505 B.R. 623
S.D.N.Y.2014Background
- Trustee seeks approval to advance three Estate Assets to customer estates to fund a 100% distribution to MF Global Inc. customers.
- Appellants PwC and eight individuals object, challenging standing, shortfall, and assignment/subrogation of customers’ claims.
- Bankruptcy Court held Appellants lacked standing, concluded Estate Assets were general estate property, found at least $560 million shortfall, and approved assignment of customers’ claims.
- Appeals were filed and consolidated from the Bankruptcy Court’s november 6, 2013 order.
- Assets at issue derive from CME and JPM settlements and Securities Excess; customer estates include domestic, foreign, and securities accounts.
- Court’s review under 28 U.S.C. § 158(a) focuses on whether the Bankruptcy Court’s findings and orders were proper; plan administrator and CFTC oppose the appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to appeal the bankruptcy order | Appellants claim standing since order affects their rights in the Customer Action | Bankruptcy standing requires aggrieved party; Appellants are not directly affected | Appellants lack standing to appeal |
| Shortfall finding in customer estates | There is a $560 million shortfall and discovery should be allowed | No clear error; adequate record; discovery not needed | Shortfall affirmed; discovery not required |
| Assignment of Customers’ claims to Trustee | Assignment invalid under SIPA | Assignment consistent with SIPA; valid consideration | Assignment valid under SIPA |
| Subrogation of Customers’ claims | BLMIS I prohibits subrogation to third parties | Traditional equitable subrogation applies; allowed | Equitable subrogation applies; Trustee may proceed as subrogee |
Key Cases Cited
- In re Ashford Hotels, Ltd., 235 B.R. 734 (S.D.N.Y.1999) (standing to appeal bankruptcy orders requires direct injury to aggrieved party)
- In re LTV Steel Co., 560 F.3d 449 (6th Cir.2009) (aggrieved-party standing; potential future defendants not enough)
- In re AMR Corp., 490 B.R. 470 (S.D.N.Y.2013) (bankruptcy findings reviewed for clear error; discovery rulings reviewed for abuse of discretion)
- In re CBI Holding Co., Inc., 529 F.3d 432 (2d Cir.2008) (trustee may accept assignment of third-party claims when consistent with SIPA)