460 B.R. 106
Bankr. S.D.N.Y.2011Background
- This SIPA liquidation case involves the Trustee's avoidance claims against Maxam Absolute Return Fund entities and related defendants.
- The Trustee seeks to recover transfers to Maxam Fund and subsequent transfers to Maxam Limited during the Preference Period.
- Maxam Limited filed a Cayman Islands action in July 2011 seeking declaratory relief and costs against the Trustee, allegedly violating the automatic stay.
- Maxam Limited had previously stipulated to extend the deadline for answers to the Trustee's complaint, which the Court notes benefited Maxam Limited.
- The Cayman Action was argued to raise issues already pending in this Court and threatened the SIPA estate and exclusive jurisdiction of this Court.
- The Court grants the Trustee's motion to enforce the automatic stay, declare the Cayman Action void ab initio, and enjoin Maxam Limited from pursuing the Cayman Action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Cayman Action violate the automatic stay and SIPA? | Picard argues Cayman Action interferes with estate and violates stay orders. | Maxam Limited contends no stay violation or forum issues arise from foreign declaratory relief. | Yes; Cayman Action violates stays and SIPA, and is void ab initio. |
| Is an injunction under §105(a) appropriate to restrain the Cayman Action? | Court should use §105(a) to protect estate and prevent jurisdictional interference. | China Trade factors control whether to enjoin; comity may limit relief. | Yes; injunction under §105(a) is warranted to preserve SIPA process and estate administration. |
| Does the Court have personal jurisdiction over Maxam Limited for injunctive purposes? | Maxam Limited has substantial New York contacts via Investment Management Agreement and U.S. nexus. | Not explicitly argued here; emphasis on foreign action. | Yes; specific jurisdiction exists given New York contact, consent via forum, and relatedness of claims. |
| Does extending the stay to the Cayman Action serve the estate and SIPA policy? | Stays prevent dilution of estate assets and protect customer property. | Not separately argued; focus on stay violation. | Yes; extension of the stay under §105(a) is appropriate to protect the estate. |
Key Cases Cited
- Cadle Co. v. Mims (In re Moore), 608 F.3d 253 (5th Cir.2010) (property of the estate includes causes of action as assets)
- FDIC v. Hirsch (In re Colonial Realty Co.), 980 F.2d 125 (2d Cir.1992) (stay violations are void and have no effect)
- In re Nakash, 190 B.R. 763 (Bankr.S.D.N.Y.1996) (extraterritorial reach of the automatic stay)
- Barton v. Barbour, 104 U.S. 126 (1881) (Barton doctrine requires leave of court before suing receivers)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) (minimum contacts and purposeful availment in jurisdictional analysis)
- Asahi Metal Indus. Co., Ltd. v. Superior Court of Cal., 480 U.S. 102 (1987) (reasonableness concerns in specific jurisdiction analysis)
- China Trade & Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33 (2d Cir.1988) (foreign proceedings enjoined when appropriate under comity factors)
- QuEnie, Ltd. v. Nygard Int'l, 321 F.3d 282 (2d Cir.2003) (Section 105 stay extensions for non-debtors when estate affected)