562 B.R. 601
Bankr. S.D.N.Y.2017Background
- Debtor Ampal-American Israel Corp., a New York corporation with headquarters and management in Israel, made a prepetition payment of NIS 344,322.64 (≈ $89,110) on June 11, 2012 from a Tel Aviv bank account to Israeli law firm Goldfarb Seligman (Goldfarb).
- Goldfarb applied the payment to outstanding Israeli legal invoices; a portion remained unpaid and Goldfarb filed an unsecured prepetition claim.
- Ampal filed bankruptcy (chapter 11, later converted to chapter 7) within 90 days of the transfer; the chapter 7 trustee sued to avoid and recover the transfer as a preference under 11 U.S.C. §§ 547 and 550.
- Parties stipulated Goldfarb provided post-transfer "new value" of NIS 103,625.64; the trustee’s avoidable amount was reduced accordingly (NIS 240,697 asserted).
- Goldfarb defended principally by invoking the presumption against extraterritoriality, arguing § 547(b) does not reach transfers that occurred abroad; trial focused on whether the transfer was a domestic application of the avoidance statute.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the presumption against extraterritoriality bars § 547 avoidance of this transfer | Trustee: avoidance/recovery applies because the Code’s avoidance provisions reach property that would be part of the estate and can include foreign property; focus is on protecting the estate | Goldfarb: § 547 lacks a clear extraterritorial statement and the transfer occurred entirely in Israel, so presumption bars application | Court: § 547 does not apply extraterritorially; presumption not rebutted; dismissal for defendant |
| Whether transfer was domestic (statute’s "focus") | Trustee: some U.S. contacts (NASDAQ listing, limited services related to U.S. filings) establish sufficient domestic focus | Goldfarb: payment was effected in Israel between Israeli accounts; predominant contacts are foreign | Court: focus is the initial transfer that depleted estate and that transfer occurred in Israel; not domestic |
Key Cases Cited
- EEOC v. Arabian Am. Oil Co., 499 U.S. 244 (presumption against extraterritoriality principle)
- Morrison v. National Australia Bank Ltd., 561 U.S. 247 (two-step test for extraterritoriality; statutory "focus")
- RJR Nabisco, 136 S. Ct. 2090 (application of Morrison framework)
- Maxwell Commc’n Corp. plc v. Societe Gen. plc, 93 F.3d 1036 (2d Cir.) (extraterritoriality and comity; foreign transfers not avoidable)
- French v. Liebmann, 440 F.3d 145 (4th Cir.) (holding § 548 reaches foreign transfers)
- Begier v. Internal Revenue Service, 496 U.S. 53 (definition of "property of the estate" limits avoidance power)
- Kiobel v. Royal Dutch Petroleum Co., 133 S. Ct. 1659 (foreign conduct must sufficiently displace presumption)