501 B.R. 644
Bankr. S.D.N.Y.2013Background
- Millards’ Cayman Islands bankruptcy proceeding seeks recognition as a foreign main proceeding under chapter 15.
- Marianas, a U.S. territory, opposes recognition based on (a) statutory requirements, (b) public policy, and (c) alleged bad faith; later requests a bond if recognized.
- Millards moved from the U.S. to the Marianas in 1986, later moved to the Cayman Islands in 1993, where COMI is found to be the Cayman Islands.
- Marianas had two default judgments against Millards for unpaid taxes (~$18 million each in 1994) now claimed to exceed $118 million after interest; Cayman court already upheld Millards’ Cayman bankruptcy petition.
- Cayman Bankruptcy Proceeding is a foreign proceeding under 101(23) and 1517; COMI resides in the Cayman Islands; U.S. courts are to cooperate under 1509.
- Court grants recognition, denies bond under 1522, and notes potential for later relief under 305 if appropriate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Cayman Proceeding qualifies as a foreign main proceeding under 1517(a)(1). | Marianas contends Millards’ insolvency is not established under Cayman law. | Millards’ Cayman proceeding is a foreign proceeding under 101(23) and 1517; COMI is in Cayman. | Yes; Cayman Proceeding is a foreign main proceeding. |
| Whether recognition is forbidden due to public policy under 1506. | Recognition would contravene U.S. public policy by enabling an unbonded stay and asset insulation. | Public policy exception is narrow; no fundamental U.S. policy violated. | No; recognition not manifestly contrary to U.S. public policy. |
| Whether bad faith by foreign representatives justifies denial of recognition. | Bad faith exists because they seek unbonded relief to review judgments. | Bad faith not shown; bond not required; seeking review elsewhere is permissible. | Bad faith not established as a basis to deny recognition. |
| Whether the court should require a bond under 1522 or 305 post-recognition. | Bond is appropriate to secure future compliance. | Bond is not required; Texas Texaco-type discretion not to bond. | Bond under 1522 denied; 305 rights reserved for potential dismissal/suspension if needed. |
Key Cases Cited
- Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133 (2d Cir. 1986) (court may order stays without full bond; discretion in bankruptcy)
- Ran, In re Ran, 607 F.3d 1017 (5th Cir. 2010) (COMI determination and treatment of foreign proceedings)
- Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167 (2d Cir. 2001) (default judgments; public policy and notice standards)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) (notice requirements; reasonableness of publication notices)