Opinion ID: 3011898
Heading Depth: 2
Heading Rank: 2

Heading: Choice-of-Law Analysis

Text: Maxwell also served as the fulcrum for the Bankruptcy Court’s choice-of-law analysis. Insofar as the Court was being called upon to determine which law applied to Stonington’s claims in Delaware, deciding whether, for purposes of the Plan of Reorganization in the Delaware bankruptcy proceedings, subordination of those claims, or no subordination of those claims, is the rule,10 it _________________________________________________________________ 10. Technically, preventing Stonington from pursuing its claims in Belgium under Belgian law may leave open the possibility that it could pursue its claims in Belgium under United States law. And in some ways, the order does force the Belgian court to apply U.S. law to the treatment of Stonington’s claims through the anti-suit injunction. However, in granting L&H’s motion, the Bankruptcy Court specifically said that it was not dictating the law the Belgian court should apply in the Belgian proceedings. Further, L&H specifically disclaimed any intention of having the Bankruptcy Court dictate how claims will be treated in the Belgian Proceeding and, in fact, said that the Bankruptcy Court lacked the power to do so. 17 appropriately applied the choice-of-law considerations outlined in Maxwell. However, we fear the Bankruptcy Court’s center of gravity analysis falls short of what is required in this factual setting, and what Maxwell teaches, given the notions of comity that must be considered. As in Maxwell, the Court here determined that there was a true conflict11 and then examined the transactions at issue and the connections of the parties in order to assess the most connected locale or jurisdiction. Here, based upon the transactions leading to the Dictaphone Merger Claims, that jurisdiction was found to be Delaware. In Maxwell, it was found to be England. However, that is not, and was not in Maxwell, the end of the analysis. Rather, the heart of the inquiry in Maxwell involved the court’s assessment of the nature of the respective countries’ policies and the principles animating the laws, so as to determine which country actually had a stronger interest in its policy’s being advanced. The court considered the strength of the policies underlying the Bankruptcy Code’s avoidance provisions and concluded that the policies of equal distribution to creditors and preserving the value of the estate were effectuated by the English equivalent. Maxwell, 93 F.3d at 1052. To make this determination, it relied on the detailed exposition of the two countries’ laws and policies in the bankruptcy court opinion below. The court also noted that the strong English connection to the transactions implied England’s strong interest in applying its law, and also suggested that it was foreseeable that English law would be applied. Id. Finally, it examined which choice of law would further thesystemic _________________________________________________________________ 11. Stonington urges that there was not, or at least not yet, a true conflict that would trigger a comity analysis, but we agree with the Bankruptcy Court that a true conflict existed. See Maxwell, 93 F.3d at 1050 ([A] conflict between two avoidance rules exists if it is impossible to distribute the debtor’s assets in a manner consistent with both rules.). Some language in the Bankruptcy Court’s oral opinion suggests that the relevant conflict is between the parties rather than between the laws. As the relevant conflict is between United States and Belgian law, this issue may need to be revisited and clarified on remand. 18 interest in smoothly functioning international law. Id. at 1053. The type of examination, then, requires more than an analysis of contacts. It requires, in addition, a qualitative assessment that can only occur if there is some understanding, and explication, of the way in which the allowance, or subordination, of the claims at issue would advance or detract from each nation’s policy regarding insolvency proceedings and distributions to creditors. For instance, the Bankruptcy Court should consider the strength of the United States’ interest in applying its bankruptcy laws and, specifically, its subordination rules in these circumstances. The policies generally furthered by subordination may be less compelling here if Stonington was induced to enter a merger agreement, and become an equity holder, by fraud. The Bankruptcy Court should also consider the countervailing Belgian subordination rules and underlying policies, which are mentioned, but not developed, in the record. This discussion was not present in the Bankruptcy Court’s consideration here and should be undertaken when the Bankruptcy Court engages in a choice-of-law determination.