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FTI Consulting, Inc. v. Merit Management Group, LP

United States District Court, N.D. Illinois, Eastern Division

August 5, 2014

FTI CONSULTING, INC., as Trustee of the Centaur, LLC Litigation Trust, Plaintiff,


JOAN B. GOTTSCHALL, District Judge.

FTI Consulting, Inc., as trustee of the Centaur, LLC Litigation Trust, sued Merit Management, LP, in an attempt to avoid an allegedly fraudulent transfer of $16, 503, 850 to Merit. Merit has filed a motion to dismiss and a motion to transfer venue to the Bankruptcy Court for the District of Delaware. For the reasons explained below, both motions are denied.


In 2002, a developer named Valley View Downs, LP, applied for Pennsylvania's last available harness-racing license. Valley View's goal was to obtain the racing license as well as a gaming license so that it could develop a race track with a casino, also known as a "racino." The Pennsylvania State Harness Racing Commission initially denied Valley View's application, but gave the company an opportunity to reapply.

To strengthen its chances at securing the racing license, Valley View decided to buy out another company that was competing with Valley View for the license-Bedford Downs Management Corporation. The two companies entered into a Settlement Agreement whereby Valley View agreed to pay Bedford Downs $55 million in exchange for Bedford Downs's promise to withdraw its application for the racing license. As a 30.007% owner of Bedford Downs, Valley View paid Merit $16, 503, 850 at the closing of the deal.

With Bedford Downs out of the picture, the Racing Commission granted Valley View's application. To develop a "racino, " however, Valley View still needed to secure a gaming license. Valley View applied for that license, but the Pennsylvania Gaming Control Board denied the application. Valley View never received the gaming license, and the company filed for bankruptcy in 2009.

The Valley View bankruptcy was administered by a bankruptcy judge in the District of Delaware. See In re Centaur, LLC, No. 10-10799 (KJC) (Bankr. D. Del. filed Mar. 6, 2010).[1] As part of the bankruptcy proceeding, the bankruptcy judge approved a "Second Modified Fourth Amended Joint Chapter 11 Plan of Reorganization" (the Plan). Under the Plan, FTI Consulting (the Trustee) was appointed to oversee the "Centaur, LLC Litigation Trust." As Trustee, FTI acquired Valley View's right, title and interest in certain "Designated Avoidance Actions, " which FTI alleges include the claims asserted in this case.

The Trustee brought an avoidance action against Merit in this court, seeking to avoid Valley View's payment of $16, 503, 850 to Merit. Merit now moves to dismiss for lack of standing and to transfer venue to the Delaware Bankruptcy Court.


A. Motion to Dismiss for Lack of Standing

Motions to dismiss for lack of standing are considered under Federal Rule of Civil Procedure 12(b)(1) as an argument that the court lacks subject-matter jurisdiction. See Am. Fed'n of Gov't Emps., Local 2119 v. Cohen, 171 F.3d 460, 465 (7th Cir. 1999). When reviewing a motion to dismiss brought under Rule 12(b)(1), the court "must accept as true all well-pleaded factual allegations, and draw reasonable inferences in favor of the plaintiff." Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995). To determine subject-matter jurisdiction, the court "may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject[-]matter jurisdiction exists." Id. The burden of proof in a Rule 12(b)(1) motion is on the party asserting jurisdiction. United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003), overruled on other grounds by Minn-Chem, Inc. v. Agrium, Inc., 683 F.3d 845 (7th Cir. 2012).

B. Motion to Transfer

Under 28 U.S.C. § 1404(a), "[f]or the convenience of the 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 or to any district or division to which all parties have consented." Similarly, under 28 U.S.C. § 1412, "[a] district court may transfer a case or proceeding under title 11 to a district court for another district, in the interest of justice or for the convenience of the parties."

"In determining whether a forum is more convenient, the court must consider the private interests of the parties as well as the public interest of the court." Aldridge v. Forest River, Inc., 436 F.Supp.2d 959, 960 (N.D. Ill. 2006). The factors related to the parties' private interests include: "(1) the plaintiff's choice of forum, (2) the situs of material events, (3) the relative ease of access to sources of proof; (4) the convenience of the witnesses; and (5) the ...

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