513 B.R. 222
S.D.N.Y.2014Background
- Trustee (SIPA) seeks to recover transfers from Madoff Securities to foreign feeder funds and then to foreign transferees.
- Feeder funds Fairfield Sentry (BVI) and Harley (Cayman) invested heavily in Madoff and are in foreign liquidations.
- CACEIS Luxembourg and CACEIS Bank (France) are foreign custodians that received transfers via feeder funds, not directly from Madoff.
- Consolidated proceedings challenge whether 11 U.S.C. § 550(a)(2) applies extraterritorially during a SIPA liquidation.
- Court previously consolidated issues on extraterritoriality and commingling with SIPA, then held 550(a)(2) would be extraterritorial and precluded by law and comity.
- Court’s ultimate ruling: § 550(a)(2) does not apply extraterritorially to recover purely foreign transfers; alternative comity analysis also forecloses relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 550(a)(2) apply extraterritorially here? | Trustee argues focus is on transfers abroad in SIPA context. | CACEIS et al. argue presumption against extraterritoriality governs. | No; extraterritorial application not warranted. |
| Did Congress clearly intend extraterritorial application of § 550(a)(2)? | Trustee asserts no clear expression limiting domestic application. | Defendants rely on textual silence to show no extraterritorial intent. | Not clearly expressed; presumption against extraterritoriality stands. |
| Would comity bar application if extraterritorial? | Trustee argues policy supports reaching foreign transfers. | Foreign liquidations and law interests weigh against US law. | Comity precludes application; even if extraterritorial, relief denied. |
Key Cases Cited
- Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247 (2010) (two-step extraterritoriality analysis; focus on statutory transactions)
- Aramco v. Haley, 499 U.S. 244 (1991) (presumption against extraterritoriality; domestic focus unless clearly stated)
- In re Colonial Realty Co., 980 F.2d 125 (2d Cir.1992) (property recovered under §541 avoids treating transferred property as estate property too soon)
- Maxwell I, 186 B.R. 807 (S.D.N.Y.1995) (extraterritoriality considerations under §548; focus on where transfers occur and who receives them)
- Maxwell II, 93 F.3d 1036 (2d Cir.1996) (comity analysis in bankruptcy contexts; foreign forum interests matter)