f corporate insolvencies, the hallmark of a "proceeding" is a statutory framework that constrains a company's actions and that regulates the final distribution of a company's assets.

In re Betcorp, 400 B.R. at 278.

The Corporations Act is just such a statutory framework. The mechanism for commencing the Liquidation Proceedings, the effect on corporate governance, the duties and responsibilities of the liquidators, the rights of creditors, including priorities — all are governed by Chapter 5 of the Corporations Act. No objections have been raised alleging that the Liquidation Proceedings fail to meet this requirement. This Court finds that the Liquidation Proceedings are "proceedings" under § 101(23).

b. Judicial Or Administrative In Character

Section § 101(23) requires that a foreign proceeding be judicial or administrative in character. The majority of the Liquidators' tasks are administrative in nature, e.g., collecting assets; distributing assets pursuant to the priorities set forth in the Corporations Act; conducting investigations of possible voidable transactions (e.g., preferences); circulating information to creditors; preparing various required reports; convening meetings. As the court recognized in Betcorp, "[a]n Australian voluntary winding up is, generally, a proceeding with an administrative character, although under certain circumstances the proceeding may temporarily become more appropriately characterized as judicial." Betcorp, 400 B.R. at 280. A winding up becomes judicial in character whenever the Australian Court exercises its supervisory powers under the Corporations Act. See infra part (f).

The Court finds that the Liquidation Proceedings are primarily administrative in character, and at times judicial in character and therefore satisfy this requirement of § 101(23).

c. Collective In Nature

A proceeding is collective if it considers the rights and obligations of all creditors. In re Betcorp, 400 B.R. at 281. "Liquidation is, like bankruptcy, a procedure of an inherently collective nature. . . . The procedure is compulsory, in order to ensure that there is an orderly, cooperative system. The result is that any attempt by a creditor to undermine the collective nature of liquidation is outlawed." Id. (quoting the Australian treatise McPherson's Law of Company Liquidation, Michael Gronow, at 1-51 (5th ed. 2006)). Various provisions of the Corporations Act reflect the collective nature of liquidation proceedings, e.g., § 501 (liquidator has a duty to consider the rights of all creditors in distributing the corporation's property) and § 555 (subject to priorities, preferences, etc., debts and claims rank equally and are to be paid pro rata).

The facts of this case bear out the collective nature of the Liquidation Proceedings. Sixty-two creditors, amounting to approximately $1.9 billion of debt, were represented at the second creditors' meeting, at which the Liquidation Proceedings were commenced. Tr. 8/9 at 29 (Moloney). The election to enter liquidation required the votes of the majority of creditors, in both absolute number and amount of debt. Transcript of June 24, 2010 hearing ("Tr. 6/24") at 43 (Testimony of Scott Hedge, counsel to Liquidators); Martin Decl. at 7. The creditors' committee formed at the second meeting (a "committee of inspection" under Australian law) consisted of nine (9) members representing various types of creditors, including, in part, general unsecured creditors, the Bank Syndicate, and bondholders. Tr. 8/9 at 29-30 (Moloney).

Supra fn. 4.

RCS alleges that ABC Group's U.S. creditors did not have adequate notice of the Australian proceedings and the related creditors' meeting and were thereby excluded from active participation, rendering the Liquidation Proceedings non-collective. The notice provided to creditors is a proper consideration when assessing the collective nature of a proceeding. See In re British American Insurance Co., Ltd., 425 B.R. 884 (Bankr. S.D. Fla. 2010). However, there is no allegation that the notices provided by the ABC Group entities, the Administrators, and the Liquidators was inadequate under Australian law. Pursuant to orders by the Australian courts, the Administrators notified all known creditors and employees of the first creditors' meetings. Tr. 6/24 at 74 (Hedge). Notice of the second creditors' meeting, at which the creditors placed the ABC Group entities into liquidation, was more extensive: pursuant again to orders by the Australian Courts, the Administrators placed a notification on the Administrators' website; advertised in a national newspaper; and directly notified those creditors that the companies' directors identified in the "Report[s] as to Affairs" and any additional creditors that had come forward. Tr. 6/24 at 74 — 76 (Hedge); Tr. 8/9 at 24 — 25 (Moloney); Australian Court Order at Petitioners' Exh. 11. Petitioners, in their roles as Administrators and then Liquidators, notified approximately 172 non-Australian creditors of the Administration and Liquidation Proceedings, approximately 105 of whom were U.S. creditors. Tr. 8/9 at 35 (Moloney). RCS, specifically, had actual notice of the second creditors meeting. Id. at 26-27.

Furthermore, the Corporations Act provides creditors with the right to seek court review. Section § 1321 of the Act provides that "a person [including creditors] aggrieved by any act, omission or decision of . . . a liquidator" may appeal to an Australian court and the court "may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit." See also § 511 of the Corporations Act and the discussion at (f), infra. If RCS feels aggrieved, it may appeal to the Australian court.

Given that notice was proper under Australian Law, RCS had actual notice of the second creditors' meeting, and RCS may seek redress from the Australian court, the Court finds RCS's objection unpersuasive.

RCS further argues that even though the Petitioners seek recognition of the Liquidation Proceedings, the Court should consider the Petitions as requests for recognition of the Receivership Proceedings because, RCS alleges, the Receivers and Bank Syndicate control the Liquidation Proceedings and are directing them for their own benefit. RCS argues that the Receivership Proceedings "trump" or "dominate" the Liquidation Proceedings, such that the secured creditors are riding roughshod over the rights of all other creditors.

The Petitioners and RCS agree that receivership proceedings are not collective in nature as they are, by design, for the benefit of the secured creditor(s) that commence such an action.

The Court does not agree. Australian law provides for the concurrent existence of Liquidation and Receivership Proceedings. Liquidators and Receivers have clearly delineated roles under the Corporations Act. Liquidators are appointed by the creditors as a whole and are responsible for winding up the affairs of a company and ultimately dissolving it; specific duties include: collecting assets; establishing deadlines for proving claims; distributing assets per the priorities set forth in the Corporations Act; convening required meetings; maintaining records; creating and distributing required reports to various parties, including ASIC; and conducting investigations into possibly voidable transactions. See, e.g., Corporations Act §§ 506 — 509, 533, 539, 556; Tr. 8/9 at 32-33 (Moloney). Receivers, on the other hand, are appointed by a secured creditor and their primary role is to recover secured assets for the benefit of the secured creditor and return any surplus to the company. Martin Decl. at 18. See, e.g., Corporations Act §§ 420, 422, 433.

Pursuant to the Corporations Act, the Receivers took control and possession of the A.B.C. Group's assets in which the Bank Syndicate had a security interest and which were in existence at the time the Receivership Proceedings were commenced. The assets were substantially all of the companies' assets. The Receivers are working to realize those assets for the benefit of the Bank Syndicate. Simultaneously, the Liquidators are realizing the assets under their purview, namely, claims related to potentially voidable transactions antecedent to the Liquidation Proceedings, such as preference payments, insolvent trading, and insider transactions. Tr. 8/9 at 41 (Moloney). (The security interests held by the Bank Syndicate are among the potentially preferential transactions that the Liquidators are investigating. Id. at 46.) There are no allegations that the Receivers have acted beyond the scope of their authority under the Corporations Act, and no allegations that the Liquidators have failed to discharge their duties under the Corporations Act.

The Court finds that the Receivership Proceedings and the Liquidation Proceedings are separate and distinct proceedings under Australian law, and that the Liquidation Proceedings should be evaluated on their own merits. Based upon the provisions of the Corporations Act, case law, and the evidence presented, the Court finds that the Liquidation Proceedings are collective in nature.

d. Located In A Foreign Country

The fourth requirement of § 101(23) is that the proceeding must be located in a foreign country. The Debtors' Liquidation Proceedings are undisputedly located in Australia. The Debtors are registered Australian corporations. The Liquidation Proceedings were commenced under, and are governed by, Australian law. The Liquidators/Petitioners are based in Australia. Judicial authority rests with the Australian courts and regulatory authority rests with ASIC. Based upon the evidence, the Court finds that the Liquidation Proceedings are located in a foreign country.

e. Authorized Or Conducted Under A Law Related To Insolvency Or The Adjustment of Debts

The Corporations Act governs all Australian corporations from the incorporation stage to dissolution. In re Betcorp, 400 B.R. at 281. Numerous subsections within the Corporations Act address corporate insolvency and the adjustment of corporate debt. See Corporations Act §§ 435A-451D, 461-464, 465A-489E. Australia's Cross-Border Insolvency Bill of 2008 (adopting the United Nations Commission on International Trade Law's Model Law on Cross-Border Insolvency) and the accompanying Explanatory Memorandum by the Australian Senate identify Chapter 5 and § 601CL of the Corporations Act as the Australian laws "relating to" corporate insolvency. (http://www.comlaw.gov.au, select "Advanced Search," enter "C2008B00008," select "Cross-Border Insolvency Bill 2008," last visited Oct. 19, 2010.) The Court finds that as the Liquidation Proceedings are authorized under and are being conducted pursuant to the Corporations Act, this element of § 101(23) is satisfied.

Section 601CL concerns the "cessation of business" of a registered foreign company in Australia. (http://www.comlaw.gov.au, enter "Corporations Act 2001," last visited Oct. 19, 2010.)

f. Debtor's Assets and Affairs Under A Foreign Court's Control Or Supervision

Section 101(23) requires a foreign proceeding be conducted in such a manner that the assets and affairs of the debtor are subject to the control or supervision of a foreign court. Section 1502 of the Bankruptcy Code defines "foreign court" as "a judicial or other authority competent to control or supervise a foreign proceeding."

The Australian Court had significant involvement in Debtors' Voluntary Administration Proceedings. It issued orders, inter alia, extending the deadline for convening a second meeting of creditors; providing for notice of employee-creditors; creating a single creditors' committee for all ABC Group entities; and approving a mechanism for terminated employees to access government benefits. Moloney Decl. at 8, 11-13. It conducted contested hearings and public examinations, and issued opinions.

The Australian Court's control and supervisory role continues in the Liquidation Proceedings, as provided for by numerous sections of the Corporations Act. Martin Decl. at 12-14; Tr. 6/24 at 77-80 (Hedge). Sections 482-489 provide that a court may terminate the liquidation, require property to be delivered to the liquidator, appoint a special manager on request of the liquidator, fix a claims bar date, and issue arrest warrants. An Australian court can remove a liquidator from his or her position for cause and appoint another liquidator. Id. at § 503. Under § 536 of the Corporations Act, if it appears to a court that the actions of a liquidator are in derogation of the Act, the court "may take such action as it thinks fit." In re Betcorp, 400 B.R. at 284 (quoting Cresvale Far East (in liq) v. Cresvale Sec. Ltd, (2001) 39 A.C.S.R. 622, ¶ 63, 2001 WL 1353240 (Austl.) ("In a voluntary winding up, the appointment of the liquidator is consensual but a liquidator's duties and powers are prescribed by the Corporations Act, and there are elements of supervision by the Court.")). Furthermore, numerous provisions allow interested parties to seek relief from the court. Section 1321 of the Corporations Act provides that "a person aggrieved by any act, omission or decision of . . . a liquidator" may appeal to an Australian court and the court "may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit." Section 511 of the Corporations Act allows both liquidators and creditors to request a court to determine "any question arising in the winding up of a company." A creditor can file an application with the Australian court to review the decisions of a liquidator. Corporations Act § 536. A creditor can also require the liquidator to hold a creditor formation meeting and, in the event that the liquidator refuses to hold such a meeting, the liquidator's decision is immediately reviewable by an Australian court. Id. at §§ 548-52.

In arguing that Australian courts' role in winding up proceedings is extremely limited and does not rise to supervision, RCS points out that 1) actions in the Australian courts related to liquidation proceedings are typically initiated by interested parties, 2) Australian courts give deference to a business' "commercial judgment" and do not direct the day-to-day operations of a debtor, and 3) liquidators proceed with most of their duties without court involvement. Tr. 6/24 at 94, 99-100, 105-107 (Hedge). These examples do not undermine the Australian courts' supervisory role. Most actions in a U.S. Bankruptcy Court are upon the motion of an interested party and are not undertaken sua sponte, U.S. Bankruptcy Courts also give deference to business judgments and do not direct the daily activities of debtors, and the majority of U.S. bankruptcies proceed with minimal court involvement.

Based on the provisions of the Corporations Act and the evidence presented, the Court finds that the Liquidation Proceedings are under the control and supervision of a foreign court.

g. Reorganization Or Liquidation Purpose

The final element of § 101(23) requires that the foreign proceeding have a reorganization or liquidation purpose. The Debtors' creditors resolved at the second creditors' meeting to wind up the companies and commenced the Liquidation Proceedings. See Walker Suppl. Decl. at 2-3; Petitioners' Exhibits 3 and 5. The express purpose of winding up proceedings under the Corporations Act is the orderly liquidation of the subject business. See, e.g., Corporations Act § 493. Tr. 8/9 at 33 (Moloney). The Court finds, therefore, that this final element of § 101(23) is satisfied.

In summary, the Court finds that the Liquidation Proceedings are "foreign proceedings" pursuant to § 101(23). Having addressed this preliminary issue, the court now addresses the requirements for recognition of foreign proceedings set forth in §§ 1515 and 1517, turning to § 1517 first.

2. The Liquidation Proceedings Meet The Requirements For Recognition Under § 1517

Section 1517 requires recognition of a foreign proceeding if:

(1) such foreign proceeding for which recognition is sought is a foreign main proceeding or foreign nonmain proceeding within the meaning of section 1502;

(2) the foreign representative applying for recognition is a person or body; and

(3) the petition meets the requirements of section 1515.

11 U.S.C. § 1517(a)

Recognition under § 1517 of the Bankruptcy Code is not a "rubber stamp exercise." In re Gold Honey, Ltd., 410 B.R. 357, 366 (Bankr. E.D.N.Y. 2009) (quoting In re Basis Yield Alpha Fund (Master), 381 B.R. 37, 40 (Bankr. S.D.N.Y. 2008)). The ultimate burden of proof of each element is on the foreign representative, i.e., the Petitioners. In re Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd., 389 B.R. 325, 335 (S.D.N.Y. 2008).

a. The Liquidation Proceedings Are Foreign Main Proceedings

A foreign main proceeding is defined as a "foreign proceeding pending in the country where the debtor has the center of its main interests ["COMI"]." 11 U.S.C. § 1502(4). A foreign nonmain proceeding is any other proceeding "pending in a country where the debtor has an establishment." 11 U.S.C. § 1502(5). "Establishment" is defined as "any place of operations where the debtor carries out a nontransitory economic activity." 11 U.S.C. § 1502(2).

Section 1516(c) provides that "[i]n the absence of evidence to the contrary, the debtor's registered office . . . is presumed to be the center of the debtor's main interests." 11 U.S.C. § 1516(c); See In re Tri-Continental Exchange Ltd., 349 B.R. 627, 635 (Bankr. E.D. Cal. 2006) (recognizing the winding up proceedings of insurance companies in St. Vincent and the Grenadines as foreign main proceedings). Debtors are registered in Australia. No objection was raised and no evidence presented rebutting the presumption that Debtors' registered office is their COMI.

For further analysis, the District Court for the Southern District of New York has outlined several factors for courts to consider when making a COMI determination, including:

1. the location of the debtor's headquarters;

2. the location of those who actually manage the debtor;

3. the location of the debtor's primary assets;

4. the location of the majority of the debtor's creditors or of a majority of the creditors who would be affected by the case; and/or

5. the jurisdiction whose law would apply to most disputes.

In re Bear Stearns, 389 B.R. 325 (S.D.N.Y. 2008)

The undisputed evidence overwhelmingly supports the determination that each of the Debtors' COMI is Australia: Debtors are incorporated and registered in Australia; Debtors are listed on the Australian stock exchange; Debtors' directors, the Liquidators, and the Receivers reside in Australia; Debtors' principal place of business is Australia; Debtors' books and records are located in Australia; the majority of Debtors' assets are located in Australia; the majority of Debtors' creditors are located in Australia; the Debtors' liquidations and receiverships were initiated and are proceeding under Australian law. The Court finds that the center of main interests of both Debtors is Australia and that the Liquidation Proceedings are properly considered foreign main proceedings under §§ 1517(b)(1) and 1502(4).

b. The Petitioners Are Persons Foreign Representatives

"Foreign Representative" means "a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or liquidation of the debtor's assets or affairs or to act as a representative of such foreign proceeding." § 101(24) "The term `person' includes individual, partnership, and corporation . . ." § 101(41).

The Petitioners Peter Walker and George Moloney are individuals whom the Debtors' creditors appointed as Debtors' Liquidators and, as Liquidators, they administer the liquidation of those assets not governed by the Receivership Proceedings and act as representatives of the Liquidation Proceedings, thereby meeting the requirements of § 1517(a)(2).

c. The Petition Meets The Requirements of § 1515

The final requirement for recognition under § 1517 is that the petition for recognition meets the procedural requirements of § 1515:

§ 1515. Application for recognition

(a) A foreign representative applies to the court for recognition of a foreign proceeding in which the foreign representative has been appointed by filing a petition for recognition.

(b) A petition for recognition shall be accompanied by —

(1) a certified copy of the decision commencing such foreign proceeding and appointing the foreign representative;

(2) a certificate from the foreign court affirming the existence of such foreign proceeding and of the appointment of the foreign representative; or

(3) in the absence of evidence referred to in paragraphs (1) and (2), any other evidence acceptable to the court of the existence of such foreign proceeding and of the appointment of the foreign representative.

(c) A petition for recognition shall also be accompanied by a statement identifying all foreign proceedings with respect to the debtor that are known to the foreign representative.

(d) The documents referred to in paragraphs (1) and (2) of subsection (b) shall be translated into English. The court may require a translation into English of additional documents.

11 U.S.C. § 1515

The Court has already determined that the Petitioners are "foreign representatives" and that the Liquidation Proceedings are "foreign proceedings." (§ 1515(a)) The Petitioners properly filed Petitions seeking recognition. (§ 1515(a)) Petitioner Peter Walker's Statement of Foreign Representative, at D.I. 4, is acceptable evidence under § 1515(b)(3) of the existence of the foreign proceedings and the appointment of the foreign representatives. The translation requirement of § 1515(d) is inapplicable, as the Statement obviates the need for documentary evidence under §§ 1515(b)(1) and (b)(2) and, furthermore, the original language of documents issued by the Australian courts is English. The Statement also contains Petitioner Walker's assertion that, to his knowledge, no other foreign proceedings exist with respect to Debtors. (§ 1515(c))

The Petition meets the requirements for recognition under § 1517. The Court now considers RCS's argument that recognition of the Liquidation Proceedings is contrary to U.S. public policy.

3. Recognition Of The Liquidation Proceedings Is Not Manifestly Contrary To U.S. Public Policy

Chapter 15 of the Bankruptcy Code was enacted in 2005 to implement the Model Law on Cross-Border Insolvency (the "Model Law") (promulgated by the United Nations Commission on International Trade Law ("UNCITRAL") and available at

http://www.uncitral.org/uncitral/en/uncitral_texts/insolvency/1997Model.html, last visited Oct. 27, 2010). See In re Tri-Continental Exchange Ltd., 349 B.R. at 631-32. The purpose of Chapter 15 is to encourage and increase the cooperation between U.S. courts and authorities and foreign courts and authorities in cross-border insolvency cases; to provide greater certainty and consistency in the law for trade and investment; to promote fair and efficient administration of cross-border insolvencies while protecting the interests of all creditors and other interested parties, including the debtor; to protect and maximize the value of a debtor's assets; and to facilitate the rescue of financially troubled businesses. 11 U.S.C. § 1501. In re Ernst Young, Inc., 383 B.R. 773, 776 (Bankr. D. Col. 2008) (recognizing a Canadian receivership as a foreign main proceeding).

Section 1506 allows the Court to refuse to recognize a foreign proceeding under Chapter 15 if such recognition is "manifestly contrary" to U.S. public policy.

11 U.S.C. § 1506. Public policy exception

Nothing in this chapter prevents the court from refusing to take an action governed by this chapter if the action would be manifestly contrary to the public policy of the United States.

This exception is to be narrowly construed. In re Tri-Continental Exchange, Ltd., 349 B.R. at 638-39. "This provision follows the Model Law article 5 exactly, is standard in UNCITRAL texts, and has been narrowly interpreted on a consistent basis in courts around the world. The word `manifestly' in international usage restricts the public policy exception to the most fundamental policies of the United States." Id. at fn. 6, quoting H.R. Rep. No. 109-31(I) at 109. See also In re Ephedra Products Liability Litigation, 349 B.R. 333, 336 (S.D.N.Y. 2006).

RCS argues that Debtors are seeking recognition of the Liquidation Proceedings at the behest of the Receivers and Bank Syndicate for the purpose of gaining an unfair advantage in the Arizona and Nevada Litigations. The Court's granting of recognition of the Liquidation Proceedings as foreign main proceedings imposes the automatic stay of § 362 and thereby affects the course of the Arizona and Nevada Litigations to the benefit of ABC Group. However, the Court is not persuaded that the effect on the litigation with RCS was the motivating factor behind the filing of the Petition. Petitioner Moloney testified credibly regarding the Petitioners' reasons for seeking recognition of the Liquidation Proceedings under Chapter 15:

Because of threats by RCS that they were looking to — or threatening to attach to [sic] American assets of A.B.C. And a fundamental tenet of the Australian solvency and liquidation law is that all creditors should be treated equally and that the assets allowable to a company in liquidation should be distributed equally and ratably amongst creditors — all creditor [sic] — all unsecured creditors. And I also believe that one of my duties as a liquidator was to preserve and protect the assets of the company.

Tr. 8/9 at 35 (Moloney).

These reasons are wholly proper.

Furthermore, the Debtors are not receiving protections beyond what debtors in U.S. bankruptcy proceedings receive. The fact that these protections are disadvantageous to RCS does not mean that they violate U.S. public policy. On the contrary, a stay of litigation against a debtor and of the enforcement of a judgment against a debtor is explicitly provided for by §§ 362(1) and (2) of the Bankruptcy Code. The District Court for the Eastern District of Virginia recently held that "[a] conflict between foreign law and U.S. law is a necessary prerequisite to the § 1506 analysis — for absent such conflict the comity and public policy exception questions become moot." In re Qimonda AG Bankruptcy Litigation, 433 B.R. 547, 568 (E.D. Va. 2010) (remanding the Bankruptcy Court's recognition of German insolvency proceedings for consideration of § 1506). There is no such conflict here.

While not raised by RSC, inadequate notice might be grounds for refusal to grant recognition, pursuant to § 1506. However, the Court has determined that the notice provided by the ABC Group, the Administrators, and the Liquidators was adequate.

The Court finds that recognition of the Liquidation Proceedings is not manifestly contrary to U.S. public policy and the Court will not deny recognition under the public policy exception of § 1506.

4. Relief Granted Upon Recognition

Section 1520 provides that the automatic stay is imposed upon recognition of a foreign proceeding as a foreign main proceeding. Furthermore, § 1521 allows the court to impose additional relief.

"Upon recognition of a foreign proceeding that is a foreign main proceeding — (1) sections 361 and 362 apply with respect to the debtor and the property of the debtor within the territorial jurisdiction of the United States; . . ." 11 U.S.C. § 1520(a).

Upon recognition of a foreign proceeding, whether main or nonmain, where necessary to effectuate the purpose of this chapter and to protect the assets of the debtor or the interest of the creditors, the court may, at the request of the foreign representatives, grant any appropriate relief . . .

11 U.S.C. § 1521(a)

The Petitioners are seeking additional relief pursuant to § 1521, as set forth in the proposed order provided to the Court. RCS has set forth alternative additional relief in its proposed order. Based upon a review of the record and the additional relief suggested by each party, the Court's companion order sets forth the additional relief the Court deems appropriate.

B. RCS'S Lift Stay Motion Is Granted As For A Limited Purpose

Pursuant to § 1520, recognizing the Liquidation Proceedings as foreign main proceedings triggers the automatic stay of § 362. RCS seeks relief from the automatic stay to 1) reduce the Arizona Verdict to judgment and 2) assert the resulting judgment as a setoff in the Nevada Litigation. The Debtors object, arguing that such relief would impose unnecessary costs on Debtors and is premature.

The purpose of the automatic stay is "to prevent certain creditors from gaining a preference for their claims against the debtor; to forestall the depletion of the debtor's assets due to legal costs in defending proceedings against it; and, in general, to avoid interference with the orderly liquidation or rehabilitation of the debtor." St. Croix Condominium Owners v. St. Croix Hotel, 682 F.2d 446, 448 (3d Cir. 1982). The automatic stay is not meant to be absolute, and the Bankruptcy Code provides for relief from stay in appropriate circumstances. In re The SCO Group, Inc., 395 B.R. 852, 856 (Bankr. D. Del. 2007) (citing Wedgewood Inv. Fund, Ltd. v. Wedgewood Realty Group, Ltd., (In re Wedgewood), 878 F.2d 693, 697 (3d Cir. 1989). Section 362(d)(1) of the Bankruptcy Code provides that:

On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying or conditioning such stay —

(1) for cause, including the lack of adequate protection of an interest in property of such party in interest. . . .

Beyond lack of adequate protection, "cause" is not defined in § 362(d)(1). "Cause is a flexible concept and courts often conduct a fact intensive, case-by-case balancing test, examining the totality of the circumstances to determine whether sufficient cause exists to lift the stay." In re The SCO Group, Inc., 395 B.R. at 856 (citing Baldino v. Wilson (In re Wilson), 116 F.3d 87, 90 (3d Cir. 1997); In re Laguna Assocs. Ltd., 30 F.3d 734, 737 (7th Cir. 1994); American Airlines, Inc. v. Continental Airlines, Inc. (In re Continental Airlines, Inc.), 152 B.R. 420, 424 (D. Del. 1993)).

This Court has developed a three-prong balancing test to determine whether to grant relief from the stay to pursue litigation in another forum:

1. Whether any great prejudice to either the bankrupt estate or the debtor will result from continuation of the civil suit;

2. Whether the hardship to the non-bankrupt party by maintenance of the stay considerably outweighs the hardship to the debtor; and

3. The probability of the creditor prevailing on the merits.

In re SCO, 395 B.R. 852, 857 (Bankr. D. Del. 2007); See also Izzarelli v. Rexene (In re Rexene Prods. Co.), 141 B.R. 574, 576 (Bankr. D. Del. 1992).

1. Relief From Stay Does Not Result In Great Prejudice To Debtors

The first factor the Court must consider in determining whether to grant relief from the automatic stay for "cause" is whether lifting the stay will result in "great prejudice" to the debtors or their estates. Debtors argue that lifting the stay and allowing RCS to convert its verdict into a judgment would force the Debtors to either concede the decision against it or expend considerable funds pursuing its right to appeal. The Debtors have the right to appeal the decision in the Arizona Litigation, but are not required to do so by law. An appeal certainly carries costs, but the Court finds that the costs of appeal do not rise to "great prejudice." Additionally, the Arizona and Nevada Litigations are being pursued and managed by the Receivers, not by the Liquidators/Petitions, see Tr. 8/9 at 58 (Moloney), which supports the Court's finding that the Debtors will not suffer "great prejudice" from an appeal.

2. The Hardship To RCS Of Maintaining The Stay Considerably Outweighs The Hardship To Debtors

As for the second factor, whether the hardship to the creditor considerably outweighs the hardship to the Debtors and their estates, the Court again finds in favor of RCS. Absent relief from stay, RCS cannot reduce its verdict in the Arizona Litigation to judgment, and therefore cannot seek setoff in the Nevada Litigation. Section 553 of the Bankruptcy Code recognizes and preserves a creditor's setoff rights against a debtor. Even though setoff often results in a creditor receiving a greater percentage of recovery on its claim compared to those creditors without setoff, this seemingly inequitable result is provided for explicitly by the Code. See 5 Collier on Bankruptcy ¶ 553.02 (Alan N. Resnick Henry J. Sommer eds., 16th ed. (describing setoff as "a lawful preference."). "Conceivably, Congress might have abrogated setoff rights in all bankruptcy proceedings. In practice, Congress has done precisely the opposite . . ." Id. (discussing historical reasons for protection of setoff rights). The hardship to RCS of not being able to assets its setoff rights in the Nevada Litigation considerably outweighs the minimal hardship to Debtors of appealing the Arizona Verdict.

3. RCS Has A Probability Of Success On The Merits

Finally, the Court must consider the probability that RCS will succeed in 1) having its Arizona Verdict reduced to judgment and 2) receiving a setoff in the Nevada Litigation. Even a slight probability of success on the merits may be sufficient to support lifting an automatic stay in an appropriate case. In re SCO Group, Inc., 395 B.R. at 859 (citing Int'l Business Machines v. Fernstrom Storage Van, Co. (In re Fernstrom Storage Van Co.), 938 F.2d 731, 737 (7th Cir. 1991); Rexene, 141 B.R. at 578).

a. Reducing The Arizona Judgment To Verdict

Reducing a verdict to judgment is usually a simple ministerial task that does not constitute the continuation of a judicial proceeding, which would be stayed under § 362(a)(1). In re Rexnord Holdings, Inc., 21 F.3d 522, 527 (7th Cir. 1994). However, under Arizona law, reducing the Arizona Verdict to judgment requires more than the mere entry of the judgment by the Clerk of Court. The Arizona Court first must rule on certain post-verdict matters, namely: (1) the application for award of attorneys' fees; (2) the application for costs; (3) the application of award for pre-judgment interest; and (4) the form of judgment. Due to these requirements, and out of an abundance of caution, RCS seeks relief from stay to seek entry of a verdict. Courts routinely grant relief from stay to permit a verdict to be reduced to judgment when fees and costs must first be determined. See, e.g., In re Beguelin v. Volcano Vision, Inc., 220 B.R. 94, 97-98 (B.A.P. 9th Cir. 1998); In re Nugent, 254 B, R, 14, 40 (Bankr. D. N.J. 1998). The rulings that the Arizona Court is required to make prior to entry of judgment do not call into question whether judgment should be entered. Instead, they ensure that the Arizona Court has addressed all related matters. The Court finds a strong probability that RCS will succeed in reducing its Arizona Verdict to judgment.

b. Asserting Setoff Rights In The Nevada Litigation

The automatic stay enjoins "the setoff of any debt owing to the debtor that arose before the commencement of the case. . . ." 362(a)(7). RCS's claim arose pre petition. A creditor is entitled to seek relief from the automatic stay in order to assert its setoff rights. In re NTG Industries, Inc., 103 B.R. 195, 197 (Bankr. N.D. Ill. 1989). Here, Debtors' representatives are prosecuting an action in the Nevada State Court. The imposition of the automatic stay would place RCS at a disadvantage, thereby prompting the Court to exercise its discretion to grant stay relief to RCS. See Berustein v. IDT Corp., 76 B.R. 275, 280 (S.D.N.Y. 1975).

Section 553(a) of the Code does not create an independent federal right to setoff, but merely preserves whatever setoff rights may exist under applicable state law. Here, the merits of any setoff defense asserted by RCS in the Nevada Litigation are properly determined by the Nevada Court. Based on the parties' arguments, the Court is convinced that RCS has at least a slight probability of success in receiving recognition of setoff by the Nevada Court, and therefore meets this requirement. Furthermore, even if the Court were to abstain from any conjecture regarding RSC's likely success in asserting setoff, the totality of the circumstances supports granting relief. All other factors in the Court's analysis strongly favor granting RCS's request for relief, and this Court finds it appropriate to leave the analysis and application of Nevada law to the Nevada Court.

4. The Timing Of Relief From Stay

Debtors argue that granting relief at this time is premature because RCS's setoff rights will arise only if a Nevada jury enters a verdict in favor of the Debtors, and the Nevada Litigation has not yet gone to trial. In order to assert setoff rights, RCS must first reduce the Arizona Verdict to judgment. Allowing RCS to reduce the Arizona Verdict to judgment now forces Debtors either to concede the Arizona Verdict or to lodge an appeal, when it is unknown whether RCS will ever be in a position to seek a setoff. The Court, however, is not convinced that delaying relief is appropriate. As discussed above, the Court finds that the burden on Debtors of appealing the decision in the Arizona Litigation is minimal. In addition, delaying RCS relief to assert setoff before the Nevada Court provides no benefit to the parties and may create judicial inefficiencies if the parties must return to this Court in the future.

VI. CONCLUSION

The Court finds that the Liquidation Proceedings satisfy § 101(23) and §§ 1517 and 1515 of the Bankruptcy Code and therefore grants the Petitions and recognizes the Australian Liquidation Proceedings of Debtors as foreign main proceedings. The Court further grants RCS's Lift Stay Motion for the limited purposes of allowing RCS to convert its Arizona Verdict to judgment and to seek setoff in the Nevada Litigation. An appropriate order will follow.

Dated: November 16, 2010