United States District Court, D. Maryland
WEBB MASON, INC. Plaintiff,
VIDEO PLUS PRINT SOLUTIONS, INC. Defendant.
L. Hollander United States District Judge
October 13, 2017, plaintiff Webb Mason, Inc. ("Webb
Mason") filed suit against defendant Video Plus Print
Solutions, Inc. ("VPP"). Webb Mason brings a claim
of breach of contract against VPP, alleging a violation of
the non-interference clause in the parties' preferred
partnership agreement. ECF 1 ("Complaint").
October 23, 2018, VPP, a Canadian limited liability company,
filed for bankruptcy in Ontario, Canada (ECF 29-1,
"Notice of Bankruptcy") and notified the Court of
the bankruptcy. ECF 27. The next day, I held a scheduling
conference with counsel for both sides. See Docket.
During the conference, I requested memoranda from the parties
addressing whether this case is subject to an automatic stay
as a result of VPP's bankruptcy filing in Canada.
October 30, 2018, Webb Mason filed a memorandum in opposition
to a stay. ECF 28. Thereafter, on November 13, 2018, VPP
submitted its memorandum (ECF 29), seeking a stay. VPP also
filed exhibits (ECF 29-1) and a memorandum from Michael
Baigel of Baigel Corp (ECF 29-2). Baigel Corp is the trustee
of the bankrupt estate of VPP. Webb Mason replied on November
19, 2018. ECF 30.
hearing is necessary to resolve the dispute. Local Rule
2005, Congress enacted Chapter 15 of the Bankruptcy Code to
"provide effective mechanisms for dealing with cases of
cross-border insolvency." 11 U.S.C. § 1501(a). It
authorizes "the representative of a foreign insolvency
proceeding to commence a case in a U.S. bankruptcy court by
filing a petition for recognition of the foreign
proceeding." Jaffe v. Samsung Ekes. Co., 737
F.3d 14, 24 (4th Cir. 2013) (citing 11 U.S.C. §§
1504, 1509(a), 1515). If the foreign representative's
petition meets the requirements listed in §1517, the
court must grant "recognition" to the foreign
proceeding. 11 U.S.C. § 1517. Further, the court must
recognize the foreign proceeding as "a foreign main
proceeding" if it is "pending in the country where
the debtor has the center of its main interests."
Id. § 1517(b)(1); see also Id. §
1502(4). In such cases, the representative of the foreign
proceeding is entitled to an automatic stay under § 362.
See Id. § 1520(a)(1).
In re Bear Stearns High-Grade Structured Credit
Strategies Master Fund, Ltd., 389 B.R. 325 (S.D.N.Y.
2008), the district court said, id. at 333 (internal
Recognition turns on the strict application of objective
criteria. Conversely, relief is largely discretionary and
turns on subjective factors that embody principles of comity.
If recognition is refused, then the bankruptcy court is
authorized to take any action necessary to prevent the U.S.
courts from granting comity or cooperation to the foreign
Requiring recognition as a condition to nearly all court
access and consequently as a condition to granting comity
distinguishes Chapter 15 from its predecessor section 304.
Prior to the enactment of Chapter 15, access to the United
States courts by a foreign representative was not dependent
on recognition; rather, all relief under section 304 was
discretionary and based on subjective, comity-influenced
factors. By establishing a simple, objective eligibility
requirement for recognition, Chapter 15 promotes
predictability and reliability. The considerations for
post-recognition relief remain flexible and pragmatic in
order to foster comity and cooperation in appropriate cases.
The objective criteria for recognition reflect the
legislative decision by UNCITRAL [United Nations Commission
on International Trade Law] and Congress that a foreign
proceeding should not be entitled direct access to or
assistance from the host country courts unless the debtor had
a sufficient pre-petition economic presence in the country of
the foreign proceeding. If the debtor does not have its
center of main interests or at least an establishment in the
country of the foreign proceedings, the bankruptcy court
should not grant recognition and is not authorized to use its
power to effectuate the purposes of the foreign proceeding.
Implicitly, in such an instance the debtor's liquidation
or reorganization should be taking place in a country other
than the one in which the foreign proceeding was filed to be
entitled to assistance from the United States.
Both the plain language and legislative history of Chapter 15
thus requires a factual determination with respect to
recognition before principles of comity come into play.
Mason maintains that VPP has not filed a Chapter 15 petition
and therefore is not entitled to an automatic stay pursuant
to § 362. Conversely, VPP contends that Chapter 15 does
not expressly state that filing a petition with the
bankruptcy court is necessary for obtaining a stay. ECF 29 at
5-6. Further, VPP maintains that principles of comity warrant
the stay of the case.
support of its argument, VPP relies almost entirely on §
304, which was repealed in 2005 with the enactment of Chapter
15, as well as case law that predates Chapter 15. VPP cites
only two cases decided after 2005: In re Agrokor
d.d,591 B.R. 163 (Bankr. S.D.N.Y. 2018) and In re
Atlas Shipping A/S,404 B.R. 726 (Bankr. S.D.N.Y. 2009).
Both are cited to support the claim that "many of the
principles and processes underlying section 304 remain in
effect under chapter 15." ECF 29 at 4-5 (citing