Ad Hoc Group of Vitro Noteholders v. Vitro S.A.B. De C.V.
701 F.3d 1031
| 5th Cir. | 2012Background
- Vitro S.A.B. de C.V. is Mexico's largest glass manufacturer and entered a Mexican concurso proceeding under the Ley de Concursos Mercantiles during the 2008–2009 global financial crisis.
- The Old Notes were unsecured and guaranteed by Vitro’s subsidiaries; the guaranties stated non-debtor guarantors could not be released in insolvency.
- Vitro sought recognition of the concurso in Chapter 15 and appointed two foreign representatives; Noteholders argued the representatives were not validly appointed because they were not court-appointed.
- Vitro’s concurso plan would extinguish guarantor obligations of non-debtors and issue New 2019 Notes and MCDs; some creditors would be paid through trusts with different treatment for consenting vs non-consenting creditors.
- The bankruptcy court denied enforcement of the plan; the district court affirmed the recognition and denial of enforcement, and the Fifth Circuit also affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper recognition of foreign representatives under Chapter 15 | Noteholders contend Sánchez-Mujica and Arechavaleta-Santos were not foreign-representative appointments by a foreign court. | Vitro argues representatives authorized in the foreign proceeding, even if not court-appointed, suffice under § 101(24). | Recognition proper; non-court appointment can qualify as foreign representatives. |
| Enforcement of the Concurso plan discharging non-debtor guarantors | Vitro and Fintech seek enforcement to discharge non-debtor guarantors under Chapter 15. | Objecting creditors argue relief should be limited to US-law protections and not discharge non-debtors. | Discharge of non-debtor guarantors not permitted under § 1521/1522 and § 1507 framework; enforcement denied. |
| Framework for Chapter 15 relief and comity | Vitro emphasizes comity to recognize relief beyond § 1521. | Objecting creditors argue comity does not override statutory limits and US policy against non-debtor releases. | Court adopts a three-step framework prioritizing § 1521 relief, then § 1521(a) ‘any appropriate relief,’ and finally § 1507; relief denied on comity grounds. |
Key Cases Cited
- In re Pac. Lumber Co., 584 F.3d 229 (9th Cir. 2009) (non-debtor releases generally not allowed; rare exceptions require extraordinary circumstances)
- Metromedia Fiber Network, Inc. v. Feb. 5, 416 F.3d 136 (2d Cir. 2005) (non-debtor releases viewed with caution; rare, exceptional circumstances needed)
- In re Ran, 607 F.3d 1017 (5th Cir. 2010) (recognition under Chapter 15 requires careful jurisdictional analysis; comity emphasis)
- In re Condor Ins. Ltd., 601 F.3d 319 (5th Cir. 2010) (framework for relief under Chapter 15; interplay of 1521 and 1507 guidance)
- Hilton v. Guyot, 159 U.S. 113 (1895) (comity as a discretionary principle in cross-border matters)