484 B.R. 615
Bankr. S.D.N.Y.2013Background
- Foreign representative sold Sentry's SIPA Claim to Farnum in an arms-length 2010 sale after negotiations; Trustee later settled in SIPA proceedings, increasing the claim's value; the BVI Liquidator sought to disapprove the sale under Chapter 15 and relevant U.S. code provisions; the BVI Court found the Trade Confirmation valid and approved; this Court previously recognized the BVI proceeding as foreign main and acknowledged comity; the application here seeks US court disapproval, which the Court denies as comity and territoriality foreclose plenary review.
- The SIPA Claim is a primary Sentry asset; after partial prepayments, the SIPA Claim is fully allowed at $230 million; other Sentry assets are liquid and limited in value; the Sale was documented with a Trade Confirmation describing the sale of Sentry’s rights against BLMIS.
- The Trade Confirmation required BVI Court and U.S. Bankruptcy Court approvals, with Seller's fiduciary duties controlling whether approvals are pursued; New York law governs the Trade Confirmation.
- The BVI proceedings and recognition order position the BVI Court as the primary forum for the SIPA Claim; U.S. interests here are minimal, and comity supports deferring to the BVI judgment.
- The court ultimately denies the application and forecloses a plenary Section 363 review under 1520(a)(2); the SIPA Claim sale is not a US territorial transfer, so Section 363 is inapplicable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a Section 363 review is warranted under 1520(a)(2) | Foreign representative argues sale qualifies for Section 363审 | Farnum contends no US transfer occurred | Not warranted; court defers to BVI proceedings |
| Whether comity and territorial limits bar plenary review | Comity should not defer to BVI | Comity requires deference to BVI judgment | Comity bars plenary US review; denial of relief aligns with comity |
| Location of SIPA Claim for 1520(a)(2) purposes | Claim located in US; within US jurisdiction | Claim is a BVI intangible located abroad | SIPA Claim located in the BVI; no 1520(a)(2) transfer |
Key Cases Cited
- Severnoe Securities Corp. v. London and Lancashire Insurance Co., 255 N.Y. 120 (N.Y. 1931) (situs of intangibles and practical location analysis)
- Butner v. United States, 440 U.S. 48 (U.S. 1979) (nonbankruptcy law governs property interests situs)
- Peterson v. Islamic Republic of Iran, 627 F.3d 1117 (9th Cir. 2010) (situs of intangible right to payment under state law)
- In re Iroquois Energy Mgmt., LLC, 284 B.R. 28 (Bankr.W.D.N.Y. 2002) (location of intangible asset (right to payment) anchored at debtor's domicile)
- Yayasan Sabah Dua Shipping SDN BHD v. Scandinavian Liquid Carriers Ltd., 335 F.Supp.2d 441 (S.D.N.Y. 2004) (contextual situs of intangibles and justice/convenience factors)
- In re Fairfield Sentry Ltd., 440 B.R. 60 (Bankr.S.D.N.Y. 2010) (recognition and comity framework for foreign main proceeding)
- SNP Boat Serv. S.A. v. Hotel Le St. James, 483 B.R. 776 (S.D. Fla. 2012) (comity and cross-border insolvency principles in foreign proceedings)
- In re Treco, 240 F.3d 148 (2d Cir. 2001) (comity as ultimate relief factor in cross-border cases)
- JSC BTA Bank, 434 B.R. 334 (S.D.N.Y. 2010) (interest of comity and territorial limits in Chapter 15)