Lehman Brothers Holdings Inc. v. LendingTree, LLC

Background

Lehman brought this declaratory-relief action to enforce an allowed claim against Home Loan Center, Inc. in HLC’s bankruptcy proceedings. The claim arose from alleged defects in residential mortgage loans that HLC sold to Lehman Brothers Bank and from Lehman’s later settlements and liabilities involving purchasers of those loans. Lehman alleged that LendingTree, LLC and LendingTree, Inc. were responsible for HLC’s obligations because of their corporate relationships with HLC and because LendingTree, Inc. allegedly assumed HLC’s liabilities.

Lehman settled its claim in HLC’s California bankruptcy case for $13.3 million. Lehman then sought a declaration that the LendingTree defendants were liable for the amount represented by that allowed claim. Lehman asserted federal bankruptcy-related jurisdiction and argued that Minnesota was a proper venue.

The Motion and the Court’s Analysis

The defendants moved to dismiss for lack of personal jurisdiction. Alternatively, they sought dismissal or transfer based on improper venue, discretionary transfer for convenience, or an order requiring arbitration of Count One. Lehman opposed dismissal and arbitration. If the case were transferred, Lehman requested transfer to the Southern District of New York for reference to the bankruptcy court handling Lehman’s bankruptcy proceedings.

The court found that Minnesota was not a proper venue under 28 U.S.C. § 1391(b)(2), because the events supporting Lehman’s indemnification claims involved loan transactions and agreements in California, New York, or Delaware, bankruptcy proceedings in New York and California, and corporate relationships involving Delaware, North Carolina, and New York. The court concluded that none of those events, much less a substantial part of them, concerned Minnesota.

The court also considered whether venue could be proper because all defendants were subject to Minnesota personal jurisdiction. It held that LendingTree, LLC was subject to general personal jurisdiction based on its consent through Minnesota’s corporate-registration statutes, because controlling Eighth Circuit precedent recognized that consent. The court stated that it was unclear whether that consent could be imputed to LendingTree, Inc., but found that Lehman had adequately alleged the domination and control needed for such an argument. The court did not finally resolve the defendants’ personal-jurisdiction arguments.

Transfer Analysis

Because the case was related to Lehman’s bankruptcy estate, the court applied 28 U.S.C. § 1412, which permits transfer of a bankruptcy-related case in the interest of justice or for the parties’ convenience. The court found that the interests of justice strongly favored transfer to the Southern District of New York for reference to the Southern District of New York Bankruptcy Court. That court was handling Lehman’s other indemnification proceedings, and transfer would promote efficient administration of Lehman’s bankruptcy estate and judicial efficiency. The court also considered its concerns about personal jurisdiction in favor of transfer.

The convenience-of-the-parties factors were neutral: North Carolina would be more convenient for the defendants, while New York would be more convenient for Lehman and its bankruptcy-related personnel and proceedings. The court nevertheless concluded that the interests of justice weighed heavily in favor of transfer.

Disposition

Judge Susan Richard Nelson ordered that the defendants’ motion to dismiss, transfer venue, or compel arbitration was GRANTED IN PART. The court transferred the case to the United States District Court for the Southern District of New York for reference to the United States Bankruptcy Court for the Southern District of New York. The order did not decide the defendants’ request to compel arbitration and did not dismiss the case for lack of personal jurisdiction.