Vol 11 (2014) - Issue 2

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Jaffé v Samsung Electronics Co., Ltd.: Exploring the Limits of ‘Additional Relief ’ and ‘Additional Assistance’ under Chapter 15 of the US Bankruptcy Code

Chapter 15 of the US Bankruptcy Code is drafted to provide administrators of non-US insolvency proceedings considerable latitude in seeking and obtaining assistance from US Bankruptcy Courts. Beyond the relief that follows automatically with recognition of such proceedings in US courts, both sections 1507 and 1521 of the Bankruptcy Code make 'additional relief' or 'special assistance' available for the administration of such proceedings.
But this assistance is not without its limits: Sections 15071 and 15222 each condition the Court’s provision of 'additional assistance' on the requirement that the Court provide appropriate ‘protection’ for creditors of the non-US debtor. Section 1506 separately permits US Bankruptcy Courts to refuse relief 'if [that relief] would be manifestly contrary to the public policy of the United States'.
The latter section (section 1506) is known colloquially as chapter 15’s 'public policy exception', and its application remains somewhat unclear. At least two appellate courts have found, under differing circumstances, that it does not apply; but to date, no appellate decision has found that it does. The Fourth Circuit Court of Appeals, however, has at least added to the growing discussion surrounding section 1506. Jaffe v Samsung Electronics Co., Ltd., though decided on other grounds, nevertheless provides food for thought on how sections 1507 and 1522 may – or may not – work together with section 1506 to impact the 'additional relief' and 'additional assistance' otherwise available to administrators under chapter 15.

Background: the German insolvency proceeding of Qimonda AG
Qimonda AG (Qimonda), a producer of Dynamic Random Access Memory (DRAM) chips, also held a portfolio of approximately 10,000 patents. Approximately 4,000 of these were of US origin.
Qimonda’s patents were subject to cross-licensing agreements with a number of other semiconductor manufacturers. These agreements were 'common in the semiconductor industry to avoid infringement risks caused by the “patent thicket” resulting from the overlapping patent rights of some 420,000 patents in the semiconductor industry'.
During 2007 and 2008, prices for PC-based DRAM technology collapsed. Despite efforts to restructure, Qimonda entered German insolvency proceedings in January 2009. The Munich court overseeing the proceeding appointed Dr Michael Jaffé as Qimonda’s insolvency administrator. Dr Jaffé subsequently sought and obtained recognition for Qimonda’s German insolvency proceeding in the United States under Chapter 15 of the US Bankruptcy Code.