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On June 29, 2007, the 11th Circuit Court of Appeal in an unpublished decision in In re Rosacometta, S.R.L., 244 Fed.Appx. 286 (11th Cir. 2007) upheld the decision of the Bankruptcy Court of the Southern District of Florida. The bankruptcy court had allowed an ancillary petition under section 304 (pre-BAPCPA) and enjoined the creditor from collecting on a writ of garnishment in the state court against the Italian company that had filed for bankruptcy relief in Italy. The 11th Circuit rejected the creditor's arguments that the bankruptcy court had acted outside of its jurisdiction, that it had erred in granting comity to a foreign proceeding, and that it had failed to give full faith and credit to a state court decision refusing to dissolve the writ of garnishment. The 11th Circuit held that the bankruptcy court did not abuse its discretion in weighing the section 304(c) factors and granting section 304(b) relief. The 11th Circuit held that prejudice to the creditor was just one of the five factors for the court to consider per section 304(c) and is not even the "ultimate" factor. The 11th Circuit found that the other factors set forth in section 304(c), including comity, weighed in favor of granting the relief. The 11th Circuit further held that the bankruptcy court is granted broad powers under section 304(b) to grant relief to a foreign debtor.
The bankruptcy court had previously issued its decision dated December 19, 2005 in In re Rosacometta, SrL, 336 B.R. 557 (Bankr.S.D.Fla.2005)(Mark C.J.). In this case, the Italian trustee of an Italian corporation that was a debtor in a bankruptcy case in Italy filed an ancillary case under section 304 (pre-BAPCPA) seeking to enjoin all creditor collection activity in the United States nunc pro tunc to the date of the filing of the bankruptcy in Italy. At issue were certain funds owed to the the debtor in the U.S. that a U.S. creditor was attempting to garnish. The court recognized the effect of the Italian automatic stay and found the creditor action in violation of the stay was void, including the attempted garnishment.
This case came before the court under section 304 as a case ancillary to a foreign bankruptcy proceeding. The case was allowed to proceed under 304 as there was a foreign proceeding and the petitioner was the foreign representative. 11 U.S.C. 304(a). The court explained that section 304 enables United States courts to aid foreign bankruptcy proceedings and to accommodate the extraterritorial effect of these proceeding within the U.S. The primary purpose of section 304 is to prevent piecemeal distribution of a foreign debtor's assets in the U.S. by means of legal proceedings in U.S. courts and to afford the foreign court an opportunity to assess where and when claims should be liquidated in order to conserve resources and to maximize distributions to creditors.
The court found that the creditor was not a secured creditor as the writ of garnishment was served after the commencement of the Italian bankruptcy and was therefore void as in violation of the Italian automatic stay. The court found that recognition of the Italian automatic stay was "other appropriate relief" under section 304(b)(3) and consistent with the overall purpose of section 304 and the specific criteria of 304(c). The court held that the claimed funds should be returned to Italy where the creditor may pursue its claim.
The bankruptcy court found the reasoning of Artimm , 278 B.R. 832, 840 (Bankr.C.D.Cal.2002) as persuasive and found that the Italian automatic stay applied extra territorially. The Artimm court concluded that the Italian automatic stay has worldwide effect as Italian law provides for a stay of all creditor collection activities and claims worldwide jurisdiction over the property of the debtor. Id. at 840. The Artimm court also found that provisions of Italian law indicate movement in Itlian law towards handling international insolvencies under the "universal" approach, which advocates treating an international bankruptcy as a single case in which assets and creditor are treated equally wherever they may be located. Id. at 841.
The bankruptcy court stated that many courts have noted that comity is the ultimate factor in determining whether section 304 relief is appropriate. The Supreme Court described comity as "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 tis own citizens..." Hilton v. Guyot, 159 U.S. 113 (1895). Comity is extended to a foreign court if that court is a court of competent jurisdiction and if the laws and public policy of the forum state and the rights of its residents will not be violated. Cunard S.S. Co., Ltd. v. Salen Reefer Services AB, 773 F.2d at 452 (2d Cir.1985). Comity should not be withheld unless its extension would be inimical to the interest of the United States. Cunard, 773 F.2d at 457. The interest of the United States in granting comity is to ensure that “the assets of a debtor are dispersed in an equitable, orderly, and systematic manner, rather than in a haphazard, erratic, or piecemeal fashion.” Cunard, 773 F.2d at 458. United States courts, therefore, have “consistently recognized the interest of foreign courts in liquidating or winding up the affairs of their own domestic business entities.” Id. at 458. Moreover, “every person who deals with a foreign corporation impliedly subjects himself to such laws of the foreign government, affecting the powers and obligations of the corporation with which he voluntarily contracts, as the known and established policy of that government authorizes.” Id. Therefore, U.S. creditors of a bankrupt foreign corporation may be required to assert their claims against the foreign debtor before a foreign court. Cunard, 773 F.2d at 458-59.
The Florida bankruptcy court found that extending comity to the Italian bankruptcy case and the laws of Italy was appropriate as the bankruptcy in Italy was proceeding under the aegis of a court of competent jurisdiction in accordance with the laws and policies of Italy. It further found that extending comity would result n an orderly and fair distribution to all creditors on a worldwide basis. Furthermore, the laws governing the Italian bankruptcy case comported with U.S. standards of procedural fairness and are not inimical to the law or policy of the U.S. The court noted that at least two U.S. court have previously extended comity to Italian bankruptcy proceedings.
Furthermore, the bankruptcy court found that the statutory factors of 304(c) were met, including the just treatment of all holders of claims against or interest in the estate, protection of claim holders in the U.S. against prejudice and inconvenience in processing of claim in the foreign proceeding, prevention of preferential or fraudulent dispositions of property of the estate, and distribution of proceeds of the estate are substantially in accordance with the order prescribed in the bankruptcy code.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
On June 29, 2007, the 11th Circuit Court of Appeal in an unpublished decision in In re Rosacometta, S.R.L., 244 Fed.Appx. 286 (11th Cir. 2007) upheld the decision of the Bankruptcy Court of the Southern District of Florida. The bankruptcy court had allowed an ancillary petition under section 304 (pre-BAPCPA) and enjoined the creditor from collecting on a writ of garnishment in the state court against the Italian company that had filed for bankruptcy relief in Italy. The 11th Circuit rejected the creditor's arguments that the bankruptcy court had acted outside of its jurisdiction, that it had erred in granting comity to a foreign proceeding, and that it had failed to give full faith and credit to a state court decision refusing to dissolve the writ of garnishment. The 11th Circuit held that the bankruptcy court did not abuse its discretion in weighing the section 304(c) factors and granting section 304(b) relief. The 11th Circuit held that prejudice to the creditor was just one of the five factors for the court to consider per section 304(c) and is not even the "ultimate" factor. The 11th Circuit found that the other factors set forth in section 304(c), including comity, weighed in favor of granting the relief. The 11th Circuit further held that the bankruptcy court is granted broad powers under section 304(b) to grant relief to a foreign debtor.
The bankruptcy court had previously issued its decision dated December 19, 2005 in In re Rosacometta, SrL, 336 B.R. 557 (Bankr.S.D.Fla.2005)(Mark C.J.). In this case, the Italian trustee of an Italian corporation that was a debtor in a bankruptcy case in Italy filed an ancillary case under section 304 (pre-BAPCPA) seeking to enjoin all creditor collection activity in the United States nunc pro tunc to the date of the filing of the bankruptcy in Italy. At issue were certain funds owed to the the debtor in the U.S. that a U.S. creditor was attempting to garnish. The court recognized the effect of the Italian automatic stay and found the creditor action in violation of the stay was void, including the attempted garnishment.
This case came before the court under section 304 as a case ancillary to a foreign bankruptcy proceeding. The case was allowed to proceed under 304 as there was a foreign proceeding and the petitioner was the foreign representative. 11 U.S.C. 304(a). The court explained that section 304 enables United States courts to aid foreign bankruptcy proceedings and to accommodate the extraterritorial effect of these proceeding within the U.S. The primary purpose of section 304 is to prevent piecemeal distribution of a foreign debtor's assets in the U.S. by means of legal proceedings in U.S. courts and to afford the foreign court an opportunity to assess where and when claims should be liquidated in order to conserve resources and to maximize distributions to creditors.
The court found that the creditor was not a secured creditor as the writ of garnishment was served after the commencement of the Italian bankruptcy and was therefore void as in violation of the Italian automatic stay. The court found that recognition of the Italian automatic stay was "other appropriate relief" under section 304(b)(3) and consistent with the overall purpose of section 304 and the specific criteria of 304(c). The court held that the claimed funds should be returned to Italy where the creditor may pursue its claim.
The bankruptcy court found the reasoning of Artimm , 278 B.R. 832, 840 (Bankr.C.D.Cal.2002) as persuasive and found that the Italian automatic stay applied extra territorially. The Artimm court concluded that the Italian automatic stay has worldwide effect as Italian law provides for a stay of all creditor collection activities and claims worldwide jurisdiction over the property of the debtor. Id. at 840. The Artimm court also found that provisions of Italian law indicate movement in Itlian law towards handling international insolvencies under the "universal" approach, which advocates treating an international bankruptcy as a single case in which assets and creditor are treated equally wherever they may be located. Id. at 841.
The bankruptcy court stated that many courts have noted that comity is the ultimate factor in determining whether section 304 relief is appropriate. The Supreme Court described comity as "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 tis own citizens..." Hilton v. Guyot, 159 U.S. 113 (1895). Comity is extended to a foreign court if that court is a court of competent jurisdiction and if the laws and public policy of the forum state and the rights of its residents will not be violated. Cunard S.S. Co., Ltd. v. Salen Reefer Services AB, 773 F.2d at 452 (2d Cir.1985). Comity should not be withheld unless its extension would be inimical to the interest of the United States. Cunard, 773 F.2d at 457. The interest of the United States in granting comity is to ensure that “the assets of a debtor are dispersed in an equitable, orderly, and systematic manner, rather than in a haphazard, erratic, or piecemeal fashion.” Cunard, 773 F.2d at 458. United States courts, therefore, have “consistently recognized the interest of foreign courts in liquidating or winding up the affairs of their own domestic business entities.” Id. at 458. Moreover, “every person who deals with a foreign corporation impliedly subjects himself to such laws of the foreign government, affecting the powers and obligations of the corporation with which he voluntarily contracts, as the known and established policy of that government authorizes.” Id. Therefore, U.S. creditors of a bankrupt foreign corporation may be required to assert their claims against the foreign debtor before a foreign court. Cunard, 773 F.2d at 458-59.
The Florida bankruptcy court found that extending comity to the Italian bankruptcy case and the laws of Italy was appropriate as the bankruptcy in Italy was proceeding under the aegis of a court of competent jurisdiction in accordance with the laws and policies of Italy. It further found that extending comity would result n an orderly and fair distribution to all creditors on a worldwide basis. Furthermore, the laws governing the Italian bankruptcy case comported with U.S. standards of procedural fairness and are not inimical to the law or policy of the U.S. The court noted that at least two U.S. court have previously extended comity to Italian bankruptcy proceedings.
Furthermore, the bankruptcy court found that the statutory factors of 304(c) were met, including the just treatment of all holders of claims against or interest in the estate, protection of claim holders in the U.S. against prejudice and inconvenience in processing of claim in the foreign proceeding, prevention of preferential or fraudulent dispositions of property of the estate, and distribution of proceeds of the estate are substantially in accordance with the order prescribed in the bankruptcy code.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
Are Changes on the Way for Bankruptcy and Student Loans? There’s one big change Joe Biden can make (without Congress) so people who can’t afford to pay their student loans can clear them in bankruptcy. During his presidential campaign, Joe Biden promised to help people who can’t pay their student loans. So far, he’s helped […]
The post Are Changes on the Way for Bankruptcy and Student Loans? by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
Are Changes on the Way for Bankruptcy and Student Loans? There’s one big change Joe Biden can make (without Congress) so people who can’t afford to pay their student loans can clear them in bankruptcy. During his presidential campaign, Joe Biden promised to help people who can’t pay their student loans. So far, he’s helped […]
The post Are Changes on the Way for Bankruptcy and Student Loans? by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.
ControversyThe topic of "not for publication" has raised controvery over the years, the main issues precedential value and the ability to cite as precedent. Some defend and some do not. This article written in 2003 titled "How Opinions are Developed in the United States Court of Appeals for the Eleventh Circuit" explains that "[i]n the Eleventh Circuit, unpublished opinions have no precedential value, which means that they are not binding upon a subsequent panel, although they are persuasive." The author explains that in "most other circuits, citing unpublished opinions is either barred or limited."
11th Circuit Rules - There is a "But"11th Cir. R. 36-2 provides that "opinions shall be unpublished unless a majority of the panels decides to publish it. Unpublished opinion are not considered binding precedent, but they may be cited as persuasive authority." But there is a "but" - this rule states "but see" I.O.P. 7 which provides that in section 2, that "[u]nder the law of this circuit, published opinions are binding precedent" and cites to Martin v. Singletary, 965 F.2d 944, 945 n.1 (11th Cir. 1992)(in which the Court writes in footnote one that "[t]he stay of the mandate in Johnson merely delays the return of jurisdiction to the district court to carry out our judgment in that case. The stay in no way affects the duty of this panel and the courts in this circuit to apply now the precedent established by Johnson as binding authority.")"Not to Publish" to "Publish"Rule 36-3 provides that "[a]t any time before the mandate has been issued, the panel, on its own motion or upon the motion of a party, may by unanimous vote order a previously unpublished opinion to be published."
Stare DecisisAs an aside, this article reviews the binding effect of District Court decisions on Bankruptcy Courts in their district - "anarchy". He also explains that "stare decisis" is a legal doctrine that has been part of the American jurisprudence for over 200 year and that under this doctrine "a deliberate or solemn decision of court made after argument on question of law fairly arising in this case and necessary to its determination, is an authority or binding precedent in the same court or in lower courts in the judicial hierarchy in subsequent cases where the very point is again in controversy."
Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
ControversyThe topic of "not for publication" has raised controvery over the years, the main issues precedential value and the ability to cite as precedent. Some defend and some do not. This article written in 2003 titled "How Opinions are Developed in the United States Court of Appeals for the Eleventh Circuit" explains that "[i]n the Eleventh Circuit, unpublished opinions have no precedential value, which means that they are not binding upon a subsequent panel, although they are persuasive." The author explains that in "most other circuits, citing unpublished opinions is either barred or limited."11th Circuit Rules - There is a "But"11th Cir. R. 36-2 provides that "opinions shall be unpublished unless a majority of the panels decides to publish it. Unpublished opinion are not considered binding precedent, but they may be cited as persuasive authority." But there is a "but" - this rule states "but see" I.O.P. 7 which provides that in section 2, that "[u]nder the law of this circuit, published opinions are binding precedent" and cites to Martin v. Singletary, 965 F.2d 944, 945 n.1 (11th Cir. 1992)(in which the Court writes in footnote one that "[t]he stay of the mandate in Johnson merely delays the return of jurisdiction to the district court to carry out our judgment in that case. The stay in no way affects the duty of this panel and the courts in this circuit to apply now the precedent established by Johnson as binding authority.")"Not to Publish" to "Publish"Rule 36-3 provides that "[a]t any time before the mandate has been issued, the panel, on its own motion or upon the motion of a party, may by unanimous vote order a previously unpublished opinion to be published."
Stare DecisisAs an aside, this article reviews the binding effect of District Court decisions on Bankruptcy Courts in their district - "anarchy". He also explains that "stare decisis" is a legal doctrine that has been part of the American jurisprudence for over 200 year and that under this doctrine "a deliberate or solemn decision of court made after argument on question of law fairly arising in this case and necessary to its determination, is an authority or binding precedent in the same court or in lower courts in the judicial hierarchy in subsequent cases where the very point is again in controversy."
Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
Colonial Bankruptcy Laws
In the American colonial era, many of the states had bankruptcy and insolvency laws. Imprisonment for debt was commonplace.
Bankruptcy Act of 1800
The first federal bankruptcy law was passed by Congress in 1800, eleven years after the ratification of the United States Constitution. This Bankruptcy Act was designed to be a temporary measure and was repealed after only three years.
This act was virtually a copy of the existing English law, which was the 1732 Statute of George II. The English laws maintained a distinction between "bankruptcy laws" and "involvency" laws. Bankruptcy law generally involved involuntary proceedings against business trader while involvency law addressed concerns of debt relief generally, including the release from debtor's prison.
Bankruptcy Act of 1841
Following the financial Panic of 1837, the Bankruptcy Act of 1841 was passed. It provided for both involuntary and voluntary bankruptcy. This act allowed a person some basic exemptions of property, but state exemptions were not available. Although the act worked well, creditors considered it a failure and it was repealed in 1843. The 1841 Act though was important in that it established the allowance of voluntary bankruptcy for all debtors.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
Colonial Bankruptcy Laws
In the American colonial era, many of the states had bankruptcy and insolvency laws. Imprisonment for debt was commonplace.
Bankruptcy Act of 1800
The first federal bankruptcy law was passed by Congress in 1800, eleven years after the ratification of the United States Constitution. This Bankruptcy Act was designed to be a temporary measure and was repealed after only three years.
This act was virtually a copy of the existing English law, which was the 1732 Statute of George II. The English laws maintained a distinction between "bankruptcy laws" and "involvency" laws. Bankruptcy law generally involved involuntary proceedings against business trader while involvency law addressed concerns of debt relief generally, including the release from debtor's prison.
Bankruptcy Act of 1841
Following the financial Panic of 1837, the Bankruptcy Act of 1841 was passed. It provided for both involuntary and voluntary bankruptcy. This act allowed a person some basic exemptions of property, but state exemptions were not available. Although the act worked well, creditors considered it a failure and it was repealed in 1843. The 1841 Act though was important in that it established the allowance of voluntary bankruptcy for all debtors.Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
The Circuit Court of Appeals of the 3rd Circuit recently issued its opinion in In re SCH Corp., et al, 2014 WL 2724606 involving the doctrine of "equitable mootness" in the bankruptcy context. The District Court had dismissed the appeal from the Bankruptcy Court as being "equitably moot" by applying the five-factor test set forth in In re Continental Airlines, 91 F.3d 553 (3rd Cir. 1996). In making its decision, the 3rd Circuit reviewed that distinctions between the concepts of "mootness", "equitable mootness", and the "prudence doctrine".
Constitutional MootnessThe Court explained that the mootness determination it was making in this case, was not that of mootness in the constitutional sense of the limits of the federal courts' authority under Article III, but rather that of equitable mootness or the application of prudential factors. The Court noted that the Continental decision cited Supreme Court precedent that "an appeal is moot in the constitutional sense only if events have taken place during the pendency of the appeal that make it "impossible for the court to grant ‘any effectual relief whatever.’ ” The Court noted that a case is not moot merely because a court cannot restore the parties to the status quo ante - but rather, whether a court can can fashion some form of meaningful relief, even if it only partially. Equitable Mootness The Court referred to a 7th Circuit decision that stated: “[t]here is a big difference between inability to alter the outcome (real Article III Constitutional mootness) and unwillingness to alter the outcome (‘equitable mootness') and that these concepts should not be confused. The Court also noted that another court preferred not to ask whether a case is "equitably moot", but rather whether it is "prudent" to upset a bankruptcy reorganization plan at a later date. The Continental Court stated that these “equitable” or “prudential” considerations focus on the following five “concerns unique to bankruptcy proceedings”: 1. whether the reorganization plan has been substantially consummated2. whether a stay has been obtained3. whether the relief requested would affect the rights of parties not before the court4. whether the relief requested would affect the success of the plan5. the public policy of affording finality to bankruptcy judgments
Statutory Mootness
The Court in SCH Corp. did not reach the concept of "statutory mootness". This ABI article explains that the concept of statutory mootness is provided for in sections 363(m) and 364(e) of the Bankruptcy Code and are designed to protect capital providers, including purchasers and lenders.
Further References
Other articles, here and here, review the Supreme Court denial of cert. in a case involving the issue of equitable mootness in the case of Law Debenture Trust Co. v. Charter Communications, Inc., No. 12-847. The doctrine of equitable mootness as applied in the 2nd Circuit is also reviewed in this article by Hunton & Williams, LLP. Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
The Circuit Court of Appeals of the 3rd Circuit recently issued its opinion in In re SCH Corp., et al, 2014 WL 2724606 involving the doctrine of "equitable mootness" in the bankruptcy context. The District Court had dismissed the appeal from the Bankruptcy Court as being "equitably moot" by applying the five-factor test set forth in In re Continental Airlines, 91 F.3d 553 (3rd Cir. 1996). In making its decision, the 3rd Circuit reviewed that distinctions between the concepts of "mootness", "equitable mootness", and the "prudence doctrine".
Constitutional MootnessThe Court explained that the mootness determination it was making in this case, was not that of mootness in the constitutional sense of the limits of the federal courts' authority under Article III, but rather that of equitable mootness or the application of prudential factors. The Court noted that the Continental decision cited Supreme Court precedent that "an appeal is moot in the constitutional sense only if events have taken place during the pendency of the appeal that make it "impossible for the court to grant ‘any effectual relief whatever.’ ” The Court noted that a case is not moot merely because a court cannot restore the parties to the status quo ante - but rather, whether a court can can fashion some form of meaningful relief, even if it only partially. Equitable Mootness The Court referred to a 7th Circuit decision that stated: “[t]here is a big difference between inability to alter the outcome (real Article III Constitutional mootness) and unwillingness to alter the outcome (‘equitable mootness') and that these concepts should not be confused. The Court also noted that another court preferred not to ask whether a case is "equitably moot", but rather whether it is "prudent" to upset a bankruptcy reorganization plan at a later date. The Continental Court stated that these “equitable” or “prudential” considerations focus on the following five “concerns unique to bankruptcy proceedings”: 1. whether the reorganization plan has been substantially consummated2. whether a stay has been obtained3. whether the relief requested would affect the rights of parties not before the court4. whether the relief requested would affect the success of the plan5. the public policy of affording finality to bankruptcy judgments
Statutory Mootness
The Court in SCH Corp. did not reach the concept of "statutory mootness". This ABI article explains that the concept of statutory mootness is provided for in sections 363(m) and 364(e) of the Bankruptcy Code and are designed to protect capital providers, including purchasers and lenders.
Further References
Other articles, here and here, review the Supreme Court denial of cert. in a case involving the issue of equitable mootness in the case of Law Debenture Trust Co. v. Charter Communications, Inc., No. 12-847. The doctrine of equitable mootness as applied in the 2nd Circuit is also reviewed in this article by Hunton & Williams, LLP. Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com
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