994 F.2d 996 (2nd Cir. 1993), 1378, Allstate Life Ins. Co. v. Linter Group Ltd.

Docket Nº:1378, 1379, Dockets 92-9064L, 93-7052CON.
Citation:994 F.2d 996
Party Name:ALLSTATE LIFE INSURANCE CO., et al., Appellants, v. LINTER GROUP LIMITED, et al., Appellees.
Case Date:June 02, 1993
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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994 F.2d 996 (2nd Cir. 1993)

ALLSTATE LIFE INSURANCE CO., et al., Appellants,

v.

LINTER GROUP LIMITED, et al., Appellees.

Nos. 1378, 1379, Dockets 92-9064L, 93-7052CON.

United States Court of Appeals, Second Circuit

June 2, 1993

Argued April 22, 1993.

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John F. Harnes, New York City (Silverman, Harnes, Obstfeld & Harnes, on the brief), for appellants.

Francis M. Holozubiec, New York City (Terrence J. Galligan, and Kirkland & Ellis, on the brief), for appellees Linter Companies and their liquidators, officers, and directors.

George Brandon, New York City (B. Kelly Kiser, and Milbank, Tweed, Hadley & McCloy, on the brief), for appellee Chase AMP Bank Limited.

The following filed a brief without oral argument:

Boulanger, Hicks, Stein & Churchill, P.C., New York City (J. Portis Hicks, and Todd C. Girolamo, on the brief), for appellee Bank of New Zealand.

Cleary, Gottlieb, Steen & Hamilton, New York City (Mitchell A. Lowenthal, on the brief), for appellee Sumitomo Intern. Finance Australia Ltd.

Davis, Polk & Wardwell, New York City (Steven F. Goldstone, and Bradley J. Butwin, on the brief), for appellees Australia and New Zealand Banking Group Ltd., Commonwealth Bank of Australia, State Bank of South Australia, and Westpac Banking Corp.

Fried, Frank, Harris, Shriver & Jacobson, New York City (Jed S. Rakoff, and John Sullivan, on the brief), for appellee Security Pacific Australia Ltd.

Simpson Thacher & Bartlett, New York City (John J. Kerr, Michael J. Chepiga, and John C. Gustafsson, on the brief), for appellee Barclays Bank Australia Ltd.

Before: TIMBERS, KEARSE, and ALTIMARI, Circuit Judges.

TIMBERS, Circuit Judge:

Appellants appeal from judgments entered in the Southern District of New York, Robert P. Patterson, Jr., District Judge, dismissing securities actions on the grounds of comity and forum non conveniens in recognition of liquidation proceedings pending in Australia.

On appeal, appellants contend that the court abused its discretion in dismissing their actions.

We reject appellants' claims and we affirm the judgments in all respects.

I.

We summarize only those facts and prior proceedings believed necessary to an understanding of the issues raised on appeal.

The actions consolidated for this appeal, Allstate Life Ins. Co. v. Linter Group Ltd., 91 Civ. 1655, 1992 WL 136849 (Linter I ) and Allstate Life Ins. Co. v. Linter Group Ltd., 91 Civ. 2873, 1992 WL 398446 (Linter II ), arose from the October 13, 1988 public offering in the United States by appellee Linter Textiles Corporation Ltd. (Linter Textiles), an Australian corporation, of approximately $200 million of its 13 3/4% Senior Subordinated Debentures. The debentures were registered with the Securities and Exchange Commission (SEC), underwritten by Drexel Burnham Lambert, Inc., and issued pursuant to a trust indenture between Linter Textiles and United States Trust Company of New York. Pursuant to SEC regulations, Linter Textiles filed an amended registration statement and disseminated a prospectus to the public.

Prior to the offering, Linter Textiles' parent corporation, appellee Linter Group Ltd. (Linter Group), had outstanding debt of 323,000,000 in Australian dollars. This debt was guaranteed to nine Australian and New Zealand banks (Banks) by Linter Textiles' subsidiaries through negative pledge agreements. On the day before the public offering, Linter Group, Linter Textiles' subsidiaries, and the Banks executed identical agreements releasing the subsidiaries from their guarantees in exchange for promises by Linter Textiles and its subsidiaries to enter into new agreements with the Banks and with each other to guarantee Linter Group's debt within 30 days. These agreements were not

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disclosed in Linter Textiles' prospectus or its registration statement. Instead, the prospectus stated that Linter Textiles would be virtually debt free after the offering.

In 1991, Linter Group, Linter Textiles, and Linter Textiles' subsidiaries (collectively the Linter companies) became insolvent and were placed in liquidation by orders of the Supreme Court of New South Wales, Australia. Subsequently, appellants, a group of institutional investors, including insurance companies and publicly-traded mutual funds owning more than $120 million in debentures, commenced an action in the Australian Federal Court against, inter alia, the Linter companies and the Banks, alleging violations of Australian law in connection with the public offering. Appellants also commenced a declaratory judgment action in the Equity Division of the New South Wales Court requesting a ruling under Australian law that their claims were not subordinate to the Banks' claims. Appellants subsequently have attempted unsuccessfully to stay these proceedings in favor of their United States actions, Linter I and Linter II. At present, both Australian suits are pending.

(A) Linter I

On March 8, 1991, appellants commenced an action in the Southern District of New York against the Linter companies, their liquidators, and several of their officers and directors, alleging violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as state and common law. Specifically, appellants alleged that Linter Textiles' prospectus and registration statement contained material misrepresentations that induced them to purchase debentures. On December 12, 1991, defendants in that action moved to dismiss or stay the action on the basis of the ongoing liquidation proceedings in Australia and on the ground of forum non conveniens...

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