18 F. Supp. 3d 375
S.D.N.Y.2014Background
- Duff & Phelps, successor to Chanin, sues Vitro for breach of contract and unjust enrichment over a $3.25 million Restructuring Fee allegedly triggered by Vitro’s 2013 settlement with U.S. noteholders.
- Vitro argues the Restructuring Fee was discharged in Vitro’s Mexican concurso proceeding, so comity requires abstention from this suit.
- Chanin’s claim was presented in the Mexican bankruptcy proceeding, with a Conciliador recommending partial recognition and denying the full Restructuring Fee as contingent on a future transaction.
- The Mexican District Court adopted the Conciliador’s recommendation, recognizing Chanin for a reduced amount and preserving Chanin’s potential to pursue the contingent fee if the condition occurred.
- Vitro later settled with U.S. noteholders in 2013; Chanin invoiced Vitro for the $3.25 million in April 2013 and Vitro refused to pay.
- The court denied the Rule 12(b)(1) motion on comity grounds but stayed discovery for three months to allow clarifications from the Mexican court about its disposition of the Restructuring Fee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Mexican bankruptcy discharged the Restructuring Fee | Duff & Phelps argues no discharge of the fee occurred. | Vitro contends the Restructuring Fee was discharged under the concurso. | _motion denied; no discharge established |
| Whether Chanin submitted the Restructuring Fee claim in the Mexican proceeding | Chanin included the fee as a claim for closing a transaction. | Chanin’s claim for the fee was contingent and not properly recognized. | Chanin’s claim included the Restructuring Fee; supported by the filing |
| Whether the Mexican LCM permits discharge of contingent liabilities | The LCM does not permit discharge of contingent claims. | LCM can discharge contingent liabilities like the Restructuring Fee. | LCM permits discharge of contingent liabilities; court so holds |
| Whether comity requires dismissal under Rule 12(b)(1) | No discharge means comity does not require dismissal. | If discharged, comity warrants abstention. | No dismissal on comity; discovery stay for clarification |
| Whether unjust enrichment claim survives alongside breach of contract | Unjust enrichment is a valid independent claim where contract terms are disputed. | Unjust enrichment duplicative but permissible where contract existence is contested. | Denied without prejudice; can proceed with both claims |
Key Cases Cited
- JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418 (2d Cir. 2005) (comity and foreign bankruptcy considerations in recognition)
- Finanz AG Zurich v. Banco Economico S.A., 192 F.3d 240 (2d Cir. 1999) (comity and orderly distribution in foreign proceedings)
- Allstate Life Ins. Co. v. Linter Group Ltd., 994 F.2d 996 (2d Cir. 1993) (comity principles in foreign bankruptcy contexts)
- In re Chateaugay Corp., 944 F.2d 997 (2d Cir. 1991) (discharge of debtor obligations in bankruptcy)
- In re Vitro, S.A.B. de C.V., 701 F.3d 1031 (5th Cir. 2012) (endorsement of comity and cross-border bankruptcy effects)
- In re Ionosphere Clubs, Inc., 85 F.3d 992 (2d Cir. 1996) (executory contracts and bankruptcy treatment)
- Route 21 Associates of Belleville, Inc. v. MHC, Inc., 486 B.R. 75 (S.D.N.Y. 2012) (recognition and discharge of creditor claims in bankruptcy)