Thompson v. Greenwood, 06-6430.

• Decision Date: 08 November 2007
• Docket Number: No. 06-6430.,No. 06-6519.,06-6430.,06-6519.
• Citation: 507 F.3d 416
• Parties: Reuben Walter THOMPSON and Patricia J. Thompson; and Leonard W. Jordan, Petitioners-Appellants, v. Madalyn S. GREENWOOD, et al., Respondents-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

507 F.3d 416

Reuben Walter THOMPSON and Patricia J. Thompson; and Leonard W. Jordan, Petitioners-Appellants, v. Madalyn S. GREENWOOD, et al., Respondents-Appellees.

No. 06-6430.

No. 06-6519.

United States Court of Appeals, Sixth Circuit.

Argued: September 10, 2007.

Decided and Filed: November 8, 2007.

ARGUED:

Holly W. Schumpert, Law Office of Holly W. Schumpert, Memphis, Tennessee, for Appellants. Kelsi Brown Corkran, United States Department of Justice, Washington, D.C., for Appellee.

ON BRIEF:

Holly W. Schumpert, Law Office of Holly W. Schumpert, Memphis, Tennessee, Steven F. Bilsky, Memphis, Tennessee, for Appellants. Jonathan H. Levy, William Kanter, United States Department of Justice, Washington, D.C., for Appellee.

Before: BOGGS, Chief Judge; and MARTIN and SUTTON, Circuit Judges.

OPINION

BOGGS, Chief Judge.

This consolidated appeal arises from a Title 11 bankruptcy action brought on behalf of two sets of debtors, all of whom are residents of the Northern District of Mississippi, who filed their actions in the Western District of Tennessee (Memphis Division) for reasons of convenience. The United States Trustee's Office for the Northern District of Mississippi moved to transfer the cases. This case presents a single issue on appeal: whether a bankruptcy court may retain a case filed in an improper venue under 28 U.S.C. § 1408 over a timely objection by an interested party, if it determines that retention is in the interests of justice or for the convenience of the parties. The district court answered that question in the negative and ordered the cases transferred to the Northern District of Mississippi. We affirm.

I

Debtors Reuben and Patricia Thompson and Leonard Jordan ("the debtors"), all of whom reside in the Northern Mississippi suburbs of Memphis, filed voluntary petitions for bankruptcy in the United States Bankruptcy Court for the Western District of Tennessee in June 2004. In both cases, the United States Trustee in the Northern District of Mississippi filed motions to dismiss or transfer on the ground that venue was lacking because the debtors did not reside in the district, as required by 28 U.S.C. § 1408. Although the debtors conceded, both then and now, that venue in Tennessee was "technically improper," Appellants' Br. at 9, they maintained that, both as a matter of statutory construction and for equitable reasons, the bankruptcy judges had inherent authority to retain the cases in the interest of justice or for the convenience of the parties. The Trustee argued that a proper interpretation of the applicable venue statutes left the judge with no discretion to retain the cases, and that the court was required either to dismiss or transfer the cases under the plain language of 28 U.S.C. § 1406.

The decisions of the bankruptcy judges in the two cases were contradictory. In the case of Mr. Jordan, Chief Bankruptcy Judge David S. Kennedy agreed with the debtor's position, holding that "the court, in its discretion, pursuant to its inherent or implicit authority, . . . may retain `cases' filed in an improper district `for the convenience of the parties' or `in the interest of justice' even if a timely motion is filed to contest venue. . . ." In re Jordan, 313 B.R. 242, 264 (Bankr.W.D.Tenn.2004). In contrast, in the case of the Thompsons, Bankruptcy Judge Jennie D. Latta, relying on the reasoning of her prior decision in In re McDonald, 219 B.R. 804 (Bankr. W.D.Tenn.1998), found that venue was not proper in the Western District of Tennessee and ordered the case transferred to Mississippi. Both cases were appealed to the District Court for the Western District of Tennessee, which thoroughly analyzed the applicable venue statutes and determined that the Trustee's position was "the most coherent reading of the statute as a whole in conformity with accepted norms of statutory construction." In re MacDonald, 356 B.R. 416, 428 (W.D.Tenn. 2006). The court therefore affirmed Judge Latta's ruling in In re Thompson and reversed Chief Judge Kennedy's ruling in In re Jordan. Id. at 429. The debtors then appealed to this court.

This issue has divided the lower courts, with a decided majority siding with the Trustee's interpretation. See, e.g., U.S. Trustee v. Sorrells (In re Sorrells), 218 B.R. 580 (B.A.P. 10th Cir.1998); Swinney v. Turner, 309 B.R. 638 (M.D.Ga.2004); Peachtree Lane Assocs. v. Granader (In re Peachtree Lane Assocs.), 188 B.R. 815 (N.D.Ill.1995); Micci v. Bank of New Haven (In re Micci), 188 B.R. 697 (S.D.Fla. 1995); EDP Med. Computer Sys. v. United States (In re EDP Med. Computer Sys.), 178 B.R. 57 (M.D.Pa.1995); In re Great Lakes Hotel Assocs., 154 B.R. 667 (E.D.Va.1992); ICMR, Inc. v. Tri-City Foods, 100 B.R. 51 (D.Kan.1989); In re Ross, 312 B.R. 879 (Bankr.W.D.Tenn.2004) (Judge William H. Brown); In re Pannell, 243 B.R. 23 (Bankr.S.D.Ohio 1999); In re McDonald, 219 B.R. at 806 (Judge Jennie D. Latta); In re Columbia Western, Inc., 183 B.R. 660 (Bankr.D.Mass.1995); In re Petrie, 142 B.R. 404 (Bankr.D.Nev.1992); In re Sporting Club at Ill. Ctr., 132 B.R. 792 (Bankr.N.D.Ga.1991); In re Pick, 95 B.R. 712 (Bankr.D.S.D.1989); In re Townsend, 84 B.R. 764 (Bankr.N.D.Fla.1988). A minority of courts, however, favors the debtors' interpretation. See, e.g., U.S. Aviex Co. v. Aviex Int'l, Inc. (In re U.S. Aviex Co.), 96 B.R. 874 (N.D.Ind.1989); In re Brazzle, 321 B.R. 893 (Bankr.W.D.Tenn. 2005) (Judge G. Harvey Boswell); In re Jordan, 313 B.R. at 264 (Chief Judge David S. Kennedy); In re Capital Hotel Group, 206 B.R. 190 (Bankr.E.D.Mo.1997); In re Lazaro, 128 B.R. 168 (Bankr. W.D.Tex.1991).¹ No other circuit court of appeals appears to have addressed this issue. We agree with the majority interpretation for the reasons that follow, and adopt it as the rule in this circuit. We therefore affirm.

II

"In a case which comes to us from bankruptcy court by way of an appeal from a decision of a district court, we review directly the decision of the bankruptcy court." Brady-Morris v. Schilling (In re Kenneth Allen Knight Trust), 303 F.3d 671, 676 (6th Cir.2002). "[W]e apply the clearly erroneous standard to the bankruptcy court's findings of fact, and we review de novo the bankruptcy court's conclusions of law." Ibid. In the present case, the facts are undisputed and the question is purely one of the proper interpretation of the applicable venue statutes.

A

As this court has recognized, a fundamental canon of statutory construction is that "when interpreting statutes, the language of the statute is the starting point for interpretation, and it should also be the ending point if the plain meaning of that language is clear." United States v. Boucha, 236 F.3d 768, 774 (6th Cir.2001) (internal quotation omitted). Venue in a Title 11 case is governed by 28 U.S.C. § 1408, which reads, in pertinent part:

[A] case under title 11 may be commenced in the district court for the district . . . in which the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is the subject of such case have been located for the one hundred and eighty days immediately preceding such commencement. . . .

28 U.S.C. § 1408 (2006). Under this standard, the debtors concede that venue is not proper in the Western District of Tennessee, or, at least, not "technically" proper. Appellants' Br. at 9. Improperly venued cases are governed by 28 U.S.C. § 1406, which is headed "Cure or waiver of defects" and instructs:

(a) The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.

(b) Nothing in this chapter shall impair the jurisdiction of a district court of any matter involving a party who does not interpose timely and sufficient objection to venue.

28 U.S.C. § 1406(a)-(b) (2006). Although this section does not specifically mention Title 11 bankruptcy cases, its broad language plainly encompasses all improperly venued cases of whatever variety. Presumably, since bankruptcy judges "constitute a unit of the district court," 28 U.S.C. § 151 (2006), this includes Title 11 cases.² Therefore, under § 1406, if a case is brought in an improper venue and an interested party³ timely objects, a district court has only two options: (1) dismiss the case, or (2) transfer the case to a jurisdiction of proper venue, if it be in the interest of justice.

The debtors, however, argue that § 1406 is inapplicable to bankruptcy cases because another, more specific provision applies — § 1412, which is headed "Change of venue" and reads: "A district court may transfer a case or proceeding under title 11 to a district court for another district, in the interest of justice or for the convenience of the parties." 28 U.S.C. § 1412 (2006). The debtors argue that the use of the term "may" implies that the court is not required to transfer a case, but may also retain it. See In re Jordan, 313 B.R. at 256 (quoting In re Lazaro, 128 B.R. at 168, 172-74, which in turn quotes In re Boeckman, 54 B.R. at 111: "[T]he permissive language used in Section 1412 . . . merely says that a district court `may' transfer a case to another district; it does not say it must transfer the case. . . ."). While at first glance this might appear to be a plausible interpretation, it erroneously assumes that § 1412 applies to both properly and improperly venued cases. If this assumption were accurate, and the debtors' interpretation adopted, it would render § 1408 a nullity, or at least significantly diminish its importance. Under such an interpretation, parties would be free to disregard the venue strictures of § 1408 and file their Title 11 cases in any court in the country, so long as the bankruptcy judge thought the choice of venue just or convenient—factors nowhere mentioned in § 1408. Because courts must "give...