Court: District Court, M.D. North Carolina; November 6, 2011; Federal District Court
Plaintiffs' Motion for Remand is denied, while Wells Fargo's Motion to Shorten Response Time and for Expedited Consideration is deemed moot. Wells Fargo's Motion for Change of Venue is granted. The case involves a refinance loan obtained by Plaintiff on her home in Durham, North Carolina, with Mortgaged, Inc. as the loan originator and Nichols Satterfield, PLLC as the settlement agent. Plaintiff alleges that the initial homeowner's insurance premium, expected to be paid from closing funds, was not paid, resulting in the lapse of her insurance policy. Subsequently, Wells Fargo force-placed an insurance policy and created an escrow account, increasing Plaintiff's monthly payments significantly. Plaintiff claims Wells Fargo did not act until fourteen months after being notified of the previous policy's expiration and charged her for three annual premiums at inflated rates. Unable to afford the increased payments, Plaintiff defaulted, leading to foreclosure proceedings initiated by Wells Fargo. The action was originally filed in the Superior Court of Durham County against multiple defendants, including Wells Fargo, alleging breach of contract, good faith and fair dealing, negligent misrepresentation, and negligence. Wells Fargo removed the case based on diversity of citizenship and seeks to transfer it to the United States District Court for the Eastern District of North Carolina, where it can be handled alongside Plaintiff's bankruptcy case, asserting the matter is part of the bankruptcy estate and under bankruptcy court jurisdiction.
Wells Fargo filed a motion to expedite the Plaintiff's response to its Motion for Change of Venue, seeking to transfer the case to the United States District Court for the Eastern District of North Carolina, which is related to the Plaintiff's bankruptcy proceedings. Despite previously filing a Motion for Remand, the Plaintiff submitted a Notice of Consent to this transfer while reserving her rights to later seek remand. The Court acknowledges a debate on whether 28 U.S.C. § 1404(a) or § 1412 governs such venue changes, noting that while § 1412 applies to core bankruptcy proceedings, there is a split in authority on its application to actions related to bankruptcy in a different forum. Some courts favor § 1404(a) for transfers related to bankruptcy cases, citing that both statutes share similar language and considerations for transfer. However, § 1404(a) restricts venue transfer to districts where the action could have originally been brought, a factor that may be pertinent in this case, especially since Wells Fargo's removal was based on diversity of citizenship.
Venue for diversity of citizenship cases is dictated by 28 U.S.C. § 1391(a), allowing civil actions based on diversity jurisdiction to be filed in specific judicial districts: (1) where any defendant resides if all reside in the same state; (2) where a substantial part of the events or omissions occurred, or where relevant property is situated; or (3) where any defendant is subject to personal jurisdiction if no other venue is available. Section 1391(c) clarifies that a corporation is considered to reside in any district where it is subject to personal jurisdiction at the time of filing. If a corporation has contacts sufficient for personal jurisdiction in multiple districts within a state, it is deemed to reside in any such district or in the district with its most significant contacts.
The current pleadings did not address the defendants' contacts with the Eastern District of North Carolina, making it impossible for the court to ascertain whether venue was proper under § 1391(a)(1). Additionally, there is no indication that substantial events or property linked to the claim occurred in the Eastern District, thus failing to meet the criteria of § 1391(a)(2). Since proper venue appears to exist in the Middle District of North Carolina, § 1391(a)(3) is inapplicable.
While § 1409(a) allows bankruptcy-related proceedings to be initiated in the district where the bankruptcy case is pending, the plaintiff's bankruptcy claims were not filed in the Eastern District at the time of this action. Section 1412 provides a basis for venue transfer based solely on the interests of justice and party convenience, without requiring prior venue eligibility in the Eastern District. The Southern District of West Virginia's analysis in Dunlap v. Friedman’s, Inc. addressed whether to apply § 1404 or § 1412 for transferring bankruptcy-related cases, ultimately noting that § 1404 could hinder transfers due to jurisdictional and venue prerequisites that must be met for related actions.
An outcome that undermines the presumption of litigating related-to proceedings in the home court would be detrimental. The court reviewed the history of 28 U.S.C. § 1412 and determined it is the appropriate statute for venue transfer in related-to actions. The court found the reasoning in Dunlap persuasive and will evaluate Wells Fargo’s Motion for Change of Venue under this statute. The court’s analysis aligns with Dunlap, which establishes that motions to transfer actions related to bankruptcy should be considered under § 1412.
The court next needs to assess if the current action meets the Fourth Circuit's related-to jurisdiction criteria, which states that an action is related to bankruptcy if its outcome could influence the debtor's rights or the administration of the bankrupt estate. The case satisfies this test, as the determination of the parties' obligations regarding a refinancing loan will impact the bankrupt estate, particularly the Plaintiff’s liability to Wells Fargo. Additionally, the Plaintiff's request to enjoin a foreclosure sale directly affects the bankruptcy estate.
With the matter found to be related to the Plaintiff’s bankruptcy, the court will evaluate whether the case warrants a transfer for the interests of justice or convenience of the parties. Factors considered under the interest of justice include the efficient administration of the bankruptcy estate, judicial economy, fairness of trial venues, local interest in the controversy, potential impacts on judgment enforceability, and whether the Plaintiff's choice of forum should be altered.
The court determined that transferring the case to the Eastern District of North Carolina is appropriate, considering various factors related to the convenience of the parties and the interests of justice. Key points include:
1. **Convenience Factors**: The court assessed the convenience of the parties based on the location of the plaintiff and defendant, ease of access to evidence, and the convenience of witnesses. The plaintiff's consent to Wells Fargo’s motion for change of venue and her bankruptcy filing in the Eastern District indicate that this venue is not less convenient than the original one.
2. **Proximity of Districts**: The physical proximity between the Middle and Eastern Districts of North Carolina minimizes logistical concerns regarding access to proof and witnesses, as well as the costs associated with obtaining unwilling witnesses.
3. **Interests of Justice**: Transferring the case promotes the efficient administration of the bankruptcy estate and judicial economy by reducing duplicative litigation. There is a presumption that the district hearing the bankruptcy case is the proper venue for related actions.
4. **Plaintiff's Consent**: The plaintiff's consent to the transfer and her bankruptcy filing allow the court to give minimal weight to her original choice of forum.
5. **Conclusion and Orders**: The court granted Wells Fargo’s motion for change of venue, rendering the plaintiff's motion for remand and Wells Fargo’s motion to expedite consideration moot. The Clerk is instructed to transfer the entire record to the Eastern District of North Carolina for further proceedings.
Overall, the court emphasized the appropriateness of consolidating related claims within the bankruptcy proceedings to enhance judicial efficiency.
A Magistrate Judge can issue a non-dispositive transfer order without District Court approval, supported by case law from Scheafnocker and others. The record indicates that the Plaintiff has not served any Defendants, including American Security, Nichols Satterfield, and Mortgageit, who have not appeared in the case. Only Defendant Brock Scott has filed an Answer and made a separate appearance. The lack of service does not affect the Court’s authority to transfer the case, as established in Hanover Ins. Co. v. Paint City Contractors. Furthermore, Wells Fargo has served the Motion for Change of Venue to all named Defendants, who did not object. Plaintiff initiated the action in the Superior Court of Durham County on September 15, 2010, and later filed for Title 11 relief in Bankruptcy Court on September 13, 2011.
