Opinion ID: 724999
Heading Depth: 2
Heading Rank: 2

Heading: Applicability of the Doctrine to the Case at Hand

Text: 47 Because Congress legislates against a backdrop that includes those international norms that guide comity analysis, absent a contrary legislative direction the doctrine may properly be used to interpret any statute. Comity is especially important in the context of the Bankruptcy Code for two reasons. First, deference to foreign insolvency proceedings will, in many cases, facilitate equitable, orderly, and systematic distribution of the debtor's assets. Cunard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452, 458 (2d Cir.1985) (American courts have consistently recognized the interest of foreign courts in liquidating or winding up the affairs of their own domestic business entities.); Victrix Steamship Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709, 713 (2d Cir.1987) (American courts have long recognized the particular need to extend comity to foreign bankruptcy proceedings.). Second, Congress explicitly recognized the importance of the principles of international comity in transnational insolvency situations when it revised the bankruptcy laws. See 11 U.S.C. § 304; see S.Rep. No. 989, 95th Cong., 2d Sess. 35, reprinted in 1978 U.S.C.C.A.N. 5787, 5821 (explaining § 304). 48 The examiner contends the doctrine is inapplicable to the present case because Congress has conclusively resolved whether the preference law applies by legislative direction. Although such a direction would obviously make it easier to decide this case, the examiner has not pointed us to a statutory section that supports his contention. Instead, he relies on § 103(a), which simply states that the provisions of Chapter 5 of the Bankruptcy Code, including § 547 and § 502(d), apply in a case under chapter ... 11. But § 103(a) contains only general words, which we have held must be read with regard to the traditional limitations states impose on the exercise of their power to prescribe laws. Alcoa, 148 F.2d at 443; see also Lauritzen, 345 U.S. at 581, 73 S.Ct. at 927-28 (Congress was on notice that generality of language in Jones Act would lead courts to apply it with reference to international maritime law). Such general words do not limit the application of international comity, nor do they conclusively resolve this issue. The same is true of other statutory provisions relied upon by the examiner. See § 303(b)(4) (permitting foreign representative of the estate in a foreign proceeding to file involuntary petition); § 109(a) (limiting debtor status). 49 The plaintiffs cite a variety of other Code sections that purportedly direct courts not to apply comity principles. For example, the examiner suggests that because Congress, in § 304 of the Code, established a flexible procedure for conducting a proceeding ancillary to a foreign proceeding, it must have intended to prohibit such flexibility in ordinary Chapter 11 proceedings. But, as we have previously noted, the inclusion of § 304 in the Code and the explicit reference in it to comity should not be read to overrule in foreign bankruptcies well-established principles based on considerations of international comity. Cunard, 773 F.2d at 456. We are unable to conclude from § 304 that it was Congress' purpose that courts ignore principles of comity when deciding whether to apply the avoidance law. The provision in § 304 has even less significance than the general words interpreted in Lauritzen and Alcoa. Similarly, the Code provisions referring to applicable law or applicable nonbankruptcy law cited by the administrators, see 11 U.S.C. §§ 363(f)(1), 365(c)(1)(A), 510(a), 541(c)(2), 544(b), 1126(b)(1), afford no statutory basis for ignoring comity considerations. 50 Nor are we persuaded by the examiner's conclusory assertion that the Bankruptcy Code always applies, comity notwithstanding, when a bankruptcy case has been properly commenced, and that choice-of-law analysis is never appropriate in a bankruptcy case. The examiner relies heavily on Nolte v. Hudson Navigation Co., 31 F.2d 527 (2d Cir.1929), an equity receivership case holding that the measure of unsecured bondholders' provable claims was governed by the law of the forum rather than the state in which the debtor was incorporated. Rejecting the rule proffered by the unsecured creditors, Judge Swan reasoned that the proceeding was not a winding-up proceeding governed by the law of the state of incorporation, but was in the nature of an equitable execution,--a remedy accorded creditors by the law of the forum, in order to reach their debtor's property and apply it in satisfaction of their claims. Id. at 529. 51 Assuming arguendo that bankruptcy proceedings are among those remedies Nolte referred to--those accorded to creditors by the law of the forum--the rationale in Nolte is nonetheless inapposite. There a receiver had been appointed in New York to dispose of property in that state. Here, to maximize the return to creditors, there are two concurrent proceedings involving property in two jurisdictions. Thus, to say that the law of the forum governs begs the question, and our refusal in Nolte to apply the law of the debtor's state of incorporation can give plaintiffs no comfort. Indeed, the difference between that case and the present one--here, there are two forums--illuminates why resort to choice-of-law principles is necessary. For the same reason, the examiner's citation to Prudential Ins. Co. of Am. v. Land Estates, 110 F.2d 617 (2d Cir.1940), another receivership case, which held only that New York law provided for the application of the forum state's law, is unpersuasive. Neither Nolte nor Prudential points to any statutory basis for ignoring comity principles in analyzing the Bankruptcy Code. We therefore are unable to accept plaintiffs' contention that the terms of the statute preclude us from giving effect to comity.