Petition for Writ of Certiorari — The Estate of Omar Fontana, et al., Petitioners v. ACFB Administracao Judicial LTDA-ME
Supreme Court briefDec 1, 2021
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No. 21-_______
IN THE
Supreme Court of the United States
THE ESTATE OF OMAR FONTANA, DENILDA PEREIRA
FONTANA, ANTÔNIO CELSO CIPRIANI, MARISE PEREIRA
FONTANA CIPRIANI, EMIDIO CIPRIANI, AND DEVOM
CONSULTORIA E PARTIPAÇÕES LTDA,
Petitioners,
v.
ACFB ADMINISTRAÇÃO JUDICIAL LTDA – ME, ACTING
BY AND THROUGH ANTONIO VIVIANA SANTOS DE
OLIVEIRA CAVALCANTE, THE TRUSTEE OF DEBTOR
TRANSBRASIL S.A. LINHAS AÉREAS,
Respondent.
ON PETITION FOR A WRIT OF CERTIORARI FROM THE
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
Jeffrey P. Bast
BAST AMRON LLP
SunTrust International Center
One Southeast Third Avenue
Suite 1400
Miami, Florida 33131
(305) 379-7904
jbast@bastamron.com
Counsel for Estate of Omar
Fontana, Denilda Pereira
Fontana, and Devom
Consultoria e Partipações Ltda
Dated: December 1, 2021
G. Eric Brunstad, Jr.
Counsel of Record
DECHERT LLP
199 Lawrence Street
New Haven, CT 06511
(860) 524-3960
eric.brunstad@dechert.com
Counsel for Petitioners
Patricia A. Redmond
STEARNS WEAVER MILLER
WEISSLER ALHADEFF &
SITTERSON, P.A.
150 West Flagler Street
Suite 2200
Miami, Florida 33130
(305) 789-3553
predmond@stearnsweaver.com
Counsel for Antonio Celso
Cipriani and Marise Pereira
Fontana Cipriani
John R. Borgo
Brian S. Dervishi
WEISSMAN & DERVISHI, P.A.
SunTrust International
Center
One Southeast Third Avenue
Suite 1700
Miami, Florida 33131
jborgo@wdpalaw.com
bdervishi@wdpalaw.com
Counsel for Emidio Cipriani
Melanie C. MacKay
DECHERT LLP
35 West Wacker Drive
Suite 3400
Chicago, IL 60601
(312) 646-5800
melanie.mackay@dechert.com
Counsel for Petitioners
i
QUESTION PRESENTED
In Ritzen Group, Inc. v. Jackson Masonry, LLC, __
U.S. __, 140 S. Ct. 582 (2020), this Court held that a
bankruptcy court order is final and appealable if it
conclusively disposes of a “discrete dispute” within the
overarching bankruptcy case. In particular, the Court
found that an order disposing of a motion for relief
from the automatic stay resolves a discrete dispute
where: (1) the motion “initiates a discrete procedural
sequence, including notice and a hearing,” (2) it is
“separate from the rest of the case,” (3) it “occurs
before and apart from proceedings on the merits of the
creditors’ claims,” and (4) the order “grants or denies
relief according to a statutory standard.” Id. at 586,
589, 591.
This matter involves the finality of a discovery
order entered in a case under Chapter 15 of the
Bankruptcy Code. Although discovery orders in cases
under other chapters of the Code are usually not final,
in Chapter 15 cases they often involve stand-alone
proceedings, may be the only substantive order
entered in the case, and are often distinct from other
Chapter 15 matters. The Second Circuit has held that
such an order is final and appealable. In re Barnet,
737 F.3d 238 (2d Cir. 2013). The court below reached
the opposite conclusion. The question presented is:
Should the Court grant certiorari to resolve a
conflict among the courts of appeals over whether a
stand-alone discovery order entered in a Chapter 15
case is final and appealable?
ii
PARTIES TO THE PROCEEDING
The Estate of Omar Fontana;
Denilda Pereira Fontana, in her personal capacity
and as trustee of Petitioner Estate of Omar Fontana;
Antônio Celso Cipriani;
Marise Pereira Fontana Cipriani;
Emidio Cipriani;
Devom Consultoria e Partipações Ltda; and
ACFB Administração Judicial LTDA – ME, acting
by and through Antonio Viviana Santos de Oliveira
Cavalcante, the Trustee of Debtor Transbrasil S.A.
Linhas Aéreas.
RULE 29.6 STATEMENT
Petitioner Devom Consultoria e Partipações Ltda
(“Devom”) is a limited liability company organized
and existing under the laws of Brazil. No corporation
is a parent of Devom and no publicly held corporation
owns 10% or more of its stock.
iii
RELATED CASES
In re: Transbrasil S.A. Linhas Aéreas, No. 20-12238,
U.S. Court of Appeals for the Eleventh Circuit.
Judgment entered July 19, 2021.
In re: Transbrasil S.A. Linhas Aéreas, No. 19-23700,
U.S. District Court for the Southern District of
Florida. Judgment entered March 16, 2020.
In re: Transbrasil S.A. Linhas Aéreas, No. 11-19484,
U.S. Bankruptcy Court for the Southern District of
Florida. Judgment entered July 16, 2019 and August
21, 2019.
iv
TABLE OF CONTENTS
QUESTION PRESENTED.......................................... i
PARTIES TO THE PROCEEDING ........................... ii
RULE 29.6 STATEMENT .......................................... ii
RELATED CASES .................................................... iii
OPINIONS BELOW ....................................................1
JURISDICTION ..........................................................1
RELEVANT STATUTORY PROVISIONS .................1
PRELIMINARY STATEMENT ..................................2
STATEMENT OF THE CASE ....................................4
The Freeze Order ..............................................4
The Discovery Dispute .....................................4
The Appeal to the District Court .....................5
The Rationale of Barnet ...................................6
Petitioners’ Further Appeal and the
Rationale of Ritzen ...........................................7
The Opinion of the Court of Appeals ...............8
REASONS FOR GRANTING THE PETITION .......11
I.
THE DECISION BELOW
CREATES A SPLIT OF
AUTHORITY BETWEEN THE
SECOND AND ELEVENTH
CIRCUITS. ...........................................11
II.
THE DECISION BELOW
CONFLICTS WITH THIS
COURT’S DECISION IN
RITZEN. ...............................................15
v
III.
THE DECISION BELOW
INVOLVES AN IMPORTANT
QUESTION OF LAW...........................18
IV.
THE DECISION BELOW IS
WRONG................................................19
CONCLUSION ..........................................................19
vi
TABLE OF APPENDICES
Page
APPENDIX A — OPINION OF THE UNITED
STATES COURT OF APPEALS FOR THE
ELEVENTH CIRCUIT, DATED JULY 19,
2021 ........................................................................1a
APPENDIX B — ORDER OF THE UNITED
STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF FLORIDA,
DATED MARCH 16, 2020 ...................................16a
APPENDIX C — ORDER OF THE UNITED
STATES BANKRUPTCY COURT FOR THE
SOUTHERN DISTRICT OF FLORIDA,
FILED AUGUST 21, 2019...................................34a
APPENDIX D — ORDER OF THE UNITED
STATES BANKRUPTCY COURT FOR THE
SOUTHERN DISTRICT OF FLORIDA,
FILED JULY 16, 2019.........................................37a
APPENDIX E — DENIAL OF REHEARING
OF THE UNITED STATES COURT OF
APPEALS
FOR
THE
ELEVENTH
CIRCUIT, FILED SEPTEMBER 2, 2021 ...........54a
APPENDIX F — RELEVANT STATUTORY
PROVISIONS ......................................................56a
vii
TABLE OF AUTHORITIES
Page(s)
Cases
In re Barnet,
737 F.3d 238 (2d Cir. 2013) .......................passim
Colorado River Water Conservation Dist. v.
United States,
424 U.S. 800 (1976) ........................................... 18
Gillespie v. U.S. Steel Corp.,
379 U.S. 148 (1964) ............................................. 8
Jaffe v. Samsung Electronics Co., Ltd.,
737 F.3d 14 (4th Cir. 2013) ............................... 18
Ritzen Group, Inc. v. Jackson Masonry,
LLC, __ U.S. __, 140 S. Ct. 582 (2020) ......passim
Statutes
11 U.S.C. § 362 ................................................passim
11 U.S.C. § 1504 ....................................................... 2
11 U.S.C. § 1507 ....................................................... 2
11 U.S.C. § 1515 ....................................................... 2
11 U.S.C. § 1517 ....................................................... 2
11 U.S.C. § 1520 ..............................................passim
11 U.S.C. § 1521 ..............................................passim
viii
28 U.S.C. § 158 ......................................................... 1
28 U.S.C. § 1254 ....................................................... 1
28 U.S.C. § 1782 ................................................... 1, 6
Other Authorities
Fed. R. Bankr. P. 2004 ......................................... 1, 5
U.S. Sup. Ct. R. 10 ................................................. 15
1
OPINIONS BELOW
The opinion of the Court of Appeals for the
Eleventh Circuit is published at 860 Fed. Appx. 163,
and is reproduced in the appendix at Pet. App. 1a. The
opinion of the District Court for the Southern District
of Florida is published at 2020 WL 10458631 (S.D.
Fla. Mar. 16, 2020) and is reproduced in the appendix
at Pet. App. 16a. The opinions of the Bankruptcy
Court for the Southern District of Florida are
unpublished and are reproduced in the appendix at
Pet. App. 34a and 37a.
JURISDICTION
The Court of Appeals entered its judgment on July
19, 2021 and denied the Petitioners’ petition for
rehearing on September 2, 2021. The court had
jurisdiction under 28 U.S.C. § 158(d). The jurisdiction
of this Court is invoked under 28 U.S.C. § 1254(1).
RELEVANT STATUTORY PROVISIONS
The following statutory provisions and rules are
relevant to this matter.1 11 U.S.C. § 362, 11 U.S.C. §
1520, 11 U.S.C. § 1521, 28 U.S.C. § 1782, and Fed. R.
Bankr. P. 2004.
PRELIMINARY STATEMENT
This matter arises out of a Chapter 15 bankruptcy
case involving Tranbrasil S.A. Linhas Aéreas
(“Transbrasil”), a Brazilian airline placed in
The relevant portions of these provisions are reproduced in
Petitioners’ Appendix. See Pet. App. 56a.
1
2
involuntary bankruptcy in Brazil in 2002 (the
“Brazilian Bankruptcy Case”). Petitioners are the
estate of Omar Fontana, the founder of Transbrasil;
several members of his family; a former president of
Transbrasil; and a privately owned corporation whose
assets include stock in Transbrasil. Respondent is the
trustee of Transbrasil’s Brazilian bankruptcy estate
(the “Trustee”).
In 2011, the Trustee filed a petition in the U.S.
Bankruptcy Court for the Southern District of Florida
(the “Bankruptcy Court”) under 11 U.S.C. § 1515(a),
seeking recognition of the Brazilian Bankruptcy Case
as a foreign “main proceeding” under 11 U.S.C. § 1517.
See also 11 U.S.C. § 1515. The Bankruptcy Court
granted the petition on May 11, 2011, establishing the
U.S. proceeding as an ancillary proceeding. By its
nature, an ancillary Chapter 15 proceeding is not a
full-blown U.S. bankruptcy case. Rather, it is a
limited-purpose administrative proceeding designed
to provide assistance in the United States to the
representative of a foreign bankruptcy estate seeking
to fulfill administrative responsibilities under
applicable foreign bankruptcy law. See 11 U.S.C. §§
1504, 1507(a).
In the petition for recognition, the Trustee stated
that the purpose of the Chapter 15 proceeding was to
locate assets of Transbrasil and related companies
that may have been in or transferred through the
United States. The Trustee, however, has not located
any significant assets in the U.S. Rather, the only
significant activity in the Chapter 15 case since
November 2013 has been the Trustee’s efforts seeking
3
discovery from Petitioners and a third-party entity
related to them.
The question presented is the finality of the
Bankruptcy Court’s orders permitting the Trustee’s
far-reaching discovery, and specifically denying
Petitioners’ requests for a protective order. The
Eleventh Circuit determined that the Bankruptcy
Courts orders were not final, and therefore not
appealable, notwithstanding that the orders are the
only substantive orders that have been entered in the
Chapter 15 case and the Trustee has used the Chapter
15 proceeding essentially only to obtain such
discovery. In In re Barnet, 737 F.3d 238 (2d Cir. 2013),
the Second Circuit reached the opposite conclusion
from the decision below, reasoning that such orders
dispose of a discrete dispute within the Chapter 15
case and are properly final and appealable. This
Court should grant certiorari to resolve this conflict
among the courts of appeals.
In addition, the Court should grant certiorari
because the decision below conflicts with this Court’s
resolution of the question of the finality of bankruptcy
court orders in Ritzen Group, Inc. v. Jackson Masonry,
LLC, __ U.S. __, 140 S. Ct. 582 (2020). Further, the
question presented is important as it involves the
appellate jurisdiction of the courts of appeals. Finally,
the decision below is wrong.
4
STATEMENT OF THE CASE
The Freeze Order
In 2015, the Trustee filed a motion in the Brazilian
Bankruptcy Case to extend the scope of the Brazilian
bankruptcy proceeding to encompass additional
entities and individuals, including Petitioners (the
“Separate Action”). This motion effectively sought to
pierce the corporate veil and include Petitioners’
assets as part of Tranbrasil’s bankruptcy estate.
The Trustee also sought from a Brazilian court an
order freezing Petitioners’ assets pending the outcome
of the Separate Action. In December 2018, a Brazilian
appellate court (the “Court of Justice”) entered an
order (the “Freeze Order”) blocking the disposal, or
transfer, of Petitioners’ assets in Brazil and abroad.
Critically, however, the Court of Justice later clarified
that the Freeze Order did not apply to Petitioners’
personal financial assets and was appropriately
limited by Brazilian bank privacy principles that
protect the privacy of personal financial information.
As a result, in order to avoid violating bank privacy
protections, the Freeze Order carved-out and did not
permit the Trustee to gain access to or use Petitioners’
personal financial information. Rather, the Freeze
Order contemplated that it could be implemented only
in a manner consistent with such principles.
The Discovery Dispute
In January and February of 2019, the Trustee
issued subpoenas to five financial institutions where
Petitioners maintained accounts or did business (the
5
“Subpoenas”). The Subpoenas sought Petitioners’
personal financial records of every description for the
past twenty years. Petitioners filed a motion for a
protective order, which the Bankruptcy Court denied.
Petitioners then filed a motion for reconsideration,
which the Bankruptcy Court also denied. These two
orders, denying Petitioners’ motions for a protective
order and for reconsideration (the “Bankruptcy Court
Orders”) are the subject of this Petition.
The Appeal to the District Court
Petitioners appealed the Bankruptcy Court Orders
to the District Court. Their principal argument was
that the orders exceeded the scope of 11 U.S.C. §
1521(a)(4), the relevant statute governing discovery in
Chapter 15 proceedings.
Although discovery in bankruptcy cases generally
is governed by Federal Rule of Bankruptcy Procedure
2004(b), Chapter 15 is the only chapter under the
Bankruptcy Code to have its own statutory provision
regulating discovery.
Section 1521(a)(4) limits
discovery to “the debtor’s assets, affairs, rights,
obligations or liabilities.” 11 U.S.C. § 1521(a)(4)
(emphasis added). Quite clearly, the Trustee sought
far more than what section 1521(a)(4) authorizes.
The Trustee filed a motion to dismiss the appeal on
the ground that the Bankruptcy Court Orders were
non-final and non-appealable.
In opposing the
motion, Petitioners argued that the Orders were final
and appealable because they were issued in a Chapter
15 proceeding. In Chapter 15, discovery orders are
appealable because the proceeding is ancillary to a
6
foreign bankruptcy case, and if the orders were
deemed non-final they would characteristically evade
appellate scrutiny. Petitioners relied principally on In
re Barnet, 737 F.3d 238 (2d Cir. 2013), which
addressed the finality of discovery orders under
section 1521(a)(4). Barnet held that such orders are
final and appealable.
The Rationale of Barnet
The court in Barnet analogized section 1521(a)(4)
(governing discovery in Chapter 15 cases) to 28 U.S.C.
§ 1782(a) (authorizing discovery “for use in a
proceeding in a foreign or international tribunal.”).
The court noted that a discovery order under section
1782(a) “constitutes a final resolution of a petition to
take discovery in aid of a foreign proceeding and is,
therefore, immediately appealable.” 737 F.3d at 244.
“Chapter 15 proceedings, like Section 1782
proceedings, are ancillary to a suit in another
tribunal, such that there will never be a final
resolution on the merits beyond the discovery itself.”
Id.
The Barnet court also analogized 1521(a)(4) to 11
U.S.C. § 1520(a), which makes 11 U.S.C. § 362
applicable in Chapter 15 proceedings. Section 362(a)
imposes an automatic stay of non-bankruptcy
proceedings against the debtor in the United States.
The Barnet court stated, “once recognition [of a foreign
proceeding] is granted, the imposition of automatic
relief requires no further action by the Bankruptcy
Court. The discretionary relief permitted by Section
1521 requires an extra step, but once that step is
taken, and the Bankruptcy Court has chosen to
7
exercise its discretion, a party aggrieved by Section
1521 stands in the same position as one aggrieved by
Section 1520. If appellate review is available to one,
therefore, it should be available to the other.” Id.
The District Court acknowledged that the
reasoning in Barnet and Petitioners’ reliance on it
“have merit,” but felt bound by an earlier decision of
the Eleventh Circuit holding that a previous discovery
order in this case was non-final. Accordingly, the
District Court granted the Trustee’s motion to dismiss
and denied Petitioners’ motion for reconsideration.
Petitioners’ Further Appeal and the Rationale of
Ritzen
Petitioners appealed to the Court of Appeals for
the Eleventh Circuit on June 18, 2020. Six months
earlier, on January 14, 2020, this Court decided
Ritzen Group, Inc. v. Jackson Masonry, LLC. __ U.S.
__, 140 S.Ct. 582 (2020), in which it addressed the
question of the finality of a bankruptcy court order
denying relief from an automatic stay. Concluding
that such an order is indeed final and appealable, the
Court explained that bankruptcy court orders are
final “if they finally dispose of discrete disputes within
the larger bankruptcy case.” Id. at 587. The Court
found that an order denying relief from stay disposes
of a discrete dispute where (1) the motion “initiates a
discrete procedural sequence, including notice and a
hearing,” (2) which is “separate from the rest of the
case,” (3) “occurs before and apart from proceedings on
the merits of the creditors’ claims,” and (4) “grants or
denies relief according to a statutory standard.” Id. at
589, 591.
8
According to the Court, these factors demonstrate
finality regardless of the procedural posture of the
case: “It does not matter whether the bankruptcy
court has preclusively resolved a substantive issue. It
does not matter whether the court rested its decision
on a determination potentially pertinent to other
disputes in the bankruptcy case, so long as the order
conclusively resolved the movant’s entitlement to the
requested relief.” Id. at 591.
The Opinion of the Court of Appeals
In their appeal to the Eleventh Circuit, Petitioners
argued that the Bankruptcy Court Orders were final
because they conclusively resolved a discrete dispute
separate from the rest of the Chapter 15 proceeding
(including any possible future implementation of the
Freeze Order in the United States), and otherwise
satisfied the Ritzen criteria. Petitioners also argued
that, assuming the orders were non-final, they fell
within the exception to the finality rule established by
Gillespie v. U.S. Steel Corp., 379 U.S. 148 (1964).
On July 19, 2001, the Court of Appeals held that
(1) the Bankruptcy Court Orders were non-final and
non-appealable, and (2) did not fall within the
Gillespie exception. Petitioners seek review of the
first holding, but not the second.
In conducting its analysis, the Court of Appeals
applied what it called “the Ritzen Group framework,”
concluding that the Bankruptcy Court Orders did not
satisfy the Ritzen criteria. Pet. App. at 9a. The court
reasoned as follows:
9
Discovery, whether in a Chapter 15 case
or otherwise, is ordinarily not “discrete”
or “separate” from the proceeding for
which discovery is sought.
To the
contrary, discovery is merely a
preliminary step to obtain information
for use in some other proceeding, and
thus, discovery disputes are nothing
more than “disputes over minor details
about how a bankruptcy case will
unfold.” As such, the appropriate
procedural unit for determining finality
is not the discovery dispute but the
proceeding for which discovery is sought.
Id. The court added: “Here, that proceeding is the
implementation of the Freeze Order, as the record is
clear that the Trustee sought the discovery in part to
aid in implementing the Freeze Order. And the record
demonstrates that the Freeze Order may eventually
be implemented in the Chapter 15 case.” Id.
The court rejected Petitioners’ argument that
Chapter 15 discovery orders should be treated
differently from other discovery orders for two
reasons. First, it held that “the record belies the
[Petitioners’] assertion that the Bankruptcy Court has
‘nothing left to do’ in this Chapter 15 proceeding”
because it “may be called upon to implement the
Freeze Order based on the discovery at issue in the
discovery orders.” Id. at 10a-11a. Second, it held that
“we are not convinced that the primary authority the
[Petitioners] rely on for their position, the out-ofcircuit decision in In re Barnet, 737 F.3d 238 (2d Cir.
2013), applies here.” Id. at 11a.
10
The court rejected the applicability of Barnet for
two reasons.
First, the Second Circuit did not have the
benefit of Ritzen Group when it issued
Barnet, so it did not wrestle with the
question of whether discovery under
Chapter 15 is a ‘discrete’ or ‘separate’
proceeding or ‘merely a preliminary step’
in some other proceeding. As such, the
two bases for its decision are largely
irrelevant under the now-required
analysis to the extent the Second Circuit
analogized discovery orders under
Chapter 15 to orders in other contexts
instead of applying Ritzen Group’s
framework.
Second, there is no indication in Barnet
that any proceedings other than
discovery
proceedings
were
contemplated in that Chapter 15 case. As
such, Barnet is different than this case,
where the record is clear that the
Trustee sought the discovery in part to
aid in implementing the Freeze Order in
the Chapter 15 case.
Id. at 11a-12a.
The Court of Appeals conceded that, in some cases,
discovery may be the only purpose of a Chapter 15
proceeding. In those instances, the court agreed that
it would make sense to treat a discovery order as final
and appealable.
According to the court below,
11
however, “that’s not the case we have. Instead, the
discovery orders here were ‘merely a preliminary step’
in the Freeze Order proceeding,” which the court
characterized as its own “separate” and “distinct”
proceeding. Id. at 13a.
REASONS FOR GRANTING THE PETITION
The Court should grant certiorari for four reasons.
First, the decision below, concluding that the
discovery orders entered in Transbrasil’s Chapter 15
case are not final and appealable, conflicts
irreconcilably with an authoritative decision of the
Second Circuit concluding that discovery orders
entered in a Chapter 15 case are indeed final and
appealable. Second, the decision below conflicts
irreconcilably with this Court’s analysis in Ritzen.
Third, the decision below involves an important,
recurring question that merits this Court’s review.
Finally, the decision below is wrong.
I.
THE DECISION BELOW CREATES A
SPLIT OF AUTHORITY BETWEEN THE
SECOND AND ELEVENTH CIRCUITS.
In Barnet, the Second Circuit treated the discovery
order in question as one that, on its own, finally
resolved a discrete dispute in the Chapter 15 case—a
dispute over discovery. In the decision below, the
Eleventh Circuit refused to do the same, instead
treating the discovery orders in question like
discovery orders in ordinary civil litigation—as part
and parcel of some other potential proceeding. The
two decisions irreconcilably conflict because only one
may be correct, and the reasoning of one is
12
fundamentally inconsistent with the reasoning of the
other.
Notably, the decision below did not involve a
discovery order entered in the context of some already
pending substantive dispute initiated within the
Chapter 15 proceeding. For example, the Trustee had
not already commenced an adversary proceeding
against Petitioners seeking some form of substantive
relief against them, and then sought discovery in the
context of that proceeding.
Rather, the Trustee
sought discovery as a stand-alone matter, which
Chapter 15 permits (and regulates under its own
unique statutory criteria). See 11 U.S.C. § 1521(a)(4).
Although it is hypothetically true that the Trustee
might decide in the future to bring some other kind of
substantive proceeding within the Chapter 15 case, no
such proceeding is yet in prospect. Nor does the
possibility of such a future proceeding necessarily
have anything to do with the discovery orders at issue
here—they may be completely unrelated. Moreover,
the possibility of some other proceeding is virtually
always true. When a trustee seeks discovery as a
stand-alone matter in a Chapter 15 case, it is typically
the case that the trustee might well pursue some
other kind of substantive claim later on. Certainly,
that was also true in Barnet, yet the Second Circuit
concluded that the discovery order in question was
final. There is simply no way to reconcile the two
decisions.
In conducting its analysis, the Second Circuit
relied on an analogy between the issuance of discovery
orders in Chapter 15 cases and relief under section
1520(a). Section 1520(a) provides: “Upon recognition
13
of a foreign proceeding that is a foreign main
proceeding—(1) sections 361 and 362 apply with
respect to the debtor and the property of the debtor
that is within the territorial jurisdiction of the United
States.” 11 U.S.C. § 1520(a). In a nutshell, section
1520(a) makes the automatic stay provisions of
section 362 applicable in the Chapter 15 context. Both
these provisions enjoin various forms of debtcollection activity against the debtor while the debtor
remains in bankruptcy.
The Barnet court reasoned that, because an order
imposing an automatic stay under section 1520(a) is
final, a discovery order under section 1521(a)(4)
should also be treated as final. In re Barnet, 737 F.3d
at 244. According to the court, the only difference
between a stay imposed under section 1520(a) and a
discovery order under section 1521(a)(4) is that the
stay is imposed by operation of law, and the discovery
order is within the bankruptcy court’s discretion. The
court found, however, that this difference is
immaterial. Id.
The Eleventh Circuit disagreed. It rejected the
Barnet court’s analogy between sections 1520(a) and
1521(a)(4), and it distinguished Barnet itself more
generally as “irrelevant” on the ground that “the
Second Circuit did not have the benefit of Ritzen
Group when it issued Barnet, so it did not wrestle with
the question of whether discovery under Chapter 15 is
a ‘discrete’ or ‘separate’ proceeding.” Pet. App. at 11a12a.
With respect, the Eleventh Circuit’s observation is
inapposite, as Barnet reached the correct outcome
14
under the criteria this Court applied in Ritzen. In
Ritzen, this Court held that an order denying a
creditor’s motion for relief from the automatic stay
under section 362(a), and thus continuing the stay in
place, is final and appealable because it resolved a
discrete proceeding. It did not matter that further
proceedings on the particular creditor’s claim were yet
to be resolved in the bankruptcy court at the time of
the order denying relief from stay. Nor did it matter
that the creditor might possibly renew its motion for
relief from stay at a later date. What mattered was
that (1) a motion for relief from stay “initiates a
discrete procedural sequence, including notice and a
hearing,” (2) it is “separate from the rest of the case,”
(3) it “occurs before and apart from proceedings on the
merits of the creditors’ claims,” and (4) the relevant
order “grants or denies relief according to a statutory
standard.” Ritzen Grp., Inc., 140 S. Ct. at 586, 589,
591.
The same is true of a stand-alone discovery order
in a Chapter 15 case. In Ritzen, this Court held that
an order denying relief from stay under section 362(a)
is final. In Barnet, the Second Circuit held that, just
as an order under section 1520(a)—which makes
section 362 applicable to Chapter 15 cases—is final,
so too is a discovery order under section 1521(a). The
imposition of an automatic stay under section 1520(a)
derives directly from 362(a). The only conceptual
difference between Ritzen and Barnet is that Ritzen
involved section 362(a) and Barnet involved section
1521(a).
Otherwise, the Second Circuit applied
essentially the same reasoning as this Court did in
Ritzen.
15
In Barnet, the Second Circuit also properly framed
the issue as whether a discovery order under section
1521(a)(4) resolves a discrete proceeding. The court
answered that question with a resounding “yes”—just
like Ritzen.
In contrast, the Eleventh Circuit
answered with a resounding “no,” creating the circuit
split at issue here.
Additionally, although the
Eleventh Circuit acknowledged that a discovery order
might be final if the discovery proceeding was the
“only proceeding” in a Chapter 15 case, that conflicts
with Barnet, which did not render such a narrow
holding. This Court should grant certiorari to resolve
this disagreement among the courts of appeals. See
U.S. Sup. Ct. R. 10 (stating that a petition for
certiorari may be granted if “a United States court of
appeals has entered a decision in conflict with the
decision of another United States court of appeals on
the same important matter.”).
II.
THE DECISION BELOW CONFLICTS
WITH THIS COURT’S DECISION IN
RITZEN.
In Ritzen, this Court analyzed at length the
criteria for determining whether a bankruptcy court
order resolves a “discrete” dispute and is thus final for
appellate purposes. The court below made no attempt
to apply those criteria. Instead, it took an entirely
different approach: considering whether the dispute
before it might later lead to some other, hypothetical
proceeding within the Chapter 15 case.
That
approach, however, conflicts with Ritzen because
applying the Eleventh Circuit’s method would require
a conclusion diametrically opposed to the one this
Court actually reached: under the Eleventh Circuit’s
16
approach, an order denying relief from stay would not
be final where, as in Ritzen, it served as a prelude to
a proceeding on the creditor’s claim.
In Ritzen, the creditor sought relief from stay so
that it could continue its already pending lawsuit
against the debtor in state court. The bankruptcy
court’s denial of the creditor’s motion for relief from
stay meant that the action would not proceed in state
court, but would instead be litigated in the
bankruptcy court as part of the process of determining
the creditor’s claim. Because the order denying relief
from stay was preliminary to further proceedings in
the bankruptcy court, under the Eleventh Circuit’s
approach the order would not be final. This Court,
however, held the opposite. The Eleventh Circuit’s
analysis in this case thus does not square with this
Court’s precedent.
Unlike ordinary civil litigation, in which orders
entered during the course of a case are not typically
appealable until the entire case is finally resolved,
bankruptcy orders are final so long as they resolve a
discrete dispute within the larger bankruptcy case.
As this Court held in Ritzen, “the usual judicial unit
for analyzing finality in ordinary civil litigation is the
case, but in bankruptcy, it is often the proceeding.”
140 S. Ct. at 588. As a result, “[c]orrect delineation of
the dimensions of a bankruptcy ‘proceeding’ is a
matter of considerable importance.” Id. at 587. The
critical task is to identify “the appropriate procedural
unit for determining finality.” Id.
Examining the order in question in the context in
which it arose, this Court observed in Ritzen that
17
“[a]djudication of a stay-relief motion . . . occurs before
and apart from proceedings on the merits of creditors’
claims. The motion initiates a discrete procedural
sequence, including notice and a hearing, and the
creditor’s qualification for relief turns on the statutory
standard.” Id. at 589. The question was thus
“whether the order in question terminates a
procedural unit separate from the remaining case, not
whether the bankruptcy court has preclusively
resolved a substantive issue. It does not matter
whether the court rested its decision on a
determination potentially pertinent to other disputes
in the bankruptcy case, so long as the order
conclusively resolved the movant’s entitlement to the
requested relief.” Id. at 591 (emphasis added).
A key flaw in the Eleventh Circuit’s analysis was
its failure to heed this Court’s admonition that “[i]t
does not matter whether the court rested its decision
on a determination potentially pertinent to other
disputes in the bankruptcy case . . . .” Id. Indeed,
rather than heed this admonition, the court below
treated it as the major premise on which it based its
decision: the fact that the Trustee might make use of
the discovery it obtained to commence some other
proceeding within the Chapter 15 case was the reason
it cited for determining that the order was not final.
This reasoning obviously does not square with this
Court’s analysis.
The decision below also conflicts with this Court’s
contextual focus on whether the order in question
involved the application of discrete statutory criteria.
Like relief from stay under section 362, stand-alone
discovery in a Chapter 15 case is just one of several
18
forms of relief available under section 1521(a). See 11
U.S.C. §§ 1521(a)(1)-(7). The statutory grounds for
obtaining relief are set out in the provision, directing
that the bankruptcy court shall grant relief “where
necessary to effectuate the purpose of this chapter and
to protect the assets of the debtor or the interests of
the creditors.” § 1521(a).
In addition, “[t]he
bankruptcy court . . . may only grant discretionary
relief under § 1521 if it determines that ‘the interests
of the creditors and other interested entities,
including the debtor, are sufficiently protected.’” Jaffe
v. Samsung Electronics Co., Ltd., 737 F.3d 14, 24 (4th
Cir. 2013). Other courts have determined that orders
granting other forms of relief under section 1521 are
final and appealable.
See Jaffe v. Samsung
Electronics Co., Ltd., 737 F.3d 14 (4th Cir. 2013)
(section 1521(a)(5)). Under this Court’s analysis in
Ritzen, the same result is compelled here.
III.
THE DECISION BELOW INVOLVES AN
IMPORTANT QUESTION OF LAW.
The Courts of Appeals have a “virtually
unflagging” obligation to exercise the jurisdiction
conferred upon them.
Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 817
(1976).
The question of the Eleventh Circuit’s
appellate jurisdiction in this case is thus vitally
important. See also Ritzen, 140 S. Ct. at 587 (“Correct
delineation of the dimensions of a bankruptcy
‘proceeding’ is a matter of considerable importance.”).
The issue is likewise recurring, particularly given the
frequency with which requests for discovery are made
in Chapter 15 cases under section 1521. For these
additional reasons, certiorari is warranted.
19
IV.
THE DECISION BELOW IS WRONG.
Finally, for all of the reasons addressed above, the
decision below is wrong. Given the conflict among the
Courts of Appeals on the question presented, the
conflict between the decision below and this Court’s
decision in Ritzen, and the importance of the question
presented, certiorari is warranted.
CONCLUSION
For the foregoing reasons, Petitioners respectfully
request that the Court grant certiorari to review the
decision of the Eleventh Circuit in this case.
20
Respectfully Submitted,
Jeffrey P. Bast
BAST AMRON LLP
SunTrust International
Center
One Southeast Third
Avenue Suite 1400
Miami, Florida 33131
(305) 379-7904
jbast@bastamron.com
G. Eric Brunstad, Jr.
Counsel of Record
DECHERT LLP
199 Lawrence Street
New Haven, CT 06511
(860) 524-3960
eric.brunstad@dechert.com
Melanie C. MacKay
DECHERT LLP
35 West Wacker Drive
Counsel for Estate of
Omar Fontana, Denilda Suite 3400
Chicago, IL 60601
Pereira Fontana, and
(312) 646-5800
Devom Consultoria e
melanie.mackay@dechert.com
Partipações Ltda
Patricia A. Redmond
STEARNS WEAVER
MILLER WEISSLER
ALHADEFF &
SITTERSON, P.A.
150 West Flagler Street
Suite 2200
Miami, Florida 33130
(305) 789-3553
predmond@stearnswea
ver.com
Counsel for Antonio
Celso Cipriani and
Marise Pereira Fontana
Cipriani
Counsel for Petitioners
John R. Borgo
Brian S. Dervishi
WEISSMAN & DERVISHI, P.A.
SunTrust International
Center
One Southeast Third
Avenue Suite 1700
Miami, Florida 33131
jborgo@wdpalaw.com
bdervishi@wdpalaw.com
Counsel for Emidio Cipriani
APPENDIX
1a
Appendix A — Appendix
opinionAof the united
states court of appeals for the
eleventh circuit, dated july 19, 2021
United States Court of Appeals
for the Eleventh Circuit
No. 20-12238
In re: TRANSBRASIL S.A. LINHAS AÉREAS,
Debtor.
ESTATE OF OMAR FONTANA, et al.,
Plaintiffs-Appellants,
versus
ACFB ADMINISTRAÇÃO JUDICIAL LTDA,
as Trustee of Transbrasil
S.A. Linhas Aéreas,
Defendant-Appellee.
Appeal from the United States District Court for
the Southern District of Florida. D.C. Docket No.
1:19-cv-23700-CMA, Bkcy No. 11-bk-19484-AJC.
July 19, 2021, Decided
2a
Appendix A
MARTIN, Circuit Judge:
Several parties appeal two discovery-related orders
in a bankruptcy case. After careful consideration, and
with the benefit of oral argument, we conclude the orders
were not final and thus dismiss this appeal for lack of
jurisdiction.
I. BACKGROUND
I n 2 0 0 2 , T r a n s br a s i l S . A . L i n h a s A é r e a s
(“Transbrasil”), an airline, was placed in involuntary
bankruptcy in Brazil (the “Brazilian Bankruptcy Case”). In
2011, seeking U.S. recognition of the Brazilian Bankruptcy
Case, the Trustee1 for Transbrasil’s estate filed a petition
in the Bankruptcy Court for the Southern District of
Florida (“the Bankruptcy Court”) under Chapter 15 of
the Bankruptcy Code. See 11 U.S.C. § 1515(a). Chapter
15 was enacted to “provide effective mechanisms for
dealing with cases of cross-border insolvency.” 11 U.S.C.
§ 1501(a); see also 1 Collier on Bankruptcy ¶ 13.03[1][a]
(16th ed. 2021) [hereinafter “Collier”] (stating one
“objective of chapter 15 is to furnish effective mechanisms
to achieve cooperation between courts of the United States
and courts of foreign countries involved in cross-border
insolvency cases”). Section 1515(a), part of Chapter 15,
permits a foreign representative to apply to a bankruptcy
court “for recognition of a foreign proceeding . . . by filing a
petition for recognition.” The Trustee here, as the foreign
1. The current trustee is ACFB Administração Judicial Ltda
— ME (“ACFB”). Before ACFB, two people served as co-trustees:
Gustavo Henrique Sauer de Arruda Pinto and Alfredo Luiz
Kugelmas. We refer to ACFB and its predecessors as the “Trustee.”
3a
Appendix A
representative, sought Chapter 15 recognition of the
Brazilian Bankruptcy Case in order to seek information
about any assets of Transbrasil and related companies
that might have been in or transferred through the United
States. The Bankruptcy Court granted the petition.
In 2015, the Trustee filed a motion in the Brazilian
Bankruptcy Case to extend that case to additional entities
and individuals, including the plaintiffs-appellants in this
appeal (the “Affected Parties”). This request effectively
sought to pierce the corporate veil and include the Affected
Parties’ assets in the bankruptcy estate. The Trustee also
filed a request in the Brazilian Bankruptcy Case to freeze
the Affected Parties’ assets. According to the Trustee, it
sought to extend the Brazilian Bankruptcy Case to the
Affected Parties and to freeze their assets because the
Affected Parties “controlled Transbrasil when it was
operational and received assets derived from a scheme to
raid the company’s coffers.” A Brazilian court entered an
order freezing the Affected Parties’ assets (the “Freeze
Order”). The Freeze Order indicated that it should also
be implemented by the Bankruptcy Court for assets in
the United States.
In 2019, the Trustee issued several subpoenas to U.S.based financial entities concerning the Affected Parties’
financial affairs. 2 The Trustee said the discovery was
relevant for three purposes: (1) to support the Trustee’s
claims against the Affected Parties in the Brazilian
2. Chapter 15 has its own provision for discovery. See 11 U.S.C.
§ 1521(a)(4); see also 1 Collier ¶ 13.07[2] (“Section 1521(a)(4) authorizes
the court to give the foreign representative the power to engage in
discovery[.]” (footnote omitted)).
4a
Appendix A
Bankruptcy Case, (2) to investigate potential claims
against participants in a supposed scheme to divert
assets from Transbrasil, and, relevant here, (3) to aid in
implementing the Freeze Order for assets in the United
States. The Affected Parties moved for a protective order
to shield them from the subpoenas, and the Bankruptcy
Court denied that motion. The Bankruptcy Court also
denied the Affected Parties’ motion for reconsideration.
The Affected Parties appealed both orders to the District
Court.
The District Court dismissed the appeal for lack of
jurisdiction. The District Court found that the Bankruptcy
Court’s orders denying the protective order and denying
reconsideration were not final orders the District Court
could review. The District Court noted that, in this very
same Chapter 15 case, this Court previously ruled that
an order denying a motion to quash a different subpoena
was not final. See Marigrove, Inc. v. Sauer de Arruda
Pinto, No. 15-11596, ECF No. 41, slip op. at 1-2 (11th
Cir. Aug. 7, 2015) (unpublished) (per curiam). 3 Based on
Marigrove, the District Court here found “the Eleventh
Circuit resolved the precise issue raised by [the parties],
in this very case, mandating the Court come to the same
3. In Marigrove, the Trustee served a subpoena on a third
party concerning Marigrove, Inc. and other entities (collectively
“Marigrove”), who moved to quash the subpoena. Marigrove, slip op.
at 1. The Bankruptcy Court denied in part the motion to quash, and
Marigrove appealed. Id. The District Court dismissed the appeal,
and Marigrove then appealed that dismissal to this Court. Id. This
Court dismissed Marigrove’s appeal for lack of jurisdiction, noting
that as a “general rule, orders denying motions to quash subpoenas
are not final orders that are immediately appealable.” Id. at 2-3.
5a
Appendix A
conclusion.”4 The District Court denied the Affected
Parties’ motion for reconsideration. The Affected Parties
appealed both rulings.
II. DISCUSSION
We consider de novo all jurisdictional issues. 5 In re
Donovan, 532 F.3d 1134, 1136 (11th Cir. 2008). This Court
4. The District Court also denied the Affected Parties leave to
appeal the Bankruptcy Court’s discovery orders as a discretionary
interlocutory appeal. See 28 U.S.C. § 158(a)(3). The Affected Parties
do not challenge this ruling on appeal, so we do not address it here.
5. In passing, the Trustee says “all Subpoena recipients have
produced the requested documents,” so “it is entirely possible
that this appeal is moot.” An appeal is moot, and this Court lacks
jurisdiction, when the case “no longer presents a live controversy
with respect to which the court can give meaningful relief.” Aaron
Private Clinic Mgmt. LLC v. Berry, 912 F.3d 1330, 1335 (11th Cir.
2019) (quotation marks omitted). Our Court has an obligation to
consider sua sponte whether an appeal is moot, id., so we pressed
counsel at oral argument on this issue. The parties agreed that
even if the documents have been produced, there is at least some
relief a court could give, such as ordering the Trustee to destroy the
documents in the United States. Cf. Church of Scientology of Cal. v.
United States, 506 U.S. 9, 13, 113 S. Ct. 447, 450, 121 L. Ed. 2d 313
(1992) (holding that an appeal concerning produced tape recordings
was not moot because a court could “effectuate a partial remedy by
ordering the [receiving party] to destroy” copies of the recordings).
However, in light of our holding that this Court lacks jurisdiction
over the appeal because the Bankruptcy Court’s discovery orders
were not final, we need not also decide whether this appeal is moot.
See Sinochem Int’l Co. v. Malay. Int’l Shipping Corp., 549 U.S. 422,
431, 127 S. Ct. 1184, 1191, 167 L. Ed. 2d 15 (2007) (“[T]here is no
mandatory ‘sequencing of jurisdictional issues.’”).
6a
Appendix A
has jurisdiction “over only final judgments and orders
arising from a bankruptcy proceeding.” Id.; see 28 U.S.C.
§ 158(d)(1). By the same token, we lack jurisdiction over
interlocutory bankruptcy orders. In re Celotex Corp.,
700 F.3d 1262, 1265 (11th Cir. 2012) (per curiam). The
Affected Parties primarily argue the discovery orders
were final and thus this Court has jurisdiction over their
appeal. In the alternative, the Affected Parties argue the
discovery orders fall under one of the exceptions to the
final judgment rule. We address each argument in turn.
A. The Discovery Orders Were Not Final
The Affected Parties argue that this Court has
jurisdiction over their appeal because the Bankruptcy
Court’s orders denying their motion for a protective order
and their motion for reconsideration were final orders.
It is well-established that, as a “general proposition,”
discovery orders are “not final orders” and therefore
“not immediately appealable.” In re Int’l Horizons, Inc.,
689 F.2d 996, 1000-01 (11th Cir. 1982) (quotation marks
omitted). However, the Affected Parties argue that
discovery orders in Chapter 15 cases are final orders
because “chapter 15 proceedings are, by definition,
proceedings ancillary to bankruptcy cases in foreign
courts” and thus “a bankruptcy court has nothing left to
do after granting or denying discovery.” As the parties
acknowledge, our framework for deciding whether a
bankruptcy order is final comes from the Supreme Court’s
recent decision in Ritzen Group, Inc. v. Jackson Masonry,
LLC, 589 U.S. __, 140 S. Ct. 582, 205 L. Ed. 2d 419 (2020).
7a
Appendix A
In ordinary civil litigation, a decision is “final” for
purposes of appeal only “upon completion of the entire
case, i.e., when the decision terminates the action or ends
the litigation on the merits and leaves nothing for the court
to do but execute the judgment.” Id. at 586 (alteration
adopted and quotation marks omitted). But bankruptcy
litigation is a bit different than ordinary civil litigation. “A
bankruptcy case embraces an aggregation of individual
controversies. Orders in bankruptcy cases qualify as
‘final’ when they definitively dispose of discrete disputes
within the overarching bankruptcy case.” Id. (citation and
quotation marks omitted); see also Donovan, 532 F.3d at
1136 (“Finality is given a more flexible interpretation in
the bankruptcy context[.]”). It is therefore common for a
bankruptcy court to resolve discrete disputes, thereby
allowing separate “appeals from discrete, controversyresolving decisions,” even “while the umbrella bankruptcy
case remains pending.” Ritzen Grp., 140 S. Ct. at 58687. “In short,” although in ordinary civil litigation the
“usual judicial unit for analyzing finality” is “the case,”
in bankruptcy it is often “the proceeding.” Id. at 587
(quotation marks omitted); see also In re Charter Co., 778
F.2d 617, 621 (11th Cir. 1985) (“In bankruptcy proceedings,
it is generally the particular adversary proceeding or
controversy that must have been finally resolved, rather
than the entire bankruptcy litigation.”). As such, a court
considering whether an order in a bankruptcy case is
final must “define” the “appropriate procedural unit for
determining finality.” Ritzen Grp., 140 S. Ct. at 588-89.
In Ritzen Group, the Supreme Court considered
whether a bankruptcy court’s order denying relief from
8a
Appendix A
the automatic stay is a final order. Id. at 586. Under
the automatic stay, the “filing of a bankruptcy petition
automatically halts efforts to collect prepetition debts
from the bankrupt debtor outside the bankruptcy forum.”
Id. at 589. However, a creditor may move for relief from
the automatic stay (a “stay-relief motion”) when the
creditor has a claim against the debtor’s estate. Id. In
Ritzen Group, the debtor argued that an order denying
a stay-relief motion is a final order because the relevant
proceeding for determining finality is the stay-relief
motion. See id. The creditor, in turn, argued that the
relevant proceeding is the creditor’s claim against the
debtor’s estate, so a ruling on the stay-relief motion is only
“a first step” in the claim proceeding and thus not final. Id.
The Supreme Court agreed with the debtor and
held that “the appropriate ‘proceeding’ is the stay-relief
adjudication.” Id. As a result, the Court held that an order
denying a stay-relief motion is a final order. Id. It reasoned
that an “order ruling on a stay-relief motion disposes of
a procedural unit anterior to, and separate from,” the
creditor’s claim and “initiates a discrete procedural
sequence.” Id. Stated differently, the Supreme Court
viewed the stay-relief motion and the creditor’s claim as
two “discrete” or “separate” proceedings and thus held
that an order on the stay-relief motion is a final order
in that separate proceeding. However, in doing so, the
Supreme Court also cautioned that courts should not view
“disputes over minor details about how a bankruptcy case
will unfold” as separate proceedings. Id. at 590.
9a
Appendix A
Applying the framework provided by Ritzen Group,
we hold that the Bankruptcy Court’s discovery orders
were not final orders.6 Discovery, whether in a Chapter
15 case or otherwise, is ordinarily not “discrete” or
“separate” from the proceeding for which the discovery
is sought. Id. at 589. To the contrary, discovery is “merely
a preliminary step” to obtain information for use in
some other proceeding, and thus discovery disputes are
nothing more than “disputes over minor details about how
a bankruptcy case will unfold.” Id. at 590. As such, the
“appropriate procedural unit for determining finality” is
not the discovery dispute but the proceeding for which
the discovery is sought. Id. at 588. Here, that proceeding
is the implementation of the Freeze Order, as the record
is clear that the Trustee sought the discovery in part to
aid in implementing the Freeze Order. And the record
demonstrates that the Freeze Order may eventually be
implemented in the Chapter 15 case. The Brazilian court
that entered the Freeze Order indicated that the Order
should be implemented by the Bankruptcy Court for
assets in the United States. Specifically, the Brazilian
court stated the Affected Parties’ assets in the United
States “must be frozen/attached,” which could be done by
6. As noted above, the District Court made the same finding
based on this Court’s order in Marigrove, which concluded that a
separate discovery order in this same Chapter 15 case was not a
final order. See Marigrove, slip op. at 1-2. The parties dispute the
scope of Marigrove’s holding and whether Marigrove governs this
appeal. Because we hold that the discovery orders here were not
final under the Supreme Court’s recent decision in Ritzen Group,
we need not consider this Court’s earlier unpublished (and therefore
nonprecedential) order in Marigrove.
10a
Appendix A
“directly petition[ing]” the Bankruptcy Court. This shows
the discovery at issue in the discovery orders may be used
by the Trustee to aid in implementing the Freeze Orders.7
On this record, the discovery orders were “merely a
preliminary step” in the Freeze Order proceeding and
thus were not final orders. Id. at 590.
We are not persuaded otherwise by the Affected
Parties’ argument that discovery orders under Chapter 15
should receive special treatment in terms of finality. Again,
the Affected Parties say discovery orders under Chapter
15 are final orders because “chapter 15 proceedings are,
by definition, proceedings ancillary to bankruptcy cases
in foreign courts” and thus “a bankruptcy court has
nothing left to do after granting or denying discovery.”
For starters, the record belies the Affected Parties’
assertion that the Bankruptcy Court has “nothing left
to do” in this Chapter 15 proceeding. As just discussed,
the Bankruptcy Court may be called upon to implement
the Freeze Order based on the discovery at issue in the
7. The Affected Parties say the subpoenas at issue in the
discovery orders were directed at their personal financial accounts,
but the Freeze Order does not apply to such accounts. As such, the
Affected Parties argue the discovered information cannot be used
to implement the Freeze Order. The Trustee disagrees and argues
that the Freeze Order does not exclude the Affected Parties’ personal
financial accounts. We do not view this dispute as material. Even
assuming the Affected Parties are correct that the Freeze Order
does not apply to their financial accounts, that does not mean the
discovered information cannot be used in aid of implementing the
Freeze Order. For instance, the discovered information could be
used by the Trustee to locate other assets that are covered by the
Freeze Order.
11a
Appendix A
discovery orders. Beyond that, we are not convinced that
the primary authority the Affected Parties rely on for
their position, the out-of-circuit decision in In re Barnet,
737 F.3d 238 (2d Cir. 2013), applies here.
In Barnet, the foreign representatives petitioned a
bankruptcy court under Chapter 15 for recognition of a
liquidation proceeding in Australia. Id. at 241. The foreign
representatives sought discovery from a company, and the
court denied the company’s motion to stay the discovery.
Id. On appeal, the Second Circuit categorically held
that a discovery order under Chapter 15 is immediately
appealable for two reasons. Id. at 244. First, the Second
Circuit compared discovery under Chapter 15 to discovery
under 28 U.S.C. § 1782(a), which permits discovery “for
use in a proceeding in a foreign or international tribunal.”
Id. (quotation marks omitted). It noted that, like discovery
under section 1782(a), discovery under Chapter 15 is
“ancillary to a suit in another tribunal, such that there
will never be a final resolution on the merits beyond
the discovery itself.” Id. (quotation marks and citation
omitted). Second, the Second Circuit noted that “a party
aggrieved by the automatic relief imposed by Section
1520” (another provision in Chapter 15) could immediately
appeal, as “the imposition of automatic relief requires no
further action by the Bankruptcy Court.” Id. Therefore,
the Second Circuit reasoned, if “appellate review is
available to one, . . . it should be available to the other.” Id.
Barnet is distinguishable from this case for a couple
reasons. First, the Second Circuit did not have the benefit
of Ritzen Group when it issued Barnet, so it did not
12a
Appendix A
wrestle with the question of whether discovery under
Chapter 15 is a “discrete” or “separate” proceeding or
“merely a preliminary step” in some other proceeding.
See Ritzen Grp., 140 S. Ct. at 589-90. As such, the two
bases for its decision are largely irrelevant under the
now-required analysis to the extent the Second Circuit
analogized discovery orders under Chapter 15 to orders
in other contexts instead of applying Ritzen Group’s
framework. 8
Second, there is no indication in Barnet that any
proceedings other than discovery were contemplated in
that Chapter 15 case. As such, Barnet is different than
this case, where the record is clear that the Trustee
sought the discovery in part to aid in implementing the
Freeze Order in the Chapter 15 case. In our view, this
difference matters. If a Chapter 15 case exists solely to
8. Neither do we adopt Barnet’s analogy between discovery
orders under Chapter 15 and those under section 1782(a). Like the
Second Circuit, our Court has held that discovery orders under
section 1782(a) are immediately appealable. See In re Furstenberg
Fin. SAS v. Litai Assets LLC, 877 F.3d 1031, 1034 (11th Cir. 2017)
(“In a § 1782 proceeding, the underlying case is necessarily conducted
in a foreign tribunal. Therefore, once the district court has ruled on
the parties’ motions concerning the evidentiary requests, there is
no further case or controversy before the district court.” (alteration
adopted and quotation marks omitted)). But it does not follow from
the section 1782(a) context that all discovery orders in the Chapter 15
context are also categorically final and thus immediately appealable.
In a section 1782(a) proceeding, there is nothing but the discovery,
so the discovery order must be immediately appealable. See id.
In a Chapter 15 case, by contrast, and as this case demonstrates,
a discovery order is ordinarily a “preliminary step” of a larger
proceeding.
13a
Appendix A
obtain discovery for use in a foreign bankruptcy case, then
the discovery might not be “merely a preliminary step”
in some other Chapter 15 proceeding. Instead, in such a
case, it would seem the discovery is the only proceeding,
and thus a discovery order may be a final order that is
immediately appealable, as the Second Circuit held in
Barnet. But again, that’s not the case we have. Instead,
the discovery orders here were “merely a preliminary
step” in the Freeze Order proceeding.
In sum, the Bankruptcy Court’s discovery orders
were not final orders.
B. The Discovery Orders Do Not Fall Under One of
the Exceptions to the Final Judgment Rule
As an alternative to their arg ument that the
Bankruptcy Court’s discovery orders were final, the
Affected Parties also argue the orders fall under one of the
exceptions to the final judgment rule, and thus this Court
has jurisdiction. Specifically, citing Gillespie v. U.S. Steel
Corp., 379 U.S. 148, 153-54, 85 S. Ct. 308, 311-12 (1964),
the Affected Parties argue that the discovery orders “fall
within the exception for intermediate resolution of issues
fundamental to the merits of the case.” In Gillespie, the
Supreme Court held that “even an order of marginal
finality should be accorded immediate review if the
question presented is fundamental to further conduct of
the case.” Atl. Fed. Sav. & Loan Ass’n of Ft. Lauderdale
v. Blythe Eastman Paine Webber, Inc., 890 F.2d 371, 376
(11th Cir. 1989).
14a
Appendix A
The Affected Parties say the question presented
in the merits of their appeal—whether the discovery
orders are valid—is fundamental to the further conduct
of the Chapter 15 case and thus the Gillespie exception
applies. They say the validity of the discovery orders is
fundamental to the conduct of the case because if the
orders are invalid, then the Trustee will be forced to end
its discovery into the Affected Parties’ financial affairs,
which they assert is the only remaining purpose of the
Chapter 15 case.
We reject the Affected Parties’ assertion. For one
thing, the Supreme Court has since narrowed the Gillespie
exception to the “unique facts of that case”; otherwise,
the Supreme Court said, the final judgment rule “would
be stripped of all significance.” Coopers & Lybrand v.
Livesay, 437 U.S. 463, 477 n.30, 98 S. Ct. 2454, 2462
n.30, 57 L. Ed. 2d 351 (1978), superseded by rule on other
grounds as stated in Microsoft Corp. v. Baker, 582 U.S.
__, 137 S. Ct. 1702, 198 L. Ed. 2d 132 (2017). In Coopers &
Lybrand, the Supreme Court characterized Gillespie as a
case involving “an unsettled issue of national significance”
in which “none of the policies of judicial economy served
by the finality requirement” were at play. Id. The Affected
Parties do not attempt to liken this case to those “unique
facts,” and we see little resemblance ourselves.
In any event, the Affected Parties fail to show how
the validity of the discovery orders is fundamental to
the conduct of the Chapter 15 case. The record does not
indicate that the Chapter 15 case exists solely to obtain
information about the Affected Parties’ financial affairs.
15a
Appendix A
For instance, the Trustee initiated the Chapter 15 case
in part to seek information on Transbrasil’s assets in the
United States more broadly. In fact, the Affected Parties
acknowledge that, even if the discovery orders are invalid,
the Trustee “will still be able to search for Transbrasil’s
assets” in the Chapter 15 case. As such, the validity of
the discovery orders is not fundamental to the conduct of
this case and thus the Gillespie exception does not apply.
III. CONCLUSION
The Bankruptcy Court’s discovery orders were not
final orders and thus were not immediately appealable.
The discovery orders also do not fall under one of the
exceptions to the final judgment rule. Our Court therefore
lacks jurisdiction over this appeal.
DISMISSED.
16a
B the united
Appendix b —Appendix
ORDER of
states DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF FLORIDA, DATED MARCH 16, 2020
United States District Court for
the Southern District of Florida
CASE NO. 19-23700-CIV-ALTONAGA
In re: TRANSBRASIL S.A. LINHAS AÉREAS,
Debtor.
March 16, 2020, Decided
March 16, 2020, Entered
ORDER
CECILIA M . ALTONAGA , U NITED STATES
DISTRICT JUDGE
THIS CAUSE comes before the Court on Appellees,
Gustavo Henrique Sauer de Arruda Pinto and Alfredo Luiz
Kugelmas’s (“Trustees[’]”) Motion for Dismissal of Appeal
[ECF No. 21]. Appellants, The Estate of Omar Fontana,
Denilda Pereira Fontana, Emidio Cipriani, Antônio Celso
Cipriani, Marise Pereira Fontana Cipriani, and Devom
Consultoria e Participações Ltda., filed a Response [ECF
No. 26]; to which the Trustees filed a Reply [ECF No. 27].
The Court has carefully considered the parties’ written
submissions, the record, and applicable law. For the
following reasons, the Motion is granted, and the appeal
is dismissed for lack of jurisdiction.
17a
Appendix B
I. BACKGROUND
This appeal arises from two discovery orders entered
in a chapter 15 proceeding (“U.S. Bankruptcy Case”):1 (1)
a June 16, 2019 Order [Bankr. ECF No. 474] denying a
joint motion for a protective order from subpoenas duces
tecum for Rule 2004 examination; and (2) an August 21,
2019 Order [Bankr. ECF No. 494] denying Appellants’
motion to reconsider the June 16, 2019 Order (collectively
“Bankruptcy Court Orders”). The issues before the Court
are (1) whether the Bankruptcy Court Orders are “final”
such that the Court has jurisdiction, and (2) if not, whether
the Orders nevertheless merit discretionary review.
A. The Bankruptcy Cases and Freeze Order
Trustee Gustavo Henrique Sauer de Arruda Pinto
commenced the U.S. Bankruptcy Case on April 7, 2011 to
render assistance to an insolvency proceeding pending in
Brazil (the “Brazil Bankruptcy Case”) regarding Debtor,
Transbrasil S.A. Linhas Aéreas. (See Mot. 2; see also
Verified Pet. for Recognition of Foreign Main Proceeding
[Bankr. ECF No. 2]).
On September 16, 2015, in the Brazil Bankruptcy
Case, the Trustees filed a motion with the Third Judicial
Reorganization and Bankruptcy Court for the Judicial
District of São Paulo, Central Civil Venue (“Brazilian
Bankruptcy Court”) to extend the Brazil Bankruptcy
1. In re Transbrasil S.A. Linhas Aéreas, Bankr. No. 11-19484
(S.D. Fla. filed Apr. 7, 2011). References to docket entries in the U.S.
Bankruptcy Case are denoted with “Bankruptcy ECF No.”
18a
Appendix B
Case to additional entities and individuals, including
Appellants. (See Mot. 6). In connection with their motion,
the Trustees requested the Brazilian Bankruptcy Court
enter a provisional order freezing Appellants’ assets. (See
id.). This request was initially denied but on May 4, 2017,
the São Paulo Tribunal of Justice (the “Brazilian Appellate
Court”) entered an order (“Freeze Order”) prohibiting
the alienation of Appellants’ assets. (See id.).
On December 18, 2018, the Brazilian Appellate Court
issued a more detailed decision concerning the Freeze
Order (the “December 18, 2018 Freeze Order”). (See
[Bankr. ECF No. 437] 4-19). 2 The December 18, 2018
Freeze Order refers to discovery already obtained in the
related U.S. Bankruptcy Case and anticipates further
discovery:
[A]t this time, if it cannot be said for certain that
there was fraud, there is circumstantial evidence
suggesting so, pointing to odd transactions
corroborated by existing documents, the
big picture of which has been reinforced by
the information gathered in the ancillary
proceedings taking place in the U.S. state of
Florida.
...
2. Appellants refer the Court to Bankr. ECF No. 14-1 at 100,
114-15; however, this citation appears to be a scrivener’s error.
The Court located the December 18, 2018 Freeze Order on the
bankruptcy court docket.
19a
Appendix B
Moreover, concerning the appellees’ assets,[2]
to enforce the court order on the assets located
in that country, the appellant [may] . . . directly
petition the judge of the U.S. Bankruptcy
Court — State of Florida, which would have
jurisdiction as legally recognized in court
in that country, and, in accordance with the
local laws, execute orders from the competent
Brazilian court hearing the Transbrasil
bankruptcy case[.]
(Dec. 18, 2018 Freeze Order 11, 15-16 (alterations added);
see also Mot. 7).
In January 2019, the Trustees issued several
subpoenas to U.S.-based financial entities. (See [Bankr.
ECF Nos. 436, 438-41]; see also Mot. 3). According to
the Trustees, the discovery sought is relevant for three
reasons: (1) to support the Trustees’ pending claims
against Appellants in the Brazil Bankruptcy Case; (2) to
investigate additional potential claims that may be brought
against participants in the scheme to divert assets from
the Debtor; and (3) to aid in the implementation of the
Freeze Order. (See Mot. 3).
On February 13, 2019, Appellants filed their Joint
Motion for Protective Order from the subpoenas with
the bankruptcy court. (See [Bankr. ECF No. 445]). The
bankruptcy court denied the motion. (See generally June
16, 2019 Order). The Trustees filed a Joint Motion for
Reconsideration [Bankr. ECF No. 477], which was also
denied. (See generally Aug. 21, 2019 Order). This appeal
followed.
20a
Appendix B
B. Prior Discovery in the U.S. Bankruptcy Case
This is not the first case in this District concerning
discovery in the U.S. Bankruptcy Case. (See Mot. 4). In
2014, the Trustees issued a subpoena duces tecum for
Rule 2004 examination to obtain financial information
concerning several non-parties, including Cave Creek
Holdings, Corp. (“Cave Creek”), Cel-Air Inc. (“CelAir”), Energy Ventures Limited, and Trilogy Holdings
Limited. (See id.). Cave Creek, Cel-Air, and another nonparty, Marigrove, Inc. (“Marigrove”) moved to quash
the subpoenas, but these motions were denied by the
bankruptcy court on April 25, 2014. (See Apr. 25, 2014
Order [Bankr. ECF No. 95]).
On appeal, the district court affirmed the bankruptcy
court order in part. See Marigrove, Inc. v. Pinto, No.
14-cv-22580, 2015 U.S. Dist. LEXIS 66312 Order (S.D.
Fla. Mar. 30, 2015) (“March 30, 2015 Order”). Cave
Creek, Cel-Air, and Marigrove appealed the district
court’s order. See Marigrove, Inc. v. Pinto, No. 15-11596
(11th Cir. filed Apr. 14, 2015) (“Marigrove, Inc. Appeal”).
Before the briefs were filed, the Eleventh Circuit posed
a jurisdictional question, requesting the parties “address
whether [the Eleventh Circuit] has jurisdiction to review
the district court’s order affirming in part and dismissing
in part the bankruptcy court’s April 2014 ‘Order on
. . . Motion to Quash Subpoena Duces Tecum for Rule 2004
Examination.’ Specifically, was the bankruptcy court’s
order ‘final.’” (Marigrove, Inc. Appeal, Jurisdictional
Question (May 20, 2015) (alterations and emphasis added)).
21a
Appendix B
The Trustees and the Discovery Targets filed
responses to the jurisdictional question. (See Marigrove,
Inc. Appeal, Trustees’ Resp. to Jurisdictional Question
(June 3, 2015); Marigrove, Inc. Appeal, Appellants’ Br. in
Resp. to Jurisdictional Question (June 3, 2015)). Like the
Trustees in this case, Cave Creek, Cel-Air, and Marigrove
argued the bankruptcy court’s order was final and thus
subject to review by the district court:
Below, the district court should have analyzed
the bankruptcy court’s order in the context
of the proceeding in which it was brought:
a discovery proceeding under chapter 15
recognized for the very purpose of issuing
piecemeal discovery on third parties with
respect to Transbrasil’s assets . . . . Unlike
discovery orders in other cases, in this chapter
15 proceeding there are no further steps to be
taken by the court or the parties with respect
to Appellants or the Rule 2004 subpoena “to
enable the court to adjudicate on the merits”
and, thus, the order is final and appealable.
(Marigrove, Inc. Appeal, Appellants’ Br. in Resp. to
Jurisdictional Question 14 (alteration added)).
The Eleventh Circuit affirmed the March 30, 2015
Order, noting “[a]s a general rule, orders denying
motions to quash subpoenas are not final orders that
are immediately appealable.” (Marigrove, Inc. Appeal,
Jurisdictional Order (Aug. 7, 2015) (alteration added;
citations omitted)).
22a
Appendix B
II. ANALYSIS
The district court functions as an appellate court in
reviewing bankruptcy decisions. In re Piper Aircraft
Corp., 362 F.3d 736, 738 (11th Cir. 2004) (citation and
internal quotation marks omitted). Under 28 U.S.C.
section 158(a), the district court has jurisdiction to hear
appeals “(1) from final judgments, orders, and decrees;
(2) from interlocutory orders and decrees issued under
section 1121(d) of title 11 . . . ; and (3) with leave of the
court, from other interlocutory orders and decrees.” Id.
(alteration added). The present Motion requires the Court
resolve whether the Bankruptcy Court Orders are “final;”
and if not, whether as interlocutory Orders they merit
discretionary review.
A. Whether the Bankruptcy Court Orders are Final
For the purpose of appellate jurisdiction, a final order
“is one ‘by which a district court disassociates itself from
the case.’” Doe No. 1 v. United States, 749 F.3d 999, 1004
(11th Cir. 2014) (quoting Mohawk Indus., Inc. v. Carpenter,
558 U.S. 100, 106, 130 S. Ct. 599, 175 L. Ed. 2d 458 (2009);
other citation omitted). “An interlocutory order or decree
is one which does not finally determine a cause of action
but only decides some intervening matter pertaining to
the cause, and which requires further steps to be taken
in order to enable the court to adjudicate the cause on
the merits.” Matter of Kutner, 656 F.2d 1107, 1111 (5th
Cir. 1981) (citation omitted). “In civil litigation generally
. . . a ‘final decision’. . . is normally limited to an order that
resolves the entire case.” Ritzen Grp., Inc. v. Jackson
23a
Appendix B
Masonry, LLC, __ U.S. __, 140 S. Ct. 582, 205 L. Ed. 2d
419, 2020 WL 201023, at *2 (U.S. Jan. 14, 2020) (alterations
added). But “[t]he regime in bankruptcy is different. A
bankruptcy case embraces an aggregation of individual
controversies. Orders in bankruptcy cases qualify as ‘final’
when they definitively dispose of discrete disputes within
the overarching bankruptcy case.” Id. (alteration added;
citations and first internal quotation marks omitted).
Appellants argue the Bankruptcy Court Orders are
“final” because they fully resolve a discrete dispute —
namely, whether the subpoenas are enforceable, leaving
nothing for the bankruptcy court to do regarding the
controversy. (See Resp. 10). Relying on In re Barnet, 737
F.3d 238 (2d Cir. 2013), Appellants draw a distinction
between discovery orders generally, and those in chapter
15 bankruptcy cases. (See Resp. 7-10). In In re Barnet,
the court analogized discovery orders in chapter 15
proceedings to “discovery orders issued pursuant to 28
U.S.C. [section] 1782(a), which provides for discovery ‘for
use in a proceeding in a foreign or international tribunal.’”
Id. at 244 (alteration added; quoting 28 U.S.C. § 1782(a)).
According to In re Barnet, chapter 15 discovery orders
are final and appealable because they, “like Section 1782
proceedings, are ancillary to a suit in another tribunal,
. . . such that there will never be a final resolution on the
merits beyond the discovery relief itself.” Id. (alteration
added; citations and internal quotation marks omitted).
Appellants contend the Court should come to the same
conclusion.
24a
Appendix B
Appellants argue the In re Barnet holding is reinforced
by the Supreme Court’s recent decision in Ritzen Grp.,
Inc., __ U.S. __, 140 S. Ct. 582, 205 L. Ed. 2d 419, 2020
WL 201023. (See Resp. 10). In Ritzen Group, the Supreme
Court found a bankruptcy court order denying relief from
an automatic stay was final and appealable because it
“dispos[ed] of a procedural unit anterior to, and separate
from, claim-resolution proceedings.” Ritzen Grp., Inc.,
__ U.S. __, 140 S. Ct. 582, 205 L. Ed. 2d 419, 2020 WL
201023 at *5 (alteration added). The Court distinguished
the dispute over the automatic stay from disputes “over
minor details about how the bankruptcy case will unfold,”
noting “[r]esolution of a motion for stay relief can have
large practical consequences.” Id. (alteration added;
citation omitted).
Naturally, the Trustees take a contrary view. They
emphasize discovery orders, generally, are non-final and
not immediately appealable. (See Mot. 9). According to
the Trustees, Appellants’ position “slices the case too thin
and threatens to turn chapter 15 cases into an unworkable
morass of frequent appeals from every disputed subpoena.”
(Reply 6 (alteration removed; internal quotation marks
omitted)). Significantly, the Trustees point out another
judge in this District has already “concluded that [a
chapter 15 discovery order] was interlocutory” and “[t]he
Eleventh Circuit agreed.” (Id. (alterations added)).
The Court finds Appellants’ argument and the
reasoning in In re Barnet have merit. Ultimately, however,
they are not dispositive given countervailing authority
from this Circuit. As noted by Trustees, the Eleventh
Circuit has already considered, in connection with
25a
Appendix B
this very case, whether a bankruptcy court order on a
motion to quash a subpoena is “final.” Appellants insist
the district court’s opinion in the Marigrove, Inc. Appeal
“misapprehended the issue before it” (Resp. 12), but they
ignore the effect of the Eleventh Circuit’s affirmance of
the district court.
It is particularly noteworthy that in the Marigrove,
Inc. Appeal, the Eleventh Circuit asked the parties to
address whether the bankruptcy court order on the
motion to quash was final. (See Marigrove, Inc. Appeal,
Jurisdictional Question). In response to the jurisdictional
question, Cave Creek, Cel-Air, and Marigrove made the
same arguments Appellants make here — namely that
“[u]nlike discovery orders in other cases, in this chapter
15 proceeding there are no further steps to be taken by
the court or the parties with respect to Appellants or the
Rule 2004 subpoena ‘to enable the court to adjudicate on
the merits’ and, thus, the [discovery] order is final and
appealable.” (Marigrove, Inc. Appeal, Appellants’ Brief
in Resp. to Jurisdictional Question 14). That Cave Creek,
Cel-Air, and Marigrove did not cite — and the Eleventh
Circuit did not address — In re Barnet does not change
the outcome. At bottom, the Eleventh Circuit resolved
the precise issue raised by Appellees’ Motion, in this very
case, mandating the Court come to the same conclusion. 3
3. Neither does Ritzen Group change the outcome. Although
Ritzen Group affirms the same principle on which the In re Barnet
court relies — that orders disposing of “a procedural unit anterior to,
and separate from, claim-resolution proceedings” are final — Ritzen
Group does not concern a discovery order. Ritzen Grp., Inc., 140 S.
Ct. 582, 205 L. Ed. 2d 419, 2020 WL 201023 at *5.
26a
Appendix B
B. Whether the Bankruptcy Court Orders Merit
Discretionary Review
Appellants next argue the Discovery Orders merit
discretionary review even if they are interlocutory. The
Court disagrees.
“In determining when to exercise [its] discretionary
authority, a district court will look to the standards which
govern interlocutory appeals from the district court to the
court of appeals pursuant to 28 U.S.C. [section] 1292(b).”
Figueroa v. Wells Fargo Bank N.A., 382 B.R. 814, 824
n.5 (S.D. Fla. 2007) (first alteration omitted; second and
third alterations added; quoting In re Celotex Corp., 187
B.R. 746, 749 (M.D. Fla. 1995); other citation omitted). To
obtain interlocutory review, “a party must demonstrate
that: (1) the order presents a controlling question of law;
(2) over which there is a substantial ground for difference
of opinion among courts; and (3) the immediate resolution
of the issue would materially advance the ultimate
termination of the litigation.” Laurent v. Herkert, 196
F. App’x 771, 772 (11th Cir. 2006) (citation omitted).
“[D]istrict courts should allow interlocutory bankruptcy
appeals sparingly since interlocutory bankruptcy appeals
should be the exception, not the rule.” In re Hinners, No.
12-80924-MC, 2012 U.S. Dist. LEXIS 130509, 2012 WL
4049967, at *1 (S.D. Fla. Sept. 13, 2012) (alteration added;
citation omitted).
Appellants contend the “central issue in this case is
whether the [Appellants]’ personal financial information
is within the scope of permissible discovery in chapter
27a
Appendix B
15 cases.” (Resp. 16 (alteration added)). According to
Appellants, there is conflicting authority regarding
whether discovery in this case should be governed by
Federal Rule of Bankruptcy Procedure 2004(b), which
authorizes relatively broad discovery; or by 11 U.S.C.
section 1521(a)(4), which Appellants contend limits
discovery to information concerning the “debtor’s assets,
affairs, rights, obligations or liabilities.” (Id. 4 (quoting 11
U.S.C. § 1521(a)(4))).
Appellants point to two bankruptcy cases from the
Southern District of New York appearing to treat the
interplay between Rule 2004(b) and section 1521(a)(4)
differently: In re Glitnir banki hf., No. 08-14757, 2011
Bankr. LEXIS 3296, 2011 WL 3652764 (Bankr. S.D.N.Y.
Aug. 19, 2011), and In re Millennium Global Emerging
Credit Master Fund Ltd., 471 B.R. 342 (Bankr. S.D.N.Y.
2012). Appellants quote from each case to demonstrate
the contrast. (See Resp. 17). First, Appellants point to
language in Glitnir, where the court stated
Section 1521(a)(4) expressly governs the Foreign
Representative’s discovery rights. Bankruptcy
Rule 2004 complements those rights, and may
provide a procedural mechanism to obtain a
subpoena under Rule 9016 of the Federal Rules
of Bankruptcy Procedure, but cannot expand
those rights beyond what the statute and the
order issued pursuant to the statute permit.
2011 Bankr. LEXIS 3296, 2011 WL 3652764, at *6
(emphasis added). Appellants contrast this excerpt with
one from Millennium Global, where the court observed it
28a
Appendix B
need not reach this issue on this motion, but the
Court notes that one of the main purposes of
chapter 15 is to assist a foreign representative
in the administration of the foreign estate
. . . which would militate in favor of granting a
foreign representative broad discovery rights
using the full scope of Rule 2004.
471 B.R. at 346-47 (citation omitted; alteration and
emphasis added).
While these statements seem to conflict, Appellants
do not establish a “substantial ground for difference of
opinion among courts” for two reasons. 4 First, cases
outside and within this District appear largely, if not
uniformly, to agree with In re Millenium Global. See,
e.g., In re Petroforte Brasileiro de Petroleo Ltda., 542
B.R. 899, 911 (Bankr. S.D. Fla. 2015) (“The Court agrees
with the interpretation in Millennium and finds that
Rule 2004 is applicable in this chapter 15 case.”); In re
Markus, 607 B.R. 379, 390 (Bankr. S.D.N.Y. 2019) (noting,
under section 1507(a), “Rule 2004 [is] fully applicable in a
chapter 15 case” (alteration added; citations and quotation
marks omitted)); In re AJW Offshore, Ltd., 488 B.R. 551,
561 (Bankr. E.D.N.Y. 2013) (“[D]iscovery will only be
permitted by motion on notice with an opportunity for
hearing to the adverse parties and by making examination
and production of documents under Rule 2004 . . . with any
discovery to be allowed to be subject to conditions imposed
4. The Court assumes, without deciding, the Bankruptcy Court
Orders present a controlling issue of law.
29a
Appendix B
in accordance with [section] 1522.” (alterations added;
citation omitted)). Appellants present no direct authority,
and the Court can find none, approving the holding in In re
Glitnir with respect to the issue whether section 1521(a)(4)
limits discovery otherwise available under Rule 2004(b).
While not dispositive to the analysis of whether there
is a “substantial ground for difference of opinion,” the
Court finds the lack of authority supporting In re Glitnir
militates against the notion it presents a conflict of laws
meriting interlocutory review. See Couch v. Telescope
Inc., 611 F.3d 629, 633 (9th Cir. 2010) (“[J]ust because
a court is the first to rule on a particular question or
just because counsel contends that one precedent rather
than another is controlling does not mean there is such
a substantial difference of opinion as will support an
interlocutory appeal.” (alteration added; quotation marks
and citation omitted)); Arista Networks, Inc. v. Cisco
Sys. Inc., No. 16-cv-00923, 2018 U.S. Dist. LEXIS 98177,
2018 WL 2761855, at *5 (N.D. Cal. June 8, 2018) (finding
the defendant’s “contention that reasonable jurists could
disagree and that one out-of-circuit case suggests a
different result” was “insufficient to show a substantial
ground for difference of opinion.” (citation omitted)); In
re Chinese-Manufactured Drywall Prod. Liab. Litig.,
No. CV 09-2047, 2018 U.S. Dist. LEXIS 76528, 2018 WL
2095729, at *5 (E.D. La. May 7, 2018) (“The threshold
for establishing a ‘substantial ground for difference of
opinion’ is higher than mere disagreement or even the
existence of some contrary authority.” (quotation marks
and citation omitted)); Sunflower Redevelopment, LLC v.
Illinois Union Ins. Co., No. 4:15-cv-577, 2016 U.S. Dist.
30a
Appendix B
LEXIS 39858, 2016 WL 1228659, at *4 (W.D. Mo. Mar. 28,
2016) (“A substantial ground for disagreement is reflected
by a sufficient number of conflicting and contradictory
opinions, but not by an established body of law or dearth
of cases.” (quotation marks and citation omitted)); LaBelle
v. Philip Morris Inc., No. 2:98-3235-23, 1999 U.S. Dist.
LEXIS 24271, 1999 WL 33591439, at *1 (D.S.C. June
16, 1999) (“The mere fact that there is some difference
of opinion among legal commentators on a particular
issue is insufficient to establish the substantial ground
for difference of opinion that is required by [section]
1292(b), particularly in light of the rather one-sided
judicial authority to the contrary.” (alteration added;
internal quotation marks and citation omitted)); Oyster
v. Johns-Manville Corp., 568 F. Supp. 83, 88 (E.D. Pa.
1983) (finding a “single case demonstrates that while there
may be grounds for differences of opinion, they are not,
however, substantial” (emphasis in original)).
Second, on close review of In re Glitnir, the Court
finds its holding is too narrow to present a direct conflict
with Millennium Global. In In re Glitnir, the bankruptcy
court signed a recognition order authorizing a foreign
representative of an Icelandic bank undergoing liquidation
to issue subpoenas concerning the bank’s assets and
liabilities. 2011 Bankr. LEXIS 3296, 2011 WL 3652764,
at *1. The bankruptcy court quoted from a portion of
the recognition order, noting it tracked the language of
section 1521(a)(4):
31a
Appendix B
T he Foreig n Represent at ive is hereby
authorized to examine witnesses, take evidence,
seek production of documents, and deliver
information concerning the assets, affairs,
rights, obligations or liabilities of Glitnir, as
such information is required in the Icelandic
Proceeding under the law of the United States.
In addition, Rule 2004 states in relevant part
that the Court may allow a party in interest to
examine an entity and compel the production
of documents only as to “the acts, conduct,
or property or to the liabilities and financial
condition of the debtor, or to any matter which
may affect the administration of the debtor’s
estate.”
2011 Bankr. LEXIS 3296, 2011 WL 3652764, at *6.
The foreign representative issued subpoenas to
several U.S. entities seeking financial information
pertaining to two individuals. See 2011 Bankr. LEXIS
3296, [WL] at *3. The individuals moved to quash the
subpoenas. See id. In partially granting the motions, the
bankruptcy court stated “[s]ection 1521(a)(4) expressly
governs the Foreign Representative’s discovery rights.
Bankruptcy Rule 2004 complements those rights . . . but
cannot expand those rights beyond what the statute and
the order issued pursuant to the statute permit.” 2011
Bankr. LEXIS 3296, [WL] at *6 (alterations and emphasis
added; footnote call number omitted). The In re Glitnir
court commented on the interplay between 1521(a)(4) and
Rule 2004(b), but it did so with reference to the recognition
32a
Appendix B
order “track[ing]” section 1521(a)(4). Id. (alteration added).
Absent the recognition order, it is unclear the In re Glitnir
court would have declined to consider the broadening
effect of other chapter 15 provisions.
The court in Millennium Global made the point:
[W]hile Glitnir contrasted the broader language
of Bankruptcy Rule 2004, it did not consider the
authority of the Bankruptcy Court, under 11
U.S.C. [section] 1507(a), to “provide additional
assistance to a foreign representative under this
title [the Bankruptcy Code] or under other laws
of the United States.” Additional assistance
can be provided by making Bankruptcy Rule
2004 fully applicable. The Court need not
reach this issue on this motion, but the Court
notes that one of the main purposes of chapter
15 is to assist a foreign representative in the
administration of the foreign estate . . . which
would militate in favor of granting a foreign
representative broad discovery rights using the
full scope of Rule 2004. This conclusion would be
consistent with case law under the predecessor
of chapter 15, 11 U.S.C. [section] 304, whose
authorization of “other appropriate relief” to a
foreign representative was construed to allow
for broad discovery. . . . Moreover, although
chapter 15 is more explicit than [section]
304 in specifically providing that a foreign
representative can request discovery in aid of
a foreign proceeding under [section] 1521(a)(4),
there is no authority that chapter 15 was
33a
Appendix B
intended to limit the discovery available to
foreign representatives.
471 B.R. at 346-47 (third alteration in original; citations
omitted; emphasis added).
Because In re Glitnir’s reliance on only section
1521(a)(4) appears to be constrained by the case’s factual
background, the Court does not find its holding to be in
substantial conflict with Millennium Global. In other
words, the contrast between the two cases appears to be
one of breadth, and not substance.
III. CONCLUSION
Appellants do not establish the Bankruptcy Court
Orders are final, nor do they satisfy the second prong of
the test for discretionary interlocutory review. Mindful
district courts “should allow interlocutory bankruptcy
appeals sparingly,” In re Hinners, 2012 U.S. Dist. LEXIS
130509, 2012 WL 4049967, at *1 (citation omitted), it is
ORDERED AND ADJUDGED Appellees, Gustavo
Henrique Sauer de Arruda Pinto and Alfredo Luiz
Kugelmas’ Motion for Dismissal of Appeal [ECF No. 21]
is GRANTED. This appeal is DISMISSED for lack of
jurisdiction.
DONE AND ORDERED in Miami, Florida, this 16th
day of March, 2020.
/s/ Cecilia M. Altonaga
CECILIA M. ALTONAGA
UNITED STATES DISTRICT
JUDGE
34a
C the united
Appendix c —Appendix
order of
states bankruptcy court for the
southern district of florida,
filed august 21, 2019
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
Chapter 15
Case No. 11-19484-BKC-AJC
IN RE:
TRANSBRASIL S.A. LINHAS AÉREAS,
Debtor in a Foreign Proceeding.
ORDER DENYING JOINT MOTION
FOR RECONSIDERATION
THIS CAUSE came before the Court for hearing on
August 15, 2019 upon the Joint Motion for Reconsideration
of and to Alter or Amend Order Denying Motion for
Protective Order from Subpoenas Duces Tecum for Rule
2004 Examination (“Joint Motion”) (ECF 477). The Joint
Motion was filed by the Estate of Omar Fontana, Denilda
Pereira Fontana, Antonio Celso Cipriani, Marise Pereira
Fontana Cipriani, Emidio Cipriani, and Devom Consultoria
e Partipacoes Ltda (collectively, the “Movants”),
On March 21, 2019, the Court conducted a hearing
upon the Movants’ joint motion for protective order (ECF
445) from certain subpoenas for Rule 2004 Examinations
served on financial institutions (ECFs 436, 438, 439,
35a
Appendix C
440, 441, and 444). At the conclusion of the hearing on
the motion for protection, the Court took the matter
under advisement and invited the parties to submit
further argument in the form of proposed memorandum
decisions supporting each party’s respective position. The
Court received proposed opinions from the Trustees and
the Movants. Upon review of the parties’ submissions,
the Court considered the arguments and positions of
the Movants, again, but was no more persuaded by
their proposed order than it was by their proffers and
representations at the hearing. The Court ruled in
favor of the Trustees, having been persuaded by their
arguments and written submissions. Accordingly, after
certain revisions and editing, the Court entered the Order
Denying Motion for Protective Order from Subpoenas
Duces Tecum for Rule 2004 Examination on July 16, 2019
(ECF 474), as proposed by the Trustees and as amended
by the Court.
The Movants thereafter sought reconsideration of the
Order denying the motion for protective order by filing
the Joint Motion. On August 15, 2019, the Court provided
the Movants an opportunity to present argument on the
Joint Motion. However, having considered the Joint Motion
and the representations at the hearing thereon, the Court
determined the Movants’ arguments raised no new issues
of law or fact that the Court did not previously consider
when entering the Order Denying Motion for Protective
Order from Subpoenas Duces Tecum for Rule 2004
Examination on July 16, 2019. Any “errors” by the Court,
which the Court does not concede exist, are immaterial
and inconsequential to the Court’s ruling in favor of
36a
Appendix C
discovery. Moreover, the Court found no merit to any of
the additional arguments raised upon reconsideration,
including the argument that this Court is required to
also recognize the legal proceeding taken against the
Movants before authorizing discovery, notwithstanding
that this Court has already recognized the foreign main
proceeding.
The Court believes that discovery is justified and
warranted under the circumstances and concludes there
is no basis to reconsider its prior Order. It is
ORDERED AND ADJUDGED that the Joint Motion
for Reconsideration of and to Alter or Amend Order
Denying Motion for Protective Order from Subpoenas
Duces Tecum for Rule 2004 Examination (ECF 477) is
DENIED.
37a
Appendix d —Appendix
order D
of the united
states bankruptcy court for the
southern district of florida,
filed july 16, 2019
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
Chapter 15
Case No. 11-19484-AJC
In re:
TRANSBRASIL S.A. LINHAS AÉREAS
Debtor in a Foreign Proceeding.
ORDER DENYING MOTION FOR PROTECTIVE
ORDER FROM SUBPOENAS DUCES TECUM
FOR RULE 2004 EXAMINATION
THIS CAUSE came before the Court for hearing on
March 21, 2019 (the “Hearing”), upon the joint motion
(ECF 445, the “Motion”) of the Estate of Omar Fontana
(the “Fontana Estate”), Denilda Pereira Fontana, Antonio
Celso Cipriani, Marise Pereira Fontana Cipriani, Emidio
Cipriani, and Devom Consultoria e Participacoes Ltda.
(collectively, the “Movants”) for protective order from
certain subpoenas for Rule 2004 Examinations served on
financial institutions (ECFs 436, 438, 439, 440, 441, and 444,
the “Subpoenas”), and the response in opposition to the
Motion filed by Gustavo Henrique Sauer de Arruda Pinto
and Alfredo Luiz Kugelmas (the “Trustees”), as Trustees
of Transbrasil S.A. Linhas Aéreas (“Transbrasil”). ECF
451.
38a
Appendix D
The Court has considered the Motion, the Trustees’
response, the record in this matter, and the argument of
counsel at the Hearing. For the reasons set forth herein,
the Motion is DENIED.
BACKGROUND
1. This case (the “Chapter 15 Case”) is an ancillary
proceeding filed before this Court under Chapter 15 of the
Bankruptcy Code for the purpose of rendering assistance
to the insolvency proceedings of Transbrasil pending in
the 19th Civil Court of São Paulo, Brazil (together with
appeals relating thereto, the “Brazilian Proceedings”).
Recognition was sought and obtained, and now the
Trustees in the Transbrasil insolvency proceedings seek
to use the tools available under Chapter 15 to, among
other things, take discovery regarding assets that were
diverted from Transbrasil.
2. The Subpoenas seek financial information of the
Movants from the two years preceding the commencement
of the Brazilian Proceedings up to the present, to the
extent that it is available through the financial institutions
that have received subpoenas. The Trustees maintain
that this discovery is relevant for three reasons: (1) to
support the Trustees’ pending claims against the Movants
in the Brazilian Proceedings (i.e. a request to extend the
bankruptcy to Movants and find that Movants are alter
egos of Transbrasil), (2) to investigate additional potential
claims that could be brought against participants in the
scheme to divert assets from Transbrasil, and (3) to aid
the implementation of the Freeze Order (defined below)
39a
Appendix D
rendered in the Brazilian Proceedings. See ECF 445, p.
19, lns 2-12 and p. 23, lns 6-11, 17-24.
3. The Movants seek the Court’s inter vention
because they claim the discovery sought has no nexus
to Transbrasil and because it violates the terms of the
Freeze Order.
THE BRAZILIAN PROCEEDINGS
4. The Court has reviewed translations of various
orders rendered at the trial court and appellate level in the
Brazilian Proceedings, heard argument regarding those
orders at the Hearing, reviewed additional [translated]
orders from the Brazilian Proceedings which were filed
in this case after the Hearing, and considered the Expert
Report of Professor Keith S. Rosenn with Respect to
Brazilian Law (ECFs 464, 467 and 469, collectively, the
“Rosenn Report”), which was filed by the Movants.1
5. On September 16, 2015, the Trustees filed a motion
with the Third Judicial Reorganization and Bankruptcy
1. The Court “may consider any relevant material or source,
including testimony” to make a determination of foreign law.
Fed.R.Civ.P. 44.1. Where the Rosenn Report presents a summary
of orders that have been translated to English and filed with the
Court, it can be reviewed to navigate the voluminous filings. Where
the foreign orders themselves refer to Brazilian statutes, the
Rosenn Report’s description of those statutes can be considered
under Rule 44.1 and Fed.R.Evid. 702. However, Mr. Rosenn’s
interpretation of foreign orders is not the proper subject of expert
opinion testimony under Fed.R.Evid. 702 nor a “determination of
foreign law” under Fed.R.Civ.P. 44.1.
40a
Appendix D
Court for the Judicial District of São Paulo, Central Civil
Venue (the “Brazilian Bankruptcy Court”) to pierce the
corporate veil and extend the Transbrasil bankruptcy to
various entities and individuals, including the Movants and
three companies who have not appeared in this Chapter 15
Case (together, the “Additional Defendants”). See Motion,
ECF 445:3; ECF 437, Ex. A at 2. This motion commenced
what the Rosenn Report and the Trustees refer to as an
“incidental proceeding” or an “adversarial proceeding.”
See ECF 467, ¶ 6(3), ¶ 8. On November 30, 2016, the
Brazilian Bankruptcy Court denied the Trustees’ request
for an urgent provisional order freezing the assets of the
Additional Defendants to preserve the status quo during
the litigation of the merits. See Id. at ¶ 9 (this order was
not filed in the Chapter 15 Case, but all parties agree that
it denied the freeze order requested by the Trustees).
6. On May 4, 2017, the Sao Paulo Tribunal of Justice
(the “Brazilian Appellate Court”) reversed the portion
of the order denying the preliminary relief, effectively
freezing assets of the Additional Defendants (including
the Movants) until judgment on the Trustees’ claim to
pierce the corporate veil and extend the bankruptcy
of Transbrasil. The parties refer to this Order as the
“Freeze Order.” By its terms, it appears the Freeze Order
was intended to be a restraint on alienation but not an
impediment to the use and enjoyment of assets during the
pendency of the proceedings. The Freeze Order provides
that its purpose “is only to avoid any possible sale of
assets by the appellees while the incidental proceeding
is judged; however, this restriction does not represent a
restriction of any kind on the full exercise of the regular
41a
Appendix D
use and enjoyment of these assets.” ECF 425, p. 11.
The Freeze Order, together with a certified translation
thereof, is attached to the Trustees’ Response to Motion
to Terminate Recognition [ECF 425] as Exhibit 1 thereto.
7. On July 25, 2018, the Brazilian Bankruptcy Court
effectuated the Freeze Order by ordering the Central
Bank’s BACENJUD system to block the financial assets
of the Additional Defendants in the pending Brazilian
adversarial case (the Movants and others). ECF 453, p. 4-5;
ECF 464, ¶ 14. That same order required the production
of certain financial information regarding the Additional
Defendants: a request to the Brazilian taxing authorities
for copies of defendants’ asset declarations, as well as a
request to the National Financial System’s Customer
Registration (CSS-BACEN) for information regarding
current accounts, savings accounts, time deposits and
other assets and rights in the name of the defendants. Id.
8. On December 18, 2018, a panel of three judges of the
same intermediate appellate court issued a more detailed
decision on the Freeze Order. This decision references
discovery previously taken in this Chapter 15 Case (“the
big picture . . . has been reinforced by the information
gathered in the ancillary proceedings taking place in
the U.S. state of Florida”) and anticipates that comity
by this Court may be sought in this Chapter 15 Case to
enforce the Freeze Order (“to enforce the court order
on assets located [outside of Brazil, the Trustees may]
directly petition the judge of the U.S. Bankruptcy Court
– State of Florida, which would have jurisdiction as legally
recognized in court in that country, and, in accordance
42a
Appendix D
with the local laws, execute orders from the competent
Brazilian court hearing the Transbrasil bankruptcy
case”). ECF 437, pp. 11, 15-16. 2
9. The Brazilian Appellate Court relied upon
“concrete facts” including a large volume of suspicious
and unexplained transfers, the unaccounted for loss of
a R$100,000,000 bailout from the Brazilian government
two years before the commencement of the Brazilian
Proceedings, and the unexplained loss of Transbrasil’s
accounting books, which “ought to show the destination
of the monies and assets, all of which gives credence to
allegations that the destination of these large transfers
was concealed and the amounts were apparently embezzled
by the appellees.” Id. at 9-10.
10. The thrust of the Freeze Order, as explained in
the December 2018 order, is to block “the disposal, or
transfer, of the [Additional Defendants’] assets in Brazil
and abroad (immovable and moveable assets, including
the companies’ aircraft and stock).” Id. at 19. The purpose
of the Freeze Order is to preserve the status quo of the
Additional Defendants’ assets: “to prevent the disposal of
2. The Movants have moved for reconsideration of the Freeze
Order in Brazil [DE 445:5] but the Court has not been made aware
of any order staying the Freeze Order. Accordingly, the Court
will take into consideration the Freeze Order, as it stands, unless
and until it is overturned, reversed or stayed. See In re Petroforte
Brasileiro de Petroleo Ltda., 542 B.R. 899, 910 (Bankr. S.D. Fla.
2015) (finding no cause to abate or stay discovery pending the
outcome of an appeal in the Brazilian main case where there was
no stay pending appeal).
43a
Appendix D
the [Additional Defendants’] assets – disposal effected to
avoid paying obligations that may result if the motion
to extend the effects of the bankruptcy and pierce the
corporate veil is granted.” Id. at 16-17.
11. The Freeze Order includes a limitation on the
garnishment of bank accounts, and “allows any personal,
professional or corporate billing or income necessary for
the [Movants] to carry out their business and economic
activity and also allows the [Movants] to make regular
movements with their deposit and savings accounts[.]”
Id. at 19.
As for the rest of the assets, they must be
frozen/attached, including any assets located
in the United States of America, particularly
until other evidence can be gathered in order to
reveal the true facts concerning the appellees’
involvement in possible fraudulent practices,
whereby a large volume of the bankrupt
debtor’s assets were allegedly siphoned off
using controlled and associated companies,
and intermediaries too, including offshore
companies that created a channel to funnel cash
and hide its origin.
Id. at 8.
12. The Brazilian Appellate Court outlines two options
to enforce or implement the Freeze Order against assets
in the U.S.: (1) letters rogatory, and (2) a direct request
for equivalent measures available under U.S. law, which
44a
Appendix D
request should be made in this Chapter 15 Case. Id. at
15-16. To date, no request has been made in this Court
to enforce the Freeze Order. Instead, the Trustees have
elected to first conduct discovery to identify property and
the U.S. laws necessary to effectively “freeze” such assets
depending on their type and location in the United States.
13. On December 19, 2018, the day immediately
following its detailed ruling on the Freeze Order, the
Brazilian Appellate Court denied the appeal brought
by the Additional Defendants against the July 25, 2018
decision of the Brazilian Bankruptcy Court. ECF 455. The
appeal argued that the bankruptcy judge incorrectly read
the Freeze Order and that freezing their bank accounts
incorrectly denied them the earnings in those accounts.
The Brazilian Appellate Court denied the interlocutory
appeal because it had already issued an order clarifying
that bank accounts were not to be frozen under the
Freeze Order and for procedural reasons. Id.; ECF 464,
¶ 18. Significantly, the Brazilian Appellate Court did not
reverse the financial discovery that was granted to the
Trustees by the Brazilian Bankruptcy Court.
14. On February 13, 2019, the Brazilian Appellate
Court denied a request for clarification brought by the
Additional Defendants regarding the factual allegations
relied upon in the Freeze Order. ECF 464, ¶¶ 19-20.
15. On June 14, 2019, the Brazilian Bankruptcy Court
issued another order directing that certain third parties
produce financial information regarding the Additional
Defendants (including the Movants) to the Trustees and
45a
Appendix D
addressing a request from the Trustees for approval
of the form of the Subpoenas. The Trustees requested
account statements from Brazilian banks, information
on checking, saving and time deposit accounts from the
Customer Registry of the National Financial System,
and information on suspect property and financial
operations from the Counsel for Financial Activities
Control, all relating to the Additional Defendants in the
pending adversarial proceeding. See ECF 466, pp. 57-58.
The Brazilian Bankruptcy Court, “supplementing the
preliminary ruling ordering the freezing of the assets
requested during the processing of this incident and
observing the exact content of the appellate decision . . .,
which maintained said freezing” authorized each of the
types of financial discovery requested by the Trustees. Id.
16. Additionally, in Item II.7 and Item IV.p, the
Trustees reported on this Chapter 15 Case, the Motion,
and the request for information to assist with implementing
the Freeze Order in the U.S. See Id. at 18-20; 28. In
response, the Brazilian Bankruptcy Court stated that
“under the terms of Chapter 15 of the Bankruptcy Code,
there is no reason not to entertain the measures related
to the location and retrieval of assets and the instruction
of any legal measures to be taken by the bankruptcy
estate pertaining to Transbrasil S/A Linha Aereas
abroad, for the benefit of creditors, as well as in order to
obtain information related to its financial transactions,
without prejudice to whatever measures may be taken in
Brazil to the same effect and that are being determined
by this Court ruling over the principal bankruptcy.” Id.
at 58. The Brazilian Bankruptcy Court did not express
46a
Appendix D
concern over issues raised by the Movants with respect
to the Subpoenas (such as relevance or banking secrecy).
Instead, the Brazilian Bankruptcy Court stated that
“I have not understood the reason why the trustee is
postulating that a specific measure be authorized when,
during the processing of said ancillary bankruptcy
proceeding, several diligences were requested directly
to the North-American Court.” Id. at 59.
ANALYSIS
A trial court has “broad discretion . . . to decide when
a protective order is appropriate and what degree of
protection is required.” Seattle Times Co. v. Rhinehart,
467 U.S. 20, 36 (1984). The Motion asserts that once a
2004 examination is challenged, the burden shifts to the
party seeking the examination to show “good cause”
exists for taking the discovery. See ECF 445, p. 7 (citing
In re Kelton, 389 B.R. 812, 820 (Bankr. S.D. Ga. 2008)
(denying motion for protective order and allowing UST
to take examination “to investigate many of the apparent
anomalies in debtors’ filings.”)). “‘Generally, good cause
is shown if the [Rule 2004] examination is necessary to
establish the claim of the party seeking the examination,
or if denial of such request would cause the examiner
undue hardship or injustice.’” Id. (quoting In re Metiom,
Inc., 318 B.R. 263, 268 (S.D.N.Y. 2004) (quoting In re
Dinubilo, 177 B.R. 932, 943 (E.D. Cal. 1993), called into
doubt on other grounds by In re Symington, 209 B.R. 678
(Bankr. D.Md. 1997))).
47a
Appendix D
The Movants argue that they are non-debtor third
parties and that the Subpoenas do not set forth the
requisite nexus between their financial information and
the administration of the Transbrasil estate. They reason
that the Subpoenas seek information that implicates the
rights and privacy interests of non-debtors and the Court
should therefore apply a higher level of scrutiny. The
Freeze Order, they argue, cannot establish the requisite
nexus because it “did not authorize such [financial]
discovery to occur in Brazil” and in fact the Freeze Order
carves out bank accounts. ECF 445.
The Movants’ argue that because bank accounts are
expressly excluded from seizure under the Freeze Order,
the Trustees are violating the Freeze Order by seeking
to take discovery relating to bank accounts. The Movants
also argue that the only two means of implementing
the Freeze Order in the U.S. are those set forth in the
Freeze Order itself – either letters rogatory or a direct
petition in this Chapter 15 Case. They argue that since
discovery was omitted from the list of options, discovery
is not appropriate. At the Hearing, counsel for Movants
argued that the order rendered by the Brazilian Appellate
Court on February 13, 2019 contained a finding that the
Subpoenas go beyond the limits of the Freeze Order. See
ECF 445, pp. 7-10. However, even the Rosenn Report
(submitted by the Movants) explains that the Additional
Defendants sought clarification on a number of points
(including a clarification that the “measures that the
Trustee sought to implement in the United States went
beyond the scope of what had been authorized by the
Tribunal of Justice’s decision of December 18, 2018”), but
48a
Appendix D
that such request for clarification was denied. ECF 464,
¶¶ 19-20.
The Movants also argue that the Subpoenas are not
narrowly tailored to lead to the discovery of admissible
evidence. The information sought by the Subpoenas is not
limited to transactions with or relating to Transbrasil,
but rather the Subpoenas seek all banking records of the
Additional Defendants for a 20-year period. The Movants
assert that the breadth of the Subpoenas demonstrates
that they were served for the “improper purpose of
harassing [the Movants], creating burdensome discovery
proceedings in the United States, and to circumvent
the discovery orders and procedures of the [Brazilian]
Proceeding.” Id. at 9.
The Trustees assert the Subpoenas seek information
relevant to implement the Freeze Order and to fully
litigate the claims on which the Freeze Order is based.
The Subpoenas seek financial discovery dating back to
the time in which Transbrasil was operational in order
to investigate claims that the assets of Transbrasil were,
as the Brazilian Appellate Court stated, “siphoned off
by the bankrupt debtor [and] passed through offshore
companies, including dollar smugglers, before reaching
its final destination.” ECF 437. The Trustees justify
the breadth of the Subpoenas because of the complex
web of intermediaries that facilitated the scheme to
deplete Transbrasil’s assets. In addition, the Trustees
assert that the bank account information sought by the
Subpoenas is calculated to lead to information about assets
of the Additional Defendants which should be enjoined
49a
Appendix D
or attached under the Freeze Order. Specifically, the
Trustees assert that the records regarding the bank
accounts of the Additional Defendants are reasonably
calculated to lead to information regarding the purchase,
sale, transfer and use of assets which are in fact subject
to the Freeze Order.
It is uncontested that the Subpoenas are governed
by Rule 2004 and that procedural matters are governed
by the law of the forum. Thus, applying U.S. law, this
Court must decide whether, in an ancillary case where the
foreign court has found preliminary evidence that assets
were diverted from the bankrupt and has ordered assets
of third parties be frozen to preserve the status quo, the
financial affairs of such third parties are within the scope
of Rule 2004. The Court believes they are.
An examination under Rule 2004 may relate “to
any matter which may affect the administration of the
debtor’s estate.” Rule 2004 may be used for “discovering
assets, examining transactions, and determining whether
wrongdoing has occurred.” In re Strecker, 251 B.R.
878, 882 (Bankr. D.Colo. 2000) (citing In re Duratech
Indus., Inc., 241 B.R. 283, 289 (E.D.N.Y. 1999)). It is well
established that investigation of potential claims against
third parties is a proper use of discovery in an ancillary
case. See In re Hughes, 281 B.R. 224, 228 (Bankr. S.D.N.Y.
2002) (explaining that ancillary proceedings are “intended
to enable domestic courts to aid foreign courts, so as to
promote a more efficient and economic administration of
transnational insolvency proceedings” and finding that
investigating potential claims falls squarely within the
broad scope of permissible Rule 2004 discovery).
50a
Appendix D
With respect to pending claims against third parties
in a foreign adversary case, the case law developed
under 28 U.S.C. § 1782 provides a relevant framework for
discovery. “Section 1782 is analogous to seeking discovery
assistance under section 1521 and [] courts routinely
read the discovery provisions of section 1521 (or former
section 304) in concert with section 1782.” In re Platinum
Partners Value Arbitrage Fund L.P., 583 B.R. 803, 815
(Bankr. S.D.N.Y. 2018). The Supreme Court has identified
a number of discretionary factors that courts should
consider in ruling on a §1782 application: (1) whether the
person from whom discovery is sought is a participant
in the foreign proceeding; (2) the nature of the foreign
tribunal, the character of the proceeding underway
abroad, and the receptivity of the foreign court to U.S.
court assistance; (3) whether the application conceals
an attempt to circumvent foreign proof–gathering
restrictions of a foreign country; and (4) whether the
application is unduly intrusive or burdensome. Intel Corp.
v. Advanced Micro Devices, Inc., 542 U.S. 241, 264-65
(2004); see In re Clerici, 481 F. 3d 1324, 1334 (11th Cir.
2007) (reciting factors).
Applying the Intel analysis by analogy in a Chapter 15
context, the court in Platinum Partners determined that
the foreign court would not be offended by the evidence
the liquidator sought in the U.S., even if that type of
evidence would not be available if it were located in the
home country. 583 B.R. at 815. Judge Mark similarly
rebuffed a request for a protective order regarding
discovery in aid of a pending adversary proceeding in
Brazil, rejecting the argument that such discovery was
51a
Appendix D
duplicative and/or should first have been sought through
the Brazilian proceedings. See In re SAM Industrias S.A.,
Case No. 18-23941-BKC-RAM, (Bankr. S.D.Fla.), ECF 43
(Mar. 14, 2019), ECF 62 (April 11, 2019), ECF 73 (May 22,
2019), ECF 78 (June 14, 2019). Here, the evidence is being
sought from financial institutions in the U.S., who are not
parties to the adversarial proceeding pending in Brazil,
and the nature of the proceeding here and the history of
the proceedings, in general, indicate that the Brazilian
courts are receptive to U.S. court assistance.
Under the Intel analysis, the key question is not
whether the Freeze Order authorizes discovery of the
financial information of the Additional Defendants, but
whether seeking such information in the U.S. is an attempt
to circumvent a foreign proof-gathering restriction or
whether the Brazilian courts would be offended by the
evidence sought by the Trustees in the U.S. Considering
that similar financial discovery regarding the Additional
Defendants at Brazilian banks has been authorized by the
Brazilian Bankruptcy Court [ECF 466, pp. 57-58], this
Court believes that similar discovery from U.S. banks
would not be offensive to or prohibited by the Brazilian
courts. The Court rejects Movants contention that what
is not expressly authorized is implicitly prohibited. The
Freeze Order is akin to a preliminary injunction; it is not a
discovery order, and that is why the Brazilian Bankruptcy
Court has separately ordered financial discovery from
sources available within Brazil, first on July 25, 2018 and
second on June 14, 2019. See ECF 453; ECF 466, pp. 57-58.
52a
Appendix D
Moreover, the Trustees do not need permission or
approval from the Brazilian Bankruptcy Court for the
Subpoenas or for financial discovery relating to the
Additional Defendants. The Brazilian Bankruptcy Court
has stated that “there is no reason not to entertain the
measures related to the location and retrieval of assets”
in the Chapter 15 Case [Id. at 58, Item II.7]. This Court
therefore concludes that the Brazilian courts are receptive
to and are not offended by the production of information
relating to the Additional Defendants from financial
institutions in the U.S. Brazilian trial and appellate courts
have been given the opportunity to express disapproval
for the Subpoenas and have not done so.
The bank account records of the Additional Defendants
from the time period where the scheme was being carried
out (1997 to 2002) are relevant to the veil-piercing and
extension claims brought by the Trustees and may affect
the administration of the Transbrasil estate. Those records
may also show the involvement of other participants in
the scheme. The bank account records may reveal the
purchase, sale or use of assets that are currently held by
the Additional Defendants and which may be subject to
the Freeze Order. Although the Freeze Order does not
apply to the deposits held by such financial institutions, it
would apply to real property, aircraft and stocks held by
the Additional Defendants in the U.S.; and, because such
high-value assets may be purchased or maintained using a
bank account, discovery of the accounts of the Additional
Defendants may reveal such assets.
53a
Appendix D
Finally, Movants argue that it would not be appropriate
for this Court to grant comity to the Freeze Order.
However, the Brazilian Appellate Court points to
“concrete facts” of substantial assets that were siphoned
off of Transbrasil by insiders [ECF 437, p. 9] and concludes
that “if it cannot be said for certain that there was fraud,
there is circumstantial evidence suggesting so, pointing
to odd transactions corroborated by existing documents.”
Id. at 11. These findings, among others, of the Brazilian
Appellate Court, establish a nexus between the financial
affairs of the Additional Defendants and the assets of
Transbrasil, which have never been accounted for and
which appear to have been diverted for the benefit of
insiders. In light of the nuanced and intentionally opaque
manner in which Transbrasil’s assets were diverted and
its books and records were never turned over to the
Trustees, the broad financial discovery about individuals
and companies against whom the Freeze Order was
rendered is entirely appropriate.
The argument that the Subpoenas are unduly
burdensome misses the mark because the Subpoenas do
not require the Movants to do anything. See In re Cty of
Orange, 208 B.R. 117, 121 (Bankr. S.D.N.Y. 1997) (“The
mere assertion that a subpoena is burdensome, without
evidence to prove the claim, cannot form the basis for an
‘undue burden’ finding”). Accordingly, having given this
matter careful consideration, the Court concludes that the
discovery sought by the Subpoenas is neither harassing
nor otherwise improper. It is therefore
ORDRERED AND ADJUDGED that the Motion is
DENIED.
54a
Appendixof
E rehearing of
Appendix E — denial
the united states court of appeals
for the eleventh circuit,
filed september 2, 2021
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
No. 20-12238-BB
IN RE: TRANSBRASIL S.A. LINHAS AEREAS,
Debtor.
ESTATE OF OMAR FONTANA, DENILDA
PEREIRA FONTANA, ANTONIO CELSO
CIPRIANI, MARISE PEREIRA FONTANA
CIPRIANI, EMIDIO CIPRIANI, DEVOM
CONSULTORIA E PARTIPACOES LTDA,
Plaintiffs-Appellants,
versus
ACFB ADMINISTRACAO JUDICIAL LTDA,
as Trustees of Transbrasil
S.A. Linhas Areas,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of Florida
55a
Appendix E
BEFORE: MARTIN, ROSENBAUM, and LUCK, Circuit
Judges.
PER CURIAM:
The Petition for Panel Rehearing filed by Appellants is
DENIED.
56a
F statUTory
Appendix F —Appendix
relevant
provisions
11 U.S.C. § 362. Automatic stay
(a) Except as provided in subsection (b) of this section,
a petition filed under section 301, 302, or 303 of this title
[11 USCS § 301, 302, or 303], or an application filed under
section 5(a)(3) of the Securities Investor Protection Act of
1970 [15 USCS § 78eee(a)(3)], operates as a stay, applicable
to all entities, of—
(1) the commencement or continuation, including
the issuance or employment of process, of a judicial,
administrative, or other action or proceeding against
the debtor that was or could have been commenced
before the commencement of the case under this title,
or to recover a claim against the debtor that arose
before the commencement of the case under this title;
(2) the enforcement, against the debtor or against
property of the estate, of a judgment obtained before
the commencement of the case under this title;
(3) any act to obtain possession of property of the
estate or of property from the estate or to exercise
control over property of the estate;
(4) any act to create, perfect, or enforce any lien
against property of the estate;
(5) any act to create, perfect, or enforce against
property of the debtor any lien to the extent that
such lien secures a claim that arose before the
commencement of the case under this title;
57a
Appendix F
(6) any act to collect, assess, or recover a claim against
the debtor that arose before the commencement of the
case under this title;
(7) the setoff of any debt owing to the debtor that arose
before the commencement of the case under this title
against any claim against the debtor; and
(8) the commencement or continuation of a proceeding
before the United States Tax Court concerning a
tax liability of a debtor that is a corporation for a
taxable period the bankruptcy court may determine
or concerning the tax liability of a debtor who is an
individual for a taxable period ending before the date
of the order for relief under this title.
(b) The filing of a petition under section 301, 302, or 303 of
this title [11 USCS § 301, 302, or 303], or of an application
under section 5(a)(3) of the Securities Investor Protection
Act of 1970 [15 USCS § 78eee(a)(3)], does not operate as
a stay—
(1) under subsection (a) of this section, of the
commencement or continuation of a criminal action or
proceeding against the debtor;
(2) under subsection (a)—
(A) of the commencement or continuation of a civil
action or proceeding—
(i) for the establishment of paternity;
58a
Appendix F
(ii) for the establishment or modification of an
order for domestic support obligations;
(iii) concerning child custody or visitation;
(iv) for the dissolution of a marriage, except
to the extent that such proceeding seeks to
determine the division of property that is
property of the estate; or
(v) regarding domestic violence;
(B) of the collection of a domestic support obligation
from property that is not property of the estate;
(C) with respect to the withholding of income that
is property of the estate or property of the debtor
for payment of a domestic support obligation under
a judicial or administrative order or a statute;
(D) of the withholding, suspension, or restriction
of a driver’s license, a professional or occupational
license, or a recreational license, under State
law, as specified in section 466(a)(16) of the Social
Security Act [42 USCS § 666(a)(16)];
(E) of the reporting of overdue support owed by
a parent to any consumer reporting agency as
specified in section 466(a)(7) of the Social Security
Act [42 USCS § 666(a)(7)];
(F) of the interception of a tax refund, as specified
59a
Appendix F
in sections 464 and 466(a)(3) of the Social Security
Act [42 USCS §§ 664 and 666(a)(3)] or under an
analogous State law; or
(G) of the enforcement of a medical obligation, as
specified under title IV of the Social Security Act
[42 USCS §§ 601 et seq.];
(3) under subsection (a) of this section, of any act to
perfect, or to maintain or continue the perfection of,
an interest in property to the extent that the trustee’s
rights and powers are subject to such perfection under
section 546(b) of this title [11 USCS § 546(b)] or to the
extent that such act is accomplished within the period
provided under section 547(e)(2)(A) of this title [11
USCS § 547(e)(2)(A)];
(4) under paragraph (1), (2), (3), or (6) of subsection (a)
of this section, of the commencement or continuation
of an action or proceeding by a governmental unit
or any organization exercising authority under the
Convention on the Prohibition of the Development,
Production, Stockpiling and Use of Chemical Weapons
and on Their Destruction, opened for signature on
January 13, 1993, to enforce such governmental
unit’s or organization’s police and regulatory power,
including the enforcement of a judgment other than a
money judgment, obtained in an action or proceeding
by the governmental unit to enforce such governmental
unit’s or organization’s police or regulatory power;
(5) [Deleted]
60a
Appendix F
(6) under subsection (a) of this section, of the exercise
by a commodity broker, forward contract merchant,
stockbroker, financial institution, financial participant,
or securities clearing agency of any contractual right
(as defined in section 555 or 556 [11 USCS § 555 or
556]) under any security agreement or arrangement
or other credit enhancement forming a part of or
related to any commodity contract, forward contract
or securities contract, or of any contractual right (as
defined in section 555 or 556 [11 USCS § 555 or 556])
to offset or net out any termination value, payment
amount, or other transfer obligation arising under or
in connection with 1 or more such contracts, including
any master agreement for such contracts;
(7) under subsection (a) of this section, of the exercise
by a repo participant or financial participant of any
contractual right (as defined in section 559 [11 USCS §
559]) under any security agreement or arrangement or
other credit enhancement forming a part of or related
to any repurchase agreement, or of any contractual
right (as defined in section 559 [11 USCS § 559]) to
offset or net out any termination value, payment
amount, or other transfer obligation arising under or in
connection with 1 or more such agreements, including
any master agreement for such agreements;
(8) under subsection (a) of this section, of the
commencement of any action by the Secretary of
Housing and Urban Development to foreclose a
mortgage or deed of trust in any case in which the
mortgage or deed of trust held by the Secretary is
61a
Appendix F
insured or was formerly insured under the National
Housing Act and covers property, or combinations of
property, consisting of five or more living units;
(9) under subsection (a), of—
(A) an audit by a governmental unit to determine
tax liability;
(B) the issuance to the debtor by a governmental
unit of a notice of tax deficiency;
(C) a demand for tax returns; or
(D) the making of an assessment for any tax and
issuance of a notice and demand for payment of
such an assessment (but any tax lien that would
otherwise attach to property of the estate by
reason of such an assessment shall not take effect
unless such tax is a debt of the debtor that will not
be discharged in the case and such property or its
proceeds are transferred out of the estate to, or
otherwise revested in, the debtor).
(10) under subsection (a) of this section, of any act by
a lessor to the debtor under a lease of nonresidential
real property that has terminated by the expiration of
the stated term of the lease before the commencement
of or during a case under this title to obtain possession
of such property;
(11) under subsection (a) of this section, of the
62a
Appendix F
presentment of a negotiable instrument and the
giving of notice of and protesting dishonor of such an
instrument;
(12) under subsection (a) of this section, after the date
which is 90 days after the filing of such petition, of
the commencement or continuation, and conclusion
to the entry of final judgment, of an action which
involves a debtor subject to reorganization pursuant
to chapter 11 of this title and which was brought by
the Secretary of Transportation under section 31325
of title 46 (including distribution of any proceeds of
sale) to foreclose a preferred ship or fleet mortgage,
or a security interest in or relating to a vessel or
vessel under construction, held by the Secretary of
Transportation under chapter 537 of title 46 [46 USCS
§§ 53701 et seq.] or section 109(h) of title 49 [49 USCS
§ 109(h)], or under applicable State law;
(13) under subsection (a) of this section, after the date
which is 90 days after the filing of such petition, of the
commencement or continuation, and conclusion to the
entry of final judgment, of an action which involves a
debtor subject to reorganization pursuant to chapter
11 of this title and which was brought by the Secretary
of Commerce under section 31325 of title 46 (including
distribution of any proceeds of sale) to foreclose
a preferred ship or fleet mortgage in a vessel or a
mortgage, deed of trust, or other security interest in
a fishing facility held by the Secretary of Commerce
under chapter 537 of title 46 [46 USCS§§ 53701 et seq.];
63a
Appendix F
(14) under subsection (a) of this section, of any action
by an accrediting agency regarding the accreditation
status of the debtor as an educational institution;
(15) under subsection (a) of this section, of any action
by a State licensing body regarding the licensure of
the debtor as an educational institution;
(16) under subsection (a) of this section, of any action
by a guaranty agency, as defined in section 435(j) of
the Higher Education Act of 1965 [20 USCS § 1085(j)]
or the Secretary of Education regarding the eligibility
of the debtor to participate in programs authorized
under such Act;
(17) under subsection (a) of this section, of the exercise
by a swap participant or financial participant of any
contractual right (as defined in section 560 [11 USCS §
560]) under any security agreement or arrangement or
other credit enhancement forming a part of or related
to any swap agreement, or of any contractual right
(as defined in section 560 [11 USCS § 560]) to offset
or net out any termination value, payment amount, or
other transfer obligation arising under or in connection
with 1 or more such agreements, including any master
agreement for such agreements;
(18) under subsection (a) of the creation or perfection
of a statutory lien for an ad valorem property tax, or
a special tax or special assessment on real property
whether or not ad valorem, imposed by a governmental
unit, if such tax or assessment comes due after the date
of the filing of the petition;
64a
Appendix F
(19) under subsection (a), of withholding of income from
a debtor’s wages and collection of amounts withheld,
under the debtor’s agreement authorizing that
withholding and collection for the benefit of a pension,
profit-sharing, stock bonus, or other plan established
under section 401, 403, 408, 408A, 414, 457, or 501(c)
of the Internal Revenue Code of 1986 [26 USCS § 401,
403, 408, 408A, 414, 457, or 501(c)], that is sponsored by
the employer of the debtor, or an affiliate, successor,
or predecessor of such employer—
(A) to the extent that the amounts withheld and
collected are used solely for payments relating to
a loan from a plan under section 408(b)(1) of the
Employee Retirement Income Security Act of 1974
[29 USCS § 1108(b)(1)] or is subject to section 72(p)
of the Internal Revenue Code of 1986 [26 USCS §
72(p)]; or
(B) a loan from a thrift savings plan permitted
under subchapter III of chapter 84 of title 5 [5 USCS
§§ 8431 et seq,], that satisfies the requirements of
section 8433(g) of such title [5 USCS § 8433(g)];
but nothing in this paragraph may be construed to
provide that any loan made under a governmental
plan under section 414(d) [26 USCS § 414(d)], or a
contract or account under section 403(b) [26 USCS
§ 403(b)], of the Internal Revenue Code of 1986
constitutes a claim or a debt under this title;
65a
Appendix F
(20) under subsection (a), of any act to enforce any lien
against or security interest in real property following
entry of the order under subsection (d)(4) as to such
real property in any prior case under this title, for a
period of 2 years after the date of the entry of such
an order, except that the debtor, in a subsequent case
under this title, may move for relief from such order
based upon changed circumstances or for other good
cause shown, after notice and a hearing;
(21) under subsection (a), of any act to enforce any lien
against or security interest in real property—
(A) if the debtor is ineligible under section 109(g)
to be a debtor in a case under this title; or
(B) if the case under this title was filed in violation
of a bankruptcy court order in a prior case under
this title prohibiting the debtor from being a debtor
in another case under this title;
(22) subject to subsection (l), under subsection (a)(3),
of the continuation of any eviction, unlawful detainer
action, or similar proceeding by a lessor against a
debtor involving residential property in which the
debtor resides as a tenant under a lease or rental
agreement and with respect to which the lessor has
obtained before the date of the filing of the bankruptcy
petition, a judgment for possession of such property
against the debtor;
66a
Appendix F
(23) subject to subsection (m), under subsection
(a)(3), of an eviction action that seeks possession of
the residential property in which the debtor resides
as a tenant under a lease or rental agreement based
on endangerment of such property or the illegal use of
controlled substances on such property, but only if the
lessor files with the court, and serves upon the debtor,
a certification under penalty of perjury that such an
eviction action has been filed, or that the debtor, during
the 30-day period preceding the date of the filing of
the certification, has endangered property or illegally
used or allowed to be used a controlled substance on
the property;
(24) under subsection (a), of any transfer that is not
avoidable under section 544 [11 USCS § 544] and that
is not avoidable under section 549 [11 USCS § 549];
(25) under subsection (a), of—
(A) the commencement or continuation of an
investigation or action by a securities self regulatory
organization to enforce such organization’s
regulatory power;
(B) the enforcement of an order or decision, other
than for monetary sanctions, obtained in an action
by such securities self regulatory organization to
enforce such organization’s regulatory power; or
(C) any act taken by such securities self regulatory
organization to delist, delete, or refuse to permit
67a
Appendix F
quotation of any stock that does not meet applicable
regulatory requirements;
(26) under subsection (a), of the setoff under applicable
nonbankruptcy law of an income tax refund, by a
governmental unit, with respect to a taxable period
that ended before the date of the order for relief
against an income tax liability for a taxable period
that also ended before the date of the order for relief,
except that in any case in which the setoff of an
income tax refund is not permitted under applicable
nonbankruptcy law because of a pending action to
determine the amount or legality of a tax liability, the
governmental unit may hold the refund pending the
resolution of the action, unless the court, on the motion
of the trustee and after notice and a hearing, grants
the taxing authority adequate protection (within the
meaning of section 361 [11 USCS § 361]) for the secured
claim of such authority in the setoff under section
506(a) [11 USCS § 506(a)];
(27) under subsection (a) of this section, of the exercise
by a master netting agreement participant of any
contractual right (as defined in section 555, 556, 559,
or 560 [11 USCS § 555, 556, 559, or 560]) under any
security agreement or arrangement or other credit
enhancement forming a part of or related to any
master netting agreement, or of any contractual
right (as defined in section 555, 556, 559, or 560 [11
USCS § 555, 556, 559, or 560]) to offset or net out any
termination value, payment amount, or other transfer
obligation arising under or in connection with 1 or more
68a
Appendix F
such master netting agreements to the extent that such
participant is eligible to exercise such rights under
paragraph (6), (7), or (17) for each individual contract
covered by the master netting agreement in issue;
(28) under subsection (a), of the exclusion by the
Secretary of Health and Human Services of the debtor
from participation in the medicare program or any
other Federal health care program (as defined in
section 1128B(f) of the Social Security Act [42 USCS §
1320a-7b(f)] pursuant to title XI or XVIII of such Act
[42 USCS §§ 1301 et seq. or 1395 et seq.]); and
(29) under subsection (a)(1) of this section, of any
action by—
(A) an amateur sports organization, as defined in
section 220501(b) of title 36 [36 USCS § 220501(b)],
to replace a national governing body, as defined in
that section, under section 220528 of that title [36
USCS § 220528]; or
(B) the corporation, as defined in section 220501(b)
of title 36 [36 USCS § 220501(b)], to revoke the
certification of a national governing body, as
defined in that section, under section 220521 of that
title [36 USCS § 220521].
The provisions of paragraphs (12) and (13) of this
subsection shall apply with respect to any such
petition filed on or before December 31, 1989.
69a
Appendix F
(c) Except as provided in subsections (d), (e), (f), and (h)
of this section—
(1) the stay of an act against property of the estate
under subsection (a) of this section continues until such
property is no longer property of the estate;
(2) the stay of any other act under subsection (a) of this
section continues until the earliest of—
(A) the time the case is closed;
(B) the time the case is dismissed; or
(C) if the case is a case under chapter 7 of this title
[11 USCS §§ 701 et seq.] concerning an individual
or a case under chapter 9, 11, 12, or 13 of this title
[11 USCS §§ 901 et seq., 1101 et seq., 1201 et seq.,
or 1301 et seq.], the time a discharge is granted or
denied;
(3) if a single or joint case is filed by or against a debtor
who is an individual in a case under chapter 7, 11, or 13
[11 USCS §§ 701 et seq., 1101 et seq., or 1301 et seq.],
and if a single or joint case of the debtor was pending
within the preceding 1-year period but was dismissed,
other than a case refiled under a chapter other than
chapter 7 after dismissal under section 707(b) [11
USCS § 707(b)]—
(A) the stay under subsection (a) with respect to
any action taken with respect to a debt or property
70a
Appendix F
securing such debt or with respect to any lease
shall terminate with respect to the debtor on the
30th day after the filing of the later case;
(B) on the motion of a party in interest for
continuation of the automatic stay and upon notice
and a hearing, the court may extend the stay in
particular cases as to any or all creditors (subject
to such conditions or limitations as the court may
then impose) after notice and a hearing completed
before the expiration of the 30-day period only if
the party in interest demonstrates that the filing
of the later case is in good faith as to the creditors
to be stayed; and
(C) for purposes of subparagraph (B), a case is
presumptively filed not in good faith (but such
presumption may be rebutted by clear and
convincing evidence to the contrary)—
(i) as to all creditors, if—
(I) more than 1 previous case under any of
chapters 7, 11, and 13 [11 USCS §§ 701 et
seq., 1101 et seq., and 1301 et seq.] in which
the individual was a debtor was pending
within the preceding 1-year period;
(II) a previous case under any of chapters 7,
11, and 13 [11 USCS §§ 701 et seq., 1101 et
seq., and 1301 et seq.] in which the individual
was a debtor was dismissed within such
71a
Appendix F
1-year period, after the debtor failed to—
(aa) file or amend the petition or other
documents as required by this title
[11 USCS §§ 101 et seq.] or the court
without substantial excuse (but mere
inadvertence or negligence shall not be
a substantial excuse unless the dismissal
was caused by the negligence of the
debtor’s attorney);
(bb) provide adequate protection as
ordered by the court; or
(cc) per for m the ter ms of a plan
confirmed by the court; or
(III) there has not been a substantial change
in the financial or personal affairs of the
debtor since the dismissal of the next most
previous case under chapter 7, 11, or 13 [11
USCS §§ 701 et seq., 1101 et seq., or 1301
et seq.] or any other reason to conclude that
the later case will be concluded—
(aa) if a case under chapter 7 [11 USCS
§§ 701 et seq.], with a discharge; or
(bb) if a case under chapter 11 or 13 [11
USCS §§ 1101 et seq. or 1301 et seq.],
with a confirmed plan that will be fully
performed; and
72a
Appendix F
(ii) as to any creditor that commenced an action
under subsection (d) in a previous case in which
the individual was a debtor if, as of the date
of dismissal of such case, that action was still
pending or had been resolved by terminating,
conditioning, or limiting the stay as to actions
of such creditor; and
(4)(A)(i) if a single or joint case is filed by or against a
debtor who is an individual under this title, and if 2 or
more single or joint cases of the debtor were pending
within the previous year but were dismissed, other
than a case refiled under a chapter other than chapter
7 after dismissal under section 707(b) [11 USCS §
707(b)], the stay under subsection (a) shall not go into
effect upon the filing of the later case; and
(ii) on request of a party in interest, the court
shall promptly enter an order confirming that
no stay is in effect;
(B) if, within 30 days after the filing of the later
case, a party in interest requests the court may
order the stay to take effect in the case as to
any or all creditors (subject to such conditions
or limitations as the court may impose), after
notice and a hearing, only if the party in interest
demonstrates that the filing of the later case is in
good faith as to the creditors to be stayed;
(C) a stay imposed under subparagraph (B) shall
be effective on the date of the entry of the order
allowing the stay to go into effect; and
73a
Appendix F
(D) for purposes of subparagraph (B), a case is
presumptively filed not in good faith (but such
presumption may be rebutted by clear and
convincing evidence to the contrary)—
(i) as to all creditors if—
(I) 2 or more previous cases under this title
in which the individual was a debtor were
pending within the 1-year period;
(II) a previous case under this title in which
the individual was a debtor was dismissed
w ithin the time period stated in this
paragraph after the debtor failed to file or
amend the petition or other documents as
required by this title or the court without
substantial excuse (but mere inadvertence
or negligence shall not be substantial excuse
unless the dismissal was caused by the
negligence of the debtor’s attorney), failed
to provide adequate protection as ordered
by the court, or failed to perform the terms
of a plan confirmed by the court; or
(III) there has not been a substantial change
in the financial or personal affairs of the
debtor since the dismissal of the next most
previous case under this title, or any other
reason to conclude that the later case will
not be concluded, if a case under chapter 7
[11 USCS §§ 701 et seq.], with a discharge,
74a
Appendix F
and if a case under chapter 11 or 13 [11
USCS §§ 1101 et seq. or 1301 et seq.], with a
confirmed plan that will be fully performed;
or
(ii) as to any creditor that commenced an action
under subsection (d) in a previous case in which
the individual was a debtor if, as of the date
of dismissal of such case, such action was still
pending or had been resolved by terminating,
conditioning, or limiting the stay as to such
action of such creditor.
(d) On request of a party in interest and after notice and a
hearing, the court shall grant relief from the stay provided
under subsection (a) of this section, such as by terminating,
annulling, modifying, or conditioning such stay—
(1) for cause, including the lack of adequate protection
of an interest in property of such party in interest;
(2) with respect to a stay of an act against property
under subsection (a) of this section, if—
(A) the debtor does not have an equity in such
property; and
(B) such property is not necessary to an effective
reorganization;
(3) with respect to a stay of an act against single
asset real estate under subsection (a), by a creditor
75a
Appendix F
whose claim is secured by an interest in such real
estate, unless, not later than the date that is 90 days
after the entry of the order for relief (or such later
date as the court may determine for cause by order
entered within that 90-day period) or 30 days after
the court determines that the debtor is subject to this
paragraph, whichever is later—
(A) the debtor has filed a plan of reorganization
that has a reasonable possibility of being confirmed
within a reasonable time; or
(B) the debtor has commenced monthly payments
that—
(i) may, in the debtor’s sole discretion,
notwithstanding section 363(c)(2) [11 USCS
§ 363(c)(2)], be made from rents or other
income generated before, on, or after the date
of the commencement of the case by or from
the property to each creditor whose claim is
secured by such real estate (other than a claim
secured by a judgment lien or by an unmatured
statutory lien); and
(ii) are in an amount equal to interest at the
then applicable nondefault contract rate of
interest on the value of the creditor’s interest
in the real estate; or
(4) with respect to a stay of an act against real property
under subsection (a), by a creditor whose claim is
76a
Appendix F
secured by an interest in such real property, if the
court finds that the filing of the petition was part of
a scheme to delay, hinder, or defraud creditors that
involved either—
(A) transfer of all or part ownership of, or other
interest in, such real property without the consent
of the secured creditor or court approval; or
(B) multiple bankruptcy filings affecting such real
property.
If recorded in compliance with applicable State laws
governing notices of interests or liens in real property,
an order entered under paragraph (4) shall be binding
in any other case under this title purporting to affect
such real property filed not later than 2 years after
the date of the entry of such order by the court,
except that a debtor in a subsequent case under this
title may move for relief from such order based upon
changed circumstances or for good cause shown, after
notice and a hearing. Any Federal, State, or local
governmental unit that accepts notices of interests or
liens in real property shall accept any certified copy
of an order described in this subsection for indexing
and recording.
(e)(1) Thirty days after a request under subsection (d)
of this section for relief from the stay of any act against
property of the estate under subsection (a) of this section,
such stay is terminated with respect to the party in
interest making such request, unless the court, after
77a
Appendix F
notice and a hearing, orders such stay continued in effect
pending the conclusion of, or as a result of, a final hearing
and determination under subsection (d) of this section.
A hearing under this subsection may be a preliminary
hearing, or may be consolidated with the final hearing
under subsection (d) of this section. The court shall order
such stay continued in effect pending the conclusion of
the final hearing under subsection (d) of this section if
there is a reasonable likelihood that the party opposing
relief from such stay will prevail at the conclusion of
such final hearing. If the hearing under this subsection
is a preliminary hearing, then such final hearing shall be
concluded not later than thirty days after the conclusion
of such preliminary hearing, unless the 30-day period is
extended with the consent of the parties in interest or
for a specific time which the court finds is required by
compelling circumstances.
(2) Notwithstanding paragraph (1), in a case under
chapter 7, 11, or 13 [11 USCS §§ 701 et seq., 1101 et seq.,
or 1301 et seq.] in which the debtor is an individual, the
stay under subsection (a) shall terminate on the date
that is 60 days after a request is made by a party in
interest under subsection (d), unless—
(A) a final decision is rendered by the court during
the 60-day period beginning on the date of the
request; or
(B) such 60-day period is extended—
(i) by agreement of all parties in interest; or
78a
Appendix F
(ii) by the court for such specific period of time
as the court finds is required for good cause, as
described in findings made by the court.
(f) Upon request of a party in interest, the court, with
or without a hearing, shall grant such relief from the
stay provided under subsection (a) of this section as is
necessary to prevent irreparable damage to the interest
of an entity in property, if such interest will suffer such
damage before there is an opportunity for notice and a
hearing under subsection (d) or (e) of this section.
(g) In any hearing under subsection (d) or (e) of this section
concerning relief from the stay of any act under subsection
(a) of this section—
(1) the party requesting such relief has the burden of
proof on the issue of the debtor’s equity in property;
and
(2) the party opposing such relief has the burden of
proof on all other issues.
(h)(1) In a case in which the debtor is an individual, the
stay provided by subsection (a) is terminated with respect
to personal property of the estate or of the debtor securing
in whole or in part a claim, or subject to an unexpired lease,
and such personal property shall no longer be property
of the estate if the debtor fails within the applicable time
set by section 521(a)(2) [11 USCS § 521(a)(2)]—
79a
Appendix F
(A) to file timely any statement of intention
required under section 521(a)(2) [11 USCS § 521(a)
(2)] with respect to such personal property or to
indicate in such statement that the debtor will
either surrender such personal property or retain
it and, if retaining such personal property, either
redeem such personal property pursuant to section
722 [11 USCS § 722], enter into an agreement of the
kind specified in section 524(c) [11 USCS § 524(c)]
applicable to the debt secured by such personal
property, or assume such unexpired lease pursuant
to section 365(p) [11 USCS § 365(p)] if the trustee
does not do so, as applicable; and
(B) to take timely the action specified in such
statement, as it may be amended before expiration
of the period for taking action, unless such statement
specifies the debtor’s intention to reaffirm such
debt on the original contract terms and the creditor
refuses to agree to the reaffirmation on such terms.
(2) Paragraph (1) does not apply if the court determines,
on the motion of the trustee filed before the expiration
of the applicable time set by section 521(a)(2) [11 USCS §
521(a)(2)], after notice and a hearing, that such personal
property is of consequential value or benefit to the
estate, and orders appropriate adequate protection of
the creditor’s interest, and orders the debtor to deliver
any collateral in the debtor’s possession to the trustee.
If the court does not so determine, the stay provided
by subsection (a) shall terminate upon the conclusion
of the hearing on the motion.
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(i) If a case commenced under chapter 7, 11, or 13 [11 USCS
§§ 701 et seq., 1101 et seq., or 1301 et seq.] is dismissed due
to the creation of a debt repayment plan, for purposes of
subsection (c)(3), any subsequent case commenced by the
debtor under any such chapter shall not be presumed to
be filed not in good faith.
(j) On request of a party in interest, the court shall
issue an order under subsection (c) confirming that the
automatic stay has been terminated.
(k)(1) Except as provided in paragraph (2), an individual
injured by any willful violation of a stay provided by this
section shall recover actual damages, including costs and
attorneys’ fees, and, in appropriate circumstances, may
recover punitive damages.
(2) If such violation is based on an action taken by
an entity in the good faith belief that subsection (h)
applies to the debtor, the recovery under paragraph (1)
of this subsection against such entity shall be limited
to actual damages.
(l)(1) Except as otherwise provided in this subsection,
subsection (b)(22) shall apply on the date that is 30 days
after the date on which the bankruptcy petition is filed,
if the debtor files with the petition and serves upon the
lessor a certification under penalty of perjury that—
(A) under nonbankruptcy law applicable in the
jurisdiction, there are circumstances under which
the debtor would be permitted to cure the entire
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Appendix F
monetary default that gave rise to the judgment
for possession, after that judgment for possession
was entered; and
(B) the debtor (or an adult dependent of the debtor)
has deposited with the clerk of the court, any rent
that would become due during the 30-day period
after the filing of the bankruptcy petition.
(2) If, within the 30-day period after the filing of the
bankruptcy petition, the debtor (or an adult dependent
of the debtor) complies with paragraph (1) and files
with the court and serves upon the lessor a further
certification under penalty of perjury that the debtor
(or an adult dependent of the debtor) has cured, under
nonbankruptcy law applicable in the jurisdiction, the
entire monetary default that gave rise to the judgment
under which possession is sought by the lessor,
subsection (b)(22) shall not apply, unless ordered to
apply by the court under paragraph (3).
(3)(A) If the lessor files an objection to any certification
filed by the debtor under paragraph (1) or (2), and
serves such objection upon the debtor, the court
shall hold a hearing within 10 days after the filing
and service of such objection to determine if the
certification filed by the debtor under paragraph (1)
or (2) is true.
(B) If the court upholds the objection of the lessor
filed under subparagraph (A)—
(i) subsection (b)(22) shall apply immediately
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Appendix F
and relief from the stay provided under
subsection (a)(3) shall not be required to enable
the lessor to complete the process to recover
full possession of the property; and
(ii) the clerk of the court shall immediately
serve upon the lessor and the debtor a certified
copy of the court’s order upholding the lessor’s
objection.
(4) If a debtor, in accordance with paragraph (5),
indicates on the petition that there was a judgment for
possession of the residential rental property in which
the debtor resides and does not file a certification under
paragraph (1) or (2)—
(A) subsection (b)(22) shall apply immediately upon
failure to file such certification, and relief from
the stay provided under subsection (a)(3) shall not
be required to enable the lessor to complete the
process to recover full possession of the property;
and
(B) the clerk of the court shall immediately serve
upon the lessor and the debtor a certified copy
of the docket indicating the absence of a filed
certification and the applicability of the exception
to the stay under subsection (b)(22).
(5)(A) Where a judgment for possession of residential
property in which the debtor resides as a tenant under
a lease or rental agreement has been obtained by the
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Appendix F
lessor, the debtor shall so indicate on the bankruptcy
petition and shall provide the name and address of
the lessor that obtained that pre-petition judgment on
the petition and on any certification filed under this
subsection.
(B) The form of certification filed with the petition,
as specified in this subsection, shall provide for the
debtor to certify, and the debtor shall certify—
(i) whether a judgment for possession of
residential rental housing in which the debtor
resides has been obtained against the debtor
before the date of the filing of the petition; and
(ii) whether the debtor is claiming under
paragraph (1) that under nonbankruptcy
law applicable in the jurisdiction, there are
circumstances under which the debtor would be
permitted to cure the entire monetary default
that gave rise to the judgment for possession,
after that judgment of possession was entered,
and has made the appropriate deposit with the
court.
(C) The standard forms (electronic and otherwise)
used in a bankruptcy proceeding shall be amended
to reflect the requirements of this subsection.
(D) The clerk of the court shall arrange for
the prompt transmittal of the rent deposited in
accordance with paragraph (1)(B) to the lessor.
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Appendix F
(m)(1) Except as otherwise provided in this subsection,
subsection (b)(23) shall apply on the date that is 15 days
after the date on which the lessor files and serves a
certification described in subsection (b)(23).
(2)(A) If the debtor files with the court an objection
to the truth or legal sufficiency of the certification
described in subsection (b)(23) and serves such
objection upon the lessor, subsection (b)(23) shall not
apply, unless ordered to apply by the court under this
subsection.
(B) If the debtor files and serves the objection
under subparagraph (A), the court shall hold a
hearing within 10 days after the filing and service
of such objection to determine if the situation giving
rise to the lessor’s certification under paragraph
(1) existed or has been remedied.
(C) If the debtor can demonstrate to the satisfaction
of the court that the situation giving rise to the
lessor’s certification under paragraph (1) did not
exist or has been remedied, the stay provided under
subsection (a)(3) shall remain in effect until the
termination of the stay under this section.
(D) If the debtor cannot demonstrate to the
satisfaction of the court that the situation giving
rise to the lessor’s certification under paragraph
(1) did not exist or has been remedied—
(i) relief from the stay provided under subsection
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Appendix F
(a)(3) shall not be required to enable the lessor
to proceed with the eviction; and
(ii) the clerk of the court shall immediately
serve upon the lessor and the debtor a certified
copy of the court’s order upholding the lessor’s
certification.
(3) If the debtor fails to file, within 15 days, an objection
under paragraph (2)(A)—
(A) subsection (b)(23) shall apply immediately upon
such failure and relief from the stay provided under
subsection (a)(3) shall not be required to enable
the lessor to complete the process to recover full
possession of the property; and
(B) the clerk of the court shall immediately serve
upon the lessor and the debtor a certified copy of
the docket indicating such failure.
(n)(1) Except as provided in paragraph (2), subsection (a)
does not apply in a case in which the debtor—
(A) is a debtor in a small business case pending at
the time the petition is filed;
(B) was a debtor in a small business case that was
dismissed for any reason by an order that became
final in the 2-year period ending on the date of the
order for relief entered with respect to the petition;
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Appendix F
(C) was a debtor in a small business case in which a
plan was confirmed in the 2-year period ending on
the date of the order for relief entered with respect
to the petition; or
(D) is an entity that has acquired substantially all
of the assets or business of a small business debtor
described in subparagraph (A), (B), or (C), unless
such entity establishes by a preponderance of the
evidence that such entity acquired substantially
all of the assets or business of such small business
debtor in good faith and not for the purpose of
evading this paragraph.
(2) Paragraph (1) does not apply—
(A) to an involuntary case involving no collusion by
the debtor with creditors; or
(B) to the filing of a petition if—
(i) the debtor proves by a preponderance of the
evidence that the filing of the petition resulted
from circumstances beyond the control of the
debtor not foreseeable at the time the case then
pending was filed; and
(ii) it is more likely than not that the court will
confirm a feasible plan, but not a liquidating
plan, within a reasonable period of time.
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Appendix F
(o) The exercise of rights not subject to the stay arising
under subsection (a) pursuant to paragraph (6), (7), (17),
or (27) of subsection (b) shall not be stayed b
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