     11-4376-cv
     Morning Mist Holdings Ltd. v. Krys

 1                       UNITED STATES COURT OF APPEALS
 2
 3                           FOR THE SECOND CIRCUIT
 4
 5                               August Term, 2012
 6
 7
 8     (Argued: November 19, 2012            Decided: April 16, 2013)
 9
10                               Docket No. 11-4376
11
12   - - - - - - - - - - - - - - - - - - - -x
13
14   In the Matter of: Fairfield Sentry Limited,
15
16                     Debtor,
17
18   MORNING MIST HOLDINGS LIMITED, MIGUEL LOMELI,
19
20                     Appellants,
21
22               - v.-
23
24   KENNETH KRYS, CHRISTOPHER STRIDE,
25
26                     Appellees.
27
28   - - - - - - - - - - - - - - - - - - - -x
29

30         Before:           JACOBS, Chief Judge, WINTER, Circuit
31                           Judge, SWAIN, District Judge.*
32
33         Morning Mist Holdings Limited and Miguel Lomeli appeal

34   from the judgment of the United States District Court for

35   the Southern District of New York (Daniels, J.), affirming


           *
             The Honorable Laura Taylor Swain, United States
     District Judge for the Southern District of New York,
     sitting by designation.
1    the order of the United States Bankruptcy Court for the

2    Southern District of New York (Lifland, J.), which

3    determined that the debtor in this case, Fairfield Sentry

4    Limited, had its center of main interests in the British

5    Virgin Islands, and therefore recognized Fairfield Sentry’s

6    liquidation in the British Virgin Islands as a “foreign main

7    proceeding” under 11 U.S.C. § 1517.    We affirm.

 8                                 ROBERT A. WALLNER, Milberg LLP,
 9                                 New York, New York (Kent A.
10                                 Bronson, on the brief; Stephen
11                                 A. Weiss, Seeger Weiss LLP, New
12                                 York, New York, on the brief),
13                                 for Appellants.
14
15                                 DAVID J. MOLTON, Brown Rudnick
16                                 LLP, New York, New York (Daniel
17                                 J. Saval, May Orenstein, Kerry
18                                 L. Quinn, on the brief), for
19                                 Appellees.
20
21   DENNIS JACOBS, Chief Judge:
22
23       The question presented is where the debtor in this

24   bankruptcy proceeding had its “center of main interests”

25   within the meaning of Chapter 15 of the Bankruptcy Code

26   (enacted as part of the Bankruptcy Abuse Prevention and

27   Consumer Protection Act of 2005).    The answer determines

28   whether the pending foreign bankruptcy proceeding is a

29   “foreign main proceeding,” in which event U.S. proceedings

30   against the debtor are stayed.     Morning Mist Holdings

                                    2
1    Limited and Miguel Lomeli (collectively, “Morning Mist”)

2    appeal from the judgment of the United States District Court

3    for the Southern District of New York (Daniels, J.),

4    affirming the order of the United States Bankruptcy Court

5    for the Southern District of New York (Lifland, J.), which

6    determined that the debtor, Fairfield Sentry Limited

7    (“Sentry”), had its “center of main interests” in the

8    British Virgin Islands (“BVI”), and therefore recognized

9    Sentry’s liquidation in the BVI as a “foreign main

10   proceeding” under 11 U.S.C. § 1517.   For the following

11   reasons, we affirm.

12       To determine the proper “center of main interests”

13   (“COMI,” as the term is abbreviated by the parties and other

14   courts), we consider the relevant time period for weighing

15   the interests, and the principles and factors for

16   determining which jurisdiction predominates.   We conclude

17   (as did the bankruptcy court and the district court) that

18   the relevant time period is the time of the Chapter 15

19   petition, subject to an inquiry into whether the process has

20   been manipulated.   The relevant principle (for which we

21   consult foreign law, as directed by the statute) is that the

22   COMI lies where the debtor conducts its regular business, so



                                   3
1    that the place is ascertainable by third parties.   The

2    statute includes a presumption that the COMI is where the

3    debtor’s registered office is found.   Among other factors

4    that may be considered are the location of headquarters,

5    decision-makers, assets, creditors, and the law applicable

6    to most disputes.

7

8                             BACKGROUND

9        Sentry was organized in 1990 as an International

10   Business Company under the laws of the BVI.   From 1990 until

11   Bernard Madoff’s arrest on December 11, 2008, Sentry was the

12   largest of the “feeder funds” that invested with Bernard L.

13   Madoff Investment Securities LLC (“BLMIS”).   Roughly 95% of

14   Sentry’s assets were invested with BLMIS, totaling over $7

15   billion.

16       Pursuant to its Memorandum of Association, Sentry

17   administered its business interests from the BVI, where its

18   registered office, registered agent, registered secretary,

19   and corporate documents, among other things, were located.

20   Sentry’s Board of Directors oversaw the management, with

21   day-to-day operations handled by an investment manager,




                                  4
1    Fairfield Greenwich Group (“FGG”), based in New York.2

2    Sentry’s three directors, Walter Noel, Jr., Jan Naess, and

3    Peter Schmid, resided in New York, Oslo, and Geneva,

4    respectively.

5        When Madoff was arrested, Sentry’s two independent

6    directors, Naess and Schmid, suspended all share

7    redemptions.    (Noel was recused from that meeting as the

8    owner and principal of FGG, Sentry’s investment manager.)

9    Over the ensuing months, Naess and Schmid focused on winding

10   down Sentry’s business and preserving assets in anticipation

11   of litigation and bankruptcy.       From December 2008 to July

12   2009 (when Sentry entered liquidation in the BVI), they

13   participated in approximately 44 teleconference board

14   meetings initiated by Sentry’s registered agent in the BVI.

15   During this time, Naess and Schmid advised Sentry’s

16   shareholders as to measures being taken in response to the

17   Madoff scandal.   That correspondence issued from Sentry’s

18   address in the BVI, as shown on the letterhead.

19       In February 2009, Naess and Schmid constituted

20   themselves as a litigation committee with the authority to


          2
             Fairfield Greenwich (Bermuda) Ltd., a member company
     of FGG, served as Sentry’s investment manager. We refer to
     those entities collectively as “FGG.”
                                     5
1    (among other things) consider, commence, and settle

2    litigation to be taken by or against Sentry.   Sentry would

3    subsequently become engulfed in lawsuits.

4        In May 2009, Morning Mist, a Sentry shareholder, filed

5    a derivative action in New York state court, claiming that

6    Sentry’s directors, management, and service providers

7    breached duties to Sentry (the “derivative action”).1

8        Back in the BVI, ten of Sentry’s shareholders applied

9    for the appointment of a liquidator.   On July 21, 2009, the

10   High Court of Justice of the Eastern Caribbean Supreme Court

11   (the “BVI court”) entered an order which commenced Sentry’s

12   liquidation proceedings under the Virgin Islands Insolvency

13   Act of 2003.   The order appointed Kenneth Krys and

14   Christopher Stride (from the BVI liquidation firm of Krys

15   and Associates) as liquidator,2 and gave the liquidator

16   “custody and control of all the assets of the Company.”

17       On June 14, 2010, pursuant to an order of the BVI

18   court, the liquidator petitioned the United States

          1
             Later that month, Sentry would file a direct lawsuit
     in New York state court against its investment manager, FGG,
     and FGG’s affiliates.
          2
             Stride later resigned and was replaced by Joanna
     Lau, who herself then resigned. Krys is currently Sentry’s
     sole liquidator and the appellee in this case (hereafter
     referred to as the “liquidator”).
                                   6
1    Bankruptcy Court in the Southern District of New York

2    (Lifland, J.) for recognition of the BVI liquidation

3    proceedings under Chapter 15 of the Bankruptcy Code (the

4    “Chapter 15 petition”).3

5        As of that date, Sentry’s liquid assets consisted of

6    approximately $73 million in Ireland, $22 million in the

7    United Kingdom, and $17 million in the BVI.     Its other

8    assets were claims and causes of action, including claims

9    for approximately: $6 billion in customer funds under the

10   Securities Investor Protection Act; $3 billion from Madoff

11   customers who profited from redemptions in New York; and

12   $150 million in similar redemption claims in the BVI.       Other

13   proceedings were commenced in the Netherlands and Ireland.

14   The litigations were undertaken under the supervision of the

15   BVI court and with the assistance of the liquidator’s

16   BVI-based counsel.

17       On July 22, 2010, the bankruptcy court granted the

18   liquidator’s Chapter 15 recognition petition.    In

19   determining Sentry’s COMI for purposes of Chapter 15, the

20   bankruptcy court examined the period between December 2008,


          3
             Recognition of a foreign proceeding under Chapter 15
     can have the effect of staying all other actions against the
     debtor in the United States, as explained in Part I below.
                                  7
1    when Sentry stopped doing business, and June 2010, when the

2    Chapter 15 petition was filed.    The bankruptcy court

3    determined that Sentry’s “COMI for the purpose of

4    recognition as a main proceeding is in the BVI, and not

5    elsewhere,” and therefore recognized the BVI liquidation as

6    a “foreign main proceeding” under 11 U.S.C. § 1517(b)(1).

7    Modified Bench Mem. & Order Granting Chapter 15 Petitions of

8    Fairfield Sentry Ltd., Fairfield Sigma Ltd. & Fairfield

9    Lambda Ltd. for Recognition of Foreign Proceedings, In re

10   Fairfield Sentry Ltd., No. 10-13164(BRL), at 6 (Bankr.

11   S.D.N.Y. July 30, 2010) (hereinafter “Bankr. Order”).

12       Pursuant to 11 U.S.C. § 1520, recognition of the BVI

13   liquidation as a foreign main proceeding imposed an

14   automatic stay on any other proceedings against Sentry in

15   the United States--including the derivative action brought

16   by Morning Mist.   Id. at 9 (recognizing automatic stay); see

17   also 11 U.S.C. § 1520(a)(1) (imposing automatic stay from 11

18   U.S.C. § 362).   The bankruptcy court concluded in the

19   alternative that even if the BVI liquidation was a “nonmain”

20   proceeding (in which a stay would not be automatic), a stay

21   of the derivative action was appropriate under 11 U.S.C.

22   § 1521, which allows for such relief.   Bankr. Order at 9-11.



                                   8
1        Morning Mist appealed the bankruptcy court’s order to

2    the district court.   On September 16, 2011, the United

3    States District Court for the Southern District of New York

4    (Daniels, J.) affirmed, holding that the bankruptcy court

5    properly considered Sentry’s administrative activities in

6    its COMI analysis, and correctly considered Sentry’s COMI as

7    of the filing of the Chapter 15 petition (not over its 18

8    year operational history).     Mem. Decision & Order, In re

9    Fairfield Sentry Ltd., No. 10 Civ. 7311(GBD), at 7-12

10   (S.D.N.Y. Sept. 16, 2011).     Morning Mist had argued there

11   (as it argues here) that recognition of the BVI liquidation

12   would be manifestly contrary to U.S. public policy, and was

13   therefore barred by 11 U.S.C. § 1506, because the court

14   records in the BVI liquidation were sealed.    The argument

15   was rejected on the ground that the right of public access

16   to court records is not absolute.    Id. at 14-17.

17       Imposition of the automatic stay was affirmed,

18   including the stay of Morning Mist’s derivative action

19   against Sentry.   Id. at 18.    Morning Mist timely appealed.

20

21

22


                                     9
1                              DISCUSSION

2        We review an appeal from a district court’s affirmance

3    of a bankruptcy court decision “independently,” accepting

4    the bankruptcy court’s factual findings unless clearly

5    erroneous, and reviewing the bankruptcy court’s legal

6    conclusions de novo.   In re Enron Corp., 419 F.3d 115, 124

7    (2d Cir. 2005) (quoting In re AroChem Corp., 176 F.3d 610,

8    620 (2d Cir. 1999)).

9

10                                 I
11
12       Chapter 15 of the Bankruptcy Code was enacted in 2005

13   as part of the Bankruptcy Abuse Prevention and Consumer

14   Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23

15   (codified at 11 U.S.C. §§ 1501-1532).   Its goal “is to

16   incorporate the Model Law on Cross-Border Insolvency so as

17   to provide effective mechanisms for dealing with cases of

18   cross-border insolvency,” while promoting international

19   cooperation, legal certainty, fair and efficient

20   administration of cross-border insolvencies, protection and

21   maximization of debtors’ assets, and the rescue of

22   financially troubled businesses.   11 U.S.C. § 1501(a).

23


                                   10
1        Chapter 15 is derived from the Model Law promulgated by

2    the United Nations Commission on International Trade Law

3    (“UNCITRAL”), and it instructs that “[i]n interpreting

4    [Chapter 15], the court shall consider its international

5    origin, and the need to promote an application of this

6    chapter that is consistent with the application of similar

7    statutes adopted by foreign jurisdictions.”   11 U.S.C.

8    § 1508.   The legislative history accompanying the passage of

9    Chapter 15 recommends the Guide to Enactment of the Model

10   Law, promulgated by UNCITRAL, “for guidance as to the

11   meaning and purpose of [the Model Law’s] provisions.”     H.R.

12   Rep. No. 109-31, pt. 1, at 106 n.101 (2005) (hereinafter

13   “House Report”).3

14       The recognition of foreign proceedings is governed by

15   Sections 1515 through 1524.   Under Section 1517, “an order

16   recognizing a foreign proceeding shall be entered if--(1)

17   such foreign proceeding . . . is a foreign main proceeding

18   or foreign nonmain proceeding within the meaning of section


          3
             See also id. at 109-10 (“Uniform interpretation will
     also be aided by reference to CLOUT, the UNCITRAL Case Law
     On Uniform Texts . . . . Not only are these sources
     persuasive, but they advance the crucial goal of uniformity
     of interpretation. To the extent that the United States
     courts rely on these sources, their decisions will more
     likely be regarded as persuasive elsewhere.”).
                                   11
1    1502; (2) the foreign representative applying for

2    recognition is a person or body; and (3) the petition meets

3    the requirements of section 1515.”     11 U.S.C. § 1517(a).

4    There is no dispute that the second and third requirements

5    are met here.   The only point at issue is whether the BVI

6    liquidation qualifies as a foreign main or nonmain

7    proceeding.

8        Section 1502 defines a foreign main proceeding as a

9    “foreign proceeding pending in the country where the debtor

10   has the center of its main interests,” and defines a foreign

11   nonmain proceeding as a “foreign proceeding, other than a

12   foreign main proceeding, pending in a country where the

13   debtor has an establishment.”4     11 U.S.C. § 1502(4)-(5).

14   The statute does not define COMI.     It does, however,

15   establish a presumption: “In the absence of evidence to the

16   contrary, the debtor’s registered office . . . is presumed

17   to be the center of the debtor’s main interests.”     11 U.S.C.

18   § 1516(c).

19       Upon recognition of a foreign main proceeding, Section

20   1520 provides certain automatic, nondiscretionary relief,


          4
             “Establishment” is defined as “any place of
     operations where the debtor carries out a nontransitory
     economic activity.”   11 U.S.C. § 1502(2).
                                   12
1    including an automatic stay of all proceedings against the

2    debtor in the United States.    11 U.S.C. § 1520(a).   A

3    discretionary stay is also available under Section 1521,

4    regardless of whether a foreign main proceeding is

5    recognized.   11 U.S.C. § 1521(a).

6        Finally, Section 1506 provides an overriding public

7    policy exception to all of Chapter 15: “Nothing in this

8    chapter prevents the court from refusing to take an action

9    governed by this chapter if the action would be manifestly

10   contrary to the public policy of the United States.”       11

11   U.S.C. § 1506.

12

13                                  II
14
15       Few courts have considered the meaning of COMI under

16   Chapter 15, especially with respect to the time frame and

17   the factors that bear on the question.5

18       A.   Relevant Time Period

19       Morning Mist argues that the bankruptcy court should


          5
             We have only mentioned Chapter 15 in cases where
     Section 304 of the Bankruptcy Code, the predecessor
     provision to Chapter 15, applied. See, e.g., In re Bd. of
     Dirs. of Telecom Arg., S.A., 528 F.3d 162, 169 (2d Cir.
     2008) (noting that Section 304 controls because the
     bankruptcy petition was filed prior to Chapter 15’s
     effective date).
                                    13
1    have looked at Sentry’s entire operational history, while

2    the liquidator advocates affirmance of the determinations

3    that COMI should be considered as of the filing of the

4    Chapter 15 petition.     To identify the time frame relevant to

5    the COMI determination, we consider: (1) the text of the

6    statute; (2) guidance from other federal courts; and (3)

7    international sources.     We conclude that a debtor’s COMI is

8    determined as of the time of the filing of the Chapter 15

9    petition.   To offset a debtor’s ability to manipulate its

10   COMI, a court may also look at the time period between the

11   initiation of the foreign liquidation proceeding and the

12   filing of the Chapter 15 petition.

13       Statutory Text.    Chapter 15 does not define COMI.

14   Section 1517 provides that a “foreign proceeding shall be

15   recognized . . . as a foreign main proceeding if it is

16   pending in the country where the debtor has the center of

17   its main interests.”     11 U.S.C. § 1517(b) (emphases added).

18       The present tense suggests that a court should examine

19   a debtor’s COMI at the time the Chapter 15 petition is

20   filed.   “Consistent with normal usage, we have frequently

21   looked to Congress’ choice of verb tense to ascertain a

22   statute’s temporal reach.”     Carr v. United States, 130 S.


                                     14
1    Ct. 2229, 2236 (2010); see also Dobrova v. Holder, 607 F.3d

2    297, 301 (2d Cir. 2010) (relying on Congress’s use of

3    present perfect tense in statutory construction).     In In re

4    AroChem Corp., we were guided by the tense used in a

5    provision of the Bankruptcy Code allowing bankruptcy

6    trustees to hire professionals (e.g., lawyers, accountants),

7    as long as the professionals “‘do not hold or represent an

8    interest adverse to the estate.’”    In re AroChem Corp., 176

9    F.3d 610, 623 (2d Cir. 1999) (quoting 11 U.S.C. § 327(a))

10   (emphasis added).   The present tense signified that an

11   estate’s counsel would not be disqualified based on past or

12   future representations.   Id.

13       It therefore matters that the inquiry under Section

14   1517 is whether a foreign proceeding “is pending in the

15   country where the debtor has the center of its main

16   interests.”   11 U.S.C. § 1517(b)(1) (emphases added).

17   In this light, we reject Morning Mist’s invitation for us to

18   consider the debtor’s entire operational history.     Likewise,

19   a COMI determination based on the date of the initiation of

20   the foreign proceeding is not compelled by the statute.      A

21   foreign proceeding “is pending,” 11 U.S.C. § 1517(b)(1)

22   (emphasis added), only after it has been commenced.      Under


                                     15
1    the text of the statute, therefore, the filing date of the

2    Chapter 15 petition should serve to anchor the COMI

3    analysis.

4        Other Federal Courts.   Nearly every federal court to

5    address this question has determined that COMI should be

6    considered as of the time the Chapter 15 petition is filed.

7        Among circuit courts, only the Fifth has specifically

8    decided the question.   The argument that the COMI

9    determination should be made with regard to the debtor’s

10   operational history was rejected in In re Ran:

11       Every operative verb is written in the present or
12       present progressive tense. . . . Congress’s choice to
13       use the present tense requires courts to view the COMI
14       determination in the present, i.e. at the time the
15       petition for recognition was filed. If Congress had,
16       in fact, intended bankruptcy courts to view the COMI
17       determination through a look-back period or on a
18       specific past date, it could have easily said so.
19
20   In re Ran, 607 F.3d 1017, 1025 (5th Cir. 2010).      The court

21   highlighted a provision in the Bankruptcy Code that

22   explicitly includes a look-back period (11 U.S.C. §

23   522(b)(3)(A)), as was not done in Chapter 15.     Id.

24       The Fifth Circuit observed that its approach would

25   advance Congress’s purpose of harmonizing transnational

26   insolvency proceedings because looking at a company’s full

27   operational history could make it more difficult to pinpoint

                                   16
1    a single COMI: “In fact, a meandering and never-ending

2    inquiry into the debtor’s past interests could lead to a

3    denial of recognition in a country where a debtor’s

4    interests are truly centered, merely because he conducted

5    past activities in a country at some point well before the

6    petition for recognition was sought.”   Id.

7        For similar reasons, the Fifth Circuit emphasized that

8    third parties (primarily creditors) should be able to

9    ascertain a debtor’s COMI.   Id. at 1025-26.   We agree.6

10       The Fifth Circuit left open the possibility (albeit in

11   dicta) of looking at a broader time frame in order to

12   frustrate possible bad-faith COMI manipulation:

13       Lastly, we note that this case does not involve a
14       recent change of domicile by the [debtor] in question.
15       A similar case brought immediately after the party’s
16       arrival in the United States following a long period of
17       domicile in the country where the bankruptcy is pending
18       would likely lead to a different result.
19
20   Id. at 1026.

21       Most courts in this Circuit and throughout the country

22   appear to have examined a debtor’s COMI as of the time of

          6
             The Fifth Circuit pointed to English cases “which
     seem to select a time linked to the commencement or service
     of the relevant insolvency proceeding.” Id. at 1026
     (emphasis added). But the italicized phrase is (at least)
     ambiguous, a matter not resolved by the Fifth Circuit. We
     consider international law on this point in the following
     section.
                                   17
1    the Chapter 15 petition.     See, e.g., In re Fairfield Sentry

2    Ltd., No. 10 Civ. 7311(GBD), 2011 WL 4357421, at *6

3    (S.D.N.Y. Sept. 16, 2011); In re British Am. Isle of Venice

4    (BVI), Ltd., 441 B.R. 713, 720-21 (Bankr. S.D. Fla. 2010);

5    In re British Am. Ins. Co., 425 B.R. 884, 909-10 (Bankr.

6    S.D. Fla. 2010); In re Betcorp Ltd., 400 B.R. 266, 290-92

7    (Bankr. D. Nev. 2009).     But there have certainly been courts

8    that have taken a different approach.      See, e.g., In re

9    Millennium Global Emerging Credit Master Fund Ltd., 474 B.R.

10   88, 92 (S.D.N.Y. 2012) (recognizing bankruptcy court’s

11   conclusion that “COMI should be determined as of the date of

12   the commencement of the foreign proceeding, rather than--as

13   most of the courts that have looked at the issue have

14   concluded--the date on which the Chapter 15 petition was

15   filed”).

16       Morning Mist, taking a cue from a prominent bankruptcy

17   court decision, suggests that we should employ the American

18   jurisdictional concept of “principal place of business” when

19   considering COMI, which would thus require consideration of

20   a debtor’s operational history.      Appellants’ Br. 33 (citing

21   In re Millennium Global Emerging Credit Master Fund Ltd.,

22   458 B.R. 63, 72 (Bankr. S.D.N.Y. 2011)).     In In re



                                     18
1    Millennium Global, the bankruptcy court suggested

2    substituting principal place of business for COMI, in which

3    case “it is obvious that the date for determining an

4    entity’s place of business refers to the business of the

5    entity before it was placed into liquidation.”   458 B.R. at

6    72.   In support, the bankruptcy court quoted a law review

7    article by one of the drafters of Chapter 15.    Id.    The

8    quoted text, however, supports the contrary view: Congress’s

9    decision to use the term “COMI” instead of “principal place

10   of business” was intentional:

11         Chapter 15 was drafted to follow the Model Law as
12         closely as possible, with the idea of encouraging other
13         countries to do the same. One example is use of the
14         phrase “center of main interests,” which could have
15         been replaced by “principal place of business” as a
16         phrase more familiar to American judges and lawyers.
17         The drafters of Chapter 15 believed, however, that such
18         a crucial jurisdictional test should be uniform around
19         the world and hoped that its adoption by the United
20         States would encourage other countries to use it as
21         well.
22
23   Jay Lawrence Westbrook, Chapter 15 At Last, 79 Am. Bankr.

24   L.J. 713, 719-20 (2005).

25         As further support for the analogy to principal place

26   of business, the bankruptcy court in In re Millennium Global

27   pointed to Chapter 15’s predecessor, Section 304 of the

28   Bankruptcy Code.   458 B.R. at 73.   Section 304, now


                                     19
1    repealed, allowed a party to commence a proceeding in U.S.

2    bankruptcy court “ancillary” to a “foreign proceeding” and

3    defined “foreign proceeding” as a proceeding “in a foreign

4    country in which the debtor’s domicile, residence, principal

5    place of business, or principal assets were located at the

6    commencement of such proceeding.”     11 U.S.C. § 101(23)

7    (2000).   That wording looks to a debtor’s principal place of

8    business at the time of the commencement of the foreign

9    liquidation proceeding.   But while the concept may be useful

10   in adducing factors that point to a COMI, Congress abandoned

11   that provision in enacting Chapter 15.

12       International Interpretations.     Congress instructed

13   that “[i]n interpreting [Chapter 15], the court shall

14   consider its international origin, and the need to promote

15   an application of this chapter that is consistent with the

16   application of similar statutes adopted by foreign

17   jurisdictions.”   11 U.S.C. § 1508.   Legislative history

18   points to the Guide to Enactment of the UNCITRAL Model Law

19   on Cross-Border Insolvency (the “UNCITRAL Guide”) “for

20   guidance as to the meaning and purpose of [Chapter 15’s]

21   provisions.”   House Report at 106 n.101.   Although the

22   statutory text controls, first and ultimately, we consider



                                   20
1    international sources to the extent they help us carry out

2    the congressional purpose of achieving international

3    uniformity in cross-border insolvency proceedings.

4        The UNCITRAL Guide, which does not define COMI,

5    indicates that the concept was drawn from the European Union

6    Convention on Insolvency Proceedings.    See UNCITRAL Guide

7    ¶¶ 31, 72.    In turn, the European Union Council Regulation

8    enacting the Convention on Insolvency Proceedings provides

9    some guidance: “The ‘centre of main interests’ should

10   correspond to the place where the debtor conducts the

11   administration of his interests on a regular basis and is

12   therefore ascertainable by third parties.”    Council

13   Regulation (EC) No 1346/2000 of 29 May 2000, Preamble ¶ 13

14   (emphases added) (hereinafter “EU Regulation”).   Like the

15   U.S. statute, the EU Regulation employs the present tense.

16   The focus on regularity and ascertainability should also

17   inform our interpretation of the text.   The reference to the

18   debtor’s administration “on a regular basis,” however, could

19   suggest a potentially broader time frame.

20       But the EU Regulation does not operate as an analog to

21   Chapter 15.   Under the EU Regulation, a main insolvency

22   proceeding in one EU member state is automatically


                                    21
1    recognized by all other EU member states.   See EU Regulation

2    art. 16.   So the EU has no need for a recognition petition

3    such as provided under Chapter 15.   (Because the United

4    States and the BVI are not parties to an agreement on the

5    subject and are not otherwise governed by a common legal

6    framework, a debtor must file a Chapter 15 petition in the

7    United States for the BVI proceeding to be recognized).7

8    Although the EU Regulation might refer to a broader time

9    frame for considering a debtor’s COMI, it is not a fit for

10   construing Chapter 15.

11       Relevant European case law interpreting COMI appears to

12   generally focus on whether a debtor’s COMI is regular and

13   ascertainable, as suggested by the EU Regulation.   For

14   example, in In re Eurofood IFSC Ltd., the Court of Justice

15   of the European Union focused on “criteria that are both

16   objective and ascertainable by third parties” to determine a

          7
             In In re Millennium Global, the bankruptcy court
     observed that “[t]he EU Regulation does not contemplate the
     commencement of a separate ancillary proceeding to seek
     recognition of a foreign insolvency case, as in the Model
     Law and chapter 15, as the members of the Union are
     automatically required to recognize foreign proceedings from
     the date of their opening.” 458 B.R. at 74. But that
     conclusion does not persuade us that we should determine
     COMI under Chapter 15 based on the date of commencement of
     the foreign proceeding as the bankruptcy court held in that
     case; rather, it suggests that the EU Regulation may be a
     poor analog for interpreting Chapter 15.
                                   22
1    debtor’s COMI.   In re Eurofood IFSC Ltd., Case C-341/04,

2    2006 E.C.R. I-3813, 2006 WL 1142304, ¶ 33 (E.C.J. 2006).

3    Likewise, in In re Stanford International Bank Ltd., the

4    England and Wales Court of Appeal (Civil Division) looked to

5    whether third parties could ascertain a debtor’s COMI,

6    specifically by examining factors “in the public domain.”

7    In re Stanford Int’l Bank Ltd., Case No. A3/2009/1565 &

8    1643, 2010 EWCA Civ 137, 2010 WL 605796, ¶¶ 54-56 (Ct. of

9    Appeal 2010).    These interpretations also reflect a concern

10   about possible COMI manipulation.    See, e.g., In re Eurofood

11   IFSC Ltd., 2006 WL 1142304, ¶ 35 (indicating concern with a

12   “‘letterbox’ company not carrying out any business in the

13   territory of the Member State in which its registered office

14   is situated”).   A COMI that is regular and ascertainable is

15   not easily subject to tactical removal.

16       Overall, international sources are of limited use in

17   resolving whether U.S. courts should determine COMI at the

18   time of the Chapter 15 petition or in some other way.

19                                * * *

20

21       We therefore hold that a debtor’s COMI should be

22   determined based on its activities at or around the time the



                                    23
1    Chapter 15 petition is filed, as the statutory text

2    suggests.    But given the EU Regulation and other

3    international interpretations, which focus on the regularity

4    and ascertainability of a debtor’s COMI, a court may

5    consider the period between the commencement of the foreign

6    insolvency proceeding and the filing of the Chapter 15

7    petition to ensure that a debtor has not manipulated its

8    COMI in bad faith.

9        B.      COMI Factors

10       The parties also dispute what factors are relevant for

11   locating a COMI.     Morning Mist argues that Sentry’s

12   liquidation activities are irrelevant to the COMI

13   determination; the liquidator responds that these activities

14   and the fact of the BVI proceedings are the kind of

15   objective criteria that can be ascertained by third parties,

16   and are therefore critical.     We hold that any relevant

17   activities, including liquidation activities and

18   administrative functions, may be considered in the COMI

19   analysis.

20

21       Chapter 15 creates a rebuttable presumption that the

22   country where a debtor has its registered office will be its


                                     24
1    COMI: “In the absence of evidence to the contrary, the

2    debtor’s registered office, or habitual residence in the

3    case of an individual, is presumed to be the center of the

4    debtor’s main interests.”   11 U.S.C. § 1516(c).   But federal

5    courts have focused on a variety of other factors as well.

6    The United States Bankruptcy Court for the Southern District

7    of New York has developed a widely adopted list of COMI

8    factors--warning, however, against mechanical application:

 9       Various factors, singly or combined, could be relevant
10       to such a determination: the location of the debtor’s
11       headquarters; the location of those who actually manage
12       the debtor (which, conceivably could be the
13       headquarters of a holding company); the location of the
14       debtor’s primary assets; the location of the majority
15       of the debtor’s creditors or of a majority of the
16       creditors who would be affected by the case; and/or the
17       jurisdiction whose law would apply to most disputes.
18
19   In re SPhinX, Ltd., 351 B.R. 103, 117 (Bankr. S.D.N.Y.

20   2006).   This nonexclusive list is a helpful guide, but

21   consideration of these specific factors is neither required

22   nor dispositive.

23       The SPhinX court and other federal courts have also

24   turned to international law, as directed by Congress.     See,

25   e.g., In re SPhinX, Ltd., 351 B.R. at 118; In re

26   Tri-Continental Exch. Ltd., 349 B.R. 627, 634 (Bankr. E.D.

27   Cal. 2006).   As discussed in Part II.A above, the EU



                                   25
1    Regulation enacting the European Union Convention on

2    Insolvency explains that COMI “should correspond to the

3    place where the debtor conducts the administration of his

4    interests on a regular basis and is therefore ascertainable

5    by third parties.”   EU Regulation, Preamble ¶ 13.   While

6    this guidance may have been of limited utility in resolving

7    the timing question discussed in Part II.A, it underscores

8    the importance of factors that indicate regularity and

9    ascertainability.8

10       The absence of a statutory definition for a term that

11   is not self-defining signifies that the text is open-ended,

12   and invites development by courts, depending on facts

13   presented, without prescription or limitation.

14

15                                III

          8
             As mentioned above, the bankruptcy court in In re
     Millennium Global employed the concept of “principal place
     of business” to guide its COMI analysis. Accordingly, it
     applied the Supreme Court’s recent definition of that
     concept, which looks at a corporation’s “nerve center,”
     i.e., “where a corporation’s officers direct, control, and
     coordinate the corporation’s activities.” Hertz Corp. v.
     Friend, 130 S. Ct. 1181, 1192 (2010). Given Congress’s
     choice to use COMI instead of “principal place of business,”
     that concept does not control the analysis. But to the
     extent that the concepts are similar, a court may certainly
     consider a debtor’s “nerve center,” including from where the
     debtor’s activities are directed and controlled, in
     determining a debtor’s COMI.
                                   26
1
2        Applying the principles set out above, we affirm the

3    decision of the district court (which affirmed the

4    bankruptcy court) recognizing the BVI liquidation as a

5    foreign main proceeding.

6        In a nutshell: for a proceeding to be recognized as a

7    “foreign main proceeding,” it must be “pending in the

8    country where the debtor has the center of its main

9    interests.”   11 U.S.C. § 1517(b)(1).   That determination is

10   based on a debtor’s COMI at the time the Chapter 15 petition

11   is filed.   A court may look at the period between the

12   commencement of the foreign proceeding and the filing of the

13   Chapter 15 petition to ensure that a debtor has not

14   manipulated its COMI in bad faith, but there is no support

15   for Morning Mist’s contention that a debtor’s entire

16   operational history should be considered.   The factors that

17   a court may consider in this analysis are not limited and

18   may include the debtor’s liquidation activities.

19       The bankruptcy court made factual findings that place

20   Sentry’s COMI in the BVI during the relevant time period:

21       Upon the revelation of the notorious Madoff fraud in
22       December of 2008, the Debtors discontinued the transfer
23       of funds for investment with BLMIS in New York, which
24       comprised 95% of Sentry’s investments. The board of
25       representatives at the Debtors’ New York-based

                                   27
 1       investment managers, [FGG], resigned shortly
 2       thereafter, and the Debtors’ contracts with FGG were
 3       severed in 2009, still long before the filing of the
 4       Petition. As a result, the Debtors have no place of
 5       business, no management, and no tangible assets located
 6       in the United States. Rather, the Debtors’ activities
 7       for an extended period of time have been conducted only
 8       in connection with winding up the Debtors’
 9       business. . . . The Court finds that the facts now
10       extant provide a sufficient basis for finding that the
11       Debtors’ COMI for the purpose of recognition as a main
12       proceeding is in the BVI, and not elsewhere.
13
14   Bankr. Order at 5-6.   The court went on to find that, even

15   though Sentry had assets in other jurisdictions, the

16   administration of its affairs in the relevant time was

17   orchestrated from the BVI.   Id. at 6.   There was no finding

18   of bad-faith COMI manipulation: “the record here as to the

19   relevant time period beginning December 2008, which

20   straddles the Liquidators’ appointment dates, does not

21   support a finding of an opportunistic shift of the Debtors’

22   COMI or any biased activity or motivation to distort factors

23   to establish a COMI in the BVI.”   Id. at 8.

24       The bankruptcy court’s factual findings are not clearly

25   erroneous and support the conclusion that Sentry’s COMI was

26   in the BVI at the time of the Chapter 15 petition, and that

27   Sentry did not manipulate its COMI in bad faith between the

28   initiation of the BVI proceeding and the filing of the

29   Chapter 15 petition.   True, the relevant time period was

                                   28
1    when the Chapter 15 petition was filed (with a look backward

2    to thwart manipulation), whereas the bankruptcy court looked

3    at a longer period (beginning with Madoff’s arrest), but the

4    difference is not material.    We therefore affirm.9

5

6                                   IV
7
8        Finally, Morning Mist argues that the bankruptcy court

9    should have applied the public policy exception available

10   under 11 U.S.C. § 1506, because the BVI proceedings, which

11   are in the main confidential, were “cloaked in secrecy.”

12   Appellants’ Br. 25.

13       Section 1506 provides: “Nothing in this chapter

14   prevents the court from refusing to take an action governed

15   by this chapter if the action would be manifestly contrary

16   to the public policy of the United States.”    11 U.S.C.

17   § 1506.   This Court has not had occasion to discuss the

18   application of Section 1506.

19       The statutory wording requires a narrow reading.


          9
             Morning Mist also claims that the bankruptcy court
     erroneously stayed the derivative action that it brought
     against Sentry. Appellants’ Br. 36-37. Because we affirm
     the recognition of the BVI liquidation as a foreign main
     proceeding, the stay was automatic. See 11 U.S.C. § 1520(a)
     (imposing automatic stay on U.S. proceedings against debtor
     upon recognition of foreign main proceeding).
                                    29
1    Section 1506 does not create an exception for any action

2    under Chapter 15 that may conflict with public policy, but

3    only an action that is “manifestly contrary.”     11 U.S.C.

4    § 1506 (emphasis added).   The legislative history confirms:

 5       [Section 1506] follows the Model Law article 5 exactly,
 6       is standard in UNCITRAL texts, and has been narrowly
 7       interpreted on a consistent basis in courts around the
 8       world. The word “manifestly” in international usage
 9       restricts the public policy exception to the most
10       fundamental policies of the United States.
11
12   House Report at 109 (emphases added).     The UNCITRAL Guide

13   further explains that the exception should be read

14   “restrictively” and invoked only “under exceptional

15   circumstances concerning matters of fundamental importance

16   for the enacting State.”   UNCITRAL Guide ¶ 89.    Federal

17   courts in the United States have adopted this view.     See,

18   e.g., In re Vitro S.A.B. de CV, 701 F.3d 1031, 1069-70 (5th

19   Cir. 2012); In re Iida, 377 B.R. 243, 259 (B.A.P. 9th Cir.

20   2007); In re Ephedra Prods. Liab. Litig., 349 B.R. 333, 336

21   (S.D.N.Y. 2006); In re Toft, 453 B.R. 186, 193 (Bankr.

22   S.D.N.Y. 2011); In re Metcalfe & Mansfield Alt. Invs., 421

23   B.R. 685, 697 (Bankr. S.D.N.Y. 2010).10

          10
             Even beyond the bankruptcy context, we apply public
     policy exceptions sparingly. For example, in the judgment
     enforcement context, a foreign judgment “is unenforceable as
     against public policy to the extent that it is repugnant to
     fundamental notions of what is decent and just in the State
                                   30
1        The confidentiality of BVI bankruptcy proceedings does

2    not offend U.S. public policy.        Although the BVI liquidation

3    has proceeded under seal, Morning Mist’s assertion that they

4    are “shrouded in secrecy” is overwrought.        Appellants’

5    Br. 7.   The BVI court did seal the various applications and

6    orders in the liquidation, but public summaries have been

7    made available.   See, e.g., J.A. 445-46 (summarizing

8    applications and orders before BVI court).        Such restricted

9    access to court documents is not unusual in the BVI, as the

10   liquidator explains, because only certain limited records

11   are typically available to non-parties.        Appellees’ Br.

12   12-13.   And in all cases in the BVI, including this

13   liquidation, any non-party may apply to the court for access

14   to sealed documents.   Id.

15       In any event, Morning Mist cannot establish that

16   unfettered public access to court records is so fundamental

17   in the United States that recognition of the BVI liquidation

18   constitutes one of those exceptional circumstances

19   contemplated in Section 1506.        “[T]he right to inspect and

20   copy judicial records is not absolute.”        Nixon v. Warner



     where enforcement is sought,” but that “standard is high,
     and infrequently met.” Ackermann v. Levine, 788 F.2d 830,
     841 (2d Cir. 1986) (internal quotation marks omitted).
                                     31
1    Commc’ns, Inc., 435 U.S. 589, 598 (1978).     In Lugosch v.

2    Pyramid Co. of Onondaga, we discussed at length the common

3    law and constitutional rights to public access of court

4    documents.   Lugosch v. Pyramid Co. of Onondaga, 435 F.3d

5    110, 119-20 (2d Cir. 2006).     The right to access court

6    documents is not absolute and can easily give way to

7    “privacy interests” or other considerations.     Id. at 120;

8    see also United States v. Amodeo, 44 F.3d 141, 146 (2d Cir.

9    1995) (“Although there is a presumption favoring access to

10   judicial records, the fact that a document is a judicial

11   record does not mean that access to it cannot be

12   restricted.” (internal citation omitted)).

13       Important as public access to court documents may be,

14   it is not an exceptional and fundamental value.     It is a

15   qualified right; and many proceedings move forward in U.S.

16   courtrooms with some documents filed under seal, including

17   many cases in this Court.     There is no basis on which to

18   hold that recognition of the BVI liquidation is manifestly

19   contrary to U.S. public policy.

20

21                               CONCLUSION

22       For the foregoing reasons, we affirm.




                                     32
