The United States District Court for the Northern District of Texas recently considered the question of which statute applies when a district court seeks to transfer a case related to a bankruptcy proceeding: 28 U.S.C. § 1404 or 28 U.S.C. § 1412? The answer to this venue question has split district courts across the country.
The general transfer-of-venue statute, Section 1404(a), provides that “[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.” Section 1412 states 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.”
The court highlighted three important differences between the two transfer statutes:
First, under Section 1404(a), a district court may transfer “any civil action,” while under Section 1412, a district court can only transfer “a case or proceeding under title 11.”
Second, under Section 1404(a), a district court can only transfer a case to another “district or division where it might have been brought.” Section 1412 has no analogous restriction.
Third, under Section 1404(a), a district court can only transfer a case “[f]or the convenience of the parties and witnesses, in the interest of justice.” Section 1412 is disjunctive, allowing transfer for convenience of the parties or in the interest of justice.
The crux of the court’s analysis centered on the meaning of the phrase “a case or proceeding under title 11” in Section 1412 and whether said language renders the statute applicable only to core proceedings or whether it is also applicable to proceedings that are merely related to a bankruptcy i.e., non-core proceedings.
In concluding that Section 1412 does, in fact, apply to non-core proceedings, the court was persuaded by the reasoning of earlier decisions out of the Northern District of Texas. These earlier decisions looked to 28 U.S.C. § 1409—the statute governing venue in title 11 cases—for guidance in interpreting the term “proceeding” in the context of Section 1412. Because the term “proceeding” under Section 1409 explicitly includes actions related to core proceedings, the courts reasoned that the word “proceeding” in Section 1412 should encompass the same. If Section 1412 did not include related claims, then a court could only transfer cases closely related to core proceedings under the more-restrictive Section 1404 to another “district or division where it might have been brought.” These courts held that such a requirement would “hamper the well settled principle that the court in which the bankruptcy case is pending is the proper venue for adjudicating all related litigation.”
Courts that have instead applied section 1404(a) in evaluating whether a transfer of venue is appropriate for a non-core adversary proceeding point to the fact that the language of section 1412 does not reference proceedings “related to” title 11. These courts reason that Congress intentionally omitted the “related to” language in section 1412 in order to limit the jurisdiction of the bankruptcy courts.