Picard Ex Rel. Bernard L. Madoff Investment Securities LLC v. Chais (In Re Bernard L. Madoff Investment Securities LLC)
440 B.R. 282
Bankr. S.D.N.Y.2010Background
- Picard moves to dismiss counterclaims by the Chais defendants rooted in a March 6, 2009 notice letter to Goldman Sachs regarding BLMIS funds.
- Account at Goldman opened by Stanley Chais in 2002 was the Chais family’s principal liquid asset besides Madoff accounts.
- Goldman froze the Account following the Trustee’s letter, later formalized by a consent order freezing assets.
- Court had issued temporary restraining orders in Oct. 2009 allowing limited withdrawals; a Nov. 2, 2009 consent order fully froze assets.
- Trustee's motion to dismiss arguing immunity; oral argument held May 5, 2010; ruling granted in full.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Trustee immunity for the Letter | Trustee acted within duties and immunized as a quasi-judicial officer. | Immunity not available due to alleged improper purpose or misstatement of law. | Granted; Trustee immune and counterclaims dismissed. |
| Adequacy of pleading tortious interference with contract | Counterclaims rely on Trustee's Letter; proper pleading exists. | Letter caused breach and was improper. | Dismissed; no plausible claim against Trustee. |
| Adequacy of pleading tortious interference with a business relationship | Letter interfered with Goldman's business relations with Chais. | There was wrongful means or malice involved. | Dismissed; absence of wrongful means and causation. |
| Adequacy of pleading conversion | Funds were converted by Trustee's actions. | Trustee exercised ownership and control over funds. | Dismissed; Goldman, not Trustee, froze funds; no conversion by Trustee. |
| Fifth Amendment due process claim viability | Trustee acted as a state actor depriving property without process. | Trustee is a state actor and violated due process. | Dismissed; Trustee not a state actor and actions did not deprive property without due process. |
Key Cases Cited
- In re Smith, 400 B.R. 370 (Bankr.E.D.N.Y. 2009) (bankruptcy trustee immunity for acts within duties)
- In re Adler, Coleman Clearing Corp., 208 F.3d 202 (2d Cir. 2000) (SIPA trustee duties; wide discretion; immunity when acting within statutory scheme)
- Weissman v. Hassett, 47 B.R. 462 (S.D.N.Y. 1985) (trustee immunity for lawful exercises of judgment)
- Kusch v. Mishkin, 208 F.3d 202 (2d Cir. 2000) (SIPA trustee duties; immunity when acting in interest of estate)
- Picard v. Merkin, et al. (In re Bernard L. Madoff Inv. Sec. LLC), 440 B.R. 243 (Bankr.S.D.N.Y. 2010) (statutory interpretation of customer property under SIPA; context for good-faith positions)
- Carvel Corp. v. Noonan, 3 N.Y.3d 182 (N.Y. 2004) (higher standard for 'wrongful means' in tortious interference)
- White Plains Coat & Apron Co., Inc. v. Cintas Corp., 460 F.3d 281 (2d Cir. 2006) (economic justification to defeat interference claims; business judgment)
- In re Bernard L. Madoff Inv. Sec. LLC, 440 B.R. 282 (2010) (Memorandum decision addressing dismissal of counterclaims; immunity and pleading standards)