Sheehan v. Breccia Unlimited Co. (In re Sheehan)

• Decision Date: 07 September 2022
• Docket Number: s. 21-2946 & 21-2954
• Citation: 48 F.4th 513
• Parties: IN RE: Joseph C. SHEEHAN, Debtor. Joseph C. Sheehan, Plaintiff-Appellant, v. Breccia Unlimited Company, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

48 F.4th 513

IN RE: Joseph C. SHEEHAN, Debtor.

Joseph C. Sheehan, Plaintiff-Appellant,
v.
Breccia Unlimited Company, et al., Defendants-Appellees.

Nos. 21-2946 & 21-2954

United States Court of Appeals, Seventh Circuit.

Argued May 25, 2022
Decided September 7, 2022

Brian P. Welch, David K. Welch, Attorneys, Burke, Warren, MacKay & Serritella, P.C., Chicago, IL, for Debtor-Appellant.

George W. Hicks, Jr., Kirkland & Ellis LLP, Washington, DC, Andrew C. Lawrence, Attorney, Clement & Murphy, PLLC, Alexandria, VA, Jason J. Ben, Attorney, Freeborn & Peters LLP, Chicago, IL, for Defendants-Appellees.

Before Ripple, Rovner, and Kirsch, Circuit Judges.

Rovner, Circuit Judge.

Joseph Sheehan, an Illinois resident, would like the bankruptcy court in Illinois to enforce that court's stay against his Irish creditors. Those creditors, who are residents of Ireland, seek to sell Sheehan's Irish property to recoup their loss on loans made in Ireland, and on which Sheehan defaulted in Ireland. The bankruptcy court determined it had no personal jurisdiction over the foreign defendants and granted their motions to dismiss. The district court on appeal affirmed the orders of the bankruptcy court, and we affirm that court's judgment.

I.

Joseph Sheehan is a retired surgeon who emigrated from Ireland several decades ago and currently lives in Winfield, Illinois. In 2006, Sheehan obtained loans from an Irish bank to buy interest in Blackrock Hospital Limited, an Irish medical company (the "Blackrock Shares"), and also to purchase personal real estate located in Ballyheigue, Ireland (the "Ballyheigue property"). In 2008, he obtained additional loans to pay for more Blackrock Shares. Both loans were secured by the Blackrock Shares themselves. Sheehan defaulted on both loans in 2010. In 2014, defendant-appellee Breccia Unlimited Company ("Breccia"), an Irish entity that also owned shares in Blackrock Hospital Limited, acquired the loans—both the loans secured by the Blackrock Shares and the Irish bank's interest in the Ballyheigue property mortgage—and proceeded to take steps to foreclose on the underlying collateral. Breccia is a private unlimited company incorporated under the laws of Ireland and maintains its principal place of business in Dublin. Sheehan sued to prevent those foreclosure efforts in Irish courts, but in July 2019, an Irish appellate court found in Breccia's favor and gave the company authorization to enforce its security interest in the Blackrock Shares and the Ballyheigue property with the aid of an Irish receiver. The Irish Supreme Court declined to disturb that final judgment. Subsequently, in December 2019, Breccia registered the Blackrock Shares in its name and appointed a receiver, defendant-appellee Damien Murran, to take possession of the Ballyheigue property, secure it, market it, and sell it. Murran is an Irish citizen who resides in Ireland and is an employee of defendant-appellee, RSM Ireland Business Advisory Limited ("RSM Ireland"). RSM Ireland is an Ireland limited liability company.¹ On March 5, 2020,

48 F.4th 518

Breccia appointed Murran as the receiver for the Ballyheigue Property as well. Murran accepted the receivership on March 23, 2020.

On March 12, 2020, Sheehan filed a petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of Illinois. Under the rules of the United States Bankruptcy Code, Sheehan's bankruptcy filing triggered an automatic stay applicable to "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." 11 U.S.C. § 362 (a)(3). On the same day that Sheehan filed his bankruptcy petition, he notified the Irish receiver, Murran, that he had commenced bankruptcy proceedings, and that the automatic stay barred any efforts by the receiver to exercise control over the Blackrock Shares. Several days later, on March 18, he provided the same notice to Breccia, but this time noted that the stay applied not only to the Blackrock Shares, but also to "any other property owned by Dr. Sheehan." App. 80.² Nevertheless, Breccia, having prevailed in the Irish courts, continued, through the receiver, to take the necessary steps toward sale of the collateral securing the loans on which Sheehan had defaulted. For example, on March 13, 2020, Murran entered into a contract with defendant-appellee, Irish Agricultural Development Company Unlimited ("IADC") for the sale of the Blackrock Shares.³ Like the other two companies, IADC is incorporated in Ireland, maintains its principal place of business in Ireland, and has no operations in the United States.

On March 25, 2020, Murran accepted an appointment as receiver for the Ballyheigue property, but Sheehan did not become aware of the Ballyheigue property receivership until April 7, 2020, when the receiver informed Sheehan that the receivership of the property had commenced, the locks had been changed, and the receivership intended to sell the property and apply

48 F.4th 519

the proceeds toward the discharge of Sheehan's debts. Six days later, on April 13, 2020, Sheehan filed the underlying adversary complaint in the United States bankruptcy court, alleging that Breccia, IADC, the receiver Murran, and Murran's employer, RSM Ireland, improperly exercised control over the property of his bankruptcy estate in violation of the Bankruptcy Code's automatic stay provision. In his complaint, he requested the return of the Blackrock Shares and the Ballyheigue Property to the bankruptcy estate, an order compelling the defendant-appellees to comply with the automatic stay, and an award of damages for their willful violation of the automatic stay.

Sheehan initially e-mailed the defendants to request that they accept service of process of the complaint through their Irish attorneys. The defendants did not do so, but rather argued inter alia in support of their subsequent motions to dismiss that the email notice Sheehan had provided was not sufficient process under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the "Hague Service Convention"). On June 12, two months after Sheehan filed his adversary complaint, and one month after the defendants filed their motions to dismiss, Sheehan formally served Murran, RSM, and IADC. He formally served Breccia on June 16.

On May 13, thirty days after Sheehan filed his complaint, Breccia and IADC together moved to dismiss the adversary proceeding, and Murran and RSM Ireland jointly did the same. Both motions sought dismissal of the adversary complaint under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction, and 12(b)(5) for insufficient service of process.⁴ In addition, Murran and RSM Ireland argued that the doctrine of forum non conveniens dictated dismissal. In response, and as an alternative to denial of the motions to dismiss, Sheehan requested discovery related to the matters set forth in the declarations attached to the defendants' motions to dismiss. The bankruptcy court granted both motions to dismiss (in separate orders), finding that the bankruptcy court lacked personal jurisdiction over the Irish defendants, as none of the defendants conducted any activity related to the adversary claims in the United States, and the only link between the defendants and the forum was the fact that Sheehan lived in Illinois. The bankruptcy court also concluded that Sheehan's e-mail service to the defendant-appellees was ineffective under the Hague Service Convention. In its order granting Murran and RSM Ireland's motion to dismiss, the bankruptcy court also held that the doctrine of forum non conveniens provided an additional basis for dismissal. Sheehan appealed to the district court which confirmed that the bankruptcy court lacked personal jurisdiction over any defendant. Additionally, the district court concluded that "all of the facts that [Sheehan] wished to investigate through jurisdictional discovery either do not involve [the defendants'] suit-related conduct or concern their contacts with Sheehan regarding the Blackrock Shares or the Ballyheigue Property," and thus the bankruptcy court had not abused its discretion in denying discovery sub silentio. App. 637, 651. Having found that the bankruptcy court lacked personal jurisdiction over the defendants, the district court did not reach the questions of service of process or forum non conveniens.

48 F.4th 520

II.

We review the judgment of the district court using the same standard of review with which the district court reviewed the bankruptcy court's ruling. Wiese v. Cmty. Bank of Cent. Wis. , 552 F.3d 584, 588 (7th Cir. 2009). Specifically, we review a district court's dismissal for lack of subject matter jurisdiction de novo, while reviewing findings of fact considered in determining jurisdiction only for clear error. City of Chicago ex rel. Rosenberg v. Redflex Traffic Sys., Inc. , 884 F.3d 798, 802 (7th Cir. 2018) ; see also Illinois Ins. Guar. Fund v. Becerra , 33 F.4th 916, 922 (7th Cir. 2022) ("Subject-matter jurisdiction sometimes depends on disputed factual issues, and we review for clear error a district court's findings on jurisdictional facts.").

A. Personal jurisdiction

An assessment of jurisdiction is the starting point of every case in federal court. In this case, it happens to be the ending point as well. The bankruptcy court is a court of limited jurisdiction and receives its jurisdictional mandate in a statutory grant of...