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In re Pirogova

United States District Court, S.D. New York

January 8, 2020

In re: NATALIA MIKHAILOVNA PIROGOVA, Debtor.
v.
NATALIA MIKHAILOVNA PIROGOVA, ET AL., Appellees. YURI VLADMIROVICH ROZHKOV, Appellant,

          OPINION AND ORDER

          LORNA G. SCHOFIELD, UNITED STATES DISTRICT JUDGE.

         Appellant Yuri Rozhkov, the foreign trustee (“Foreign Representative”) of a bankruptcy proceeding in the Commercial Court of the Moscow Region against Debtor Natalia Pirogova (the “Russian Insolvency Proceeding”), appeals from two orders of the United States Bankruptcy Court for the Southern District of New York (Chapman, J.) (the “Orders”).[1] The Orders deny recognition of the Russian Insolvency Proceeding as either (i) a “foreign main proceeding” under 11 U.S.C. §§ 1517(a) and 1517(b)(1), or (ii) a “foreign nonmain proceeding” under 11 U.S.C. §§ 1517(a) and 1517(b)(2). For the reasons below, the Orders are affirmed.

         I. BACKGROUND

         The following facts are drawn from the Orders unless otherwise noted. See In re Platinum Partners Value Arbitrage Fund L.P., 18 Civ. 5176, 2018 WL 3207119, at *1 (S.D.N.Y. June 29, 2018) (a district court may draw on the “bankruptcy court's . . . opinion” to establish the “facts of [the] appeal”).

         A. The Recognition Petition

         Ms. Pirogova is a Russian citizen who has been a United States permanent resident since 2008. In October 2015, a Russian creditor initiated the Russian Insolvency Proceeding after Ms. Pirogova failed to repay an alleged $18.5 million bank debt. The Moscow Commercial Court appointed Appellant as trustee and financial administrator in the proceeding.

         In March 2018, Appellant filed a petition in the Southern District of New York Bankruptcy Court (the “Bankruptcy Court”) to “recognize” the Russian Insolvency Proceeding under Chapter 15 of the U.S. Bankruptcy Code. Among other things, recognition stays disposition of a foreign debtor's U.S. assets and permits a foreign trustee to access and dispose of these assets in a foreign bankruptcy. See 11 U.S.C. §§ 1520 & 1521. The goal of recognition is to “provide effective mechanisms for dealing with cases of cross-border insolvency, while promoting international cooperation, legal certainty, fair and efficient administration of cross-border insolvencies, protection and maximization of debtors' assets, and the rescue of financially troubled businesses.” In re Fairfield Sentry Ltd., 714 F.3d 127, 132 (2d Cir. 2013) (internal quotation marks omitted). A foreign bankruptcy will be recognized only if it is a “foreign main” or “foreign nonmain” proceeding. 11 U.S.C. § 1517(a)(1). A “foreign main proceeding” is a bankruptcy proceeding that takes place in the foreign country where a debtor has its “center of main interests” (“COMI”) as of the date of the recognition petition. 11 U.S.C. §§ 1502(4) & 1517(b)(1). A “foreign nonmain proceeding” is a bankruptcy proceeding that takes place in a country where a debtor has a “place of operations” from which it carries out “nontransitory economic activity.” 11 U.S.C. §§ 1502(5) & 1517(b)(2). After a two-day evidentiary hearing the Bankruptcy Court denied recognition of the Russian Insolvency Proceeding.

         B. Debtor's Contacts with Russia

         At the evidentiary hearing, Ms. Pirogova stated her intention to remain in the U.S. with no plans to reside in Russia ever again. She “apparently fled” Russia because Russian authorities have an outstanding warrant for her arrest. Ms. Pirogova admitted, however, to maintaining an “internal” Russian passport until October 2015. Appellant argues that Ms. Pirogova used the passport to travel surreptitiously in and out of Russia through the open Belarus-Russian border, but the Bankruptcy Court found no “proof that she did in fact do so.”

         Ms. Pirogova allegedly owns property in Russia. She is the listed owner of an apartment in Moscow, but has not occupied or visited the apartment in “a very long time.” The apartment has no furniture or personal effects. Although utility bills are issued to Ms. Pirogova, the electricity bills have not been paid since December 2015 and the water bills since April 2013. The parties dispute whether Ms. Pirogova still owns the apartment, which has been subject to a “seizure” order since February 13, 2013, based on a November 27, 2012 Russian municipal court order. The seizure order “encumb[ers]” and “restrict[s Ms. Pirogova's] rights” to the apartment. According to the Bankruptcy Court, Appellant presented no evidence that Ms. Pirogova maintains the apartment as her habitual residence.

         Ms. Pirogova is also the listed owner of two cars in Moscow. She continues to maintain insurance for one car. Both cars, however, have been “seized, ” and her rights to one car have been restricted since 2012 and the other since 2014.

         The Bankruptcy Court furthermore found no evidence that Ms. Pirogova maintains a close relationship with her family and friends in Russia. As of late 2018, she had not spoken with her son in nearly five years and is not in touch with her grandchildren. She is the founder of a Moscow yacht club, “Yacht-Club Zolotoy Gorod, ” but there was no evidence that she was paying dues or participating in the club at the time of the petition. Ms. Pirogova represents that her personal life is centered in the U.S., where she is married to, and lives with, an American citizen.

         Ms. Pirogova also has liability for past business activities in Russia, but these business activities predate the filing of the petition. Ms. Pirogova faces civil and criminal actions for an alleged $75 million loan that her Russian company, Rizalti-Plus-DKD, allegedly fraudulently obtained in 2007 (the “Rizalti Loan”). Appellant contends that Ms. Pirogova fled Russia to evade creditors and authorities in connection with this loan. Ms. Pirogova also owns a Russian company called Taurus LLC, which is in liquidation in a Russian bankruptcy proceeding that commenced in 2017. The Bankruptcy Count found no proof that Ms. Pirogova had “active[ly] participat[ed]” in or even “minimal[ly] manage[d]” Taurus or the bankruptcy proceeding at the time of the petition.

         C. The ...


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