In 2005, the United States adopted the Model Law on Cross-Border Insolvency, promulgated by the United Nations Commission on Internal Trade, under chapter 15 of the United States Bankruptcy Code. In so adopting, Congress intended chapter 15 “to be the exclusive door to ancillary assistance to foreign proceedings.” H.R.Rep. No. 109–31, at 110–11 (2005). Notwithstanding the express congressional intent, not all courts have required chapter 15 relief as a prerequisite to seeking relief in a pending civil litigation against a debtor. Two district court decisions highlight the divergent views.
First, in HFOTCO LLC v. Zenia Special Maritime Enterprise, the United States District Court for the Southern District of Texas (the “HFOTCO Court”), denied a motion for summary judgment seeking dismissal, based on German insolvency law, of all claims against a debtor that had a pending insolvency proceeding in Germany. Following the majority view, the HFOTCO Court found that it is powerless to afford comity to the movant because its insolvency proceeding had not been formally recognized under chapter 15.
Second, in David Moyal v. Münsterland Gruppe GmbH & Co. KG (the “New York Action”) the United States District Court of the Southern District of New York (the “Moyal Court”) dismissed a lawsuit against a German debtor, Münsterland Gruppe GmbH & Co. KG (“MGKG”), based on the pendency of its insolvency proceeding and the application of German law. The Moyal Court applied an outdated ad hoc comity analysis and summarily rejected as “absurd” the need for recognition under chapter 15. And, by implication, treated chapter 15 as a kind of discretionary alternative to general comity.Continue reading “Don’t Ignore Bankruptcy Code’s Chapter 15 in Civil Actions; It Ends the Unpredictable Ad Hoc Comity Analysis”