BENCH MEMORANDUM DETERMINING TRUSTEE’S MOTION FOR ENTRY OF AN INJUNCTION
Before the Court is the motion (the “Motion”) of Irving H. Picard, Esq. (the “Trustee” or “Picard”), trustee for the substantively consolidated Securities Investor Protection Act 1 (“SIPA”) liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”) and Bernard L. Madoff (“Madoff’), pursuant to sections 362(a) and 105(a) of title 11 of the United States Code, 11 U.S.C. § 101 et. seq. (the “Code”), Rule 7065 of the Federal Rules of Bankruptcy Procedure (the “Rules”), and SIPA § 78eee(b)(2), seeking (i) entry of an order enforcing the automatic stay of the Code, the provisions of SIPA prohibiting suits against the Trustee, and the Stay Orders (as defined below) of the United States District Court for the Southern District of New York (the “District Court”), and declaring that the action filed by Max- *113 am Absolute Return Fund, LTD (“Maxam Limited” or the “Defendant”) against the Trustee in the Grand Court of the Cayman Islands on or about July 11, 2011 (the “Cayman Action”) violates the automatic stay and is void ab initio and (ii) the issuance of an injunction prohibiting Max-am Limited from pursuing the Cayman Action.
The Cayman Action is a clear attack on this Court’s exclusive jurisdiction and a blatant attempt to hijack the key issues to another court for determination. It is a thinly-veiled effort to forum-shop and ultimately wrest control over the Trustee’s claims from this Court. Upon review of the papers and after oral argument, the Trustee’s motion is therefore GRANTED.
BACKGROUND
On December 8, 2010, the Trustee filed a complaint (the “Complaint”) against several Maxam funds seeking the avoidance of certain transfers, including the recovery of subsequent transfers to Maxam Limited. Two of the other funds named in the Trustee’s Complaint are central to the matter at hand' — -Maxam Capital Management, LLC (“Maxam Capital”) and Maxam Absolute Return Fund, L.P. (“Maxim Fund”). The former acted as Maxam Limited’s “Investment Manager” and the latter as its “Master Fund.” That is, Maxam Capital was authorized through an Investment Management Agreement dated July 1, 2006, (the “Investment Management Agreement”) to provide investment advice to Maxam Limited, which deposited all of its assets with Maxam Fund. 2
Between 2006 and 2008, nearly $100 million was transferred from BLMIS to Max-am Fund in the form of withdrawals. During the 90 days prior to December 11, 2008 (the “Filing Date”), three transfers totaling approximately $25 million were made to Maxam Fund (the “Preference Period Transfers”). Compl. ¶ 153, ¶ 156. And based on correspondence from Max-am Fund’s counsel to the Trustee, the latter has determined that some or all of the Preference Period Transfers were subsequently transferred to Maxam Limited. Compl. ¶ 157. In the Complaint, the Trustee seeks the return of these funds.
On May 20, 2011 Maxam Limited entered into a stipulation (the “Stipulation”) that extended the time for all Defendants to answer the Trustee’s Complaint. The Stipulation was so ordered by this Court on May 20, 2011 and there is no dispute that it benefitted Maxam Limited and the other Defendants.
On July 11, 2011, Maxam Limited filed its Answer to the Trustee’s Complaint. On or about the same day, Maxam Limited filed the Cayman Action seeking (i) a declaration that Maxam Limited is not liable to the Trustee for either the $25 million Maxam Limited received from Maxam Fund within the period of 90 days prior to the Filing Date or any amounts in excess of the $25 million that Maxam Limited received from Maxam Fund within the period of two years prior to December 11, 2008, as well as (ii) costs and any other relief the Court deems proper.
DISCUSSION
I. The Cayman Action Violates the Automatic Stay, the Stay Orders, the Barton Doctrine, and SIPA
A. The Automatic Stay
The commencement of a SIPA liquidation operates as an automatic stay
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of,
inter alia,
“the commencement or continuation ... of a judicial, administrative, or other action or proceeding against the debtor,” or “any act to obtain possession of ... or to exercise control over property of the estate.” 11 U.S.C. § 362(a)(1), (3); SIPA § 78fff(b) (applying chapter 3 of Title 11). Property of the estate, in turn, includes “all legal or equitable interests of the debtor in property as of the commencement of the case,” 11 U.S.C. § 541(a)(1), “wherever located and by whomever held,” 11 U.S.C. § 541(a). “The term ‘all legal and equitable interests of the debtor in property’ is all-encompassing and includes rights of action as bestowed by either federal or state law.”
Cadle Co. v. Mims (In re Moore),
Maxam Limited therefore violated the stay by usurping causes of action belonging to the estate under sections 362(a)(3) and 541 of the Code. As property of the estate, the Trustee has discretion whether to bring the cause of action and, if not statutorily limited to a specific jurisdiction, to choose forum to bring it in. Here, the Trustee commenced the Avoidance Action in this Court; by starting the Cayman action, Maxam Limited has thus interfered with the Trustee’s chosen forum for litigation and unlawfully attempted to exercise control over the Avoidance Action.
As discussed previously by this Court, the automatic stay is one of the most fundamental bankruptcy protections and applies broadly to “give[ ] the debtor a breathing spell” and to prevent creditors from “obtaining] payment of the[ir] claims in preference to and to the detriment of other creditors.”
Picard v. Fox (In re BLMIS),
Relying on an unreported decision,
AW Treuhand GmbH Wirtschaftsprufungsge-sellschaft Steuerberatungsgesellschaft v. Peregrine Systems, Inc. (In re Peregrine Systems, Inc.) (“Peregrine”),
Maxam Limited argues unconvincingly that the Cayman Action does not violate the automatic stay. Nos. 02-12740,
et al.,
Accordingly, as the Cayman Action is violative of the automatic stay, it is void
ab initio. See
11 U.S.C. § 541(a) (“[Property of the estate] is comprised of all the following property,
ivherever located and by whomever held.”)
(emphasis added);
FDIC v. Hirsch (In re Colonial Realty Co.),
B. The Stay Orders
Moreover, in light of the foregoing analysis, the Cayman Action violates at least one stay order of the District Court in connection with the ongoing SEC litigation related to the instant matter. The District Court’s order entered December 15, 2008 (the “December 15, 2008 Stay Order”) declared that “all persons and entities are stayed, enjoined and restrained from directly or indirectly ... interfering with any assets or property owned, controlled or in the possession of [BLMIS],” and that “any other suit against any receiver, conservator or trustee of [BLMIS] or its property ... is stayed.” SEC v. Bernard L. Madoff, 08-CIV-10791 (LLS), Docket No. 4, at ¶¶ IV, V; see also Order On Consent Imposing Preliminary Injunction Freezing Assets and Granting Other Relief Against Defendants, Dec. 18, 2008, Docket No. 8, at ¶ IX (the “December 18, 2008 Stay Order”) (“no creditor or claimant against [BLMIS], or any person acting on behalf of such creditor or claimant, shall take any action to interfere with the control, possession, or management of the assets subject to the receivership.”); Partial Judgment on Consent Imposing Per *116 manent Injunction and Continuing Other Relief, Feb. 9, 2009, Dkt. No. 18, at ¶ IV (incorporating and making permanent the December 18, 2008 Stay Order) (the “February 9, 2009 Stay Order,” and together with the December 15, 2008 and December 18, 2008 Stay Orders, the “District Court Stay Orders”). Accordingly, the Cayman Action not only violates the automatic stay, but also directly contravenes at least the December 15, 2008 Stay Order.
C. The Barton Doctrine
In addition, the Cayman Action violates the
Barton
doctrine, which was created from common law by the Supreme Court in
Barton v. Barbour,
D. SIPA
Finally, the Cayman Action violates several sections of SIPA. Sections 78eee(b)(2)(A)(i) and (b)(2)(A)(ii) of SIPA provide that this court has “exclusive jurisdiction of BLMIS and its property, wherever located (including property located outside the territorial limits of such court ...)” and “exclusive jurisdiction of any suit against the trustee with respect to a liquidation proceeding.” Thus, the Cayman Action violates these provisions by naming the Trustee as a defendant in the Cayman Action and attempting to assert control over BLMIS property and by seeking to impose costs and fees against the Trustee.
II. The Cayman Action is Enjoined Pursuant to Section 105(a) of the Code
A. Personal Jurisdiction
Courts have the power to enjoin litigants subject to their jurisdiction from proceeding with an action in a foreign jurisdiction.
China Trade & Dev. Corp. v. M.V. Choong Yong,
A court is said to have
specific
jurisdiction over a foreign defendant who “purposefully direet[s] his activities at residents of the forum” and where the underlying cause of action “arise[s] out of or relate[s] to those activities.”
Burger King Corp. v. Rudzewicz,
1. Minimum Contacts
Given this framework, and given Maxam Limited’s entering into and performing under the Investment Management Agreement with its New York choice of law clause as well as directing investments to the United States, the Court cannot escape the conclusion that it has specific jurisdiction over Maxam Limited.
The Second Circuit has indicated that entering into a contract with a New York choice of law clause is “a significant factor in a personal jurisdiction analysis because the parties ... invoke the benefits and protections of New York law.”
Sunward Electronics, Inc. v. McDonald,
The same Investment Management Agreement references an Information Memorandum for Maxam Fund, dated July 1, 2006, (the “Maxam Fund Information Memorandum”). That Memorandum is identical in relevant part to the one for Maxam Limited, dated March 3, 2008 (the “Maxam Limited Information Memorandum”), which suggests Maxam Limited directed investments to the United States: All assets in Maxam Limited were to be placed into Maxam Fund, which utilized “the services of the Investment Manager to allocate [its] assets ... to Broker Dealers.” Powers Declaration, Ex. K, at 1; see also Compl. ¶ 38. And furthermore, the Information Memorandum lists Maxam Capital, with its Connecticut address, as the “Investment Manager,” Powers Declaration, Ex. K, at (iv), and sets out:
The Investment Manager will provide the selected Broker Dealer with the authority to trade securities that are in the Standard & Poor’s 500 Index on a discretionary basis. The Investment Manager will also open [sic] Option Accounts wherein the Investment Manager will grant the selected Broker Dealers the authority to trade options in accordance with the Broker Dealer’s trading strategy. Such options transactions will be used as a hedge against the long positions.
Powers Declaration, Ex. K, at 2. In addition, it has been represented to this Court that Maxam Fund was a BLMIS “feeder fund.” Memorandum of Law in Support of the Maxam Defendants’ Motion to Withdraw the Reference, ¶¶ 5, 38, 40, (Dkt. No. 18). And finally, the Trustee contends, Maxam Limited engaged in a series of repeated transactions that intentionally channeled investor money into the BLMIS Ponzi scheme in New York.
Furthermore, several of the Trustee’s claims “arise out of or relate to” these contacts with the United States such that Maxam Limited “should reasonably anticipate adjudication of these transactions to take place” here.
Chais,
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Finally, there are also participatory factors indicating Defendants consent to personal jurisdiction in this adversary proceeding. In
Beak & Co., Inc.,
2. Reasonableness
Determining whether jurisdiction would be unreasonable under the circumstances entails an examination of,
inter alia,
the following factors: (1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiffs interest in obtaining convenient and effective relief; (4) the interstate judicial system’s interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering social substantive policies. Asa
hi,
While courts recognize a potential burden given a location abroad, “often the interests of the plaintiff and the forum in the exercise of jurisdiction will justify even the serious burdens placed on the alien defendant.”
Asahi,
Given the above, then, exercising jurisdiction over Maxam Limited could not be said to be unreasonable or run afoul of comporting with fair play and substantial justice.
B. Continuation of the Cayman Action Threatens the Court’s Jurisdiction and Interferes with the Administration of the Case, Warranting an Injunction under Section 105(a)
Section 105(a) of the Code permits the Court to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Code].” 11 U.S.C. § 105(a). Section 105 is not limitless, and thus “does not authorize the bankruptcy courts to create substantive rights that are otherwise unavailable under applicable law.”
Solow v. Kalikow (In re Kalikow),
Nos. 08-5268-bk, 08-5274-bk,
A substantial threat to this Court’s jurisdiction warrants the issuance of a injunction pursuant to section 105(a) of the Code. Because injunctions under section 105(a) are authorized by statute, they need not comply with traditional requirements of Rule 65.
McHale v. Alvarez (In re The 1031 Tax Group, LLC),
As the Court presiding over the SIPA liquidation of BLMIS, this Court has sole jurisdiction over the administration and distribution of estate assets to customers.
Tennessee Student Assistance Corp. v. Hood,
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Furthermore, the Cayman Action frustrates the strong U.S. public policies outlined in SIPA. Congress enacted SIPA in 1970, in response to “a rash of failures among securities broker-dealers in the late 1960s that had resulted in significant losses to customers whose assets either were unrecoverable or became tied up in the broker-dealers’ bankruptcy proceedings.”
In re New Times Securities Services, Inc.,
C. Threat to the BLMIS Estate Warrants Extension of Section 362(a) of the Code
To the extent section 362(a) and the District Court Stay Orders do not apply in their own right to stay the Cayman Action, the damaging effects of the Actions on the estate warrant extending the stay pursuant to section 105(a) of the Code and well-settled Second Circuit precedent. While section 362(a)(1) of the Code typically stays “proceeding[s] against the debtor,” courts have consistently utilized section 105 to extend section 362 to third-party actions against non-debtor entities “when a claim against the non-debtor will
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have an immediate adverse economic consequence for the debtor’s estate.”
Queenie, Ltd. v. Nygard Int’l,
While the Cayman Action is styled as a claim against the Trustee, if successful, it will produce a result that will be binding on the BLMIS estate and prevent the Trustee from recovering customer funds transferred by BLMIS. Accordingly, the Court finds that an extension of the stay is appropriate and necessary to preserve the integrity of the SIPA proceedings and prevent a potential diminution in recovery of customer property for the benefit of the BLMIS estate and all of its customer claimants.
D. Enjoining Maxam Limited from Continuing the Cayman Action is appropriate under Section 105 of the Code
Maxam Limited argues that despite its violations of the Stay and SIPA, an injunction of a foreign proceeding must always satisfy the multi-factor, foreign anti-injunction standard outlined in
China Trade.
However, given that the foreign proceeding in
China Trade
did not violate any law of the United States or interfere with the exclusive jurisdiction of a U.S. court, this Court finds the comity-based
China Trade
factors inapplicable to the instant proceeding. Maxam Limited cannot use notions of international comity to undermine this Court’s exclusive jurisdiction and interfere with the administration of the estate.
See Underwood v. Hilliard (In re Rimsat, Ltd.),
Even assuming every injunction affecting a foreign proceeding must meet the
China Trade
factors, enjoining Maxam Limited from continuing the Cayman Action is warranted thereunder.
China Trade
outlines a two-step inquiry for enjoining a foreign proceeding. First, an injunction may be imposed only if “(A) the parties are the same in both matters, and (B) resolution of the case before the enjoining court is dispositive of the action to be enjoined.”
Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara,
(1) frustration of a policy in the enjoining forum; (2) the foreign action would be vexatious; (3) a threat to the issuing court’s in rem or quasi in rem jurisdiction; (4) the proceedings in the other forum prejudice other equitable considerations; or (5) adjudication of the same issues in separate actions would result in delay, inconvenience, expense, inconsistency, or a race to judgment.
*123
Ibeto Petrochemical Indus. Ltd. v. M/T Beffen,
Here, the Cayman Action would be vexatious because it forces the Trustee to litigate issues already pending in front of this Court in another forum. While vexa-tiousness is “likely to be present whenever parallel actions are proceeding concurrently,” the Cayman action is particularly so. The Trustee’s Action against Maxam and its related entities seeks almost $100 million, and the Cayman Action attempts to litigate Maxam Limited’s liability as subsequent transferee of $25 million. As the liability of the other Maxam defendants would still be adjudicated in this Court regardless of the outcome in the Cayman one, continuation of any proceeding in the latter means any re-litigation of the same legal issues therein would truly be for naught. Likewise, the need to litigate the same issues in both this Court and the Cayman Action will result in delay, inconvenience, expense, and inconsistency. Finally, as discussed above, the Cayman Action threatens to erode the strong public policies underlying SIPA, namely, protecting investors and their faith in the securities market by expeditiously returning customer funds to investors. Accordingly, enjoining the Cayman Action satisfies the China Trade factors and is warranted.
CONCLUSION
As set forth herein and at oral argument, this Court finds the Cayman Action directly violates the automatic stay, at least one of the District Court Stay Orders, SIPA, and the Barton Doctrine, and is therefore void ab initio. Additionally, Maxam Limited shall be enjoined from proceeding with the Cayman Action. And accordingly, for all the reasons set forth herein, the Trustee’s Motion is hereby GRANTED. The Court will enter an order simultaneously herewith.
Notes
. 15 U.S.C. §§ 78aaa et seq. References to sections of SIPA hereinafter shall replace "15 U.S.C.” with "SIPA.”
. Both Maxam Capital and Maxam Fund had accounts with Bank of America and their principal places of business in Connecticut. Maxam Fund also opened a direct account with BLMIS in New York in July of 2006 with the account number 1M0232 (the "BLMIS Account”).
. While there is a split among circuits in the standard employed to determine whether a cause of action "arises out of or relates to” a defendant’s contacts, Second Circuit cases have been summarized as holding that the degree of "relatedness” required varies in relation to the "overall picture” of the defendant’s contacts.
See Del Ponte v. Universal City Dev. Partners, Ltd.,
No. 07-CV-2360,