From a trial court in Hawaii to the bankruptcy court in Maryland and eventually to the United States District Court and the Fourth Circuit Court of Appeals, the creditors’ rights battle waged by Genesys Pacific Technologies against its franchisor, Genesys Data Technologies, lasted more than a decade before the creditors' rights and bankruptcy attorneys at Gallagher Evelius & Jones LLP produced a victory for a happy client.

The legal fight began in 1991 when Genesys Pacific sued Genesys Data in Hawaii on claims arising from a contract between Data, a seller of optical disk imaging systems, and Pacific, its franchisee. The Hawaii court rendered a default judgment for $1.26 million in favor of Pacific. Pacific then enrolled the judgment in Maryland, where Data was headquartered, to facilitate payment.

Data, meanwhile, ceased operations in 1992 when its lender foreclosed on its assets. Data subsequently sued its law firm for malpractice and breach of fiduciary duties. Four years later, a jury found in favor of Data, but before it could award damages, Data and the law firm settled for an undisclosed amount. Despite that settlement, Data refused to honor the default judgment previously awarded to Pacific, contending that it was based on no real debt and was procured fraudulently.

Retaining Gallagher, Evelius & Jones LLP because of the firm’s reputation for success in creditors’ rights litigation, Pacific initiated involuntary bankruptcy proceedings against Data. The Bankruptcy Court ruled in Pacific’s favor, disallowing only a small portion of Pacific's claim. On appeal, though, District Court allowed Pacific’s entire claim, concluding that the Full Faith and Credit Clause prevented bankruptcy court from changing the Hawaii court’s ruling in any way.

Finally in 2001, the United States Court of Appeals ruled that under Hawaii law, the default judgment precluded relitigating the issues resolved in the Hawaii trial court. The court also determined that Pacific’s submission of an allegedly fraudulent affidavit did not constitute fraud and would not justify vacating the default judgment. The court’s ruling constituted an overwhelming victory on all counts for Genesys Pacific. Thus, in the end, the tenacity and skill of Gallagher Evelius & Jones LLP paid off handsomely for the client.