463 B.R. 280
S.D.N.Y.2011Background
- Picard, as SIPA trustee, filed adversary proceedings against Greiff, Flinn, Blumenthal, Goldman, and Hein in SDNY.
- District Court has automatic reference to the bankruptcy court under 28 U.S.C. § 157(a) and a standing SDNY order.
- Defendants moved to withdraw the reference to the bankruptcy court; the motions present identical questions of law across cases.
- The court recognizes mandatory withdrawal under § 157(d) only where substantial non-bankruptcy statutory interpretation is necessary.
- The court has already issued bottom-line orders in Greiff, Flinn, and Blumenthal and applies that reasoning to Goldman and Hein.
- The court frames the withdrawal as limited to specific issues where non-bankruptcy law requires substantial interpretation and final resolution is potentially constitutional or jurisdictional.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Trustee may avoid transfers under SIPA when transfers allegedly satisfied antecedent debts | Greiff contends avoidance cannot be used if customer property suffices to pay claims | Greiff argues SIPA limits avoidance where antecedent debts are satisfied under securities law | Withdraw reference for this issue; requires significant interpretation of securities law |
| Whether § 546(e) limits avoidance under the Bankruptcy Code in these SIPA transfers | Trustee argues § 546(e) applies only in specific contexts and may limit avoidance | Defendants contend § 546(e) governs these transfers differently | Withdraw reference for this issue; requires significant interpretation of securities law |
| Whether transfers that satisfied antecedent debts under securities law can be avoided | Trustee asserts ability to avoid transfers despite debt satisfaction | Defendants rely on securities-law defenses to defeats avoidance | Withdraw reference for this issue; significant interpretation of securities law necessary |
| Whether § 546(e) applies given the completion of securities transactions | Trustee must determine applicability of § 546(e) under complex securities-transaction facts | Defendants challenge § 546(e) scope | Withdraw reference for this issue; requires interpretation of securities-law concepts |
| Whether IRS/IRC provisions on minimum distributions from IRAs affect avoidance | Trustee can avoid transfers despite IRA distribution rules | Tax provisions complicate avoidance and integration with bankruptcy. | Withdraw reference for this issue; requires significant integration of bankruptcy and tax law |
| Whether Stem v. Marshall requires Article III courts for final resolution of fraudulent transfer claims | Trustee seeks finality in bankruptcy court not constrained by Stem | Stem restricts delegation of core matters to non-Article III tribunals | Withdraw reference on this issue to determine if final resolution requires judicial power beyond bankruptcy court |
| Whether the bankruptcy court can render findings of fact and conclusions of law if it cannot finally resolve the claims | Trustee may still prepare findings if final resolution lies elsewhere | Defendants argue for Article III adjudication for finality | Withdraw reference on this issue to address procedural posture of findings |
| Whether Greiff’s fee-structure raises due process concerns and warrants withdrawal | Trustee’s fee arrangement creates conflicts of interest | No novel withdrawal issues; standard conflicts analysis applies | Withdraw reference to assess potential conflicts only; no withdrawal on substantive issues |
Key Cases Cited
- In re Ionosphere Clubs, Inc., 922 F.2d 984 (2d Cir.1990) (mandatory withdrawal requires substantial non-bankruptcy interpretation)
- In re Bernard L. Madoff Investment Securities, LLC, 654 F.3d 229 (2d Cir.2011) (SIPA interplay with securities law; statements not controlling of expectations)
- City of New York v. Exxon Corp., 932 F.2d 1020 (2d Cir.1991) (withdrawal standard limited to where non-bankruptcy law requires substantial interpretation)
- In re Bernard L. Madoff Sec., Inc., 654 F.3d 236 (2d Cir.2011) (discussion of broker statements and fraud not deferring to investor expectations)
- Granfinanciera, S. A. v. Nordberg, 492 U.S. 33 (1989) (private vs public rights; fraud-transfer actions not public rights)
- Stem v. Marshall, 131 S. Ct. 2594 (2011) (limits on bankruptcy courts final resolution of certain claims; Article III concerns)
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (applies Stem framework to determine judicial power constraints)
- Zandford, 535 U.S. 813 (2002) (broker misrepresentation and deceptive transactions context)
- Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329 (2d Cir.2011) (illustrates interplay of bankruptcy and securities law)