British Am. Ins. Co. v. Fullerton

• Decision Date: 28 February 2013
• Docket Number: Bankruptcy Nos. 09–31881–EPK, 09–35888–EPK.,Adversary No. 11–03118–EPK.
• Citation: 488 B.R. 205
• Parties: In re BRITISH AMERICAN INSURANCE COMPANY LIMITED, Debtor in a Foreign Proceeding. British American Insurance Company Limited, Plaintiff, v. Robert Fullerton, Brian Branker, Ramchand Ramnarine, Lawrence Duprey, Vishnu Ramlogan, Shiva Ramberran, Green Island Holdings, LLC, and Charles Pratt, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of Florida

488 B.R. 205

In re BRITISH AMERICAN INSURANCE COMPANY LIMITED, Debtor in a Foreign Proceeding.British American Insurance Company Limited, Plaintiff,

v.Robert Fullerton, Brian Branker, Ramchand Ramnarine, Lawrence Duprey, Vishnu Ramlogan, Shiva Ramberran, Green Island Holdings, LLC, and Charles Pratt, Defendants.

Bankruptcy Nos. 09–31881–EPK, 09–35888–EPK.

Adversary No. 11–03118–EPK.

United States Bankruptcy Court,

S.D. Florida,

West Palm Beach Division.

Feb. 28, 2013.

Sean T. Cork, Miami, FL, Traci H. Rollins, West Palm Beach, FL, for Plaintiff.

Kristopher E. Pearson, Brett M. Amron, Esq., Dana R. Quick, Miami, FL, Thomas L. Abrams, Esq., Plantation, FL, Howard D. Dubosar, Esq., Boca Raton, FL, for Defendants.

Brian Branker, Trinidad, WI, pro se.

MEMORANDUM OPINION ON DEFENDANTS' MOTION TO DISMISS

ERIK P. KIMBALL, Bankruptcy Judge.

THIS MATTER came before the Court upon Lawrence Duprey's and Vishnu Ramlogan's Motion to Dismiss Count I of the Adversary Complaint or, Alternatively, for Abstention [ECF No. 174] (the “Motion to Dismiss”) filed by Lawrence Duprey and Vishnu Ramlogan ¹ (together, the “Defendants”). The Defendants argue that Count I of the Adversary Complaint should be dismissed for lack of subject matter jurisdiction or that, in the alternative, the Court should abstain from adjudicating Count I.

In Count I the plaintiff, British American Insurance Company Limited (“BAICO” or the “plaintiff”), seeks damages for breach of fiduciary duty against its former directors, including the Defendants. The Defendants argue that the claim presented in Count I is a tort claim constituting intangible property located outside the United States and that this Court is without jurisdiction to entertain such a claim in light of the provisions of 11 U.S.C. § 1521(a)(5). The Defendants argue that the Court also lacks subject matter jurisdiction as Mr. Brian Glasgow, the foreign representative of BAICO in the above-captioned nonmain chapter 15 case, lacks standing to pursue Count I because he represents only a branch of BAICO in Saint Vincent and the Grenadines and not the entire entity. The Defendants argue that permitting Mr. Glasgow to bring Count I under United States bankruptcy jurisdiction would have unintended and unwelcome consequences. In the alternative, the Defendants argue that the Court should abstain from adjudicating Count I ² under the permissive abstention provisions of 28 U.S.C. § 1334(c)(1).

As set forth more fully below, inter alia, the Court rules that there is “related to” jurisdiction over Count I of the complaint under 28 U.S.C. § 1334(b), that 11 U.S.C. § 1521(a)(5) does not present a limitation on the Court's subject matter jurisdiction, that 11 U.S.C. § 1521(a)(5) limits the Court's in rem jurisdiction but such jurisdiction is not implicated in Count I, and that 28 U.S.C. § 1334(c)(1) does not permit the Court to abstain from hearing Count I on a permissive basis, and so the Motion to Dismiss will be denied.

OVERVIEW OF CHAPTER 15

This adversary proceeding is filed in connection with a pending case under chapter 15 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq. While Congress enacted chapter 15 as part of the Bankruptcy Code, and the bankruptcy court is the obvious forum to address cross-border insolvency concerns, much of chapter 15 is divorced from the remainder of the Bankruptcy Code. To understand this case in the light under which it comes to the Court, it is useful to review the purposes of chapter 15 and the process for recognition of a foreign proceeding.

Chapter 15 is entitled “Ancillary and Other Cross–Border Cases.” 11 U.S.C. § 1501 et seq. Enacted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, chapter 15 replaced section ³ 304 of the Bankruptcy Code. Section 1501(a) sets out the goals of chapter 15:

(a) The purpose of this chapter is to incorporate the Model Law on Cross–Border Insolvency so as to provide effective mechanisms for dealing with cases of cross-border insolvency with the objectives of—

(1) cooperation between—

(A) courts of the United States, United States trustees, trustees, examiners, debtors, and debtors in possession; and

(B) the courts and other competent authorities of foreign countries involved in cross-border insolvency cases;

(2) greater legal certainty for trade and investment;

(3) fair and efficient administration of cross-border insolvencies that protects the interests of all creditors, and other interested entities, including the debtor;

(4) protection and maximization of the value of the debtor's assets; and

(5) facilitation of the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

11 U.S.C. § 1501(a).

Chapter 15 represents a nearly verbatim enactment of the Model Law on Cross–Border Insolvency (the “Model Law”) promulgated by the United Nations Commission on International Trade Law (“UNCITRAL”) in 1997. 11 U.S.C. § 1501(a); In re Basis Yield Alpha Fund (Master), 381 B.R. 37, 43 (Bankr.S.D.N.Y.2008) (“The language of chapter 15 tracks the Model Law, with some modifications that are designed to conform the Model Law with existing United States law.”). The Model Law has been enacted in the following countries: Australia (2008), British Virgin Islands, overseas territory of the United Kingdom of Great Britain and Northern Ireland (2003), Canada (2005), Colombia (2006), Eritrea (1998), Great Britain (2006), Greece (2010), Japan (2000), Mauritius (2009), Mexico (2000), Montenegro (2002), New Zealand (2006), Poland (2003), Republic of Korea (2006), Romania (2002), Serbia (2004), Slovenia (2007), South Africa (2000), Uganda (2011), and the United States of America (2005). UNCITRAL, Status: 1997–Model Law on Cross-border Insolvency, http:// www. uncitral. org/ uncitral/ en/ uncitral_ texts/ insolvency/ 1997 Model_ status. html (last visited Feb. 28, 2013).

International uniformity is a primary goal of the Model Law and thus of chapter 15. 11 U.S.C. §§ 1501(a), 1508. UNCITRAL expressed the desire that the Model Law be enacted by adopting countries with as few changes as possible “in order to achieve a satisfactory degree of harmonization and certainty.” United Nations Commission on International Trade Law (UNCITRAL), Cross–Border Insolvency: Guide to Enactment of the UNCITRAL Model Law on Cross–Border Insolvency, ¶ 12, UN. Doc. A/CN.9/442 (Dec. 19, 1997) [hereinafter “Guide to Enactment”].⁴ When implementing chapter 15, section 1508 requires the Court to “consider its international origin, and the need to promote an application of this chapter that is consistent with the application of similar statutes adopted by foreign jurisdictions.” 11 U.S.C. § 1508. The House Report contemplates courts looking to the Guide to Enactment and the Reports cited therein to aid the courts in achieving a uniform interpretation of chapter 15. H.R.Rep. No. 109–31, pt. 1, at 109–10 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 172–73 (the “House Report”).

Sections 1515 through 1518, inclusive, set out a rigid procedure for recognition of a proceeding pending in a foreign country. In re Bear Stearns High–Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. 122, 132 (Bankr.S.D.N.Y.2007), aff'd,389 B.R. 325 (S.D.N.Y.2008). This recognition procedure is completely new to the Bankruptcy Code. It reflects a policy determination by UNCITRAL and Congress that this Court should not assist a representative of a foreign action unless the debtor has a sufficient presence in the country in which the foreign action is taking place. In re Bear Stearns High–Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333–34 (S.D.N.Y.2008) ( citing House Report at 110; § 1509(b)(3)).

If the debtor does not have its center of main interests or at least an establishment in the country of the foreign proceedings, the bankruptcy court should not grant recognition and is not authorized to use its power to effectuate the purposes of the foreign proceeding. Implicitly, in such an instance the debtor's liquidation or reorganization should be taking place in a country other than the one in which the foreign proceeding was filed to be entitled to assistance from the United States.

Id. at 334 (internal citations omitted).

The general principles of comity that governed acknowledgement of cross-border matters under former section 304 no longer apply to recognition under chapter 15. Lavie v. Ran, 406 B.R. 277, 282 (S.D.Tex.2009), aff'd,607 F.3d 1017 (5th Cir.2010).

Approaches based purely on the doctrine of comity or on exequatur do not provide the same degree of predictability and reliability as can be provided by specific legislation, such as the one contained in the Model Law, on judicial cooperation, recognition of foreign insolvency proceedings and access for foreign representatives to courts.

Guide to Enactment ¶ 16. Except with regard to certain relief that may be accorded after recognition of a foreign proceeding, it is not appropriate to rely on case law under former section 304. In re Bear Stearns High–Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. at 132; House Report at 109–10, 113, 119.

A person seeking recognition of a proceeding in a foreign country must file a petition for recognition under sections 1504, 1509, and 1515. Upon filing of a petition for recognition, the court will set a hearing on notice as required by Fed. R. Bankr.P.2002(q).

The Court must review the petition for recognition in light of the requirements of chapter 15. In re Bear Stearns High–Grade Structured Credit Strategies Master Fund, Ltd., 374 B.R. at 126–27. If a petition for recognition is unopposed, the Court may rely on certain presumptions provided by section 1516. Even so, the Court has a duty to review each petition to determine whether it satisfies all requisites for recognition. Id. at 129–30.

Section 1517 sets out the substantive test for recognition of a foreign proceeding. It...