District Court Enforces German Stay, Ignoring Bankruptcy Code’s Chapter 15
The authors explain that a recent decision by a New York bankruptcy court treated Chapter 15 of the U.S. Bankruptcy Code and the relief it offers as a kind of discretionary alternative to general comity—despite the intent for Chapter 15 to be the “exclusive door to ancillary assistance to foreign proceedings.”
In David Moyal v. Münsterland Gruppe GmbH & Co. KG (the “New York Action”), the U.S. District Court of the Southern District of New York (the “U.S. District Court” or the “Moyal Court”) dismissed a lawsuit suit filed by a contract counterparty, seeking damages for a breach of a contract, because Münsterland Gruppe GmbH & Co. KG (“MGKG”) had commenced a German insolvency proceeding.
Specifically, the U.S. District Court recognized MGKG’s German insolvency proceeding and the relief accorded to a debtor under German insolvency law under principles of comity, including a moratorium barring all litigations against a German debtor and a German law requirement that all claims against a German debtor must be adjudicated in a central German forum. In so ruling, the U.S. District Court summarily rejected as “absurd” the need for recognition under Chapter 15 of the U.S. Bankruptcy Code of MGKG’s German insolvency proceeding. And so, by implication, the Moyal Court treated Chapter 15 and the relief it offers as a kind of discretionary alternative to general comity—despite the explicit intent behind the UNCITRAL Model Law on Insolvency, as enacted in Chapter 15, to be the “exclusive door to ancillary assistance to foreign proceedings.”
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“District Court Enforces German Stay, Ignoring Bankruptcy Code’s Chapter 15,” by Michael B. Schaedle and Evan J. Zucker was published in the September 2021 edition of The Banking Law Journal (Vol. 138, No. 8), an A.S. Pratt Publication. Reprinted with permission.