Vitro SAB Files Opening Brief in Chapter 15 Appeal
August 13, 2012

by Casey Neeley, cneeley@glass.com

Vitro SAB has filed its opening brief to appeal a recent decision by the U.S. Bankruptcy Court for the Northern District of Texas not to enforce the company's Mexican plan of reorganization in the U.S. The appeal brief was filed in the U.S. Court of Appeals for the Fifth Circuit on Friday. The company had announced its intention to appeal the case in late June.

Counsel for Vitro argues in the brief that, "because the Bankruptcy Court misinterpreted and misapplied chapter 15 in its consideration of the enforceability of the Concurso Plan, this court must reverse the enforcement denial order, direct entry of an order enforcing the Concurso Approval Order and the Concurso Plan in the United States, and grant Vitro SAB such further relief as it deems just and proper."

Vitro argues the appeal brief under the application of chapter 11 bankruptcy rulings, citing the lack of difference between several of those rulings and its case.

"It should not impede enforcement of a foreign reorganization plan in a chapter 15 case when it would not even impede confirmation of the same plan in a chapter 11 case," reads Vitro's appeal brief. "Whether the Bankruptcy Court erred as a matter of law when, after it concluded that the Concurso Approval Order was the product of a process that was not corrupt or unfair to the appellees, it refused to enforce the Concurso Approval Order solely because the Concurso Plan novated guarantee obligations of non-debtor parties and replaced them with new obligations of substantially the same parties."

The company further argues that "the relevant policies and provisions of chapter 15 mandate that the Concurso Plan and the Concurso Approval Order be enforced."

The appeal also discusses the weight of the court's decision. "This appeal - the culmination of the most heavily litigated case under Bankruptcy Code chapter 15 since Congress adopted the Model Law on Cross-Border Insolvency 'to facilitate cooperation between U.S. courts and foreign bankruptcy proceedings' - presents this Court with the opportunity to embrace the immutable truth expressed by Justice Cardozo a century ago," writes Vitro. "The outcome of this appeal is crucial to international cooperation in cross-border insolvency proceedings, which the United States has long championed, and to the continued survival of one of Mexico's largest manufacturing enterprises with more than 17,000 employees worldwide."

Vitro officials previously noted in its motion dated June 28 that they expect to "succeed on the merits of this appeal in light of binding Fifth Circuit precedent ... that compels reversal of the legal conclusions reached by the Bankruptcy Court."

The noteholders must file their reply brief by August 30. Vitro will have until September 7 to respond. Oral arguments are scheduled for the first week of October.

The appeal case follows a June ruling by a Texas bankruptcy court, which ruled against the enforcement of Vitro's Mexican Plan of Reorganization in the United States in June. In his ruling, the judge stated, "such [an] order manifestly contravenes the public policy of the United States and is also precluded from enforcement under 1507, 1521 and 1522 of the Bankruptcy Code."