Any defendant to a bankruptcy adversary proceeding seeking to transfer venue of their case should read the recent opinion dated November 3, 2014, in which the Honorable Mary F. Walrath granted Defendant’s motion to transfer venue in the case styled as: IPC Int’l Corp. v. Milwaukee Golf Shopping Center LLC, et al. (In re IPC Int’l Corp.), Adv. No. 14-50333 (MFW) (Bankr. D. Del. Nov. 3, 2014). The Court transferred the case to the U.S. District Court for the Northern District of Illinois.
In granting the motion, the Court was persuaded that the “interests of justice and convenience of the parties favors transfer”. (Slip op. at 1.) The Court found that each of the claims asserted by the Debtor IPC Int’l Corp. (“Debtor” or “IPC”) were non-core claims, despite the fact that IPC asserted a claim for turnover under Section 542 of the Bankruptcy Code.
While a turnover claim is generally considered a “core” claim (slip op. 4-5), the Court found that IPC’s turnover claim was without merit. This is so because a “debtor may not use Section 542(b) to recover a debt if the debt is a bona fide dispute.” (Slip op. at 6.) Here the Court found that a bona fide dispute existed regarding the debt, rendering a turnover action inappropriate. In addition the Court found that the debt was “unmatured”, and that the requested turnover of post-petition debt was also non-core.
Finding that the claims asserted were non-core, the Court then analyzed the traditional factors for transfer of venue, including (i) plaintiff’s choice of forum, (ii) defendant’s choice of forum, (iii) location where claims arose, (iv) location of books and records, (v) convenience of the parties and witnesses, (vi) the enforceability of any judgment rendered, (vii) practical considerations, (viii) relative administrative difficulty, (ix) public policy of the for a, (x) familiarity with applicable state law, and (xi) local interest. The Court found that most of these factors weighed in favor of transfer, or were neutral. Therefore, the Court granted Defendant’s motion to transfer venue to the Northern District of Illinois.
This case is significant for any defendant in a bankruptcy adversary proceeding seeking to transfer venue of their case. In determining whether the causes of action are core or non-core, the Court will not be convinced that a matter is “core” simply because it is formally pled as a traditional core matter, such as turnover under Section 542(b). Instead, the Court will “look under the hood” of the actual allegations raised to determine whether a core action has legitimately been raised by a debtor or trustee.
Carl D. Neff is a bankruptcy attorney with the law firm of Fox Rothschild LLP. Carl is admitted in Delaware and regularly practices before the United States Bankruptcy Court for the District of Delaware. You can reach Carl at (302) 622-4272 or at email@example.com.