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Keywords

settlementplaintiffmotionleasebankruptcycorporationclass action
settlementplaintiffjurisdictioninjunctiontrialmotionleasecorporationclass action

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In re Sino-Forest Corporation, 501 B.R. 655, 58 Bankr.Ct.Dec. 226

Facts

Ernst & Young LLP (E & Y) sought recognition of a March 20, 2013 order from the Ontario Superior Court of Justice that approved a settlement of class action claims against it in connection with Sino-Forest Corporation's restructuring under Canada's Companies Creditors Arrangement Act. The settlement involved a CAD $117 million payment to resolve claims from both Canadian and U.S. class action plaintiffs, and E & Y's agreement to release all claims against Sino-Forest and its affiliates. The motion was unopposed and supported by the foreign representative and class action plaintiffs.

Through the Motion, E & Y seeks entry of an order giving full force and effect in the United States to the March 20, 2013 order (the “Settlement Order”) of the Ontario Superior Court of Justice (Commercial List) (the “Ontario Court”) in the proceeding (the “Canadian Proceeding”) of Sino–Forest Corporation (“SFC”) under Canada's Companies Creditors Arrangement Act (as amended, the “CCAA”).

Issue

Whether the Bankruptcy Court should grant comity to the Canadian court's settlement order approving a third-party non-debtor release in a Chapter 15 case.

The principal remaining condition that must be satisfied before the E & Y Settlement can be implemented is the recognition and enforcement of the Settlement Order in the United States.

Rule

The court applied principles of comity, which allow for the recognition and enforcement of foreign court orders if the foreign proceedings are fair and do not contravene U.S. public policy.

The correct inquiry, therefore, is whether the foreign orders should be enforced in the United States in this chapter 15 case….

Analysis

The court determined that the Canadian court's approval of the settlement was consistent with the requirements for third-party releases under Canadian law and that the parties had a full and fair opportunity to litigate the issues. The court noted that the settlement provided substantial benefits to stakeholders and was necessary for the restructuring of Sino-Forest Corporation. The court found no reason to deny the motion based on U.S. public policy.

The parties to the Canadian proceedings in this case had a full and fair opportunity to litigate the issues, and the trial court reached a reasoned decision that it had the jurisdiction to grant the requested relief and that such relief was appropriate in the circumstances.

Conclusion

The court granted the motion to recognize and enforce the Canadian settlement order, allowing E & Y to proceed with the settlement and receive the global release.

Therefore, the Motion to recognize and enforce the Canadian court order is GRANTED.

Who won?

Ernst & Young LLP prevailed in the case as the court granted its motion to recognize and enforce the Canadian settlement order, finding that the order met the necessary legal standards.

E & Y, supported by the Foreign Representative and the Canadian and U.S. Class Action Plaintiffs, seeks an order granting comity to a Canadian court order approving class action settlements that include a third-party release and injunction in favor of E & Y in return for a payment of CAD $117 million.

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