In the decision of In re Fairfield Sentry Ltd., 2014 WL 4783370, *4-5 (2d Cir. Sept. 26, 2014), the U.S. Court of Appeals for the Second Circuit ruled that a U.S. Bankruptcy Court was required to review a foreign debtor's sale of property within the territorial jurisdiction of the United States, relying upon the language of Section 1520(a)(2) of the Bankruptcy Code. While this decision was rendered by the Second Circuit, it may have an impact on decisions within the Third Circuit, including the District of Delaware.
Moreover, the Second Circuit held that the bankruptcy court erred when it gave deference to a foreign court's approval of the asset sale. According to the opinion, regardless of what the foreign (BVI) court did, the U.S. bankruptcy court had an obligation to approve only the "best possible bid." Id. at 19. It had no "good business reason" and no valid legal reason for deferring to the BVI court's misjudgment. Id. at 10.
This opinion should be considered by any purchaser of U.S. assets of a foreign debtor in a Chapter 15 proceeding. Chapter 15 of the Bankruptcy Code is relatively new (adopted in 2005), and there is a dearth of case law interpreting its provisions.
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