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<b><i> In Re Fairfield Sentry Limited</i></b>
Krys v. Farnum Place, LLC (In re Fairfield Sentry Ltd.), 768 F.3d 239 (2d Cir. 2014) (Fairfield Sentry) is the first federal circuit court decision to address the application of Section 363 in a Chapter 15 bankruptcy case. Enacted in 2005, Chapter 15 of the Bankruptcy Code applies to cross-border insolvency proceedings. Chapter 15 enables the representative of the foreign bankruptcy estate to apply to a U.S. bankruptcy court for recognition of a foreign insolvency proceeding and, if recognition is granted, relief in aid of that proceeding. Where the foreign proceeding is recognized as a foreign main proceeding (i.e., a foreign insolvency proceeding pending in the location of the debtor's center of main interests), Section 1520(a) automatically makes certain core provisions of the Bankruptcy Code applicable as to matters within the United States.
The meaning and application of Section 1520(a)(2) was at the heart of the Fairfield Sentry decision. Section 1520(a)(2) makes Section 363 (among other Code sections) applicable upon foreign main recognition to “the transfer of an interest of the debtor in property that is within the territorial jurisdiction of the United States to the same extent that the section[] would apply to property of an estate.” Undertaking a “plain meaning” statutory analysis, the U.S. Court of Appeal for the Second Circuit in Fairfield Sentry held that, when triggered under Chapter 15, Section 363 applies no differently than it would in a plenary bankruptcy case, and requires the bankruptcy court to perform an independent review of the proposed sale under the well-established Section 363 standards, even if the foreign court overseeing the main proceeding has previously approved the transaction.
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