In Re: Ocean Rig UDW Inc.
1:17-cv-07222
| S.D.N.Y. | Apr 6, 2018Background
- Debtors: Ocean Rig UDW Inc. (UDW), a Cayman Islands exempted company, and three subsidiaries (DRH, DFH, DOV) operating an international deepwater drilling business and heavily indebted.
- JPLs (joint provisional liquidators/foreign representatives) sought recognition under Chapter 15 of Cayman Islands provisional liquidation and schemes of arrangement (the Cayman Proceedings) as a foreign main proceeding; Bankruptcy Court granted recognition and related relief (including a U.S. stay).
- Appellant (Tally M. Wiener), proceeding pro se and claiming to be a UDW shareholder, objected at the bankruptcy trial but offered no evidence of share ownership; Bankruptcy Court nonetheless addressed the merits and recognized the Cayman Proceedings.
- The Cayman restructuring was finalized on September 22, 2017 (new equity issued, cash distributions to creditors, new secured facility, management agreement); appellant did not seek a stay of the Recognition/Enforcement Orders pending appeal.
- District Court reviewed de novo as to law and for clear error as to facts, and appellees (debtors) moved to dismiss the appeal for lack of standing and on equitable-mootness grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to appeal ("aggrieved person" / pecuniary interest) | Wiener claims shareholder status and thus an interest to challenge recognition | Debtors: Wiener lacks pecuniary interest because UDW was insolvent; creditors receive reorganization value and pre-reorg shareholders receive effectively no recovery (only nominal 0.02%) | Held: Wiener lacks appellate standing; not an "aggrieved person" with pecuniary interest |
| Prudential standing (asserting third-party rights) | Wiener asserts rights of shareholders generally, relying on nominal equity allocation | Debtors: Wiener asserts third-party rights and cannot challenge for others' benefit; no creditor opposed plan | Held: Wiener lacks prudential standing; challenges concern third-party interests |
| Applicability of Fairfield Sentry precedent | Wiener relies on Fairfield Sentry to contend shareholders of insolvent entities can have standing | Debtors: Fairfield materially differs—there shareholders were only claimants and entity had liquid assets; not analogous where creditors will not recover in full | Held: Fairfield distinguishable; does not confer standing here |
| Equitable mootness (failure to obtain stay; substantial consummation) | Wiener argues Chapter 15 differs from Chapter 11 / §304 so equitable-mootness inapplicable | Debtors: Substantial consummation occurred and appellant failed to seek stay; equities and comity support dismissal | Held: Appeal is equitably moot; dismissal appropriate |
Key Cases Cited
- Licensing by Paolo, Inc. v. Sinatra (In re Gucci), 126 F.3d 380 (2d Cir.) (bankruptcy appellate standing: "aggrieved person")
- Kane v. Johns-Manville Corp. (In re Johns-Manville Corp.), 843 F.2d 636 (2d Cir.) (party may appeal only if order directly affects pecuniary interests)
- In re Fairfield Sentry Ltd., 714 F.3d 127 (2d Cir.) (shareholder appeal of recognition in different factual posture; not determinative here)
- Official Comm. of Unsecured Creditors of LTV Aerospace & Def. Co. v. Official Comm. of Unsecured Creditors of LTV Steel Co. (In re Chateaugay Corp.), 988 F.2d 322 (2d Cir.) (equitable mootness doctrine)
- Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944 (2d Cir.) (factors to overcome presumption of equitable mootness)
- Deutsche Bank AG v. Metromedia Fiber Network, Inc. (In re Metromedia Fiber Network, Inc.), 416 F.3d 136 (2d Cir.) (equitable mootness and importance of seeking a stay)