Cole Eiber
St. John's University School of Law
American Bankruptcy Institute Law Review Staff
In In re Bensalz Productions, LLC, the U.S. Bankruptcy Court for the Southern District of Florida (the “FL Bankruptcy Court”) granted a creditor’s motion to transfer the debtor’s chapter 11 case to the U.S. Bankruptcy Court for the Southern District of New York based on improper venue.[1]
On November 19, 2021, Bensalz Productions, LLC (“Bensalz”), the debtor and debtor-in-possession, filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Court”) in the FL Bankruptcy Court and elected in that petition to proceed under Subchapter V.[2] Prior to the filing, Bensalz and Belinda Baker of Starborne Productions, LLC (“Baker”), the creditor that successfully moved to transfer venue of Bensalz’s bankruptcy case, entered into a series of business agreements. After a period of about 10 years, “things went awry.”[3]The reality television show “TANKED!,” which Bensalz produced, was taken off the air, and subsequently Baker commenced litigation against Bensalz for claims of “sexual assault and appropriation of material protected by a nondisclosure agreement.”[4] The combination of the television show cancellation, as well as the litigation commenced by Baker “adversely impacted Bensalz’s bottom line.”[5]
On February 14, 2022, Baker filed the Creditor and Plaintiff Belinda Baker’s Emergency Motion for Entry of an Order (I) Dismissing the Debtor’s Chapter 11 Case, or Alternatively, (II) Transferring the Debtor’s Chapter 11 Case to the Bankruptcy Court for the Southern District of New York (the “Emergency Motion”) in the Bensalz bankruptcy case. The Emergency Motion presented two issues to the bankruptcy court: (1) whether Bensalz’s bankruptcy case should be dismissed; and (2) whether venue of Bensalz’s bankruptcy case should be transferred.
The FL Bankruptcy Court concluded that venue was improper and should be transferred. With respect to Baker’s request to dismiss Bensalz’s bankruptcy case, the FL Bankruptcy Court determined that dismissal was premature.[6] If the FL Bankruptcy Court were to take that path, it would require an evidentiary hearing to give Bensalz every possible benefit of the doubt prior to ending its bankruptcy journey.[7]
With respect to the FL Bankruptcy Court’s decision to grant Baker’s request to transfer venue, the FL Bankruptcy Court noted that “[a]lthough Bensalz has argued that Florida operated as the principal place of business for at least 180 days preceding the petition date, that assertion contradicts prior sworn statements, record evidence, and a federal court opinion.”[8] The FL Bankruptcy Court cited Bankruptcy Rule 1014 and 28 U.S.C. § 1408 as the basis for its decision.[9]Bankruptcy Rule 1014 states in pertinent part, “[i]f a petition is filed in the proper [or improper] district, the court . . . may transfer the case to any other district if the court determines that the transfer is in the interest of justice or for the convenience of the parties.”[10] Furthermore, Section 1408 of title 28 provides that the appropriate venue for cases under title 11 is the district “in which the domicile, residence, principal place of business . . . or principal assets . . . of the person or entity that is the subject of such case have been located for the one hundred and eighty days immediately preceding such commencement.”[11]
The FL Bankruptcy Court ultimately determined that venue was appropriate in the Southern District of New York. While still applying Bankruptcy Rule 1014 and 28 U.S.C. § 1408, the FL Bankruptcy Court focused primarily on (1) Bensalz assets,[12] (2) Bensalz’s geographic ties,[13] (3) Bensalz’s principal place of business,[14] and (4) the interest of justice and convenience to the parties.[15] First, Bensalz “was organized in the state of New York and its principal place of business is there.[16]” Second, Bensalz’s managing member, Richard Bennett, described Bensalz, under oath, as “a New York-based company” back in 2019.[17] Third, “Bensalz’s one undisputed unsecured creditor is the New York law firm, Reavis Page Jump LLP, which represented Bensalz in the New York Litigation.”[18] Fourth, “New York law governs the agreement between Starbreacher Enterprises (Baker’s business entity) and Bensalz.”[19] And fifth, “all four of Bensalz’s creditors are either located in or connected to New York.[20] As the FL Bankruptcy Court itself put it, “[t]he list of New York ties continues.”[21]
The FL Bankruptcy Court’s analysis described many facts supporting a transfer of venue in the interests of justice and for the convenience of the parties.[22] While the FL Bankruptcy Court held a full hearing on the issue of venue, considered the Emergency Motion, the Response, all exhibits, and the full record of this bankruptcy case, because of the ultimate convenience of the parties and the interests of justice weighed in favor of a transfer, the court ordered that venue be transferred to the Southern District of New York.[23
[1]See In re Bensalz Prods., LLC, No. 21-21018, 2022 WL 1617690, at *10 (Bankr. S.D. Fla. May 19, 2022).
[2] See id. at 1.
[3] Id.
[4] Id. at 1-2.
[5] Id. at 2.
[6] Id. at 6. (“[T]here is insufficient evidence in the record to date to definitively determine that dismissal of this bankruptcy case is appropriate.”).
[7] Id. at 6.
[8] See id. at 7 (citing Baker v. Bensalz Prods., Inc., 480 F.Supp. 3d 792, 796 (S.D. Ohio 2020) ([Bensalz] is a limited liability company organized under New York law, with its principal place of business in New York.”).
[9] Id. at 7.
[10] Id.
[11] Id.
[12] Id. at 2–3.
[13] Id. at 3–4.
[14] Id. at 7–8.
[15] Id. at 8.
[16] Id. at 4.
[17] Id.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] Id. at 10.
[23] Id.