Samba v. Int'l Petroleum Prods. (In re re Black Gold S.A.R.L.)
| Decision Date | 17 February 2022 |
| Docket Number | BAP NC-21-1068-BGT,Bk. 20-41815 |
| Parties | In re: BLACK GOLD S.A.R.L., Debtor. v. INTERNATIONAL PETROLEUM PRODUCTS AND ADDITIVES COMPANY, INC., Appellee. JEAN-PAUL SAMBA, Foreign Representative of Debtor, Appellant, |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Appeal from the United States Bankruptcy Court for the Northern District of California Roger L. Efremsky, Bankruptcy Judge Presiding
James R. Irving of Dentons Bingham Greenebaum LLP argued for appellant;
Vinay Vijay Joshi of Amin Turocy & Watson LLP argued for appellee.
Before: BRAND, GAN, and TAYLOR, Bankruptcy Judges.
Jean-Paul Samba, Foreign Representative of debtor Black Gold S.A.R.L ("Black Gold"), appeals an order denying his petition for recognition of a foreign proceeding under chapter 15.[1] Previously, Black Gold had filed an insolvency proceeding in Monaco ("Monegasque Proceeding"). Mr. Samba is the appointed trustee. Black Gold's primary creditor, International Petroleum Products and Additives Company, Inc. ("IPAC"), maintained that the Monegasque Proceeding was a "sham" proceeding and that the chapter 15 filing in the United States was just an act in furtherance of the sham.
The bankruptcy court ruled that, based on the misconduct and bad faith of Black Gold, its insiders, Mr. Samba, and their attorneys, the case did not serve the purposes and objectives of § 1501, and it denied recognition of the Monegasque Proceeding on that basis. This was error.
Section 1501 did not provide the court with the discretion to deny recognition of a foreign proceeding. Rather, that determination had to be made under § 1517(a). If the requirements under that statute were satisfied, the court could only deny recognition if it found that doing so would be manifestly contrary to U.S. public policy. § 1506. The court did not make any findings under § 1517(a), and it declined to find that the Monegasque Proceeding violated the public policy provision of § 1506.
The facts in this case are undisputed. We conclude that the requirements for recognition under § 1517(a) were satisfied, and that recognition of the Monegasque Proceeding would not be manifestly contrary to U.S. public policy, whether we consider Monegasque insolvency law generally or the individual misconduct or bad faith alleged here. Thus, recognition should have been granted. Accordingly, we REVERSE.
Black Gold is a Monaco limited liability company. Its sole shareholders are Lorenzo Napoleoni and his wife, Sofia, Italian citizens who reside in Monaco. Mr. Napoleoni is Black Gold's manager and CEO. Black Gold has no other employees, officers, or directors. Until June 2020, Black Gold operated as a trading company and distributor offering oil and lubricant products in Europe, Africa, and Asia. IPAC is a California-based petroleum additive manufacturing and sales company. IPAC is Black Gold's largest creditor; more than 96% of Black Gold's debt is owed to IPAC.
In 2016, Black Gold agreed to be a sales representative and exclusive distributor of IPAC products in Europe. Black Gold had access to sensitive and confidential IPAC information, including IPAC's customer list, the quantity and pricing of IPAC products, and trade secrets for IPAC's products. Black Gold agreed to maintain the confidentiality of IPAC's information and to not provide service or assistance for competing products. Despite the confidentiality agreement, and unbeknownst to IPAC, Mr. Napoleoni and a former IPAC employee established a competing additives business, PXL.
When IPAC discovered PXL's existence and the theft of its trade secrets and customer list, it initiated an arbitration proceeding against Black Gold in California. On May 29, 2019, the arbitrator issued a Final Award to IPAC for $1, 094, 193.58, finding that Black Gold, through Mr. Napoleoni, stole IPAC's trade secrets to formulate, make, market and sell PXL products. Over Black Gold's objection, the California district court confirmed the Final Award and entered Judgment.
IPAC took actions in Monaco and the United States to collect the debt, but those efforts have not borne fruit, and the commencement of the Monegasque Proceeding halted IPAC's collection efforts in Monaco. IPAC has filed a claim in the Monegasque Proceeding, but the outcome appears grim. In California, IPAC pursued a judgment debtor examination of Black Gold, seeking to examine the Napoleonis about the disposition of Black Gold's assets, which IPAC claimed the Napoleonis transferred to themselves to defraud IPAC. The chapter 15 filing prevented the examination from going forward.
In May 2020, Black Gold filed an insolvency proceeding in Monaco. The Monegasque court then entered a judgment commencing the Monegasque Proceeding. It fixed May 29, 2019, as the date of Black Gold's "cessation of payments" (or insolvency date) and appointed Mr. Samba as trustee. Mr. Samba has been a trustee in insolvency proceedings in Monaco since 1983.
The following is an overview of Monaco's insolvency laws, which have been codified in articles 408 to 611 of the Monegasque Commercial Code.[2]Upon entry of the insolvency judgment and commencement of the insolvency proceeding, the Monegasque court fixes the date of the debtor's cessation of payments, which may be no earlier than three years prior to the date of the judgment but may be later modified on request. Id. arts. 414, 455. The fixed date is significant, as it allows the trustee to avoid and recover certain improper transfers or payments made by the debtor after that date. Id. arts. 456, 457. The court appoints a judge specializing in insolvency matters and a trustee. Id. art. 414. The trustee is responsible for administering the case, assisting or representing the debtor, and acting on behalf of creditors. Id. art. 421. The judge is responsible for monitoring the process and oversees the trustee. Id. art. 417. The judge can rule on disputed issues and convene a meeting of creditors to ascertain their position on an issue. Id.
Throughout the proceeding, the trustee has various reporting duties. Initially, the trustee must prepare a report regarding the debtor's finances. Id. art. 438. The trustee later submits a statement of claims against the debtor (discussed below). Id. art. 468. Any transaction or act proposed to be performed by the trustee may be deferred to the judge, with the judge also able to intervene sua sponte. Id. art. 425. If the judge believes it to be appropriate, he or she can replace or remove a trustee. Id. art. 424.
Upon entry of the insolvency judgment, the debtor retains its interests in its property, but essentially cannot act with respect to such property without first obtaining the trustee's consent. Any act by the debtor as to its property without consent is not enforceable. Id. art. 441. Additionally, any actions or proceedings as to the debtor's property, whether being prosecuted or defended by the debtor, may only be pursued by the trustee. Id. The debtor is obligated to assist the trustee with respect to any acts concerning the administration and disposition of the debtor's property. Id. If the debtor does not perform an act necessary to protect its property, the trustee can do so with authorization from the judge. Id. art. 442.
Entry of the insolvency judgment suspends any actions by creditors to enforce or collect a debt against or from the debtor. Id. art. 461. Creditors must submit claims to the trustee, which the trustee verifies. Id. arts. 462, 466, 467. Following verification, the trustee prepares a statement indicating whether the claim is admitted or disputed. Id. art. 468. The judge then issues a decision confirming or denying the trustee's position on each claim. Id. The debtor and creditors have the right to object to the trustee's statement of claims before the court. Id. arts. 470-472. Absent some exception, if a creditor does not submit a claim, the creditor is excluded from the insolvency proceeding and not entitled to receive any distributions made. Id. art. 464.
Once the trustee's statement of claims becomes final and all objections are adjudicated, the court determines whether the insolvency proceeding will proceed with a settlement (reorganization) or a liquidation. Id. arts. 493, 494. If a settlement is ordered, the debtor proposes a debt restructuring settlement with its creditors. Id. arts. 494, 497, 498. If a liquidation is ordered, the debtor is divested of all rights in its property and the trustee is authorized to liquidate the property, without the need to consult or obtain the debtor's consent. Id. arts. 494, 495, 530. Sales of the debtor's property are usually by public auction, but the trustee may, with judicial authorization, sell property by private sale. Id. art. 535.
Creditors are ranked according to their claims' priority rights. Id. art. 533. The trustee then makes distributions in accordance with the priority scheme established under Monegasque law. Id. arts. 540-542. Secured and preferential creditors who are not paid in full are considered unsecured creditors for the outstanding balance of their claims. Id. art. 539. A liquidation proceeding is closed once the claims are paid. Id. art. 547. If due to lack of assets administration cannot continue any further, the court can suspend the liquidation proceeding. Id. art. 544.
In November 2020, Mr. Samba as Foreign Representative filed a chapter 15 petition and motion for recognition on behalf of Black Gold in the California bankruptcy court. He argued that recognition of the Monegasque...
To continue reading
Request your trial