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New York Bankruptcy Court Finds Constitutional Authority to Enter Default Judgments Against Foreign Defendants

In a recent opinion, United States Bankruptcy Judge Martin Glenn of the Southern District of New York held that Bankruptcy Courts may enter final default judgments against non-US defendants who fail to respond to a properly served summons and complaint.

Judge Glenn held that a properly served foreign defendant in a preference action who fails to respond is deemed to have implied its consent to a Bankruptcy Court’s entry of a final order and, thus, under Stern v. Marshall and its progeny, a Bankruptcy Court may enter a default judgment. In this case, Judge Glenn carefully considered all applicable US and international service requirements in holding service was in fact proper and, thus, entry of default judgments was appropriate.

The case and decision are In re Advance Watch Co., Ltd., No. 15-12690 (MG), 2018 WL 3203386 (Bankr. S.D.N.Y. June 29, 2018). The decision follows a nearly identical holding by Judge Glenn in In re Oldco M Corp., 484 B.R. 598 (Bankr. S.D.N.Y. 2012). The Oldco decision came after the Supreme Court’s seminal Stern v. Marshall decision in 2011 but before its 2015 follow-up to Stern in Wellness International, where the Supreme Court held that litigants may consent to a Bankruptcy Court’s final adjudication of so-called Stern claims, i.e. claims that are “core” under the relevant statute but that, after Stern, require final adjudication by an Article III judge.

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* This article was first published by INSOL International on August 10, 2018.

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