In re Condor Ins. Ltd.

• Decision Date: 17 March 2010
• Docket Number: No. 09-60193.,09-60193.
• Citation: 601 F.3d 319
• Parties: In the Matter of: CONDOR INSURANCE LIMITED, in Official Liquidation, Debtor. Richard Fogerty, in capacity as Joint Official Liquidator of Condor Insurance Limited; William Tacon, in capacity as Joint Official Liquidator of Condor Insurance Limited, Appellants, v. Petroquest Resources, Inc.; Harvey Milam; Byron Tyghe Williams; Ross N. Fuller; T. Alan Owen; Intercontinental Development And Investment Corporation; Gymnogyps Management, Inc.; Finpac Holdings, Inc.; Condor Guaranty, Inc., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

601 F.3d 319

In the Matter of: CONDOR INSURANCE LIMITED, in Official Liquidation, Debtor Richard Fogerty, in capacity as Joint Official Liquidator of Condor Insurance Limited; William Tacon, in capacity as Joint Official Liquidator of Condor Insurance Limited, Appellants, v. Petroquest Resources, Inc.; Harvey Milam; Byron Tyghe Williams; Ross N. Fuller; T. Alan Owen; Intercontinental Development And Investment Corporation; Gymnogyps Management, Inc.; Finpac Holdings, Inc.; Condor Guaranty, Inc., Appellees.

No. 09-60193.

United States Court of Appeals, Fifth Circuit.

March 17, 2010.

David W. Parham (argued), Laurie D. Babich, Baker & McKenzie, L.L.P., Dallas, TX, for Appellants.

Jeffrey Ryan Barber, Sr. (argued), Watkins Ludlam Winter & Stennis, P.A., Jackson, MS, for Harvey Milam, Gymnogyps Management, Inc., Condor Guaranty, Inc., Appellees.

Byron Tyghe Williams, Mentor, OH, pro se.

Ross N. Fuller, Nashville, TN, pro se.

T. Alan Owen, Arlington, TX, pro se.

Thomas Burton, Reno, NV, for Finpac Holdings, Inc., Appellee.

Before HIGGINBOTHAM, WIENER, and GARZA, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

This appeal concerns the jurisdiction of a bankruptcy court to offer avoidance relief under foreign law in a Chapter 15 bankruptcy proceeding. We hold that the bankruptcy court has that authority and reverse the judgment of the district court dismissing for want of jurisdiction.

I

Condor Insurance Ltd., a Nevis corporation, was in the insurance and surety bond business. On November 27, 2006, a creditor filed a winding up petition in Nevis, much like a Chapter 7 proceeding under United States law. The petition was granted and Richard Fogerty and William Tacon were appointed Joint Official Liquidators.

Fogerty and Tacon, as foreign representatives, filed a Chapter 15 bankruptcy proceeding in Mississippi contending Condor Insurance fraudulently transferred over $313 million in assets to Condor Guaranty, Inc. to put them out of the reach of creditors during the Nevis proceeding. Chapter 15 permits foreign representatives of a foreign insolvency proceeding to seek assistance from U.S. courts in an ancillary proceeding once the foreign proceeding is recognized by the bankruptcy court as a foreign main or nonmain proceeding under the Chapter.¹ The bankruptcy court recognized the Nevis winding up proceeding as a foreign main proceeding and the foreign representatives filed an adversary proceeding alleging Nevis law claims against Condor Guaranty to recover the assets.

Condor Guaranty moved to dismiss the proceeding pursuant to Rule 12(b)(1) or alternatively Rule 12(b)(6) as avoidance actions only available through a Chapter 7 or 11 proceeding. As Condor Insurance is classified as a foreign insurance company, it is prohibited from filing a Chapter 7 or 11 case.² The bankruptcy court dismissed the proceeding and the district court affirmed. The foreign representatives now appeal.

II

This court reviews de novo a district court's dismissal pursuant to Federal Rules of Civil Procedure 12(b)(1) or 12(b)(6).³ 28 U.S.C. § 1334 grants jurisdiction to district courts for "all cases under title 11"—the Bankruptcy Code.⁴ There is no question that the bankruptcy court has jurisdiction to recognize the Nevis proceeding as a foreign main proceeding. Our question is whether the exceptions listed in section 1521(a)(7) to the relief available in the ancillary proceeding exclude not only avoidance actions under U.S. law but also exclude reliance upon domestic law of the foreign main proceeding.⁵

III

"In a statutory construction case, the beginning point must be the language of the statute, and when a statute speaks with clarity to an issue judicial inquiry into the statute's meaning, in all but the most extraordinary circumstance, is finished. The statute must be read as a whole, and only if the language is unclear does the court turn to statutory history."⁶ "A statute is ambiguous if it is susceptible to more than one reasonable interpretation or more than one accepted meaning."⁷

Our interpretive task in part guided by the circumstance that Chapter 15 implements the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross-Border Insolvency.⁸ Chapter 15 directs courts to "consider its international origin, and the need to promote an application of the chapter that is consistent with the application of similar statutes adopted by foreign jurisdictions" in interpreting its provisions.⁹

Prior to UNCITRAL's work on the Model Law, inter-jurisdictional collaboration in an international bankruptcy case depended on the openness of particular national courts, providing a reticulated pattern of cooperation, with U.S. courts often being more open to cooperation than foreign tribunals.¹⁰ Unfortunately, this nigh unilateral effort by the United States did not provide the "commercial predictability" that could be supplied by uniform international rules for cooperation between jurisdictions.¹¹ In short, while parties to a foreign bankruptcy proceeding could often obtain assistance in U.S. courts, parties in a U.S. bankruptcy proceeding could not necessarily count on reciprocal cooperation by foreign jurisdictions—often to the detriment of U.S. businesses and creditors that were denied access to assets of the debtor located abroad.

The UNCITRAL Model Law represents a culmination of a long standing effort by the United States and other countries to develop a uniform system guiding needed cooperation.¹² That the final negotiations included thirty-six UNCITRAL members—including the United States—representatives of forty observer states, and thirteen international organizations evidences its widespread support.¹³ The Model Law was "expressly designed to be integrated into local insolvency law"¹⁴ and Chapter 15 closely hewed to the text of the enactment. "Any departures from the actual text of the Model Law . . . were as narrow and limited as possible."¹⁵ All this being part of an effort by the United States to harmonize international bankruptcy proceedings for the benefit of American businesses operating abroad. As directed by Congress, we mind this background as we discern the Chapter's reach.

Chapter 15 provides for the "recognition" of a "foreign proceeding" and an ancillary proceeding to assist the foreign proceedings. To be recognized, the foreign proceeding must either fall within the definition of a "foreign main proceeding"¹⁶ or "foreign nonmain proceeding."¹⁷ With recognition, the foreign representative may access federal courts with its claims under Chapter 15.

The foreign representatives seek relief under section 1521(a) of Chapter 15. Section 1521(a) provides that the bankruptcy court may grant "any appropriate relief," including staying various aspects of the proceedings, suspending rights of transfer, providing for discovery, granting administrative powers to the foreign representatives and "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)."¹⁸ This exception does not exist in the Model Law.¹⁹ While it is plain that relief under the listed sections is excluded, the statute is silent regarding proceedings that apply foreign law, including any rights of avoidance such law may offer.

The sections explicitly excepted from (a)(7) are often referred to as "avoidance powers"—a trustee's powers to avoid the transfer of debtor property that would deplete the debtor's estate at the expense of creditors. Such powers, generally described, include those addressing exempt property (§ 522), the "strong arm" power, which permits the trustee to act as a judicial lien creditor (§ 544), the power to avoid statutory liens (§ 545), the power to avoid transactions as "preferences" (§ 547), the power to avoid fraudulent transfers (§ 548), and the power to avoid liens that secure claims for compensatory fine, penalty, or forfeiture, or punitive damages (§ 724(a)). Section 550 contains the rules that govern the mechanics of avoidance actions.

Where avoidance actions under U.S. law are excluded from a Chapter 15 ancillary proceeding, section 1523(a) ensures they may be brought in a full bankruptcy proceeding. And to ensure that a foreign representative enjoys the status of a trustee under those provisions, section 1523(a) grants standing to a foreign representative wishing to pursue an avoidance action not under its domestic law but under U.S. bankruptcy law in a Chapter 7 or 11 proceeding—a power generally reserved to the trustee or specific creditors.²⁰ This language roughly tracks that of the Model Law.²¹ To be sure, section 1523(a) grants no substantive right of avoidance. Rather it lifts a potential standing roadblock for resort to Chapters 7 or 11.

Generally where there are enumerated exceptions "additional exceptions are not to be implied, in the absence of a contrary legislative intent."²² And the oft recited maxim expressio unius est exclusio alterius carries weight. The statute provides for "any relief" and excepts only actions under sections 522, 544, 545, 547, 548, 550, and 724(a) of the Code and includes no other language suggesting that other relief might be excepted. While the statute denies the foreign representative the powers of avoidance created by the U.S.Code absent a filing under Chapter 7 or 11 of the Bankruptcy Code, it does not necessarily follow that Congress intended to deny the foreign representative powers of avoidance supplied by applicable foreign law. If Congress wished to bar all avoidance actions whatever their source, it could have stated so; it did not.²³

The stated purpose and overall structure of Chapter 15 reflects its international origin and strongly suggests the answer— section 1521(a)(7) does not exclude avoidance actions under foreign law. Section 1501 states the purpose of the Chapter is to further cooperation between the U.S. courts, parties in U.S....