On March 23, 2012, Judge Peter J. Walsh of the United States Bankruptcy Court for the District of Delaware entered a memorandum opinion in James R. Zazzali v. 1031 Exchange Group LLC, et al. (In re DBSI, Inc., et al.) (Adv. Proc. No. 10-54648 (PJW)), denying the motion (the “Motion”) of certain defendants (“Defendants”) to dismiss the proceeding for lack of personal jurisdiction, since (i) the complaint (“Complaint”) established a prima facie case of jurisdiction over the Defendants; (ii) the Defendants were properly served pursuant to Fed. R. Bank. P. 7004; (iii) the Defendants had sufficient minimum contacts with the United States; and (iv) it was not burdensome for the Defendants to have the action resolved in the District of Delaware.
The Chapter 11 Trustee (the “Trustee”) in the DBSI, Inc. bankruptcy cases sought to avoid 893 fraudulent transfers made by the debtors (the “Debtors”) to 370 defendants residing in thirty-three different states. The Defendants that filed the Motion, constituting 112 of the 370 named defendants, had provided pre-petition real estate brokerage services for the Debtors.
In denying the Motion, the Court found the following: (1) the Complaint established a prima facie case of jurisdiction over the Defendants, primarily because the Defendants’ did not present evidence that they would suffer financial distress if the proceedings stayed in Delaware’s jurisdiction; (2) service upon the Defendants was proper since Fed. R. Bankr. P. 7004 permits nationwide service of process, despite the Defendants’ arguments that such service can only be authorized by a federal statute; (3) the Defendants had sufficient minimum contacts with the United States by way of their residing and conducting business in the this country; and (4) the burden upon the Defendants was not constitutionally significant, since much of the discovery would take place remotely or electronically; conversely, the burden of the Trustee having to litigate the same case in thirty-three different venues would be immense. Thus, the Motion was denied.
A copy of the memorandum opinion can be found here.