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The Sixth Circuit affirmed, noting that this issue has divided the lower courts, but that a decided majority has sided with the Trustee's interpretation. The court concluded that the venue requirements of ' 1408 are mandatory, not optional. Further, that a court's discretion to transfer or retain a case under ' 1412 applies only to cases filed in a proper venue. That ' 1406 applies to all cases, including bankruptcy cases, filed in an improper venue. Finally, that FRBP 1014(a)(2) authorizes the transfer of an improperly venued case only to a district in which it could have originally been brought, and only in the interest of justice, in accordance with the plain language of ' 1406.

Improper Venue

The Sixth Circuit has ruled that a bankruptcy court may not retain jurisdiction of a case filed in an improper venue under 28 U.S.C. ' 1408 over the timely objection by an interested party, despite the determination by the bankruptcy court that retention would be in the interest of justice or the convenience of the parties. Thompson v. Greenwood, No. 06-6430 (Nov. 8).

Debtors filed two voluntary petitions in the Western District of Tennessee despite the fact that they resided in the Northern Mississippi suburbs of Memphis. The U.S. Trustee filed motions to dismiss or transfer both cases on the ground that venue was lacking because the debtors did not reside in the district, as required by ' 1408. Although debtors conceded that venue in Tennessee was 'technically improper,' the debtors argued that, both as a matter of statutory construction and for equitable reasons, the bankruptcy judges had inherent authority to retain the cases in the interest of justice or for the convenience of the parties. The Trustee argued that under the plain language of ' 1406 the court had no discretion to retain the cases. The decisions of the bankruptcy judges in the two cases were contradictory. One agreed with the debtor's position, holding that 'the court, in its discretion, pursuant to its inherent or implicit authority ' may retain 'cases' filed in an improper district 'for the convenience of the parties' or 'in the interest of justice' even if a timely motion is filed to contest venue ' ' The other found that venue was not proper and ordered the case to be transferred. On appeal, the district court held that the Trustee's position was 'the most coherent reading of the statute as a whole in conformity with accepted norms of statutory construction.'

The Sixth Circuit affirmed, noting that this issue has divided the lower courts, but that a decided majority has sided with the Trustee's interpretation. The court concluded that the venue requirements of ' 1408 are mandatory, not optional. Further, that a court's discretion to transfer or retain a case under ' 1412 applies only to cases filed in a proper venue. That ' 1406 applies to all cases, including bankruptcy cases, filed in an improper venue. Finally, that FRBP 1014(a)(2) authorizes the transfer of an improperly venued case only to a district in which it could have originally been brought, and only in the interest of justice, in accordance with the plain language of ' 1406.