In re Commodore Intern., Ltd.

• Decision Date: 15 December 1999
• Docket Number: Bankruptcy No. 94 B 42185(JLG),94 B 42386(JLG). Adversary No. 97/8294A.
• Parties: In re COMMODORE INTERNATIONAL, LIMITED, and Commodore Electronics, Limited, Debtors. Official Committee of Unsecured Creditors, Plaintiffs, v. Transpacific Corporation Ltd., Defendant.
• Court: United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York

242 B.R. 243 (1999)

In re COMMODORE INTERNATIONAL, LIMITED, and Commodore Electronics, Limited, Debtors.

Official Committee of Unsecured Creditors, Plaintiffs, v. Transpacific Corporation Ltd., Defendant.

Bankruptcy Nos. 94 B 42185(JLG), 94 B 42386(JLG). Adversary Nos. 97/8294A.

United States Bankruptcy Court, S.D. New York.

December 15, 1999.

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Stroock, Stroock & Lavan, LLP, New York City, for the Committee.

Kronish, Lieb, Weiner & Hellman, LLP, New York City, for Transpacific Company Ltd.

MEMORANDUM DECISION ON TRANSPACIFIC COMPANY'S MOTION TO DISMISS

JAMES L. GARRITY, Jr., Bankruptcy Judge.

Transpacific Company Ltd. ("TPC")¹ moves pursuant to Fed.R.Bankr.P. 7004, 7012, and 7041 and Fed.R.Civ.P. 4(m), 12(b)(2)-(6) and 41(a) for an order dismissing the complaint in this adversary proceeding (the "Complaint"). The unsecured creditors' committee appointed herein (the "Committee") opposes the motion. We grant it.

Facts

The relevant facts are not disputed. Commodore International, Limited ("CIL") is the parent company of Commodore Electronics, Limited ("CEL", and together with CIL, the "debtors") and other affiliated entities formerly engaged in the world-wide manufacture of personal computers and related products under the "Commodore" and "Amiga" brand names. CIL and CEL are Bahamian corporations and are the subject of liquidation proceedings pending in the Supreme Court for the Commonwealth of The Bahamas (the "Bahamas Supreme Court"). Franklyn R. Wilson and MacGregor N. Robinson (the "Liquidators") are the court-appointed liquidators of those entities. CIL and CEL also are chapter 11 debtors in this court. Both courts approved a protocol (the "Protocol") in an effort to coordinate and harmonize these dual insolvency proceedings.

By order dated on or about March 13, 1997, as supplemented by one dated on or about April 12, 1997, we authorized the Committee, on behalf of the debtors, to pursue preferential transfer claims against various third parties in the United States. On or about April 4, 1997, the Committee commenced this action. In the Complaint, the Committee seeks to avoid certain payments by the debtors to TPC totaling approximately $10 million as preferences and/or fraudulent transfers under §§ 547(b), 548 and 550 of the Bankruptcy Code. More specifically, it alleges that: (i) on or about February 26, 1993, TPC entered into an agreement to advance $10,000,000 to CEL, in return for which CEL gave an interest bearing demand promissory note in the same amount (see Complaint ¶ 11); (ii) on or about April 12, 1993, TPC entered into an agreement to advance CEL another $7,000,000, in return for which CEL gave TPC a new interest-bearing demand promissory note in the amount of $17,000,000 (id. ¶ 12); (iii) on or about April 13, 1993, CEL and certain of its subsidiaries gave TPC a security interest in their inventory and accounts receivable and a pledge of certain stock as security for the $17,000,000 loan (id. ¶ 13); (iv) on or about May 24, 1993, CEL's German subsidiary transferred inventory with a value of $9,500,000 to TPC in partial payment of the $17,000,000 loan to CEL (id. ¶ 14); (v) the security agreements were amended thereafter so that CEL's obligation to TPC was secured by the proceeds of the sale of certain of CEL's German subsidiary's inventory (id. ¶ 15); (vi) on or about November 8, 1993, CEL paid TPC $9,891,039 in partial satisfaction of its obligation to TPC (id. ¶ 16); and (vii) TPC received additional funds thereafter, the amount of which is not currently known, from CEL's German subsidiary. Id. ¶ 17. Accordingly, the Committee alleges that the $9,891,039 payment by CEL on November 8, 1993 to TPC in partial satisfaction of CEL's $17 million debt to TPC, and the granting of security interests by CEL to TPC on or about April 13, 1993 to secure that debt, are avoidable as preferential and/or fraudulent transfers under §§ 547, 544(b) and 548 of the Bankruptcy Code. Id. ¶¶ 22, 27.

TPC has not filed an answer. Instead, it seeks to dismiss the Complaint on the basis of lack of jurisdiction, lack of standing, collateral estoppel, comity, forum non conveniens, the contractual obligation to litigate in the Bahamas and the non-extraterritorial reach of the avoidance provisions of the Bankruptcy Code. We address each of these below.

Discussion

We have subject matter jurisdiction of this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(a) and the "Standing Order of Referral of Cases to Bankruptcy Judges" of the United States District Court for the Southern District of New York, dated July 10, 1984 (Ward, Acting C.J.). This is a core proceeding. See 28 U.S.C. § 157(b)(2)(F) and (H).

Fed.R.Bankr.P. 7012 makes Fed. R.Civ.P. 12 applicable herein. As TPC's motion pertains to that rule, TPC contends that the Complaint must be dismissed under subsections (2) through (6), which address, respectively, personal jurisdiction, venue, sufficiency of process and the legal sufficiency of the Committee's claims in the Complaint. In determining those issues, we have considered both the allegations in the Complaint as well as affidavits and other materials submitted by the parties. Were this a motion pursuant to Rule 12(b)(6), our consideration of matters outside of the pleadings would mean that we were treating it as one for summary judgment under Rule 56. See Fed.R.Civ.P. 12(b). However, the only defenses raised by TPC that might arguably fall under the rubric of Rule 12(b)(6) — i.e. lack of standing, comity, contractual choice of forum and forum non-conveniens — are more appropriately addressed to the propriety of our subject matter jurisdiction (Fed. R.Civ.P. 12(b)(1)) or the proper venue for this action (Fed.R.Civ.P. 12(b)(3)). See Thompson v. County of Franklin, 15 F.3d 245, 247 (2d Cir.1994) (finding that although lack of standing defense may be raised under Rule 12(b)(6), it is more properly directed to Rule 12(b)(1)); Leonard v. Garantia Banking Ltd., No. 98 Civ. 4848, 1999 WL 944802, *1 (S.D.N.Y. Oct. 19, 1999) (dismissing complaint on basis of forum non conveniens and contractual forum selection clause under Rule 12(b)(3)); Filetech S.A.R.L. v. France Telecom, 978 F.Supp. 464, 482 n. 16 (S.D.N.Y.1997) (where party did not specify which subsection of Rule 12(b) it was moving under court could consider materials outside complaint in deciding motion to dismiss on grounds of international comity without converting motion to one for summary judgment by treating motion as one pursuant to Rule 12(b)(1)), vacated on other grounds, 157 F.3d 922 (2d Cir.1998); see also Antares Aircraft, L.P. v. Federal Republic of Nigeria, 948 F.2d 90, 96 (2d Cir.1991) (on a "challenge to the ... court's subject matter jurisdiction, the court may resolve disputed jurisdictional fact issues by reference to evidence outside the pleadings, such as affidavits").

Standing

TPC claims that the Committee lacks standing to sue and that we should dismiss this case in light of the Bahamas Supreme Court's determination on December 8, 1997 that the Liquidators did not have authority under Bahamian law to consent to the Committee's prosecution of this action. See Gould v. Commodore International Limited (In Liquidation), No. 665 (S.Ct. Bahamas Dec. 8, 1997). According to TPC, the Committee is collaterally estopped by Gould from relitigating its standing to maintain this proceeding because: (i) Gould represents a final judgment on the merits of the Liquidators' purported assignment to the Committee of the right to litigate on the debtors' behalf; (ii) the issue raised here by the Committee is the same issue that was decided in Gould; (iii) the Committee is in privity with the party against whom that issue was decided in Gould — i.e. the Liquidators; and (iv) the Liquidators (privies to the Committee) had a full and fair opportunity in Gould to litigate the validity of the assignment.

The Committee contends that it is not estopped by Gould from arguing that it has standing to maintain this proceeding because Gould explicitly provides that it is not binding on the Committee. It also asserts that TPC's argument is an impermissible effort to manipulate the litigation process by attempting to bind the Committee with a decision in which the Committee was denied the opportunity to be heard, and that to do so would be fundamentally unfair. Finally, the Committee maintains that we would violate the terms of the Protocol if we accepted TPC's argument.

Collateral estoppel, or issue preclusion, "precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same." Burgos v. Hopkins, 14 F.3d 787, 792 (2d Cir.1994); see also Charles Alan Wright, The Law of Federal Courts, § 100A at 730 (5th ed.1994). It will apply when: (i) the subject issue in both proceedings is identical; (ii) the issue was litigated and necessarily decided; (iii) there was a full and fair opportunity to litigate in the prior proceeding; and (iv) resolution of the issue was necessary to support a valid and final judgment. See Central Hudson Gas & Elec. Corp. v. Empresa Naviera Santa, 56 F.3d 359, 368 (2d Cir.1995); Liona Corp., Inc. v. PCH Associates (In re PCH Associates), 949 F.2d 585, 593 (2d Cir.1991); First National Bank v. Overmyer (In re Overmyer), 52 B.R. 111, 115 (Bankr. S.D.N.Y.1985).

In Gould, the Bahamas Supreme Court held that the Liquidators were required to obtain its permission prior to delegating authority to the Committee to bring suit based upon causes of action belonging to the debtors. In doing so, it construed the relevant provision of the Protocol and concluded, among other things, that notwithstanding Protocol ¶ M(6), which provides that the Liquidators are authorized to "cause CEL or...