TATUM et al v. CHRYSLER GROUP LLC.

Filing 57

REPORT AND RECOMMENDATIONS re 32 MOTION to Transfer Case to United States District Court for the Southern District of New York for Referral to Bankruptcy Court in that District filed by CHRYSLER GROUP LLC. Objections to R&R due by 10/17/2011. Signed by Magistrate Judge Cathy L. Waldor on 10/3/2011. (nr, )

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
NOT FOR PUBLICATION
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:
Gabriella Tatum, et al.,
:
:
Plaintiffs,
:
:
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v.
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Chrysler Group, LLC,
:
:
Defendant.
:
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Civil Action 10-4269 (ES)(CLW)

REPORT & RECOMMENDATION
October 3, 2011

WALDOR, United States Magistrate Judge
Before the Court is Defendant Chrysler Group LLC’s (“Chrysler”) motion to transfer
venue (“Motion to Transfer Venue”) pursuant to 28 U.S.C. § 1412 to the Bankruptcy Court for
the Southern District of New York. (Docket Entry No. 32). Plaintiffs Gabriella Tatum and
Jamie Meyer (“Plaintiffs”) submitted opposition to the motion. (Docket Entry No. 36). Pursuant
to Local Civil Rule 72.1, the Honorable Esther Salas, United States District Judge, referred this
motion to the Undersigned for report and recommendation. For the reasons set forth below, this
Court respectfully recommends GRANTING in part and DENYING in part Chrysler’s Motion to
Transfer Venue to the Bankruptcy Court for the Southern District of New York.
I. Facts and Procedural History
Plaintiffs’ filed their original complaint (“Complaint”) on August 19, 2010 alleging the
existence of a braking defect in model-year 2009 and 2010 Dodge Journey vehicles. Plaintiffs
seek relief, in part, for alleged violations of the New Jersey Consumer Fraud Act (“NJCFA”),
N.J.S.A. 56:8-1, et seq. This claim is based on alleged acts and omissions occurring before

Defendant existed. More specifically, on April 30, 2009, Old Carco LLC (f/k/a Chrysler LLC)
and several of its subsidiaries (“Old Carco” and/or “Debtors”) filed for bankruptcy protection in
the United States Bankruptcy Court for the Southern District of New York. See In re Old Carco
LLC (f/k/a Chrysler LLC), Case No. 09-50002 (Bankr. S.D.N.Y.). Defendant Chrysler, an entity
that did not exist until April 28, 2009, purchased certain assets of Old Carco in the bankruptcy
proceeding pursuant to the terms of a 49-page Order entered by the Bankruptcy Court on June 1,
2009 “(I) Authorizing the Sale of Substantially All of the Debtor’s Assets Free and Clear of All
Liens, Claims, Interests, and Encumbrances, (II) Authorizing the Assumption and Assignment of
Certain Executory Contracts and Unexpired Leases in Connection Therewith and Related
Procedures, and (III) Granting Related Relief” (“the Sale Order”). The Sale Order addressed, in
pertinent part, whether Chrysler would be responsible for the liabilities of the Debtors:

Except for the assumed liabilities expressly set forth in the purchase agreement or
described therein . . . none of the Purchaser, its successors or assigns or any of their
respective affiliates shall have any liability for any claim that (a) arose prior to the
closing date, (b) relates to the production of vehicles prior to the Closing date or (c)
is otherwise assertable against the Debtors or is related to the Purchased Assets prior
to the Closing Date. The Purchaser shall not be deemed . . . to: (a) be a legal
successor, or otherwise be deemed a successor to the Debtors . . . (b) have, de facto,
or otherwise, merged with or into the Debtors; or (c) be a mere continuation or
substantial continuation of the Debtors or the enterprise of the Debtors.
(Sale Order ¶ 35.)
The Sale Order also addressed whether Chrysler Group would be liable for state breach of
warranty claims under the Magnuson-Moss Warranty Act:
Notwithstanding anything else contained herein or in the Purchase Agreement, in
connection with the purchase of the Debtor’s brands and related Purchased Assets,
the Purchaser, from and after the Closing, will recognize, honor and pay liabilities
under Lemon Laws for additional repairs, refunds, partial refunds (monetary
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damages) or replacement of a defective vehicle (including reasonable attorneys’ fees,
if any, required to be paid under such Lemon Laws and necessarily incurred in
obtaining those remedies), and for any regulatory obligations under such Lemon
Laws arising now, including but not limited to cases resolved pre-petition or in the
future, on vehicles manufactured by the Debtor in the five years prior to the Closing
(without extending any statute of limitations provided under such Lemon Laws), but
in any event not including punitive, exemplary, special, consequential, or multiple
damages or penalties and not including any claims for personal injury or other
consequential damages that may be asserted in relationship to such vehicles under the
Lemon Laws. As used herein, “Lemon Law” means a federal or state statute,
including, but not limited to, claims under the Magnuson-Moss Warranty Act based
on or in conjunction with a state breach of warranty claim, requiring a manufacturer
to provide a consumer remedy when the manufacturer is unable to conform he
vehicle to the warranty after a reasonable number of attempts as defined in the
applicable statute.
(Sale Order ¶ 19.)
The Bankruptcy Court retained jurisdiction to “interpret, enforce, and implement the terms
and provisions of [the] Sale Order and Purchase Agreement.” (Sale Order ¶ 43). The Bankruptcy
Court has also noted that it has “special expertise regarding the meaning of its own order,” and that
“its interpretation is entitled to deference.” Wolff v. Chrysler Group, slip op. at 13 (Adv. Proc. No.
10-5007, S.D.N.Y., July 30, 2010) (attached to Def’s Mot. at Ex. H, at 7; CM/ECF No. 32).
On December 22, 2010, Chrysler filed a motion to dismiss (“Motion to Dismiss”) pursuant
to Fed. R. Civ. P. 12(b)(6), arguing that Chrysler is not liable for obligations that existed prior to the
bankruptcy reorganization that created Chrysler as it is presently constituted. (Docket Entry No. 6).
On March 28, 2011, Judge Cavanaugh issued an opinion granting in part and denying in part
Chrysler’s Motion to Dismiss. (Docket Entry No. 13). As it relates to the instant motion, Judge
Cavanaugh discussed and analyzed the relevant law relating to successor liability but ultimately
reserved decision with respect to whether Chrysler impliedly assumed liability under the Sale Order.
Id.
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On May 24, 2011, Plaintiffs filed a Second Amended Complaint (“SAC”). The SAC
contains four causes of action: Counts I and II allege violations of the NJCFA; Count III alleges
breach of warranty under the Magnuson-Moss Warranty Act; and Count IV alleges breach of express
warranty under state law. On May 27, 2011, Chrysler filed the present Motion to Transfer Venue
pursuant to 28 U.S.C. § 1412. (Docket Entry No. 32). On June 21, 2011, Plaintiffs filed opposition
to Chrysler’s Motion to Transfer Venue. (Docket Entry No. 36).
II. Parties’ Arguments on Transfer
Defendant contends that the issue of whether Chrysler assumed the liabilities for the claims
made in Count I of Plaintiffs’ SAC should be determined by the Bankruptcy Court that issued the
Sale Order. (Def’s Br. 7). In support, Chrysler argues that several district courts, including courts
in this District, have transferred cases brought against Chrysler to the Bankruptcy Court, which has
retained jurisdiction to interpret and enforce the Sale Order, when a threshold issue in the case
involved a dispute over an alleged assumed liability.1 Id. at 9. Here, Chrysler contends that
Plaintiffs’ claims raise a threshold issue as to whether Chrysler assumed liabilities arising out of
violations of state consumer protection statutes thus requiring an interpretation and application of
the Sale Order. As such, it is Chrysler’s belief that transfer is appropriate. Id. at 10.
Plaintiffs argue that transfer is inappropriate because the only claim that may arguably
implicate assumed liability is the Count I NJCFA claim, N.J.S.A. 56:8-1, et seq. (Pl’s Br. 2).

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Chrysler specifically points the Court to the following cases: Perno v. Chrysler Group, LLC, 2011 WL
868899 at *3, n.2 (D.N.J. Mar. 10, 2011) at *3, n.2; Shatzki v. Abrams, No. 09-2046, 2010 WL 148183 (E.D.Ca.
Jan. 12, 2010); Clark v. Chrysler Group, LLC, No. 10-3030, 2010 WL 4486927, *7-8 (E.D.Pa. Nov. 5, 2010); Doss
v. Chrysler Group, LLC, No. 09-2130, 2009 WL 4730932, *3 (D.Ariz. Dec. 7, 2009); Cooper v. Daimler AG, No.
09-2507, 2009 WL 4730306, *4 (N.D. Ga. Dec. 3, 2009).

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Plaintiffs further claim that because the original Complaint was filed on August 19, 2010, the Court
has already invested considerable time becoming familiar with the relevant facts and legal issues thus
making this Court the more efficient forum to handle the litigation. Id. Next, Plaintiffs take issue
with the means by which Defendant seeks to transfer the case; namely, Plaintiffs argue that 28
U.S.C. § 1412 is inapplicable because the statute governs transfer of cases already pending in
bankruptcy court. Finally, Plaintiffs claim that Chrysler’s filing of the present motion, more than
nine months after the case was filed, is nothing more than a prejudicial attempt to forum-shop. Id.
at 6.
Neither party disputes that the remaining three counts of the Complaint may be properly and
effectively handled by this Court. In fact, Chrysler conceded and stipulated on the record that it
assumed liabilities associated with breach of warranty claims arising out of alleged defects in the
vehicles at issue. (Def’s Br. 1, n. 1). Moreover, Chrysler has explicitly represented and agreed as
follows: “If this case is transferred so that the Bankruptcy Court can interpret its own Sale Order on
the ‘successor liability’ issue implicated by the First Count of the SAC, Chrysler Group will not
oppose a motion filed by Plaintiffs to remand back to this Court whatever claims may remain after
that Court issues its ruling(s) on any legal issues implicated by the SAC.” (Def.’s Reply Br. 5).
III. Discussion
A. Legal Standard
28 U.S.C. § 1412 provides that “[a] district court may transfer a case or proceeding under title
11 to a district court for another district, in the interests of justice or for the convenience of the
parties.” Id. Section 1412 allows for the transfer of a case in either of two situations: in the interests
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of justice or for the convenience of the parties. Clark v. Chrysler Group, LLC, No. 10-3030, 2010
WL 4486927, at *5 (E.D.Pa. Nov. 5, 2010) (emphasis added); In re Dunmore Homes, Inc., 380 B.R.
663, 670 (S.D.N.Y. 2008) (“Section 1412 is worded in the disjunctive allowing a case to be
transferred under either the interest [of justice] rationale or the convenience of parties rationale.”);
Perno v. Chrysler Group, LLC, No. 10-5100, 2011 WL 868899 (D.N.J. Mar. 10, 2011).2
Defendant moves to transfer under the interests of justice prong. This prong is “broad and
flexible” and must be “applied on a case-by-case basis.” Perno, 2011 WL 868899, at *3 (citing Gulf
States Exploration Co. v. Manville Forest Prods. Corp., 896 F.2d 1384, 1391 (2d Cir. 1990). Courts
are to consider the following non-exhaustive list of factors when determining whether transfer is
appropriate under the interests of justice prong: (1) the economics of estate administration; (2) a
presumption in favor of the home court; (3) judicial efficiency; (4) the ability to receive a fair trial;
(5) the state’s interest in having local controversies decided within its borders; (6) the enforceability
of any judgment; and (7) plaintiff’s choice of forum. Id.
A case need not be transferred in whole. Fed. R. Civ. P. 21 provides: “any claim against any
party may be severed and proceeded with separately.” See Chrysler Credit Corp. v. Country
Chrysler, Inc., 928 F.2d 1509, 1518-19 (10th Cir. 1991) (holding that claims may be properly severed
under Fed. R. Civ. P. 21); Dao v. Knightsbridge Intern. Reinsurance Group, 15 F.Supp.2d 567
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The Court notes Plaintiffs’ argument that 28 U.S.C. § 1412 is inapplicable because “the current case was
brought against Chrysler Group LLC, a non-bankrupt entity, in federal district court and raises state and federal
statutory and common law claims having nothing to do with title 11.” (Pl. Opp., at 7). However, the Third Circuit
and this District, specifically, have consistently applied § 1412 to transfer of “related to” bankruptcy proceedings.
See Perno, No. 10-5100, 2011 WL 868899 at *4; Clark, No. 10-3030, 2010 WL 4486927, at *6; Johanna Foods,
Inc. v. Toobro Holdings TBF LLC, No. 11-2612, 2011 WL 1791352 (D.N.J. May 10, 2011); Donahue v. Vertis,
Inc., No. 10-2942, 2010 WL 5313312 (D.N.J. Dec. 20, 2010); Abrams v. General Nutrition Companies, Inc., No.
06-1820, 2006 WL 2739642 (D.N.J. Sept. 25, 2006). Here, Count I of the Complaint requires interpretation of the
Bankruptcy Court’s Sale Order to determine whether Chrysler has assumed certain liability in this case. As such, the
case is “related to” the bankruptcy proceeding and the Court deems it unnecessary to address this argument further.

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(D.N.J. 1998); Murray, Wilson and Hunter v. Jersey Boats, Inc., No. 91-7733, 1992 WL 37516, at
*2 (E.D.Pa., Feb. 21, 1992). A court may order severance of an action on its own initiative.
American Fidelity Fire Ins. Co. v. Construcciones Werl, Inc., 407 F.Supp. 164 (D.V.I. 1975). See
In re LR Buffalo Creek, LLC, No. 09-196, 2009 WL 2382285 (W.D.N.C. July 30, 2009) (severing
and transferring claim deemed related and critical to the bankruptcy proceeding).
B. Application
1. Count I: Violation of the New Jersey Consumer Fraud Act
The Court finds that transfer of Count I is appropriate because it is necessary to interpret the
Sale Order to determine whether Chrysler has assumed certain liabilities in this case. The relevant
§ 1412 factors favor transfer. First, courts have concluded that when civil actions are related to a
pending bankruptcy, there is a presumption that the district where the bankruptcy case is pending is
the appropriate venue. Toth v. Bodyonics, Ltd., No. 06-1617, 2007 WL 792172, at *2 (E.D.Pa. Mar.
15, 2007). To that end, Chrysler asserts, and Plaintiff concedes, that interpretation of the Sale Order
is required to determine whether a claim requiring both a breach of warranty and bad faith or unfair
dealing equates with a claim for breach of warranty, alone, within the meaning of the Sale Order.
Second, transfer will promote judicial efficiency. As noted above, the Bankruptcy Court has
expressly retained jurisdiction to interpret the terms of its Sale Order. (Sale Order ¶ 43). By
transferring the case to the Bankruptcy Court, the Court reduces the risk of inconsistent interpretation
of the Sale Order. As Judge Falk noted in Perno, “allowing for different courts in different
jurisdictions to interpret the terms of the Sale Order creates the possibility for inconsistent

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determinations, inconsistent liability to [Chrysler], and needless confusion.” 2011 WL 868899, at
*4.
The Court has considered Plaintiffs’ choice of forum, convenience and expedience arguments
and the deference afforded to Plaintiffs in litigating in the forum they select. However, these factors
are outweighed by those stated above. Specifically, although Plaintiffs argue that this Court is more
familiar with these proceedings, that representation is of marginal truth. This case was first referred
to this particular Court on August 3, 2011. As such, the Court has had little opportunity to engage
in more than a cursory review of the Sale Order. The Bankruptcy Court, however, as the enforcer
of the Sale Order at issue, is significantly more familiar with the voluminous Sale Order. Lastly, to
the extent Count I requires the application of New Jersey law, Plaintiffs are not precluded from filing
a motion to remand the claim back to this Court once the question of Chrysler’s liability under the
Sale Order is resolved.
Finally, Plaintiffs contend that Chrysler has essentially waived its ability to move to transfer
venue because of the purported maturity of this litigation. This Court disagrees. A motion to
transfer venue is not deemed to have been waived if not raised in an initial response to the complaint.
McGuire v. Waste Mgmt., Inc., No. 09-2591, 2011 WL 692203 (D.S.C. Feb. 18, 2011). See Ins. Co.
of N. America v. Ozean/Stinnes-Linien, 367 F.2d 224, 227 (5th Cir. 1966) (holding that a motion
to transfer venue could have been made even after a motion to dismiss has been denied); Campbell
v. FMC Corporation, No. 91-7536, 1992 WL 176417, *6, n. 6 (E.D.Pa. July 17, 1992) (according
no weight to plaintiff’s allegation of “dilatoriness” where neither party had progressed far in
preparation for trial); Inter-City Prods. Corp. v. Ins. Co. of N. America, No. 90-717, 1993 WL

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18948, at *9 (D.N.J. Jan. 26, 1993) (finding that timing did not weigh against transfer). Accordingly,
the fact that Defendant first filed its Motion to Transfer Venue nine months after the filing of the
original Complaint does not waive its ability to seek relief under § 1412.
2. Counts II-IV:
The Court does not believe it appropriate to transfer Counts II-IV to the Bankruptcy Court
because the remaining claims do not relate to the pending bankruptcy proceeding. The remaining
counts are as follows: (1) Count II: Violation of the NJCFA, N.J.S.A. 56:8-1, et seq.; (2) Count III:
Breach of Written Warranty under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301, et seq.; and
(3) Count IV: Breach of Express Warranty under State Law. These claims implicate no assumed
liability issues. Instead, these claims focus exclusively on breach of warranty claims or rely entirely
on allegations related to Chrysler’s post-bankruptcy conduct. To that end, Chrysler conceded and
stipulated on the record that it assumed the liabilities associated with breach of warranty claims
arising out of alleged defects in the vehicles at issue. Additionally, Chrysler has already expressed
its willingness to litigate the remaining claims in this forum. Lastly, the Court agrees with Plaintiffs’
contention that the balance of factors fails to support transfer. Plaintiffs selected this forum, Named
Plaintiff Jamie Meyer’s claim arose out of New Jersey, and it would be more convenient and less
costly to Plaintiffs to litigate the balance of claims in this District. Accordingly, to the extent
Chrysler seeks entry of an Order transferring Counts II-IV to the Bankruptcy Court for the Southern
District of New York, this Court recommends that the request be denied.

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V. Conclusion
For the reasons set forth above, the Court recommends GRANTING Chrysler’s Motion to
Transfer Venue to the Bankruptcy Court for the Southern District of New York as to Count I and
DENYING Chrysler’s Motion to Transfer Venue as to Counts II-IV. In the interest of administrative
efficiency, the Court also recommends administratively terminating the case pending resolution of
Count I. Pursuant to Local Civil Rule 72.1, the parties have fourteen days from receipt of this Report
and Recommendation to file and serve any objections.

s/ Cathy L. Waldor
CATHY L. WALDOR
UNITED STATES MAGISTRATE JUDGE

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