In re Comair Ltd.
| Decision Date | 12 February 2023 |
| Docket Number | 21-10298 JLG |
| Parties | In re: COMAIR LIMITED, Debtor in a foreign proceeding. [1] |
| Court | U.S. Bankruptcy Court — Southern District of New York |
NOT FOR PUBLICATION
PILLSBURY WINTHROP SHAW PITTMAN LLP Attorneys for the Foreign Representative of Comair Limited 31 West 52nd Street New York, NY 10019-6131 By: John A. Pintarelli, Esq. Hugh M McDonald, Esq. Rahman Connelly, Esq.
KIRKLAND & ELLIS LLP KIRKLAND & ELLIS INTERNATIONAL LLP Attorneys for The Boeing Company 601 Lexington Avenue New York, New York 10022 By: David R. Seligman, Esq. Susan D Golden, Esq. Michael B. Slade, Esq.
Comair Limited ("Comair") is a commercial airline incorporated in the Republic of South Africa. In May 2020, it commenced a Business Rescue Proceeding, essentially to rehabilitate its business, under the South African Companies Act of 2008, in the High Court of South Africa (the "High Court"). Comair appointed Richard Ferguson and Shaun Collyer as Comair's business rescue petitioners (the "Business Rescue Practitioners" or "BRPs").[3] In September 2020, Comair's creditors approved a Rescue Plan, and in February 2021, the BRPs filed a Verified Petition[4] in this Court, commencing Comair's case under chapter 15 of title 11 of the United States Code (the "Chapter 15 Case"), and in doing so, seeking recognition of the Business Rescue Proceeding under chapter 15 of the Bankruptcy Code. In April 2021, the Court entered an order (the "Recognition Order")[5] granting recognition of the Business Rescue Proceeding as a foreign main proceeding under section 1502(4) of the Bankruptcy Code and recognizing the BRPs as foreign representatives of Comair within the meaning of section 101(24) of the Bankruptcy Code. In November 2021, the Court granted the BRPs Discovery Motion and authorized the BRPs to take discovery of the Boeing Company ("Boeing").
On June 14, 2022, the High Court entered a provisional order granting the BRPs' Winding Up Application, which effectively terminated the Business Rescue Proceeding and placed Comair into a provisional liquidation (the "Provisional Liquidation"). On June 17, 2022, the High Court appointed Cloete Murray, Kgashane Christopher Monyela, Ahmed Carim, Tracy Anne Cameron, and Buhle Jeffery Eric Buthelezi as the joint provisional liquidators (the "JPLs") of Comair in the Provisional Liquidation. On June 23, 2022, the High Court certified the appointment of the JPLs. The matter before the Court is the JPLs motion (the "Motion")[6] seeking the entry of an order:
Boeing filed an objection to the Motion (the "Objection" or "Obj.").[7] The JPLs filed a reply in support of the Motion (the "Reply").[8] The Court heard arguments on the Motion. At the hearing, this Court instructed the JPLs' counsel to supplement the Second Harduth Declaration to address certain developments in the proceeding before the High Court, after which Ms. Harduth duly filed her supplemental declaration.[9] Boeing also filed an objection to the Supplemental Harduth Declaration,[10] to which the JPLs filed a brief response.[11]
For the reasons set forth herein, the Court grants the Motion.
The Court has jurisdiction over the Motion pursuant to §§ 1334(a) and 157(a) of title 28 of the United States Code, and the Amended Standing Order of Reference dated January 31, 2012 (Preska, C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(P).
On September 18, 2013, Comair and Boeing entered into an agreement (the "Purchase Agreement") for the sale, manufacture and delivery of eight 737 MAX 8 aircraft (the "Aircraft"). Only one Aircraft was delivered as scheduled under the agreement. In March 2019, following two fatal crashes involving 737 MAX 8 aircraft manufactured by Boeing, the Federal Aviation Administration grounded all 737 MAX 8 aircraft worldwide, thereby delaying two deliveries of Aircraft scheduled under the Purchase Agreement. Comair terminated the Purchase Agreement before Boeing delivered any of the remaining seven Aircraft. Comair asserts that the consequential disruption to Comair's re-fleeting plan, coupled with the worldwide COVID-19 pandemic, contributed to its financial distress.
Chapter 6 of the South African Companies Act 71 of 2008 ("Companies Act") governs "Business Rescue and Compromise with Creditors."[12] The High Court of South Africa (the "High Court") has exclusive jurisdiction over business rescue proceedings. Companies Act § 128(1)(e)).The goal of a business rescue proceeding is to facilitate the rehabilitation of a financially distressed company by providing for:
(i) the temporary supervision of the company, and the management of its affairs, business and property by a business rescue practitioner; (ii) a temporary moratorium (stay) on the rights of claimants against the company or in respect of property in its possession; and (iii) the development and implementation, if approved, of a business rescue plan to rescue the company by restructuring its business, property, debt, affairs, and equity in a manner that maximizes the likelihood of the company continuing into existence on a solvent basis or, if that is not possible, results in a better return for the company's creditors or shareholders than would result from the immediate liquidation of the company.
Harduth Decl. ¶ 8 (citing Companies Act § 128(1)(b)).[13] A company in a business rescue proceeding is placed under the supervision of a business rescue practitioner, who, "is an officer of the court, and must report to the court in accordance with any applicable rules of, or orders made by, the court," Companies Act § 140(3)(a), and who, without limitation, "has full management control of the company in substitution for its board and pre-existing management," id. § 140(1)(a). "[T]he board of a company may resolve that the company voluntarily begin business rescue proceedings and place the company under supervision, if the board has reasonable grounds to believe that- (a) the company is financially distressed; and (b) there appears to be a reasonable prospect of rescuing the company," id. § 129(1). Without limitation, business rescue proceeding begins when the company "files a resolution to place itself under supervision in terms of section 129(3)", id. § 132(a)(i), and it ends when "the court . . . has converted the proceedings to liquidation proceedings," id. § 132(2)(a)(ii).
On May 4, 2020, Comair's board of directors adopted a resolution (the "Board Resolution") authorizing the commencement of business rescue proceedings under section 129(1). The Board Resolution appointed Richard Ferguson and Shaun Collyer as the Business Rescue Practitioners pursuant to section 129(3)(b) of the Companies Act. See First Harduth Decl. ¶ 29. On May 5, 2020, Comair commenced a business rescue proceeding (the "Business Rescue Proceeding"). First Harduth Decl. ¶¶ 11, 30. On September 18, 2020, Comair's creditors approved its business rescue plan (as amended, the "Rescue Plan"), but the proceeding remained open while the BRPs continued to assess whether Comair had a reasonable likelihood of being rehabilitated. See Motion ¶ 6; Second Harduth Decl. ¶ 10.
On February 16, 2021 (the "Petition Date"), the BRPs filed the Verified Petition in this Court seeking recognition of the Business Rescue Proceeding as a foreign main proceeding and the BRPs as the foreign representatives of Comair. On April 13, 2021, the Court entered the Recognition Order and granted recognition to the Business Rescue Proceeding pursuant to section 1517(b)(1) of the Bankruptcy Code. See id. ¶¶ 1-2. In doing so, the Court found that (i) the Business Rescue Proceeding was a foreign main proceeding pursuant to section 1502(4) of the Bankruptcy Code and (ii) the BRPs were "foreign representatives" of Comair within the meaning of section 101(24) of the Bankruptcy Code. See Recognition Order ¶¶ G, J-L.
On July 19, 2021, the BRPs filed a motion seeking entry of an order permitting them to conduct discovery of Boeing pursuant to section 1521(a)(4) of the Bankruptcy Code.[14] To obtain relief under section 1521(a), a foreign representative must demonstrate that the relief is "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 BRPs contended that they required discovery of Boeing to assess (a) the claims and causes of action that the Debtor might have against Boeing in connection with the Purchase Agreement, (b) the Debtor's rights (if any) to be compensated for any damages from the fund created as part of Boeing's settlement with the Department of Justice relating to its manufacture of 737 MAX 8 aircraft, and (c) the extent of the Debtor's claims against Boeing for the repayment of deposits...
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