In re Maxwell Communication Corp. plc, 91 B 15741 (TLB)
| Decision Date | 12 September 1995 |
| Docket Number | 94 Civ. 8412 (SAS) and 94 Civ. 8413 (SAS).,94 Civ. 8411 (SAS),No. 91 B 15741 (TLB),91 B 15741 (TLB) |
| Citation | 186 BR 807 |
| Parties | In re MAXWELL COMMUNICATION CORPORATION PLC, et al., Debtors. MAXWELL COMMUNICATION CORPORATION PLC, By Andrew Mark HOMAN, Colin Graham Bird, Jonathon Guy Anthony Phillips, and Alan Rae Dalziel Jamieson, its Joint Administrators, Plaintiffs/Appellants, v. SOCIETE GENERAL PLC, Defendant/Appellee. MAXWELL COMMUNICATION CORPORATION PLC, By Andrew Mark HOMAN, Colin Graham Bird, Jonathon Guy Anthony Phillips, and Alan Rae Dalziel Jamieson, its Joint Administrators; Plaintiff/Appellant, and Richard A. Gitlin, Examiner, Intervenor Plaintiff/Appellant, v. BARCLAYS BANK PLC, Defendant/Appellee. MAXWELL COMMUNICATION CORPORATION PLC, By Andrew Mark HOMAN, Colin Graham Bird, Jonathon Guy Anthony Phillips, and Alan Rae Dalziel Jamieson, its Joint Administrators; Richard A. Gitlin, Examiner, Plaintiffs/Appellants, v. NATIONAL WESTMINSTER BANK PLC, Defendant/Appellee. |
| Court | U.S. District Court — Southern District of New York |
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John G. Gellene, Milbank, Tweed, Hadley & McCloy, New York City, for plaintiffs Maxwell Communication Corp.
Evan D. Flaschen, G. Eric Brunstad, Jr., Ronald J. Silverman, Hebb & Gitlin, Hartford, CT, for plaintiff Richard A. Gitlin.
John W. Dickey, James H. Carter, Tamar Feder, Sullivan & Cromwell, New York City, Karen E. Wagner, Henry L. King, James P. Rouhandeh, Davis Polk & Wardwell, New York City, for defendant National Westminster Bank plc.
Thomas C. Rice, Dennis C. O'Donnell, Steven Fuhrman, Simpson, Thacher & Bartlett, New York City, for defendant Barclays Bank plc.
Jeffrey Barist, Jennifer L. Sheppard, White & Case, New York City, for defendant/appellee Societe Generale.
Debtor Maxwell Communication Corporation plc ("MCC" or the "Debtor") and Examiner Richard A. Gitlin (the "Examiner") appeal from final judgments of the bankruptcy court for the Southern District of New York, Tina L. Brozman, J., dismissing Adversary Complaints filed by MCC and the Examiner against defendants/appellees Barclays Bank plc ("Barclays"), National Westminster Bank plc ("NatWest"), and Societe General ("SocGen").1 The three Complaints sought to avoid and recover certain transfers made by MCC to Defendants within 90 days prior to the commencement of MCC's Chapter 11 case and to disallow claims filed by the Defendants against the Debtor's bankrupt estate.
The bankruptcy court dismissed the Complaints pursuant to Fed.R.Civ.P. 12(b)(6), holding that the general presumption against extraterritoriality and considerations of comity prevented utilization of § 547 of the Bankruptcy Code, 11 U.S.C. § 101 et seq., to avoid the pre-petition transfers. On appeal, MCC and the Examiner contend that the transfers were not extraterritorial in nature, and that, even if they were, Congress clearly intended that § 547 apply extraterritorially. MCC and the Examiner also argue that considerations of comity did not require the bankruptcy court to dismiss the Complaints. For the reasons set forth below, I disagree with appellants and affirm the judgment of the bankruptcy court.
The facts underlying the Complaints are fully set forth in the bankruptcy court's decision and need not be repeated here except for a brief summary.2 MCC is an English company that, prior to its Chapter 11 case, functioned primarily as a holding company for a variety of publishing and information service businesses located throughout the world. Approximately 80% of MCC's total asset pool and its largest sources of revenue consisted of its ownership of two American entities, MacMillan, Inc. ("MacMillan") and Official Airlines Guide, Inc. ("OAG"). However, MCC incurred most of its debt in England.
Barclays and NatWest are English Companies which maintain their principal offices in London, although both banks have branch offices in the United States. SocGen is a French banking institution headquartered in Paris, France with branch offices in London and New York. All three defendants are in the business of providing banking and financial services throughout the world and provided MCC with credit facilities to service its working capital needs. These credit facilities, which were administered and drawn upon by MCC in London prior to its bankruptcy filings, helped MCC finance its purchases of Macmillan and OAG in 1988.
The unique aspect and the most important feature of this case for purposes of these appeals is MCC's parallel bankruptcy filings in the courts of two nations. On December 16, 1991, MCC filed a Chapter 11 petition in the Southern District of New York. On December 17, 1991, MCC presented a petition to the High Court of Justice in London for an administration order under the Insolvency Act 1986. Because the dual filings commenced plenary insolvency proceedings in the U.S. and England, the U.S. bankruptcy court appointed an Examiner whose "mandate was to harmonize the two proceedings so as to permit a reorganization under U.S. law which would maximize the return to creditors." In re Maxwell, 170 B.R. at 802. The High Court appointed four Joint Administrators in the English proceeding to function as the corporate governance of MCC and to administer its affairs.
The Joint Administrators and the Examiner subsequently entered into a procedural "Protocol" in order to coordinate their efforts. The Protocol enumerates the respective powers and duties of the Joint Administrators and the Examiner and provides the basis for the "Plan of Reorganization" ("Plan") filed in U.S. bankruptcy court and "Scheme of Arrangement" ("Scheme") filed in the High Court in England. The Plan and Scheme, which set forth the debtor's post-reorganization obligations to its creditors, are mutually interdependent documents that "constitute a single mechanism, consistent with the laws of both countries, for reorganizing MCC." In re Maxwell, 170 B.R. at 802. The documents create a single pool of assets and permit creditors to file claims in either jurisdiction which suffice for participation under both the Plan and Scheme. However, the choice of law and forum issues which are the subject of this appeal were explicitly not decided in these documents: MCC's Disclosure Statement — submitted in connection with creditor voting on the Plan and Scheme — expressly recognized that the appropriate forum for a given claim is to be decided on a basis. See Disclosure Statement at p. 133. In addition, § 6.04 of the Plan states that the Joint Administrators shall consult with the Examiner on "whether or in which court to assert a particular claim" and on "choice of law" matters, while the Scheme states that the word "court" in both the Plan and Scheme means "the English Court or the U.S. Court, as is the more appropriate forum in the particular case." Plan of Reorganization at § 6.04; Scheme of Arrangement at Annexure 1 (Definitions).
Before it filed for bankruptcy protection, MCC sold significant portions of its U.S. assets in an attempt to reduce some of the debt it had incurred in acquiring Macmillan and OAG. Specifically, Macmillan sold its "Directories" division for $145 million and Computer Book Publishing, a subsidiary, for $157.5 million. As detailed in the bankruptcy court's opinion, portions of the sale proceeds were used to repay MCC's overdraft balances on its accounts with the Banks in London. These transfers, which occurred within 90 days of MCC's bankruptcy filings, consisted of transfers of over $30 million dollars and over 2 million pounds to Barclays, over 71.5 million pounds to NatWest, and over 5.7 million pounds to SocGen. See In re Maxwell, 170 B.R. at 803-4, 806-7.
SocGen is the only defendant to dispute that it received loan payments from the sale proceeds of MCC's U.S. assets. Unlike the Adversary Complaints filed against Barclays and NatWest, the SocGen Complaint does not contain any allegations that the transfer to SocGen derived from the sale of MCC's U.S. assets. However, MCC argues that the Court should assume for purposes of the instant motion that the transfers came from U.S. assets because the transfer to SocGen occurred on the same day that Macmillan sold its "Directories" division. This evidence, while not overwhelming, is sufficient in the context of a motion to dismiss to raise a reasonable inference that the transfer to SocGen originated from U.S. asset sales. See Paulemon v. Tobin, 30 F.3d 307, 308 (2d Cir.1994) (). Accordingly, I assume for purposes of these appeals that the transfers to SocGen derived from U.S. asset sales.
After the Banks filed notices of claim in England, MCC filed Adversary Complaints, pursuant to 11 U.S.C. §§ 547 and 550, to recover the transfers made to the Banks and to disallow their claims pursuant to 11 U.S.C. § 502(d). Section 547(b) provides in pertinent part:
The Banks then moved, pursuant to Fed. R.Civ.P. 12(b)(6), to dismiss the complaints for failure to state a claim...
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