Out-of-state defendants are sometimes surprised to learn that their lack of minimum contacts with the forum state is irrelevant if the lawsuit against them is filed as an adversary proceeding in a federal bankruptcy court. For example, a company or individual that has minimum contacts with the United States as a whole, but not with Louisiana specifically, is still subject to the jurisdiction of a United States Bankruptcy Court in Louisiana. A defendant’s motion to dismiss for lack of personal jurisdiction based on having no contacts with the forum state will be denied.
Federal district courts have original jurisdiction over any civil action that is “related to” a bankruptcy case. See 28 U.S.C. § 1334(b). Most, if not all, federal district courts have a Standing Order or Local Rule that refers civil actions related to a bankruptcy case to the federal bankruptcy court where the bankruptcy case is pending. When a civil action is pending in federal bankruptcy court, the Federal Rules of Bankruptcy Procedure (“FRBPs”) apply. The FRBPs incorporate most of the Federal Rules of Civil Procedure, but there are several key differences.
One difference that bankruptcy litigation novices may not be familiar with is FRBP 7004(d), which allows a summons and complaint for an adversary proceeding pending in federal bankruptcy court to be served “anywhere in the United States.” So long as the “exercise of jurisdiction is consistent with the Constitution and the laws of the United States,” the defendant is subject to personal jurisdiction in the federal bankruptcy court where the adversary proceeding is pending. Fed. R. Bankr. P. 7004(f). That is materially different from Federal Rule of Civil Procedure 4’s provision that service of a summons establishes personal jurisdiction over a served defendant only if that defendant “is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located,” i.e., a defendant with minimum contacts in the forum state. Fed. R. Civ. P. 4(k)(1)(A). The key question for a minimum contacts analysis in federal district court — is the defendant subject to jurisdiction of the forum state? — is completely irrelevant in federal bankruptcy court. With nationwide service of process, the forum is the United States. “So minimum contacts with the United States (Fifth Amendment due process) suffice; minimum contacts with a particular state (Fourteenth Amendment due process) are beside the point.” Double Eagle Energy Services, L.L.C. v. MarkWest Utica EMG, L.L.C., 936 F3d 260, 264 (5th Cir. 2019) (citations omitted).
Defendants in adversary proceedings often have many legal defenses available that an experienced bankruptcy lawyer can help them plead and prove. But 99 times out of 100, asserting that the bankruptcy court lacks personal jurisdiction over a defendant will not accomplish anything more than showing that defense counsel has very little experience with bankruptcy litigation.