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Keywords

motiontrustbankruptcychapter 11 bankruptcycorporationbad faith
motionwillbankruptcycorporationcase law

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In re Patriot Coal Corp., 482 B.R. 718

Facts

On July 9, 2012, Patriot Coal Corporation and ninety-eight subsidiaries filed for Chapter 11 bankruptcy in the Southern District of New York. The United Mine Workers of America and several sureties filed motions to transfer the cases to the Southern District of West Virginia, arguing it was in the interest of justice and for the convenience of the parties. The debtors objected, asserting that their filing in New York was proper and not in bad faith, as they had established affiliates in New York to meet venue requirements.

On July 9, 2012, Patriot Coal Corporation (“Patriot”) and ninety-eight of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code.

Issue

Should the Chapter 11 cases of Patriot Coal Corporation and its affiliated debtors be transferred to another district, and if so, which district would best serve the interest of justice and convenience of the parties?

This decision will thus address not only the relatively scant case law on venue transfer in large bankruptcy cases but will also examine the historical basis of the concept of venue; the decades-old controversy surrounding the domicile/affiliate rule; and, last but not least, the meaning of justice in the context of the Patriot cases.

Rule

The court applied the 'interest of justice' test for venue transfer as set forth in 28 U.S.C. § 1412, considering factors such as the location of assets, the domicile of the debtors, and the convenience of the parties involved.

In order to answer the narrow question the Court must attempt to answer the broader question and give meaning to the “interest of justice” test for venue transfer set forth in 28 U.S.C. § 1412.

Analysis

The court analyzed the facts surrounding the debtors' formation of affiliates in New York and their subsequent bankruptcy filings. It concluded that while the debtors did not act in bad faith, the creation of these affiliates was a significant factor in the interest of justice analysis. The court determined that the majority of the debtors' operations and stakeholders were located in West Virginia, but ultimately found that the Eastern District of Missouri was the most appropriate venue for the cases.

The Court has authorized the financing contemplated by the First Out DIP Facility and the Second Out DIP Facility (together, the “DIP Facilities”) on a final basis, pursuant to which Patriot may borrow and obtain letters of credit up to an aggregate principal or face amount of $802 million.

Conclusion

The court granted the UST Motion to transfer the cases to the Eastern District of Missouri, while partially granting and denying the UMWA and Sureties' motions. The transfer was deemed necessary to serve the interest of justice.

For the reasons set forth in detail below, the UST Motion is granted. The UMWA Motion and the Sureties' Motion are granted in part and denied in part.

Who won?

The United States Trustee prevailed in the case, as the court agreed with the UST Motion to transfer the cases to the Eastern District of Missouri, emphasizing the need for a venue that best served the interests of all stakeholders.

The UST Motion seeks transfer in the interest of justice; it does not seek transfer to any specific district, nor does it seek transfer for the convenience of the parties.

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