Vertiv, Inc. v. Wayne Burt PTE, Ltd.

92 F.4th 169

VERTIV, INC.; Vertiv Capital, Inc.; and Gnaritis, Inc., Appellants v. WAYNE BURT PTE, LTD., and TGS Mahesh

No. 22-3305

United States Court of Appeals, Third Circuit

Argued: September 6, 2023

Filed: February 1, 2024

On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 3:20-cv-00363), District Judge: Honorable Georgette Castner

Robert T. Szyba [ARGUED], Seyfarth Shaw, 620 Eighth Avenue, New York, NY 10018, Counsel for Appellants

Patrick T. Collins [ARGUED], Skoloff & Wolfe, 293 Eisenhower Parkway, Suite 390, Livingston, NJ 07039, Counsel for Appellee

Before: CHAGARES, Chief Judge, HARDIMAN and FREEMAN, Circuit Judges.

OPINION OF THE COURT

FREEMAN, Circuit Judge.

This case originated as a simple breach-of-contract claim. But then the District Court learned that the defendant company was in liquidation proceedings (analogous to United States bankruptcy proceedings) in Singapore. The District Court was asked to dismiss the action out of principles of international comity, and it did so despite little recent guidance from this Court. We now clarify the standard courts must apply when deciding whether to abstain from adjudicating a case in deference to what is essentially a pending foreign bankruptcy proceeding. We will vacate the order of the District Court and remand to give it the opportunity to apply this new guidance in the first instance.

I

Vertiv, Inc., Vertiv Capital, Inc., and Gnaritis, Inc. (together "Vertiv") are Delaware corporations headquartered in New Jersey. Wayne Burt, PTE Ltd. ("Wayne Burt") is a Singaporean corporation with a primary place of business in Singapore.

In January 2020, Vertiv sued Wayne Burt and Cetex Petrochemicals LTD ("Cetex") in the United States District Court for the District of New Jersey. Vertiv alleged that Wayne Burt had defaulted on a loan and now owed Vertiv the full value of the principal and interest due on the loan along with the 46.82% of the total shares of Cetex stock pledged as security. Vertiv sought damages and a declaratory judgment. One of Wayne Burt's directors promptly acknowledged the debt and informed the District Court that judgment for Vertiv was proper. So just two weeks after docketing the complaint, the District Court signed a consent order granting judgment for Vertiv. The judgment awarded Vertiv $29,290,000 in damages, and it declared that Vertiv owned the shares of Cetex stock that Wayne Burt had pledged as security for the loan.¹

In September 2020, Vertiv filed a second suit against Wayne Burt. It was identical to the first except that, in the place of Cetex, it named Wayne Burt Petro Chemical Private Limited as a defendant along with Wayne Burt. The parties again agreed to a consent judgment, and the District Court entered judgment in Vertiv's favor in November 2020.

But these cases would not be resolved so easily. In February 2021, Wayne Burt moved to vacate both judgments under Federal Rule of Civil Procedure 60(b). It informed the District Court that it was in liquidation proceedings in Singapore—proceedings that began before Vertiv filed its suits in the District Court. It contended that the officers who purportedly consented to the judgments in the District Court lacked the authority to act on Wayne Burt's behalf because, under Singapore law, only the Singaporean court-appointed Liquidator could do so.

In its Rule 60(b) motions (which were filed by the Liquidator on the company's behalf), Wayne Burt also asserted that the loans underlying the judgments in the District Court never existed. It attached evidence in support of that contention. And it emphasized that it could not have intervened earlier to oppose the judgments because the Liquidator did not have notice of the proceedings.

In July 2021, the District Court granted the Rule 60(b) motions and vacated both judgments. It found that the Liquidator "presented substantial and compelling evidence of the fraudulent nature of these loans" and that the evidence, "at a minimum, fits the definition of 'misconduct' under Rule 60(b)(3)." App. 582; Fed. R. Civ. P. 60(b)(3) (permitting courts to grant a party relief from a final judgment based on "fraud . . . , misrepresentation, or misconduct"). But it did not grant relief under Rule 60(b)(3) because the motions may have been untimely if filed on that basis. See Fed. R. Civ. P. 60(c) (providing that a Rule 60(b)(3) motion "must be made within a reasonable time" and "no more than a year after the entry of the judgment" that it seeks to vacate). Instead, it vacated the judgments as void because the Wayne Burt officers who consented to the judgments were not authorized to represent Wayne Burt—only the Liquidator was so authorized. See Fed. R. Civ. P. 60(b)(4) (permitting courts to grant a party relief from a final judgment that is void); Fed. R. Civ. P. 60(c) (providing that a Rule 60(b)(4) motion "must be made within a reasonable time"). Having vacated the judgments, the District Court reopened both civil actions.

The matters were then consolidated, and Vertiv filed the operative amended complaint in September 2021. It brought the same claims as before against Wayne Burt. It also brought a breach-of-contract claim against one of Wayne Burt's directors, TGS Mahesh, alleging that he had personally guaranteed the loans.

In November 2021, Wayne Burt (through the Liquidator) moved to dismiss Vertiv's claims under Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6).² It asked the District Court to dismiss the amended complaint either (1) on international comity grounds in deference to the ongoing liquidation proceedings in Singapore, or (2) because the court lacked personal jurisdiction over the company. Vertiv opposed the motion, arguing that extending comity to the Singaporean proceedings was inappropriate under our precedent. It also argued that the loan documents' forum selection clauses gave the District Court personal jurisdiction over Wayne Burt.

The District Court resolved the motion on international comity grounds, without addressing personal jurisdiction. Because the parties disagreed about the appropriate test to apply when addressing international comity, the District Court addressed both of the tests the parties suggested. It held that extending comity to the Singaporean court proceedings was appropriate under either test.

First, the District Court applied the four-factor test articulated in Austar International, Ltd. v. AustarPharma LLC, 425 F. Supp. 3d 336 (D.N.J. 2019). It concluded that all four factors supported extending comity. Specifically, it concluded that (1) Singapore has jurisdiction over Wayne Burt's liquidation; (2) the Singapore liquidation and this action are parallel, and Vertiv can make claims as Wayne Burt's creditors in the Singapore liquidation proceedings; (3) extraordinary circumstances necessitate dismissal of this action; and (4) United States policy supports dismissal of this action.

Next, the District Court addressed our test from Philadelphia Gear Corp. v. Philadelphia Gear de Mexico, S.A., 44 F.3d 187 (3d Cir. 1994). It noted our holding in Philadelphia Gear that "a party seeking a stay of a judicial proceeding in this country based on a foreign bankruptcy proceeding must demonstrate the following: (1) the foreign bankruptcy court shares our policy of equal distribution of assets; and (2) the foreign law mandates the issuance or at least authorizes the request for the stay." Id. at 193. It found that those two factors were satisfied, so it concluded that extending comity was appropriate. It granted Wayne Burt's motions to dismiss the amended complaint, dismissed the amended complaint with prejudice, and ordered the Clerk's Office to close the case. Vertiv timely appealed.³

II

The District Court had diversity jurisdiction under 28 U.S.C. § 1332, and we have subject-matter jurisdiction under 28 U.S.C. § 1291.

We review a district court's "extension or denial of comity" to a foreign proceeding for abuse of discretion, Phila. Gear, 44 F.3d at 191, and we review findings of fact underlying the decision for clear error, Remington Rand Corp. Del. v. Bus. Sys. Inc., 830 F.2d 1260, 1266 (3d Cir. 1987). A district court abuses its discretion if its ruling is based on an erroneous view of the law. Highmark Inc. v. Allcare Health Mgmt. Sys., Inc., 572 U.S. 559, 563 n.2, 134 S.Ct. 1744, 188 L.Ed.2d 829 (2014).

III

A

Vertiv appeals the District Court's decision to extend comity to Wayne Burt's insolvency proceeding in Singapore. "Comity is a recognition which one nation extends within its own territory to the legislative, executive, or judicial acts of another." Somportex Ltd. v. Phila. Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir. 1971). It is a practice intended to give "due regard both to international duty and convenience, and to the rights of [a nation's] citizens, or of other persons who are under the protection of its laws." Hilton v. Guyot, 159 U.S. 113, 164, 16 S.Ct. 139, 40 L.Ed. 95 (1895).

This case involves adjudicatory comity, which is a discretionary act of deference to a foreign court. Mujica v. AirScan Inc., 771 F.3d 580, 599 (9th Cir. 2014) (discussing "adjudicatory comity" or "comity among courts").⁴ Under this doctrine, a court asks if it should "decline to exercise jurisdiction over matters more appropriately adjudged elsewhere . . . ." Id. (quoting Hartford Fire Ins. Co. v. California, 509 U.S. 764, 817, 113 S.Ct. 2891, 125 L.Ed.2d 612 (1993) (Scalia, J., dissenting in part)).

Adjudicatory comity arises only when a matter before a United States court is pending in or has resulted in a final judgment from a foreign court—that is, when there is or was a "parallel" foreign proceeding.⁵ See Spencer v. Kugler, 454 F.2d 839, 847 n.17 (3d Cir. 1972) ("[O]ne court should defer action on causes properly within its jurisdiction until the courts of another sovereignty with concurrent powers, and already cognizant of the litigation, have had an opportunity to pass upon...