607 B.R. 160
Bankr. S.D.N.Y.2019Background
- Two Chapter 15 recognition orders were entered for Russian insolvency proceedings: one for Foreign Economic Industrial Bank, Ltd. ("Bank") (DIA as foreign representative) and one for individual debtor Larisa Markus (Yuri Rozhkov as foreign representative).
- Judge Vyskocil recognized both Russian proceedings as foreign main proceedings after hearings where the Sokolov and Rozhkov declarations and documentary evidence were admitted and notice was given under Bankruptcy Rule 2002(q).
- Attorney Victor Worms (appearing for Markus and asserting appearance for the Bank) moved to vacate both recognition orders under Fed. R. Civ. P. 60(b), alleging lack of personal jurisdiction/service, failure to hold an evidentiary hearing, §109(a) ineligibility (Bank), and that recognition violated U.S. public policy (§1506).
- The Foreign Representatives opposed, showing (inter alia) a New York retainer and documentary proof of the foreign proceedings and challenging Worms’ procedural and factual contentions.
- The Court denied the motions, holding Rule 60(b) inapplicable to Chapter 15 recognition (§1517(d) governs), finding the §1517(a) requirements met (COMI in Russia, proper petition materials and notice), concluding the Bank met §109(a) via a New York retainer, and rejecting the §1506 public-policy claim as inadequately supported.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction / service for recognition | Worms: recognition required service under Fed. R. Civ. P. 4 / 7004 (Hague) | Foreign Reps: Chapter 15 recognition uses Bankruptcy Rule 2002(q); Rule 7004/4 not required | Court: Rule 7004/4 not required for Chapter 15 recognition; Rule 2002(q) complied with; no personal-jurisdiction defect |
| Requirement of an evidentiary hearing before recognition | Worms: order should be vacated because no evidentiary hearing occurred | Foreign Reps: testimony and declarations were offered and admitted; statutory hearing requirement satisfied | Court: no case law requires a full evidentiary trial; admitted evidence and statutory hearing sufficed |
| Debtor eligibility under 11 U.S.C. § 109(a) (Bank) | Worms: Bank lacked property in the U.S. at petition date; thus ineligible | Foreign Reps: Bank had a New York retainer held by counsel constituting property in the U.S. | Court: retainer in New York is sufficient property to confer §109(a) eligibility; Bank is a debtor |
| Public-policy exception (§1506) | Worms: Russian proceedings are being used to "steal" assets and thus recognition is manifestly contrary to U.S. public policy | Foreign Reps: no evidence foreign procedures were unfair or violated U.S. fundamental rights; §1506 is narrow | Court: Worms offered only conclusory allegations, no proof of procedural unfairness or fundamental rights violations; §1506 not met |
Key Cases Cited
- Drawbridge Special Opportunities Fund LP v. Barnet, 737 F.3d 238 (2d Cir. 2013) (§109(a) applies to Chapter 15)
- In re Berau Capital Res. Pte Ltd, 540 B.R. 80 (Bankr. S.D.N.Y. 2015) (attorney retainer can satisfy "property in the United States" for §109(a))
- In re Ran, 607 F.3d 1017 (5th Cir. 2010) (factors for determining an individual debtor's COMI)
- United States v. Int'l Bd. of Teamsters, 247 F.3d 370 (2d Cir. 2001) (Rule 60(b) relief is granted only in exceptional circumstances)
- In re Oi Brasil Holdings Cooperatief U.A., 578 B.R. 169 (Bankr. S.D.N.Y. 2017) (Chapter 15 recognition modifications governed by §1517(d); Rule 60(b) inappropriate)