468 B.R. 620
Bankr. S.D.N.Y.2012Background
- Ponzi scheme through BLMIS; Trustee seeks second amended complaint adding Spouse Defendants, Family Defendants, and various transfers.
- Original complaint against Family Defendants, later amended; Spouse Defendants omitted from initial pleadings but sued separately.
- Trustee seeks to add Spouse Defendants to Bankruptcy Claims under Rule 15(c)(1)(C)(ii) and to add transfers under §550 for Subsequent Transfer Claims.
- Court analysis centers on relation back under Rule 15(c)(1)(C)(ii) and whether the omission was a mistake.
- Bankruptcy Claims against Spouse Defendants are time-barred under 11 U.S.C. § 546(a); relation back fails; discovery shows notice arguments.
- Court grants leave to add Spouse Defendants for Subsequent Transfer Claims and to add Stephanie Mack and Deborah Madoff for Common Law Claims; also grants leave to add and clarify Family Transfers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Spouse Defendants may be added to Bankruptcy Claims | Trustee argues mistake under Rule 15(c)(1)(C)(ii) | Spouse Defendants did not mistakefully omitted; strategic choice | No, time-barred; relation back not satisfied |
| Relation back under Rule 15(c)(1)(C)(ii) for Spouse Defendants | Omission was a mistake given ongoing investigation and public case | Omission was strategic, not a mistake | Not satisfied; relation back denied for Bankruptcy Claims |
| Whether Trustee may add Spouse Defendants for Subsequent Transfer Claims | Claims timely under §550; relation back not required | Not barred by limitations because §550(f) applicable | Yes, may add for Subsequent Transfer Claims |
| Whether Stephanie Mack and Deborah Madoff may be added for Common Law Claims | Claims not time-barred; in pari delicto unresolved | In pari delicto may bar; first-impression issue | Yes, may add for constructive trust and unjust enrichment |
| Whether Family Transfers may be added/clarified under Rule 15(c) | Transfers part of same course of conduct | Adequate notice provided; no objection | Yes, may add and clarify Family Transfers |
Key Cases Cited
- Krupski v. Costa Crociere S.p.A., 130 S. Ct. 2485 (U.S. 2010) (test for identity-mistake relation back under Rule 15(c)(1)(ii))
- Esmilla v. Cosmopolitan Club, 2011 WL 814007 (S.D.N.Y. 2011) (illustrates mistake concept in relation back (unreported WL))
- VKK Corp. v. Nat'l Football League, 244 F.3d 114 (2d Cir. 2001) (relation back when original pleading shows intended party)
- In re Enron Corp., 361 B.R. 36 (Bankr.S.D.N.Y. 2006) (relation back and §550 context in bankruptcy)
- Rodriguez v. City of New York, 2011 WL 4344057 (S.D.N.Y. 2011) (relation back analysis in amendments)