Manatt Secures Second Circuit Win Reinstating Bankruptcy Default Judgment

Bankruptcy Partner represented the litigation administrator for Décor Holdings Inc.’s bankruptcy estate in pursuing avoidance claims against a large foreign creditor, Sumec Textile Co. After Décor’s Chapter 11 filing, the litigation administrator sought to recover prepetition transfers and served the complaint on the creditor’s U.S.-based collection agent, which had been authorized to collect the full debt and filed a multimillion-dollar proof of claim.

When the creditor failed to respond, the bankruptcy court entered a default judgment exceeding $693,000. Although the district court later vacated that judgment and dismissed the claims, Manatt successfully appealed.

The Second Circuit reversed, holding that the creditor’s grant of authority to its agents, combined with the circumstances, provided both actual and implied authority to accept service. The ruling reinstates the default judgment and clarifies that service on authorized collection agents may be sufficient in cross border bankruptcy matters.

This outcome underscores Manatt’s strength in appellate advocacy and complex procedural disputes, preserving estate claims and maximizing recoveries.

To learn more about the ruling, click .