Picard v. JPMorgan Chase & Co., 721 F.3d 54

Background

Bernard Madoff ran a vast Ponzi scheme through BLMIS; Picard was appointed SIPA trustee after BLMIS’s collapse and SIPC advanced roughly $800 million to customer claimants.
The Trustee sued major banks and fund sponsors (JPMorgan, UBS, HSBC, UniCredit, Access, etc.) alleging they aided and abetted Madoff, ignored red flags, and were unjustly enriched, seeking billions to replenish the customer property fund.
Trustee asserted common-law claims (aiding and abetting fraud, breach of fiduciary duty, unjust enrichment, conversion) on behalf of BLMIS and BLMIS’s customers; he also sought contribution under New York law.
District courts dismissed the Trustee’s common-law and contribution claims on in pari delicto, lack of third‑party standing, and because SIPA provides no contribution right.
On appeal, the Second Circuit affirmed: (1) Trustee stands in BLMIS’s shoes, so in pari delicto bars estate claims against third‑party wrongdoers; (2) SIPA does not grant a trustee authority to litigate customers’ individual tort claims on their behalf via bailment or broad subrogation; (3) SIPA payments are federal obligations and do not create state-law contribution rights.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether in pari delicto bars Trustee’s claims on behalf of BLMIS	Picard: SIPA trustee is different; he’s not a wrongdoer and should be able to sue third parties	Defendants: Trustee stands in debtor’s shoes; debtor’s misconduct imputed; Wagoner/NY law bars recovery	Held: In pari delicto bars claims by Trustee on behalf of BLMIS (affirmed)
Whether Trustee may seek contribution for SIPC advances under New York law	Picard: Contribution available because defendants are joint tortfeasors	Defendants: SIPA-created payments are federal obligations; state contribution not available to recoup federal-mandated disbursements	Held: No contribution — payments were compelled by SIPA and federal law provides no contribution right
Whether Trustee has prudential/Article III standing to assert customers’ individual tort claims	Picard: SIPA makes Trustee a bailee and/or SIPC subrogee so Trustee can sue on customers’ behalf	Defendants: Caplin/Wagoner prohibit trustee suing on behalf of creditors; SIPA doesn’t create such standing	Held: Trustee lacks standing to assert customers’ third‑party claims; Caplin/Wagoner controls; SIPA does not confer third‑party standing
Whether SIPA (bailment, Rule 15c, or subrogation) gives Trustee authority to pursue customers’ claims en masse	Picard: statutory scheme, bailment analogy, Rule 17/15c, and SIPC subrogation imply authority	Defendants: SIPA treats trustee like a Title 11 trustee; statutory text and history do not authorize broad subrogation or bailee suits	Held: Rejected — SIPA does not create a broad bailee or subrogation-based right for Trustee to step into customers’ shoes; equitable doctrines cannot expand statutory grants

Key Cases Cited

Warth v. Seldin, 422 U.S. 490 (holding a plaintiff must assert his own legal rights and not third-party rights)
Caplin v. Marine Midland Grace Trust Co., 406 U.S. 416 (trustee may not bring suits to recover money owed to creditors)
Shearson Lehman Hutton Inc. v. Wagoner, 944 F.2d 114 (2d Cir.) (trustee lacks standing to sue third parties on behalf of creditors)
In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d 229 (2d Cir. 2011) (treatment of customers under SIPA and background on Madoff liquidation)
Touche Ross & Co. v. Redington, 442 U.S. 560 (Supreme Court decision that effectively voided Redington precedent on implied private right of action)
Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299 (discussing in pari delicto and relative culpability in securities suits)
Kirschner v. KPMG LLP, 15 N.Y.3d 446 (N.Y. 2010) (New York Court of Appeals affirming in pari delicto principles and narrowness of adverse‑interest exception)
Holmes v. SIPC, 503 U.S. 258 (discussing limits and uncertainties of SIPC’s subrogation theory)