In re Ace Track Co.

556 B.R. 887

In re: Ace Track Co., Ltd., Debtor in a Foreign Proceeding.

Case No. 15bk13819

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

Signed September 13, 2016

Attorneys for Sooan Cho, Foreign Representative of Ace Track Co., Ltd.: Brian L. Shaw and Mark L. Radtke, Shaw Fishman Glantz & Towbin LLP, Chicago, Illinois

Attorney for USCO, S.p.A.: Mia D. D'Andrea, Chapman and Cutler LLP, Chicago, Illinois

Attorney for Valuepart, Inc.: R. Scott Alsterda, Nixon Peabody LLP, Chicago, Illinois

MEMORANDUM DECISION

Timothy A. Barnes, United States Bankruptcy Judge

This matter comes on for consideration on USCO, S.p.A.'s Amended Motion for Order Granting Protection under 11 U.S.C. § 1522 [Dkt. No. 64] (the “Amended Motion”), brought by USCO, S.p.A. (“USCO”), a creditor in the above-captioned chapter 15 case. The Amended Motion is opposed by Sooan Cho, the foreign representative (the “Foreign Representative”) of Ace Track Co., Ltd. (the “Debtor”), and by Valuepart, Inc. (“VPI”), another creditor of the Debtor.

The Amended Motion raises serious concerns regarding the Debtor's postpetition treatment of property of the Debtor that is within the territorial jurisdiction of the United States. Further, the litigation surrounding the Amended Motion evidences a misunderstanding of the parties regarding the statutory roles of foreign representatives and debtors in chapter 15 cases generally, and this case specifically.

Upon a review of the parties' respective filings and after holding two hearings on the matter, the court finds that, though the Amended Motion raises significant issues, the Amended Motion failed to establish the statutory and factual grounds upon which any claim for affirmative relief was predicated. Further, the Amended Motion was presented in a manner that obfuscated whether affirmative relief was actually sought. The Amended Motion in fact appears to only request declaratory relief. For these reasons, it is the court's conclusion that the Amended Motion should be and, by order concurrent with this Memorandum Decision, is granted insofar as this Memorandum Decision declares the state of the law with respect to the parties' duties, but otherwise denied without prejudice.

JURISDICTION

The federal district courts have “original and exclusive jurisdiction” of all cases under title 11 of the United States Code, 11 U.S.C. § 101, et seq. (the “Bankruptcy Code”). 28 U.S.C. § 1334(a). The federal district courts also have “original but not exclusive jurisdiction” of all civil proceedings arising under the Bankruptcy Code, or arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred may enter final judgment on any core proceeding arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte , whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(3). As to the former, the court may hear and determine such matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy court may hear the matters, but may not decide them without the consent of the parties. 28 U.S.C. § 157(b)(1) & (c) ; In re Radco Merch. Servs., Inc. , 111 B.R. 684, 686 (N.D.Ill.1990). Instead, the bankruptcy court must “submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.” 28 U.S.C. § 157(c)(1).

The scope of what is or is not a core proceeding when arising in a chapter 15 case is unsettled. See In re Bluberi Gaming Techs., Inc. , et al ., 554 B.R. 841, 843 (Bankr.N.D.Ill.2016) (Barnes, J.).¹ Recognition of foreign proceedings and other matters under chapter 15 of the Bankruptcy Code are expressly core proceedings. 28 U.S.C. § 157(b)(2)(P). At least one court has held, however, that the “other matters” language from this section is not outcome determinative. In re Fairfield Sentry Ltd. Litig. , 458 B.R. 665, 676 (S.D.N.Y.2011) (“that ‘recognition of foreign proceedings and other matters under chapter 15 of title 11’ are core proceedings is not relevant” to a determination of whether such “other matters” are in fact core proceedings). Put another way, the “other matters” catchall operates in much the same way as section 105 of the Bankruptcy Code ; it helps fill in the gaps but does not allow the court to act where it clearly should not. See, e.g. , Mobil Oil Corp. v. Higginbotham , 436 U.S. 618, 625, 98 S.Ct. 2010, 56 L.Ed.2d 581 (1978) (“There is a basic difference between filling a gap left by Congress' silence and rewriting rules that Congress has affirmatively and specifically enacted.”); Levit v. Ingersoll Rand Fin. Corp. , 874 F.2d 1186, 1197–98 (7th Cir.1989) (same); see also Bluberi Gaming Techs. , 554 B.R. at 843 .

Here, each party has voluntarily submitted itself to this court's jurisdiction (the Debtor and the Foreign Representative, by petitioning for chapter 15 relief, and the movant by bringing the Amended Motion) or has impliedly consented to this court's jurisdiction, and thus the court may statutorily hear and determine the matters as core matters. Radco Merch. Servs., Inc. , 111 B.R. at 686 ; Bluberi Gaming Techs. , 554 B.R. at 844–45 . Further, a question of conditions on chapter 15 relief under section 1522(b) or modification of relief granted under section 1522(c) is clearly a creature of the statute itself, the Bankruptcy Code, and thus is a core proceeding arising under title 11. 28 U.S.C. § 157(b)(1) ; Wellness Int'l Network, Ltd. v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 1939, 191 L.Ed.2d 911 (2015) ; Richer v. Morehead , 798 F.3d 487, 490 (7th Cir.2015).

Thus the court has jurisdiction and constitutional authority to hear and determine this matter.

PROCEDURAL HISTORY

In considering the Amended Motion, the court has considered the arguments of the parties at the April 27, 2016 and June 29, 2016 hearings on the Amended Motion, and has reviewed and considered the following filed documents in the bankruptcy case:

(1) USCO, S.p.A.'s Motion for Order Granting Protection Under 11 U.S.C. § 1522 [Dkt. No. 61] (the “Original Motion” and together with the Amended Motion, the “Motions”);

(2) Order [Dkt. No. 63] (the “Scheduling Order”);(3) Foreign Representative's Response in Opposition to USCO, S.p.A.'s Amended Motion for Order Granting Protection under 11 U.S.C. § 1522 [Dkt. No. 65] (the “Response”);

(4) Brief in Support of USCO, S.p.A.'s Motion for Order Granting Protection under 11 U.S.C. § 1522 [Dkt. No. 66];

(5) Supplemental Brief in Support of USCO, S.p.A.'s Motion for Order Granting Protection under 11 U.S.C. § 1522 [Dkt. No. 78] (the “Supplemental Brief in Support”); and

(6) Foreign Representative's Response to USCO, S.p.A.'s Supplemental Brief in Support of Its Motion for Order Granting Protection under 11 U.S.C. § 1522 [Dkt. No. 85] (the “Supplemental Response”).

The court has also considered the procedural history and previous court filings in the chapter 15 case, including:

(a) Chapter 15 Petition for Recognition of a Foreign Main Proceeding [Dkt. No. 1] (the “Petition”);

(b) Foreign Representative's Motion for (I) Provisional Relief Pursuant to 11 U.S.C. § 1519 and (II) Approve Shortened and Limited Notice [Dkt. No. 8] (the “Interim Relief Motion”);

(c) USCO, S.p.A,'s [sic] Objection to Foreign Representative's Motion for (I) Provisional Relief Pursuant to 11 U.S.C. § 1519 and (II) Approve Shortened and Limited Notice [Dkt. No. 11];

(d) USCO, S.p.A.'s Motion for Change of Venue [Dkt. No. 12] (the “Change of Venue Motion”);

(e) Order Granting Foreign Representative's Motion for: (I) Provisional Relief Pursuant to 11 U.S.C. § 1519 and (II) Approve Shortened and Limited Notice [Dkt. No. 18] (the “Provisional Order”);

(f) Foreign Representative's Objection to USCO, S.p.A.'s Motion for Change of Venue [Dkt. No. 28] (the “Venue Response”);

(g) Valuepart, Inc.'s Response to USCO S.p.A.'s Objection to, and Brief in Support of, Foreign Representative's Motion for (I) Provisional Relief Pursuant to 11 U.S.C. § 1519 and (II) Approve Shortened and Limited Notice [Dkt. No. 31];

(h) Valuepart, Inc.'s Response in Opposition to USCO, S.p.A.'s Motion for Change of Venue [Dkt. No. 32];

(i) Foreign Representative's Reply in Support of Motion for (I) Provisional Relief Pursuant to 11 U.S.C. § 1519 and (II) Approve Shortened and Limited Notice [Dkt. No. 33];

(j) USCO, S.p.A.'s Motion for Relief from Prior Order [Dkt. No. 40];

(k) USCO, S.p.A.'s Limited Objection to the Foreign Representative's Petition for Recognition [Dkt. No. 42];

(l) Valuepart, Inc.'s Response to Motion for Relief from Prior Order [Dkt. No. 44];

(m) Order [Dkt. No. 50] (Withdrawing Change of Venue Motion);

(n) Order [Dkt. No. 51] (Mooting Motion for Relief from Provisional Order);

(o) Agreed Order Recognizing Foreign Main Proceeding [Dkt. No. 52] (the “Recognition Order”);

(p) Foreign Representative's Motion to (I) Modify Automatic Stay and (II) Waive 14 Day Stay Pursuant to Fed. R. Bankr. P. 4001(a)(3) [Dkt. No. 54] (the “Stay Relief Motion”); and(q) Order Modifying the Automatic Stay [Dkt. No. 57] (the “Stay Relief Order”).

The court has also taken into consideration any and all exhibits submitted in conjunction with the foregoing. Though these items do not constitute an exhaustive list of the filings in the above-captioned...