455 B.R. 73
Bankr. S.D.N.Y.2011Background
- Awal Bank, BSC was in administration in Bahrain; Charles Russell, LLP served as External Administrator.
- Awal Bank sought recognition of its Bahrain administration as a foreign main proceeding under chapter 15, which was granted.
- A related chapter 11 case was filed to pursue U.S. avoidance relief against HSBC for a set-off of about $13 million from a July 2009 transfer.
- External Administrator proposed to file creditor-by-creditor claim information but omit amounts, seeking relief from § 521 disclosure requirements, or filing under seal.
- HSBC moved to dismiss both the chapter 11 case and the adversary proceeding; the U.S. Trustee objected to sealing the creditor information.
- Court granted limited relief under § 521, denied dismissal of the chapter 11 case and the adversary proceeding, and allowed potential timing and coordination with Bahrain proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §521 relief permit omitting Creditor Claim Information? | External Administrator seeks to omit or seal Creditor Claim Information. | HSBC opposes omission/sealing as improper disclosure. | Granted limited relief from §521 disclosure requirements. |
| Should the chapter 11 case be dismissed for cause? | Case progress is limited but may be coordinated with Bahrain administration. | Bad faith and failure to file schedules/plan justify dismissal. | Dismissal denied; case not ripe for dismissal at this stage. |
| May §553(b) relief be pursued in a chapter 15 ancillary proceeding and/or in a related chapter 11 case? | Chapter 15 recognition permits avoidance actions analogous to U.S. law; look-back date may be chapter 15 filing date. | §553(b) relief is limited to a plenary case and timing should follow chapter 11 petition date. | §553(b) relief can be pursued in chapter 15; reference date treated as chapter 15 filing date for timing; consolidation may be appropriate. |
| Are the External Administrator's common-law claims preempted by UCC Article 4A or defeated by discharge-for-value? | Common-law claims survive unless inconsistent with Article 4A or discharged by value. | Article 4A preempts common-law claims when applicable and discharge-for-value may defeat recovery. | Common-law claims survive to the extent not precluded by Article 4A; issues of notice and scope require factual development. |
Key Cases Cited
- In re Premier General Holdings, Ltd., 427 B.R. 592 (Bankr. W.D. Tex. 2010) (consolidation and look-back principles to maximize avoidance relief)
- In re Loy, 432 B.R. 551 (E.D. Va. 2010) (avoidance rights and cross-border considerations under chapter 15)
- In re Bennett Funding Group, Inc., 146 F.3d 136 (2d Cir. 1998) (broad discretion of courts in recognizing setoffs under § 553)
- Sheerbonnet, Ltd. v. American Express Bank, Ltd., 951 F. Supp. 403 (S.D.N.Y. 1996) (exclusivity of Article 4A is limited to areas covered by the Article)
- In re Maxwell Communications Corp., 93 F.3d 1036 (2d Cir. 1996) (recognition of avoidance law and cross-border insolvency considerations)