GCX Ltd. v. Standard Chartered Bank (In re GCX Ltd.)

634 B.R. 441

IN RE: GCX LIMITED, et al., Debtors.

GCX Limited, Plaintiff,

v.Standard Chartered Bank, Defendants.

Case No. 19-12031 (CSS)

Adv. Pro. No.: 20-50624 (CSS)

United States Bankruptcy Court, D. Delaware.

Signed November 30, 2021

YOUNG CONAWAY STARGATT & TAYLOR, LLP, Michael S. Neiburg, M. Blake Cleary, Jaime Luton Chapman, Michael S. Neiburg, 1000 North King Street, Wilmington, Delaware 19801 and BOIES SCHILLER FLEXNER UK LLP, Matthew Getz, Nicholas Turvey, 5 New Street Square London, EC4A 3BF UK, Counsel for Debtor-Plaintiff GCX Limited

POTTER ANDERSON & CORROON, LLP, Katherine Good, 1313 N. Market Street, 6^th Floor, Wilmington, DE 19801 and BAKER & MCKENZIE LLP, Debra A. Dandeneau, Charles Cummings, Blaire A. Cahn, 452 Fifth Avenue, New York, NY 10018, Counsel for Defendant Standard Chartered Bank

OPINION

Sontchi, J.

INTRODUCTION

Before the Court are two motions: (i) Standard Chartered Bank's ("SCB") Motion to Dismiss the Complaint¹ (the "Motion to Dismiss") and (ii) Plaintiff's² Cross-Motion for Entry of an Order Alternatively Authorizing a Limited Period of Jurisdictional Discovery and Granting Related Relief³ (the "Cross-Motion"). The Court heard oral argument on these motions on May 6, 2021 and took them under advisement. The Motion to Dismiss seeks dismissal for lack of personal and in rem jurisdiction and, in the alternative, dismissal of the case on forum non conveniens grounds. In addition, the Motion to Dismiss seeks dismissal of the constructive fraudulent transfer claims (Counts III and IV of the Complaint) for violating the presumption against extraterritoriality. Plaintiff opposes SCB's Motion to Dismiss in its entirety and, in its Cross-Motion, seeks jurisdictional discovery.

Accordingly, the issues presented are whether: (i) this Court has in personam or in rem jurisdiction over SCB (or whether Plaintiff should be afforded jurisdictional discovery prior to this determination); (ii) this action should be dismissed under the doctrine of forum non conveniens ; and (iii) Plaintiff's fraudulent transfer claims violate the presumption against extraterritoriality.

The Court will grant the Motion to Dismiss under the doctrine of forum non conveniens and will deny the Cross Motion. The balance of the arguments in the Motion to Dismiss are moot.

JURISDICTION AND VENUE

Although the parties disagree as to whether the Court has personal jurisdiction over SCB, the parties do not contest that the Court has subject matter jurisdiction, pursuant to 28 U.S.C. §§ 157 and 1334, and that venue is proper before the United States Bankruptcy Court for the District of Delaware, pursuant to 28 U.S.C. § 1409(a).⁴ The parties consent to the entry of final orders or judgments.⁵

STATEMENT OF FACTS

A. General Background

The Debtors⁶ , together with their non-debtor affiliates, are a "leading global data communications services provider, operating one of the world's largest fiber networks."⁷ After experiencing financial challenges, on September 15, 2019 (the "Petition Date"), the Debtors and certain of its affiliates filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code.

The Debtors' stated purpose in filing for bankruptcy was to implement a Restructuring Support Agreement (the "RSA") executed between the Debtors, their non-debtor affiliates, and an ad hoc group of Senior Secured Noteholders holding more than 88% of Senior Secured Notes, which would eliminate USD $150 million in prepetition bond debt and pay unsecured creditors in full.⁸ The Debtors and their non-debtor affiliates entered into the RSA because they were unable to refinance their sole funded debt obligation⁹ of approximately USD $366 million of 7.00% Senior Secured Notes, which were issued under a Senior Secured Notes Indenture¹⁰ , dated August 1, 2014.¹¹ Pursuant to the RSA, the Senior Secured Noteholders agreed to vote in favor of the Debtors' Joint Prepackaged Chapter 11 Plan of GCX Limited and Its Debtor Affiliates .¹²

The dispute at the core of this Adversary Proceeding is centered around a USD $700 million Facility Agreement between non-debtor RGBV (as borrower) and SCB (as lender), dated June 22, 2010 (amended and restated on June 30, 2015) (the "Facility Agreement").¹³ RGBV pledged GCX's equity and the stock of GCX's direct parent, non-debtor GCXL, as collateral under the Facility Agreement. It is undisputed that GCX is not a borrower under the Facility Agreement, nor did GCX guarantee RGBV's obligations under the Facility Agreement.¹⁴ In fact, GCX was released from any liability (including guarantees) in connection with the Facility Agreement by way of a Deed of Release dated August 1, 2014 (the "Release").¹⁵

Citing RCOM's financial distress, RGBV defaulted under the Facility Agreement, with approximately USD $13.56 million in interest and principal outstanding on the Petition Date.¹⁶ On July 31, 2019, one day before GCX was due to make payment on the Senior Secured Notes¹⁷ , SCB seized USD $10,172,238.34 from GCX's account, the Funds purportedly due to SCB as a result of RGBV's default under the Facility Agreement (the "Funds").¹⁸ According to GCX, SCB does not hold a security interest in any property of GCX, including the account from which it seized the Funds.¹⁹ SCB did not foreclose on the equity of GCX that was pledged by RGBV.²⁰ GCX argues that, had SCB not seized the Funds, they would constitute property of the estate and be available to distribute to the Debtors' creditors.

SCB argues that its seizure of the Funds was a lawful triangular set-off pursuant to the "Standard Terms"²¹ contained in the Account Application GCX executed on July 15, 2014 when opening its English bank account at SCB (the "Account Application").²² While acknowledging the Release, SCB argues that "[t]he Release did not affect any rights or security concerning GCX that were granted to SCB ... under other agreements not named in the Release – including the setoff rights in clause 13.1 of the Standard Terms ...."²³

Accordingly, the main and ultimate issue presented by this Adversary Proceeding is whether SCB's seizure of the Funds was unlawful such that the Funds are property of the Debtors' estate.²⁴

B. Facts and Arguments Pertinent to the Doctrine of Forum Non Conveniens

GCX is a Bermudan company with its principal place of business in Bermuda.²⁵ SCB is incorporated and headquartered in England, with branches around the world.²⁶ The Account Application provides that English law governs the contractual relationship between SCB and GCX and further provides that English courts will decide disputes concerning GCX's account with SCB.²⁷ The Facility Agreement and its related documents are also governed under English law. Indeed, the Facility Agreement contains a Forum Selection Clause, which provides that the courts of England have "exclusive jurisdiction" over disputes in connection with the Facility Agreement.²⁸

With respect to SCB's seizure of the Funds, although SCB argues that the "act of debiting" occurred in the United Kingdom, GCX contends that SCB used its New York branch²⁹ as an intermediary for foreign transactions, including processing bookkeeping entries with respect to its seizure of the Funds.³⁰ Specifically, GCX argues that "SCB's utilization of its New York branch ... was a necessary vehicle by which [SCB] took GCX's funds and funneled it through the United States on purpose and deliberately to pay down debts that were owed by non-debtor RGBV...."³¹

At oral argument, counsel for SCB explained that there were "two automated computer transactions that took, in total, less than 10 seconds to complete," and that these "bookkeeping entries were processed through SCB's New York branch because they involved U.S. dollars."³² According to SCB, the bookkeeping entries "happened after the debiting of the account and only so that SCB could effectively transfer funds from SCB to its Hong Kong and Singapore affiliates."³³

That being said, SCB argues that none of the complained of acts occurred in the United States such that this case should be dismissed under the doctrine of forum non conveniens . Specifically, among other things, SCB argues that it is an English bank, the bank account at issue and the parties' relationship is governed under English law, the act of debiting occurred in England, and the validity of the triangular set-off is similarly governed under English law. Also, SCB argues that all potential witnesses are located in England and that English courts would undisputedly have jurisdiction over SCB (unlike here where jurisdiction is at issue).

In response, GCX asserts that, as a debtor in bankruptcy, its choice of forum is entitled to substantial deference under the "home court" presumption. To that end, GCX argues that its choice of forum, where its bankruptcy case was commenced, should not be disturbed. Also, GCX argues that it would incur additional expenses litigating this dispute in England and that, for the benefit of judicial economy, this matter should remain with this Court under centralized management along with its bankruptcy cases.

STANDARD OF REVIEW

As discussed in the Introduction, although SCB raises a threshold jurisdictional issue, the Court will "bypass that issue and instead address [SCB's] argument that this case should be dismissed on the grounds of forum non conveniens ."³⁴

"The doctrine of forum non conveniens is a discretionary device permitting a court ... to dismiss a [case] even if the court is a permissible venue with proper jurisdiction over the [case]."³⁵ "Determinations of forum non conveniens ... are not solely questions of law. Rather, they represent ... discretion by trial judges appraising the practical inconveniences posed to the litigants and to the court should a particular action be litigated in one forum rather than another."³⁶

The Third Circuit has articulated a three-part test for courts to use when analyzing motions to dismiss for forum non conveniens :

First, the court must determine whether

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