Invoking Second Circuit authority, a magistrate judge in New York dismissed a suit against a German company undergoing insolvency proceedings in Germany, as a matter of comity. The opinion is authority for the proposition that a foreign liquidator can stop lawsuits in the U.S. without obtaining recognition under chapter 15.
A plaintiff sued a German company in a New York state court for breach of a distribution agreement. The German company removed the suit to federal court. Represented there by U.S. counsel, the German company consented to the entry of an order finding liability.
The German company said it conceded liability because it lacked the resources to defend itself in the U.S. or in Germany if the plaintiff sought to enforce a U.S. judgment.
The district judge referred the case to Magistrate Judge Stewart D. Aaron to determine damages. The parties consented to allowing Judge Aaron to enter final judgment.
Before proceedings on damages before Judge Aaron, the German company initiated insolvency proceedings in Germany, resulting in the appointment of an insolvency administrator. The insolvency proceedings stayed legal actions in Germany.
U.S. counsel for the German defendant then filed a motion to be relieved as counsel and either to stay or dismiss the suit. Counsel explained that he had been advised by the insolvency administrator that his authority to act on behalf of the defendant terminated on commencement of insolvency proceedings.
The plaintiff opposed the motions but lost in a May 17 opinion by Judge Aaron.
The “mere existence” of a parallel proceeding abroad does not override the district court’s “virtually unflagging obligation” to exercise jurisdiction, Judge Aaron said, quoting the Second Circuit in Royal & Sun Alliance Ins. Co. of Canada v. Century Int’l Arms. Inc., 466 F.3d 88, 92 (2d Cir. 2006). However, he went on to say, “Foreign bankruptcy proceedings . . . generally are an exception to this rule.”
Again quoting Royal & Sun, Judge Aaron said that a foreign country’s interest in an equitable and orderly distribution “is an interest deserving of particular respect and deference.” Id. at 92-93.
Deference “is appropriate,” Judge Aaron said, “where ‘the foreign proceedings are procedurally fair and . . . do not contravene the laws or public policy of the United States.’ JP Morgan Chase Bank v. Altos Hornos de Mexico. S.A. de C.V., 412 F.3d 418, 424 (2d Cir. 2005).”
Judge Aaron recognized that the party seeking to invoke comity carries the burden. In successfully shouldering that burden, he recited how the German company had demonstrated that “the German insolvency proceedings are procedurally fair and do not contravene the laws or public policy of the United States.” He noted that Germany imposes a stay and shares a policy with the U.S. of equal distribution of assets, giving no preference to German creditors.
The defendant argued that the German company’s U.S. counsel lacked authority to file the motion to dismiss or stay. Judge Aaron said that objection was “meritless” because the attorney was the German company’s counsel of record when the motion was filed.
Judge Aaron dismissed the suit and granted the motion to withdraw because the attorney “no longer has authority to act on behalf of” the defendant.
Invoking Second Circuit authority, a magistrate judge in New York dismissed a suit against a German company undergoing insolvency proceedings in Germany, as a matter of comity. The opinion is authority for the proposition that a foreign liquidator can stop lawsuits in the U.S. without obtaining recognition under chapter 15.
A plaintiff sued a German company in a New York state court for breach of a distribution agreement. The German company removed the suit to federal court. Represented there by U.S. counsel, the German company consented to the entry of an order finding liability.
The German company said it conceded liability because it lacked the resources to defend itself in the U.S. or in Germany if the plaintiff sought to enforce a U.S. judgment.
The district judge referred the case to Magistrate Judge Stewart D. Aaron to determine damages. The parties consented to allowing Judge Aaron to enter final judgment.
Before proceedings on damages before Judge Aaron, the German company initiated insolvency proceedings in Germany, resulting in the appointment of an insolvency administrator. The insolvency proceedings stayed legal actions in Germany.
U.S. counsel for the German defendant then filed a motion to be relieved as counsel and either to stay or dismiss the suit. Counsel explained that he had been advised by the insolvency administrator that his authority to act on behalf of the defendant terminated on commencement of insolvency proceedings.
The plaintiff opposed the motions but lost in a May 17 opinion by Judge Aaron.