Foreign Debtors' Forum Shopping Warranted Stay Of U.S. Avoidance Litigation

Even if a U.S. court has jurisdiction over a lawsuit involving foreign litigants, the court may conclude that a foreign court is better suited to adjudicate the dispute because either: (i) it would be more convenient, fair, or efficient for the foreign court to do so (a doctrine referred to as "forum non conveniens"); or (ii) the U.S. court concludes that it should defer to the foreign court as a matter of international comity. Both of these doctrines were addressed in a ruling recently handed down by the U.S. Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). In In re National Bank of Anguilla (Private Banking Trust) Ltd., 580 B.R. 64 (Bankr. S.D.N.Y. 2018), the court, on grounds of forum non conveniens and comity, stayed litigation commenced in a chapter 11 case by two Anguillan banks to avoid fraudulent transfers in deference to the banks' Anguillan administration proceedings and litigation pending in an Anguilla court involving the same issues. The court concluded that the debtors, whose Anguillan administrations it had previously recognized under chapter 15, had engaged in forum shopping by filing the avoidance litigation in the U.S. after: (i) commencing chapter 11 cases for that purpose; and (ii) commencing litigation in Anguilla with the same parties regarding the same transactions and nucleus of facts.

Forum Non Conveniens

The doctrine of forum non conveniens permits a court to dismiss litigation even if the court is a proper venue with jurisdiction over the claims asserted. Application of the doctrine to dismiss a case is committed to a court's broad discretion, which may be deployed "when considerations of convenience, fairness, and judicial economy so warrant." Magi XXI, Inc. v. Sato della Citta del Vaticano, 714 F.3d 714, 729 n.6 (2d Cir. 2013).

Courts in the Second Circuit apply a three-step process to determine whether an action should be dismissed under the doctrine. The court must: (i) determine the degree of deference to give the plaintiff's choice of forum; (ii) determine whether an adequate alternative forum exists; and (iii) balance the private interests of the parties in pursuing litigation in the competing forums against any public interests at stake. See Iragorri v. United Techs. Corp., 274 F.3d 65, 73-74 (2d Cir. 2001).

A plaintiff's choice of forum is presumed to be adequate, and the defendant bears a heavy burden in seeking to have a case dismissed on the ground of forum non conveniens.

A court will accord less deference to a plaintiff's choice of forum if it appears that the selection was motivated by forum shopping, because it "is much less reasonable to presume that the choice was made for convenience." Id. at 71. Other factors that courts consider in determining the degree of deference include: (i) the convenience of the plaintiff's residence in relation to the chosen forum; (ii) the proximity of the chosen forum to witnesses or evidence; (iii) the defendant's amenability to suit in the chosen forum; (iv) the availability of suitable legal assistance; and (v) other matters pertaining to convenience or expense. Id. at 72.

Comity

A court may also choose not to exercise jurisdiction on the basis of principles of international comity. "Comity" is "the recognition which one nation allows within its territory to the legislative, executive or judicial...

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