Case of the Day: Collins v. Oilsands Quest

The case of the day is Collins v. Oilsands Quest, Inc. (S.D.N.Y. 2012). Oilsands Quest is an Alberta business that sought bankruptcy protection from the Alberta Court of Queen’s Bench. Collins, on behalf of a putative class, had sued the company and several officers and directors on securities claims. Ernst & Young, which was Oilsands Quest’s bankruptcy monitor and authorized foreign representative, sought recognition of the Alberta proceedings in New York under Chapter 15 of the Bankruptcy Code and an order enforcing the Alberta court’s stay of the proceedings, including the proceedings against individual officers and directors (such a stay is typical in Canadian bankruptcy cases).

On recognition of the Canadian proceedings, the only point in dispute was whether Oilsands Quest’s center of main interests was in Canada. If not, then under 11 U.S.C. § 1517(b)(1), then the US court could not recognize the proceedings. Under § 1516(c) of the Code, the debtor’s registered office is the presumptive center of a debtor’s main interests, and here Oilsands Quest’s registered office was in Colorado. But the judge found that Oilsands Quest’s headquarters and management were located in Alberta; that Oilsands Quest did not have a US place of business or employees in the US; that all decisionmaking took place in Alberta; and that all employees and principal assets were located in Alberta. The company’s principal creditors were also in Canada. The plaintiffs pointed to a putative US class action against the company in New York He therefore found that Oilsands Quest had overcome the presumption and that its center of main interests was in Canada. Thus the judge found that the Canadian proceedings were entitled to recognition as foreign main proceedings.

The remaining question was whether to give effect to the Canadian order and stay the actions against the individual officers and directors. The automatic stay under US law would not bar such claims, and the plaintiffs suggested that Oilsands Quest had filed in Canada rather than the United States precisely in order to receive the benefit of the broader Canadian stay. Under 11 U.S.C. § 1509, the court is to grant comity or cooperation to the foreign representative once a foreign main proceeding is recognized, but that “does not mean that the Court must enforce every order entered into by the Alberta Court, for, under the plain terms of the statute, the Court must also consider any limitations that the court may impose consistent with the policy of chapter 15.” But this means only that the court should not enforce orders contrary to the “most fundamental policies of the United States,” as long as the foreign proceedings are fair and impartial. Here, while US policy favors investor protection and the regulation of the capital markets, a temporary stay of the plaintiff’s action was not drastically contrary to US policy. Thus the judge enforced the Canadian court’s stay.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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