Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01805/USCOURTS-caed-2_06-cv-01805-2/pdf.json

Nature of Suit Code: 150
Nature of Suit: Overpayments &amp; Enforcement of Judgments
Cause of Action: 28:1441 Petition For Removal--Other Contract

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ORTHODONTIC CENTERS OF

CALIFORNIA, INC.,

NO. CIV. S-06-1805 WBS EFB

Plaintiff,

v.

ORDER

DAVID C. HOBSON, D.D.S., M.S.

and D.C. HOBSON, D.D.S., M.S., 

a professional corporation, 

Defendants.

 

----oo0oo----

This is plaintiff’s action to recover on the three

promissory notes executed by Dr. Hobson. The matter is before

the court now on plaintiff’s motion, pursuant to 28 U.S.C. §

1412, to transfer to the Eastern District of Louisiana. 

Plaintiff and other subsidiaries of OCA, Inc. have

filed for Chapter 11 relief in the United States Bankruptcy Court

for the Eastern District of Louisiana. Under 28 U.S.C. § 1412,

“[a] district court may transfer a case or proceeding under title

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11 to a district court for another district, in the interest of

justice or for the convenience of the parties.” Because of

plaintiff’s pending bankruptcy, this action may be regarded as a

case or proceeding under title 11.

In determining whether to transfer an action under

section 1412, the court must consider the convenience of the

parties and the interests of justice. In re Commonwealth Oil

Refining Co., 596 F.2d 1239, 1247 (5th Cir. 1979). In

considering the convenience of the parties, courts may take into

account: (1) the proximity of creditors of every kind to the

court; (2) the proximity of the bankrupt (debtor) to the court;

(3) the proximity of the witnesses necessary to the

administration of the estate; (4) the location of the assets; (5)

the economic administration of the estate; and (6) the necessity

for ancillary administration if bankruptcy should result. 

Commonwealth Oil Refining, 596 F.2d at 1247. However, “the most

important consideration is whether the requested transfer would

promote the economic and efficient administration of the estate.”

Id.; see also In re Consolidated Equity Properties, 136 B.R. 261,

267 (D. Nev. 1991). Additionally, the Court should consider any

local interests which argue in favor of retaining jurisdiction. 

In re Slentz, 94 B.R. 446, 449 (Bankr. N.D. Ohio 1988) (citing In

re Thomasson, 60 B.R. 629 (Bankr. M.D. Tenn. 1985)).

The “interest of justice” component of § 1412 is a

broad and flexible standard, requiring a case-by-case analysis

and contemplating a consideration of whether transferring venue

would promote the efficient administration of the bankruptcy

estate, judicial economy, timeliness, and fairness. Manville

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Forest Prods., 896 F.2d at 1391; In re Enron Corp., 284 B.R. 376,

403 (Bankr. S.D.N.Y. 2002). This factor “encompasses, among

other things, inquiry as to the forum which facilitates the

efficient, proper and expeditious functioning of the courts. 

Although vague, this inquiry would include looking into the

desirability of having a judge familiar with applicable law hear

and determine issues arising in the case.” In re Pinehaven

Assoc., 132 B.R. 982, 990 (Bankr. E.D.N.Y. 1991). One court has

noted, “so far as appears, nearly every case that has considered

transfer of a bankruptcy proceeding has construed this phrase in

section 1412 to give primacy to administrative matters affecting

the estate.” Sudbury, Inc. v. Dlott, 149 B.R. 489, 492 (Bankr.

N.D. Ohio 1993) (citing Manville Forest Prods., 896 F.2d at

1384)).

Here, Dr. Hobson has already obtained a judgment in

this court against plaintiff in the amount of $485,022 for his

attorney’s fees in case No. Civ. S-02-0886. He acknowledges

liability on the promissory notes which are the subject of this

action, and the only question is the amount plaintiff is entitled

to recover. It is undisputed that in any event the amount

plaintiff will recover on the notes will be less than the amount

of Dr. Hobson’s judgment in Civ. S-02-0886. That judgment is

presently on appeal the Ninth Circuit, awaiting decision after

oral argument. Thus, unless the judgment of this court is

reversed in that appeal, whatever plaintiff may recover in this

action will simply serve as a set off against Dr. Hobson’s

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Plaintiff has posted a bond sufficient to cover the 1

judgment in Civ. S-02-0886.

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judgment in that case. Accordingly, any judgment in this case 1

will have no substantial effect on the economic administration of

the bankruptcy estate.

On the other hand, if this court’s judgment in the

other case were to be reversed, then any judgment in this case

could affect the administration of the bankruptcy estate. 

Presently, there are in excess of 70 adversary proceedings

involving the business service agreements entered into by OCA.

These adversary proceedings involve numerous Affiliated Practices

and OCA and its subsidiaries across several states. The estate

would not be administered efficiently if OCA was forced to

litigate these claims in different courts around the country. 

Thomson McKinnon Secur., 126 B.R. at 836 (“The debtor should not

be required to engage in collection suits all over the country in

order to assemble its assets for distribution to creditors.”).

While it is never prudent to predict what the Court of

Appeals will do, this court is not inclined to base its decision

in this case on the assumption that its decision in the prior

case will be overturned on appeal. Unless and until told

otherwise, this court therefore assumes that any judgment in this

case will simply serve as a set off against Dr. Hobson’s recovery

on his judgment in the previous case, and will therefore have no

substantial impact on the bankruptcy proceedings in Louisiana. 

On the other side of the equation, Dr. Hobson would be

detrimentally affected by transfer due to increased costs of

defending the action. Courts have found that the financial

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effect on the non-moving party is a factor. GEX Kentucky, Inc.

v. Wolf Creek Collieries Co. (In re GEX Kentucky, Inc.), 85 B.R.

431, 435 (Bankr. N.D. Ohio 1987) (“the additional costs of

litigating in a distant court militate against the factors in

favor of the transfer”); In re Whilden, 67 B.R. 40 (Bankr. M.D.

Fla. 1986).

IT IS THEREFORE ORDERED that plaintiff’s motion,

pursuant to 28 U.S.C. § 1412, to transfer this case to the

Eastern District of Louisiana be, and the same hereby is DENIED,

without prejudice to the right of plaintiff to renew its motion

if the judgment of this court in Case No. Civ. S-02-0886 is

reversed on appeal.

DATED: January 9, 2007

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