IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 09-20288

In the Matter of: YUVAL RAN, 

 Debtor

ZURIEL LAVIE, 

 Appellant

v.

YUVAL RAN, 

 Appellee

Appeal from the United States District Court 

for the Southern District of Texas

Before STEWART, DENNIS, and HAYNES, Circuit Judges.

CARL E. STEWART, Circuit Judge:

In a matter of first impression before this court, Zuriel Lavie (“Lavie”), an

Israeli bankruptcy receiver, appeals the district court’s denial of his petition for

recognition under Chapter 15 of the Bankruptcy Code of an ongoing, involuntary

bankruptcy proceeding pending in Israel, for debtor Yuval Ran (“Ran”). In

particular, the petition sought recognition of the Israeli bankruptcy proceeding

United States Court of Appeals

Fifth Circuit

F I L E D

May 27, 2010

Lyle W. Cayce

Clerk

Case: 09-20288 Document: 00511124097 Page: 1 Date Filed: 05/27/2010
No. 09-20288

2

as a foreign main or nonmain proceeding. If granted, that recognition would

have entitled Lavie to the protections of a variety of Bankruptcy Code provisions.

For the reasons discussed below, we affirm the district court’s denial of Lavie’s

petition for recognition under Chapter 15 of the Bankruptcy Code.

 I. FACTUAL AND PROCEDURAL BACKGROUND

Ran was a well-known Israeli businessman and promoter when he

encountered financial difficulties in the late 1990’s. In fact, he was a director or

shareholder in almost one hundred Israeli companies, some of them

publicly-traded. The largest company in which Ran had a controlling interest

was Israel Credit Lines Supplementary Financial Services Ltd. (“Credit Lines”),

a public company that was co-founded by Ran and for which he served as CEO.

Credit Lines raised millions of dollars from investors and owned interests in

numerous other companies. It is now in liquidation through an Israeli

bankruptcy proceeding, and its receiver has asserted claims against Ran for

millions of dollars in damages. On June 16, 1997, an involuntary bankruptcy

proceeding was commenced against Ran, in the Israeli District Court of Tel

Aviv-Jaffa. Lavie was initially appointed as temporary receiver of Ran’s assets

and later, on November 28, 1998, Lavie was appointed permanent receiver.

In April 1997, before the involuntary bankruptcy proceeding was

commenced, Ran left Israel and has never returned. After leaving, Ran moved

to Houston, Texas, in May or June of 1997, where he and his family have since

resided continuously. Ran’s wife and five children are United States citizens, and

Ran is a legal permanent resident of the United States and is currently seeking

United States citizenship. Ran and his wife own a home in Houston and are

both employees of a furniture company in the area. After leaving Israel, Ran

temporarily assisted in collecting debts owed to Credit Lines, but ceased doing

so when receivership and liquidation proceedings began for Credit Lines in 1998.

Case: 09-20288 Document: 00511124097 Page: 2 Date Filed: 05/27/2010
No. 09-20288

3

Currently, Ran carries out no business activity in Israel, and has not done so

since 1998. 

On December 11, 2006, nearly a decade after Ran and his family

emigrated from Israel and more than eight years after being appointed receiver

of Ran’s estate, Lavie filed a petition seeking recognition of the Israeli

bankruptcy proceeding as a foreign main or nonmain proceeding under Chapter

15 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Southern

District of Texas. On May 22, 2007, the Bankruptcy Court denied the petition.

The Bankruptcy Court’s order was the subject of two appeals to the district

court, the first resulting in a remand for additional findings and the second

resulting in an order affirming the denial of Lavie’s petition for recognition. This

appeal followed. 

II. DISCUSSION

A. Standard of Review

“We review a district court’s affirmance of a bankruptcy court decision by

applying the same standard of review to the bankruptcy court decision that the

district court applied.” In re Martinez, 564 F.3d 719, 725-26 (5th Cir. 2009). “We

thus generally review factual findings for clear error and conclusions of law de

novo.” Id. at 726 (quoting In re OCA, Inc., 551 F.3d 359, 366 (5th Cir. 2008))

(internal quotation marks omitted). While a determination of whether Ran’s

bankruptcy proceeding is a foreign main or nonmain proceeding is inherently a

fact-driven inquiry, the facts in this case are not in dispute and the appeal to the

district court was de novo, as is the appeal to this court. See, e.g., In re Belsome,

434 F.3d 774, 776 (5th Cir. 2005); see also, William H. Schrag, William C. Heuer,

& Robert E. Cortes, Cross-Border Insolvencies and Chapter 15: Recent U.S. Case

Law Determining Whether a Foreign Proceeding Is “Main” or”Nonmain” or

Neither, 17 J. BANKR. L. & PRAC. 5, art. 4 (Aug. 2008) (noting that “[t]he

Case: 09-20288 Document: 00511124097 Page: 3 Date Filed: 05/27/2010
No. 09-20288

4

determination of whether a foreign proceeding is ‘main’ or ‘nonmain’ is factdriven”). 

B. Chapter 15’s Framework

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

(“BAPCPA”) enacted Chapter 15 of the Bankruptcy Code, “so as to provide

effective mechanisms for dealing with cases of cross-border insolvency.” 11

U.S.C. § 1501(a). It replaced former Section 304 of the Bankruptcy Code and

“incorporate[s] the Model Law on Cross-Border Insolvency” drafted by

UNCITRAL, the United Nations Commission on International Trade Law, which

in turn, is based upon the European Union Convention on Insolvency

Proceedings (the “EU Convention”). See 11 U.S.C. § 1501(a) et seq.; see also In re

Tri-Continental Exch. Ltd., 349 B.R. 627, 633-34 (Bankr. E.D. Cal. 2006). The

statutory intent to conform American law with international law is explicit in

the text of Section 1501(a), and also is expressed in Section 1508, which states

that “[i]n interpreting this chapter, the court shall consider its international

origin, and the need to promote an application of this chapter that is consistent

with the application of similar statutes adopted by foreign jurisdictions.” 11

U.S.C. § 1508; see also House Report on the Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005, H.R. Rep. No. 109-31, pt. I, at 105 (2005),

reprinted in 2005 U.S.C.C.A.N. 88, 169 (“[Chapter 15] incorporates the Model

Law on Cross-Border Insolvency to encourage cooperation between the United

States and foreign countries with respect to transnational insolvency cases . . .

. [hereinafter “House Report”]; 8 ALAN N. RESNICK & HENRY J. SOMMER,

COLLIER ON BANKRUPTCY § 1501.01 (15th ed. rev. 2008) (explaining the basis for

Chapter 15).

A non-exhaustive list of relief available to a foreign proceeding’s

representative in a Chapter 15 case includes: (1) an automatic stay of actions

against the debtor under Bankruptcy Code Section 362; (2) the ability to operate

Case: 09-20288 Document: 00511124097 Page: 4 Date Filed: 05/27/2010
No. 09-20288

5

the debtor’s business; (3) examination of witnesses; and (4) the entrusting of the

administration of the debtor’s United States assets to the foreign representative.

See generally 11 U.S.C. § 1520(a)(1)-(3); see also id. § 1519(a)(1)-(3). In order for

a foreign proceeding to gain recognition within the framework of Chapter 15, the

following prerequisites must be met:

(1) such foreign proceeding for which recognition is sought is a

foreign main proceeding or foreign nonmain proceeding within the

meaning of section 1502;

(2) the foreign representative applying for recognition is a person or

body; and

(3) the petition meets the requirements of section 1515.

11 U.S.C. § 1517(a); see also In re Betcorp Ltd,, 400 B.R. 266, 285 (Bankr. D.

Nev. 2009). 

This statutory mandate is subject to a narrow public policy exception

which permits a court to refuse recognition “if the action would be manifestly

contrary to the public policy of the United States.” 11 U.S.C. § 1506. But, the

exception is intended to be invoked only under exceptional circumstances

concerning matters of fundamental importance for the United States. See In re

Iida, 377 B.R. 243 (9th Cir. BAP 2007); In re Atlas Shipping A/S, 404 B.R. 726

(Bankr. S.D.N.Y. 2009); In re Ernst & Young, Inc., 383 B.R. 773, 781 (Bankr. D.

Colo. 2008). Nevertheless, recognition under Section 1517 of the Bankruptcy

Code is not a “rubber stamp exercise.” In re Basis Yield Alpha Fund (Master),

381 B.R. 37, 40 (Bankr. S.D.N.Y. 2008). Even in the absence of an objection,

courts must undertake their own jurisdictional analysis and grant or deny

recognition under Chapter 15 as the facts of each case warrant. See In re Bear

Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R.

325, 335 (S.D.N.Y. 2008). The ultimate burden of proof on the requirements of

recognition is on the foreign representative. See id. at 334. 

Case: 09-20288 Document: 00511124097 Page: 5 Date Filed: 05/27/2010
No. 09-20288

6

Although listed as the third element, the first requirement for recognition

under Section 1517 is purely procedural in nature; that is, the petition must

meet the pleading requirements of Section 1515. See 11 U.S.C. § 1517(a)(3).

Section 1515 establishes several pleading requirements. First, it requires that

the foreign representative has filed a petition for recognition. Id. § 1515(a).

Second, Section 1515 requires the petitioner to establish that a foreign

proceeding exists, and that the petitioner has been appointed as the foreign

representative. Id. § 1515(b). The first two paragraphs of this subsection provide

for what constitutes sufficient evidence, and specify that the petitioner may

satisfy this requirement by providing a “certified copy of the decision

commencing such foreign proceeding and appointing the foreign representative”

and “a certificate from the foreign court affirming the existence of the foreign

proceeding and the appointment of the foreign representative.” Id. Third,

Section 1515 requires that the petition for recognition must be accompanied by

a statement identifying all foreign proceedings with respect to the debtor that

are known to the foreign representative. Id. § 1515(c). Lavie has satisfied all of

these procedural requirements. Thus, Section 1517(a)(3) has been satisfied.

Lavie has also met the requirements of the second element of Section 1517(a)

because “the foreign representative applying for recognition is a person or

body[.]” Id. § 1517(a)(2).

Because the second and third requirements set forth in Section 1517(a)

are indisputably met, the only substantive issue before the court becomes the

first delineated requirement of Section 1517(a)(1)—whether the foreign

proceeding for which recognition is sought, here Ran’s ongoing, involuntary

bankruptcy proceeding pending in Israeli, is a foreign main or nonmain

proceeding. If the foreign proceeding is neither then it is simply ineligible for

recognition under Chapter 15. See In re Bear Stearns, 389 B.R. at 334; see also

Case: 09-20288 Document: 00511124097 Page: 6 Date Filed: 05/27/2010
No. 09-20288

7

In re SPhinX, Ltd., 351 B.R. 103, 120 n.22 (Bankr. S.D.N.Y. 2006), aff’d, 371

B.R. 10 (S.D.N.Y. 2007). 

C. Determining Status as a Foreign Main Proceeding

A foreign main proceeding is “a foreign proceeding pending in the country

where the debtor has the center of its main interest.” 11 U.S.C. § 1502(4)

(emphasis added). The phrase “center of main interest” (“COMI”) is a term of

art, which the Bankruptcy Code does not define explicitly. Chapter 15, however,

does provide that “[i]n the absence of evidence to the contrary, the debtor’s

registered office, or habitual residence in the case of an individual, is presumed

to be the center of the debtor’s main interests.” Id. § 1516(c). This presumption

can be rebutted by evidence to the contrary. See In re Tri-Continental Exch. Ltd.,

349 B.R. at 634. Thus, to determine where Ran’s presumptive COMI lies, we

must determine the location of his habitual residence and then determine if any

evidence to the contrary was presented by Lavie to rebut the presumption that

Ran’s habitual residence is his COMI. If so, our inquiry does not end and we

must consider all evidence to determine the location of Ran’s COMI. 

The Code does not define “habitual residence,” but it has been analyzed

recently by foreign courts as virtually identical to the more commonly used, at

least in the United States, concept of domicile. Under our law, domicile is

established by physical presence in a location coupled with an intent to remain

there indefinitely. Texas v. Florida, 306 U.S. 398 (1939). One acquires a

“domicile of origin” at birth, and that domicile continues until a new one (a

“domicile of choice”) is acquired. Mississippi Band of Choctaw Indians v.

Holyfield, 490 U.S. 30 (1989). To defeat the presumption of continuing domicile

and establish a new domicile, an individual must demonstrate residence in a

new state and an intention to remain in that state indefinitely. Acridge v.

Evangelical Lutheran Good Samaritan Soc’y, 334 F.3d 444, 448 (5th Cir. 2003).

Similarly, according to foreign courts, the existence of a habitual residence

Case: 09-20288 Document: 00511124097 Page: 7 Date Filed: 05/27/2010
No. 09-20288

8

largely depends on whether the debtor intends to stay in the location

permanently. See, e.g., Pinna v. Caisse d’ Allocations Familiales de la Savoie,

[1986] E.C.R. 1 (ECJ 1986) (France). Other factors pertinent to a finding of an

individual’s habitual residence include: (1) the length of time spent in the

location; (2) the occupational or familial ties to the area; and (3) the location of

the individual’s regular activities, jobs, assets, investments, clubs, unions, and

institutions of which he is a member. See, e.g., id.; see also George A. Rosenberg,

Israeli Tax Reform, J. INT’L TAX’N 31, 2003 WL 1871011 at *31 (April 2003);

Geveran Trading Co. v. Skjevesland, 2002 WL 31947334 (Ch. D. Bankruptcy

Ct.) (Eng.); Israel Doran & Tal Golan, Aging, Globalization, and the Legal

Construction of “Residence:” The Case of Old Age Pensions in Israel, 15 ELDER

L.J. 1, 16 (2007). 

Here, it is evident that when Lavie filed the petition for recognition, Ran’s

habitual residence was in Houston, Texas. Our conclusion is supported by our

review of the record which reveals that Ran left Israel nearly a decade prior to

the filing of the petition, has no intent to return, and has established

employment and a permanent residence in Houston. Ran is a legal permanent

resident of the United States and his children are United States citizens. And

the record also reflects that Ran maintains his finances exclusively in Texas.

The totality of the circumstances before us indicates that the United States is

Ran’s habitual residence and thus his presumptive COMI. 

Before the district court, Lavie introduced evidence to rebut the

presumption that Ran’s COMI is located in the United States. Because of this,

we cannot rely solely upon Section 1516(c)’s presumption. Instead, in order to

determine Ran’s COMI we must consider all evidence, while keeping in mind

that it is Lavie’s burden to persuade the court by a preponderance of the

evidence that Ran’s COMI is in Israel. See In re Bear Stearns, 389 B.R. at

335-36; see also FED. R. EVID. 301 (explaining that a party’s rebuttal of a

Case: 09-20288 Document: 00511124097 Page: 8 Date Filed: 05/27/2010
No. 09-20288

9

presumption does not shift the burden of proof; rather, the risk of nonpersuasion

remains upon the party on whom it was originally cast—in this case, Ran); In re

Tri-Continental Exch. Ltd., 349 B.R. at 635 (discussing the 11 U.S.C. § 1516(c)

presumption); Schaflein v. Comm’n of the European Cmtys., (Case 284/87)

[1988] ECR 4475 (ECJ 2d Chamber 1988) (noting that although an individual’s

habitual residence is presumed to be his COMI, this presumption is not outcome

determinative if other evidence suggests the debtor’s COMI is elsewhere); see

also Guide to Enactment of the UNCITRAL Model Law on Cross-Border

Insolvency § 122 (noting that the presumption does “not prevent, in accordance

with applicable procedural law, calling for or assessing other evidence if the

conclusion suggested by the presumption is called into question by the court or

an interested party”).

Neither Chapter 15 nor the Model Law on Cross-Border Insolvency

describes the factors that may be relevant to a determination of the debtor’s

COMI in a case where it is disputed. But, the SPhinX court suggested the

following list of non-exhaustive factors to be considered when a debtor’s COMI

is in dispute:

Various factors, singly or combined, could be relevant to such a

determination: the location of the debtor’s headquarters; the

location of those who actually manage the debtor (which,

conceivably could be the headquarters of a holding company); the

location of the debtor’s primary assets; the location of the majority

of the debtor’s creditors or a majority of the creditors who would be

affected the case; and/or the jurisdiction whose law would apply to

most disputes.

351 B.R. at 117, aff’d, 371 B.R. 10 (S.D.N.Y. 2007). In SPhinX the court was

concerned with the COMI of a debtor corporation. It noted that in the absence

Case: 09-20288 Document: 00511124097 Page: 9 Date Filed: 05/27/2010
No. 09-20288

10

of evidence to the contrary, the COMI of a corporation is presumed to be the

place of its registered office which it equated with the corporation’s principal

place of business. Id. at 116. Considering the above listed factors, the court

then determined that the statutory presumption regarding COMI had been

overcome and that the debtor corporation’s COMI was not the place of its

registered office. Id.

While the factors set forth in SPhinX offer a useful analytical framework

to determine the disputed COMI of a corporate debtor, the relevant factors to

determine the disputed COMI in the case of an individual debtor who has no

registered office, headquarters, or holding company may be somewhat different.

Nevertheless, in In re Loy, 380 B.R. 154. 162 (Bankr. E.D. Va. 2007), the only

case to address the concept of COMI with respect to an individual debtor, the

court noted that factors such as (1) the location of a debtor’s primary assets; (2)

the location of the majority of the debtor’s creditors; and (3) the jurisdiction

whose law would apply to most disputes, may be used to determine an individual

debtor’s COMI when there exists a serious dispute. In other words, the Loy

court considered factors which are normally applied to the determination of a

corporate debtor’s COMI in order to determine the disputed COMI of an

individual debtor. After weighing the evidence before it concerning each factor,

the bankruptcy court concluded that Loy’s COMI was England. Id. 

The applicability vel non of the SPhinX factors to the determination of the

disputed COMI of an individual debtor is an argument that we need not address

today. Even assuming arguendo their applicability to the instant case our

review of the record reveals that Lavie’s evidence, while sufficient to rebut the

presumption that Ran’s COMI was in the United States, was nevertheless

insufficient to prove by a preponderance of the evidence that Israel is the

location of Ran’s center of main interests. 

Case: 09-20288 Document: 00511124097 Page: 10 Date Filed: 05/27/2010
No. 09-20288

11

Lavie proffered the following evidence before the district court to establish

that Ran’s center of main interests lies in Israel: (1) Ran’s creditors are located

in Israel; (2) Ran’s principal assets are being administered in bankruptcy

pending in Israel; and (3) Ran’s bankruptcy proceedings initiated in Israel and

would be governed by Israeli law. These factors, however, when weighed against

the following: (1) Ran along with his family left Israel nearly a decade prior to

the filing of the petition; (2) Ran has no intent to return to Israel; (3) Ran has

established employment and a residence in Houston, Texas; (4) Ran is a

permanent legal resident of the United States and his children are United States

citizens; and (5) Ran maintains his finances exclusively in Texas, are insufficient

to prove by a preponderance of the evidence that Israel is Ran’s COMI. See

Pennzoil Co. v. F.E.R.C., 789 F.2d 1128, 1136 (5th Cir. 1986) (noting that a fact

finder can still credit the evidence of the party in favor of whom the rebutted

presumption operates despite the existence of contrary evidence and despite the

resultant destruction of the presumption). 

Lavie’s reliance upon Loy to provide support for his argument that Lavie’s

COMI is Israel is misplaced because it is plainly distinguishable for a number

of reasons. First, in Loy the court concluded that the debtor’s habitual residence

was the United Kingdom. Loy, 380 B.R. at 163. Thus, the presumption

identified in Section 1516(c) weighed in favor of the court finding that the United

Kingdom was Loy’s COMI. Id. In contrast, in the instant case, before being

rebutted, the Section 1516(c) presumption weighed in favor of Ran’s COMI being

in the United States, the location of his habitual residence. Second, unlike in the

instant case, the debtor in Loy was involved in the bankruptcy proceedings in

the United Kingdom prior to his departure for the United States. Unlike Ran,

Loy never successfully transferred his COMI before the petition for recognition

was filed. 

Case: 09-20288 Document: 00511124097 Page: 11 Date Filed: 05/27/2010
No. 09-20288

12

Although our review of the objective factors establishes that Ran’s COMI

is in the United States, Lavie has another argument. He contends that the

COMI determination should be made with reference to Ran’s operational history,

and not merely by focusing upon where Ran’s COMI lies on the date the petition

for recognition was filed. In other words, Lavie argues that because Ran’s COMI

was located in Israel at some point in time before he filed the petition for

recognition, we should lookback at Ran’s operational history in Israel to conclude

that his COMI lies in Israel. We disagree. 

An analysis of the proper COMI timeframe starts with, as it must, the text

of Section 1502 of the Code. See Mark Lightner, Determining the Center of Main

Interest Under Chapter 15, 17 J. BANKR. L. & PRAC. 5, art. 2 (2009). In the

bankruptcy context, the analysis must end with the text if the language is clear

and does not lead to an absurd result. See, e.g., United States v. Ron Pair

Enters., Inc. (In re Ron Pair Enters.), 489 U.S. 235, 298 (1989). While Section

1502 does not expressly discuss a temporal framework for determining COMI,

the grammatical tense in which it is written provides guidance to the court.

Every operative verb is written in the present or present progressive tense.

More specifically, Section 1502 defines foreign main proceeding as a “foreign

proceeding pending in the country where the debtor has the center of its main

interests.” 11 U.S.C. § 1502(4). Congress’s choice to use the present tense

requires courts to view the COMI determination in the present, i.e. at the time

the petition for recognition was filed. If Congress had, in fact, intended

bankruptcy courts to view the COMI determination through a lookback period

or on a specific past date, it could have easily said so. This is particularly

significant because Congress is clearly capable of creating lookback periods in

the Bankruptcy Code. See, e.g., id. § 522 (b)(3)(A) (creating a lookback provision

for property exemptions). 

Case: 09-20288 Document: 00511124097 Page: 12 Date Filed: 05/27/2010
No. 09-20288

13

Moreover, examining a debtor’s COMI at the time the petition for

recognition is filed fulfills Congress’s purpose for implementing Chapter 15. As

noted above, Chapter 15 was implemented by Congress in an attempt to

harmonize transnational insolvency proceedings. If we were to assess COMI by

focusing upon Ran’s operational history, there would be an increased likelihood

of conflicting COMI determinations, as courts may tend to attach greater

importance to activities in their own countries, or may simply weigh the

evidence differently which may lead to the possibility of competing main

proceedings, thus defeating the purpose of using the COMI construct. See In re

Betcorp Ltd., 400 B.R. at 290. In fact, a meandering and never-ending inquiry

into the debtor’s past interests could lead to a denial of recognition in a country

where a debtor’s interests are truly centered, merely because he conducted past

activities in a country at some point well before the petition for recognition was

sought. See Jay Lawrence Westbrook, Locating the Eye of the Financial Storm,

32 BROOK. J. INT’L L. 1019, 1020 (2007). 

Additionally, it is important that the debtor’s COMI be ascertainable by

third parties. If the debtor’s main interests are in a particular country and third

parties observe this situation, it should be irrelevant that the debtor’s interests

were previously centered in a different country almost a decade prior to the

receiver attempting to have the foreign bankruptcy proceeding recognized. See

In re Betcorp Ltd., 400 B.R. at 290. The presumption is that creditors will look

to the law of the jurisdiction in which they perceive the debtor to be operating

to resolve any difficulties they have with that debtor, regardless of whether such

resolution is informal, administrative or judicial. This is consistent with English

cases interpreting the European Union Regulation, which seem to select a time

linked to the commencement or service of the relevant insolvency proceeding.

Shierson v. Vlieland-Boddy, [2005] EWCA (Civ) 974, §§ 39, 55, 2005 WL 1860177

Case: 09-20288 Document: 00511124097 Page: 13 Date Filed: 05/27/2010
No. 09-20288

14

(Eng); Re Collins & Aikman Corp. Group, [2005] EWHC (Ch) 1754, § 39, 2005

WL 4829623 (Eng.). 

Lavie urges the court to recognize the Israeli proceeding to effect the

principles of comity and deference encompassed in Chapter 15 by deferring to

the jurisdictional choice of the Israeli creditors. This argument has no merit.

The plain language of Chapter 15 requires a factual determination with respect

to recognition before principles of comity come into play. See 11 U.S.C. § 1507.

By arguing comity without first satisfying the conditions for recognition, Lavie

urges this court to ignore the statutory requirements of Chapter 15. 

Lastly, we note that this case does not involve a recent change of domicile

by the party in question. A similar case brought immediately after the party’s

arrival in the United States following a long period of domicile in the county

where the bankruptcy is pending would likely lead to a different result. 

In sum, the district court’s denial of recognition of the Israeli bankruptcy

proceeding as a foreign main proceeding is affirmed. 

D. Determining Status as a Foreign Nonmain Proceeding

Although the Israeli bankruptcy proceeding is not a foreign main

proceeding, our inquiry does not end there. We must next determine whether

it may be recognized as a foreign nonmain proceeding. While recognition of a

foreign proceeding as a foreign nonmain proceeding may provide the same relief

as recognition as a foreign main proceeding, the relief is not automatic; rather,

whether any such relief is appropriate is determined by the bankruptcy court

after notice and a hearing, at the court’s discretion, and subject to the

requirement that all creditors be sufficiently protected. See 11 U.S.C. § 1521.

Lavie argues that the administration of Ran’s bankruptcy estate in Israel

is itself an establishment within the meaning of Chapter 15 and that it therefore

should be recognized as a foreign nonmain proceeding. Notably, no United

States court has decided whether an individual’s bankruptcy proceeding pending

Case: 09-20288 Document: 00511124097 Page: 14 Date Filed: 05/27/2010
No. 09-20288

15

in another country and related debts alone are sufficient to constitute an

establishment under Chapter 15. A foreign nonmain proceeding is “a foreign

proceeding, other than a foreign main proceeding, pending in a country where

the debtor has an establishment.” 11 U.S.C. § 1502(5) (emphasis added). Section

1502(2) defines an establishment as “any place of operations where the debtor

carries out a nontransitory economic activity.” Id. § 1502(2) (emphasis added).

In contrast to COMI, “[t]he existence of an establishment is essentially a factual

question, with no presumption in its favor.” In re Bear Stearns, 389 B.R. at 338.

As one court noted, “the bar is rather high” to prove that a debtor has an

establishment in a particular location. In re Bear Stearns High-Grade

Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 131 (Bankr.

S.D.N.Y. 2007), aff’d, 389 B.R. 325 (S.D.N.Y. 2007). 

Similar to a determination of Ran’s COMI, the relevant time period to

determine whether Ran has an establishment in Israel is at the time Lavie filed

his petition for recognition. Our conclusion is again supported by a plain

language reading of Chapter 15, which notes that a foreign nonmain proceeding

can exist where a debtor “has an establishment.” 11 U.S.C. § 1502(5) (emphasis

added). Likewise, Section 1502(2) refers to an establishment as “any place of

operations where the debtor carries out a nontransitory activity.” Id. § 1502(2)

(emphasis added). The use of the present tense implies that the court’s

establishment analysis should focus on whether the debtor has an establishment

in the foreign country where the bankruptcy is pending at the time the foreign

representative files the petition for recognition under Chapter 15. See Mark

Lightner, Determining the Center of Main Interest Under Chapter 15, 17 J.

BANKR. L. & PRAC. 5, art. 2 (2009). 

So in order for Ran to have an establishment in Israel, Ran must have (1)

had a place of operations in Israel and (2) been carrying on nontransitory

economic activity in Israel at the time that Lavie brought the petition for

Case: 09-20288 Document: 00511124097 Page: 15 Date Filed: 05/27/2010
No. 09-20288

16

recognition in the United States. Neither Chapter 15 nor its legislative history

explain what it means for a debtor to have “any place of operations” or to have

“been carrying on nontransitory economic activity” in a location. See H.R. Rep.

No. 109-31(I), at 107, reprinted in 2005 U.S.C.C.A.N. at 170 (mentioning only

that the definition was taken from Model Law for Cross-Border Insolvency

Article 2). However, the Model Law for Cross-Border Insolvency and the sources

from which it emanates provide guidance concerning what it means for a debtor

to have an establishment in a location. 

The drafters of the Model Law for Cross-Border Insolvency relied on the

EU Convention to define an establishment. See Guide to Enactment of the

UNCITRAL Model Law on Cross-Border Insolvency § 75 (1997). Per the EU

Convention’s legislative history, in order to have a “place of operations” in Israel

Ran must have had “a place from which economic activities are exercised on the

market ( i.e. externally), whether the said activities are commercial, industrial

or professional” at the time that Lavie filed the petition for recognition. COUNCIL

REPORT ON THE CONVENTION ON INSOLVENCY PROCEEDINGS, at 49, No. 6500/96.

The mere presence of assets in a given location does not, by itself, constitute a

place of operation. Id. at 48. In the context of corporate debtors, there must be

a place of business for there to be an establishment. In re Bear Stearns, 374 B.R.

at 131; see also Daniel M. Glosband, SPhinX Chapter 15 Opinion Misses the

Mark, 25 AM. BANKR. INST. J. 44, 45 (Dec./Jan. 2007). Equating a corporation’s

principal place of business to an individual debtor’s primary or habitual

residence, a place of business could conceivably align with the debtor having a

secondary residence or possibly a place of employment in the country where the

receiver claims that he has an establishment. See 11 U.S.C. § 1516(c) (equating

a corporate debtor’s registered office with the habitual residence in the case of

an individual). At the time Lavie filed his petition for recognition, Ran possessed

neither a secondary residence nor place of employment in Israel. 

Case: 09-20288 Document: 00511124097 Page: 16 Date Filed: 05/27/2010
No. 09-20288

17

Even if the court were to conclude that Ran possessed a place of operations

in Israel at the time the petition was filed, Ran did not carry out any

nontransitory economic activity in Israel and as a result the second part of the

establishment requirement is not met. Since Ran’s departure from Israel in

1997, he has engaged in almost no economic activity in that country; rather, the

evidence suggests that almost all of his economic activities are centered in

Houston and Harris County, Texas. At the time Lavie brought his suit for

recognition of the foreign bankruptcy proceeding the Israeli insolvency

proceedings, brought involuntarily and in Ran’s absence, and corresponding

debts were the only evidence of Ran’s purported establishment in Israel. These

debts, however, only represent evidence of previous economic activity and are

insufficient to show that Ran carried on transitory activity in Israel at the time

the petition for recognition was filed. Nevertheless, Lavie argues that as trustee

of Ran’s estate there exists a principal-agent relationship between himself and

Ran and that he has carried out economic activity in Israel on behalf of Ran, his

principal. The law is clear—Lavie as the trustee of Ran’s estate is not Ran’s

agent and cannot act on behalf of Ran. See 11 U.S.C. § 323.

 Further, as the district court noted, recognition based on the existence of

the bankruptcy proceeding and debts alone poses problems. First, a bankruptcy

proceeding is by definition a transitory action, but recognition as a nonmain

proceeding requires that the debtor carry out nontransitory activity in a location.

WEBSTER’s NEW INTERNATIONAL DICTIONARY 2692 (2d ed. 1939) (defining

“transitory action” as “[a]n action which may be brought in any country, [such]

as actions for debts, etc.”). To permit a transitory action, i.e., the existence of the

Israeli bankruptcy proceeding and corresponding debts alone to constitute the

basis for finding nontransitory economic activity, would be inappropriate because

it would go against the plain meaning of the statute. Second, if Ran’s

bankruptcy proceeding and associated debts, alone, could suffice to demonstrate

Case: 09-20288 Document: 00511124097 Page: 17 Date Filed: 05/27/2010
No. 09-20288

18

an establishment, this would render the framework of Chapter 15 meaningless.

There would be no reason to define establishment as engaging in a nontransitory

economic activity. The petition for recognition would simply require evidence of

the existence of the foreign proceeding. But the statute requires more than

that—it requires evidence of a foreign proceeding and that the proceeding meet

the definition of foreign nonmain proceeding. Lavie’s argument that Chapter 15

would not apply to any individuals if the Israeli bankruptcy is not an

establishment, making Chapter 15 a nullity, is unconvincing. Debtors with

ongoing business operations located in the country where the foreign proceeding

is pending would be subject to Chapter 15. Finding that a foreign proceeding

itself is not an establishment does not make Chapter 15 a nullity. 

In sum, the district court’s denial of recognition of the Israeli bankruptcy

proceeding as a foreign nonmain proceeding is affirmed.

III. CONCLUSION 

This court does not attempt to define the scope of possible activities that

would suffice in demonstrating the existence of an individual debtor’s COMI or

establishment in a particular location. Rather, we conclude only that on the

record before us today Lavie’s petition for recognition is insufficient to support a

finding that Ran’s COMI or establishment are located in Israel. Therefore, the

district court’s denial of recognition of the Israeli proceeding as a foreign main or

nonmain proceeding is AFFIRMED.

Case: 09-20288 Document: 00511124097 Page: 18 Date Filed: 05/27/2010
No. 09-20288

19

Case: 09-20288 Document: 00511124097 Page: 19 Date Filed: 05/27/2010