In re Positron Corp.

541 B.R. 816

In re: Positron Corporation, Alleged Debtor.

Case No.: 15–50205–RLJ–11

United States Bankruptcy Court, N.D. Texas, Lubbock Division.

Signed December 1, 2015

David R. Langston, Mullin, Hoard & Brown, Lubbock, TX, for Alleged Debtor.

MEMORANDUM OPINION AND ORDER

Robert L. Jones, United States Bankruptcy Judge

In this involuntary bankruptcy case, Positron Corporation, the alleged debtor, moves for dismissal or, alternatively, to transfer venue to the bankruptcy court for the Northern District of Illinois. Venue is proper in Texas, and within this district, the Northern District, as Positron is a Texas corporation that has maintained operations in the Northern District, specifically Lubbock, Texas. 28 U.S.C. § 1408(proper venue for a bankruptcy case includes the district of the alleged debtor's domicile or residence, principal place of business, or principal place of assets). Dismissal under Rule 12(b)(3) of the Federal Rules of Civil Procedurefor improper venue, as alleged, is thus not available.

The question, then, is whether the case should be transferred to the Northern District of Illinois. SeeFed. R. Bankr.P. 1014(the court may transfer a case that is filed in a proper district to another district if the court determines that the transfer is in the interest of justice or for the convenience of the parties). Section 1412 of title 28 addresses a change of venue for a bankruptcy case and, like Rule 1014, states that the venue of the case may be transferred “in the interest of justice or for the convenience of the parties.” 28 U.S.C. § 1412.¹Though satisfaction of either principle is sufficient to support a transfer, “[t]he decision of whether to transfer venue is within the court's discretion based on an individualized case-by-case analysis of convenience and fairness.” In re Enron Corp.,274 B.R. 327, 342 (Bankr.S.D.N.Y.2002)(citations omitted). The movant typically bears the burden of showing, by a preponderance of the evidence, that the transfer is warranted. Ries v. Ardinger (In re Adkins Supply, Inc.),No. 14–01000, 2015 WL 1498856, at *5 (Bankr.N.D.Tex. Mar. 27, 2015)(citations omitted). But here, a contested involuntary proceeding that has been filed in a court of proper venue, it is, really, for the Court to decide, within its discretion, where the trial on the involuntary petition—and if relief is granted, where the bankruptcy case—should proceed. Fed. R. Bankr.P. 1014(b); see alsoIn re Caesars Entm't Operating Co., Inc.,No. 15–10047, 2015 WL 495259, at *5 (Bankr.D.Del. Feb. 2, 2015).

A.

Courts typically review the following factors in assessing the interests of justice:

(a) efficiency and economics of estate administration; (b) presumption in favor of the “home court”; (c) judicial economy and efficiency; (d) fairness and the ability to receive a fair trial; (e) the state's interest in having local controversies decided within its borders; and (f) plaintiff's original choice of forum.

Ries,2015 WL 1498856, at *5(citations omitted). As for determining the venue that is more convenient for the parties, courts often examine the following factors:

(a) location and proximity of the parties; (b) ease of access to necessary proof; (c) convenience of witnesses, including their location and proximity; (d) location of the assets, including books and records; (e) availability of subpoena power for the unwilling witness; and (f) expenses related to obtaining witnesses.

Id.(citations omitted). In the context of the trial of an opposed involuntary bankruptcy case, the factors can be pared down to the following: the proximity of the petitioning creditors and all other creditors; the proximity of the debtor to the court; the proximity of potential witnesses; the location of the estate assets; and the economic administration of the estate to be potentially administered in bankruptcy. SeeCaesars Entm't,2015 WL 495259, at *6.

B.

Positron is, to say the least, a troubled enterprise. It is generally described as a “nuclear medicine healthcare company specializing in the field of cardiac [p]ositron [e]mission [t]omography (PET) imaging.” Positron's Ex. 1 at 5. In 2005, it entered into a joint venture with a Chinese company for the manufacturing of PET cameras to be sold to users such as hospitals and, in particular, cardiologists for use in diagnosing heart ailments. In 2011, it sold thirteen PET cameras and was the designated servicer under service contracts and warranties issued in connection with the PET cameras. Several problems beset the company, including the criminal indictment and prosecution of its former chief executive officer for violations of federal securities laws. Positron and its former CEO were also named defendants in a civil action brought in 2014 by the Securities and Exchange Commission in the United States District Court for the Southern District of Florida; a permanent injunction and a civil penalty were assessed against Positron.

In 2012, Positron began the first stage of an ambitious, integrated business plan. It acquired another Texas company, Manhattan Isotope Technology, LLC (MIT), based in Lubbock, Texas. MIT was “the only commercial resource in the United States with practical knowledge and experience in all stages of strontium–82 (Sr–82) production”; Sr–82 is the radioactive material required for the scanning capabilities of the PET cameras. Id.at 7. To further secure its long-term commercial prospects, Positron and MIT planned to build and operate a “commercial high energy/high current cyclotron” that would produce a steady supply of radioisotopes for the ultimate production of Sr–82. Id.Positron was thus seeking to change its profile from that of a medical imaging device company to one that had the capability of providing all “key components of the cardiac PET supply chain” and therefore “offer an end-to-end solution for the nuclear cardiology market.” Id.For many reasons not necessarily relevant to the venue question, this business plan has thus far failed. Positron has lost over $9 million in the past three years, including over $900,000 in the first six months of 2015. Positron has never operated at a profit. Apart from a few service contracts, Positron has no other ongoing business operations.

Positron presently has eleven employees: two in Westmont, Illinois; five in New York; two in Lubbock, Texas; one in Houston, Texas; and one in Tennessee.²One of the two in Illinois is Corey Conn, who is the chief financial officer and is a member of the board of directors of Positron Corporation. The president and chairman of the board of Positron Corporation, Joe Oliverio, resides in and serves the company from Niagara, New York. Positron owns a building in Westmont, Illinois, where Mr. Conn and an assistant maintain offices. Positron intends to sell the building to raise funds to pay-off its major creditor, DX, LLC. The day-to-day management decisions, to the extent there are any, are made in Westmont; the accounting and bookkeeping services are likewise maintained there. The company's accountants and attorneys are in Chicago.

As stated, Mr. Oliverio resides in Niagara, New York. Though he is board chairman, he does not hold board meetings; he testified that he confers with other board members and with Mr. Conn by email.

The assets that are integral to Positron's business plan are located in Lubbock, Texas. MIT leases a warehouse facility where it maintains an inventory of radioactive material; it is also the location of various items of equipment that were purchased by MIT or Positron and are, ostensibly, held in the name of MIT. Positron is the sole shareholder of MIT.

The two employees of Positronin Lubbock are charged with maintaining and securing the radioactive material in conformance with state and federal laws and regulations. MIT holds the license for the handling of the radioactive material in the Lubbock facility. Lawrence Pitt, one of the two Lubbock employees, is a certified radiological safety officer. Pitt credibly testified that it would cost as much as $500,000 to close down the Lubbock facility and properly remove the material. Mr. Pitt and the other Lubbock employee are presently attempting to find other employment in light of Positron's dire financial prospects. Neither Positron nor MIT are licensed to maintain the material at any other location. Another major asset of MIT's is the so-called Drug Master File (DMF). The DMF was described as the “recipe book” for the formula to Sr–82. Mr. Oliverio testified that this “cookbook” has...