JOAN N. FEENEY, Bankruptcy Judge.
The matter before the Court is the "Motion for an Order Pursuant to 11 U.S.C. §§ 1521(a)(5) and 1521(b) Directing the Turnover of All Assets of the Debtors Located in the United States to the Foreign Representatives" (the "Turnover Motion") filed by John Robert Lees ("Mr. Lees") and Mat Ng (collectively, the "Foreign Representatives"). Raymond Cho-Min Lee ("Raymond Lee") and Priscilla Hwang Lee ("Priscilla Lee") (jointly, the "Foreign Debtors") filed an Objection to the Turnover Motion. Additionally, Oasis Development Enterprises, Inc. ("ODE") and East-West Enterprises Co., Ltd. ("EWE"), and their affiliates (collectively, the "US Companies") filed an Opposition to the Turnover Motion. The Court conducted a trial with respect to the Turnover Motion on February 6, 2012. Prior to the commencement of the trial, the parties narrowed the disputed issues about the turnover of assets sought by the Foreign Representatives. The only remaining dispute among the parties concerns whether the Foreign Representatives are entitled to the turnover of the Foreign Debtors' equity interests in the U.S. Companies.
At the trial, two witnesses, Mr. Lees and Jodie S. Garzon ("Ms. Garzon"), Senior Vice President of Finance and Controller of Oasis Consulting, Inc. ("OCI"), testified and 43 exhibits were admitted into evidence. At the conclusion of the trial, the Court directed the parties to file supplemental briefs.
The salient legal issues presented are 1) whether the Foreign Representatives are entitled to the turnover of the Foreign Debtors' equity interests in the U.S. Companies; and 2) whether "the interests of the creditors and other interested entities, including the debtor," will be "sufficiently protected," if the Turnover Motion is granted and economic control of the Foreign Debtors' equity interests passes to the Foreign Representatives and, if not, whether the Turnover Motion should be denied. See 11 U.S.C. § 1522(a). Subsidiary issues, which are unresolved by existing case law, include who has, and what is, the burden of proof relative to whether the interests of the creditors and other interested entities, including the debtor, are sufficiently protected under applicable provisions of Chapter 15 of the Bankruptcy Code.
Most of the material facts necessary to decide the issues are not in contention. Rather, the ramifications of the "turnover" of the Foreign Debtors' equity interests to the Foreign Representatives are vigorously contested, although neither the Foreign Debtors nor the U.S. Companies disagree that the Foreign Representatives have "stepped into the shoes" of the Foreign Debtors with respect to their equity interests in the U.S. Companies pursuant to Hong Kong law. In short, the Foreign Debtors and the U.S. Companies maintain that allowance of the Turnover Motion will trigger defaults under various mortgages encumbering properties owned by entities in which the Foreign Debtors have direct or indirect equity interests and expose Raymond Lee to huge potential liabilities
Through their Turnover Motion, the Foreign Representatives seek an order pursuant to 11 U.S.C. §§ 1521(a)(5) and 1521(b) directing the turnover of all assets of the Foreign Debtors located in the United States. As noted above, the parties resolved their disputes as to the assets of the Foreign Debtors in the United States except for the equity interests in the U.S. Companies. With respect to the equity interests, the Foreign Representatives stated the following in their Turnover Motion:
On November 24, 2009, the Foreign Representatives filed a "Verified Petition Seeking Entry of Order Recognizing Foreign Main Proceeding Pursuant to 11 U.S.C. §§ 1515 and 1517 and Relief Pursuant to 11 U.S.C. §§ 1520 and 1521" of the Bankruptcy Code against the Foreign Debtors. At the time the Foreign Representatives filed their petitions, the Foreign Debtors had been adjudged bankrupts on August 31, 2009 following the filing of petitions in the High Court of the Hong Kong Special Administrative Region Court of First Instance on April 28, 2009 and May 27, 2009. The Hong Kong petitions were filed by Value Partners Strategic Equity Fund ("Value Partners") and Winchesto Finance Company Limited ("Winchesto"), entities to whom the Foreign Debtors owed substantial sums relating to the failure of Oasis Hong Kong Airlines Limited, a low-cost, long-haul airline founded by the Foreign Debtors in 2005. The liquidated debt of the Foreign Debtors in the Hong Kong proceedings is approximately $33 million, excluding significant contingent debt owed to the Bank of China.
At the time they were adjudged bankrupts in Hong Kong, the Foreign Debtors held significant property interests in the United States. For purposes of the present dispute, the Debtors have direct and indirect ownership interests in over 20 properties through their ownership interests in tiers of corporations, limited liability companies, and single-asset, special purpose entities. The Debtors' ownership interests are undisputed.
OCI also is a Massachusetts corporation. It provides employees and human resources, accounting, and other services to ODE, which has no employees of its own. OCI employs 10 people, most of whom work in its offices in Lynn, Massachusetts. Raymond Lee is OCI's President, and both Foreign Debtors serve as directors.
The Foreign Debtors collectively own 71.4% of the shares of ODE, as well as 71.4% of the shares of OCI. Raymond Lee owns 38.1% of each company; Priscilla Lee owns 33.3%.
As noted above, the Oasis Group's portfolio currently is comprised of 16 commercial properties with more than 1,475,000 square feet of space leased to over 80 tenants. All of the properties except one are located in Massachusetts. The non-Massachusetts property is located in Las Vegas, Nevada. Specifically, Oasis Ten Milk Street Associates, Inc. owns Oasis Ten Milk Street LLC, which, in turn, owns a Class B office building located at 10 Milk Street, Boston, Massachusetts. The Foreign Debtors own 40.48% of Oasis Ten Milk Street LLC and EWE owns 27.932%. Raymond Lee is President of both Oasis Ten Milk Street Associates, Inc. and Oasis Ten Milk Street, LLC.
The Foreign Debtors also own 45.25% of ODE Asia, LLC (EWE owns 32.71%), which, in turn, owns 100% of Oasis Net Leased Holdings LLC. Oasis Net Leased Holdings LLC is a limited liability company, which holds the membership interests of 11 single-asset, special purpose entities comprising the so-called Net Leased Portfolio. Each of the special purpose entities, whose membership interests are held by Oasis Net Leased Holdings LLC, are owned in part by other individual investors. In total, over 30 individual and institutional investors have invested in one or more of the Oasis Group companies.
EWE directly owns five commercial real estate properties in Massachusetts with more than 150,000 square feet leased to over 60 tenants. Raymond Lee is the Chairman and President of EWE. He, his brother David C. Lee, and his sister Karen C. Lee, each own one third of EWE. EWE owns 99% of Oasis Northwoods, LLC, which is the record owner of a property located at 222 Rosewood Drive, Danvers, Massachusetts. That entity is in receivership.
Two other properties, which are, or were, part of the Oasis Group, are implicated in the Turnover Motion by reason of
(emphasis added). Profits produced by properties in the ODE and EWE portfolios are distributed proportionately to the individual investors. As will be discussed below, although many of the properties in the Oasis Group portfolio and the EWE portfolio are valued at less than the outstanding mortgage debt, the properties generate significant operating revenue.
The Foreign Debtors are employed by, and receive salaries from, OCI. In addition, they realize income from the operations of the properties in the ODE and EWE portfolios through the distribution of profits, as do the other investors in the Oasis Group and EWE. Distributions are paid out of cash flow after debt service in whatever amount can be prudently paid to investors while maintaining adequate cash reserves for the operation of the properties and related expenses, including expenditures for leasing and improvements.
Two exhibits constitute the only evidence of the value of the properties in the ODE and EWE portfolios, and, thus, inferentially, the value of the Foreign Debtors' equity interests, namely Exhibit 38 submitted by the Foreign Representatives, which shows, as of August 1, 2009, total appraised values for the 22 properties in the ODE and EWE portfolios at that time of $175,190,000, subject to loan balances totaling $228,081,635; and Exhibit 1 submitted by the U.S. Companies which is the Affidavit of Ms. Adams. Ms. Adams separately valued 18 of the properties using either (i) a discounted cash flow calculation; or (ii) a direct capitalization calculation based on certain assumptions regarding future leasing activity at certain of the properties.
With respect to the EWE portfolio, Ms. Adams stated that the portfolio secures a loan in the original principal amount of $10,900,000 from Eastern Bank (the "Eastern Loan") and that, as of January 1, 2012, the principal balance of the Eastern Loan was $10,248,806. She explained the status of the loan as follows in her Affidavit:
(emphasis supplied). Ms. Adams opined that the value of the five commercial properties in the portfolio is $13,034,000, leading
Ms. Adams also valued 10 Milk Street, Boston, MA, an 11-story Class B office and retail building in Boston, owned by Oasis Ten Milk Street LLC. According to Ms. Adams, the Milk Street Property secures a loan in the original principal amount of $58,000,000 from Merrill Lynch Mortgage Lending, Inc. ("Merrill Lynch"), which assigned the Loan to CMBS trust. Additionally, according to Ms. Adams, administration of the Milk Street Loan is under the direction of a special servicer. Ms. Adams opined that, as of January 1, 2012, the principal balance of the Milk Street Loan was $58,000,000 and that the value of the property is $45,735,000, resulting in "substantial negative equity in the Milk Street Property, in the amount of ($12,265,000)."
With respect to the property located at 700 Longwater Drive, Norwell, Massachusetts, a two-story Class A suburban office building owed by Oasis 700 Longwater LLC, Ms. Adams stated that the property secures a loan in the original principal amount of $8,650,000 from Column Financial, Inc. ("Column Financial"), which assigned the loan to CMBS trust and that, as of January 1, 2012, the principal balance of the loan was $8,641,471. She opined that the value of the 700 Longwater Drive property is $7,510,000, resulting in substantial negative equity in the amount of ($1,131,471).
With respect to unencumbered property located at 7 Concord Farms, Concord, MA, Ms. Adams opined that the value was $528,000, resulting in owner's equity of $528,000.
The acquisition or refinancing of properties in the Oasis Group portfolio and the properties in the EWE portfolio, as well as several additional properties, were financed through a complex series of promissory notes and mortgages. These documents, including guaranties executed by Raymond Lee, contain among other things, default provisions, equity transfer restrictions and other prohibitions that the Foreign Debtors and the U.S. Companies cite in support of their opposition to the Turnover Motion. During the trial, Ms. Garzon referenced a number of pertinent provisions in her trial testimony which are discussed below.
The single-asset, special purpose limited liability companies which comprise the Oasis
Additionally, Article 7.1a.(iii), captioned "Representations and Warranties," contains an additional ground for Wells Fargo to declare an Optional Default:
In addition to citing those specific events of default,
Article 6.15.c.(ii) permits equity transfers and provides:
The term "Minimum Equity Requirement" is defined as
A "Qualified Raymond Lee Family Member" is defined as "any of the spouse, descendants, heirs, legatees or devisees of Raymond C. Lee that are qualified for employment by Oasis Development Enterprises, Inc. in a managerial capacity equivalent to that of a managing director."
Article 4.4 of the mortgage governs the "Rights of Mortgagee upon Default." It provides, in section 4.4.a., labeled "Disposition of Collateral":
Ms. Garzon also testified about a "Mortgage, Assignment of Leases and Rents and Security Agreement" executed by Oasis Ten Milk Street, LLC to secure a $58,000,000 Loan Agreement dated April 18, 2007 provided by Merrill Lynch. As stated by Ms. Garzon, Article 6, captioned "No Sale or Encumbrance" provides at Section 6.2(a) the following:
The Loan Agreement contained the following definition of "Restricted Party" at Section 6.1: "Restricted party shall mean Borrower, Guarantor, any SPE Component Entity, any Affiliated Manager, or any shareholder, partner, member or non-member manager, or any direct or indirect
Article 10 of the Loan Agreement, captioned "Events of Default; Remedies" provided that any action under "any Creditors Rights Laws" against any managing member of Borrower or Guarantor would constitute an event of default, triggering the remedies set forth in Section 10.2 of the Loan Agreement.
Ms. Garzon testified about a $6,256,000 loan made by Column Financial to Oasis 700 Longwater LLC. referencing a Mortgage and Security Agreement dated November 20, 2003. She stated that Article 1, "Covenants of Borrower," at Section 1.13, captioned "Alienation and Further Encumbrances" provides at subsection (a)(2) the following:
(emphasis supplied). The Loan Agreement further provided in Article II, "Events of Default" at Section 2.1.(f):
Insolvency of a managing member or guarantor also constituted an event of default pursuant to Section 2.1.(h). Raymond Lee executed an Indemnity and Guaranty Agreement on November 6, 2009.
The Court takes judicial notice of its docket
Ms. Garzon testified about the Articles of Organization for ODE. In particular, in her testimony, she referenced Article V, which set forth restrictions imposed upon the transfer of shares of stock of any class as follows:
Ms. Garzon also testified about the transfer restrictions contained in the Articles of Organization of EWE. Paragraph 5 provides the following:
Ms. Garzon testified about similar provisions applicable to the Amended and Restated Operating Agreement for ODE Asia, LLC. At paragraph 6, captioned "Substitution and Assignment of a Member's Interest," the Agreement provides:
(emphasis added). Ms. Garzon, in her testimony, added that the provisions in ODE Asia, LLC's Operating Agreement with respect to transfer restrictions are typical for the single-asset, special purpose entities in the Oasis Group portfolio. She further testified that Raymond Lee's bankruptcy proceeding would constitute a default under all of the loan documents submitted into evidence, citing Section 7.1(b)(iii) of the Wells Fargo Mortgage; section 10.1(f)(ii) of the Merrill Lynch Mortgage and Section 2.1(h) of the Column
Approximately 16 months after the filing of the Chapter 15 petitions, this Court, on April 7, 2011, entered an Amended Order Granting Recognition of Foreign Main Proceedings and Related Relief, attached to which was a Stipulation executed by the Foreign Debtors, the Foreign Representatives and the U.S. Companies. The Amended Order Granting Recognition provided, inter alia, that this Court has jurisdiction to consider the matter pursuant to 28 U.S.C. §§ 157, 1334 and that Hong Kong is the center of main interest of the Foreign Debtors. Under Section 30A of the Hong Kong Bankruptcy Ordinance, individual bankruptcy cases, such as those of the Foreign Debtors, commence on the day the individuals are adjudged bankrupts and continue for a period of four years when the bankrupts are discharged. As noted above, the Foreign Debtors were adjudged bankrupts on August 31, 2009. The Foreign Representatives may obtain an extension of that four year period, however.
The Amended Order provided that "the Foreign Representatives are hereby entrusted with the administration, realization, and distribution of all of the Foreign Debtors' assets located within the territorial jurisdiction of the United States, pursuant to 11 U.S.C. § 1521(a)(5)," subject "in all respects to the terms and conditions of the Recognition Stipulation." The "Stipulation Regarding Verified Petitions Seeking Entry of Order Recognizing Foreign Main Proceedings Pursuant to 11 U.S.C. §§ 1515 and 1517 and Relief Pursuant to 11 U.S.C. §§ 1520 and 1521," which was attached to the April 7, 2011 Amended Order, in pertinent part, provides:
(emphasis supplied).
In conjunction with the Turnover Motion, the parties executed a Stipulation Resolving Stipend Motion and Partially Resolving Turnover Motion, which the Court approved on February 6, 2012. Pursuant to that stipulation, the parties significantly
In her Affidavit which was accepted into evidence at the trial, Ms. Garzon, recognized the agreement of the parties, stating that "[i]n compliance with the stipulation, the U.S. Companies have to date [February 1, 2012] paid a total of $2,797,353.38 to the Foreign Representatives."
Mr. Lees testified that, although the Foreign Representatives agreed to abide by the decisions of courts in the United States, he had a duty under Hong Kong law to take possession of all assets of the bankrupts, including shares in companies, adding that the Foreign Representatives "like to take an active part in decision making in these companies" with the goal of maximizing value. He stated: "[w]e're not short-term in this situation; we're long term. We'd be very happy to stay in here for five, six, seven or eight years if we need to see the values improve." Concluding his direct testimony, he testified that the Foreign Representatives intended to keep the Chapter 15 proceedings open as long as the Hong Kong proceedings were open.
On cross-examination, Mr. Lees explained that under the Hong Kong Bankruptcy Ordinance it was possible to obtain an extension of the applicable four-year period for bankruptcy cases in Hong Kong upon application and the establishment of "a good reason for that extension," adding that in most cases all the assets are collected
Mr. Lees explained his testimony that the Foreign Representatives would like to take "an active part in decision making" as follows:
Mr. Lees indicated that, although he could not criticize the decisions made with respect to the sale of the 50 Dunham Road property in Beverly, Massachusetts or the loan modification involving Ten Milk Street, Boston, Massachusetts, the Foreign Representatives were only made aware of the decisions affecting those properties after the fact. He expressed a desire for "some strict corporate governance... so that certain things are relayed to us and before things happen."
With respect to his duties to the other non-debtor shareholders or members of the U.S. Companies, Mr. Lees testified that the Foreign Representatives would always consider the interests of the other investors in the companies, adding "we certainly can't do something which might severely jeopardize the interests of other parties." He testified that he could not envision a scenario in which the interests of the creditors of the Foreign Debtors would conflict with the interests of the holders of the other equity interests, other than the Foreign Debtors, in the U.S. Companies.
With respect to the vesting of the Foreign Debtors' ownership interests in the U.S. Companies in the Foreign Representatives, Mr. Lees stated that he had not attempted to sell the Foreign Debtors' shares in ODE or EWE and had not received any unsolicited offers, reiterating that "any sale would have to be conducted according to any restrictive rights of those shares." Mr. Lees also testified that he had not considered managing ODE if the Turnover Motion were granted. He stated, however, that he would like to receive more information about management decisions than what the Foreign Representatives have been receiving in the form of "quarterly reports and occasional management accounts." Mr. Lees added: "It's not a matter of `carrying on the business' of the bankrupts. It's a matter of taking control of the various assets." Referencing Section 61(a) of the Hong Kong Bankruptcy Ordinance, he testified that that provision permitted him to, among other things, carry on the business of the bankrupts as far as may be necessary for the beneficial winding up of the same or to allow the bankrupt to restructure the business, while recognizing that the Foreign Debtors do not operate businesses, rather they own equity interests in companies that are in business that do not have employees. Because Section 61 permits the Foreign Representatives to engage in certain
Upon redirect examination, Mr. Lees testified that, if the Turnover Motion were denied, it likely would constitute grounds for extending the bankruptcies in Hong Kong "because there's outstanding business basically" and "[a]ll the affairs of the bankruptcy [sic] ... must be tidied up before the completion of the bankruptcy."
The Foreign Representatives, relying upon the Declaration of Richard David Hudson, a partner in the Litigation and Dispute Resolution Department of Deacons, a law firm located in Hong Kong, which represents them, maintain that under Hong Kong law the equity interests, and in particular shares of stock, vest in the them as trustees of the bankrupts in the Foreign Main Proceeding and that that vesting by operation of Hong Kong law does not constitute a transfer implicating the transfer restrictions in the Articles of Organization of ODE or other applicable Operating Agreements or Articles of Organization. In their view, regardless of any transfer restrictions affecting the shares of stock owned by the Foreign Debtors in ODE or EWE, under Hong Kong law, upon the commencement of the bankruptcy and their appointment as trustees, the shares vested in them as trustees pursuant to Sections 43, 53 and 58 of the Bankruptcy Ordinance. The Foreign Representatives rely on Section 58(3) of the Hong Kong Bankruptcy Ordinance which provides that property of the debtor vests in the trustee without, inter alia, "any conveyance, assignment or transfer whatever." Thus, in their view, pursuant to Hong Kong law, the Foreign Debtors' equity interests automatically vested in the Foreign Representatives when they were appointed as joint trustees, regardless of any transfer restrictions. Because the Bankruptcy Ordinance expressly provides that the vesting of property does not constitute a transfer, the Foreign Representatives maintain that no corporate transfer restrictions can apply. Stated another way, if vesting does not involve a transfer, no transfer restrictions apply to vesting.
The Foreign Representative also rely upon Section 53(3) of the Bankruptcy Ordinance which provides "Where any part of the property of the bankrupt consists of stock, ... shares, or any other property transferable in the books of any company, office or person, the trustee may exercise the right to transfer the property to the same extent as the bankrupt might have exercised it if he had not become bankrupt." In addition, the Foreign Representatives recognize Section 43(5) of the Bankruptcy Ordinance which provides that "property comprised in a bankrupt's estate is so comprised subject to the rights of any person other than the bankrupt (whether as a secured creditor of the bankrupt or otherwise) in relation thereto ...," although they maintain that Section 43(5) does not and cannot operate to permit third parties to exercise transfer restriction rights to prohibit the vesting of shares in a bankruptcy trustee because the vesting of shares does not constitute a transfer pursuant to Section 58 of the Bankruptcy Ordinance. Alternatively, the Foreign Representatives argue that even if this Court were to view the vesting of the equity interests in them as an event that would trigger the "transfer" restrictions in the Articles of Organization or LLC Operating
The Foreign Representatives argue that the provisions of Hong Kong Bankruptcy Ordinance are consistent with the provisions of the Bankruptcy Code. Although they do not dispute that they must operate within the confines of the applicable Articles of Organization and Operating Agreements and abide by provisions relating to transfer restrictions because they "step into the shoes" of the Foreign Debtors, they assert that they must have the ability to make decisions commensurate with the estates' equity interests, citing In re First Protection, Inc., 440 B.R. 821, 830 (9th Cir. BAP 2010) ("We conclude that all of Debtors' contractual rights and interest in Redux [a corporation] became property of their estate under § 541(a)(1) by operation of law when they filed their petition. Section 541(c)(1)(A) overrides both contract and state law restrictions on the transfers or assignment of Debtors' interest in Redux in order to sweep all their interests into their estate.... Accordingly, the restrictions Debtors point to under the operating agreement or the Arizona LLC Act did not prevent the vesting of their contractual rights in their bankruptcy estate.").
The Foreign Representatives conclude that the equity interests are property of the Hong Kong bankruptcy estate and that they should have the authority to control those equity interests consistent with the Foreign Debtors' ownership of approximately 72% of ODE, which manages the Oasis Group portfolio. With respect to EWE, in which Raymond Lee is only a one-third equity interest holder, they contend they would have whatever rights he would have to participate in the governance of EWE, especially as Raymond Lee is President of EWE and there is a single loan, which has matured, that governs all the properties in the EWE portfolio. As noted above, Ms. Adams, in her Affidavit, indicated that the loan matured in September of 2011 and that there is a forbearance agreement which requires EWE to sell two of the five properties by June 30, 2012 and to sell as many of the other three properties as may be necessary to satisfy the loan in full by the end of 2012.
The Foreign Representatives emphasize that their activities are governed by the law of Hong Kong; that they are rational economic actors charged with maximizing the value of the equity interests for the estate; that they intend to engage professionals to protect and maximize the value of the equity interests; and that their interests are not adverse to those of the other interest holders in the U.S. Companies. Moreover, the Foreign Representatives contend that the provisions of Chapter 15, i.e., 11 U.S.C. §§ 1501, 1521(a)(5) and 1521(b), pre-empt state law transfer restrictions that would prevent this Court from entrusting the Foreign Debtors' equity interests to the them. They argue that this conclusion is valid because the result — the vesting of the assets in the Foreign Trustees — is the same result that would occur in a Chapter 7 case through the operation of 11 U.S.C. § 541(c)(1).
The Foreign Representatives reject the arguments of the Foreign Debtors and the U.S. Companies that defaults under the loan documents compel denial of the Turnover Motion. Noting the absence of testimony or other evidence from representatives of the lenders, the Foreign Representatives observe that the Hong Kong proceeding is itself a default and that the EWE loan is in default and the subject of a forbearance agreement. They point to the record which establishes that the lenders have not been aggressive in enforcing default provisions applicable to the Oasis Group and EWE portfolios, noting that the Foreign Debtors have been successful in negotiating forbearance agreements.
The Foreign Representatives also discount the provisions in the loan documents about which Ms. Garzon testified. They observe that the U.S. Companies are already in default because the Lees were adjudged bankrupts under Hong Kong law. Moreover, they note that the EWE loan has matured and is the subject of a forbearance agreement which requires the sale of properties,
With respect to that requirement of Chapter 15 that relief may be granted pursuant to section 1521 only if the interests of creditors and other interested entities are "sufficiently protected," 11 U.S.C. § 1522(a), the Foreign Representatives maintain that under In re Atlas Shipping A/S, 404 B.R. 726, 740 (Bankr.S.D.N.Y. 2009), sufficient protection is determined with reference to whether the law of the foreign jurisdiction protects creditors and parties in interest. They maintain sufficient protection exists here because of the striking similarity between the Hong Kong Bankruptcy Ordinance and the Bankruptcy Code together with their acknowledgment that they will be bound by applicable transfer restrictions.
The Foreign Debtors adopted and joined the arguments advanced by the U.S. Companies. Accordingly, the Court shall refer
The U.S. Companies emphasize that in addition to the Foreign Debtors the companies have approximately 30 other shareholders comprised of 19 individuals and entities. They urge the Court to recognize that those individuals and entities have invested over $34 million in the properties. They contend that the vesting of the equity interests in the Foreign Representatives will constitute transfers by operation of law which are subject to the share transfer restrictions in the Articles of Organization which should be upheld. In the alternative, they assert that the type of turnover sought by the Foreign Representatives, namely full and permanent ownership of the Foreign Debtors' shares in ODE and EWE, will trigger the transfer restriction provisions. They differentiate between the Hong Kong Foreign Representatives being in charge of the portfolios and potentially causing the liquidation of the companies through control over the board of directors and ownership of the stock. They add that the Foreign Debtors' ownership of stock in closely-held corporations does not equal and should not equal outright management of the portfolio companies, particularly where the companies have been operated in the interests of all shareholders, all income has been distributed in accordance with the parties' stipulations, and problems can be addressed through the commencement of complaints for violations of fiduciary duties or the automatic stay.
The U.S. Companies also insist that the share transfer restrictions set forth in the Articles of Organization of ODE and EWE must be recognized, while observing that this Court can and should condition the relief sought in the Turnover Motion to comport with the provisions of the Stipulation Regarding Verified Petitions which requires that any disputes relative to transfers of the Foreign Debtors' equity interests or the exercise of rights inherent in full and complete ownership of those equity interests should be brought to this Court. In other words, the U.S. Companies argue that the Chapter 15 proceedings should remain open to the parties in interest in the United States who are concerned about having the Foreign Representatives liquidate the companies themselves.
The U.S. Companies contend that the critical issue is whether the protections for other shareholders embodied in the transfer restrictions apply to the Foreign Representatives when they merely hold stock, or only when they elect to eventually, if ever, transfer the Foreign Debtors' equity interests to third parties. They rely on the Section 43 of the Hong Kong Bankruptcy Ordinance, arguing that the property rights that are not violative of Article V
The U.S. Companies maintain that the interests of their equity holders will not be sufficiently protected because the operation of the companies will be directly influenced by the Foreign Representatives, despite the testimony of Mr. Lees that the Foreign Representatives have a long-term view and would be "benevolent overlords" with respect to the equity interest holders. In sum, the U.S. Companies contend that denial of the Turnover Motion is warranted, adding that the Foreign Representatives can seek further relief in this Court in the event there is "any particular thing that they want to do or prohibit us from doing at the company level" in the future. They add that interference with the ownership structure and management should not be countenanced.
After the evidentiary hearing, the Foreign Debtors and the U.S. Companies submitted the Declaration of William M.F. Wong, a Barrister-at-Law and a member of chambers of Des Voeux Chambers, resident in Hong Kong (the "Wong Declaration"). In reliance upon the Wong Declaration, they advanced additional arguments. The maintain that the Wong Declaration confirms that (i) the vesting of the Equity Interests in the Foreign Representatives under Hong Kong bankruptcy law did not effect a transfer of all of the Debtors' rights with respect to the Equity Interests, and (ii) the Foreign Representatives' right to exercise ownership and control of the Equity Interests is limited by the stock transfer restrictions in the U.S. Companies' organizational documents that are enforceable under Massachusetts law. They add that the Foreign Representatives overstate the nature and effect of vesting under the Hong Kong Bankruptcy Ordinance because, in their view, the Hong Kong law requires more than mere vesting to enable the Foreign Representatives to exercise full ownership and control of the equity interests. To obtain full ownership and control of the equity interests, they maintain that the Foreign Representatives must comply with any applicable stock transfer procedures, adding that for a Hong Kong company, which ODE, EWE and the limited liability companies are not, one such procedure is registration. They observe that in Hong Kong, before a trustee can exercise all rights of a shareholder in a Hong Kong corporation, he "must be registered as a shareholder in the company's register of members" so that the mere vesting of the equity interests does not transfer full rights in the equity interests.
The U.S. Companies further argue that this second stage requires compliance with the U.S. Companies' share transfer procedures and legal requirements such as, in Hong Kong, registration. Noting that the Foreign Representatives state that because "the vesting of property does not constitute a transfer, it follows that no transfer restrictions can apply, the U.S. Companies argue that "[t]his utterly misstates the dispute and ignores the relief actually sought, because, while the transfer restrictions may not apply to the first stage of vesting of the equity interests, they do apply to this second stage. Citing Section 43(5) of the Bankruptcy Ordinance, which expressly provides that the equity interests vest in the Foreign Representatives "subject to the rights of any person other than the bankrupt with respect to [the equity interests]," they conclude that the requirements and prerequisites applicable to a share transfer under a company's charter apply to a transfer to the
The Turnover Motion, through which the Foreign Representatives seek "to determine whether holding the Foreign Debtors' equity interests in trust for the benefit of creditors (in the hope that the market will rebound) or conducting a public sale," implicates both the Hong Kong Bankruptcy Ordinance and Chapter 15 of the Bankruptcy Code. Section 103(a) of the Bankruptcy Code provides in relevant part: "Except as provided in section 1161 of this title, chapters 1, 3, and 5 of this title apply in a case under chapter 7, 11, 12, or 13 of this title, and this chapter, sections 307, 362(o), 555 through 557, and 559 through 562 apply in a case under chapter 15." 11 U.S.C. § 103(a). Accordingly, neither section 541(a) nor 541(c)(1) are applicable to a determination of property of the Hong Kong bankruptcy estates, and the determination of property of the estates must be made under Hong Kong law. Notably, were section 541(c) to apply, the transfer restrictions set forth in the Articles of Organization and Operating Agreements would be unenforceable.
The provisions of Chapter 15 of the Bankruptcy Code support a determination that the Hong Kong Bankruptcy Ordinance governs what constitutes property of the Foreign Debtors' bankruptcy estates and the Foreign Representatives' rights with respect to that property, subject to protections set forth in that statute and the Bankruptcy Code. Section 1501 of the Bankruptcy Code provides that the purpose of Chapter 15 is to facilitate cooperation between U.S. and foreign courts and representatives. 11 U.S.C. § 1501(a).
SNP Boat Serv. S.A., 2012 WL 1355550 at *8.
Under Section 58 of the Hong Kong Bankruptcy Ordinance, property of the bankrupt vests in an Official Receiver upon the making of a bankruptcy order. Thereafter, upon the appointment of a trustee, the property of the bankrupt, vests in the trustee. In this case, the property of Raymond and Priscilla Lee vested in the Foreign Representatives. The bankrupt's estate is defined at Section 43(1)(a) of the Bankruptcy Ordinance, which provides that property of the estate is comprised of "all property belonging to or vested in the bankrupt at the commencement of the bankruptcy." It also includes "any property which by virtue of any of the provisions of this Ordinance is comprised in that estate or is treated as falling within paragraph (a)." Id. at 43(1)(b). Unlike property of the estate under the Bankruptcy Code where an interest of the debtor in property becomes property of the estate notwithstanding any provision in an agreement, such as the Articles of Organization, that restricts or conditions transfer of such interest by the debtor, see 11 U.S.C. § 541(c)(1), Section 43(5) of the Hong Kong Bankruptcy Ordinance provides in pertinent part the following:
Although the Hong Kong Bankruptcy Ordinance defines the bankrupts' estate for purposes of the Turnover Motion, resolution of the parties' disputes hinge on interpretation of provisions of
11 U.S.C. § 1522(a) (emphasis supplied).
The provisions of Chapter 15 make clear that the Court is to be guided in its decision making by the purpose of Chapter 15, which are set forth in section 1501(a)(1)-(5), which include "protection and maximization of the value of the debtor's assets." 11 U.S.C. § 1501(a)(4). Moreover, section 1508 of the Bankruptcy Code directs the Court, "[i]n interpreting this chapter, ... [to] ... consider its international origin, and the need to promote an application of this chapter that is consistent with the application of similar statutes adopted by foreign jurisdictions." 11 U.S.C. § 1508. According to the court in In re Tri-Cont'l Exch. Ltd., 349 B.R. 627 (Bankr.S.D.Cal. 2006), a crucial goal is "uniformity of interpretation." Id. at 633 (citing § 1508). The court observed that "Congress also focused the attention of United States courts to various international sources when construing chapter 15, which sources Congress described as `persuasive.'" Id. (citing House Rep. No. 109-31 at 109-10). In particular, according to the court in Tri-Cont'l Exch., "[o]ne of the sources that a United States court is obliged to treat as persuasive is the Guide to Enactment of the UNCITRAL Model Law Insolvency that was promulgated in connection with the approval of the Model Law. Guide to Enactment of the UNCITRAL Model Law on Cross-Border Insolvency, U.N. Gen. Ass., UNCITRAL 30th Sess., U.N. Doc. A/CN.9/442 (1997) (`Guide')." Id.
In implementing the purposes of Chapter 15 and applying the principles set forth in sections 1521 and 1522, this Court, in fashioning relief, as noted above, must consider how best "to protect the assets of the debtor or the interests of creditors" and the "other interested entities, including the debtor." According to the California bankruptcy court in Cont'l Exch., "[s]tandards that inform the analysis of § 1522 protective measures in connection with discretionary relief emphasize the need to tailor relief and conditions so as to balance the relief granted to the foreign representative
Atlas Shipping, 404 B.R. at 740.
The dispute between the Foreign Representatives, on the one hand, and the Foreign Debtors and the U.S. Companies, on the other hand, involves the narrow issue of whether the relief requested by the Foreign Representatives in their Turnover Motion, full entrustment of the Foreign Debtors' equity interests for purposes of "administration and realization" and distribution, involves more than merely "stepping into the shoes" of the Foreign Debtors. In other words, will the allowance of the Turnover Motion precipitate "transfers" triggering defaults under the loan documents and provisions governing the rights of first refusal in the Articles of Organization and Operating Agreements?
The parties did not submit, and the Court was unable to find, decisions specifically addressing the burdens of proof with respect to turnover motions in the context of Chapter 15 cases. As the movants, the Court concludes that Foreign Representatives have the initial burden of establishing that they are entitled to relief under 11 U.S.C. §§ 1521(a)(5), 1521(b), and 1522(a) and should be entrusted with the administration and realization, of the Foreign Debtors' equity interests in the U.S. Companies and the distribution of equity interests which comprise part of the Foreign Debtors' assets in the United States. The Court further concludes that the Foreign Representatives have the initial burden of demonstrating that the interests of the Foreign Debtors and the U.S. Companies are sufficiently protected, but that the ultimate burden of establishing the absence of sufficient protection rests on the objecting parties. The Court's conclusion is consistent with the burden of proof imposed with respect to turnover motions filed pursuant to 11 U.S.C. § 542. Although section 542 is inapplicable to Chapter 15 cases, see 11 U.S.C. § 103(a), the burden of proof applicable to that section of the Bankruptcy Code is warranted here as it is both consistent with the parties' Stipulation Regarding Verified Petition, quoted above, and equitable under the circumstances where the U.S. Companies have neither alleged nor established that they are creditors of the Foreign Debtors.
In In re Meyers, 616 F.3d 626 (7th Cir.2010), the United States Court of Appeals for the Seventh Circuit stated:
In re Meyers, 616 F.3d at 629-30. See In re Int'l Banking Corp. B.S.C., 439 B.R. 614, 626 (Bankr.S.D.N.Y.2010) (court recognized that "turnover, like the other remedies provided in § 1521, is discretionary"); In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 333 (S.D.N.Y.2008) (In contrast to recognition, which turns on "strict application of objective criteria," post-recognition relief is "largely discretionary...."). See also Braunstein v. McCabe, 571 F.3d 108 (1st Cir.2009)(noting that turnover is historically equitable in nature).
Applying the standard enunciated by the Seventh Circuit in Meyers, the Court concludes that the Foreign Representatives satisfied their burden of proof by a preponderance of the evidence for multiple reasons, including 1) the purposes of Chapter 15 set forth in 11 U.S.C. § 1501 and the provisions of the Hong Kong Bankruptcy Ordinance, which are similar to, and not inconsistent with, the provisions of the Bankruptcy Code, see Atlas Shipping, 404 B.R. at 740; 2) the testimony of Mr. Lees in which he enunciated reasonable goals and conditions for realizing the value of the Foreign Debtors' equity interests; 3) the Stipulation Regarding Verified Petitions Seeking Entry of Order Recognizing Foreign Main Proceedings in which the parties agreed that "United States law will govern any action taken by the Foreign Representatives against the U.S. Companies, including ... any attempt by them to liquidate or otherwise realize upon the foreign Debtors' interest(s) in the U.S. Companies, or any challenge to the operation or management of the U.S. Companies;" 4) the fiduciary duties imposed upon shareholders of closely held corporations and members of limited liability companies; and 5) the status of the U.S. Companies, which have never identified themselves as creditors of the Foreign Debtors. Because the Foreign Representatives satisfied their burden of proof with respect to the allowance of the Turnover Motion, the U.S. Companies and the Foreign Debtors, to defeat allowance of the Turnover Motion, must establish lack of sufficient protection. In short, the Court finds for the reasons set forth in more detail below, that the Hong Kong Bankruptcy Ordinance provides for the just treatment of holders of claims against the Foreign Debtors' bankruptcy estate and for distributions of proceeds substantially in accordance with the Bankruptcy Code and that any U.S. claimants will not be prejudiced or inconvenienced because the Chapter 15 proceedings shall remain open. See Atlas Shipping, 404 B.R. at 740. In this regard, the Court further rules that the Foreign Debtors and the U.S. Companies, while raising valid concerns with respect to defaults under the loan documents and transfer restrictions in the Articles of Organization and Operating
The Court has highlighted the provisions of section 1501, which should be interpreted "to promote an application ... consistent with the application of similar statutes adopted by foreign jurisdictions." 11 U.S.C. § 1508. The Hong Kong Bankruptcy Ordinance and the Bankruptcy Code both set forth duties of trustees and debtors, establish priority for distributions to classes of creditors, and provide for the recovery of preferential and fraudulent transfers. Section 60 of the Hong Kong Bankruptcy Ordinance sets forth the powers of the Foreign Representatives, as trustees. It provides:
(emphasis supplied). Moreover, pursuant to Section 62 of the Bankruptcy Ordinance, the Foreign Representatives, "with the permission of the creditors' committee, may appoint the bankrupt himself to superintend the management of the property of the bankrupt or of any part thereof ... and in any other respect to aid in administering the property, in such manner and on such terms as the trustee may direct." That provision may, if utilized by the Foreign Representatives, minimize costs to the estate and avoid potential issues with respect to the provisions in the loan documents requiring Raymond Lee's ongoing management of ODE and EWE. Coincident to the duties of the Foreign Representatives, the Foreign Debtors pursuant to Section 26(3) of the Bankruptcy Ordinance are required to "aid to the utmost of... [their] ... power in the realization of... property and the distribution of the proceeds among ... creditors." (emphasis supplied). That provision resonates with 11 U.S.C. § 521(a)(3), which requires debtors to cooperate with the trustee "as necessary to enable the trustee to perform the trustee's duties under this title." In addition, the Bankruptcy Ordinance, in sections 37 and 38, like the Bankruptcy Code, contains provisions prioritizing payment of classes of claims.
Based upon those provisions of the Bankruptcy Ordinance, the Court finds credible the testimony of Mr. Lees that he is motivated by his duty to exercise control over the Foreign Debtors' equity interests, a duty which is similar to the duties of a trustee under the provisions of the Bankruptcy Code set forth in 11 U.S.C. §§ 521 and 704. Mr. Lees testified that the Foreign Representatives are experienced insolvency professionals who would engage the appropriate agents to facilitate entrustment of the Foreign Debtors' equity
In summary, Hong Kong law is consistent with United States law and the Foreign Representatives' rights will be no greater than the rights that the Foreign Debtors could have exercised. Mr. Lees testified that, if entrusted with the Foreign Debtors' equity interests, the Foreign Representatives will abide by the transfer restrictions in the operative articles and agreements, thereby ensuring that the rights of the U.S. Companies and their equity owners will be protected. Aware of the loan modification affecting the property owned by Oasis Ten Milk Street LLC which will expire in November of 2012 and the maturation of Eastern Bank loan affecting the properties in the EWE portfolio, the Foreign Representatives are entitled to "seats at the table." Their duties to the Hong Kong creditors, which are analogous to the duties of a Chapter 7 trustee, compel the Foreign Representatives to be more than passive recipients of distributions from U.S. Companies, a scheme altered by the Stipulation Resolving Stipend Motion and Partially Resolving Turnover Motion, and after-the-fact information about loan modifications or other workouts.
The parties stipulated to the applicability of the laws of the United States to their disputes. Accordingly, the interests of the U.S. Companies are sufficiently protected because any attempt by the Foreign Representative "to liquidate or otherwise realize upon the Foreign Debtors' interest(s) in the U.S. Companies, or any challenge, to the operation or management of the U.S. Companies" will be governed by United States law. Indeed, in their Turnover Motion, the Foreign Representatives reference 11 U.S.C. § 363.
ODE, EWE and ODE, Asia, LLC are Massachusetts corporations and a Massachusetts limited liability company, respectively. With respect to closely held corporations,
Donahue v. Rodd Electrotype Co. of N.E., 367 Mass. 578, 592-93, 328 N.E.2d 505 (1975) (footnote omitted, emphasis supplied). See also A. W. Chesterton Co., Inc. v. Chesterton, 128 F.3d 1, 5-6 (1st Cir. 1997); In re Access Cardiosystems, Inc., 404 B.R. 593, 677 (Bankr.D.Mass.2009). Similarly, members of limited liability companies cannot act with impunity toward fellow members. See One to One Interactive, LLC v. Landrith, 76 Mass.App.Ct. 142, 920 N.E.2d 303, review denied, 456 Mass. 1105, 925 N.E.2d 547 (2010). See generally J. William Callison and Maureen A. Sullivan, Limited Liability Companies: A State-by-State Guide to Law and Practice, § 8.7 (2011). Because the Foreign Representatives are "stepping into the shoes" of the Foreign Debtors, whatever actions they take in the performance of their duties must comport with the fiduciary duties imposed by Massachusetts law. Thus, in the event that the Foreign Representatives in any way ignore the rights of first refusal or other duties owed to the Foreign Debtors or the U.S. Companies, this Court, as the repository of "United States laws," is available to address any disputes that may arise among the parties.
In response to the Turnover Motion, the Foreign Debtors and the U.S. Companies emphasize the default provisions in the loan documents, highlighting Raymond Lee's exposure as a "carve-out" guarantor (meaning that upon the occurrence of certain conditions specified in the loan documents he will become personally liable for the outstanding loan amounts) for approximately $217 million in loans, and the transfer restrictions in the Articles of Organization and Operating Agreements. The Court recognizes that the lenders could have issued notices of default in response to the Hong Kong proceedings; they did not do so. In addition, they have not sought to enforce any guaranties executed by Raymond Lee either with respect to the 50 Dunham Road, Beverly, Massachusetts property or the Ten Milk Street, Boston, Massachusetts property.
The Foreign Debtors and the U.S. Companies failed to introduce any evidence that the lenders have taken any actions, or are likely to take any actions, in the Chapter 15 cases to enforce the default provisions or the guaranties executed by Raymond Lee. Indeed, none of the lenders, including Wells Fargo, Merrill Lynch, Column Financial, Eastern Bank, or CMBS trust, the assignee of Wells Fargo and Merrill Lynch, have filed notices of appearance in the case. In view of the existing defaults arising from the commencement of the Hong Kong proceedings and the existing default resulting from the nonpayment of the Eastern Bank loan at maturity, and arguably the modification of the Oasis Ten Milk Street loan, the Court is not persuaded that the potential for default declarations is sufficient to establish the absence of sufficient protection for the interests of the Foreign Debtors and the U.S. Companies, particularly where under both the Hong Kong Bankruptcy Ordinance and the Bankruptcy Code the interests of the U.S. Companies, as non-creditors, must be subordinated to the interests of the Hong Kong creditors.
With respect to the transfer restrictions, the Foreign Representatives have indicated through Mr. Lees's testimony that they are bound by those restrictions as a result of Section 43(5) of the Hong Kong Bankruptcy Ordinance, although they maintain that vesting alone is insufficient to trigger the rights of first purchase, a contention
Pursuant to Article V, Paragraph 4.(b) of ODE's Articles of Organization,
(emphasis supplied). Pursuant to Article V, Paragraph 5,
(emphasis supplied). The Court has no evidence that the Foreign Debtors, as stockholders of ODE, complied with Paragraph 4.(b) by sending written notice to ODE that they were adjudged bankrupts under the Hong Kong Bankruptcy Ordinance, although the Court takes judicial notice of a certificate of service filed by the Foreign Representatives pursuant to which ODE was served on December 9, 2009 with notice of the Chapter 15 petitions and other documents. Because Raymond Lee was and is both President and Chief Executive Officer of ODE, written notice that the Foreign Representatives acceded to the equity interests of the Foreign Debtors pursuant to Section 58(3) of the Hong Kong Bankruptcy Ordinance by the Foreign Debtors to ODE would elevate form over substance and serve no practical purpose. Moreover, the absence of a "price specified therein," with respect to a purported transfer event "by operation of law," resulting from the vesting of the Foreign Debtors' equity interests in the Foreign Representatives, makes application
In summary, with respect to a transfer event specified in Article V, Paragraph 4.(a)(iv), two circumstances are immediately obvious from that provision: 1) the U.S. Companies, and ODE in particular, have been aware of the appointment of Mr. Lees and Mat Ng as provisional trustees since August of 2009 when the Foreign Debtors were adjudged bankrupts by the Hong Kong court (or at the latest in December of 2009 when the U.S. Companies were served with notices of the Chapter 15 cases) and that pursuant to Section 58(3) of the Hong Kong Bankruptcy Ordinance, the Foreign Representatives were vested with ownership of the equity interests on their appointment; and 2) ODE did not exercise any rights to purchase arising from that event pursuant to Article V, Paragraph 5.
Even if the Court were to assume that ODE and the U.S. Companies were unaware of that provision of the Hong Kong Ordinance in August of 2009, pursuant to Paragraph 4.(b), 90-days have passed since the Foreign Representatives filed the Turnover Motion. Accordingly, the Court finds that, at least with respect to ODE, the U.S. Companies, waived reliance upon a written notice of a transfer event from the Foreign Debtors to ODE and, more importantly, "vesting" as a Transfer Event. Accordingly, ODE, despite its present opposition, waived the right of first purchase arising from the Foreign Representatives "stepping into the shoes" of the Foreign Debtors with respect to their equity interests pursuant to Article V, Paragraph 5.
Alternatively, the Court concludes that Paragraph 6 of Article V of ODE's Articles of Organization, pertaining to "Transfers in Violation of Article," which was not referenced by any of the parties, provides additional protection to the U.S. Companies. It provides in relevant part the following:
Thus, Paragraph 6 provides further protection to the U.S. Companies, which, in any event, failed to introduce any evidence that they have either the willingness or ability to tender the purchase price for the Foreign Debtors' shares of ODE which, pursuant to Article V, Paragraph 7.(a) is stated to be "the book value per share" as determined by an independent accountant then representing the corporation or a certified public accountant appointed by the board of directors.
Similarly, the Amended and Restated Operating Agreement for ODE, Asia, LLC, which the parties agreed is typical of all the limited liability companies, provides
In view of the provisions discussed above, the Court finds that the Foreign Debtors and the U.S. Companies, while making cogent and sincere arguments, ultimately failed in their burden of proof. The Court concludes that neither the default provisions in the loan documents nor the transfer restrictions in the Articles of Organization or Operating Agreements are impediments to the allowance of the Turnover Motion. Not only do the Articles of Organization of ODE and EWE provide sufficient protection to ODE, the provisions of the Bankruptcy Ordinance also provide sufficient protection — indeed more protection than what would be available under the Bankruptcy Code.
The valuations of the properties in the Oasis Group portfolio and the EWE portfolio in relation to the mortgage debt present novel practical and legal problems for the Foreign Representatives, the U.S. Companies, and the Foreign Debtors. The properties in the portfolios have the potential to continue generating distributions while increasing in value, such that the Foreign Representatives may wish to solicit offers for the Foreign Debtors' equity interests, at which time they will be bound by the transfer restrictions in the Articles of Organization or Operating Agreements and all parties will be bound by the fiduciary duties imposed by Massachusetts law. The Court concludes that the Foreign Representatives are duty-bound to maximize the value of the equity interests of the Foreign Debtors and that their interests are neither inconsistent with the Bankruptcy Code nor the interests of the U.S. Companies. Similarly, the Court does not view the position of the Foreign Representatives as adverse to the lenders whose views have not been articulated in this contested matter. In view of the Stipulations of the parties, and the evidence presented, the Court shall enter an order granting the Turnover Motion.
(emphasis supplied).
11 U.S.C. § 541(c) (emphasis supplied).
11 U.S.C. § 1501(a).
In re Tri-Cont'l Exchange Ltd., 349 B.R. at 637 n. 14.
