Case Type:
Case Status:
21-2946 & 21-2954 (7th Circuit, Sep 07,2021) Published
A bankruptcy court's in rem jurisdiction is insufficient to establish personal jurisdiction over foreign defendants, and the automatic stay of 11 U.S.C. § 362(a) is unenforceable if the bankruptcy court does not have personal jurisdiction over foreign entities and persons holding the debtor's property. The underlying transactions, which occurred in Ireland and involved Irish property, were insufficient to create specific personal jurisdiction just because the debtor was a resident in the United States.
Procedural context:
The debtor appealed the bankruptcy court's order dismissing his adversary proceeding against Irish persons and entities who for lack of personal jurisdiction.
Joseph Sheehan, the debtor, emigrated from Ireland to Illinois. In 2006, Sheehan obtained a loan from an Irish bank to buy shares in Blackrock Hospital Limited, an Irish company, and real estate in Ballyheigue, Ireland. In 2008, the bank made other loans to Sheehan to purchase more shares in Blackrock. The Blackrock shares secured both loans, and the Ballyheigue property also secured the mortgage loan. Sheehan defaulted on the loans in 2010. Another Blackrock shareholder, Breccia Unlimited Company, bought the loans and began to foreclose. Breccia is an Irish private unlimited company, and Dublin is its principal place of business. Sheehan sued in Irish courts to try to stop the foreclosure. In July 2019, an Irish appeals court ruled in favor of Breccia and authorized Breccia to foreclose. Breccia foreclosed on the Blackrock shares and registered them in its name. On March 5, 2020, Breccia also appointed a receiver, defendant-appellee Damien Murran, to seize and sell the Ballyheigue property. Murran is an employee of defendant-appellee RSM Ireland Business Advisory Limited, an Irish limited liability company. On March 12, 2020, before Murran accepted the receivership, Sheehan filed a chapter 11 petition and advised Murran that 11 U.S.C. § 362(a) barred Murran from exercising control over the Blackrock shares. Six days later, on March 18, Sheehan advised Breccia of the automatic stay and advised Breccia that the automatic stay applied to the Blackrock shares and "any other property owned by Dr. Sheehan." Breccia, however, continued with the foreclosure. On March 13, 2020, Murran entered into a contract for the sale of the Blackrock shares with defendant-appellee Irish Agricultural Development Company Unlimited ("IADC"), which has its principal place of business in Ireland and no US operations. Sheehan learned of the Ballyheigue property receivership on April 7, 2020. Six days later, on April 13, 2020, Sheehan filed an adversary proceeding in the U.S. bankruptcy court against Breccia, Murran, RSM Ireland, and IADC. The defendants declined to accept service of process. Instead, the defendants subsequently argued that Sheehan's notice was insufficient under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the "Hague Service Convention"). Sheehan then properly served the defendants in June 2020, after they had filed motions to dismiss under Fed. R. Civ. P. 12(b)(2), for lack of personal jurisdiction, and Rule 12(b)(5), for insufficient service of process. Sheehan asked the court to allow him to conduct discovery on the defendants' contacts with the United States. The bankruptcy court denied Sheehan's motion and granted the motions to dismiss for lack of personal jurisdiction, finding that none of the defendants had conducted any relevant activity in the United States. The bankruptcy court also found that the doctrine of forum non conveniens provided an additional basis for dismissal. On appeal, the district court affirmed and found that the bankruptcy court did not abuse its discretion by denying Sheehan's motion to allow discovery. The district court found that Sheehan's proposed discovery did not relate to the defendants' suit-related contact or the defendants' contacts with Sheehan regarding the Blackrock shares or the Ballyheigue property. The district court did not rule on the forum non conveniens issue.

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