Zhejiang Topoint Photovoltaic Co. v. Zhi Chen (In re Zhejiang Topoint Photovoltaic Co.)

• Citation: 600 B.R. 312
• Decision Date: 02 April 2019
• Docket Number: Case No. 14-24549 (JNP),Adv. Pro. No. 16-01873
• Parties: IN RE: ZHEJIANG TOPOINT PHOTOVOLTAIC CO., LTD., Debtor. Zhejiang Topoint Photovoltaic Co., Ltd., Plaintiff, v. Zhi Chen and Henghe North American, Inc., Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

600 B.R. 312

IN RE: ZHEJIANG TOPOINT PHOTOVOLTAIC CO., LTD., Debtor.Zhejiang Topoint Photovoltaic Co., Ltd., Plaintiff,

v.Zhi Chen and Henghe North American, Inc., Defendants.

Case No. 14-24549 (JNP)

Adv. Pro. No. 16-01873

United States Bankruptcy Court, D. New Jersey.

Signed April 2, 2019

Theodore Geiger, The Law Office of Theodore Geiger, PLLC, Jonathan Proman, Jonathan M. Proman, Esq., New York, NY, Jiangang Ou, Nguyen & Chen, LLP, Houston, TX, for Plaintiff.

David H. Stein, Wilentz, Goldman & Spitzer, P.A., Woodbridge, NJ, Christian R. Oehm, Lindgren, Lindgren, Oehm & You, LLP, Edison, NJ, for Defendants.

MEMORANDUM DECISION

JERROLD N. POSLUSNY, JR., U.S. Bankruptcy Judge

Before the Court is the motion (the "Motion") filed by Zhi Chen ("Chen") and Henghe North American, Inc. (collectively, the "Defendants") for reconsideration of its previous motion to dismiss the complaint ("Complaint") filed by the foreign liquidators of Zhejiang Topoint Photovoltaic Co., Ltd. ("Topoint"). Although filed as a motion for reconsideration, the grounds for relief cited in the Motion are entirely new. The Motion argues this Court lacks subject matter jurisdiction over the Chapter 15 case, and therefore, the adversary proceeding, because the liquidation proceeding in China ("Foreign Main Proceeding") has concluded. As such, the Court treats this as a motion to dismiss the Chapter 15 case for lack of subject matter jurisdiction. For the reasons discussed below, the Motion is Denied.

I. Background

Topoint filed a Chapter 15 petition for recognition of the Foreign Main Proceeding on July 16, 2014. Case No, 14-24549 (the "Main Case") Dkt. No. 1. This Court issued an order recognizing the Foreign Main Proceeding on August 12, 2014 (the "Recognition Order"). Main Case Dkt. No. 37. Two years later, Topoint filed the Complaint against the Defendants for conversion, turnover, unjust enrichment, as well as a claim for breach of fiduciary duty against Chen only, Dkt. No. 1. The Defendants filed a motion to dismiss arguing that the Complaint failed to state a claim upon which relief could be granted, and that the Court lacked subject matter jurisdiction, or in the alternative, that the Court should abstain from exercising its jurisdiction. Dkt. No. 4. The Court issued an opinion and order ("Previous Decision") which granted the motion to dismiss, in part, and denied it, in part. Dkt. Nos. 20 and 21. Specifically, the Court denied the motion to dismiss as to the claim for unjust enrichment, but dismissed the claims for turnover, conversion and breach of fiduciary for failure to state a claim but allowed Topoint twenty-one days to file an amended complaint as to the claims for conversion and breach of fiduciary duty. The Defendants then filed this Motion. Dkt. No. 24.¹

The Motion states that the Defendants have received new evidence that the Foreign Main Proceeding concluded on October 14, 2014, and is now closed. Dkt. No. 24. Attached to the Motion is a certification by Chen, with translated documents from the court in China including a copy of Topoint's plan of reorganization ("Plan"), as well as a copy of the order approving the Plan. Id. According to Chen's translation, these documents show that Topoint's reorganization was concluded by order of the Foreign Court. Id. Additionally, the Motion states that the implementation and supervisory periods for the Plan have expired and that the foreign administrator has been discharged and his term complete. Id. at 10. The Motion further states that in 2016, Topoint was dissolved, and a new "Topoint" emerged, with a new corporate form, representatives and shareholders. See id. Each of these allegations is alleged either directly in the certification submitted by Chen or in his translation of the court documents attached to the Motion. Because of these changes, the Defendants argue that this Court now lacks subject matter jurisdiction and that Topoint lacks the standing to bring the Complaint. Id.

Topoint filed opposition (the "Opposition") arguing that the Motion fails to meet the standards under Federal Rule of Bankruptcy Procedure 9023 and that the Court still has subject matter jurisdiction given the status of the Foreign Main Proceeding. Dkt. No. 30. Attached to the Opposition is a stamped certification (the "Certification"), purportedly from the court in China dated January 16, 2018, translated by Shanghai Lawtone Trans Co., Ltd.; and a certification by Jiangang Ou ("Ou"), stating that he is the authorized signatory for the foreign representative of Topoint. Id. The translated Certification states that "Topoint was ... authorized ... by this Court to pursue ... ‘overseas assets’ ...." Id. Further that the disposition of recovered assets was still subject to the Foreign Court's jurisdiction. Id. The Ou certification states that these orders are still in full force and effect. Id.

The Defendants' reply reiterates the arguments presented in the Motion and includes additional arguments that the Certification presented by Topoint is improper under Federal Rule of Evidence 804 and New Jersey Rule of Evidence 902 ; and may have been procured on an ex parte basis. Additionally, the Defendants' reply argues that Topoint has failed to provide this Court with updates related to the Foreign Main Proceeding and should be dismissed under the public policy exception of section 1506 of the Bankruptcy Code. Finally, the reply argues that adjudication of this case would not sufficiently protect the interest of creditors in the United States as required by section 1521 of the Bankruptcy Code. Dkt. No. 33.

At a hearing on February 20, 2018 ("February Hearing"), the Court determined that although couched as a motion for reconsideration, the Motion should be considered as a motion to dismiss for lack of subject matter jurisdiction, February Hrg. at 3:20. The Court further determined that evidence and witness testimony would be required instead of competing certifications and scheduled an evidentiary hearing for August 8, 2018 ("August Hearing"). Id. At the August Hearing however, Topoint's witness was not present and the Court granted a motion to adjourn. Additionally, the Court discussed with the parties alternative options it was considering under section 1525 of the Bankruptcy Code to determine the status of the Foreign Main Proceeding. August Hrg. at 10:23. These options were to either communicate directly with the court in China handling the Foreign Main Proceeding (the "Foreign Court") by sending a letter inquiring into the status of the Foreign Main Proceeding, or to have the parties seek clarification of the Foreign Main Proceeding's status via filing motions before the Foreign Court. Id. The Court explained it was considering these options due to the conflicting certifications submitted by the parties, the likelihood that testimony would not be helpful to determining the Motion and the questions surrounding the admissibility of some of the documents submitted to the Court. Id. The Court also felt this action was necessary because many of the documents submitted by the parties required translation from Mandarin to English. The Court allowed the parties time to confer regarding the of filing joint or individual motions in the Foreign Court and to file any responses they may have to the Court communicating directly with the Foreign Court. Dkt. No. 35.

Topoint consented to the Court's communication with the Foreign Court, Dkt. No. 39. The Defendants also consented and further stated that "Defendants will not be participating in any extra-territorial motion practice, as Defendants have no objection to, and indeed prefer, that Your Honor initiate contact pursuant to 11 U.S.C. § 1525(b), in lieu of motions being filed in China ...." Dkt. No. 40. However, the Defendants objected to the Plaintiff's request to "provide input regarding the wording of communications among courts." Id. Additionally, the Defendants noted that the Court may not have the authority to contact the Foreign Court, as Article 23 of the Civil Procedure Law of the People's Republic of China ("Article 23") requires any requests for judicial assistance to be through diplomatic channels. Specifically, the law provides that no foreign organization or individual may "serve documents or make investigations and collect evidence within the territory of... China." Id.

The Court found it did have authority to contact the Foreign Court pursuant to section 1525 of the Bankruptcy Code and permitted both parties input before sending a letter ("Letter"), written in English with a Mandarin translation, to the Foreign Court. Dkt. Nos. 53 and 60. As further discussed below, the Letter inquired as to the current status of the Foreign Main Proceeding and the entity, Topoint, Dkt. No. 60. The Foreign Court replied with a letter ("Reply Letter"), stating that although the case was closed, it was still supervising Topoint's execution of the Plan. Dkt. No. 62.

The Court published the Reply Letter on the Docket on February 19, 2019 and allowed the parties until March 12 to review and file any further responses. Topoint filed a response on March 12, arguing that the Reply Letter established that this Court continues to have jurisdiction. Dkt. No. 63. The Defendants filed a late response on March 20, which response attempted to introduce another order purportedly from the Foreign Court. Dkt. No. 64.

II. Jurisdiction

This Court has jurisdiction under 28 U.S.C. §§ 157(b)(1) and 1334(b). Venue is proper in this Court under 28 U.S.C. § 1410. This is a core proceeding under 28 U.S.C. § 157(b)(2)(P). The following constitutes the Court's findings of fact and conclusions of law as required by Fed. R. Bankr. P. 7052.

III. Discussion

The Motion argues the Court lacks subject matter jurisdiction over the Main Case because the Foreign Main Proceeding is now closed.² Dkt. No. 24. Although the Motion was filed in the adversary proceeding it in fact challenges the Court's jurisdiction over the...