469 B.R. 408
S.D.N.Y.2012Background
- Trustee Picard seeks mandatory withdrawal of the reference for adversary proceedings against various defendants in Madoff Securities bankruptcy matters.
- Court relies on Picard v. Flinn Inv., LLC to decide which portions must be withdrawn.
- Second Circuit precedent limits withdrawal to where substantial non-bankruptcy federal law is necessary.
- Courts may withdraw the reference for issues involving SIPA/securities-law interaction with bankruptcy standards.
- Court withdraws reference for several issues (good-faith standard under §548(c), §546(e) application, antecedent-debt avoidance, Stern v. Marshall issues, and judicial-power concerns) and denies withdrawal in other respects.
- Parties must confer for further proceedings by a set deadline.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SIPA and securities laws modify the good-faith standard under §548(c). | Picard argues securities laws require withdrawal to analyze willful blindness. | Shapiro/Greenberger argue withdrawal is needed to assess good-faith standard. | Withdrawn to address impact of securities laws on good faith. |
| Whether §546(e) limits avoidance actions and requires non-bankruptcy-law consideration. | Picard contends §546(e) applicability is unsettled and needs withdrawal. | Defendants contend §546(e) governs avoidance without broad non-bankruptcy analysis. | Withdrawn to resolve §546(e) applicability. |
| Whether transfers satisfying antecedent debts can be avoided given securities-law context. | Picard asserts avoidance possible under securities-law framework. | Defendants contend antecedent-debt transfers not avoidable under SIPA context. | Withdrawn to address antecedent-debt issue. |
| Whether Stern v. Marshall forecloses final bankruptcy-court resolution of fraudulent-transfer claims. | Picard argues Stern permits non-Article III resolution of such claims. | Defendants claim Stern requires Article III power for final resolution. | Withdrawn to consider bankruptcy-court power post-Stern. |
| Whether the trustee has standing to bring avoidance actions on behalf of the estate. | Trustee asserts standing under bankruptcy statutes. | Avellino argues lack of standing under Wagoner risk. | Not withdrawn; standing issue resolved as non-merits-triggering. |
Key Cases Cited
- In re Ionosphere Clubs, Inc., 922 F.2d 984 (2d Cir. 1990) (necessity of substantial non-bankruptcy law analysis for withdrawal)
- Picard v. Katz, 462 B.R. 447 (S.D.N.Y. 2011) (securities laws alter the good-faith standard under §548(c))
- Picard v. Flinn Inv., LLC, 463 B.R. 280 (S.D.N.Y. 2011) (withdrawal decisions guiding SIPA-related issues)
- In re Bernard L. Madoff Investment Securities, 654 F.3d 229 (2d Cir. 2011) (SIPA dual purposes; securities-law context relevant to proceedings)
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (Ruling on judicial-power limits post-Stern)
- Picard v. HSBC Bank PLC, 450 B.R. 406 (S.D.N.Y. 2011) (addressed avoidance claims under SIPA)
- In re New Times Sec. Servs., Inc., 371 F.3d 68 (2d Cir. 2004) (investor vigilance not emphasized in SIPA history)