In the Wayne Burt appeal, the Third Circuit vacated the District Court’ s order finding that although there was a parallel proceeding, the District Court failed to apply the four-part test to consider the fairness of the parallel proceeding.
The Chapter 15 Case On remand to the District Court, Wayne Burt’ s liquidator renewed his motion to dismiss. Following his renewed motion, protracted discovery ensued, delaying a District Court ruling on comity.
Additionally, during the pendency of the appeal, Wayne Burt’ s liquidator commenced an action in Singapore seeking that Vertiv turn over certain stock in Cetex Petrochemicals Ltd. that Wayne Burt pledged as security for a loan from Vertiv( the“ Singapore Turnover Litigation”). Wayne Burt’ s liquidator contended that the pledge was void against the liquidator. Vertiv did not appear in the Singapore proceedings and the High Court of Singapore entered an order requiring the turnover of the shares( the“ Singapore Turnover Order”).
As a result, Wayne Burt’ s liquidator shifted his strategy to obtain broader relief than what adjudicatory comity could afford in the pending U. S. litigation— recognition and enforcement of the Singapore Turnover Order. The only way to accomplish both the goal of dismissal of the U. S. litigation and enforcement of the Singapore Turnover Order is through a Chapter 15 proceeding.
On October 8, 2024, Wayne Burt’ s liquidator commenced the Chapter 15 case( the“ Chapter 15 Case”) by filing a petition along with the Motion for Recognition of Foreign Proceedings and Motion to Compel Turnover of Cetex Shares( the“ Motion”). Vertiv opposed the Motion, contending that, under the new test laid out by the Third Circuit, the Singapore Liquidation Proceeding should not be considered the main proceeding because it may harm Vertiv. 10 Vertiv further contended that even if the Singapore Liquidation Proceeding was considered the main proceeding, the Bankruptcy Court should not“ blindly” enforce the Singapore Turnover Order and should itself review the transaction to the extent it impacts assets in the United States. 11
Less than two months after the Chapter 15 Case was commenced, the Bankruptcy Court overruled Vertiv’ s objection, finding that recognition and enforcement of a turnover action was appropriate. 12 In so ruling, the
Bankruptcy Court applied the new adjudicatory comity requirements set forth by the Third Circuit, in addition to Chapter 15 requirements.
The Bankruptcy Court began its analysis with finding that recognition and enforcement of the Singapore Turnover Order is appropriate under 11 U. S. C. §§ 1521 and 1507. Under Section 1521, upon recognition of a foreign proceeding, a bankruptcy court may grant any additional relief that may be available to a U. S. trustee( with limited exceptions) where necessary to effectuate the purposes of Chapter 15 and to protect the assets of the debtor or the interests of creditors. Courts have exceedingly broad discretion in determining what additional relief may be granted. Here, the Bankruptcy Court found that the Singapore insolvency system was sufficiently similar to the United States bankruptcy process.
Under Section 1507, a court may provide additional assistance in aid of a foreign proceeding as along as the court considers whether such assistance is consistent with principles of comity and will reasonably assure the fair treatment of creditors, protect claim holders in the United States from prejudice in the foreign proceeding, prevent preferential or fraudulent disposition of estate property, and distribution of proceeds occurs substantially in accordance with the order under U. S. bankruptcy law. Here, the Bankruptcy Court found that the Singapore Turnover Litigation was an effort to marshal an asset of the Wayne Burt insolvency estate for the benefit of all of Wayne Burt’ s creditors and that enforcement of the Singapore Turnover Order specifically would allow for the equal treatment of all of Wayne Burt’ s creditors.
Finally, the Bankruptcy Court found that recognition and enforcement of the Singapore Turnover Order was appropriate under the Third Circuit’ s comity analysis. Specifically, the Bankruptcy Court found that the Singapore Turnover Litigation is parallel to the Motion, relying on the facts that:( 1) Wayne Burt is a debtor in a foreign insolvency proceeding before a duly authorized tribunal, the Singapore High Court,( 2) Vertiv has not challenged the Singapore High Court’ s jurisdiction over the Singapore Liquidation Proceeding, and( 3) the outcome of the Bankruptcy Court’ s ruling would have a direct impact on the estate within the Singapore Liquidation Proceeding as it relates to ownership of the Cetex shares. The Bankruptcy Court concluded that the Singapore Liquidation Proceeding and the Chapter 15 Case are parallel.
( continued on page 15)
MAINBRACE • 14