In re Poymanov, 571 B.R. 24

Background

Petitioner Aleksey Bazarnov is the financial administrator appointed by a Russian Commercial (Arbitrazh) Court to administer the insolvency of Russian resident debtor Sergey Poymanov under Russian Bankruptcy Law; Russian court found Poymanov insolvent and ordered sale of his assets.
Poymanov and related companies defaulted on large loans from Sberbank; Sberbank assigned claims to Sberbank Capital and then to Suintex; various Russian insolvency proceedings against P-Granit and P-Invest followed.
Petitioner opened a New York retainer account funded by two payments (the “Gureev Payments”) made on behalf of Poymanov; Petitioner filed a Chapter 15 petition in SDNY seeking recognition of the Russian proceeding as a foreign main proceeding and to have the SDNY litigation stayed.
PPF Management LLC filed suit in SDNY asserting claims (the SDNY Action) it says were assigned to it by Poymanov and his former wife and opposed recognition and the automatic stay; PPF alleges reiderstvo (corporate raiding) and conflicts of interest by the Petitioner.
The bankruptcy court held an evidentiary hearing, received expert testimony about Russian law and reiderstvo, reopened the record for supplemental evidence, and heard final argument.
The Russian court is separately considering Petitioner applications challenging the purported assignment to PPF; factual questions about the assignment date and related documents remain pending in Russia.

Issues

Issue	Petitioner (Bazarnov) Argument	PPF Argument	Held
Whether Chapter 15 section 109(a) eligibility is satisfied (does debtor have U.S. property)?	Retainer account funds and possibly SDNY claims are property of Poymanov in the U.S.; retainer funded by Gureev Payments tied to a verified Russian court-confirmed debt.	Transfer to retainer was improper under Russian law; payments could be void or gifts; thus not property of Poymanov in U.S.	Held: Retainer account funds are property of Poymanov in the U.S.; section 109(a) satisfied.
Whether the Russian insolvency is a "foreign main proceeding" and Petitioner a "foreign representative" under Chapter 15	Russian proceeding is collective, supervised by Russian court, and Russia is debtor’s COMI; Russian court appointed Petitioner to administer estate.	Contends proceeding is not collective and Petitioner has conflicts of interest/bad faith.	Held: Proceeding is a foreign main proceeding; Petitioner qualifies as foreign representative; conflicts/neutrality not required under §101(24).
Whether recognition is manifestly contrary to U.S. public policy under §1506	Recognition furthers Chapter 15 cooperation; no U.S. public policy is offended by recognition.	Argues transfers, possible money laundering, conflicts, and reiderstvo risk make recognition repugnant to U.S. public policy.	Held: Public policy exception not met; recognition is not manifestly contrary to U.S. policy.
Whether SDNY Action is subject to the Chapter 15 automatic stay (§1520)	SDNY claims (or part) are property of Poymanov and thus subject to the automatic stay; assignment to PPF may be void under Russian law and is pending in Russian court.	Maintains SDNY claims belong to PPF and were validly assigned.	Held: Automatic stay applies to property of Poymanov in U.S.; whether SDNY claims are Poymanov’s property depends on validity of assignment under Russian law and is reserved to Russian court proceedings; SDNY action risks stay violation if pursued.

Key Cases Cited

Drawbridge Special Opps. Fund LP v. Barnet, 737 F.3d 238 (2d Cir.) (Chapter 15 §109(a) eligibility and related principles)
In re Inversora Eléctrica de Buenos Aires S.A., 560 B.R. 650 (Bankr. S.D.N.Y. 2016) (debtor funds in counsel retainer account constitute U.S. property for §109(a))
In re Berau Capital Resources Pte Ltd., 540 B.R. 80 (Bankr. S.D.N.Y. 2015) (same on retainer accounts and Chapter 15 eligibility)
In re Octaviar Admin. Pty Ltd., 511 B.R. 361 (Bankr. S.D.N.Y. 2014) (same analysis on U.S. property in retainer accounts)
In re OAS S.A., 533 B.R. 83 (Bankr. S.D.N.Y. 2015) (foreign representative appointment and limits on imposing neutrality/disinterestedness requirements)
Morning Mist Holdings Ltd. v. Krys, 714 F.3d 127 (2d Cir.) (narrow construction of §1506 public-policy exception)
In re Rede Energia S.A., 515 B.R. 69 (Bankr. S.D.N.Y. 2014) (§1506 applied sparingly in Chapter 15 recognition)
In re Toft, 453 B.R. 186 (Bankr. S.D.N.Y. 2011) (analysis of §1506 public-policy exception)
Lamie v. U.S. Trustee, 540 U.S. 526 (U.S. 2004) (statutory interpretation principles)
Lee v. Bankers Trust Co., 166 F.3d 540 (2d Cir. 1999) (plain meaning controls statutory interpretation)