BROWN v. WELLS FARGO BANK et al
MEMORANDUM OPINION AND ORDER signed by MAG/JUDGE L. PATRICK AULD on 11/3/11 that Wells Fargo's Motion for Change of Venue (Docket Entry 17 ) is GRANTED and this action is transferred to the Eastern District of North Carolina for further proceed ings. The Clerk is directed to send the entire record of this action to the Eastern District of North Carolina. IT IS FURTHER ORDERED that Plaintiff's Motion for Remand (Docket Entry 13 ) and Wells Fargo's Motion to Shorten Response Time and for Expedited Consideration of Wells Fargo's Motion for Change of Venue (Docket Entry 19 ) are DENIED AS MOOT. (Wilson, JoAnne)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
WELLS FARGO, N/A; AMERICAN
SECURITY INSURANCE COMPANY;
BROCK & SCOTT, PLLC; NICHOLS &
SATTERFIELD, PLLC; and
MEMORANDUM OPINION AND ORDER
OF UNITED STATES MAGISTRATE JUDGE
This matter comes before the Court on (1) Plaintiff’s Motion
for Remand (Docket Entry 13); (2) Wells Fargo’s Motion for Change
of Venue (Docket Entry 17); and (3) Wells Fargo’s Motion to Shorten
Response Time and for Expedited Consideration of Wells Fargo’s
Motion for Change of Venue (Docket Entry 19). For the reasons that
follow, the Court will deny Plaintiff’s Motion for Remand (Docket
Entry 13) and Wells Fargo’s Motion to Shorten Response Time and for
Expedited Consideration of Wells Fargo’s Motion for Change of Venue
(Docket Entry 19) as moot and grant Wells Fargo’s Motion for Change
of Venue (Docket Entry 17).1
“[A] Magistrate Judge is empowered to issue the transfer order, which is
non-dispositive, without the approval of the District Court.” Scheafnocker v.
Commissioner of Internal Revenue Serv., 642 F.3d 428, 433 n.6 (3d Cir. 2011);
accord Century Furniture, LLC v. C & C Imports, Inc., No. 1:07CV179, 2007 WL
2712955, at 1 n.1 (W.D.N.C. Sept. 14, 2007) (unpublished); Surotchak v. Apfel,
No. Civ. A. 98-0073-C, 1999 WL 301705, at *1 (W.D. Va. Feb. 8, 1999)
Plaintiff’s claims arise from events surrounding a refinance
loan Plaintiff obtained on her home in Durham, North Carolina.
(See Docket Entry 2, ¶ 13; Docket Entry 17 at 5.).
Inc. (“Mortgageit”) was the originator of the loan (see Docket
Satterfield”) was the settlement agent for the closing (see id.,
¶ 15). Mortgageit endorsed the promissory note to Wells Fargo, N/A
(“Wells Fargo”) (see id., ¶ 14), and Wells Fargo’s standard forms
were used at closing (id.).
Under the terms of the closing documents, Plaintiff was
required to maintain homeowner’s insurance for the property.
understanding that the initial homeowner’s insurance premium would
be paid out of closing funds, said premium was never paid. (Id.,
¶¶ 18, 19.)
Though Plaintiff originally had an insurance policy
covering the house, as a result of the failure to pay the premium
at closing, the insurance policy lapsed (see id., ¶ 22).
Fargo in turn force-placed an insurance policy on the home (see
id., ¶¶ 27-29) and created an escrow account for Plaintiff, which
significantly increased her monthly payments (see id., ¶ 31).
Plaintiff contends that Wells Fargo did not take said action until
previous policy and “placed a back dated insurance policy with
Wells Fargo also effectively requested payment from
[Plaintiff] of three annual premiums for hazard insurance (two for
backdated policies and one prospectively), . . . which cost
approximately twice the market rate.”
(Id., ¶ 30.)
ultimately unable to manage the increased monthly payments, and,
after default, Wells Fargo initiated a foreclosure proceeding on
(Id., ¶ 36.)
Plaintiff filed the instant action in the Superior Court
Division of Durham County against Defendants Wells Fargo, American
Satterfield and Mortgageit alleging (1) “Breach of Contract” (see
id., ¶¶ 45-48); (2) “Covenant of Good Faith and Fair Dealing” (see
id., ¶¶ 49-50); (3) “Negligent Misrepresentation” (see id., ¶¶ 5155); and (4) “Negligence” (see id., ¶¶ 56-58).
Defendant Wells Fargo petitioned the Court for removal based
on diversity of citizenship
(see Docket Entry 1) in response to
which Plaintiff filed a Motion for Remand (see Docket Entry 13).
Plaintiff subsequently filed a petition for relief under Title 11
of the United States Code in the United States Bankruptcy Court for
the Eastern District of North Carolina. (See Docket Entry 14.) In
response to said petition, Defendant Wells Fargo filed its motion
for change of venue with this Court, seeking to transfer the
instant action to the United States District Court for the Eastern
District of North Carolina (see Docket Entry 17), with the ultimate
goal of having the action referred to the United States Bankruptcy
Court for the Eastern District of North Carolina to be handled in
conjunction with Plaintiff’s bankruptcy proceedings (see id., ¶ 7).
Wells Fargo asserts that “this action is property of the bankruptcy
estate, is subject to bankruptcy court jurisdiction, and should be
heard by the bankruptcy court.”
(Docket Entry 18, at 1-2.)
Fargo also filed a motion to expedite, urging the Court to “shorten
the time for the Plaintiff to respond to the Motion for Change of
(Docket Entry 19, ¶ 13.)
Despite her prior Motion for Remand, Plaintiff subsequently
filed Notice of Consent, consenting “to the transfer of the
above-captioned Action to the United States District Court for the
Eastern District of North Carolina and to the subsequent transfer
to the United States Bankruptcy Court, Eastern District of North
Carolina, without waiving any of her rights thereafter to seek
remand of the Action.”
(Docket Entry 22 at 1.)2
There is no indication in the record that Plaintiff served any of the
Defendants in this action. (See Docket Entries dated Aug. 26, 2011, to present.)
Defendants American Security, Nichols & Satterfield and Mortgageit have not made
an appearance in this action. (Id.) Defendant Brock & Scott has filed an Answer
(see Docket Entry 8) and has separately made an appearance (see Docket Entry 15).
Any lack of service on the Defendants is immaterial to the Court’s power to
transfer the instant proceedings.
See The Hanover Ins. Co. v. Paint City
Contractors, Inc., 299 F. Supp. 2d 554, 556 n.1 (E.D. Va. 2004) (“Service of
process on all named defendants is not a prerequisite to the court’s power to
transfer.” (citing Internatio-Rotterdam, Inc. v. Thomsen, 218 F.2d 514, 516 (4th
Wells Fargo asks this Court “for an order changing venue of
this action to the United States District Court for the Eastern
District of North Carolina pursuant to 28 U.S.C. § 1404(a),”
(Docket Entry 17 at 1) on the grounds that the instant matter is
“related to” Plaintiff’s bankruptcy and should accordingly be heard
by the bankruptcy court in conjunction with those proceedings.
As an initial matter, the Court notes that there is some
debate whether a motion for change of venue for a matter “related
to” a bankruptcy proceeding should be governed by 28 U.S.C. § 1404
or 28 U.S.C. § 1412.
See, e.g., Washington State Bank v. Turnage,
No. 6:11-0004, 2011 WL 1561440, at *3 (W.D. La. Apr. 25, 2011)
(unpublished) (“While it is uncontroverted that 28 U.S.C. § 1412
applies to the main bankruptcy case and core adversary proceedings,
there is a split in authority regarding whether a motion to
transfer an action that is ‘related to’ a bankruptcy action in
another forum, such as this action, should be analyzed under
section 1404(a) rather than section 1412.”); Mello v. Hare, Wynn,
Newel & Newton, LP, No. 3:10-CV-243, 2010 WL 2253535, at *3 (M.D.
Tenn. May 30, 2010) (unpublished) (“The Bankruptcy Court for the
Middle District of Tennessee has noted that there is a split of
Cir. 1955)). Furthermore, Wells Fargo served American Security, Brock & Scott,
Nichols & Satterfield and Mortgageit with its Motion for Change of Venue (see
Docket Entry 17 at 5), but they did not file any objections to the proposed
transfer (see Docket Entries dated Oct. 3, 2011, to present).
authority on the question of whether § 1412 or § 1404 governs the
transfer of actions ‘related to’ bankruptcy proceedings.”); In re
Harwell, 381 B.R. 885, 892 n.4 (Bankr. D. Colo. 2008) (“Some courts
have held that transfer of adversary proceedings ‘related to’ a
bankruptcy case is governed by 28 U.S.C. § 1404(a) because 28
U.S.C. § 1412 does not specifically refer to proceedings ‘related
to’ a case under Chapter 11.”); City of Liberal v. Trailmobile
Corp., 316 B.R. 358, 362 (D. Kan. 2004) (citing multiple cases on
“[interestingly, courts have reached different conclusions as to
which interpretation constitutes the majority view. Cf. In re
Bruno’s, 227 B.R. [311, 323 (Bank. N.D. Ala. 1998)] (majority of
cases use § 1412 transfers), with Rumore [v. Wamstead, No. 012997],
(unpublished)] (‘most courts’ hold § 1404 governs transfer of
‘related to’ actions)”).
The language of the two statutes is
Section 1404(a) provides:
For 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.
28 U.S.C. § 1404(a).
In comparison, Section 1412 states:
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
28 U.S.C. § 1412.
“[I]n reality, the language of the statutes and the factors to
be considered in analyzing whether transfer is warranted are nearly
identical. The only substantial difference is that under 28 U.S.C.
§ 1404(a), venue may be transferred only to a district where the
action might have originally been brought.”
B.R. at 892.
In re Harwell, 381
In the instant action, however, this distinction may
As noted above, Wells Fargo petitioned for removal to this
Court on the basis of diversity of citizenship. Venue in diversity
of citizenship cases is governed by 28 U.S.C. 1391(a) which
provides as follows:
A civil action wherein jurisdiction is founded only on
diversity of citizenship may, except as otherwise
provided by law, be brought only in (1) a judicial
district where any defendant resides, if all defendants
reside in the same State, (2) a judicial district in
which a substantial part of the events or omissions
giving rise to the claim occurred, or a substantial part
of property that is the subject of the action is
situated, or (3) a judicial district in which any
defendant is subject to personal jurisdiction at the time
the action is commenced, if there is no district in which
the action may otherwise be brought.
Section 1391(c) provides assistance in analyzing the application of
subsection (1) above as it relates to corporations, stating:
[A] defendant that is a corporation shall be deemed to
reside in any judicial district in which it is subject to
personal jurisdiction at the time the action is
commenced. In a State which has more than one judicial
district and in which a defendant that is a corporation
is subject to personal jurisdiction at the time an action
is commenced, such corporation shall be deemed to reside
in any district in that State within which its contacts
would be sufficient to subject it to personal
jurisdiction if that district were a separate State, and,
if there is no such district, the corporation shall be
deemed to reside in the district within which it has the
most significant contacts.
28 U.S.C. § 1391(c).
As the current pleadings fail to address the Defendants’
contacts with the Eastern District of North Carolina and thus
whether any Defendant would be subject to personal jurisdiction in
that venue as described in Section 1391(c), the Court cannot
determine whether the Eastern District of North Carolina originally
would have had venue over this matter under Section 1391(a)(1).
Further, because the record fails to reflect that a “substantial
part of the events or omissions giving rise to the claim” occurred
in the Eastern District of North Carolina or that property at issue
was located in the Eastern District of North Carolina, it does not
appear that venue would have been proper under Section 1391(a)(2).
Finally, given that proper venue apparently existed in the Middle
District of North Carolina, Section 1391(a)(3) would not apply.
In addition, although 28 U.S.C. § 1409(a) provides that “a
proceeding arising under title 11 or arising in or related to a
case under title 11 may be commenced in the district court in which
such case is pending,” Plaintiff’s bankruptcy claims were not yet
filed in the Eastern District of North Carolina at the time of the
filing of the instant action.3
In contrast, an analysis under
§ 1412 would not require that the action “might have been brought,”
28 U.S.C. § 1404(a), in the Eastern District of North Carolina and,
therefore, a determination under that section would rest solely on
“the interest of justice,” 28 U.S.C. § 1412, and “the convenience
of the parties,” id.
Though the Fourth Circuit has yet to weigh in on whether
§ 1404 or § 1412 should govern transfer of cases “related to”
bankruptcy, the Southern District of West Virginia thoughtfully
analyzed the issue in Dunlap v. Friedman’s, Inc., 331 B.R. 674
(S.D.W. Va. 2005).
In Dunlap, after the action was filed in the
Southern District of West Virginia, the defendant sought bankruptcy
protection in Georgia and subsequently moved to transfer the case
to that venue.
Id. at 676.
In eventually granting the transfer,
the court considered the applicability of both § 1404 and § 1412.
After reviewing the split in case law on the issue, id. at 677, the
court noted “that section 1404 would, in perhaps a large number of
cases, thwart transfer.
This is so because the related-to action
might not have met, at the time of its filing, the jurisdictional
or venue prerequisites making it capable of being ‘brought’ in the
home court where the bankruptcy case is pending, a requirement
imposed by the text of section 1404. Such an outcome would dilute
Plaintiff filed the instant action in the Superior Court Division of
Durham County on September 15, 2010. (See Docket Entry 2.) Plaintiff filed for
relief under Title 11 in the United States Bankruptcy Court for the Eastern
District of North Carolina on September 13, 2011. (See Docket Entry 14.)
the well-settled presumption that ‘related to’ proceedings should
be litigated in the ‘home court[.]’” Id. at 678.
The court then
looked at the history of § 1412 and concluded that “section 1412 is
Id. at 680.
Like other courts, this Court finds the reasoning in Dunlap
persuasive and thus will consider Wells Fargo’s Motion for Change
of Venue under 28 U.S.C. § 1412.
See Creekridge Capital, LLC v.
Louisiana Hosp. Center, LLC, 410 B.R. 623, 628 (D. Minn. 2009)
(“This Court adopts the analysis in Dunlap, which thoroughly
explains the well-grounded reasons supporting the conclusion that
a motion to transfer an action related to a bankruptcy proceeding
in another forum is appropriately analyzed under § 1412.”); Quick
v. Viziquor Solutions, Inc., No. 4:06CV637SNL, 2007 WL 494924, at
*3 (E.D. Miss. Feb. 12, 2007) (unpublished) (“Having reviewed the
relevant caselaw, this Court finds that § 1412 governs the issue of
venue transfer in this ‘related to’ action for the excellent
reasons set forth in Dunlap . . . .”).
however, does not end the inquiry.
The Court must determine
whether the instant action meets the “related to” test as adopted
by the Fourth Circuit and, if so, whether the matter warrants
transfer either “in the interests of justice or for the convenience
of the parties,” 28 U.S.C. § 1412.
The test adopted by the Fourth Circuit for determining the
existence of “related to” jurisdiction provides:
“An action is related to bankruptcy if the outcome could
alter the debtor’s rights, liabilities, options or
freedom of action (either positively or negatively) and
which in any way impacts upon the handling and
administration of the bankrupt estate.”
A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 1002 n.11 (4th
Cir. 1986) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d
“The usual articulation of the test for determining
whether a civil proceeding is related to bankruptcy is whether the
outcome of that proceeding would conceivably have any effect on the
estate being administered in bankruptcy.”
Pacor, 743 F.2d at 994.
The instant matter satisfies this test.
The “handling and
administration of the bankrupt estate,” id., could be impacted by
a determination of the parties’ obligations under the refinancing
loan and the Defendants’ distribution of funds at the closing of
that loan, which will also necessarily affect the amount of
Plaintiff’s liability to Wells Fargo.
See, e.g., Ward v. Invista
S.A.R.L., LLC, 385 B.R. 817, 821 n.10 (W.D.N.C. 2008) (determining
case “related to” bankruptcy on grounds that “the outcome of this
matter will most certainly impact the amount for which the debtor
is liable to either Plaintiff or Defendant or both”). In addition,
Plaintiff’s Complaint asks the Court “to enjoin the foreclosure
sale of [Plaintiff’s] [p]roperty.”
(See Docket Entry 2, ¶ 43.)
Such relief, if granted, would directly impact the bankruptcy
As such, the instant matter is “related to” Plaintiff’s
Having found the instant matter “related to” Plaintiff’s
bankruptcy proceedings, the Court must decide whether the case
convenience of the parties,” 28 U.S.C. § 1412.
Under the “in the
interests of justice” prong, courts have considered the following
1) whether transfer would promote the economic and
efficient administration of the bankruptcy estate;
2) whether the interests of judicial economy would be
served by the transfer; 3) whether the parties would be
able to receive a fair trial in each of the possible
venues; 4) whether either forum has an interest in having
the controversy decided within its borders; 5) whether
the enforceability of any judgment would be affected by
the transfer; and 6) whether the plaintiff’s original
choice of forum should be disturbed.
In re Enron, 317 B.R. 629, 638-39 (S.D.N.Y. 2004) (citations
With respect to “the convenience of the parties,” 28 U.S.C.
§ 1412, courts have considered:
7) the location of the plaintiff and the defendant;
8) the ease of access to the necessary proof; 9) the
convenience of the witnesses and the parties and their
relative physical and financial condition; 10) the
availability of the subpoena power for unwilling
witnesses; and 11) the expense of obtaining unwilling
Id. at 639.
Factors relevant to the convenience of the parties offer
Though Plaintiff initially filed this suit in
Durham County, which sits in the Middle District of North Carolina,
Plaintiff’s subsequent consent to Wells Fargo’s Motion for Change
of Venue (see Docket Entry 22), as well as Plaintiff’s filing for
bankruptcy in the Eastern District of North Carolina (see Docket
Entry 14), indicate that the Eastern District of North Carolina
will be no less convenient.
Given the proximity of the two
districts, little change would result with respect to “ease of
access to the necessary proof,” Enron, 317 B.R. at 639, and/or the
“convenience of the witnesses and the parties and their relative
minimizes the relevance of factors regarding “the expense of
obtaining unwilling witnesses,” id., and “the availability of the
subpoena power for unwilling witnesses,” id.
Furthermore, factors relevant to the interests of justice
strongly favor transfer.
Deciding Plaintiff’s instant claims
concurrently with her bankruptcy proceedings would “promote the
economic and efficient administration of the bankruptcy estate,”
id., as well as promote the “interests of judicial economy”
generally by reducing duplicative or inter-related litigation, id.
Indeed, there is a presumption that the district hearing the
bankruptcy case is the proper venue for related actions.
Blanton v. IMN Fin. Corp., 260 B.R. 257, 267 (M.D.N.C. 2001)
(Bullock, J.) (“[M]any courts presume that the proper venue for a
proceeding related to a bankruptcy case is in the district hearing
the bankruptcy case.”); In re Vital Link Lodi, Inc., 240 B.R. 15,
19 (Bank. W.D. Mo. 1999) (“The general rule is that the court where
the bankruptcy case is pending is the proper venue for all related
Plaintiff’s consent to transfer, as well as her bankruptcy filing
in the Eastern District of North Carolina, indicate that the Court
may grant minimal weight to concerns regarding whether Plaintiff’s
“original choice of forum should be disturbed.”
the Court deems transfer of the instant matter to the Eastern
District of North Carolina appropriate.
Due to Plaintiff’s Notice of Consent to the transfer of this
matter to the Eastern District of North Carolina (Docket Entry 22),
minimal concerns regarding disposition of the case in that forum,
Plaintiff’s bankruptcy in conjunction with Plaintiff’s bankruptcy
proceedings, the Court will transfer this matter to the Eastern
District of North Carolina.
This transfer renders Plaintiff’s
earlier Motion for Remand (Docket Entry 13) moot.
disposition in this Order also moots Wells Fargo’s Motion to
Shorten Response Time and for Expedited Consideration of Wells
Fargo’s Motion for Change of Venue (Docket Entry 19).
IT IS THEREFORE ORDERED that Wells Fargo’s Motion for Change
transferred to the Eastern District of North Carolina for further
The Clerk is directed to send the entire record of
this action to the Eastern District of North Carolina.
IT IS FURTHER ORDERED that Plaintiff’s Motion for Remand
(Docket Entry 13) and Wells Fargo’s Motion to Shorten Response Time
and for Expedited Consideration of Wells Fargo’s Motion for Change
of Venue (Docket Entry 19) are DENIED AS MOOT.
/s/ L. Patrick Auld
L. Patrick Auld
United States Magistrate Judge
November 3, 2011
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