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In re Picard

United States Court of Appeals for the Second Circuit

November 16, 2018, Argued; February 25, 2019, Decided

Docket Nos. 17-2992(L), 17-2995, 17-2996, 17-2999, 17-3003, 17-3004, 17-3005, 17-3006, 17-3007, 17-3008, 17-3009, 17-3010, 17-3011, 17-3012, 17-3013, 17-3014, 17-3016, 17-3018, 17-3019, 17-3020, 17-3021, 17-3023, 17-3024, 17-3025, 17-3026, 17-3029, 17-3032, 17-3033, 17-3034, 17-3035, 17-3038, 17-3039, 17-3040, 17-3041, 17-3042, 17-3043, 17-3044, 17-3047, 17-3050, 17-3054, 17-3057, 17-3058, 17-3059, 17-3060, 17-3062, 17-3064, 17-3065, 17-3066, 17-3067, 17-3068, 17-3069, 17-3070, 17-3071, 17-3072, 17-3073, 17-3074, 17-3075, 17-3076, 17-3077, 17-3078, 17-3080, 17-3083, 17-3084, 17-3086, 17-3087, 17-3088, 17-3091, 17-3100, 17-3101, 17-3102, 17-3106, 17-3109, 17-3112, 17-3113, 17-3115, 17-3117, 17-3122, 17-3126, 17-3129, 17-3132, 17-3134, 17-3136, 17-3139, 17-3140, 17-3141, 17-3143, 17-3144, 17-3862.

Opinion

 [*91]  Wesley, Circuit Judge:

These eighty-eight consolidated appeals arise from the ongoing fallout of Bernard Madoff's Ponzi scheme. As alleged, Bernard L. Madoff Investment Securities LLC ("Madoff Securities") fraudulently transferred billions of dollars to foreign investors, including the feeder funds at issue here. These feeder funds, the initial transferees of that property, subsequently transferred it to other foreign investors, a group that includes the hundreds of Appellees. Irving H. Picard, [**5]  the Appellant and Trustee for the Liquidation of Madoff Securities, alleges these transfers are fraudulent, and thus avoidable (meaning "voidable"), under § 548(a)(1)(A) of the Bankruptcy Code. Invoking § 550(a)(2) of the Bankruptcy Code, the Trustee sued the Appellees to recover the property. The question before us is whether, where a trustee seeks to avoid an initial property transfer under § 548(a)(1)(A), either the presumption against extraterritoriality or international comity principles limit the reach of § 550(a)(2) such that the trustee cannot use it to recover property from a foreign subsequent transferee that received the property from a foreign initial transferee.

Following an order of the United States District Court for the Southern District of New York (Rakoff, J.),1 the United States Bankruptcy Court for the Southern District of New York (Bernstein, J.)2 dismissed the Trustee's actions, holding in each that either the presumption against extraterritoriality or international comity principles prevent the Trustee from using § 550(a)(2) to recover this property. We disagree and hold that neither doctrine bars recovery in these actions. Accordingly, we vacate the judgments below and remand to the bankruptcy court for further proceedings.

BACKGROUND

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917 F.3d 85 *; 2019 U.S. App. LEXIS 5411 **

IN RE: IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF BERNARD L. MADOFF INVESTMENT SECURITIES LLC

Subsequent History: Later proceeding at HSBC Holdings PLC v. Picard, 140 S. Ct. 643, 205 L. Ed. 2d 383, 2019 U.S. LEXIS 7519 (U.S., Dec. 9, 2019)

US Supreme Court certiorari denied by Hsbc Holdings v. Picard, 2020 U.S. LEXIS 3004 (U.S., June 1, 2020)

Prior History: These eighty-eight consolidated appeals come from dozens of related orders of the United States Bankruptcy Court for the Southern District of New York (Bernstein, J.). Plaintiff-Appellant Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC ("Madoff Securities"), alleges that Madoff Securities transferred property to foreign entities that subsequently transferred it to other foreign entities, including the hundreds of Appellees. The Trustee contends that Madoff Securities' transfers are avoidable (meaning "voidable") as fraudulent under § 548(a)(1)(A) of the Bankruptcy Code. He thereby seeks to recover the property from the Appellees using § 550(a)(2) of the Bankruptcy Code. These actions were dismissed on the grounds that the presumption against extraterritoriality and international comity principles limit the scope of § 550(a)(2) [**1]  such that the trustee of a domestic debtor cannot use it to recover property that the debtor transferred to a foreign entity that subsequently transferred it to another foreign entity. We disagree and hold that neither doctrine bars recovery in these actions. Accordingly, we VACATE the judgments of the bankruptcy court and REMAND for further proceedings.

Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Madoff), 2016 Bankr. LEXIS 4067 (Bankr. S.D.N.Y., Nov. 21, 2016)Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 513 B.R. 222, 2014 U.S. Dist. LEXIS 91508 (S.D.N.Y., July 6, 2014)

CORE TERMS

feeder, domestic, comity, liquidation, investors, fraudulent, extraterritoriality, customer, entity, infringement, prescriptive, orderly, tandem, withdrawal, equitable, depletes

Bankruptcy Law, Bankruptcy, Estate Property, Contents of Estate, Securities Law, Investment Advisers, Adviser, Broker & Dealer Liability, Case Administration, Examiners, Officers & Trustees, Duties & Functions, Avoidance, Transferee Liabilities & Rights, Fraudulent Transfers, Elements, Business & Corporate Compliance, International Law, Dispute Resolution, Conflict of Law, Civil Procedure, Appeals, Standards of Review, De Novo Review, International Law, Comity Doctrine, Comity Doctrine Procedures, Discretion Regarding Procedures, Abuse of Discretion, Conflict of Law, Choice of Law, Comity Doctrine, Areas of Law, Bankruptcy