Third Circuit Clarifies Comity Abstention Test

Singapore by the 3B’s (CC BY 2.0 DEED)

The Third Circuit recently clarified the appropriate test for deferring to foreign bankruptcy proceedings. The court’s opinion in Vertiv, Inc. v. Wayne Burt PTE, Ltd. is clear, correct, and helpful in disambiguating the different contexts in which other federal courts have referred to “international comity abstention” and adjudicatory comity.

The Facts

In January 2020, Vertiv, Inc. and associated entities (all Delaware corporations based in New Jersey) sued Wayne Burt PTE, Ltd. (a Singaporean corporation based in Singapore) and another company in federal court in New Jersey. Vertiv alleged that Wayne Burt had defaulted on a loan and now owed Vertiv the full principal plus interest, as well as significant shares in the other defendant company, which Wayne Burt had pledged as security. After one of Wayne Burt’s directors acknowledged the debt, the district court quickly signed a consent order awarding Vertiv more than $29 million in damages and declaring that it now owned the pledged shares. Vertiv filed a second, similar suit against Wayne Burt and a related company in September 2020, leading to another consent judgment in November 2020.

Then things got interesting. In February 2021, Wayne Burt moved under Fed. R. Civ. P. 60(b) to reopen the judgments. It explained that it had been in liquidation proceedings in Singapore since before January 2020 and that, as a result, only the Singaporean court-appointed Liquidator had authority to consent to any judgments. Further, the Singaporean Liquidator noted he had not received notice of Vertiv’s complaints (explaining his belated request that the U.S. court stay its hand), and he submitted evidence that the loans to Vertiv had never in fact existed.

The district court granted the Rule 60(b) motion and reopened the judgments. While it noted that the facts seemed to fit Rule 60(b)(3)’s grounds for relief based on “fraud, … misrepresentation, or misconduct,” it explained that the one-year time limit for raising a Rule 60(b)(3) motion had likely already passed. The court instead relied on Rule 60(b)(4), which does not have a similar time limit and which permits granting relief if a judgment is void. The court reasoned that its prior judgments were void because only the Singaporean Liquidator had the authority to consent to those judgments. Once the cases were reopened and consolidated, the court granted the Liquidator’s Rule 12(b)(6) motion to dismiss Vertiv’s complaints on the grounds of international comity in light of the Singaporean liquidation proceedings. Vertiv appealed.

Defining Adjudicatory Comity

In an opinion authored by Judge Arianna Freeman, the Third Circuit began its analysis by correctly identifying that “[t]his case involves adjudicatory comity, which is a discretionary act of deference to a foreign court,” as opposed to prescriptive comity, which relates to the applicability of a sovereign’s laws. The court then helpfully clarified that “[a]djudicatory comity arises only when a matter before a United States court is pending in or has resulted in a final judgment from a foreign court—that is, when there is or was a ‘parallel’ foreign proceeding.” As it explained in a footnote, that would include (1) abstaining in light of a pending foreign proceeding, (2) enforcing a foreign judgment, and (3) precluding relitigation of a claim or issue already adjudicated by a foreign tribunal.

Notably missing from this definition of adjudicatory comity is abstention based on foreign relations concerns. This was not an oversight, as the court cited (for other purposes) the leading Ninth Circuit decision applying foreign relations abstention, Mujica v. Airscan Inc. (2014). Vertiv thus reaffirms the Third Circuit’s prior rejection of foreign relations abstention in Gross v. German Foundation Industrial Initiative (2007).

Deference to Foreign Bankruptcy Proceedings

The Third Circuit then emphasized the particular deference that foreign bankruptcy proceedings merit as distinct from other types of parallel litigation. Because its two leading decisions on this question—Remington Rand v. Business Systems Inc. (1987) and Philadelphia Gear Co. v. Gear de Mexico, S.A. (1994)—are now thirty years old, the court set out to update its guidance for the district courts.

First, the Third Circuit acknowledged that a broader definition of “parallel proceeding” is needed in the bankruptcy context. It thus adopted the concept of “related” matters in U.S. bankruptcy proceedings: a civil action is “related to” a foreign bankruptcy if its outcome “may affect the debtor’s estate.”

Second, if there is an ongoing foreign bankruptcy proceeding to which the U.S. civil action is related, the party seeking the extension of comity must make a prima facie showing that (in the words of Philadelphia Gear) (1) “the foreign bankruptcy law shares our policy of equal distribution of assets,” and (2) “the foreign law mandates the issuance or at least authorizes the request for the stay.”

Third, once these preliminary requirements are satisfied, the U.S. court must consider the foreign proceeding’s fairness to the parties and its compatibility with U.S. policy. The Third Circuit elaborated on a variety of factors, including whether creditors would receive equal treatment, be fairly treated, and receive due process protections. It emphasized, however, that the thumb is on the scale in favor of deference because Chapter 15 of the Bankruptcy Code strongly endorses deference to foreign bankruptcy proceedings.

For this case, the Third Circuit concluded that the record already established that the first two requirements were satisfied. It remanded to the district court, however, to evaluate in the first instance whether the additional factors under the third step might weigh against deference. (Based on the Third Circuit’s opinion and the district court’s prior decisions, the district court seems likely to conclude that deference is indeed warranted.)


The Third Circuit is to be commended for its clear and helpful decision, including its outline of the proper bases for adjudicatory comity, its distinct treatment of foreign bankruptcy proceedings, and its updated and thoughtful guidance for the district courts. As I have previously argued, it is vitally important for courts to distinguish clearly between adjudicatory and prescriptive comity and to analyze foreign bankruptcy proceedings under a different rubric than that used for other foreign parallel proceedings. The Third Circuit’s decision also makes clear that adjudicatory comity does not provide a basis for declining jurisdiction out of the concern for foreign relations fictions. Vertiv is a gift to the Third Circuit’s district courts and a model for sister circuits likewise looking to clarify this unnecessarily murky area of the law.