445 B.R. 318
Bankr. D. Del.2011Background
- Debtors ABC Learning Centres Limited and A.B.C. USA Holdings Pty Limited seek recognition of Australian liquidation proceedings under Chapter 15.
- Australian proceedings began as voluntary administration, then were converted by creditors to liquidation under the Corporations Act.
- RCS Capital Development, LLC opposes recognition, arguing the proceedings are not a foreign proceeding under §101(23) and/or violate U.S. public policy under §1506.
- Arizona verdict in favor of RCS (claims against ABC Learning and ABC Delaware) reduced to judgment is sought by RCS to be enforceable in Nevada litigation via setoff.
- Debtors request recognition as foreign main proceedings that would trigger automatic stay; RCS seeks limited stay relief to convert the Arizona verdict to judgment and pursue a setoff in Nevada.
- Court grants recognition as foreign main proceedings and grants lift-stay relief for limited purposes described.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether liquidation proceedings are foreign proceedings under §101(23). | Petitioners (foreign representatives) | RCS | Yes; they meet seven-factor test (collective, foreign, insolvency law, COMI, etc.). |
| Whether the liquidations meet recognition criteria under §1517. | Liquidations are foreign main proceedings with COMI in Australia | RCS | Yes; COMI in Australia; petition complies with §1515; representations proper. |
| Whether recognition is not manifestly contrary to U.S. public policy. | Recognition aligns with Model Law and comity | Potential bias toward creditors | Not contrary to U.S. public policy; denied public policy denial. |
| Whether RCS is entitled to lift stay for judgment reduction and setoff rights. | Relief would be premature and costly | Relief necessary to protect setoff rights | Granted in limited form to permit reduction to judgment and assertion of setoff in Nevada litigations. |
Key Cases Cited
- In re Betcorp Ltd., 400 B.R. 266 (Bankr.D.Nev. 2009) (framework for 'proceeding' and foreign main/nonmain distinctions under §101(23))
- In re Tri-Continental Exchange Ltd., 349 B.R. 627 (Bankr.E.D. Cal. 2006) (COMI and Model Law considerations in COMI determinations)
- In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325 (S.D.N.Y. 2008) (COMI factors for main vs nonmain under Chapter 15)
- In re Rexene Prods. Co., 141 B.R. 574 (Bankr.D.Del. 1992) (setoff and stay-relief considerations)
- The SCO Group, Inc., 395 B.R. 852 (Bankr. D. Del. 2007) (three-prong test for stay relief)