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Case 18-1374, Document 43-1, 08/13/2018, 2366772, Page1 of 38

-
IN THE

mntttb &tatt- QCourt of ~ptal-


FOR THE SECOND CIRCUIT
»-«

In Re: Ocean Rig UDW Inc.

Debtor.

Tally Mindy Wiener,

Appellant,
v.

Ocean Rig UDW Inc., Iraklis Sbarounis, Drill Rigs Holdings Inc.,
Drillships Financing Holding Inc., Drillships Ocean Ventures Inc.,

Debtors ~ Appellees,

Simon Appell, Foreign Representative, Eleanor Fisher, Foreign


Representative
Debtors.
»-«
On Appeal from the United States District Court
for the Southern District ofNew York

BRIEF FOR THE APPELLANT

TALLY M. WIENER, ESQ.


c/o Law Offices of Tally M. Wiener, Esq.
119 west 72"d Street, PMB 350
New York, NY 10023
(212) 574-7975
Case 18-1374, Document 43-1, 08/13/2018, 2366772, Page2 of 38

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES 3

PRELIMINARY STATEMENT 6

STATEMENT OF JURISDICTION 12

ISSUES PRESENTED FOR REVIEW 13

STATEMENT OF THE CASE 13

SUMMARY OF THE ARGUMENT 15

ARGUMENT

The District Court should not have granted the


motion to dismiss for purported lack of appellate standing.
The Appellant has appellate standing
to proceed with the appeal. 16

The District Court should not have granted the


motion to dismiss for alleged equitable mootness.
The appeal is not equitably moot and
should proceed on the merits. 25

CONCLUSION 37
Case 18-1374, Document 43-1, 08/13/2018, 2366772, Page3 of 38

TABLE OF AUTHORITIES
Page(s)
Cases

Allstate Ins. Co. v. Hughes, 174 B.R. 884


(S.D.N.Y. 1994) 26-27

Antony Gibbs & Sons v. La Société Industrielle et


Commerciale des Métaux (1890) LR 25 QBD 399 9

Freeman v. Journal Register Co.,


452 B.R. 367 (S.D.N.Y. 2010) 18-19

FritoLay, Inc. v. LTV Steel Co.


(In re Chateaugay Corp.), 10 F.3d 944 (2d Cir.1993) 30-31, 36

Hertz Corp. v. Friend, 559 U.S. 77 (2000) 7

In re Barnet, 737 F.3d 238 (2d Cir. 2013) passim

In re Bear Stearns High-Grade Structured Credit


Strategies Master Fund, 374 B.R. 122
(Bankr S.D.N.Y. 2007),
aff’d 389 B.R. 325 (S.D.N.Y. 2018) passim

In re BGI, Inc., 772 F.3d 102 (2d Cir. 2014) 30

In re British American Ins. Co. Ltd., 488 B.R. 205


(Bankr. S.D. Fla. 2013) 28-30

In re Charter Commc’ns, Inc., 691 F.3d 476 (2d Cir. 2012) passim

In re Chateaugay Corp., 988 F.2d 322 (2d Cir. 1993) passim

In re Creative Finance Ltd., 543 B.R. 498


(Bankr. S.D.N.Y. 2016) 35-36

In re DBSD N. Am. Inc., 634 F.3d 79


(2d Cir. 2011) 16-17

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

In re Fairfield Sentry Ltd.,714 F.3d 127 (2d Cir. 2013) passim

In re Gucci, 126 F.3d 380 (2d Cir.1997) 17

Lavie v. Ran, 406 B.R. 277 (S.D. Tex. 2009),


aff'd, 607 F.3d 1017 (5th Cir. 2010) 28

In re Metromedia Fiber Network, Inc.,


416 F.3d 136 (2d Cir. 2005) 30

In re MPM Silicones LLC, 2017 WL 4772248


(2d Cir. October 20, 2017) 32-33

In re Point Center Financial, Inc., 890 F.3d 1188


(9th Cir. 2018) 16, 18

In re Quigley Co., Inc., 391 B.R. 695


(Bankr. S.D.N.Y. 2008) 18

In re SPhinX, Ltd., 351 B.R. 103


(Bankr. S.D.N.Y. 2006) 8

In re Zenith Electronics Corp., 329 F.3d 338


(3d Cir. 2003) 36-37

Int'l Trade Admin. v. Rensselaer Polytechnic Inst.,


936 F.2d 744 (2d Cir.1991) 17

Kane v. Johns-Manville Corp., 843 F.2d 636


(2d Cir. 1988) 17-18

Koon v. United States, 518 U.S. 81 (1996) 25

Lujan v. Defenders of the Wildlife,


504 U.S. 555 (1992) 16-17

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. § 304 passim

11 U.S.C. § 1101 29

11 U.S.C. § 1515 10

11 U.S.C. § 1519 35

11 U.S.C. § 1520 6, 16, 30

11 U.S.C. § 1521 6, 16, 30

28 U.S.C. § 158 12-13, 15

Federal Rule of Bankruptcy Procedure 1007(a)(4) 10

Federal Rule of Bankruptcy Procedure 1008 10

Federal Rule of Evidence 201 14

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.

are foreign companies that became the subjects of chapter 15 bankruptcy

proceedings in New York after joint provisional liquidators Simon Appell

and Eleanor Fisher petitioned the U.S. Bankruptcy Court for the Southern

District of New York. The Appellant, Tally Mindy Wiener, is a U.S.

shareholder of the Ocean Rig parent company Ocean Rig UDW Inc. that

trades on the Nasdaq stock exchange in New York under ticker symbol

ORIG. At issue in this appeal is appellate review of injunctive relief ordered

by the Bankruptcy Court to which the Appellant is subject after contesting

the Ocean Rig debtors’ eligibility for chapter 15 recognition at trial.

Chapter 15 recognition is not automatic and is the statutory condition

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

U.S. if U.S. relief is needed. As the Bankruptcy Court observed in Bear

Stearns, representatives of Cayman Islands proceedings that are denied

chapter 15 recognition as was the case in Bear Stearns are left with the

possibility of commencing bankruptcy cases under chapters 7 or 11 of the

Bankruptcy Code, and some relief is available under section 1509 of the

5
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Bankruptcy Code. In re Bear Stearns High-Grade Structured Credit

Strategies Master Fund, 374 B.R. 122, 132-33 (Bankr S.D.N.Y. 2007), aff’d

389 B.R. 325 (S.D.N.Y. 2018).

To achieve assistance available upon recognition as a foreign main

proceeding, in this case injunctive relief,1 representatives of debtors’

proceedings must show the proceedings they seek to have recognized were

pending in the country in which the debtors’ center of main interests

(COMI) was at the time of the chapter 15 petition date, “subject to an

inquiry into whether the process has been manipulated.” In re Fairfield

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

on limited Cayman Islands connections they presented. The alleged

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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another company’s space.2 Also raised at trial was non-satisfaction of the

“widely adopted list of COMI factors” developed in the Southern District of

New York:

the location of the debtor’s headquarters; the location of those


who actually manage the debtor (which, conceivably could be
the headquarters of a holding company); the location of the
debtor’s primary assets; the location of the majority of the
debtor’s creditors or the majority of the creditors who would be
affected by the case; and/or the jurisdiction whose law would
apply to most disputes.

Fairfield at 137 (citing In re SPhinX, Ltd., 351 B.R. 103, 117 (Bankr.

S.D.N.Y. 2006)). While no single standard is dispositive, Fairfield at 137,

COMI standards look to nature and quality of connections to a country, and

the Appellant contended that the evidence showed absence of connections to

the Cayman Islands supporting a Cayman Islands COMI conclusion. After

taking the matter under advisement, the Bankruptcy Court recognized as

foreign main proceedings the Ocean Rig chapter 15 debtors’ four Cayman

Islands provisional liquidation proceedings pending as of the March 27,

2017 chapter 15 bankruptcy filings and the debtors’ four Cayman Islands

scheme of arrangement proceedings, which were not then pending.

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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Eight Ocean Rig proceedings were filed in the Cayman Islands in

total. The eight foreign proceedings included four provisional liquidation

proceedings and four schemes of arrangement proceedings (two proceedings

for each of the four Ocean Rig debtors). Schemes of arrangement in the

Cayman Islands follow in some respects an English tradition. The debtors

filed four inter-related schemes, reflecting attempts to discharge under

foreign law New York law governed debts. This is contrary to a prohibition

in common law jurisdictions of discharge of debt incurred in one country

under the laws of another.3 Because debt discharge under schemes has been

challenged on multiple occasions, often testimony is presented concerning

whether they are likely to be enforced outside of the country in which a

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

existing shareholders in the publicly traded parent company, with

management previously holding a 9% stake prior to the filing of the schemes

of arrangement able to achieve a 9% stake thereafter, though creditors were

not paid in full.

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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On the chapter 15 bankruptcy petition date, only the four provisional

liquidation proceedings were pending. While chapter 15 petitions for the

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

((a)“A foreign representative applies to the court for recognition of a foreign

proceeding in which the foreign representative has been appointed by filing

a petition for recognition. (b) A petition for recognition shall be

accompanied by….) (emphasis supplied); Federal Rule of Bankruptcy

Procedure 1007(a)(4) (requiring documents beyond those required in 11

U.S.C. § 1515 shall be filed) (emphasis supplied); Federal Rule of

Bankruptcy Procedure 1008 (requiring bankruptcy petitions include

verifications). The statutory requirements set by Congress for chapter 15

petitions were not satisfied with respect to the schemes of arrangement.

In the Fairfield chapter 15 recognition appeal, like the present appeal

brought by shareholders, this Court explained that assessment of whether a

foreign proceeding should be recognized as a foreign main proceeding

pending in the country where the debtor has the center of its main interests

should be undertaken as of the chapter 15 bankruptcy petition date seeking

recognition of the foreign proceeding. In re Fairfield, 714 F.3d at 130 (“We

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

whether the process has been manipulated.”). Fairfield’s requirements

recognition of foreign proceedings be assessed as of the chapter 15 petition

date were not, and could not have been, satisfied with respect to the scheme

of arrangement proceedings because they were not pending foreign

proceedings as of the March 27, 2017 chapter 15 petition date of the

provisional liquidation proceedings.4 Recognition of the scheme of

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

The Bankruptcy Court entered a Memorandum Opinion on August 24, 2017,


explaining this again at page 35 [Docket Number 129 on the Bankruptcy
Court’s docket] (“If the Cayman Court sanctions the Foreign Debtors’
schemes of arrangement, upon application of the Foreign Representatives,
the Court will determine whether each scheme of arrangement should be
recognized and enforced by this Court.”). The same day the Bankruptcy
Court entered a recognition order [Docket Number 130 on the Bankruptcy

10
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arrangement proceedings should be reversed for these reasons independently

of the additional issues precluding recognition of both those proceedings and

the provisional liquidation proceedings, including but not limited to failure

to prove a Cayman Islands center of main interests.

STATEMENT OF JURISDICTION

On September 7, 2017, the Appellant timely filed a Notice of Appeal

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

orders of the Bankruptcy Court by the District Court is 28 U.S.C. § 158,

providing: “(a) The district courts of the United States shall have jurisdiction

to hear appeals (1) from final judgments, orders and decrees[.]”

On May 4, 2018, the Appellant timely filed a Notice of Appeal of the

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

judgment. The jurisdictional basis for appellate review of judgments of the

District Court by the Court of Appeals is 28 U.S.C. § 158(d), providing: “(1)

The courts of appeals shall have jurisdiction of appeals from all final

Court’s docket] granting recognition of all eight of the debtors’ proceedings


in the Cayman Islands, after the Bankruptcy Court had explained it would
not be ruling on their four scheme of arrangement proceedings.

11
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decisions, judgments, orders and decrees entered under subsections (a) and

(b) of this section.”

ISSUES PRESENTED FOR REVIEW

Did the District Court err in dismissing the chapter 15 appeal to it

from the Bankruptcy Court without reaching the merits of the appeal, on the

basis of purported lack of appellate standing?

Did the District Court err in dismissing the chapter 15 appeal to it

from the Bankruptcy Court without reaching the merits of the appeal, on the

basis of alleged equitable mootness?

STATEMENT OF THE CASE

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.,

Drillships Financing Holding Inc., Drillships Ocean Ventures Inc., Ocean

Rig UDW Inc., Eleanor Fisher, Iraklis Sbarounis, Simon Appell” (the

“Appellees”)5 entered by the District Court pursuant to a Memorandum

Opinion and Order by District Judge John G. Koeltl. The District Court

dismissed the Appellant’s appeal from an Order of the U.S. Bankruptcy

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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The Bankruptcy Court entered relief under chapter 15 of the

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

filed a letter in opposition seeking to go forward on the merits. (A4-A5).

The District Court held a hearing on October 26, 2017 during which the

parties presented their opposing positions with respect to proceeding. (A8-

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).

On April 6, 2018 the District Court entered a Memorandum Opinion

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.

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dismissal that occurred without merits review and that merits review

proceed.

SUMMARY OF THE ARGUMENT

The Appellant satisfies the standing requirements for appellate review

of the Bankruptcy Court’s rulings. She is a person aggrieved by an

injunction to which she is subject that is ongoing. Merits review is sought

with respect to whether there was a basis satisfying the requirements set by

Congress in chapter 15 of the Bankruptcy Code for the injunctive relief

pursuant to which the Appellant is enjoined. Shareholders’ challenges to the

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

standing and, likewise, the appeal of chapter 15 recognition should proceed.

The District Court abused its discretion in dismissing the appeal for

equitable mootness. The analysis contains numerous errors of law. The

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

equitable mootness analysis should be undertaken. Chapter 15 appeals

proceed on the merits where, as here, recognition is at issue – whether the

threshold requirements imposed by Congress on foreign debtors seeking

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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

THE DISTRICT COURT SHOULD NOT HAVE GRANTED THE


MOTION TO DISMISS FOR PURPORTED LACK OF APPELLATE
STANDING. THE APPELLANT HAS APPELLATE STANDING TO
PROCEED WITH THE APPEAL.

A. Standard of Review

Standing is an issue of law, subject to do novo review. See In re Point

Center Financial, Inc., 890 F.3d 1188, 1191 (9th Cir. 2018) (recent Court of

Appeals ruling applying de novo standard of review and reversing District

Court dismissal of bankruptcy appeal for lack of appellate standing).

B. Argument

The Appellant satisfies the standing requirements for appellate review

of the Bankruptcy Court’s rulings. The Bankruptcy Code imposes no limits

on standing beyond those of Article III of the United States Constitution. In

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

caused by the conduct complained of by the litigant). The Appellant also

satisfies In re Gucci’s “person aggrieved” standard. In re Gucci, 125 F.3d

380 (2d Cir. 1997). She is a shareholder aggrieved by injunctions to which

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

for the Second Circuit has explained:

The current Bankruptcy Code prescribes no limits on standing


beyond those implicit in Article III of the United States
Constitution. See In re Gucci, 126 F.3d 380, 388 (2d Cir. 1997).
Congress has given us jurisdiction over “all final decisions,
judgments, orders, and decrees” of the district courts in
bankruptcy cases, 28 U.S.C. § 158(d)(1), which courts in turn
have jurisdiction to review all “final judgments, orders, and
decrees” of the bankruptcy courts, id. § 158(a)(1). Nevertheless,
for practical reasons this Court and others have “adopted the
general rule, loosely modeled on the former Bankruptcy Act,
that in order to have standing to appeal from a bankruptcy court
ruling, an appellant must be ‘a person aggrieved’-a person
‘directly and adversely affected pecuniarily’ by the challenged
order of the bankruptcy court. Int'l Trade Admin. v. Rensselaer
Polytechnic Inst., 936 F.2d 744, 747 (2d Cir.1991) (citation
omitted). An appellant . . . therefore, must show not only
“injury in fact” under Article III but also that the injury is
“direct[ ]” and “financial.” Kane v. Johns-Manville Corp., 843
F.2d 636, 642 & n. 2 (2d Cir. 1988).

In re DBSD N. Am. Inc., 634 F.3d 79 (2d Cir. 2011). Consideration of a

“person aggrieved” standard is a “general rule.” In the DBSD analysis cited

above (emphasis on the word general supplied) and more recently In re

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

order that diminishes one’s property, increases one’s burdens, or

detrimentally affects one’s rights has a direct and adverse pecuniary effect

for bankruptcy standing purposes.”).

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

(Bankr. S.D.N.Y. 2008) (cited by the District Court, concerning insurance

company standing before Bankruptcy Courts). This is not a situation like

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

and interests insofar as his appeal challenged an incentive and management

equity plan on grounds it took away from potential recoveries to equity

holders and unfairly discriminated among unsecured creditors. Here, there

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

management equity plan or treatment of unsecured creditors.

The District Court’s appellate standing ruling relies heavily on chapter

11 cases and reflects the structure of chapter 11 of the Bankruptcy Code and

the dynamics of chapter 11 plan confirmation. For example, on page 10 of

its ruling, the District Court stated the Appellant “was not entitled to receive

anything as part of the debtors’ restructuring because the debtors’ creditors

had not yet received the full portion of their claims.” This analysis is

inapposite. (A10). The schemes of arrangement enabled management to

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

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Cayman Islands are not bound by the will of Congress as it has been

expressed in the statutory requirements of the Bankruptcy Code.

Under chapter 11 of the Bankruptcy Code, chapter 11 plans generally

cannot provide distributions to junior creditors and interests until higher

priority creditors are paid. In some instances senior creditors or interest

holders try to secure non-opposition to chapter 11 plan confirmation by

sharing their recoveries with more junior creditors or interest holders. This

is sometimes referred to -- inaccurately -- as a gift. See Black’s Law

Dictionary at https://thelawdictionary.org/gift/ (defining a gift as a

“voluntary conveyance of land, or transfer of goods, from one person to

another, made gratuitously, and not upon any consideration of blood or

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

arrangement, which do not need to conform (as a matter of Cayman Islands

law) to the priority and classification laws of chapter 11 of the Bankruptcy

Code. Existing shareholders did not vote and there were no “gifts” here.

Shareholders were diluted to 0.02% as part of trying to secure continued

trading under the ticker symbol ORIG, Ocean Rig having resisted Nasdaq’s

delisting notice. As the Appellant explained to the District Court, no court

has considered whether payouts could have been limited to creditors only.

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Consideration based on that situation would result in an advisory opinion as

the schemes contemplated 0.02% stakes for existing shareholders, with

management able to achieve a 9.31% stake and:

[e]quity got something there for a reason, which is that this is a


publicly traded company. It’s a NASDAQ traded debtor. Upon
the filing, as is normal NASDAQ stepped in to try to delist the
debtors, but the debtor wanted to stay publicly traded and keep
taking money out of the capital markets; and then now it
remains traded under the same ticker symbol, which allows its
creditors to sell off the debt that was equitized into the market,
the shareholders staying in the money was a critical part of the
plan.

(A13-A14). Whether the publicly traded parent company Ocean Rig UDW

Inc. would have re-registered had it been delisted as the District Court

assumed (A32) is also unknown and unknowable because the chapter 15

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

challenge insolvency of the debtors. (A33, “Rather than contesting the

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

liquidation filings, the debtors had upcoming interest payments due of

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

incentive to timely making the payments was avoiding triggering defaults

and cross-defaults. Citing the testimony of one of the debtors’ provisional

liquidators, the Appellant’s brief explained that: “As a consequence of the

filing of winding up petitions and the commencement of the Cayman

Provisional Liquidation Proceedings, the Debtors have triggered defaults and

cross-defaults under their financial indebtedness and have exposed

themselves to any number of adverse actions in the United States.” [Docket

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

debtors among them that petitioned for provisional liquidation proceedings

in the Cayman Islands triggered defaults and cross-defaults under some $3.7

Billion dollars in financial indebtedness by filing winding up petitions and

commencing Cayman Islands provisional liquidation proceedings, are not

issues affecting whether debtors in proceedings pending abroad can prove

eligibility for U.S. injunctions to Bankruptcy Courts under chapter 15 of the

Bankruptcy Code. And, as explained below, appellate standing in chapter

15 appeals of recognition orders is not cut off by the financial condition of

chapter 15 debtors.

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Second Circuit case law reflects shareholder appellate standing to

contest chapter 15 recognition rulings. In In re Fairfield Sentry Limited, 714

F.3d 127 (2d Cir. 2013), the appellants were, as is the Appellant here,

minority shareholders who appealed chapter 15 recognition. In what became

one of this Court’s leading chapter 15 cases on interpreting Congressional

requirements for chapter 15 recognition, shareholders opposed chapter 15

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 District Court sought to differentiate Fairfield on the basis of the

Fairfield chapter 15 debtors’ financial condition. The District Court noticed

the Court of Appeals ruling in Fairfield did not discuss liabilities and yet

assumed that the assets were significant relatively. (A34, “The Court of

Appeals did not reference any liabilities.”). The Fairfield chapter 15

debtors’ liabilities to creditors and shareholders are extensive and put the

Fairfield chapter 15 debtors out of business. The Fairfield debtors were

deeply insolvent, having invested 95% of their billions of dollars in assets

with Bernard L. Madoff’s firm, which collapsed after he confessed to

22
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running a Ponzi scheme. See Memorandum Decision and Order, In re

Fairfield Sentry Limited, et al., Case 1:10-cv-07311-GBD (S.D.N.Y. Sept.

16, 2011), page 2 (discussing the multi-billion dollar losses resulting from

the Ponzi scheme).

The District Court also attempted to distinguish Fairfield on the basis

the chapter 15 debtors had no creditors, writing: “However, there was no

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

concerned timing of the chapter 15 recognition determination, because it

does not affect that analysis. See Memorandum Decision and Order, In re

Fairfield Sentry Limited, et al., Case 1:10-cv-07311-GBD (S.D.N.Y. Sept.

16, 2011), page 3 (“Since their appointment, the Liquidators have

administered Sentry’s liquidation proceedings from the BVI with the

approval of the BVI court. Sentry’s present and former contract

counterparties, including administrative agents, payment agents, and

depositories, deal exclusively with the Liquidators as representatives of

Sentry.”); Id. at page 2 (Following the disclosure of Madoff’s scheme,

Sentry ceased its routine operations and changed its business purpose to

preserving and realizing Sentry’s assets for purposes of ultimate, orderly,

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and equitable distribution, in compliance with the BVI insolvency law, to

creditors and other lawful claimants.”) (internal citations omitted).

The District Court should not have granted the Appellees’ motion to

dismiss for alleged lack of appellate standing. The Appellant has appellate

standing and the appeal should proceed.

POINT 2

THE DISTRICT COURT SHOULD NOT HAVE GRANTED THE


MOTION TO DISMISS FOR ALLEGED EQUITABLE MOOTNESS.
THE APPEAL IS NOT EQUITABLY MOOT AND SHOULD
PROCEED ON THE MERITS.

A. Standard of Review

Equitable mootness rulings in the context of chapter 11 cases have

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

equitable mootness in the context of this appeal, which is a chapter 15

appeal, did not follow binding precedential rulings of this Court in chapter

11 or chapter 15 cases, and includes multiple errors of law. It should be

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.”).

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B. Argument

This District Court should not have granted the motion to dismiss

based on purported equitable mootness; granting it was an abuse of

discretion because the District Court’s exercise of discretion was guided by

errors and erroneous legal conclusions. Id (“The abuse-of-discretion

standard includes review to determine that the discretion was not guided by

erroneous legal conclusions.”). Among the errors here are that the District

Court treated a decision under the repealed predecessor of chapter 15 by the

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

injunction that enforced, pursuant to 11 U.S.C. § 304 (the predecessor of

Chapter 15), provisions of a foreign arrangement winding up foreign

companies.”). Allstate is a nonbinding ruling by a District Court not a ruling

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

District Court erroneously characterized it as having done. The District

Court reached the merits in AllState and stated this expressly. Allstate, 174

B.R. at 89 (“I reach the merits of Allstate’s appeal.”).

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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

Court as Docket Number 22:

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

overwritten by the enactment of chapter 15. The appellant was an insurance

company seeking to enforce arbitration rights against English companies that

were in the insurance and reinsurance business. See id. at 885. The

liquidators appointed in the UK filed ancillary cases under former

Bankruptcy Code section 304, and the U.S. relief at issue was based on

section 304’s discretionary determinations, see id. at 886. The Court

concluded that Allstate could submit claims and its substantive right to

arbitrate was not violated. See id. at 891. After reaching the merits

notwithstanding mootness concerns, the Court decided not to disturb a year

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

2017 following enactment of chapter 15 of the Bankruptcy Code in 2005.

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Case law under former Bankruptcy Code section 304 is not applicable

in chapter 15. In the context of an insurance company liquidation, the

context in which Allstate was decided, the Bankruptcy Court explained:

The general principles of comity that governed


acknowledgement of cross-border matters under former section
304 no longer apply to recognition under chapter 15. Lavie v.
Ran, 406 B.R. 277, 282 (S.D. Tex. 2009), aff'd, 607 F.3d 1017
(5th Cir. 2010).

Approaches based purely on the doctrine of comity or on


exequatur do not provide the same degree of predictability and
reliability as can be provided by specific legislation, such as the
one contained in the Model Law, on judicial cooperation,
recognition of foreign insolvency proceedings and access for
foreign representatives to courts.

In re British American Ins. Co. Ltd., 488 B.R. 205, 213 (Bankr. S.D. Fla.

2013). See also In re Bear Stearns High-Grade Structured Credit Strategies

Master Fund, Ltd., 374 B.R. 122, 132 (Bankr. S.D.N.Y. 2007) (“The

Petitioners' reliance on the discretionary and flexibility attributes of caselaw

under former section 304 of the Bankruptcy Code is misplaced.”).

The District Court erred by applying a “substantially completed”

standard inconsistent with both the express terms of the Bankruptcy Code

and the precedents of the Court of Appeals (A38, using “substantially

completed” three times) as a trigger for equitable mootness analysis.

Equitable mootness analysis in chapter 11 cases is triggered by “substantial

consummation.” This is a defined term applicable in chapter 11 appeals, not

27
Case 18-1374, Document 43-1, 08/13/2018, 2366772, Page29 of 38

chapter 15 appeals, by its terms and placement in chapter 11 of the

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

tripartite definition applicable only to plans in chapter 11 cases. 11 U.S.C. §

1101(2).

In Barnet, the Court of Appeals guided determination of whether a

provision of the Bankruptcy Code applies in chapter 15 cases and related

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

statutory construction begins with the language employed by Congress. A

statute is to be construed so that effect is given to all of its provisions,

rendering none inoperative. See id. The Court’s analysis proceeded under 11

U.S.C. § 103, a provision in chapter 1 of the Bankruptcy Code, titled

Applicability of chapters. Under Barnet, (i) chapter 11 provisions not made

part of chapter 15 by Congress, such as 11 U.S.C. § 1101(2), and (ii) cases

under chapter 11, which is the only context in which substantial

consummation can occur, do not preclude this appeal from proceeding on

the merits.

Chapter 15 appeals proceed on the merits where, as here, recognition

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is at issue - the threshold requirement imposed by Congress on foreign

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),

discussed above, the appellants were enjoined minority shareholders

appealing chapter 15 recognition by the Bankruptcy Court. The Fairfield

appellants were not required to seek stays of British Virgin Islands

proceedings subject to foreign court oversight, or U.S. Bankruptcy Court

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

judicially "in response to the particular problems presented by the

consummation of plans of reorganization under Chapter 11” of the

Bankruptcy Code. In re BGI, Inc., 772 F.3d 102, 107 (2d Cir. 2014).

Equitable mootness analysis is triggered when a debtors’ chapter 11

organization plan has been “substantially consummated,” a defined term in

chapter 11 of the Bankruptcy Code. See id. at 108 (citing In re Charter

Commc’ns, Inc., 691 F.3d 476 (2d Cir. 2012) and FritoLay, Inc. v. LTV Steel

Co. (In re Chateaugay Corp.), 10 F.3d 944 (2d Cir.1993)); In re Metromedia

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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merits before considering equitable mootness. . . . Often, an appraisal of the

merits is essential to the framing of an equitable remedy”). “Nor is a claim

automatically equitably moot if the relief requested would require that a

confirmed plan be altered. . . . The Chateaugay factors ensure that there is

no per se equitable mootness by requiring a court to examine the actual

effects of the requested relief. Finally, in examining a debtor’s contention

that a claim is equitably moot, we cannot rely solely on the debtors’

conclusory predictions or opinions that the requested relief would doom the

reorganized company. Instead Chateaugay II requires an analytical inquiry

into the likely effects of the relief an appellant seeks and must be based on

facts.” Charter, 691 F.3d at 482.

The District Court did not follow Chateaugay and also erred by not

following Charter, which elaborated on Chateaugay. The District Court

treated the Appellant’s appeal as per se equitably moot without examining

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

applying this Court’s ruling in Chateaugay as it did because the presumption

of equitable mootness is triggered by substantial consummation. The

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

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seeking a stay. She was not required to in order to overcome a presumption

of equitable mootness. The presumption did not arise because there was no

substantial consummation. That standard is only subject to satisfaction in

chapter 11 per this Court’s ruling in Barnet, discussed above. Moreover, as

a practical matter, the status quo was preserved pending adjudication of the

appeal because the injunctions challenged on appeal remain in force during

the course of the appeal.

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 in the MPM Silicones chapter 11 appeals explains the underlying

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

mootness. See In re MPM Silicones LLC, 2017 WL 4772248 (2d Cir.

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

reviewing a chapter 11 plan confirmed on September 9, 2014, id. at *3. The

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appeal to the Second Circuit was submitted on November 9, 2016 and

decided on October 20, 2017. See id. at *1. This Court reversed in part

notwithstanding contentions it would be inequitable to reach the merits. See

id. at *14 note 17 (“Debtors filed with the district court a motion to dismiss

the appeal of the bankruptcy court’s confirmation order on the basis of

equitable mootness. 17-1771 JA 4570-88. The district court made no ruling

on the motion, concluding that it was ‘mooted by this Court’s decision to

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.

159; 15-1771 Doc. 102).”).

The District Court abused its discretion by granting the motion to

dismiss without allowing merits briefing to proceed or otherwise seeking to

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.

She opposed proceeding with briefing on a motion to dismiss the Appellees

anticipated being ready to file by October 18, 2017 given the District Court

had previously ordered merits briefing commence by October 30, 2017:

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Appellant has been proceeding under the Individual Practices


requirements and reasonably relied on them applying to the
appellees since the appeal was assigned on September 22, 2017.
Leave to move without a pre-motion conference would be
prejudicial, and should be denied. The setting of a pre-motion
conference on an emergency basis should also be denied. There
has been no showing of irreparable harm under Federal Rule of
Bankruptcy Procedure 8013(d) in support of briefing on an
emergency basis and good faith bases are negated by the fact
that the debtors have the benefit of injunctions going into the
appeal. Moreover, given the representation a motion to dismiss,
once cleared to be filed, can be prepared for submission no
earlier than Wednesday, October 18, a response and reply
would be due per the Local Rules after Appellant’s opening
brief. The Appellant . . . is prepared to show she has standing
and the appeal is not moot actually or equitably in her opening
brief due per the Scheduling Order in two weeks. For these
reasons and those expressed below, the Appellant respectfully
requests the relief requested should de denied in its entirety.

[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

Court was due to be filed on October 30, 2017.

The District Court’s explanation of its reasoning for concluding the

appeal is equitably moot was based on “foreign bankruptcy proceedings that

have been substantially consummated” (A39), which shows the District

Court conflated chapter 11 and chapter 15 because there is no substantial

consummation outside of chapter 11, as explained above. The stated concern

over not promoting international cooperation (A39) is not shared by

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Bankruptcy Courts, which are subject matter specialists with respect to

international bankruptcies and cooperation considerations and receive

petitions for recognition under chapter 15 on a fairly regular basis. The

Bankruptcy Courts grant some recognition requests while denying others.

This is because Congress has specified legal requirements under chapter 15

of the Bankruptcy Code. The appeal to the District Court was of threshold

statutory chapter 15 assistance requirements under the applicable de novo

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

Ocean Rig debtors’ Cayman Islands schemes of arrangement. Recognition

under chapter 15 of the Bankruptcy Code is an express statutory condition

precedent to injunctive relief under 11 U.S.C. § 1520 and 11 U.S.C. § 1521

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

B.R. 498 (Bankr. S.D.N.Y. 2016) (“Obviously, upon the denial of

recognition, the foreign representative (here the Liquidator) becomes

ineligible to obtain the benefits of section 1520, or to obtain the additional

benefits potentially available under section 1521. Also, when recognition is

denied, a U.S. court must consider the extent to which any interim relief,

previously authorized under section 1519 or otherwise, should come to an

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end.”). The District Court’s understanding of how comity considerations

(A40) come into play in chapter 15 cases relative to how they did under

section 304 of the Bankruptcy Code, which is no longer in effect, is also in

error. “Requiring recognition as a condition to nearly all court access and

consequently as a condition to granting comity distinguishes Chapter 15

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

done under this Court’s precedents. “Chateaugay II requires an analytical

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,

making analogies between chapter 15 cases and domestic reorganizations

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

that determination for a number of reasons, the most significant of which

was its decision that the first and most important Continental factor, i.e.,

whether the reorganization plan had been "substantially consummated,"

favored a finding of equitable mootness, even though a successful appeal

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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

appeal, that appeal should be dismissed on the basis of ‘other equitable

considerations.’ . . . The judgment of the District Court will be reversed and

the case remanded for further proceedings.”).

CONCLUSION

For all of the reasons stated herein, the judgment below of the District

Court dismissing the appeal should be reversed.

Dated: New York, New York


August 13, 2018

Respectfully submitted,

/s/ Tally M. Wiener


TALLY M. WIENER, ESQ.
c/o Law Offices of Tally M. Wiener, Esq.
119 west 72nd Street, PMB 350
New York, NY 10023
(212) 574-7975

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CERTIFICATE PURSUANT TO RULE 32(A)(7)(B)

This brief is certified as complying with the limitations for length set

forth in Federal Rule of Appellate Procedure 32(a)(7)(B). It is within the

word limitations because it contains no more than 8,100 words.

/s/ Tally M. Wiener


TALLY M. WIENER, ESQ.
c/o Law Offices of Tally M. Wiener, Esq.
119 west 72nd Street, PMB 350
New York, NY 10023
(212) 574-7975

37