In re Globo Comunicacoes E Participacoes S.A.
| Decision Date | 17 November 2004 |
| Docket Number | No. 04 Civ. 2818(VM).,04 Civ. 2818(VM). |
| Citation | 317 B.R. 235 |
| Parties | In re GLOBO COMUNICACOES E PARTICIPACOES S.A., Debtor, GMAM Investment Funds Trust I, Foundation for Research, & WRH Global Securities Pooled Trust, Petitioning Creditors/Appellants, v. Globo Comunicacoes e Participacoes S.A., Appellee. |
| Court | U.S. Bankruptcy Court — Southern District of New York |
Appellants GMAM Investment Funds Trust 1, Foundation for Research, and WRH Global Securities Pooled Trust (collectively, "Appellants") have appealed a final order of the United States Bankruptcy Court for the Southern District of New York (Prudence Carter Beatty, U.S.B.J.), pursuant to 28 U.S.C. § 158(a)(1) and Fed. R. Bankr.P. 8001(a). That order, dated March 3, 2004, dismissed Appellants' involuntary petition for relief under Chapter 11 of the United States Bankruptcy Code (hereinafter, "the Petition") against Globo Comunicacoes e Participacoes S.A. (hereinafter, "Globopar") for reasons expressed by the Bankruptcy Court in a hearing held on February 19, 2004 (hereinafter, "the Hearing"). Appellants argue that the Bankruptcy Court committed numerous reversible errors in dismissing Appellants' Petition, and request that the order of dismissal be vacated and the case be remanded for further proceedings before a different bankruptcy judge.
For the reasons discussed below, the Court vacates the order of the Bankruptcy Court and remands to the Bankruptcy Court for further proceedings consistent with this opinion. The Court declines to order reassignment of the case to another bankruptcy judge on remand.
This appeal presents several novel questions of law concerning a domestic creditor's ability to subject a foreign corporation to the jurisdiction of the federal bankruptcy courts. The involuntary bankruptcy petition giving rise to the appeal represents a creative way of resorting to United States bankruptcy courts to seek repayment of funds owed by an allegedly recalcitrant foreign debtor. The arguments marshaled on behalf of Appellants and Globopar, both in the Bankruptcy Court and on appeal, are similarly novel.
All of the intense lawyering on both sides, however, does not obscure one of the central points in contention in this appeal: that the Bankruptcy Court below did not develop a factual record sufficient for this Court to properly evaluate many of the arguments presented by Appellants and Globopar on appeal. The Court therefore will order, on remand, that the Bankruptcy Court develop a more detailed factual record, with findings of fact as well as an analysis of procedures necessary to ascertain: whether the case should be dismissed pursuant to 11 U.S.C. § 305(a)(1); whether the Bankruptcy Court may, consistent with Due Process requirements, exert personal jurisdiction over Globopar; and finally, whether the doctrine of forum non conveniens should deprive the federal bankruptcy courts of venue over Appellants' petition.
Because of the sparseness of the Bankruptcy Court's record and stated considerations, the following recitation of the facts and allegations contained in the briefs, supporting exhibits, and appellate material submitted to this Court is necessarily incomplete. The Court will nonetheless attempt to provide a brief overview of the facts on which all parties agree, as well as the facts contested by Appellants and Globopar.
The parties agree that Globopar is a holding company organized under Brazilian law. Globopar owns, either directly or indirectly, one of the largest television production centers in the world. It is considered the leader in Brazilian pay television services, including among its holdings a major provider of programming content for Brazilian television, a large Brazilian publishing and printing company, and major Brazilian media licensing and distribution operation. Appellants do not dispute that Globopar's headquarters and all of its own employees are located in Brazil, and that its principal office and place of business are in Rio de Janeiro, Brazil. Nor do they dispute that the vast majority of Globopar's property and other holdings are located outside of the United States.
Globopar concedes, however, that it does wholly own a Delaware corporation called DTH USA, Inc. ("DTH"), a holding company that possesses 30 percent interests in each of three Delaware general partnerships. These general partnerships have offices and operations in Florida, but concern pay television subscriber services located exclusively in Latin America. The record does not reveal who else owns interests in the Delaware general partnerships, the value of DTH's partnership interests, or the number of employees employed by, and amount of property owned by, the general partnerships or DTH.1 Globopar also admits that at one point it had maintained an active bank account in the United States used to distribute interest payments, and that the account shows a current balance of approximately $32,000.2 It claims that the bank records are inaccurate. However, the validity of this claim was not evaluated by the Bankruptcy Court.
It is also undisputed that Globopar has frequently availed itself of the United States debt market to raise what, by any account, is an extremely large amount of debt. Globopar has direct dollar-denominated debt of approximately $1.18 billion in principal amount. (See Appellee Br. at 10.) Though it is unclear from the record before the Court exactly how much of that debt was actually negotiated or sold in the United States, held by United States creditors, or actually paid into United States bank accounts, Appellants allege that the instruments associated with approximately $750 million worth of bond debt (hereinafter, "the Bond Debt" or "the Notes") was sold on United States markets and expressly subjects Globopar to the jurisdiction of New York state or federal courts for "any suit, action or proceedings ... which may arise out of or in connection with the [Bond Debt]." (Appellant Br. at 8-9 ().) Globopar also held a $200 million revolving credit facility entered into with various United States and international banks (hereinafter, "the Bank Debt") that allegedly subjects Globopar to the jurisdiction of New York state or federal courts in "any action or proceeding arising out of or relating to" the Bank Debt. (Appellant Br. at 10 ().) Appellants also allege, "on information and belief," that "a substantial portion of the Bank Debt is held by U.S. banks, and a substantial portion of the Bond Debt is owned by U.S. investors" (Appellant Br. at 7), though they have not proved these claims through any factfinding proceeding.
Also of relevance to this appeal are provisions contained within the Trust Deeds restricting bondholders' ability to sue on the Bond Debt absent approval from 25 percent of the bondholders, commonly known as a "no action" clause. The clause provides in pertinent part that "No Noteholder shall be entitled to proceed directly against the Issuer [i.e., Globopar]... to enforce the performance of any of the provisions of this Trust Deed, of the Notes," or of related notes unless the trustee of the Bond Debt fails to do so after receiving a written request by the holders of 25 percent or more of the outstanding notes. (See Appellant Br. at 41.)
In January of 1999, the Brazilian Central Bank announced that the Brazilian currency unit, the real, would no longer be pegged to the United States dollar. This action caused the value of the real to deteriorate markedly against the dollar, to the point where by October of 2002, the burden on Globopar of dollar-denominated debt negotiated under an earlier Brazilian monetary policy allegedly became untenable. The currency deterioration led Globopar to announce on October 28, 2002, that it would restructure its debt and, to that end, place a moratorium on all interest payments under its debt instruments. It does not appear that those payments have resumed, though Globopar claims to have engaged in consensual restructuring efforts with creditors since it declared the moratorium. According to Globopar, those consensual negotiations have borne fruit, resulting in the formation of steering committees composed of holders of Bank and Bond Debt and progress towards restructuring all of the outstanding debt. Globopar claims to have paid over $12 million in fees to advisors to the Bank and Bond Steering Committees in 2003 alone. (See Appellee Br. at 11-12.) However, it apparently has not paid any of the accumulated interest on the debt since the October 2002 moratorium, an amount that Appellants estimate totals over $100 million on the Bond Debt alone. (See Appellant Br. at 14.)
Appellants' involuntary bankruptcy petition was filed in the Bankruptcy Court on December 11, 2003. According to Globopar, each of the Appellants is "related in one way or another to an investment company known as W.R. Huff Asset Management Co., Inc." (hereinafter, "Huff"), and the Petition was filed exactly one month after a Huff employee sent a letter demanding that Globopar modify positions it had taken during consensual restructuring discussions. (Appellee Br. at 12-13.) Globopar's allegations clearly imply that Appellants, rather than representing three different creditors' viewpoints, each of whom agreed that filing an involuntary bankruptcy petition was necessary to secure the funds...
To continue reading
Request your trial
-
In Re Bozel S.A., Bankruptcy No. 10-11802 (AJG).
...of jurisdiction;” and (5) “the Federal Government's interest in its foreign relations policies.” In re Globo Comunicacoes Participacoes S.A., 317 B.R. 235, 257-58 (S.D.N.Y.2004) (citing Asahi, 480 U.S. at 115, 107 S.Ct. 1026). The Supreme Court has also stated, however, that “[w]hen minimum......
-
In re Sphinx, Ltd.
...is no [blanket] presumption that it is the domestic....""See also GMAM Investment Funds Trust I v. Globo Comunicacoes E Participacoes S.A. (In re Globo Comunicacoes E Participacoes S.A.), 317 B.R. 235, 253-54 (S.D.N.Y. 2004). Chapter 15 does, however, provide the court with flexibility and ......
-
In re Correra
...it would be "anomalous" to permit them to evade the court's reach.160 Marathe, 459 B.R. at 854 (citing In re Globo Comunicacoes e Participacoes S.A. , 317 B.R. 235, 250 (S.D.N.Y. 2004) ).161 Id. at 853-858.162 Judicial Watch, Inc. v. U.S. Dep't of Commerce, 196 F.R.D. 1 (D.D.C. 2000). This ......
-
In re Yukos Oil Co.
... ... 1141, 119 S.Ct. 1032, 143 L.Ed.2d 41 (1999); In re Globo Comunicacoes E Participates S.A., 317 B.R. 235 (S.D.N.Y.2004) ... ...
-
International Shipping Companies Successfully Navigate Chapter 11 With Prenegotiated Plans Of Reorganization
...was sufficient property in the United States to create eligibility to file bankruptcy); In re Globo Comunicacoes e Participacoes S.A., 317 B.R. 235, 249 (Bankr. S.D.N.Y. 2004) (explaining that Section 109(a) would be satisfied if claims that the debtor-owned subsidiary that was a U.S. compa......
-
Chapter Two The foreign Representative and the Start of a Chapter 15 Case
...(forthcoming).[77] See GMAM Inv. Funds Trust I v. Globo Comunicacoes e Partipacoes S.A. (In re Globo Comunicacoes e Partipacoes S.A.), 317 B.R. 235, 249 (S.D.N.Y. 2004) (stating that courts have repeatedly found that there is "'virtually no formal barrier' to having federal courts adjudicat......