# Manley Toys Limited

> United States Bankruptcy Court, D. New Jersey · March 31, 2020

URL: https://www.frixlaw.com/law-library/cases/10459704

## Case

- **Court:** United States Bankruptcy Court, D. New Jersey
- **Decided:** March 31, 2020
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW JERSEY

In re:
Case No. 16-15374 (JNP)
MANLEY TOYS LIMITED,
Chapter 15
Debtor in a Foreign Proceeding.

MEMORANDUM DECISION ADDRESSING ISSUES ON
REMAND AND DENYING MOTION FOR STAY RELIEF
JERROLD N. POSLUSNY, JR., U.S. Bankruptcy Judge
This matter comes before the Court on remand from the District Court (the “Remand
Order”) of an appeal of an order denying the motion for stay relief (the “Initial Motion”) filed by
ASI, Inc., f/k/a Aviva Sports, Inc. (“Aviva”). The Remand Order requires the Court to explain
whether Aviva’s arguments related to bad faith and judicial estoppel were considered in its original
decision denying stay relief (the “Previous Decision”) and further to determine whether additional
evidence Aviva attempted to introduce on appeal alters the Court’s determination to deny stay
relief. Rather than simply briefing the matters in the Remand Order, Aviva filed a new motion for
stay relief (the “Motion”). The Motion addresses not only the issues discussed in the Remand
Order, but also seeks relief from stay to obtain: (a) evidence preservation orders in other courts;
and (b) injunctive sanctions from the United States District Court for the District of Minnesota
(“Minnesota Court”) against Manley Toys, Ltd. (the “Debtor”). For the reasons discussed below,
the Court denies the Motion.
Jurisdiction
The Court has jurisdiction under 28 U.S.C. § 157(b)(1) and § 1334(b) and (d). Venue is
proper in this Court under 28 U.S.C. § 1410. The Motion is a core proceeding pursuant to 28
U.S.C. § 157(b)(2)(G).
Background
The Court assumes familiarity with the history of this case and only reviews the facts
relevant to the issues before the Court.1 The Debtor is a foreign corporation that entered voluntary

liquidation proceedings pursuant to section 228(1)(c) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance of Hong Kong statutory law (“C(WUMP)O”). On March 22,
2016, Matt Ng and Robert Lees, in their capacities as the duly appointed joint and several
liquidators (the “Liquidators”)2 of the Debtor, filed a petition under Chapter 15 of Title 11 of the
United States Code (the “Bankruptcy Code”), on behalf of the Debtor for recognition of a foreign
main proceeding. Dkt. No. 1. Aviva filed opposition. Dkt. No. 15. As part of the recognition
proceedings Aviva served discovery demands on the Liquidators and later made an informal
motion to compel (the “Motion to Compel”). Dkt. No. 40. The Court issued an oral decision (the
“Discovery Decision”) granting the Motion to Compel and requiring the Liquidators to turn over
two-years of information requested by Aviva. Dkt. No. 51. On April 1, 2016, the Court entered a
provisional stay order (the “Stay Order”), which incorporated the protections of section 362 of the
Bankruptcy Code by its terms.3
Aviva filed the Initial Motion on September 13, 2016. Dkt. No. 144. The Liquidators
opposed the Initial Motion. Dkt. No. 151. The Initial Motion sought relief from the automatic stay
to allow Aviva to pursue claims for alleged fraudulent transfers made by the Debtor to third parties,
as well as an action to pierce the corporate veil (collectively the “Claims”), and attach liability to
the principals of the Debtor and another corporation called Toy Quest, Ltd. See Dkt. No. 144. In
addition, the Initial Motion sought relief to allow Aviva to: (a) take post-judgment discovery from

1 A complete review can be found in the Previous Decision. In re Manley Toys Ltd., 2018 WL
1071167, at *1 (Bankr. D.N.J. Feb. 23, 2018). Dkt. No. 276.
2 The Liquidators were appointed by the Committee of Inspection at the creditors meeting held
on March 22, 2016.
3 On February 13, 2018, the Court entered an Order recognizing the Foreign Main Proceeding.
Dkt. No. 296
the Debtor or the Liquidators concerning the judgment it obtained against the Debtor or a separate
judgment it obtained against Manley Toy Direct; (b) request relief from other courts in the United

States with respect to the Debtor or the Liquidators to ensure the preservation of evidence relating
to the judgments Aviva obtained against the Debtor or Manley Toy Direct; (c) seek injunctive
sanctions against the Debtor for violating post-judgment discovery orders issued pre-petition by
the Minnesota Court; and (d) seek to amend complaints or judgments to include third parties. Id.
On February 13, 2018, the Court issued a decision recognizing the foreign main proceeding
(the “Recognition Opinion”). In re Manley Toys Ltd., 580 B.R. 632 (Bankr. D.N.J. 2018), aff'd,
597 B.R. 578 (D.N.J. 2019). Following this, the Court docketed the Previous Decision denying
relief from stay as it pertained to the Claims. In re Manley Toys, 2018 WL 1071167, at *1. The
Previous Decision ruled that, under Hong Kong law, once the liquidation was commenced the
Claims qualified as generalized claims and thus property of the Debtor and could only properly be
brought by the Liquidators for the benefit of all creditors. Id. Aviva appealed the Previous Decision
to the District Court arguing, among other things, that the Court had not addressed its arguments
that stay relief should be granted as to the Claims due to the bad faith of the Debtor and the
Liquidators, and that the Liquidators should be judicially estopped from arguing that the alter ego
claims were property of the Debtor. Additionally, Aviva requested the District Court take judicial
notice of, and consider a letter from the Liquidators proposing settlement of the Claims (the
“Settlement Letter”) and Aviva’s subsequent objection (the “Objection Letter” and with the
Settlement Letter, the “Letters”) to the proposed settlement. In re Manley Toys Ltd., 2019 WL
1987052, at *2 (D.N.J. May 6, 2019). The District Court remanded the case stating:
[T]he Bankruptcy Court’s decision . . . does not appear to address
the bad faith nor the estoppel issues.
* * *
The Court will remand this case for: (a) further consideration of
Aviva’s application for stay relief, and (b) a decision as to whether
the Bankruptcy Court’s consideration in that regard will include the
letters Aviva has sought to introduce into the record of this appeal.
Id. at *3
During a hearing to consider the briefing schedule for the remanded issues, Aviva stated
its intent to file a new motion for relief to address additional issues not listed in the Remand Order
and requested permission to address all issues in a single brief. In the interest of judicial economy,
the Court permitted the parties to brief all matters and objections in a single brief, and Aviva filed
this Motion. Dkt. No. 374. As a result, the Court will first consider the matters raised in the Remand
Order, and then will consider the additional matters raised by Aviva in the Motion.
Aviva argues that it should be allowed to pursue the Claims against the Debtor and its
alleged “affiliates” because the alleged bad faith of the Debtor and the Liquidators constitute cause
for stay relief. In addition to the allegations of bad acts committed by the Debtor and its principals
pre-petition, Aviva asserts that the Liquidators have a conflict of interest because they are funded
by Toy Quest and have failed to investigate or pursue fraudulent transfer and alter ego claims
against Toy Quest and the Debtor’s former principals. Dkt. No. 374. Somewhat paradoxically, the

Motion then discusses the Liquidators’ efforts to settle the Claims, and that Aviva believes the
proposed settlement is the result of collusion and does not achieve a fair recovery. Id. Additionally,
Aviva alleges that the Liquidators previously argued that creditors would be free to pursue alter
ego claims if the foreign proceeding was recognized, and therefore, should be judicially estopped
from arguing that creditors are barred from pursuing the Claims. Id.
In response, the Liquidators argue that Aviva never made a bad faith argument in the Initial
Motion. Additionally, the Liquidators argue that there is no bad faith, and that bad faith is not
grounds for relief from the stay under these circumstances. Dkt. No. 377. The Liquidators also
argue that, because under Hong Kong law the Claims belong to the Debtor, relief from the stay is
futile as Aviva would not be able to bring the Claims. Id. As to judicial estoppel, the Liquidators
argue that Aviva did not meet its burden to establish that the doctrine applies in this case. Id.
The Letters
On appeal, Aviva attempted to introduce the Letters, which were not part of the record

before this Court. Manley Toys, 2019 WL 1987052, at *2. The District Court did not decide
whether it had authority to supplement the record on appeal, instead remanding the matter to this
Court to consider whether the Letters should be considered as part of its decision. Id. (citing In re
Capital Cities/ABC, Inc.’s Application for Access to Sealed Transcripts, 913 F.2d 89, 98 (3d Cir.
1990)). Aviva included the Letters and incorporated them into the Motion. Dkt. No. 374. Because
there is no prejudice to the Liquidators by including these additional documents, the Court
reviewed the Letters as part of its consideration of the Motion.
Chapter 15 Insolvency Proceedings
Congress enacted Chapter 15 to provide effective mechanisms for dealing with cases of
cross-border insolvency with the following objectives:
(1) cooperation between . . . courts of the United States, . . . and the
courts and other competent authorities of foreign countries involved
in cross-border insolvency cases;
(2) greater legal certainty for trade and investment;
(3) fair and efficient administration of cross-border insolvencies that
protects the interests of all creditors, and other interested entities,
including the debtor;
(4) protection and maximization of the value of the debtor's assets;
and
(5) facilitation of the rescue of financially troubled businesses,
thereby protecting investment and preserving employment.
In re ABC Learning Centres Ltd., 728 F.3d 301, 304-05 (3d Cir. 2013) (citing 11 U.S.C. § 1501;
UNCITRAL Model Law on Cross–Border Insolvency preamble (stating nearly identical
purposes)). Uniformity and cooperation are essential to this goal, treating the “multinational
bankruptcy as a single process in the foreign main proceeding, with other courts assisting in that
single proceeding.” Id. This is done to ensure that creditors are universally protected, and asset
value is maximized, in contrast to the “so-called ‘grab rule’ where each country seizes assets and
distributes them according to each country's insolvency proceedings.” Id. (citing Jay Lawrence
Westbrook, Chapter 15 at Last, 79 Am. Bankr. L.J. 713, 715 (2005)). As the Third Circuit

described it, “[t]he emphasis must be on ensuring that the insolvency administrator, appointed in
that proceeding, is accorded every possible assistance to take control of all assets of the debtor that
are located in other jurisdictions.” ABC Learning Centres, 728 F.3d at 305. Chapter 15 creates an
ancillary proceeding in the United States to provide support to the foreign insolvency
administrator. Id. To further this universal approach adopted by Congress, our courts “act . . . in
aid of the main proceedings, in preference to a system of full bankruptcies . . . in each state where
assets are found.” H.R. Rep. No. 109–31(1), at 109 (2005) reprinted in 2005 U.S.C.C.A.N. 88,
171. Thus, a United States court in a Chapter 15 case “acts as an adjunct or arm of a foreign
bankruptcy court where the main proceedings are conducted.” ABC Learning Centres, 728 F.3d at
306. With this in mind, the Court turns to the question of when a Court should grant relief from
the stay imposed in a Chapter 15 case to allow an individual creditor to pursue claims that would
otherwise be pursued by the administrators appointed in the Foreign Main Proceeding.
The Automatic Stay
Pursuant to section 1517 of the Bankruptcy Code, a foreign proceeding will be recognized
if that foreign proceeding is a foreign main proceeding and the petition meets the administrative
requirements of section 1515 of the Bankruptcy Code. 11 U.S.C. § 1517(a). Section 1520 of the
Bankruptcy Code provides that recognizing a liquidation proceeding as a foreign main proceeding
triggers and imposes the automatic stay of section 362. In re ABC Learning Centres Ltd., 445 B.R.
318, 336 (Bankr. D. Del. 2010), on reconsideration in part (Jan. 21, 2011), subsequently aff'd, 728
F.3d 301 (3d Cir. 2013). In a Chapter 15 case, there is no “estate.” In re Atlas Shipping A/S, 404
B.R. 726, 739 (Bankr. S.D.N.Y. 2009). The statute refers to “property of the debtor” to distinguish
it from the “property of the estate” that is created under section 541(a) of the Bankruptcy Code.
Id. However, section 1520(a) imposes the automatic stay on any action with respect to the all the
debtor's property located in the United States. Id. at 739 (citing In re Pro–Fit Holdings Ltd., 391

B.R. 850, 864 n.48 (Bankr. C.D. Cal. 2008)). Thus, when this Court recognized the foreign main
proceeding, section 362 of the Bankruptcy Code became applicable “with respect to the debtor and
the property of the debtor that is within the territorial jurisdiction of the United States.” In re Ace
Track Co., Ltd., 556 B.R. 887, 895 (Bankr. N.D. Ill. 2016); see also In re SPhinX, Ltd., 351 B.R.
103, 115 (Bankr. S.D.N.Y. 2006).
The Previous Decision discussed whether the Claims were property of the Debtor, and thus,
subject to the stay. Manley Toys, 2018 WL 1071167, at *2-5. The Court noted that to determine
what constitutes “property of the Debtor” it must look to the controlling law where the foreign
main proceeding is located. Id. (citing ABC Learning Ctrs., 728 F.3d at 312) (foreign main
proceeding in Australia, the extent of the debtor’s interest in property is governed by the
Australia’s Corporations Act); In re Lee, 472 B.R. 156, 178 (Bankr. D. Mass. 2012) (same for
Hong Kong)). The Court first noted that under Hong Kong law, the fraudulent transfer and alter
ego claims were property of the Debtor. Manley Toys, 2018 WL 1071167, at *4 (citing Horace
Yao v. Pearl Oriental Innovation Ltd. f/k/a China Merchs Dichain (Asia) Ltd. [2010] HKEC 537
¶ 34). The Previous Decision also noted that under Hong Kong law, the Claims are referred to as
claims for “reflective loss,” or what in the United States are called “generalized claims.” Id. Under
Hong Kong law, as under United States law, generalized claims are considered property of the
debtor.4 Id. (citing Horace Yao; In re Emoral, Inc., 740 F.3d 875, 879 (3d Cir. 2014)). For a claim
to be considered “generalized,” “the claim must be a ‘general one, with no particularized injury

4 Under United States law, individual fraudulent transfer claims belong to individual creditors
outside of bankruptcy. However, once in bankruptcy, the fraudulent transfer is avoided for the
benefit of all creditors, not just to the extent necessary to satisfy the individual creditor actually
holding the avoidance claim; standing to pursue this claim is held by the trustee and the property
recovered is property of the estate. See In re Cybergenics Corp., 226 F.3d 237, 243 (3d Cir. 2000).
arising from it.’” Emoral, 740 F.3d at 879. As described by the court in In re Canyon Sys. Corp.:
Where the injury alleged is primarily to the corporation, and is an
injury to the plaintiff creditor only insofar as it decreases the assets
of the corporation to which he must look for satisfaction of his debt,
then the suit is for a tort suffered by the corporation, and properly
brought by the trustee; if there is a special damage to the creditor
suing, not common to other creditors, then it is a personal creditor
action which the trustee may not pursue.
343 B.R. 615, 659 (Bankr. S.D. Ohio 2006) (internal citations omitted). Under both Hong Kong
and United States liquidation law, individual creditors lack standing to bring generalized claims
against non-debtor third parties because recovery would benefit “the estate” as a whole, rather than
any individual creditor. Manley Toys, 2018 WL 1071167 at *2-5 (citing Horace Yao ¶ 35). See
also In re Buildings By Jamie, Inc., 230 B.R. 36, 44 (Bankr. D.N.J. 1998) (individual creditors
lack standing to pursue alter ego claims). As such, the Previous Decision ruled that only the
Liquidators have the right to pursue fraudulent transfer claims on behalf of the estate.5 Similarly,
under section 548, only a trustee may bring fraudulent transfer claims and, under section 362,
individual creditors are stayed from bringing any avoidance action to attempt to recover assets that
are “property of the Debtor.”
A primary purpose of the automatic stay is “to prevent certain creditors from gaining a
preference for their claims against the debtor; to forestall the depletion of the debtor's assets due
to legal costs in defending proceedings against it; and, in general, to avoid interference with the
orderly liquidation or rehabilitation of the debtor.” St. Croix Condo. Owners v. St. Croix Hotel,
682 F.2d 446, 448 (3d Cir.1982). This same policy applies under Hong Kong law, where the pari
passu rule is a fundamental concept in the liquidation process. 2 Collier International Business

5 Although the Liquidators are not granted authority to pursue avoidance actions under the
Bankruptcy Code, see 11 USC § 1521(a)(7), the Liquidators can pursue these claims under Hong
Kong Law. See In re Condor Ins. Ltd., 601 F.3d 319 (5th Cir. 2010); In re Fairfield Sentry Ltd.,
2018 WL 3756343, at *2 (Bankr. S.D.N.Y. Aug. 6, 2018). Alternatively, the Liquidators can
exercise United States avoidance powers by commencing a plenary case under sections 301 and
302 of the Bankruptcy Code. 2 Collier International Business Insolvency Guide P 23B.04 (2019).
Insolvency Guide P 23B.04. In liquidation it means that “all unsecured creditors are entitled to
rank and be paid equally to all others, and every creditor has the same right to information as every

other.” Id. The Horace Yao court explained that preventing individual creditors from bringing
“generalized claims” on their own serves this purpose when a corporation is insolvent, because
“the essence of distribution in a winding up is that creditors of equal rank should share whatever
assets remain equally.” Horace Yao ¶ 35. Thus, the Previous Decision concluded that Aviva lacked
standing to pursue these claims because they were property of the Debtor, and the stay applied to
any party pursuing the Claims because generalized claims should be pursued for the benefit of all
creditors, rather than allowing each individual creditor to race to recover as many of the assets as
they could for themselves. See Manley Toys, 2018 WL 1071167, at *4-5.
“The procedure for obtaining a court order for relief from the U.S. automatic stay under
subsections (d) through (g) of § 362 applies in a chapter 15 case.” Lexis 1-5 United States
International Insolvency Law § 5.06. Section 362(d)(1) of the Bankruptcy Code provides that the
Court can grant relief from the stay for “cause.” ABC Learning Centres Ltd., 445 B.R. at 336–37.
“Cause” is not defined in section 362(d)(1). “Cause is a flexible concept and courts often conduct
a fact intensive, case-by-case balancing test, examining the totality of the circumstances to
determine whether sufficient cause exists to lift the stay.” Id. “To establish cause, the party seeking
relief from the stay must show that ‘the balance of hardships from not obtaining relief tips
significantly in [its] favor.’” Atl. Marine, Inc. v. Am. Classic Voyages, Co. (In re Am. Classic
Voyages, Co.), 298 B.R. 222, 225 (D. Del. 2003) (quoting In re FRG, 115 B.R. 72, 74 (E.D. Pa.
1990)).
Bad Faith
The good faith requirement is inherent in all court proceedings. In re Lippolis, 228 B.R.
106, 112 (E.D. Pa. 1998). A finding that a debtor has filed bankruptcy in bad faith may constitute
“cause” to grant relief from the automatic stay. In re Schaffer, 597 B.R. 777, 791 (Bankr. E.D.
Pa.), aff'd sub nom. Matter of Schaffer, 606 B.R. 228 (E.D. Pa. 2019) (citing Drauschak v. VMP

Holdings Ass'n, L.P., 481 B.R. 330, 345 (Bankr. E.D. Pa. 2012)). In determining whether a case
has been filed in bad faith, courts must examine the totality of the circumstances. Id. (citing In re
Soppick, 516 B.R. 733, 746 (Bankr. E.D. Pa. 2014)).
Courts have identified several factors indicative of a bad faith bankruptcy filing for
purposes of relief from the automatic stay. See e.g., In re 1701 Commerce, LLC, 477 B.R. 652
(Bankr. N.D. Tex. 2012) (citing Little Creek, 779 F.2d at 1072–73); In re Laguna Assocs. Ltd.
P'ship, 30 F.3d 734, 738 (6th Cir. 1994), as amended on denial of reh'g and reh'g en banc (1994);
In re AMC Realty Corp., 270 B.R. 132 (Bankr. S.D. N.Y. 2001). However, there is no one test for
determining bad faith in the filing of a bankruptcy petition, and any factors which indicate bad
faith are factors to be considered by the court. 74 Causes of Action 2d 273 (Originally published
in 2016) (citing In re Venice-Oxford Assocs. Ltd. P’ship, 236 B.R. 805 (Bankr. M.D. Fla. 1998);
In re Phoenix Piccadilly, 849 F.2d at 1394 (quoting In re Albany Partners, Ltd., 749 F.2d 670, 674
(11th Cir.1984)). Ultimately, “[w]hen faced with a motion to lift the stay on bad faith filing
grounds, a judge must conduct a careful analysis . . . the relief sought is an extraordinary remedy
that requires a careful examination of the facts on a case-by-case basis.” AMC Realty, 270 B.R. at
141.
Aviva argues that the stay should be lifted due to the Debtor’s, and now the Liquidators’,
bad faith. Dkt. No. 374. Aviva makes multiple allegations of bad faith related to the Debtor, and
several more related to the Liquidators. Beginning with the Debtor and its principals, the Motion
predominantly repeats the allegations made during the recognition proceedings. Aviva’s
allegations include that the Debtor entered liquidation to thwart its creditors within the United
States; and that the timing of the liquidation was intended to stall ongoing litigation by Aviva, and
to avoid contempt rulings made or about to be made by the Minnesota Court against the Debtor.
Dkt. No. 374. Additionally, Aviva alleges that this liquidation is part of a larger scheme that the

Debtor began months or even years earlier, when it began using the trade name Toy Quest, which
Aviva alleges is no more than a corporation set up to allow the transfer of assets to avoid collection
activities by creditors. Id. Aviva also repeats allegations that it did not receive sufficient notice of
the liquidation in Hong Kong, and that this was another part of the scheme by the Debtor and its
principals to avoid its creditors. Id. The Court discussed most of these allegations in the
Recognition Opinion finding that even assuming each of these was true, it did not warrant denying
recognition of a valid foreign proceeding that complied with Hong Kong law, in which a committee
of inspection (“COI”) had the opportunity to select independent representatives to oversee and
manage the collection and liquidation of the Debtor’s assets, and the distribution of those assets to
creditors in accordance with Hong Kong law. See Manley Toys, 580 B.R. 632. Similarly, the Court
now finds that the allegations Aviva makes against the Debtor and its principals are not sufficient
cause to grant relief from the automatic stay, particularly where the estate is now being managed
by the duly appointed Liquidators.
The Motion also alleges that the Liquidators have acted, and continue to act, in bad faith;
that they are too conflicted; and that they lack the funding to properly oversee the collection and
distribution of the Debtor’s assets. Dkt. No. 374 at 3. Aviva alleges that Toy Quest hired the
Liquidators, but that the funds paid to Liquidators are earmarked exclusively for shutting down
litigation in the United States. Id. at 5. Although the Motion dedicates multiple pages to its bad
faith argument, the factual allegations against the Liquidators are limited to the following: the
Liquidators have not investigated or prosecuted the Claims; the Liquidators have not taken proper
steps to preserve the Debtor’s documents and emails; the Liquidators have not taken any steps to
prevent Toy Quest from pursuing the Debtor’s assets; and the Liquidators lack the funding to
pursue the Claims even if they wished to do so. Id. at 5-16. In addition to alleging that the
Liquidators have not taken any steps to pursue the Claims, Aviva alleges, somewhat inconsistently,

that the Liquidators intend to settle those same Claims with Toy Quest, but that the proposed
settlement does not offer reasonable value. Id. at 14. Finally, Aviva alleges that the Liquidators
have not been forthcoming with information. Dkt. No. 381 at 4.
Initially, the Court again notes that the Previous Decision found that under Hong Kong law
the Claims are generalized claims that are property of the Debtor. Manley Toys, 2018 WL
1071167, at *6. The trustee, or in this case the Liquidators, have standing to pursue generalized
claims “to the exclusion of other creditors.” Standing to bring a fraudulent transfer action,
Fraudulent Transfers, Prebankruptcy Planning and Exemptions § 18:1; see also Point Serv. Corp.
v. Pritchard Mining Co., 2010 WL 1410673, at *1 (S.D. W. Va. Mar. 31, 2010) (Alter ego theories
are the exclusive property of the bankruptcy estate and cannot be pursued by any party other than
the trustee in the absence of abandonment or the grant of derivative standing.). The Third Circuit
indicated this when it ruled that an individual creditor “cannot recover property for the benefit of
the estate unless it sues derivatively.” Official Comm. of Unsecured Creditors of Cybergenics
Corp. ex rel. Cybergenics Corp. v. Chinery, 330 F.3d 548, 565 (3d Cir. 2003) (“Cybergenics II”).
The court went on to state that it “cannot conceive of a situation in which a creditor has independent
standing which would allow it to pursue the recovery of property transferred or concealed by the
debtor.” Id. (quoting In re Blount, 276 B.R. 753, 762 (Bankr. M.D. La. 2002)) (emphasis added).
Thus, Aviva lacks standing to pursue the Claims because the Liquidators have exclusive standing
to do so.6 Granting stay relief would not confer standing upon Aviva to pursue these Claims.
Therefore, the Court concludes Aviva has failed to show the balance of hardships weighs in favor
of granting relief from the stay, because doing so will not offer Aviva the relief it seeks. Thus,

6 A creditor’s ability to pursue state law fraudulent transfer claims on its own behalf is discussed
below.
there is no “cause” to lift the automatic stay. Although not discussed in the Previous Decision,
Aviva’s bad faith argument, which was considerably more limited than the one made in this

Motion, as well as its estoppel argument, were considered and rejected by the Court, and are
rejected again here because Aviva lacks standing to bring the Claims even if stay relief was
granted.
This does not mean that creditors are without recourse in the event a trustee unjustifiably
declines to pursue a generalized claim. See generally, Cybergenics II, 330 F.3d 548. While stay
relief will not grant Aviva standing to pursue these Claims, individual creditors may pursue
generalized claims on behalf of the estate if granted derivative standing.7 Derivative standing is an
equitable remedy that allows creditors or other non-trustee parties to pursue claims on behalf of
the estate when the trustee or other responsible party has unjustifiably refused. See 43 A.L.R. Fed.
3d Art. 6 (Originally published in 2019). However, Aviva has not made a motion for, nor met its
burden to establish it is entitled to derivative standing.8 Aviva lacks standing to pursue the Claims
on its own, and so is not entitled to stay relief.
Even assuming Aviva had standing to pursue the Claims on its own behalf, there are

7 This Court may not be the proper venue for such a request. Because the Liquidators were
appointed in Hong Kong, Hong Kong appears be the appropriate venue for such a determination
to be made. But since this issue has not been raised, ruling on it is not necessary to resolve the
Motion.
8 To the extent Aviva argues that it informally requested the Court grant derivative standing, the
Court disagrees. First, Aviva has not filed a motion for derivative standing nor met its burden
under the Gibson test. See In re Nat'l Forge Co., 326 B.R. 532, 543 (W.D. Pa. 2005). Moreover,
the specific relief Aviva seeks is relief from the stay to pursue the Claims on its own behalf. For
example, at a hearing on September 27, 2016, the Court asked: “if Aviva - obtains a fraudulent
transfer judgment, who gets the money?” Aviva responded that “[w]e would say that Aviva should
. . . [b]ut . . . the question of who gets the money is different from whether we get to litigate . . . .”
Aviva’s counsel also stated “I don’t deny that Aviva wants to take the money . . . . If Aviva has to
share the . . . proceeds, well maybe it will. But that sure beats letting the claims go unasserted.”
Dkt. No. 157 at 12. None of this is consistent with a request for derivative standing, in which any
money recovered is property of the estate turned over to the Liquidators to be distributed according
to the priority scheme. As such, the Court finds that Aviva has not made any request for derivative
standing, informal or otherwise, and makes no ruling on the issue.
significant policy reasons this relief is not appropriate. Aviva argues that it should be granted stay
relief to pursue the specific fraudulent transfer claims against Toy Quest and the former principals

of the Debtor that Aviva maintains it would have the right to pursue under state law if no
liquidation was ongoing. Dkt. No. 381 at 15. This relief is not available for several reasons. First,
as noted already, “any fraudulent transfer claims against debtors or non-debtors became part of the
bankruptcy” once the liquidation commenced. Fairway Rest. Equip. Contracting, Inc. v. Makino,
148 F. Supp. 3d 1126, 1129 (D. Nev. 2015). As the Fairway Rest. Equip. court explained, any
attempt by a creditor to bring a fraudulent transfer claim against the debtor’s principals or the like
“constitutes impermissible claim splitting.” Id. at 1129. The theory of claim splitting bars a party
from subsequent, duplicative litigation where the “same controversy” exists. Id. (citing Single Chip
Sys. Corp. v. Intermec IP Corp., 495 F. Supp. 2d 1052, 1057 (S.D. Cal. 2007)). In this case, Aviva
seeks authority to pursue fraudulent transfer claims that are part of the overall Claims that the
Liquidators are proposing to settle against Toy Quest.
Moreover, Aviva may not pursue these Claims because “[t]o permit a creditor to raise a
fraudulent transfer claim after a bankruptcy case has commenced would ‘permit the creditor to
effectively circumvent the bankruptcy code’s policy and the protections to be afforded by it to the
[debtor's] other creditors.” Rosenblum, 545 B.R. 846, 857 (Bankr. E.D. Pa. 2016) (citing
Constitution Bank v. DiMarco, 155 B.R. 913, 918 (E.D. Pa. 1993) (citing In re Pointer, 952 F.2d
82, 87-88 (5th Cir.1992))). As noted above, one of the primary purposes the automatic stay serves
is protecting creditors “by preventing particular creditors from acting to protect their own self-
interests to the detriment of other creditors.” In re Formisano, 148 B.R. 217, 221 (Bankr. D.N.J.
1992) (citing St. Croix Condo. Owners, 682 F.2d at 448). “Without [the stay], certain creditors
would be able to pursue their own remedies against the debtor's property. Those who acted first
would obtain payment of the claims in preference to and to the detriment of other creditors.” St.
Croix Condo. Owners, 682 F.2d at 448 (quoting H.R.Rep.No.95-595, 95th Cong., 1st Sess. 340
(1977), reprinted in 1978 U.S. Code Cong. & Ad. News 5787, 5963, 6296-97). These Claims are

preserved for the benefit of all creditors and any proceeds are subject to “distribution in accordance
with the plan or retention by the liquidating trustee.” Fairway Rest. Equip., 148 F. Supp. 3d at
1129. As the Third Circuit observed in Cybergenics, if individual creditors were granted relief to
pursue their own claims, state law provides “a transfer or obligation may be avoided only ‘to the
extent necessary to satisfy the creditor’s claim.’” 330 F.3d at 565 (quoting 7A Uniform Laws
Annotated, Uniform Fraudulent Transfer Act § 8; 7A Uniform Laws Annotated, Uniform
Fraudulent Conveyance Act § 9). “Because an oversecured creditor cannot directly recover any
property beyond that necessary to satisfy its own claim, it cannot recover property for the benefit
of the estate unless it sues derivatively.” Id. Granting stay relief as Aviva requests would allow it
to pursue recovery of its own claim, while avoiding the distribution provisions of Hong Kong
liquidation law.
Aviva also argues it can “shoulder the expense” of pursuing the Claims to increase the
recovery for other creditors and that each individual creditor could be allowed to pursue Claims
on its own behalf. Dkt. No. 374 at 27. This relief is not permitted for the reasons discussed above.
Individual creditors cannot recover property beyond that necessary to satisfy their own claim.
Cybergenics 330 F.3d at 565. As to each creditor pursuing its own claim, both United States and
Hong Kong have adopted measures so that all assets are collected and distributed through a single
proceeding to ensure that creditors are protected, and to avoid each individual creditor racing to
recover as many of the assets as they can for themselves and to the detriment of others. See Manley
Toys, 2019 WL 1987052. Further, one of the primary goals of Chapter 15 is to treat the
“multinational bankruptcy as a single process in the foreign main proceeding, with other courts
assisting in that single proceeding.” ABC Learning Centres, 728 F.3d at 304–05 (citing 11 U.S.C.
§ 1501; UNCITRAL Model Law on Cross–Border Insolvency preamble (stating nearly identical
purposes)). In addition, the automatic stay is intended “to allow the bankruptcy court to centralize

all disputes concerning property of the debtor's estate so that reorganization can proceed
efficiently, unimpeded by uncoordinated proceedings in other arenas.” S.E.C. v. Brennan, 230 F.3d
65, 70 (2d Cir. 2000) (quoting In re United States Lines, Inc., 197 F.3d 631, 640 (2d Cir.1999))
(internal quotation marks omitted). Granting the Motion would violate not only United States
policy in adopting Chapter 15, but also the policies of priority distribution of assets adopted under
both Hong Kong and United States law. Allowing each creditor to attempt to recover whatever
assets of the Debtor it can on its own would essentially defeat an underlying purpose of bankruptcy
- to prevent the race to collect estate assets and instead impose an orderly liquidation and
distribution of assets through a single proceeding.
However, even assuming Aviva was not barred from pursuing these Claims for the above
reasons, the Court would still deny the Motion because Aviva has failed to meet its burden. “The
existence of good faith depends on an amalgam of factors and not upon one specific fact.” 74
Causes of Action 2d 273 (Originally published in 2016). Here, assuming the truth of Aviva’s
allegations, they do not support a finding of bad faith. As noted, Aviva alleges the Liquidators
have engaged and continue to engage in bad faith. Dkt. No. 374. Aviva argues broadly that this
bad faith warrants stay relief, and the hardship from not obtaining stay relief is that the Claims will
be settled for less than their value under an allegedly collusive settlement. Id.
To support this argument Aviva alleges the Liquidators have failed to pursue the Claims
against Toy Quest and former principals of the Debtor. Dkt. No. 374 at 8. However, this is not
supported by the record. Indeed, Aviva admits that the Liquidators are currently pursuing a
settlement of the Claims with Toy Quest. Id. at 12. Engaging in settlement discussions with
opposing parties is evidence that the Liquidators are in fact pursuing the Claims. See generally, In
re Caesars Entm’t Operating Co., Inc., 561 B.R. 457, 468 (Bankr. N.D. Ill. 2016) (settlement, for
purposes of determining whether derivative standing was appropriate, was sufficient to establish

the trustee had not unjustifiably refused to pursue a colorable claim); In re Milazzo, 450 B.R. 363,
371 (Bankr. D. Conn. 2011) (trustee had not unreasonably refused to bring an avoidance action
given that he had proposed a settlement after filing the complaint and engaging in discovery). As
such, Aviva’s allegations that the Liquidators have refused to pursue the Claims is not supported
by the evidence and therefore does not show the Liquidators have acted in bad faith.
Aviva next alleges that, even assuming the Liquidators were willing to pursue the Claims,
they lack the funding to do so. Dkt. No. 374 at 25. Aviva alleges the Liquidators have less than
$5,000 to fund estate activities. Id. Aviva also points out that “the Liquidators are precluded from
funding a case through a contingency fee arrangement because contingency fees are illegal in Hong
Kong.” Id. (citing Dkt. 201-5, R04339, HKSAR v Mui Kwok Keung, [2014] 1 HKLRD 116
(C.A.); Bankr. Dkt. 201-6, R04373, Winnie Lo v HKSAR, [2012] 15 HKCFAR 16 (C.F.A.)). Even
assuming this is true, it would not support a finding of bad faith. Lack of sufficient funding is a
rational basis to decline to pursue claims or to pursue settlement of claims in lieu of litigation. See
generally, Hyundai Translead, Inc. v. Jackson Truck & Trailer Repair, Inc. (In re Trailer Source,
Inc.), 555 F.3d 231, 244 (6th Cir. 2009); In re Woodbridge Grp. of Cos., LLC, 592 B.R. 761, 774
(Bankr. D. Del. 2018). Thus, rather than further Aviva’s allegations of bad faith, the fact that the
Liquidators lack the funding to pursue the Claims instead indicates that there may be a rational
basis to pursue settlement.
Aviva also alleges that the Liquidators are funded by Toy Quest, a potential defendant in
the fraudulent transfer claims, which Aviva argues creates a conflict of interest that prevents the
Liquidators from properly pursing the Claims. Dkt. No. 374 at 10. However, as acknowledged at
the hearing on the Initial Motion, it is “typical in British Commonwealth countries for fiduciaries
to obtain third party funding for litigation,” and it is common for creditors to provide that funding.
Dkt. No. 157 at 25. Aviva, in support of its argument, points to the fact that the funds provided by

Toy Quest cannot be used to pursue claims against Toy Quest. The Court addressed these
allegations in the Recognition Opinion noting that such arrangements are commonplace in Chapter
11 cases within the United States and not a basis to deny recognition. Manley Toys, 580 B.R. at
651 (citing In re Modanlo, 2006 WL 4606303 (D. Md. 2006)). During the Recognition Hearings,
Mr. Ng explained that if he determines there was a cause of action against an insider, he would
reach out to creditors to determine if they would fund litigation. Id. (citing May 12 Transcript at
45:11-15). The fact that the Liquidators cannot use the funds from Toy Quest to pursue the Claims
is not evidence that the Liquidators are acting in bad faith. Aviva has not alleged that it has offered
to fund the Liquidators’ pursuit of these Claims, or that the Liquidators have refused offers from
Aviva or other creditors to fund the litigation. Thus, while Toy Quest may be unwilling to fund
litigation against itself, the Liquidators accepting funding from Toy Quest to pursue other matters
in the Liquidation is not evidence of bad faith.
The remaining issues relate to Aviva’s allegations that the Liquidators’ failure to preserve
the Debtor’s documents and emails; and the failure to pursue Toy Quest for violations of the
automatic stay. Dkt. No. 374. According to Aviva’s allegations the Liquidators lack the funds to
pursue these matters. Thus, these allegations do not support a finding of bad faith on the part of
the Liquidators.
Finally, “[t]o establish cause, the party seeking relief from the stay must show that the
balance of hardships from not obtaining relief tips significantly in [its] favor.” Atl. Marine, 298
B.R. at 225. Here, even if Aviva had established that the Liquidators acted in bad faith, the balance
of hardships would still weigh in favor of denying stay relief. Aviva’s primary argument is that if
the Court does not lift the stay and allow Aviva to pursue the Claims on its own behalf then the
Liquidators will enter into a collusive settlement with Toy Quest, thus denying Aviva the right to
collect the full value of its claim. Dkt. No. 374 at 12. However, there are multiple other safeguards

and remedies available to Aviva. To begin, any settlement must first be approved by the creditors.
Dkt. No. 374 at 12. Thus, Aviva may voice its objection, as may other creditors, prior to the
consummation of any settlement. Additionally, Aviva has multiple other remedies available to it
in Hong Kong.
Under Hong Kong law, the Liquidators owe a duty not only to the Debtor, but also to its
creditors. 2 Collier International Business Insolvency Guide P 23B.05. C(WUMP)O states the
“liquidator of a company . . . shall . . . have regard to any directions that may be given by resolution
of the creditors . . . at any general meeting, or by the committee of inspection.” C(WUMP)O
§ 200(1). As noted above, creditors have the option of joining the COI, and Aviva was offered a
position on the COI, but declined. Manley Toys, 580 B.R. at 641. However, even without joining
the COI, Hong Kong law offers creditors substantial safeguards and remedies. For example, “any
directions given by the creditors or contributories at any general meeting shall . . . override any
directions given by the committee of inspection.” C(WUMP)O § 200(1). Additionally, regarding
the assets of the debtor under the liquidator’s administration (including the Claims at issue here),
the liquidator is also a trustee. 2 Collier International Business Insolvency Guide P 23B.05 (citing
Re Oriental Inland Steam Company [1874] LR 9 Ch App 557; Re Corbenstoke (No. 2) [1990]
BCLC 60). Further, “[i]f any person is aggrieved by any act or decision of the liquidators, that
person may apply to the court, and the court may confirm, reverse, or modify the act or decision
complained of.” C(WUMP)O § 200(5). Finally, if a liquidator is found in breach of the duties
outlined in the C(WUMP)O, the liquidator may be held personally liable. 2 Collier International
Business Insolvency Guide P 23B.05.
Thus, Aviva has the option of offering to fund the Liquidators to allow for a deeper
investigation and potential suits to avoid any alleged fraudulent transfers. Additionally, Aviva may
be able to join the COI, and if that option has expired it still may attend any general meeting of

creditors and voice its objection to any proposed settlement. Finally, Aviva may bring an action in
Hong Kong to prevent any allegedly collusive settlement or hold the Liquidators personally liable
for any violation of their duties. See C(WUMP)O § 200.
Given these protections, Aviva’s only hardship appears to be the cost of litigating in Hong
Kong, which was an economic risk Aviva accepted when it chose to do business with a company
based in Hong Kong. Thus far, however, Aviva appears to have avoided in engaging in the Hong
Kong process. For example, Aviva declined a position on the COI because it did not wish to be
subject to Hong Kong jurisdiction. Dkt. No. 143 at 59. Aviva has not alleged that it has taken any
other action in Hong Kong to protect its interests. Instead, Aviva asks this Court to create separate
remedies and procedures for Aviva (and to a lesser extent, other United States creditors), to permit
creditors in the United States to obtain relief in a separate form or action. This Court declines to
do so. As noted, uniformity and cooperation are essential to the goals of Chapter 15, and this is
accomplished though treating the “multinational bankruptcy as a single process in the foreign main
proceeding, with other courts assisting in that single proceeding.” ABC Learning Centres, 728
F.3d at 304-05. In much the same way United States law requires creditors from other nations to
come before a bankruptcy court for relief when a domestic company files bankruptcy, Aviva must
go to Hong Kong to obtain the relief it seeks. As far as this Court is aware, Aviva has not fully
participated in the process in Hong Kong. As noted, Aviva refused a position on the COI, at least
in part, to avoid being subject to the jurisdiction of Hong Kong courts. Dkt. No. 143 at 59. While
Aviva is entitled to not pursue its claims in Hong Kong, it is not entitled to attempt to circumvent
the Hong Kong Proceeding and United States international insolvency law. Aviva’s remedies lie
in Hong Kong. Thus, Aviva’s harm, if this Court declines to lift the automatic stay, is that Aviva
will be forced to pursue its remedies in a less convenient forum.
In contrast, granting stay relief would pose a substantial hardship on the Liquidators, other

creditors, and the liquidation itself. Beginning with the Liquidators’ efforts to resolve and collect
on the Claims, even assuming all other creditors support the proposed settlement, it is unlikely any
potential defendant would agree to settle with the Liquidators knowing that the same Claims may
be brought in a separate action by Aviva in another venue. Further, granting stay relief creates
significant risk of inconsistent outcomes - a settlement of the Claims in Hong Kong and
simultaneous litigation of the Claims in the United States. Alternatively, if the proposed settlement
is not approved by creditors, there may well be two separate proceedings involving the same
defendants for the same alleged conduct, and two separate judgments may be entered. This would,
among other problems, threaten the underlying purpose of Chapter 15 - to create a single
proceeding to maximize and disperse a debtor’s assets. ABC Learning Centres, 728 F.3d at 304-
05. Thus, the balance of hardships weighs heavily in favor of denying stay relief.
In conclusion, Aviva lacks standing to pursue the Claims for the reasons discussed in the
Previous Decision and summarized here. Further, stay relief is not appropriate under these facts.
Aviva has not shown that the Liquidators have acted in bad faith. Even assuming the truth of
Aviva’s allegations, the balance of harms weighs in favor of denying stay relief. Ultimately, the
Court notes that Chapter 15 was designed to, and does, grant Aviva multiple remedies for its
alleged injuries, but those remedies are not found in this forum. This is a foreign liquidation, based
in Hong Kong; and under Chapter 15, Hong Kong is where Aviva must seek this form of relief.
Judicial Estoppel
As noted in the Previous Decision, “‘piercing the corporate veil does not give rise to a
cause of action in itself.’ Instead, it is available only when there is an underlying cause of action
with which it will be brought.” Manley Toys, 2018 WL 1071167, at *4 (citing Horace Yao at ¶¶
33-38). In this case, the underlying causes of action alleged by Aviva are fraudulent transfers.
Because the Court has already determined that the claims for fraudulent transfer cannot be brought

by Aviva in its individual capacity, Aviva cannot bring the alter ego claim by itself. Further, as
noted above, because the alter ego claim is a generalized claim preserved for the benefit of all
creditors, Aviva lacks standing to pursue such a claim under Hong Kong law. However, assuming
Aviva was not barred from bringing a claim to pierce the corporate veil, judicial estoppel does not
apply.
The doctrine of judicial estoppel “seeks to prevent a litigant from asserting a position
inconsistent with one that it has previously asserted in the same or in a previous proceeding.” MD
Mall Assocs., LLC v. CSX Transp., Inc., 715 F.3d 479, 486 (3d Cir. 2013), as amended (May 30,
2013) (citing Macfarlan v. Ivy Hill SNF, LLC, 675 F.3d 266, 272 (3d Cir.2012)) (internal quotation
marks omitted). “The doctrine exists to protect the integrity of the judicial process and to prohibit
parties from deliberately changing positions according to the exigencies of the moment.” Id.
Judicial estoppel “should only be applied to avoid a miscarriage of justice.” Krystal Cadillac-
Oldsmobile GMC Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314, 319 (3d Cir. 2003) (citing
Montrose Med. Grp. Participating Sav. Plan v. Bulger, 243 F.3d 773 (3rd Cir. 2001)).
Three factors inform a court's decision whether to apply judicial estoppel: “there must be
(1) irreconcilably inconsistent positions; (2) adopted in bad faith; and (3) a showing that estoppel
addresses the harm and no lesser sanction is sufficient.” MD Mall, 715 F.3d at 486 (quoting G–I
Holdings, Inc. v. Reliance Ins. Co., 586 F.3d 247, 262 (3d Cir. 2009) (alterations and internal
quotation marks omitted). The Supreme Court adopted the following test to decide whether judicial
estoppel applies:
First, a party's later position must be “clearly inconsistent” with its
earlier position. Second, courts regularly inquire whether the party
has succeeded in persuading a court to accept that party's earlier
position, so that judicial acceptance of an inconsistent position in a
later proceeding would create “the perception that either the first or
the second court was misled.” Absent success in a prior proceeding,
a party's later inconsistent position introduces no “risk of
inconsistent court determinations,” and thus poses little threat to
judicial integrity. A third consideration is whether the party seeking
to assert an inconsistent position would derive an unfair advantage
or impose an unfair detriment on the opposing party if not estopped.
New Hampshire v. Maine, 532 U.S. 742, 750–51 (2001) (emphasis added) (citations omitted). As
stated in Montrose Med., “if a party's initial position was never accepted by a court or agency, then
it is difficult to see how a later change manifests an ‘intent to play fast and loose with the court[s]
. . . .’” 243 F.3d at 782 (quoting Ryan Operations G.P. v. Santiam-Midwest Lumber Co., 81 F.3d
355, 361 (3d Cir. 1996)) (emphasis original). Additionally, “a change of position simply cannot
evidence bad faith vis-à-vis a court unless the initial statement was accepted or adopted.” Montrose
Med. Grp., 243 F.3d at 784. For example, in G-I Holdings, the court stated that it did not reach the
three-factor test because “the District Court never accepted Hartford’s prior position.” 586 F.3d at
262. The court continued, “[w]hen it did rule, the Court did not rely on Hartford's initial position.
Rather, it held against Hartford without discussing either Hartford's prior or new position.” Id.
(emphasis added).
Aviva maintains that the Liquidators should be estopped from claiming that the alter ego
claims9 belong to the estate because they previously argued Aviva would be “free to pursue” those
claims, and “[o]n that basis, the Liquidators obtained significant limitations on discovery, such as
being allowed to withhold financial and other documents created prior to 2014.” Dkt. No. 374. In
response, the Liquidators argued that their position here is not “irreconcilably inconsistent” with
prior argument, because ownership of the alter ego claims was not relevant to the issue before the
Court - whether to recognize the Chapter 15 petition. Dkt. No. 377. Additionally, the Liquidators

9 Aviva’s argument for judicial estoppel is limited to the alter ego claim only. Aviva does not argue
that the Liquidators should be estopped from asserting ownership of the fraudulent transfer claims.
To the extent Aviva intended its argument for judicial estoppel to include the fraudulent transfer
claims, the Court declines to do so, noting that the Liquidators’ argument has been consistent from
the beginning regarding these claims having stated that “fraudulent transfer claims can be
investigated and pursued for the benefit of all creditors.” Dkt. No. 53 at 3.
argue that even if the prior argument is inconsistent with its current argument, there was no
evidence of bad faith. Id. In its reply, Aviva seems to argue that the Liquidator’s prior inconsistent

statements were made in relation to the Court’s decision to recognize the Chapter 15 petition as
well as the discovery dispute. Dkt. No. 381.
In this case, it is not necessary to consider the three-factor test because even assuming the
Liquidators had argued that the alter ego claims would not be property of the estate, the Court
never accepted that position. See Dkt. No. 51, 268. To the contrary, on April 25, 2016, this Court
granted Aviva’s motion to compel discovery and required the Liquidators to turn over two years
of documents to Aviva in relation to the recognition hearings. Dkt. No. 51. Although the decision
was rendered from the bench, a recording of the Court’s opinion is on the docket. See id. The Court
ruled in favor of Aviva, granting its discovery requests while limiting them to what was reasonable
for the matter before the Court (recognition of a foreign proceeding). Id. In short, the Court ruled
in Aviva’s favor. “Absent success in a prior proceeding, a party’s later inconsistent position
introduces no risk of inconsistent court determinations and thus poses little threat to judicial
integrity,” MD Mass, 715 F.3d at 487 (quoting New Hampshire v. Maine, 532 U.S. at 749); Otos
Tech Co. v. OGK Am., Inc., 393 F. App’x 5, 8 (3d Cir. 2010).
Despite Aviva’s arguments seemingly to the contrary, the dispute in which the discovery
requests arose was a proceeding to determine whether the Court should recognize the liquidation
in Hong Kong, and the Court tailored its ruling to allow Aviva to obtain reasonable discovery in
that respect. See Dkt. No. 51 and 268. While the parties spent considerable time arguing over the
Claims, the Court considered these and determined that ownership of the Claims was not germane
to its decision regarding whether to recognize the foreign liquidation proceeding. Indeed, the Court
explained that its decision was geared toward ensuring that only those matters relevant to whether
to recognize the foreign proceeding would be considered. The Court stated:
As discussed there are three issues that appear to be in dispute for
the recognition hearing and I’m going to discuss each in turn. The
first is whether it is collective in nature . . . The next issue before the
Court is related to the center of main interest . . . Finally, the
question of public policy under section 1506 of the Bankruptcy
Code, the Court does not need to take any action manifestly contrary
to U.S. policy.
Dkt. No. 51 (emphasis added). The Court also explained why it limited the scope of discovery:
I am not going to require turnover of the documents in box 158
because I expect many of the documents are publicly available or
would be subject to claim of privilege. Moreover, as discussed, I do
not think that there is much if any relevance to these documents
because they will not show Manley’s COMI or pertain to the public
policy issue as I have delineated it previously. I also believe that
providing the payment advices or wire reports for payment of the
liquidators providing the organizational chart of the debtors, if one
is available, providing non-privileged correspondence with account
debtors and creditors by the liquidators and providing lists of
employees may all be relevant as they may show that Manley’s
COMI was not in Hong Kong.
Id. (emphasis added). These were the bases for the Court’s determination. Similar to G-I Holdings,
at no point did this Court discuss the Liquidators’ statements regarding ownership or interest in
the claims for alter ego, and more significantly, at no point did the Court accept as accurate or
persuasive any such statements by the Liquidators. See G-I Holdings, 586 F.3d 247. Indeed, the
Court is not certain that the Liquidators actually argued such a position, but to the extent they did,
the Court was not persuaded by it nor was the argument relevant to the Court’s decision. As such,
estopping the Liquidators from arguing that the Claims belong to the estate is not warranted
because the Court never accepted any argument by the Liquidators that the Claims would not be
property of the estate. Because, “judicial estoppel is generally not appropriate where the defending
party did not convince the District Court to accept its earlier position” MD Mall, 715 F.3d at 486
(quoting G–I Holdings, 586 F.3d at 262), it does not apply in this case.
Even if the Court had accepted the Liquidators’ prior position, Aviva failed to establish
that the Liquidators’ position was “irreconcilably inconsistent” or that they argued the position in
bad faith. “Inconsistencies are not sanctionable unless a litigant has taken one or both positions ‘in
bad faith - i.e., with intent to play fast and loose with the court.’” Montrose Med., 243 F.3d at 780-
81 (quoting Ryan Operations, 81 F.3d at 361). A finding of bad faith “must be based on more than

the existence of an inconsistency.” Id. (citing Klein v. Stahl GMBH & Co. Maschinefabrik, 185
F.3d 98, 111 (3d Cir. 1999)). Indeed, a litigant has not acted in “bad faith” for judicial estoppel
purposes unless two requirements are met. First, he or she must have behaved in a manner that is
somehow culpable. Id. at 181 (citing Ryan Operations, 81 F.3d at 362 (judicial estoppel may not
be employed unless “‘intentional self-contradiction is . . . used as a means of obtaining unfair
advantage’”) (quoting Scarano, 203 F.2d at 513 (“An inconsistent argument sufficient to invoke
judicial estoppel must be attributable to intentional wrongdoing.” (emphasis in Montrose Med.))).
Second, the intentional wrongdoing must have been directed at the court. Id. “Judicial estoppel is
concerned with the relationship between litigants and the legal system, and not with the way that
adversaries treat each other.” Id. “Accordingly, judicial estoppel may not be employed unless a
litigant's culpable conduct has assaulted the dignity or authority of the court.” Id.
In this case, the Liquidators’ position is not irreconcilably inconsistent. The statements
noted by Aviva include the following:
 “[a]lter ego claims that [Aviva] may possibly have against third parties will not be
affected by recognition of the Hong Kong Proceeding.” Dkt. No. 374 (citing Dkt.
No. 53 at 3 (emphasis added));
 “ASI argues that the Chapter 15 and Hong Kong Proceeding will somehow
eliminate claims or judgments in connection with the patent infringement matters,
employment law matters, and product liability matters to which the Debtor has been
a party,” but “the adjudication of those claims is not eliminated by either of these
filings.” Id. (citing Dkt. No. 49 at 3 (emphasis added)).
Aviva also alleges that “Liquidators repeatedly asserted Aviva . . . would be free to pursue”
these claims. Id. at 22. The Court could not identify whether the Liquidators ever made these

particular statements. However even if they were made, Aviva did not establish they were made
in bad faith. While the Liquidators’ statements may not have been accurate, the Court cannot
conclude that they were intentionally false or misleading at the time. Additionally, many of the
statements to which Aviva points as evidence that the Liquidators promised Aviva would be free
to pursue the Claims, when viewed in context, do not support that argument. For example, Aviva
cites to the Liquidators’ “complaining Aviva was ‘trying to utilize this Chapter 15 proceeding as
its own personal playground for unfettered discovery for use in other courts.’” Id. (quoting Dkt.
No. 70 at 4). However, the entire statement made by the Liquidators is as follows:
Certainly, it is difficult to imagine what possible relevance to the
remaining contested issues in this matter the bank records of non-
debtor, non-parties might have. Rather, this appears to simply be the
next step in [Avivas’s] modus operandi of trying to utilize this
Chapter 15 as its own personal playground for unfettered discovery
for use in other courts.
Dkt. No. 70 at 4. The Court understood the Liquidators’ argument to be that ownership of the
Claims was not relevant to the determination of whether the Court should recognize the foreign
liquidation. This argument is not inconsistent with the Liquidators’ current position. To this extent
the Court agreed with the Liquidators’ argument. This matter arose during a discovery dispute
regarding how many years of material Aviva was entitled to receive related to the recognition
hearing. The Court based its determination on what was reasonable in that context. Ownership of
the Claims was not relevant to a determination of how much discovery was reasonable, nor was it
relevant to a determining whether the Court should recognize the foreign proceeding. Because
Aviva failed to show that the Liquidators have taken an irreconcilably inconsistent position in bad
faith, judicial estoppel does not apply to bar the Liquidators from arguing that the claims for alter
ego belong to the Debtor.
Remaining Matters
The Motion also renews Aviva’s request for stay relief to allow Aviva to seek relief against

the Debtor and other parties in other courts. Specifically, Aviva argues it should be permitted to
seek evidence preservation orders from other courts to compel the Debtor or the Liquidators to
preserve evidence related to Aviva’s judgment against the Debtor, or against the non-debtor
Manley Toy Direct. Dkt. No. 374. Similarly, Aviva has renewed its request for relief to pursue
injunctive sanctions against the Debtor for its violations of the Minnesota Court’s orders. Id.
Before addressing these arguments, the Court must determine whether it is appropriate to
consider these remaining matters. The Liquidators object to the scope of the relief requested by
Aviva in this Motion, arguing that these matters exceed the limited instructions given in the
Remand Order. Dkt. No. 377. The Liquidators correctly note that “the trial court must upon the
remand proceed in accordance with the mandate and the law of the case established by the appellate
court.” Petition of U.S. Steel Corp., 479 F.2d 489, 493 (6th Cir. 1973). However, this doctrine does
not limit a federal court's power; rather, it directs its exercise of discretion. Pub. Interest Research
Grp. of New Jersey, Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116 (3d Cir. 1997) (citing
Arizona v. California, 460 U.S. 605, 619 (1983)). As such, this doctrine “is not an inexorable
command,” but instead directs courts to use good sense and reason allowing reconsidering of a
former decision if there is a cogent reason to do so. U.S. Steel, 479 F.2d at 494. “Such reasons
may include substantially different evidence raised on subsequent trial.” Id.
In this case, the Court views Aviva’s requests as a new motion, rather than a request to
reconsider its previous decision.10 Aviva’s argument that this is a new motion is based primarily

10 Aviva did state that the Court’s previous rulings “should be reconsidered.” Dkt. No. 374. To the
extent Aviva intended this to be a motion to reconsider, the motion is denied. Federal Rule 60(b),
made applicable by Bankruptcy Rule 9024, provides “the court may relieve a party or its legal
representative from a final judgment, order, or proceeding for the following reasons: (1) mistake,
inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that, with reasonable
diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3)
on the changed status of the case, now that the Court has issued its Recognition Opinion, and
considerable time has passed. See Dkt. No. 374. Aviva argues that as more time passes, the chances

that documents will be destroyed increases. Id. The Court considers this to be a new motion, as
opposed to a reconsideration of the determinations in the Previous Decision, and so determined it
was proper to be considered at this time.11 However, Aviva failed to establish it is entitled to relief.
As noted, Aviva first requests relief from the stay to allow it to pursue preservation orders
from other courts. Dkt. No. 374. The Previous Decision explained that “[o]ne of the primary
purposes of the automatic stay to avoid interference with the orderly liquidation or rehabilitation
of the debtor.” Manley Toys, 2018 WL 1071167, at *5 (citing Borman v. Raymark Indus., Inc.,
946 F.2d 1031, 1036 (3d Cir. 1991)). The Court also noted that the Liquidators had already taken
steps to preserve information. Id. at 6 (citing Dkt. Nos. 110 and 111 at 109-110). Therefore, the
Court concluded that any additional requests to require action on the part of the Liquidators should
be made before this Court:

Channeling all such requests through this Court reduces the chances
of the Debtor’s assets being depleting through repetitive and
unnecessary litigation, and this Court is most familiar with the facts
surrounding the liquidation of the Debtor, putting it in the best
position to make an efficient decision.
Id. Aviva has not presented any facts or legal arguments that alter this conclusion. As such, Aviva’s
request is denied and the Previous Decision stands unchanged.
Aviva also renewed its request for relief to pursue injunctive sanctions against the Debtor
for its violations of the Minnesota Court’s orders. Dkt. No. 374. Specifically, Aviva requests, as it

fraud, . . . misrepresentation, or misconduct by an opposing party; (4) the judgment is void; (5) the
judgment has been satisfied, released or discharged . . .; or (6) any other reason that justifies relief.”
Hibbard v. Penn-Trafford Sch. Dist., 621 F. App'x 718, 722 (3d Cir. 2015), reh'g denied (Sept. 8,
2015) (citing Fed. R. Civ. P. 60(b)). Aviva has not established that any of these grounds are met.
To the extent Aviva intends this to be a motion under 9024, it is denied for that reason.
11 To the extent the Court lacks jurisdiction to consider these matters, Aviva’s request is denied
due to lack of jurisdiction.
did in the Initial Motion, relief to pursue an import ban against the Debtor. The Court denied this
request in its Previous Decision stating:
The Debtor is no longer operating, and the Liquidators are
responsible for marshalling the Debtor’s assets in order to disperse
these assets to creditors in accordance with Hong Kong Law. Any
injunction imposed by another court would interfere with the
Liquidators in their attempts to carry out the duties imposed upon
them by the Bankruptcy Code and Hong Kong Law, and thus have
a negative effect on other creditors. Aviva has already been granted
relief to seek monetary damages it believes itself entitled to, and is
free to pursue collection of those damages along with its other
claims through the Hong Kong liquidation case.
Manley Toys, 2018 WL 1071167, at *5. Aviva has not presented the Court with any reason to alter
its decision. Therefore, Aviva’s request will be denied for the same reasons.
Conclusion
The Remand Order instructed this Court to consider whether Aviva’s arguments related to
bad faith and judicial estoppel were considered in its Previous Decision denying stay relief and to
determine whether additional evidence Aviva attempted to introduce on appeal alters the Court’s
determination to deny stay relief. Because under Hong Kong law the Claims were property of the
Debtor, and that standing to pursue the Claims was exclusively granted to the Liquidators, neither
the alleged bad faith, nor judicial estoppel alter the Previous Decision. Although the Court
considered the Letters introduced by Aviva, those did not alter its decision for the same reasons.
Additionally, even if Aviva did have standing to pursue these claims, the Court declines to lift the
stay because it finds that Aviva failed to allege facts that, if proved, would meet its burden in
establishing that the Liquidators acted in bad faith. Moreover, even if the Liquidators had acted in
bad faith, the balance of harms weighs against granting stay relief because Aviva has remedies
available in Hong Kong which would achieve Aviva’s stated goal without threatening the
successful Liquidation of the Debtor.
Finally, it is improper to apply judicial estoppel to prevent the Liquidators from arguing
the alter ego claims belong to the Debtor. Aviva’s additional requests beyond those contained in
the Remand Order and the Previous Decision stands unchanged with respect to those requests.
The Motion is Denied, and the Court will enter an order to that effect.

Dated: March 31, 2020

(PP
JERROLD N. Pg SNY, JR.
U.S. BANKRUR f COURT JUDGE

31

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10459704. Public record. Not legal advice.