Summary
granting the withdrawal motion in part because maintaining the action in bankruptcy court would promote forum shopping by the plaintiff
Summary of this case from McHale v. Citibank, N.A.Opinion
00 Civ. 9429 (SHS)
March 29, 2002
OPINION AND ORDER
In September 1999, plaintiffs LTV Steel Company, Inc. ("LTV") and Hanna Furnace Corporation ("Hanna") initiated two lawsuits relating to environmental contamination at a former industrial site in Buffalo, New York. The first suit, an adversary proceeding in the bankruptcy court of this district (the "Adversary Proceeding"), seeks a declaratory judgment and injunction barring any claims by the defendants City of Buffalo (the "City") and the City of Buffalo Urban Renewal Agency ("BURA") relating to environmental contamination at a parcel of the industrial site plaintiffs sold to defendants in 1992, while LTV was in bankruptcy proceedings. The second suit, filed in the U.S. District Court for the Western District of New York (the "Western District Action"), charges these same defendants with polluting a portion of the former industrial site still owned by plaintiffs. Defendants have moved to withdraw the reference from the bankruptcy court pursuant to 28 U.S.C. § 157 (d) and transfer venue to the Western District of New York pursuant to 28 U.S.C. § 1404 (a). Because the Adversary Proceeding does not involve substantial and material consideration of federal statutes other than the Bankruptcy Code, mandatory withdrawal of the reference is not warranted. However, because legal and factual issues in the Adversary Proceeding overlap with the Western District Action, the Court will exercise its discretion to withdraw the reference and transfer the proceeding to that district.
I. BACKGROUND
From 1919 to 1982 the Donner-Hanna Coke Plant in Buffalo operated as a joint venture between Hanna and LTV, and LTV's predecessor in interest, Republic Steel. (Kolaga Aff. ¶ 7, Def. Ex. 6.) The facility ceased production in 1982, but Hanna and LTV continued to own the real property surrounding the plant site.
LTV filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York in July 1986. (Papajcik Aff. ¶ 2.) LTV emerged from bankruptcy in 1993, pursuant to a reorganization plan confirmed by the bankruptcy court on May 26, 1993. The reorganization plan provided that LTV would be released from all claims arising prior to June 28, 1993.
During the pendency of the bankruptcy proceedings, LTV and Hanna arranged to sell a portion of the property to BURA for use in the construction of residential housing. In response to BURA's inquiries relating to possible environmental problems with the site, LTV General Manager Donald Nemec wrote in a letter of April 1, 1991 (the "Nemec letter"):
To the best of our knowledge, there is no history of landfilling activities at the site, nor any known or suspected hazardous or industrial wastes dumped or found on the site. Also, to the best of our knowledge, the site has not been used for storage of drums or other containers filled with hazardous or industrial wastes, nor have there been any indication of environmental problems associated with the site. Finally, to the best of our knowledge, no soil nor ground water samples have been taken or tested from the site.
(Def. Ex. 14.)
LTV and Hanna agreed to sell the property to BURA for $30,000. The Sale Agreement, executed in June 1992, stated that the sale was to be "`as is' and `where is,'" with no warranties, and that the sellers "shall not be liable to [BURA] for any damage or loss . . . arising out of or in connection with this agreement or the transaction contemplated hereby, whether in contract or tort, or by reason of any local, state or federal laws or regulations." (Ex. A, annexed to Def. Ex 1, § 12.) Section 16 of the Sale Agreement provides that BURA "hereby waives any claims or rights it may have against Sellers with respect to the condition of the Property including, without limitation, the presence of hazardous substances, pollutants or contaminants." Section 17 states that sellers have no actual knowledge that hazardous substances have been released on the property.
The bankruptcy court approved the sale on November 16, 1992. (Papajcik Aff. ¶ 10.) After closing the sale on December 30, 1992, the City began constructing houses on the property (hereinafter the "Residential Property"). LTV and Hanna remained joint owners of the remainder of the industrial site property (hereinafter the "Plant Site").
In April and May of 1993, the bankruptcy court approved two settlement agreements between LTV and the U.S. Environmental Protection Agency ("USEPA") and the State of New York, respectively (collectively, the "Settlement Agreements"). Paragraph 21(a) of the USEPA settlement agreement provides that, with respect to sites no longer owned by the debtors as of confirmation, claims pursuant to sections 106 and 107 CERCLA, 42 U.S.C. § 9606 and 9607; section 7003 RCRA, 42 U.S.C. § 6973; and section 7 of the Toxic Substances Control Act, 15 U.S.C. § 2606, "arising from the Preconfirmation acts, omissions, or conduct of an LTV Debtor or any of its predecessors shall be discharged under Section 1141 of the Bankruptcy (Axle by the confirmation of a Plan of Reorganization for the LW Debtor, and shall have the status of unliquidated general unsecured claims." (Ex. B, annexed to Def. Ex. 1.) Similarly, Paragraph 14 of the New York settlement agreement provides for the discharge of "any liabilities and obligations of an LTV Debtor to New York under all the Environmental Laws." (Ex. C, annexed to Def. Ex. 1, ¶ 14(a).)
In October 1993, several months after the confirmation of the reorganization plan, LTV and Hanna executed an easement authorizing the City to construct a berm — essentially, a low wall of earth — along Abby Street on the eastern edge of the Plant Site adjacent to homes under construction on the Residential Property (the "Abby Street Berm"). (Walker Aft ¶ 15.) LW assisted the City in the construction, which continued through at least May 1994. Construction of the Abby Street Berm involved the collection of thousands of tons of soil and construction debris from sites throughout Buffalo, including the Residential Property, and their deposit at the Plant Site. (Walker Aff. ¶¶ 15-18.)
LTV contests defendants' allegation that material from the Residential Property was used in construction of the Abby Street Berm. (See Papajcik Aff. ¶ 29, n. 5.)
In 1998, the City learned of significant environmental contamination at the Residential Property, which subsequently led to the relocation of several households. In a letter dated May 7, 1999, the City informed LTV that it considered the contamination of the Residential Property a public nuisance for which LTV was responsible. (Def. Ex. 22.) The parties discussed settlement of the issue. In a later of August 20, 1999, Buffalo Mayor Anthony Masiello warned that if LTV did not agree to a proposed settlement within the week, the City would pursue a "separate path" which would include seeking reimbursement for the City's expenses in cleaning up the properties. (Def. Ex. 23.) LW replied in a letter of August 25, 1999 that it "expect[ed] to respond" by August 31, 1999 after "careful consideration." (Def. Ex. 24.)
Information obtained after the 1992 Sale Agreement revealed that plaintiffs had stored large amounts of coke and coke waste on the Residential Property. Defendants charge that between at least 1938 and the early 1950's, Hanna and its affiliates delivered between 48,000 and 96,000 tons of coal and coke per year to the Residential Property for storage and resale. Plaintiffs also stored petroleum products in an underground tank on the site. (See Walker Aff. ¶ 1 11-12, Def. Exs. 9, 11.) The City faces numerous lawsuits from residents of the Residential Property, who allege ongoing violations of environmental laws and endangerment to health and the environment. (See Walker Aff. ¶ 24, Def. Exs. 26-27.) The City implemented a remediation work plan, which included the relocation of three households and the excavation of soil from several lots, in September 1999. (Kolaga Aff. ¶ 24.) The following year the plaintiffs and the City entered into a consent order with USEPA to remove contaminated soil from five vacant lots at the Residential Property. (Papajcik Aff. ¶ 36.)
On September 2, 1999, LTV filed an adversary proceeding in the bankruptcy court in New York. The complaint, as amended, seeks a declaratory judgment and injunction barring any claims by the City or BURA "arising out of or relating to" the Residential Property, on the grounds that 1) any claims against LTV or Hanna have been waived pursuant to the Sale Agreement; and 2) claims against LTV are further precluded by the reorganization plan and settlement agreements. (Def. Ex. 1 ¶ 2.) Hanna intervened in the proceeding by leave of the bankruptcy court and filed a complaint on May 26, 2000, asserting that claims against it had been waived pursuant to the Sale Agreement. (Def. Ex. 2.)
One day after LTV initiated the Adversary Proceeding, LTV and Hanna sued the City and BURA in the U.S. District Court for the Western District of New York, alleging that the defendants had placed hazardous substances in the Abby Street Berm in violation of CERCLA, New York common law and the parties' easement agreement. (Def. Ex. 3.) Plaintiffs sought reimbursement and contribution pursuant to CERCLA for response costs associated with the Abby Street Berm, a declaratory judgment that defendants are liable for such response costs, and damages for breach of the easement, trespass, nuisance and waste. (Def. Ex. 3 ¶¶ 38-85.)
The City and BURA then submitted answers and counterclaims in the Western District Action. (Def. Exs. 4 and 5.) Defendants denied liability for any contamination in the Abby Street Berm and asserted that plaintiffs themselves were responsible for the hazardous releases alleged in the complaint. (Def. Ex. 4 ¶¶ 102-04; Def. Ex. 5 ¶¶ 105-06.) The City's counterclaims asserted violations of CERCLA, RCRA, the New York Navigation Law, nuisance, and waste of city assets in connection with the disposal and release of hazardous substances on both the Plant Site and the Residential Property. The City alleged that these substances continued to be released after LTV's bankruptcy. (Def. Ex. ¶¶ 117.) The City sought relief in the form of punitive and compensatory damages, reimbursement of the City's response costs pursuant to CERCLA, and injunctive relief, including an order requiring plaintiffs to abate an imminent and substantial endangerment to health or the environment" pursuant to § 7002(a)(1)(B) RCRA, 42 U.S.C. § 6972 (a). (Def. Ex. 4 ¶¶ 143-247.) BURA's counterclaims sought injunctive relief and damages for violations of CERCLA, the New York Navigation Law and common law nuisance. (Def. Ex. ¶¶ 124-33.)
On August 20, 2000, LTV filed a motion in the bankruptcy court for a stay of the Western District counterclaims that concern the Residential Property pending the resolution of the Adversary Proceeding. (Def. Ex. 28.) Hanna filed a similar application on September 13, 2000. (Def. Ex. 29.) On November 14, 2000, defendants filed a motion with this Court seeking to withdraw the reference from the bankruptcy court and transfer venue to the Western District of New York. After the failure of lengthy settlement discussions, the motion to withdraw the reference was submitted to this Court for decision in late 2001.
On December 29, 2000 LTV filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Ohio. Plaintiffs have waived the automatic stay provision of Section 362 of the Bankruptcy Code with respect to the Adversary Proceeding. (Papajcik Aff. ¶ 44.)
II. DISCUSSION
A. Motion to Withdraw the Bankruptcy Reference
Withdrawal of a reference to bankruptcy court may be either mandatory or permissive. 28 U.S.C. § 157 (d) provides:
The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
1. Mandatory Withdrawal
The mandatory withdrawal provision of section 157(d) has been interpreted narrowly, requiring withdrawal "of cases or issues that would otherwise require a bankruptcy court judge to engage in significant interpretation, as opposed to simple application, of federal laws apart from the bankruptcy statutes." City of New York v. Exxon Corp., 932 F.2d 1020, 1026 (2d Cir. 1991). Mandatory withdrawal is therefore appropriate only when "substantial and material consideration of non-Bankruptcy Code federal statutes is necessary for the resolution of the proceeding." Shugrue v. Airline Pilots Ass'n Int'l (In re Ionosphere Clubs, Inc.), 922 F.2d 984, 995 (2d Cir. 1990) (citations omitted). By contrast, where the action involves the "straightforward application of a federal statute to a particular set of facts" mandatory withdrawal is not warranted. United States v. Johns-Manville Corp. (In re Johns-Manville Corp.), 63 B.R. 600, 602 (S.D.N.Y. 1986).
In the Adversary Proceeding, LTV seeks a declaratory judgment that any claims against it relating to the Residential Property were discharged in bankruptcy. The question of whether a CERCLA claim may be asserted against a debtor does not require "substantial and material" interpretation of CERCLA. In United States v. LTV Corp. (In re Chateaugay Corp.), 944 F.2d 997, 1002 (2d Cir. 1991) (" Chateaugay"), the U.S. Court of Appeals for the Second Circuit established that the dischargeability of CERCLA claims against bankrupt parties should be determined by the provisions of the Bankruptcy Code, rather than the potentially conflicting provisions or policies of CERCLA. The court reasoned that Congress intended the bankruptcy statute "to override many provisions of law that would apply in the absence of bankruptcy" and if Congress wished for environmental statutes to prevail over the bankruptcy statute, the remedy was to write such exceptions into the statute. Id. The court then examined section 101(4) of the Bankruptcy Code to determine that response costs pursuant to CERCLA were "claims" dischargeable in bankruptcy when the release or threatened release of hazardous material occurred before the filing of the Chapter II petition. Id. at 1002-1006.
In another case arising out of LTV's 1986 bankruptcy, LTV Steel Co. v. Union Carbide Corp. (In re Chateaugay Corp.), 193 B.R. 669 (S.D.N.Y. 1996) ("Union Carbide"), LW filed an adversary proceeding in the bankruptcy court, seeking a declaratory judgment that its liability for certain CERCLA claims then pending in an action before the U.S. District Court for the Western District of Pennsylvania had been discharged. The court denied defendants' motion to withdraw the reference to the bankruptcy court, finding that "the sole CERCLA issue in the present case is when defendants' claims arose, and . . . that inquiry must be resolved in accordance with the Bankruptcy Code's definition of `claim.'" Id. at 674. See also, Revere Copper Brass Inc. v. Acushnet Co. (In re Revere Copper Brass Inc.), 172 B.R. 192, 198 (S.D.N.Y. 1994) (issue of whether CERCLA claim arose before or after filing of Chapter II petition did not require withdrawal of the reference).
Defendants cite still another LW bankruptcy case, LTV Steel Co. v. Pennsylvania Department of Environmental Resources (In re Chateaugay Corp.), No. 90 Civ. 7713, 1992 WL 297460 (S.D.N.Y. Oct. 7, 1992) ("Pennsylvania"). In Pennsylvania, the court granted a motion to withdraw from bankruptcy court LTV's adversary proceeding requesting an injunction against the enforcement of a pre-petition coal refuse permit. The district court held that withdrawal was mandatory because the adversary proceeding raised issues that required interpretation of the Surface Mining Control and Reclamation Act, 30 U.S.C. § 1201-1328, and related state statutes. Id. at *4. Since LTV's reorganization plan had not yet been adopted, the potential discharge of claims against LTV was not at issue.
In contrast to Pennsylvania the Adversary Proceeding at issue here directly addresses the dischargeability of claims asserted against LTV; it does not require a determination of the merits of defendants' counterclaims under federal environmental statutes. Defendants correctly argue that some claims against LW may not be discharged, either because they relite to post-petition releases of hazardous substances or because the claims seek injunctive relief to abate ongoing violations of environmental laws. For example, defendants' claim that LTV contributed to the contamination of the Residential Property through its post-petition participation in the construction of the Abby Street Berm is unlikely to be considered dischargeable. See Chateaugay, 944 F.2d at 1005. Similarly, defendants may be able to prevail on their RCRA counterclaims for injunctive relief if they can establish that plaintiffs' past or present actions have caused an ongoing violation of that statute. See id. at 1008-09; South Road Assocs. v. International Bus. Machines Corp., 216 F.3d 251, 254-55 (2d Cir. 2000). Regardless of the merits of defendants' claims, they do not require withdrawal of the reference; the Chateaugay court established the very principles defendants cite through its interpretation of the Bankruptcy Code, without substantive consideration of the underlying environmental statutes. See 944 F.2d at 1006-09.
Nor does consideration of the two settlement agreements and the Sale Agreement, all three of which were approved by the bankruptcy court, involve substantial and material interpretation of federal statutes. The release provisions of the Sale Agreement raise questions of contract law and the basic application of section 107(e)(1) CERCLA, which governs the contractual waiver of CERCLA liability. Defendants' arguments that the Nemec letter fraudulently induced them to enter into the Sale Agreement or that only BURA is bound by the agreement do not require the interpretation of CERCLA or any other federal statute. Similarly, the interpretation of the settlement agreements in light of section 113(f)(2) CERCLA is no more than the "straightforward application of a federal statute to a particular set of facts." Johns-Manville, 63 B.R. at 602. See also, Union Carbide, 193 B.R. at 674-75 (non-Code related issues, such as the alleged adequacy of notice to creditors and claim that district court action should prevail under "first-filed rule" did not involve the substantial analysis of non-bankruptcy statutes).
Section 107(e))(1) provides: "No indemnification, hold harmless, or similar agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of release under this section, to any other person the liability imposed under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a party to such agreement for any liability under this section." 42 U.S.C. § 9607 (e)(1).
Section 113(f)(2) provides: "A person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement shall not be liable for claims for contribution regarding matters addressed in the settlement. Such settlement does not discharge any of the other potentially liable persons unless its terms so provide, but it reduces the potential liability of the others by the amount of the settlement." 42 U.S.C. § 9613 (f)(2).
Since the Adversary Proceeding does not require "substantial and material consideration" of federal laws other than the Bankruptcy Code, withdrawal of the reference to the bankruptcy court is not mandatory.
2. Permissive Withdrawal
Even where mandatory withdrawal is not warranted, the Court has broad discretion to withdraw the reference for "cause." In determining whether there is sufficient cause for permissive withdrawal, a court first considers whether the claim is a "core" bankruptcy claim capable of resolution by the bankruptcy court, or a "non-core" claim which would have to be referred to the district court for review. Orion Pictures Corp. v. Showtime Networks, Inc. (In re Orion Pictures Corp.), 4 F.3d 1095, 1101 (2d Cir. 1993); See also, 28 U.S.C. § 157 (b)-(c). The court then considers "efficient use of judicial resources, delay and costs to the parties, uniformity of bankruptcy administration, the prevention of forum shopping, and other related factors." 4 F.3d at 1101. Although a finding that a matter is cores' weighs against withdrawal of the reference, it is not dispositive, and "[i]n the final analysis, the critical question is efficiency and uniformity." Mishkin v. Ageloff, 220 B.R. 784, 800 (S.D.N.Y. 1998); Houbigant, Inc. v. ACB Mercantile, Inc. (In re Houbigant Inc.), 185 B.R. 680, 686 (S.D.N.Y. 1995).
Core matters are those which fall within the bankruptcy court's area of expertise. Union Carbide, 193 B.R. at 675, 28 U.S.C. § 157 (b)(2) sets forth a nonexclusive list of core proceedings including "matters concerning the administration of the estate" and "determinations as to the dischargeability of particular debts." 28 U.S.C. § 157 (b)(2)(A), (1). "A proceeding that involves rights created by bankruptcy law, or that could arise only in a bankruptcy case, is a core proceeding," while "[a]n action that does not depend on the bankruptcy laws for its existence and which could proceed in a court that lacks federal bankruptcy jurisdiction is non-core." United Orient Bank v. Green (In re Green), 200 B.R. 296, 298 (S.D.N.Y. 1996).
The claims asserted in the Adversary Proceeding principally concern core bankruptcy matters. The question of the dischargeability of claims against LTV is clearly a core proceeding. See Union Carbide, 193 B.R. at 676, (citing In 3re Brooks Fashion Stores, Inc., 124 B.R. 436, 441 (Bankr. S.D.N.Y. 1991). While not strictly bankruptcy matters, the Sale Agreement and settlement agreements were concluded after LTV filed for Chapter 11 bankruptcy and were approved by the bankruptcy court. Disputes regarding post-petition contracts with the debtor, including settlement agreements, are core proceedings. Carabetta Enters., Inc. v. City of Asbury Park (In re Carabetta Enters., Inc.), 162 B.R. 399, 404 (Bankr. D. Conn. 1993) (citing Ben Cooper, Inc. v. Insurance Co. (In re Ben Cooper. Inc.), 896 F.2d 1394, 1399-1400 (2d Cir.), vacated on other grounds, 498 U.S. 964 (1990) opinion reinstated 924 F.2d 36 (2d Cir. 1991)). See also In re United States Lines, Inc., 197 F.3d 631, 637-38 (2d Cir. 1999); Kenston Mgmt. Co. v. Lisa Realty Co. (In re Kenston Mgmt. Co., Inc.). 137 B.R. 100, 105-06 (Bankr. E.D.N Y 1992) (collecting cases).
Even where a bankruptcy proceeding involves "core" claims, courts frequently exercise their discretion to withdraw the reference if the bankruptcy action involves common questions of law and fact with a pending district court action. In Wedtech Corp. v. London (In re Wedtech Corp.), 81 B.R. 237, 239 (S.D.N.Y. 1987), the district court withdrew the bankruptcy reference of a "core" fraudulent conveyance claim, because of the "overlapping of facts, transactions, and issues" with a securities action pending in the district court. The court reasoned that the resolution of the fraudulent conveyance issue directly related to the liability of the defendants in the district court action. Id. at 23940.See also, Big Rivers Eke. Corp. v. Green River Coal Co., 182 B.R. 751, 755 (W.D. Ky. 1995); Enviro-Scope Corp. v. Westinghouse Elec. Corp. (In re Enviro-Scope Corp.), 57 B.R. 1005, 1008 (E.D. Pa. 1985).
Plaintiffs seek to draw a sharp distinction between the Western District litigation, which relates to defendants' liability for the contamination of the Abby Street Berm, and the Adversary Proceeding, which concerns plaintiffs' liability for contamination of the Residential Property. Defendants, in contrast, maintain that the two actions are integrally connected, since both relate to plaintiffs' ongoing environmental violations and post-petition conduct, including LTV's participation in the construction of the Abby Street Berm using soil from the Residential Property. Even if LTV's bankruptcy, the settlement agreements or the Sale Agreement bars most of defendants' counterclaims with respect to the Residential Property, LTV's post-petition involvement in the construction of the Abby Street Berm nonetheless implicates issues raised in both proceedings. If LTV transported hazardous material from the Residential Property to the Abby Street Berm in 1993 and 1994, it may have contributed not only to the contamination of the berm, but also to further environmental degradation of the Residential Property, for example by exposing toxic substances previously buried. (See Mary E. Bitka, "Limited Qualitative Risk Assessment for the Property at 265 Abby Street in Buffalo, New York," Def. Ex. 21. stating that "[s]urface/near surface soil and subsequent fugitive dust are . . . the primary medium of concern" in migration of soil contaminants found at a Residential Property site.)
The Western District court is in the best position to evaluate the preclusive effect of LTV's bankruptcy, the Sale Agreement and the settlement agreements in light of the specific factual circumstances surrounding environmental contamination at the two parcels of property, including any possible overlap between the contamination at the two sites. The injunction plaintiffs seek in the Adversary Proceeding — barring any claim "arising out of or relating to" the Residential Property — is quite broad and obscures the potential interrelationship among the various claims. If the Adversary Proceeding remained with the bankruptcy court, that court would decide plaintiffs' claims outside the context of the claims and counterclaims asserted in the Western District action. Plaintiffs could then apply the judgment to the Western District action, possibly insulating themselves from responsibility for contamination at either site without a substantive evaluation of defendants' claims of post-petition environmental violations. While plaintiffs' two-court strategy may minimize their potential liability, neither the interests of justice nor judicial economy favor the litigation of these two related matters in two separate fora.
Although each side accuses the other of forum shopping, defendants' complaints bear closer scrutiny, given that plaintiffs commenced both lawsuits at issue here. Two weeks after receiving a letter from the Mayor of Buffalo that the City planned to take legal action, LW filed the Adversary Proceeding. , day later, LW and Hanna filed the Western District Action, alleging that the City was responsible for contamination at the Plant Site. By filing the Adversary Proceeding one day earlier than the Western District action, plaintiffs could take advantage of the "first-filed rule" to enjoin the Western District counterclaims and ensure that the claims asserted in the Adversary Proceeding were determined first. See Exxon, 932 F.2d at 1025. This certainly suggests forum shopping. See Union Carbide, 193 B.R. at 674-75 (citing Federal Ins. Co. v. May Dep't Stores Co., 808 F. Supp. 347, 350 (S.D.N.Y. 1992)).
While the Union Carbide court elected not to withdraw the bankruptcy reference where LTV faced CERCLA claims in a district court action, the only issue before the bankruptcy court in that case was whether LTV's liability had been discharged, LTV was the only party to the bankruptcy proceeding, and the only issue before the district court was the distribution of CERCLA liability among 24 defendants. Under those circumstances, the district court found that maintaining LTV's adversary proceeding in the bankruptcy court promoted the efficient use of judicial resources, since the bankruptcy court's determination of dischargeability issues did not affect the resolution of the liability issues before the district court. Moreover, since each party to the dispute had "run to its favorite courthouse," forum shopping concerns did not favor withdrawal of the reference. 193 B.R. at 678. Here, by contrast, LTV and Hanna, a nonbankrupt, have initiated two separate proceedings involving overlapping fact situations and transactions. The matters at issue in the two proceedings go beyond the bankruptcy court determining discharge and the district court determining liability. A finding in the Adversary Proceeding that plaintiffs cannot be held liable for any contamination "arising out of or relating to" the Residential Property bears directly on matters at issue in the Western District Action; efficiency requires that the parties litigate the matter in one forum.
B. Motion to Transfer Venue
Having decided to withdraw the reference, the decision to transfer venue is straightforward. 28 U.S.C. § 1404 (a) provides that "[for 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." The decision whether to transfer rests in the discretion of the district court. See Publicker Indus. Inc. v. United States (In re Cuyahoga Equip. Corp.), 980 F.2d 110, 117 (2d Cir. 1992). The court considers factors such as "(1) the place where the operative events occurred; (2) the convenience of the parties; (3) the convenience of the witnesses; (4) the availability of process to compel the attendance of unwilling witnesses; (5) the cost of obtaining witnesses' presence; (6) the location of records and documents; (7) a forum's familiarity with the governing law; (8) trial efficiency; and (9) the interests of justice." Rubinstein v. Skyteller, Inc., 48 F. Supp.2d 315, 325 (S.D.N.Y. 1999) (quoting Purcell Graham Inc. v. National Bank of Detroit, No. 93 Civ. 8786, 1994 WL 584550, at *4 (S.D.N.Y. Oct. 24, 1994)).
While the plaintiffs choice of forum is "`entitled to substantial consideration,'" Warrick v. General Elec, Co. (In re Warrick), 70 F.3d 736, 741 (2d Cir. 1995) (quoting A. Olnick Sons v. Dempster Bros., Inc., 365 F.2d 439, 444 (2d Cir. 1966)), "[t]he emphasis that a court places on plaintiff's choice of forum diminishes where . . . the facts giving rise to the litigation bear little material connection to the chosen forum."Fontana v. E.A.R., 849 F. Supp. 212, 215 (S.D.N Y 1994) (internal quotations omitted).
Here, a consideration of the relevant factors indicates that the action should be transferred to the Western District. The City and BURA both reside in the district and the environmental contamination which gave rise to the present action took place in that district as well. Most importantly, the plaintiffs themselves initiated related litigation in the Western District one day after filing the Adversary Proceeding. "The existence of related litigation in the transferee court strongly supports a motion to transfer." Doehler-Jarvis Ltd. P'ship v. U.S. Die Casting Dev. Co., 1993 WL 96528, at *2 (N.D. Ill. Mar. 31, 1993). Since many of the claims raised in the Adversary Proceeding are also at issue in the Western District Action, the parties can most expeditiously adjudicate their respective rights and liabilities if the Adversary Proceeding is transferred to the Western District.
III. CONCLUSION
For the reasons set forth above, the Court withdraws the reference to the bankruptcy court and transfers the Adversary Proceeding to the U.S. District Court for the Western District of New York.
SO ORDERED: