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May 22, 1979

Bernard CORNFELD, Plaintiff,

The opinion of the court was delivered by: WERKER

This indemnity action was commenced by the plaintiff Bernard Cornfeld against the defendant I.O.S., Ltd. ("IOS"), sued herein as Investors Overseas Services, Ltd., for the recovery of litigation expenses purportedly incurred by Cornfeld in his capacity as a former officer and director of IOS and an IOS- related entity. IOS, represented by its court-appointed co-liquidators and their attorneys, presently moves to dismiss or stay this action on the basis of international comity. *fn1" The Securities and Exchange Commission (the "SEC") has filed, by leave of court, an Amicus curiae memorandum of law in support of IOS's motion.


IOS is a Canadian corporation which is and has been since 1973 the subject of a liquidation proceeding being held in New Brunswick, Canada pursuant to the Canadian Winding-Up Act, Can.Rev.Stat. ch. W-10 (1970) (the "Act"). On November 5, 1973, after an adversarial hearing on the merits at which evidence was presented, Judge Dickson of the Supreme Court of New Brunswick issued an opinion in which he concluded that liquidation of IOS would be "just and equitable" and that "the most compelling case" had been made out for the issuance of a winding-up order. In re I.O.S. Ltd., slip op. at 17-23 (Sup.Ct. New Brunswick Nov. 5, 1973). Judge Dickson entered an order the same day directing "that (IOS) be wound-up under the provisions of the Winding-Up Act." The appointing of a provisional liquidator for the winding-up of IOS was subsequently affirmed by the Appeal Division of the Supreme Court of New Brunswick, and leave to appeal Judge Dickson's winding-up order was denied. *fn2"

 The Act sets forth a comprehensive scheme for the winding-up of insolvent companies. It provides for the appointment of one or more liquidators to take control of and account for all assets, debts and liabilities of an insolvent company, to collect outstanding accounts due and owing to the company, to assess and compromise claims against the company, and to assist in the fair distribution of the assets of the company to its creditors. Act §§ 23, 33-40, 93-95. The effect of the November 5, 1973 winding-up order was to prohibit IOS from carrying on any further business except to the extent that it was required to do business to wind-up its affairs. Act § 19.

 Prior to the issuance of the winding-up order, IOS was engaged principally in the sale and management of mutual funds and related financial activities. At the height of its operations, IOS and its related companies constituted "one of the largest financial services complexes in the world, with a network of dozens of subsidiaries incorporated variously throughout most of the countries of Europe and Central and North America." In re I.O.S. Ltd., slip op. at 9.

 The plaintiff Cornfeld is the founder of IOS and was an officer and director of the company until early 1971, when control of IOS passed into the hands of Robert L. Vesco. Cornfeld continues to own over 200,000 shares of IOS common stock. Affid. of Bernard Cornfeld, sworn to Mar. 10, 1979, at PP 2, 3, 7.

 Cornfeld seeks by the instant action, which was originally filed in New York Supreme Court and removed to this court by IOS on the basis of diversity jurisdiction, to attach certain alleged assets of IOS located within the State of New York. The complaint demands a money judgment against IOS in the amount of $ 1,543,698.70.

 The activities of IOS and IOS-related companies during both the Cornfeld and Vesco periods have engendered a slew of litigations. *fn3" One such lawsuit, Securities and Exchange Commission v. Vesco, et al., 358 F. Supp. 1186 (CES), was filed in November 1972 by the SEC against 42 individual and corporate defendants, including Vesco and IOS. The SEC's complaint in that action originally requested the appointment of a receiver, but this request was withdrawn "in favor of an arrangement whereby the financial affairs of IOS-related companies would be wound up in the jurisdictions where they were incorporated." SEC Memorandum, at 2. This arrangement was reached as a result of a cooperative international effort to wind-up the IOS-related companies in an equitable and practical manner. *fn4"

 On this motion to dismiss or stay the instant action IOS urges the Court to recognize and defer to the IOS liquidation proceeding in Canada as a matter of international comity. In supporting the motion, the SEC contends that deferring to the Canadian proceeding would assure "the orderly and equitable liquidation of IOS," while failing to do so would result in giving Cornfeld an undeserved preference over other IOS creditors.

 In opposing the motion, Cornfeld argues essentially that recognition of the Canadian liquidation proceeding would prejudice his rights as a citizen of New York and that New York is the appropriate forum in which to resolve the merits of this action.


 The starting point for any discussion of the doctrine of international comity is Hilton v. Guyot, 159 U.S. 113, 16 S. Ct. 139, 40 L. Ed. 95 (1895), wherein the Supreme Court defined comity as

the recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws.

 159 U.S. at 164, 16 S. Ct. at 143. Comity is to be accorded a decision of a foreign court as long as that court is a court of competent jurisdiction and as long as the laws and public policy of the forum state and the rights of its residents are not violated. Hilton v. Guyot, 159 U.S. at 113 at 202-03, 16 S. Ct. 139, 40 L. Ed. 95 ; Clarkson Co. v. Shaheen, 544 F.2d 624, 629 (2d Cir. 1976); SNR Holdings, Inc. v. Ataka America, Inc., 54 A.D.2d 406, 408, 388 N.Y.S.2d 909, 911 (1st Dep't 1976) (Per curiam ). New York has narrowly construed the exceptions to the comity doctrine: "(Foreign-based) rights should be enforced unless the judicial enforcement of such a (right) would be the approval of a transaction which is inherently vicious, wicked or immoral, and shocking to the prevailing moral sense." Intercontinental Hotels Corp. v. Golden, 15 N.Y.2d 9, 13, 254 N.Y.S.2d 527, 529, 203 N.E.2d 210, 212 (1964); ...

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