In Re: Oi S.A.

Background

The order addressed bankruptcy appeals brought by the International Bondholder Committee and Aurelius Capital Management, L.P. The appellees were Oi S.A. and Antonio Reinaldo Rabelo Filho, acting as the foreign representative of the Brazil judicial reorganization proceeding. The opinion refers to the appeals collectively and refers to Aurelius as the appellant seeking vacatur.

The appellees moved to dismiss the appeals as moot. The Steering Committee of the ad hoc group of bondholders of Oi S.A. and certain subsidiaries joined that motion. Aurelius conceded that the Second Circuit’s holding that its petitions were moot prevented Aurelius from arguing that the appeals were not moot. The Second Circuit had concluded that Aurelius’s petitions for direct appeal were moot.

Aurelius separately asked the court to vacate the Bankruptcy Court’s December 4, 2017 and March 14, 2018 opinions and related order under the Munsingwear doctrine. Vacatur is the setting aside of a prior decision. The court explained that vacatur may prevent an unreviewable decision from producing legal consequences and may clear the way for future litigation, but that a party has no automatic right to it. The decision is discretionary and depends on the equities, with particular attention to the parties’ responsibility for making the appeal moot.

Court’s analysis

The court relied on the Bankruptcy Court’s findings about Aurelius’s participation in the Dutch proceeding. According to those findings, Aurelius participated in the prior recognition proceeding, did not object to recognizing Brazil as the center of main interests for the Chapter 15 debtors, requested language limiting the United States stay to actions and property within the United States, and received similar language in the recognition order. The Bankruptcy Court characterized Aurelius’s conduct as a strategic decision.

The court also noted that Aurelius did not object to approval of the Brazil judicial reorganization plan and instead voted in favor of it. Under a backstop agreement, Aurelius agreed not to oppose completion of the Brazil reorganization plan, whose conditions included final confirmation orders in the Dutch proceeding. Aurelius therefore abstained and did not object to approval of the Dutch composition plan, which became effective on June 19, 2018 and concluded that proceeding.

Based on Aurelius’s active involvement in the Dutch proceeding, the court declined to vacate the Bankruptcy Court’s opinions and related order. The court also found that vacatur would not serve the purposes Aurelius identified. Aurelius represented that it did not intend to resume prosecution of a competing recognition petition and would not object to an order expressly precluding that litigation. Instead, Aurelius sought vacatur because the Bankruptcy Court’s opinions allegedly made factual findings about Aurelius’s conduct that caused reputational harm.

The court concluded that this request did not warrant the equitable remedy of vacatur, considering Aurelius’s representation by skilled counsel before the Bankruptcy Court and the unlikely effect of the Bankruptcy Court’s legal determinations on future litigation.

Disposition

Judge Vernon S. Broderick ordered that the appellees’ motions to dismiss the appeals were GRANTED and that Aurelius’s cross-request for vacatur was DENIED. The Clerk was directed to terminate the identified motions and close the appeals.