Zawawi v. Diss (In re Zawawi)

• Decision Date: 28 February 2022
• Docket Number: Case No: 6:21-cv-894-GAP
• Citation: 637 B.R. 663
• Parties: IN RE: Talas Qais Abdulmunem AL ZAWAWI Talas Qais Abdulmunem Al Zawawi, Appellant, v. Colin Diss, Hannah Davie and Michael Leeds, Appellees.
• Court: U.S. District Court — Middle District of Florida

637 B.R. 663

IN RE: Talas Qais Abdulmunem AL ZAWAWITalas Qais Abdulmunem Al Zawawi, Appellant,

v.Colin Diss, Hannah Davie and Michael Leeds, Appellees.

Case No: 6:21-cv-894-GAP

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

Signed February 28, 2022

Kenneth D. Herron, Jr., Herron Hill Law Group, PLLC, Orlando, FL, for Appellant.

Leyza F. Blanco, Juan Jose Mendoza, Sequor Law, PA, Miami, FL, for Appellees.

MEMORANDUM OPINION AND ORDER

GREGORY A. PRESNELL, UNITED STATES DISTRICT JUDGE

This matter comes before the Court without oral argument on appeal from the United States Bankruptcy Court for the Middle District of Florida ("Bankruptcy Court"). That court entered an order granting recognition of a foreign insolvency proceeding on May 5, 2021 ("Order") (Doc. 10–21), which is the subject of this appeal.¹ With the parties’ briefing complete (Docs. 14, 22, 27), the matter is ripe for disposition.

I. Background

After Talal Qais Abdulmunem Al Zawawi ("Al Zawawi") got divorced, a court in the United Kingdom ordered him to pay £24 million to his former wife. Doc. 10–12 ¶¶ 3-5. Al Zawawi, a citizen and resident of Oman, see Doc. 10–7 at 2; Doc. 10–8 at 10, refused to pay, so he was adjudged bankrupt under English law. See Doc. 10–12 ¶ 9. Appellees are joint trustees in the English bankruptcy proceeding. Doc. 10–12 ¶ 10.

This cross-border bankruptcy made its way to Orlando because Appellees sought, among other things, discovery related to assets purportedly held by Al Zawawi in the Middle District of Florida. Doc. 10–12 ¶¶ 21–24, 26. Al Zawawi owns shares in a Curaçaoan entity that wholly owns a web of Florida corporations based in Winter Park, Florida.² Doc. 15-1 at 20-21. And at the time of the recognition proceedings, Al Zawawi served as a director of those Florida corporations,³ which collectively own around $94 million of real estate in the area.⁴

Appellees thus petitioned the Bankruptcy Court for the Middle District of Florida for an order recognizing the English bankruptcy proceeding under Chapter 15 of the United States Bankruptcy Code,⁵ which was granted. See Docs. 10-21 & 11-1.

On appeal, Al Zawawi raises two issues. The first is whether Appellees had to show that Al Zawawi qualified as a "debtor" under Section 109(a) to obtain the recognition order. Section 1517 directs courts to "recogniz[e] a foreign proceeding" if three elements are met. 11 U.S.C. § 1517(a). Al Zawawi does not dispute that those elements were met, but asserts that Appellees had to satisfy a requirement otherwise absent from Section 1517 : that Al Zawawi had "property in the United States" under Section 109(a). In other words, Al Zawawi claims that Section 109(a) imposes a threshold requirement for all Chapter 15 recognition proceedings.

Second, if Section 109(a) applies, Al Zawawi disputes that Appellees met their burden of showing that he qualified as a "debtor" under that section. However, since the Court concludes that compliance with Section 109(a) is not a prerequisite to obtaining recognition under Chapter 15, this issue becomes moot.

II. Legal Standard

Since the issue here involves a question of law, the Court exercises de novo review. See In re Horne , 876 F.3d 1076, 1080 (11th Cir. 2017) (citation omitted).

To interpret the Bankruptcy Code, the Court relies on "the traditional standards of statutory construction." In re Tennyson , 611 F.3d 873, 877 (11th Cir. 2010). The Court begins with "the language of the statute itself." Id. (citation omitted). "We assume that Congress used the words in a statute as they are commonly and ordinarily understood, and we read the statute to give full effect to each of its provisions." Id. (citation omitted). To do so, the Court must not "look at one word or term in isolation, but instead ... look to the entire statutory context." Id. (citation omitted). The Eleventh Circuit has instructed courts to consider extrinsic materials only if: "(1) the statute's language is ambiguous; (2) applying it according to its plain meaning would lead to an absurd result; or (3) there is clear evidence of contrary legislative intent." Id. (citation omitted).

III. Analysis

a. Chapter 15 and Recognition under Section 1517

Chapter 15 is a measure of comity. See, e.g. , 11 U.S.C. § 1501 ; see generally In re Vitro S.A.B. de CV , 701 F.3d 1031, 1044 (5th Cir. 2012) (characterizing "comity" as "a principal objective" of Chapter 15 (citation omitted)). It not only authorizes bankruptcy courts to aid foreign bodies in the administration of foreign insolvency proceedings, but in some cases forces them to do so. See, e.g. , 11 U.S.C. §§ 1507, 1509, 1519 - 1521.

Once a foreign insolvency proceeding has been commenced, a "foreign representative"⁶ may petition a United States bankruptcy court for an order recognizing the proceeding. See 11 U.S.C. § 1515.

With a recognition order, Chapter 15 gives a bankruptcy court the power to "grant any appropriate relief" requested by the foreign representative that is "necessary to effectuate the purpose of th[e] chapter and protect the assets of the debtor or the interests of the creditors." 11 U.S.C. § 1521(a). That includes staying litigation and executions; suspending transfer rights; "entrusting the administration ... of all or part of the debtor's assets within the ... United States to the foreign representative"; and, most pertinent here, "providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor's assets, affairs, rights, obligations or liabilities." 11 U.S.C. § 1521(a).

Section 1517(a) sets forth just three conditions for recognition, none of which involve an assessment of the foreign debtor's contacts with the United States. See 11 U.S.C. § 1517(a). That section provides:

Subject to section 1506, after notice and a hearing, an order recognizing a foreign proceeding shall be entered if—

(1) such foreign proceeding for which recognition is sought is a foreign main proceeding or foreign nonmain proceeding within the meaning of section 1502;

(2) the foreign representative applying for recognition is a person or body; and

(3) the petition meets the [administrative] requirements of section 1515.

11 U.S.C. § 1517(a) (emphasis added).

Nonetheless, Al Zawawi claims that the requirements in Section 1517(a) are not exhaustive. He points to sections 109 and 103 of the Bankruptcy Code. Section 109(a) provides that "[n]otwithstanding any other provision of this section, only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title." 11 U.S.C. § 109(a). And Section 103(a) directs courts to apply Section 109 to cases under Chapter 15. See 11 U.S.C. § 103(a) ("Except as provided for in section 1161 of this title, ... this chapter, sections 307, 362(o), 555 through 557, and 559 through 562 apply in a case under chapter 15."). Therefore, Al Zawawi asserts, a foreign representative seeking recognition must show that the foreign debtor "resides or has a domicile, a place of business, or property in the United States." 11 U.S.C. § 109(a).⁷

But Al Zawawi misconstrues the application of Section 109(a). Section 1517 unambiguously provides the sole requirements for recognition. Recognition is not premised upon a foreign debtor having a domicile, residence, place of business, or property in the United States. C.f. Jaffe v. Samsung Elecs. Co., Ltd. , 737 F.3d 14, 24 (4th Cir. 2013) ("If the [recognition] petition meets the requirements listed in § 1517, the court must enter an order granting recognition of the foreign proceeding." (emphasis in original)); In re ABC Learning Centres Ltd. , 728 F.3d 301, 306 (3d Cir. 2013) ("Chapter 15 ... mandat[es] recognition when a foreign proceeding meets Section 1517 recognition requirements." (citation omitted)).⁸

That Chapter 15 contains the term "debtor" does not change the outcome here. Although "debtor" is defined at the start of the Bankruptcy Code, see 11 U.S.C. § 101(13), Chapter 15 provides its own, alternate definition for "debtor." See 11 U.S.C. § 1502(1) ("For the purposes of this chapter, the term ... ‘debtor’ means an entity that is the subject of a foreign proceeding ...."). That definition controls and is plainly consistent with the purposes of Chapter 15.⁹

b. Other Statutory Provisions Confirm that Recognition is Not Predicated on Section 109(a)

The Court need not look beyond Section 1517. See, e.g. , In re Guillen , 972 F.3d 1221, 1226 (11th Cir. 2020) (suggesting that when "a plain, nonabsurd meaning [comes] in[to] view," a court is not required to sail further into the horizon (citation omitted)). But numerous provisions cited by the parties further indicate that recognition is a concept that lies beyond Section 109(a) ’s reach. C.f. In re Tennyson , 611 F.3d at 877 (recognizing the import of "statutory context" (citation and internal quotation marks omitted)).

Start with Section 1528, which provides that "[a]fter recognition of a foreign main proceeding, a case under another chapter of this title may be commenced only if the debtor has assets in the United States." 11 U.S.C. § 1528 (emphasis added). If Section 109(a) created a threshold requirement to Chapter 15 as Al Zawawi suggests, Congress would have had little, if any, need to qualify Section 1528 in this manner.

Moreover, part of the venue statute for Chapter 15 cases, 28 U.S.C. § 1410, would be rendered superfluous if Section 109(a) applied a threshold bar to recognition. In a chapter 15 case, venue lies in the district:

(1) in which the debtor has its principal place of business or principal assets in the United States;

(2) if the debtor does not have a place of business or assets in the United States, in which there is pending against the debtor an action or proceeding in a Federal or State court; or

(3) in a case other than those specified in paragraph (1) or (2), in which venue will be consistent with the interests of justice and the

...