ASI INC. et al v. FOREIGN LIQUIDATORS et al
Filing
33
OPINION. Signed by Judge Renee Marie Bumb on 3/12/2019. (rtm, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
IN RE: MANLEY TOYS LIMITED,
Debtor in a Foreign
Proceeding.
---------------------------ASI, INC.,
Appellant,
Civ. Nos. 18-2836, 18-2838 (RMB)
v.
OPINION
FOREIGN LIQUIDATORS, et al.,
Appellees.
APPEARANCES:
HELLRING LINDEMAN GOLDSTEIN & SIEGAL LLP
By: Richard B. Honig, Esq.
Matthew E. Moloshok, Esq.
One Gateway Center
Newark, New Jersey 07102
and
WEISBROD MATTEIS & COPLEY PLLC
By: Stephen A. Weisbrod, Esq.
1200 New Hampshire Avenue NW
Suite 600
Washington, DC 20036
Counsel for Appellant
ARCHER & GREINER PC
By: Stephen M. Packman, Esq.
Douglas G. Leney, Esq.
One Centennial Square
Haddonfield, New Jersey 08033
and
1
GOODWIN PROCTOR LLP
By: Daniel M. Glosband, Esq.
100 Northern Avenue
Boston, Massachusetts 02210
Counsel for Appellees
BUMB, UNITED STATES DISTRICT JUDGE:
On March 22, 2016, Manley Toys Limited (“the Debtor”)
commenced a creditors’ voluntary liquidation in Hong Kong,
pursuant to Hong Kong law.
Mat Ng and John Robert Lees were
appointed as liquidators (“the Liquidators”), and on the same
day, the Liquidators filed a Chapter 15 case and motion in the
United States Bankruptcy Court for the District of New Jersey.
ASI, Inc., f/k/a Aviva Sports Inc. (“Aviva”), a judgment creditor
of the Debtor, opposed the motion. 1
After a three-day evidentiary
hearing, the Bankruptcy Court granted the motion, and recognized
the Hong Kong liquidation of the Debtor as a “foreign main
proceeding,” 11 U.S.C. § 1502(4).
decision.
Aviva appeals from that
For the reasons stated herein, the Court will affirm
the Bankruptcy Court’s well-reasoned and comprehensive
recognition decision.
1
Toys “R” Us, Inc., a former customer of the Debtor, also
opposed the motion, however, only Aviva appeals.
2
I.
FACTUAL BACKGROUND
The Court recites the facts as found by the Bankruptcy Court
in its decision. 2
In March of 2016, the Debtor was in significant
financial and legal distress.
Faced with “alleged declining
sales,” an over $8.58 million judgment entered against it in
favor of Aviva in Minnesota Federal District Court, Aviva’s
ongoing efforts to collect on that judgment, and an upcoming jury
trial in litigation with Toys “R” Us in this District, the Debtor
decided “to enter into voluntary liquidation in Hong Kong.”
In
re: Manley Toys Ltd., 580 B.R. 632, 635 (Bankr. D.N.J. 2018).
On March 11, 2016, notice of the “Creditors Meeting” to be
held 11 days later (March 22nd) in Hong Kong-- the meeting that
begins the liquidation process under Hong Kong law-- “was sent by
regular mail to all of the Debtor’s known creditors [(including
Aviva)], and notice was published in three Hong Kong newspapers.”
Manley Toys, 580 B.R. at 636.
Importantly, notice was not sent
by email or fax, id., although-- as the Bankruptcy Court found,
and Aviva does not contest on appeal-- Hong Kong law does not
require such notice.
Id.
The Bankruptcy Court further found,
and Aviva does not contest on appeal, that Hong Kong law also
does not require the notice period-- i.e., the period of time
between when the notice is sent and when the meeting is held-- to
2
In its brief, Aviva states that it “accept[s] the facts
the Bankruptcy Court found as true.” (Dkt 18-2836, Entry 29, p.
18)
3
be of any particular length.
Id. at 640-41.
In short, there is
no record evidence that there were any procedural irregularities
under Hong Kong law with regard to the notice of the Creditors
Meeting.
At the Creditors Meeting on March 22, 2016, liquidation of
the Debtor was formally initiated in Hong Kong by the appointment
of a “Committee of Inspection” (“COI”).
636.
Manley Toys, 580 B.R. at
The COI appointed the Liquidators and authorized the
Liquidators to commence the Chapter 15 case, which the
Liquidators did that same day.
Id.
Aviva argued before the Bankruptcy Court, and continues to
argue on appeal, that the Debtor and its former principals
“initiated the Hong Kong liquidation and the Chapter 15 case in
bad faith,” as “part of the principals’ long-running scheme to
defy and undermine the U.S. judicial system.”
6, 12)
(Dkt 18-2836, p.
In support of its argument, Aviva points to the following
actions and events that occurred, or allegedly occurred, in the
time leading up to March 22, 2016.
First, in late February 2016, two Manley affiliates, Toy
Quest Ltd. and Manley Fashion Direct Ltd., paid approximately HK
$125 million to Hang Seng Bank and HSBC to pay off two loans made
to the Debtor.
(Aviva Exs. 118, 121, 164-65)
The result of
these transactions was to substitute Debtor affiliates (Toy Quest
and Manley Fashion) for independent creditors (Hang Seng Bank and
4
HSBC), which, in turn, nudged the percentage of the Debtor’s
total liabilities owed to Debtor-related companies past 50%,
vesting control of the entire creditor group in Debtor
affiliates.
According to Aviva, this was a premeditated scheme
to ensure control over the anticipated liquidation, and
consequently, Aviva’s marginalization from that process. 3
Second, Aviva believes the short notice given for the
Creditors Meeting, and the decision not to email or fax notice to
creditors, demonstrates that the Debtor and its principals
desired to exclude Aviva from the meeting.
However, as the
Bankruptcy Court found, “the Liquidators and the COI have offered
to place Aviva on the COI to cure any perceived prejudice related
to lack of notice, but Aviva has refused.”
Manley Toys, 580 B.R.
at 641.
Third, Aviva asserts that “by the time the Principals [of
the Debtor] formally put the company in liquidation, it had been
stripped of nearly all of its assets.”
p. 86)
(Dkt 18-2836, Entry 19,
According to Aviva, “[a]t most, the Liquidators have less
than US $13,000 available to them in Hong Kong,” which “could not
possibly be enough to pay for” the litigation of claims “for the
3
The Liquidators admit that these transactions occurred,
and that they resulted in the substitution of Debtor affiliates
for independent bank creditors. The Liquidators maintain that
such transactions are “the norm and not nefarious or indicative
of bad faith.” (Dkt 18-2836, Entry 28, p. 15)
5
actual benefit of [] independent creditors” like Aviva.
86-87)
(Id. at
While the Liquidators have received funding from Toy
Quest, Aviva suggests that a potential conflict of interest
exists insofar as Toy Quest itself allegedly has “a highly
suspect creditor claim and, in addition, is an obvious potential
target of fraudulent transfer and alter ego litigation” (Dkt 182836, Entry 29, p. 13) in connection with Aviva’s attempts to
collect on its judgment against the Debtor.
II.
LEGAL STANDARD
This Court has jurisdiction to hear appeals from the
Bankruptcy Court’s final orders pursuant to 28 U.S.C. § 158(a).
The Bankruptcy Court’s legal determinations are reviewed de novo;
its factual findings are reviewed for clear error.
In re: Titus,
-- F.3d -- , 2019 WL 693026 at *3 (3d Cir. Feb. 20, 2019).
III. ANALYSIS
On appeal, Aviva contests only three issues with regard to
recognition: (A) that the Hong Kong proceeding is “collective” in
nature, as required by 11 U.S.C. § 101(23); (B) that the
proceeding is a “main” (as opposed to “nonmain”) proceeding
because the Debtor’s “center of main interests” (“COMI”), 11
U.S.C. § 1502(4), is in Hong Kong; and (C) that recognition of
the Hong Kong proceeding is not “manifestly contrary to the
public policy of the United States.”
6
11 U.S.C. § 1506.
A.
Collective in nature
Among other requirements, a foreign liquidation must be
“collective in nature” to be recognized under Chapter 15.
In re:
ABC Learning Centres Ltd., 728 F.3d 301, 308 (3d Cir. 2013)
(citing § 101(23)).
A proceeding is collective if it considers
the rights and obligations of all creditors.
In re: ABC Learning
Centres Ltd., 445 B.R. 318, 328 (Bankr. D. Del. 2010), aff’d, 728
F.3d 301 (3d Cir. 2013). 4
The collective proceeding requirement
reflects U.S. policy “to provide an orderly liquidation procedure
under which all creditors are treated equally.”
ABC Learning
Centres, 728 F.3d at 310 (internal citation and quotation
omitted).
Focusing on the nature of liquidation proceedings in general
under Hong Kong law (as opposed to the particular manner in which
the liquidation of this specific Debtor has proceeded), the
Bankruptcy Court held:
[t]he Hong Kong liquidation is collective in nature.
Mr. Ong testified that the Liquidators’ duty under Hong
Kong law is to all creditors, whether those creditors
are from Hong Kong or another country, including the
United States. See May 13 Transcript at 157:18–158:4.
Moreover, there are requirements for the collection and
4
See also, In re: ENNIA Caribe Holding N.V., 594 B.R. 631,
638 (Bankr. S.D.N.Y. 2018) (“When determining whether a
proceeding is ‘collective in nature,’ the primary question is
whether the proceeding considers the rights and obligations of
all creditors.”) (citing ABC Learning Centres and Collier on
Bankruptcy); In re: Irish Bank Resolution Corp. Ltd., 538 B.R.
692, 698 (D. Del. 2015) (“A collective proceeding is one that
considers the rights and obligations of all creditors.”)
(internal citation omitted).
7
distribution of funds as well as a priority scheme and
a requirement that similarly situated creditors be
treated equally. See May 13 Transcript at 157:3–6; Ong
Declaration ¶¶ 27–30.
Manley Toys, 580 B.R. at 640.
Ignoring this portion of the decision altogether, Aviva
argues that “the Court erred in finding that [the Debtor’s]
particular Hong Kong liquidation proceedings were collective in
nature.” (Dkt 18-2836, Entry 19, p. 77)
According to Aviva,
“[r]egardless of how Hong Kong liquidations are supposed to work,
the way in which [the Debtor’s] liquidation began and unfolded
shows that it is not, in fact, collective, and never will be.”
(Id.)
This Court questions whether this is the correct legal
inquiry.
Indeed, the Liquidators argue it is not.
According to
the Liquidators, “the focus and subject matter of Chapter 15
[recognition] is on the foreign proceeding and not on the
debtor.”
(Dkt 18-2836, Entry 28, p. 7)
The Court need not
decide the issue, however, because even if the Court may properly
consider the factual specifics of this particular foreign
liquidation proceeding, this proceeding is, as the Bankruptcy
Court found 5, sufficiently collective in nature.
5
The Bankruptcy Court appears also to have been somewhat
skeptical of Aviva’s particular proceeding argument, writing,
“[a]lthough the Third Circuit did not include [whether the
particular proceeding is collective] as a requirement to satisfy
the collective in nature element, see ABC Learning Ctrs., 728
8
In support of its argument that the Hong Kong liquidation of
the Debtor is not collective, Aviva relies on the manner in which
notice of the Creditors Meeting was given, the February 2016 Toy
Quest loan payoffs / alleged manipulation of the creditor list,
and the funding (and / or alleged lack of funding) of the
Liquidators.
Aviva asserts that these factors, in combination,
support the conclusion that the Debtor’s Hong Kong liquidation is
basically rigged and cannot possibly protect the interests of
independent creditors like Aviva, and therefore is not collective
in nature.
The Bankruptcy Court’s specific findings of fact, however,
undermine any conclusion that Aviva or other independent
creditors are effectively shut-out of the liquidation process in
Hong Kong.
After carefully considering all of the evidence, the
Bankruptcy Court found that: (a) Aviva could have been placed on
the COI; (b) the Liquidators-- who are “not insiders”-- credibly
testified that they “are in control of the liquidation” and
“would bring appropriate suits against [Debtor] affiliates and
officers if [an] investigation led [] to [the] conclu[sion] that
such suits were appropriate” 6; and (c) Mr. Ng, one of the two
F.3d at 310, the Court nevertheless finds that the Liquidators
have met this burden as well.” Manley Toys, 580 B.R. at 640.
6
Aviva alleges that in the two years after the petition
date, the Liquidators have not in fact investigated potential
transfers, alter ego claims and other causes of action. Aviva
claims that the Bankruptcy Court “deci[ded] to ignore the record”
9
Liquidators, credibly testified that “he believes he has
sufficient money on hand to fund [] investigation[s] [of claims
against Toy Quest or other affiliated companies], and if
necessary would ask Aviva or [Toys “R” Us] to provide funds to
allow the Liquidators to complete their investigation and to
bring claims against insiders.”
Manley Toys, 580 B.R. at 642.
At its core, Aviva’s argument seems to be that the Debtor
and its affiliates, including Toy Quest, are controlling how the
Hong Kong liquidation proceeds.
by the facts.
This argument is not supported
The Bankruptcy Court found that, as a matter of
Hong Kong law, the Liquidators-- not the Debtor, nor insiders of
the Debtor-- control the liquidation and have legal
responsibilities to all creditors.
The Bankruptcy Court further
found as fact that these particular Liquidators would act
independently from the Debtor and its affiliates.
The Bankruptcy
Court found Mr. Ng credible; it specifically stated “Mr. Ng was
[] quite believable when he testified that he would have no
problem pursuing Toy Quest if there was a claim with merit, even
in this regard. (Dkt 18-2836, Entry 19, p. 84) Aviva, however,
points to no exhibit, testimony, declaration or affidavit, nor
other evidence in the record, that the Bankruptcy Court failed to
consider. To the extent that Aviva asserts that circumstances
have changed since the Bankruptcy Court’s decision, Chapter 15
provides a mechanism for addressing subsequent developments. See
11 U.S.C.A. § 1517(d) (“The provisions of this subchapter do not
prevent modification or termination of recognition if it is shown
that the grounds for granting it were fully or partially lacking
or have ceased to exist.”).
10
though Toy Quest is a funding creditor.”
at 647.
Manley Toys, 580 B.R.
Accordingly, this Court holds that the Bankruptcy Court
correctly held that the Liquidators had satisfied their burden of
proving that the proceeding was collective in nature.
B.
COMI
A foreign proceeding is a “foreign main proceeding” if the
“proceeding [is] pending in the country where the debtor has the
center of its main interests.”
11 U.S.C. § 1502(4).
“In the
absence of evidence to the contrary, the debtor’s registered
office . . . is presumed to be the center of the debtor’s main
interests.”
11 U.S.C.A. § 1516(c).
It is undisputed that the
Debtor’s registered office is in Hong Kong.
After considering an additional four factors--(1) the
location of the Debtor’s headquarters; (2) the location of the
Debtor’s primary assets; (3) the location of the majority of the
debtor’s creditors; and (4) the jurisdiction whose law would
apply to most disputes, Manley Toys, 580 B.R. at 645 (which
factors Aviva does not argue the Bankruptcy Court erred in
considering)-- the Bankruptcy Court held that most of the factors
collectively weighed in favor of a finding that Hong Kong was,
indeed, the Debtor’s COMI.
On appeal, Aviva acknowledges that “the facts surrounding
the COMI analysis were undisputed [at the evidentiary hearing],”
nonetheless, Aviva asserts that the Bankruptcy Court erred as a
11
matter of law.
According to Aviva, the Bankruptcy Court erred
by: (a) “considering” evidence of the Debtor’s pre-petition
presence in Hong Kong, “such as where [the Debtor’s] accounting
and marketing departments were housed when [the Debtor] was still
in business” (Dkt 18-2836, Entry 19, p. 90); and (b) failing to
give sufficient weight to the US $5 million Toys “R” Us
receivable which is located in the United States, and the
Debtor’s independent creditors who are also located in the United
States.
Aviva asserts that if the Bankruptcy Court had properly
considered the receivable and the independent creditors, it would
have held that the Debtor’s COMI was the United States.
As to the first issue, Aviva takes a snippet of the
Bankruptcy Court’s lengthy and thorough COMI analysis and
presents it out of context.
As the Court’s opinion demonstrates,
the Liquidators presented many pieces of evidence weighing in
favor of Hong Kong being the location of the Debtor’s
headquarters:
The Debtor’s headquarters is in Hong Kong. See May 12
Transcript at 29:15–17; Ng Declaration ¶ 5. Mr. Ng
testified that he reached that conclusion by reviewing
the Debtor’s filing records and other documents, such as
the Debtor’s annual return which states that the Debtor
is a Hong Kong business. See May 12 Transcript at 29:18–
20, 32:2–10. The majority of the Debtor’s business
decisions and records were in Hong Kong as well as the
Debtor’s financial operations, such as accounting and
marketing. See id. at 33:24–34:12. See also Supplemental
Ng Declaration ¶ 7 (198 employees in Hong Kong; bank
accounts in Hong Kong). Mr. Ng further testified that
purchase
orders,
contracts,
invoices,
and
other
documents all state that the Debtor is located in Hong
12
Kong. See id. at 37:2–39:21 (discussing Ex. L–22).
Exhibit L–22 is a four-page exhibit of documents sent to
a customer (Village Road Show) including a confirmation,
purchase order and invoice. Each of the documents lists
the Debtor’s address as being in Hong Kong. Finally,
the vast majority of the Debtor’s employees were located
in Hong Kong. See id. at 34:13–25 (discussing Ex. L–20).
Exhibit L–20 is a list of 198 of Debtor’s employees,
which is the exact amount of employees mentioned in the
Supplemental Ng Declaration. Therefore, the Court
concludes that the first factor falls in favor of
determining that the Debtor’s COMI is in Hong Kong.
Manley Toys, 580 B.R. at 645–46 (emphasis added).
Assuming
arguendo that the Bankruptcy Court should not have considered
pre-petition evidence such as the location of the Debtor’s
accounting and marketing departments 7, there is still more than
sufficient evidence to support the Bankruptcy Court’s factual
finding that the Debtor’s headquarters was in Hong Kong.
As to the second issue, Aviva’s argument suffers from a
similar deficiency.
The location of the Toys “R” Us receivable
and the location of independent creditors are but two pieces of
evidence the Bankruptcy Court considered, among many other pieces
of evidence, supporting its factual findings concerning the
location of all of the Debtor’s assets, and all of the Debtor’s
creditors-- which findings, in combination with the Bankruptcy
Court’s other findings as to the Debtor’s headquarters, and the
7
It is unclear whether Aviva is making a relevance
objection, and if so, whether such objection was raised at the
evidentiary hearing. The Court need not resolve this ambiguity.
13
applicable law, ultimately supported the Bankruptcy Court’s
conclusion as to the Debtor’s COMI.
The Bankruptcy Court correctly considered not only the Toys
“R” Us receivable, but also the other “primary assets” of the
Debtor, which the Bankruptcy Court found to be bank accounts in
Hong Kong, and “potential claims against insiders [of the
Debtor]” in Hong Kong.
Manley Toys, 580 B.R. at 646–47.
That
Aviva would weigh the relative strength of this evidence in a
manner different from the Bankruptcy Court does not amount to
reversible error.
There is no dispute, as Aviva emphasizes, and
the Bankruptcy Court found, that the Toys “R” Us receivable is
approximately US $5 million, and the cash in the Hong Kong bank
accounts was only approximately US $90,000.
But Aviva’s argument
in this regard ignores the Bankruptcy Court’s finding that there
were other litigation claims located in Hong Kong.
Id. at 647.
Moreover, the Bankruptcy Court carefully explained why it gave
more relative weight to the bank accounts as compared to the Toys
“R” Us receivable: the Hong Kong bank accounts amounted to “hard
/ realizable (i.e., cash)” whereas the “the actual value of [the
Toys “R” Us receivable] in terms of ‘real’ dollars is not
certain.”
Id. at 647.
The Bankruptcy Court’s weighing of this
evidence is logical and not clearly erroneous.
Lastly, as to the location of creditors, the Bankruptcy
Court ruled in Aviva’s favor, finding that more creditors were
14
located in the United States than Hong Kong.
B.R. at 647.
Manley Toys, 580
However, this factor is but one of four factors the
Bankruptcy Court considered, and the other three factors, the
Court found, weighed in favor of Hong Kong.
Thus, after
meticulously weighing all of the evidence, and considering all of
the factors, the Court correctly held that “the Liquidators have
met their burden of proof that the Debtor’s COMI is Hong Kong.”
Id. at 645.
C.
Manifestly against U.S. public policy
A court can refuse to recognize a foreign proceeding under
Chapter 15 if doing so “would be manifestly contrary to the
public policy of the United States.”
11 U.S.C. § 1506.
This
exception is “narrowly construed because the word ‘manifestly’ in
international usage restricts the public policy exception to the
most fundamental policies of the United States.”
ABC Learning
Centres, 728 F.3d at 309 (internal citation and quotation
omitted).
“The public policy exception applies [(1)] where the
procedural fairness of foreign proceedings is in doubt or cannot
be cured by the adoption of additional protections or [(2)] where
recognition would impinge severely on a U.S. constitutional or
statutory right.”
omitted).
Id.
(internal citation and quotation
Aviva makes one procedural fairness argument and one
constitutional or statutory right argument.
15
Relying extensively on In re: Toft, which declined to
recognize a foreign proceeding on public policy grounds, Aviva’s
first argument is based on its late notice of the Hong Kong
Creditors’ Meeting.
453 B.R. 186 (Bankr. S.D.N.Y. 2011).
However, the Liquidators persuasively argue that Toft is
distinguishable.
Indeed, this Court views Toft as quite
different from the instant case.
The expressly stated “purpose” of the Chapter 15 proceeding
at issue in Toft was only to obtain-- ex parte, in “secret,” and
without the debtor’s knowledge 8--“access to [the debtor’s] email
accounts stored on [U.S.] servers.”
453 B.R. at 188.
The lack
of notice that was so concerning to the bankruptcy court in Toft
had a secretive, almost clandestine, aspect that is absent from
this case.
Moreover, as the bankruptcy court stated in Toth,
“the relief sought by the Foreign Representative,” which was an
ex parte order compelling the disclosure of all past and future
emails of the individual debtor, “is banned under U.S. law, and
it would seemingly result in criminal liability under the Wiretap
Act and the Privacy Act for those who carried it out.”
at 198.
453 B.R.
The relief sought in this case is not remotely
analogous.
8
Toft involved a petition by a foreign administrator to
recognize a German insolvency proceeding where the debtor was an
individual, not a corporation. 453 B.R. at 188.
16
The late notice of the Creditors Meeting alone is
insufficient to support a conclusion that the Hong Kong
liquidation is so procedurally unfair that recognizing it would
offend due process.
First, as the Bankruptcy Court found, the
Liquidators offered to place Aviva on the COI, thereby remedying
any prejudice that may have resulted from the late notice.
Second, there is a procedure in place where a Hong Kong court
could invalidate the liquidation if procedural requirements are
not satisfied.
Aviva also argues that recognizing the foreign proceeding
will “improperly reward” the Debtor for allegedly “deliberately
disobeying” U.S. court orders and ignoring the District of
Minnesota judgment, thereby “encourag[ing]” other foreign
companies to act similarly. (Dkt 18-2836, Entry 19, p. 98, 105)
The Court declines Aviva’s invitation to deny Chapter 15
recognition as a means of indirectly punishing the Debtor for
alleged affronts to United States courts that are not this Court.
Specifically, Aviva asserts that the Court should deny
recognition as a means of “preserv[ing] the Minnesota Federal
Court’s jurisdiction over, and ability to enforce orders against
[the Debtor].”
(Id., p. 100)
According to Aviva, one of the
“primary motivations in initiating the Hong Kong liquidation was
to avoid the imposition of sanctions in the Minnesota Federal
17
Action.”
(Id.)
But even if Aviva is correct 9, it does not follow
that recognition may be denied on public policy grounds.
Aviva attempts to draw parallels between this case and In
re: Gold & Honey Ltd., 410 B.R. 357 (E.D.N.Y. 2009), which the
Third Circuit cited in ABC Learning Centres as an example of a
proceeding that was manifestly contrary to public policy.
F.3d at 310.
728
But the Third Circuit’s discussion of Gold & Honey
illustrates how it is different from this case:
[a]n Israeli insolvency proceeding was found to be
manifestly contrary to public policy in In re: Gold &
Honey, Ltd., because the receivership initiated in
Israel after Chapter 11 proceeding began in the U.S.
seized the debtor’s assets, violating the bankruptcy
court’s stay order. 410 B.R. 357, 371–72 (Bankr.
E.D.N.Y.2009). This conduct hindered two fundamental
policy objectives of the automatic stay: “preventing one
creditor from obtaining an advantage over other
creditors, and providing for the efficient and orderly
distribution of a debtor’s assets to all creditors in
accordance with their relative priorities.” Id. at 372
(discussing “serious ramifications” if future creditors
followed suit and seized assets under a United States
court’s jurisdiction in violation of its orders).
ABC Learning Centres, 728 F.3d at 309.
Thus, recognizing the
foreign proceeding in Gold & Honey would have resulted in a
violation of U.S statute-- namely, the automatic stay statute, 11
9
As the Bankruptcy Court observed, such decision “may [as
Aviva asserts] have been the latest step in an effort to avoid a
day of reckoning in the United States,” Manley Toys, 580 B.R. at
649; the record evidence shows that the Debtor at least “had not
complied with many orders of the Minnesota Court.” Id. at 635.
18
U.S.C. § 362.
In contrast, Aviva does not assert that any U.S.
statute has been, or will be, violated in this case. 10
Both Toft and Gold & Honey illustrate the exceptional
circumstances under which Chapter 15 recognition will be held to
be manifestly contrary to U.S. public policy.
This case does not
meet the high standard as articulated by the Third Circuit in ABC
Learning Centres.
Accordingly, this Court holds that the
Bankruptcy Court correctly held that the public policy exception
to Chapter 15 recognition does not apply.
For all of the above-stated reasons, the Court will affirm
the Bankruptcy Court’s Chapter 15 recognition decision in its
entirety. 11
10
Moreover, while the Court need not, and does not, reach
the issue in this case, the Third Circuit’s discussion of Gold &
Honey appears to suggest that not any violation of U.S. statute
will suffice to support the public policy exception, rather it
may be that such statute must embody fundamental policy
objectives, as the automatic stay statute does, and as the
Wiretap Act and the Privacy Act do.
11
In the recognition decision, the Bankruptcy Court also
denied Aviva’s request to dismiss or suspended the case pursuant
to 11 U.S.C. § 305. In five sentences of its 124-page opening
brief, Aviva appears to argue that the Bankruptcy Court should
have found that “the Hong Kong liquidation process is providing
no benefit to creditors.” (Dkt 18-2836, Entry 19, p. 107) Aviva
does not flesh-out its argument in this regard; it does not
articulate how the Bankruptcy Court allegedly clearly erred in
its factual findings that: (1) the Liquidators would investigate
and pursue viable claims on behalf of U.S. creditors; and (2)
dismissing or suspending the case “would be potentially harmful
to creditors in the United States that have not taken an active
role in this case.” Manley Toys, 580 B.R. at 651. Moreover,
Aviva appears to have abandoned this argument, as it is not
addressed in Aviva’s reply brief. Accordingly, the Bankruptcy
19
IV.
CONCLUSION
For the foregoing reasons, the Court will affirm the
Bankruptcy Court’s Chapter 15 recognition decision and order.
An
appropriate Order shall issue on this date.
Dated: March 12, 2019
__ s/ Renée Marie Bumb _____
RENÉE MARIE BUMB
UNITED STATES DISTRICT JUDGE
Court’s decision declining to dismiss or suspend the Chapter 15
case will be affirmed.
20
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