01/16/2013 05:21:25 PM EST
Madoff Trustee Meets Stern v. Marshall
In connection with the SIPA proceeding of Bernard L.
Madoff Investment Securities, LLC, the district court issued its ruling on
whether the U.S. Supreme Court decision in Stern
v. Marshall, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011), prohibits the bankruptcy
court from issuing a final ruling on a fraudulent transfer claim. The Madoff trustee has filed hundreds of
fraudulent transfer claims against net winners and others in the Madoff
proceeding, and those defendants were given the opportunity and a deadline by
District Judge Rakoff to file motions seeking to withdraw the reference under Stern v. Marshall. The court heard
arguments in June 2012 and has now issued a ruling on the matter. SIPC v.
Madoff, 2013 U.S. Dist. LEXIS 2517
(S.D. N.Y. Jan. 4, 2013).
The court held that "although
Stern precludes the Bankruptcy Court from finally deciding avoidance actions
(unless, possibly, the Trustee has sought to disallow a claim to the estate
under § 502(d)), the Bankruptcy Court nonetheless has the power to hear the
matter in the first instance and recommend proposed findings of fact and
conclusions of law. The Court further declines to withdraw the reference of
these cases to the Bankruptcy Court 'for cause shown' before the Bankruptcy
Court has issued appropriate findings of fact and conclusions of law." Id. at *54.
In other words, the bankruptcy court
will do the heavy lifting and try the cases, issuing proposed findings of fact
and conclusions of law, but not a judgment. Judge Rakoff will then get to
decide whether he agrees with the bankruptcy court's
conclusions and enter judgment accordingly.
subscribers can access enhanced versions of the opinions cited in this article:
Stern v. Marshall,
131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011)
SIPC v. Madoff, 2013 U.S. Dist. LEXIS 2517 (S.D. N.Y. Jan. 4, 2013)
Read additional articles at The Ponzi Scheme
Kathy Bazoian Phelps is the co-author of The Ponzi Book: A Legal
Resource for Unraveling Ponzi Schemes (LexisNexis 2012), along with
Hon. Steven Rhodes. The Ponzi Book, recently reviewed by Commercial Crime International, is
available for purchase at www.lexisnexis.com/ponzibook, and more information about
the book can be found at www.theponzibook.com.
more information about LexisNexis products and solutions connect with us
through our corporate site.