Preview:

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND IN RE: STARTEC GLOBAL : COMMUNICATIONS CORP., et al. VIDESH SANCHAR NIGAM LIMITED v. : : Civil Action No. DKC 2003-1506

: STARTEC GLOBAL COMMUNICATIONS CORP., et al. : MEMORANDUM OPINION Presently pending and ready for resolution is the motion of Defendant/Appellant Videsh Sanchar Nigam Limited (VSNL) to stay all proceedings in this Adversary Proceeding pending appeal to the United States Court of Appeals for the Fourth Circuit of this court's order affirming the Bankruptcy Court's denial of Defendant's motion to compel arbitration. The issues have been Local Rule

fully briefed and no hearing is deemed necessary. 105.6.

For the reasons set forth below, VSNL's motion to stay

will be granted. I. Factual and Procedural Background On or about November 12, 1992, VSNL, a telecommunications company Services organized under the laws of India, entered a into a

Agreement

with company.

Startec All of

Incorporated, Startec

U.S.

telecommunications

Incorporated's

rights and obligations under the Services Agreement have been assumed by debtor/plaintiff Startec Operating Company (Startec).

On December 14, 2001, Startec filed a voluntary bankruptcy petition, although VSNL and Startec continued to do business under the Services Agreement despite the filing. On July 1, 2002, Startec filed a complaint in the bankruptcy court seeking, inter alia, to recover more than $7,000,000 in damages resulting Court's from VSNL's and alleged applicable violations provisions of of the the

Bankruptcy

orders

Bankruptcy Code and VNSL's alleged breach of its post-petition obligations to Startec. claims are subject to Taking the position that Startec's arbitration under the arbitration

provision in the Services Agreement, VSNL moved, on September 18, 2002, to dismiss the Adversary Proceeding or, in the

alternative, to stay the Adversary Proceeding and to compel Startec to arbitrate. On March 5, 2003, the Bankruptcy Court

conducted a hearing on VSNL's motion and, on April 24, 2003, the court denied the motion to dismiss or to stay and compel

arbitration. this court.

VSNL filed a notice of appeal on April 30, 2003 to On May 6, 2003, VSNL moved the Bankruptcy Court for

an order staying the Adversary Proceeding pending the appeal and, on June 18, 2003, a hearing before Bankruptcy Judge Duncan W. Keir was held. As a result, the court granted VSNL's motion

to stay based on the then current status of confirmation and on its belief that the appeal would be resolved expeditiously. 2 For

these reasons, Judge Keir did not find that a stay would cause irreparable harm to Startec. On October 16, 2003, this court affirmed the Bankruptcy Court's denial of VSNL's motion to dismiss or to stay and compel arbitration. Subsequently, the Bankruptcy Court, on November 4,

2003, issued an order terminating its stay and ordered the parties to appear for a scheduling conference. 1 VSNL filed a

notice of appeal to the Fourth Circuit on November 14, 2003. On December 3, 2003, VSNL filed in this court a motion to stay the Adversary Proceeding pending its appeal to the Fourth Circuit. In its motion, VSNL argues that the appeal has

divested the Bankruptcy Court of jurisdiction and, as such, all proceedings before the Bankruptcy Court should be stayed until the resolution of the appeal. Startec filed an opposition on

December 16, 2003, and VSNL filed a reply on December 30, 2003. II. Analysis Generally, when an appeal is taken from a final judgment in a federal civil case, jurisdiction over the case is transferred to the appellate court and the trial court loses jurisdiction.

The scheduling conference was originally set for December 22, 2003. On December 12, 2003, the parties filed a joint motion to continue the scheduling conference until a later date due to unavoidable travel conflicts. The Bankruptcy Court granted the motion and set the scheduling conference for January 21, 2004. 3

1

See Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58 (1982). There is a split of authority among the circuits, and

the Fourth Circuit has not explicitly ruled, regarding whether the trial court retains jurisdiction to move forward pending an appeal of an order denying a motion to compel arbitration. VSNL

urges the court to adopt the reasoning of the Seventh Circuit in Bradford-Scott Data Corp., Inc. v. Physician Computer Network, Inc., 128 F.3d 504 (7th Cir. 1997), to find that an appeal of a refusal to compel arbitration divests the lower court of

jurisdiction and that a stay is proper.

Startec, and Judge

Keir, on the other hand, look to Britton v. Co-Op Banking Group, 916 F.2d 1405 (9th Cir. 1990), in which the Ninth Circuit held that an appeal does not prevent a court from proceeding with the independent issues presented in the underlying case. Circuit, in In re Salomon Inc. Shareholders' The Second Derivative

Litigation, 68 F.3d 554, 557 (2d Cir. 1995), also allowed a case to proceed during the pendency of an appeal. 2 The court in

Trial courts in the Second Circuit have interpreted the Salomon decision as permitting cases to proceed in some circumstances: Motorola Credit Corp. v. Uzan, 282 F.Supp.2d 133, 136 (S.D.N.Y. 2003); Cendant Corp. v. Forbes, 72 F.Supp.2d 341, 343 (S.D.N.Y. 1999). On the other hand, in In re Winimo Realty Corp., 270 B.R. 99 (S.D.N.Y. 2001), the district court concluded that the filing of a notice of appeal divested the bankruptcy court of jurisdiction over an adversary proceeding. This case will be discussed, infra. 4

2

Cambio Health Solutions, LLC v. Reardon , 228 F.Supp. 2d 883, 885-86 (M.D. Tenn. 2002), predicted that the Sixth Circuit would follow the reasoning of the Seventh Circuit in Bradford-Scott. In Bradford-Scott, the Seventh Circuit reasoned that the parties, by entering into an arbitration clause, expressed their preference for non-judicial dispute resolution. According to

the court, allowing the matter to proceed pending appeal would erode the chosen benefits of arbitration and risk needless litigation if the appellate court ultimately enforced the

arbitration agreement.

The claims in dispute arose directly In Britton, the appeal generally However,

from an agreement entered into by the parties. Ninth Circuit acknowledged that filing an

results in divestiture and transfer of jurisdiction.

the court also recognized that "where an appeal is taken from a judgment which does not finally determine the entire action, the appeal does not prevent the district court from proceeding with matters not involved in the appeal." Id. at 1411 (quoting 9 J. The court explained

Moore, Moore's Federal Practice

Download In Re Startec Global Communications Corp., et al. (Memorandum).pdf

Maryland Law