Ancillary and Other Cross-Border Cases: May a Party-in-Interest Rebut the Presumption that the Debtor's Habitual Residence is the Debtor's Center of Main Interest (COMI)?

Case Note Re: Caillouet v. First Bank and Trust (In re Entringer Bakeries, Inc.), No. 07-30499, 2008 WL 4821613 (5th Cir. Nov. 6, 2008)
By: Jonathan L. Howell
February 2008

In Lavie v. Ran, the U.S. District Court for the Southern District of Texas held that a foreign representative may rebut the presumption that a debtor's habitual residence is the debtor's center of main interest ("COMI") pursuant to section 1516(c) of the Bankruptcy Code (the "Code").

An Israeli bankruptcy court issued an order declaring debtor Yuval Ran ("Ran") bankrupt. Thereafter, Zuriel Lavie, the appointed trustee of Ran's property ("Lavie"), sought recognition of the foreign proceeding from the Bankruptcy Court for the Southern District of Texas in accordance with section 1504. The bankruptcy court, however, denied recognition of the proceeding, finding the Israeli proceeding neither constituted a "foreign main proceeding" nor a "foreign nonmain proceeding" as defined in section 1502. In doing so, the bankruptcy court found that Ran's habitual residence was in Houston, triggering the presumption that Ran's COMI was in Houston as well. Later, Lavie appealed the bankruptcy court's decision.

On appeal, the district court acting in its appellate capacity remanded the case back to the bankruptcy court for further proceedings. While the district court concluded that the bankruptcy court was correct in determining Ran's habitual residence, Houston, was presumed to be the COMI pursuant to section 1516(c), the district court stated that "further factual findings and legal analysis [was] required to determine whether Lavie, through evidence either offered to him or otherwise in the record, [could meet] his burden of rebutting that presumption." Given that the bankruptcy court denied Lavie the opportunity to rebut the presumption, the district court remanded the case for further proceedings.

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