In re Picard, 917 F.3d 85

Background

Bernard L. Madoff Investment Securities LLC (Madoff Securities), a New York broker‑dealer, ran a multi‑billion dollar Ponzi scheme that commingled customer funds in a JPMorgan Chase account in New York.
SIPC placed Madoff Securities into liquidation and appointed Irving H. Picard as Trustee to recover customer property for distribution under SIPA and the Bankruptcy Code.
Picard alleges Madoff Securities’ transfers to foreign feeder funds were fraudulent under 11 U.S.C. § 548(a)(1)(A); those feeder funds then made subsequent transfers to hundreds of foreign investors (Appellees).
Picard sued under 11 U.S.C. § 550(a)(2) to recover from the foreign subsequent transferees. District and bankruptcy courts dismissed, holding either the presumption against extraterritoriality or international comity prohibited recovery.
The Second Circuit reversed: it held that when § 550(a) operates in tandem with § 548(a)(1)(A), the statutory ‘‘focus’’ is the debtor’s initial fraudulent transfer (here, from U.S. bank accounts), so applying § 550(a) is domestic; and prescriptive comity does not bar the Trustee’s recovery.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the presumption against extraterritoriality bars § 550(a)(2) recovery from foreign subsequent transferees when the debtor’s initial transfer was made from the U.S.	Picard: § 550(a) must be read with § 548(a)(1)(A); the focus is the debtor’s initial fraudulent transfer from U.S. accounts, so application is domestic.	Appellees: The relevant conduct is the subsequent foreign transfers and receipt; absent clear congressional intent, § 550(a) should not reach purely foreign-to-foreign transfers.	Held for Picard: Because § 550(a) works in tandem with § 548(a)(1)(A), the focus is the debtor’s initial transfer from the U.S.; the presumption against extraterritoriality does not bar recovery.
Whether international comity (prescriptive comity) limits the reach of § 550(a) where foreign feeder funds are in liquidation abroad	Picard: U.S. has a compelling interest in allowing domestic trustees to recover fraudulently transferred estate property; foreign liquidations of feeder funds do not displace that interest.	Appellees: Foreign liquidation proceedings and interests of foreign states weigh against U.S. courts applying U.S. avoidance/recovery rules; risk of conflicting distributions.	Held for Picard: Prescriptive comity does not foreclose recovery here; U.S. interests in remedying depletion of a domestic estate outweigh foreign interests given absence of parallel proceedings against the debtor.
Whether the statutory "focus" for extraterritoriality analysis should consider only § 550(a) or also the avoidance provision enabling recovery	Picard: The focus inquiry must consider the avoidance provision (§ 548) because § 550(a) only operates "to the extent" a transfer is avoided.	Appellees: Focus can be determined by § 550(a) alone and points to the subsequent transfer/receipt.	Held for Picard: Courts must assess § 550(a) in tandem with the avoidance statute; here § 548(a)(1)(A) directs focus to the debtor’s transfer.
Whether adjudicative comity/abstention should nonetheless require dismissal in deference to foreign proceedings	Picard: No parallel foreign proceedings against the debtor; abstention is not warranted and would undermine SIPA and Bankruptcy Code goals.	Appellees: Even if statute applies, U.S. courts should defer (abstain) to foreign liquidations as more appropriate fora.	Not reached on merits: Appellees’ abstention argument was not sufficiently preserved; the opinion resolves prescriptive comity and extraterritoriality, reversing dismissal and remanding.

Key Cases Cited

RJR Nabisco, 136 S. Ct. 2090 (canon: presume statutes have domestic application absent clear intent)
WesternGeco LLC v. ION Geophysical Corp., 138 S. Ct. 2129 (statutory "focus" test; evaluate provisions in tandem)
Morrison v. National Australia Bank Ltd., 561 U.S. 247 (defining domestic application as conduct relevant to statute's focus)
In re Maxwell Commc’n Corp. plc, 93 F.3d 1036 (2d Cir.) (international comity / choice‑of‑law test in transnational insolvency)
JP Morgan Chase Bank v. Altos Hornos de Mexico, S.A. de C.V., 412 F.3d 418 (2d Cir.) (deference to foreign insolvency proceedings guidance)
In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d 229 (2d Cir.) (SIPA purposes and trustee duties)