907 F. Supp. 2d 392
S.D.N.Y.2012Background
- Trustee Picard sues numerous defendants for RICO and common law claims in a 177-page SAC.
- Movants UniCredit, Pioneer, Bank Austria, and Profumo move to dismiss Counts I–II and Twenty–Two of the SAC as to them.
- Court has previously held Trustee lacks standing to bring the common law claims (Counts Twenty–Twenty‑Two) and dismisses them with prejudice as to the moving defendants.
- RICO claims center on a purported Medici Enterprise tied to Madoff Securities’ Ponzi scheme, with a Money In (feeder funds) and Money Out (payments for research/other) framework.
- PSLRA RICO amendment bars use of securities-fraud predicate acts to establish RICO violations, and the Court excludes Money In-based allegations, leading to failure to state a RICO claim; overall dismissal of Counts I–II as to the moving defendants.
- Court orders remand/return of proceedings to Bankruptcy Court and closes related docket entries.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Trustee has standing to plead RICO claims against the moving defendants | Trustee contends proximate cause and direct causation through the Medici Enterprise. | UniCredit/Pioneer/Bank Austria/Profumo argue lack of proximate causation and standing. | Trustee lacks standing; RICO claims dismissed for lack of proximate cause. |
| Whether PSLRA's RICO amendment bars the alleged predicate acts | The Money In acts can support RICO independent of securities claims. | Money In constitutes securities-fraud predicate acts barred by PSLRA; cannot plead RICO on such acts. | PSLRA bars RICO claims based on Money In; such acts cannot support §1962 claims. |
| Whether the remaining non-Money In allegations state a plausible RICO claim | Allegations show an enterprise and pattern of racketeering. | Allegations are conclusory and fail to show an enterprise, pattern, or agreement. | After excluding Money In, SAC fails to plead §1962(c) or §1962(d); claims dismissed. |
| Whether the Court can predicate the RICO claims on any Money In/Money Out conduct | Defendants’ conduct kept Ponzi scheme alive; supports RICO. | Money In is barred; Money Out allegations are insufficient and inadequately pleaded. | Cannot predicate on Money In; Money Out lacks sufficient factual basis; claims fail. |
| What is the final disposition of Counts I–II and related actions against the moving defendants | SAC should proceed on all viable theories absent Money In limitations. | Claims should be dismissed with prejudice due to lack of standing and failure to state a claim. | Counts One and Two dismissed with prejudice; Counts Twenty–Twenty–Two already dismissed; case remanded to Bankruptcy Court. |
Key Cases Cited
- MLS Marked Investments, LLC v. JPMorgan Chase & Co., 651 F.3d 268 (2d Cir. 2011) (RICO amendment bars securities-fraud predicate acts when applicable)
- Holmes v. SIPC, 503 U.S. 258 (Supreme Court 1992) (directness of causation required for RICO standing)
- Ashcroft v. Iqbal, 556 U.S. 662 (Supreme Court 2009) (pleading standard: plausible claims, not mere conclusory allegations)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (Supreme Court 2007) (plausibility standard for fed. pleading; avoid speculative allegations)
- Bald Eagle Area Sch. Dist. v. Keystone Fin., Inc., 189 F.3d 321 (3d Cir. 1999) (reasoning on securities-related concealment and predicate acts)