594 B.R. 167
Bankr. S.D.N.Y.2018Background
- Bernard Madoff operated BLMIS as a Ponzi scheme; filings in Dec. 2008 led to SIPA liquidation and appointment of Trustee Picard.
- BNP Paribas entities (BNP Bank, BNP Arbitrage, BNP Securities Services, BNP Cayman) provided services, credit facilities and structured products tied to BLMIS feeder funds and in some instances acted as administrators/custodians for feeder funds.
- BNP-related subsidiaries helped create and service Oreades (a Luxembourg feeder fund), delegated custodial/advisory roles to BLMIS, discovered compliance concerns and ultimately closed Oreades in 2004.
- The Trustee seeks to recover approximately $156 million as avoidable subsequent transfers under 11 U.S.C. § 550(a)(2) (transfers from Tremont-managed funds and Ascot); some Ascot claims were later settled and dismissed.
- Defendants moved to dismiss arguing lack of personal jurisdiction, that the amended complaint was filed without leave, that §546(e)/§550(b) defenses apply (value, good faith, knowledge), and that many claims are time‑barred.
- The Court denied the jurisdictional dismissal, treated the proposed amended complaint as a motion for leave to amend, granted leave in part and denied it in part: new subsequent-transfer claims added after §550(f) ran were time‑barred and dismissed; remaining claims survive only to the extent they raise the single issue whether the defendant (or a predecessor) gave value for each surviving transfer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction | Trustee: BNP's New York-based Fund Derivatives Group and related activities give rise to specific and (for some entities) general jurisdiction in NY/US | Defendants: foreign entities; insufficient U.S. contacts; no general jurisdiction | Court denied motion to dismiss for lack of personal jurisdiction; prima facie New York/U.S. contacts tied to the leveraged/structuring business and redemptions sufficed for specific jurisdiction |
| Filing amended complaint without leave | Trustee: prior Bankruptcy Court rulings (and litigation history) permitted repleading; Bankr. Ct. ET Decision granted leave on extraterritoriality issues | Defendants: PAC filed in violation of Fed. R. Civ. P. 15(a)(2) without leave or consent | Court agreed PAC was filed without leave but treated defendants’ motion as the Trustee’s motion for leave to amend; Rule 15 standards apply |
| Sufficiency of scienter (good faith/knowledge under §550(b)) | Trustee: pleadings show willful blindness/subjective knowledge by BNP based on numerous red flags, Oreades servicing/closure, third‑party warnings | Defendants: allegations are hindsight, speculative, and implausible — BNP would not knowingly fund or secure loans with worthless (Ponzi) collateral | Court held Trustee failed to plausibly plead subjective belief of high probability of fraud or willful blindness; red flags and related allegations insufficient to show lack of good faith/knowledge |
| Statute of limitations / relation-back for new subsequent transfers | Trustee: new subsequent-transfer claims relate back to the original complaint under Fed. R. Civ. P. 15(c) and prior litigation put defendants on notice | Defendants: each transfer is a separate claim; new transfers were added after §550(f) expired and do not arise from the same operative facts | Court held new subsequent-transfer claims (41 transfers) are time‑barred and relation‑back fails; leave to amend denied as to those claims; other surviving claims proceed but limited to whether value was given |
Key Cases Cited
- Daimler AG v. Bauman, 571 U.S. 117 (limits general jurisdiction to corporation's place of incorporation or principal place of business)
- Walden v. Fiore, 571 U.S. 277 (specific‑jurisdiction inquiry focuses on defendant's contacts with the forum and suit‑related conduct)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must state plausible claim to relief)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- Foman v. Davis, 371 U.S. 178 (leave to amend should be freely given absent futility or other factors)
- Global‑Tech Appliances, Inc. v. SEB S.A., 563 U.S. 754 (defines willful blindness; two‑part test for deliberate avoidance)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (reasonableness factors in specific‑jurisdiction inquiry)
- SPV Osus Ltd. v. UBS AG, 882 F.3d 333 (2d Cir.) (plaintiff must make prima facie showing of personal jurisdiction)