IN RE BD. OF DIRECTORS OF HOPEWELL INTERN. INSURANCE
| Decision Date | 09 February 2001 |
| Docket Number | No. 98-45440(ALG).,98-45440(ALG). |
| Citation | 258 BR 580 |
| Parties | In re Petition of the BOARD OF DIRECTORS OF HOPEWELL INTERNATIONAL INSURANCE LTD., as Scheme Administrators of Hopewell International Insurance Ltd., Debtor, in Foreign Proceedings. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Chadbourne & Parke LLP (Howard Siefe, Marjorie L. Cohen, of counsel), New York City, for petitioner.
Cozen and O'Connor (Stephen A. Cozen, Richard M. Mackowsky, Neal D. Colton, of counsel), Philadelphia, PA, for Gold Medal Insurance Co.
Seward & Kissel LLP (Ronald L. Cohen, Charles M. Miller, of counsel), New York City, Zelle, Hofmann, Voelbel, Mason & Gette LLP (Lawrence Zelle, Lawrence T. Hofmann, Richard L. Voelbel, of counsel), Minneapolis, MN, General Mills, Inc.
In 1998 the Board of Directors of Hopewell International Insurance Ltd. ("Hopewell"), acting as Scheme Administrators of Hopewell and as representatives of a debtor in a foreign proceeding, commenced a proceeding in this Court under § 304 of the Bankruptcy Code, 11 U.S.C. § 304. The § 304 proceeding sought, among other things, an injunction preventing Gold Medal Insurance Company ("Gold Medal") and all other creditors from commencing any arbitration or judicial proceedings or enforcing any arbitral awards against Hopewell or its property not permitted by its Bermuda Scheme of Arrangement (the "Scheme") and granting comity to and enforcing an injunction preventing Gold Medal from commencing any action or proceeding or enforcing any arbitral award or judgment against Hopewell or any of its assets in the United States. Gold Medal is a subsidiary and captive insurance company of General Mills, Inc. ("General Mills"), and it has a claim of more than US$200 million against Hopewell as a consequence of a claim filed and judgment entered against it by General Mills. General Mills and Gold Medal strongly objected to the § 304 proceeding; the objections were in large part based on the fact that enforcement in the United States of the Bermuda Scheme of Arrangement would, as a practical matter, require Gold Medal to arbitrate its claim against Hopewell in Bermuda under Bermuda law rather than in Minnesota under local law.
After eight days of trial Judge Brozman of this Court sustained the § 304 petition and entered an order enjoining all scheme creditors, including Gold Medal, from commencing or continuing any actions or proceedings in the United States which would be in violation of the Scheme. See Opinion on Motion for Injunctive Relief Pursuant to 11 U.S.C. § 304, reported at In re Board of Directors of Hopewell International Insurance, Ltd., 238 B.R. 25 (Bankr.S.D.N.Y.1999). An order was entered to that effect, reserving jurisdiction with respect to the "enforcement, amendment or modification of the order, and requests for any additional relief in this section 304 case and all adversary proceedings in connection therewith properly commenced and within the jurisdiction of this Court." Order entered September 21, 1999. Gold Medal and General Mills filed notices of appeal from this order, and the appeals are sub judice before the District Court.
Hopewell has now returned to this Court with a motion seeking an order pursuant to Bankruptcy Rule 2004 directing the production of documents and two witnesses by General Mills. The arbitration of the dispute between Hopewell and Gold Medal has been proceeding in Bermuda in accordance with Bermuda practice. Hopewell argues that the requested disclosure is needed in connection with the Bermuda arbitration; it makes no argument that the disclosure is necessary in connection with the location of assets or property of Hopewell in the United States or in connection with any issue that is distinct to the § 304 proceeding. It contends nevertheless that the requested disclosure is within the scope of the terms of Rule 2004(b), which permits discovery of "any matter which may affect the administration of the debtor's estate". Hopewell reasons that the outcome of the arbitration will result in the liquidation of a large claim in its Scheme and thus affect the estate's administration. It also paints § 304 as a continuing grant of jurisdiction to a foreign representative, giving the representative the right to access all of the "procedural" rights that a debtor would have in a U.S. bankruptcy.
General Mills, joined by Gold Medal, objects to the disclosure on two principal grounds. First, it contends that the pendency of the appeal divests this Court of jurisdiction to consider the motion. Second, it argues that the requested disclosure is outside the scope of § 304 and that Rule 2004's broad disclosure grant should not be used when its purpose is to provide discovery in another discrete action. The objectants further contend that Hopewell should not be able to access broad discovery procedures in the United States because it was the very purpose of Hopewell's § 304 proceeding to enjoin proceedings in the United States and to require Gold Medal to arbitrate its claims against Hopewell in Bermuda under Bermuda procedural and substantive law.
The Supreme Court has stated, "The filing of a notice of appeal is an event of jurisdictional significance — it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal." Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982). This language, cited in both of the Bankruptcy Court decisions relied on by General Mills for its jurisdictional objection, sets forth both the jurisdictional significance of the filing of a notice of appeal and the limitations on the doctrine that the lower court is thereby divested of jurisdiction. The lower court is divested of jurisdiction over "those aspects of the case involved in the appeal", not over any matters that may arise in the matter. Thus, notwithstanding the pendency of an appeal, bankruptcy courts are not divested of jurisdiction to decide issues and proceedings different from and collateral to those involved in the appeal. See In re Allen-Main Associates, Ltd. Partnership, 243 B.R. 606, 608-609 (D.Conn.1998). Equally, a bankruptcy court retains jurisdiction, while an appeal is pending and in the absence of a stay, to enforce the order or judgment appealed from. As the court stated in In re Prudential Lines, Inc., 170 B.R. 222, 243 (S.D.N.Y.1994), appeal dismissed, 59 F.3d 327 (2d Cir.1995), "This is true because in implementing an appealed order, the court does not disrupt the appellate process so long as its decision remains intact for the appellate court to review."
Here, the discovery issues raised by Hopewell's motion are collateral to and different from the issues that are before the District Court on appeal. The only overlap is the fact that if this Court's order is reversed and the § 304 proceeding dismissed, any collateral discovery proceedings would likely be dismissed as well. However, no stay of the order has been obtained; indeed, Gold Medal has been proceeding with arbitration in accordance with the requirements of the Bermuda Scheme of Arrangement, in compliance with the § 304 injunction. In the absence of a stay of Judge Brozman's order, it is this Court's duty to continue to administer the § 304 case in accordance with the reservation of jurisdiction contained in the order appealed from, and it has jurisdiction to hear Hopewell's motion.
Section 304(b) of the Bankruptcy Code permits a foreign representative to commence an ancillary case in the Bankruptcy Court in which the court may:
A section 304 petition does not result in the creation of an estate in the United States or a full U.S. bankruptcy proceeding, with all of the procedural and substantive provisions applicable to domestic bankruptcies. In re Koreag Controle et Revision S.A., 961 F.2d 341, 357 (2d Cir. 1992), cert. denied, 506 U.S. 865, 113 S.Ct. 188, 121 L.Ed.2d 132 (1992). It creates an ancillary proceeding in the United States in aid of the foreign proceeding, the principal purpose of which is to collect assets in the United States, prevent or undo their dismemberment, and remit them to the foreign proceeding for administration there. In re Goerg, 844 F.2d 1562, 1567-1568 (11th Cir.1988), cert. denied, 488 U.S. 1034, 109 S.Ct. 850, 102 L.Ed.2d 981 (1989); In re Gee, 53 B.R. 891, 898-899 (Bankr.S.D.N.Y.1985).
Hopewell, relying on the Court's authority under § 304(b)(3) to "order other appropriate relief", cites several cases in which bankruptcy courts have ordered discovery in § 304 cases. See Angulo v. Kedzep Ltd., 29 B.R. 417 (S.D.Tex.1983); Petition of Brierley, 145 B.R. 151 (Bankr. S.D.N.Y.1992); In re Gee, supra, 53 B.R. at 899. However, the discovery actually ordered in those cases related directly to the efforts of a foreign representative to marshal and protect assets in the United States and transfer them to the foreign proceeding for administration there. The decision of this Court in Brierley, by Judge Brozman who issued the prior opinion in this case as well as the opinion in Gee, is instructive with respect to the scope of the discovery that has heretofore been ordered in § 304 proceedings. The Court stated:
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