The opinion of the court was delivered by: JOHN KOELTL, District Judge
This is a motion to dismiss pursuant to Fed.R.Civ.P.
12(b)(6) for failure to state a claim and 9(b) for failure to
plead fraud with particularity, or alternatively, for summary
judgment pursuant to Fed.R.Civ.P. 56. The defendant also moves
in the alternative to transfer this action to the Middle District
of Tennessee. Plaintiffs Saltire Industrial, Inc. ("Saltire")
(formerly known as Scovill, Inc.) and Alper Holdings USA, Inc.
("Alper") allege that the defendant, Waller Lansden Dortch &
Davis, PLLC ("Waller Lansden"), committed fraudulent joinder of a
defendant in order to defeat federal diversity jurisdiction in a
case filed in Tennessee state court entitled Norman, et al. v.
Scovill, Inc., et al., No. CV 383 (the "Tennessee Action"). I.
The relevant facts, as alleged in the First Amended Complaint,
affidavits, and declarations submitted by the parties in
connection with the current motion, are as follows.
Plaintiff Saltire is a corporation organized under Delaware
law. (First Am. Compl. ¶ 7.) Saltire represents that its current
principal place of business is Westport, Connecticut, but that at
the time of filing its Chapter 11 bankruptcy proceeding in August
2004, Saltire's principal place of business was in New York
County. Plaintiff Alper is a corporation organized under Delaware
law, with its principal place of business in Westport,
Connecticut. (First Am. Compl. ¶ 8.) Alper is the parent company
of Saltire. (First Am. Compl. ¶ 5.) The defendant, Waller
Lansden, is a professional limited liability company organized
under Tennessee law. (First Am. Compl. ¶ 8.)
The plaintiffs' claim for damages arises out of the Tennessee
Action, which was brought in the Tennessee Circuit Court for the
Twenty-Third Judicial District in 1994. In the Tennessee Action,
Waller Lansden represented the plaintiffs (the "Tennessee
plaintiffs") in a case against Saltire for trespass, nuisance,
and battery as a result of the alleged contamination of the
Tennessee plaintiffs' ground water and supply wells by hazardous wastes discharged from a manufacturing facility
operated by Saltire in Dickson, Tennessee. The Tennessee
Plaintiffs also brought their action against the Industrial
Development Board of Dickson, Tennessee ("IDB"), which had become
the successor owner of the facility and property previously owned
by Saltire that continued to cause contamination. (Aff. of James
M. Doran, Jr. ("Doran Aff.") ¶ 2, April 4, 2005.)
In June 1994, Saltire and IDB (the defendants in the Tennessee
Action) removed the Tennessee Action to the United States
District Court for the Middle District of Tennessee on the basis
of alleged diversity jurisdiction. On or about September 8, 1994,
Saltire and IDB stipulated to the remand of the Tennessee Action
back to Tennessee state court. (Doran Aff. ¶¶ 3-4.)
In February 2003, Waller Lansden, on behalf of the Tennessee
plaintiffs, filed a Second Amended Complaint, adding Alper as an
additional defendant in the Tennessee Action. On or about January
2004, Alper filed a Notice of Removal to the United States
District Court for the Middle District of Tennessee, arguing that
IDB had been fraudulently joined. (Doran Aff. ¶ 6.) On or about May 7, 2004, before Alper's motion to remove was
decided, the Tennessee Action was settled when the parties
entered into a Settlement Agreement and Mutual Release (the
"Settlement Agreement"). (Doran Aff. ¶ 7.) As part of the
Settlement Agreement, the parties agreed to remand the case to
the Tennessee state court for approval of the Settlement
Agreement. (Settlement Agreement ¶ 2.)
On August 17, 2004, Saltire filed a voluntary petition for
Chapter 11 bankruptcy in the Bankruptcy Court for the Southern
District of New York (In re Saltire Industrial, Inc., Case No.
04 B 15389). On or about September 9, 2004, Saltire and Alper
filed a complaint in this action against Waller Lansden, alleging
that the defendant engaged in fraudulent joinder of IDB to defeat
federal diversity jurisdiction in the Tennessee Action. (First
Am. Compl. ¶ 1.) Both parties agree that the law of Tennessee
governs the underlying claim. In February 2004, the plaintiffs
Saltire and Alper were given leave to amend their complaint, and
their First Amended Complaint was served on or about February 18,
2004. The First Amended Complaint alleged common law fraud and
stated 28 U.S.C. § 1334 as the sole basis for subject matter
jurisdiction on the ground that the action was "related to"
Saltire's bankruptcy case under Title 11. (First Am. Compl. ¶ 10.) Venue was properly asserted pursuant to
28 U.S.C. § 1409(a). (First Am. Compl. ¶ 11.)
On February 23, 2005, this action was referred to the
Bankruptcy Court for the Southern District of New York. On or
about March 16, 2005, Waller Lansden filed a motion to withdraw
the reference to the Bankruptcy Court, and the plaintiffs
stipulated that they had no objection to the withdrawal. The
motion to withdraw the reference was granted by an order dated
March 16, 2005.
The defendant Waller Lansden now moves to dismiss the action,
for summary judgment, or alternatively, to transfer the action to
the Middle District of Tennessee. It is appropriate to address
the motion to transfer first.
The Court begins with the motion to transfer. The defendant
moves to transfer this action to the Middle District of Tennessee
pursuant to 28 U.S.C. § 1404(a). Section 1404(a) provides that,
"[f]or the convenience of parties and witnesses, in the interest
of justice, a district court may transfer any civil action to any
other district or division where it might have been brought."
The first issue is whether the action "might have been brought"
in the Middle District of Tennessee. Venue in this case was properly asserted in this District pursuant to
28 U.S.C. § 1409, which provides that, with certain exceptions not relevant
here, "a proceeding arising under title 11 or arising in or
related to a case under title 11 may be commenced in the district
court in which such case is pending." However, § 1409 does not
bar a transfer of venue under § 1404, because § 1409 is not an
exclusive venue provision. See Kalamazoo Realty Venture Ltd.
P'ship v. Blockbuster Entm't Corp., 249 B.R. 879, 888 (N.D. Ill.
2000) (section 1409 is not an exclusive venue provision). Thus,
an action related to a pending bankruptcy proceeding need not be
commenced in the district court in which such proceeding is
pending, and may be brought and heard in another district. See
Brock v. American Messenger Serv. Inc., 65 B.R. 670 (D.N.H.
1986) (allowing a "related" action to continue in a forum other
than the district court for district in which the title 11
bankruptcy action was proceeding).
The plaintiffs contend that in this case a transfer is not
permissible under § 1404(a) because this action could not have
been brought originally in the Middle District of Tennessee. The
plaintiffs argue that jurisdiction over their claim was
established pursuant to 28 U.S.C. § 1334, and thus § 1334(e)
should control in this action. Section 1334(e) provides that:
"The district court in which a case under title 11 is commenced or pending shall have exclusive jurisdiction of all the property,
wherever located, of the debtor as of the commencement of such
case, and of property of the estate. "The plaintiffs argue that
their claim for money damages is "property . . . of the debtor,"
and thus the United States District Court for the Southern
District of New York, as the court in the district in which their
case under Title 11 was commenced, has "exclusive" jurisdiction
over their claim, barring any transfer to Tennessee. However,
unliquidated claims are not "property" for the purposes of §
1334(e). See Tultex Corp. v. Freeze Kids, L.L.C.,
252 B.R. 32, 40-41 (S.D.N.Y. 2000). This action was properly commenced not
under § 1334(e), but under § 1334(b), which ...