Jun 13, 2013
New York Bankruptcy & Reorganization partner Douglas P. Bartner and New York Bankruptcy & Reorganization associates Robert A. Britton and Doreen Xia published an article, “Second Circuit Decides Key Issue of Statutory Interpretation Under Chapter 15 of the Bankruptcy Code,” on June 13, 2013 on the Bloomberg Services and in the June 13, 2013 issue of Bloomberg BNA's Bankruptcy Law Reporter.
The Second Circuit’s decision in In re Fairfield Sentry resolved a split of authority among lower courts in the Southern District of New York regarding which point in time a court presented with a request for recognition of a foreign proceeding should examine to determine the situs of a foreign debtor’s center of main interests (“COMI”). Reviewing the plain language of section 1517 of the Bankruptcy Code, the Second Circuit held that a chapter 15 debtor’s COMI should be determined as of its chapter 15 petition date, rather than as of the foreign proceeding commencement date, because the statute is written in the present tense. The Court recognized, however, that a debtor may make a bad faith attempt to shift its COMI by commencing a liquidation proceedings in a jurisdiction where it maintains little or no prepetition connection. To discourage this practice, the Second Circuit also held that courts may consider the period between the commencement of the foreign proceeding and the chapter 15 petition date to determine whether a debtor manipulated its COMI.