In re IFS Financial Corporation, Case No: 02-39553 (Bankr. S.D. Tex. 7/15/2008)
| Decision Date | 15 July 2008 |
| Docket Number | Case No: 02-39553.,Adversary No. 04-3824.,Adversary No. 04-3789.,Adversary No. 04-3845. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
| Parties | IN RE: IFS FINANCIAL CORPORATION, Chapter 7, Debtor. W. STEVE SMITH, TRUSTEE, Plaintiff, v. GONZALO ROMERO MATIAS, <I>et al</I> Defendant(s). |
For the reasons set forth below, the Court holds that the Court has personal jurisdiction over defendants Gonzalo Romero Matias ("Romero"), Minerva Bienes Racies, S.A. DE C.V. ("Minerva"), Mar Sur, S.A. DE C.V. ("Mar Sur"), South Sea Corp. ("South Sea"), North Sea Corp. ("North Sea"), Pacific Coast Investments ("Pacific"), and Larce, Inc. ("Larce"). For the reasons set forth below, the Court holds that the Court does not have personal jurisdiction over defendants Grupo Inmobiliaro De Tijuana, S.A. DE C.V. ("Grupo"), Palatina S.A. DE C.V. ("Palatina"), and Flaminia, S.A. DE C.V. ("Flaminia"). The Court grants Defendants' motion to dismiss with respect to defendants Grupo, Palatina, and Flaminia and denies Defendants' motion to dismiss with respect to the remaining Defendants.
The IFS Financial Corporation ("IFS") case is a jointly administered case comprised of approximately 19 related entities (the "Interamericas Companies").1 Under the jointly administered case, W. Steve Smith, Trustee, has filed over 100 adversary proceedings. The Trustee filed the present adversary on October 10, 2004.2
Defendant Romero is a shareholder in some of these related entities. Between 1998 and 2002, millions of dollars were transferred out of the Debtor and related entities to various alleged insiders. The Trustee alleges that these transfers were fraudulent transfers and defrauded and denuded the Interamericas Companies. The Trustee contends that Romero effectuated and received such transfers and seeks to recover the transfers under various legal theories.
This Court has jurisdiction of this matter under 28 U.S.C. § 1334. Venue is proper in this District pursuant to 28 U.S.C. § 1409.
IFS is part of the Interamericas Companies. The Interamericas Companies are comprised of Interamericas, Ltd., Interamericas Investments, Ltd., Interamericas Holdings, Inc., Interamericas Corporation, Interamericas Financial Holdings, Ltd., Interamericas Financial Holdings Corp., IFS, and other related entities (the "Interamericas Companies"). The Interamericas Companies received money, primarily from Mexican investors, in exchange for future payments to be made from the operation of Interamericas Companies' various businesses.3 Decisions concerning the operations of the Interamericas Companies were generally made by an Advisory Board, consisting primarily of Hugo Pimienta, Arturo Pimienta, Enrique Pimienta, Rodolfo Garcia, and Peter Ulrich.
Between 1998 and 2002, the assets of the Interamericas Companies, including IFS, were transferred between various IFS entities and ultimately transferred outside the companies. The Trustee alleges that most transfers went to insiders by way of the Interamericas Companies' bank accounts at Southwest Bank of Texas and Woodforest Bank. The Trustee alleges Romero, as a member of the Interamericas Companies' management team and as a major owner of IFS and other related entities, helped effectuate the transfers. The Trustee also contends that Romero received some of the disputed transfers, amounting to tens of millions of dollars. Romero may have received some of the transfers directly, but most are alleged to have occurred through the corporate Defendants. The Trustee characterizes the corporate Defendants as "shell," "sham" entities established solely as investment vehicles for Romero. The transfers form the basis of the Trustee's fraud, denuding, and fraudulent transfer claims against Defendants.
On December 15, 2005, defendants Romero, Minerva, Mar Sur, and Grupo filed a motion to dismiss for lack of personal jurisdiction, and alternatively sought dismissal on other grounds.
On April 24, 2006, the Court bifurcated consideration of the issues and scheduled a trial limited solely to the issue of whether the Court has personal jurisdiction over Defendants. On November 6, 7, and 8, 2006, the Court conducted a trial on the issue of personal jurisdiction. The trial was jointly conducted in adversary proceedings 04-3789, 04-3824, and 04-3845.
On September 11, 2007, the Court issued its Memorandum Opinion on Defendants' motion to dismiss for lack of personal jurisdiction. The Court found personal jurisdiction over defendants Romero Matias ("Romero), Minerva Bienes Racies, S.A. DE C.V. ("Minerva"), Mar Sur, S.A. DE C.V. ("Mar Sur"), South Sea Corp. ("South Sea"), North Sea Corp. ("North Sea"), Pacific Coast Investments ("Pacific"), and Larce, Inc. ("Larce"). The Court found no personal jurisdiction over defendants Grupo Inmobiliaro De Tijuana, S.A. DE C.V. ("Grupo"), Palatina S.A. DE C.V. ("Palatina"), and Flaminia, S.A. DE C.V. ("Flaminia"). Defendants Grupo, Palatina, and Flaminia were dismissed.
On November 15, 2007, defendants Romero and Minerva timely filed a motion for reconsideration. On January 29, 2008, the Court heard oral arguments on Defendants' motion. The Court has carefully considered the parties' motions and oral arguments and amended its September 11 Opinion in light of issues raised. However, the Court's original orders granting and denying the motion to dismiss require no amendments.
The Plaintiff, as the party invoking the jurisdiction of the Court, bears the burden of establishing that the Court has jurisdiction over the Defendants. Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 270 (5th Cir. 2006); Guidry v. U.S. Tobacco Co., 188 F.3d 619, 625 (5th Cir. 1999). Initially, at the pre-evidentiary hearing stage in a case, a plaintiff need only make a prima facie or threshold showing of jurisdiction. Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir. 2000); Guidry, 188 F.3d at 625. All factual conflicts are resolved in the plaintiff's favor. Id. Ultimately, however, the plaintiff must prove by a preponderance of the evidence at a pretrial evidentiary hearing or at trial that the requisite jurisdictional facts exist. Brown v. Slenker, 220 F.3d 411, 419 (5th Cir. 2000); DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1270-71, n.12 (5th Cir. 1983).
In this case, the Court held a bifurcated trial on the issue of personal jurisdiction. Consequently, the Plaintiff bears the burden of proof by a preponderance of the evidence.
The sole issue presently before the Court is whether the Court should exercise personal jurisdiction over the Defendants.
Personal jurisdiction analysis first requires the court to consider whether a federal statute or rule defines the extent of the court's personal jurisdiction. Federalpha Steel LLC Creditors Trust v. Fed. Pipe & Steel Corp. (In re Federalpha Steel LLC), 341 B.R. 872, 887 (Bankr. N.D. Ill. 2006) (citing Action Embroidery Corp. v. Atlantic Embroidery, Inc., 368 F.3d 1174, 1177 (9th Cir. 2004)). Federal Bankruptcy Rule 7004(f) defines personal jurisdiction over defendants in an adversary proceeding pending before a bankruptcy court. In re Teknek, LLC, 354 B.R. 181, 191. Rule 7004(f) authorizes personal jurisdiction to the extent allowed by the Fifth Amendment Due Process clause. In re Tekneck, LLC, 354 B.R. at 192 (citing Enron Corp. v. Arora (In re Enron Corp.), 316 B.R. 434, 440, 442, 444-46 and n. 8 (Bankr. S.D. N.Y. 2004); In re Federalpha Steel LLC, 341 B.R. at 884; North v. Winterthur Assurances (In re North), 279 B.R. 845, 851-53 (Bankr. D. Ariz. 2002). Consequently, a bankruptcy court's personal jurisdiction is not affected by a state's long-arm statute or constitution. In re Tekneck, LLC, 354 B.R. at 193.
The Due Process Clause permits the exercise of personal jurisdiction over a nonresident defendant when: (1) the defendant has "minimum contacts" with the forum; and (2) the exercise of jurisdiction does not offend "traditional notions of fair play and substantial justice." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985); Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); Paz v. Brush Engineered Materials, Inc., 445 F.3d 809, 813 (5th Cir. 2006). "Minimum contacts" are required to preserve a defendant's Due Process right not to be haled into a forum without "fair warning" that prior conduct subjected them to that forum's jurisdiction. Burger King Corp., 471 U.S. at 471-72. The plaintiff bears the burden of establishing "minimum contacts." Seiferth, 472 F.3d at 271 . If successful, the burden shifts to the defendant to establish that the exercise of jurisdiction would be unfair or unreasonable. Id.
With one exception, the "minimum-contacts" analysis used in diversity cases is also applied to a foreign defendant in bankruptcy court adversary proceedings based on federal law. Generally, "minimum contacts" analysis looks only at the defendant's contacts within the forum state. When the defendant is a foreign citizen haled before a bankruptcy court within an adversary proceeding based on federal law, courts aggregate the defendant's contacts within the entire United States. In re Teknek, 354 B.R. at 192. See also Application to Enforce Admin. Subpoenas Duces Tecum of S.E.C. v. Knowles, 87 F.3d 413, 417 (10th Cir. 1996) (); United States v. De Ortiz, 910 F.2d 376, 382 (7th Cir. 1990). "To satisfy due process, then, a defendant . . . need have only minimum `national contacts.'" In re Federalpha Steel LLC, 341 B.R. at 888 (quoting United Rope Distribs., Inc. v. Seatriumph Marine Corp., 930 F.2d 532, 534 (7th Cir. 1991)).
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