07-2949-cv

In Re: Parmalat Securities Litigation v.

1 UNITED STATES COURT OF APPEALS

2

3 FOR THE SECOND CIRCUIT

4

5 August Term, 2007

6

7 (Argued: November 29, 2007 Decided: July 22, 2008)

8

9 Docket No. 07-2949-cv

10

11 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

12

13 ENRICO BONDI, EXTRAORDINARY COMMISSIONER OF PARMALAT

14 FINANZIARIA S.P.A. AND PARMALAT S.P.A., A/K/A NEW PARMALAT,

15 AND OTHER AFFILIATED ENTITIES, IN EXTRAORDINARY

16 ADMINISTRATION UNDER THE LAWS OF ITALY,

17

18 Appellants,

19

20 RENATO ESPOSITO, FONDAZIONE ITALO MONZINO, SOUTHERN ALASKA

21 CARPENTERS PENSION FUND, CRISTINA PONCIBO, MARGERY LOUISE

22 KRONENGOLD, ROBERT MCQUEEN, CUSTODIAN, INDIVIDUALLY AND ON

23 BEHALF OF ALL OTHERS SIMILARLY SITUATED, FERRI GIAMPOLO,

24 FOOD HOLDINGS LIMITED, DAIRY HOLDINGS LIMITED, G. JAMES

25 CLEAVER, GORDON I. MACRAE, GERALD K. SMITH, LAURA J.

26 STURAITIS, MONUMENTAL LIFE INSURANCE COMPANY, TRANSAMERICA

27 OCCIDENTAL LIFE INSURANCE COMPANY, TRANSAMERICA LIFE

28 INSURANCE COMPANY, AVIVA LIFE INSURANCE COMPANY, PRINCIPAL

29 GLOBAL INVESTORS, LLC, PRINCIPAL LIFE INSURANCE COMPANY,

30 SCOTTISH RE {US} INC., PARMALAT CAPITAL FINANCE LIMITED,

31 HARTFOLD LIFE INSURANCE COMPANY, G. PETER PAPPAS, PLAN

32 ADMINISTRATOR AND ERSTE SPARINVEST KAPITALANLAGEGESELLSCHAFT

33 M.B.H.,

34

35 Plaintiffs,

36

37 - v.-

38

39 CAPITAL & FINANCE ASSET MANAGEMENT S.A., CATTOLICA

40 PARTECIPAZIONI S.P.A., HERMES FOCUS ASSET MANAGEMENT EUROPE

41 LIMITED, SOLOTRAT, SOCIETE MODERNE DES TERRASSEMENTS

42 PARISIENS,
2

1

2 Plaintiffs-Appellees,

3

4 BONLAT FINANCING CORPORATION, CALISTO TANZI, FAUSTO TONNA,

5 COLONIALE S.P.A., CITIGROUP INC., BUCONERO, LLC, ZINNI &

6 ASSOCIATES, P.C., DELOITTE TOUCHE TOHMATSU, DELOITTE &

7 TOUCHE S.P.A., A SOCIETA PER AZIONI UNDER THE LAWS OF ITALY,

8 GRANT THORNTON S.P.A., A SOCIETA PER AZIONO UNDER THE LAWS

9 OF ITALY NOW KNOWN AS ITALAUDIT, S.P.A., NOW KNOWN AS

10 ITALAUDIT, S.P.A, ,, DEUTSCHE BANK AG, MORGAN STANLEY & CO.,

11 INCORPORATED, BANK OF AMERICA CORPORATION, JAMES E. COPELAND

12 JR., PARMALAT FINANZIARIA S.P.A., STEFANO TANZI, LUCIANO DEL

13 SOLDATO, DOMENICO BARILI, FRANCESCO GIUFFREDI, GIOVANNI

14 TANZI, DELOITTE & TOUCHE USA, LLP., DELOITTE & TOUCHE

15 L.L.P., CREDIT SUISSE FIRST BOSTON, BANC OF AMERICA

16 SECURITIES LIMITED, BANK OF AMERICA, N.A., CITIBANK, EUREKA

17 SECURITISATION PLC, VIALATTEA LLC, PAVIA E ANSALDO, BANCA

18 NAZIONALE DEL LAVORO S.P.A., CITIBANK, N.A., MARIA

19 MARTELLINI, PROFESSOR, BANCA INTESA S.P.A., BANK OF AMERICA

20 NATIONAL TRUST & SAVINGS ASSOCIATION, BANC OF AMERICA

21 SECURITIES, LLC, BANK OF AMERICA INTERNATIONAL, LTD.,

22 DELOITTE & TOUCHE TOHMATSU AUDITORES INDEPENDENT, CREDIT

23 SUISSE INTERNATIONAL, CREDIT SUISSE SECURITIES LIMITED,

24 CREDIT SUISSE, CREDIT SUISSE GROUP, GRANT THORNTON

25 INTERNATIONAL AND GRANT THORNTON LLP,

26

27 Defendants.

28

29 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

30

31 Before: JACOBS, Chief Judge, B.D. PARKER and

32 WESLEY, Circuit Judges.

33

34 Appeal from an order of the United States District

35 Court for the Southern District of New York (Kaplan, J.),

36 denying the motion under 11 U.S.C. § 304 (repealed 2005) by

37 a debtor in bankruptcy abroad to enjoin actions brought

38 against it in the United States.

39 AFFIRMED. Judge Wesley dissents in a separate opinion.
3

1 KATHLEEN SULLIVAN (John B.

2 Quinn, Peter E. Calamari, Loren

3 Kieve, Terry L. Wit, Sanford I.

4 Weisburst, Angela Nguyen, and

5 William B. Adams, on the brief),

6 Quinn Emanuel Urquhart Oliver &

7 Hedges, LLP, New York, NY, for

8 Appellants.

9

10 STUART M. GRANT (James J.

11 Sabella, John C. Kairis, and

12 Diane Zilka, on the brief),

13 Grant & Eisenhofer P.A., New

14 York, NY; Steven J. Toll, Lisa

15 M. Mezzetti, Mark S. Willis, and

16 Joshua S. Devore, on the brief,

17 Cohen, Milstein, Hausfeld &

18 Toll, P.L.L.C., Washington,

19 D.C.; Robert M. Roseman, Andrew

20 D. Abramowitz, Daniel J.

21 Mirarchi, and Rachel E. Kopp of

22 counsel, Spector Roseman &

23 Kodroff, PC, Philadelphia, PA,

24 for Plaintiff-Appellees.

25

26 DENNIS JACOBS, Chief Judge:

27

28 This appeal is taken from an order of the United States

29 District Court for the Southern District of New York

30 (Kaplan, J.), denying the motion by a debtor in foreign

31 bankruptcy proceedings to enjoin actions brought against it

32 in the United States. In re Parmalat Sec. Litig., 493 F.

33 Supp. 2d 723 (S.D.N.Y. 2007). The debtor is the entity that

34 emerged from Parmalat’s Italian bankruptcy proceedings. 

35 Because the district court acted within its sound

36 discretion, we affirm.
4

1 Background

2 Following its financial implosion in the wake of a

3 colossal fraud, Parmalat Finanziaria, S.p.A. and several of

4 its subsidiaries and affiliates (“Old Parmalat”) filed for

5 bankruptcy protection under Italy’s newly-created Marzano

6 law. The bankruptcy court in Parma (the “Parma Court”)

7 declared Old Parmalat insolvent, and Italy’s Minister of

8 Finance appointed appellant Dr. Enrico Bondi to serve as

9 Extraordinary Commissioner of Old Parmalat’s bankruptcy

10 estate, a role analogous to Chapter 11 Trustee.

11

12 A

13 Almost immediately after Old Parmalat filed for

14 bankruptcy in Italy, purchasers of Old Parmalat’s debt and

15 equity securities (the “Securities Fraud Plaintiffs”) filed

16 securities fraud class action lawsuits in the United States

17 (the “Securities Fraud Actions”) against Old Parmalat and

18 against various banks and auditing firms that had allegedly

19 participated in the fraud. Among the defendants were Grant

20 Thornton International (“GTI”) and Grant Thornton, LLP

21 (collectively “GT”).

22 In June 2004, Dr. Bondi, in his capacity as
 Though § 304 was repealed, it remains applicable to

1

this case. See Pub. L. 109-8 (enacting Chapter 15 of the

Bankruptcy Code and repealing 11 U.S.C. § 304 for all

ancillary petitions filed after October 17, 2005).

5

1 Extraordinary Commissioner of the Old Parmalat bankruptcy

2 estate, petitioned the Southern District of New York

3 Bankruptcy Court to enjoin actions against the Old Parmalat

4 estate with respect to any property involved in its Italian

5 bankruptcy proceedings pursuant to § 304 of the Bankruptcy

6 Code, 11 U.S.C. § 304 (repealed 2005). Section 304

7 permitted a representative of a foreign bankruptcy estate to

8 commence a bankruptcy case in the United States in order to

9 enjoin litigation against the foreign debtor in U.S.

10 courts. It instructed courts to fashion relief “guided by 1

11 what will best assure an economical and expeditious

12 administration” of the foreign bankruptcy estate consistent

13 with, inter alia, “just treatment of all” holders of claims

14 against the estate, and “comity.” 11 U.S.C. § 304(c). The

15 bankruptcy court entered a preliminary injunction shielding

16 Old Parmalat from American lawsuits (“§ 304 Injunction”),

17 and the Securities Fraud Plaintiffs dropped Old Parmalat as

18 a defendant.

19 Once the § 304 Injunction was in place, Old Parmalat

20 went on the offensive in United States courts. Among other
 Some creditors have appealed from the Italian

2

bankruptcy court’s approval of the Concordato. While these

appeals do not delay implementation of the Concordato, they

keep the Italian bankruptcy case open until the Italian

appellate courts resolve the appeals.

6

1 initiatives, Old Parmalat sued GT for malpractice (the

2 “Recovery Actions”).

3 All the while, Old Parmalat’s Italian bankruptcy

4 proceedings continued. Pursuant to his duties as

5 Extraordinary Commissioner, Dr. Bondi proposed a

6 restructuring plan, the “Concordato,” which became effective

7 upon approval both by a majority of Old Parmalat’s creditors

8 and by the Parma Court. Under the Concordato, the assets

2

9 of the 16 companies that composed Old Parmalat were

10 transferred to a newly formed entity, appellant Parmalat,

11 S.p.A. (“New Parmalat”), of which Dr. Bondi is the CEO. In

12 marked contrast to bankruptcy norms in the United States,

13 New Parmalat assumed all of the legal liabilities of its

14 predecessor companies. Under the Concordato,

15

16 eligible unsecured creditors with a title

17 and/or cause that predates the date when

18 individual [Old Parmalat companies] were

19 declared eligible for Extraordinary

20 Administration Proceedings, including

21 creditors whose claims were not included

22 in the sum of liabilities but whose

23 claims [are] later verified by a court
7

1 decision that has become final and,

2 therefore, can no longer be challenged

3 (“Late-Filing Creditors”) 

4

5 are entitled to receive New Parmalat stock. Concordato ¶

6 7.3b. “New Parmalat thus functions . . . as a claims

7 administrator, converting approved [late-filed] claims

8 against Old Parmalat into . . . equity interests in New

9 Parmalat.” In re Parmalat Sec. Litig., 493 F. Supp. 2d at

10 727. Liquidated claims are discharged upon receipt of New

11 Parmalat equity.

12 After New Parmalat came into being, the district court

13 permitted the Securities Fraud Plaintiffs to amend their

14 complaint to join New Parmalat as a defendant in the

15 Securities Fraud Actions “as the successor to Old Parmalat.”

16 New Parmalat appealed on the mistaken premise that the

17 district court’s order was tantamount to denying New

18 Parmalat § 304 protection against direct securities fraud

19 claims. But the district court explained that it had not

20 yet considered whether to grant § 304 relief to New Parmalat

21 because the court had never received a motion seeking that

22 relief. New Parmalat withdrew its appeal and moved in the

23 district court to expand the existing § 304 Injunction to
8

1 bar the Securities Fraud Plaintiffs from bringing direct

2 claims against New Parmalat (the “Expansion Motion”).

3 While the Expansion Motion was pending, the district

4 court granted another motion--this one brought by GTI and

5 Bank of America, N.A.--to narrow the § 304 Injunction to

6 permit certain parties (who were defendants in both the

7 Recovery Actions and the Securities Fraud Action) to file

8 third party contribution claims against New Parmalat based

9 on Old Parmalat’s securities fraud (the “Narrowing Order”). 

10 The Narrowing Order contained a special feature: to the

11 extent that any judgment in favor of GTI, Bank of America,

12 or any other third party plaintiff, exceeds what the third

13 party plaintiff owes New Parmalat, enforcement of the

14 contribution claims will be allowed only in Italy. In other

15 words, while the third party plaintiffs can use American

16 judgments to set off their liability to New Parmalat, they

17 may collect no money from New Parmalat unless and until the

18 Italian courts choose to enforce the American court’s

19 judgment. New Parmalat appealed, and we eventually

20 affirmed. See In re Parmalat Sec. Litig., 240 F.App’x 916

21 (2d Cir. 2007).

22
9

1 B

2 While the appeal from the Narrowing Order was pending

3 in this Court, the district court denied New Parmalat’s

4 Expansion Motion, a decision which effectively let the

5 Securities Fraud Plaintiffs bring direct (in addition to

6 contribution) claims against New Parmalat. In re Parmalat

7 Sec. Litig., 493 F. Supp. 2d 723 (“Expansion Denial Order”).

8 This is the order now on appeal. 

9 In explaining the Expansion Denial Order, the district

10 court referred to its Narrowing Order (then on appeal, and

11 later affirmed, see infra), and the five considerations that

12 drove its decision there: (1) that economical and

13 expeditious administration of the Old Parmalat estate would

14 best be served by liquidating liability in the United

15 States, where relevant facts were already being litigated in

16 the Securities Fraud Litigation; (2) that comity would be

17 served because, while plaintiffs would be allowed to

18 liquidate their claims in the United States, they would be

19 enforced only in Italy, if at all; (3) that the Narrowing

20 order does not unfairly advantage GT because its

21 contribution claim will be permitted in some forum in any
10

1 event--if not in the United States, then in Italy; (4) that

2 Dr. Bondi’s equitable claim to § 304 protection is weakened

3 by his affirmative Recovery Actions against Parmalat’s

4 auditors and banks in the American courts rather than in

5 Italy; and (5) that settlement would be facilitated by

6 having all potentially liable parties before the district

7 court.

8 In denying the Expansion Motion, Judge Kaplan wrote

9 that “[t]he same considerations weigh against Section 304

10 relief here.” In re Parmalat Sec. Litig., 493 F. Supp. 2d

11 at 739. Specifically, Judge Kaplan reasoned: since the

12 Narrowing Order permitted GTI’s contribution claims against

13 New Parmalat, New Parmalat was already before the court to

14 litigate its fault for the securities fraud; as to comity,

15 the Italian courts would benefit from an American court’s

16 determination of New Parmalat’s liability under American

17 securities law (an issue the parties were already

18 litigating), and “plaintiffs seek to liquidate their claims

19 in the United States, but would seek to enforce any judgment

20 only in Italy”; Dr. Bondi’s claim to equitable relief was no

21 stronger than it was at the time of the Narrowing Order; and

22 denying § 304 relief would facilitate settlement. Id. The
11

1 district court concluded: “while denying Section 304 relief

2 undoubtedly would impose some expense on New Parmalat, the

3 Court is persuaded that the benefits in efficiency and

4 expeditiousness outweigh the costs.” Id.

5 In sum, when § 304 motion practice concluded, New

6 Parmalat was subject both to contribution claims and to

7 direct claims for securities fraud in the district court.

8 Shortly after the district court denied New Parmalat’s

9 Expansion Motion, we affirmed the Narrowing Order. In re

10 Parmalat Sec. Litig., 240 F.App’x 916. We emphasized that

11 “the district court’s decision to leave the enforcement (or

12 not) of any judgment against plaintiff-appellant to the

13 Italian courts was a sufficient measure of deference and

14 comity.” Id. at 919.

15

16 Discussion

17 We review the Expansion Denial Order for abuse of

18 discretion, see id. at 918; accord Bank of New York v. Treco

19 (In re Treco), 240 F.3d 148, 155 (2d Cir. 2001), mindful

20 that courts enjoy “broad latitude in fashioning an

21 appropriate remedy” under § 304, Koreag, Controle et
12

1 Revision S.A. v. Refco F/X Assocs., Inc. (In re Koreag,

2 Controle et Revision, S.A.), 961 F.2d 341, 348 (2d Cir.

3 1992).

4 Subsection (c) of § 304 required that,

5

6 In determining whether to grant

7 [injunctive] relief . . . , the court

8 shall be guided by what will best assure

9 an economical and expeditious

10 administration of such estate, consistent

11 with--

12

13 (1) just treatment of all holders of

14 claims against or interests in such

15 estate;

16

17 (2) protection of claim holders in

18 the United States against prejudice and

19 inconvenience in the processing of claims

20 in such foreign proceeding;

21

22 (3) prevention of preferential or

23 fraudulent dispositions of property of

24 such estate;

25

26 (4) distribution of proceeds of such

27 estate substantially in accordance with

28 the order prescribed by this title;

29

30 (5) comity; and

31

32 (6) if appropriate, the provision of

33 an opportunity for a fresh start for the

34 individual that such foreign proceeding

35 concerns.

36

37 11 U.S.C. § 304(c) (repealed 2005). New Parmalat contends

38 that the Expansion Denial Order violated § 304’s instruction
13

1 to assure an economical and expeditious administration of

2 the foreign estate, and that it was inconsistent with both

3 “just treatment” of all claimholders and “comity”.

4

5 I

6 We cannot say categorically that allowing the American

7 Securities Fraud Litigation to proceed before Judge Kaplan

8 “will best assure an economical and expeditious

9 administration of” the Old Parmalat bankruptcy estate. It

10 depends. On one hand, American litigation costs can be

11 exorbitant; on the other, it may cost New Parmalat less to

12 litigate the Securities Fraud Litigation here and now, given

13 the risk that the Securities Fraud Plaintiffs will bring

14 their American claims in the Parma Court. The governing law

15 is that of the United States, and the frauds alleged were

16 conducted in English. If the Securities Fraud Action were

17 to be litigated in Italy some time in the future, the Parma

18 Court would confront a foreign legal and regulatory scheme

19 to which (we are informed) there is no Italian analog, a

20 large number of documents in a foreign language, and (no

21 doubt) conflicting expert affidavits on what American
14

1 securities law requires. All that said, we cannot say with

2 assurance that, if excluded from American courts, the

3 Securities Fraud Plaintiffs would proceed in Italy at all. 

4 So there are good reasons on either side of the

5 proposition that granting the Expansion Motion would “best

6 assure an economical and expeditious administration of” the

7 Old Parmalat estate. The question is whether the district

8 court abused its discretion in denying the Expansion Motion.

9 Of course, if we believed that the Parma Court would

10 view the district court as lacking jurisdiction (and that

11 the Parma Court would treat any American judgment as a

12 nullity), then we would reverse. (Under that circumstance,

13 we assume the district court would not have entered its

14 order in the first place.) But, to our knowledge, the Parma

15 Court has made no statement regarding the district court’s

16 jurisdiction to liquidate the Securities Fraud Actions.

17

18 II

19 New Parmalat contends that the Expansion Denial Order

20 is inconsistent with “just treatment” of all claimholders,

21 11 U.S.C. § 304(c)(1), and “comity,” id. § 304(c)(5).
15

1 New Parmalat emphasizes that its shareholders are all

2 claimholders, and argues that the Expansion Denial Order

3 thus treats other claimholders unjustly by imposing

4 litigation costs on New Parmalat without any potential

5 benefit. But the detriment is the same as that suffered by

6 shareholders in any company that is made the defendant of a

7 legitimate lawsuit. And it would do no injustice to other

8 claimholders if the Securities Fraud Plaintiffs win a

9 judgment, which--at the direction of the Parma Court--

10 results in issuance of New Parmalat stock. True, issuance

11 of stock to the Securities Fraud Plaintiffs would dilute New

12 Parmalat’s equity, thus reducing the value of existing share

13 holdings; but there is no cognizable injustice to one

14 claimholder in the satisfaction of claims properly presented

15 by another.

16 Appellants argue (as they did when appealing the

17 Narrowing Order) that denying the Expansion Motion violates

18 § 304’s policy of “comity.” On New Parmalat’s appeal from

19 the Narrowing Order, we considered the nature of Parmalat’s

20 Italian bankruptcy proceedings and the Concordato, and we

21 concluded that “to leave the enforcement (or not) of any

22 judgment against plaintiff-appellant to the Italian courts
16

1 was a sufficient measure of deference and comity.” In re

2 Parmalat Sec. Litig., 240 F.App’x at 919. Since the

3 Expansion Denial Order makes clear that the courts of Italy

4 will decide whether or not to enforce any judgment that the

5 Securities Fraud Plaintiffs win in their direct suits

6 against New Parmalat, we adhere to the view that

7 international comity is respected.

8 This appeal is distinguishable factually from New

9 Parmalat’s appeal of the Narrowing Order, but the

10 differences do not compel a different result on comity

11 grounds. The Narrowing Order allowed the defendants in Dr.

12 Bondi’s Recovery Action to assert counterclaims, and thus to

13 set off any judgment Dr. Bondi might win against them,

14 whereas the Expansion Denial Order opens New Parmalat to

15 suit by parties unconnected to the Recovery Actions. In

16 both cases, however, the orders are consistent with comity

17 because no third party plaintiff would be permitted to

18 collect on an American judgment without the Italian courts’

19 approval.

20 Finally, the district court’s order does not violate

21 the dictate of Italian bankruptcy law that the bankruptcy

22 court has exclusive jurisdiction to satisfy creditors’

23 claims. The Securities Fraud Plaintiffs are not yet
17

1 creditors of New Parmalat. Only if the Securities Fraud

2 Plaintiffs prevail in district court will they become

3 judgment creditors of New Parmalat; and, as creditors, they

4 will be required to submit their claims to the Italian

5 courts for enforcement.

6

7 III

8 New Parmalat complains that the district court

9 considered two factors not properly a part of the § 304

10 analysis: settlement potential and Dr. Bondi’s offensive

11 litigation in the United States.

12 We are naturally inclined against judicial decisions

13 calculated to force a defendant to settle. See, e.g., In re

14 Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 148

15 (2d Cir. 2001) (Jacobs, J., dissenting). But it is hard to

16 dispute the district court’s idea that consolidating

17 American securities claims before a single court would make

18 it easier for the parties to settle their differences

19 without a judicial determination of liability. See In re

20 Parmalat Sec. Litig., 493 F. Supp. 2d at 739 (Expansion

21 Denial Order). This may or may not be true. Indeed, it is

22 unclear whether the Concordato would allow for any such

23 settlement at all. But, in any event, since it is often
18

1 thought that settlement is more economical and expeditious

2 than litigation, the district court acted within the bounds

3 of its discretion in considering likelihood of settlement.

4 Finally, we see nothing improper about weighing Dr.

5 Bondi’s offensive litigation in the United States: it is

6 incrementally harder for Dr. Bondi to contend that it is a

7 hardship for him to be where he has chosen to come.

8

9 IV

10 In dissent, Judge Wesley states that it is imprudent to

11 issue this opinion now because (in the parties’ words) “the

12 parties do not believe that a disposition of the appeal at

13 this time would advance the interests of either party,” and

14 because (in Judge Wesley’s words) “the relevance of this

15 Court’s resolution of the appeal is entirely dependent upon

16 the outcome of the settlement approval process in the

17 Southern District.” We respectfully disagree for the

18 following reasons:

19 First, the parties brought this controversy before us,

20 and they have not moved to withdraw it. As the parties

21 advise, this case is not moot--though no doubt it may become

22 moot if left undecided long enough.

23 Second, we expect that our opinion will be of use to

24 the parties--as well as other persons and entitles: (1) the
19

1 district judge may want to consider whether the case is

2 properly before him as he decides whether to approve the

3 proposed settlement, see Fed. R. Civ. P. 23(e); (2) the

4 Italian courts--to which we owe a duty of comity unaffected

5 by the stated desires of the parties, and which would decide

6 whether to enforce the resulting judgment--may wish to know

7 whether the case (and settlement) was properly before the

8 district court; and (3) the class members, who must decide

9 whether to object to the proposed settlement, see Fed. R.

10 Civ. P. 23(e)(5), or possibly opt out of it, may want to

11 know whether an American court could hear their case in the

12 event they reject the settlement.

13

14

15 Conclusion

16 We cannot say with certainty what effect the Expansion

17 Denial Order may have on the economy and expeditiousness

18 with which the Old Parmalat estate will be administered. 

19 But we cannot conclude that the district court abused its

20 discretion on that score. And our review of the record

21 satisfies us that Judge Kaplan did not act inconsistently

22 with any of the six considerations mandated by § 304(c). 

23 New Parmalat’s remaining arguments are meritless. The order

24 of the district court is therefore affirmed.
Counsel for Plaintiff-Appellees “request[ed] that th[e] letter be filed under seal and not 1

be made available to the public,” but no motion to file under seal was granted by the Court and

the issue, at this stage, is apparently moot.

The May 1 letter informed us only of the prospect of imminent settlement – i.e., “that 2

the parties [were] on the verge of reaching a settlement in this matter (subject to court approval)”

– but the agreement was, shortly thereafter, executed and made public. See “Parmalat Settles

U.S. Shareholder Suit,” N.Y. Times, May 3, 2008, available at http://www.nytimes.com (visited

July 21, 2008) (search for article title); see also Press Release, Parmalat, Settlement with “class”

20

1 WESLEY, Circuit Judge, dissenting:

2 This appeal has changed dramatically (post-oral argument) as a consequence of an

3 executed settlement agreement now awaiting approval in the Southern District of New York. 

4 Because this intervening event has materially changed the nature of an appeal that is presently on

5 the verge of resolution, the majority’s affirmance strikes me as imprudent. Were it up to me, I

6 would have voted to stay the appeal, while retaining our jurisdiction to revisit it, should the

7 promise of final settlement not bear fruit. Even if I thought the majority’s discussion of the

8 merits prudent, however, I would not think it correct. I therefore respectfully dissent. 

9 I.

10 Counsel for Plaintiff-Appellants informed the Court, by letter dated May 1, 2008, of the

11 possibility of an imminent settlement between the parties and, in light of that possibility, stated

12 that “the parties jointly request that the Court refrain from issuing any decision on this appeal at

13 this time.” Letter of Counsel for Plaintiff-Appellees of May 1, 2008. The letter went on to say 1

14 that “[i]f the settlement is approved, the appeal will be withdrawn.” Id. As subsequently

15 revealed in the public press, the settlement agreement was ultimately executed, and now awaits

16 the confirmation of the district court.

2
(May 2, 2008).

The order of this Court “directed [the parties] to submit a letter to the Court . . . 3

advising us as to whether, in view of the reported settlement of the underlying litigation: (1) the

issue on appeal has been mooted; and, (2) a disposition of the appeal would advance the present

interests of either party.” In re Parmalat Sec. Litig., No. 07-2949, (2d Cir. May 5, 2008).

21

1 The public announcement of a prospective settlement prompted this Court to solicit the

2 views of the parties on the impact of that agreement upon the instant appeal. By letter dated 3

3 May 12, 2008 (and assertedly joined in by Defendant-Appellants), counsel for Plaintiff-Appellees

4 stated that “[t]he parties do not believe that the appeal, at this juncture, has been mooted by

5 reason of the execution of the settlement agreement.” Letter of Counsel for Plaintiff-Appellees

6 of May 12, 2008. It continued: “If the settlement is approved with finality, the appeal will be

7 moot, but if the settlement is not approved, it will not become effective and the appeal would not

8 be moot.” Id. Finally, the letter stated that 

9 [t]he parties do not believe that a disposition of the appeal at this time would

10 advance the interests of either party. Because the settlement is not conditioned on

11 the result of the appeal, the disposition of the appeal will not permit either party to

12 withdraw from or request modification of the settlement.

13

14 Id.

15 In short, the relevance of this Court’s resolution of the appeal is entirely dependent upon

16 the outcome of the settlement approval process in the Southern District.

17 II.

18 In its opinion below, the district court contemplated the possibility of settlement in

19 conducting its § 304(c) analysis, concluding that “having the claims against New Parmalat before

20 this Court along with the others alleged in the [third amended complaint] will aid the process of
22

1 possibly settling this dispute.” In re Parmalat Sec. Litig., 493 F. Supp. 2d 723, 739 (S.D.N.Y.

2 2007). Defendant-Appellants argued that the district court’s weighing of the possibility of

3 settlement in its § 304(c) analysis constituted “legal error and an abuse of discretion.” 

4 Appellants’ Br. 41. 

5 There was merit, in my view, to New Parmalat’s position. After all, the possibility of

6 settlement appears nowhere among the six enumerated factors that courts were directed to

7 consider under § 304(c). Venturing beyond the specific considerations codified under § 304(c)

8 may well have constituted an abuse of discretion. 

9 Presumably, the district court thought that its consideration of the possibility of

10 settlement was relevant to § 304(c)’s instruction that, “[i]n determining whether to grant relief . .

11 . the court shall be guided by what will best assure an economical and expeditious administration

12 of such estate, consistent with” the § 304(c) factors. 11 U.S.C. § 304(c). But it is at best unclear

13 whether the pressure upon New Parmalat to settle a suit arguably not properly before the district

14 court in the first place would have helped or hindered the estate.

15 In any event, this is now “water under the bridge,” for New Parmalat has executed the

16 settlement agreement with Plaintiff-Appellees, and seeks the district court’s approval of that

17 agreement. As a result, New Parmalat’s objections to the district court’s jurisdiction over this

18 parallel proceeding, and to the district court’s consideration of the possibility of settlement, take

19 on a quite different hue. Even if it was improper for the district court to consider the possibility

20 of settlement in its § 304(c) analysis prior to the settlement agreement, New Parmalat is now hard

21 pressed to maintain its former objections. After all, the decision to settle is one that New
New Parmalat argues that Bondi’s offensive litigation in his recovery suits and New 4

Parmalat’s defensive litigation here are different in yet another respect – in the way they are

treated by Italian law. Under Italian law, says New Parmalat, “any court (Italian or foreign)

outside the Italian Bankruptcy Court that liquidates or enforces claims against the estate will be

deemed by the Italian Bankruptcy Court to be acting without jurisdiction, making its actions

void.” Appellants’ Reply Br. 12. In contrast, they argue, Italian law provides an exception for

“set-off” actions – perhaps including the compulsory counterclaims pressed by Grant Thornton

23

1 Parmalat willingly undertook. 

2 At the same time, the parties’ ambivalence concerning the prospect of our now issuing an

3 opinion counsels caution, in my view, regarding the scope of our intervention. Thus, were I in

4 the majority, I would have held the appeal to revisit it in the event that the settlement does not

5 materialize. I think it unwise for this Court to address the merits of the dispute when the parties

6 appear to be eminently (and imminently) capable of resolving it themselves.

7 III.

8 Even in the absence of a pending resolution of this case, I could not concur in the

9 majority’s discussion of the merits. First, the majority accepts as true Plaintiff-Appellants’

10 argument that “New Parmalat assumed all of the legal liabilities of its predecessor companies,”

11 Maj. at 6, a view that – despite being controverted by New Parmalat – is a question best left to

12 the Parma Court. Cf. In re Artimm, S.r.l., 278 B.R. 832, 837 (Bankr. C.D. Cal. 2002). Second,

13 the majority overlooks – as did the district court below – a crucial distinction between Dr.

14 Bondi’s posture in the Recovery Actions that he initiated in American courts, and the direct

15 securities actions filed against Bondi and New Parmalat, which he did not. Bondi’s purely

16 defensive involvement in the latter proceedings is unlike his offensive initiation of recovery suits

17 on behalf of Old Parmalat. Third, the majority presumes that the Italian courts will be poorly 4
against Bondi in response to Bondi’s Recovery Action – where the claims against the estate are

brought by a third-party plaintiff creditor in response to the debtor’s offensive suit. The

exception would arguably not apply to the instant suit, however, where Plaintiffs’ claims are

original, rather than counterclaims to Bondi’s Recovery Action.

Section 304(c)(2) requires consideration of the “protection of claim holders in the 5

United States against prejudice and inconvenience in the processing of claims in such foreign

proceeding.” 11 U.S.C. § 304(c)(2). Plaintiffs do not contest that “Italian bankruptcy law

comports with U.S. notions of fundamental fairness as it provides for notice, claims processing,

and distribution similar to that provided for under U.S. law.” Adinolfi v. Empire Marble &

Granite, Inc. (In re Rosacometta, S.r.l), 336 B.R. 557, 565 (Bankr. S.D. Fla. 2005). Furthermore,

“the mere fact that [a creditor] would have to pursue his claim against [a debtor] in a foreign

proceeding is not sufficient prejudice to deny relief.” Schimmelpenninck v. Byrne (In re

Schimmelpenninck), 183 F.3d 347, 364 (5th Cir. 1999). Section 304(c)(2) supports injunctive

relief.

Section 304(c)(3) requires consideration of the “prevention of preferential or fraudulent

dispositions of property of such estate.” 11 U.S.C. § 304(c)(3). Plaintiffs do not contest that

“Italian insolvency law proscribes both preferential and fraudulent transfers.” In re Rosacometta,

S.r.l, 336 B.R. at 565. Section 304(c)(3) supports injunctive relief.

Section 304(c)(4) instructs the court contemplating § 304 relief to consider whether the

foreign bankruptcy proceeding will undertake “distribution of proceeds of such estate

substantially in accordance with the order prescribed by this title.” 11 U.S.C. § 304(c)(4). 

Plaintiffs do not contest that “the distribution of assets under Italian law is substantially in

accordance with the order prescribed under United States law.” In re Artimm, S.r.l., 278 B.R. at

843. Section 304(c)(4) supports injunctive relief.

24

1 equipped to handle American securities fraud claims, but – like the district court before it – does

2 not weigh this fact against a number of other factors relevant to Italian law under § 304(c)(2), (3),

3 and (4), all of which counsel in favor of issuing an injunction.5

4 Fourth, although the majority is correct to note that any award in Plaintiff-Appellants’

5 favor would ultimately need to be approved by the Parma Court, New Parmalat points out that

6 just defending against Plaintiffs’ claims here, aside from any potential costs of enforcement in
 Indeed, one initial public report indicated that, pursuant to the pending settlement 6

agreement, Parmalat agreed to issue 10.5 million shares, then valued at $36.8 million, to satisfy

the class members’ claims. Parmalat Settles Shareholder Lawsuit, N.Y. L. J. May 5, 2008. The

full cost incurred by the estate did not include such transactional costs as, for example, notifying

the members of the class of the settlement, an expense then estimated to be as much as $1.55

million. Id.

We need not speculate, however, on the reasons that Parmalat has itself offered for its 7

decision to accept the settlement: “Parmalat believes that this settlement is in the best interests

of its shareholders to avoid the distraction and expense of further litigation, and diminishes

uncertainty in the value of its stock.” Press Release, Parmalat, Settlement with “class” (May 2,

2008). That uncertainty was, in part, the result of Plaintiffs’ allegations of “the loss of billions of

dollars by investors,” (Third Am. Compl. ¶ 4) forming a class whose “exact number . . . [was]

unknown to Plaintiffs at th[e] time” of the filing of the complaint, but which Plaintiffs estimated

to number in the “thousands” (id. ¶ 1139).

25

1 Parma, would impose its own set of costs, justifying deference on comity grounds. Without 6

2 knowing the inner thoughts of New Parmalat and its counsel, we may speculate as to the role this

3 concern may have played in its decision to settle with Plaintiffs. But whether it would have 7

4 been proper for such pressures to impinge upon New Parmalat’s decisionmaking (by virtue of the

5 district court’s denial of New Parmalat’s requested § 304(c) relief) is quite another matter. 

6 This Court, as well as Congress – through its adoption of the Private Securities Litigation

7 Reform Act of 1995 (“PSLRA”) – has taken note of the pressures upon corporate defendants to

8 settle securities fraud “strike suits” when those settlements are driven, not by the merits of

9 plaintiffs’ claims, but by defendants’ fears of potentially astronomical attorneys’ fees arising

10 from lengthy discovery. See, e.g., Lentell v. Merrill Lynch & Co., Inc., 396 F.3d 161, 171 (2d

11 Cir. 2005) (Jacobs, J.) (noting “the congressional intent of the PSLRA ‘to deter strike suits

12 wherein opportunistic private plaintiffs file securities fraud claims of dubious merit in order to

13 exact large settlement recoveries.’” (quoting Novak v. Kasaks, 216 F.3d 300, 306 (2d Cir. 2000));
The district court cannot be faulted in this regard, for the amicus submission was not 8

before that court.

26

1 Cal. Pub. Employees’ Ret. Sys. v. WorldCom, Inc., 368 F.3d 86, 98 (2d Cir. 2004) (“The PSLRA

2 was intended to curtail ‘strike suits’– i.e., meritless class actions alleging fraud in the sale of

3 securities. See H.R. Conf. Rep. No. 105-803 (1998).”). See also Lander v. Hartford Life &

4 Annuity Ins. Co., 251 F.3d 101, 107 (2d Cir. 2001) (same).

5 Finally, while the views of the Italian Ministry of Economic Development (as made

6 available to us in an amicus submission) are unquestionably relevant to the consideration of

7 comity under § 304(c)(5), cf. Bigio v. Coca-Cola Co., 448 F.3d 176, 178 (2d Cir. 2006)

8 (reversing, in a non-§ 304 suit, the district court’s dismissal of plaintiffs’ suit on comity grounds,

9 noting that, “[t]hroughout the long pendency of this lawsuit, the Government of Egypt has never

10 raised the slightest objection to adjudication of the instant controversy by United States courts”),

11 those views are never acknowledged by the majority. Despite its absence from the majority’s

12 opinion (as well as from the record below ), the amicus brief achieves added importance in light 8

13 of the Ministry’s role in both administering the Marzano Law and in approving Bondi’s

14 reorganization plan.

15 IV.

16 This Court’s docket is awash with pressing matters vying for our attention. The majority

17 has chosen to allocate already stressed judicial resources to an issue that is not similarly exigent,

18 and despite the parties’ express request that we hold our fire. It is arguable, I suppose, that the

19 executed settlement agreement now awaiting approval confirms the wisdom of the district court’s
27

1 decision. But such an inference would overlook the fact – well known by those who practice in

2 this field – that settlements are often struck, not because of the persuasiveness of plaintiffs’

3 claims, but because the alternative (or even the possibility of the alternative) is too costly to

4 contemplate. 

5 Whether these same concerns animated New Parmalat’s settlement decision is not

6 something we can know for certain, but what is clear is that the ends of settlement, alone, cannot

7 justify the means employed by the district court below. The statute at issue does not speak to the

8 district court’s inherent power to hear this case. It lays out a rule of judicial discretion that must

9 be measured by restraint. In my view, the district court erred as a matter of law in adding a factor

10 to its comity equation while overlooking important additional factors required by the statute. In

11 issuing its majority opinion, this Court compounds the error done – by adding to its jurisprudence

12 when neither necessity nor efficiency is served by it. I therefore respectfully dissent.