Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-01754/USCOURTS-ca8-04-01754-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-1754

___________

In re: National Warranty Insurance Risk *

Retention Group, doing business as *

National Warranty Insurance Company *

and National Warranty Insurance Group, *

*

Debtor. *

________________________________ *

*

Phyllis Hoffman, *

 *

Appellant, * Appeal from the United States 

 * Bankruptcy Appellate Panel 

v. * for the Eighth Circuit

 *

Theo Bullmore; Simon Whicker, *

as Joint Official Liquidators, *

 *

Appellees. *

___________

Submitted: August 26, 2004

Filed: September 24, 2004

___________

Before BYE, LAY, and RILEY, Circuit Judges.

___________

BYE, Circuit Judge.

Phyllis Hoffman appeals from the decision of the United States Bankruptcy

Appellate Panel for the Eighth Circuit affirming the injunction of the United States

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The Honorable Timothy J. Mahoney, Bankruptcy Judge, United States

Bankruptcy Court for the District of Nebraska.

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Bankruptcy Court for the District of Nebraska.1

 Ms. Hoffman was one of

approximately 950,000 buyers who hold a Vehicle Service Contract (“VSC”)

guaranteed by National Warranty Insurance Group (“National Warranty”). National

Warranty, a Cayman Islands corporation, operated a risk retention group insuring

group members who were obligated to contract holders that had purchased VSCs

from those group members. National Warranty’s primary place of business was

Lincoln, Nebraska and all of its business and assets were located within the United

States. Following a series of incidents where group members refused to allow their

reserve accounts to be used to pay claims, Ms. Hoffman initiated a lawsuit against

National Warranty, which she hoped to convert into a class action. National

Warranty then transferred 24 million dollars out of bank accounts within the United

States to bank accounts located in the Cayman Islands and filed for liquidation under

Cayman law. National Warranty’s liquidators, Theo Bullmore and Simon Whicker,

filed a petition under 11 U.S.C. § 304 seeking an injunction to stop all proceedings

against the assets involved in the Cayman Island liquidation. Ms. Hoffman, on behalf

of herself and others similarly situated, filed an objection to the requested § 304

relief. After conducting a trial on the merits of the injunction, the bankruptcy court

granted the requested § 304 relief. The bankruptcy appellate panel affirmed the

decision of the bankruptcy court. We affirm the decision of the bankruptcy appellate

panel.

I

We incorporate the background set forth in the opinion of the bankruptcy

appellate panel. See In re Nat'l Warranty Ins. Risk Retention Group, 306 B.R. 614,

617-19 (B.A.P. 8th Cir. 2004).

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II

The parties raise numerous issues on appeal, but we agree with the bankruptcy

appellate panel there are three main issues: whether the bankruptcy court had

jurisdiction over the matter; whether injunctive relief was appropriate; and whether

the injunction was too broad. There is also a secondary issue involving the

bankruptcy court’s denial of discovery. We now set out to answer each question.

The first question before us is whether the bankruptcy appellate panel erred in

upholding the bankruptcy court’s decision to exercise ancillary jurisdiction over the

present matter. Congress expressly granted ancillary jurisdiction to bankruptcy courts

to act as local auxiliaries to a foreign bankruptcy proceeding to honor requests from

foreign representatives for the turnover of assets, injunctions and other such requested

relief. See 11 U.S.C. § 304 (2004). Ancillary jurisdiction is triggered by a foreign

representative filing a petition showing the commencement of a foreign proceeding.

 Id. Ms. Hoffman challenges the bankruptcy court’s finding the Cayman Islands

liquidation was a “foreign proceeding.” As this challenge implicates the bankruptcy

court’s jurisdiction, we review the matter de novo. Gilbert v. Monsanto Co., 216 F.3d

695, 699 (8th Cir. 2000). 

The Bankruptcy Code defines the term “foreign proceeding” as: 

a proceeding, whether judicial or administrative and whether or not

under bankruptcy law, in a foreign country in which the debtor's

domicile, residence, principal place of business, or principal assets were

located at the commencement of such proceeding, for the purpose of

liquidating an estate, adjusting debts by composition, extension, or

discharge, or effecting a reorganization.

11 U.S.C. § 101(23). The bankruptcy court found the Cayman Islands proceeding

was a foreign proceeding in National Warranty’s domicile for the purpose of winding

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up and liquidating the corporation. On appeal, the major point of contention is the

meaning of the term “domicile.” The bankruptcy court found, and the bankruptcy

appellate panel agreed, the Cayman Islands is National Warranty’s domicile because

it is its place of incorporation. Ms. Hoffman contends, as a matter of law, the term

“domicile” as used in § 304 applies only to natural-person debtors because corporate

debtors are not generally deemed to have a “domicile.” We reject this argument. 

The meaning of the term “domicile” and the term’s application to corporate

debtors is well-settled. For years, federal courts interpreting jurisdictional and venue

issues have considered a corporation’s domicile to be its place of incorporation. See,

e.g., United States v. Orshek, 164 F.2d 741, 742 (8th Cir. 1947) (“[A] corporation has

its home, residence, domicile and citizenship where it was originally incorporated and

not elsewhere, regardless of where its principal place of business may be located.”).

Ms. Hoffman argues that jurisdiction and venue cases are inapplicable to bankruptcy

proceedings. However, even within the legal discipline of bankruptcy, a

corporation’s domicile is the place of incorporation. See, e.g., In re Rimsat, Ltd., 98

F.3d 956, 960 (7th Cir. 1996) (citing Bank of Augusta v. Earle, 38 U.S. 519, 588

(1839) (a corporation “must dwell in the place of its creation”)). Moreover, we can

think of no reason to distinguish domicile in jurisdiction cases from domicile in

bankruptcy cases involving § 304. We thus conclude the term “domicile” as used in

§ 304 refers to a corporation’s place of incorporation.

Next, Ms. Hoffman challenges the appropriateness of injunctive relief and the

proper of scope of the injunction. We review the appropriateness of and scope of

injunctive relief for an abuse of discretion. “An abuse of discretion occurs when a

relevant factor that should have been given significant weight is not considered, when

an irrelevant or improper factor is considered and given significant weight, or when

all proper and no improper factors are considered, but the court in weighing those

factors commits a clear error of judgment.” United States v. McNeil, 90 F.3d 298,

300-01 (8th Cir. 1996). A “court's decision will not be disturbed as long as it is

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within the range of discretion afforded to a given determination and is not influenced

by a mistake of law.” Id.

The prospect of obtaining injunctive relief is one reason for filing a petition

under § 304. Section 304(c) provides a list of factors to guide the court in the

determination of whether to grant § 304 relief. These factors are:

(1) just treatment of all holders of claims against or interests in such

estate; 

(2) protection of claim holders in the United States against prejudice

and inconvenience in the processing of claims in such foreign

proceeding;

(3) prevention of preferential or fraudulent dispositions of property

of such estate; 

(4) distribution of proceeds of such estate substantially in accordance

with the order prescribed by this title; 

(5) comity; and

(6) if appropriate, the provision of an opportunity for a fresh start for

the individual that such a foreign proceeding concerns.

We conclude the bankruptcy court properly evaluated the above factors and did

not abuse its discretion in granting injunctive relief. Ms. Hoffman essentially wants

to reargue her case by focusing on the “just treatment of all holders of claims” factor.

Ms. Hoffman argues the Cayman proceeding is not only inconvenient, the proceeding

completely eliminates the rights of American consumers because the Liquidators in

the Cayman Islands currently do not recognize the VSC holders as legitimate

claimants as they hold unliquidated claims. However, as the bankruptcy court found,

Cayman law provides each VSC holder with sufficient opportunity to liquidate their

claim. A class action is unlikely under Cayman law, so each claimant must liquidate

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their claim individually. Liquidating individually may be inconvenient, but we agree

with the bankruptcy court, Cayman law is capable of justly treating all claimants. 

As to the other factors, the bankruptcy court focused on the comity factor

stating it respects our sister common law jurisdiction in the Cayman Islands.

Utilizing the testimony of a highly respected barrister from England, the bankruptcy

court concluded the liquidators have the duty and ability to act impartially and

evenhandedly among the different competing interests. The bankruptcy court noted

the Cayman Companies Law was similar to but not exactly the same as the

Bankruptcy Code. All ordinary unsecured creditors are treated the same and local

creditors do not have preference over foreign creditors. Companies Law provides for

the prevention of fraudulent transfers if the payment is made with an improper

motive. The bankruptcy appellate panel also conducted a thorough review of the

bankruptcy court’s analysis concluding the decision was not clearly erroneous. We

find the bankruptcy appellate panel did not abuse its discretion in doing so.

Ms. Hoffman further challenges the broad scope of the injunction.

Specifically, Ms. Hoffman contends the bankruptcy court’s order impermissibly

prohibits discovery by third party non-debtors and disallows a class action to proceed

within the United States where the litigants can more cost effectively pursue their

claims. However, as the bankruptcy appellate panel concluded, the bankruptcy court

did not commit an abuse of discretion by fashioning a broad injunction. Other courts

reviewing the scope of an injunction pursuant to § 304 have determined the court is

free to mold appropriate relief in near “blank check” fashion. In re Culmer, 25 B.R.

621, 624 (Bankr. S.D.N.Y. 1982) (citing H.R. Rep. No. 95-595, 95th Cong., 1st Sess.

324-25 (1977); S. Rep. No. 95-989, 95th Cong., 2d Sess. 35 (1978), U.S.C.C.A.N.

1978, p. 5787). The bankruptcy appellate panel correctly analogized a § 304

injunction to the automatic stay common in nearly all bankruptcy cases. In re Banco

Nacional de Obras y Servicios Publicos, S.N.C., 91 B.R. 661, 664 (Bankr. S.D.N.Y.

1988). The purpose of an automatic stay, and a § 304 injunction, is to prevent a

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chaotic and uncontrolled scramble for the debtor’s estate, thereby permitting a

systematic and equitable distribution. See H.R. Rep. No. 595, 95th Cong., 1st Sess.

340 (1977), U.S.C.C.A.N. 1978, pp. 5787, 6296 (discussing the purpose of the

automatic stay in bankruptcy cases). The bankruptcy court and subsequently the

bankruptcy appellate panel did not abuse their discretion by broadly fashioning the

scope of the injunction to meet this purpose.

Finally, a secondary issue involving discovery remains. Ms. Hoffman contends

the bankruptcy appellate panel failed to rule upon the bankruptcy court’s denial of

discovery regarding National Warranty’s member lists. Bullmore and Whicker claim

this issue is not properly before us on appeal because the Notice of Appeal does not

identify the discovery order among the orders for which the appeal is taken.

Federal Appellate Rules require a notice of appeal to “designate the judgment,

order, or part thereof being appealed.” See Fed. R. App. P. 3(c)(1)(B). We do not

strictly construe the contents of the notice of appeal. Greer v. St. Louis Reg’l Med.

Ctr., 258 F.3d 843, 846 (8th Cir. 2001). We generally permit review where the intent

of the appeal is obvious and the adverse party shows no prejudice. Parkhill v. Minn.

Mut. Life Ins. Co., 286 F.3d 1051, 1058 (8th Cir. 2002). But cf. id. (noting “[o]ur

court previously has held that an appeal from one order does not ‘inherently imply’

an intent to appeal other orders entered in the action”). 

The Notice of Appeal indicates Ms. Hoffman appeals from the order of the

bankruptcy appellate panel affirming the decision of the bankruptcy court entered on

August 19, 2003. The bankruptcy appellate panel order and the bankruptcy court’s

August 19, 2003 order represent the final orders of the respective courts. “Ordinarily,

a notice of appeal that specifies the final judgment in a case should be understood to

bring up for review all of the previous rulings and orders that led up to and served as

a predicate for that final judgment.” Greer, 258 F.3d at 846. The obvious intent of

the Notice of Appeal was to appeal all orders, including discovery orders, that led up

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to the courts’ final decisions. Furthermore, Bullmore and Whicker demonstrate no

prejudice in us reviewing the merits of Ms. Hoffman’s claim of error. We will

therefore review the merits of Ms. Hoffman’s claim of error.

Although the bankruptcy appellate panel failed to rule on the denial of

discovery, we find that error without prejudice as the bankruptcy court did not abuse

its discretion by denying discovery. See MacGregor v. Mallinckrodt, Inc., 373 F.3d

923, 934 (8th Cir. 2004) (reviewing the district court’s discovery decision under an

abuse of discretion standard). Ms. Hoffman asserts that if all group members are

United States corporations then the requested information is relevant and necessary

to the determination of whether the convenience of the parties is better served by

litigation in the United States and whether insider treatment and preferences would

have been made known. However, all parties concede all of National Warranty’s

business including its member groups were located in the United States, so the

information would have little impact on the determination of whether the parties are

better served by litigation in the United States. Furthermore, the requested

information is of questionable relevancy in that the ultimate determination does not

hinge on the existence of insider treatment and preferences. Therefore, we are

unwilling to conclude the bankruptcy court abused its discretion in denying the

requested discovery. 

III

For the foregoing reasons, we affirm the decision of the bankruptcy appellate

panel.

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