By: Scott B. Riddle, Esq.

Empire Marble and Granite v. Antonio Adinolfi (In re Rosacometta, S.R.L)., No. 06-14003, 2007 U.S. App. LEXIS 15720 (11th Cir. June 29, 2007).  Creditors obtained a state court judgment against an Italian company.  After the Italian company filed a bankruptcy action in Italy, the debtor’s representative filed an ancillary bankruptcy proceeding in the United States Bankruptcy Court and asked the court to enjoin  the creditors from enforcing the claim against the debtor except in the Italian Bankruptcy court, pursuant to 11 U.S.C. § 304 (now 11 U.S.C. §1501, et seq.). 

The Bankruptcy Court granted the injunction. The Eleventh Circuit affirmed —

The bankruptcy court did not abuse its discretion in weighing the § 304(c) factors and granting § 304(b) relief. Before exercising the § 304(b) relief, the bankruptcy court was required by the Bankruptcy Code to consider § 304(c) factors, including the (1) just treatment of all claim holders in the estate; (2) protection of United States claim holders against prejudice and inconvenience in foreign bankruptcy proceeding; (3) prevention of preferential or fraudulent dispositions of the estate; (4) distribution of the estate substantially in accordance with United States bankruptcy code; and (5) comity. While comity is the ultimate consideration, it does not automatically override the other statutory factors. Treco, 240 F.3d at 156. Comity should not be withheld unless it is against the interests of the United States. Cunard S.S. Co. Ltd. v. Salen Reefer Services AB, 773 F.2d 452, 457 (2d Cir. 1985).

… Prejudice is just one of five factors for the court to consider, and not even the “ultimate” factor. See Treco, 240 F.3d at 156. In this case, the other factors, including comity, weigh in favor of granting Rosacometta relief. Therefore, given the unique facts of this case and the equities involved, we can find no abuse of discretion.

Furthermore, under § 304(b), the bankruptcy court is given broad powers to grant relief to a foreign debtor who is in bankruptcy proceedings in a foreign jurisdiction. The bankruptcy court is permitted to enjoin the commencement or continuation of collection actions against a foreign debtor involved in a foreign bankruptcy proceeding. 11 U.S.C. § 304(b)(1). Section 304(b)(2) permits the turn over of property of a foreign debtor’s estate to a foreign representative, while § 304(b)(3) allows the court to order “other appropriate relief.” Given this broad grant of power, the bankruptcy court was within its jurisdiction in issuing the order to enjoin the collection action by domestic creditors and turn over the funds to the foreign representative.