CORTUK et al v. BANCO TURCO ROMANA BANK

Filing 36

OPINION filed. Signed by Judge Brian R. Martinotti on 5/20/2019. (km)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________________
:
In re:
:
On Appeal From:
:
Case No.: 17-34019 (CMG)
KAMURAN CORTUK,
:
Chapter 7
:
Hon. Christine M. Gravelle, U.S.B.J.
Debtor.
:
___________________________________ :
:
KAMURAN CORTUK,
:
:
SERKAN CORTUK, and
:
:
YESÌM SAKARYA,
:
Civil Action Nos.
18-2626 (BRM)
:
18-2766 (BRM)
Appellants,
:
Hon. Brian R. Martinotti, U.S.D.J.
v.
:
:
BANCO TURCO ROMANA,
:
:
Appellee.
:
___________________________________ :
MARTINOTTI, DISTRICT JUDGE
Chapter 7 Debtor Kamuran Cortuk (“Kamuran”), Kamuran’s son Serkan Cortuk
(“Serkan”), and Kamuran’s daughter Yesìm Sakarya (“Yesìm”) (collectively, “Appellants”) 1
jointly filed two notices of appeal (ECF No. 12 and Dkt. No. 18-2766, ECF No. 1) concerning
two Bankruptcy Court orders: one dated February 14, 2018 (ECF No. 1-1), denying Appellants’
motion to enforce the automatic stay, and a second dated February 20, 2018 (Dkt. No. 18-2766,
ECF No. 1-1), granting partial relief from the automatic stay. Having reviewed the parties’
submissions in connection with the motion and having heard oral argument on March 6, 2019
The Court refers to Appellants by their first names to distinguish between parties with identical
last names. The Court intends no disrespect.
1

2

ECF numbers correspond to Civil No. 18-2626, except where otherwise noted.

pursuant to Federal Rule of Civil Procedure 78(a), for the reasons set forth below, and for good
cause shown, both Bankruptcy Court orders are AFFIRMED.
I.

FACTS AND PROCEDURAL HISTORY
A recent decision of the High Court of Justice, Business and Property Courts of England

and Wales, Commercial Court set forth the worldwide litigation history between the two parties.
See Banca Turco Română S.A. v. Cortuk [2018] EWHC (Comm) 662 (Eng. & Wales) (“U.K.
Decision”), reproduced at ECF No. 11-1. This Court does not rely on the foreign court’s
findings of fact, but its discussion may assist readers to place this decision in context.
Kamuran is a native of Turkey and current lawful permanent resident of the United
States, residing in Monroe Township, New Jersey. U.K. Decision ¶¶ 2, 5. From 1993 to 2002,
Banco Turco Romana (the “Bank”) was a large commercial and retail bank operating primarily
in Romania but also in Turkey and elsewhere. Id. ¶ 2. During that time, Kamuran owned and
controlled the Bayindir Group, which majority-owned the Bank. Id. ¶¶ 3. In the late 1990s,
Kamuran allegedly caused the Bank to fraudulently pledge its deposits as security for loans made
to the Bayindir Group. Id. ¶ 5. When the Bayindir Group defaulted on those loans, the security
holders moved against the Bank’s deposits. Id. ¶ 5.
The Bank entered liquidation, with Marina Cornelia Saita as the representative of the
Bank’s corporate liquidator.

Romanian authorities criminally prosecuted Kamuran, and

Romanian courts sentenced Kamuran to 13 years imprisonment (later reduced to 10.5 years) and
issued a civil judgment against Kamuran in favor of the Bank for $59.4 million and €11.3
million, plus interest. Id. ¶ 5. Kamuran took no part in either the Romanian criminal or civil
proceedings. Id. ¶ 5.

Switzerland authorities also began an investigation of Kamuran for violating Swiss antimoney laundering laws. Id. ¶ 24. In support of those proceedings, the Attorney General of
Geneva froze certain assets of Kamuran and related entities. Id. ¶ 24. Kamuran reached an
agreement with Swiss authorities to give up any claim to the frozen assets in exchange for an end
to the Swiss criminal proceedings.

Id.

¶ 24.

The agreement expressly disclaimed any

acceptance by Kamuran of criminal or civil liability for the allegations against him or of the
validity of the Romanian judgment. Id. ¶ 24.
In an effort to discover and seize Kamuran’s assets to satisfy the Romanian judgment, the
Bank instituted proceedings in the United Kingdom and (notwithstanding the cessation of the
Swiss criminal actions) Switzerland against Kamuran and multiple other defendants. Id. ¶ 25.
Although both the United Kingdom and Switzerland have domesticated the Romanian judgment,
the United States has not.

Id. ¶ 6, 25. The Bank’s actions in the United Kingdom and

Switzerland seek to discover and freeze assets that ostensibly belong to Kamuran, with the
eventual goal of seizing those assets to satisfy the judgment. Id. ¶¶ 22-25.
Yesìm, a Turkish citizen residing in Turkey, previously worked in the human resources
department of one of the companies within the Bayindir Group. Id. ¶ 3. Additionally, Yesìm is
Kamuran’s undisputed creditor, having loaned Kamuran the money for his legal fees.
(Appellants’ Reply Br. (ECF No. 28) at 16; Appellee’s Resp. Br. (Dkt. No. 18-2766, ECF No. 5),
at 13-14.) The Bank filed a fraudulent transfer action in this district against Kamuran, Yesìm,
and an affiliated United Kingdom company, Westport Industries, Ltd., with the goal of
unwinding a transfer of New Jersey property to Yesìm from the company. See Compl. ¶ 1, Saita
v. Cortuk, Civ. No. 17-6949 (D.N.J. filed Sept. 11, 2017), removed to Bankruptcy Court, Adv.
Proc. No. 17-1766 (Bankr. No. 17-34019) (Bankr. D.N.J filed Dec. 11, 2017). The Bank alleged

that the transfer was part of a scheme to disperse Kamuran’s assets to others, preventing the
Bank from obtaining those assets to satisfy the Romanian judgment. See id.
Serkan resides with Kamuran in New Jersey.

(ECF No. 16, at 1, 39.)

Kamuran

transferred funds to Serkan within the one-year period preceding Kamuran’s bankruptcy petition.
(Dkt. No. 18-2766, ECF No. 5, at 13.)
Kamuran filed for bankruptcy protection in the United States Bankruptcy Court for the
District of New Jersey. In re Cortuk, No. 17-34019 (Bankr. D.N.J. filed Nov. 29, 2017). The
Bankruptcy Court consolidated the fraudulent transfer action against Yesìm into Kamuran’s
bankruptcy proceeding as an adversary proceeding. Saita v. Cortuk, Adv. Proc. No. 17-1766
(Bankr. No. 17-34019) (Bankr. D.N.J filed Dec. 11, 2017).
As part of Kamuran’s bankruptcy proceeding, the Bank and the Chapter 7 Trustee
(“Trustee”) moved for entry of a “consent order”—a settlement to which both the Bank and the
Trustee consented, but to which Kamuran, Yesìm, and Serkan objected. The order would
partially lift the automatic stay, permitting the Bank to litigate judgment enforcement
proceedings in the United Kingdom and Switzerland on the Trustee’s behalf and under the
Trustee’s direction, and further require the Bank to turn over all proceeds from these British and
Swiss proceedings to the Trustee for inclusion in Kamuran’s bankruptcy estate. The Bankruptcy
Court granted this motion and denied Kamuran’s cross-motion to enforce the automatic stay.
II.

JURISDICTION
The Court has jurisdiction over this appeal because the Bankruptcy Court’s order partially

lifting the automatic stay is a “final order” over which this Court has mandatory appellate
jurisdiction. See 11 U.S.C. § 158(a)(1); Moxley v. Comer (In re Comer), 716 F.2d 168, 172 (3d
Cir. 1983).

III.

STANDING
As an initial matter, the Bank argues that the Court need not address the merits of this

case, because none of the three appellants has standing to appeal. The Court disagrees: Kamuran
has standing to appeal an order granting relief from the automatic stay, because Kamuran is
aggrieved by the order removing his protection under the automatic stay.3
“Appellate bankruptcy standing, unlike Article III standing, must be based strictly on
financial injury.” In re Revstone Indus., 690 F. App’x 88, 89 (3d Cir. 2017). “Appellate standing
in bankruptcy is limited to ‘persons aggrieved’ by an order of the bankruptcy court.” Id. (quoting
In re Combustion Eng’g, Inc., 391 F.3d 190, 214 (3d Cir. 2004)). “[T]he ‘persons aggrieved’ test
now exists as a prudential standing requirement that limits bankruptcy appeals to persons ‘whose
rights or interests are directly and adversely affected pecuniarily by an order or decree of the
bankruptcy court.’” Combustion Eng’g, 391 F.3d at 214 (quoting In re Dykes, 10 F.3d 184, 187
(3d Cir. 1993)). A person is “aggrieved only if the bankruptcy court’s order ‘diminishes their
property, increases their burdens, or impairs their rights.’” In re PWS Holding Corp., 228 F.3d
224, 249 (3d Cir. 2000) (quoting Dykes, 10 F.3d at 187).
Kamuran has standing to appeal because he is aggrieved by the Bankruptcy Court’s order
granting relief from the automatic stay: the order both increases Kamuran’s burdens and impairs
his rights. First, the order increases Kamuran’s burdens because he must now defend judgment
execution proceedings in Switzerland and the United Kingdom—proceedings which the
automatic stay barred. Second, the order impairs his rights, because Kamuran previously had the
full protection of the automatic stay—a provision Congress enacted in part to protect bankruptcy
petitioners like Kamuran, whereas now he does not. See In re Schaefer Salt Recovery, Inc., 542
3 The

Court need not address Yesìm’s or Serkan’s appellate standing, because even if both lacked
appellate standing, the Court must still address the merits of this case in light of Kamuran’s
appellate standing.

F.3d 90, 100 (3d Cir. 2008) (“The purpose of the automatic stay is ‘to afford the debtor a
breathing spell by halting the collection process. It enables the debtor to attempt a repayment or
reorganization plan with an aim toward satisfying existing debt.’” (quoting In re Siciliano, 13
F.3d 748, 750 (3d Cir.1994))).
The Bank argues that because Kamuran’s bankruptcy estate will have no assets remaining
after the Trustee exhausts the estate to compensate creditors, Kamuran has no interest in his
bankruptcy estate, and therefore cannot be aggrieved. In other words, the Bank argues that
lifting the automatic stay will not “diminish [Kamuran’s] property,” because after payment of
claims, there will be no estate property remaining for Kamuran that could be diminished. PWS
Holding Corp., 228 F.3d at 249. This argument is misplaced, because there are two additional
means by which a Bankruptcy Court’s order may “aggrieve” parties: “increas[ing] their burdens,
or impair[ing] their rights.” Id. Because lifting the automatic stay subjects Kamuran to other
legal proceedings, Kamuran faces both increased burdens and impaired rights.

The order

aggrieves Kamuran, who therefore has standing to appeal.
IV.

MERITS
Because Kamuran has standing to appeal the Bankruptcy Court’s order, the Court turns to

the merits of the Bankruptcy Court’s approving the settlement order granting relief from stay,
and affirms.
This Court reviews a bankruptcy court’s order modifying the automatic stay for abuse of
discretion. See In re Myers, 491 F.3d 120, 128 (3d Cir. 2007). When reviewing a motion for
relief from the automatic stay, a Bankruptcy Court should consider multiple factors, including:
whether relief would result in a partial or complete resolution of
the issues; (2) lack of any connection with or interference with the
bankruptcy case; (3) whether the other proceeding involves the
debtor as a fiduciary; (4) whether a specialized tribunal with the

necessary expertise has been established to hear the cause of
action; (5) whether the debtor's insurer has assumed full
responsibility for defending it; (6) whether the action primarily
involves third parties; (7) whether litigation in another forum
would prejudice the interests of other creditors; (8) whether the
judgment claim arising from the other action is subject to equitable
subordination; (9) whether movant's success in the other
proceeding would result in a judicial lien avoidable by the debtor;
(10) the interests of judicial economy and the expeditious and
economical resolution of litigation; (11) whether the parties are
ready for trial in the other proceeding; and (12) impact of the stay
on the parties and the balance of harms.
In re Sonnax Indus., 907 F.2d 1280, 1286 (2d Cir. 1990).
This Court likewise reviews compromises between a creditor and the Trustee for
abuse of discretion. In re Martin, 91 F.3d 389, 393 (3d Cir. 1996). When reviewing a
proposed settlement, the Bankruptcy Court considers four factors: “(1) the probability of
success in litigation; (2) the likely difficulties in collection; (3) the complexity of the
litigation involved, and the expense, inconvenience and delay necessarily attending it;
and (4) the paramount interest of the creditors.” Id.
After analyzing all four Martin factors and all twelve Sonnax factors, the
Bankruptcy Court approved the limited stay relief proposed by the Trustee and by the
Bank. (ECF No. 17-3, at 43-57.) Reviewing the Bankruptcy Court’s opinion, this Court
is unable to say that the Bankruptcy Court abused its discretion.
Appellants make three arguments, each to the effect that the Bankruptcy Court
committed an error of law, subject to de novo review, and warranting reversal. None of
Appellants’ arguments are persuasive.
First, Appellants argue that the Bankruptcy Court erred by allowing the Bank,
rather than the Trustee, to pursue judgment execution proceedings overseas because there
is no colorable claim for the Bank to pursue overseas. This argument is misplaced.

Assuming without deciding that Bankruptcy Code § 544 prohibits parties other
than the Trustee from pursuing certain recovery actions, the Bankruptcy Court may grant
so-called “derivative standing” to creditors to pursue claims, rather than requiring the
trustee to do so. See Unsecured Creditors of Cybergenics Corp. ex rel. Cybergenics
Corp. v. Chinery, 330 F.3d 548, 579-80 (3d Cir. 2003). A Bankruptcy Court may not
grant not derivative standing unless, among other things, the creditors have a colorable
claim to recovery. See Infinity Investors Ltd. v. Kingsborough (In re Yes! Ent. Corp.), 316
B.R. 141, 145 (D. Del. 2004). In other Bankruptcy contexts, “colorable” is synonymous
with “good faith,” such that a claim is colorable if the claim is reasonably “in dispute.”
In re St. Clair, 251 B.R. 660, 667 (D.N.J. 2000). In other words, a claim need not
necessarily be successful in order to be colorable.
The Bankruptcy Court did not abuse its discretion by finding that the Bank’s
claims for recovery in the overseas judgment execution proceedings met the low burden
of being “colorable.” The allegations in this case involve a complex web of fictitious
entities with varying ownership structures, all spread across the globe. Whether or not
the Bank’s claims would necessarily succeed is not at issue. Given the complexity of the
asset recovery issues at stake in this litigation, the Bankruptcy Court did not abuse its
discretion by finding the Bank’s claims to be colorable.
Second, Appellants argue that the Bankruptcy Court’s decision to partially lift the
automatic stay violates Kamuran’s right to litigate all actions in the Bankruptcy Court for
the District of New Jersey.4 The Court rejects this argument because Kamuran has no
such absolute right to consolidate all actions into a single court. While consolidation may
To the extent that Appellants argue that the Bankruptcy Court’s decision deprives Kamuran of
due process, the Court finds this claim to be insufficiently briefed. See T.C. ex rel. C.C. v. A.I.
Dupont Hosp. for Children, 368 F. App’x 285, 287 (3d Cir. 2010).
4

be appropriate, the Bankruptcy Court may also exercise its discretion to lift the automatic
stay to permit outside litigation to proceed. See, e.g., In re Wilson, 116 F.3d 87, 89-91 (3d
Cir. 1997) (holding that the bankruptcy court should have lifted the automatic stay to
allow a litigant to pursue a state court appeal against the debtor).

As this Court

previously explained, the Bankruptcy Court did not abuse its discretion in this case by
lifting the automatic stay, thereby permitting outside litigation to proceed.
Third, Appellants argue that the Bankruptcy Court incorrectly assumed that it
lacked jurisdiction over foreign litigation targets, and that this erroneous assumption lead
the Bankruptcy Court to permit proceedings in overseas courts that would clearly have
jurisdiction over these foreign litigation targets. The Court rejects this argument because
the error, if any, was harmless. Cf. In re Wolf, 739 F. App’x 165, 167 (3d Cir. 2018)
(holding that a bankruptcy court’s decision constituted harmless error where the decision
could be upheld on other grounds).
None of the remaining Sonnax factors the Bankruptcy Court analyzed weighed
against granting relief from the automatic stay. (ECF No. 17-3, at 45-50.) Assuming
without deciding that the Bankruptcy Court would have had jurisdiction over all the
foreign litigation targets, the Bankruptcy Court nonetheless could have exercised its
discretion to partially lift the automatic stay based on the remaining factors.
As the Appellants concede, the Bankruptcy Court’s assumption about its authority
over the foreign litigation targets applies only to the fourth, sixth, and tenth Sonnax
factors.

In weighing the remaining factors, 5 the Bankruptcy Court found that the

overseas proceedings (1) would help to identify and localize Kamuran’s assets, (2) would
For convenience, the Court numbers these factors the same as the Bankruptcy Court’s order
below. The Court does not list the eighth factor because the Bankruptcy Court found it was not
relevant here.
5

enhance the domestic bankruptcy proceeding by potentially recovering additional assets
for the estate, (3) stemmed from Kamuran’s prior fiduciary role at the Bank, (5) involved
foreign law with which foreign courts would be more familiar, (7) would not prejudice
other creditors because any recovery would return to the estate for the benefit of all
creditors, (9) would not result in a judicial lien avoidable by Kamuran, (11) are already
underway, and (12) that the balance of the harms weighs in favor of partially lifting the
stay because in this case, the stay primarily operated to protect individuals and companies
other than Kamuran, rather than Kamuran himself. (ECF No. 17-3, at 45-50.) Because
the Bankruptcy Court could have reasonably concluded that these factors alone warranted
a partial lifting of the automatic stay, any error by the Bankruptcy Court was harmless.
V.

CONCLUSION
For the reasons set forth above, both Bankruptcy Court orders are AFFIRMED. An

appropriate Order will follow.
/s/ Brian R. Martinotti
HON. BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE
Dated: May 20, 2019