United States District Court, E.D. Pennsylvania
COMMONWEALTH OF PENNSYLVANIA, by Attorney General JOSH SHAPIRO, Plaintiff,
THINK FINANCE, LLC, et al., Defendants.
MEMORANDUM AND ORDER
the Court are Defendants Think Finance, LLC (f/k/a Think
Finance, Inc.), TC Loan Service LLC, Tailwind Marketing, LLC,
TC Decision Sciences, LLC, and Financial U, LLC's
(collectively, “Think Finance Defendants”) Motion
to Transfer Venue (Doc. No. 207), the Commonwealth's
Response in Opposition thereto (Doc. No. 208), Defendant
Rees' Joinder of the Think Finance Defendants' Motion
to Transfer Venue (Doc. No. 212), the Think Finance
Defendants' Reply in Support of their Motion to Transfer
Venue (Doc. No. 213), and all other relevant material and
notices that the parties have submitted (Doc. Nos. 219, 221,
222, 225, and 227). For the following reasons, the Motion is
allegations and proceedings are well known to the parties of
this dispute. We do not review them here.
to the instant decision, we note that on October 23, 2017,
the Think Finance Defendants filed voluntary petitions for
relief under chapter 11 of the United States Code before the
United States Bankruptcy Court for the Northern District of
Texas. After doing so, the Think Finance Defendants moved to
transfer this case to the United States District Court for
the Northern District of Texas, where they believe it will be
transferred to the bankruptcy court overseeing their
proceedings under chapter 11.
Think Finance Defendants and Plaintiff, the Pennsylvania
Office of Attorney General (“OAG”), disagree on
what statute governs the transfer request in this case. The
Think Finance Defendants argue that 28 U.S.C. Section 1412
applies, which 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.” 28 U.S.C. § 1412.
While, by its terms, the statute only applies to cases or
proceedings “under title 11, ” courts have
applied Section 1412 more broadly to “relating
to” cases-i.e., to cases that have a conceivable effect
on the estate being administered in bankruptcy. Toth v.
Bodyonics, Ltd., No. 06-cv-1617, 2007 WL 792172, at *1-2
(E.D. Pa. Mar. 15, 2007) (citing Howard Brown Co. v.
Reliance Ins. Co., 66 B.R. 480, 482 (E.D. Pa. 1986)). In
response, the OAG argues for the application of the general
transfer statue, 28 U.S.C. Section 1404, which subsection (a)
provides: “[f]or the convenience of parties and
witnesses, in the interest of justice, 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.” 28
U.S.C. § 1404(a).
start, both Sections instruct us to analyze whether the
transfer is in the “interest of justice.” 28
U.S.C. §§ 1404(a), 1412. While the “interest
of justice” is a fairly amorphous phrase, we generally
consider the following factors under both Sections:
“(1) plaintiff's choice of forum; (2)
defendant's preference; (3) whether the underlying claim
arose elsewhere; (4) relative physical and financial
conditions of the parties; (5) convenience of witnesses; (6)
location of books and records; (7) enforceability of any
judgment obtained; (8) practical considerations making trial
easy, expeditious or inexpensive; (9) administrative
difficulty arising from court congestion; (10) local interest
in controversy; (11) public policies in each forum; and (12)
familiarity of trial court with applicable law.”
Toth, 2007 WL 792172, at *2 (noting the
considerations under Sections 1404 and 1412 are the same)
(citing Jumara v. State Farm Ins. Co., 55 F.3d 873,
879-80 (3d Cir. 1995)); Marino v. Kent Line
Int'l, 2002 WL 31618496, at *2 n.1 (E.D. Pa. Nov.
20, 2002) (same) (citing In re Emerson Radio Corp.,
52 F.3d 50, 55 (3d Cir. 1995)).
both Sections may consider similar factors, the Think Finance
Defendants insist that the main distinction between Sections
1404 and 1412 is that Section 1412 carries with it a
presumption in favor of transferring the case to the district
where bankruptcy proceedings are occurring. Krystal
Cadillac-Oldsmobile-GMC Truck v. General Motors Corp.,
232 B.R. 622, 627 (E.D. Pa. 1999).
district courts have considered similar transfer requests in
related litigation. Most recently, the Eastern District of
Virginia transferred a class action brought by Virginia
customers upon motion of Mr. Rees and GPL Servicing, Ltd.
Gibbs v. Rees, No. 17-cv-386, 2018 WL 1460705, at
*16 (E.D. Va. Mar. 23, 2018). Holding that Section 1412
applied to the transfer request, the court found that Mr.
Rees' and GPL Servicing, Ltd.'s indemnification
agreements with the Think Finance Defendants rendered the
case “related to” the bankruptcy proceedings
because the outcome could conceivably have an effect on the
bankruptcy estates. Id. at *12-13. The court noted
that the economic and efficient administration of the
bankruptcy estate was the most important factor considered.
Id. at *14. In doing so, the court recognized a
presumption when applying Section 1412 in favor of trying
cases “related to” a bankruptcy proceeding in the
court where the bankruptcy proceedings are pending.
months prior to the decision in Gibbs, the District
of Montana denied a transfer request from the Think Finance
Defendants in another related action brought by the Consumer
Financial Protection Bureau for loans issued to Montana
residents. CFPB v. Think Finance, LLC, No.
17-cv-127, 2018 WL 734661, at *5 (D. Mont. Feb. 2, 2018).
Because the suit was brought by the Consumer Financial
Protection Bureau, a federal agency, the court noted that the
lawsuit carried the special designation of a “police
and regulatory action” under the Bankruptcy Code.
Id. at *2-3. The court noted that, as a police and
regulatory action, the case was not subject to the automatic
stay provision under 28 U.S.C. Section 362(b)(4). To the
court, this exemption gave force to the underlying public
policy that “police and regulatory actions present
concerns more important than the goals of efficiency and
maximizing the estate.” Id. at *4 (internal
quotation omitted). Ultimately, the court denied the transfer
request under Section 1404, finding that the application of
the presumption to transfer that Section 1412 carries
“would contravene the public policy underlying the stay
exception.” Id. at *2-5.
we agree with Gibbs and follow this Court's
precedent by applying Section 1412 to the Think Finance
Defendants' transfer request. Toth, 2007 WL
792172, at *1-2. The outcome of this case clearly implicates
the Think Finance Defendants' bankruptcy estates. As
such, this case relates to the Think Finance Defendants'
bankruptcy proceedings, and we will therefore analyze their
transfer request under Section 1412.
we find that Section 1412's presumption of transfer does
not apply to police and regulatory actions, such as this
case. It is important to note that the presumption in favor
of transfer under Section 1412 cannot be found in the
statute. Rather, the presumption has developed throughout
case law in which courts were not faced with the competing
interest of affording due respect to police and regulatory
actions. See e.g., Dearden v. FCA U.S. LLC,
2017 U.S. Dist. LEXIS 48751 (E.D. Pa. Mar. 31, 2017);
Al's Family Auto. v. Bennett, No. 11-cv-6237,
2012 U.S. Dist. LEXIS 9353 (E.D. Pa. Jan. 25, 2012);
Krystal Cadillac, 232 B.R. 622 (E.D. Pa. 1999).
we agree with the court in CFPB that the public
policy underlying the exception to the automatic stay
“generates inherent tension with the public policy
underlying the presumption of transfer in [Section]
1412.” CFPB, 2018 WL 734661, at *3. Applying a
presumption of transfer to police and regulatory actions
would also conflict with the public policy underlying
Congress' decision to exempt “a civil action by a
governmental unit to enforce such governmental unit's
police or regulatory power” from 28 U.S.C. Section
1452, which permits the removal of cases from state court
that relate to bankruptcy proceedings in federal court. 28
U.S.C. § 1452(a). Simply put, Congress has favored the
interest of permitting states' regulatory and police
actions to independently proceed over the interest in
centering the administration of the defendant's related
bankruptcy proceedings, see 28 U.S.C. Section
1452(a), or the interest in facilitating ...