Cross-Border Insolvency In Brazil: The UNCITRAL Model Law Dances to A Samba Beat

By Nyana Abreu Miller and Raul Torrao

After years of debate, Brazil recently enacted legislation amending its bankruptcy statute and modernizing the Brazilian insolvency system. The new legislation provides new domestic tools to rescue distressed companies from disaster, including rules that enable DIP financing and allow creditors to propose a plan when the debtor’s proposal is unsatisfactory. In the cross-border insolvency area, the new law implements the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Cross–Border Insolvency.

The basic framework of the UNCITRAL Model Law familiar to insolvency practitioners has been road-tested in 48 countries prior to Brazil’s recent legislative change. The Model Law seeks to identify the jurisdiction where the debtor’s center of main interests (COMI) is located, and deems the insolvency proceeding filed in that jurisdiction the “foreign main proceeding.” Under Brazil’s version of the Model Law, an insolvency proceeding filed in a jurisdiction other than the debtor’s COMI and where the debtor engages in non-transitory economic activities or holds property is a “foreign non-main proceeding.” The Model Law’s vision is that a troubled multi-national business will be able to break through the disparate and sometimes contradictory insolvency regimes in different nations. The Model Law promotes cooperation across borders in order to accomplish laudable objectives, such as the rescue of financially troubled businesses.

Where Brazil is the debtor’s COMI, the new law is, in many ways, simply a codification of the existing practice. For many years, in cases where Brazil is the debtor’s COMI, Brazilian insolvencies have sought recognition and cooperation through ancillary proceedings abroad. A prominent example is the liquidation of the Brazilian bank Banco Santos, where the Brazilian trustee was able to recover and sell over 90 pieces of valuable artwork with the cooperation of foreign courts and use the repatriated proceeds to pay creditors.

However, until now, Brazilian courts could not give reciprocal treatment to foreign main proceedings when the debtor’s COMI was outside of Brazil. Indeed, prior requests to enforce foreign bankruptcy decisions in Brazil through exequatur proceedings were rebuffed. Seee.g.Gutmen Investiment Corp v. Manacá S A Armazens Gerais e Administração, Case No. SEC 11277 / VG, rapporteur Min. Maria Thereza de Assis Moura, Decision on request for granting exequatur to foreign judgment (Superior Tribunal of Justice Jul. 1, 2016). See alsoAntônio Moraes Sarmento Patrício v. Vera Maria Brak Lamy P. Raposo Patkoczy Fonseca, Case No. SEC 1.734/PT, rapporteur Min. Fernando Gonçalves, Decision on request for granting exequatur to foreign judgment (Superior Tribunal of Justice Feb. 16, 2011).

Under the new law, Brazil embraces the Model Law’s modified universalism and provides its courts with the basis to recognize and provide assistance to both main and non-main foreign proceedings. In some respects, the new Brazilian legislation deviates from the suggested wording in the Model Law in order to emphasize the broad cooperation available.

Opening the Gate: The Request for Recognition

To access comity and cooperation from a Brazilian court, the representative of the foreign insolvency proceeding (foreign representative) must pass through the gateway referred to as “recognition” in the Model Law. The foreign representative must file a request for recognition with the court of the place where the debtor has its principal “establishment” in Brazil under the Model Law definition, meaning the place of operations where the debtor carries out a non-transitory economic activity with human means and goods or services. If a voluntary or involuntary bankruptcy proceeding of the debtor was previously filed in Brazil, the foreign representative must file the request for recognition with the same court where that plenary proceeding had been filed.

The new law sets out the requirements for obtaining recognition of a foreign insolvency proceeding. The request is a straightforward document attaching evidence of the existence of the foreign proceeding, the appointment of the foreign representative, and, in practice, information sufficient to provide the context necessary to grant the relief sought. “One of the key objectives of the Model Law is to establish simplified procedures for recognition of qualifying foreign proceedings that would avoid time-consuming legalization or other processes and provide certainty with respect to the decision to recognize.” Guide to Enactment and Interpretation of the UNCITRAL Model Law on Cross-Border Insolvency, ¶29 (the Guide). In practice, this means that filing an application for recognition should not be an onerous process.

For a proceeding to qualify for recognition under the Model Law (and Brazil’s enactment thereof), it must be a collective proceeding. A collective proceeding is one in which “substantially all of the assets and liabilities of the debtor are dealt with in the proceeding, subject to local priorities and statutory exceptions, and to local exclusions relating to the rights of secured creditors.” See, Id. at ¶70. This requirement sheds light on the Model Law’s intent “to provide a tool for achieving a coordinated, global solution for all stakeholders of an insolvency proceeding,” and not merely to be used by a single creditor pursuing collection or by a debtor winding up its affairs in a proceeding that does not address claims of creditors. SeeId. at ¶69.

As part of the recognition process, the court must determine the debtor’s COMI, and that will directly affect what relief is available to the foreign representative. The court will recognize the foreign proceeding as a “foreign main proceeding” if it was filed in the jurisdiction where the debtor’s COMI is located or alternatively as a “foreign non-main proceeding” if it was filed in any other jurisdiction. Although the concept of COMI is new to Brazilian law and neither the new law nor the Model Law defines it, that concept has been long present in cross-border insolvency practice and discussed by the international insolvency community for many years. (The Model Law’s concept of COMI must not be confused with the concept of the debtor’s “principal establishment,” which is used in the Brazilian bankruptcy statute to determine the appropriate venue for a domestic bankruptcy case. The Brazilian bankruptcy statute does not define “principal establishment,” and at least three different approaches have emerged in the case law. The approach that seems to be gaining favor is the so-called economic approach — that is, the “vital center of the debtor’s main activities” and “where the debtor has the highest business volume” — as the majoritarian theory. However, to identify a debtor’s COMI, Brazilian practitioners should look not to domestic decisions about the debtor’s “principal establishment” but to the text of the new law, to the Guide and to other jurisdictions where the Model Law has been implemented.) As the Guide explains, the concept of COMI originates from the European Union Convention on Insolvency Proceedings, and it should be interpreted homogeneously in furtherance of harmonization of the notion of a “main proceeding.” SeeId. at ¶¶81-82. Determining the debtor’s COMI is one of the most important steps in cross-border insolvency proceedings, and a consistent interpretation of such concept throughout all jurisdictions that adopted the Model Law is key to promote the uniformity prescribed by Article 8 of the Model Law.

In short, the definition of debtor’s center of main interests is “the place where the debtor conducts the administration of his interests on a regular basis and is therefore ascertainable by third parties.” See, Id. at ¶83. Both the new law and the Model law provide for a rebuttable presumption that the debtor’s COMI is the debtor’s registered office or habitual residence. That legal presumption may be set aside if objective circumstances recognized by third parties indicate that the debtor has its administrative seat in another jurisdiction. The analysis of the objective circumstances may consider different facts, from the location of the debtor’s headquarters or factory where the debtor manufactures its products to the country code of the debtor’s website or phone number.

Such interpretation of the COMI enables parties to better calculate legal risks when entering into transactions. When considering potential insolvency as a risk factor, the party may assume that international jurisdiction will be based on a place known to the debtor’s potential creditors. SeeId. at ¶84.

Interestingly, the new Brazilian law includes a provision to avoid forum shopping that has no equivalent in the Model Law. In Brazil, the foreign proceeding will be recognized as a “foreign non-main proceeding” if the debtor’s COMI was transferred or manipulated with the intent to transfer the debtor’s “foreign main” jurisdiction to another country. While such a provision is intended to increase legal certainty and reduce forum shopping, it could trigger additional litigation about the debtor’s intent and about the appropriate lookback period, which is not specified in the new law.

Types of Relief Available

While recognition turns on the strict application of objective criteria, the consequences of recognition (referred to as the “relief” in the Model Law or as “medidas” in the new Brazilian law) are largely discretionary. This arrangement reflects a need for efficiency and predictability in obtaining recognition, but equips the courts with the flexibility to fashion the relief that should result from recognition.

The new law makes available to the foreign representative broad discretionary relief both before and after recognition of the foreign proceeding. From the filing of the application for recognition to the court’s ruling on such request, the foreign representative may request any injunctive relief necessary to protect the estate, the efficiency of the administration, or the enforcement of Brazilian bankruptcy law.

Upon recognition of the foreign proceeding, either as a “main” or “non-main” proceeding, the foreign representative may request any relief necessary for the protection of the assets of the estate and in the creditor’s interest. The drafter’s intent to provide Brazilian courts with the flexibility to fashion meaningful relief is evident in two provisions in the Brazilian law that differ slightly from those in the Model Law. First, in the list of discretionary relief available after recognition, the Model Law includes a catchall provision allowing the court to grant “additional relief that may be available to [the trustee] under the laws of this State.” See, Model Law, Art. 21 (g). The Brazilian law would allow the court to “grant any additional relief that may be necessary” and is not limited by reference to the powers of a Brazilian trustee. See, Art. 167-N, V – Law 11.101/2005.

Second, the new Brazilian law includes a provision with no parallel in the Model Law by clarifying that the relief available under the cross-border insolvency chapter of the new law are “merely exemplary” and that relief available under “other laws” may be sought. See, Art. 167-A §2 – Law 11.101/2005. It is unclear whether this phrase would allow lawsuits, such as claw backs, under non-Brazilian laws, or whether it is limited to “other [Brazilian] laws.”

In addition to the permissive relief, the new law provides for automatic relief if the foreign proceeding is recognized as a “foreign main proceeding”: i) the stay of specific lawsuits against the debtor; ii) the toll of the statute of limitations for the enforcement actions against the debtor; and iii) the avoidance of transfers and encumbrances of the debtor’s non-current assets without previous court authorization.

It is important to note that under Brazil’s bankruptcy laws the stay of proceedings against the debtor is narrower compared to some other jurisdictions. Brazilian insolvency law provides numerous legal exceptions to the stay or suspension of lawsuits. In broad terms, Brazil’s insolvency laws impose a stay only to non-tax judgment enforcement proceedings and other actions directly related to the debtor’s assets. Ordinary lawsuits and arbitration proceedings at a pre-judgment phase are not stayed either by operation of Brazil’s general insolvency law. Accordingly, obtaining automatic or discretionary stays under Brazil’s adoption of the Model Law imposes a less robust set of prohibitions.

Granting Recognition to Foreign Insolvency Proceedings vs. Granting Exequatur to Foreign Judgments

Brazilian commentators have expressed some concern that the new law’s recognition of foreign proceedings could be confused with the previously existing mechanisms for international judicial assistance in Brazil, namely exequatur of foreign judgments and letters rogatory. In fact, granting recognition of foreign insolvency proceedings has little or nothing to do with granting exequatur. The Model Law was created as a necessary alternative to the legal systems’ traditional approach to judicial cooperation under the comity doctrine and exequaturSee, Guide, ¶8.

While the new law sets forth a streamlined process by which the bankruptcy courts (courts of first instance) shall recognize foreign proceedings, the Brazilian constitution grants to the Superior Tribunal of Justice (STJ) — a centralized court superior to the state and federal courts of appeals — jurisdiction over exequatur of foreign judgments and letters rogatory. Those who understand the purpose and effect of the recognition of foreign insolvency proceedings, including those who drafted Brazil’s new law, do not see a conflict with the STJ’s exequatur jurisdiction. Acknowledging that recognition under the new law does not encroach upon the STJ’s exequatur jurisdiction, the new law expressly submits to the STJ’s constitutional jurisdiction over exequatur “whenever applicable.” See, Art. 167-A§6 – Law 11.101/2005.

While this reference to the STJ’s exequatur proceedings has been the source of some debate leading up to the law’s implementation, most Brazilian commentators take the position that such provision does not impede the local bankruptcy courts from recognizing foreign insolvency proceedings. Indeed, recognizing a foreign insolvency proceeding is not tantamount to enforcing an order issued by the judicial authority of a sovereign state. For example, a foreign administrative proceeding in which no court orders whatsoever have been made is eligible for recognition under Brazil’s new law. In addition, the Brazilian legislature implemented a system to recognize foreign insolvency proceedings and expressly granted jurisdiction to the trial court of the place where the debtor has its principal “establishment” to hear such cases. It would be illogical to interpret that, in writing rules with specific provisions on the jurisdiction to process requests for recognition, the legislature, in fact, intended the Superior Tribunal of Justice to have jurisdiction to rule on such petitions.

Another context in which the STJ’s exequatur jurisdiction may become relevant is where the Brazilian bankruptcy court is asked to cooperate with a court order entered in the foreign proceeding. The new law requires the bankruptcy court to cooperate “to the maximum possible extent with the foreign authority or with the foreign representative[.]” See, Art. 167-P – Law 11.101/2005. This provision implies that certain deference may be given to orders made in the foreign main proceeding, such as orders confirming a plan of reorganization, orders made in a claim dispute between debtor and creditor, and discovery orders. The cooperation called for in the new law does not require that such orders be enforced directly in Brazil. Cooperation can be achieved by giving deferential treatment to such orders in light of the law’s international origin and objectives. Giving deferential treatment means recognizing the foreign court’s better position to rule on the matter as the court with the main interest and most information on the issue, and to refrain from reviewing the matter de novo. It also means recognizing that when acting as the ancillary court, the Brazilian court cannot impose its own domestic priority scheme or claims process on the debtor. The ancillary court must remain focused on the goals expressly noted in the new law: promotion of international cooperation with foreign courts and representatives, greater legal certainty, and fair and efficient administration of cross-border insolvencies. By giving deferential treatment to an order in the foreign main proceeding, the ancillary court may avoid a conflict and a duplication of efforts that could weigh down efforts to rescue a struggling enterprise.

A Plenary Bankruptcy Proceeding

A debtor whose foreign main or non-main proceedings have been recognized in Brazil may commence a full liquidation or reorganization case if the relief available in the ancillary case is insufficient to accomplish its purposes.

As a preliminary matter, it is important to understand the distinction between the ancillary proceedings contemplated under the Model Law and the plenary proceedings that may be commenced to reorganize or liquidate a company under Brazilian law. The gateway for ancillary proceedings is through the Model Law’s streamlined recognition process and simple eligibility criteria, embodied in Articles 167-H and 167-J of the new Brazilian law. The reward for entering through this gate is the relief described in Articles 167-L, 167-M, and 167-N of the new law. Ancillary proceedings are an act of comity between nations and thus they are simple proceedings that attempt to avoid duplication of effort. In this vein, the Model Law and Brazil’s enactment of it do not establish a separate claims process or reorganization plan in the ancillary proceeding. Indeed, the Model Law envisions that these should be handled in the foreign main proceeding.

A plenary proceeding, on the other hand, is a full liquidation or reorganization case, which in Brazil is governed by the other chapters of Law 11.101/2005. A debtor whose foreign main or non-main proceedings have been recognized in Brazil may commence a liquidation or reorganization case only if the debtor has assets or an establishment in Brazil, and that Brazilian plenary case will apply only to the Brazilian assets or establishment. The new law sets forth measures for cooperation and coordination between the Brazilian plenary case and the foreign main proceeding.

It should be noted that even in the absence of a petition for a plenary proceeding, Brazil’s new law allows the court to grant broad discretionary relief to the recognized foreign proceeding. Thus, there may be few instances in which foreign representatives might be interested in filing a plenary proceeding petition with the Brazilian court. This may change if Brazilian courts limit in practice the relief available to ancillary proceedings under their ample discretion. In any event, creditors also may initiate an involuntary plenary proceeding, especially if they are interested in establishing a claims process in Brazil, which is unavailable in the ancillary proceeding.

Generally, the party filing for a voluntary or involuntary plenary proceeding must show the petition meets the bankruptcy requirements under Brazilian law. Specifically, the foreign representative will have to show in the reorganization petition that the debtor is in regular business activity for more than two years and meets other requirements of the statute, such as not having been through reorganization in the last five years. See, Art. 48 – Law 11.101/2005. To initiate a liquidation proceeding in Brazil, the requesting party must show the so-called “legal insolvency” of the debtor by meeting one of the three statutory requirements: 1) unjustified default of an obligation over 40 minimum wages; 2) nonpayment of any amount under a judgment enforcement action; or 3) performance of any of the seven acts of bankruptcy listed in the statute (e.g., fraudulent transfer of property to avoid creditors or default on an obligation provided for in a reorganization plan). See, Art 94 – Law 11.101/2015.

Relevantly, the new law provides that the insolvency of the debtor is presumed if the foreign proceeding was recognized in Brazil as a “foreign main proceeding.” However, it is not clear if such presumption of the debtor’s insolvency is sufficient to show the “legal insolvency” requirement in liquidation petitions.

Outbound Cross-Border Insolvency and Communication With Foreign Representative and Courts

The new law does not limit its rules to inbound cross-border insolvency proceedings. It also includes rules related to outbound proceedings, which empower the representative of the Brazilian insolvency proceeding and the Brazilian court to seek recognition abroad and to act in that proceeding.

Under the new law, the trustee in the Brazilian liquidation and the debtor in the Brazilian reorganization are automatically authorized to act as representatives of the Brazilian proceeding in foreign jurisdictions. The Brazilian court may appoint a different representative for the Brazilian liquidation when necessary.

Moreover, the new law abrogates the long-established requirements of formal communication with foreign courts through letters rogatory. It expressly grants broad communication powers to the Brazilian bankruptcy court and trustee with foreign courts, representatives, and authorities.

Overall, the new law adheres closely to the Model Law and provides Brazilian bankruptcy courts with the tools to effectively cooperate in cross-border insolvencies. After many years of receiving international assistance for Brazilian insolvency proceedings, Brazilian courts are now ready to reciprocate. The tools for effective cooperation are in place and the Brazilian legal community is eager to usher in a new era.

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Omani businessman appeals US recognition of English bankruptcy

An Omani citizen is seeking to overturn a Florida court’s recognition of his English bankruptcy, which he describes as “a divorce case being played out on the international stage”.

On 19 May in the US Bankruptcy Court for the Middle District of Florida, Talal Al Zawawi filed a notice of appeal against a recognition order granted to Grant Thornton’s Michael Leeds, Colin Diss and Hannah Davie as his bankruptcy trustees.

Al Zawawi initially opted to have the appeal heard by a bankruptcy appellate panel, but it has since been transferred to the local district court. The grounds of appeal have yet to be published.

Herron Hill Law Group shareholder Kenneth Herron is counsel to Al Zawawi on the appeal, while Sequor Law shareholder Leyza Blanco and attorney Cristina Beard are advising the trustees.

The bankruptcy court recognised the trustees on 6 May, six weeks after granting them interim recognition.

The trustees sought recognition to block any party from transferring property owned by Al Zawawi, including any ownership interest he may hold in four Florida companies and a Texan company that does business in Florida, as well Omani businessman appeals US recognition of English bankruptcy as to obtain discovery powers to investigate his finances.

Judge Lori Vaughan issued the recognition order despite an objection from Al Zawawi, who argued that he did not have any ownership interests in the five companies.

“This case does not involve an international business entity or any other form of international intrigue,” Al Zawawi said in his objection. “It merely involves a divorce case being played out on the international stage.”

Al Zawawi, a UK resident with Omani citizenship, has been subject to bankruptcy proceedings in England since June last year. His ex-wife had filed a bankruptcy petition against him over failure to pay a 2019 divorce decree, which required him to pay her £24 million (US$34.1 million).

The businessman received a prison sentence a month after the decree was issued, due to his failure to comply with an order to disclose financial information to his ex-wife’s lawyers. His assets are currently subject to a worldwide freezing order.

The trustees responded to Al Zawawi’s objection by claiming that he was a director of the Florida companies, that the companies owed US$94 million of assets between them and that he indirectly owned them through a Curaçao holding company, Qapa Investing Corporation.

They have obtained a Curaçao attachment order against Qapa, which is coowned by the businessman and his six siblings.

Since securing the recognition order, the trustees have filed notices of examination on the US branches of several banks, including Barclays, Citibank and Deutsche Bank, seeking documents relating to Al Zawawi’s financial affairs.

Judge Gregory Presnell has been assigned to the appeal proceedings in the district court. He has yet to schedule a hearing.

To read the original article, click here.

Sequor On the Go

Just Say No: Discovery in Chapter 15 Bankruptcies is Asymmetrical

By: Dan Coyle

Foreign Representatives in Chapter 15 petitions are specifically permitted to conduct discovery to locate the debtor’s assets within the United States to increase estate and creditor recoveries in the overseas proceedings and to probe the debtor’s affairs, rights, obligations or liabilities. In the U.S. ancillary proceeding, the Foreign Representative will encounter resistance and other entities may seek to propound subpoenas under Fed. R. Bankr. 2004. Sometimes, these entities are creditors who seek information relevant to their claim or assets available to pay the same. Other times, these entities are subpoena targets who seek to gain a peek into the Foreign Representative’s search, seek to distract and/or delay the Foreign Representative from the asset search, or who seek to “punish” the Foreign Representative. The Foreign Representative may be able to avoid responding to such requests by moving for protective order or to quash the subpoena based upon 11 U.S.C. 1521(a)(4) and/or Rule 2004(a). The arguments are based upon: 1) the language of 1521(a)(4) and two canons of statutory construction, or, alternatively; 2) interpretive case law under Rule 2004 as to the requirements to show a “pecuniary interest” in a case.

Read the original article here.

The BLS Celebrating Women’s History Month: An Interview with Judge Walsh

By: Amanda Finley

In honor of Women’s History Month and International Women’s Day, the Business Law Section is interviewing a series of women judges to learn about their experiences, trials, tribulations, and advice for other women lawyers. I had the honor of interviewing Judge Walsh.

Rise to the Bench

Judge Walsh explained her journey as an attorney and career path to becoming a judge. She worked in the public interest as a public defender. She tried about 30 jury trial cases and in private practice, she owned her firm focusing almost exclusively on appellate work. Her appellate practice consisted of a variety of subject matters, so that gave her flexibility. She put that to use after she became a judge because she was able to adapt and transition from dependency, to criminal, to civil, back to criminal, and again to civil. This flexibility also assists her now in her position as the administrative judge in the Appellate Division. Judge Walsh’s experience and career is nothing short of remarkable.

Obstacles and Silver Linings

Judge Walsh expressed constant gratitude that her experience in the law has been a positive one. While not unruffled, she said, “there are always challenges in getting business or in handling a particularly difficult case or just in handling the burdens of the profession or running a business. But I’ve been relatively fortunate in always having work, finding success in the law, developing my craft and skills, and building a business.”

When asked about an example of a hurdle, she explained that she experienced a challenge in bringing in criminal appellate work when she was particularly qualified, knowledgeable, and experienced in that practice area. By the time she went into private practice, she had handled over 300 appeals – one all the way to the U.S. Supreme Court as well as arguing cases at the Eleventh Circuit, and a number of cases before the Supreme Court of Florida. Given her background, it would seem logical that she would be able to easily bring in criminal appellate work. However, it was not easy and the difficulty was sadly rooted in discrimination.

She stated, “I would be told to my face, we’re going to take your male partner to visit the client. We’re not going to take you. The clients just think that you’re not going to fight for them. I was judged on my appearance. That’s tied to my gender. There’s no way around that.”

However, where there is an obstacle, there is also a solution and typically a silver lining. Despite having no experience at that time handling civil appeals or marital appeals, she was able to bring in those cases with ease and was able to build her practice and develop a substantial book of business fairly easily within a year and a half. She ended up confronting this hurdle and ultimately making it work to her advantage.

National Association of Women Judges

Next, we discussed Judge Walsh’s experience with bar associations. Before she was appointed to the bench, she got involved with the Florida Association for Women Lawyers and was its president in 2007-2008.

In 2015-2016, Judge Walsh became the President of the National Association of Women Judges (“NAWJ”). She stated that she valued the platform, which provided “unbelievable opportunities for growth and development as a speaker, as a lawyer, as a judge, and as a leader. Without a doubt, that was the most extraordinary experience professionally of my life to become the president of the National Association of Women Judges. It is an incredible organization. There are judges in every state, federal, state, military, tribal, and administrative.”

She explained that “NAWJ is the U.S. chapter for the International Association of Women Judges. The year that I became president was also the year that the United States was hosting the Bi-Annual Conference of the International Association of Women Judges. I got to stand in front of a room of 1,000 women judges from all over the world, as the President of the host chapter of the U.S. chapter in Washington, DC, and welcome the world of women judiciary to the United States for a four-day conference while participating in those events.”

Judge Walsh described how amazing it was to meet and get acquainted with judges from so many other jurisdictions. The U.S. judges would describe how they practice law, manage a civil system and our business courts, while learning how judges from other jurisdictions practice law and manage their court systems. Learning from other judges “broadens your mind to the things that you can do to improve your practice here, improve your judging here.” She expressed that she is “so incredibly lucky to have had that role for that year to be their president.”

Judge Walsh explained that “our Supreme Court Justices, not only the women justices, but also Chief Justice Roberts are all members” of NAWJ. She had the opportunity to meet the late Justice Ginsburg, one of the most incredible women jurists of our time. Judge Walsh was also able to meet Justice Sotomayor, who was so “generous with her time and stood at a conference for three hours so that every person could shake her hand or take a picture with her.”

Judge Walsh most wishes that she could have met the late Justice Sandra Day O’Connor. She admired her for her philosophy, deliberateness on the Court, and fun-loving down-to-Earth nature outside of court. At the NAWJ conferences, she would lead a conga line. Justice O’Connor would wear a t-shirt that says, “I’m not Ruth,” and Justice Ginsburg would wear a t-shirt that says, “I’m not Sandra.”

Words of Wisdom and the Unforgiving Concept of “Balance”

When asked what advice she would give to her 21-year-old-self, Judge Walsh said “time passes very quickly. Try to notice each important moment. There is a tendency when you are young to script the important moments in your life and think about the details … to master every part of every equation” (the birth of your first child, setting up your home, first day of school, family vacations). Her advice to her younger self would be to “manage my professional life, while having a fulfilling personal life as well a fulfilling family life” and “to not be so sure that I understand my path that I’m not open to walking in a different direction. Looking back, I may have spent too much time in one place without being open to move or change. Because every time you take a step forward, that is a step on your path, whether that is ultimately the right direction or not, it will move you ultimately in the right direction, but standing still rarely gets you there.”

This circles back to the universal issue for every woman in law or business – how to achieve the coveted goal of work/life balance. Judge Walsh takes a unique and refreshing stance on this issue. She said “I don’t believe that there is such a thing as balance. There’s an amalgam of life, all of which is important. It’s a matter of which part of your life you are … prioritizing in a particular moment.” She explained that “oftentimes, when you’re young, you don’t get to pick your priorities. When you are a young person, you are beholden to your boss, your partner, your manager, to the concept of establishing yourself and building your business to the networking that you need to ensure … the quality of your product, which is going to take longer when you’re less experienced. This is the paradox of youth in business and family. I would personally scrap the idea of balance because I think it places additional, unneeded pressure on the shoulders of young people especially young women. This idea of balance is another opportunity to tell yourself that you’re failing at something.”

Another overarching issue is mindfulness and learning to focus on the present. Judge Walsh expressed, “I look back and wonder if I was present enough. I was so proud of myself for always physically being where I needed to be. I made professional decisions about where I worked and how I worked in order to ensure that I could always be physically present where I needed to be. I could bill frankly, as much as my husband did. I could get everything done on time. I could serve my clients. I could be available to my clients, and manage my business, and also be at every assembly, take my kids … to every pediatrician or dental appointment, every parent teacher conference, every soccer meet, every piano recital, every concert, every chess match, I could do all of that.” Being meaningfully present everywhere was understandably the difficulty.

Judge Walsh encourages everyone to “absolutely relinquish the idea of perfection. I think that in work, as well as in your home life, that perfect is the enemy of the good. Because the most important thing is that if your child wants you [to] read a book to them that you have the time and the space and the presence of mind to be able to do it and be completely meaningfully present for them. I would let go of a concept of ‘balance’ and let go of the concept of ‘perfection,’ or of really caring that other people who don’t matter to you perceive you as perfect. At the end of the day, the end of your life, what other people think right now is irrelevant. The only thing that matters to me is the quality of the childhood and the upbringing that I gave to my kids.”

The Effect of the Pandemic

Judge Walsh remarked on the effect of the pandemic – both personally and professionally. On one hand, the pandemic has successfully integrated technology into the everyday practice of law by allowing Zoom hearings, which are more efficient and cost-effective. Judge Walsh would like to see mass calendars continue virtually even after the effects of the pandemic subside. On the other hand, since most lawyers are working from home, there is less of a clearly defined boundary for personal or family time.

Judge Walsh stated that she is “very concerned about the effect that the pandemic is currently having on the profession, specifically on women – whether it’s going to send women backward. There is an existing problem in the practice of law that women in their 40s and 50s are leaving in disproportionate numbers than their male counterparts. That phenomenon has been explained in the past as some work/life balance or family issue. I don’t think that’s what drives it. I think it’s financial equality in the practice of law. That is the driving force in that issue. What’s happening right now is that children are at home virtual schooling, while women are working at home virtually. There are no demarcations right now between work and home. Work is 24 hours a day; childcare is 24 hours a day; there is no help; and you’re 100% in the house.” She continued, “women are leaving the profession or they’re leaving other professions, which means that their financial stability is going to slip. Their power is going to slip. How do you develop business under these circumstances? It depends how quickly we recover from this. I know that the practice of law generally is not suffering very much, but I do … think that women practitioners are experiencing a unique phenomenon. I just hope that it doesn’t have a semi-permanent effect on the push for equal opportunity in the practice of law.”

Mentorship

Judge Walsh had many mentors, who came to her very naturally. Her boss at the public defender’s office, Beth Weitzner, was the best boss she ever had and truly helped her develop as a writer. She gave her that “eureka moment to understand written persuasion – how to capture the attention of a judge; how to maintain, develop, and never lose your credibility; how to take your reader on a journey from point A to point Z, which is the conclusion you want them to reach; and how to deal with difficult people and difficult facts.” Judge Walsh’s other mentors were Lauri Waldman Ross and Pamela Perry, who were exceptional appellate lawyers that helped her immensely when she was starting out.

Judge Walsh emphasized that peers can be mentors too. Younger lawyers do not necessarily have to seek out lawyers that are a generation older to be their mentor. Finding peers with different strengths, weaknesses, and experiences is important. Judge Walsh stated, “I’m a big proponent for relying on your backup. You need your true friends – really close professional colleagues and friends where you nurture each other along the way and everyone succeeds.”

The Next Generation of Women Leaders

When asked about the next generation of women leaders, Judge Walsh stated that she is “impressed with the next generation and the current generation of women leaders because they do not wring their hands. They don’t ask for permission. When I was 25 just starting out and my superior would say to me, argue x do x, my first impulse would be – can I do that? Whether it is … okay or am I allowed never enters the minds of the women in the profession now. Now, the question in their mind is not whether, but how.” She remarked that “there’s a core strength, a self confidence that is incredibly healthy and refreshing and combined with a work ethic and a fearlessness that make for a formidable combination.”

Last Words of Advice

Judge Walsh’s last words of advice were encouragement and offering assistance. “My colleagues and my peers, we’re here for you. We want to be helpful to you. We really want to see you shine. I can’t tell you how good it makes me feel when it’s no longer an issue as to who comes to court to argue. I have really big cases where there are millions of dollars in controversy or large developments of lands. When I see that there is a young woman lawyer, who is arguing the position of their client, just as well as anyone else who’s in the case, it just gives me an extra charge. It doesn’t mean that they’re going to win their position, of course, but that just shouldn’t be an issue. It shouldn’t be an issue as to who gets to argue a point. I can’t tell you how many times in the past I’ve seen that the person who actually wrote the pleadings and signed the pleadings sitting quietly at counsel table, while their partners were arguing and didn’t know the nuance, the details, or the elements in the record to be able to argue as effectively as I know that his associate could have done the job.”

“It doesn’t matter if they’re women or men or lawyers of color or lawyers of a different ethnic background. None of it should matter. Everyone should have the same opportunity for success depending upon their qualifications, their experience, their skill, and their ability to develop business.” She reiterated “we’re here for you – if anyone wants to pick up the phone and talk or thinks that you have an issue of professional development or wants advice. Don’t cocoon. Get out there and talk to the people that care, so that you can do the best for yourself because you only have one shot at your career. You only have one shot at your life. All of us want to make sure that you take that shot and give it your best shot.”

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March 2021 - Quarterly Newsletter

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Sequor Law Promotes Two Attorneys to Counsel

February 8th, 2021 Miami, Florida – Sequor Law, a boutique, Miami-based international law firm working in the areas of asset recovery, financial fraud, insolvency and financial services litigation, both domestically and cross-border, announced today that two attorneys have been named to new roles within the firm, effective February 8th, 2021.

Sequor Law is delighted to announce that Nyana Abreu Miller and Daniel Matthias Coyle have been promoted to Counsel at Sequor Law.  “We are exceptionally pleased that Nyana and Daniel have accepted this new role,” said Founding Shareholder Edward H. Davis Jr. “With their focus on building relationships and winning strategies for clients, Nyana and Dan have been tremendous assets on some of our firm’s most high-profile and challenging cases. This promotion is a reflection of their ability as well as our commitment to developing and recognizing talent.”

Daniel joined the firm over ten years ago and has focused his practice on bankruptcy, creditors’ rights, secured transactions, collections, executions, asset recovery and cross-border insolvency, routinely representing financial institutions and other creditors in bankruptcy, federal and state court litigation.  Daniel is on the international committee for NAFER, recently joined the International Law Committee of the American Bankruptcy Association’s Business Law section and was named Rising Star by Super Lawyers consecutively from 2016-2018. Daniel received his J.D. from the University of Miami School of Law in 2008 and was a Magna Cum Laude Graduate and Order of the Coif.

Nyana has focused her practice on international asset recovery and financial fraud. Nyana has worked on cases brought under Chapter 15 of the U.S. Bankruptcy Code on behalf of foreign trustees seeking to take discovery, administer property and bring claims against third parties. Currently serving as the Latin America Regional Director for the International Women’s Insolvency and Restructuring Federation (IWIRC), she was awarded 2020 Rising Star by IWIRC International and 2020 Emerging Leader by IWIRC’s Florida Network. Nyana received her J.D. from the University of Miami School of Law in 2011, where she was valedictorian of her class.

“Nyana’s and Dan’s accomplishments since joining the firm seven and eleven years ago respectively, have exceeded the expectations we had for them,” said Founding Shareholder Gregory Grossman.  “They both have achieved success in their careers because they demonstrate tremendous ability, consistent dedication to our clients providing the highest standards of service. This commitment and energy help drive their achievement and benefits both our clients and our firm.”

 

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Sequor Law is a Miami-based international law firm representing financial institutions, sovereign governments and state-owned enterprises, public and non-public companies, insolvency practitioners and individual clients in the areas of asset recovery, financial fraud, insolvency and financial services litigation. More information is available at www.SequorLaw.com.

 

Click here for Nyana’s headshot and Daniel’s headshot.

Asset recovery column: Euromepa and Gorsoan, oh my

Sequor Law shareholder Leyza Blanco and attorney Christopher Noel discuss the evolving standard to obtain Section 1782 assistance in the US Court of Appeals for the Second Circuit and beyond.

The US Court of Appeals for the Second Circuit, which includes the states of Connecticut, New York, and Vermont within its jurisdiction, is currently tasked with addressing and deciding how far to extend an ever narrowing standard applied to proceedings brought pursuant to Section 1782 of the United States Code.

In In re: Application of Gorsoan out of the US District Court for the Southern District of New York, the Second Circuit has been asked to decide whether an application for judicial assistance to obtain discovery for use in aid of a foreign judgment meets the statutory requirements for relief to be granted pursuant to Section 1782. The ramifications of the Second Circuit’s decision are certain to resonate globally, as New York remains a hotbed for seeking US judicial assistance for foreign tribunals, both because of its geographic proximity to Europe and because of the myriad of global businesses that identify New York as their principal places of business.

As many global restructuring and insolvency practitioners are aware, Section 1782 is the product of more than 150 years of effort from the US Congress to provide federal-level court assistance in gathering evidence in the US for use in a foreign tribunal. Generally, whether to grant this assistance is determined by a two-part inquiry: (1) whether a US District Court is authorised to grant relief pursuant to Section 1782; and (2) whether a US District Court should grant relief in its broad discretion.

At issue before the Second Circuit is one of the statutory prongs examined when a US District Court is deciding whether it is authorised to grant relief –to wit, that the evidence sought must be “for use in a proceeding in a foreign or international tribunal.”

The Gorsoan case began with an alleged US$25 million fraud, which caused a Cypriot court to issue a worldwide freezing injunction and asset disclosure order against dozens of defendants, including the Belarusian born, Florida-based socialite Janna Bullock. After Bullock refused to comply with the Cypriot court’s order, Gorsoan, a Cyprus company and fraud victim, sought assistance in the US District Court for the Southern District of New York, pursuant to Section 1782. Upon challenge in the Second Circuit, the appellate court affirmed the order granting judicial assistance and Bullock was required to produce the requested discovery. Much to the dismay of Gorsoan, and fellow fraud victim Gazprombank, Bullock failed to produce substantive discovery in response to Gorsoan’s requests. As a result, Gorsoan obtainedleave of court and a court order to take a second deposition of Bullock. At this second, court-supervised deposition, Bullock refused to answer questions by invoking her Fifth Amendment right against self-incrimination.

Thereafter, Gorsoan led its second application for judicial assistance pursuant to Section 1782, seeking authorisation to subpoena Bullock’s children, mother, and other related persons. The District Court granted that application and Gorsoan’s subsequent motion to compel, which led to Bullock’s intervention and a motion to quash the subpoenas. In January of this year, the Southern District of New York denied Bullock’s defensive motions and granted Gorsoan’s motion to compel related to its subpoenas. Atpresent, the Southern District of New York’s decision remains on appeal at the Second Circuit. However, based upon its own prior precedent in Euromepa, SA v R Esmerian, Inc, which broadly held that enforcement of a foreign judgment does not meet the “for use” prong required for Section 1782 relief, the Second Circuit may well further limit Section 1782’s use for obtaining discovery in the United States for use in foreign tribunals.

In Euromepa, the dispute stemmed from an insurance claim for approximately US$20 million in lost or stolen diamonds and other precious jewelry owned by jeweler Esmerian, Inc. and insured by Euromepa. Underlying the Section 1782 proceedings in the United States was a French action wherein the French trial court issued a judgment of approximately US$10 million in favor of Esmerian, which resulted from a finding of equal fault between Esmerian and Euromepa in the loss of the jewelry. Following the French trial court’s ruling, and after perfecting an appeal, Euromepa filed its Section 1782 petition in the Southern District of New York, seeking discovery of Esmerian regarding, among other items, proof of the jewelry’s ownership, proof of the jewelry’s insurance, and proof of the jewelry lost. Ultimately, Euromepa sought this discovery for use in its appeal of the French trial court’s ruling of equal fault among the parties. Upon review, the Southern District of New York denied Euromepa’s application, resulting in an appeal to the Second Circuit.

In between appellate argument and the Second Circuit’s decision, the French appellate court favorably amended the French trial court’s judgment in Esmerian’s favor, holding Euromepa wholly liable for the US$20 million loss. As a result, Euromepa immediately sought protection in the French bankruptcy court. The Second Circuit, without addressing the decision of the French appellate court, reversed and remanded the case for further proceedings. Contemporaneously, Euromepa sought review of the French appellate court’s decision with the French Supreme Court, which resulted in an affirmance of the lower appellate court’s opinion. Immediately following the French Supreme Court’s decision, the Southern District of New York dismissed Euromepa’s Section 1782 petition as moot because that decision effectively eliminated all pending proceedings in which Euromepa could use the discovery sought in the United States.

Thereafter, Euromepa’s second appeal followed, arguing that the Southern District of New York failed to consider the pending French bankruptcy proceeding and a potential motion to reopen the judgment of the French appellate court, as bases to avoid the Court’s finding of mootness. Upon examination, the Second Circuit found that the French bankruptcy proceeding is not adjudicative within the meaning of Section 1782 because the merits of the dispute between Esmerian and Euromepa have already been adjudicated and would not be considered in the French bankruptcy proceeding, based upon French law. Further, the Second Circuit held that Euromepa’s argument concerning the potential motion to reopen the judgment of the French appellate court was meritless, because its conceded that such a petition was unlikely to be made absent newly discovered evidence. Accordingly, the Second Circuit held that the Southern District of New York did not abuse its discretion in dismissing Euromepa’s Section 1782 petition as moot.

Applying this precedent to the Gorsoan appeal, it is entirely possible that theSecond Circuit will again hold that, because the adjudicative function of the foreign tribunal is complete, there is no basis under Statute 1782 to grant relief, thereby foreclosing Gorsoan’s ability to obtain discovery in the United States.

All hope is not lost for obtaining discovery in the US, however. While the Second Circuit appears to be gradually narrowing the door for discovery pursuant to Section 1782, the Southern District of New York specifically recognised that “[n]one of the decisions [cited by Bullock in Gorsoan] established a broad rule that asset discovery can never be adjudicative and is thus always impermissible under § 1782.” (435 F.Supp.3d at 598). Ultimately, the nuance lies in whether the discovery sought pursuant to Section 1782 could have an effect on the merits of the dispute being decided in the foreign tribunal.

Moreover, District Courts around the US have sought to further clarify the holding in Euromepa. For example, in In re: Stati, the US District Court for the District of Massachusetts held that “the Euromepa court did not universally bar discovery in all bankruptcy proceedings, particularly where issues are being adjudicated.” Further, in JSC MCC EuroChem v. Chauhan, the US District Court for the Middle District of Tennessee held that “Euromepa had not held that ‘all post-judgment proceedings are not adjudicative’.” Finally, even within theSouthern District of New York, there remains some dispute regarding how far the Euromepa decision extends: in In re: Galaxy Energy & Res Co, the court cited Euromepa for the limited proposition that Section 1782 discovery “is inappropriate where the merits of a controversy have already been decided by the foreign tribunal.”

Ultimately, according to the Southern District of New York in In re: Gorsoan Limited, “adopting the proposed far-reaching rule against asset discovery would be incongruent with § 1782’s ‘underlying policy’ that, ‘[a]bsent specific directions to the contrary from a foreign forum, . . . district courts [should] provide some form of discovery assistance’.” (435 F.Supp.3d 589, 599).

At some point later this year, the Second Circuit will likely decide whether Gorsoan will be permitted to obtain the discovery it seeks related to Bullock’s alleged involvement in the US$25 million fraud. At present, proceedings in the Southern District of New York have been stayed by court order, pending resolution of the appeal. Until resolution, and further clarity from the Second Circuit, practitioners should not wait to file their respective applications for judicial assistance pursuant to Section 1782. Instead, non-US practitioners should carefully consider the various jurisdictions where an application for Section 1782 assistance could be filed in the US (any district where the person from whom discovery is sought resides or is found), especially if that location is outside of the Second Circuit’s jurisdiction.

Further, there are other litigation tools that counsel in the US may use to otherwise obtain the discovery needed for use in a foreign tribunal when there is already a judgment – one example is domestication of a foreign judgment pursuant to a variety of state laws allowing the enforcement of foreign judgments in the US. Although differing somewhat from state to state, most states have already adopted the Uniform Foreign Money-Judgments Recognition Act (UFMJRA) and have common law decisions that reinforce a foreign party’s ability to both domesticate and enforce foreign judgments within the US.

Case references

In re: Application of Gorsoan (2d Cir. Case No. 20-680, Filed 21 February 2020)

Euromepa, SA v. R Esmerian, Inc, 154 F.3d 24 (2d Cir. 1998)

In re: Stati, No. 15-mc-91509, 2018 WL 474999, at *4 (D. Mass. 2018)

JSC MCC EuroChem v. Chauhan, No. 17-mc-5, 2018 WL 3872197, at *12 (M.D. Tenn. Aug. 15,2019)

In re: Galaxy Energy & Res. Co., 190mc-287 (LIS), 2019 WL 2743205, at *1 (S.D.N.Y. July 1,2019)

 

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Happy Holidays and Warm Wishes for 2021

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