remand/abstention motion instead of transferring the motion to the home court in Oregon for a decision. Id. at 892, 893, 895-98.
Other courts have found that the "bankruptcy court in which the bankruptcy is pending (usually referred to as the `home court') is in the best position to determine the issues underlying motions to abstain or remand." See In re Scanware, Inc., 411 B.R. at 895 (collecting cases); see also Thomas v. Lorch, Wedlo, Inc. (In re Wedlo, Inc.), 212 B.R. 678, 679 (Bankr. M.D. Ala.1996) (transferring case to "home" court in Illinois because that court was in the "best position to determine the issues underlying the motion to remand, abstain, or dismiss."). As explained in Scanware:
In re Scanware, Inc., 411 B.R. at 895-96. This approach was taken by the United States District Court for the Northern District of Alabama in El Paso E&P Co., L.P. v. CMV Joint Venture, a case where the court's abstention analysis informed its decision to transfer. Like El Paso, consideration of factors pertinent to the abstention inquiry here also reveals the propriety of having the home bankruptcy court decide whether to remand or abstain.
Title 28 U.S.C. § 1334(c)(2), sometimes referenced as the "so-called mandatory abstention provision" provides that:
28 U.S.C. § 1334(c)(2); El Paso E&P Co., 2010 WL 11579728, at *4. Alternatively, Title 28 U.S.C. § 1334(c)(1) allows for permissive abstention "in the interest of justice, or in the interest of comity with State court or respect for State law." 28 U.S.C. § 1334(c)(1). Additionally, there is 28 U.S.C. § 1452(b) which provides for remand of a removed proceeding "on any equitable ground." 28 U.S.C. § 1452(b).
Turning to mandatory abstention, there are three elements necessary to mandate abstention: (1) "the proceeding is based on a state law claim which, although related to a title 11 case, does not arise under title 11 or out of a title 11 case;" (2) "the proceeding could not have been commenced in federal court but for the bankruptcy;" and (3) "the state court can timely adjudicate the cause of action." El Paso E&P Co., 2010 WL 11579728, at *4, citing In re Royal, 197 B.R. 341, 349 (Bankr. N.D. Ala. 1996). Here, whether the state court can "timely litigate the cause of action" is disputed.
Pending before the California Bankruptcy Court is a motion for relief from the automatic stay where Commonwealth seeks to lift the stay for the limited purpose of the state court deciding its partial summary judgment motion. (Ca. Bankr. Doc. 56.) Also pending is Vestavia Hills's adversary proceeding in which it seeks extension of the stay to the individual guarantor defendants. (Ca. Bankr. Doc. 116.) Because resolution of these motions by the California Bankruptcy Court will determine what, if any, litigation can proceed in state court (by virtue of whether the stay is in place and against whom), the ability of the state court to timely render an adjudication is unknown. Additionally, this Court questions whether Vestavia Hills is an indispensable party to the State Court Action, in which case its presence would be procedurally required and the state court case litigation would be forestalled even if the stay is not extended to the individual guarantor defendants.
Accordingly, this Court finds that "... whether the [home] bankruptcy court is willing (or able) to lift the stay controls whether the [Jefferson County Circuit Court] may timely adjudicate the case." El Paso E&P Co., 2010 WL 11579728, at *6. Because "the decision whether to remand this case pursuant to § 1334(c)(2) necessarily turns on a contingency beyond the control of the parties or this court," this Court is "unable to meaningfully evaluate [Commonwealth's] mandatory abstention argument absent needless conjecture regarding the [California Bankruptcy Court's] amenability to lifting [or extending] the stay." Id. And while this "impasse, however, is not necessarily terminal" this Court finds that, given the facts and circumstances of this particular case, "the [California] bankruptcy court is in the best position to assign relative weight to [the remand and abstention] factors, which require evaluation of the state court claims vis-à-vis the bankruptcy proceedings." Id. This is so because "only the [California] bankruptcy court has the requisite familiarity
Relatedly, the parties dispute whether the present action constitutes a core or non-core matter. "Mandatory abstention only applies to non-core matters — `that is, proceedings related to a case under title 11, but not arising under title 11, or arising in a case under title 11.'" Thomason Auto Group, L.L.C. v. China America Cooperative Automotive, No. 08-3365-JLL, 2009 WL 512195, at *1, *5 (D.N.J. Feb. 27, 2009). "[T]his Court has already concluded — as a prerequisite to asserting jurisdiction — that the present case is `related to' a bankruptcy proceeding, [but] it has not analyzed each claim to determine whether it is core or non-core." Thomason, 2009 WL 512195, at *5. Such a determination (core versus non-core) is one that this Court makes regularly. Notwithstanding, this Court recognizes that it is a determination "intimately related to the administration of the bankruptcy estate, see 28 U.S.C. § 157(b)(2)," and therefore some courts have held that the "the home court is better positioned to conduct it." Id., citing Bayou Steel Corp. v. Boltex Mfg. Co., L.P., No. 03-1045, 2003 WL 21276338 (E.D. La. June 2, 2003). Under the particular facts and circumstances of this case, this Court agrees and defers to the home bankruptcy court in California to determine whether the claims at issue are core, non-core, or both.
Along those lines, the parties dispute whether the underlying agreement between Vestavia Hills and Commonwealth constitutes an executory contract. While this is again a determination that this Court is called to make with some frequency, it is also a determination that will ultimately impact the administration of the bankruptcy estate. Indeed, under the "functional approach" that some courts utilize in determining whether a contract is executory, the analysis is keyed to "the benefits that assumption or rejection would produce for the estate." See Sipes v. Atlantic Gulf Communities Corp. (In re General Dev. Corp.), 84 F.3d 1364, 1375 (11th. Cir. 1996) (citing In re G-N Partners, 48 B.R. 462 (Bankr. Minn.1985); In re Norquist, 43 B.R. 224 (Bankr. Wash. 1984); In re Booth, 19 B.R. 53 (Bankr. D. Utah 1982)). For this additional reason, the Court concludes that under the facts and circumstances of this case, "the home court is best positioned to make, and should make, the decision regarding remand [and abstention]," and whether the underlying agreement is an executory contract between Vestavia Hills and Commonwealth. Cornerstone Dental, PLLC v. Smart Dental Care, LLC, Adv. No. 07-09002-TLM, 2008 WL 907374, at *1, *2 (Bankr. Idaho. Mar. 31, 2008).
Turning to the merits of the motion to transfer venue, this Court finds that pursuant to 28 U.S.C § 1412
"Many courts have held that the most important factor to be considered in determining whether to transfer venue of a bankruptcy proceeding under the interest-of-justice prong is whether transfer would promote the economic and efficient administration of the bankruptcy estate." Mello v. Hare, Wynn, Newell & Newton, LLP, No. 10-243, 2010 WL 2253535, at *4 (M.D. Tenn. May 30, 2010) (citing Bruno's, 227 B.R. at 324). To that end, "the first factor — economics of estate administration and third factor — judicial efficiency — merge into a single inquiry: whether transferring the civil proceeding to the transferee court facilitates the efficient administration of the bankruptcy." El Paso E&P Co., 2010 WL 11579728, at *9 (quoting Bruno's, 227 B.R. at 325 n.45 ("[Efficient administration of the bankruptcy estate] is essentially broken down into `economics of estate administration' and `judicial efficiency' in this court's analysis.")).
Here, Vestavia Hills is the undisputed owner of real and personal property that is subject to a Purchase Agreement which Commonwealth claims was breached. That property, Mount Royal Towers, is the primary asset to be administered in Vestavia Hills's chapter 11 bankruptcy case. It is also the asset to which Commonwealth stakes a claim by virtue of demanding specific performance of the Purchase Agreement in the State Court Action. And, it is the asset for which Vestavia Hills has sought approval to sell to a different buyer in the California Bankruptcy Court. Moreover, and quite significantly, Mount Royal Towers is an asset which houses 517 residents. And so, according to argument advanced by Vestavia Hills, Mount Royal Towers is the asset which the debtor must sell quickly in order to protect the best interests of these residents.
That is the reality of this case and the context in which this Court must decide whether the interest of justice warrants transfer. Whether Vestavia Hills has provided "evidence that the preparation or filing of a disclosure statement or a plan of reorganization would be delayed if this proceeding is not transferred, or that confirmation of a plan would be delayed" is not dispositive. (Doc. 9 at 5.) Here, the preponderance of evidence substantiating that the interest of justice compels transfer is found in the record and is demonstrated by the procedural posture of a complex chapter 11 case. See In re Taylor,
In reaching this conclusion, the fact that Mount Royal Towers is home to 517 Alabama residents is not lost on this Court. If the debtor's chapter 11 case had been filed here, this Court would have welcomed the opportunity to preside over the bankruptcy case and, as the home court, decide whether to remand the State Court Action or abstain from hearing it. But those are not the facts before this Court. The reality here is that there are limited funds and resources to keep Mount Royal Towers operational for the 517 residents that live there. Realistically, therefore, selling Mount Royal Towers to a purchaser like the stalking horse described by counsel may be the best chance to ensure that Mount Royal Towers stays operational for the benefit of its residents. Given these facts, the Court is persuaded that the efficient administration of the bankruptcy estate is in the best interests of the 517 residents, and that transfer is the best means to facilitate that effort so that the California Bankruptcy Court may address the State Court Action within the context of the debtor's chapter 11 bankruptcy case.
The Court's conclusion that transfer is warranted is not altered by Commonwealth's assertion that Vestavia Hills has chosen "a home court that has no relation to [Mount Royal Towers'] primary assets and operations," or by Commonwealth's claims of forum shopping. (Doc. 9 at 5.) To begin, Commonwealth has not alleged improper venue of the California bankruptcy proceeding, nor moved to dismiss it. More importantly, however, the procedural history of this removed case speaks for itself. To the extent that Vestavia Hills's actions are thinly vailed attempts at forum shopping, this Court is confident that the California Bankruptcy Court is more than capable of considering the same in deciding whether to remand or abstain. Further, under the facts and circumstances of this case, Commonwealth's reliance on the Bruno's and Twyman decisions is unpersuasive. In Bruno's, the court considered the home court's "familiarity with the substantive issues and familiarity with the law to be applied in the proceeding" in the context of evaluating the judicial efficiency of transfer. In re Bruno's Inc., 227 B.R. 311, 327-28 (N.D. Ala. 1998). In doing so, the court found that "[n]o evidence was presented that the Delaware court has any familiarity with the progress of and issues raised in the action, and this Court assumes
In the context of the instant case, the Twyman decision is likewise unpersuasive. In Twyman, a settlement proposed in state court was central to the court's judicial efficiency analysis: "the dominant fact is that an overwhelming part of the matters involved in the proceedings before this Court will be resolved if the proposed settlement is consummated. Judicial efficiency based on this fact alone weighs in favor of [denying transfer]." Twyman v. Wedlo, Inc., 204 B.R. 1006, 1015 (Bankr. N.D. Ala. 1996). Irrespective of the settlement, the court also found the fact that a class had been certified in the state court litigation was another reason justifying transfer on grounds of judicial efficiency. Id. These facts (a proposed settlement and class certification) significantly informed the court's judicial efficiency analysis and, concomitantly, its decision to deny transfer. And they are facts distinct from the circumstances presented here.
In the instant case, transfer promotes the efficient administration of the bankruptcy estate. Indeed, because "the [home] bankruptcy court is more familiar with the bankruptcy action and what may be required for efficient administration of the estate and ... the [home] bankruptcy court is better positioned to determine how and to what extent this action will affect administration of the bankruptcy estate," this factor strongly weighs in favor of transfer. El Paso E&P Co., 2010 WL 11579728, at *9 (citations omitted).
"[C]ourts often presume that the proper venue for a proceeding related to a bankruptcy case is in the district where the bankruptcy case is pending (here, the [California Bankruptcy Court])." Marroquin v. Taylor Bean & Whitaker Mortg. Co. (In Taylor Bean & Whitaker Mortgage Corp.), No. 3:09-BK-07047-JAF, A.P. No. 13-1024-HCM, 2013 WL 1703867, *1 (W.D. Tx. Apr. 19, 2013). And "§ 1412's consideration of the home court presumption strongly informs the efficiency analysis." El Paso E&P Co., 2010 WL 11579728 at * 9, citing In re Harnischfeger Indus., Inc., 246 B.R. 421, 440 (Bankr. N.D. Ala. 2000) ("[T]he home court presumption was created to facilitate an economic and efficient administration of the debtor's estate."). As noted by the court in the El Paso decision:
El Paso E&P Co., 2010 WL 11579728 at *9.
In the instant action, Vestavia Hills filed its bankruptcy petition in the Southern District of California, which makes that court the presumptively proper venue for related civil proceedings. Irwin v. Beloit Corp., (In re Harnischfeger), 246 B.R. 421, 440 (Bankr. N.D. Ala. 2000) ("A majority of the courts that have considered whether change of venue is appropriate have created a presumption that the bankruptcy court in which the debtor's case is pending, the home court, is the proper venue for adjudicating all proceedings in the case, including state actions removed to a bankruptcy court in which the debtor's case is not pending (referred to as the `conduit court' or `outpost court')."). As it must, Commonwealth concedes the presumption in favor of the California Bankruptcy Court, arguing instead that the presumption should not be applied here because the presumption was not created to facilitate forum shopping. Commonwealth cites to Harnischfeger in support of its position. While this Court concurs that the home court presumption was not created to facilitate forum shopping, Commonwealth's reliance on Harnischfeger is unpersuasive. In Harnischfeger, a co-defendant, not the debtor, sought to invoke the home court presumption. This key fact provides context for the court's statement that it believed "the home court presumption exists to help the debtor, not to facilitate forum-shopping for co-defendants." In re Harnischfeger, 246 B.R. at 440. Here, the debtor has moved for transfer and for the benefit of the home court presumption. To that end, the Court finds that the application of the home court presumption, under the particular circumstances and facts of this case, is consistent with the intended purpose "to facilitate an economic and efficient administration of the debtor's estate." In re Harnischfeger, 246 B.R. at 440.
As to the remaining factors, the ability to receive a fair trial, the state's interest in having local controversies decided within its borders, enforceability of any judgment rendered, and the plaintiff's original choice of forum, the Court finds that these factors do not outweigh those favoring transfer. The parties concede that the ability to receive a fair trial is neutral. And the state's interest factor, enforceability of a judgment factor, and the plaintiff's original choice of forum factor, are either insufficient to "counterbalance the strong justification for transfer," or are neutral. El Paso E&P Co., 2010 WL 11579728, at *10. Moreover, should the California Bankruptcy Court decide to either remand the litigation to the state court in Alabama or abstain, the state's interest in having local controversies decided within its borders is protected and any enforceability of judgment concerns are allayed.
Under the particular facts of this case, this Court finds that allowing the home bankruptcy court in California to rule on the remand and abstention motion is the best course. The avoidance of piecemeal
In this case, the undersigned must determine which court should decide the State Court Action and when — should the home bankruptcy court in California or the local bankruptcy court in Alabama decide the removed case? Should the case be equitably remanded or is abstention appropriate, whether mandatory or permissive? Answers to these questions involve considerations of the "effect of abstention on the efficient administration of the bankruptcy estate" and "the burden of the bankruptcy court's docket." Rayonier Wood Products, L.L.C. v. Scanware Inc., (In re Scanware), 411 B.R. 889, 897-98 (Bankr. S.D. Ga. 2009). Absent transfer, therefore, this court would be speculating as to the impact that abstention would have on a chapter 11 bankruptcy estate being administered in the Southern District of California. Moreover, absent transfer, this Court would have to speculate on the "burden" of the California Bankruptcy Court's docket.
And furthermore, this Court would have to decide whether the state court could timely adjudicate the litigation, a decision necessarily influenced by how the California Bankruptcy Court decides Commonwealth's pending motion for relief from stay and Vestavia Hills's pending complaint to extend the stay. In most scenarios, unlike this case, remand and abstention could probably be decided by the local bankruptcy court without issue; here, however, contingencies exist that are in the control and purview of the California Bankruptcy Court, and those contingencies weigh in favor of the home bankruptcy court, in California, deciding whether to remand or abstain.
Regarding Vestavia Hills's transfer motion, "two preeminent considerations, namely the home court's presumptive suitability and that transfer will facilitate the economical and efficient administration of the estate," inform this Court's decision. Dunlap v. Friedman's, Inc., 331 B.R. 674, 681 (S.D. W. Va. 2005). "Inasmuch as these two important considerations decidedly favor" Vestavia Hills's position, the Court concludes, in its discretion, that transfer is warranted. Id.
Based on these findings and conclusions, the circumstances of this proceeding indicate that the Motion to Transfer is due to be granted. Therefore, this action is due to be transferred to the United States District Court for the Southern District of California. Accordingly, it is hereby