543 B.R. 127
Bankr. S.D.N.Y.2016Background
- In Dec. 2007 Basell (Luxembourg) — controlled by Leonard Blavatnik via layers of entities — paid a €100 million shareholder distribution (the "December Distribution") about two weeks before closing its leveraged acquisition of Lyondell (a U.S. company), which financed the merger largely with debt and paid out ~$12.5 billion to Lyondell shareholders.
- Lyondell filed Chapter 11 in Jan. 2009; the Trustee (Weisfelner) brought an adversary complaint asserting 21 claims including Counts 14 (Luxembourg tort for the December Distribution) and 19 (avoidance/recovery under 11 U.S.C. § 548). BI S.á.r.l. (a Luxembourg entity) is a defendant.
- BI S.á.r.l. was served worldwide under Fed. R. Bankr. P. 7004(f); the Rule 12(b)(2) jurisdictional dispute therefore turns on Fifth Amendment due process (minimum contacts with the United States as a whole) and on whether BI S.á.r.l. is an alter ego of Nell Limited or Blavatnik.
- Trustee alleged alter-ego based on common ownership and overlapping managers but pleaded few facts about undercapitalization, disregarded corporate formalities, intermingling of funds, or control of operational/marketing policies specific to BI S.á.r.l.
- Court held Trustee failed to make a prima facie showing that BI S.á.r.l. was the alter ego of Nell Limited or Blavatnik and therefore GRANTED dismissal of Counts 14 and 19 for lack of personal jurisdiction (without prejudice and with leave to amend). The court DENIED BI S.á.r.l.’s Rule 12(b)(6) challenge to Count 19 on extraterritoriality grounds, concluding §548 can reach certain extraterritorial transfers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over BI S.á.r.l. via alter-ego of Nell Limited | BI S.á.r.l.’s ownership and overlapping managers allow imputation of parent/entity U.S. contacts to BI S.á.r.l. | Allegations are conclusory; no facts showing undercapitalization, disregard of formalities, or control of operations specific to BI S.á.r.l. | Dismissal for lack of personal jurisdiction granted; Trustee failed to make prima facie alter-ego showing; leave to amend granted |
| Personal jurisdiction over BI S.á.r.l. via alter-ego of Blavatnik (individual) | Blavatnik controlled Access entities and directed distributions; his U.S. contacts can be imputed | Complaint lacks specific allegations that BI S.á.r.l. was Blavatnik’s alter ego (no commingling, no failure of corporate formalities, no lack of business discretion alleged) | Dismissal for lack of personal jurisdiction granted; alter-ego to individual not pleaded sufficiently |
| Extraterritorial reach of 11 U.S.C. § 548 (Count 19) — whether December Distribution is subject to avoidance | §548 and related provisions (esp. §541(a) and §550) show Congress intended avoidance powers to reach foreign transfers affecting the estate; Fourth Circuit precedent supports extraterritorial application | The Distribution was a foreign-to-foreign transfer with a primarily foreign "center of gravity," so §548 should not apply extraterritorially | Court found the Distribution was extraterritorial but held Congress intended §548 to reach such transfers; Rule 12(b)(6) dismissal on extraterritoriality denied |
| Jurisdictional discovery and amendment | Trustee sought jurisdictional discovery and, if dismissal ordered, leave to amend | BI S.á.r.l. argued discovery was adequate and further discovery unnecessary | Court denied additional jurisdictional discovery (discovery already extensive) but granted leave to amend the complaint to plead additional non-conclusory jurisdictional facts |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must contain factual content plausibly showing entitlement to relief)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead facts crossing the line from possibility to plausibility)
- Morrison v. National Austl. Bank Ltd., 561 U.S. 247 (2010) (presumption against extraterritoriality; focus on statute's domestic "focus")
- French v. Liebmann (In re French), 440 F.3d 145 (4th Cir. 2006) (§548 may apply extraterritorially; §541 supports worldwide reach of avoidance powers)
- FDIC v. Colonial Realty Co., 980 F.2d 125 (2d Cir. 1992) (property recovered by trustee under avoidance powers becomes property of the estate only when recovered)
- Saudi Arabia v. Arabian American Oil Co. (Aramco), 499 U.S. 244 (1991) (statutes presumptively apply only domestically absent clear congressional intent)