Monday, August 28, 2006

Comity Dictates that Claim Determination in Foreign Court Should Operate as Res Judicata in U.S. Bankruptcy Court, Rules S.D.N.Y

Per In re Aerovias Nacionales De Colonbia S.A. Avianca, 345 B.R. 120 (Bkrtcy. S.D.N.Y. July 12, 2006):

A claim determination by a non-bankruptcy court in the United States would seemingly be conclusive as to the issues determined, for bankruptcy purposes, based on res judicata or collateral estoppel grounds. See Kelleran v. Andrijevic, 825 F.2d 692 (2d Cir.1987). A similar result should ordinarily apply to the determinations of foreign courts by virtue of principles of comity. Hilton v. Guyot, 159 U.S. 113, 163-64, 16 S.Ct. 139, 40 L.Ed. 95 (1895), sets out the classic definition of comity: "Comity," in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.

United States courts will ordinarily defer to foreign proceedings so long as "the foreign court had proper jurisdiction and enforcement does not prejudice the rights of United States citizens or violate domestic public policy." Finanz AG Zurich v. Banco Economico S.A., 192 F.3d 240, 246 (2d Cir.1999), quoting Victrix S.S. Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709, 713 (2d Cir.1987); see also International Transactions Ltd. v. Embotelladora Agral Regiomontana, 347 F.3d 589, 594 (5th Cir.2003) (to obtain recognition, foreign procedures must provide "a system compatible with the requirements of due process of law"); In re Hackett, 184 B.R. 656, 658 (Bankr.S.D.N.Y.1995); In re Gee, 53 B.R. 891, 901 (Bankr.S.D.N.Y.1985).

U.S. courts have frequently granted comity in cases involving foreign insolvency proceedings. See, e.g., Ecoban Fin. Ltd. v. Grupo Acerero del Norte, S.A. de C.V., 108 F.Supp.2d 349, 352-53 (S.D.N.Y.2000), aff'd, 2 Fed.Appx. 80 (2d Cir.2001), cert. denied, 534 U.S. 814, 122 S.Ct. 39, 151 L.Ed.2d 12 (2001); Finanz AG Zurich v. Banco Economico S.A., 192 F.3d at 246; Cunard S.S. Co. v. Salen Reefer Servs. AB (In re Cunard), 773 F.2d 452, 457 (2d Cir.1985). They have also granted comity to foreign proceedings in determining issues arising in a Chapter 11 case where the underlying conduct took place abroad. In Maxwell Communication Corp., the dispute involved alleged preferential transfers, and the Second Circuit concluded that England had a "much closer connection to these disputes than does the United States," that England had a greater interest in the application of its rule of law, that the U.S. bankruptcy court should forbear from applying its own laws, and that comity should be granted to the English proceedings. 93 F.3d at 1051-53. As noted above, the Court, in particular, rejected the contention that U.S. law should apply automatically. Id. at 1049.The same reasoning leads to the conclusion that Colombian law and the determinations of the Colombian courts should, in principle, govern the determination of these Colombian labor claims.


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