In re Al Zawawi, 6:21-bk-01251-LVV

• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida
• Parties: In re: TALAL QAIS ABDULMUNEM AL ZAWAWI, Debtor in a Foreign Proceeding .
• Docket Number: 6:21-bk-01251-LVV
• Decision Date: 30 August 2021

In re: TALAL QAIS ABDULMUNEM AL ZAWAWI, Debtor in a Foreign Proceeding .

No. 6:21-bk-01251-LVV

United States Bankruptcy Court, M.D. Florida, Orlando Division

August 30, 2021

Chapter 15

SUPPLEMENTAL MEMORANDUM OPINION ON ORDER GRANTING RECOGNITION OF FOREIGN MAIN PROCEEDING

Lori V. Vaughan, United States Bankruptcy Judge

Chapter 15 of the Bankruptcy Code^[1] provides for recognition of foreign insolvency proceedings. Recognition allows representatives appointed in the foreign insolvency proceeding to obtain the court's assistance to locate and obtain assets or discover information in the United States. The question that arises in this case is whether the subject of a foreign insolvency proceeding, a foreign debtor, is subject to the same requirements to be a debtor in a bankruptcy case in the United States. The Court holds a foreign debtor is not subject to the same requirements.

On April 22, 2021, this case came before the Court to consider the Motion for Order Granting Recognition of Foreign Main Proceeding pursuant to §§ 1515 and 1517 of the Bankruptcy Code (Doc. No. 2) ("Motion") filed by Colin Diss, Hannah Davie, and Michael Leeds (collectively, the "Foreign Representatives"), as court-appointed joint trustees of the foreign bankruptcy estate of Talal Qais Abdulmunem Al Zawawi ("Foreign Debtor"), pending before the High Court of Justice, Business and Property Courts of England and Wales, Case No. BR-2020-000300 (the "UK Bankruptcy"). The Foreign Debtor opposed recognition of the UK Bankruptcy because he does not meet the requirements of a debtor under 11 U.S.C. § 109(a). (Doc. No. 30). After considering the pleadings, proffer of counsel and argument of parties, the Court rendered oral findings of fact and conclusions of law and then entered an order granting the Motion, which held 11 U.S.C. § 109(a) does not apply in proceedings under chapter 15. (Doc. No. 36)("Order"). The Order provided that the Court may enter a supplemental decision to expand on this holding. These are the Court's supplemental written findings and conclusions explaining the holding and are made pursuant to In re Mosley, 494 F.3d 1320 (11th Cir. 2007).

Factual Background

Foreign Debtor is an individual residing outside the United States. Although he does not reside in the United States, the Foreign Debtor does or did have connections through various business entities to the United States. These connections, which can be difficult to follow, may be divided into two groups-the QAPA Entities and Texas Q Zone.

QAPA Entities

Foreign Debtor and his siblings inherited ownership interests in QAPA Investing Corporation NV ("QAPA Investing"), an entity incorporated in Curacao.^[2] QAPA Investing owns 100% of an entity named QAPA Holdings, Inc. ("QAPA Holdings") which is a Florida corporation.^[3] QAPA Holdings then owns 100% of the following entities: Hawthorne Groves Apartments, Inc. ("HGA"), Hawthorne Village at Port Orange, Inc., ("HVPO") and QAPA Investing Company USA, Inc. ("QAPA USA").^[4] HGA and HVPO own apartment buildings located within the Middle District of Florida, ^[5] and QAPA USA owns office buildings located in Winter Park, Florida.^[6] According to the 2021 Annual Reports filed with Florida's Department of State Division of Corporations by QAPA Holdings, HGA, HVPO and QAPA USA, the Foreign Debtor is listed as a director.^[7] All Florida entities also list an address in Winter Park, Florida as their current principal place of business.^[8]

Texas Q Zone

Texas Q Zone, Inc. ("Texas Q Zone") is a Florida corporation that owns three parcels of land which are leased to Ale House restaurants.^[9] Prior to 2020, the Foreign Debtor had a 60% ownership interest in Texas Q Zone, and the Foreign Debtor's brother owned the remaining 40% interest.^[10] In February 2020, the Foreign Debtor sold his interest in Texas Q Zone to the other shareholder-his brother. According to the 2021 Annual Report Texas Q Zone filed with Florida's Department of State Division of Corporations, the Foreign Debtor is listed as a director.^[11] Texas Q Zone also lists an address in Winter Park, Florida as its current principal place of business.^[12]

UK Bankruptcy

About one month after the Foreign Debtor sold his interest in Texas Q Zone, a creditor petitioned the UK Bankruptcy court seeking an adjudication that the Foreign Debtor was bankrupt.^[13] On June 29, 2020, the UK Bankruptcy court entered an order adjudicating the Foreign Debtor bankrupt and the Foreign Representatives were appointed as joint trustees for the UK Bankruptcy estate.^[14] As joint trustees, the Foreign Representatives are investigating the affairs of the Foreign Debtor for the purpose of recovering assets for the benefit of creditors.^[15]One of these creditors, Foreign Debtor's former spouse, holds a judgment for £24, 075, 000.^[16]

On March 24, 2021, the Foreign Representatives filed a Chapter 15 Petition for Recognition of a Foreign Proceeding-the UK Bankruptcy-and filed the Motion.^[17] The Foreign Representatives seek recognition to recover the Foreign Debtor's assets within the United States, conduct discovery to locate and discover other assets within the United States, and possibly file actions or bring claims against third parties for the benefit of creditors.^[18] The Foreign Debtor opposes the Motion.

Discussion

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") repealed § 304 of the Bankruptcy Code and added a new chapter-chapter 15. SNP Boat Service S.A. v. Hotel le St. James, 483 B.R. 778, 782 (S.D. Fla. 2012). Chapter 15 incorporates the Model Law on Cross-Border Insolvency formulated by the United Nations Commission on International Trade Law, with some modifications designed to conform the Model Law with existing United States law. See In re Iida, 377 B.R. 243, 256 (B.A.P. 9th Cir. 2007). Fundamentally procedural in nature, Iida, 377 B.R at 256, chapter 15 allows a foreign representative to petition the bankruptcy court for recognition of a foreign insolvency proceeding and creates an ancillary proceeding to assist the foreign proceeding. In re Condor Ins. Ltd., 601 F.3d 319, 322 (5th Cir. 2010); In re O'Reilly, 598 B.R. 784, 793 (Bankr. W.D. Pa. 2019); In re Loy, 380 B.R. 154, 161 (Bankr. E.D. Va. 2007). Section 1517 governs recognition of a foreign proceeding which provides "…after notice and a hearing, an order recognizing a foreign proceeding shall be entered if…" the elements stated in paragraphs (1), (2) and (3) are met. 11 U.S.C. § 1517(a).

Upon recognition, the foreign representative acquires a broad range of relief under chapter 15. The foreign representative obtains the capacity to sue and be sued, the ability to apply directly to the court for appropriate relief, and the requirement that all courts in the United States grant comity or cooperation to the...