Cases & Deals

Minsheng aircraft leasing entities defeat fraudulent transfer and preference claims with presumption against extraterritoriality

Client(s) Minsheng Financial Leasing Company Limited, Minsheng Business Aviation Limited, Yuntian 3 Leasing Company Designated Activity Company, and Yuntian 4 Leasing Company Designated Activity Company

Jones Day represented Chinese and Irish aircraft leasing entities (the "Minsheng and Yuntian Entities") in the chapter 7 cases of Zetta Jet PTE, Ltd, a Singapore entity ("Zetta Singapore") and Zetta Jet USA, Inc. (collectively, the "Zetta Entities"). The Zetta Entities operated a private jet charter service for businesses and ultra-high net worth clientele. Certain Minsheng and Yuntian Entities leased multiple aircraft to Zetta Singapore pursuant to sale-leaseback agreements. Zetta Singapore made payments to certain Minsheng and Yuntian Entities pursuant to those agreements within the two years preceding the bankruptcy. The relevant agreements were governed by English law and the payments were made between Zetta Singapore's bank account in Singapore and the Minsheng and Yuntian Entities' bank accounts in Ireland and Hong Kong.

The chapter 7 trustee asserted actual and constructive fraudulent transfer, preference, and other claims against the Minsheng and Yuntian Entities to claw back amounts transferred to them by Zetta Singapore, alleging the payments were made as part of a "Ponzi scheme." Jones Day filed motions to dismiss on behalf of our clients arguing that, among other things, the United States Bankruptcy Code's avoidance and recovery provisions could not apply extraterritorially to transactions and payments that were predominantly foreign in nature. The United States Bankruptcy Court for the Central District of California agreed and dismissed all of the avoidance claims. The parties subsequently settled the litigation pursuant to Bankruptcy Rule 9019.