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Delaware Bankruptcy Court Transfers Cases to Illinois

By Evan T. Miller

On February 16, 2012, Judge Kevin J. Carey issued a memorandum opinion and order granting a motion to transfer venue (“Motion”) in the jointly administered In re Qualteq, Inc., d/b/a VCT New Jersey, Inc., et al. (Case No. 11-12572) cases to the United States Bankruptcy Court for the Northern District of Illinois. He concluded that the Movant satisfied Delaware’s standard for interpreting 28 U.S.C. § 1412.

The Movant and the Debtors stipulated to certain facts which the Court adopted. These facts established that: the overwhelming majority of the relevant debtor entities and creditors were nearer to Illinois and/or a non-Delaware forum than to Delaware; an overwhelming majority of the Debtors’ employees and books and records were in Illinois; the Debtors’ principals and agents lived primarily in Illinois; and there were three separate legal actions taking place in the District and Bankruptcy Courts for the Northern District of Illinois that involved the Debtors’ principals and agents.

In the District of Delaware, courts consider six-factors when interpreting 28 U.S.C. § 1412, including (a) proximity of creditors of every kind to the court; (b) proximity of the debtor; (c) proximity of witnesses who are necessary to the administration of the estate; (d) the location of the debtor’s assets; (e) the economic administration of the estate; and (f) the necessity for ancillary administration in the event of liquidation. The Court applied the six factors to the agreed upon facts and concluded that all factors weighed in favor of venue transfer.

Additionally Judge Carey concluded that (1) the proximity of estate professionals to Delaware was of little import; (2) the most important factor, efficient economic administration of the estate, was far better served in Chicago; (3) the cases had only dealt with routine matters to date and there had not yet been a hearing on the adequacy of the Debtors’ disclosure statement; (4) the Debtors were trying to avoid the federal courts in Chicago, a practice that could not be condoned; and (5), an Illinois bankruptcy court could certainly deal with a complex bankruptcy. Based on the law and applicable facts, the Court granted Movant’s motion to transfer venue.

A copy of the bankruptcy court’s opinion is available here.

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