James M. Lawniczak on Thompson v. Greenwood

James M. Lawniczak on Thompson v. Greenwood

 
The courts have not agreed on whether 28 U.S.C.S. § 1412 allows a bankruptcy court to retain jurisdiction of an improperly venued case. The majority of lower courts have held that a court cannot keep such a case, given the plain language of 28 U.S.C. §§ 1406 and 1408. However, a strong minority position has advocated a practical approach and has emphasized that, since § 1412 does not limit transfer to a court in which the case could have been originally filed, there is no reason not to allow a case to remain before a court, regardless of proper venue, if in the interest of justice or for the convenience of the parties. The Court of Appeals for the Sixth Circuit has become the first circuit court to rule on this issue. As James Lawniczak, of Cleveland’s Calfee, Halter & Griswold,  explains in his Expert Commentary on the decision, Thompson v. Greenwood, 507 F.3d 416 (6th Cir. 2007), the Sixth Circuit comes down firmly on the side of strict statutory construction, holding that in the face of improper venue a bankruptcy court must dismiss the case or transfer it to a district where it originally could have been brought.
 
The author writes:  “The Court of Appeals for the Sixth Circuit first noted that the debtors agreed that venue was improper under the plain language of 28 U.S.C. § 1408. 507 F.3d at 419. The court next turned its attention to the proper interpretation and application of 28 U.S.C. § 1406(a), which governs improperly venued cases. The court began its analysis by observing that, although § 1406 does not specifically mention title 11 bankruptcy cases, it is generally applicable to all district court cases. Because the bankruptcy judges constitute a unit of the district court under 28 U.S.C. § 151, title 11 cases are indeed included within the scope of § 1406. Therefore, the court of appeals found that, where venue is improper and an interested party timely objects, a district court can either (1) dismiss the case or (2) transfer the case to a jurisdiction of proper venue. 507 F.3d at 419-20.
 
"Yet the debtors argued that § 1406 is inapplicable to bankruptcy proceedings and that the more specific title 11 transfer-of-venue section, 28 U.S.C. § 1412, should apply instead. The debtors further argued that the use of the word 'may' in § 1412 indicates that a court considering convenience may retain the case itself in addition to transferring it to another district. 507 F.3d at 420.
 
“The court of appeals disagreed, concluding that the case was governed by the ‘plain text’ of 28 U.S.C. § 1406. 507 F.3d at 423. The court cited the U.S. Supreme Court case of Connecticut National Bank v. Germain, 503 U.S. 249, 112 S. Ct. 1146, 117 L. Ed.2d 391 (1992), for the proposition that a court must give effect to the plain language of congressional enactments.”