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Analysis: Forum Shopping Could Be Crucial in Prosser Bankruptcy Cases

Jan. 4, 2007 — In legal circles it is called "forum shopping" — the process by which lawyers seek to place their case in what they think will be the most favorable jurisdiction for their client.
There has been a lot of forum shopping in the various cases involving Innovative Communications Corp. owner Jeffrey Prosser and his companies, including Innovative Telephone (also known as Vitelco), the local V.I. telephone company.
Generally, Prosser's adversaries, which are mainland investors of various kinds, want the debt and bankruptcy issues to be decided in mainland courts (federal courts in Delaware, New York, and earlier Virginia and the Delaware Chancery Court); while Prosser's lawyers want the jurisdiction to be set in, or moved to, the U.S. Virgin Islands.
On Dec. 14, Prosser's lawyers won a round when U.S. Bankruptcy Judge Judith K. Fitzgerald ruled that the bankruptcy cases (filed earlier in Delaware and in the U.S. Virgin Islands bankruptcy courts) should be heard in the V.I. court (See "Judge Grants Change of Venue for Prosser Bankruptcy Cases").
Just eight days later, Prosser's lawyers filed more papers seeking to have the jurisdiction moved again — this time from the V.I. bankruptcy court to the federal district court in the islands.
This motion, which raised fierce objections from Prosser's creditors, was filed, as Prosser's adversaries point out, on "Friday before Christmas."
Prosser's now-estranged, longtime bankers, the Rural Telephone Finance Cooperative, said in their objection to Prosser's latest forum-shopping move:
" … RTFC does not believe that this court [i.e., the bankruptcy court] intended, and this court could not have possibility anticipated at the time of its venue ruling, that the debtors [i.e., the Prosser interests] would, only eight days later, attempt to circumvent the bankruptcy process and the 3rd Circuit-mandated structure for bankruptcy case administration …."
Later in the brief, RTFC referred to "the debtors' … apparent desire to pry control of these cases not only from their dominant creditors … but also from the Bankruptcy Court itself …."
Both RTFC and its ally, the Greenlight companies, have filed motions asking Fitzgerald to reconsider her decision to place the cases in the V.I. bankruptcy courts, where parties may appeal to the U.S. district court in St. Thomas.
Greenlight represents the interests of former minority stockholders in a Prosser-controlled firm that Prosser took private in 1998; they have won a ruling from Delaware state courts saying that they were shortchanged when Prosser took the firm private.
The current documents, now on file electronically with the U.S. courts, indicate that the venue reconsideration motion will be heard Feb. 5 at the bankruptcy courts on St. Thomas. The same source indicates that still another issue – whether Prosser's financial arrangements will continue be kept secret by the court – will be thrashed out in Pittsburgh on Jan. 12.
In both hearings, Fitzgerald is expected to preside, as she is a traveling judge who is based in Pittsburgh, but also works in Delaware and the Virgin Islands.
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