UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Merchants Automotive Group, Inc.
v. Civil No. 14-cv-318-JD Opinion No. 2015 DNH 029 Advantage Opco, LLC
O R D E R
Merchants Automotive Group, Inc. (“Merchants”) brought suit
in state court, seeking a declaratory judgment as to the
obligations of Advantage Opco, LLC (“Advantage”) under an
agreement for leasing vehicles to use in the rental car business.
Advantage removed the case to this court and now moves to have
the case transferred to the Southern District of Mississippi.
Merchants objects to transfer.
Background1
Advantage operated a national rental car company, Advantage-
Rent-A-Car, and was owned by Simply Wheelz, LLC. In April of
2013, Wheelz and Merchants signed the Master Lease Agreement for
Merchants to lease vehicles with certain financing for Advantage-
Rent-A-Car. A few months later, in November of 2013, Wheelz
filed a voluntary petition for bankruptcy protection under
Chapter 11 in the United States Bankruptcy Court for the Southern
1 The background facts are taken from Merchants’s complaint and the parties’ filings in support of and in opposition to the motion to transfer. District of Mississippi, In re: Simply Wheelz LLC, d/b/a
Advantage-Rent-A-Car, Case No. 13-03332-EE (Bankr. S.D. Miss.)
A week after filing the petition, Wheelz moved for
permission to sell all of its assets. The bankruptcy court set a
procedure for the sale, which included bidding and an auction.
Catalyst Capital Group, Inc. (“Catalyst”), a private equity firm
based in Canada, successfully bid to acquire certain assets from
Wheelz. Catalyst and Wheelz entered into an asset purchase
agreement (“APA”). The bankruptcy court held a hearing on
Wheelz’s motion to sell its assets and reviewed the APA. On
January 2, 2014, the bankruptcy court issued an order (“Sale
Order”) that granted Wheelz’s motion to sell the designated
assets and approved the APA. The parties appear to agree that,
under the terms of the APA, the Master Lease Agreement between
Wheelz and Merchants was not one of the assets purchased by
Catalyst.
Wheelz closed the asset sale to Catalyst on April 30, 2014,
and Catalyst designated Advantage as the purchaser of the assets.
Merchants alleges that just before the closing of the asset sale,
Wheelz leased approximately 3400 vehicles from Merchants.
Advantage contends that Wheelz terminated the Master Lease on
April 29, 2014, the day before closing the asset sale. After the
closing, Advantage and Wheelz entered a transition services
agreement (“TSA”) through which Wheelz allowed Advantage, for
payment, to use certain assets that had not been purchased
through the APA, which included the leased vehicles.
2 Advantage represents that Wheelz, Merchants, and Advantage
engaged in negotiations before and after the sale closing to
arrive at a lease arrangement, but the negotiations were
unsuccessful. Advantage also represents that Wheelz has
continued to make payments to Merchants for the leased vehicles.
Merchants brought suit in June of 2014, seeking a
declaratory judgment that Advantage is the successor to Wheelz’s
obligations under the Master Lease, that Advantage is the
“Customer” as that term is defined and used in the Master Lease,
and that Advantage is liable to Merchants as the Customer under
the Master Lease. In response, Wheelz filed a motion in the
bankruptcy proceeding titled: “Motion of Debtor for Entry of an
Order Approving the Assumption and Assignment and Sale, Pursuant
to Bankruptcy Code Sections 105(a), 363, and 365 and Bankruptcy
Rules 2002, 6004, and 6006, of Certain Vehicle Leases of the
Debtor with Merchants Automotive Group, Inc. and Granting Related
Relief” (“Assignment Motion”). The Assignment Motion remains
pending in the bankruptcy proceeding.
Discussion
Advantage moves to transfer this case to the Southern
District of Mississippi on grounds that the bankruptcy court in
the Wheelz proceeding has exclusive jurisdiction over this case,
that the automatic stay applies to this case, and that the
Southern District of Mississippi would be a more convenient
forum. Merchants objects to transfer and asserts that this court
3 has jurisdiction, that the automatic stay does not apply to this
case, and that transfer is not appropriate.
I. Jurisdiction
In its notice of removal, Advantage asserted that this court
has subject matter jurisdiction under 28 U.S.C. § 1332. As the
removing party, Advantage has the burden of showing that
jurisdiction exists. Gross v. Sun Life Assurance Co., 734 F.3d
1, 7 (1st Cir. 2013). Now, in support of its motion to transfer
the case to the Southern District of Mississippi, Advantage has
changed course and argues that this court lacks subject matter
jurisdiction over the dispute. Advantage now asserts that the
bankruptcy court has exclusive jurisdiction over the case based
on its Sale Order and 28 U.S.C. § 1334.2
Section 1334 provides that “the district courts shall have
original and exclusive jurisdiction of all cases under title 11"
and “original but not exclusive jurisdiction of all civil
proceedings arising under title 11, or arising in or related to
cases under title 11.” § 1334(a) & (b). A case is “related to”
a bankruptcy case if the case has “some potential effect on the
bankruptcy estate.” In re Paolo, 619 F.3d 100, 102 n.2 (1st Cir.
2010). In addition, “[t]he district court in which a case under
2 If, as Advantage asserts, this court lacked subject matter jurisdiction at the time of removal, the case would be remanded to the New Hampshire state court from which it was removed, an outcome Advantage opposed. See 28 U.S.C. § 1447(c). Advantage has not shown that the jurisdictional argument supports transferring the case to the Southern District of Mississippi.
4 title 11 is commenced or is pending shall have exclusive
jurisdiction -- (1) of all property, wherever located, of the
debtor as of the commencement of such case, and of property of
the estate; . . . .” § 1334(e).
Merchants’s suit is not a case under title 11. Therefore,
the bankruptcy court does not have exclusive jurisdiction under
§ 1334(a).
Advantage argues, however, that the Sale Order precludes
Merchants’s claim in this case and that the bankruptcy court is
the only court that can interpret the Sale Order. Advantage
provides no developed argument and no citation to authority to
show that this court is precluded from interpreting the Sale
Order. In essence, Advantage is challenging the merits of
Merchants’s claim, not the court’s jurisdiction to hear the case.
To the extent Advantage argues that this case is related to the
bankruptcy proceeding, within the meaning of § 1334(b), that
circumstance would not divest this court of jurisdiction.
Advantage mentions in passing that § 1334(e) confers
exclusive jurisdiction in the Southern District of Mississippi.
In support, Advantage states only that Merchants’s claim
“concerns the Master Agreement, or more accurately, the
contractual provisions that survived the Debtor’s notice of
termination (i.e., the Remaining Vehicle Leases), and hence the
Debtor’s rights and obligations thereunder indisputably
constitute property of its bankruptcy estate subject to the
exclusive jurisdiction provisions of 28 U.S.C. 1334(e).”
5 Advantage’s statement falls far short of a persuasive analysis of
the jurisdictional significance of the Master Lease in the
context of Merchants’s claim in this case. To the extent
Advantage challenges the jurisdiction of this court based on
§ 1334(e), it may file a properly supported motion to that effect
within the time allowed below.
The court is satisfied that subject matter jurisdiction
exists under § 1332.
II. Automatic Stay
Advantage supports its motion for transfer, in part, on the
ground that this case is subject to an automatic stay under
§ 362(a), arising from Wheelz’s bankruptcy proceeding. Advantage
does not explain, however, by what means the case could be
transferred if it were stayed. Instead, it appears, once stayed,
the case would remain in this district until the stay was lifted.
Although the automatic stay issue does not appear to support
Advantage’s motion to transfer, the court must determine whether
the case must be stayed or may proceed.
The filing of a bankruptcy petition may trigger automatic
stay provisions in the Bankruptcy Code that bar actions against
the debtor or actions to obtain or gain control over property of
the estate. 11 U.S.C. § 362(a). “[T]he automatic stay creates
‘breathing room’ for debtors, at least temporarily . . . .”
Soto-Rios v. Banco Popular de P.R., 662 F.3d 112, 116 (1st Cir.
2011). Once imposed, the automatic stay continues until “the
6 stay is lifted by the bankruptcy court or dissolved by operation
of law.” In re Shamus Holdings, LLC, 642 F.3d 263, 265 (1st Cir.
2011).
In support of its motion to transfer the case, Advantage
states that Wheelz is a necessary party and the real party in
interest in this case. Although Advantage cites no part of
§ 362(a) or any case law in support of that assertion, it appears
Advantage may have intended to invoke an exception to
§ 362(a)(1). Advantage also relies on § 362(a)(3).
A. Section 362(a)(1)
By its terms, § 362(a)(1) applies to “action[s] or
proceeding[s] against the debtor” and to actions “to recover a
claim against the debtor . . . .” § 362(a)(1) (emphasis added);
see Monarch Life Ins. Co. v. Ropes & Gray, 65 F.3d 973, 979 (1st
Cir. 1995); In re Two Appeals Arising Out of San Juan Dupont
Plaza Hotel Fire Litig., 994 F.2d 956, 969 (1st Cir. 1993) (“As a
general rule, section 362(a)’s automatic stay provisions apply
only to the debtor in bankruptcy.”). Wheelz, the bankruptcy
debtor, is not a party in this case.
To the extent Advantage may have intended to argue that the
stay applies because Wheelz is a necessary party under Federal
Rule of Civil Procedure 19, that argument was not sufficiently
developed to be addressed. See Coons v. Indus. Knife Co., Inc.,
620 F.3d 38, 44 (1st Cir. 2010); Higgins v. New Balance Ath.
Shoe, Inc., 194 F.3d 252, 260 (1st Cir. 1999). In addition,
7 Wheelz has not moved to intervene, and Advantage has not moved to
join Wheelz as a party in this case.
Courts have recognized an exception to the general rule that
§ 362(a)(1) applies only to actions or proceedings against the
debtor in rare and unusual circumstances when the debtor is not
named but is the real party in interest. See, e.g., Kreisler v.
Goldberg, 478 F.3d 209, 213 (4th Cir. 2007); In re Panther
Mountain Land Dev., LLC, 686 F.3d 916, 922 (8th Cir. 2012);
Reliant Energy Servs. v. Enron Canada Corp., 349 F.3d 816, 825
(5th Cir. 2003). Advantage has fallen far short of showing that
the exception would apply here.
B. Section 362(a)(3)
Advantage argues that an automatic stay under
§ 362(a)(3) applies because Merchants’s declaratory judgment
claim would adversely affect Wheelz’s interests in the Master
Lease, the APA, and the TSA and would violate an injunction
issued by the Bankruptcy Court in the Sale Order. Merchants
responds, arguing that its claim does not seek control over any
property or interest of Wheelz and that the TSA and the Sale
Order have no effect on this case.
Section 362(a)(3) provides that a stay shall issue against
“any act to obtain possession of property of the estate or of
property from the estate or to exercise control over property of
the estate.” “Property of the estate” is defined broadly to
include “all legal or equitable interests of the debtor in
8 property as of the commencement of the case.” 11 U.S.C.
§ 541(a)(1); In re The Ground Round, Inc., 482 F.3d 15, 17 (1st
Cir. 2007).
1. Contract Interests
Advantage contends that if Merchants were successful on its
declaratory judgment claim, the result would invalidate Wheelz’s
termination of the Master Lease which would have substantial
financial consequences to Wheelz, would violate the terms of the
APA, and would be contrary to the parties’ intent in the TSA.
Advantage contends that, in effect, Merchants is attempting to
force Wheelz to assume the Master Lease and assign it to
Advantage. In response, Merchants states that it is not seeking
to compel Wheelz to do anything but, instead, is seeking a
declaratory judgment that Advantage, by its own conduct, has
assumed Wheelz’s obligations under the Master Lease.
At this stage, Advantage’s theories about the possible harm
to Wheelz’s contract interests are too hypothetical and
speculative to support imposition of an automatic stay. See,
e.g., In re Downey Fin. Corp., 428 B.R. 595, 610 (Bankr. D. Del.
2010); In re Medex Regional Labs., LLC, 314 B.R. 716, 722-23
(E.D. Tenn. 2004).
Advantage also argues that if Merchants were successful on
its claim in this case, the resulting collateral estoppel effect
would force Wheelz to assume the Master Lease and then to assign
the lease to Advantage. A forced assignment of the Master Lease,
9 Advantage asserts, “is an act of control over property of the
Debtor’s estate that contravenes the automatic stay.” In
support, Advantage relies on In re Jefferson County, Ala., 491
B.R. 277 (Bankr. N.D. Ala. 2013).
In Jefferson County, the bankruptcy court denied a motion to
lift or modify the stay, under § 362(a), imposed in one of two
related state court lawsuits that did not name the debtor as a
party. 491 B.R. at 281. The court noted that although the
debtor was not named as a party in one of the two suits, the
debtor was a party in the other related suit, which was
proceeding before the same judge, with the same claims arising
out of the same facts, and with coordinated discovery. Id. The
court also found that the debtor’s and the non-debtor party’s
interests were “inextricably interwoven” because of their
indemnification agreements and claims for common law
indemnification and contribution, because discovery in the case
against the non-debtor would burden the debtor and hinder the
adjustment of its debts, and because the preclusive effect
against the debtor of findings in the suit against the non-debtor
party would require the debtor’s participation. Id. at 293-94.
The unusual circumstances in Jefferson County are not
present here. This case is the only case involving the issues
between Merchants and Advantage pending in this court.3
3 Apparently, Advantage is asserting that the Assignment Motion makes the bankruptcy case and this case identical as in Jefferson County. The analogy is unpersuasive given the different jurisdictions, different claims, and different parties.
10 Advantage has not suggested that Advantage and Wheelz have
indemnification or contribution agreements between them as the
parties did in Jefferson County. Advantage has not shown that
discovery in this case could burden Wheelz or that findings in
this case would have an adverse preclusive effect on Wheelz in
the bankruptcy case. As such, the circumstances and reasoning in
Jefferson County are inapposite here.
2. Injunction
In its supplemental memorandum, Advantage asserts that the
bankruptcy court issued an injunction in the Sale Order that
“squarely prohibited Merchants or any other creditor from
asserting successor liability claims against Advantage Opco.”
Merchants responds that Advantage’s invocation of the Sale Order
is a red herring.
“Every order granting an injunction and every restraining
order must: (A) state the reasons why it issued; (B) state its
terms specifically; and (C) describe in reasonable detail--and
not by referring to the complaint or other document--the act or
acts restrained or required.” Fed. R. Civ. P. 65(d). An
injunction is not enforceable unless it meets the specificity
required by Rule 65(d). Healey v. Spencer, 765 F.3d 65, 74 (1st
Cir. 2014).
Advantage did not cite any part of the Sale Order to show
that an injunction issued or make any developed argument to show
that an injunction exists and that it is enforceable against
11 Merchants. Even if the Sale Order included an injunction,
Advantage does not explain how an injunction would require the
imposition of an automatic stay under § 362(a)(3). Therefore,
Advantage has not shown that any injunction in the Sale Order
requires an automatic stay in this case.
This case is not stayed under § 362(a).
III. Transfer
Advantage moves to transfer the case to the United States
District Court for the Southern District of Mississippi, relying
on both 28 U.S.C. § 1404 and § 1412. In support, Advantage
asserts that the issues raised by Merchants here are similar to
the issues raised by Wheelz in the Assignment Motion in the
bankruptcy proceeding, that transfer would be convenient for the
parties, and that transfer would promote efficient adjudication
of the dispute. Merchants objects, contending that venue is
proper in this district and that no grounds exist to transfer the
case to the Southern District of Mississippi.
A. Section 1404
“For the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any civil
action to any other district . . . where it might have been
brought.” § 1404(a). “‘Section 1404(a) is intended to place
discretion in the district court to adjudicate motions for
transfer according to individualized, case-by-case considerations
12 of convenience and fairness.’” Astro-Med, Inc. v. Nihon Kohden
Am., Inc., 591 F.3d 1, 12 (1st Cir. 2009) (quoting Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)) (further internal
quotation marks omitted)). The pertinent considerations include
the convenience of parties and witnesses, the availability of
documentary evidence, the possibility of consolidation with
another case, the relative costs, public interest in having a
local controversy adjudicated in the local forum, where the
underlying incidents occurred, and whether a forum selection
clause exists. Coady v. Ashcraft & Gerel, 223 F.3d 1, 11 (1st
Cir. 2000); CFTC v. Cromwell Fin. Servs., Inc., 2006 WL 435451,
at *2 (D.N.H. Feb. 22, 2006) (citing Moore’s Federal Practice §
111.13(1)(b)). “The burden of proof rests with the party seeking
transfer; there is a strong presumption in favor of the
plaintiff’s choice of forum.” Coady, 223 F.3d at 11.
1. Venue
As a threshold issue, “[i]n order for the court to transfer
under § 1404(a), it must be shown that the case could have been
properly brought in the transferee forum.” CardiAO Valve Techs.,
Inc. v. Neovasc, Inc., --- F. Supp. 3d ---, 2014 WL 5151320, at
*1 (D. Mass. Oct. 3, 2014). “A civil action may be brought in -
(1) a judicial district in which any defendant resides, if all
defendants are residents of the State in which the district is
located; (2) a judicial district in which a substantial part of
the events or omissions giving rise to the claim occurred . . .;
13 or (3) if there is no district in which an action may otherwise
be brought . . . any judicial district in which an action may
otherwise be brought . . . .” 28 U.S.C. § 1391(b).
Advantage, the moving party with the burden of proof, did
not address the question of whether Merchants could have properly
brought this case in the Southern District of Mississippi. For
that reason alone, the motion must be denied.
In addition, based on the parties’ allegations, it appears
that Advantage is a Florida limited liability company and that
its sole member is a Delaware corporation with its principal
place of business in Florida. As such, Advantage does not appear
to reside in Mississippi. There are no allegations that any of
the incidents that gave rise to Merchants’s claim occurred in
Mississippi. Therefore, it appears that venue would not be
proper in Mississippi.
2. Considerations for Transfer
Even if Advantage had made the necessary showing for venue
in Mississippi, the circumstances do not support transfer.
Neither Merchants nor Advantage is located in Mississippi.
Advantage has not shown that any witnesses or evidence is located
in Mississippi or that underlying incidents occurred there. The
dispute between Merchants and Advantage appears to have no local
interest in Mississippi and there is no suggestion that costs
wold be minimized by proceeding there.
14 Based on the current record, the case cannot be transferred
to the Southern District of Mississippi in the absence of a
showing that venue would be proper in that district.
B. Section 1412
Advantage argues in a perfunctory manner for transfer
pursuant to § 1412. Section 1412 provides 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.”
This suit was not brought under Title 11. “[A]uthorities
are divided on whether Section 1412 applies to actions related to
cases under Title 11 or only actions under Title 11 or arising in
cases under Title 11.” New Eng. Wood Pellet, LLC v. New Eng.
Pellet, LLC, 419 B.R. 133, 148 (D.N.H. 2009). It is not
necessary to decide whether this case could be construed as a
case related to a case under Title 11 and whether § 1412 would
apply because transfer would be based on the same analysis that
was used for § 1404. Id. Advantage has not shown any plausible
reason to transfer this case to the Southern District of
Mississippi.
Conclusion
For the foregoing reasons, the defendant’s motion to
transfer (document no. 9) is denied.
15 If Advantage intends to pursue exclusive jurisdiction under
28 U.S.C. § 1334(e), it shall file a motion with appropriate
support and addressing the issue of remand under 28 U.S.C.
§ 1447(c) on or before March 5, 2015.
SO ORDERED.
____________________________ Joseph A. DiClerico, Jr. United States District Judge
February 19, 2015
cc: Holly J. Barcroft, Esq. Steven J. Dutton, Esq. Bruce W. Felmly, Esq.