CONCURRENT SESSION Chapter 15 Answers that My Bankruptcy Teacher Never Told Me Ronald J. Silverman, Moderator Hogan Lovells; New York Hon. Leif M. Clark (ret.) San Antonio Hon. Mr. Justice Geoffrey B. Morawetz Superior Court of Justice - Toronto Region; Toronto R. Adam Swick Claudia R. Tobler Paul, Weiss, Rifkind, Wharton & Garrison LLP; Washington, D.C. 2015 Reid Collins & Tsai LLP; Austin, Texas Access circuit court opinion summaries From the Courts to You within 24 Hours! With Volo: • Receive case summaries and view full decisions • Automatically have opinions in your circuit delivered • Search by circuit, case name or topic • Access it free as an ABI member Be the First to Know with Volo volo.abi.org 66 Canal Center Plaza • Suite 600 • Alexandria, VA 22314-1583 • phone: 703.739.0800 • abi.org Join our networks to expand yours: © 2015 American Bankruptcy Institute All Rights Reserved. AMERICAN BANKRUPTCY INSTITUTE 3/2/15 Washington, DC April 2015 SINO-FOREST CORPORATION (SFC): ¨  ¨  ¨  ¨  Canadian public holding company Subsidiaries owned forestry assets mainly located in China Common shares listed on Toronto Stock Exchange $1.8 billion unsecured notes. 1 247 ANNUAL SPRING MEETING 2015 3/2/15 INSOLVENCY ¨  ¨  Muddy Waters Report: June 2011 – SFC is a “near total fraud” and a “Ponzi scheme” SFC obtains Initial Order under CCAA, which includes stay of proceedings against SFC and subsidiaries The black vertical line indicates the date Muddy Waters publicised its report and short position CLASS ACTIONS ¨  ¨  $9.2 billion in damages sought by shareholders and noteholders in proposed class action against SFC, underwriters and auditors Underwriters and auditors claim they are indemnified by SFC 2 248 AMERICAN BANKRUPTCY INSTITUTE 3/2/15 EQUITY CLAIMS ¨  Subordinate to debt claims under CCAA ¨  SFC sought declaration that: •  •  shareholder claims are equity claims auditor and underwriter indemnity claims against SFC, stemming from the shareholder claims, are equity claims EQUITY CLAIMS – AS DEFINED IN S.2 OF THE CCAA ¨  “equity claim” means a claim that is in respect of an equity interest, including a claim for, among others, … d)  e)  ¨  a monetary loss resulting from the ownership, purchase or sale of an equity interest or from the rescission… of a purchase or sale of an equity interest, or contribution or indemnity in respect of a claim referred to in … paragraphs (a) to (d); “equity interest” means … a share in the company … 3 249 ANNUAL SPRING MEETING 2015 3/2/15 THIRD PARTY RELEASE & RECOGNITION ¨  ¨  $117 million settlement proposed between Ernst & Young and class action claimants Conditional on: •  Third-party releases which preclude any right to contribution or indemnity against E&Y. •  Chapter 15 recognition order in United States ú  Granted in Ontario ú  Granted in United Sates Bankruptcy Court for the Southern District of New York, 4 250 4/9/15 SCOPE OF SECTION 1521(a)(7) Context •  Recogni.on and Relief Automa.cally Available upon Recogni.on •  Sec.on 1520(a): “Upon recogni.on of a foreign proceeding that is a foreign main proceeding…” •  361 and 362 •  363, 549, and 552 SCOPE OF SECTION 1517(A)(7) Addi+onal Relief •  Sec.on 1521(a): •  “Upon recogni.on of a foreign proceeding, whether main or nonmain . . . ” •  “The court may, at the request of the foreign representa4ve, grant appropriate relief, including— •  (1)-‐(3) stays •  (4) discovery •  (5) entrus.ng the administra.on or realiza.on of US assets •  (6) extending provisional relief . . . AND 1 4/9/15 SCOPE OF SECTION 1517(a)(7) (7) “gran.ng any addi.onal relief that may be available to a trustee, except for relief available under sec.ons 522, 544, 545, 547, 548, 550, and 724(a)” •  Does “any” really mean any? •  Sec.on 103’s impact SCOPE OF SECTION 1517(a)(7) Case Law Examples •  In re Condor, 601 F.3d 319 (5th Cir. 2010) •  Foreign avoidance law •  In re AJW Oﬀshore, Ltd., 488 B.R. 551 (Bankr. E.D.N.Y. 2013) •  Turnover under Sec.on 542(e) •  In re Fairﬁeld Sentry Ltd., 452 B.R. 52 (Bankr. S.D.N.Y. 2011) •  Sec.on 108 (not really addi.onal relief) 2 4/9/15 SCOPE OF SECTION 1517(a)(7) Limita+ons •  Statutory •  Sec.on 1521(a): relief may be granted “where necessary to eﬀectuate the purpose of this chapter and to protect the assets of the debtor or the interests of the creditors” •  Sec.on 1522(a): relief under Sec.on 1521 may be granted, modiﬁed, or terminated “only if the interests of the creditors and other interested en..es . . . are suﬃciently protected” •  Sec.on 1522(b): “The court may subject relief granted under sec.on . . . 1521 . . . To condi.ons it considers appropriate, including the giving of security or ﬁling of a bond.” •  Court’s power is broad and discre.onary, as opposed to with recogni.on 3 AMERICAN BANKRUPTCY INSTITUTE 251 ANNUAL SPRING MEETING 2015 252 AMERICAN BANKRUPTCY INSTITUTE 253 ANNUAL SPRING MEETING 2015 254 AMERICAN BANKRUPTCY INSTITUTE 255 ANNUAL SPRING MEETING 2015 256 AMERICAN BANKRUPTCY INSTITUTE 257 ANNUAL SPRING MEETING 2015 258 AMERICAN BANKRUPTCY INSTITUTE 259 ANNUAL SPRING MEETING 2015 260 AMERICAN BANKRUPTCY INSTITUTE 261 ANNUAL SPRING MEETING 2015 262 AMERICAN BANKRUPTCY INSTITUTE 263 ANNUAL SPRING MEETING 2015 264 AMERICAN BANKRUPTCY INSTITUTE 265 ANNUAL SPRING MEETING 2015 266 AMERICAN BANKRUPTCY INSTITUTE 267 ANNUAL SPRING MEETING 2015 268 AMERICAN BANKRUPTCY INSTITUTE 269 ANNUAL SPRING MEETING 2015 270 AMERICAN BANKRUPTCY INSTITUTE 271 ANNUAL SPRING MEETING 2015 272 AMERICAN BANKRUPTCY INSTITUTE 273 ANNUAL SPRING MEETING 2015 274 AMERICAN BANKRUPTCY INSTITUTE 275