The opinion of the court was delivered by: Gerard E. Lynch, District Judge
Plaintiff-appellant John Osanitsch appeals from an order of the United States Bankruptcy Court for the Southern District of New York (the Honorable Stuart M. Bernstein, Chief United States Bankruptcy Judge), dismissing for lack of jurisdiction an adversary proceeding he brought against defendants-appellees Marconi PLC and three affiliated companies. The judgment will be vacated and the case remanded to the Bankruptcy Court.
John Osanitsch was an executive at defendant Mariposa Technology, Inc. ("Mariposa"), a California telecommunications company, when Mariposa was acquired by defendant Marconi PLC, a British entity. Osanitsch continued to work for Marconi until December 2001. In a dispute over severance benefits to which he claims entitlement, Osanitsch charges that Marconi and the other defendants are guilty of fraud and breach of contracts.
Unfortunately, Marconi took no legal action on these claims until December 30, 2004. By that time, Marconi had gone bankrupt, and had entered a "Scheme of Arrangement" ("Scheme") -- roughly equivalent to a plan of reorganization in an American bankruptcy proceeding -- that was approved by the High Court in London in or about April 2003. At approximately the same time, the company's court-appointed representatives filed an ancillary proceeding in the United States Bankruptcy Court for the Southern District of New York pursuant to the former 11 U.S.C. § 304, seeking an order recognizing and assisting Marconi's reorganization in the United States.*fn1 On May 14, 2003, the Bankruptcy Court entered an order that, among other things, gave "full force and effect in the United States" to the Scheme, deemed Marconi discharged in accordance with the terms of the Scheme, and enjoined Marconi's creditors from, among other things, "commencing or continuing any action or other proceeding related to any [Marconi] Scheme Claim" against Marconi. (Order of May 14, 2003, at 5-6.)
Osanitsch, apparently unaware of the Bankruptcy Court's order, brought an action against Marconi and others in the California state courts in December 2004. Marconi removed the case to federal court, and on February 10, 2006, the United States District Court for the Northern District of California (the Honorable Charles R. Breyer, United States District Judge) denied Osanitsch's motion to remand and dismissed the case, finding it barred by the Bankruptcy Court's injunction, "without prejudice to plaintiff re-filing the action in bankruptcy court." (Order of Dismissal, Osanitsch v. Marconi PLC, No. C 05-3988 CRB, at 1 (N.D. Cal. Feb. 10, 2006)).
Osanitsch then filed this action as an adversary proceeding in the Bankruptcy Court, essentially repeating the same claims that had been dismissed in California. Marconi filed a motion to dismiss Osanitsch's complaint, which the Bankruptcy Court converted sua sponte to a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 and Federal Rule of Bankruptcy Procedure 7056. (Order Granting Motion of Defendant Marconi PLC for Summary Judgment and Dismissing Adversary Proceeding, Osanitsch v. Marconi PLC, No. 06-01262 (SMB), at 1-2 (Bankr. S.D.N.Y. Aug. 7, 2006)). Thereafter, the Bankruptcy Court, upon the above undisputed facts, granted summary judgment to defendants dismissing the case for lack of jurisdiction. Id. at 5. Osanitsch appealed that order to this Court.
Because the issues in this case are matters of statutory interpretation, the Court reviews the decision of the Bankruptcy Court de novo. In re Koreag, Controle et Revision, S.A., 961 F.2d 341, 347-48 (2d Cir. 1992).*fn2
Former § 304 of the Bankruptcy Code authorizes representatives of a foreign bankrupt to institute ancillary proceedings in the United States Bankruptcy Courts "to protect the administration of the foreign proceeding." Id. at 348. "Among the forms of relief authorized by § 304 are an injunction prohibiting actions against the debtor and the 'turnover' of property to a foreign representative." In re Treco, 240 F.3d 148, 151 (2d Cir. 2001), citing 11 U.S.C. § 304(b)(1), (2). "The purpose of a § 304 petition is to prevent the piecemeal distribution of assets in the United States by means of legal proceedings instituted in domestic courts by local creditors," and the bankruptcy courts are given broad discretion to fashion appropriate remedies. Koreag, 961 F.2d at 348.
These powers are not limitless. In Treco, the Second Circuit emphasized that § 304 sets forth a number of factors that must be balanced by a bankruptcy court in deciding whether to grant relief under § 304. The statute represents "a step toward the universality approach" in which "a primary insolvency proceeding is instituted in the debtor's domiciliary country, and ancillary courts in other jurisdictions -- typically in jurisdictions where the debtor has assets -- defer to the foreign proceeding and in effect collaborate to facilitate the centralized liquidation of the debtor's estate according to the rules of the debtor's home country." 240 F.3d at 153-154. However, the statute represents only a "modified" universalism that accepts the notion that assets should be collected and distributed on a worldwide basis, but reserves to local courts the discretion to evaluate the fairness of the foreign bankruptcy proceedings and to protect the interests of local creditors. Id. at 154. The statute thus expressly directs the bankruptcy court to evaluate a number of factors before deferring to the foreign court and granting the requested relief. Id. In Treco, the Court of Appeals reversed an order of the Bankruptcy Court, finding that that court had abused its discretion in granting an order requiring turnover of certain property to the bankruptcy estate. Id. at 160-61.
In this case, however, there is no contention that the Bankruptcy Court abused its powers in granting the relief requested by the Marconi representatives. The Court expressly found that relief was necessary "to permit the expeditious and economical administration" of the foreign bankruptcy; that absent relief, creditors would likely sue Marconi in the United States and thereby do "irreparable injury" to the ability of the British representatives to marshal Marconi's assets and administer them in accordance with the reorganization Scheme; and that the relief requested -- including an injunction against such suits -- "will not cause undue hardship or inconvenience to" American creditors of Marconi, or at least that any such hardship or inconvenience "is outweighed by the benefits to [Marconi], its estate and [its] creditors." (Order of May 14, 2004, at 4-5.) The Bankruptcy Court thus properly enjoined the bringing of a lawsuit such as that pursued by Osanitsch.
The present complaint sought to institute an adversary proceeding in the Bankruptcy Court. The amended complaint incorporated by reference the complaint previously filed in California (Am. Compl. ¶ 3), and expressly demanded "judgment for the damages and other relief prayed for in [the California complaint]." (Id. at 5.) The complaint further alleged that the proceeding "is one arising in the debtor's case number 03-B-11949 pursuant to Section 304 of the Bankruptcy Code," and that the court "has jurisdiction pursuant to 28 U.S.C. § 1334 [and] 11 United States Code section 304." (Id. ¶ 2; emphasis omitted.) But as defendants point out, to the extent that plaintiff seeks a judgment for damages, these provisions do not authorize institution of an action in the Bankruptcy Court.
Section 304 is a strictly limited provision. It authorizes the institution of a particular kind of action by particular parties. Only a "foreign representative," as defined by the Code,*fn3 may file a petition under § 304(a); Osanitsch does not and cannot claim that he meets this definition. Although § 304(b) grants the court broad discretion to fashion appropriate relief, the types of relief specifically authorized by § 304(b) and the considerations that the court is directed to apply under § 304(c) make clear that the action contemplated by § 304 is one by authorized representatives of the foreign bankrupt to marshal and protect the estate's assets in the United States for ...