The World in U.S. Courts: Winter 2016 - Bankruptcy | October.21.2016
A chapter 7 bankruptcy trustee sought to avoid and recover certain alleged fraudulent transfers made to defendants by a debtor, Roman Sledziejowski, and non-debtor, TWS Investment Partners LLC. The transfers related to the winding up of Sledziejowski’s equity investment in certain defendants and TWS’s loan to certain defendants. Specifically, Sledziejowski owned a 25% equity interest in two Polish limited liability companies located in Poland. His business partner—one of the moving defendants—was a Polish resident with a 40% equity interest in the Polish LLCs, and he also was the Chairman of the LLCs’ Board of Directors. Sledziejowski’s entity, TWS, provided several loans to Sledziejowski’s Polish business partner and the two Polish LLCs. While the loans were advanced in US dollars from a US bank account, the entities used those loans to engage in real estate development projects in Poland and the agreements memorializing the equity and lending relationship were governed by Polish law. The defendants moved to dismiss the claim, arguing as relevant here that the court lacked personal jurisdiction over them given their significant ties to Poland and their lack of contact with the US.
The Court began its analysis by conducting a two-part personal jurisdiction inquiry. First, it considered if the defendants had the requisite “minimum contacts” with the United States as a whole, the proper scope of inquiry under the national bankruptcy laws. Second, if such minimum contacts exist to support either specific or general personal jurisdiction, it would be required to determine whether the exercise of jurisdiction was reasonable under the circumstances and whether doing so would not “offend traditional notions of fair play and substantial justice.”
Only specific personal jurisdiction was asserted, based on a claim that the defendants had “purposefully directed” their activities at the US, and that the trustee’s claim related to such activities. The Court found that the defendants’ alleged contacts with the US were inadequate to support jurisdiction. It noted the “overwhelmingly foreign nature of the transactions at issue,” including how investments had been made in Polish real estate with Polish entities under Polish law and that the investments were sold to non-U.S. entities. Moreover, each defendant was located outside the US, the transactions involved investments outside the US, and the agreements at issue were governed by Polish law.
However, the Court found that the trustee’s request for jurisdictional discovery was appropriate because the trustee made “a sufficient start toward establishing jurisdiction” as numerous allegations—such as how Sledziejowski’s Polish business partner visited the US to advance the transactions and that some defendants sent notices to the US—suggested the possibility that jurisdiction was appropriate. Moreover, jurisdictional discovery was proper because the trustee had limited means to determine the relevant facts, many of which were exclusively within the defendants’ exclusive knowledge.