Judgment Proof: The English Supreme Court Pushes Back On U.S. Bankruptcy Court Jurisdiction

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In a case with truly global implications, the Supreme Court of England and Wales held earlier today that judgments of U.S. Bankruptcy Courts against foreign defendants who had not submitted to the Bankruptcy Court’s jurisdiction were not enforceable in England and Wales in the case of Rubin v. Eurofinance SA.

Factual Background -

The Consumer Trust (the “Debtor”) was a trust created by Eurofinance S.A. (“Eurofinance”) to hold money for beneficiaries of a sales promotion scheme in which merchants issued cashable vouchers to customers who purchased certain products. Although Eurofinance was a British Virgin Islands entity initially controlled by Adrian Roman, a British citizen, all of the merchants and consumers involved in the scheme were located in the U.S. and Canada.

The Debtor proved to be a financially profitable enterprise for Eurofinance (and, in turn, Mr. Roman) but was forced to file for chapter 11 bankruptcy protection after it reached a settlement in excess of $1.6 million with the Missouri Attorney General’s Office for violation of consumer protection laws. Fearing that other states would soon follow Missouri’s lead, Eurofinance applied to the English High Court of Justice to appoint certain representatives of the Debtor as receivers (the “Receivers”) to file a chapter 11 case on behalf of the Debtor in the U.S. Bankruptcy Court Southern District of New York (the “Bankruptcy Court”). Following approval of the appointment by the High Court, the chapter 11 bankruptcy petition was filed on behalf of the Debtor in the Bankruptcy Court on December 5, 2005 (the “Bankruptcy Case”).

Please see full Alert below for further information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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