Now Updating

Summarizing by Shane Ramsey


Case Type:
Case Status:
21-2946 & 21-2954 (7th Circuit, Sep 07,2022) Published
Agreeing with the U.S. Bankruptcy and District Courts for the Northern District of Illinois (BC and DC), the U.S. Court of Appeals for the Seventh Circuit found bankruptcy in rem jurisdiction inadequate to establish personal jurisdiction over four foreign entities and allow § 362(a)’s use against holders of Irish property arising out of Irish transactions authorized and affirmed by that nation’s trial and appellate courts.
Procedural context:
On March 12, 2020 (Petition Date), Joseph Sheehan (DR or Sheehan), an Illinois resident, filed a chapter 11 case in the BC. On that same day, the DR informed Damien Murran (Murran), an Irish citizen and resident employed by RSM Ireland Business Advisory Limited (RSM), itself an Irish limited liability company. Prepetition, Murran had had been appointed as the receiver of personal real estate, located in Ballyheigue, Ireland (Ballyheigue Property), once owned by Sheehan but foreclosed upon by Breccia Unlimited Company (Breccia), an Irish private unlimited company with its principal place of business in Dublin. On March 18, 2020, Sheehan informed Breccia directly that the stay applied to the Ballyheigue Property and the Blackrock Shares. On March 13, 2020, RSM entered into a contract with Irish Agricultural Development Company Unlimited (IADC), for the sale of the other property foreclosed upon by Breccia: Sheehan’s shares in Blackrock Hospital Limited (Blackrock Shares), an Irish medical company. On April 13, 2020, Sheehan filed an adversary complaint against Murran, RSM, Breccia, and IADC, for improperly exercising control over property of his bankruptcy estate in violation of § 362(a). Around this time, Sheehan initially emailed the defendants to request that they accept service of process through their Irish attorneys; the defendants did not do so. On May 13, 2020, Breccia and IADC as well as Murran and RSM moved to dismiss the adversary proceeding for lack of personal jurisdiction and insufficient service of process under rules 12(b)(2) and 12(b)(5) of the Federal Rules of Civil Procedure, made applcibale to adversary proceeding per Federal Rule of Bankruptcy Procedure 7012(b); Murran and RSM also argued for dismissal on the basis of forum non conveniens. Only on June 12, 2020, one month after these motions had been filed, did Sheehan formally service Murran, RSM, and IADC; it took another four days before Breccia received its own formal service. The BC dismissed by separate orders, finding a lack of personal jurisdiction, that service had been insufficient, and that the doctrine of forum non conveniens provided an independent basis for dismissal. The DC confirmed the BC lacked personal jurisdiction and, having done so, did not reach the questions of service of process or forum non conveniens. Sheehan timely appealed.
Everything happened in Ireland, and all but Sheehan were Irish entities with their principal places of business in the Emerald Isle. In 2006, Sheehan, a retired surgeon who had immigrated from Ireland “decades ago” and lived in Illinois, obtained loans to purchase the Blackrock Shares and the Ballyheigue Property from an Irish bank. In 2008, Sheehan obtained additional loans so as to purchase more of the former interest. Both loans were secured by the Blackrock Shares themselves. In 2014, Sheehan defaulted. Sometime later, Breccia acquired the loans and proceeded to foreclose on the underlying collateral. While Sheehan sued to prevent this foreclosure, an Irish appellate court found in Breccia’s favor in July 2019, giving it authorization to enforce its security interest; Ireland’s highest court opted to leave the judgment undisturbed. So empowered, Breccia eventually registered the Blackrock Shares in its name in December 2019 and appointed Murran (and his company) as the receiver for the Ballyheigue Property on March 5, 2020. While all these events occurred prepetition, things continued post-petition. Specifically, Murran did not accept the receivership until March 23 (or 25), 2020, and Breccia entered into a contract with IADC for the sale of the Blackrock Shares on March 13, 2020, though Sheehan alerted Murran to the stay’s purported application on the Petition Date and informed Breccia that the same stay allegedly covered the Blackrock Shares and the Ballyheigue Property on March 18, 2020. Sheehan did not become aware of the Ballyheigue Property receivership until April 7, 2020, when Murran bluntly told him that the receivership had commenced, the locks had been changed, and that a sale was planned.
Kenneth F. Ripple; Ilana K.D. Rovner; and Thomas L. Kirsch II

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