Opinion ID: 2975898
Heading Depth: 4
Heading Rank: 2

Heading: Cases filed in improper district

Text: 2 The debtors attempt to parse the word “case” to show that a bankruptcy “case” is not the same thing as a district court “case” as that term is used in § 1406, and thus § 1406 does not apply. Appellants’ Br. at 16-17; see also In re Jordan, 313 B.R. at 249-50, 255 (making a similar argument and concluding that the “provisions of . . . § 1406 that are applicable in the United States district court do not apply to bankruptcy ‘cases’ under the Bankruptcy Code”). While we recognize that there are differences between bankruptcy cases and civil cases more generally, this alone is hardly a compelling reason to conclude that the word “case” in § 1406 has a different meaning from the word “case” used just two sections later in § 1408 (“[A] case under title 11 may be commenced in the district court . . . .”). Rather, we conclude that bankruptcy cases, like other cases, are encompassed by the plain language of § 1406. 3 The United States Trustee is an interested party by statute. See 11 U.S.C. § 307 (2006) (“The United States Trustee may raise and may appear and be heard on any issue in any case or proceeding under this title . . . .”); see also In re Miles, 330 B.R. 848, 849-51 (Bankr. M.D. Ga. 2004) (holding that the Trustee has standing to bring a motion to dismiss or transfer a Title 11 case due to improper venue). Nos. 06-6430/6519 Thompson, et al. v. Greenwood, et al. Page 5 If a petition is filed in an improper district, on timely motion of a party in interest and after hearing on notice to the petitioners, the United States trustee, and other entities as directed by the court, the case may be dismissed or transferred to any other district if the court determines that transfer is in the interest of justice or for the convenience of the parties. Fed. R. Bankr. P. 1014(a). Thus, part (a)(1) of the rule provides that if a case is properly venued, it may be transferred (in accord with § 1412). Part (a)(2) states that if, on the other hand, the case is improperly venued, it may be dismissed or transferred (in accord with § 1406). As in § 1412, the use of seemingly permissive language (“may be transferred,” rather than “must be transferred”) could be interpreted as granting the court authority to also retain the case. It could, that is, if such an interpretation were not explicitly foreclosed by the rule’s accompanying advisory note: Formerly, 28 U.S.C. § 1477 authorized a court either to transfer or retain a case which had been commenced in a district where venue was improper. However, 28 U.S.C. § 1412, which supersedes 28 U.S.C. § 1477, authorizes only the transfer of a case. The rule is amended to delete the reference to retention of a case commenced in the improper district. Dismissal of a case commenced in the improper district as authorized by 28 U.S.C. § 1406 has been added to the rule. Fed. R. Bankr. P. 1014 advisory committee’s note. The advisory note makes clear that, since the repeal of 28 U.S.C. § 1477,4 which explicitly permitted retention of an improperly venued case, there is no longer any authority for such retention, and only dismissal or transfer of the case is authorized. While we acknowledge that this note (and, indeed, the entire rule) must give way to conflicting statutory authority under some circumstances, see 28 U.S.C. § 2075 (2006) (stating that the “rules shall not abridge, enlarge, or modify any substantive right”), there is no conflict between the rule and any applicable statute on the specific question at issue in this case—whether a bankruptcy court has authority to retain an improperly venued case over the timely objection of an interested party. Both Rule 1014(a)(2) and § 1406 answer that question in the negative. To be sure, as the district court recognized, there is some conflict between Rule 1014(a)(2) and § 1406 vis-à-vis the transfer of an improperly venued case. See In re MacDonald, 356 B.R. at 427-28. Specifically, the statute permits transfer only to a district where venue would have been proper in the first instance, and only in the interest of justice. In contrast, Rule 1014(a)(2) appears to permit transfer to “any other district,” whether the case could have been brought there originally or not, and includes the “convenience of the parties” as an additional consideration. Compare 28 U.S.C. § 1406 with Fed. R. Bankr. P. 1014(a)(2). Although resolving these apparent discrepancies is not strictly necessary to render a decision in the case before us, in the interest of providing guidance to the lower courts in future bankruptcy cases, we note that the statute trumps the rule. See Fed. R. Bankr. P. 9030 (“These rules shall not be construed to extend or limit the jurisdiction of the courts or the venue of any matters therein.”). Thus, where a bankruptcy case is brought in an improper venue, and an interested party timely objects, the court must either dismiss it or transfer 4 28 U.S.C. § 1477 formerly governed venue in bankruptcy cases. It clearly authorized bankruptcy courts to retain improperly venued case in the interest of justice or for the convenience of the parties. See 28 U.S.C. § 1477 (1982) (repealed). Unfortunately for the debtors, it was repealed as part of the Bankruptcy Amendments and Federal Judgeship Act of 1984, which restructured the bankruptcy courts following the Supreme Court’s decision in Northern Pipeline Const. Co. v. Marathon Pipeline Co., 458 U.S. 50 (1982) (holding that the bankruptcy courts constituted an impermissible delegation of Article III judicial powers to non-Article III courts). It is unclear precisely why § 1477 was repealed. Compare In re Jordan, 313 B.R. at 253 n.11, 255 (noting that the legislative history is “sparse” but suggesting that the repeal may have been a drafting oversight caused by Congress’s rush to resolve the jurisdictional problems caused by Northern Pipeline) with In re MacDonald, 356 B.R. at 425 (adopting “a presumption of fundamental legislative competence on the part of Congress” and concluding that the repeal was purposeful). Whatever the reason for its repeal, however, the simple fact is that § 1477 no longer exists, and we cannot pretend otherwise. Nos. 06-6430/6519 Thompson, et al. v. Greenwood, et al. Page 6 it to a jurisdiction of proper venue in accordance with § 1406, notwithstanding any differing language in Rule 1014(a)(2). Note, however, that no such conflict arises with regard to cases that are properly venued in the first instance. Compare 28 U.S.C. § 1412 with Fed. R. Bankr. P. 1014(a)(1) (both authorizing transfer to another district, without limitation, in the interest of justice or for the convenience of the parties). Thus, a case that is properly venued in the first instance could be transferred to another district (even one where the case could not originally have been brought) in accordance with § 1412 and Rule 1014(a)(1). Those courts adhering to the minority view take issue with this interpretation because of the seeming illogic of this rule—that a case that is filed in an improper venue must be dismissed or transferred to a proper venue, but one that is first filed in a proper venue can be transferred to a district where venue is improper. See, e.g., In re Lazaro, 128 B.R. at 172 (“It is an odd construction indeed to maintain that New Mexico would be free to transfer this case to the Western District of Texas . . . , but that the Western District of Texas is not free to retain the self-same case.”). We, however, are inclined to agree that “[t]he statutory scheme . . . merely recognizes that it is the role of the ‘home’ court to make [the] determination [whether to transfer a case to another district].” In re Petrie, 142 B.R. at 407. Whether this framework is the best way to manage venue in bankruptcy cases is not for us to decide; it is enough that the textual authority inescapably leads to our conclusion. Thus, we agree “that fixing any perceived problem is a job for Congress and not the courts.” Swinney, 309 B.R. at 641.