Certa Dose, Inc.

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
:
Certa Dose, Inc., 	: 	Chapter 11
: 	Case No. 21-11045 (LGB)
Debtor. 	:
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DECISION ON MOTION OF COPIC INSURANCE COMPANY,
PURSUANT TO 28 U.S.C. § 1412 AND FED. R. BANKR. P. 1014(A)(2),
TO TRANSFER VENUE TO THE UNITED STATES BANKRUPTCY
COURT FOR THE DISTRICT OF COLORADO
A P P E A R A N C E S
ORTIZ & ORTIZ LLP
Attorneys for the Debtor
35-10 Broadway, Suite 202
Astoria, NY 11060
By: 	Norma E. Ortiz, Esq.
LEWIS ROCA ROTHGERBER CHRISTIE LLP
Attorneys for COPIC Insurance Company
1630 Welton Street, Suite 200A
Denver, CO 80202
By: 	Fredrick J. Baumann, Esq.
Chadwick S. Caby, Esq.
Tyler Nemkov, Esq.
MEDINA LAW FIRM LLC
Attorneys for Dr. Caleb Hernandez
641 Lexington Avenue, 13th Floor
New York, NY 10022
By: 	Eric S. Medina, Esq.
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LISA G. BECKERMAN
UNITED STATES BANKRUPTCY JUDGE
The Court denies the Motion of COPIC Insurance Company, Pursuant to 28 U.S.C.
§ 1412 and Fed. R. Bankr. P. 1014(a)(2), to Transfer Venue to the United States Bankruptcy
Court for the District of Colorado [ECF No. 36] (the “Motion”) because the preponderance of
the evidence does not support a transfer of venue of the Chapter 11 case from the United States
Bankruptcy Court for the Southern District of New York to United States Bankruptcy Court for
the District of Colorado either in the interest of justice or for the convenience of parties.
I. 	PROCEDURAL BACKROUND AND FINDINGS OF FACT
On May 30, 2021 (the “Petition Date”), Certa Dose, Inc. (the “Debtor”) filed a voluntary
petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York commencing this Chapter 11 case (the “Case”).
On June 22, 2021, COPIC Insurance Company (“COPIC” or the “Movant”) filed the
Motion. The Motion requests that this Court to transfer venue of the Case from the United States
Bankruptcy Court for the Southern District of New York to the United States Bankruptcy Court
for the District of Colorado. The Motion is joined by the following parties: Stephen R.
Hoffenberg (“Dr. Hoffenberg”); Alan Young Synn; Davis K. Hurley; Brian C. Harrington; Niles
Cole; Geraldine A. Lewis-Jenkins; Matthew Fleishman; Theodore J. Clarke; Katherine Driscoll,
as Trustee of the 2015 LFD III GRAT-TRUST U/A 8.26.15; Phoebe Fisher, M.D.; Thomas S.
Cowan; and Anthony R. Mayer (collectively, the “Noteholders”). Motion pp. 4-5.
On July 9, 2021, the Debtor filed an opposition to the Motion [ECF No. 56] (the
“Objection”) and Dr. Caleb Hernandez (“Dr. Hernandez”), founder, chief executive officer, and
the majority shareholder of the Debtor, filed a joinder to the Debtor’s Objection [ECF No. 55].
On July 12, 2021, COPIC filed a reply in support of the Motion [ECF No. 62] (the “Reply”).
Counsel to COPIC filed the following declarations in support of the Motion: (i) on June
22, 2021, declarations of Steve Rubin and Chad S. Caby, Motion Exs. 1–2; (ii) on July 12, 2021,
declarations of each of the Noteholders and Daniel Hoffman, Reply Exs. 3–15; and (iii) on
August 10, 2021, a supplemental declaration of Dr. Hoffenberg [ECF No. 86]. Counsel to the
Debtor filed the following declarations in opposition to the Motion: (i) on July 9, 2021, a
declaration of Dr. Hernandez [ECF No. 54] (the “Hernandez Venue Decl.”) and declarations of
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Daniel Eason, Andrew Glaser, and Robert Willoughby, III, Hernandez Venue Decl. Ex. A; (ii)
on July 23, 2021, a first supplemental declaration of Dr. Hernandez [ECF No. 71] (the “First
Suppl. Hernandez Venue Decl.”); and (iii) on September 28, 2021, a second supplemental
declaration, which contained modifications to a declaration filed on September 17, 2021 [ECF
No. 119] (the “Second Suppl. Hernandez Venue Decl.”).
This Court held a four-day evidentiary hearing on the Motion on September 21, 22, 23,
and 28, 2021 wherein 134 exhibits, including the various declarations, were moved by the parties
and entered into evidence as part of the hearing record.
A. The Debtor and Its Operations
The Debtor was founded by Dr. Hernandez in 2013 and originated in Colorado.
Hernandez Venue Decl. ¶¶ 3–4. The Debtor was incorporated in the state of Delaware. Id. at
¶ 4.
The Debtor is primarily in the business of developing specifications and licensing patents
for medical devices including syringes and kits used to deliver medicine to in a manner that
reduces the risk of overdose or to deliver epinephrine. Id. at ¶ 3. The Debtor is a specifications
developer and does not manufacture its own products. Rather, the Debtor’s function is to
engineer and design its products, and to administer and monetize the intellectual property that it
develops. Transcript of Evidentiary Hearing on September 28, 2021 (“Sept. 28 Tr.”) at 28:14–
22.
Based on Dr. Hernandez’s testimony, the Debtor presently contracts with two vendors for
the manufacture of its products: SMC Ltd. and PlasTech Engineering. Id. at 29:2–6; First Suppl.
Hernandez Venue Decl. ¶ 16. The Debtor contracts with these vendors in order to procure
products ordered by the Debtor’s distributors. Sept. 28 Tr. at 29:2–30:30. Cardinal Health, a
third-party logistics company, receives and ships the Debtor’s products intended for distributors
and accepts payment from the distributors which it then remits to the Debtor. Id.; First Suppl.
Hernandez Venue Decl. ¶ 16.
The Debtor generates most of its revenue from its licensing business, whereby it licenses
patents to pharmaceutical manufacturers. Sept. 28 Tr. at 34:3–11. Sources of revenue from this
area of the Debtor’s business include the Debtor’s collaboration agreement with Johnson &
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Johnson Consumer, Inc. (“J&J”), COPIC Ex. 66, and its collaboration agreement with Janssen
Pharmaceuticals, Inc. (“Janssen”), COPIC Ex. 13, among other agreements.
The Debtor is registered to do business in Colorado, Delaware, and New York. Second
Suppl. Hernandez Venue Decl. ¶ 6.
B. Events Leading up to the Chapter 11 Filing
1. 	Investments by COPIC and the Noteholders into the Debtor
COPIC is a medical professional liability insurance provider founded in 1981 by
Colorado physicians and is incorporated and headquartered in Colorado. Motion Ex. 1 (the
“Rubin Decl.”), ¶¶ 2–3. In 2012, the COPIC Medical Foundation provided a grant to Dr.
Hernandez that funded field testing of certain medical products. Id. at ¶ 5. Subsequently, from
December 2014 to March 2019, through a series of transactions, COPIC purchased 483,824
shares of Series Seed 2 Preferred Stock of the Debtor (“Preferred Stock”) for a total of $850,000
and lent a total of $2,231,000 to the Debtor in exchange for convertible promissory notes
(“Convertible Notes”). Id. at ¶¶ 6–13. From January 2015 to late 2018, Dr. Hoffenberg served
as COPIC’s designee member of the Debtor’s board of directors. Transcript of Evidentiary
Hearing on September 22, 2021 (“Sept. 22 Tr.”) at 187:9–12.1 Thereafter, for approximately
eleven months ending in October 2019, Mr. Rubin, the president of COPIC, served as COPIC’s
designee on the Debtor’s board. Transcript of Evidentiary Hearing on September 21, 2021
(“Sept. 21 Tr.”) at 180:19–25.
The Debtor and COPIC entered into a series of agreements in connection with COPIC’s
purchase of Preferred Stock that all contain the following forum selection language:
The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction
of the state courts of Colorado and to the jurisdiction of the United States District
Court for the District of Colorado for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement, (b) agree not to
commence any suit, action or other proceeding arising out of or based upon this
Agreement except in the state courts of Colorado or the United States District
Court for the District of Colorado, and (c) hereby waive, and agree not to assert,
by way of motion, as a defense, or otherwise, in any such suit, action or
proceeding, any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
1 Dr. Hoffenberg continued to serve as a member of the Debtor’s board of directors until October 2019. Id. at
221:1–20.
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execution, that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced in or by such court.
Rubin Decl. Exs. A–H.
Similarly, the note purchase agreements with respect to COPIC’s Convertible Notes all
contain provisions with the following language:
6.2 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury
Trial. This Agreement shall be governed by and construed under the laws of the
State of Colorado as applied to agreements among Colorado residents, made and
to be performed entirely within the State of Colorado, without giving effect to
conflicts of laws principles. Each party hereto hereby irrevocably and
unconditionally (i) agrees that any legal action, suit or proceeding arising out of or
relating to this Note shall be brought in the courts of the State of Colorado for the
City and County of Denver, Colorado or the federal courts of the United States
sitting in the District of Colorado, (ii) submits to the exclusive jurisdiction of any
such court in any such action, suit or proceeding, and (iii) waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of venue of any action or proceeding arising out of or relating
to this Note in any court referred to in this section and the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court. Final judgment against the Company in any action, suit or proceeding shall
be conclusive and may be enforced in any other jurisdiction by suit on the
judgment. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT, HE OR SHE MAY HAVE TO A TRIAL BY JURY IN CONNECTION
WITH ANY ACTION OR PROCEEDING IN ANY WAY RELATING TO THIS
NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY, WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY
Id. at Exs. I–K; Motion Ex. 8.
Individuals both affiliated and not affiliated with COPIC, a subset of which are the
Noteholders, also purchased Convertible Notes from the Debtor over the period of July 3, 2018
through April 19, 2019. Reply Exs. 3–14. In total, the Noteholders purchased an aggregate
principal amount of $2,484,000 of the Convertible Notes. Id.
On November 15, 2019, the Debtor carried out actions that purported to convert all
outstanding Convertible Notes to Preferred Stock. Sept. 21 Tr. at 64:9–19; 97:14–24; 98:9–17.
COPIC and the Noteholders deny that the Convertible Notes were properly converted. See, e.g.,
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Sept. 22 Tr. at 47:22–49:6; 50:5–16; 72:23–73:1; 116:10–21; 119:1–10; 208:17–24; 230:5–24;
Transcript of Evidentiary Hearing on September 23, 2021 (“Sept. 23 Tr.”) at 9:2–17; 15:11–23.
Additionally, over the period of November 2019 through December 2020, the Debtor
adopted a series of amendments to its certificate of incorporation that increased the number of
authorized shares of Preferred Stock by over 1.3 million shares. Motion Ex. 3 (“COPIC’s
Delaware Verified Complaint”), ¶¶ 20–26. COPIC alleged that the Debtor issued additional
shares of Preferred Stock pursuant to these amendments, which had the effect of diluting
COPIC’s share of outstanding Preferred Stock from approximately 79.3% to approximately
25.2%. COPIC’s Delaware Verified Complaint ¶ 26.
2. 	Prepetition Litigation Between the Parties
On December 20, 2019, COPIC and the Noteholders filed complaints against the Debtor
in the District Court for the City and County of Denver, Colorado (the “Denver Court”)
captioned COPIC Insurance Company, et al. v. Certa Dose, Inc., 2019CV34850 (the “Denver
Note Action”). Through the Denver Note Action, COPIC and the Noteholders sought to recover
principal and interest, in an amount not less than $3,665,000, that they claimed the Debtor owed
pursuant to the Convertible Notes. Motion ¶ 1.
On January 27, 2020, the Debtor initiated an action in the Supreme Court of the State of
New York, Queens County, Commercial Division (the “NY State Court”) captioned Certa Dose,
Inc. vs. COPIC et al., Index No. 720576/2019 (the “NY Action”) against COPIC, the
Noteholders, John Blood, who is the Debtor’s former chief financial officer and chief operating
officer, and other parties. Motion Ex. 13. The Debtor alleged, among other things, that certain
defendants made a hostile takeover attempt of the Debtor in the summer of 2019 and made steps
to attempt to force a sale of the Debtor in October 2019. Id. The Debtor alleged that defendants
Mr. Rubin, Dr. Hoffenberg, Mr. Blood, Cooley LLP, Michael L. Platt, and Kelly Bartling
breached fiduciary duties, and that COPIC, along with additional specified defendants, aided and
abetted the breach of fiduciary duties. Id. The Debtor also alleged that all defendants breached
the implied covenant and duty of good faith and fair dealing and breached all securities
instruments and other agreements in which the respective defendants are parties with the Debtor.
Id. The Debtor further raised claims of fraud, conversion, and legal malpractice, and subjected
the defendants to claims for amotion and disgorgement of their stock and shares. Id. On
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October 20, 2020, the NY State Court dismissed the NY Action as against COPIC, Mr. Rubin,
and Dr. Hoffenberg on personal jurisdiction and forum non conveniens grounds. Motion Ex. 29.
On October 20, 2020 and October 21, 2020, the NY State Court dismissed the NY Action as
against the remaining Noteholders on personal jurisdiction grounds. Motion Exs. 30–31.
On November 4, 2020, Daniel Hoffman, a former employee and director of the Debtor,
filed a lawsuit against Dr. Hernandez and the Debtor in the Denver Court, Case Number
2020CV33739 (the “Hoffman Action”). See Motion Ex. 32 (the “Hoffman Action Motion to
Compel Arbitration”). The Hoffman Action involves, among other things, disputes over Mr.
Hoffman’s compensation and claims against the Debtor. Id. On January 7, 2021, the Debtor
moved to compel arbitration and the District Court granted the Debtor’s motion. Motion ¶ 14;
see also Hoffman Action Motion to Compel Arbitration. The arbitration is currently pending at
the Denver, Colorado offices of JAMS, Case ID 27352 and stayed by this Chapter 11 case.
Hoffman Action Motion to Compel Arbitration; Reply Ex. 15, ¶ 2. The arbitrator, Hon. C. Scott
Crabtree (Ret.), is located in Denver, Colorado. Sept. 22 Tr. at 170:5–7.
On December 23, 2020, pursuant to a clause in the Debtor’s December 2, 2020
amendment to its certificate of incorporation, the Debtor initiated internal amotion and
disenfranchisement proceedings against COPIC for actions in bad faith toward the Debtor or
other shareholders or actions aiding and abetting a breach of a director or officer’s fiduciary
duties toward the Debtor. COPIC’s Delaware Verified Complaint Exs. E–F. In the amotion and
disenfranchisement proceedings, the Debtor alleged similar charges and facts as those in the NY
Action. Id. at Ex. F. As a result of the proceedings, on December 31, 2020, the Debtor adopted
an action by written consent of its stockholders to disenfranchise COPIC of all of its shares in the
Debtor, purporting to cause COPIC to forfeit the shares. Id. at Ex. G.
On January 19, 2021, the Debtor initiated an action in the Denver Court against Mr.
Blood captioned Certa Dose, Inc. vs. John Blood, Case No. 2021CV30193 (the “Blood Action”).
Hernandez Venue Decl. ¶ 14, Ex. D. The Debtor made similar factual allegations in the Blood
Action as in the NY Action. Hernandez Venue Decl. Ex. D; Motion ¶ 15. The Debtor and Mr.
Blood agreed to arbitrate the Debtor’s claims in the Blood Action based upon an arbitration
clause in Mr. Blood’s employment agreement requiring arbitration in Denver, Colorado. Motion
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¶ 15. In May 2021, the Debtor filed a demand for arbitration with an arbitration and alternative
dispute resolution service located in Denver, Colorado. Id.
On February 9, 2021, the Debtor initiated litigation captioned Certa Dose, Inc. vs.
COPIC Insurance Co. et al., Case No. 2021CV30160, in the Colorado District Court of Jefferson
County Colorado (“Jefferson County Action”) against COPIC and the Noteholders. Hernandez
Venue Decl. Ex. C. The claims asserted in the Jefferson County Action were similar to the
claims asserted against COPIC and the Noteholders in the NY Action. Id.; Motion ¶ 16. On
May 14, 2021, certain of the defendants filed motions to dismiss the Jefferson County Action or
transfer venue to the Denver Court. Motion ¶ 17, Ex. 35. Prior to the Petition Date, the Debtor’s
responses to these motions were due on July 2, 2021. Id. at ¶ 17.
In February 2021, COPIC filed COPIC’s Delaware Verified Complaint in the Delaware
Chancery Court (“Delaware Action”) against Dr. Hernandez and the Debtor, alleging that Dr.
Hernandez breached the Debtor’s certificate of incorporation and his fiduciary duties to COPIC
and to the Debtor and requesting that the court declare invalid certain actions taken by the
Debtor’s board, including the Debtor’s 2019 and 2020 amendments to its certificate of
incorporation. Motion ¶¶ 18, 20. On April 22, 2021, COPIC moved for partial summary
judgment in the Delaware Action. Id. at ¶ 20. Prior to the Petition Date, oral arguments on the
motion were scheduled for August 5, 2021. Id.
On April 13, 2021, the Denver Court granted summary judgment in favor of COPIC and
the Noteholders in the Denver Note Action and found the Debtor liable for the principal and
interest owed under the Convertible Notes, plus other fees and costs. Id. at ¶ 4. Thereafter, on
May 16, 2021, the Denver Court entered judgments for the Noteholders against the Debtor in the
Denver Note Action (the “Denver Noteholder Judgments”). Id. at Exs. 9–11. Specifically, the
Denver Court entered judgments in favor of: Dr. Hoffenberg in the amount of $71,690.74; Dr.
Synn in the amount of $93,035.68; Dr. Hurley in the amount of $602,336.77; Dr. Harrington in
the amount of $31,004.98; Mr. Cole in the amount of $227,934.54; Ms. Lewis-Jenkins in the
amount of $155,059.46; Dr. Fleishman in the amount of $264,497.58; and Dr. Clarke in the
amount of $292,148.72. Id. at Ex. 9–10. The Denver Court also entered a judgment in the
amount of $1,847,271 for Ms. Driscoll, as Trustee of the 2015 LFD III GRAT-TRUST U/A
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8.26.15; Dr. Fisher; Mr. Cowan; and Mr. Mayer, but determined that additional attorneys’ fees
and costs for such Noteholders would be handled by separate order. Id. at Ex. 11.
The Debtor filed voluntary petitions for chapter 11 relief two weeks after the date of
entry of the Denver Noteholder Judgments. As of the date hereof, the Denver Court has not
issued a monetary judgment in favor of COPIC. Motion ¶ 8. The Denver Note Action also
continues to be pending for the purpose of determining the further judgment on attorneys’ fees
and costs. Reply Ex. 3 (the “Cowan Decl.”), ¶ 2. In COPIC’s proposed final judgment order,
COPIC requests that the Denver Court award it $1,782,842.21 in principal and interest on the
Convertible Notes, plus accruing interest, and $130,687.30 in attorneys’ fees, plus accruing
interest. Motion Ex. 12. The Denver Note Action is not the subject of any pending appeal. Id.
at p. 9.
In a declaration filed by the Debtor, Dr. Hernandez has admitted that “[t]here is no
question that but for the Debtor’s dispute with Copic, the Debtor would not have been forced to
commence its bankruptcy case.” Second Suppl. Hernandez Venue Decl. ¶ 20.
C. The Debtor’s Capital Structure
Dr. Hernandez is the only secured creditor of the Debtor. In June 2020, SBA acquired a
first lien security interest on all of the Debtor’s assets as collateral for a loan in the principal
amount of $150,000. Amended Declaration Pursuant to Local Rule 1007-2 and in Support of
First Day Motions [ECF No. 12], ¶ 8. Post-petition, the SBA assigned its interests with respect
to its secured claim to Dr. Hernandez. See Sixth Interim Order Granting Motion Authorizing the
Use of Cash Collateral [ECF No. 113], ¶ 6; Second Suppl. Hernandez Venue Decl. ¶ 17.
Dr. Hernandez also holds a second lien security interest on all of the Debtor’s assets on
account of a $77,000,000 secured claim arising from a November 1, 2020 settlement agreement
with the Debtor (the “Hernandez Secured Claim”). See ECF No. 1, Ex. A. COPIC disputes the
validity of the Hernandez Secured Claim. See Reply ¶ 15 (“Dr. Hernandez’s alleged lien against
substantially all of the Debtor’s assets is highly suspect and will almost certainly be avoided as a
preference or fraudulent conveyance under 11 U.S.C. §§ 547 and 548.”).
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D. Locations of the Debtor’s Headquarters
1. 	The Welton Address
For a period of time until February 2018, the Debtor operated out of a location in San
Antonio, Texas. Sept. 28 Tr. at 71:10–18; Sept. 21 Tr. at 27:24–25; Sept. 22 Tr. at 197:19–
198:3. Thereafter, until about December 2019, the Debtor operated from office space located
within COPIC’s headquarters in Colorado. Transcript of Deposition of Patricia Golkowski on
September 8, 2021 (the “Golkowski Dep.”), 26:23–27:16, 27:21–24; Sept. 28 Tr., 71:10–18;
First Suppl. Hernandez Venue Decl. ¶ 5. That office was located at 7351 E. Lowry Blvd.,
Denver, Colorado. First Suppl. Hernandez Venue Decl. ¶ 5.
In January 2020, after the Debtor left its space at COPIC’s headquarters, the Debtor
began renting a four (4) person physical office in a shared office suite located at 2590 Welton
Street, Denver, Colorado (the “Welton Address”). Id.; Golkowski Dep. 28:7–14. The monthly
user fee for the Welton Address was $1,100.00 per month, and the term of the arrangement ran
for 12 months, through January 1, 2021. First Suppl. Hernandez Venue Decl. Ex. B. The
Debtor’s employees used the physical office in January and February 2020. Sept. 22 Tr. at
144:8–18. However, from the commencement of the business shut-down resulting from the
COVID-19 pandemic onwards, none of the employees of the Debtor worked from the Debtor’s
Welton Address. Golkowski Dep. 29:9–11. Consequently, the Debtor and the lessor for the
Welton Address entered into an agreement that in May 2020 converted the Debtor’s arrangement
for the Welton Address into a virtual membership. First Suppl. Hernandez Venue Decl. Ex. C.
The Debtor presently maintains the Welton Address as the Debtor’s address of record.
Id. at ¶ 6. The monthly user fee pursuant to the Welton Address’ virtual membership agreement
is $75.00 per month, and the term of the agreement runs month-to-month. Id. at Ex. C. The
agreement includes the following terms:
This agreement includes a virtual membership to Craft Coworking. This
membership includes: Free use of mailing address, 2590 Welton Street, Suite 200,
Denver, CO 80205, option of virtual mail service (with permission, Craft
Coworking will scan any mail received to your email), member rates for any
additional services purchase. […] Members understand that access to Craft
Coworking is not included in this virtual membership without purchase of a day
pass, meeting room reservation, or coworking membership package. Any guest
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must purchase a coworking membership, day pass, or meeting room reservation to
have access to Craft Coworking.
Id.
The Welton Address serves the function of a P.O. box, where any mail received at that
address is scanned and emailed to the Debtor’s employees. Golkowski Dep. 28:7–29:2, 91:3–14.
None of the Debtor’s employees commute to the Welton Address or conduct any business there.
Id. at 29:9–12. The Debtor does not have a physical cubicle or workspace at the Welton
Address. Id. at 91:15–23.
Between 2020 and 2021, the Debtor used the Welton Address as its address on forms that
the Debtor completed for, among other things: its April 13, 2021 request for an automatic
extension to file its 2020 New York City tax return (COPIC Ex. 7; Golkowski Dep. 107:17–
108:3); a Paycheck Protection Program loan filed with the SBA (COPIC Ex. 10; Sept. 21 Tr. at
32:9–13); its establishment registration and device listings with the FDA (COPIC Exs. 63–65;
Sept. 21 Tr. at 72:14); its license agreement with Janssen (COPIC Ex. 13; Sept. 21 Tr. at 48:13–
17); a June 30, 2021 periodic report filed with the Colorado Secretary of State (COPIC Ex. 8).
In each of the UCC financing statements that the Debtor filed with the Colorado Secretary of
State, Delaware Department of State, and New York State Division of Corporations with respect
to the Hernandez Secured Claim, the Debtor listed the Welton Address as its mailing address.
Supplemental Declaration of Caleb S. Hernandez [ECF No. 26], Exs. C–E. Such was the case as
well for a UCC financing statement filed in Colorado for SBA’s lien on the Debtor’s assets.
Motion Ex. 37.
In an August 1, 2021 press release announcing its entry into a contract with Vizient Inc.,
the Debtor stated the location of the news to be in Denver and listed the Welton Address on the
webpage. Sept. 21 Tr. at 28:13–29:12. The Debtor continues to maintain the Welton Address as
its address on its website. Id. at 29:13–18.
In the Hoffman Action Motion to Compel Arbitration, the Debtor asserted that it “is a
company headquartered in Denver, Colorado.” Hoffman Action Motion to Compel Arbitration
at 2.
With respect to why the Debtor maintains the Welton Address as its address of record in
light of its virtual function, Dr. Hernandez stated in a declaration that “[t]he process for changing
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the Debtor’s address to New York for all of these filings is a labor-intensive, time-consuming
and costly.” Second Suppl. Hernandez Venue Decl. ¶ 8. The Debtor does not plan to change its
address of record in the near future. Id.
2. 	The JLABS Address
In June 2018, the Debtor was awarded space in the office of an affiliate of J&J known as
JLABS (the “JLABS Address”). Sept. 22 Tr. at 199:8–20. The JLABS Address is located at 101
Avenue of the Americas, New York, NY 10013. Id. at 31:23–25. The license agreement for the
JLABS Address was entered into on May 28, 2018 and has been amended to extend its term
through December 31, 2021. Second Suppl. Hernandez Venue Decl. ¶ 16, Ex. D. The Debtor
has maintained its space at the JLABS Address through the present. Id. at ¶ 13. The Debtor
asserts that the JLABS Address is its only physical office. Id. at ¶ 14 (“[The JLABS Address] is
the only location in the world where Certa Dose maintains a physical office[…]”). The Debtor
further asserts that Dr. Hernandez makes all business and managerial decisions from the JLABS
Address. Objection ¶ 16. Dr. Hernandez testified that he “travels to the Debtor’s office in New
York City on a daily basis.” Hernandez Venue Decl. ¶ 4.
Mr. Hoffman testified that the Debtor’s workspace at the JLABS Address consists of a
single desk. Sept. 22 Tr. at 142:1–12. Dr. Hernandez described the license agreement to be for
the use of a workstation. First Suppl. Hernandez Venue Decl. ¶ 6. Dr. Hernandez has also
described the Debtor’s space at the JLABS Address as an “office” and has stated that the location
includes meeting spaces for business development and communications capability resources, as
well as on-site business functions support personnel. Second Suppl. Hernandez Venue Decl.
¶¶ 13–14.
Since the Petition Date, the Debtor has used the JLABS Address to hold meetings with
potential post-petition investors in the Debtor. Sept. 28 Tr. at 57:10–17. According to Dr.
Hernandez’s testimony, Dr. Hernandez has held at least three (3) meetings with potential
investors at the JLABS Address. Id. Dr. Hernandez testified that beginning on October 3, 2021,
J&J would require full in-person participation at the JLABS Address. Second Suppl. Hernandez
Venue Decl. ¶ 14.
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E. Locations of the Debtor’s Employees
The Debtor currently has three full-time employees: Dr. Hernandez, in-house counsel
Josue Hernandez, and sales manager Chris Karageorge. Golkowski Dep. 85:13–20. As of the
Petition Date, the Debtor also employed Patricia Golkowski as the Debtor’s controller. Id. at
13:21–15:21, 21:19–23. On September 7, 2021, Ms. Golkowski’s employment terminated by
letter of resignation. Id. at 21:19–22:13.
Dr. Hernandez is the president, chief executive officer, chief science officer, and chief
medical officer of the Debtor. Sept. 28 Tr. at 71:19–23; Hernandez Venue Decl. ¶ 1; First Suppl.
Hernandez Venue Decl. 1. Dr. Hernandez manages the Debtor’s product and licensing
businesses, as well as the creation of new products and other business decisions. Sept. 28 Tr. at
36:21–37:1. Additionally, Dr. Hernandez maintains non-accounting-related books and records
for the Debtor and handles matters that arise with respect to this Chapter 11 case. Id. at 32:3–23,
54:22–55:3. Dr. Hernandez has resided in New York City since June 2018. Second Suppl.
Hernandez Venue Decl. ¶ 13; Sept. 22 Tr. at 200:4–13; Sept. 28 Tr. at 50:7–11; Debtor Ex. 202–
03. Dr. Hernandez has testified that “[i]f the Court were to transfer the Chapter 11 case to
Colorado, I would be traveling to the state for the sole purpose of prosecuting the Debtor’s
Chapter 11 case. There is no other business purpose of the Debtor for me to travel to Colorado.”
Second Suppl. Hernandez Venue Decl. ¶ 19.
Mr. Josue Hernandez, who is Dr. Hernandez’s brother, resides in Denver, Colorado. As
the Debtor’s in-house counsel, he currently represents the Debtor in the various civil actions.
Motion ¶ 40. Though he resides in Colorado, Mr. Hernandez works remotely and does not
commute to the Welton Address. Second Suppl. Hernandez Venue Decl. ¶ 12.
Mr. Karageorge is presently in charge of sales of the Debtor and maintains the Debtor’s
sales records. Sept. 28 Tr. at 36:5–16. Mr. Karageorge resides in Ohio. Sept. 22 Tr. at 206:14–
207:3.
As former controller for the Debtor, Ms. Golkowski handled the Debtor’s accounting
records, bills, taxes, registrations, and accounts reconciliations but was not involved in any
strategic business decisions or sales efforts. Golkowski Dep. 24:15–25:16; Sept. 28 Tr. at 36:17–
37:9. The Debtor’s schedules and statements list Ms. Golkowski as the sole accountant and
bookkeeper for the Debtor. ECF No. 73 (the “Amended Schedules”); Sept. 22 Tr. at 37:13–
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38:12. Ms. Golkowski resides in Denver, Colorado. Golkowski Dep. 7:17–24, 20:22–21:2;
Sept. 22 Tr. at 134:9–11.
F. 	Locations of the Debtors’ Operations
With respect to the Debtor’s business, the Debtor made only one product sale to a
customer in Colorado in the six months ending September 28, 2021 for $10. Second Suppl.
Hernandez Venue Decl. ¶ 11. According to the Debtor’s books and records, as of the Petition
Date, Cardinal Health owed between $90,000 to $140,000 in accounts receivable to the Debtor
on account of product sales. First Suppl. Hernandez Venue Decl. ¶ 3. The Debtor’s
manufacturers, SMC Ltd. and Plastech Engineering, manufacture the Debtor’s products in
Massachusetts and Wisconsin, respectively. Id. at ¶ 16; Sept. 28 Tr. at 29:2–6. Cardinal Health
is located in Tennessee. First Suppl. Hernandez Venue Decl. ¶¶ 3, 16. Dr. Hernandez testified
that none of the physical processes that occur between the Debtor’s manufacturers, Cardinal
Health, and the distributors take place in Colorado. Id. at ¶ 16.
The majority of the Debtor’s revenue in 2019 and 2020 was generated from the Debtor’s
agreements with J&J. Second Suppl. Hernandez Venue Decl. ¶ 15. Dr. Hernandez testified that
J&J is the Debtor’s most significant business relationship and that the nexus of the relationship is
the JLABS Address. Id. at ¶ 11; see also Sept. 28 Tr. at 34:16–35:9.
Dr. Hernandez meets with J&J’s New York-based representatives weekly in Manhattan when the
individuals are not working remotely. Second Suppl. Hernandez Venue Decl. ¶ 14.
In addition to the business with J&J, Dr. Hernandez testified that he engages with
existing and prospective business partners in New York and New Jersey and takes “frequent
weekly trips” to New Jersey. Hernandez Venue Decl. ¶ 5–6. As one offered exemplary result of
these efforts, post-petition, the Debtor entered into a healthcare partnership agreement which
makes the Debtor’s products “preferred products” in over 5,000 healthcare systems nationwide.
Id. at ¶ 6. Dr. Hernandez testified that all of the discussions involving this agreement and the
key persons involved were located in and around New York City. Id.
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The Debtor has retained the New York-based law firm of Ortiz & Ortiz, L.L.P. as its
bankruptcy counsel. Amended Application for Entry of an Order Pursuant to Bankruptcy Code
Section 327(a) Authorizing the Employment of Ortiz & Ortiz L.L.P. as Debtor’s Counsel [ECF
No. 16] (the “Ortiz Retention Application”); Order Pursuant to Section 327(a) of the Bankruptcy
Code Authorizing the Employment of Ortiz & Ortiz L.L.P. as Attorneys for the Debtor [ECF No.
57]. The Debtor has also engaged, subject to the Court’s approval, the New York-based firm of
Huebscher & Co. as its financial advisor. Second Suppl. Hernandez Venue Decl. ¶ 16;
Application for Entry of an Order Authorizing the Employment and Retention of Huebscher &
Co., Effective Nunc Pro Tunc to September 12, 2021, as the Debtor’s Financial Advisor [ECF
No. 117] (the “Huebscher Retention Application”). As discussed in Section I.D supra, Dr.
Hernandez testified that he has met in-person with potential post-petition investors in Manhattan,
at the JLABS Address. Sept. 28 Tr. at 57:10–17.
G. Locations of the Debtor’s Assets
Due to the nature of its business, the Debtor does not own much physical inventory nor
equipment. See Sept. 28 Tr. at 31:1–8. Much of the tangible assets that the Debtor does own,
including its pre-finished and finished goods, is stored at the facilities of SMC Ltd., Plas-Tech
Engineering, Cardinal Health, and Sterling Storage, each located in Massachusetts, Wisconsin,
Tennessee, and Massachusetts, respectively. First Suppl. Hernandez Venue Decl. ¶ 8; Second
Suppl. Hernandez Venue Decl. ¶ 12. Debtor owns, and does not lease, three label applicators.
First Suppl. Hernandez Venue Decl. ¶ 10. Two of the machines are located in Massachusetts and
one machine is located in Wisconsin. Id. The Debtor has completely depreciated the value of
the machines on its books and no longer assigns a value to these equipment assets. Id. The
Debtor maintains a storage unit in Colorado with some old laptops, old syringes, and marketing
materials remaining from the Debtor’s former office in COPIC’s headquarters. Id. at ¶ 15.
The Debtor states the book value of its patents, licenses, trademarks, and intellectual
property to be either approximately $902,000, id. at ¶ 11, or approximately $1,032,800,
Amended Schedules. The patents and trademarks are either registered or pending with: U.S.A,
Brazil, Canada, the European Patent Office, Hong Kong, Japan, Australia, China, India, Europe,
Republic of Korea, Mexico, and the Patent Cooperation Treaty. First Suppl. Hernandez Venue
Decl. ¶ 11. The Debtor’s design history files and other records are kept in a quality management
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system maintained by Greenlight Guru. Sept. 28 Tr. at 32:3–33:10. Greenlight Guru is
headquartered in Indianapolis, Indiana. First Suppl. Hernandez Venue Decl. at ¶ 4.
H. Locations of COPIC and the Noteholders
The majority of COPIC’s business activities take place in Colorado, and the majority of
COPIC’s premium revenue is derived from Colorado sources. Rubin Decl. ¶ 3. COPIC does not
maintain a physical presence in the State of New York and has not engaged, or attempted to
engage, in the business of insurance in New York. Id. at ¶ 4. COPIC’s corporate headquarters
are located in Denver, Colorado. Sept. 22 Tr. at 31:6–15.
Of the thirteen Noteholders, eleven reside in Colorado. Amended Schedules. The
remaining two reside outside of both New York and Colorado. Id. Mr. Cowan resides in
Illinois. Id.; see also Sept. 22 Tr. at 105:17–18. Ms. Fisher resides in Pennsylvania. Sept. 22 Tr.
at 57:16–18. Both Mr. Cowan and Ms. Fisher have filed declarations expressing their requests
that venue in this case be transferred to the District of Colorado. Cowan Decl. ¶ 10; Reply Ex. 4,
¶ 10.
I. 	Locations of Other Parties in Interest
1. 	Daniel Hoffman
Mr. Hoffman lives in New York County in the State of New York. Sept. 22 Tr. at
125:16–21. He currently works in Westminster, Colorado and travels between New York and
Colorado for business. Id. at 139:2–4. Mr. Hoffman testified that he plans on living in Colorado
in the beginning of the upcoming year for personal and family reasons. Id. at 139:4–8.
2. 	John Blood
As of January 19, 2021, it was the Debtor’s understanding that Mr. Blood was a resident
of the state of Colorado. Hernandez Venue Decl. Ex. D. Dr. Hoffenberg testified at the hearing
that Mr. Blood has never moved to New York City in connection with the Debtor’s relationship
with J&J. Sept. 23 Tr. at 51:9–12.
3. 	Additional Witnesses with Respect to Prepetition Conduct
At the time that the Debtor took actions to convert certain of the Convertible Notes into
Preferred Stock, the Debtor retained lawyers from the firm of Husch Blackwell who were not
based in Colorado. Sept. 21 Tr. at 123:16–24. Counsel from the law firm of Cooley LLP
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provided outside corporate advice to the Debtor through October 2019 and was located in
Colorado. Id. at 127:22–129:1. COPIC’s counsel through October 2019 was located in
Colorado. Id. at 131:12.
Mr. Hoffman testified that the majority of witnesses that will be needed for the Hoffman
Action are in Colorado, but there are also a significant number of witnesses who are not located
in Colorado, including Dr. Hernandez. Sept. 22 Tr. at 168:18–169:12.
4. 	Contract Counterparties
The Debtor’s schedules list fifteen executory contract and unexpired leases. Amended
Schedules. The counterparties to these contracts include many of the entities discussed infra,
including J&J, Janssen, SMC Ltd., and Cardinal Health. Id. They also include the lessor of the
Debtor’s location at the Welton Address and the licensor of the Debtor’s location at the JLABS
Address. Id. Of the fifteen contract counterparties, two are located in the District of Colorado,
two are located in the Southern District of New York, and eleven are located elsewhere. Id.
None of the documents pertaining to the contracts that were admitted into evidence contain
forum selection clauses for the District of Colorado or the Southern District of New York.
COPIC Exs. 13, 66; Debtor Exs. 217, 265–67, 269–81.
5. 	Unsecured Creditors
The Debtor’s schedules list thirteen unsecured creditors exclusive of COPIC, the
Noteholders, and Mr. Hoffman. Amended Schedules. The Debtor estimates these unsecured
creditors’ claims to be approximately $471,608.68 in the aggregate. Id. Of such creditors, three
are located in the District of Colorado, none are located in the Southern District of New York,
and ten are located elsewhere. Id. The largest two unsecured creditors that are not Noteholders,
Pacific Western Bank and Cooley LLP, are owed approximately $210,000.00 and $144,000.00
respectively and are both located in California. Id.
6. 	Equity Holders
According to the Debtor’s records, Dr. Hernandez and Mr. Hoffman are the two largest
shareholders of the Debtor, with each respectively owning approximately 63.4% and 3.8% of the
Debtor. First Suppl. Hernandez Venue Decl. Ex. E. Of the remaining shareholders, fourteen
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reside or are located in the District of Colorado, one resides in the Southern District of New
York, and fifteen reside or are located elsewhere. Id.
The Debtor has submitted declarations of three shareholders of the Debtor who have
expressed their support for venue to remain in the Southern District of New York. Hernandez
Venue Decl. Ex. A. Such shareholders collectively hold approximately 3.6% of the outstanding
shares of the Debtor. Id.; First Suppl. Hernandez Venue Decl. Ex. E. Two reside in Texas and
one resides in New York. Id.
II. 	CONCLUSIONS OF LAW
The Court now turns to the questions of law addressed in the Motion. The Southern
District of New York has always respected a debtor’s choice of venue. A debtor’s choice of
forum is entitled to great weight if venue is proper pursuant to section 1408. See, e.g., In re
Enron Corp. (Enron II), 284 B.R. 376 (Bankr. S.D.N.Y. 2002). The Second Circuit has stated
that the district in which the underlying bankruptcy case is pending “is presumed to be the
appropriate district for hearing and determination of a proceeding in bankruptcy.” Gulf States
Exploration Co. v. Manville Forest Prod. Corp. (In re Manville Forest Prod. Corp.), 896 F.2d
1384, 1391 (2d Cir. 1990). A movant seeking transfer of a bankruptcy case to a different venue
bears the burden of proof by a preponderance of the evidence. See id. at 1390.
Section 1408 of Title 28 of the United States Code is the general venue statute that
controls where a bankruptcy case may be filed. Section 1408 provides that a bankruptcy case
may be filed in the district in which the debtor retains a domicile, residence, principal place of
business or assets, or in which there is a pending bankruptcy case filed by the debtor’s affiliate,
general partner, or partnership. The concept of venue is based in fairness and convenience. It is
fairness, rather than geography, that has been and should continue to be the key factor in
determining the appropriateness of venue. See In re Patriot Coal Corp. (In re Patriot Coal), 482
B.R. 718, 739 (Bankr. S.D.N.Y. 2012). COPIC does not move for transfer of venue under
Section 1408. See Motion ¶ 30 (“While COPIC believes that venue is not proper in New York
under 28 U.S.C. § 1408 […] at this time COPIC only seeks relief under 28 U.S.C. § 1412.”).
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Instead, COPIC seeks relief in the Motion pursuant to Section 1412 of Title 28 of the
United States Code and Rule 1014(a) of the Federal Rules of Bankruptcy Procedure.2 In contrast
to Section 1408 which provides for where a case may be properly commenced, Section 1412
authorizes a bankruptcy court to transfer venue to “another district, in the interest of justice or for
the convenience of the parties.” 28 U.S.C. § 1412; see also Enron II, 284 B.R. at 386; In re
Greenhaven Assocs., Ltd., 93 B.R. 35, 40 (Bankr. S.D.N.Y. 1988). Section 1412 is written in the
disjunctive, meaning that each of the two prongs—“in the interest of justice” or “for the
convenience of the parties”—constitutes an independent ground for transferring venue. See In re
Asset Resol. LLC, 2009 Bankr. LEXIS 3711 at *6 (Bankr. S.D.N.Y. Nov. 24, 2009).
The Second Circuit has found that “[t]he ‘interest of justice’ component of § 1412 is a
broad and flexible standard which must be applied on a case-by-case basis. It contemplates a
consideration of whether transferring venue would promote the efficient administration of the
bankruptcy estate, judicial economy, timeliness, and fairness . . . .” In re Manville Forest Prod.
Corp., 896 F.2d at 1391. Ultimately, “[t]he decision to transfer venue is within the discretion of
the court, as evidenced by the use of the permissive ‘may’ in section 1412[.]” In re TS Emp.,
Inc., No. 15-10243 (MG), 2015 Bankr. LEXIS 2747, at *9 (Bankr. S.D.N.Y. Aug. 18, 2015)
(unpublished decision) (citing Enron Corp. v. Arora (Enron III), 317 B.R. 629, 650 n. 8 (Bankr.
S.D.N.Y. 2004)).
Courts in this district apply a preponderance of the evidence standard when determining
whether the interest of justice and/or the convenience of the parties warrant transfer of venue.
See, e.g., In re Manville Forest Prods. Corp., 896 F.2d at 1390–91; AZZ, Inc. v. S. Nuclear
Operating Co. (In re Westinghouse Elec. Co. LLC), No. 17-10751 (MEW), 2019 U.S. Dist.
LEXIS 50311, at *17–18 (S.D.N.Y. Mar. 25, 2019) (unpublished opinion). Ensuring that parties
do not abuse the bankruptcy court system, by filing in a district for the purpose of “forum
2 Section 1014(a) of the Federal Rules of Bankruptcy Procedure provides that the court may, upon notice and
hearing, (1) “transfer the case to any other district if the court determines that the transfer is in the interest of justice
or for the convenience of the parties” where the case is filed in the proper district and (2) “dismiss the case or
transfer it to any other district if the court determines that transfer is in the interest of justice or for the convenience
of the parties if the case is filed in improper district.” FED. R. BANKR . P. 1014(a). A court only needs to find that
one of the stated grounds for transfer of venue are present. See, e.g., Zohar CDO 2003-1, Ltd. v. Patriarch Partners,
LLC, 620 B.R. 456, 461 (S.D.N.Y. 2020) (citing ICICI Bank Ltd. v. Essar Glob. Fund Ltd., 565 B.R. 241, 257
(S.D.N.Y. 2017)).
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shopping,” is also grounds to transfer venue in the interest of justice. In re Eclair Bakery, Ltd.,
255 B.R. 121, 142 (Bankr. S.D.N.Y. 2000) (holding that the debtor’s filing in one venue because
of previous adverse rulings in a different venue warranted transfer); see In re Patriot Coal, 482
B.R. at 739 (citing In re Eclair Bakery, Ltd., 255 B.R. at 142).
In this Case, there was no forum shopping as the Debtor has had some operations and an
office in New York since 2018 and at the time of its Chapter 11 filing, its founder, chief
executive officer, and majority shareholder was for several years (and still is) located in New
York. As this Court has previously noted, either New York or Colorado would have been an
appropriate venue for the Case. So, the Court finds that venue is proper under Section 1408 of
Title 28 of the United States Code.
For COPIC to prevail on the Motion, the facts must show that the interest of justice
and/or the convenience of the parties strongly favor transferring venue. See N.Y. Marine & Gen.
Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 113–14 (2d Cir. 2010); In re Westinghouse Elec.
Co. LLC, 2019 U.S. Dist. LEXIS 50311 at *17–18 (applying N.Y. Marine & Gen. Ins. Co. to 28
U.S.C. § 1412).
A. 	Interest of Justice
When considering the interest of justice, courts consider a multitude of factors when
analyzing transfer of venue, specifically whether the transfer will “promote the efficient
administration of the bankruptcy estate, judicial economy, timeliness, and fairness.” See, e.g., In
re Manville, 896 F.2d at 1391; Deutsche Oel & Gas S.A. v. Energy Cap. Partners Mezzanine
Opportunities Fund A, LP, No. 19-CV-11058 (RA), 2020 U.S. Dist. LEXIS 181000, at *39–40
(S.D.N.Y. Sep. 30, 2020) (unpublished opinion). Factors considered in this analysis are as
follows:
(i) transfer would promote the economic and efficient administration of the
bankruptcy estate; (ii) the interests of judicial economy would be served by the
transfer; (iii) the parties would be able to receive a fair trial in each of the possible
venues; (iv) either forum has an interest in having the controversy decided within
its borders; (v) the enforceability of any judgment would be affected by the
transfer; and (vi) the plaintiff’s original choice of forum should be disturbed.
In re TS Emp., Inc., 2015 Bankr. LEXIS 2747, at *11 (quoting In re Enron Corp. (“Enron I”),
274 B.R. 327, 343 (Bankr. S.D.N.Y. 2002) (internal quotations omitted)); In re Dunmore Homes,
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Inc., 380 B.R 663, 672 (Bankr. S.D.N.Y. 2008). “In addition, courts consider the ability of
interested parties to participate in the proceedings and the additional costs that might be incurred
to do so.” In re TS Emp., Inc., 2015 Bankr. LEXIS 2747, at *11 (quoting In re Dunmore Homes,
Inc., 380 B.R. at 672) (internal quotations omitted).
Courts have held that the most important of the factors is the economic and efficient
administration of the estate. See Enron I, 274 B.R. at 343. Courts have interpreted that factor as
“the need to obtain post-petition financing, the need to obtain financing to fund reorganization
and the location of the sources of such financing and the management personnel in charge of
obtaining it.” Huntington Nat’l Bank v. Indus. Pollution Control, Inc. (In re Indus. Pollution
Control, Inc.), 137 B.R. 176, 182 (Bankr. W.D. Pa. 1992); In re Int’l Filter Corp., 33 B.R. 952,
956 (Bankr. S.D.N.Y. 1983).
The Debtor requires post-petition financing. See Debtor’s Emergency Motion for (1) an
Interim Order Authorizing the Debtor to Obtain Post-petition Interim Financing from Dr. Caleb
S. Hernandez (the “Lender”) and Granting the Continued Use of Cash Collateral; (2)
Scheduling a Hearing on the Final Request for the Use of Cash Collateral; (3) Scheduling a
Hearing on the Request for a Final Order Approving Post-petition Financing; (4) Authorizing
the Prior Loans to the Debtor from the Lender; and (5) Granting Such Other and Further Relief
as is Deemed Appropriate [ECF No. 122]; Interim Order Granting Debtor’s Emergency Motion
for (1) an Interim Order Authorizing the Debtor to Obtain Post-petition Interim Financing from
Dr. Caleb S. Hernandez (the “Lender”) and Granting the Continued Use of Cash Collateral; (2)
Scheduling a Hearing on the Final Request for the Use of Cash Collateral; (3) Scheduling a
Hearing on the Request for a Final Order Approving Post-petition Financing; (4) Authorizing
the Prior Loans to the Debtor from the Lender; and (5) Granting Such Other and Further Relief
as is Deemed Appropriate [ECF No. 126].
Since the Petition Date, the Debtor has used the JLABS Address to hold meetings with
potential post-petition investors in the Debtor. Sept. 28 Tr. at 57:10–17. According to Dr.
Hernandez’s testimony, Dr. Hernandez has held at least three meetings with potential investors at
the JLABS Address. Id. Additionally, Dr. Hernandez handles matters that arise with respect to
the Case on behalf of the Debtor. Id. at 52:6–55:16. Thus, Dr. Hernandez, along with the
Debtor’s professionals, will be in charge of obtaining such financing. Dr. Hernandez has
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testified that “[i]f the Court were to transfer the Chapter 11 case to Colorado, I would be
traveling to the state for the sole purpose of prosecuting the Debtor’s Chapter 11 case. There is
no other business purpose of the Debtor for me to travel to Colorado.” Second Suppl. Hernandez
Venue Decl. ¶ 19. Accordingly, the standard of economic and efficient administration of the
estate weighs in favor of venue remaining in New York.
The next factor that must be considered is whether the interests of judicial economy
would be served by the transfer. There are currently two stayed arbitration proceedings pending
in Colorado with former employees of the Debtor, one being the Hoffman Action and the other
being the Blood Action. There are two stayed litigations pending in Colorado, one being the
Denver Note Action commenced by COPIC and the Noteholders where the Denver Court has
entered judgment for many, though not all, of the plaintiffs and has not yet ruled with respect to
legal fees and other costs, and the other being the Jefferson County Action commenced by the
Debtor against COPIC and the Noteholders alleging a hostile takeover attempt of the Debtor in
the summer of 2019 and steps to attempt to force a sale of the Debtor in October 2019 which
litigation had not progressed very far as of the Petition Date. There is also the stayed Delaware
Action litigation pending in the Delaware Chancery Court commenced by COPIC against the
Debtor and Dr. Hernandez alleging that Dr. Hernandez breached the Debtor’s certificate of
incorporation and his fiduciary duties to COPIC and to the Debtor and requesting that the court
declare invalid certain actions taken by the Debtor’s board, including the Debtor’s 2019 and
2020 amendments to its certificate of incorporation. The Colorado arbitrations and two Colorado
litigations involve issues under Colorado law.
Mr. Hoffman is currently located in New York. Sept. 22 Tr. at 125:16–21. Mr. Hoffman
testified that the majority of witnesses that will be needed for the Hoffman Action are in
Colorado, but there are also a significant number of witnesses who are not located in Colorado,
including Dr. Hernandez. Id. at 168:18–169:12.
It is not clear from the testimony how much remains to occur in the Denver Note Action
beyond entering judgment for COPIC and deciding the amount of legal fees and other costs to be
awarded to the plaintiffs, but any remaining proceedings will involve attorneys located in
Colorado. The Jefferson County Court will involve a significant number of witnesses located in
Colorado, see Sept. 21 Tr. at 169:25–171:2, as will the Blood Action and the Delaware Action.
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However, if modification of the automatic stay were sought and granted, these
arbitrations and litigations would proceed in the existing forum. The Debtor has not sought to
remove these actions to this Court and the time period for doing so has passed. It is possible that
some of the issues in the pending arbitrations and litigations will be resolved by this Court as
part of the claims process. Notwithstanding, this factor weighs in favor of the Movant.
The third factor is whether the parties would be able to receive a fair trial in each of the
possible venues. The answer is yes. The United States Bankruptcy Court in the District of
Colorado is equally as capable as this Court in terms of handling the Case and any ancillary
litigation commenced by the parties.
The fourth factor is whether either forum has an interest in having the controversy
decided within its borders. Here, the facts support each forum’s interests in having the Case
decided within its borders. The trial testimony is that the Debtor generates most of its revenue
from its licensing business, whereby it licenses patents to pharmaceutical manufacturers. Sept.
28 Tr. at 34:3–11. Specifically, the majority of the Debtor’s 2019 and 2020 revenue was
generated from the Debtor’s agreements with J&J, which the Debtor attends to in New York.
Second Suppl. Hernandez Venue Decl. ¶¶ 11, 15; see also Sept. 28 Tr. at 34:16–35:9. The
Debtor’s only physical location is in New York.3 So, New York has a strong interest in the
ongoing business of the Debtor, including any disposition of assets and taxes. Colorado also has
a strong interest in having the Case transferred to Colorado since the vast majority of unsecured
creditors by amount owed reside in Colorado as do some of the equityholders and there are
several litigations and arbitrations pending in Colorado which involve Colorado state law.
The fifth factor is whether enforceability of any judgment would be affected by the
transfer of venue. The answer is that it likely would not be. The vast majority of the Debtor’s
assets are located outside of Colorado and possibly also outside New York.4 First Suppl.
Hernandez Venue Decl. ¶¶ 8, 10; Second Suppl. Hernandez Venue Decl. ¶ 12.
The sixth factor of the analysis is whether the plaintiff’s original choice of forum should
be disturbed. Courts look at whether the Debtor’s interests will be harmed or whether the estate
3 This Court finds that the virtual office in Colorado maintained by the Debtor is just that, virtual and not a physical
location.
4 It is possible that some or all of the intellectual property owned by the Debtor could be deemed to be within the
jurisdiction of New York.
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will suffer a diminution in value if venue is transferred. See Dunmore, 380 B.R. at 675. Dr.
Hernandez provided the only testimony on this point. Dr. Hernandez testified that “[i]f the Court
were to transfer the Chapter 11 case to Colorado, I would be traveling to the state for the sole
purpose of prosecuting the Debtor’s Chapter 11 case. There is no other business purpose of the
Debtor for me to travel to Colorado.” Second Suppl. Hernandez Venue Decl. ¶ 19.
Notwithstanding Dr. Hernandez’s testimony, some of the Debtor’s operations occur in
Colorado since it has one employee that resides there, in-house counsel Josue Hernandez, and
prior to Ms. Golkowski’s resignation on September 7, more of the Debtor’s operations occurred
there. However, most of the Debtor’s revenue is derived from patent licensing arrangements
which have been taking place in New York and the Debtor’s efforts to locate investors and
financing have also been taking place in New York, in each case spearheaded by Dr. Hernandez.
Second Suppl. Hernandez Decl. ¶¶ 11, 15; Sept. 28 Tr. at 34:16–35:9; 57:10–17. The evidence
in the record demonstrates that the Debtor’s interests may be harmed if venue is transferred to
Colorado since Dr. Hernandez will have to spend less time in New York and at the JLABS office
and more time traveling to and from Colorado.
Lastly, the Court has considered the forum selection clause argument made by COPIC.
There is a question as to whether a forum selection clause applies in the context of filing a
Chapter 11 case.5 The existence of a valid forum selection clause is analyzed as part of the
interest of justice inquiry. See Atl. Marine Constr. Co. v. U.S. Dist. Ct., 571 U.S. 49, 62 (2013);
ResCap Liquidating Tr. v. PHH Mortg. Corp., 518 B.R. 259, 267 (S.D.N.Y. 2014) (applying the
forum selection analysis in Atl. Marine Constr. Co. to 28 U.S.C. § 1412).
With regards to core bankruptcy proceedings, some courts in the Southern District of
New York have held that “the public interest in centralizing bankruptcy proceedings always
outweighs the public and private interests in enforcing a forum-selection clause, unless the core
proceeding is inextricably intertwined with non-core matters” while others have “balanced the
public interest in centralizing a particular core proceeding in a bankruptcy court against the
parties' legitimate expectations and the interest of justice in enforcing a forum-selection clause.”
ResCap Liquidating Tr., 518 B.R. at 268 (collecting cases). This Court believes that the public
5 This Court believes that a forum selection clause argument may be more persuasive in connection with venue for
an adversary proceeding.
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interest in centralizing bankruptcy proceedings generally outweighs the public and private
interests in enforcing a forum selection clause. There are other unsecured creditors located
outside of New York and Colorado and this Court does not know what each of their agreements
with the Debtor provide in terms of forum selection clauses. The Court does know that of the
contracts listed on Schedule G that contain forum selection clauses, none select New York nor
Colorado. See Amended Schedules; COPIC Exs. 13, 66; Debtor Exs. 217, 265–67, 269–81.
Accordingly, this Court will not enforce COPIC and the Noteholders’ forum selection clauses in
connection with the Debtor’s choice of venue for the Case.
After applying the preponderance of the evidence standard and considering the factors set
forth in the applicable case law, including the forum selection clauses in COPIC and the
Noteholders’ agreements with the Debtor, this Court finds that the Movant has not proven that
the venue of the Case should be transferred in the interest of justice.
B. Convenience of the Parties
When considering the convenience of the parties, courts in this district consider:
(i) proximity of creditors of every kind to the court; (ii) proximity of the debtor;
(iii) proximity of witnesses necessary to the administration of the estate; (iv)
location of the assets; (v) economic administration of the estate; and (vi) necessity
for ancillary administration if liquidation should result. Among these, the
economic and efficient administration of the estate is the factor given the greatest
weight.
See, e.g., In re TS Emp., Inc., 2015 Bankr. LEXIS 2747, at *11 (internal citation and quotation
omitted); Dunmore, 380 B.R. at 672.
Economic administration of the estate “encompasses all of the factors considered under
the convenience of the parties.” Enron II, 284 B.R. at 395. “The central consideration to the
‘economic and efficient administration of the estate’ inquiry” is “whether the debtor-in-
possession will be able to formulate a plan that is acceptable to all relevant parties[,]” which
requires “an analysis of the facts surrounding the post-petition efforts of the debtor-in-
possession.” Id. (internal citation omitted); see also Enron I, 274 B.R. at 349 (holding that the
forum “which would best serve the debtor’s reorganization efforts” was the more economic and
convenient forum).
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Whether a confirmable plan of reorganization will be able to be formulated by the Debtor
is uncertain. The vitriol which was evident in the testimony from Dr. Hernandez, COPIC’s
witnesses, Mr. Hoffman and the Noteholders is a result of two years of fighting among the
parties. This could not be ignored by the Court and is quite concerning. Unless there is an
investor who can pay all of the creditors in full in cash, settlements will need to be negotiated
among these same parties concerning who will own and operate the company going forward in
order for it to reorganize. Additionally, Dr. Hernandez’s security interest that was acquired
pursuant to the Settlement Agreement will likely be subject to challenge. The Court has
expressed its concerns as to whether reorganization will be possible for the Debtor but, for
purposes of the Motion, it will assume that formulation of a plan of reorganization is possible.
Assuming that it is possible for the Debtor to formulate a plan acceptable to all relevant
parties, it will need financing to do so. This financing may come from Dr. Hernandez and/or
new third party lenders/investors. To date, none of the other creditors of the Debtor have offered
to provide financing for the Debtor. Such discussions and negotiations are more likely to occur
in New York based on the facts that (a) numerous pharma/medical companies are located in the
New York/New Jersey area, (b) New York is a financial center, and (c) Dr. Hernandez is located
in New York. In addition, both the financial advisor for the Debtor, Mr. Huebscher, and the
Debtor’s bankruptcy attorney, Ms. Ortiz, are located in New York. See Huebscher Retention
Application; Ortiz Retention Application. Moreover, Dr. Hernandez is the only current
employee who has been appearing in this Court as a witness for the Debtor with respect to the
Case and he is located in New York. Second Suppl. Hernandez Venue Decl. ¶ 13; Sept. 28 Tr. at
50:7–9. Accordingly, the economic administration of the estate would be better served by the
Case remaining in New York.6
The Debtor has an office in New York and does not currently have a non-virtual office
located in Colorado. Second Suppl. Hernandez Venue Decl. ¶¶ 13–14; Golkowski Dep. 91:3–23.
The Debtor’s chief executive officer is located in New York. Thus, New York is more
convenient for the Debtor.
6 The Court does not know if the costs to the estate would be less if a financial advisor and bankruptcy counsel in
Colorado were to be retained by the Debtor and if so, whether those cost savings would offset the additional travel
costs incurred by Dr. Hernandez if the Case were to be transferred. This argument was made but no evidence was
submitted in support of it.
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In contrast, Colorado is more convenient for the Noteholders and COPIC. See, e.g.,
Reply Ex. 5, ¶¶ 9–10; Rubin Decl. ¶¶ 3–4, 19–20. With respect to other creditors, the only
secured creditor is Dr. Hernandez who is located in New York. The majority of the Debtor’s
other unsecured creditors are located outside of New York and Colorado so it is unclear as to
which would be a more convenient forum for them. Amended Schedules. Colorado is more
convenient for the vast majority by dollar amount owed of the Debtor’s unsecured creditors but
not the Debtor’s secured creditor and other unsecured creditors. Stockholders should also be
included within the inquiry of proximity of creditors. Enron II, 284 B.R at 401. The equity
holder list indicates that, based upon holdings, the majority stockholders currently reside in New
York and based upon the number of equity holders, about half of the stockholders reside in
Colorado and half reside elsewhere.7 First Suppl. Hernandez Venue Decl. Ex. E. However, the
proximity of creditors to the court alone is not a determinative factor. Enron II, 284 B.R. at 400.
Most of the Debtor’s assets are not located in Colorado. Most of the tangible assets are
located in Massachusetts and states other than Colorado or New York. First Suppl. Hernandez
Venue Decl. ¶¶ 8, 10; Second Suppl. Hernandez Venue Decl. ¶ 12. With respect to the
intangible assets, under applicable law, they could be deemed to be located where the Debtor is
domiciled which is in Delaware or where the Debtor utilizes the intellectual property under
licenses with other parties (New York, New Jersey, or elsewhere). Because of the nature and
location of the Debtor’s assets, this Court finds that, if an ancillary administration were required,
Colorado would not have a strong interest in ancillary administration. It is unclear if New York
would either except for the location of the company’s chief executive officer. Thus, neither the
location of the assets or the necessity for ancillary administration if liquidation would result
supports transferring venue to Colorado.
With respect to the factor of the proximity of witnesses necessary for the administration
of the estate, it appears that Dr. Hernandez will continue to be required to be a witness in the
Case as may Mr. Huebscher with respect to financial issues of the Debtor. However, it is unclear
what other litigation will occur before this Court. The Debtor did not seek to remove any of the
pending actions in Delaware and Colorado to this Court before the deadline for removal passed.
7 The Court notes that there are disputes as to the accuracy of the equity holder list.
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Thus, none of that pending litigation will take place before this Court or the United States
Bankruptcy Court in the District of Colorado if the Motion were to be granted.
There could be litigation brought before this Court with respect to the validity of Dr.
Hernandez’s secured claim which will involve Dr. Hernandez and possibly other parties. There
could be objections brought to proofs of claim filed by creditors heard by this Court which would
involve witnesses who reside in Colorado having to appear in New York. However, that
litigation is not a certainty and, even if it were, hearings are currently not being held in person in
this Court unless it is an evidentiary hearing or a trial in an adversary proceeding. Currently,
most hearings are being held telephonically or on Zoom and no one has to travel to New York to
appear in Court. Witnesses located outside of New York will not be inconvenienced or incur
additional costs relating to traveling to New York for hearings. While the proximity of witnesses
in the pending litigations and arbitrations might support transfer of venue in Colorado, the issue
is the proximity of the witnesses necessary for the administration of the estate before the Court.
It is unclear how many witnesses located in Colorado will be involved in such proceedings and
even if they are involved, it is not clear that, under the current circumstances, they will have to
travel to New York in order to participate. Accordingly, this Court finds that this factor does not
weigh in favor of a transfer of venue of the Case.
After applying the preponderance of the evidence standard and considering the factors set
forth in the applicable case law, this Court finds that the Movant has not proven that the venue of
the Case should be transferred for the convenience of the parties.
III. 	CONCLUSION
For all of the reasons set forth herein, the Motion is DENIED.
Dated: November 4, 2021 	/s/ Lisa G. Beckerman
New York, New York 	HON. LISA G. BECKERMAN
U.S. BANKRUPTCY JUDGE
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