Jed S. Rakoff last week largely sided with Fred Wilpon and Saul Katz, the
owners of the New York
Mets, and their families and affiliated enterprises (the "Wilpon/Katz
Group") on their motion to dismiss the adversary proceeding brought by Irving
Picard, the trustee of Bernard L. Madoff Investment Securities LLC
Rakoff's decision will affect not only this particular lawsuit, but also
many of the other lawsuits Picard has commenced seeking the recovery of funds
from former investors of BLMIS. (Kelley Drye & Warren LLP represents
other Madoff investors who may benefit from this ruling.)
Judge Rakoff dismissed most of the counts against the
Wilpon/Katz Group based on his reading of the "safe harbor" provisions Section 546(e) of the Bankruptcy Code. That
section limits a trustee's powers to recover any transfer from a "stockbroker"
that was a "settlement payment" made "in connection with a securities contract"
to transfers made with actual fraudulent intent. Crucially, this
interpretation of 546(e) only permits a recovery of intentionally fraudulent
transfers pursuant to Section
548(a)(1)(A) of the Bankruptcy Code, which has a two-year look back
period. It completely eliminates Picard's ability to rely on the six-year
look back period under New York state law fraudulent transfer provisions.
Read this article in its entirety at Kelley Drye &
Warren LLP's Bankruptcy
Law Insights blog