In re Maxwell Communication Corp. plc, Bankruptcy No. 91B 15741. Adv. No. 92-1181A
| Decision Date | 10 August 1994 |
| Docket Number | Bankruptcy No. 91B 15741. Adv. No. 92-1181A,93-9622A and 94-8066A. |
| Parties | In re MAXWELL COMMUNICATION CORPORATION plc, et al., Debtors. MAXWELL COMMUNICATION CORPORATION plc, by Andrew Mark HOMAN, Colin Graham Bird, Jonathan Guy Anthony Phillips, and Alan Rae Jamieson, its Joint Administrators, Plaintiffs, and Richard A. Gitlin, Examiner, Intervenor Plaintiff, v. BARCLAYS BANK plc, Defendant. MAXWELL COMMUNICATION CORPORATION plc, by Andrew Mark HOMAN, Colin Graham Bird, Jonathan Guy Anthony Phillips, and Alan Rae Dalziel Jamieson, its Joint Administrators, and Richard A. Gitlin, Examiner, Plaintiffs, v. NATIONAL WESTMINSTER BANK plc, Defendant. MAXWELL COMMUNICATION CORPORATION plc, by Andrew Mark HOMAN, Colin Graham Bird, Jonathan Anthony Guy Phillips, and Alan Rae Dalziel Jamieson, its Joint Administrators, Plaintiffs, v. SOCIÉTÉ GÉNÈRALE, Defendant. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
Milbank, Tweed, Hadley & McCloy by John Gellene, John Jerome and Lisa Turiel, New York City, for the Joint Administrators.
Simpson Thacher & Bartlett by Thomas Rice and Steven Fuhrman, New York City, for Barclays Bank plc.
Davis Polk & Wardwell by Henry King, Karen Wagner and James Rouhandeh, Sullivan & Cromwell by John Dickey, New York City, for National Westminster Bank plc.
White & Case by Jeffrey Barist, Helena Tavares and Jennifer Sheppard, New York City, for Société Génèrale.
Hebb & Gitlin by Evan Flaschen and Ronald Siverman, Hartford, CT, for Richard Gitlin, Examiner.
Jay Lawrence Westbrook, Austin, TX, amicus curiae.
OPINION ON MOTIONS TO DISMISS
When filed, the insolvency case of Maxwell Communications Corporation plc (MCC) was unique, MCC, an English corporation, having filed a chapter 11 petition in this court followed immediately by a petition for administration in the High Court of Justice in London. What was so unusual about this is that both cases were and remained, through each court's approval of a joint plan of reorganization and scheme of arrangement, primary proceedings under the laws of the respective nations. Not a lot of imagination is needed to predict that under such circumstances choice-of-law questions might arise. And, indeed, in a very limited sense they have.
MCC, prior to its bankruptcy, made some large transfers in England to three banks, two English1 and one French2, which MCC, through the joint administrators appointed by the High Court, now seeks to recover as preferential under U.S. law. The banks, which do not challenge my subject matter jurisdiction over the chapter 11 case or my personal jurisdiction over them, nonetheless urge me to dismiss the preference actions under a variety of theories all of which are grounded in the notion that these transfers ought be governed by U.K. law and adjudicated in the parallel English proceedings. If successful in their quest for dismissal the banks may be very successful, for it is likely that under the English analogue to our preference law, the transfers would not be avoidable. The English administrators, openly desirous of substantially augmenting MCC's estate, contend that I must apply U.S. law. There is a certain irony in this; so well have the two cases been meshed that the administrators urge that I not defer to the court which appointed them.
The salient facts are uncontroverted.3 MCC is an English holding company which was controlled by Ian Robert Maxwell from 1981 until his untimely death in November, 1991.4 MCC's crown jewels were its 100% ownership, directly or indirectly, of two American entities, the well-known publishing company Macmillan, Inc. (Macmillan) and Official Airlines Guide, Inc. (OAG), which together constituted approximately 80% of MCC's total asset pool. MCC had acquired Macmillan in 1988 for roughly $2.6 billion and OAG that same year for approximately $750 million. Although the most valuable of MCC's subsidiaries were found in the United States, most of MCC's debt was incurred in England.
On December 16, 1991, shortly after Maxwell died and his financial empire began crumbling, MCC filed its chapter 11 petition. MCC having substantial asset holdings in this country, no one disputed my jurisdiction to entertain its petition. The following day, both to protect against dismemberment by English creditors of its assets held outside the United States and because directors of an insolvent English corporation may be liable for trading while insolvent, MCC presented a petition to the High Court of Justice for an administration order under the Insolvency Act 1986. On December 20, 1991, Mr. Justice Leonard Hoffmann appointed Andrew Mark Homan, Colin Graham Bird and Jonathan Guy Anthony Phillips as joint administrators in the English proceeding. Rice Aff. Exh. D.5 On that same day, I appointed Richard Gitlin, Esq., as examiner in the U.S. proceeding. Id. Exh. E. The examiner's mandate was to harmonize the two proceedings so as to permit a reorganization under U.S. law which would maximize the return to creditors.
The joint administrators in England and the examiner in New York, subject to the jurisdiction of both courts, have carried out the administration of MCC in unprecedented cooperation with each other. To aid that endeavor, Mr. Justice Hoffmann and I entered orders authorizing the joint administrators and the examiner to coordinate their efforts. They have done so in accordance with a document called the "Protocol." Rice Aff. Exh. F. My January 15, 1992, order approving that Protocol recognized the joint administrators as the corporate governance of MCC. Id. In similar fashion, Mr. Justice Hoffmann granted standing to the examiner to be heard in his court. The order expressed not to affect the jurisdiction of the High Court in England or of this court under our respective laws or to preclude any party from seeking an expansion or reduction of the examiner's powers. Id. Nor did it place any limits on the exercise of avoidance powers under the Bankruptcy Code or the Insolvency Act 1986.
In February, 1993, building on what the Protocol had created, the joint administrators, with the concurrence of the examiner, filed their plan of reorganization (plan) and scheme of arrangement (scheme). Although separate plan and scheme documents exist, the plan and scheme are mutually dependent and, in their effect, constitute a single mechanism, consistent with the laws of both countries, for reorganizing MCC through the sale of assets as going concerns and for distributing assets to creditors. The disclosure statement accompanying MCC's plan provided creditors around the world with a summary of the plan and an explanation of the potential for recoveries to creditors from asset dispositions and causes of action, including preferences under U.S. law. Rather than carving up the assets for distribution by the two courts to different groups of creditors, the plan and scheme set up a single "pot" for distribution to all creditors. In keeping with the single distribution mechanism, creditors were permitted to submit a claim in either jurisdiction which would suffice for participation under both the plan and scheme.
See Rice Aff. Exh. M at pp. 133-36. The plan and scheme established September 27, 1993, as the last day to file claims in the U.S. and to lodge claims in the U.K. All three defendants lodged claims with the U.K. court; none filed a proof of claim with this court.
Voting on MCC's plan was completed on July 1, 1993, with holders of 99.3% in number and 99.98% in amount of class 3A (general unsecured) claims voting to accept the plan. I confirmed MCC's plan on July 14, 1993. The U.K. court sanctioned MCC's scheme pursuant to section 425 of the Companies Act 1985 the following week, with holders of 99.3% in number and 99.7% in amount of scheme claims voting to accept the scheme.
Barclays, as a member of MCC's creditors' committee7, has taken an active role in MCC's case. Although most...
To continue reading
Request your trial