Rick Antonoff and Evan Jason Zucker
Chapter 15 of the U.S. Bankruptcy Code provides a streamlined process for recognition (a form of comity) of a foreign insolvency proceeding. However, courts are divided as to whether a foreign debtor must satisfy the general definition of “debtor” as that term is used in section 109(a) of the Bankruptcy Code, which requires a debtor seeking bankruptcy relief to reside or have a domicile, a place of business, or property in the United States.
On February 28, 2022, the U.S. District Court for the Middle District of Florida (the “Florida District Court”) ruled that section 109(a) does not apply in chapter 15 cases. Talas Qais Abulmunem Al Zawawi v. Diss, et al. (In re Talas Qais Abdulmunem Al Zawawi), Case No. 21-894-GAP (M.D. Fla. Feb. 28, 2022). The court relied on a straightforward interpretation of section 1517(a)’s mandatory criteria, finding that chapter 15 “provides the sole requirements for recognition” and that recognition is not premised upon a foreign debtor meeting section 109(a) requirements for eligibility. The Florida District Court’s opinion conflicts with an opinion rendered in 2013 by the U.S. Court of Appeals for the Second Circuit (the “Second Circuit”) in the case Drawbridge Special Opportunities Fund L.P. v. Barnet (In re Barnet), 737 F.3d 238 (2d Cir 2013), which held that section 109(a) is applicable in chapter 15. Al Zawawi is the latest in a string of judicial opinions and scholarly articles, disagreeing with the Second Circuit’s decision in Barnet. See In re Bemarmara Consulting a.s., Case No. 13-13037 (Bankr. D. Del. Dec. 17, 2013); Daniel M. Glosband and Jay Lawrence Westbrook, Chapter 15 Recognition in the United States: Is a Debtor “Presence” Required?, 24 Int’l Insolv. Rev. 28 (2015). See also, Douglas G. Baird, Revisions to Chapter 15 of the Bankruptcy Code, at 4–7 (letter from National Bankruptcy Conference to Congress proposing Bankruptcy Code revision to clarify that section 109(a) does not apply in chapter 15 cases).
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