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Interpool Ltd. v. Certain Freights of M/VS Venture Star


argued: May 15, 1989.


On Appeal from the United States District Court for the District of New Jersey, D.C. Civil Nos. 86-0149, 86-0150, 86-0200, 86-0299 86-0340, 87-2292, 87-2888, 88-2225.

Mansmann, Greenberg and Scirica, Circuit Judges.

Author: Greenberg


GREENBERG, Circuit Judge

Presently before the court is an appeal by Robert George Dunn, the Australian liquidator of the estate of KKL (Kangaroo Line) Pty Limited ("KKL"), from an order of the district court denying his motion to dismiss a Chapter 7 proceeding brought by KKL's creditors and, correspondingly, granting leave for the Chapter 7 case to proceed. Because we find that Section 305(c) of the Bankruptcy Code forecloses appellate review of the district court's order, we will dismiss the liquidator's appeal.


KKL, an Australian company incorporated in 1983, operated a liner service between the west coast of the United States and Australia. In January 1986, KKL went into liquidation in Australia. At about the same time, various American creditors of KKL filed complaints in the United States District Court for the District of New Jersey, seeking warrants of arrest and writs of maritime attachment against the freights of KKL's vessels and such relief was issued.*fn1 These lien creditor actions were consolidated on February 11, 1986.

On February 19, 1986, the Australian courts ordered KKL to wind up operations and appointed Dunn as KKL's liquidator. On February 27, 1986, Dunn commenced a case ancillary to a foreign proceeding by filing a petition in the United States Bankruptcy Court for the District of New Jersey pursuant to 11 U.S.C. 304(a). He ... simultaneously filed a complaint in that court against the American lien creditors, seeking an order enjoining them from further proceeding against KKL's assets and requiring them to turn over those assets. On April 28, 1987, the district court entered an interim order withdrawing the section 304 petition from the bankruptcy court, consolidating it with the lien creditors' actions against KKL, and enjoining the creditors from proceeding against KKL's assets. Most of the maritime lien claims ultimately were resolved by order of April 15, 1988.*fn2

Meanwhile, on April 2, 1986, a Chapter 7 involuntary petition in bankruptcy had been filed in the United States Bankruptcy Court for the Central District of California by other American creditors of KKL, which had provided it with transportation services. The case was transferred to the District of New Jersey in June 1987, and consolidated with the other actions involving KKL.

On September 3, 1987, the liquidator filed a motion to dismiss the Chapter 7 proceedings.*fn3 More specifically, in his notice of motion, the liquidator sought an order "pursuant to 11 U.S.C. 305, dismissing the pending Chapter 7 petition. . . ." The motion subsequently was withdrawn, but on February 22, 1988, the liquidator again moved for dismissal of the Chapter 7 petition. This time, however, he sought a final order "[pursuant] to Section 304 of the United States Bankruptcy Code" which would "recognize the pending Australian liquidation proceeding under principles of comity" and, correspondingly, would dismiss the Chapter 7 petition. The liquidator further sought approval of the settlement of the lien creditors' litigation; authorization of the distribution of assets to those creditors and to the liquidator; and an injunction prohibiting the continuation or commencement of any further proceedings against KKL. The Chapter 7 creditors opposed the liquidator's motion.

On October 14, 1988, the district court denied the liquidator's motion. In its comprehensive opinion, it first noted that most of the liens had been resolved by earlier orders, slip op. at 4 n. 1. It then went on to examine whether "the factors enumerated in 304 (c)" warranted granting the liquidator's motion to dismiss the Chapter 7 proceedings, slip op. at 11, and ultimately determined that they did not. It accordingly held that "the 304 petition should not be granted and the motion for a Chapter 7 Petition should be granted and an Order for Relief entered," adding that "[all] of the assets located in the United States . . . shall be considered part of the bankrupt estate and be administered under the laws of the United States Bankruptcy Code." Slip op. at 21. This appeal followed.

Sections 304 & 305

As its caption -- "cases ancillary to foreign proceedings" -- indicates, section 304 governs not full-fledged bankruptcy cases, but rather limited proceedings "designed to operate in aid of a principal proceeding abroad." 2 Collier on Bankruptcy, 304.01, at 304-8 (15th ed. 1988). The filing of a section 304 petition by a foreign representative does not trigger the automatic stay; instead, the foreign representative must affirmatively request injunctive or other available relief.*fn4

Section 304(c) provides that the touchstone in determining whether to grant any requested relief is "what will best assure an economical and expeditious administration of [the] estate," consistent with six enumerated criteria.*fn5 If, after consideration of the relevant factors, the court decides that relief is warranted, section 304(b) authorizes it to provide a broad spectrum of remedies. Specifically, it may

(1) enjoin the commencement or continuation of --

(A) any action against --

(i) a debtor with respect to property involved in such foreign proceeding; or

(ii) such property, or

(B) the enforcement of any judgment against the debtor with respect to such property, or any act or the commencement or continuation of any judicial proceeding to create or enforce a lien against the property of such estate;

(2) order turnover of the property of such estate, or the proceeds of such property, to such foreign representative; or

(3) order other appropriate relief.

11 U.S.C. 304(b).

Significantly, section 304(b) does not mention "dismissal" as an available option. However, section 305 of the Code, entitled "Abstention," specifically addresses this alternative. Section 305(a) provides as follows:

(a) The court, after notice and a hearing, may dismiss a case under this title, or may suspend all proceedings in a case under this title, at any time if --

(1) the interests of creditors and the debtor would be better served by such dismissal or suspension; or

(2) (A) there is pending a foreign proceeding; and

(B) the factors specified in section 304(c) of this title warrant such dismissal or suspension.*fn6

Finally, section 305(c) provides:

(c) An order under subsection (a) of this section dismissing a case or suspending all proceedings in a case, or a decision not so to dismiss or suspend, is not reviewable by appeal or otherwise.

The legislative history emphasizes that "[the] bankruptcy court, based on its experience and discretion is vested with the power of decision." H.R.Rep.No. 595, 95th Cong., 1st Sess. 325 (1977), reprinted in 1978 U.S.Code Cong. & Admin.News 5963, 6282; S.Rep.No. 989, 95th Cong., 2nd Sess. 36 (1978), reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5822.


In his February 22, 1988, motion, the liquidator placed not only his request for injunctive relief against KKL's lien creditors, but also his request for dismissal of the Chapter 7 proceedings, under the umbrella of section 304. Not surprisingly, therefore, the district court never mentioned section 305 in the context of its decision not to dismiss the Chapter 7 case, referring only to section 304.*fn7 According to the liquidator, the absence of any reference to section 305 in his motion to dismiss the Chapter 7 case renders section 305 inapplicable to this case, and appeal therefore is not foreclosed by section 305(c).

We cannot agree with the liquidator's analysis. Although section 304(b) provides the bankruptcy court with considerable leeway in fashioning an appropriate remedy, dismissal of a case is not an express option. Section 305, however, specifically addresses the court's authority to dismiss a case, incorporating the same criteria used in assessing whether to grant section 304 relief. Read in tandem, as we believe they should be, it is apparent that section 305 rather than section 304 was designed to control dismissal of a competing bankruptcy proceeding when a foreign proceeding is pending.*fn8 See In re Gee, 53 Bankr. 891, 897 (Bkrtcy.S.D.N.Y. 1985). The liquidator's omission of any reference to section 305 in his motion does not change this. Moreover, the bare fact that the district court did not rely on section 305 for its order simply does not alter the fact that the court, after considering the 304(c) criteria, decided not to dismiss a bankruptcy case -- a decision governed by section 305.

The consequences of a contrary holding would be anomalous; motions seeking identical relief on identical grounds would be treated differently, without rhyme or reason, for purposes of appellate review. Relatedly, the availability of the simple expedient of seeking dismissal under section 304 rather than section 305 "would effectively obviate section 305." In re Gee, 53 Bankr. at 905 n. 21. Indeed, in this very case, the liquidator previously filed a motion to dismiss under section 305, which he withdrew and ultimately replaced with a motion seeking similar relief against the Chapter 7 creditors under section 304. We can hardly attribute to Congress an intent to allow appellate review of decisions on dismissal to hinge upon maneuvering of this kind by the moving party. Rather, appealability should depend upon the nature of the decision rendered.*fn9

The liquidator has cited no case law which directly supports his position.*fn10 He points out, however, that section 304 is not the exclusive remedy for a representative of a foreign bankrupt; that the representative may, alternatively, request the court to recognize pending foreign proceedings as a matter of international comity. See Remington Rand v. Business Systems Inc., 830 F.2d 1260, 1271-72 (3d Cir. 1987); see also Cunard Steamship Co. v. Salem Reefer Services, 773 F.2d 452, 454-56 (2d Cir. 1985). Contending that an order grounded upon general principles of comity would be reviewable, the liquidator maintains that it would be inconsistent to preclude appellate review in his case -- where principles of comity are implicated under section 304(c)(5) -- yet permit such review in cases not brought under section 304.

The short answer is that regardless of whether or not there is an inconsistency, we cannot ignore the statutory scheme which the liquidator himself chose to utilize. Having filed a petition under section 304 and having secured diverse relief thereunder, the liquidator now seeks to avoid the statutory boundaries. We are neither willing nor able to allow him to do so.*fn11


When a foreign representative files an ancillary petition under section 304 of the Bankruptcy Code and thereafter seeks dismissal of a competing bankruptcy proceeding against the foreign debtor, such relief is governed by section 305 and the court's decision is nonreviewable. Because this is such a case, we lack jurisdiction to hear the liquidator's appeal and therefore we will dismiss it.*fn12

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