In re Positron, 541 B.R. 816 (Bankr. N.D. Tex. 2015)

debtorsIssue: Whether the bankruptcy court should transfer an involuntary bankruptcy case to the venue requested by the alleged debtor.

Holding: When an alleged debtor has no significant ongoing business operations, its principal asset is located in the district where the involuntary was filed, and the disposition of that asset will be the most important part of the alleged debtor’s case, venue should not be transferred.

Synopsis:

In January 2015, the battle over venue of Caesars Entertainment Operating Company’s (the main operating subsidiary of the large casino empire) bankruptcy case made national headlines. As a refresher, just prior to Caesar’s filing its voluntary petition in Illinois, a number of second lien note holders  commenced an involuntary bankruptcy case in Delaware. See In re Caesars Entm’t Operating Co., Case No. 15-10047, 2015 WL 495259 *2 (Bankr. D. Del. Feb. 2, 2015). The Delaware bankruptcy court evaluated the traditional two-prong test associated with venue motions—convenience of the parties and interest of justice—and concluded that the case should proceed in Illinois. See id. at *5.

In Positron, Judge Jones analyzed the same two prongs but reached the opposite conclusion. See In re Positron, 541 B.R. 816, 821-22 (Bankr. N.D. Tex. 2015). Judge Jones echoed Judge Gross’s statement of the law in Caesar’s and held that “[i]n the context of the trial of an opposed involuntary bankruptcy case, the factors can be pared down to the following: proximity of the petitioning creditors and all other creditors’ the proximity of potential witnesses, the location of the estate assets, and the economic administration of the estate to be potentially administered in bankruptcy.” See id. at 818-19 (citing Caesars Entm’t, 2015 WL 45259, at *6). Applying these factors to the facts in Positron, the Court concluded that the case should not be transferred to the alleged debtor’s venue of choice. Specifically, Judge Jones ultimately focused on two aspects of the case. First, he found as a practical matter there was no ongoing business operations and no clear prospect for such and thus the debtor’s argument that Illinois was the “nerve center” was not persuasive. See id. at 821. Second, he found that the only asset of real significance and importance was some equipment and radioactive materials maintained at a facility in Lubbock. See id. As a result, “[i]f relief is granted here upon trial of the involuntary petition, the maintenance and likely disposition of the radio active material will be the most important part of Positron’s administration in bankruptcy.” Id. Based upon this rationale, Judge Jones denied the motion to transfer.

Full Opinion