IN RE: JOSEPH C. SHEEHAN, JOSEPH C. SHEEHAN, Plaintiff-Appellant, v. BRECCIA UNLIMITED COMPANY, et al., Defendants-Appellees.
Nos. 21-2946 & 21-2954
United States Court of Appeals For the Seventh Circuit
DECIDED SEPTEMBER 7, 2022
ARGUED MAY 25, 2022
Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. Nos. 1:20-cv-05282 & 1:20-cv-05283 — Andrea R. Wood, Judge.
Before RIPPLE, ROVNER, and KIRSCH, Circuit Judges.
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,
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.”
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
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
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 power. See Celotex Corp. v. Edwards, 514 U.S. 300, 307 (1995) (listing the statutory sources of a bankruptcy court‘s jurisdiction). And of course, as the Federal Rules of Bankruptcy Procedure remind us, all jurisdiction is ultimately subject to constitutional constraints.
When a defendant moves to dismiss a complaint for lack of personal jurisdiction under
Because Sheehan attempts to link personal jurisdiction over the defendants to the bankruptcy court‘s in rem
Sheehan spends many pages of his brief focusing on the in rem jurisdictional powers of the bankruptcy court. There is no need to convince this court that the bankruptcy court had jurisdiction over any property in Sheehan‘s estate, however, as this point was conceded by all parties and recognized by both courts below. In pursuit of his in rem-focused argument, Sheehan asserts conclusively that “[t]he Blackrock Shares and the Ballyheigue Property are property of the Debtor‘s bankruptcy estate.” Sheehan Brief at 16. The accuracy of this statement is far from clear given the Irish court‘s judgment against Sheehan in a suit in Ireland.6 For purposes of these proceedings, however, the defendants are willing to concede that Sheehan held some kind of interest in the Blackrock Shares and Ballyheigue property at the time he filed his bankruptcy petition, and we will do the same. But the court‘s ability to assert control over any property in Sheehan‘s estate located in Ireland depends on whether the court has personal jurisdiction over the Irish citizens and entities holding that property.
Sheehan‘s in rem-linked theory relies on the legal fiction that property of a bankruptcy estate “regardless of actual location—is legally located within the jurisdictional boundaries of the district in which the court sits.” Sheehan Brief at 22 (quoting In re Simon, 153 F.3d 991, 996 (9th Cir. 1998) (emphasis in original)). According to Sheehan‘s argument, because the Irish property was subject to the legal
A court can have either general or specific personal jurisdiction over a party. Neither party asserts that the court has general jurisdiction over the defendant-appellees, as none are “at home” in the jurisdiction either by being incorporated in Illinois or having a principal place of business there. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919, 924 (2011). All defendant-appellees are Irish citizens or Irish businesses and conduct their business operations in Ireland.
Thus we turn to the only applicable question of jurisdiction—whether the bankruptcy court had specific personal jurisdiction over the defendants. Specific personal jurisdiction depends on “an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum State and is therefore subject to the State‘s regulation.” Bristol-Myers Squibb Co. v. Superior Ct., 137 S. Ct. 1773, 1780 (2017) (cleaned up).
This court has enumerated the requirements for specific personal jurisdiction as follows: first, defendants must have purposefully directed their activities at the forum state or purposefully availed themselves of the privilege of conducting business in the forum; second, the alleged injury must arise out of or relate to the defendants’ forum-related activities; and third, any exercise of personal jurisdiction must comport with traditional notions of fair play and substantial justice. Rogers v. City of Hobart, Ind., 996 F.3d 812, 819 (7th Cir. 2021); Tamburo v. Dworkin, 601 F.3d 693, 702 (7th Cir. 2010).
Within the framework of those three requirements, the Supreme Court and this court have given more specific guidance on what it means to have purposefully directed activity at a forum or availed oneself of the privileges of a forum. That guidance informs us that our assessment of personal jurisdiction must focus on the acts and activities of the defendant. Walden v. Fiore, 571 U.S. 277, 284 (2014); NBA Properties, Inc. v. HANWJH, No. 21-2909, 2022 WL 3367823, at *4 (7th Cir. Aug. 16, 2022). The relationship between the defendant and the forum “must arise out of contacts that the ‘defendant himself creates with the forum State.” Walden, 571 U.S. at 284 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985)) (emphasis in both opinions); see also Asahi Metal Indus. Co. v. Superior Ct. of Cal., Solano Cnty., 480 U.S. 102, 109 (1987) (“Jurisdiction is proper ... where the contacts proximately result from actions by the defendant himself that create a substantial connection with the forum State.“) (emphasis in original) (internal citations omitted); Rogers, 996 F.3d at 820 (“[A] defendant‘s relationship to the forum state must arise out of contacts that the defendant himself creates with the forum State.“) (internal citations omitted) (emphasis in original).
This means that specific personal jurisdiction cannot depend solely on the actions of the plaintiff or third parties. Walden, 571 U.S. at 284. Moreover, the defendants’ minimum contacts must be with the forum itself and not merely with a person who resides there. Id. at 285. Said another way, “the plaintiff cannot be the only link between the defendant and the forum. Rather, it is the defendant‘s conduct that must form the necessary connection with the forum State that is the basis for its jurisdiction over him.” Id. at 285. “Due process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the ‘random, fortuitous, or attenuated’ contacts he makes by interacting with other persons affiliated with the State.” Walden, 571 U.S. at 286 (quoting Burger King, 471 U.S. at 475); see also NBA Properties, 2022 WL 3367823, at *7 (“The question is not whether the plaintiff purchased enough goods to subject the defendant to personal jurisdiction. The focus is whether [the defendant] purposefully directed its conduct at Illinois.“).
This focus on a defendant‘s activities means that it is not enough that the defendant took some action that ultimately had an effect on the plaintiff in the forum. “The question is not whether the plaintiff experienced a particular injury or effect in the forum state but whether the defendant‘s conduct connects him with the forum in a meaningful way.” Rogers, 996 F.3d at 819. A “meaningful way” is one in which defendants “purposefully directed” their actions at the forum. Id. This is true even if the defendant could have foreseen the effect on the plaintiff—that is, that the plaintiff would be harmed in the forum. Burger King Corp., 471 U.S. at 474; Cent. States, Se. & Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 943 (7th Cir. 2000). The Supreme Court‘s precedents make clear “that it is the defendant‘s actions, not his expectations, that empower a State‘s courts to subject him to judgment.” J. McIntyre Mach., Ltd. v. Nicastro, 564 U.S. 873, 883 (2011). Thus, for example, “a defendant‘s awareness that the stream of commerce may or will sweep the product into the forum State does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum State.” Asahi Metal Indus., 480 U.S. at 112. Likewise liquidating property in Ireland after receiving permission from an Irish court to do so is not activity directed toward Illinois merely because it might have an effect on a resident and citizen of Illinois.
We can see the difference between actions that are purposefully directed at a forum and those that are not, by juxtaposing two Supreme Court cases addressing personal jurisdiction. In Calder v. Jones, 465 U.S. 783 (1984), a reporter and editor, both of whom were based in Florida, published an allegedly libelous magazine article that was widely circulated in California. The Court found that the California court had jurisdiction over the defendants not only because their actions had an effect in California—that is, damage to the plaintiff‘s reputation—but also because the defendants had created ample contacts with California—they reached into California by telephoning and relying on California sources, they wrote the story about the
Although we recognized that the defendants’ activities “focused” on the plaintiff, our jurisdictional inquiry “focused on ‘the relationship among the defendant, the forum, and the litigation.‘” Calder, 465 U.S. at 788. Specifically, we examined the various contacts the defendants had created with California (and not just with the plaintiff) by writing the allegedly libelous story. We found those forum contacts to be ample.
Walden, 571 U.S. at 287 (cleaned up).
The Walden court went on to explain that mere injury to a forum resident, even if predictable, is not a sufficient connection to the forum. Id. at 290. “The crux of Calder was that the reputation-based ‘effects’ of the alleged libel connected the defendants to California, not just to the plaintiff.” Id. at 287.
The Walden court distinguished the facts in Calder from those in the case before it and held that a Georgia police officer in a Georgia airport who questioned and searched Nevada travelers, seized their cash, and allegedly filed a false probable cause affidavit to support that seizure, could not be successfully haled into a Nevada court as a defendant even if the officer must have known that his actions would cause harm to the Nevada plaintiffs in their home state. The Court compared the two cases and found that, unlike the reporter in Calder, the officer in Walden never travelled to Nevada, conducted activities therein, contacted anyone in Nevada, sent anything to anyone in Nevada, or otherwise aimed his activity at Nevada. Walden, 571 U.S. at 289.
Similarly, this court has concluded that when a plaintiff is injured by acts that a defendant commits entirely within one forum (in this case, Ireland), the fact that the plaintiff suffers the negative effects of those acts in his home forum (in this case, Illinois) does not confer personal jurisdiction over the defendant in the latter forum. See Mobile Anesthesiologists Chicago, L.L.C. v. Anesthesia Assocs. of Houston Metroplex, 623 F.3d 440, 444 (7th Cir. 2010). In Mobile Anesthesiologists, a medical anesthesia business in Houston created a website in Houston with a similar name to one registered to Mobile Anesthesiologists Chicago. The Houston defendant continued to use the website even after receiving a cease and desist letter from the plaintiff Chicago company, which the plaintiffs maintained constituted actual knowledge that the plaintiff was suffering a harm in Illinois. Nevertheless, we noted that the Supreme Court in Calder made clear “that a defendant‘s intentional tort creates the requisite minimum contacts with a state only when the defendant expressly aims its actions at the state with the knowledge that they would cause harm to the plaintiff there.” Id. at 445. In other words, harm to a plaintiff in the forum state is by itself insufficient. Id. at 447. The Mobile Anesthesiologists opinion emphasized
In short, “‘express aiming’ remains the crucial requirement when a plaintiff seeks to establish personal jurisdiction under Calder.” Mobile Anesthesiologists Chicago, 623 F.3d at 445-46. In this case, the defendants’ acts in Ireland may indeed have had an effect upon Sheehan in Illinois, but none of the defendants “intentionally direct[ed]” or “expressly aim[ed]” the alleged wrongdoing (exerting control over and liquidating collateral) at Sheehan, let alone at Illinois. Walden, 571 U.S. at 289 (“Petitioner‘s actions in Georgia did not create sufficient contacts with Nevada simply because he allegedly directed his conduct at plaintiffs whom he knew had Nevada connections.“); Mobile Anesthesiologists Chicago, 623 F.3d at 445 (“[A] defendant‘s intentional tort creates the requisite minimum contacts with a state only when the defendant expressly aims its actions at the state with the knowledge that they would cause harm to the plaintiff there.“). The Irish defendants directed their activity at Irish property located in Ireland and which served as collateral for a loan made by an Irish bank, in accordance with the permission of an Irish court after several years of litigation resolving disputes over ownership of the property. None of the defendants did anything to reach out to the United States and affiliate themselves with the United States or Illinois. The only connection between the defendant‘s suit-related conduct and the United States is Sheehan‘s residence in Illinois and his unilateral act of filing for Chapter 11 bankruptcy in Illinois. Specific personal jurisdiction cannot be based on the plaintiff‘s mere presence in the forum or on the “unilateral activity” of a plaintiff. Walden, 571 U.S. at 285–86. As an aside, it is worth noting that the genesis of this case came from Sheehan‘s acts when he reached out to Ireland to request financing from an Irish bank to purchase Irish property. The defendants were on the path to liquidating the collateral for that financing when Sheehan filed for bankruptcy in Illinois. Long before Sheehan filed for bankruptcy in Illinois, the defendants had litigated in Irish courts their right to liquidate the collateral, and they had already put into place a receivership to do just that. Had Sheehan never filed for bankruptcy in Illinois (or had he filed in any other state), the defendants would have proceeded just as they did. See Walden, 571 U.S. at 290. They cannot, therefore, have been aiming their conduct at Illinois.
Moreover, the fact that the defendants could have foreseen that their conduct would effect Sheehan in Illinois was insufficient to establish personal jurisdiction. See Walden, 571 U.S. at 289. Thus Sheehan‘s unilateral act of sending notice to the defendants of the bankruptcy proceedings in Illinois and the effect of the automatic stay, did not create minimum contacts. “To find express aiming
Despite the clear guidance from Walden, Calder, and Mobile Anesthesiologists, Sheehan cites to three bankruptcy cases from out-of-circuit bankruptcy courts (all pre-dating Walden) which Sheehan interprets to require this court to find that the court in this case had personal jurisdiction over the defendants.7 We need not spend much time differentiating these cases from the one before us or ruling on the propriety of the holdings, as our charge is to follow the dictates of the Supreme Court and this circuit which instruct that the defendants’ contacts with the bankruptcy court here were insufficient to establish jurisdiction.
We also find that the alleged injury to Sheehan did not arise out of defendants’ forum-related activities. Ford Motor Co. v. Montana Eighth Jud. Dist. Ct., 141 S. Ct. 1017, 1025 (2021). All of the acts taken by the defendants to assert control and ownership over the Irish property occurred in Ireland. See, e.g., Philos Techs., Inc. v. Philos & D, Inc., 802 F.3d 905, 915 (7th Cir. 2015) (even an informational business trip to Illinois did not turn a primarily Korean business deal into one with jurisdictional contacts in Illinois). Moreover, the few letters that Breccia sent to Sheehan announcing the receivership and start of the liquidation of Sheehan‘s collateral for defaulted loans were nothing more than ministerial actions taken in light of the Irish court‘s disposition of the litigation in Ireland. They do not constitute taking aim at Illinois, and were far from sufficient to create minimum contacts with Illinois.
Given our conclusion that none of the defendants had minimum contacts with the United States, we need not determine whether exercising personal jurisdiction would “violate traditional notions of fair play and substantial justice.” Int‘l Shoe, 326 U.S. at 316; Rogers, 996 F.3d at 819.
B. Discovery
As an alternative to a denial of the motion to dismiss, Sheehan asked the bankruptcy court to allow discovery relating to the testimony in the declarations submitted in support of the defendants’ motions to dismiss. The bankruptcy court granted the motions to dismiss based on its finding that it lacked personal jurisdiction over the defendants and based on Sheehan‘s failure of service under the Hague Service Convention. The bankruptcy court did not specifically address Sheehan‘s alternative request for discovery. Like district courts, bankruptcy courts have wide discretion on matters of discovery. See, e.g., USA Gymnastics v. Liberty Ins. Underwriters, Inc., 27 F.4th 499, 514 (7th Cir. 2022). We therefore review for abuse of discretion only, and grant great deference to, a bankruptcy court‘s decision to disallow discovery. Fields v. City of Chicago, 981 F.3d 534, 551 (7th Cir. 2020). A plaintiff must be able to establish “a colorable or prima facie showing of personal jurisdiction before discovery should be permitted.” Cent. States, 230 F.3d at 946. In addition to the heavy weight of a bankruptcy court‘s discretion, there is a further
Because we hold that the bankruptcy court had no jurisdiction over the defendants, we need not address the issues of proper service or forum non conveniens.
The judgment of the district court is AFFIRMED.
Notes
We also note that, as of February 24, 2020, the Irish courts were still issuing post-decision rulings, including an injunction to prevent Sheehan from disposing of his assets in Ireland, which may have affected the timing of the receiver‘s sales.