United States District Court, S.D. New York
In re: NATALIA MIKHAILOVNA PIROGOVA, Debtor.
NATALIA MIKHAILOVNA PIROGOVA, ET AL., Appellees. YURI VLADMIROVICH ROZHKOV, Appellant,
OPINION AND ORDER
G. SCHOFIELD, UNITED STATES DISTRICT JUDGE.
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”). 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.
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”).
The Recognition Petition
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.
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.
Debtor's Contacts with Russia
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.”
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
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
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.
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.