The Huntington National Bank v. Hard Rock Exploration, Inc. et al

Filing 147

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT YOST'S MOTION TO TRANSFER, DENYING AS MOOT THE INDIVIDUAL DEFENDANTS' MOTIONS FOR ABSTENTION, DENYING AS MOOT HUNTINGTON'S MOTION TO STRIKE NOTICE TO CHAPTER 11 TRUSTEE AND GRANTING MOTIO NS FOR JOINDER: It is ORDERED that 96 , 97 , and 98 motions to Abstain are DENIED AS MOOT; 107 and 109 Motions for Joinder are GRANTED; 119 Motion to Transfer Case is GRANTED; 135 Motion to Strike is DENIED AS MOOT; and 142 and 143 Motion for Joinder are GRANTED. Plaintiff's 121 Motion for Summary Judgment and any other pending motions are hereby TRANSFERRED to the U.S. Bankruptcy Court for the Southern District of West Virginia. Signed by Senior Judge Frederick P. Stamp, Jr on 2/16/18. (email Clerk of USBC-SDWV)(cnd)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
THE HUNTINGTON NATIONAL BANK,
Plaintiff,
v.

Civil Action No. 1:16CV48
(STAMP)

HARD ROCK EXPLORATION, INC.,
CARALINE ENERGY COMPANY,
BLUE JACKET GATHERING, LLC,
BLUE JACKET PARTNERSHIP,
BROTHERS REALTY, LLC,
DUANE YOST,
JAMES L. STEPHENS, JR.,
GREGORY LAUGHLIN and
MONICA R. FRANCISCO,
Defendants.
MEMORANDUM OPINION AND ORDER
GRANTING DEFENDANT YOST’S MOTION TO TRANSFER,
DENYING AS MOOT THE INDIVIDUAL DEFENDANTS’
MOTIONS FOR ABSTENTION,
DENYING AS MOOT HUNTINGTON’S MOTION
TO STRIKE NOTICE TO CHAPTER 11 TRUSTEE
AND GRANTING MOTIONS FOR JOINDER
I.
Defendants

Hard

Rock

Background
Exploration,

Inc.,

Caraline

Energy

Company, Blue Jacket Gathering, LLC, Blue Jacket Partnership, and
Brothers

Realty

(collectively,

the

“Hard

Rock

Entities”)

are

business entities affiliated with defendant Hard Rock Exploration,
Inc., which engages in oil and gas development.

Defendants James

Stephens, Jr., Monica Francisco, Duane Yost, and Gregory Laughlin
(collectively, “the individual defendants”) are shareholders of
defendant Hard Rock Exploration, Inc.

The Hard Rock Entities

borrowed money from the plaintiff, The Huntington National Bank
(“Huntington”), so as to pursue oil and gas operations.

Several

years into the lending relationship, however, Huntington claims
that the defendants have failed to satisfy their obligations.

In

particular, the following amounts allegedly remain outstanding: (1)
a $500,000.00 loan; (2) a $17,887,867.00 loan; (3) a $6,250,000.00
loan; (4) a $5,000,000.00 loan; and (5) an unspecified credit card
obligation, which is allegedly worth $19,148.10.

In addition, the

parties engaged in a series of swap transactions and a forbearance
agreement, which contain the following obligations: (1) termination
charges for the swaps totaling $839,606.02; and (2) a $30,000.00
forbearance fee.

Huntington seeks a judgment for the balance due

under the obligations listed above, including legal fees.
The defendants filed a counterclaim asserting claim for fraud
and

deceit

(Count

I),

interference

with

prospective

business

advantage (Count II), breach of implied covenant of good faith and
fair dealing (Count III), breach of contract (Count IV), economic
duress (Count V), breach of fiduciary duty (Count VI), demand for
injunctive relief (Count VII), demand for declaratory judgment
(Count VIII), and demand for an accounting (Count IX).

Huntington

filed a motion to dismiss the counterclaims (ECF No. 40), and this
Court entered a memorandum order and opinion denying Huntington’s
motion to dismiss the counterclaims (ECF No. 69).

2

On September 7, 2017, the Hard Rock Entities filed a notice of
bankruptcy stating that they each had filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the Southern District of
West Virginia.

ECF No. 87.

The bankruptcy actions are proceeding

before United States Bankruptcy Judge Frank W. Volk in the United
States Bankruptcy Court for the Southern District of West Virginia.
Accordingly, pursuant to 11 U.S.C. § 362 of the United States
Bankruptcy Code, this Court stayed this case as to the Hard Rock
Entities.

ECF No. 91.

Also pursuant to § 362(a), the proceedings

were not stayed as to the individual, non-debtor defendants.
The state court civil action, which includes the same parties
as

this

Court’s

case

and

was

removed

to

the

United

States

Bankruptcy Court for the Northern District of West Virginia on
September 8, 2017 (Misc. No. 1:17-MP-00001), was transferred to the
United States Bankruptcy Court for the Southern District of West
Virginia

(Misc.

No.

2:17-MP-02001)

on

November

14,

2017.

Accordingly, both that case and the bankruptcy case underlying this
civil action are now before Judge Volk in the United States
Bankruptcy Court for the Southern District of West Virginia.
Defendant Duane Yost (“Yost”) has filed a motion for transfer
of venue to the United States Bankruptcy Court for the Southern
District of West Virginia.

Thereafter, Huntington responded and

defendant Yost replied. Thus, the motion is fully briefed and ripe

3

for review.

For the reasons set forth below, defendant Yost’s

motion to transfer venue is granted.

Accordingly, pending motions

for abstention filed by the individual defendants are denied as
moot.
II.

Applicable Law

There are two different transfer provisions that may be
applicable to this civil action: 28 U.S.C. §§ 1404(a) and 1412.
A.

28 U.S.C. § 1404(a)
A motion to transfer a case to another venue is generally

subject to the provisions of 28 U.S.C. §§ 1404(a) and 1391(a).
Pursuant to 28 U.S.C. § 1404(a), “a district court may transfer any
civil action to any other district or division where it might have
been brought” where such transfer is made “[f]or the convenience of
parties and witnesses, in the interest of justice.”
§ 1404(a).

28 U.S.C.

This rule is intended to allow a court to transfer

venue in order to “make trial of a case easy, expeditious and
inexpensive.”

Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)

(superceded by statute on other grounds).
Under § 1404(a), the decision to transfer venue is left to the
sound discretion of the trial court.
235 F.2d 198, 201 (4th Cir. 1956).

Southern Ry. Co. v. Madden,

In making this determination,

a court should consider:
(1) ease of access to sources of proof; (2) the
convenience of parties and witnesses; (3) the cost of
obtaining the attendance of witnesses; (4) the
availability of compulsory process; (5) the possibility
4

of a view; (6) the interest in having local controversies
decided at home; and (7) the interests of justice.
In re Campbell Transp. Co., Inc., 368 F. Supp. 2d 553, 555-56 (N.D.
W. Va. 2005) (citing Alpha Welding & Fabricating Co. v. Todd
Heller, Inc., 837 F. Supp. 172, 175 (S.D. W. Va. 1993)).

The

movants typically bear the burden of demonstrating that transfer is
proper. Versol B.V. v. Hunter Douglas, Inc., 806 F. Supp. 582, 592
(E.D. Va. 1992).

The Supreme Court of the United States has

further stated that “unless the balance is strongly in favor of the
defendant,

the

disturbed.”
B.

plaintiff’s

choice

of

forum

should

rarely

be

Gulf Oil, 330 U.S. at 508.

28 U.S.C. § 1412
Whereas § 1404(a) is the default change-of-venue statute,

§ 1412 specifically deals with changes of venue in bankruptcy
actions.

Section 1412 provides as follows:

“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.”
C.

28 U.S.C. § 1412.

Choice Between 28 U.S.C. §§ 1404(a) and 1412
The United States District Court for the Southern District of

West Virginia has “conclude[d] that section 1412 is the appropriate
statute for venue transfer purposes in [a] related-to [bankruptcy]
action.”
Va. 2005).

Dunlap v. Friedman’s, Inc., 331 B.R. 674, 680 (S.D. W.
The Dunlap court observed as follows:

5

[S]ection 1404 would, in perhaps a large number of
[related-to bankruptcy] 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 the well-settled presumption that
“related to” proceedings should be litigated in the “home
court[.]”
Id. at 678.
III.
A.

Discussion

Motion to Transfer
In his motion to transfer, defendant Yost represents that

Huntington filed its proof of claims against the Hard Rock Entities
on October 3, 2017, and that the proof of claims “track, mirror,
and encompass the claims presented in the instant action.” ECF No.
119 at 2.

Thus, defendant Yost argues that the claims are

“duplicative and unnecessary and allow for two active federal
actions within this Court’s jurisdiction to persist, all to the
burden, expense, and detriment” of the non-debtor, individual
defendants. Id. Further, defendant Yost contends that no proposed
plan of reorganization or pending motion to convert to a Chapter 7
case can be fully considered unless the Bankruptcy Court has the
instant action within its docket.

Defendant Yost also represents

that Huntington will not be prejudiced by transfer because it will
still be able to fully litigate both actions in the Bankruptcy
Court.

6

Huntington argues that the motion to transfer should be denied
because the proof of claims filed by Huntington in the bankruptcy
proceedings do not track the claims presented in the instant
action.

Specifically, Huntington contends that defendant Yost

ignores that the proof of claims are asserted against the Hard Rock
Entities,

not

the

individual

defendants.

Thus,

Huntington

concludes that the motion to transfer should be denied because
Huntington’s claims against the individual defendants are not
pending in any forum other than this Court.
Considering the motion to transfer under § 1412, this Court
may grant the motion if doing so is in the interest of justice or
for the convenience of the parties.

In Dunlap, a consumer brought

a class action lawsuit against a jeweler for its alleged fraudulent
or deceptive practices in the United States District Court for the
Southern District of West Virginia. 331 B.R. at 675-76. After the
consumer filed the class action lawsuit, the jeweler filed for
bankruptcy in the United States Bankruptcy Court for the Southern
District of Georgia, and the consumer then filed a motion to
transfer the Southern District of West Virginia case to the United
States Bankruptcy Court for the Southern District of Georgia.
at 675-76.

Id.

The United States District Court for the Southern

District of West Virginia granted the movants’ motion to transfer
to the United States Bankruptcy Court for the Southern District of
Georgia upon finding that it would be in the interest of justice to

7

do so.

Id. at 681-82.

In that case, the Dunlap court did not

consider the convenience of the parties prong given that the motion
could be granted on the interests of justice prong.

Id. at 682

n.3.
Under the interests of justice prong of § 1412, the Dunlap
court noted that “[t]he factors applied by bankruptcy courts when
deciding whether to transfer venue in matters . . . relating to a
case under title 11 are often the same factors applied when
deciding whether to transfer a bankruptcy case.”

Id. at 680

(citing 1 Howard J. Steinberg, Bankruptcy Litigation §§ 2:4, 2:6
(2005)).

The Dunlap court describes those factors as follows:

1. The proximity of creditors of every kind to the
court[;] 2. The proximity of the debtor to the court[;]
3. The proximity of the witnesses necessary to the
administration of the estate[;] 4. The location of the
assets[;]
and
5.
The
economical
and
efficient
administration of the estate.
The most important of these factors is the fifth factor,
the economic and efficient administration of the estate.
This factor is an amalgamation of the four preceding
factors.
Other factors that have been applied are: 1. The
presumption in favor of the home court; 2. The ability to
receive a fair trial; 3. The state’s interest in having
local controversies decided within its borders, by those
familiar with its law; 4. Enforceability of any judgment
to be rendered; 5. Plaintiff’s original choice of forum.
Id.

The Dunlap court found that “two important considerations

decidedly favor the movants’ position:” (1) “the home court’s
presumptive suitability” and (2) “that transfer will facilitate the

8

economical and efficient administration of the estate.”

Id. at

681.
In another case, the United States District Court for the
Southern

District

of

West

Virginia

sua

sponte

transferred

a

related-to bankruptcy action to the Northern District of West
Virginia after the plaintiff in the Southern District case reopened
his

Chapter

7

bankruptcy

proceedings

in

the

United

States

Bankruptcy Court for the Northern District of West Virginia.
Miller v. Huntington Nat’l Bank, N.A., No. 2:12-CV-01255, 2012 WL
4463877 (S.D. W. Va. Sept. 26, 2012).

The Miller court found that

the sua sponte transfer was appropriate under the convenience prong
of § 1412 because the Northern District was the “home court” of the
reopened Chapter 7 bankruptcy proceedings and because the property
at issue in the Southern District case was the plaintiff’s main
asset in his reopened bankruptcy.

Id. at *3.

The Miller court

also found that the sua sponte transfer was appropriate under the
interests of justice prong because there was no indication that
either party would not receive a fair trial in the Northern
District, “[t]he state of West Virginia’s interest is equally
satisfied by venue either in the Southern or Northern District of
West Virginia,” and [t]here is no indication the judgment would
suffer any enforceability issue if transferred.”

Id.

In the instant case, this Court finds that the proximity
factors do not weigh heavily either for or against transfer.

9

The

civil action was filed in Clarksburg, West Virginia, and then
reassigned to the undersigned judge in Wheeling. The United States
District Court for the Southern District of West Virginia, which is
located in Charleston, West Virginia, is only somewhat farther from
Clarksburg than Wheeling.

The factor of the state’s interest in

having local controversies decided within its borders also does not
weigh for or against transfer because both potential forums are
located in West Virginia. Furthermore, there is nothing to suggest
that the parties would not receive a fair trial in the Southern
District of West Virginia.
The enforceability of any judgment to be rendered factor
weighs in favor of transfer to the Southern District of West
Virginia because the related removed state court civil action and
the bankruptcy action underlying this civil action are in that
district and the rulings in those proceedings could affect a
judgment in the instant action.

Although Huntington’s choice of

forum was the Northern District of West Virginia, that factor
weighs only slightly against transfer because Huntington is already
litigating the related proceedings in the Southern District of West
Virginia.
The two factors the Dunlap court found to be most important
both weigh heavily in favor of transfer.

First, the home court of

the underlying bankruptcy action is in the Southern District of
West Virginia, and, thus, that court is “presumptively suitable.”

10

Second, because both the related removed state court civil action
and the bankruptcy action underlying this civil action are pending
before Judge Volk in the Southern District of West Virginia,
transfer of this civil action to the Southern District of West
Virginia will be more economical and efficient than continuing to
litigate only this civil action in this Court.
Additionally, the parties in the instant case have represented
that they already have to travel to Charleston because both the
related removed state court civil action and the bankruptcy action
underlying this civil action are pending before Judge Volk.

Thus,

the convenience prong of § 1412 also weighs in favor of granting
the motion to transfer.
Lastly, transfer is appropriate because this civil action is
stayed as to the Hard Rock Entities (the debtors) but not as to the
individual defendants (the non-debtors and guarantors).

At this

time, there has been no motion in the bankruptcy court to lift the
automatic stay as to the debtors.
B.

Motions for Abstention
Because this Court grants defendant Yost’s motion to transfer,

the individual defendants’ motions for abstention must be denied as
moot.

Additionally, even if the motions for abstention were not

mooted by the transfer, they would still be mooted by the fact that
the state court action has also been transferred to the United
States Bankruptcy Court for the Southern District of West Virginia.

11

IV.

Conclusion

For the above stated reasons, defendant Duane Yost’s motion to
transfer the case to the United States Bankruptcy Court for the
Southern District of West Virginia (ECF No. 119) is GRANTED and the
individual defendants’ motions to abstain (ECF Nos. 96, 97, and 98)
are DENIED AS MOOT.

The Huntington National Bank’s motion to

strike defendant Duane Yost’s notice regarding the Chapter 11
Trustee (ECF No. 135) is DENIED AS MOOT.

Defendants Gregory

Laughlin, James Stephens, Jr., and Monica Francisco’s motions for
joinder

in

defendant

Duane

Yost’s

reply

to

the

individual

defendants’ motions to abstain (ECF Nos. 107 and 109) and in
defendant Duane Yost’s response to The Huntington National Bank’s
motion for summary judgment (ECF Nos. 142 and 143) are GRANTED.
Additionally,

The

Huntington

National

Bank’s

motion

for

summary judgment (ECF No. 121), which is fully briefed at this
time, is transferred to and will then be pending before the United
States Bankruptcy Court for the Southern District of West Virginia.
Any other pending motions are also transferred to the United States
Bankruptcy Court for the Southern District of West Virginia.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein and to the Clerk of
the United States Bankruptcy Court for the Southern District of
West Virginia.

12

DATED:

February 16, 2018

/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE

13