Vitro S.A.B. de C.V., Appellant, v. Ad Hoc Group of Vitro Noteholders; Wilmington Trust, National Association, solely in its capacity as indenture trustee; U.S. Bank National Association, Appellees. In the Matter of Vitro S.A.B. de C.V., Debtor. Fintech Investments, Limited, Appellant, v. Ad Hoc Group of Vitro Noteholders; Wilmington Trust, National Association, solely in its capacity as indenture trustee; U.S. Bank National Association, Appellees. In the Matter of VITRO S.A.B. DE C.V., Debtor. Ad Hoc Group of Vitro Noteholders, Appellant, v. Vitro S.A.B. de C.V., Appellee. In the Matter of Vitro S.A.B. de CV, Debtor.
Nos. 12-10542, 12-10689 and 12-10750.
United States Court of Appeals, Fifth Circuit.
Nov. 28, 2012.
701 F.3d 1031
Before KING, SMITH and BARKSDALE, Circuit Judges.
V
For these reasons, we REVERSE and render summary judgment for Steadfast.
Jeff Philipp Prostok, Forshey & Prostok, L.L.P., Fort Worth, TX, Allan S. Brilliant, Dechert, L.L.P., New York City, G. Eric Brunstad, Jr. (argued), Matthew Joseph Delude, Collin O‘Connor Udell, Dechert, L.L.P., Hartford, CT, for Ad Hoc Group of Vitro Noteholders.
Andrew M. Leblanc (argued), Milbank, Tweed, Hadley & McCloy, L.L.P., Washington, DC, David Mark Bennett, Katharine Battaia Clark, Cassandra Ann Sepanik, Thompson & Knight, L.L.P., Dallas, TX, Alan J. Stone, Jeremy C. Hollembeak, Milbank, Tweed, Hadley & McCloy, L.L.P., New York City, for Vitro S.A.B. de CV.
Kevin K. Russell, Goldstein & Russell, P.C., Washington, DC, for Government of the United Mexican States, Amicus Curiae.
Jeff Philipp Prostok, Forshey & Prostok, L.L.P., Fort Worth, TX, Sanford M. Litvack, Hogan Lovells US, L.L.P., New York City, for Wilmington Trust, Nat. Ass‘n.
Jason S. Brookner, Cameron Phair Pope, Andrews Kurth, L.L.P., Houston, TX, Jeanne P. Darcey, Kevin M. Colmey, Richard Hiersteiner, Amy A. Zuccarello, Sullivan & Worcester, Boston, MA, Jeff Philipp Prostok, Forshey & Prostok, L.L.P., Fort Worth, TX, for U.S. Bank Nat. Ass‘n.
Lindsee P. Granfield (argued), Cleary, Gottlieb, Steen & Hamilton, L.L.P., New York City, Briana Leigh Cioni, Sander L. Esserman, Stutzman, Bromberg, Esserman & Plifka, P.C., Dallas, TX, for Fintech Investments, Limited.
KING, Circuit Judge:
Consolidated before us are three cases relating to the Mexican reorganization proceeding of Vitro S.A.B. de C.V., a corpоration organized under the laws of Mexico. The Ad Hoc Group of Vitro Noteholders, a group of creditors holding a substantial amount of Vitro‘s debt, appeal from the district court‘s decision affirming the bankruptcy court‘s recognition of the Mexican reorganization proceeding and Vitro‘s appointed foreign representatives under Chapter 15 of the Bankruptcy Code. Vitro and one of its largest third-party creditors, Fintech Investments, Ltd., each appeals directly to this court the bankruptcy court‘s decision denying enforcement of the Mexican reorganization plan because the plan would extinguish the obligations of non-debtor guarantors. For the following reasons, we affirm the district court‘s judgment recognizing the Mexican reorganization proceeding and the appointment of the foreign representatives. We also affirm the bankruptcy court‘s order denying enforcement of the Mexican reorganization plan.
I. FACTUAL AND PROCEDURAL BACKGROUND
A. Vitro S.A.B. de C.V. and the 2008 Financial Crisis
Vitro S.A.B. de C.V. (“Vitro“) is a holding company that, together with its subsidiaries, constitutes the largest glass manufacturer in Mexico. Originally incor
Payment in full of the Old Notes was guaranteed by substantially all of Vitro‘s subsidiaries (the “Guarantors“). The guaranties provide that the obligations of the Guarantors will not be released, discharged, or otherwise affected by any settlement or release as a result of any insolvency, reorganization, or bankruptcy proceeding affecting Vitro. The guaranties further provide that they are to be governed and construed under New York law and include the Guarantors’ consent to litigate any disputes in New York state courts. Thе guaranties state that “any rights and privileges that [Guarantors] might otherwise have under the laws of Mexico shall not be applicable to th[e] Guarant[ies].”
In the latter half of 2008, Vitro‘s fortunes took a turn for the worse when the global financial crisis significantly reduced demand for its products. Vitro‘s operating income declined by 36.8% from 2007 to 2008, and an additional 22.3% from 2008 to 2009. In February of 2009, Vitro announced its intention to restructure its debt and stopped making scheduled interest payments on the Old Notes.
B. Vitro Restructures Its Obligations
After Vitro stopped making payments on the Old Notes, it entered into a series of transactions restructuring its debt obligations. On December 15, 2009, Vitro entered into a sale leaseback transaction with Fintech Investments Ltd. (“Fintech“), one of its largest third-party creditors, holding approximately $600 million in claims (including $400 million in Old Notes). Under the terms of this agreement, Fintech paid $75 million in exchange for the creation, in its favor, of a Mexican trust composed of real estate contributed by Vitro‘s subsidiaries. This real estate was then leased to one of Vitro‘s subsidiaries to continue normal operations. The agreement also gave Fintech the right to acquire 24% of Vitro‘s outstanding capital or shares of a sub-holding company owned by Vitro in exchange for transferring Fintech‘s interest in the trust back to Vitro or its subsidiaries.
Partly as a result of these transactions, Vitro generated a large quantity of intercompany debt. Previously, certain of Vitro‘s operating subsidiaries directly and indirectly owed Vitro an aggregate of approximately $1.2 billion in intercompany debt. As a result of a series of financial transactions in December of 2009, that debt was wiped out and, in a reversal of roles, Vitro‘s subsidiaries became creditors to which Vitro owed an aggregate of approximately $1.5 billion in intercompany debt. Despite requests by holders of Old Notes, Vitro did not disclose these transactions. In August of 2010, Fintech purchased claims by five banks holding claims against Vitro and its subsidiaries and extended the maturity of various promissory notes issued by Vitro‘s subsidiaries. Pur
Only in October of 2010, approximately 300 days after completing the transactions with its subsidiaries, did Vitro disclose the existence of the subsidiary creditors. This took the transactions outside Mexico‘s 270-day “suspicion period,” during which such transactions would be subject to additional scrutiny before a business enters bankruptcy.
C. Vitro Commences a Concurso Proceeding in Mexican Court
Between August 2009 and July 2010, Vitro engaged in negotiations with its creditors and submitted three proposals for reorganization. Each was rejected by creditors. After the last proposal, the Ad Hoc Group of Vitro Noteholders (the “Noteholders“), a group of creditors holding approximately 60% of the Old Notes, issued a press release “strongly recommend[ing]” that all holders of the Old Notes deny consent to any reorganization plan that the Noteholders had not approved. On November 1, 2010, Vitro disclosed its intention to commence a voluntary reorganization proceeding in Mexico, together with a pre-packaged plan of reorganization. On December 13, 2010, Vitro initiated in a Mexican court a concurso proceeding under the Mexican Business Reorganization Act, or
The Mexican court initially rejected Vitro‘s filing on January 7, 2011, because Vitro could not reach the 40% creditor approval threshold necessary to file a concurso petition without relying on intercompany claims held by its subsidiaries. On April 8, 2011, that decision was overruled on appeal and Vitro was then declared to be in bankruptcy, or concurso mercantil. Pursuant to Mexican law, Javier Luis Navarro Velasco was appointed as conciliador.2
The conciliador was tasked with filing an initial list of recognized claims and mediating the creation of a reorganization plan. The conciliador did so, and on August 5, 2011, filed a proposed final list of recognized creditors, which included those subsidiaries holding intercompany debt. The conciliador then negotiated terms of a reorganization plan between Vitro and the recognized creditors to submit to the Mexican court for approval. Throughout this process, the parties were apparently in frequent contact with the Mexican court on an ex parte basis.
1. Terms of the Concurso Plan
On December 5, 2011 the conciliador submitted to the Mexican court a proposed restructuring plan (the “Concurso plan” or “Plan“) substantially identical to the one Vitro had originally proposed. Under the
[O]nce this Agreement is approved by the Court ... this Agreement ... will substitute, pay, reрlace and terminate the above obligations, instruments, securities, agreements and warranties in which were agreed upon Approved Credits and, therefore ... will terminate personal guarantees granted a third and/or direct and indirect subsidiaries [sic] of Vitro with regards to the obligations, instruments, securities and agreements that gave rise to the Approved Credits.
The Plan further provides that Vitro would issue new notes payable in 2019 (the “New 2019 Notes“), with a total principal amount of $814,650,000. The New 2019 Notes would be issued to Vitro‘s third-party creditors (not including those subsidiaries holding intercompany debt, who would forgo their pro rata share of the Plan‘s consideration and instead receive other promissory notes). The New 2019 Notes would bear a fixed annual interest rate of 8.0%, but would “not have ... payments of principal during the first 4 (years) years [sic] ... and from the fifth year of operation and until the seventh year ... will have repayments or payments of [a] total principal amount of $23,960,000.00 USD ... payable semiannually on June 30 and December 31 of each year and the remaining balance upon due date.” The New 2019 Notes would also “be unconditionally and supportively guaranteed for each of the Guarantors.” Payment under the New 2019 Notes would go into a third-party payment trust, which would deliver payment to those creditors who had consented to the Plan. A second trust would be created to pay non-consenting creditors upon their written agreement to the terms of the Plan. In addition to the New 2019 Notes, Vitro would also provide to the holders of the Old Notes $95,840,000 aggregate principal amount of new mandatory convertible debt obligations (“MCDs“) due in 2015 with an interest rate of 12%, convertible into 20% equity in Vitro if not paid at full maturity. Finally, the Plan also provided cash consideration of approximately $50 per $1000 of principal of Old Notes.
2. The Concurso Plan is Approved
Under Mexican law, approval of a reorganization plan requires votes by creditors holding at least 50% in aggregate principal amount of unsecured debt. As distinguished from United States law, Mexico does not divide unsecured creditors into interest-aligned classes, but instead counts the votes of all unsecured creditors, including insiders, as a single class. As a result, although creditors holding 74.67% in aggregate principal amount of recognized claims voted in favor of the plan, over 50% of all vоting claims were held by Vitro‘s subsidiaries in the form of intercompany debt. The 50% approval threshold could not have been met without the subsidiaries’ votes. After the initial approval, the LCM provides a period during which objecting creditors can veto the plan. A veto requires agreement by recognized creditors holding a minimum of 50% in aggregate principal amount of debt or by recognized creditors numbering at least 50% of all unsecured creditors. As only 26 of the 886 recognized creditors sought to veto the Concurso plan, and as those creditors held less than 50% of the aggregate recognized debt, the veto failed.3
The Mexican court approved the Concurso plan on February 3, 2012. On February 23, 2012, the Plan went into effect,
D. Objecting Creditors Resist Enforcement
While objecting to the concurso proceeding in Mexico, creditors dissatisfied with Vitro‘s reorganization efforts attempted to collect on the Old Notes and guaranties in a variety of ways. By April 2010, Vitro had received acceleration notices for all the Old Notes. On November 17, 2010, involuntary Chapter 11 petitions were filed against fifteen Guarantors domiciled in the United States.5 Various holders of Old Notes also commenced two substantially identical lawsuits in New York state court against Vitro and 49 Guarantors, resulting in orders of attachment with respect to any property located in New York.
Parallel to the concurso proceeding, in August 2011, Wilmington Trust, National Association (“Wilmington“), the indenture trustee for the Old Notes due in 2012 and 2017, filed suit in New York state court against various of the Guarantors, seeking a declaratory judgment confirming the Guarantors’ obligations under the related indentures. The state court granted partial summary judgment in Wilmington‘s favor on December 5, 2011. The court held that New York law applied to the dispute and that under the unambiguous terms of the relevant Old Notes, “any nonconsensual release, discharge or modification of the obligations of thе Guarantors ... is prohibited.” Wilmington Trust v. Vitro Automotriz, S.A. De C.V., 33 Misc.3d 1231, 943 N.Y.S.2d 795 (table), 2011 WL 6141025, at *6 (N.Y.Sup.Ct. Dec. 5, 2011). The court went on to find, however, that “whether such prohibitive provisions may be modified or eliminated by applicable Mexican laws is not at issue here.” Id. at *5.6 A separate suit brought by U.S. Bank National Association (“U.S. Bank“), the indenture trustee for the Old Notes due in 2013, achieved the same outcome.
E. Vitro Commences a Chapter 15 Proceeding in the United States
On October 29, 2010, Vitro‘s Board of Directors appointed Alejandro Sanchez-Mujica to act as Vitro‘s foreign representa
The bankruptcy court, over objections, held that the Mexican reorganization proceeding was a “foreign main proceeding” and approved the petition confirming Sanchez-Mujica and Arechavaleta-Santos as foreign representatives pursuant to
On March 2, 2012, Vitro‘s foreign representatives filed a motion in bankruptcy court entitled “Motion of Foreign Representatives of Vitro S.A.B. de C.V. for an Order Pursuant to
II. STANDARD OF REVIEW
We review a district court‘s affirmance of a bankruptcy court‘s decision by applying the same standard of review that the district court applied. In re Martinez, 564 F.3d 719, 725-26 (5th Cir.2009). Accordingly, questions of fact are reviewed for clear error and conclusions of law are reviewed de novo. Id. at 726. Mixed questions of law and fact are reviewed de novo. In re McLain, 516 F.3d 301, 307 (5th Cir.2008). We review a bankruptcy court‘s decision on direct appeal under the same standards. By contrast, “[w]e review a denial of declaratory or injunctive relief for abuse of discretion.” In re Schimmelpenninck, 183 F.3d 347, 353 (5th Cir.1999). A court‘s decision to grant comity is also reviewed for abuse of discretion. Int‘l Transactions, Ltd. v. Embotelladora Agral Regiomontana, SA de CV, 347 F.3d 589, 593 (5th Cir.2003) (applying abuse of discretion standard to review district court‘s grant of comity to Mexican bankruptcy court‘s ex parte order); see also In re Qimonda AG Bankr. Litig., 433 B.R. 547, 556 (E.D.Va.2010).
III. CHAPTER 15
The dispute before us arises under Chapter 15 of the Bankruptcy Code and broadly involves two issues: recognition of the foreign representatives and enforcement of the Concurso plan. As to the first, on April 14, 2011, Sanchez-Mujica and Arechavaleta-Santos, as co-foreign representatives, filed a petition seeking recognition of the concurso proceeding under Chapter 15. The Noteholders objected that Sanchez-Mujica and Arechavaleta-Santos were not properly appointed as foreign representatives because they were not appointed by the Mexican court and because Vitro did not have the powers of a debtor in possession. The bankruptcy court granted recognition of the concurso proceeding as a foreign main proceеding under
Because recognition of a proceeding under Chapter 15 is a precondition for the more substantive relief Vitro seeks in the Enforcement Motion, we will resolve the recognition issue first. We hold that the bankruptcy court and the district court correctly interpreted Chapter 15 as not requiring official court appointment. We further find that the term “foreign representatives” was intended to include debtors in possession, including those that may not meet Chapter 11‘s definition of debtors in possession, and that Vitro retained enough authority over its affairs to be a debtor in possession and could thus appoint Sanchez-Mujica and Arechavaleta-Santos as foreign representatives. Accordingly, we affirm the district court‘s ruling affirming the bankruptcy court‘s order.
We then address the Enforcement Motion. On March 2, 2012, Vitro‘s co-foreign representatives filed a motion seeking “to 1) give full force and effect in the United States to the Concurso Approval Order, 2)
A. Chapter 15 of the United States Bankruptcy Code
This case concerns a foreign bankruptcy proceeding for which recognition and enforcement are sought under Chapter 15 of the United States Bankruptcy Code. Chapter 15 was enacted in 2005 to implement the Model Law on Cross-Border Insolvency (“Model Law“) formulated by the United Nations Commission on International Trade Law (“UNCITRAL“), and replaced former
Central to Chapter 15 is comity. Comity is the “recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other per
Such a foreign representative must first petition a United States bankruptcy court for recognition of a foreign proceeding.
[A] collective judicial or administrative proceeding in a foreign country, including an interim proceeding, under a law rеlating to insolvency or adjustment of debt in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation.
Only after a United States court recognizes a proceeding can “the foreign representative ... apply directly to a court in the United States for appropriate relief in that court.”
Chapter 15 provides for a broad range of relief. This includes the ability to sue and be sued in United States courts, to apply directly to a United States court for relief, to commence a non-Chapter 15 case, and to intervene in any United States case to which the debtor is a party. In re Condor Ins. Ltd., 601 F.3d 319, 324 (5th Cir.2010). Section 1520 also provides for certain automatic relief upon recognition of a foreign main proceeding, like the one here, including an automatic stay and the power to prevent transfers of the debtor‘s property. A bankruptcy court is also empowered under
In considering whether to grant relief, it is not necessary that the result achieved in the foreign bankruptcy proceeding be identical to that which would be had in the United States. It is sufficient if the result is “comparable.” In re Schimmelpenninck, 183 F.3d at 364; Overseas Inns, 911 F.2d at 1149; see also In re Sivec SRL, 476 B.R. 310, 324 (Bankr.E.D.Okla.2012) (“The fact that priority rules and treatment of claims may not be identical is insufficient to deny a request for comity.“); In re Qimonda AG, 462 B.R. 165, 184 n. 17 (Bankr.E.D.Va.2011); In re Petition of Garcia Avila, 296 B.R. 95, 112 (Bankr.S.D.N.Y.2003). “[T]he foreign laws need not be identical to their counterparts under the laws of the United States; they merely must not be repugnant to our laws and policies.” In re Schimmelpenninck, 183 F.3d at 365.
B. Recognition of Foreign Representatives
After initiation of a foreign bankruptcy proceeding, a “foreign representative” may petition a United States court tо recognize the proceeding under Chapter 15. Chapter 15 defines a “foreign representative” as “a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor‘s assets or affairs or to act as a representative of such foreign proceeding.”
Three requirements, contained in
(a) Subject to
section 1506 , after notice and a hearing, an order recognizing a foreign proceeding shall be entered if—(1) such foreign proceeding for which recognition is sought is a foreign main proceeding or foreign nonmain proceeding within the meaning of
section 1502 ;(2) the foreign representative applying for recognition is a person or body; and
(3) the petition meets the requirements of
section 1515 .
Section 1515, in turn, provides the following procedural requirements:
(a) A foreign representative applies to the court for recognition of a foreign proceeding in which the foreign representative has been appointed by filing a petition for recognition.
(b) A petition for recognition shall be accompanied by—
(1) a certified copy of the decision commencing such foreign proceeding and appointing the foreign representative;
(2) a certificate from the foreign court affirming the existence of such foreign proceeding and of the appointment of the foreign representative; or
(3) in the absence of evidence referred to in paragraphs (1) and (2), any other evidence acceptable to the court of the existence of such foreign proceeding and of the appointment of the foreign representative.
(c) A petition for recognition shall also be accompanied by a statement identifying all foreign proceedings with respect to the debtor that are known to the foreign representative.
(d) The documents referred to in paragraphs (1) and (2) of subsection (b) shall be translated into English. The
court may require a translation into English of additional documents.
These requirements are to be strictly construed in line with our holding that the requisite analysis is not a “rubber stamp exercise,” and that “[e]ven in the absence of an objection, courts must undertake their own jurisdictional analysis and grant or deny recognition under Chapter 15 as the facts of each case warrant.” In re Ran, 607 F.3d at 1021.
Neither Sanchez-Mujica nor Arechavaleta-Santos, the recognized foreign representatives in this case, was appointed by a foreign court or tribunal. Both were voted into their positions by Vitro‘s Board of Directors. The bankruptcy court recognized the concurso proceeding under Chapter 15 and the district court affirmed, holding that whether a given individual could act as a foreign representative was a matter of United States law, and that it was unnecessary for a foreign representative to be appointed by a court. The court‘s holding rested on its analysis of § 101(24)‘s language and cases applying that subsection, which showed that it was sufficient for a foreign representative to be authorized in the context of a foreign bankruptcy proceeding. Vitro I, 470 B.R. at 411-13. The district court further determined that Vitro was the Mexican equivalent of a “debtor in possession,” able to administer its own reorganization, and was thus able to appoint a foreign representative under Chapter 15. Id. at 412.14
On appeal, the Noteholders argue that the individuals appointed here do not satisfy Chapter 15‘s definition of “foreign representatives” for two reasons. First, neither was “authorized in a foreign proceeding,” because neither was appointed by a foreign court or administrative tribunal.
Vitro responds that the plain language of § 101(24) does not require court appointment and that this conclusion is support by both Chapter 15‘s legislative history and UNCITRAL‘s Model Law. Vitro further argues that § 101(24) was intended to apply to a “debtor in possession,” like Vitro, and thus it had the power to appoint individuals as foreign representatives of the concurso proceeding.
Because the district court correctly interpreted § 101(24), defining foreign rep
1. Authorized in a Foreign Proceeding
The Noteholders point to numerous parts of Chapter 15 that allegedly show that a foreign court must explicitly authorize individuals or bodies to act as representatives. Contrary to the Noteholders’ interpretation, we do not find that any of Chapter 15‘s provisions requires action by a foreign tribunal.
We interpret statutes according to their plain meaning. Gaddis v. United States, 381 F.3d 444, 472 (5th Cir.2004). Section 101(24)—defining the term “foreign representative“—is wholly devoid of any statement that a foreign representative must be judicially appointed. The definition‘s requirement that a representative be “authorized in a foreign proceeding” is certainly compatible with appointment by a foreign court, but it is hardly necessary. As the district court observed, it would be equally compatible with a requirement that an individual be appointed “in the context of” a foreign proceeding. Vitro I, 470 B.R. at 411. It could also mean during, or in the course of, a foreign proceeding.
The other provisions the Noteholders identify suffer from the same defect. Section 1515(a) provides that “[a] foreign representative applies to the court for recognition of a foreign proceeding in which the foreign representative has been appointed” and requires that a petition for recognition be accompanied by either, 1) “a certified copy of the decision commencing such foreign proceeding and appointing the foreign representative,” 2) “a certificate from the foreign court affirming the existence of such foreign proceeding and of the appointment of the foreign representative,” or 3) other evidence “of such foreign proceeding and of the appointment of the foreign representative.”
Caselaw supports our interpretation. To be sure, foreign representatives have been appointed by foreign tribunals in many cases. One such case was In re Grand Prix Associates, Inc., where the court specifically held that § 1517(a) was satisfied where the purported foreign representative was able to present an order by the foreign court appointing it as the foreign representative of the business entities in question. No. 09-16545(DHS), 2009 WL 1410519, at *5 (Bankr.D.N.J. May 18, 2009); see also In re Innua Canada Ltd., No. 09-16362(DHS), 2009 WL 1025090, at *4-5 (Bankr.D.N.J. Apr. 15, 2009) (receivership order entered by Canadian court stated foreign representative had capacity to commence Chapter 15 proceeding); In re Oversight, 385 B.R. at 534 (Spanish insolvency court had power to appoint foreign representative for Chapter 15 purposes); In re Basis Yield Alpha Fund (Master), 381 B.R. 37, 46 n. 30 (Bankr.S.D.N.Y.2008); In re Tri-Cont‘l Exch. Ltd., 349 B.R. 627, 632 (Bankr.E.D.Cal.2006). But the district court identified numerous cases cited by the bankruptcy
The Mexican court‘s actions make it equally apparent that Sanchez-Mujica and Arechavaleta-Santos were properly appointed. It is undisputed that the Mexican court had the power to enjoin Sanchez-Mujica and Arechavaleta-Santos from acting as foreign representatives. Yet, when presented with a motion requesting such an order, the Mexican court denied it in full. The Mexican court also refused to declare the conciliador to be the only person authorized to act as foreign representative. In deciding not to enjoin the foreign representatives’ conduct, the Mexican court gave the representatives its tacit approval.16
Finally, our decision is informed by consideration of the Model Lаw, and reports by the UNCITRAL Working Group on Insolvency Law (“Working Group“).
The definition of foreign representatives in § 101(24) closely follows the language of Model Law Article 2(d).17 In drafting this definition, the Working Group expressly rejected the requirement that a foreign representative be “[specifically] authorized by statute or other order of court (administrative body) to act in connection with a foreign proceeding.” UNCITRAL Rep. of the Working Group on Insolvency Law on the Work of the Eighteenth Session, ¶ 111, U.N. Doc. A/CN.9/419 (Dec. 1, 1995), available at http://www.uncitral.org/uncitral/en/commission/working_groups/5Insolvency.html (Dec. 1995 Rep.) (alteration in original). That definition was rejected because of concerns that “the expressions would be unfamiliar and might have the unintended effect of being unduly restrictive, since the list would inevitably be incomplete.” Id. ¶ 112. The Working Group also declined to include the word “specifically” because “it would be unusual for a State to appoint an insolvency representative specifically to act abroad.” Id. ¶ 113. This supports our conclusion that the Noteholders’ proposed interpreta
Accordingly, we conclude that Sanchez-Mujica and Arechavaleta-Santos are not disqualified from serving as foreign representatives merely because they were not the subject of an official court appointment.
2. Power to Administer the Reorganization or Liquidation of a Debtor‘s Assets or Affairs
Having determined that Chapter 15 does not require a foreign representative to be appointed by court order, we still must address whether Sanchez-Mujica‘s and Arechavaleta-Santos’ appointments comport with the remainder of § 101(24). In particular, § 101(24) requires that a foreign representative have the authority “to administer the reorganization or the liquidation of the debtor‘s assets or affairs or to act as a representative of such foreign proceeding.”
The district court held that Vitro could appoint its own foreign representatives because, under Mexican law, a debtor continues to manage its business during a concurso proceeding, making it akin to a “debtor in possession.” Vitro I, 470 B.R. at 412.20 The Working Group clearly intended to include foreign representatives of proceedings in which a debtor in possession remains in control of its assets. Dec. 1995 Rep. ¶ 115. The National Bankruptcy Review Commission, created by Congress in 1994 to make recommendations on improving bankruptcy law and procedure, in its review of the Model Law, reached the same conclusion. Nat‘l Bankr.Rev. Comm‘n, Bankruptcy: The Next Twenty Years, Nat‘l Bankr. Rev. Comm‘n Final Rep., (1997), available at http://govinfo.library.unt.edu/nbrc/reportcont.html (Nat‘l Bankr. Comm‘n).
The Noteholders, however, challenge whether Vitro can be classified as a debtor in possession, and argue that such power is reserved for the conciliador in a concurso proceeding. The Noteholders also point out that under Chapter 11, a debtor in possession has the rights, powers, and duties of a Chapter 11 trustee, which include the right to negotiate, file, and seek confirmation of a plan of reorganization, and that Vitro lacked this authority.21
The Noteholders also argue that Vitro‘s appointment fails because it occurred prior to the concurso filing and because the appointment creates a conflict of interest between Vitro and its creditors. Finally, they repeatedly point out that the foreign representatives lacked the expertise necessary to serve in that role, and that they abdicated their responsibilities by ceding decision-making authority to United States counsel. The Noteholders cite no pertinent authority in support of these contentions.
Here, there is little doubt that Vitro met that definition. Vitro has presented extensive evidence that it retained broad control over its affairs, pursuant to various provisions of the LCM. See
We further observe that if Vitro were not permitted to proceed as a debtor in possession, with the power to appoint foreign representatives, it is unclear who would. Any other potential candidate would be susceptible to the same attacks raised by the Noteholders. For example, in a concurso proceeding the conciliador
acts as mediator between the debtor and creditors. A visitador only inspects the debtor‘s accounting books and records and determines whether the debtor meets the LCM‘s liquidity standard. The sindico is a receiver charged with liquidating the business and selling its assets if a plan is not reached within a specific period of time. None of these individuals possesses the full authority the Noteholders argue is required underAccordingly, we conclude that Vitro had the powers of a debtor in possession for purposes of
C. Enforcement of the Plan
1. Vitro‘s Request for Relief
In the Enforcement Motion, Vitro sought broad relief pursuant to
[A] permanent injunction enjoining all persons from initiating or continuing any suit, action, extra-judicial proceeding or other proceeding (including [already commenced actions in New York state court]) or any enforcement or collection process (including pursuant to any judgment, notices of attachment or [levies, restraining notices, or similar documentation]) in any jurisdiction within the United States or its territories ... against Vitro SAB and/or the Old Guarantors ... or their Property ... except
as permitted under the Concurso Plan or the Concurso Approval Order ...
If Vitro werе to succeed in obtaining all the relief that it requested, actions, executions, attachments, or other collection or enforcement processes currently pending against Vitro or its subsidiaries would be “permanently stayed, suspended, discharged, and dismissed.” Judgments already rendered against it or its subsidiaries would be declared “null and void and of no further force or effect.” Moreover, any entity having withheld payment to Vitro or its subsidiaries as a result of Vitro‘s default would immediately remit such payments to the applicable party. Finally, Vitro and its subsidiaries would be released from all liabilities with respect to any claims discharged under the Concurso plan. Of course, the bankruptcy court could grant some, but not all, of the relief requested.
The bankruptcy court held that the Concurso plan “which extinguishes the guarantee claims of the Objecting Creditors that were given under an indenture issued in the United States against non-debtor entities that are subsidiaries of Vitro, should not be accorded comity to the extent it provides for the extinguishment of the non-debtor guarantees of the indentures.” Vitro II, 473 B.R. at 132. The bankruptcy court specifically denied enforcement under
The circumstances under which the Plan was approved and the treatment creditors received raise many questions that are not before us about whether such a plan could be enforced under Chapter 15. The bankruptcy court explicitly dealt with some of these questions, while flagging others for our consideration without itself reaching them. Thus, for example, the bankruptcy court considered whether, as alleged by the Objecting Creditors, the Mexican judicial system and the concurso proceeding were corrupt, and should not be granted comity for this reason. Addressing the Objecting Creditors’ expert—Dr. Stephen D. Morris—who testified to a series of “suspicious circumstances” and “red flags” in the concurso proceeding, the bankruptcy court held that, although the witness was knowledgeable and qualified to speak on corruption in Mexico generally, his analysis of what impact such corruption had on this proceeding was unpersuasive. The bankruptcy court therefore concluded that it “ha[d] not seen evidence that the Mexican Proceeding [was] the product of corruption, or that the LCM itself is a corrupt process,” and rejected the Objecting Creditors’ argument. Id. at 130. The bankruptcy court reached a similar conclu-22sion as to whether, as argued by the Objecting Creditors, enforcement would have an adverse impact on credit markets. The court ultimately concluded that, while testimony by Dr. Elaine Buckberg, a former economist at the International Monetary Fund, was credible, her testimony did not quantify the negative effects of enforcing the Plan, and thus the court could not conclude that enforcement would adversely affect credit markets. Id. The bankruptcy court also considered, but rejected, the argument that relief should not be granted because the Mexican proceeding was “unfair.” Id. at 130-31. The bankruptcy court observed that although there had been ex parte meetings, such meetings were had by both sides and were, in fact, common in Mexico. Id. at 131. Responding to the Objecting Creditors’ allegations that they were not permitted to raise certain arguments in the Mexican court and that the conciliador was biased, the bankruptcy court held that such arguments were better left for the Mexican court system.22 Id.
The bankruptcy court did not reach two other arguments it described as “[p]os-sibl[y] [m]eritorious [o]bjections.” Id. at 132. These were that insiders were allowed to vote in favor of the Plan, and that the Concurso plan violates the absolute priority rule. Other arguments the bankruptcy court did not explicitly address, but which might be subsumed under its other holdings, are that the Concurso plan imposed a kind of “death trap” provision that precluded non-consenting creditors from recovering anything. Another such argument is that Mexico‘s single-class voting made no distinctions between creditors with adverse interests. Finally, a third
We need not concern ourselves with the vast majority of these issues, as Vitro and Fintech have framed their appeal in terms of only one:
Whether the Bankruptcy Court erred as a matter of law when, after it concluded that the Concurso Approval Order was the product of a process that was not corrupt or unfair to the Appellees, it refused to enforce the Concurso Approval Order solely because the Concurso plan novated guarantee obligations of non-debtor parties and replaced them with new obligations of substantially the same parties?
The issue Vitro and Fintech identify underpins the bankruptcy court‘s entire opinion. As that court summarized, “the Concurso plan approved in this instance ... extinguishes the guarantee claims of the Objecting Creditors that were given under an indenture issued in the United States against non-debtor entities that are subsidiaries of Vitro .... Such order manifestly contravenes the public policy of the United States and is also precluded from enforcement under §§ 1507, 1521 and 1522 of the Bankruptcy Code,” and would not be accorded comity. Id. at 133.
2. Chapter 15‘s Framework for Granting Relief
As already discussed, “[a] central tenet of Chapter 15 is the importance of comity in cross-border insolvency proceedings.” In re Cozumel Caribe, S.A. de C.V., 482 B.R. 96, 114 (Bankr. S.D.N.Y. 2012). “The extent to which the law of one nation, as put in force within its territory, whether by executive order, by legislative act, or by judicial decree, shall be allowed to operate within the dominion of another nation, depends upon what our greatest jurists have been content to call the comity of nations.” Hilton v. Guyot, 159 U.S. 113, 164 (1895). In applying the principles of comity, we “take[] into account the interests of the United States, the interests of the foreign state or stаtes involved, and the mutual interests of the family of nations in just and efficiently functioning rules of international law.” In re Artimm, S.r.L., 335 B.R. 149, 161 (Bankr. C.D. Cal. 2005). Accordingly, Chapter 15 provides courts with broad, flexible rules to fashion relief appropriate for effectuating its objectives in accordance with comity. See In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333-34 (S.D.N.Y. 2008); In re SPhinX, Ltd., 351 B.R. 103, 112 (Bankr. S.D.N.Y. 2006) (“[C]hapter 15 maintains—and in some respects enhances—the ‘maximum flexibility,’ that section 304 provided bankruptcy courts ... in light of principles of international comity and respect for the laws and judgments of other nations.” (citation omitted)).
Given Chapter 15‘s heavy emphasis on comity, it is not necessary, nor to be expected, that the relief requested by a foreign representative be identical to, or available under, United States law. In re Metcalfe & Mansfield Alternative Invs., 421 B.R. 685, 697 (Bankr. S.D.N.Y. 2010) (“The relief granted in the foreign proceeding and the relief available in a U.S. proceeding need not be identical.“); see also Artimm, 335 B.R. at 160 n. 11. We have previously cautioned that the mere fact that a foreign representative requests relief that would be available under the law of the foreign proceeding, but not in the United States, is not grounds for deny-
Nevertheless, Chapter 15 does impose certain requirements and considerations that act as a brake or limitation on comity, and preclude granting the relief requested by a foreign representative. In this case, the bankruptcy court rested on three of Chapter 15‘s sections,
Thus, while comity should be an important factor in determining whether relief will be granted, we are compelled by the bankruptcy court‘s decision and the parties’ arguments to get into the weeds of Chapter 15 to determine whether a foreign representative may independently seek relief under either
We concludе that a court confronted by this situation should first consider the specific relief enumerated under
We start by acknowledging that “[t]he relationship between
(1) staying the commencement or continuation of an individual action or proceeding concerning the debtor‘s assets, rights, obligations or liabilities to the extent they have not been stayed under section 1520(a);
(2) staying execution against the debtor‘s assets to the extent it has not been stayed under section 1520(a);
(3) suspending the right to transfer, encumber or otherwise dispose of any assets of the debtor to the extent this right has not been suspended under section 1520(a);
(4) providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor‘s assets, affairs, rights, obligations or liabilities;
(5) entrusting the administration or realization of all or part of the debtor‘s assets within the territorial jurisdiction of the United States to the foreign representative or another person, including an examiner, authorized by the court;
(6) extending relief granted under section 1519(a); and
(7) granting any additional relief that may be available to a trustee, except for relief available under sections 522, 544, 545, 547, 548, 550, and 724(a).
Additionally, under
Unlike
(b) In determining whether to provide additional assistance under this title or under other laws of the United States, the court shall consider whether such additional assistance, consistent with principles of comity, will reasonably assure
1) just treatment of all holders of claims against or interests in the debtor‘s property; 2) protection of claim holders in the United States against prejudice and inconvenience in the processing of claims in such foreign proceeding;
3) prevention of preferential or fraudulent dispositions of property of the debtor;
4) distribution of proceeds of the debtor‘s property substantially in accordance with the order prescribed by this title; and
5) if appropriate, the provision of an opportunity for a fresh start for the individual that such foreign proceeding concerns.
We are thus faced with two statutory provisions that each provide expansive relief, but under different standards. To clarify our resolution of requests for relief under Chapter 15 we adopt the following framework for analyzing such requests.
First, because
Second, if
Third, only if the requested relief appears to go beyond the relief previously available under
We believe this framework provides foreign representatives with the clearest path by which to seek Chapter 15 relief. See Clark, supra, at *10 (advising attorneys to consult
At the same time, this approach means that, by first considering
3. Availability of Relief under § 1521 and § 1507
Applying our analytic framework to Vitro‘s request for relief, the bankruptcy
(a) Step 1: Section 1521‘s enumerated provisions
The bankruptcy court denied relief under
Contrary to the Objecting Creditors’ assertion and the bankruptcy court‘s finding, the requested relief is not available under any of
For substantially the same reason, we reject the bankruptcy court‘s suggestion that
(b) Step 2: Section 1521(a)‘s grant of “any appropriate relief”
Having determined that none of the enumerated forms of relief listed un-
First, the relief Vitro seeks, a non-consensual, non-debtor release through a bankruptcy proceeding, is generally not available under United States law. Indeed, this court has explicitly prohibited such relief. In re Pac. Lumber Co., 584 F.3d 229, 251-52 (5th Cir. 2009) (discharge of debtor‘s debt does not affect liability of other entities on such debt and denying non-debtor release and permanent injunction); In re Zale Corp., 62 F.3d 746, 760 (5th Cir. 1995) (“Section 524 prohibits the discharge of debts of nondebtors.“). Because our law prohibits the requested discharge, a request for such relief more properly falls under
Second, our conclusion is bolstered by the fact that in the one case where a foreign proceeding‘s non-debtor discharge
Finally, we note that the bankruptcy court‘s decision was proper under
(c) Step Three: Section 1507‘s “additional assistance”
The bankruptcy court denied relief under
Under a Chapter 11 plan, the noteholders would receive their distribution from the debtor and would be free to pursue their other obligors, in this case the non-debtor guarantors. The Concurso plan provides drastically different treatment in that the noteholders receive a fraction of the amounts owed under the indentures from Vitro SAB and their rights against the other obligors are cut off. Id.
Vitro challenges the bankruptcy court‘s holding predominantly on the ground that it accorded insufficient weight to comity. The Objecting Creditors point to disparities between the Concurso plan and a similar proceeding in United States bankruptcy court. They also assert that the Mexican court‘s disregard for a relevant decision in New York state court precludes extending comity to its decision.
We conclude that
i. Availability of non-consensual, non-debtor discharges under § 1507
This court has previously foreclosed the type of relief sought here in the context of a United States bankruptcy proceeding. We acknowledge, however, that our view on this subject is not universally shared by our sister circuits. Although
In re Pacific Lumber Co. concerned a proposed plan that would “release[] [owners and guarantors] from liability ... related to proposing, implementing, and administering the [reorganization] plan.” 584 F.3d at 251. Quoting
Other circuits agree. See In re Lowenschuss, 67 F.3d 1394, 1401 (9th Cir. 1995) (“This court has repeatedly held, without exception, that § 524(e) precludes bankruptcy courts from discharging the liabilities of non-debtors.“); In re W. Real Estate Fund, Inc., 922 F.2d 592, 600–02 (10th Cir. 1990); In re Jet Fla. Sys., Inc., 883 F.2d 970, 972-73 (11th Cir. 1989). Those circuits not in agreement nevertheless prohibit such releases in all but the rarest of cases.
In Metromedia, for example, the court expressed great reluctance in approving non-debtor releases. 416 F.3d at 141. It observed that the Bankruptcy Code expressly authorizes such releases only under
Similarly, in In re Dow Corning Corp., the court observed that enjoining a non-consenting creditor‘s claim against a non-debtor is a “dramatic measure” and instructed courts to approve such a release only when the following seven factors are present:
(1) There is an identity of interests between the debtor and the third party, usually an indemnity relationship, such that a suit against the non-debtor is, in essence, a suit against the debtor or will deplete the assets of the estate; (2) The non-debtor has contributed substantial assets to the reorganization; (3) The injunction is essential to reorganization, namely the reorganization hinges on the debtor being free frоm indirect suits against parties who would have indemnity or contribution claims against the debtor; (4) The impacted class, or classes, has overwhelmingly voted to accept the plan; (5) The plan provides a mechanism to pay for all, or substantial-ly all, of the class or classes affected by the injunction; (6) The plan provides an opportunity for those claimants who choose not to settle to recover in full and; (7) The bankruptcy court made a record of specific factual findings that support its conclusions.
280 F.3d 648, 658-61 (6th Cir. 2002).
Other courts have imposed similar restrictions on enjoining third-party claims against non-debtors. See In re Specialty Equip. Cos., 3 F.3d 1043, 1044-49 (7th Cir. 1993) (section 524(e) does not bar granting release to third parties where release is consensual and non-coercive and would bind only those creditors voting in favor of the plan); In re A.H. Robins Co., Inc., 880 F.2d 694, 701-02 (4th Cir. 1989) (enjoining suits where plan was overwhelmingly approved, late claimants were given opportunity to recover, reorganization hinged on debtor being free from claims against parties with indemnity or contribution claims against it, and creditors who opted out would have had their claims fully satisfied by staying within settlement agreement).
The decisions of these courts demonstrate disagreement among the circuits as to when, if ever, a non-debtor discharge is appropriate. We conclude that, although our court has firmly pronounced its opposition to such releases, relief is not thereby precluded under
ii. Appropriateness of non-consensual, non-debtor discharges under § 1507
Having determined that the relief Vitro seeks is theoretically available under
Vitro contends that the bankruptcy court incorrectly denied enforcement because the Concurso рlan did not provide creditors with exactly what they would
The Objecting Creditors respond that the evidence presented at trial demonstrated that, under the Concurso plan, they would recover only around 40% of the Old Notes’ value, while Vitro‘s shareholders would retain equity interests worth $500 million.36 They also point to various
We conclude that the evidence Vitro presented at trial does not support the presence of circumstances comparable to those necessary for effectuating the release of non-debtor guarantors in those of our sister circuits that allow such a release. See In re Schimmelpenninck, 183 F.3d at 364.
We begin our analysis, as we must, by considering comity.
The New York state court addressed a declaratory judgment action brought by Wilmington, which sought a confirmation of Vitro‘s obligations under the indentures. Wilmington Trust, 2011 WL 6141025, at *1. The state court carefully parsed the issues before it and determined that “any declaratory relief in this court can only be in the context of determining the rights and obligation of the parties under the Indentures.” Id. at *5. The court next determined that the indentures were governed by New York law and that “pursuant to the relevant provisions of the Indentures ... any non-consensual ... release, discharge or modification of the Guarantors’ obligations is prohibited.” Id. The court was clear, however, that its authority went no further. “Whether such rights and obligations can or cannot be novated, substituted, released or modified under the Mexican bankruptcy law is an issue for the Mexican Court.” Id. To remove all doubt, the court explicitly stated that “granting a declaratory judgment in favor of [the Objecting Creditors], to the extent stated herein, will not interfere with the Mexican Court proceeding, which is the proper jurisdiction to determine the issues that may arise in connection with the approval of the Concurso Plan, pursuant to applicable Mexican law.” Id. The court concluded by stating that “whether any Concurso Plan that is ultimately approved by the Mexican Court may be enforced in the United States is an issue for the feder-
The Mexican court was presented with the opportunity to consider the New York decision and its impact on the concurso proceeding. Although the Mexican court does not appear to have provided specific reasons, we infer from its decision that it did not find that the indentures precluded Mexican law from novating the obligations contained therein. Because the New York court explicitly set aside this issue for the Mexican court, reciprocity was not offended by the Mexican court‘s subsequent decision of that very issue. We thus do not view this as a ground for denying comity. Our decision comports with the approach adopted by the court in Metcalfe, which, while recognizing that a third-party non-debtor release might be inappropriate under United States law, left it to the Canadian courts to determine whether they had the jurisdiction to grant such relief. 421 B.R. at 697-700.
We next consider whether the bankruptcy court erred in basing its decision on
We turn finally to whether the evidence Vitro has presented in favor of comity and enforcement so outweighed the bankruptcy court‘s concerns under
Vitro‘s second witness, Luis Mejan—an expert in Mexican bankruptcy law—was
In summary, although extensive testimony was taken before the bankruptcy court that the LCM‘s legal framework is substantially in accordance with our own, this does not end the analysis of whether to grant comity. See In re Treco, 240 F.3d at 158-61 (bankruptcy court abused its discretion by affording comity to Bahamian bankruptcy proceeding without considering effects on creditor‘s claim). The bankruptcy court correctly observed that we have “largely foreclosed non-consensual non-debtor releases and permanent injunctions outside of the context of mass tort claims being channeled toward a specific pool of assets.” Vitro II, 473 B.R. at 131. There appears little dispute that, under United States law, non-debtor releases, while possible in other circuits, are only appropriate in extraordinary circumstances. To that end, Vitro was required to show that something comparable to such circumstances was present here. The mere fact that the concurso proceeding complied with the relevant provisions of the LCM is not, in itself, sufficient.
To that end, we observe that many of the factors that might sway us in favor of granting comity and reversing the bankruptcy court to that end are absent here. Vitro has not shown that there existed truly unusual circumstances necessitating the release. To the contrary, the evidence shows that equity retained substantial value. The creditors also did not receive a distribution close to what they were originally owed. Moreover, the affected creditors did not consent to the Plan, but were grouped together into a class with insider voters who only existed by virtue of Vitro reshuffling its financial obligations between it and its subsidiaries. It is also not the case that the majority of the impacted group of creditors, consisting predominantly of the Objecting Creditors, voted in favor of the Plan. Nor were non-consenting creditors given an alternative to recover what they were owed in full.41
Vitro cannot rely on the fact that a substantial majority of unsecured creditors voted in favor of the Plan. Vitro‘s majority depends on votes by insiders. To allow it to use this as a ground to support enforcement would amount to letting one discrepancy between our law and that of Mexico (approval of a reorganization plan by insider votes over the objections of creditors) make up for another (the discharge of non-debtor guarantors). Cf. CIBC Bank & Trust Co. (Cayman) Ltd., 886 F.Supp. at 1114.42
Vitro argues that there would be financial chaos as a result of the Plan not being enforced. We are aware of the adverse consequences that may ensue from the decision not to enforce the Plan. But Vitro‘s reasoning seeks to justify a prior bad decision on the basis that not enforcing it now would lead to further negative consequences.43 Worse, the harm from those consequences would predominantly affect Vitro, the party responsible for bringing about this state of affairs in the first place. Vitro cannot propose a plan that fails to substantially comply with our order of distribution and then defend such a plan by
Those cases Vitro points to in which a similar discharge of non-debtor obligations was allowed are inapposite. The closest factual analog to this case is the bankruptcy court‘s decision in Metcalfe. As here, the central issue in Metcalfe was “[t]he enforceability of the non-debtor release and injunction on private civil actions in the United States” contained in a Canadian court order approving a restructuring plan. 421 B.R. at 687-88 n. 1. Recognizing that “a third-party non-debtor release ‘is proper only in rare cases,‘” id. at 694 (quoting Metromedia, 416 F.3d at 141), the court nevertheless found that approval was not precluded under
We agree that Metcalfe is distinguishable. The fact that the Plan approved here was the result of votes by insiders holding intercompany debt means that, although under Metcalfe non-debtor releases may be enforced in the United States under Chapter 15, the facts of this case exceed the scope of that decision. We further observe that in that case the Canadian court‘s decision to approve the non-debtor release “reflect[ed] similar sensitivity to the circumstances justifying approving such provisions,” a sensitivity we find absent in the Mexican court‘s approval of the Plan. 421 B.R. at 698. The Canadian court‘s decision was also the result of “near-cataclysmic turmoil in the Canadian commercial paper market following the onset of the global financial crisis.” Id. at 700. As already discussed, Vitro‘s evidence on this point largely emphasizes the turmoil only Vitro would be exposed to.
Vitro also relies on our decision in Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. 1987). In that case, “we address[ed] the question whether [the] bankruptcy court‘s confirmation order which, beyond the statutory grant of the [Bankruptcy] Code, expressly released a third-party guarantor, [was] to be given res judicata effect.” Id. at 1047. We held that once a reorganization plan passed the appeal stage it could not be challenged even though it violated the Bankruptcy Code‘s prohibition on such discharges. Id. at 1050. Aside from the fact that Republic Supply Co. was a case about the effects of res judicata and has been distinguished for not addressing the legality of non-debtor releases, see In re Pac. Lumber Co., 584 F.3d at 252 n. 27, we have also emphasized the “limited nature” of that decision, In re Applewood Chair Co., 203 F.3d 914, 918 (5th Cir. 2000). For example, Republic Supply Co. involved a reorganization plan in which a third-party guarantor and creditor were specifically discharged. 815 F.2d at 1051-54. We have distinguished other cases for including general, as opposed to specific, releases. Applewood Chair, 203 F.3d at 919. As a result, Republic Supply Co. provides no guidance where, as here, we are confronted not by a specific release, but by a general release of all the non-
On the basis of the foregoing analysis, we hold that Vitro has not met its burden of showing that the relief requested under the Plan—a non-consensual discharge of non-debtor guarantors—is substantially in accordance with the circumstances that would warrant such relief in the United States. In so holding, we stress the deferential standard under which we review the bankruptcy court‘s determination. It is not our role to determine whether the above-summarized evidence would lead us to the same conclusion. Our only task is to determine whether the bankruptcy court‘s decision was reasonable. See Friends for Am. Free Enter. Ass‘n v. Wal-Mart Stores, Inc., 284 F.3d 575, 578 (5th Cir. 2002) (“Generally, an abuse of discretion only occurs where no reasonable person could take the view adopted by the trial court.” (quoting Dawson v. United States, 68 F.3d 886, 896 (5th Cir. 1995))); Bear Stearns, 389 B.R. at 333 (relief under
4. Section 1506‘s Bar to Relief
The bankruptcy court concluded that “the protection of third party claims in a bankruptcy case is a fundamental policy of the United States” and held that even if Chapter 15 relief were appropriate, it would be barred under
Section 1506 provides that “[n]othing in [Chapter 15] prevents the court from refusing to take an action governed by this chapter if the action would be manifestly contrary to the public policy of the United States.”
As already discussed, this court holds that the Bankruptcy Code precludes non-consensual, non-debtor releases. In re Pac. Lumber Co., 584 F.3d at 252. Nevertheless, not all our sister circuits agree, and we recognize that the relief potentially available under
IV. CONCLUSION
For the aforementioned reasons, we AFFIRM in all respects the judgment of the district court affirming the order of the bankruptcy court in No. 12-10542, and we AFFIRM the order of the bankruptcy court in Nos. 12-10689 and 12-10750. The temporary restraining order originally entered by the bankruptcy court, the expiration of which was stayed by this court, is VACATED, effective December 14, 2012. Each party shall bear its own costs.