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Consumer Financial Protection Bureau v. Think Finance, LLC

United States District Court, D. Montana, Great Falls Division

February 6, 2018

CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiff,
v.
THINK FINANCE, LLC, formerly known as Think Finance, Inc., Defendants.

          ORDER

          Brian Morris, United States District Court Judge.

         Plaintiff Consumer Financial Protection Bureau (“CFPB”) commenced this action on November 15, 2017. (Doc. 1.) The Complaint alleges four violations of the Consumer Financial Protection Act. (Doc. 1 at 26-30.) Defendant Think Finance, LLC (“Think Finance”) filed the instant Motion to Transfer Venue on January 5, 2018. (Doc. 4.) Think Finance seeks an order transferring this action to the U.S. District Court for the Northern District of Texas. Think Finance seeks this transfer with the understanding that the U.S. District Court would refer the matter to the U.S. Bankruptcy Court for the Northern District of Texas. (Doc. 5 at 6.)

         I. BACKGROUND

         Think Finance is a privately held company that performs critical functions for lending businesses, including provision of software, analytics, and marketing services. (Doc. 1 at 3-4.) CFPB is an independent agency of the United States Government created under the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. § 5491(a). (Doc. 1 at 2.)

         CFPB's Complaint concerns three lending businesses owned by Indian tribes (“Tribal Lenders”) for which Think Finance provided critical services. (Doc. 1 at 4.) One such lender, Plain Green, LLC (“Plain Green”) is located in the District of Montana. (Doc. 1 at 5.) Plain Green did not make loans to Montana consumers. CFPB alleges that the other two Tribal Lenders named in the Complaint originated loans in Montana to Montana consumers. (Doc. 13 at 11 fn. 2.)

         The Complaint alleges that Think Finance, through the Tribal Lenders (who are not party to this action), collected loan payments that customers did not owe, as the loans issued to those customers were void ab initio due to violations of state law. (Doc. 1 at 26.) CFPB alleges that Think Finance nevertheless collected on these void loans through unfair and abusive practices. (Doc. 1 at 28-29.) Finally, CFPB alleges that Think Finance provided substantial assistance to Tribal Lenders and other entities. (Doc. 1 at 30.) CFPB contends that Think Finance acted knowingly or recklessly in providing this substantial assistance to the Tribal Lenders. Id.

         Think Finance and its subsidiaries filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code, 11 U.S.C. § 101 et seq., in the U.S. Bankruptcy Court for the Northern District of Texas on October 23, 2017. (Doc. 5 at 8.) CFPB filed this action three weeks later on November 15, 2017.

         The Bankruptcy Court jointly administers the bankruptcy actions of Think Finance and its subsidiaries. (Doc. 5 at 8.) The joint bankruptcy action has triggered the automatic stay provision of 11 U.S.C. § 362(a). The automatic stay provision has put on hold numerous other putative class action claims filed against Think Finance in other states. Think Finance anticipates that the Bankruptcy Court will resolve claims underlying those putative class actions. (Doc. 5 at 9.)

         The Pennsylvania Attorney General filed a similar action against Think Finance in 2014. Pennsylvania v. Think Finance, et al., No. 14-7139-JCJ (E.D. Penn. 2014). The Pennsylvania action stands exempt from the automatic stay provision, however, as it involves a police or regulatory action. 11 U.S.C. § 362(b)(4). Think Finance has moved to transfer the Pennsylvania case to the Northern District of Texas. The U.S. District Court for the Eastern District of Pennsylvania has not yet ruled on the transfer motion. (Doc. 5 at 10.)

         Think Finance moves to transfer this action to the U.S. District Court for the Northern District of Texas. Think Finance anticipates that the District Court in Texas would refer the matter to the U.S. Bankruptcy Court for the Northern District of Texas. (Doc. 5 at 6.) See In re Gugliuzza, 852 F.3d 884, 890 (9th Cir. 2017).

         II. DISCUSSION

         The parties disagree as to which change of venue statute this Court should apply. (Docs. 5 at 14; 13 at 15.) Both 28 U.S.C. § 1404 and 28 U.S.C. § 1412 afford the Court discretion to transfer venue based on consideration of the same factors: the interest of justice and the convenience of the parties (and witnesses). 28 U.S.C. § 1404, § 1412. The presumption or deference afforded to either party represents the major difference between the two venue statutes. A second difference between the two statutes arises from the fact that Congress drafted § 1412 in the disjunctive. Congress equipped a court with the discretion to transfer a case to the bankruptcy court either for the interest of justice or for the convenience of the parties. 28 U.S.C. § 1412.

         Section 1404 defers to the plaintiff's selection of forum. Reid-Ashman Mfg., Inc. v. Swanson Semiconductor Serv., LLC., No. C-06-04693 JCS, 2008 WL 425638, at *1 (N.D. Cal. Feb 14, 2008). CFPB argues that § 1404 should apply. Section 1404 further requires that the party seeking the transfer -- Think Finance --demonstrate that both factors favor transfer. 28 U.S.C. § 1404. Section 1412, by contrast, “carries a presumption in favor of” transfer to the bankruptcy court. Id. Think Finance argues that § 1412 should apply. The Court will analyze the pending motion under both statutes.

         A. Consideration of Police and Regulatory Actions

         CFPB has chosen to file what it characterizes as a police and regulatory action in the District of Montana. CFPB seeks injunctive relief as well as monetary penalties, damages, disgorgement, and costs that will have an “effect” on Think Finance's bankruptcy estate. (Doc. 1 at 31.) CFPB does not dispute that this action “relate[s] to” the bankruptcy case.

         A court in the District of Montana previously transferred a civil breach of contract claim “related to” a bankruptcy action pursuant to § 1412. McGillis/Eckman Investments-Billings, LLC v. Sportsman's Warehouse, Inc., CV 10-26-BLG-RFC-CSO, 2010 WL 3123266, at *7 (D. Mont. June 30, 2010), adopted CV-10-26-BLG-RFC, 2010 WL 3153416 (D. Mont. Aug. 9, 2010). Other district courts within the Ninth Circuit have reached differing conclusions regarding the applicability of § 1412 to cases only “related to” bankruptcy actions, as opposed to the bankruptcy actions themselves. See EnSource Investments, LLC v. Tatham, No. 17-cv-79, 2017 WL 3923784, at *4 (S.D. Cal. Sept. 7, 2017) (declining to apply § 1412); and Senorx, Inc. v. Coudert Bros., LLP, No. 7-1075, 2007 WL 2470125 (N.D. Cal. August 27, 2007) (applying § 1412). The Ninth Circuit has not resolved this split.

         The district court in EnSource determined that § 1412 does not provide for transfer of matters “related to” bankruptcy actions. Ensource, 2017 WL 3923784, at *4. The court declined, based on § 1404, to transfer venue to the Southern District of Texas where one of the defendants had filed for bankruptcy protection. Id. The court noted that the defendants had traveled to California to pitch an investment opportunity to plaintiffs. Id. at 1. The court further indicated that it would exercise its discretion to decline to transfer even under § 1412 because the bankruptcy proceeding in Texas involved only one of the defendants. Id.

         By contrast, the district court applied § 1412 and granted the motion to transfer filed by a defendant New York law firm in Senorx, Inc. Plaintiffs had filed professional negligence claims against the law firm in its representation of plaintiffs on several international patent matters. Senorx, Inc., 2017 WL 2470125, at * 1. The district court recognized that witnesses would be found in both California, where plaintiffs had filed the case and where the law firm had provided the legal advice, and in New York, the home office of the law firm. Id. at *2. The district court also cited the fact that ...


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