Walker v. Directory Distribution Assocs., Inc. (In re Directory Distrib. Assocs., Inc.)

566 B.R. 869

IN RE: DIRECTORY DISTRIBUTING ASSOCIATES, INC., Debtor.

Ervin Walker, Donald Walker, Eric Allen, Justin Cooper, Regina Coutee, Trent Jedkins, and Brian Mathis, Plaintiffs

v.Directory Distribution Associates, Inc., AT & T Corporation, Richard Price, Stephen Washington, Laura Washington, Roland E. Schmidt, and Wallace A. Sanders, Defendants.

Case No. 16–47428 (E.D. Mo.)

Adversary No. 16–03258

United States Bankruptcy Court, S.D. Texas, Houston Division.

Signed February 6, 2017

Ervin Walker, pro se.

Cynthia Thomson Diggs, Judith Batson Sadler, Holmes Diggs Eames, Richard Warren Mithoff, Jr., Mithoff Law Firm, Russell S. Post, Beck Redden Secrest LLP, Houston, TX, for Plaintiffs.

Robert E. Eggman, Desai Eggman Mason LLC, St. Louis, MO, L. Don Luttrell, Luttrell Williams et. al., Johnie J. Patterson, Walker & Patterson, P.C., Zack A Clement, Zack A. Clement PLLC, Katherine Ginzburg Treistman, Orrick Herrington Sutcliffe LLP, Houston, TX, Marc Aaron Levinson, Julie A. Totten, Orrick Herrington et. al., Sacramento, CA, for Defendants.

MEMORANDUM OPINION AND ORDER: (1) GRANTING THE DEBTOR'S MOTION TO TRANSFER VENUE TO MISSOURI; AND (2) DENYING THE PLAINTIFFS' MOTION TO TRANSFER VENUE TO CALIFORNIA [Adv. Doc. Nos. 12, 15, & 29]

Jeff Bohm, United States Bankruptcy Judge

I. INTRODUCTION

On November 23, 2016, a lawsuit styled Ervin Walker, et al v. Directory Distributing Associates, Inc., et al. , Cause No. 2011–50578, pending in the 269th Judicial District Court of Harris County, Texas was removed to this Court (the "Texas Proceeding "). [Adv. Doc. No. 1]. Now before the Court are two dueling motions to transfer venue of the Texas Proceeding. Donald Walker, Eric Allen, Justin Cooper, Regina Coutee, Brian Mathis, and the opt-in collective action members (the "Plaintiffs ") want this Court to transfer the Texas Proceeding to the United States District Court for the Northern District of California (the "California Court "). [Adv. Doc. No. 12]. The Plaintiffs make this request on the grounds that there is an existing lawsuit pending in the California Court—James Krawczyk , et al. v. Directory Distributing Associates, Inc. and AT & T Corp. , Cause No. 3:16–cv–02531–vc (the "California Proceeding ")—that the Plaintiffs contend is one-half of a Fair Labor Standards Act (the "FLSA") collective action, with the other half being the Texas Proceeding.

Opposing the Plaintiffs' request is Directory Distributing Associates, Inc., one of the defendants in the Texas Proceeding (the "Debtor "). The Debtor requests this Court to transfer the Texas Proceeding to the United States Bankruptcy Court for the Eastern District of Missouri, St. Louis Division (the "Missouri Court "). [Adv. Doc. No. 15]. The Debtor makes this request on the grounds that its Chapter 11 case is presently pending in the Missouri Court. AT & T Corporation ("AT & T "), one of the other defendants in the Texas Proceeding, has joined in the Debtor's request to transfer venue to the Missouri Court. [Adv. Doc. No. 29]. Not surprisingly, the Plaintiffs vigorously oppose the Debtor's request to transfer venue of the Texas Proceeding to the Missouri Court. [Adv. Doc. No. 30].

About the only issue on which all parties agree is that the Texas Proceeding should not be adjudicated in the Southern District of Texas. The Court will accommodate the parties' collective desire on this point.

II. PROCEDURAL BACKGROUND

On July 27, 2012, the Plaintiffs commenced the Texas Proceeding in the 269th Judicial District Court of Harris County alleging that the Debtor, Richard Price, Steve Washington, Laura Washington, Roland E. Schmidt, Sandy Sanders, and AT & T (the "Defendants ") owed them unpaid wages and overtime compensation under the FLSA for improper classification as independent contractors. [Adv. Doc. No. 1–3, p. 8 of 11]. The class of Plaintiffs was defined as "all current and former individuals employed by [the Debtor] at any time during the period of August 25, 2008 to the present who were classified as independent contractors and hired to deliver AT & T telephone directories." [Id. at p. 7 of 11]. Through an interlocutory order, the state court dismissed any non–Texas plaintiffs from the suit for failure to satisfy Texas' venue requirements. [Adv. Doc. No. 1–14]. The Plaintiffs appealed this order to the Texas Supreme Court, where review of the appellate decision affirming the order was denied on April 1, 2016. [Adv. Doc. No. 12, p. 3 of 15]; [Pls' Ex. No. 5].¹

Shortly thereafter, in May 2016, the California Proceeding was filed in the California Court. [Adv. Doc No. 12, pp. 3–4 of 15]. The Plaintiffs contend that the California Proceeding is essentially the same lawsuit as the Texas Proceeding but includes the non–Texas plaintiffs who were dismissed from the Texas Proceeding as well as Texas-based plaintiffs seeking damages for a different time than described in the Texas Proceeding. [Id. at p. 4 of 15].

The Debtor initiated the main bankruptcy case by filing a Chapter 11 petition in the Missouri Court on October 14, 2016. (In re Directory Distributing Assocs., Inc., Cause No. 16–47428, Bankr. E.D. M.O.). On November 23, 2016, all of the Defendants except AT & T removed the Texas Proceeding to this Court from the 269th Judicial District Court of Harris County. [Adv. Doc. No. 1]. Then, on January 3, 2017, the Plaintiffs filed their Motion to Transfer Venue seeking to transfer the Texas Proceeding to the California Court (the "Plaintiffs' Motion to Transfer "), [Adv. Doc. No. 12]; and on January 5, 2017, the Debtor filed its Motion to Transfer Venue seeking to transfer the Texas Proceeding to the Missouri Court (the "Debtor's Motion to Transfer "), [Adv. Doc. No. 15]. Finally, on January 26, 2017, AT & T filed its Consolidated Joinder in Debtor's Motion to Transfer and Opposition to Plaintiffs' Motion to Transfer ("AT & T's Joinder "). [Adv. Doc. No. 29].

On February 1, 2017, the Court held an evidentiary hearing on the Plaintiffs' Motion to Transfer and the Debtor's Motion to Transfer. Only one witness, Ervin Walker (one of the Plaintiffs), testified. The Court admitted exhibits one through thirty-two for the Plaintiffs; exhibits one through five for the Debtor; and exhibits one through fourteen for AT & T. The Court heard closing arguments from counsel for all parties, and then took the matter under advisement.

For the reasons set forth herein, this Court enter this order transferring the Texas Proceeding to the Missouri Court.

III. JURISDICTION, VENUE, AND CONSTITUTIONAL AUTHORITY TO ISSUE A FINAL ORDER ON THE PLAINTIFFS' MOTION TO TRANSFER AND THE DEBTOR'S MOTION TO TRANSFER

A. Jurisdiction

This Court has jurisdiction over the Plaintiffs' Motion to Transfer and the Debtor's Motion to Transfer pursuant to 28 U.S.C. § 1334(b).² Section 1334(b) provides that "the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11 [the Code], or arising in or related to cases under title 11." District courts may, in turn, refer these proceedings to the bankruptcy judges for that district. § 157(a). In the Southern District of Texas, General Order 2012–6 (entitled General Order of Reference) automatically refers all eligible cases and proceedings to the bankruptcy courts.

The pending dispute, i.e., whether this Court should transfer venue of the Texas Proceeding to the California Court or the Missouri Court, is a core proceeding pursuant to. § 157(b)(2)(A) because it affects the administration of the Debtor's Chapter 11 estate. See In re Pope Vineyards , 90 B.R. 252, 254 (Bankr. S.D. Tex. 1988) (concluding that a motion to transfer venue is a core proceeding); In re Red Door Prop. Mgmt., LLC, No. 11-02704-KMS, 2011 WL 5592910, at *2 (Bankr. S.D. Miss. Nov. 16, 2011) (same). Specifically, this Court's transfer of venue of the Texas Proceeding will affect the administration of the Debtor's Chapter 11 case because, among other things, the Texas Proceeding involves claims asserted by the Plaintiffs against the Debtor, and these claims must necessarily be liquidated, or at least estimated, in order for the Debtor to obtain confirmation of any plan of reorganization that it proposes and attempts to confirm in the Missouri Court.

Further, the venue dispute at bar is a core proceeding pursuant to the general "catch-all" language of § 157(b)(2)(O). See In re Southmark Corp. , 163 F.3d 925, 930 (5th Cir. 1999) ("[A] proceeding is core under § 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case."); De Montaigu v. Ginther (In re Ginther Trusts) , Adv. No. 06-3556, 2006 WL 3805670, at *19 (Bankr. S.D. Tex. Dec. 22, 2006) (holding that a matter may constitute a core proceeding under § 157(b)(2) "even though the laundry list of core proceedings under § 157(b)(2) does not specifically name this particular circumstance"). Here, the Plaintiffs' Motion to Transfer and the Debtor's Motion to Transfer are based, in part, upon § 1412, a statute which expressly governs transfer of venue disputes arising only from the filing of a bankruptcy petition.

For all of the reasons set forth above, this Court has jurisdiction over this venue dispute.

B. Venue

Venue is proper in the Southern District of Texas under § 1452(a) because the state court where the Texas Proceeding was pending is located in this district. See In re Trafficwatch , 138 B.R. 841, 843 (Bankr. E.D. Tex. 1992) (holding that it is important to respect the original forum choice; therefore, Congress specifies that removal must be to the district where the litigation is pending, not where the bankruptcy is pending). Further, pursuant to the District Court's General Order 2012–6, the Texas Proceeding is subject to automatic referral to this Court upon the filing of the appropriate removal pleadings. See In re: Order of Reference to Bankruptcy Judges, General Order 2012–6 (S.D. Tex. May 24, 2012); see also ...