Christensen v. Madsen (In re Madsen)

Christensen v. Madsen (In re Madsen), BAP No. UT-13-094 (B.A.P. 10th Cir. Aug. 25, 2014)
The Bankruptcy Appellate Panel ruled that a creditor may pursue a nondischargeability complaint in a forum other than the debtor's "home" bankruptcy court, provided that the creditor's forum choice is fair, reasonable, and provides the debtor with due process.
Procedural context:
The debtor filed a Chapter 7 case in the U.S. Bankruptcy Court for the Western District of Washington. The creditor timely filed a nondischargeability complaint against the debtor in the U.S. Bankruptcy Court for the District of Utah, the district in which many of the underlying events occurred. The Utah bankruptcy court dismissed the complaint for lack of personal jurisdiction under 28 U.S.C. § 1334(e) and for improper venue under 28 U.S.C. § 1408. The creditor appealed the dismissal order to the Bankruptcy Appellate Panel for the Tenth Circuit.
The creditor, an attorney, represented the debtor's ex-wife in their divorce proceedings in Utah. When the ex-wife failed to pay a significant portion of his legal fees, the creditor recorded an attorney lien on all money that the debtor was to pay the ex-wife under the Utah divorce decree. The creditor then sued the debtor in Utah state court, alleging that the debtor had conspired with his ex-wife to enter into a direct payment agreement in order to ensure that the creditor would never recover his legal fees. The debtor moved to Washington and later filed a Chapter 7 bankruptcy case in the Washington bankruptcy court. In response, the creditor timely filed a nondischargeability complaint in the Utah bankruptcy court. The debtor then moved to dismiss the complaint, arguing that: (1) the court lacked personal jurisdiction under 28 U.S.C. § 1334(e); and (2) venue was improper under 28 U.S.C. § 1408. The Utah bankruptcy court agreed and dismissed the complaint. On appeal, the Bankruptcy Appellate Panel reversed and remanded. First, the Panel concluded that section 1334(e) addresses only "in rem" jurisdiction, not personal jurisdiction. Second, the Panel concluded that section 1408 governs venue of bankruptcy cases, not adversary proceedings. The Panel, therefore, reversed and remanded with instructions for the Utah bankruptcy court: (1) to determine whether exercising personal jurisdiction over the debtor comports with due process in light of the Tenth Circuit's prior decision in Peay v. Bellsouth Med. Assistance Plan, 205 F.3d 1206 (10th Cir. 2000); and (2) to consider whether venue lies in Utah under 28 U.S.C. § 1409(a). Finally, the Panel suggested that "the most expeditious alternative" might be to transfer the proceeding to the Washington bankruptcy court, given the debtor's request for a transfer under 28 U.S.C. § 1412.
Nugent, Romero, and Somers

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