In In re Manley Toys, the United States Bankruptcy Court for the District of New Jersey on remand denied relief from the stay imposed pursuant to 11 U.S.C. § 1520(a) to allow a creditor that lacked standing to pursue avoidance actions that were property of the debtor under Hong Kong law. In rejecting cause for stay relief based on alleged bad faith, the bankruptcy court held the movant also lacked derivative standing, and granting stay relief would circumvent the policies of priority distribution of assets under both Hong Kong and United States law for an orderly liquidation and distribution of assets through a single proceeding. Further, the bankruptcy court noted the liquidators accepting funding for the liquidation is not evidence of bad faith for stay relief. In refusing to apply judicial estoppel, the bankruptcy court held it never accepted any argument by the liquidators that alter ego claims did not belong to the estate, and the movant failed to show that the liquidators took irreconcilably inconsistent positions in bad faith. The bankruptcy court concluded the movant can pursue remedies in Hong Kong (the location of the foreign main proceeding) without threatening the successful liquidation of the debtor.
