Moyal v. Munsterland Gruppe GmbH & Co KG

Background

David Moyal brought the action seeking damages from Munsterland Gruppe GmbH & Co. KG, doing business as Original Antique Furniture, for breach of a distribution agreement. The action began in New York state court and was later removed to the Southern District of New York. Moyal filed a First Amended Complaint.

The defendant initially agreed that a default could be entered as to liability while reserving the right to contest the amount of damages. The case then proceeded toward a damages determination. On March 11, 2021, the defendant and its general partner began insolvency proceedings in the District Court of Münster, Germany. The German proceeding automatically stayed previously filed actions against the defendant under German law, and the German court appointed an insolvency administrator.

The defendant moved to dismiss or stay this action based on the German insolvency proceeding. Its U.S. lawyer separately moved to withdraw after being informed that German law had ended his authority to represent the defendant.

Comity and the Motion to Dismiss

The court explained that international comity can include a U.S. court’s discretionary decision to defer to a foreign court that is properly handling a matter. Courts generally give particular respect to foreign bankruptcy proceedings because of the foreign country’s interest in the fair and orderly distribution of a debtor’s property.

The party seeking this deference must show that the foreign proceeding is procedurally fair and does not conflict with U.S. law or public policy. The court found that the defendant met that burden. It relied on evidence that German insolvency law provides for equal distribution of assets, fairly treats claims by U.S. and German creditors, does not prefer creditors based on nationality, and automatically stays actions against the insolvent defendant.

The court rejected Moyal’s objections. It found that the defendant’s lawyer had authority to file the motion because he was still counsel of record at that time. It also found that the defendant’s general partner was not its parent company for purposes of the required ownership disclosure. Finally, the court found that Moyal had learned of the German insolvency proceeding by March 26, 2021, and had later received formal notice.

Based on comity, the court dismissed the action. The court also noted that Moyal would not be prejudiced because, even if a default judgment for a specific amount had been entered, the defendant would still receive the protections of German bankruptcy law.

Withdrawal of Counsel

Under Local Civil Rule 1.4, an attorney may withdraw only with the court’s permission and must show a satisfactory reason. The court found that the lawyer satisfied those requirements because he no longer had authority to act for the defendant under German law. He also stated that he was not asserting a retaining or charging lien and served the required parties.

Disposition

Judge Stewart D. Aaron granted the defendant’s motion to dismiss and granted the defendant’s counsel’s motion to withdraw as counsel. The court directed the Clerk of Court to close the case.