Opinion ID: 8414534
Heading Depth: 2
Heading Rank: 3

Heading: Arbitration Proceedings, the Transfer Agreement, and SBT’s Bankruptcy

Text: When SBT ultimately responded but failed to either provide a settlement proposal or provide an indication that it would perform the Contracts, appellants filed a request for arbitration in accordance with the arbitration clause of the Contracts with the ICC Paris on November 16, 2009. Soon thereafter, SBT requested an extension of time from the ICC Paris until February 15, 2010 to answer the request for arbitration. The ICC Paris granted an extension until January 27, 2010. During this period, appellants allege that SBT, at Mende and Kundrun’s direction, formulated and enacted “their [fraudulent] scheme to transfer all of SBT’s assets to a preexisting shell company owned by Mende and Kundrun” on December 23, 2009. App’x at 793 ¶ 48. For example, appellants learned through publicly available records that a Swiss entity named Prime Carbon GmbH (“Prime Carbon”) had begun making significant purchases of pig iron. On January 15, 2010, appellants sent a letter to the ICC Paris suggesting that SBT appeared to be “transferring its business operations and assets to Prime Carbon[.]” App’x at 794 ¶ 50. Appellants had discovered that: (a) Prime Carbon had the same address as SBT’s parent company AMCI International; (b) Mende was the President of the Board of Directors of Prime Carbon; (c) former directors of SBT had become directors of Prime Carbon; and (d) SBT’s website was no longer available. Ten days later, SBT responded by stating: [SBT] does not try to evade from its obligations^] It is true that the website www. stéelbasetrade.com was shut down at the beginning of January 2010[.] The reason is that [SBT] first has to analyze [its] position regarding pending or imminent claims for damages from purchasers as well as against suppliers as well as [its] financial situation[.] Therefore, [SBT] has at least temporarily suspended [its] business activities. Please note, however, [SBT] is still existing and has not resolved to be dissolved and liquidated. App’x at 794 ¶ 51. According to appellants, this letter represents an additional intentional misrepresentation made by appel-lees to both appellants and the ICC Paris in order for the appellees to “buy time” while they “effectuate[d] their plan to make SBT an assetless and 'judgment' proof company.” Appellants’ Br. at 10. Indeed, on December 27, 2009, around one month before SBT submitted its answer to appellants’ Request for Arbitration and two weeks before SBT sent its letter to the ICC Paris stating it “ha[d] not resolved to be dissolved and liquidated[,]” appellants allege SBT entered into a transfer agreement with Prime Carbon. See CBF Indústria de Gusa S/A/ v. AMCI Holdings, Inc. No. 13 Civ. 2581, 2015 WL 1190137, at  (S.D.N.Y. Mar. 16, 2015) (hereinafter “Enforcement Decision”). Under this transfer agreement, designated as a “single entity succession” by the terms of the agreement, Prime Carbon became SBT’s successor in interest. SBT transferred nearly all of its assets, valued at approximately $126 million, along with liabilities of approximately $130 million to Prime Carbon in exchange for $1. App’x at 795-96 ¶¶ 58-59. The transferred assets included SBT’s ownership stake in Prime-trade USA (its main asset), shares of an Aruba LLC, insurance policies and physical assets, and bank lines. SBT’s sole remaining asset after the transfer was a few thousand Swiss francs (“CHF”). SBT also retained approximately $50 million in liability to appellants and $4.5 million in liability to anothér creditor, Progress Rail. Appellants describe the transfer agreement as a “turn-key operation” so that Prime Carbon could “seamlessly assume SBT’s place in the pig iron market without any contractual obligations to Appellants.” Appellants’ Br. at 11 (internal quotation marks omitted). On January 18, 2010, SBT sent letters to a variety of its pig iron suppliers notifying them that (i) as of November 30, 2009, SBT had transferred all Goods and the respective title of the Goods to Prime Carbon; (ii) Prime Carbon was the new and sole owner of the Goods; (iii) Prime Carbon assumes all rights with respect to the transferred Goods; and (iv) Prime Carbon is willing to enter in[to] all contracts between your company and [SBT] and to perform under the same conditions. App’x at 794-95 ¶ 53 (internal quotation marks omitted). Further, the letters advised pig iron suppliers “to act from the time being only on [the] instruction of Prime Carbon.” App’x at 795 ¶ 54. According to appellants, “SBT, at Mende’s and Kundrun’s direction, used the delay granted by the ICC Paris to effectuate their plan to transfer SBT’s assets to a new company ultimately owned by them.” Appellants’ Br. at 12. . Following the transfer agreement, Prime Carbon (a) had at least five of the same directors as SBT; (b) assumed ten of SBT’s employment contracts; (c) appointed Mende to serve as the President of its Board of Directors; and (d) had, at all times, either the same address as SBT or the same address as AMCI International. The boards of SBT and Prime Carbon formally approved the transfer agreement on January 27, 2010, just two days after SBT had informed ICC Paris that SBT “does not try to evade from its obligations” and that SBT “is still existing and has not resolved to be dissolved and liquidated,” App’x at 794 ¶ 51, and the same day SBT filed its answer to appellant’s Request for Arbitration, App’x at 797 ¶ 65. On April 27, 2010, SBT mysteriously transferred 15,000 CHF to Prime Carbon. Afterward, SBT was left with only 7,000 CHF in assets. The next day, April 28, 2010, SBT filed for bankruptcy in Switzerland before the Cantonal Court of Zug. Appellants note that, despite having little to no assets following the transfer agreement, SBT waited four -months to file for bankruptcy. Appellants also contend that the transfer of 15,000 CHF to Prime Carbon on April 27, 2010 was an intentional act designed to make it impossible for SBT’s bankruptcy administrator to participate in the arbitration on SBT’s behalf. Appellants, however, admit that “none of SBT’s records provide a contemporaneous explanation” for the transfer. Appellants’ Br. at 13. SBT’s bankruptcy administrator thereafter sought a stay of the arbitration proceedings pending before the ICC Paris on June 18, 2010. The ICC Paris did not initially rule on the request.