In re Manley Toys Limited

          HELLRING LINDEMAN GOLDSTEIN & SIEGAL LLP Richard B. Honig, Esq. Matthew E. Moloshok, Esq. and WEISBROD MATTEIS & COPLEY PLLC Stephen A. Weisbrod, Esq. Counsel for Appellant

          ARCHER & GREINER PC Stephen M. Packman, Esq. Douglas G. Leney, Esq. And GOODWIN PROCTOR LLP Daniel M. Glosband, Esq. Counsel for Appellees

          OPINION

          RENÉE MARIE BUMB, UNITED STATES DISTRICT JUDGE.

         On March 22, 2016, Manley Toys Limited (“the Debtor”) commenced a creditors' voluntary liquidation in Hong Kong, pursuant to Hong Kong law. Mat Ng and John Robert Lees were appointed as liquidators (“the Liquidators”), and on the same day, the Liquidators filed a Chapter 15 case and motion in the United States Bankruptcy Court for the District of New Jersey. The Bankruptcy Court granted the motion, and recognized the Hong Kong liquidation as a “foreign main proceeding, ” 11 U.S.C. § 1502(4) (“the Recognition Decision”). Aviva appealed that decision to this Court, and this Court recently affirmed the Recognition Decision in its entirety. See In re Manley Toys Ltd., 597 B.R. 578 (D.N.J. 2019).^[1]

         Aviva presently appeals from the Bankruptcy Court's subsequent denial of relief from the provisional stay that the Bankruptcy Court imposed in connection with the Chapter 15 petition. Also before this Court is Aviva's application to “supplement the record on appeal.” For the reasons stated herein, the Court will remand the case for further proceedings consistent with this Opinion.

         I. FACTUAL BACKGROUND

         As the Court's opinion affirming the Bankruptcy Court's Recognition Decision should make apparent, this case is factually, legally and procedurally complex. Thus, the Court will not repeat the lengthy discussion of the facts set forth in the previous Opinion which is available at In re Manley Toys Ltd., 597 B.R. 578 (D.N.J. 2019).

         Relevant to the instant appeal, on the same day that the Liquidators filed the Chapter 15 Petition with the Bankruptcy Court, the Liquidators moved for provisional relief, including a provisional stay pursuant to 11 U.S.C. §§ 362 and 1519(a).^[2] Aviva opposed the motion. After holding a hearing on the matter, on April 1, 2016, the Bankruptcy Court granted provisional relief in relevant part as follows:

[p]ursuant to 11 U.S.C. §§ 362 and 1519(a)(1), all persons and entities are stayed, without limitation, from the commencement or continuation of any and all litigation by, against or with respect to the Debtor, including, but not limited to, the litigation identified in the Verified Petition (the “Litigation Claims”) and any other actions, motions, discovery, trials and proceedings, and including the enforcement of any claims, causes of action, judgments, writs of execution, levies, garnishments or attempt of enforcement or relief against the Debtor, or against any property of the Debtor, in the United States and from any act to obtain possession of, exercise control over, transfer, dispose of or encumber property of the Debtor in the United States, including, but not limited to, the U.S. Assets, or take any other actions with respect to assets of the Debtor, absent Court approval. For purposes of this Order, the term “US Assets” shall mean all of the Debtor's assets of any kind in the United States.

(Bankruptcy Docket 16-15374-JNP (“Bankr. Docket”), Docket No. 18)

         On September 13, 2016, Aviva moved the Bankruptcy Court for relief from the Provisional Stay Order. (Bankr. Docket No. 144) The Bankruptcy Court held a hearing on September 27, 2016, and on October 25, 2016 entered an order in part granting and in part reserving decision on Aviva's motion. (Id. at Docket No. 159) Most relevantly to the instant appeal, in the Order, the Bankruptcy Court reserved decision on “whether Aviva may seek injunctive sanctions against Manley for violating the Minnesota Federal Court's post-judgment discovery orders or to compel compliance with such orders, ” and “whether the Liquidators are estopped from arguing that this Chapter 15 proceeding or the Hong Kong ‘liquidation' prohibit, limit or otherwise affect such alter ego claims.” (Bankr. Docket No. 159, p. 4 of 5)

         As noted by the Bankruptcy Court, “[t]hereafter between October 2016 and May 2017, . . . several additional briefs [were filed] on the matter.” In re Manley Toys Ltd., 2018 WL 1071167 at *1 (Bankr. D.N.J. Feb. 23, 2018).^[3] As set forth in the Bankruptcy Court's opinion addressing the remainder of Aviva's Stay Relief Motion, the relief Aviva sought was multifaceted and broad. The Bankruptcy Court ultimately granted in part and denied in part the remainder of Aviva's motion. Id.

         Aviva timely appealed the Bankruptcy Court's Stay Relief Order to this Court on February 28, 2018. On March 12, 2019--over a year after the appeal was filed-- Aviva sought relief from this Court to “supplement the record on appeal.” Specifically, Aviva has asked this Court to consider two exhibits: (1) a February 18, 2019 letter from Liquidator Matt Ng notifying creditors, including Aviva, of a “Proposed Settlement” between the Debtor and Toy Quest Ltd.; and (2) Aviva's written objection to the Proposed Settlement, dated March 1, 2019.

         In response to Aviva's application, this Court issued an Order to Show Cause “why this Court, sitting as an appellate court reviewing the Bankruptcy Court's decision, has jurisdiction to consider evidence that was not before the Bankruptcy Court when it rendered that decision.” (District Court Docket 18-2836, Docket No. 35; District Court Docket 18-2838, Docket No. 33) Both ...