In re Commodore Business Machines
| Decision Date | 15 March 2000 |
| Docket Number | No. 95 Civ. 8477(DAB).,95 Civ. 8477(DAB). |
| Citation | 246 BR 476 |
| Parties | In re COMMODORE BUSINESS MACHINES, et al., Debtors. Franklyn R. Wilson and MacGregor N. Robertson, as Liquidators, and Fulbright & Jaworski, L.L.P and William J. Rochelle, III, Appellants-Petitioners, v. Creditors' Committees of Commodore International Ltd., Commodore Electronics Ltd., and Commodore Business Machines, Inc. Appellees-Respondents. |
| Court | U.S. District Court — Southern District of New York |
Fulbright & Jaworski, L.L.P., New York City, Evelyn H. Biery, William J. Rochelle, III, Letitia J. Hanson, of counsel, for the Appellants.
Orrick, Herrington & Sutcliffe, L.L.P., New York City, Michael E. Emrich, Lorraine S. McGowen, of counsel, for Creditors' Committees of Commodore International, Ltd. and Commodore Electronics, Ltd.
Stroock & Stroock & Lavan, L.L.P., Boston, MA, Stephen M. Richmond, Peter J. Antoszyk, Lisa G. Beckerman, of counsel, for Creditors' Committee of Commodore Business Machines, Inc.
Franklyn R. Wilson and Macgregor N. Robertson (the "Liquidators"), together with Fulbright & Jaworski, L.L.P. ("Fulbright") and William J. Rochelle, III ("Rochelle") (collectively, "Appellants"), appeal from two Orders entered in the United States Bankruptcy Court, Southern District of New York (James L. Garrity, Jr., U.S.B.J.). Appellants also petition for a writ of mandamus. For the following reasons, the decision of the Bankruptcy Court on August 7, 1995 is AFFIRMED, the appeal of the September 21, 1995 Order of the Bankruptcy Court is dismissed for lack of jurisdiction, and the petition for a writ of mandamus is DENIED.
Commodore International Limited ("CIL") and Commodore Electronics Limited ("CEL") are incorporated in the Commonwealth of the Bahamas under the International Business Companies Act. (Appellants' Brief1 at 1, 3.) CIL and CEL were "the ultimate corporate parents" of approximately 40 international corporations involved in the development, manufacture, and distribution of computers. (Id.) Approximately 6% of the total sales were generated in the United States; principal markets were in Europe and manufacturing was performed in Asia. (Id.) By 1995, CIL, CEL, and their affiliated corporations were engaged in liquidation proceedings on a global scale. (Appellees' App. Tab 8, at 31-32.)
Commodore Business Machines, Inc., ("CBM"), one of the "indirect subsidiaries" of CIL and CEL, is incorporated in the United States and has its principal place of business in the United States. (Appellants' Brief at 5; CBM Brief at 6.)
On April 29, 1994, CEL commenced liquidation proceedings in the Bahamas. (Appellants' Brief at 3-4.) On or about the same day, the Supreme Court of the Bahamas (the "Bahamian Court") appointed Messrs. Wilson and Robertson as the Liquidators of CEL. (Appellants' Brief at 4; CBM Brief at 6.) On May 4, 1994, three creditors of CBM, CIL, and CEL commenced involuntary petitions in the United States Bankruptcy Court, Southern District of New York (the "Bankruptcy Court").2 (Appellants' Brief at 4; CBM Brief at 6.) On May 24, 1994, an involuntary petition was filed in the Bahamas for the liquidation of CIL (in addition to the liquidation already pending for CEL). (Id. at 4.) Messrs. Wilson and Robertson also were named trustees for the benefit of creditors under Bahamian law. (CBM Brief at 6.)
On May 25, 1994, the Liquidators filed a petition in the Bankruptcy Court for commencement of an ancillary proceeding under 11 U.S.C. § 304 and a motion seeking to have the Bankruptcy Court abstain from exercising its jurisdiction with respect to the United States proceedings against CIL and CEL. (Appellants' App. at 46-47.) During the pendency of these proceedings, the Liquidators and the Unofficial Committee negotiated and entered into a "Protocol", which purported to set forth the conduct of the liquidation proceedings in the Bahamas and the United States. (Appellants' App. at 6-19.) The Liquidators and the Chairman of the Unofficial Committee signed the Protocol on December 8, 1994, and the Protocol was authorized, ratified and approved by Judge Garrity on January 20, 1995. (Id. at 4.) Under the terms of the Protocol, the Unofficial Committee became the "Official Committee of Unsecured Creditors" of CIL and CEL (the "CIL/CEL Committee"). (Id. at 3.) Pursuant to the Protocol, Fulbright and Jaworski, L.L.P. was retained as attorneys for the Liquidators in the United States. (Appellants' App. at 12.) CBM was not a party to the Protocol. (CBM Brief at 7.)
On or around April 21, 1995, the Bankruptcy Court approved the sale of substantially all of the assets of CEL, CIL, and CBM to Escom AG (the "Sale Order"). (Appellants' App. at 20-28, 49.) The Liquidators also obtained approval of the sale from the Bahamian Court. (Appellants' App. at 49.) Over the objection of the creditors of CBM ("CBM Committee") and the United States Trustee, the sale proceeds of $10,000,000 were deposited by the Liquidators in an interest-bearing account (the "Account") at the Royal Bank of Canada, located in the Bahamas. (Appellants' App. at 50.) In "so ordering" the deposit of the proceeds, Judge Garrity relied on representations of the Liquidators' American counsel, William J. Rochelle, III, of Fulbright and Jaworski, that the Liquidators were subject to the jurisdiction of the Bankruptcy Court of the Southern District of New York. (Id.) No funds in the Account could be disbursed "except upon further order of a court of competent jurisdiction." (Id. at 27-28, 51.) A status conference was set for June 7, 1995, to resolve issues related to disbursement and allocation of the sale proceeds. (CBM Brief at 11.)
At the status conference on June 7, 1995, the parties informed Judge Garrity that proceedings before the Bahamian Court continued during the pendency of the proceedings in the United States. (Appellees' App. Tab 8, at 26-32.) Because the proceeds from the sale to Escom constituted substantially all of the assets available to pay creditors of all of the various interrelated debtor corporations (CIL, CEL, CBM, and other companies located throughout the world), (Appellees' App. Tab 8, at 9-11), the parties discussed strategies for a global resolution. (Id. at 11.)
In light of the complicated nature of the competing claims, Judge Garrity also conducted status conferences on July 5, 1995, July 12, 1995, and July 20, 1995, all to discuss allocation of the sale proceeds. (CIL/CEL Brief at 9.)
On July 11, 1995, at the request of the Liquidators, the Bahamian Court issued an ex parte Originating Summons (the "Summons") against CBM, Commodore Italiana S.p.A., and Commodore Buromaschinen GmbH. (CBM Brief at 13.) The Summons sought a declaration that the subsidiaries of CIL (including CBM) be considered a "single economic unit" with CIL; a declaration that the Liquidators and the Supreme Court of the Bahamas are entitled to retain control over the Account; and an injunction restraining removal of the funds from the Account in the Bahamas until a judgment or further order of the Bahamian Court. (CBM Brief at 13.)
In support of the Summons, Rochelle filed an Affidavit in the Bahamian Court asserting, inter alia, that "to the best of my knowledge, information and belief, no proceedings are now pending in the Bankruptcy Court, or in any other court in the United States with respect to a disposition of the Escrowed Funds the Account." (Appellees' App. Tab 24, at 4.) Rochelle's Affidavit was dated July 14, 1995. (Id.) Rochelle appeared at status conferences and hearings before Judge Garrity of the United States Bankruptcy Court on April 21, June 7, July 5, July 12, and July 20, 1995. (Appellees' App. Tabs 6, 8, 13, 15, 17.)
Upon receipt of the Summons, CBM informed Fulbright that it considered the Summons a violation of the automatic stay and of the jurisdiction of the Bankruptcy Court over CBM, and that the Summons "appeared inconsistent" with Rochelle's representations before the Bankruptcy Court.3 (CBM Brief at 14.) The letter also sought information regarding Fulbright's involvement with the Summons and sought withdrawal of the Summons as to CBM. (Id. at 14-15.)
By letter dated July 28, 1995, Rochelle refused to divulge information regarding Fulbright's involvement with the issuance of the Summons, asserting attorney-client privilege. (CBM Brief at 15.) Rochelle also contested the Bankruptcy Court's jurisdiction and asserted that the Liquidators could proceed against the Account only upon further order of the Bahamian Court, not the Bankruptcy Court. (Id.)
On the same day, the Liquidators sought and obtained, in the Bahamas, an ex parte order (the "Account Order") enjoining CBM from taking any action to cause removal of the funds in the Account from the jurisdiction of the Bahamian Court. (CBM Brief at 15; CIL/CEL Brief at 12.)
On August 2, 1995, the CBM Committee filed an emergency application with the Bankruptcy Court seeking, inter alia, a restraining order enjoining the Appellants from taking further action with respect to the Account, a declaration holding the Appellants in contempt, and imposition of sanctions. (CIL/CEL Brief at 13.) At the hearing on August 2, 1995, Judge Garrity stated:
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