Alastair Beveridge of Alixpartners Servs. U.K., LLP v. Vidunas (In re O'Reilly)

• Decision Date: 22 March 2019
• Docket Number: Case No. 18-24564-JAD
• Citation: 598 B.R. 784
• Parties: IN RE: Anthony John O'REILLY, Debtor. Alastair Beveridge of AlixPartners Services U.K., LLP, as Foreign Representative, Movant, v. Sabina Vidunas, Respondent.
• Court: U.S. Bankruptcy Court — Western District of Pennsylvania

598 B.R. 784

IN RE: Anthony John O'REILLY, Debtor.

Alastair Beveridge of AlixPartners Services U.K., LLP, as Foreign Representative, Movant,

v.Sabina Vidunas, Respondent.

Case No. 18-24564-JAD

United States Bankruptcy Court, W.D. Pennsylvania.

Signed March 22, 2019

Gary M. Sanderson, Meyer, Unkovic & Scott, LLP, Pittsburgh, PA, for Debtor.

Related to ECF No. 9

MEMORANDUM OPINION

The Honorable Jeffery A. Deller, United States Bankruptcy Judge

The matter before the Court is a Motion for Recognition of Foreign Bankruptcy Proceeding Pursuant to Sections 1515 & 1517 of the US Bankr. Code (the "Motion for Recognition") filed by Alastair Beverage of AlixPartners Services U.K., LLP, as Foreign Representative.

This matter is a core proceeding in which the Court has the requisite subject-matter jurisdiction and authority to enter a final judgment pursuant to 28 U.S.C. §§ 157(b)(1), 157(b)(2)(A), 157(b)(2)(P), 1334(a), and 1334(b).

An objection to the Motion for Recognition has been filed by Ms. Sabina Vidunas (the "Respondent" or "Ms. Vidunas"), who is an alleged creditor of Anthony John O'Reilly (the "Debtor" or "Mr. O'Reilly"). For the reasons set forth below, the objection is overruled in part, and sustained in part. Specifically, while the Court overrules the objection insofar as Ms. Vidunas challenges the "collective" nature of the foreign proceeding at issue, the Court determines that the Foreign Representative has not met his burden of proving that the foreign proceeding is either a "main" proceeding or "nonmain" proceeding entitled to recognition under Chapter 15 of the Bankruptcy Code.

I.Background

At present, this case is not terribly complicated. Mr. O'Reilly is the former chairman and chief executive officer of the H.J. Heinz Company. See Vidunas v. O'Reilly, No. 13-CV-1746, 2015 WL 5177762, at *2 (W.D. Pa. Sept. 4, 2015). In 1995, Ms. Vidunas was hired to be Mr. O'Reilly's personal nurse and assistant. Around 2010 or 2011, the employment or independent contractor relationship, whatever it may have been, ended. Thereafter, in 2013 Ms. Vidunas filed a diversity action against Mr. O'Reilly in the United States District Court for the Western District of Pennsylvania at Case No. 13-1746, asserting (by way of a Second Amended Complaint ) a single cause of action sounding in breach of contract.

To date, the claim asserted in this federal lawsuit has not been liquidated; nor has it been reduced to judgment. In fact, after the commencement of this lawsuit, and in June of 2015, Mr. O'Reilly filed a bankruptcy proceeding in the Commonwealth of the Bahamas-Supreme Court, Commercial Division at Docket No. 28-2015 (hereinafter, the "Bahamian Bankruptcy").

Within the Bahamian Bankruptcy, and on or about July 8, 2016, the Honorable Justice Ian Winder issued a Certificate of Appointment, appointing Alastair Beveridge of AlixPartners Services, U.K., LLP (the "Bahamian Trustee") as the Trustee of Mr. O'Reilly's Bahamian Bankruptcy.

Sometime after his appointment, the Bahamian Trustee was made aware of the litigation commenced by Ms. Vidunas against Mr. O'Reilly. Ms. Vidunas, or her counsel, was provided notice of the Bahamian Bankruptcy. But for reasons that have not been articulated or disclosed, Ms. Vidunas has been unwilling to participate as a creditor in the Bahamian Bankruptcy, has elected to not file a proof of claim or debt in the Bahamian Bankruptcy, and desires to proceed with her lawsuit against Mr. O'Reilly in the United States District Court for the Western District of Pennsylvania.

Consequently, the Bahamian Trustee commenced the instant case under Chapter 15 of the United States Bankruptcy Code (the "Bankruptcy Code") by filing a petition for foreign recognition on November 26, 2018. Not long after the filing of the petition, the Bahamian Trustee filed his Motion for Recognition.¹

"Recognition" of a "foreign proceeding" under Chapter 15 of the Bankruptcy Code provides certain mandatory relief, and in some circumstances discretionary relief, from the bankruptcy court. The extent and scope of such relief depends upon whether the "foreign proceeding" is a foreign "main proceeding" or a foreign "nonmain proceeding" entitled to recognition.

By way of example, Section 1520 of the Bankruptcy Code provides that upon "recognition" of a foreign "main proceeding," the automatic stay of 11 U.S.C. § 362 applies with respect to both the debtor and property of the debtor that is within the territorial jurisdiction of the United States. See 11 U.S.C. § 1520(a)(1).

Section 1520 also provides additional relief upon recognition of a foreign main proceeding, including authorizing the "foreign representative" to operate the debtor's business and affording him or her with the powers of a bankruptcy trustee to the extent provided by 11 U.S.C. §§ 363 and 552. See 11 U.S.C. § 1520(a)(3). The preceding are just examples of relief, and Chapter 15 affords further relief to a foreign representative when a foreign main proceeding is recognized. See, e.g. 11 U.S.C. § 1520(a)(2) (applying 11 U.S.C. §§ 363, 549 and 552 to certain transfers).

Chapter 15 of the Bankruptcy Code also contains discretionary relief upon recognition of a foreign proceeding, regardless of whether it is determined to be a "main proceeding" or "nonmain proceeding."

Specifically, Section 1521 of the Bankruptcy Code states that "[u]pon recognition of a foreign proceeding, whether main or nonmain," the court may grant "any appropriate relief" where "necessary to effectuate the purpose of this chapter and to protect the assets of the debtor or the interests of the creditors." 11 U.S.C. § 1521(a).

The statute also contains specific items of "appropriate relief," most of which consist of various statutory stays or injunctions protecting the debtor or its assets, providing for the examination of witnesses, and other relief. Id. at §§ 1521(a)(1) - (a)(7) and 1521(b).

By the Motion for Recognition, the Bahamian Trustee asserts the status of a "foreign representative," asserts that the Bahamian Bankruptcy is a "foreign proceeding," and asserts that the Bahamian Bankruptcy is a "main proceeding" thereby triggering the protections of the automatic stay (and comity with respect to any discharge order entered by the Bahamian court).

Alternatively, the Bahamian Trustee asserts that the Bahamian Bankruptcy is a foreign "nonmain proceeding," and that this Court should exercise its discretion and impose the automatic stay against Ms. Vidunas and recognize any discharge order entered (or to be entered) in the Bahamian Bankruptcy.

Ms. Vidunas has objected to the relief requested in the Motion for Recognition. Specifically, while Ms. Vidunas does not contest the status of the Bahamian Trustee as a "foreign representative," Ms. Vidunas contends that the Bahamian Bankruptcy does not constitute a "foreign proceeding" as the term is defined in 11 U.S.C. § 101(23). As such, she contends that recognition of the Bahamian Bankruptcy is not appropriate since the recognition provisions of Chapter 15 apply only to "foreign proceedings." See 11 U.S.C. § 1515(a).

Ms. Vidunas also argues, in the alternative, that if the Bahamian Bankruptcy is a "foreign proceeding," it is merely a "nonmain" proceeding and not a "main" proceeding. As Ms. Vidunas points out, this distinction is material because if the Bahamian Bankruptcy is a "nonmain" proceeding, the automatic stay of 11 U.S.C. § 362 is not triggered by the mere recognition of the foreign proceeding. Rather, according to Ms. Vidunas, the foreign representative is legally required to demonstrate why this Court should exercise its discretion and impose an injunction against Ms. Vidunas. In this regard, Ms. Vidunas has contended that the Bahamian Trustee has not set forth in his papers a claim for discretionary injunctive relief, let alone proven that such relief should be granted. Each of the objections of Ms. Vidunas are examined more fully below.

II.The Bahamian Bankruptcy is a "Foreign Proceeding"

11 U.S.C. § 1515(a) plainly states that a foreign representative has standing to apply for recognition of a "foreign proceeding" under Chapter 15 of the Bankruptcy Code. 11 U.S.C. § 1517 further sets forth what the foreign representative must prove in order to have a "foreign proceeding" recognized by the United States Bankruptcy Court.

What is clear by these provisions is that a bankruptcy court may recognize only those insolvency matters that fall within the statutory definition of "foreign proceeding" for purposes of Chapter 15 of the Bankruptcy Code. If a foreign insolvency case fails to qualify as a "foreign proceeding," no recognition is to be given. In re Betcorp Ltd., 400 B.R. 266, 275 (Bankr. D. Nev. 2009).

The term "foreign proceeding" is defined in Section 101(23) of the Bankruptcy Code, which states:

The term "foreign proceeding" means a collective judicial or administrative proceeding in a foreign country, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation.

11 U.S.C. § 101(23). Given this definition, the concept of a "foreign proceeding" can be broken down into seven components: (1) a proceeding, (2) that is either judicial or administrative, (3) that is collective in nature, (4) that is in a foreign country, (5) that is authorized or conducted under a law related to insolvency or adjustment of debts, (6) in which the debtor's assets and affairs are subject to the control or supervision of a foreign court, and (7) which proceeding is for the purpose of reorganization or liquidation. See In re ABC Learning Ctrs. Ltd., 728 F.3d 301, 307-08 (3d Cir. 2013).

It appears that there is no dispute that six of the seven components of a foreign proceeding are present in this case. That is, the parties appear to agree that the Bahamian Bankruptcy is a proceeding, that it is...