In re Bavelis

• Decision Date: 31 May 2011
• Docket Number: Adversary No. 10–2508.,Bankruptcy No. 10–58583.
• Citation: In re Bavelis, 453 B.R. 832 (Bankr. S.D. Ohio 2011)
• Parties: In re George A. BAVELIS, Debtor.George A. Bavelis, Plaintiff,v.Ted Doukas, et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

453 B.R. 832

In re George A. BAVELIS, Debtor.George A. Bavelis, Plaintiff,

v.Ted Doukas, et al., Defendants.

Bankruptcy No. 10–58583.

Adversary No. 10–2508.

United States Bankruptcy Court, S.D. Ohio, Eastern Division,

May 31, 2011.

Marion H. Little, Jr., Richard K. Stovall, Zeiger, Tigges & Little LLP, Columbus, OH, for Debtor and Plaintiff.Steven Newburgh, Steven S. Newburgh, P.A., West Palm Beach, FL, Philomena S. Ashdown, Cincinnati, OH, for Defendants.John M. Stravato, Melville, NY, pro se.

MEMORANDUM OPINION AND ORDER ON MOTIONS REQUESTING DISMISSAL, TRANSFER, ABSTENTION OR REMAND

JOHN E. HOFFMAN, JR., Bankruptcy Judge.

I. Introduction

In this adversary proceeding commenced by the debtor and debtor in possession in the underlying Chapter 11 bankruptcy case, George A. Bavelis (“Debtor”), the issue before the Court at this stage of the litigation is not whether the Debtor's claims for relief have merit, but rather whether the Court should adjudicate those claims at all. The claims arise out of transactions between the Debtor and companies with which he is affiliated, on the one hand, and Mahammad Qureshi (“Qureshi”), Ted Doukas (“Doukas”), Masroor Rab (“Rab”) and companies with which they are affiliated, on the other. The Debtor seeks relief against Qureshi, Doukas and Rab, as well as against other defendants, under both the Bankruptcy Code and Florida law. Among other things, the Debtor requests, pursuant to 11 U.S.C. §§ 544(b) and 548, the avoidance of certain transfers that he alleges were constructively fraudulent and the recovery of the property transferred, or its value, for the benefit of his bankruptcy estate under § 550.

In response, Qureshi, Doukas, Rab and certain of the other defendants ask the Court to dismiss, transfer, remand or abstain from hearing this adversary proceeding.¹ In so doing, they assert several legal theories, including lack of subject-matter and personal jurisdiction, improper venue, mandatory and permissive abstention and equitable remand. For the reasons explained below, the Court concludes that it has core subject-matter jurisdiction over the Debtor's causes of action brought pursuant to the Bankruptcy Code and related-to jurisdiction over his state law claims. The Court also finds that venue of this adversary proceeding is proper in the Southern District of Ohio, that transfer to another district is not warranted and that abstention and remand also are not appropriate. Likewise, the Qureshi Defendants' arguments do not support their requests that the Court dismiss this adversary proceeding based on a lack of personal jurisdiction. Although the Qureshi Defendants are correct that the process served on them was insufficient, this means only that the summonses served by the Debtor must be corrected and re-served on the Qureshi Defendants within 30 days after the entry of this opinion and order if the Court is to have personal jurisdiction over them, not that the adversary proceeding should be dismissed. The Court, therefore, declines to dismiss, transfer, remand or abstain from hearing this adversary proceeding.

II. Jurisdiction

The Court has jurisdiction to hear and determine the Motions pursuant to 28 U.S.C. §§ 157 and 1334 and the general order of reference entered in the Southern District of Ohio. Although the Court's authority to decide this adversary proceeding has been challenged, the Court has jurisdiction to determine whether it in fact has subject-matter jurisdiction. See, e.g., Chicot Cnty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 376–77, 60 S.Ct. 317, 84 L.Ed. 329 (1940); Pratt v. Ventas, Inc., 365 F.3d 514, 521 (6th Cir.2004) (“ ‘The court has the authority to pass upon its own jurisdiction....’ ” (quoting Chicot, 308 U.S. at 377, 60 S.Ct. 317)); Mata v. Eclipse Aerospace, Inc. (In re AE Liquidation, Inc.), 435 B.R. 894, 900 (Bankr.D.Del.2010) (citing Chicot for the proposition that “[t]he Court has jurisdiction to determine whether it has subject matter jurisdiction over the ... [a]dversary [p]roceeding”).

In addition, although the core nature of the claims asserted in this adversary proceeding is disputed, the Motions themselves constitute core proceedings. Motions seeking dismissal based on an alleged lack of subject-matter jurisdiction are core proceedings. See Casey v. Grasso (In re Riccitelli), 320 B.R. 483, 487 (Bankr.D.Mass.2005) (“This motion (as opposed to the adversary proceeding as a whole) is a proceeding ... to determine whether the court has subject matter jurisdiction over the adversary proceeding.... [T]his Court has jurisdiction to hear and determine the motion to dismiss and to enter an appropriate and final order on it.”). So too are motions seeking abstention, remand and transfer of venue. See Frelin v. Oakwood Homes Corp., 292 B.R. 369, 376 (Bankr.E.D.Ark.2003) (holding that motions for abstention, remand and transfer of venue are core proceedings and that the court has the authority to enter final orders on such motions); Brizzolara v. Fisher Pen Co., 158 B.R. 761, 767 (Bankr.N.D.Ill.1993) (same); Christensen v. St. Paul Bank for Coops. (In re Fulda Indep. Co-op.), 130 B.R. 967, 972–73 n. 5 (Bankr.D.Minn.1991) (explaining that bankruptcy courts are authorized to enter final orders on motions for abstention and remand as a result of the Judicial Improvements Act of 1990). Accordingly, the Court has the authority to enter an order on the Motions without submitting proposed findings of fact and conclusions of law to the District Court.

III. Background

The background set forth below is based on the Court's review of the Complaint, the Motions, the affidavits filed by the parties and the entire record of the Debtor's bankruptcy case and this adversary proceeding. The Court is providing this background only for the purpose of its analysis of the issues presented by the Motions, not for the purpose of making findings of fact relevant to the merits of the Complaint or to express any views regarding the veracity of the allegations made by the parties.

A. The Debtor's Bankruptcy Case and His Assets

The Debtor grounds his position regarding venue on the pendency of his bankruptcy case in the Southern District of Ohio, which, in turn, is based in part on the location of his principal assets here. On July 20, 2010 (“Petition Date”), the Debtor commenced a case under Chapter 11 of the Bankruptcy Code in this Court. Among other things, he asserts that his principal assets were located in the Southern District of Ohio as of the Petition date, see Voluntary Petition (Doc. 1 in Case No. 10–58583), and those assets and their then current approximate values, included the following: a brokerage account opened by the Debtor in 2005 with Fifth Third Securities, Inc. (“Brokerage Account”) in Columbus, Ohio ($11.4 million); ² business assets of an unspecified value; and real property that the Debtor has owned in Columbus for more than 24 years ($435,000).³ The aggregate value of those assets as of the Petition Date (not including the business assets of an unspecified value) is approximately $11.8 million. The other assets listed on the Debtor's schedules of assets and liabilities, including those clearly located in places other than the Southern District of Ohio and those whose location is not evident, have an aggregate value of less than $8 million.

B. Other Facts Relevant to the Court's Adjudication of the Motions1. The Debtor's Allegations

a. The Events Leading to the Commencement of this Adversary Proceeding

According to the Debtor, the events that ultimately led to the filing of this adversary proceeding began in 2009 when he, FLOHIO, LLC (“FLOHIO”) and Bavelis Family, LLC (“Bavelis Family”) joined with Qureshi, MAQ Management and Qureshi Family to form additional companies—including three of the other Qureshi Defendants, FLOVEST, BMAQ and GMAQ (collectively, “Bavelis–Qureshi LLCs”)—for the purpose of investing in gas stations, office space and mixed-use real estate projects. The Debtor also alleges that the Bavelis–Qureshi LLCs obtained bank financing (including from Fifth Third Bank), that the Debtor and Qureshi executed guarantees in favor of the bank lenders (“Guarantees”) and that, while the Debtor advanced sums to service the bank debt, Qureshi failed to do so.

According to the Complaint, Doukas (1) gained the Debtor's trust and persuaded him that he could help resolve business disputes he allegedly was having with Qureshi, (2) thereafter caused Nemesis—a company affiliated with Doukas—to obtain a 10% interest in the Bavelis–Qureshi LLCs by means of assignments the Court will collectively refer to as the “March 2009 Assignments” and (3) later caused the entire remaining interests held by the Debtor, FLOHIO and Bavelis Family in the Bavelis–Qureshi LLCs to be assigned to Nemesis through assignments that the Court will collectively refer to as the “December 2009 Assignments.” Doukas and Qureshi, according to the Debtor, were acting in concert to divert assets from the Bavelis–Qureshi LLCs to other entities (including, allegedly, to BNK and FLS), causing the Debtor further exposure on the Guarantees. The Debtor alleges that Rab also was acting in concert with the other Defendants.

In addition, the Complaint alleges that Doukas induced the Debtor to issue a promissory note (“Quick Capital Note” and, together with the March 2009 Assignments and the December 2009 Assignments, the “2009 Transactions”) to yet another Doukas-affiliated company—Quick Capital. Prior to the Petition Date, Quick Capital commenced a lawsuit against the Debtor in the Supreme Court of New York, County of Nassau (“New York State Court”) for amounts due under the Quick Capital Note (“Quick Capital Lawsuit”) despite, according to the Complaint, the Debtor's having repaid to Quick Capital all amounts he actually borrowed from it.

b. The Claims for Relief Asserted in the Complaint

i. The Bankruptcy Law Counts

After reciting in extensive detail the facts summarized...