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IN THE
Debtor.
Appellant,
v.
Ocean Rig UDW Inc., Iraklis Sbarounis, Drill Rigs Holdings Inc.,
Drillships Financing Holding Inc., Drillships Ocean Ventures Inc.,
Debtors ~ Appellees,
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES 3
PRELIMINARY STATEMENT 6
STATEMENT OF JURISDICTION 12
ARGUMENT
CONCLUSION 37
Case 18-1374, Document 43-1, 08/13/2018, 2366772, Page3 of 38
TABLE OF AUTHORITIES
Page(s)
Cases
In re Charter Commc’ns, Inc., 691 F.3d 476 (2d Cir. 2012) passim
2
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Page(s)
In re Fairfield Sentry Limited, et al.,
Case 1:10-cv-07311-GBD
(S.D.N.Y. Sept. 16, 2011) 24-25
3
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Page(s)
Statutes
11 U.S.C. § 101(15) 7
11 U.S.C. § 101(41) 7
11 U.S.C. § 1101 29
11 U.S.C. § 1515 10
11 U.S.C. § 1519 35
4
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PRELIMINARY STATEMENT
Ocean Rig UDW Inc. and subsidiary companies Drill Rigs Holdings
Inc., Drillships Financing Holding Inc., and Drillships Ocean Ventures Inc.
and Eleanor Fisher petitioned the U.S. Bankruptcy Court for the Southern
shareholder of the Ocean Rig parent company Ocean Rig UDW Inc. that
trades on the Nasdaq stock exchange in New York under ticker symbol
precedent for injunctive relief under 11 U.S.C. § 1520 and 11 U.S.C. § 1521.
Non-recognition does not leave debtors without a path for proceeding in the
chapter 15 recognition as was the case in Bear Stearns are left with the
Bankruptcy Code, and some relief is available under section 1509 of the
5
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Strategies Master Fund, 374 B.R. 122, 132-33 (Bankr S.D.N.Y. 2007), aff’d
proceedings must show the proceedings they seek to have recognized were
Sentry Ltd., 714 F.3d 127, 130 (2d Cir. 2013). The Appellant contended at
trial the debtors had not and could not prove a Cayman Islands COMI based
connections were similar to the ones given as examples of what does not
suffice for a “nerve center” finding by the Supreme Court in Hertz Corp. v.
Friend, 559 U.S. 77, 1195 (2010), including listing an address on forms, and
having “a mail drop box, a bare office with a computer” which is an office
that the Ocean Rig debtors did not even have because they were borrowing
1
The Bankruptcy Court injunctions apply to “all entities (as that term is
defined in section 101(15) of the Bankruptcy Code.” [Docket Numbers 130
and 153 on the Bankruptcy Court’s Docket]. The Bankruptcy Code defines
an “entity” as including a “person” and a person as including an individual.
11 U.S.C. 101(15) & 101(41).
6
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New York:
Fairfield at 137 (citing In re SPhinX, Ltd., 351 B.R. 103, 117 (Bankr.
foreign main proceedings the Ocean Rig chapter 15 debtors’ four Cayman
2017 chapter 15 bankruptcy filings and the debtors’ four Cayman Islands
2
This is still so today. Per Ocean Rig’s website, the chapter 15 debtors’
“offices” are “Physical address[es] and address[es] for packages c/o Ocean
Rig Cayman Management Services SEZC Limited.” www.ocean-
rig.com/contact
7
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for each of the four Ocean Rig debtors). Schemes of arrangement in the
foreign law New York law governed debts. This is contrary to a prohibition
under the laws of another.3 Because debt discharge under schemes has been
judge signs off on them. They are different from chapter 11 restructurings in
multiple respects, including because they do not meet the same requirements
for priority and classification. Ocean Rig’s provided a 0.02% stake for
3
Under English law, for example, a debt governed by English law cannot be
discharged or compromised by foreign proceedings pursuant to Gibbs Rule.
Antony Gibbs & Sons v. La Société Industrielle et Commerciale des Métaux
(1890) LR 25 QBD 399.
8
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later scheme of arrangement proceedings could have been filed including the
materials and information required by the Bankruptcy Code and the Federal
Rules of Bankruptcy Procedure, they were not filed. See 11 U.S.C. § 1515
pending in the country where the debtor has the center of its main interests
9
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conclude (as did the bankruptcy court and the district court) that the relevant
time period is the time of the Chapter 15 petition, subject to an inquiry into
date were not, and could not have been, satisfied with respect to the scheme
4
Pursuant to the pretrial conference before the Bankruptcy Court, the scope
of the trial was limited to the provisional liquidation proceedings as the
pretrial transcript shows at pages 6-7) (“THE COURT: Look, the schemes
have not been sanctioned [i.e. approved] by the Cayman court. This hearing
this week does not address assuming that the scheme is sanctioned, whether
this Court should recognize and enforce it. It’s premature. . . . Right.
There’s a hearing in September in the Cayman with respect to whether or not
-- what is it? Four separate schemes, right? Whether or not the Cayman
court will sanction the schemes, the four separate schemes. And nothing
that I read from the Petitioners has asked me to take any action, and I
wouldn’t take any action with respect to -- I don’t give advisory opinions
whether or not the Court will recognize and enforce orders whether it’s
sanctioning a scheme or other orders. So that’s not before me.”)
https://www.dropbox.com/s/fdzx6hemy1q263g/OceanRigPretrialConference
Transcript.pdf?dl=0
10
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STATEMENT OF JURISDICTION
to the U.S. District Court for the Southern District of New York. The appeal
was from a final order. The jurisdictional basis for appellate review of final
providing: “(a) The district courts of the United States shall have jurisdiction
Judgment entered by the District Court’s dismissing her appeal, to the U.S.
Court of Appeals for the Second Circuit. (A43). The appeal is from a final
The courts of appeals shall have jurisdiction of appeals from all final
11
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decisions, judgments, orders and decrees entered under subsections (a) and
from the Bankruptcy Court without reaching the merits of the appeal, on the
from the Bankruptcy Court without reaching the merits of the appeal, on the
This is an appeal from a Judgment of the U.S. District Court for the
Southern District of New York “in favor of Drill Rigs Holdings Inc.,
Rig UDW Inc., Eleanor Fisher, Iraklis Sbarounis, Simon Appell” (the
Opinion and Order by District Judge John G. Koeltl. The District Court
Court for the Southern District of New York entered by Bankruptcy Judge
Martin Glenn.
5
The Appellees are specified in the Judgment (A42) docketed as Docket
Number 30 [District Court Docket Entries at A7].
12
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Bankruptcy Code that enjoins the Appellant the basis of which the Appellant
challenged on appeal to the District Court. The Appellees filed a letter with
the District Court seeking to move to dismiss the appeal and the Appellant
The District Court held a hearing on October 26, 2017 during which the
A22 (Transcript of October 26, 2017 Conference)). The District Court then
stayed merits briefing and, over the next few weeks, the Appellees moved to
dismiss and the parties filed briefs for and against dismissal and letters.6
(A5-A6).
and Order (A23-A41) and Judgment (A42) dismissing the appeal without
reaching the merits of the appeal. The Appellant seeks reversal of the
6
The Appellees sometimes referred to the Appellant as a purported
shareholder. After she directed the District Court’s attention to some of the
numerous writings in which the Appellees admitted she is a shareholder,
including their filings with the Bankruptcy Court, they admitted she is a
shareholder in a filing of Ocean Rig UDW Inc. with the Securities and
Exchange Commission of November 16, 2017 stating on page 6: “a
shareholder filed an appeal of certain orders of the bankruptcy court to the
United States Bankruptcy Court for the Southern District of New York.”
https://www.sec.gov/Archives/edgar/data/1447382/000091957417008229/d
7738375_424b-3.htm Judicial notice of Ocean Rig UDW Inc.’s
representations to the SEC is respectfully requested under Federal Rule of
Evidence 201.
13
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dismissal that occurred without merits review and that merits review
proceed.
with respect to whether there was a basis satisfying the requirements set by
basis for chapter 15 recognition such as the one before the Court of Appeals
here gave rise to one of the leading cases on chapter 15 recognition decided
by the District Court and the Court of Appeals. The Appellant has appellate
The District Court abused its discretion in dismissing the appeal for
District Court did not apply the standards set by Congress in the Bankruptcy
Code and did not follow a series of decisions by this Court guiding how an
14
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injunctive relief under Bankruptcy Code sections 1520 and 1521 have been
satisfied. The District Court erred by not considering the actual effects of
assessing the appeal on the merits, which it should have done under this
Court’s precedents. The appeal is not equitably moot and should proceed.
ARGUMENT
POINT 1
A. Standard of Review
Center Financial, Inc., 890 F.3d 1188, 1191 (9th Cir. 2018) (recent Court of
B. Argument
re DBSD N. Am. Inc., 634 F.3d 79 (2d Cir. 2011). The Appellant has Article
III standing to challenge the Ocean Rig debtors’ chapter 15 recognition. See
Lujan v. Defenders of the Wildlife, 504 U.S. 555, 560 (1992) (requiring an
15
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injury in fact, which is concrete and particularized, actual and imminent and
she is subject, to which she remains subject because they are ongoing in the
U.S., entered over her objection to their basis. As the U.S. Court of Appeals
16
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Barnet, this Court has explained that while the pecuniary interest aspect of
the person aggrieved standard is “often used and often useful” it is not the
only test for appellate standing in bankruptcy cases. In re Barnet, 737 F.3d
238, 242 note 1 (2d Cir. 2013). See also In re Point Center Financial, Inc.,
890 F.3d 1188, 1191 (9th Cir. 2018) (reversing District Court dismissal of
bankruptcy appeal for alleged lack of appellate standing and explaining “an
detrimentally affects one’s rights has a direct and adverse pecuniary effect
The Appellant is asserting her own “rights and interests” not “legal
rights or interests of third parties.” In re Quigley Co., Inc., 391 B.R. 695
Johns-Manville, 843 F.2d 636 (2d Cir. 1988) insofar as the appellant was
endeavoring to assert, not only his claims, but also some claims belonging to
future asbestos claimants and notice rights of a class of third party present
claimants that did not contest notice. The District Court cited its ruling in
Freeman v. Journal Register Co., 452 B.R. 367 (S.D.N.Y. 2010), in which
the District Court had reasoned based on the facts presented that “the
appellant had no basis for recovery” under a chapter 11 plan not providing a
17
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recovery to equity holders. Id. at 371. The District Court concluded in that
case that the appellant was “not asserting his own legal rights and interests.”
Id. at 371. The appellant in that case was not asserting his own legal rights
are actual recoveries under the schemes of arrangement for equity holders,
and the chapter 15 recognition appeal does not seek review on appeal of a
11 cases and reflects the structure of chapter 11 of the Bankruptcy Code and
its ruling, the District Court stated the Appellant “was not entitled to receive
had not yet received the full portion of their claims.” This analysis is
achieve an equity stake (9.31%) and other shareholders a smaller stake than
management (0.02%) though creditors were not paid in full and have higher
priority (as a matter of the U.S. Bankruptcy Code) than management. The
18
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Cayman Islands are not bound by the will of Congress as it has been
sharing their recoveries with more junior creditors or interest holders. This
money.”) Ocean Rig et al. could have (and still can) file chapter 11
proceedings, but they did not. They pursued a restructuring via schemes of
Code. Existing shareholders did not vote and there were no “gifts” here.
trading under the ticker symbol ORIG, Ocean Rig having resisted Nasdaq’s
has considered whether payouts could have been limited to creditors only.
19
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(A13-A14). Whether the publicly traded parent company Ocean Rig UDW
Inc. would have re-registered had it been delisted as the District Court
debtors took steps to ensure continued trading under the valuable ORIG
ticker symbol following which Ocean Rig UDW Inc. was not delisted.
The District Court made the observation that the Appellant did not
debtors’ insolvency…”). This is not a fair critique. For one thing what
accelerated the debtors’ cash flow insolvency was raised in her brief to the
District Court opposing dismissal. The brief referred to Ocean Rig UDW
Inc.’s then CFO’s testimony that in late March 2017, prior to the provisional
20
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$14.9M and $4.7M, the first of which he explained could have been made
with available cash and the second with borrowed funds, and that an
Number 22 on the District Court Docket, pages 13-16]. Whether and when
the Ocean Rig family of companies became insolvent, i.e. before or after the
in the Cayman Islands triggered defaults and cross-defaults under some $3.7
chapter 15 debtors.
21
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F.3d 127 (2d Cir. 2013), the appellants were, as is the Appellant here,
recognition before the United States Bankruptcy Court for the Southern
District for New York then appealed to the United States District Court for
the Southern District of New York and the United States Court of Appeals
for the Second Circuit. There were no appellate standing issues precluding
the shareholders from proceeding to merits review. There are none here.
the Court of Appeals ruling in Fairfield did not discuss liabilities and yet
assumed that the assets were significant relatively. (A34, “The Court of
debtors’ liabilities to creditors and shareholders are extensive and put the
22
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16, 2011), page 2 (discussing the multi-billion dollar losses resulting from
indication that the case involved any creditors of the feeder fund -- or that
any existed -- other than its shareholders.” (A34). The chapter 15 debtors
had creditors. This was not the focus of the Court of Appeals case, which
does not affect that analysis. See Memorandum Decision and Order, In re
Sentry ceased its routine operations and changed its business purpose to
23
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The District Court should not have granted the Appellees’ motion to
dismiss for alleged lack of appellate standing. The Appellant has appellate
POINT 2
A. Standard of Review
been reviewed for abuse of discretion in this circuit. See, e.g., In re Charter
Commc’ns, Inc., 691 F.3d 476, 482 (2d Cir. 2012) (noting there is a circuit
split on the standard of review). The District Court’s ruling with respect to
appeal, did not follow binding precedential rulings of this Court in chapter
reversed for abuse of discretion. See Koon v. United States, 518 U.S. 81, 100
(1996) (“A district court by definition abuses its discretion when it makes an
error of law.”).
24
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B. Argument
This District Court should not have granted the motion to dismiss
standard includes review to determine that the discretion was not guided by
erroneous legal conclusions.”). Among the errors here are that the District
U.S. District Court for the Southern District of New York in Allstate Ins. v.
Hughes, 174 B.R. 884 (S.D.N.Y. 1994) as a ruling by the United States
Court of Appeals for the Second Circuit (A35, “And the Court of Appeals
for the Second Circuit has dismissed on mootness grounds an appeal from an
by the Court of Appeals. Another error is that the District Court in Allstate
did not, in fact, dismiss the appeal before it on mootness grounds as the
Court reached the merits in AllState and stated this expressly. Allstate, 174
25
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The District Court in the ruling appealed from also erred in stating the
Appellant had not cited authority for why law under the repealed section 304
of the Bankruptcy Code in the context of which Allstate was decided did not
have force in chapter 15. (A38). The Appellant had, in fact, cited multiple
authorities and explained at pages 19-20 of her brief filed with the District
The analysis in Allstate Ins. Co. v. Hughes, 174 B.R. 884, 889
(S.D.N.Y. 1994), on which the Appellees rely is not binding, and was
were in the insurance and reinsurance business. See id. at 885. The
Bankruptcy Code section 304, and the U.S. relief at issue was based on
concluded that Allstate could submit claims and its substantive right to
arbitrate was not violated. See id. at 891. After reaching the merits
1993 discretionary injunction, see id., granted under section 304, which was
the standard in 1994 and is no longer the standard for U.S. assistance in
26
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Case law under former Bankruptcy Code section 304 is not applicable
In re British American Ins. Co. Ltd., 488 B.R. 205, 213 (Bankr. S.D. Fla.
Master Fund, Ltd., 374 B.R. 122, 132 (Bankr. S.D.N.Y. 2007) (“The
standard inconsistent with both the express terms of the Bankruptcy Code
27
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Bankruptcy Code in chapter 11. See In re Charter Commc’ns, Inc., 691 F.3d
476, 482 (2d Cir. 2012) (discussing the defined term “substantial
consummation”). The definition opens with: “In this chapter” and has a
1101(2).
appeals. See In re Barnet, 737 F.3d 238, 246-47 (2d Cir. 2013). Citing U.S.
Supreme Court and Second Circuit jurisprudence, this Court explained that
rendering none inoperative. See id. The Court’s analysis proceeded under 11
the merits.
28
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debtors seeking injunctive relief under Bankruptcy Code sections 1520 and
1521. In the case In Fairfield Sentry Limited, 714 F.3d 127 (2d Cir. 2013),
orders to proceed with their appeals to the District Court and this Court. As
this Court has explained, the doctrine of equitable mootness was developed
Bankruptcy Code. In re BGI, Inc., 772 F.3d 102, 107 (2d Cir. 2014).
Commc’ns, Inc., 691 F.3d 476 (2d Cir. 2012) and FritoLay, Inc. v. LTV Steel
Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005) (“Because equitable
mootness bears only upon the proper remedy, and does not raise a threshold
question of our power to rule, a court is not inhibited from considering the
29
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conclusory predictions or opinions that the requested relief would doom the
into the likely effects of the relief an appellant seeks and must be based on
The District Court did not follow Chateaugay and also erred by not
the actual effects of the requested relief, which must be based on facts, under
these binding precedents. The District Court also made an error of law
presumption was not triggered in the current appeal and the District Court
erred by dismissing the appeal based in large part on the Appellant not
30
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of equitable mootness. The presumption did not arise because there was no
a practical matter, the status quo was preserved pending adjudication of the
The District Court also did not proceed as per a more recent Second
Circuit case on equitable mootness, decided on October 20, 2017 and raised
by the Appellant during the Conference before the District Court on October
27, 2017 (A14-A15) and again in briefing. The ruling of the Court of
appeals went forward without a stay in place. Neither the District Court nor
this Court granted the debtors’ motions to dismiss based on alleged equitable
October 20, 2017) (“We decline to dismiss any of these appeals as equitably
moot.”). In the pending Ocean Rig appeal there are injunctions in place; in
MPM Silicones there were no stays or other injunctive relief in place, and
even in that context there was no reason to rush. The appellate courts were
31
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decided on October 20, 2017. See id. at *1. This Court reversed in part
id. at *14 note 17 (“Debtors filed with the district court a motion to dismiss
affirm the Orders of the Bankruptcy Court.’ 531 B.R. at 338 n.14. Debtors
then filed motions to dismiss on equitable mootness grounds with this Court,
15-1682 Doc. 58; 15-1771 Doc. 62, which we summarily denied without
prejudice to Debtors ‘rais[ing] the issue in their merits brief,’ 15-1682 Doc.
determine the effect of proceeding with review of the final order appealed to
the District Court. The Appellant had requested the opportunity to address
the equitable mootness issues raised by the Appellees in her opening brief.
anticipated being ready to file by October 18, 2017 given the District Court
32
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[Docket Number 14 on the District Court Docket, page 1]. The District
Court stayed merits briefing on October 26, 2017 (A26), days before the
Appellant’s opening brief on the final order appealed from to the District
33
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of the Bankruptcy Code. The appeal to the District Court was of threshold
legal review standard, concerning whether there was a defensible basis for
broad U.S. injunctions that are not extensions of the conservative ones in the
and can be revoked along with ensuing relief where it is shown that the
grounds for granting it were lacking. See In re Creative Finance Ltd., 543
denied, a U.S. court must consider the extent to which any interim relief,
34
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(A40) come into play in chapter 15 cases relative to how they did under
from its predecessor section 304.” In re Bear Stearns, 389 B.R. 333.
The District Court abused its discretion also by not considering the
actual effects of assessing the appeal on the merits, which it should have
inquiry into the likely effects of the relief an appellant seeks and must be
based on facts.” Charter, 691 F.3d at 482. The closing of the District
Court’s ruling shows it was considering the situation only in the abstract,
and between chapter 15 and the repealed section 304 of the Bankruptcy
Code (A40). See In re Zenith Electronics Corp., 329 F.3d 338 (3d Cir.
2003) (“We conclude that the District Court abused its discretion in making
was its decision that the first and most important Continental factor, i.e.,
35
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would have only a minor impact on and, at all events, could not result in the
unraveling of the plan…. The District Court also abused its discretion in
determining that even if equitable mootness does not apply to the Trustee's
CONCLUSION
For all of the reasons stated herein, the judgment below of the District
Respectfully submitted,
36
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This brief is certified as complying with the limitations for length set
37