Morning Mist Holdings Ltd. v. Krys

11-4376-cv
Morning Mist Holdings Ltd. v. Krys
UNITED STATES COURT OF APPEALS 1
2
FOR THE SECOND CIRCUIT 3
4
August Term, 2012 5
6
7
(Argued: November 19, 2012 Decided: April 16, 2013) 8
9
Docket No. 11-4376 10
11
- - - - - - - - - - - - - - - - - - - -x 12
13
In the Matter of: Fairfield Sentry Limited, 14
15
Debtor, 16
17
MORNING MIST HOLDINGS LIMITED, MIGUEL LOMELI, 18
19
Appellants, 20
21
- v.- 22
23
KENNETH KRYS, CHRISTOPHER STRIDE, 24
25
Appellees. 26
27
- - - - - - - - - - - - - - - - - - - -x 28
29
Before: JACOBS, Chief Judge, WINTER, Circuit 30
Judge, SWAIN, District Judge.*
31
32
Morning Mist Holdings Limited and Miguel Lomeli appeal 33
from the judgment of the United States District Court for 34
the Southern District of New York (Daniels, J.), affirming 35
* The Honorable Laura Taylor Swain, United States
District Judge for the Southern District of New York,
sitting by designation.

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the order of the United States Bankruptcy Court for the 1
Southern District of New York (Lifland, J.), which 2
determined that the debtor in this case, Fairfield Sentry 3
Limited, had its center of main interests in the British 4
Virgin Islands, and therefore recognized Fairfield Sentry’s 5
liquidation in the British Virgin Islands as a “foreign main 6
proceeding” under 11 U.S.C. § 1517. We affirm. 7
ROBERT A. WALLNER, Milberg LLP, 8
New York, New York (Kent A. 9
Bronson, on the brief; Stephen 10
A. Weiss, Seeger Weiss LLP, New 11
York, New York, on the brief), 12
for Appellants. 13
14
DAVID J. MOLTON, Brown Rudnick 15
LLP, New York, New York (Daniel 16
J. Saval, May Orenstein, Kerry 17
L. Quinn, on the brief), for 18
Appellees. 19
20
DENNIS JACOBS, Chief Judge: 21
22
The question presented is where the debtor in this 23
bankruptcy proceeding had its “center of main interests” 24
within the meaning of Chapter 15 of the Bankruptcy Code 25
(enacted as part of the Bankruptcy Abuse Prevention and 26
Consumer Protection Act of 2005). The answer determines 27
whether the pending foreign bankruptcy proceeding is a 28
“foreign main proceeding,” in which event U.S. proceedings 29
against the debtor are stayed. Morning Mist Holdings 30
2

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Limited and Miguel Lomeli (collectively, “Morning Mist”) 1
appeal from the judgment of the United States District Court 2
for the Southern District of New York (Daniels, J.), 3
affirming the order of the United States Bankruptcy Court 4
for the Southern District of New York (Lifland, J.), which 5
determined that the debtor, Fairfield Sentry Limited 6
(“Sentry”), had its “center of main interests” in the 7
British Virgin Islands (“BVI”), and therefore recognized 8
Sentry’s liquidation in the BVI as a “foreign main 9
proceeding” under 11 U.S.C. § 1517. For the following 10
reasons, we affirm. 11
To determine the proper “center of main interests” 12
(“COMI,” as the term is abbreviated by the parties and other 13
courts), we consider the relevant time period for weighing 14
the interests, and the principles and factors for 15
determining which jurisdiction predominates. We conclude 16
(as did the bankruptcy court and the district court) that 17
the relevant time period is the time of the Chapter 15 18
petition, subject to an inquiry into whether the process has 19
been manipulated. The relevant principle (for which we 20
consult foreign law, as directed by the statute) is that the 21
COMI lies where the debtor conducts its regular business, so 22
3

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that the place is ascertainable by third parties. The 1
statute includes a presumption that the COMI is where the 2
debtor’s registered office is found. Among other factors 3
that may be considered are the location of headquarters, 4
decision-makers, assets, creditors, and the law applicable 5
to most disputes. 6
7
BACKGROUND 8
Sentry was organized in 1990 as an International 9
Business Company under the laws of the BVI. From 1990 until 10
Bernard Madoff’s arrest on December 11, 2008, Sentry was the 11
largest of the “feeder funds” that invested with Bernard L. 12
Madoff Investment Securities LLC (“BLMIS”). Roughly 95% of 13
Sentry’s assets were invested with BLMIS, totaling over $7 14
billion. 15
Pursuant to its Memorandum of Association, Sentry 16
administered its business interests from the BVI, where its 17
registered office, registered agent, registered secretary, 18
and corporate documents, among other things, were located. 19
Sentry’s Board of Directors oversaw the management, with 20
day-to-day operations handled by an investment manager, 21
4

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Fairfield Greenwich Group (“FGG”), based in New York. 2
1
Sentry’s three directors, Walter Noel, Jr., Jan Naess, and 2
Peter Schmid, resided in New York, Oslo, and Geneva, 3
respectively. 4
When Madoff was arrested, Sentry’s two independent 5
directors, Naess and Schmid, suspended all share 6
redemptions. (Noel was recused from that meeting as the 7
owner and principal of FGG, Sentry’s investment manager.) 8
Over the ensuing months, Naess and Schmid focused on winding 9
down Sentry’s business and preserving assets in anticipation 10
of litigation and bankruptcy. From December 2008 to July 11
2009 (when Sentry entered liquidation in the BVI), they 12
participated in approximately 44 teleconference board 13
meetings initiated by Sentry’s registered agent in the BVI. 14
During this time, Naess and Schmid advised Sentry’s 15
shareholders as to measures being taken in response to the 16
Madoff scandal. That correspondence issued from Sentry’s 17
address in the BVI, as shown on the letterhead. 18
In February 2009, Naess and Schmid constituted 19
themselves as a litigation committee with the authority to 20
2 Fairfield Greenwich (Bermuda) Ltd., a member company
of FGG, served as Sentry’s investment manager. We refer to
those entities collectively as “FGG.”
5

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(among other things) consider, commence, and settle 1
litigation to be taken by or against Sentry. Sentry would 2
subsequently become engulfed in lawsuits. 3
In May 2009, Morning Mist, a Sentry shareholder, filed 4
a derivative action in New York state court, claiming that 5
Sentry’s directors, management, and service providers 6
breached duties to Sentry (the “derivative action”). 1
7
Back in the BVI, ten of Sentry’s shareholders applied 8
for the appointment of a liquidator. On July 21, 2009, the 9
High Court of Justice of the Eastern Caribbean Supreme Court 10
(the “BVI court”) entered an order which commenced Sentry’s 11
liquidation proceedings under the Virgin Islands Insolvency 12
Act of 2003. The order appointed Kenneth Krys and 13
Christopher Stride (from the BVI liquidation firm of Krys 14
and Associates) as liquidator, 2 and gave the liquidator 15
“custody and control of all the assets of the Company.” 16
On June 14, 2010, pursuant to an order of the BVI 17
court, the liquidator petitioned the United States 18
1 Later that month, Sentry would file a direct lawsuit
in New York state court against its investment manager, FGG,
and FGG’s affiliates.
2 Stride later resigned and was replaced by Joanna
Lau, who herself then resigned. Krys is currently Sentry’s
sole liquidator and the appellee in this case (hereafter
referred to as the “liquidator”).
6

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Bankruptcy Court in the Southern District of New York 1
(Lifland, J.) for recognition of the BVI liquidation 2
proceedings under Chapter 15 of the Bankruptcy Code (the 3
“Chapter 15 petition”). 3
4
As of that date, Sentry’s liquid assets consisted of 5
approximately $73 million in Ireland, $22 million in the 6
United Kingdom, and $17 million in the BVI. Its other 7
assets were claims and causes of action, including claims 8
for approximately: $6 billion in customer funds under the 9
Securities Investor Protection Act; $3 billion from Madoff 10
customers who profited from redemptions in New York; and 11
$150 million in similar redemption claims in the BVI. Other 12
proceedings were commenced in the Netherlands and Ireland. 13
The litigations were undertaken under the supervision of the 14
BVI court and with the assistance of the liquidator’s 15
BVI-based counsel. 16
On July 22, 2010, the bankruptcy court granted the 17
liquidator’s Chapter 15 recognition petition. In 18
determining Sentry’s COMI for purposes of Chapter 15, the 19
bankruptcy court examined the period between December 2008, 20
3 Recognition of a foreign proceeding under Chapter 15
can have the effect of staying all other actions against the
debtor in the United States, as explained in Part I below.
7

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when Sentry stopped doing business, and June 2010, when the 1
Chapter 15 petition was filed. The bankruptcy court 2
determined that Sentry’s “COMI for the purpose of 3
recognition as a main proceeding is in the BVI, and not 4
elsewhere,” and therefore recognized the BVI liquidation as 5
a “foreign main proceeding” under 11 U.S.C. § 1517(b)(1). 6
Modified Bench Mem. & Order Granting Chapter 15 Petitions of 7
Fairfield Sentry Ltd., Fairfield Sigma Ltd. & Fairfield 8
Lambda Ltd. for Recognition of Foreign Proceedings, In re 9
Fairfield Sentry Ltd., No. 10-13164(BRL), at 6 (Bankr. 10
S.D.N.Y. July 30, 2010) (hereinafter “Bankr. Order”). 11
Pursuant to 11 U.S.C. § 1520, recognition of the BVI 12
liquidation as a foreign main proceeding imposed an 13
automatic stay on any other proceedings against Sentry in 14
the United States--including the derivative action brought 15
by Morning Mist. Id. at 9 (recognizing automatic stay); see 16
also 11 U.S.C. § 1520(a)(1) (imposing automatic stay from 11 17
U.S.C. § 362). The bankruptcy court concluded in the 18
alternative that even if the BVI liquidation was a “nonmain” 19
proceeding (in which a stay would not be automatic), a stay 20
of the derivative action was appropriate under 11 U.S.C. 21
§ 1521, which allows for such relief. Bankr. Order at 9-11. 22
8

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Morning Mist appealed the bankruptcy court’s order to 1
the district court. On September 16, 2011, the United 2
States District Court for the Southern District of New York 3
(Daniels, J.) affirmed, holding that the bankruptcy court 4
properly considered Sentry’s administrative activities in 5
its COMI analysis, and correctly considered Sentry’s COMI as 6
of the filing of the Chapter 15 petition (not over its 18 7
year operational history). Mem. Decision & Order, In re 8
Fairfield Sentry Ltd., No. 10 Civ. 7311(GBD), at 7-12 9
(S.D.N.Y. Sept. 16, 2011). Morning Mist had argued there 10
(as it argues here) that recognition of the BVI liquidation 11
would be manifestly contrary to U.S. public policy, and was 12
therefore barred by 11 U.S.C. § 1506, because the court 13
records in the BVI liquidation were sealed. The argument 14
was rejected on the ground that the right of public access 15
to court records is not absolute. Id. at 14-17. 16
Imposition of the automatic stay was affirmed, 17
including the stay of Morning Mist’s derivative action 18
against Sentry. Id. at 18. Morning Mist timely appealed. 19
20
21
22
9

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DISCUSSION 1
We review an appeal from a district court’s affirmance 2
of a bankruptcy court decision “independently,” accepting 3
the bankruptcy court’s factual findings unless clearly 4
erroneous, and reviewing the bankruptcy court’s legal 5
conclusions de novo. In re Enron Corp., 419 F.3d 115, 124 6
(2d Cir. 2005) (quoting In re AroChem Corp., 176 F.3d 610, 7
620 (2d Cir. 1999)). 8
9
I 10
11
Chapter 15 of the Bankruptcy Code was enacted in 2005 12
as part of the Bankruptcy Abuse Prevention and Consumer 13
Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 14
(codified at 11 U.S.C. §§ 1501-1532). Its goal “is to 15
incorporate the Model Law on Cross-Border Insolvency so as 16
to provide effective mechanisms for dealing with cases of 17
cross-border insolvency,” while promoting international 18
cooperation, legal certainty, fair and efficient 19
administration of cross-border insolvencies, protection and 20
maximization of debtors’ assets, and the rescue of 21
financially troubled businesses. 11 U.S.C. § 1501(a). 22
23
10

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Chapter 15 is derived from the Model Law promulgated by 1
the United Nations Commission on International Trade Law 2
(“UNCITRAL”), and it instructs that “[i]n interpreting 3
[Chapter 15], the court shall consider its international 4
origin, and the need to promote an application of this 5
chapter that is consistent with the application of similar 6
statutes adopted by foreign jurisdictions.” 11 U.S.C. 7
§ 1508. The legislative history accompanying the passage of 8
Chapter 15 recommends the Guide to Enactment of the Model 9
Law, promulgated by UNCITRAL, “for guidance as to the 10
meaning and purpose of [the Model Law’s] provisions.” H.R. 11
Rep. No. 109-31, pt. 1, at 106 n.101 (2005) (hereinafter 12
“House Report”). 3
13
The recognition of foreign proceedings is governed by 14
Sections 1515 through 1524. Under Section 1517, “an order 15
recognizing a foreign proceeding shall be entered if--(1) 16
such foreign proceeding . . . is a foreign main proceeding 17
or foreign nonmain proceeding within the meaning of section 18
3 See also id. at 109-10 (“Uniform interpretation will
also be aided by reference to CLOUT, the UNCITRAL Case Law
On Uniform Texts . . . . Not only are these sources
persuasive, but they advance the crucial goal of uniformity
of interpretation. To the extent that the United States
courts rely on these sources, their decisions will more
likely be regarded as persuasive elsewhere.”).
11

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1502; (2) the foreign representative applying for 1
recognition is a person or body; and (3) the petition meets 2
the requirements of section 1515.” 11 U.S.C. § 1517(a). 3
There is no dispute that the second and third requirements 4
are met here. The only point at issue is whether the BVI 5
liquidation qualifies as a foreign main or nonmain 6
proceeding. 7
Section 1502 defines a foreign main proceeding as a 8
“foreign proceeding pending in the country where the debtor 9
has the center of its main interests,” and defines a foreign 10
nonmain proceeding as a “foreign proceeding, other than a 11
foreign main proceeding, pending in a country where the 12
debtor has an establishment.” 4 11 U.S.C. § 1502(4)-(5). 13
The statute does not define COMI. It does, however, 14
establish a presumption: “In the absence of evidence to the 15
contrary, the debtor’s registered office . . . is presumed 16
to be the center of the debtor’s main interests.” 11 U.S.C. 17
§ 1516(c). 18
Upon recognition of a foreign main proceeding, Section 19
1520 provides certain automatic, nondiscretionary relief, 20
4 “Establishment” is defined as “any place of
operations where the debtor carries out a nontransitory
economic activity.” 11 U.S.C. § 1502(2).
12

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including an automatic stay of all proceedings against the 1
debtor in the United States. 11 U.S.C. § 1520(a). A 2
discretionary stay is also available under Section 1521, 3
regardless of whether a foreign main proceeding is 4
recognized. 11 U.S.C. § 1521(a). 5
Finally, Section 1506 provides an overriding public 6
policy exception to all of Chapter 15: “Nothing in this 7
chapter prevents the court from refusing to take an action 8
governed by this chapter if the action would be manifestly 9
contrary to the public policy of the United States.” 11 10
U.S.C. § 1506. 11
12
II 13
14
Few courts have considered the meaning of COMI under 15
Chapter 15, especially with respect to the time frame and 16
the factors that bear on the question. 5
17
A. Relevant Time Period 18
Morning Mist argues that the bankruptcy court should 19
5 We have only mentioned Chapter 15 in cases where
Section 304 of the Bankruptcy Code, the predecessor
provision to Chapter 15, applied. See, e.g., In re Bd. of
Dirs. of Telecom Arg., S.A., 528 F.3d 162, 169 (2d Cir.
2008) (noting that Section 304 controls because the
bankruptcy petition was filed prior to Chapter 15’s
effective date).
13

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have looked at Sentry’s entire operational history, while 1
the liquidator advocates affirmance of the determinations 2
that COMI should be considered as of the filing of the 3
Chapter 15 petition. To identify the time frame relevant to 4
the COMI determination, we consider: (1) the text of the 5
statute; (2) guidance from other federal courts; and (3) 6
international sources. We conclude that a debtor’s COMI is 7
determined as of the time of the filing of the Chapter 15 8
petition. To offset a debtor’s ability to manipulate its 9
COMI, a court may also look at the time period between the 10
initiation of the foreign liquidation proceeding and the 11
filing of the Chapter 15 petition. 12
Statutory Text. Chapter 15 does not define COMI. 13
Section 1517 provides that a “foreign proceeding shall be 14
recognized . . . as a foreign main proceeding if it is 15
pending in the country where the debtor has the center of 16
its main interests.” 11 U.S.C. § 1517(b) (emphases added). 17
The present tense suggests that a court should examine 18
a debtor’s COMI at the time the Chapter 15 petition is 19
filed. “Consistent with normal usage, we have frequently 20
looked to Congress’ choice of verb tense to ascertain a 21
statute’s temporal reach.” Carr v. United States, 130 S. 22
14

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Ct. 2229, 2236 (2010); see also Dobrova v. Holder, 607 F.3d 1
297, 301 (2d Cir. 2010) (relying on Congress’s use of 2
present perfect tense in statutory construction). In In re 3
AroChem Corp., we were guided by the tense used in a 4
provision of the Bankruptcy Code allowing bankruptcy 5
trustees to hire professionals (e.g., lawyers, accountants), 6
as long as the professionals “‘do not hold or represent an 7
interest adverse to the estate.’” In re AroChem Corp., 176 8
F.3d 610, 623 (2d Cir. 1999) (quoting 11 U.S.C. § 327(a)) 9
(emphasis added). The present tense signified that an 10
estate’s counsel would not be disqualified based on past or 11
future representations. Id. 12
It therefore matters that the inquiry under Section 13
1517 is whether a foreign proceeding “is pending in the 14
country where the debtor has the center of its main 15
interests.” 11 U.S.C. § 1517(b)(1) (emphases added). 16
In this light, we reject Morning Mist’s invitation for us to 17
consider the debtor’s entire operational history. Likewise, 18
a COMI determination based on the date of the initiation of 19
the foreign proceeding is not compelled by the statute. A 20
foreign proceeding “is pending,” 11 U.S.C. § 1517(b)(1) 21
(emphasis added), only after it has been commenced. Under 22
15

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the text of the statute, therefore, the filing date of the 1
Chapter 15 petition should serve to anchor the COMI 2
analysis. 3
Other Federal Courts. Nearly every federal court to 4
address this question has determined that COMI should be 5
considered as of the time the Chapter 15 petition is filed. 6
Among circuit courts, only the Fifth has specifically 7
decided the question. The argument that the COMI 8
determination should be made with regard to the debtor’s 9
operational history was rejected in In re Ran: 10
Every operative verb is written in the present or 11
present progressive tense. . . . Congress’s choice to 12
use the present tense requires courts to view the COMI 13
determination in the present, i.e. at the time the 14
petition for recognition was filed. If Congress had, 15
in fact, intended bankruptcy courts to view the COMI 16
determination through a look-back period or on a 17
specific past date, it could have easily said so. 18
19
In re Ran, 607 F.3d 1017, 1025 (5th Cir. 2010). The court 20
highlighted a provision in the Bankruptcy Code that 21
explicitly includes a look-back period (11 U.S.C. § 22
522(b)(3)(A)), as was not done in Chapter 15. Id. 23
The Fifth Circuit observed that its approach would 24
advance Congress’s purpose of harmonizing transnational 25
insolvency proceedings because looking at a company’s full 26
operational history could make it more difficult to pinpoint 27
16

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a single COMI: “In fact, a meandering and never-ending 1
inquiry into the debtor’s past interests could lead to a 2
denial of recognition in a country where a debtor’s 3
interests are truly centered, merely because he conducted 4
past activities in a country at some point well before the 5
petition for recognition was sought.” Id. 6
For similar reasons, the Fifth Circuit emphasized that 7
third parties (primarily creditors) should be able to 8
ascertain a debtor’s COMI. Id. at 1025-26. We agree. 6
9
The Fifth Circuit left open the possibility (albeit in 10
dicta) of looking at a broader time frame in order to 11
frustrate possible bad-faith COMI manipulation: 12
Lastly, we note that this case does not involve a 13
recent change of domicile by the [debtor] in question. 14
A similar case brought immediately after the party’s 15
arrival in the United States following a long period of 16
domicile in the country where the bankruptcy is pending 17
would likely lead to a different result. 18
19
Id. at 1026. 20
Most courts in this Circuit and throughout the country 21
appear to have examined a debtor’s COMI as of the time of 22
6 The Fifth Circuit pointed to English cases “which
seem to select a time linked to the commencement or service
of the relevant insolvency proceeding.” Id. at 1026
(emphasis added). But the italicized phrase is (at least)
ambiguous, a matter not resolved by the Fifth Circuit. We
consider international law on this point in the following
section.
17

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the Chapter 15 petition. See, e.g., In re Fairfield Sentry 1
Ltd., No. 10 Civ. 7311(GBD), 2011 WL 4357421, at *6 2
(S.D.N.Y. Sept. 16, 2011); In re British Am. Isle of Venice 3
(BVI), Ltd., 441 B.R. 713, 720-21 (Bankr. S.D. Fla. 2010); 4
In re British Am. Ins. Co., 425 B.R. 884, 909-10 (Bankr. 5
S.D. Fla. 2010); In re Betcorp Ltd., 400 B.R. 266, 290-92 6
(Bankr. D. Nev. 2009). But there have certainly been courts 7
that have taken a different approach. See, e.g., In re 8
Millennium Global Emerging Credit Master Fund Ltd., 474 B.R. 9
88, 92 (S.D.N.Y. 2012) (recognizing bankruptcy court’s 10
conclusion that “COMI should be determined as of the date of 11
the commencement of the foreign proceeding, rather than--as 12
most of the courts that have looked at the issue have 13
concluded--the date on which the Chapter 15 petition was 14
filed”). 15
Morning Mist, taking a cue from a prominent bankruptcy 16
court decision, suggests that we should employ the American 17
jurisdictional concept of “principal place of business” when 18
considering COMI, which would thus require consideration of 19
a debtor’s operational history. Appellants’ Br. 33 (citing 20
In re Millennium Global Emerging Credit Master Fund Ltd., 21
458 B.R. 63, 72 (Bankr. S.D.N.Y. 2011)). In In re 22
18

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Millennium Global, the bankruptcy court suggested 1
substituting principal place of business for COMI, in which 2
case “it is obvious that the date for determining an 3
entity’s place of business refers to the business of the 4
entity before it was placed into liquidation.” 458 B.R. at 5
72. In support, the bankruptcy court quoted a law review 6
article by one of the drafters of Chapter 15. Id. The 7
quoted text, however, supports the contrary view: Congress’s 8
decision to use the term “COMI” instead of “principal place 9
of business” was intentional: 10
Chapter 15 was drafted to follow the Model Law as 11
closely as possible, with the idea of encouraging other 12
countries to do the same. One example is use of the 13
phrase “center of main interests,” which could have 14
been replaced by “principal place of business” as a 15
phrase more familiar to American judges and lawyers. 16
The drafters of Chapter 15 believed, however, that such 17
a crucial jurisdictional test should be uniform around 18
the world and hoped that its adoption by the United 19
States would encourage other countries to use it as 20
well. 21
22
Jay Lawrence Westbrook, Chapter 15 At Last, 79 Am. Bankr. 23
L.J. 713, 719-20 (2005). 24
As further support for the analogy to principal place 25
of business, the bankruptcy court in In re Millennium Global 26
pointed to Chapter 15’s predecessor, Section 304 of the 27
Bankruptcy Code. 458 B.R. at 73. Section 304, now 28
19

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repealed, allowed a party to commence a proceeding in U.S. 1
bankruptcy court “ancillary” to a “foreign proceeding” and 2
defined “foreign proceeding” as a proceeding “in a foreign 3
country in which the debtor’s domicile, residence, principal 4
place of business, or principal assets were located at the 5
commencement of such proceeding.” 11 U.S.C. § 101(23) 6
(2000). That wording looks to a debtor’s principal place of 7
business at the time of the commencement of the foreign 8
liquidation proceeding. But while the concept may be useful 9
in adducing factors that point to a COMI, Congress abandoned 10
that provision in enacting Chapter 15. 11
International Interpretations. Congress instructed 12
that “[i]n interpreting [Chapter 15], the court shall 13
consider its international origin, and the need to promote 14
an application of this chapter that is consistent with the 15
application of similar statutes adopted by foreign 16
jurisdictions.” 11 U.S.C. § 1508. Legislative history 17
points to the Guide to Enactment of the UNCITRAL Model Law 18
on Cross-Border Insolvency (the “UNCITRAL Guide”) “for 19
guidance as to the meaning and purpose of [Chapter 15’s] 20
provisions.” House Report at 106 n.101. Although the 21
statutory text controls, first and ultimately, we consider 22
20

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international sources to the extent they help us carry out 1
the congressional purpose of achieving international 2
uniformity in cross-border insolvency proceedings. 3
The UNCITRAL Guide, which does not define COMI, 4
indicates that the concept was drawn from the European Union 5
Convention on Insolvency Proceedings. See UNCITRAL Guide 6
¶¶ 31, 72. In turn, the European Union Council Regulation 7
enacting the Convention on Insolvency Proceedings provides 8
some guidance: “The ‘centre of main interests’ should 9
correspond to the place where the debtor conducts the 10
administration of his interests on a regular basis and is 11
therefore ascertainable by third parties.” Council 12
Regulation (EC) No 1346/2000 of 29 May 2000, Preamble ¶ 13 13
(emphases added) (hereinafter “EU Regulation”). Like the 14
U.S. statute, the EU Regulation employs the present tense. 15
The focus on regularity and ascertainability should also 16
inform our interpretation of the text. The reference to the 17
debtor’s administration “on a regular basis,” however, could 18
suggest a potentially broader time frame. 19
But the EU Regulation does not operate as an analog to 20
Chapter 15. Under the EU Regulation, a main insolvency 21
proceeding in one EU member state is automatically 22
21

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recognized by all other EU member states. See EU Regulation 1
art. 16. So the EU has no need for a recognition petition 2
such as provided under Chapter 15. (Because the United 3
States and the BVI are not parties to an agreement on the 4
subject and are not otherwise governed by a common legal 5
framework, a debtor must file a Chapter 15 petition in the 6
United States for the BVI proceeding to be recognized). 7
7
Although the EU Regulation might refer to a broader time 8
frame for considering a debtor’s COMI, it is not a fit for 9
construing Chapter 15. 10
Relevant European case law interpreting COMI appears to 11
generally focus on whether a debtor’s COMI is regular and 12
ascertainable, as suggested by the EU Regulation. For 13
example, in In re Eurofood IFSC Ltd., the Court of Justice 14
of the European Union focused on “criteria that are both 15
objective and ascertainable by third parties” to determine a 16
7 In In re Millennium Global, the bankruptcy court
observed that “[t]he EU Regulation does not contemplate the
commencement of a separate ancillary proceeding to seek
recognition of a foreign insolvency case, as in the Model
Law and chapter 15, as the members of the Union are
automatically required to recognize foreign proceedings from
the date of their opening.” 458 B.R. at 74. But that
conclusion does not persuade us that we should determine
COMI under Chapter 15 based on the date of commencement of
the foreign proceeding as the bankruptcy court held in that
case; rather, it suggests that the EU Regulation may be a
poor analog for interpreting Chapter 15.
22

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debtor’s COMI. In re Eurofood IFSC Ltd., Case C-341/04, 1
2006 E.C.R. I-3813, 2006 WL 1142304, ¶ 33 (E.C.J. 2006). 2
Likewise, in In re Stanford International Bank Ltd., the 3
England and Wales Court of Appeal (Civil Division) looked to 4
whether third parties could ascertain a debtor’s COMI, 5
specifically by examining factors “in the public domain.” 6
In re Stanford Int’l Bank Ltd., Case No. A3/2009/1565 & 7
1643, 2010 EWCA Civ 137, 2010 WL 605796, ¶¶ 54-56 (Ct. of 8
Appeal 2010). These interpretations also reflect a concern 9
about possible COMI manipulation. See, e.g., In re Eurofood 10
IFSC Ltd., 2006 WL 1142304, ¶ 35 (indicating concern with a 11
“‘letterbox’ company not carrying out any business in the 12
territory of the Member State in which its registered office 13
is situated”). A COMI that is regular and ascertainable is 14
not easily subject to tactical removal. 15
Overall, international sources are of limited use in 16
resolving whether U.S. courts should determine COMI at the 17
time of the Chapter 15 petition or in some other way. 18
* * * 19
20
We therefore hold that a debtor’s COMI should be 21
determined based on its activities at or around the time the 22
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Chapter 15 petition is filed, as the statutory text 1
suggests. But given the EU Regulation and other 2
international interpretations, which focus on the regularity 3
and ascertainability of a debtor’s COMI, a court may 4
consider the period between the commencement of the foreign 5
insolvency proceeding and the filing of the Chapter 15 6
petition to ensure that a debtor has not manipulated its 7
COMI in bad faith. 8
B. COMI Factors 9
The parties also dispute what factors are relevant for 10
locating a COMI. Morning Mist argues that Sentry’s 11
liquidation activities are irrelevant to the COMI 12
determination; the liquidator responds that these activities 13
and the fact of the BVI proceedings are the kind of 14
objective criteria that can be ascertained by third parties, 15
and are therefore critical. We hold that any relevant 16
activities, including liquidation activities and 17
administrative functions, may be considered in the COMI 18
analysis. 19
20
Chapter 15 creates a rebuttable presumption that the 21
country where a debtor has its registered office will be its 22
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COMI: “In the absence of evidence to the contrary, the 1
debtor’s registered office, or habitual residence in the 2
case of an individual, is presumed to be the center of the 3
debtor’s main interests.” 11 U.S.C. § 1516(c). But federal 4
courts have focused on a variety of other factors as well. 5
The United States Bankruptcy Court for the Southern District 6
of New York has developed a widely adopted list of COMI 7
factors--warning, however, against mechanical application: 8
Various factors, singly or combined, could be relevant 9
to such a determination: the location of the debtor’s 10
headquarters; the location of those who actually manage 11
the debtor (which, conceivably could be the 12
headquarters of a holding company); the location of the 13
debtor’s primary assets; the location of the majority 14
of the debtor’s creditors or of a majority of the 15
creditors who would be affected by the case; and/or the 16
jurisdiction whose law would apply to most disputes. 17
18
In re SPhinX, Ltd., 351 B.R. 103, 117 (Bankr. S.D.N.Y. 19
2006). This nonexclusive list is a helpful guide, but 20
consideration of these specific factors is neither required 21
nor dispositive. 22
The SPhinX court and other federal courts have also 23
turned to international law, as directed by Congress. See, 24
e.g., In re SPhinX, Ltd., 351 B.R. at 118; In re 25
Tri-Continental Exch. Ltd., 349 B.R. 627, 634 (Bankr. E.D. 26
Cal. 2006). As discussed in Part II.A above, the EU 27
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Regulation enacting the European Union Convention on 1
Insolvency explains that COMI “should correspond to the 2
place where the debtor conducts the administration of his 3
interests on a regular basis and is therefore ascertainable 4
by third parties.” EU Regulation, Preamble ¶ 13. While 5
this guidance may have been of limited utility in resolving 6
the timing question discussed in Part II.A, it underscores 7
the importance of factors that indicate regularity and 8
ascertainability. 8
9
The absence of a statutory definition for a term that 10
is not self-defining signifies that the text is open-ended, 11
and invites development by courts, depending on facts 12
presented, without prescription or limitation. 13
14
III 15
8 As mentioned above, the bankruptcy court in In re
Millennium Global employed the concept of “principal place
of business” to guide its COMI analysis. Accordingly, it
applied the Supreme Court’s recent definition of that
concept, which looks at a corporation’s “nerve center,”
i.e., “where a corporation’s officers direct, control, and
coordinate the corporation’s activities.” Hertz Corp. v.
Friend, 130 S. Ct. 1181, 1192 (2010). Given Congress’s
choice to use COMI instead of “principal place of business,”
that concept does not control the analysis. But to the
extent that the concepts are similar, a court may certainly
consider a debtor’s “nerve center,” including from where the
debtor’s activities are directed and controlled, in
determining a debtor’s COMI.
26

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1
Applying the principles set out above, we affirm the 2
decision of the district court (which affirmed the 3
bankruptcy court) recognizing the BVI liquidation as a 4
foreign main proceeding. 5
In a nutshell: for a proceeding to be recognized as a 6
“foreign main proceeding,” it must be “pending in the 7
country where the debtor has the center of its main 8
interests.” 11 U.S.C. § 1517(b)(1). That determination is 9
based on a debtor’s COMI at the time the Chapter 15 petition 10
is filed. A court may look at the period between the 11
commencement of the foreign proceeding and the filing of the 12
Chapter 15 petition to ensure that a debtor has not 13
manipulated its COMI in bad faith, but there is no support 14
for Morning Mist’s contention that a debtor’s entire 15
operational history should be considered. The factors that 16
a court may consider in this analysis are not limited and 17
may include the debtor’s liquidation activities. 18
The bankruptcy court made factual findings that place 19
Sentry’s COMI in the BVI during the relevant time period: 20
Upon the revelation of the notorious Madoff fraud in 21
December of 2008, the Debtors discontinued the transfer 22
of funds for investment with BLMIS in New York, which 23
comprised 95% of Sentry’s investments. The board of 24
representatives at the Debtors’ New York-based 25
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investment managers, [FGG], resigned shortly 1
thereafter, and the Debtors’ contracts with FGG were 2
severed in 2009, still long before the filing of the 3
Petition. As a result, the Debtors have no place of 4
business, no management, and no tangible assets located 5
in the United States. Rather, the Debtors’ activities 6
for an extended period of time have been conducted only 7
in connection with winding up the Debtors’ 8
business. . . . The Court finds that the facts now 9
extant provide a sufficient basis for finding that the 10
Debtors’ COMI for the purpose of recognition as a main 11
proceeding is in the BVI, and not elsewhere. 12
13
Bankr. Order at 5-6. The court went on to find that, even 14
though Sentry had assets in other jurisdictions, the 15
administration of its affairs in the relevant time was 16
orchestrated from the BVI. Id. at 6. There was no finding 17
of bad-faith COMI manipulation: “the record here as to the 18
relevant time period beginning December 2008, which 19
straddles the Liquidators’ appointment dates, does not 20
support a finding of an opportunistic shift of the Debtors’ 21
COMI or any biased activity or motivation to distort factors 22
to establish a COMI in the BVI.” Id. at 8. 23
The bankruptcy court’s factual findings are not clearly 24
erroneous and support the conclusion that Sentry’s COMI was 25
in the BVI at the time of the Chapter 15 petition, and that 26
Sentry did not manipulate its COMI in bad faith between the 27
initiation of the BVI proceeding and the filing of the 28
Chapter 15 petition. True, the relevant time period was 29
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when the Chapter 15 petition was filed (with a look backward 1
to thwart manipulation), whereas the bankruptcy court looked 2
at a longer period (beginning with Madoff’s arrest), but the 3
difference is not material. We therefore affirm. 9
4
5
IV 6
7
Finally, Morning Mist argues that the bankruptcy court 8
should have applied the public policy exception available 9
under 11 U.S.C. § 1506, because the BVI proceedings, which 10
are in the main confidential, were “cloaked in secrecy.” 11
Appellants’ Br. 25. 12
Section 1506 provides: “Nothing in this chapter 13
prevents the court from refusing to take an action governed 14
by this chapter if the action would be manifestly contrary 15
to the public policy of the United States.” 11 U.S.C. 16
§ 1506. This Court has not had occasion to discuss the 17
application of Section 1506. 18
The statutory wording requires a narrow reading. 19
9 Morning Mist also claims that the bankruptcy court
erroneously stayed the derivative action that it brought
against Sentry. Appellants’ Br. 36-37. Because we affirm
the recognition of the BVI liquidation as a foreign main
proceeding, the stay was automatic. See 11 U.S.C. § 1520(a)
(imposing automatic stay on U.S. proceedings against debtor
upon recognition of foreign main proceeding).
29

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Section 1506 does not create an exception for any action 1
under Chapter 15 that may conflict with public policy, but 2
only an action that is “manifestly contrary.” 11 U.S.C. 3
§ 1506 (emphasis added). The legislative history confirms: 4
[Section 1506] follows the Model Law article 5 exactly, 5
is standard in UNCITRAL texts, and has been narrowly 6
interpreted on a consistent basis in courts around the 7
world. The word “manifestly” in international usage 8
restricts the public policy exception to the most 9
fundamental policies of the United States. 10
11
House Report at 109 (emphases added). The UNCITRAL Guide 12
further explains that the exception should be read 13
“restrictively” and invoked only “under exceptional 14
circumstances concerning matters of fundamental importance 15
for the enacting State.” UNCITRAL Guide ¶ 89. Federal 16
courts in the United States have adopted this view. See, 17
e.g., In re Vitro S.A.B. de CV, 701 F.3d 1031, 1069-70 (5th 18
Cir. 2012); In re Iida, 377 B.R. 243, 259 (B.A.P. 9th Cir. 19
2007); In re Ephedra Prods. Liab. Litig., 349 B.R. 333, 336 20
(S.D.N.Y. 2006); In re Toft, 453 B.R. 186, 193 (Bankr. 21
S.D.N.Y. 2011); In re Metcalfe & Mansfield Alt. Invs., 421 22
B.R. 685, 697 (Bankr. S.D.N.Y. 2010). 10
23
10 Even beyond the bankruptcy context, we apply public
policy exceptions sparingly. For example, in the judgment
enforcement context, a foreign judgment “is unenforceable as
against public policy to the extent that it is repugnant to
fundamental notions of what is decent and just in the State
30

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The confidentiality of BVI bankruptcy proceedings does 1
not offend U.S. public policy. Although the BVI liquidation 2
has proceeded under seal, Morning Mist’s assertion that they 3
are “shrouded in secrecy” is overwrought. Appellants’ 4
Br. 7. The BVI court did seal the various applications and 5
orders in the liquidation, but public summaries have been 6
made available. See, e.g., J.A. 445-46 (summarizing 7
applications and orders before BVI court). Such restricted 8
access to court documents is not unusual in the BVI, as the 9
liquidator explains, because only certain limited records 10
are typically available to non-parties. Appellees’ Br. 11
12-13. And in all cases in the BVI, including this 12
liquidation, any non-party may apply to the court for access 13
to sealed documents. Id. 14
In any event, Morning Mist cannot establish that 15
unfettered public access to court records is so fundamental 16
in the United States that recognition of the BVI liquidation 17
constitutes one of those exceptional circumstances 18
contemplated in Section 1506. “[T]he right to inspect and 19
copy judicial records is not absolute.” Nixon v. Warner 20
where enforcement is sought,” but that “standard is high,
and infrequently met.” Ackermann v. Levine, 788 F.2d 830,
841 (2d Cir. 1986) (internal quotation marks omitted).
31

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Commc’ns, Inc., 435 U.S. 589, 598 (1978). In Lugosch v. 1
Pyramid Co. of Onondaga, we discussed at length the common 2
law and constitutional rights to public access of court 3
documents. Lugosch v. Pyramid Co. of Onondaga, 435 F.3d 4
110, 119-20 (2d Cir. 2006). The right to access court 5
documents is not absolute and can easily give way to 6
“privacy interests” or other considerations. Id. at 120; 7
see also United States v. Amodeo, 44 F.3d 141, 146 (2d Cir. 8
1995) (“Although there is a presumption favoring access to 9
judicial records, the fact that a document is a judicial 10
record does not mean that access to it cannot be 11
restricted.” (internal citation omitted)). 12
Important as public access to court documents may be, 13
it is not an exceptional and fundamental value. It is a 14
qualified right; and many proceedings move forward in U.S. 15
courtrooms with some documents filed under seal, including 16
many cases in this Court. There is no basis on which to 17
hold that recognition of the BVI liquidation is manifestly 18
contrary to U.S. public policy. 19
20
CONCLUSION 21
For the foregoing reasons, we affirm. 22
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