New York Bankruptcy Courts Grapple with Territorial Limits of U.S. Bankruptcy Code
Two bankruptcy court judges have taken different approaches to the issues of their ability to assert personal jurisdiction over foreign defendants, and application of U.S. laws to transactions that occur, at least in part, outside of the United States. The authors of this article discuss the decisions and the implications.
In a pair of opinions from the U.S. Bankruptcy Court for the Southern District of New York, two judges took varying approaches to the issues of (1) their ability to assert personal jurisdiction over foreign defendants, and (2) application of U.S. laws to transactions that occur, at least in part, outside of the United States.
The first opinion, from Judge Sean H. Lane, denied the defendants’ motion to dismiss a lawsuit seeking to avoid and recover money initially transferred to correspondent bank accounts in New York designated by the defendants, before being further transferred outside of the United States to complete transactions under investment agreement executed outside of the United States and governed by foreign law. On remand after a district judge ruled that the defendants’ use of correspondent banks in the United States was sufficient for the bankruptcy court to have personal jurisdiction over them, Judge Lane held that the doctrine of international comity and the presumption against extraterritoriality did not prevent application of U.S. law to avoid transfers under the Bankruptcy Code. The second opinion, from Judge James L. Garrity, Jr., dismissed a bankruptcy trustee’s claims to avoid and recover transfers under U.S. bankruptcy law that occurred entirely outside the territory of the United States.
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“New York Bankruptcy Courts Grapple with Territorial Limits of U.S. Bankruptcy Code,” by Rick Antonoff, Michael B. Schaedle, Bryan J. Hall, and Matthew E. Kaslow was published in the June 2018 edition of Pratt’s Journal of Bankruptcy Law, an A.S. Pratt Publication, LexisNexis. Reprinted with permission.
This article was first published in the March 2018 edition of Mainbrace, Blank Rome’s quarterly maritime newsletter.