USA – NEW JERSEY Trends and Developments Contributed by: Brett S. Theisen, John S. Mairo, Robert K. Malone and David N. Crapo, Gibbons P.C.
when these criteria are met ( FTX Trading , 91 F.4th at 153). The debtors, along with the Official Commit - tee of Unsecured Creditors and others opposing the motion to appoint an examiner, had argued that the qualifier “as is appropriate” granted flexibility, but the Third Circuit interpreted it as directing the scope of investigation – not whether to appoint an examiner – which remains obligatory (ibid at 153–54). Legislative intent and practical safeguards In reaching its decision, the Third Circuit relied heav - ily on legislative history: Chapter 11’s framework for large cases is meant to provide special protection, including an “automatically appointed” examiner to ensure transparency and public trust (ibid at 155). At the same time, the court acknowledged that courts retain discretion to calibrate the examiner’s investiga - tion scope, duration and cost – thus balancing over - sight with efficiency (ibid at 156). Application in FTX and broader impact In FTX , the Third Circuit reversed the bankruptcy court’s denial of an examiner appointment – even though alternative investigations were already underway – citing public interest and conflict con - cerns involving debtor’s counsel (ibid at 156–57). By remanding for appointment of an independent exam - iner (Robert J. Cleary) with cost capped at USD1.6 million, the court reinforced the self-executing nature of the statutory trigger of Section 1104 (c)(2) once its requirements were met. Following FTX , practitioners must anticipate examiner motions in mid-to-large fil - ings. Even if burdensome, courts refusing to appoint will likely be reversed on appeal. Courts may still limit an examiner’s scope, but the requirement of appoint - ment is clear. Chapter 15 and comity: Vertiv, Inc. v Wayne Burt PTE (Third Circuit/D.N.J., 2024) The Third Circuit reaffirmed the application of com - ity principles under Chapter 15 for enforcing foreign bankruptcy orders through a case involving a Singa - pore liquidation proceeding and concurrent New Jer - sey filings. The ruling underscored the efficacy of Chapter 15 in obtaining US recognition and enforce - ment of foreign insolvency decisions. (See Vertiv, Inc. v Wayne Burt PTE, Ltd , 92 F.4th 169 (3d Cir. 2024).) The efficacy of Chapter 15 is essential to international
restructurings with a US component. Indeed, courts in New Jersey increasingly reinforce cross-border co- operation. Comity outside Chapter 15? Chapter 15 provides a statutory framework allowing US courts to recognise and enforce foreign insolvency judgments under principles of comity. Jurists have debated whether, absent a Chapter 15 filing, comity principles still allow deference to foreign proceedings. In Vertiv , the Third Circuit remanded a district court dismissal of Singapore-based litigation, where a liq - uidator sought enforcement of a turnover order. The district court had declined comity-based relief without Chapter 15 recognition. The Third Circuit found that the district court failed to apply appropriate deference as a matter of adjudicative comity ( Vertiv , 92 F.4th at 175–76). Chapter 15 as a practical tool in New Jersey and strategic takeaways In the bankruptcy court, the liquidator promptly secured recognition of the Singapore court’s order via Chapter 15, gaining relief that had been unobtainable through ordinary litigation pending for over four years. Given the speed and flexibility available via Chapter 15 proceedings, one expects to see additional instances of debtors turning to Chapter 15 to solve third-party release issues post- Purdue . (See Harrington v Purdue Pharma L.P ., 144 S. Ct. 2071 (2024).) In fact, a rul - ing on 1 April 2025 by the United States Bankruptcy Court for the District of Delaware indicates that bank - ruptcy courts within the Third Circuit may be open to recognising, pursuant to Chapter 15, non-consensual releases in restructuring plans approved by non-US tribunals. In In re Crédito Real, S.A.B. de C.V., SOFOM, E.N.R. (Bankr. D. Del. Case No 25-10208-TMH), Bankruptcy Judge Thomas M. Horan ruled that non-consensual third-party releases approved by non-US tribunals do not preclude recognition under Chapter 15 of the restructuring plans containing them. In that case, the debtor had obtained approval by a Mexican court of a pre-packaged restructuring plan containing such releases. In opposition to the recognition of the plan, a creditor argued that non-consensual releases were contrary to US public policy in the wake of the
546 CHAMBERS.COM
Powered by FlippingBook