Defendants in adversary proceedings before the Bankruptcy Court moved this Court for leave to appeal from an order of the Bankruptcy Court denying Defendants’ motions to remand these cases to state court or abstain from asserting jurisdiction.
In re Fairfield Sentry Ltd. (Fairfield III),
Following a hearing on the motion for leave to appeal, the parties agreed to use their submissions to the Bankruptcy Court on the substantive issues as their briefs on the merits of the issues in this Court if leave to appeal were granted. In re Fairfield Sentry, Ltd., No. 11 MC 224 (S.D.N.Y. Aug. 22, 2011). This opinion and order also addresses Defendants’ appeal of the Bankruptcy Court’s order denying Defendants’ motions to remand or abstain. After careful consideration of all of the parties’ submissions in the Bankruptcy Court and in this Court as well as the arguments made in the hearing before this Court, the order of the Bankruptcy Court is reversed.
I. BACKGROUND
The facts involved in this appeal are laid out in prior orders of the Bankruptcy Court and this Court, and the Court assumes familiarity with those facts.
In re Fairfield Sentry Ltd.
(Fairfield I),
Plaintiffs, Fairfield Sentry Limited, Fairfield Sigma Limited, and Fairfield Lambda Limited (the “Funds”), are three Funds organized under the laws of the British Virgin Islands (“BVI”). The Funds sold shares to foreign investors and “invested” the proceeds with Bernard L. Madoff Investment Securities LLC (“BLMIS”). The Funds’ shareholders could redeem their shares at will. After Madoffs fraud was exposed, the Funds’ “investments” were eviscerated. As a result, each of the Funds entered liquidation proceedings in either February or April of 2009 in the BVI.
The BVI courts appointed liquidators and foreign representatives of the Plaintiffs. Beginning in April 2010, the foreign representatives began filing numerous lawsuits for Plaintiffs in the New York state courts against these and other Defendants. These Defendants are, generally, banks
On June 14, 2010, the foreign representatives commenced an ancillary proceeding in the Bankruptcy Court under Chapter 15 of title 11, United States Code, seeking recognition of the BVI liquidation proceedings as “foreign main proceedings.” 11 U.S.C. §§ 1502(4), 1515. That petition was granted on July 22, 2010.
Fairfield I,
After this, the foreign representatives began fifing substantially identical claims in the Bankruptcy Court rather than in state court. To date, over 200 substantially similar lawsuits have been filed in the state and federal courts. After recognition, the foreign representatives, under 28 U.S.C. § 1452(a), removed the actions that had been filed in state court to this Court, which referred them automatically to the Bankruptcy Court. Not all of the actions were removed simultaneously. Now, all of these lawsuits have been consolidated in the Bankruptcy Court.
Before recognition, the foreign representatives commenced in the New York state courts the 41 lawsuits against the present Defendants, claiming over $3 billion. These Defendants filed the motions to remand or abstain in the Bankruptcy Court on October 4, 2010, arguing that the Bankruptcy Court lacked subject matter jurisdiction and that it should abstain from hearing these cases. In addition, certain defendants claimed that the removal of the actions against them was untimely.
After the remand motions were filed, the foreign representatives amended 34 of the instant actions in January 2011 to include statutory claims under BYI law for “unfair preferences” and “undervalue transactions.” These claims target transfers made within the vulnerability period under BVI law. Nevertheless, the essential facts to be determined are identical to the state-law claims for mistaken payment.
On May 23, 2011, the bankruptcy court denied the remand motion.
Fairfield III,
II. LEAVE TO APPEAL
This Court has discretion to grant an interlocutory appeal of an order of the Bankruptcy Court. 28 U.S.C. § 158(a)(3). In exercising that discretion,
This case presents issues of first impression regarding federal subject matter jurisdiction of the bankruptcy courts in a Chapter 15 case. The issues, as the discussion below shows, are nuanced and difficult, involve a new statutory scheme, and reach questions about the limits of the bankruptcy court’s jurisdiction. There are substantial grounds for differences of opinion not only with respect to the Bankruptcy Court’s determinations as to jurisdiction but also with respect to its determination as to abstention. Moreover, the issues are pure issues of law. The litigation has barely progressed, and little, if any, discovery has even been conducted.
Fairfield II,
III. MERITS OF THE APPEAL
On appeal, Defendants’ primary argument is that the Bankruptcy Court erred in determining that it had subject matter jurisdiction. First, Defendants argue that there is no “core” bankruptcy jurisdiction because these actions have no connection to the United States and are not cases arising “in” or “under” title 11. See 28 U.S.C. § 1334(b). They say that Plaintiffs’ claims are independent of the United States Bankruptcy Code (and bankruptcy generally) and involve foreign plaintiffs seeking foreign transfers from foreign entities. Second, Defendants argue that the Bankruptcy Court erred in determining that it has “related to” or “non-core” jurisdiction over these actions. Defendants also argue that the Bankruptcy Court erred in failing to abstain from exercising jurisdiction under either the mandatory or permissive standards governing the decision to abstain. Certain Defendants finally argue that the Bankruptcy Court erred in sua sponte enlarging the time period for filing a notice of removal.
After outlining the standard of review and principles of federal subject matter jurisdiction in the bankruptcy context, the Court addresses Defendants’ arguments in turn, beginning with “core” jurisdiction.
When reviewing a decision of the Bаnkruptcy Court, this Court sits as an appellate court. It reviews the Bankruptcy Court’s conclusions of law
de novo
but its findings of fact for clear error.
In re Quigley Co.,
B. Legal Landscape of Subject Matter Jurisdiction in Bankruptcy Court
Subject matter jurisdiction over bankruptcy cases is a creature of statute. “Statutory interpretation always begins with the plain language of the statute, which [the Court] consider^] in the specific context in which that language is used, and the broader context of the statute as a whole.”
In re Ames Dep’t Stores, Inc. (In re Ames II),
The district court has “original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. § 1334(b). Jurisdiction of the full array of bankruptcy cases may be referred to the bankruptcy court. Id. § 157(a).
To satisfy constitutional limitations on the subject matter jurisdiction of the Article I bankruptcy courts, bankruptcy jurisdiction is divided into “core” and “non-core” jurisdiction.
See
28 U.S.C. § 157;
N. Pipeline Constr. Co. v. Marathon Pipe Line Co.,
Core claims are those proceedings “arising under title 11” and proceedings that “arise in” cases under title 11. 28 U.S.C. § 157(a)-(b);
In re Ames Dep’t Stores Inc.,
No. 06 Civ. 5394,
Sixteen different types of matters are listed in the statute, providing a nonexclusive list of what claims are included within the bankruptcy court’s core jurisdiction. 28 U.S.C. § 157(b)(2);
Stem,
Non-core claims are those that are “related to” a bankruptcy case. See 28 U.S.C. § 157(c)(1). “[A] civil proceeding is ‘related to’ a title 11 case if the action’s outcome might have any conceivable effect on the bankrupt estate.”
Parmalat Capital Fin. Ltd v. Bank of Am. Corp.,
C. Core Jurisdiction
Although asserted in several state- and foreign-law guises, all of the claims involved in these cases rest on the same essential theory: redemptions from the Funds prior to the discovery of Madoff s fraud — and prior to the commencement of the BVI liquidation proceedings — were based on inaccurate and falsely inflated calculations of the Funds’ NAV because of the fraud. Therefore, the theory goes, portions of these redemption payments should be clawed back or rescinded for the benefit of the Funds’ now-bankrupt estates because the redemption payments were mistakenly too high. 1
After reviewing the parties’ submissions to the Bankruptcy Court and to this Court, the Court concludes that these cases do not fall within the Bankruptcy Court’s core jurisdiction for two reasons. First, these cases do not “arise under” title 11 nor do they “arise in” a title 11 case. Second, the assertion of subject matter jurisdiction over these cases by an Article I court contravenes the principle of separation of powers enshrined in Article III of the Constitution. The Court discusses each of these rationales in turn.
1. ‘Arising Under” Title 11 or “Arising in” a Title 11 Case
a. “Arising Under” Title 11
There is no question that the state- and BVI-law claims do not “arise under” title 11. Neither the causes of action nor substantive rights claimed in these cases are created by the Bankruptcy Code.
MBNA
The fact that a foreign representative may seek to assert these causes of action in a Chapter 15 case does not change anything because Chapter 15 merely does not prohibit the application of the law
as provided by
the other sovereign.
See In re Condor Ins. Ltd.,
b. ‘Arising in” a Case Under Title 11
That these cases do not “arise under” title 11 does not end the inquiry. The Court also must determine whether these causes of action “arise in” a title 11 case. First, the Court determines whether there is a statutory basis for subject matter jurisdiction. Then the Court considers whether the form and substance of the claims falls within the bankruptcy court’s core jurisdiction.
i. Statutory Basis
Aside from recognition of a foreign proceeding, “other matters under chapter 15 of title 11” are core proceedings under the statute. 28 U.S.C. § 157(b)(2)(P). While the statute provides for certain automatic relief, such as the operation of the automatic stay on assets of the foreign debtor located within the territorial jurisdiction of the United States, 11 U.S.C. § 1520(a), the foreign representatives seek discretionary relief under 11 U.S.C. § 1521(a), entitled “Relief that may be granted upon recognition.” Section 1521(a) provides:
(a) Upon recognition of a foreign proceeding, whether main or nonmain, where necessary to effectuate the purpose of this chapter and to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief, including—
(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 debt- or’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 thisright 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 rеlief that may be available to a trustee, except for relief available under sections 522, 544, 545, 547, 548, 550, and 724(a) [of title 11].
In the alternative, the foreign representatives seek relief under 11 U.S.C. § 1507(a), which states, “Subject to the specific limitations stated elsewhere in this chapter the court, if recognition is granted, may provide additional assistance to a foreign representative under this title or under other laws of the United States.”
The Bankruptcy Court’s holding was premised primarily on its finding of core jurisdiction under sections 1521(a)(5) and (a)(7),
Fairfield, III,
Section 1521(a)(5) cannot be the basis for concluding that core jurisdiction exists, although it is the sole basis for the relief Plaintiffs’ seek included by Plaintiffs in the amended complaints. These actions seek to recover certain asset transfers from the foreign debtors and therefore “realiz[e]” assets of the foreign debtor, but section 1521(a)(5) contains a specific territorial limitation. The court may entrust the “realization of all or part of the debt- or’s assets
within the territorial jurisdiction of the United States.”
11 U.S.C. § 1521(a)(5) (emphasis added). “Within the territorial jurisdiction of the United States ... refers to tangible property located within the territory of the United States and intangible property deemed under applicable nonbankruptcy law to be located within that territory....”
Id.
§ 1502(8). The foreign representatives seek recovery of foreign assets by challenging foreign transfers. In these cases, there are no assets sought “within the territorial jurisdiction of the United States.” Nowhere in the complaints, Plaintiffs’ papers, Defendants’ papers, or at oral argument can there be found a nonfrivolous reference to any assets sought that are located within the territorial jurisdiction of the United States or in possession of a U.S. domiciled defendant.
2
At oral argument, the assumption of all of
Plaintiffs and the Bankruptcy Court rely heavily on section 1521(a)(7) as a basis for core jurisdiction in these cases. Section 1521(a)(7) is a catchall provision that allows the bankruptcy court to grant “any additional relief that may be available to a trustee” aside from the relief listed in the prior sections of section 1521(a). However, section 1521(a)(7) limits this grant of authority in an important way. The foreign representative may not employ U.S.law avoidance powers listed in the enumerated Bankruрtcy Code sections unless he files a plenary U.S. bankruptcy case under Chapter 7 or 11 within a Chapter 15 case.
In re Condor,
Plaintiffs say that although a trustee may not assert avoidance powers under U.S. law, 1521(a)(7) allows the foreign representatives to assert avoidance actions based on foreign law. They look to In re Condor as support for their position because it held that “[wjhatever its full reach, Chapter 15 does not constrain the federal court’s exercise of the powers of foreign law it is to apply.” Id. at 324. Specifically, “section 1521(a) (7) does not exclude avoidance actions under foreign law.” Id. Because Plaintiffs say these cases are avoidance actions under BVI law, they say that the claims may be adjudicated by a federal court.
Defendants take a different and more nuanced view. They argue that as an ancillary case, Chapter 15 is different from a plenary case because the United States courts do not assert universal jurisdiction over the debtors’ assets. They argue that the statutory text, structure, and purpose of Chapter 15 suggest that Congress intended to limit the foreign representative’s ability to obtain relief against assets to those cases involving assets within the territorial jurisdiction of the United States. Defendants distinguish In re Condor on the bаsis that it dealt with the application of foreign avoidance law to the debtor’s assets within the territorial jurisdiction of the United States, a situation not present here.
Resolving this dispute requires some explication. Chapter 15 cases are “ancillary” cases. In such a case, a United States bankruptcy court acts “in aid of the [foreign] main proceedings” to avoid “a system of full bankruptcies ... in each state where assets are found.” H.R.Rep. No. 109-31(1), at 108 (2005),
reprinted in
2005 U.S.C.C.A.N. 88, 171. Thus, a Chapter 15 court in the United States acts as an
Nevertheless, Chapter 15 cases differ from plenary bankruptcy cases in at least one significant respect. While plenary cases in the United States assert universal jurisdiction over a debtor’s assets, Chapter 15 ancillary cases assert only territorial jurisdiction over a debtor’s assets located here.
4
See In re JSC BTA Bank,
The situation presented in this case cuts against the grain of Chapter 15’s text, structure, purpose, the legislative history, and prior case law. Moreover, current case law is consistent with prior case law and Defendants’ interpretation. The Court explains.
First, section 1521(a)(7) provides for any relief that would be “available to a trustee.” However, section 1521(a)(7) itself prohibits the use of avoidance powers under United States law as a trustee normally would. A foreign representative is only permitted U.S.-law avoidance powers when he commences a plenary bankruptcy case within a Chapter 15 case. In such a case, the application of United States law, which ordinarily applies universally, is limited to assets “within the
Second, all of the provisions in Chapter 15 dealing directly with relief as to assets — section 1520 (automatic stay on only U.S. assets), section 1521(a)(5) (realization of only U.S. assets), and section 1528 (plenary proceeding in a Chapter 15 case limited to only U.S. assets), among others — are limited to assets within the territorial jurisdiction of the United States.
E.g., In re JSC BTA Bank,
Importantly, the specific provision most directly applicable to these claims, section 1521(a)(5), is limited to assets “within the territorial jurisdiction of the United States.” It is a basic tenet of statutory interpretation that a “statute which addresses the matter in specific terms controls over a statute which addresses the issue in general terms, unless Congress has manifested a contrary aim.”
Greene v. United States,
Third, as explained above, Chapter 15’s position and structure in the international 'bankruptcy context does not contemplate jurisdiction over assets located abroad. E.g., 8 Collier on Bankruptcy ¶ 1521.04. The purpose of an ancillary proceeding is to provide assistаnce to a foreign representative in a country where the foreign court may not have jurisdiction to prevent debtors from hiding assets. Chapter 15 is analogous to what it calls “foreign nonmain proceedings.” Id. These proceedings are territorial and are not designed to have extraterritorial effect. Id. ¶ 1502[2],
Fourth, the legislative history is clear that in a Chapter 15 case, “the United States is acting solely in an ancillary position, so jurisdiction over property is limited to that stated in chapter 15.” H.R.Rep. No. 109-31(1), at 96, 2005 U.S.C.C.A.N., at 181 (emphasis added).
Congress did not intend to restrict the powers of the U.S. court to apply the law of the country where the main proceeding pends. Refusing to do so would lend a measure of protection to debtors to hide assets in the United States out of the reach of the foreign jurisdiction, forcing foreign representatives to initiate much more expansive proceedings to recover assets fraudulently conveyed, the scenario Chapter 15 was designed to prevent.
Sixth, the law under the predecessor to Chapter 15, section 304, did not allow jurisdiction over claims to assets where no assets were located within the territorial jurisdiction of the United States. Chapter 15 does not “expand or reduce the scope of relief’ that was available under prior law. H.R.Rep. No. 109-31(1), at 94, 2005 U.S.C.C.A.N., at 178. Indeed, “Congress intended that case law under section 304 apply unless contradicted by Chapter 15.”
In re Condor,
Here, there are no assets in the United States. The Plaintiffs’ actions seek assets, so their location is relevant. Plaintiffs do not seek discovery or stays of proceedings in the United States. Thus, the ancillary character of the Chapter 15 cases here is at a low ebb — it is certainly not within the core jurisdiction of the bankruptcy court to aid the BVI courts in these cases because there are no assets sought in the United States. Thus, for the six reasons stated, the bankruptcy court does not have core jurisdiction under section 1521(a)(7). 9 For the same reasons, the Court rejects Plaintiffs’ argument that the expansive personal jurisdiction of the United States courts is a sufficient nexus to the United States to be of aid in obtaining assets for the BVI courts and thus confers core jurisdiction. Section 1521(a)(7) does not confer core jurisdiction on the Bankruptcy Court.
This does not bring the Court to the end of the statutory journey. Like the Bankruptcy Court, Plaintiffs also point to other statutory bases for core jurisdiction,
Similarly, the Court rejects Plaintiffs’ argument that these cases concern “the administration of the estate” under section 157(b)(2)(A) or are proceedings “affecting the liquidation of the assets of the estate” under section 157(b)(2)(0). Both of those sections require the existence of a bankruptcy estate, which is not created in a Chapter 15 proceeding.
In re JSC BTA Bank,
ii. Nature of Claims
With no basis provided by statute for core jurisdiction, the only other basis for core jurisdiction would be a determination that form and substance of the claims ■ implicates the bankruptcy court’s core jurisdiction.
10
In re Ames,
Looking at the form and substance of the claims asserted in these cases, the
The fact that these claims are independent is, in some senses, obvious. The redemptions at issue occurred well before the Funds’ bankruptcy. The state-law claims at issue here were asserted well before any Chapter 15 case was commenced and could have proceeded in the state courts. Plaintiffs demanded a jury, which is probative of the non-core nature of these claims.
See Langenkamp v. Culp,
All of these considerations lead to a conclusion that the claims are non-core. “In determining whether a contract dispute such as the one in this lawsuit is core, [the Court looks] to (1) whether the contract is antecedent to the reorganization petition; and (2) the degree to which the proceeding is independent of the reorganization.”
Mt. McKinley,
Moreover, the claims are entirely independent of the bankruptcy, and no bankruptcy-created rights are at issue. A practical view helps illustrate the independence of these claims. Had the Fund’s investments been diversified such that, say, only 5% of the Funds’ assets were “invested” with BLMIS, the BLMIS fraud would have been significant to the Funds’ performance but not deadly. The Funds could have pursued the same claims asserted here in tort and continued about their ordinary business without ever having filed for bankruptcy. The claims are independent of bankruptcy and involve facts wholly antecedent to the bankruptcy. They are not core claims.
That said, the urgency of these claw back claims obviously is heightened by the fact that the Funds allegedly “invested” 95% of the money received from the sale of shares with BLMIS
(id.
¶ 32) and now cannot pay their liabilities. Although this state of affairs led to the Funds’ demise, it does not change the fact that the essence of the claims is not, as the Bankruptcy Court found, traditionally core in nature. As shown by a review of the operative complaints, these claims are disputes between two private parties thаt have existed for centuries and are “made of ‘the stuff of the traditional actions at common law tried by the courts at Westminster in 1789.’ ”
See Stem,
The Bankruptcy Court focused on the addition of the BVI-law claims as tipping the balance in favor of core jurisdiction because those claims are “traditionally core in nature.”
Fairfield III,
Plaintiffs’ suggestion at oral argument that these eases more closely resemble
Katchen v. Landy,
Here, the Chapter 15 proceedings are ancillary to the BVI proceedings. The right of recovery is not provided by federal bankruptcy law, as shown above. The purpose of a Chapter 15 case is to aid foreign jurisdictions in administering bankruptcies by preventing debtors from squirreling away assets in the United States.
See In re Condor,
2. Constitutional Issues
Article III, section 1, of the Constitution states that “[t]he judicial Power of the United States shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” Bankruptcy courts are not Article III courts. They are legislatively created Article I courts and differ from Article III courts in important ways. “Article III protects liberty not only through its role in implementing the separation of powers, but also by specifying the defining characteristics of Article III judges.”
Stem,
The scope of the public rights doctrine is not clearly defined. In
Northern Pipeline,
a majority of the Supreme Court held that a debtor’s pre-petition breach of contract claim against a creditor that had not filed a claim against the estate could not be heard by a bankruptcy court.
The adjudication of these cases to a final judgment by an Article I court would violate these principles. As described above, the claims in these cases are not independent federal claims or even independent foreign law claims. They are classic common law claims for money had and received or mistaken payment. The claims are matters of private right because they are disputes between two private parties about whether the redemptions were proper. The claims have “nothing to do” with a matter of public right.
See id.
They do not involve ordering of creditors’ claims or other statutory rights; they “resemble state law contract claims brought by a
Moreover, these claims, like those in
Northern Pipeline,
involve a nucleus of fact and contracts entered into before any bankruptcy petition was filed.
3. Conclusion
The claims asserted do not “arise under” title 11. They do not “arise’in” a title 11
D. Non-Core Jurisdiction
Plaintiffs contend that “related to” non-core jurisdiction exists in these cases under
Parmalat.
That case held that an ancillary case under section 304 is a case under title 11 and that “a civil proceeding is ‘related to’ a title 11 case if the action’s outcome might have any conceivable effect on the bankrupt estate.”
The Court need not address whether “related to” jurisdiction exists in these cases because even if it does, the Bankruptcy Court must reconsider abstaining from hearing these cases for the reasons that follow. 15
E. Abstention
Abstention is a statutory requirement in certain cases. The statute provides:
Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction.
28 U.S.C. § 1334(c)(2). Thus, abstention is required where (1) the motion to abstain was timely filed, (2) the action is based on state-law claims, (3) the action is non-core, (4) the sole basis for federal jurisdiction is 28 U.S.C. § 1334, (5) an action is commenced in state court, and (6) that action can be timely adjudicated in state court.
In re Adelphia,
The first five factors clearly favor Defendants. There is no dispute that Defendants timely filed motions to remand or abstain. These cases involve the assertion
The only question is whether these actions can be timely adjudicated in the state courts. In evaluating whether the cases can be timely adjudicated, the Court of Appeals has instructed courts to review “(1) the backlog of the state court’s calendar relative to the federal court’s calendar; (2) the complexity of the issues presented and the respective expertise of each forum; (3) the status of the title 11 bankruptcy proceeding to which the state law claims are related; and (4) whether the state court proceeding would prolong the administration or liquidation of the estate.”
Parmalat,
The Bankruptcy Court did not make findings regarding the speed with which that these cases could be heard in state court. Although there is no reason to doubt that these cases could be consolidated before the same judge they were assigned to the first go-around in the state court and could be moved expeditiously in the Commercial Division of the New York Supreme Court, the Bankruptcy Court must make findings on remand.
The third factor is not relevant because there is no title 11 proceeding ongoing here.
As to the second and fourth factors, the Bankruptcy Court seemed to suggest that because 160 or more other, similar, actions are pending before it, remand of these cases would be inefficient. It is certainly true that the Bankruptcy Court is intimately familiar with the Madoff factual context generally and the other Madoff-related cases. That familiarity may allow for some efficiency gains. However, while this may be true in the abstract, these cases have hardly moved forward, and
Two important asides. In this analysis, the
effect
of these cases on the BLMIS bankruptcy or other
separate
but related cases is not material.
See Parmalat,
Mandatory abstention should be reconsidered on remand. Defendants’ argument that permissive abstention should have been granted is moot because the denial of permissive abstention is not reviewable on appeal.
Baker,
F. Timeliness of Removal
The Bankruptcy Court excused four removals it acknоwledged were untimely on the basis that accepting these cases is necessary to promote efficiency in adjudicating these cases.
Fairfield III,
Bankruptcy Rule 9006(b)(l)(l) allows the bankruptcy court to enlarge the time for removal before the time for removal expires
sua sponte.
However, after that time period expires, enlargement of the time for removal may be granted “on motion made” if “the failure to act was the result of excusable neglect.” Fed. R. Bankr.P. 9006(b)(l)(2). In these cases, Plaintiffs made no motion, and the Bankruptcy Court enlarged the time period
sua sponte
after the time period expired. Moreover, the Bankruptcy Court made no finding of excusable neglect, saying only that there would be no prejudice to the proceedings. Although enlargement for excusable neglect is a matter of equity,
Pioneer Inv. Servs. Co. v. Brunswick
As
socs. Ltd. P’ship,
IV. CONCLUSION
For the reasons elucidated above, the Bankruptcy Court’s May 23, 2011, order is REVERSED. The Clerk of the Court is directed to close these appeals, and the matters are remanded to the Bankruptcy Court for further proceedings consistent with this opinion.
SO ORDERED.
Notes
. The Court need not consider Defendants' argument that it was improper for the Bankruptcy Court in determining whether it had core jurisdiction to have considered the amended BVI-law claims, which were added after Plaintiffs' notice of removal was filed.
See, e.g., Hallingby v. Hallingby,
. The Plaintiffs’ suggestion that the Chapter 15 cases themselves satisfy the requirements of section 1521(a)(5) is incorrect. For one thing, the actions are intangible assets, which are located where the plaintiff is domiciled.
Delaware
v.
New York,
. When asked whether there were assets in the United States, Plaintiffs suggested that because Defendants are subject to personal jurisdiction in the United States (but not in the BVI), the Bankruptcy Court has jurisdiction to hear Plaintiffs' claim. This argument belies a misunderstanding of federal jurisdictional concepts. Subject matter jurisdiction does not exist because personal jurisdiction exists.
Ins. Corp. of Ireland, Ltd. v. Compag-nie des Bauxites de Guinee,
. Indeed, ''[i]n most instances, ... in Chapter 15 cases, the U.S. courts assert jurisdiction over only those assets of the foreign debtor that are located in the U.S.” Susan Power Johnston, "Conflict Between Bankruptcy Code §§ 109(a) and 1515: Do U.S. Bankruptcy Courts Have Jurisdiction over Chapter 15 Cases if the Foreign Debtor Has No Assets or Presence in the U.S.?,” 17 J. Bankr. L. & Prac. 5, art. 6 (Aug. 2008); accord Comment, “COMI Strikes a Discordant Note: Why U.S. Courts Are Not in Complete Harmony Despite Chapter 15 Directives,” 27 Emory Bankr. Dev. J. 117, 159 (2010) (“It is equally clear that a proceeding under chapter 15, or the Model Law, does not purport to affect all of the debtor’s assets, only the local ones.”).
. This is not to say that all Chapter 15 cases require assets of the debtor in the United States. To the contrary, section 1521(a)(4), for example, allows for discovery in the United States whether or not a debtor has assets here. In addition, section 1521(a)(1) allows a court to stay a proceeding (clearly in the United States or else a U.S. court would have such power) that would affect the assets of the debtor, no matter where they are located. See Johnston, supra (listing scenarios where assets in the United States not required to obtain legitimate relief). Nevertheless, when the relief sought in a Chapter 15 case acts directly upon the assets sought, the assets must be within the territorial jurisdiction of the United States. As explained infra, the same result obtained under section 304, the precursor to Chapter 15.
. Unsurprisingly,
In re Metzeler,
upon which Plaintiffs rely, was a case just like
In re Condor.
There, the court held that a section 304 proceeding may provide relief under foreign law to seek avoidance of transfers that occurred within the United States.
. Where assets were at issue, the jurisdictional limitations applied under prior law because "[t]he ultimate purpose of the section 304 mechanism is to prevent dismemberment by local creditors of assets located in this country that are involved in a foreign insolvency proceeding.”
In re Goerg,
. In fact, practically speaking, all of the relief permitted by the statute involves something over which the bankruptcy court has jurisdiction, be it witnesses, 11 U.S.C. § 1521(a)(4), other court proceedings, id. § 1521(a)(1), or property, id. § 1521(a)(5). However, where the issue is property, principles of in rem jurisdiction command that the court have jurisdiction over the res.
.The Court does not address Defendants' argument that 11 U.S.C. § 546(e) deprives the bankruptcy court of the ability to grant relief in these cases and, thus, of subject matter jurisdiction because there is no basis to find subject matter jurisdiction on other grounds. Moreover, it is not clear that section 546(e) is a jurisdictional statute. In other contexts, the Supreme Court has cautioned that "when Congress does not rank a statutoiy limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.”
Arbaugh v. Y & H Corp.,
. Plaintiffs' reliance on the catchall provisions of Chapter 15 as a basis for core jurisdiction is unfounded.
See
11 U.S.C. § 1507 (stating that court “may provide additional assistance to a foreign representative'!);
id.
§ 1521(a) (stating thаt court may provide “any appropriate relief” that is “necessary to effectuate the purpose” of Chapter 15). Given that the specific statutory provisions do not provide core jurisdiction, these general provisions, even if “exceedingly broad,”
In re Atlas Shipping A/S,
. Each action has its owh complaint with minor differences. The parties ascribe no meaning to these differences, and the Court finds no material differences in the complaints for jurisdictional purposes. Therefore, references to this example complaint are used throughout for consistency.
. In any event, the assets sought are not property of the Funds until it is determined whose property they are.
See In re DHP Holdings II Corp.,
. The Court’s conclusion does not mean that any foreign-created bankruptcy law action asserted in a Chapter 15 case may not be adjudicated by a bankruptcy court. To the contrary, many cases could be, and that is the purpose of Chapter 15.
See In re Condor,
. The Bankruptcy Court’s reliance on efficiency in administering this case along with the other related BLMIS bankruptcy matters or consistency with the goals of Chapter 15 is not material to the constitutional calculus.
Stem,
. One thing is clear: although Plaintiffs argue that these cases may be related to the separate SIPA litigation pending involving BLMIS, that cannot be. The SIPA litigation is not a title 11 case and, thus, 28 U.S.C. § 1334 confers no jurisdiction over a case "related to” that litigation.
See In re W.R. Grace & Co.,
.It is true that the BVI claims were amended to most of the instant cases. However, those claims were added well after removal and probably should not have been considered in the first instance.
See supra
note 1. The Court makes no determination about that issue, however. In any case, "[f]or purposes of the applicability of mandatory abstention, ... the salient point is that the ... action is not based upon any federal cause of action.”
Von Richthofen
v.
Family M. Found., Ltd.,
. In fact, had the foreign representatives simply used the Chapter 15 process before filing any of the actions in state court, none of this expensive jurisdictional litigation likely would have ensued.
. That approach is not universal. "The question is not whether the action would be more quickly adjudicated in [the bankruptcy court] than in state court, but rather, whether the action can be timely adjudicated in the state court.”
In re Exide Techs.,
. Many tribunals and judges will hear Ma-doff-related litigation because the fraud was so expansive. Judge Marrero remanded complex securities and derivative class action claims made
against
Plaintiffs to state court.
See Anwar v. Fairfield Greenwich Ltd.,