DECISION AND ORDER ON DEFENDANT BI S.À.R.L.'S MOTION TO DISMISS COUNTS 14 AND 19 OF THE COMPLAINT

ROBERT E. GERBER, UNITED STATES BANKRUPTCY JUDGE.

In late December 2007, Basell AF S.C.A. ("Basell"), a Luxembourg entity controlled by Leonard Blavatnik ("Blavatnik"), acquired Lyondell Chemical Company ("Lyondell"), a Delaware corporation headquartered in Houston — forming a new company after a merger (the "Merger"), LyondellBasell Industries AF S.C.A. (as used by the parties, "LBI," or here, the "Resulting Company"),1 Lyondell's parent — by means of a leveraged buyout ("LBO"). The LBO was 100% financed by debt, which, as is typical in LBOs, was secured not by the acquiring company's assets, but rather by the assets of the company to be acquired. Lyondell took on approximately $21 billion of secured indebtedness in the LBO, of which $12.5 billion was paid out to Lyondell stockholders.

In the first week of January 2009, less than 13 months later, a financially strapped Lyondell filed a petition for chapter 11 relief in this Court.2 Lyondell's unsecured creditors then found themselves behind that $21 billion in secured debt, with Lyondell's assets effectively having been depleted by payments of $12.5 billion in loan proceeds to stockholders. Lyondell's assets were allegedly also depleted by payments incident to the LBO and the Merger — of approximately $575 million in transaction fees and expenses, and another $337 million in payments to Lyondell officers and employees in change of control payments and other management benefits.

Those events led to the filing of what are now five adversary proceedings — three against shareholder recipients of that $12.5 billion, one dealing with unrelated issues,3 and one other — this action, which was originally the first of the five — against Blavatnik and companies he controlled; Lyondell's officers and directors; and certain others.

In his Amended Complaint (the "Complaint") in this adversary proceeding (brought, like the others, under the umbrella of the jointly administered chapter 11 cases of Lyondell, the Resulting Company and their affiliates (the "Debtors")), Edward S. Weisfelner (the "Trustee"), the trustee of the LB Litigation Trust (one of two trusts formed to prosecute the Debtors' claims), asserts a total of 21 claims against the defendants in this action. The 21 claims variously charge breaches of fiduciary duty; the aiding and abetting of those alleged breaches; intentional and constructive fraudulent conveyances, unlawful dividends, and a host of additional bases for recovery under state law, the Bankruptcy Code, and the laws of Luxembourg, under which several of the Basell entities were organized.4 The Complaint also seeks to equitably subordinate defendants' claims that might otherwise be allowed.

The Trustee's Complaint, in turn, engendered a large number of motions to dismiss. This is one of several opinions ruling on those motions5 — here relating to Counts 14 and 19.6

Those counts relate to a shareholder distribution of 100 million Basell made on December 7, 2007, about two weeks before the closing of the Merger (the "December Distribution"), that allegedly "drained Basell of the capital that it would soon desperately need to continue in operation and meet its obligations."7 In Count 14, the Trustee seeks to hold various defendants, including BI S.à.r.l., the parent of Basell before the Merger, liable for extra-contractual tort under Articles 1382 and 1383 of the Luxembourg Civil Code for approving the December Distribution. In Count 19, the Trustee seeks to avoid and recover the December Distribution as a fraudulent transfer under sections 548 and 550 of the Bankruptcy Code.8

Defendant BI S.à.r.l. moves, pursuant to Fed.R.Civ.P. 12(b)(2), to dismiss Counts 14 and 19 for lack of personal jurisdiction, and, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss Count 19 for failure to state a claim, on grounds that the avoidance powers of section 548 of the Bankruptcy Code do not apply to the December Distribution because it was an extraterritorial transaction.

For the reasons set forth below, the Court:

The bases for the Court's determination follow.

Facts

The Complaint is quite detailed, at over 140 pages, but most of those details are unnecessary for purposes of the motions being decided here. Useful background may be found in the Court's prior opinions in the actions brought by the Trustee against selling shareholders, familiarity with which is assumed. To minimize the length of this decision, the Court summarizes background facts essential for context and ease of reference, but otherwise only focuses on facts relevant to Counts 14 and 19.

As previously noted, the gist of the Trustee's claims is that the Merger — and more importantly, the highly leveraged financing of the Merger — left the newly formed Resulting Company, Lyondell and many of their affiliates insolvent, inadequately capitalized, and grossly overleveraged. Prior to the Merger, Basell AF GP S.à.r.l. ("Basell GP") was the general partner of Basell, and BI S.à.r.l. was the immediate corporate parent of Basell GP. BI S.à.r.l. held 99.99% of the capital stock of Basell (with Basell GP holding the rest).9 BI S.à.r.l. is an entity organized under the laws of Luxembourg, and was at all relevant times directly and wholly owned by Nell Limited.10 Nell Limited is a Gibraltar entity owned by Access Industries Holdings LLC ("Access Industries") and NAG Investments, LLC, both Delaware entities and both owned and controlled by Leonard Blavatnik ("Blavatnik"),11 Chairman and President of Access Industries.12

On December 7, 2007, two weeks before the closing of the Merger, Basell made the December Distribution to its shareholders, BI S.à.r.l. and Basell GP. According to the Complaint, the distribution was "initiated by Blavatnik after he had begun to implement his plan of acquiring Lyondell,"13 proposed by Basell's general partner (Basell GP), and approved by Basell's shareholders (BI S.à.r.l. and Basell GP), each acting through their managers.14

According to the Complaint, at all relevant times, the managers of BI S.à.r.l. were:

In addition, the Complaint asserts that management of Basell GP included Bigman, Richard Floor and Philip Kassin, both of whom were also members of the board of the Resulting Company.

Discussion

The standards for deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6) are well known. "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face."15 But legal conclusions couched as factual allegations are not entitled to the assumption of the truth.16 "A claim has facial plausibility," the Supreme Court has explained:

Determining whether a complaint states a plausible claim for relief is a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.18

A trial court's function on a motion to dismiss is "not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient."19 A complaint is "deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference."20 Where the plaintiff has relied "on the terms and effect of a document in drafting the complaint," the court may consider the document on a dismissal motion.21 Defendants may raise affirmative defenses on a motion to dismiss, but only "if the defense appears on the face of the complaint."22

I.

This Court's Jurisdiction over BI S.à.r.l. (Counts 14 and 19)

Upon motion, the Court is required to dismiss an action against any defendant over whom it lacks personal jurisdiction.23 "On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of showing that the court has jurisdiction over the defendant."24 Where, as here, the court does not conduct a full-blown evidentiary hearing on the issue of personal jurisdiction, "the plaintiff need only make a prima facie showing that the court possesses personal jurisdiction over the defendant."25 "After discovery, the plaintiff's prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by the trier, would suffice to establish jurisdiction over the defendant."26 "In deciding whether the plaintiff has met this burden, the pleadings and affidavits must be viewed in the light most favorable to the plaintiff, with all doubts resolved in its favor."27 "However, conclusory allegations are not enough to establish personal jurisdiction."28

A. This Court's Authority to Exercise Jurisdiction over BI S.à.r.l.

A federal court applies a two-step test when analyzing personal jurisdiction over a defendant. The first is whether a statute or rule provides a basis for exercising jurisdiction. The second question — and the issue that the parties dispute here — is whether exercising jurisdiction over BI S.à.r.l. comports with due process.

1. Statutory Basis for Personal Jurisdiction

There is clearly a legal basis for this Court to exercise jurisdiction over BI S.à.r.l. under the Federal Rules of Civil Procedure, together with the Federal Rules of Bankruptcy Procedure. Fed. R. Bankr.P. 7004(f), which applies in adversary proceedings, provides:

Fed.R.Civ.P. 4(k), made applicable pursuant to Fed. R. Bankr.P. 7004(a), allows for worldwide service of process.30 There is no dispute that service was proper under applicable federal law,31 and so the Court has a statutory basis for the exercise of jurisdiction over BI S.à.r.l. The question the Court next addresses is whether such exercise is consistent with due process.32

2. Personal Jurisdiction and Due Process

When an action is in federal court on the basis of 28 U.S.C. § 1334 jurisdiction, the sovereign exercising its power over a defendant is the United States, and not any particular state.33 Therefore, to determine whether a bankruptcy court's exercise of personal jurisdiction is constitutionally proper, only the requirements of the Fifth Amendment to the U.S. Constitution must be satisfied. That analysis has two components: (1) whether the defendant has sufficient minimum contacts with the United States as a whole;34 and (2) whether the exercise of jurisdiction is "reasonable" such that it would not offend "traditional notions of fair play and substantial justice."35

The Trustee argues that BI S.à.r.l. has had sufficient contacts with the United States for purposes of personal jurisdiction because it is an "alter ego" of Blavatnik and Nell Limited, and therefore Blavatnik and Nell Limited's contacts with the United States can be imputed to BI S.à.r.l.36 BI S.à.r.l., however, contends that the Trustee has failed to adequately allege that BI S.à.r.l. is the alter ego of either Nell Limited or Blavatnik such that this Court may exercise personal jurisdiction over BI S.à.r.l. consistent with due process.

The Court agrees with BI S.à.r.l.

B. Choice of Law for "Alter Ego" Analysis

The parties disagree whether New York or federal law governs the Court's "alter ego" jurisdictional analysis. When a plaintiff asserts an alter ego theory of liability, the governing law is chosen using applicable choice of law rules.37 Here, however, the Trustee relies on an alter ego theory of jurisdiction. Caselaw on whether a choice-of-law analysis is required in this context is unsettled, with some courts finding that for a jurisdictional analysis, courts should instead apply either the law governing the interpretation of the applicable jurisdictional statute (here, federal law) or federal due process jurisprudence, or both.38

Here, neither party contends that the Court needs to undertake a choice-of-law analysis and therefore the Court does not determine whether such an analysis is required.39 The Trustee argues that New York law is applicable, not based on choice-of-law rules, but because he believed (erroneously, as the Court has now concluded) that New York jurisdictional statutes could be the basis for this Court's exercise of personal jurisdiction over BI S.à.r.l. Because, as explained above, federal law, not New York law, provides the basis for this Court's exercise of personal jurisdiction, the Court would apply federal law to its alter ego analysis.40

However, the Court need not determine whether New York or federal law is appropriate here because both federal and New York law recognize that "as long as a parent and a subsidiary are separate and distinct corporate entities, the presence of one in a forum state may not be attributed to the other",41 and both federal law and New York law lead to the same conclusion — that the Trustee has failed to allege sufficient facts to establish that BI S.à.r.l. and either Nell Limited or Blavatnik were not separate and distinct entities.42

1. Alter Ego Jurisdiction Under Federal Law

"Under the federal law governing the exercise of in personam jurisdiction, if a corporation is the alter ego of an individual defendant, or one corporation the alter ego of another, the Court may `pierce the corporate veil' jurisdictionally and attribute `contacts' accordingly."43 "It is [] well established that the exercise of personal jurisdiction over an alter ego corporation does not offend due process."44

"Federal common law allows piercing of the corporate veil where (1) a corporation uses its alter-ego status to perpetrate a fraud or (2) where it so dominates and disregards its alter-ego's corporate form that the alter-ego was actually carrying on the controlling corporation's business instead of its own."45 With respect to the second prong, a plaintiff demonstrates that an entity is the alter ego of another entity for jurisdictional purposes when one entity "exerts greater than normal control" over the other or one entity is merely an empty shell.46 A plaintiff need not show that the allegedly "sham" corporate structure laid out in a complaint was used for an evil purpose, but must demonstrate that "it would be unfair under the circumstances not to disregard the corporate form."47

While traditionally alter ego jurisdiction is used to obtain personal jurisdiction over a foreign parent that exercises control over affiliated entities within the forum, the reverse is also possible, and a parent's contacts with a forum can be imputed to a subsidiary to obtain personal jurisdiction over that subsidiary.48 Federal courts have also found that an individual shareholder's contacts can be imputed to an alter ego corporation.49

2. Alter Ego Theory Under New York Law

The same is true under New York law. A New York (or domestic) subsidiary can confer jurisdiction over a foreign parent where the subsidiary is so dominated by the parent that it is the "alter ego"50 of the parent.51 New York courts will also pierce the corporate veil in reverse and "exercise personal jurisdiction over a subsidiary based on its jurisdiction over the parent company ... when the subsidiary is an `alter ego' or `mere department' of the parent company."52 Similarly, "where personal jurisdiction over an individual or corporation is proper, such jurisdiction may be extended in order to obtain jurisdiction over a foreign corporation... if the latter is deemed the alter ego of the former."53

Under New York law, "[e]stablishing the exercise of personal jurisdiction over an alleged alter ego requires application of a less stringent standard than that necessary to pierce the corporate veil for purposes of liability."54 "[W]hen veil piercing is only being used to assert jurisdiction, the question is whether the allegedly controlled entity was a shell for the allegedly controlling party; it is not necessary to show also that the shell was used to commit a fraud, which is normally required to pierce the corporate veil for liability."55

C. Analysis of BI S.à.r.l. as Alter Ego of Nell Limited or Blavatnik

Having laid out the requirements for alter ego jurisdiction, the Court evaluates whether the Trustee has provided sufficient allegations in the Complaint for this Court to find that BI S.à.r.l. was the alter ego of either Nell Limited or Blavatnik for purposes of personal jurisdiction.

1. Whether BI S.à.r.l is an Alter Ego of Nell Limited

The Court turns first to the Trustee's contention that BI S.à.r.l. is an "alter ego" of Nell Limited.

To determine whether the subsidiary is an "alter ego" of the parent corporation, courts from this circuit have considered: (1) "common ownership"; (2) "financial dependency of the subsidiary on the parent corporation"; (3) "the degree to which the parent corporation interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities"; and (4) "the degree of control over the marketing and operational policies exercised by the parent."56 "The first factor, common ownership, is essential to the assertion of jurisdiction over a foreign related corporation, while the three other factors are important."57 Therefore, common ownership is a necessary, but not sufficient, factor to establish alter ego status.58 "The overall weighing of the various factors thus necessitates a balancing process, and not every factor need weigh entirely in the plaintiff's favor."59

With respect to the threshold factor, common ownership, the Complaint adequately alleges that at all relevant times, BI S.à.r.l. was directly and wholly owned by Nell Limited,60 and BI S.à.r.l. did not offer evidence to the contrary. Therefore, the first factor has been satisfied.

But the Complaint is deficient with respect to the second factor, BI S.à.r.l.'s financial dependency on Nell Limited. The Complaint contains no allegations as to whether BI S.à.r.l. was undercapitalized, whether it had any operations or was merely a holding company, or whether and how money flowed between BI S.à.r.l. and Nell Limited.

The Complaint is likewise deficient with respect to the third factor, which looks at both the degree to which the parent corporation chooses the subsidiary's personnel and whether the entities failed to observe corporate formalities. The Trustee alleges that there was significant overlap between the managers of BI S.à.r.l. and the officers and directors of other indirect or direct parents of BI S.à.r.l. Of the four managers of BI S.à.r.l., one, Thoren, was also an officer of Access Industries Management LLC, the entity that managed the two shareholders of Nell Limited (Access Industries and NAG), and a second, Alex Blavatnik, was a vice president of Access Industries, which, together with NAG, owned Nell Limited.61 But the Complaint lacks any allegations with respect to the maintenance of (or failure to maintain) corporate formalities. There are no allegations that BI S.à.r.l.'s corporate form was disregarded.

In addition, the Complaint lacks allegations sufficient to satisfy the fourth factor — "the degree of control over the marketing and operational policies exercised by the parent." Courts have found this factor satisfied where a complaint and supporting affidavits alleged, among other things, that the affiliates were merely holding companies formed to finance, own, operate and manage the parent corporation's business in foreign country; that policies for affiliates were made at meetings of the parent's executives; and that agreements involving affiliates required the participation and consent of parent.62 The same may in fact be true with respect to BI S.à.r.l.; however, no such allegations are in the Complaint. The Complaint fails to allege even that BI S.à.r.l. served as a mere holding company for Nell Limited.

In sum, the Complaint alleges only that BI S.à.r.l. was wholly-owned by Nell Limited, and that there was significant overlap of management and personnel. However, courts have recognized that "[t]he existence of common directors and officer is a normal business practice of a multi-national corporation,"63 and that a showing of mere corporate ownership or common management will not be sufficient to justify veil piercing.64

The majority of cases on which the Trustee relies do not suggest otherwise.65 And the Trustee has not identified, and the Court cannot find, a single case in which analogous allegations, without more, have been found to make a prima facie showing of alter ego jurisdiction. Rather, courts in this circuit have found a prima facie showing of alter ego jurisdiction only where the plaintiff alleged (and in some instances provided evidence), in addition to common ownership and overlapping officers and directors, that the subsidiary was kept undercapitalized, that there was a failure to respect corporate formalities or permit autonomous decision-making, or both.66

The conclusory allegation in the Complaint that "upon information and belief, [BI S.à.r.l.] was operated as a mere department of both Nell Limited and Nell Limited's shareholders"67 is insufficient to make a prima facie showing of jurisdiction.68

For these reasons, the Court finds that the Trustee has not made a prima facie showing that BI S.à.r.l. is subject to personal jurisdiction in this court as the "alter ego" of Nell Limited.

2. Whether BI S.à.r.l. is the Alter Ego of Blavatnik

The Trustee also asserts that this Court has personal jurisdiction over BI S.à.r.l. because BI S.à.r.l. is the alter ego of Blavatnik. For alter ego analyses involving an individual shareholder, courts have considered, either explicitly or implicitly: (1) the absence of corporate formalities normally attendant on corporate existence, such as issuance of stock, election of directors, keeping of corporate records, and so forth; (2) inadequate capitalization; (3) the intermingling of corporate and personal finances; and (4) the amount of business discretion displayed by the purported alter ego corporation.69

Here, there are no allegations in the Complaint that BI S.à.r.l. failed to maintain its corporate form or formalities; that BI S.à.r.l. was kept undercapitalized; that Blavatnik used BI S.à.r.l. to intermingle personal and corporate finances; or that BI S.à.r.l. was merely a holding company for Blavatnik and lacked business discretion.70 While it is alleged that the distribution from Basell to BI S.à.r.l. was "initiated by Blavatnik," it is not alleged that BI S.à.r.l. ever failed to exercise its business discretion in connection with the December Distribution, the Merger or otherwise.

The only non-conclusory relevant allegations71 in the Complaint are (1) that BI S.à.r.l. held 99.99% of the capital stock of Basell; (2) that BI S.à.r.l. was directly and wholly owned by Nell Limited, which was in turn indirectly owned by Blavatnik; (3) that the managers of BI S.à.r.l. were Bigman, Alex Blavatnik, Thoren, and Baker; and (4) that BI S.à.r.l. approved the payment of the distributions from Basell, and then received the distributions from Basell. As explained above, such allegations are insufficient to plead that BI S.à.r.l. is the alter ego of Blavatnik for jurisdictional purposes.

The Trustee does point to allegations in the Complaint that Blavatnik exercised significant control over entities under the Access umbrella other than BI S.à.r.l., and over the officers and directors of those entities. But these allegations are insufficient for a prima facie showing, as they allege no specific facts with respect to BI S.à.r.l. The Trustee also points to allegations in the Complaint that Blavatnik formed AI Chemical Investments LLC ("AI Chemical," another Access entity) solely for the purpose of using it as a pass-thru entity to minimize tax liability on payments he would receive in connection with his ownership of approximately 10% of Lyondell's stock pre-Merger, and that AI Chemical was dissolved shortly after he received those payments. Such allegations might establish that AI Chemical was merely an alter ego of Blavatnik, but are irrelevant with respect to BI S.à.r.l. And lastly, the Trustee points to allegations in the Complaint demonstrating that Bigman, a manager of BI S.à.r.l., "acted under the control and direction of Blavatnik," "participated in every step of the merger discussions," and was essentially Blavatnik's right-hand man.72 But the Complaint does not allege that Blavatnik ever used his influence over Bigman to exercise control over BI S.à.r.l.

For these reasons, the Court concludes that the Trustee has not alleged sufficient facts to demonstrate that BI S.à.r.l. is the alter ego of Blavatnik for jurisdictional purposes.73

D. Conclusions on Personal Jurisdiction

Because the Court finds that the Complaint fails to allege facts sufficient to establish that BI S.à.r.l. is the alter ego of Nell Limited or Blavatnik, the contacts of Nell Limited and Blavatnik with the United States cannot be imputed to BI S.à.r.l. Therefore, the Trustee has failed to make a prima facie case for this Court's exercise of personal jurisdiction over BI S.à.r.l consistent with due process. BI S.à.r.l.'s motion to dismiss Counts 14 and 19 for lack of personal jurisdiction is therefore granted.

II.

Extraterritorial Reach of Section 548 (Count 19)

In Count 19 of the Complaint, the Trustee seeks recovery from BI S.à.r.l. of the December Distribution as a fraudulent transfer under section 548 of the Bankruptcy Code. In its motion to dismiss, BI S.à.r.l. argues that Count 19 must be dismissed under Rule 12(b)(6) because the December Distribution was an extraterritorial transfer, and the Court's avoidance powers under section 548 cannot be applied extraterritorially.

It is well-settled that "Congress has the authority to enforce its laws beyond the territorial boundaries of the United States."74 However, it is a "longstanding principle of American law that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States."75 The presumption "serves to protect against unintended clashes between our laws and those of other nations which could result in international discord."76

Courts perform a two-step inquiry when determining whether to apply the presumption against extraterritorial reach of a statute in a specific factual setting.77 First, a court must determine if the presumption applies at all — by "identifying the conduct proscribed or regulated by the particular legislation in question," and considering whether that conduct "occurred outside of the borders of the U.S."78 "Second, if the presumption is implicated, an inquiry into Congressional intent must be undertaken to determine if Congress intended to extend the coverage of the relevant statute to such extraterritorial conduct."79

Based on the allegations in the Complaint, the Court concludes that the December Distribution was an extraterritorial transfer, but that Congress' intent was to extend the scope of section 548 to cover extraterritorial conduct. Therefore, the presumption against extraterritoriality has been rebutted and does not preclude the relief sought in Claim 19 under section 548. Thus, BI S.à.r.l.'s motion to dismiss Count 19 on this ground is denied.

A. Was the Transaction Extraterritorial?

BI S.à.r.l. argues that the December Distribution was extraterritorial because it was made by a foreign entity (Basell, a Luxembourg company) to a foreign entity (BI S.à.r.l., its Luxembourg parent). However, in determining whether a transaction is domestic or extraterritorial, courts employ a less simplistic and formalistic approach and consider a number of factors.80 In a case in this district, Judge Scheindlin noted that if courts concluded that a transfer (in that case, under section 547) was extraterritorial based solely on the fact that the debtor paid, and the creditor received, the funds outside of the United States:

Thus courts rely on a "flexible" approach,82 and "have applied a `center of gravity' test, under which they `look at the facts of a case to determine whether they have a center of gravity outside the United States.'"83 Such an analysis may include consideration of "all component events of the transfer[],"84 such as "whether the participants, acts, targets, and effects involved in the transaction at issue are primarily foreign or primarily domestic."85

Although the December Distribution was made from one Luxembourg entity to another,86 the Trustee points to certain "component events" of the transfer that have connections to the United States. First, the Trustee argues that at least some of the decisions to make the December Distribution were made in the United States.87 According to the Complaint, the December Distribution was initiated by and occurred at the direction of Blavatnik,88 who operated out of New York.89 Second, the Trustee argues that the Merger had substantial connections to the United States and, as a part of the Merger, so does the December Distribution. Third, the Trustee suggests that the payment of the December Distribution had substantial effects in the United States by rendering Basell — and 13 days later the Resulting Company — undercapitalized.90

Nevertheless, the minimal contacts to the United States that the Trustee points to in the Complaint91 are insufficient to overcome the substantially foreign nature of the December Distribution.92 As stated in the Supreme Court's decision in Morrison v. National Australian Bank Ltd., the court must target its inquiry on "the `focus' of congressional concern," or, in other words, the "transactions that the statute seeks to `regulate.'"93 Section 548 focuses on the "nature of the transaction in which property is transferred."94 A court in this district has stated that a "mere connection to the U.S .... is insufficient on its own to make every application of the Bankruptcy Code domestic."95 "[E]ven where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application."96 Here, the connection to the United States is not sufficiently strong for the transfer to be considered anything but extraterritorial.97 As Justice Scalia stated in Morrison: "[I]t is a rare case of prohibited extraterritorial application that lacks all contact with the territory of the United States. But the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case."98

B. Did Congress Intend Section 548 to Apply to Extraterritorial Transfers?

Having found that the December Distribution was extraterritorial, the Court now must consider whether the presumption against a statute's extraterritoriality precludes the Trustee's use of section 548 to avoid the transfer.

As the Supreme Court made clear in Morrison, "`unless there is the affirmative intention of the Congress clearly expressed' to give a statute extraterritorial effect," courts "must presume it is primarily concerned with domestic conditions."99 "When a statute gives no clear indication of an extraterritorial application, it has none."100 Thus, to determine whether a federal statute can be applied extraterritorially, and whether Congress so intended, the court must look to the language of the statute.

Section 548 of the Bankruptcy Code provides that a trustee may avoid any fraudulent transfer "of an interest of the debtor in property" that was made within 2 years of the filing of the bankruptcy petition. The text of section 548 does not contain any express language or indication that Congress intended the statute to apply extraterritorially.101 However, the presumption against Congressional intent to extend the reach of a statute extraterritorially is not a "clear statement rule," and courts may look to "context,"102 including surrounding provisions of the Bankruptcy Code, to determine whether Congress nevertheless intended that statute to apply extraterritorially.103

Pursuant to 28 U.S.C. § 1334 and section 541 of the Bankruptcy Code, a bankruptcy court has in rem jurisdiction over all of a debtor's property, whether foreign or domestic.104 Section 541, which defines "property of the estate," provides, in relevant part:

And section 550 authorizes a trustee to recover transferred property for the benefit of the estate to the extent that a transfer is avoided, inter alia, as fraudulent under either section 544 or section 548.106

The Fourth Circuit, in addressing the same issue presented here, concluded that section 548 of the Code, read in conjunction with section 541, demonstrates congressional intent to apply section 548 extraterritorially.107 In French, the Fourth Circuit, speaking through Judge Motz, explicitly stated that section 548 could be applied extraterritorially regardless of when property subject to a fraudulent avoidance action becomes property of the estate: "we hold that § 548 applies to the transfer in this case even assuming that § 541's definition of "property of the estate" does not by itself extend to the Bahamian property...."108 The French court explained that section 548 applies extraterritorially not because it provides for recovery of property that is already property of the estate, but rather, because section 548 provides for the recovery of property that would have been property of the estate — i.e. property worldwide in which the debtor would have had an interest — but for the fraudulent transfer.109

But the Fourth Circuit's views in Frenchare not uniformly shared.110 In Midland Euro, a decision from the Central District of California Bankruptcy Court, the court acknowledged that section 541(a) provides that property of the estate includes property "wherever located," but ultimately concluded that section 541 did not support a reading of section 548 to apply extraterritorially. The court reasoned that because property held by third-party transferees would become "property of the estate" only when the transfer has been avoided — a proposition for which the Midland Euro court cited the Second Circuit's decision in Colonial Realty for support — section 541 did not indicate Congress' intent for section 548 to apply extraterritorially.111

In Colonial Realty, the Second Circuit did indeed conclude that fraudulently conveyed property does not become property of the estate until it has been recovered.112 But that is just a matter of timing. It is not at all the same thing as finding a lack of Congressional intent to allow property to be recovered on an extraterritorial basis. The Colonial Realty court noted that, pursuant to section 541(a)(1), property of the estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case," and pursuant to section 541(a)(3), property of the estate also includes "[a]ny interest in property that the trustee recovers" under specified Bankruptcy Code provisions, including section 550 — which comes after the commencement of the case. The Circuit explained:

Relying on that holding in Colonial Realty, the Midland Euro court criticized the Fourth Circuit's conclusion in French that Congress intended section 548 to apply extraterritorially:

But this Court cannot agree with Midland Euro's criticism of French, and rather finds the Fourth Circuit's decision in Frenchto be persuasive.115 First, but importantly, the Colonial Realty court recognized that sections 541(a)(1) and (a)(3) were speaking as of different times. Section 541(a)(1) speaks of property of the estate "as of the commencement of the case"; whereas sections 541(a)(3) speaks of property that enters the estate at a later time, when it is recovered under section 550. That plainly correct observation by the Second Circuit falls far short of holding that property not in the estate as of the commencement of the case cannot be brought into the estate because it is in a foreign locale. Second, it is hard to believe that Congress intended for the Code to apply extraterritorially with respect to property of the estate, but not to apply extraterritorially with respect to what would have been property of the estate but for a fraudulent transfer.

Therefore, this Court believes that the conclusion reached by the Fourth Circuit in French is the superior one, in part for the reasons stated by the French court, but more importantly for the reasons stated by Professor Jay Westbrook in an article which addresses the French and Midland Euro decisions.116 Discussing the French court's examination of the statutory language of section 541(a)(1) of the Bankruptcy Code together with section 1334 of the Judicial Code, Professor Westbrook explained:

Professor Westbrook further noted that:

This Court agrees with Professor Westbrook that section 541(a)(3) of the Bankruptcy Code supports a finding that Congress intended section 548 to extend extraterritorially. Section 541(a)(3) provides that any interest in property that the trustee recovers under section 550 becomes property of the estate. Section 550 authorizes a trustee to recover transferred property to the extent that the transfer is avoided under either section 544 or section 548. It would be inconsistent (such that Congress could not have intended) that property located anywhere in the world could be property of the estate once recovered under section 550, but that a trustee could not avoid the fraudulent transfer and recover that property if the center of gravity of the fraudulent transfer were outside of the United States. It is necessary to rule as the French court did in order to protect the in rem jurisdiction of the bankruptcy courts over assets that Congress has declared become property of the estate when recovered under section 541(a)(3).

For these reasons, even after Colonial Realty (which addresses a wholly different issue), the Court finds that section 541 evidences an intent by Congress that section 548 can be employed extraterritorially to claw back the December Distribution. Therefore, BI S.à.r.l.'s motion to dismiss Count 19 for failure to state a claim is denied.

III.

Jurisdictional Discovery and Leave to Amend

In his opposition brief, the Trustee asserts that if the Court finds that the Complaint does not make out a prima facie case for the Court to exercise personal jurisdiction over BI S.à.r.l., the Trustee should be entitled to jurisdictional discovery.

"[I]t is within the trial court's discretion to determine whether a plaintiff is entitled to conduct jurisdictional discovery."119 However, "if the plaintiff has failed to establish a prima facie case for personal jurisdiction, jurisdictional discovery is generally not granted."120 The Complaint and briefs on this motion were filed before discovery was completed. Between briefing and oral argument on this motion, the parties undertook additional discovery, and discovery has since been completed. Because the Trustee has had significant discovery in this case, the Court believes that additional jurisdictional discovery would be inappropriate.

The Trustee also requests that the dismissal of Counts 14 and 19 for lack of personal jurisdiction be without prejudice and for leave to amend the Complaint. Leave to amend a complaint "shall be freely given when justice so requires."121 Leave to amend should be granted in the absence of "evidence of undue delay, bad faith or dilatory motive on the part of the movant, undue prejudice to the opposing party, or futility."122

The Court does not believe that the Defendant would be prejudiced by the Trustee's amendment of the Complaint, or that such an amendment would be futile. Counsel for the Trustee represented to the Court at oral argument that it obtained additional information through discovery conducted after the Complaint was filed and after briefing was completed on this motion. Thus, although the facts alleged here are insufficient for the exercise of personal jurisdiction over BI S.à.r.l., it is possible that with this new information, the Trustee may be able to plead legally sufficient, non-conclusory allegations establishing a prima facie case of personal jurisdiction over BI S.à.r.l. Therefore, the dismissal of Counts 14 and 19 for lack of personal jurisdiction is without prejudice, and the Trustee is granted leave to amend.

Conclusion

For the reasons stated above, BI S.à.r.l.'s motion to dismiss Counts 14 and 19 of the Amended Complaint for lack of personal jurisdiction is granted; BI S.à.r.l.'s motion to dismiss Count 19 for failure to state a claim is denied; the Trustee's request to conduct further jurisdictional discovery is denied; but the Trustee is granted leave to amend his Complaint again to cure the deficiencies as to personal jurisdiction.

SO ORDERED.

APPENDIX A

                                         APPENDIX A*

Count   Claim                                         Defendant Parties

1       Constructive fraudulent transfer under the    Nell, Limited; AI Chemical Investments
        Bankruptcy Code and applicable state law      LLC; and Leonard Blavatnik

2       Intentional fraudulent transfer under the     Nell, Limited; AI Chemical Investments
        Bankruptcy Code and applicable state law      LLC; and Leonard Blavatnik

3       Constructive fraudulent transfer under the    Lyondell Pre-Merger Directors and
        Bankruptcy Code and applicable state law      Lyondell Pre-Merger Officers1

4       Intentional fraudulent transfer under the     Lyondell Pre-Merger Directors and
        Bankruptcy Code and applicable state law      Lyondell Pre-Merger Officers

5       Breach of fiduciary duty                      Lyondell Pre-Merger Directors

6       Mismanagement and breach of duty under        Leonard Blavatnik2
        Luxembourg law

7       Tort under Luxembourg law                     Blavatnik;3 the GP Managers; the
                                                      Nominees; and the Successors4

* Except as to Count 6, (see n.2, infra), counts and claims listed below are based on the amended complaint
dated July 23, 2010 [Dkt. 381] (the "Complaint"). This table does not reflect subsequent dismissals of
claims or defendants by stipulation of the parties or by order of the Court.

1 Pre-Merger, in addition to chairman and CEO Dan Smith, Lyondell had ten outside directors on its Board
of Directors: Carol Anderson, Susan Carter, Stephen Chazen, Travis Engen, Paul Halata, Daniel Huff,
David Lesar, David Meachin, Daniel Murphy, and William Spivey (collectively, the "Lyondell Pre-Merger
Directors"). The relevant Lyondell officers identified in the Complaint as named defendants are:
James Bayer, T. Kevin DeNicola, Bart de Jong, Edward Dineen, Kerry Galvin, Morris Gelb, John
Hollinshead, and W. Norman Philips (collectively, the "Lyondell Pre-Merger Officers").

2 This Count 6 is based upon the second amended complaint dated September 29, 2011 [Dkt. 598].

3 Although the Complaint did not specify whether Count 7 is asserted against Leonard Blavatnik or Alex
Blavatnik, who is also a named defendant in this action, the Court understands this claim to be asserted
against Leonard Blavatnik.

4 The "GP Managers" are identified in the Complaint as including: Alan Bigman, Richard Floor and Philip
Kassin. The "Nominees" are defined in the Complaint as including: Simon Baker, Dawn Shand, and
Bertrand Duc. The "Successors" are defined in the Complaint as including: Philip Kassin, Lincoln Benet,
Lynn Coleman, and Richard Floor.

Richard Floor is deceased and Diane Currier has been appointed as the executor for the estate of Richard
Floor.

8       Breach of fiduciary duty                      Subsidiary Directors5

9       Avoidance preference under the                Access Industries Holdings LLC
        Bankruptcy Code and applicable state law

10      Equitable subordination under the             AI International, S.à.r.l.
        Bankruptcy Code

11      Constructive fraudulent transfer under the    Nell Limited; Deutsche Bank Securities
        Bankruptcy Code and applicable state law      Inc.; and Perella Weinberg Partners LP

12      Breach of contract                            Access Industries Holdings LLC; and
                                                      AI International, S.à.r.l.

13      Illegal dividends or redemption               Lyondell Pre-Merger Directors

14      Unlawful distribution and extra-contractual   Leonard Blavatnik; the GP Managers;
        tort under Luxembourg law                     BI S.à.r.l.; Alan Bigman; Alex
                                                      Blavatnik; Peter Thorén; Simon Baker;
                                                      and the Nominees

15      Declaratory judgment for characterization     Access Industries Holdings LLC; and
        of purported loan advances under the          the Lyondell Post-Merger Directors6
        Access Revolver as capital contributions

16      Illegal dividends                             Lyondell Post-Merger Directors

17      Constructive fraudulent transfer under the    Access Industries Holdings LLC
        Bankruptcy Code and applicable state law

18      Aiding and abetting breach of fiduciary       Nell Limited; Access Industries
        duty under applicable state law and           Holdings, LLC; Access Industries, Inc.;
        Luxembourg law                                AI International, S.à.r.l.; AI Chemical
                                                      Investments LLC

5 The "Subsidiary Directors" are identified in the Complaint as including: Kevin Cadenhead, Charles Hall,
Rick Fontenot, and John Fisher Gray.

6 The "Lyondell Post-Merger Director" are identified in the Complaint as including: Alan Bigman, Edward
Dineen, and Morris Gelb.

19      Constructive fraudulent transfer under the    BI S.à.r.l.
        Bankruptcy Code

20      Breach of fiduciary duty                      Dan Smith; T. Kevin DeNicola; Edward
                                                      Dineen; Kerry Galvin; and W. Norman
                                                      Phillips

21      Aiding and abetting breach of fiduciary       T. Kevin DeNicola; Edward Dineen;
        duty                                          Kerry Galvin; and W. Norman Phillips