Free Motion to Transfer Case - District Court of Colorado - Colorado

Case 1:01-cv-02313-JLK

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-K-2313 GLN COMPLIANCE, INC., Plaintiff, v. UNITED AIRLINES, INC., d/b/a UNITED BIZJET HOLDINGS, BIZJET CHARTERS, INC. and BIZJET SERVICES, INC.; and JONATHAN ROSS, Defendants. MOTION TO TRANSFER COUNTERCLAIM TO NORTHERN DISTRICT OF ILLINOIS Defendant United Air Lines, Inc., d/b/a United Bizjet Holdings, BizJet Charter, Inc., and BizJet Services, Inc. ("United"), by and through undersigned counsel respectfully submits this Motion to Transfer Counterclaim to Northern District of Illinois. Certificate of Compliance with D.C.Colo.L.R. 7.1A Counsel for United has conferred with opposing counsel regarding this matter and, while counsel for Jonathan Ross does not oppose the relief sought herein, counsel for GLN Compliance, Inc. ("GLN") does oppose the relief sought herein. INTRODUCTION On August 12, 2002, United filed a counterclaim for breach of contract (the "Counterclaim") against GLN. The Counterclaim arose from a contractual dispute between United and GLN that related to the claims originally brought by GLN in the present action. However, on October 16, 2007 this Court dismissed all of GLN's claims against United. As a result, GLN is not proceeding against United before this Court on any basis.

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Instead, GLN is now pursuing its breach of contract claim as a general unsecured claim against United before the Bankruptcy Court for the Northern District of Illinois (the "Bankruptcy Court"). Accordingly, United's only connection with the present case is its Counterclaim that revolves around the identical set of facts that are currently being litigated before the Bankruptcy Court in connection with GLN's general unsecured claim. Simply, requiring the parties to litigate the same set of core facts before both the Bankruptcy Court and this Court would constitute an undeniable waste of time, money and judicial resources for all involved. As such, United respectfully requests that this Court transfer the Counterclaim to the District Court for the Northern District of Illinois for reference to the Bankruptcy Court pursuant to 28 U.S.C. § 1404(a). BACKGROUND This action arises out of a business relationship that deteriorated shortly after it was consummated. As this Court is aware, in September 2000, GLN and United entered into a contract (the "Contract") under which GLN agreed to provide consulting services and assist United in obtaining certain operating certificates from the Federal Aviation Administration (FAA). Shortly after the Contract was signed, the parties began to have heated disputes.

Eventually, United terminated the contract in light of its dissatisfaction with GLN's work and the great difficulties involved in working effectively with Gerald Naekel, GLN's president. Naekel has continued to maintain that United breached the contract and still owes GLN additional money. United, by contrast, believes that GLN materially breached the contract by failing to perform work in accordance with its terms, and maintains that it never received adequate value for the significant amount of money already paid to GLN.

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Following the termination of the business relationship, GLN proceeded to multiple courts seeking payment of the amounts it claims it is owed by United. First, GLN filed a suit in this Court, naming United and Jonathon Ross, a former GLN employee, as defendants. Once United filed bankruptcy, GLN switched its focus to the Northern District of Illinois, where Judge Eugene Wedoff of the Bankruptcy Court was handling United's reorganization. Asserting the same set of operative facts as included in its Complaint in this Court, GLN filed a Proof of Claim, seeking additional payment under the Contract along with damages for United's alleged "breach." United objected to GLN's Proof of Claim as part of its fifty-second omnibus objection to claims (the "Fifty-Second Omnibus Objection") maintaining that GLN materially breached the Contract. At the time the Administrative Stay of this matter was lifted, this Court correctly dismissed all claims against United in the present case, thereby leaving United's Counterclaim as its only connection to this Court. A. Bankruptcy Proceedings United and 27 of its direct and indirect, wholly-owned subsidiaries (collectively "United") filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Court on December 9, 2002 (the "Petition Date"). United's Chapter 11 cases were referred to the Bankruptcy Court and were jointly administered (Case No. 02-48191) before Chief Judge Wedoff. On May 5, 2003, GLN filed proof of claim number 30992 (the "Proof of Claim"). The Proof of Claim was based upon a general unsecured prepetition claim for sums allegedly owed for consulting services that were rendered by GLN pursuant to the GLN Part 135 Compliance Contract between United and GLN, dated September 14, 2000 (the "Contract").

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On January 20, 2006, the Bankruptcy Court entered the Order Confirming Debtors' Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code (the "Confirmation Order").1 The Confirmation Order confirmed the Debtors' Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the United States Bankruptcy Code (the "Plan"). The Plan became effective on February 1, 2006 (the "Effective Date"). The Confirmation Order approves the Permanent Injunction, which, among other things, states that: all Entities who have held, hold, or may hold Claims against or Interests in the Debtors or against the Released parties and Exculpated parties are permanently enjoined, from and after the Effective Date, from: (i) commencing or continuing in any manner any action or other proceeding of any kind on account of or in connection with or with respect to any such Claim against or Interest in the Reorganized Debtors, the Exculpated Parties, the Released Parties, any statutory committee or members thereof, and the employees, agents, and professionals of each of the foregoing (acting in such capacity)... Confirmation Order, at ¶ 4(e). After confirmation of the Plan, on October 15, 2007, United filed its fifty-second omnibus objection to claims (the "Fifty-Second Omnibus Objection), objecting to seven proofs of claim for which United asserts it has no liability. Among the seven claims to which United objected is GLN's Proof of Claim, referenced above. On November 2, 2007, GLN filed an Objection to United's Fifty-Second Omnibus Objection, reiterating its position that United breached the Agreement, and that GLN was entitled to unpaid fees and damages. United continues to assert that GLN is the party that materially breached the Contract, making United's non-payment excusable as a matter of law. United is currently discussing the
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A copy of the Confirmation Order and Plan can be found at www.pd-ual.com.

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submission of an agreed trial schedule with GLN's Illinois counsel regarding the Bankruptcy Proceedings before Judge Wedoff. B. Current Proceeding GLN first filed the instant action in this Court on November 30, 2001. GLN filed its First Amended Complaint (the "Amended Complaint") on August 1, 2002. The Amended Complaint concerns the same Contract that is referenced in GLN's Proof of Claim and that must be litigated before the Bankruptcy Court. GLN alleges that United "failed and refused to perform their obligations" under the Contract, which GLN considers to be a wrongful repudiation of the entire Contract. GLN brought claims against United for breach of contract, unjust enrichment, civil theft and civil conspiracy. On August 12, 2002, United filed its Counterclaim to the First Amended Complaint, asserting a claims against GLN for breach of contract. All assertions in United's Counterclaim refer to the same Contract that is at issue before the Bankruptcy Court with respect to GLN's Proof of Claim. On April 9, 2003, this Court imposed an administrative stay on all claims against United pending resolution of United's bankruptcy proceedings in the Northern District of Illinois. On October 16, 2007, this Court lifted the administrative stay, and ordered that GLN's claims against Jonathan Ross could proceed. At the same time, the Court dismissed all claims against United. Although the October 16, 2007 Order makes no reference to United's

Counterclaim against GLN, United interprets the silence to mean that its Counterclaim is still pending in this Court. United respectfully submits that because it is no longer a defendant in this action and the crux of its Counterclaim will already have to be litigated in the Bankruptcy Court, its

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Counterclaim against GLN should be transferred to the Bankruptcy Division of the District Court for the Northern District of Illinois. ARGUMENT A. United's Counterclaim Should Be Transferred To The Northern District Of Illinois, The More Convenient And Appropriate Forum Because a trial relating to the identical facts and issues of law present in United's Counterclaim will occur before the Bankruptcy Court, the interests of justice and the convenience of the parties mandates that this Court transfer the Counterclaims to the District Court for the Northern District of Illinois, for reference to the Bankruptcy Court. 28 U.S.C. § 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." 28 U.S.C. § 1404(a). In the case at bar, these factors weigh heavily in support of transferring the Counterclaim to the Bankruptcy Court to be heard in connection with GLN's pending Proof of Claim against United's estate. As required by the Supreme Court, a district court must analyze a request to transfer based on "an individualized, case-by-case consideration of convenience and fairness." Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1998).2 Courts in this Circuit have found that the following factors provide the appropriate framework for making such a determination:

2

Before weighing these factors, the Court must make a threshold determination that the Counterclaims could have been brought in the proposed transferee district. 28 U.S.C. § 1404(a); see also Books are Fun, Ltd. v. Bullard, No. CIV06CV00127REBBNB, 2006 WL 726291, at *1 (D. Colo. March 20, 2006) ("section 1404(a) gives the court discretion to transfer a case `to any other district or division where it might have been brought.' The proposed transferee district thus must be one in which the district court would have had original...jurisdiction over the action.") (citing Continental Grain Co. v. The FBL-585, 364 U.S. 19, 21-22 (1960). It is clear that United's Counterclaims could have been brought in the Northern District of Illinois. The district court where a debtor's bankruptcy is pending has jurisdiction over "any and all cases under Title 11 and any or all proceedings arising under Title 11 or arising in or related to a case under Title 11." 11 U.S.C. § 1334(b). In the Tenth Circuit, a proceeding is related to a bankruptcy case "if the outcome could alter the debtor's rights, liabilities, options, or freedom of action in any way, thereby impacting on the handling and administration of the bankruptcy estate." In re Gardner, 913 F.2d 1515, 1518 (10th Cir. 1990). Here, the Counterclaims not only provide a basis to bring in additional assets for the benefit of United's creditors, but

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"the plaintiff's choice of forum; the accessibility of witnesses and other sources of proof, including the availability of compulsory process to insure attendance of witnesses; the cost of making the necessary proof; questions as to the enforceability of a judgment if one is obtained; relative advantages and obstacles to a fair trial; difficulties that may arise from congested dockets; the possibility of the existence of questions arising in the area of conflicts of laws; the advantage of having a local court determine questions of local law; and, all other considerations of a practical nature that make a trial easy, expeditious, and economical." Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 147 (10th Cir. 1967). In this case, the balance of factors weigh heavily in favor of the Illinois forum, for example: (i) (ii) the plaintiff's choice of forum -- United is the plaintiff with respect to the Counterclaims and it wishes to proceed in the Northern District of Illinois. accessibility of witnesses and other sources of proof -- United is headquartered in the Northern District of Illinois and many of the potential witnesses reside within the Northern District of Illinois. cost of making necessary proof -- Both United and GLN are already actively participating in United's bankruptcy case in Chicago. Thus, potential witnesses are already obliged to appear before Judge Wedoff in the Northern District of Illinois. As such, transferring venue to Chicago will not only make it more convenient for both witnesses and the parties, but it will also eliminate the unnecessary costs that would be associated with requiring the parties and witness to appear in two separate courts to fight the same battle. enforceability of judgment -- The Bankruptcy Court has both subject matter and personal jurisdiction over GLN and the claims between the parties. Thus, there is no reasonable basis to assert that a judgment of the Bankruptcy Court should not be fully enforceable against GLN, wherever it may reside. possibility of the existence of questions arising in the area of conflict of laws - The matters at issue in United's Counterclaim are not complex and the transfer of such claims is unlikely to result in questions arising regarding conflict of laws. Moreover, even were such questions to arise, United's bankruptcy has been pending in the Illinois Bankruptcy Court for more than five years, and during this time, Judge Wedoff has considered and ruled on a myriad of complicated issues regarding claims against United's estate relating to parties across the United States and, indeed, the world.

(iii)

(iv)

(v)

they are essential defenses with respect to GLN's claim against United's estate. Thus, resolution of those defenses will directly impact the amount of assets available for the distribution to other unsecured creditors of United's estate. Accordingly, the Counterclaims certainly could have been brought in Illinois.

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(vi) ·

all other considerations of a practical nature that make a trial, easy expeditious and economical -First, and perhaps most importantly, GLN's claim against United based upon the identical fact pattern comprising United's Counterclaim in the action will be heard before the Bankruptcy Court. Thus, the parties and relevant witnesses to the present action will already be required to participate in a trial on the identical set of facts comprising the Counterclaim before the Bankruptcy Court. Avoiding a second proceeding on the same set of facts unquestionably is the most economical and efficient choice. Second, federal courts have adopted a strong presumption that all civil proceedings related to a bankruptcy should be tried in the "home" court where the bankruptcy is pending. See DVI Fin. Serv., Inc. v. Cardiovascular Labs, Inc., 2004 WL 727105, at *2 (Bankr. E.D. Pa. 2004); In re Grogg, 295 B.R. 297, 30607 (Bankr. C.D. Ill. 2003); Frelin v. Oakwood Homes Corp., 292 B.R. 369, 38788 (Bankr. E.D. Ark. 2003); In re Wedlo, Inc., 212 B.R. 678, 679 (Bankr. M.D. Ala. 1996); In re Aztec Indus., Inc., 84 B.R. 464, 467 (Bankr. N.D. Ohio 1987); In re Convent Guardian Corp., 75 B.R. 346, 347 (Bankr. E.D. Pa. 1987). Indeed, "[t]he general rule is that the court where the bankruptcy case is pending is the proper venue for all related proceedings within the court's jurisdiction, because speedy and economic administration of cases is a paramount consideration in the bankruptcy process." In re Vital Link Lodi, Inc., 240 B.R. 15, 19 (Bankr. W.D. Miss. 1999) (emphasis added).

·

Simply, the sum of the factors to be weighed by this Court demonstrates that a transfer of the Counterclaim is justified not only for the interest of justice and judicial economy, but for the convenience of the parties and witnesses as well. Indeed, if the Counterclaim was to remain in this Court, all parties involved would be forced to expend significant resources to litigate the exact same dispute in multiple courts, causing a complete waste of time, money and judicial resources and potentially resulting in inconsistent judgments. Conclusion The Counterclaim is clearly "related to" United's bankruptcy and is inextricably intertwined with GLN's Proof of Claim already pending in the Bankruptcy Court. The most practical and logical course of action is to transfer the Counterclaim to the Illinois District Court for reference to the Illinois Bankruptcy Court. Such action would enable the Bankruptcy Court 8

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to continue hearing all disputes that are related to the assets available for distribution to United's creditors and obviate the need for the parties and their witnesses to appear in multiple courts with possibly inconsistent results. WHEREFORE, United respectfully requests that the Court grant its motion and enter an order transferring the Counterclaim to the District Court for the Northern District of Illinois, for reference to the Bankruptcy Court. Respectfully submitted this 17th day of March, 2008.

s/ Mark T. Barnes Mark T. Barnes BROWNSTEIN HYATT & FARBER, LLP 410 17th St., Suite 2200 Denver, Colorado 80202 (303) 223-1100 [email protected] ATTORNEYS FOR DEFENDANT UNITED AIR LINES, INC.

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CERTIFICATE OF SERVICE I hereby certify that on this 17th day of March, 2008, I electronically filed the foregoing MOTION TO TRANSFER COUNTERCLAIM TO NORTHERN DISTRICT OF ILLINOIS with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail address: [email protected] [email protected] [email protected] [email protected] I hereby certify that on this 17th day of March, 2008, I served a true and correct copy of the attached MOTION TO TRANSFER COUNTERCLAIM TO NORTHERN DISTRICT OF ILLINOIS via the United States mail, postage pre-paid, properly addressed to: Ricks Fracier, Esq. United Air Lines, Inc. 1200 East Algonquin Road Elk Grove Township, Illinois 60007 Jonathan Ross c/o Stephen Gurr, Esq. KAMLET SHEPHERD & REICHERT, LLP 1515 Arapahoe Tower One, Suite 1600 Denver, CO 80202 /s Mark T. Barnes Mark T. Barnes BROWNSTEIN HYATT FARBER SCHRECK, LLP 410 17th Street, Suite 2200 Denver, Colorado 80202 Phone: (303) 223-1100 Fax: (303) 223-1111 E-mail: [email protected] ATTORNEYS FOR DEFENDANT UNITED AIR LINES, INC.

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