Case of the Day: Ivey v. Lynch

The case of the day is Ivey v. Lynch (M.D.N.C. 2018). In 2012, a German court appointed Dr. Christian Willmer as the insolvency administrator for the assets of Ingolf Boex, who resided in Germany. The German court enjoined Boex from transferring his property and granted the power to dispose of Boex’s property to Willmer. Willmer hired Andrew Lynch, a Washington D.C. lawyer, to represent him concerning Boex’s property in the United States. Willmer executed documents appointing Lynch as an officer of the Carolinas Golf Development Company (apparently Boex had been the controlling shareholder)  for the limited purpose of conveying a golf course to 71st Partners, LLC. Lynch, on Willmer’s instructions, executed and delivered a deed conveying the property. (It’s not critical to the outcome, but it’s curious to note that there were no ancillary proceedings under Chapter 15 of the Bankruptcy Code instituted in the United States with regard to Boex).

Meanwhile, an involuntary bankruptcy proceeding was begun against the Carolinas Golf Development Co. in North Carolina, and Charles Ivey was appointed trustee. Ivey sued Lynch for unjust enrichment, fraudulent transfer, and, in the alternative, breach of fiduciary duty on account of the sale. Lynch moved to dismiss on the basis of foreign official immunity.

There were two questions for the court. First, is Willmer a foreign official entitled to immunity? Second, if so, does Lynch, who of course is not himself a foreign official, derive any immunity from his relationship with Willmer?

First, I think it is useful to consider the immunity of a US bankruptcy trustee in an ordinary domestic bankruptcy case. Whatever the outcome of the foreign trustee’s immunity, it will be best if the two cases are treated similarly, or at least if we don’t give a foreign trustee immunity in cirumstances where a domestic trustee would lack it. In fact, under Barton v. Barbour, 104 U.S. 126 (1881), a bankruptcy trustee has a jurisdictional immunity from suit, except in the court that appointed him or her, unless the appointing court has first granted leave to sue. The same rule applies to the trustee’s counsel, when counsel is acting at the trustee’s direction. (There are of course exceptions—claims concerning the operation of an ongoing business are treated differently, for example, from claims concerning the administration or liquidation of assets of the bankruptcy estate).

The judge reviewed the relevant German statutes and an expert declaration stating:

Under the prevailing legal view, the insolvency administrator is considered to be a court-appointed office holder” with “certain [transferred] judicial sovereign powers”, his “task is official in nature with judicative authority”, and he “serves a public purpose or public function

In light of his understanding of German law, the judge held that Willmer was entitled to immunity as an official of the German government. And he went on to hold, on the strength of Butters v. Vance International, 225 F.3d 462 (4th Cir. 2000), that Lynch was entitled to immunity as his agent. Vance was hired by the Saudi government to provide personal security to a member of the royal family and was entitled to immunity against  claims of sex discrimination in employment when it was acting at the direction of the Saudi government. The judge rejected a comparison with Yousuf v. Samantar, 699 F.3d 763 (4th Cir. 2012), the Fourth Circuit’s decision on remand from the Supreme Court’s Samantar decision, where the court rejected a claim of immunity when the foreign official was accused of jus cogens violations.

Since the defendants were immune from liability, the court dismissed the claim. I do wonder about the absence of a Chapter 15 proceeding. If the case is appealed, perhaps we will hear more about that.

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