By Evan T. Miller

On September 16, 2015, Judge Kevin Gross, of the United States Bankruptcy Court for the District of Delaware, issued an opinion in Barry v. Santander Bank, N.A. (In re Liberty State Benefits of Delaware, Inc.), No. 14-50020, in which the Court denied Santander Bank, N.A.’s (“Defendant”) motion to transfer venue (the “Motion”) of an adversary proceeding to the United States District Court for the District of New Jersey (“DNJ”).  In so finding, the judge rejected Defendant’s argument that because certain transactions took place in New Jersey, the adversary proceeding should be heard before the DNJ.

On July 29, 2011 (the “Petition Date”), Liberty State Benefits, et al. (the “Debtors”), filed voluntary chapter 11 petitions for relief.  Richard A. Barry was appointed as Chapter 11 Trustee (the “Trustee” or “Plaintiff”) shortly thereafter.  On January 10, 2014, the Trustee filed  a complaint (the “Complaint”) asserting eleven causes of action stemming from a series of transactions allegedly designed to convey various assets of the Debtors to various non-Debtor entities (the “Non-Party Conspirators”) for minimal to no value.  The bases for these counts are as follows:

• Prior to the Petition Date, the Debtors acquired the beneficial interest in a trust (the “Trust”) holding a life insurance policy with a face value of $11.5 million. The Trustee alleges that Defendant aided and abetted the Non-Party Conspirators in conspiring to steal the Trust, then laundering the sale of the policy through their personal Santander accounts.  Notably, the implicated Santander employees notarized various relevant documents at the bank’s Westmont, New Jersey branch (the “Westmont Branch”), where the Non-Party Conspirators maintained their accounts as well;

• Defendant was also allegedly involved in a fraudulent mortgage scheme (the “Mortgage Scheme”), in which the conspirators stole money from the Debtors’ trust accounts and deposited it in their Westmont Branch bank accounts. The Trustee alleges that Defendant missed red flags indicative of fraudulent activity, including that the Federal Trade Commission had commenced proceedings against the conspirators years prior.  The alleged conspirators in the Mortgage Scheme were also based out of southern New Jersey;

• One of the Mortgage Scheme conspirators further defrauded the Debtors by misappropriating at least $13 million in proceeds from the Debtors’ debt offerings as part of a Ponzi scheme. As with the prior schemes, the conspirator laundered the proceeds of the offerings through Westmont Branch accounts;

• Lastly, Defendant also allegedly assisted the Non-Party Conspirators in the theft of real property owned by one of the Debtors in Lacey, New Jersey. Santander purportedly facilitated the sale when two Westmont Branch employees fraudulent notarized the deed and other documents necessary to complete the transfer.

In response to Defendant’s motion to transfer venue, the Court analyzed twelve factors referred to inJumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995), as  supplemented for bankruptcy cases by  considering the interests of the estate and its creditors.  Through this analytical framework, the Court found that:

(1) the Trustee’s choice of Delaware for the adversary proceeding was the most logical choice in light