OPINION AND ORDER
These consolidated bankruptcy appeals arise out of the multi-billion dollar Ponzi scheme orchestrated by Bernard L. Ma-doff (“Madoff’), and the subsequent bankruptcy of Bernard L. Madoff Investment Securities LLC (“BLMIS”) in the wake of the public revelation of that scheme. The appellants Adele Fox and Susanne Stone Marshall (collectively, the “Appellants”) each invested money in BLMIS. After the bankruptcy proceedings began, Fox and Marshall filed separate class action lawsuits in the United State District Court for the Southern District of Florida (the “Florida Actions”), asserting Florida state law claims against Jeffrey Picower, an alleged Madoff co-conspirator, and other related defendants (collectively, the “Picower defendants”). The appellee, Irving H. Pi-card (“Picard” or the “Trustee”), is the trustee for the BLMIS estate pursuant to the Securities Investor Protection Act of 1970 (“SIPA”), 15 U.S.C. §§ 78aaa et seq. Picard now has reached a settlement agreement with the Picower defendants under which they will repay $5 billion to the BLMIS estate. In addition to the $5 billion, the Picower defendants agreed with the Government to forfeit approximately $2.2 billion. The result of these agreements is that the Picower defendants will return the total amount of their net withdrawals from BLMIS for the benefit of the other customers of BLMIS.
The Appellants appeal the declaration of the Bankruptcy Court (Lifland, B.J.) that the Florida Actions were void at the outset because they were commenced in violation of the automatic stay order in this case, as well as a preliminary injunction issued by the Bankruptcy Court enjoining the Appellants from proceeding with the Florida Actions. The Appellants also appeal the Bankruptcy Court’s approval, in a later decision, of the settlement reached by Pi-card with the Picower defendants, and its issuance of a final injunction precluding the assertion of claims that were duplicative or derivative of claims brought by the Trustee, or that could have been brought
The Bankruptcy Court was plainly correct in finding that the Florida Actions violated the automatic stay and should be preliminarily enjoined. They were a transparent effort to pursue claims against the Picower defendants that were duplicative of claims brought by the Trustee and that belonged to the Trustee on behalf of all the creditors of BLMIS. Similarly, the Bankruptcy Court was correct in approving the settlement with the Picower defendants that was extraordinarily beneficial to the BLMIS estate, and in enjoining claims against the Picower defendants duplicative of those brought by or which could have been brought by the Trustee.
I.
In December, 2008, Madoff was arrested and charged with criminal violations of 15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. § 240.10b-5 in the United States District Court for the Southern District of New York in connection with a massive securities fraud scheme. Secs. Investor Prot. Corp. v. Bernard, L. Madoff Inv. Secs. LLC (“Automatic Stay Decision”),
On December 15, 2008, the District Court granted a motion by the Securities Investor Protection Corporation (“SIPC”) to place those who had invested money with BLMIS (“BLMIS customers”) under the protection of SIPA and issued a Protective Order. Id.; see also Protective Order filed Dec. 15, 2008, (the “Dec. 15 Protective Order”), Secs. Investor Prot. Corp. v. Bernard L. Madoff Inv. Secs. LLC, Case No. 08-1789 (Bankr.S.D.N.Y.), ECF No. 1. Appellee Picard was appointed as the trustee for the SIPA liquidation of BLMIS, and the liquidation proceedings were transferred to the Bankruptcy Court. Automatic Stay Decision,
Under SIPA, “customers share pro rata in customer property” recovered by the trustee “to the extent of their net equities.” Automatic Stay Decision,
Appellant Marshall filed her claim with the Trustee in January 2009. Picard allowed her claim in July, 2009, in the amount of $30,000, the amount of Marshall’s initial deposit with BLMIS. The final balance on Marshall’s BLMIS account statement was $202,836.91. Marshall received a payment of $30,000 from Picard in August, 2009. Before receiving that payment, “Marshall executed an assignment and release of any claims against BLMIS or third parties for, inter alia, any illegal or fraudulent activity with respect to her BLMIS account that gave rise to her customer claim against BLMIS.” Automatic Stay Decision,
Appellant Fox had two accounts with BLMIS, the final balances of which were $887,420 and $1,948,718 respectively. Id. Fox does not contest that she does not have net equity in either account, having withdrawn amounts greater than her principal investment, and thus is barred by the terms of the Net Equity Decision from receiving payments through the liquidation until all BLMIS customers have received back their principal investments. Fox filed claims with the Trustee, which were denied. See Adele Fox’s Objection to Trustee’s Determination of Claim, Secs. Investor Prot. Corp. v. Bernard L. Madoff Inv. Secs. LLC, Case No. 08-1789 (Bankr. S.D.N.Y. June 2, 2010), ECF No. 2354, Ex. A (Determination of Claim); Adele Fox’s Objection to Trustee’s Determination of Claim, Secs. Investor Prot. Corp. v. Bernard L. Madoff Inv. Secs. LLC, Case No. 08-1789 (Bankr.S.D.N.Y. Dec. 15, 2010), ECF No. 3498, Ex. A (Determination of Claim). Fox objected to those determinations. She received no payment from the Trustee.
In May, 2009, as part of his efforts to recover funds for the BLMIS estate, Pi-card filed an adversary proceeding against the Picower defendants (the “New York Action”) for, among other things, fraudulent transfers and conveyances made by the Picower defendants as part of their conspiracy with Madoff. The Trustee relied on 11 U.S.C. §§ 544, 547, 548, and 550, the New York Uniform Fraudulent Conveyance Act, N.Y. Debt. & Cred. Law §§ 270-281, and other applicable law relating to turnover, accounting, preferences and fraudulent conveyances. See Complaint at ¶¶ 1-5, Picard v. Picower, Case No. 09-1197 (Bankr.S.D.N.Y. May 12, 2009), ECF No. 1 (“Picard Comph”). The complaint in the New York Action sought to recover more than $6.7 billion from the Picower defendants. Picard then began settlement negotiations with the Picower defendants. Automatic Stay Decision,
On March 31, 2010, Picard commenced an action in the Bankruptcy Court to enjoin the Florida Actions. Id. at 430. Pi-card sought a declaration that the Florida Actions were barred by the automatic stay provisions of 11 U.S.C § 362(a). Picard also sought a preliminary injunction pursuant to 11 U.S.C. § 105(a), which allows courts to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions” of the Bankruptcy Code. Picard sought to enjoin Fox and Marshall from further prosecuting the Florida Actions.
The Bankruptcy Court granted these applications on May 3, 2010. The Bankruptcy Court held that the claims in the Florida Actions were covered by the automatic stay under § 362(a), finding that, “the claims asserted in the Florida Actions seek to redress a harm common to all BLMIS customer claimants and, consistent with the purposes of the automatic stay, belong exclusively to the Trustee.” Automatic Stay Decision,
In August, 2010, the Bankruptcy Court issued a “Striking Order,” which struck from the Appellants’ statements of issues to be presented on appeal the fifth issue listed, which concerned the Bankruptcy Court’s subject matter jurisdiction. See, e.g., Notice of Appeal, Picard v. Fox, No. 10 Civ. 7101 (S.D.N.Y. Sept. 16, 2010), ECF No. 1, Ex. A (“Striking Order”), at 1-2.
After the Bankruptcy Court’s ruling on the preliminary injunction, Picard reached a settlement with the Picower defendants pursuant to which the Picower defendants agreed to return $5 billion to the BLMIS estate, and to forfeit an additional amount of over $2.2 billion to the Government. See Settlement Agreement at 3. That money, over $7.2 billion in total, is currently in escrow pending the entry of a final, nonappealable order approving the settlement. Id. As part of the settlement agreement, Picard agreed to seek a permanent injunction pursuant to § 105(a) barring claims against the Picower defendants by BLMIS investors that are duplicative or derivative of the claims that were brought, or that could have been brought, by Picard. See id. at 5-6.
In December, 2010, Picard filed a motion in the Bankruptcy Court to approve the settlement, and to enter a permanent injunction as contemplated by the settlement agreement. Fox and Marshall objected to the settlement and the permanent injunction. See Settlement Order at 1-2. In a January 2011 Order, the Bankruptcy Court approved the settlement, finding that the settlement was fair, reasonable, equitable, and in the best interests of the BLMIS estate. Id. at 6. The Bankruptcy Court also issued a permanent injunction barring claims against the Picower defendants by third parties that are duplicative or derivative of the claims that were brought, or that could have been brought, by Picard. See id. at 6-7.
The current appeals concern a number of the Bankruptcy Court’s orders. Fox and Marshall appeal the order of the Bankruptcy Court declaring that the Florida Actions violated the automatic stay, and were therefore void ab initio, and the preliminary injunction issued by the Bankruptcy Court pursuant to § 105(a) enjoining the Appellants from proceeding with the Florida Actions to the extent that those actions were not barred by § 362(a). Fox and Marshall also appeal the Bankruptcy Court’s order striking certain issues and corresponding portions of the record from their appeal of those rulings. Fox and Marshall also appeal separately the Bankruptcy Court’s order approving the settlement agreement entered into by Picard with the Picower defendants, and the issuance of the permanent injunction that accompanied the approval of the settlement to the extent that it permanently bars them from prosecuting the Florida Actions.
A district court reviews a bankruptcy court’s findings of fact for clear error and its legal conclusions de novo. See In re Bell,
II.
As an initial matter, Fox and Marshall appeal the Bankruptcy Court’s Striking Order. They argue that the Bankruptcy
The Federal Rules of Bankruptcy Procedure require appellants from a decision by a bankruptcy court to file, within fourteen days of filing their notice of appeal, “a designation of the items to be included in the record on appeal and a statement of the issues to be presented.” Fed. R. Bankr.P. 8006. With regard to the statement of the issues to be presented, courts in this Circuit have held that a district court may consider issues on appeal that are not included in that statement, because Rule 8006 “is not intended to bind either party to the appeal as to the issues that are to be presented.” In re Cohoes Indus. Terminal, Inc.,
Both of the parties cite cases indicating that a bankruptcy court has the power to strike documents from, and otherwise shape, the record on appeal, even after a notice of appeal has been filed. See, e.g., In re Ames Dep’t Stores, Inc.,
Nevertheless, it is plain that a bankruptcy court lacks the power to prevent a district court from considering legal arguments on appeal. No such power is specified in the jurisdictional statutes related to bankruptcy proceedings. See, e.g., 28 U.S.C. §§ 157, 158. More broadly, such a power, if it existed, would allow bankruptcy courts to insulate their legal decisions from review by Article III courts, in contravention of well-established Supreme Court precedent. See N. Pipeline Constr. Co. v. Marathon Pipe Line Co.,
The Trustee argues that, in any event, the arguments raised in issue five— that the Bankruptcy Court ignored the doctrine of in pari delicto (and the related Wagoner Rule) — were waived because they were not raised before the Bankruptcy Court. “However, a court sitting on the appellate level has discretion to hear a new issue when necessary to avoid a mani
Accordingly, the Striking Order of the Bankruptcy Court is VACATED. This Court will consider issue five in conjunction with the Appellants’ other arguments.
III.
The Appellants appeal the Bankruptcy Court’s order explained in the Automatic Stay Decision, that declared that the Florida Actions were barred by the automatic stay and were therefore void, and that further preliminarily enjoined the Appellants from pursuing the Florida Actions pursuant to § 105(a). The central issue in this appeal is whether the Bankruptcy Court had the power to declare the Florida Actions void and otherwise to enjoin the Appellants from prosecuting them. That question hinges on the nature of the Florida Actions — whether they are independent actions, or whether they are derivative or duplicative of claims that were the property of the BLMIS estate.
A.
1.
The automatic stay provision of the Bankruptcy Code operates to enjoin, among other things, “any act to obtain possession of ... or to exercise control over property of the estate.” 11 U.S.C. § 362(a)(3). “[A]ll legal or equitable interests of the debtor in property as of the commencement of the case,” “wherever located and by whomever held,” are property of the estate. Id. at § 541(a)(1). Causes of action may be property of the estate. In re Jackson,
In addition, the automatic stay operates to enjoin “the commencement or continuation ... [of an] action or proceeding against the debtor ..., or to recover a claim against the debtor....” 11 U.S.C. § 362(a)(1), (6). Actions “to recover a claim against the debtor” can include actions by creditors against the debtor’s transferees in certain circumstances. See Colonial,
A major objective of the automatic stay is “to prevent dissipation of the debt- or’s assets before orderly distribution to creditors can be effected.” S.E.C. v. Brennan,
The Court of Appeals for the Second Circuit has explained that “actions taken in violation of the stay are void and without effect.” Colonial,
2.
In this case, the Bankruptcy Court held that the claims asserted in the Florida Actions against the Picower defendants are the property of the estate pursuant to § 362(a)(3), and thus that the Florida Actions were void and without effect because they were filed in violation of the automatic stay. See, e.g., In re The 1031 Tax Grp., LLC,
In this case, neither of the Appellants disputes that the factual allegations in their respective Florida complaints are virtually identical to those made by Picard in his New York Action against the Picower defendants. (See, e.g., Oral Arg. Tr. 5, Dec. 19, 2011 (“Let’s assume they are substantially the same facts, I suggest.”).) Indeed, the complaints in the Florida Actions explicitly rely on the Trustee’s complaint in the New York Action, (see, e.g., Fox Complaint ¶ 3), and cite to the Trustee’s complaint throughout. (See, e.g., Fox Complaint ¶¶ 15-28, 30-31, 37-38, 43, 46, 55, 59-60, 63.) The Florida Actions, like Picard’s New York Action, are based upon the same conduct by the Picower Defendants: involvement in the Madoff Ponzi scheme, and the transfer of billions of dollars in BLMIS-held customer funds to the Picower defendants. The Florida complaints contain no additional allegations of acts by the Picower defendants that were directed toward the Appellants specifically, or any duty owed specifically to the Appellants by the Picower defendants. Put bluntly, the wrongs pleaded in the Florida Actions and in the Trustee’s action are the same. Cf. In re Granite Partners, L.P.,
The alleged wrongful acts harmed every BLMIS investor (and BLMIS itself) in the same way: by withdrawing billions of dollars in customer funds from BLMIS and thus substantially diminishing the assets available to BLMIS to pay its customers and creditors, and to continue to function. Indeed, the very essence of the allegations against the Picower defendants is that they paid themselves out of assets that comprised other customers’ accounts, thereby diminishing the value of BLMIS. (See, e.g., Fox Complaint ¶ 73 (“Defendants participated in and profited from the fraud on other BLMIS customers, and ... converted the cash (there were no securities) of other BLMIS account holders to pay themselves these fictitious profits.”).) There is no allegation that the Picower defendants owed any duty directly to the Appellants. Cf. In re Johns-Manville Corp.,
Moreover, the claims asserted in the Florida Actions are claims that “could be brought by any creditor of the debtor.” Id. Indeed, Appellant Marshall, at oral argument, asserted that “every single [BLMIS] customer” could have brought the claims alleged in the Florida Actions. (Oral Arg. Tr. at 17.) Even without that concession, though, it is plain that every BLMIS customer suffered the same types of damages asserted by the Appellants in the Florida Actions. The damages are all based on the alleged actions of the Picower defendants withdrawing funds from BLMIS to which they were not entitled and thereby diminishing the funds that could otherwise be paid to the customers of BLMIS in an appropriate distribution mechanism which has been found to be the Net Equity method. The Appellants attempt to circumvent this obvious proposition by arguing that they are seeking different damages from the distributions to be made according to the Net Equity method. They claim that they are seeking the lost time-value of their investments as well as any taxes paid on gains that never existed. But these are all the same types of damages that could be claimed by other BLMIS customers in general. Every BLMIS investor did not receive their final BLMIS balance, and thus lost the time-value of their investment, as well as any taxes paid on gains that never existed. Some BLMIS customers did not withdraw an amount greater than their principal in
In this case, there ultimately is no substantive difference between the claims already asserted by the Trustee, on behalf of the BLMIS estate, in the New York Action, and those claims asserted in the Florida Actions. See, e.g., MacArthur Co. v. Johns-Manville Corp.,
3.
The Appellants argue that, unlike the causes of action in the Trustee’s New York Action, which sound in bankruptcy, the Florida Actions assert causes of action that sound in tort. However, this nominal difference does not amount to a substantive difference. If potential creditors could bypass the automatic stay injunction by simply pleading around it, even when the substance of their claims — the wrongful acts pleaded, the relationships and duties between the actors, the nature of the damages suffered — was identical to the substance of an action already brought by a trustee, the bankruptcy laws’ core purpose would be severely undermined, because some potential creditors could “obtain[ ] payment of the[ir] claims in preference to and to the detriment of other creditors” simply by styling their pleadings as sounding in tort.
To the extent that the Appellants urge that the claims asserted in the Florida Actions are not property of the estate by virtue of the names of the causes of action asserted, this argument is unpersuasive. While as a general matter a court should accept as true the allegations pleaded in a complaint at this stage in a case, that principle has limits. The Court of Appeals for the Second Circuit has rejected “rigid reading[s] of ‘property of the estate,’ ” explaining that the meaning of that term is “broad.” United States v. Whiting Pools, Inc.,
4.
The Appellants argue that the Court of Appeals’ 2008 opinion in the long-running Johns-Manville case supports their position that the Florida Actions are independent and thus belong to the individual creditors rather than the Trustee. It does not.
In Johns-Manville, the Direct Action plaintiffs, a group of claimants injured by asbestos produced by Johns-Manville, alleged that Travelers, Manville’s insurer, had injured them by failing to warn them of the dangers of asbestos.
5.
The Appellants also argue that the Wagoner Rule, and the related doctrine of in pari delicto, would bar the Trustee from asserting the claims asserted in the Florida Actions. They argue that, because those rules would bar the trustee from bringing the Florida Actions, the Florida Actions cannot be the property of the estate. “[A] bankruptcy trustee has no standing generally to sue third parties on behalf of the estate’s creditors, but may only assert claims held by the bankrupt corporation itself.” Shearson Lehman Hutton, Inc. v. Wagoner,
As an initial matter, the Appellants’ argument fails because “[t]he Wagoner Rule does not ... apply to causes of action that the Bankruptcy Code specifically confers on a trustee or a debtor in possession.” In re Park South Securities, LLG,
Moreover, the Appellants’ argument would require a significant expansion of the Wagoner Rule. The Appellants rely on decisions from courts in this district that have held that claims by the Trustee against various parties allegedly involved in the Madoff Ponzi scheme were barred under the Wagoner Rule and the doctrine of in pari delicto. See Picard v. JPMorgan Chase & Co.,
There is good reason for this lack of precedent. Even if the Trustee might be
Nor does the doctrine of in pari delicto prevent the claims asserted in the Florida Actions from being property of the estate. While Wagoner is a federal rule of standing, in pari delicto is an affirmative defense of state common law. See Kirschner, 912 N.Y.S.2d 508, 938 N.E.2d at 959-60; see also Perlman v. Wells Fargo Bank, N.A.,
In sum, applying Wagoner and in pari delicto as swords for creditor-plaintiffs seeking to work around a bankruptcy court would allow creditors to plead around the automatic stay, and obtain judgments without the bankruptcy system, based on claims that are derivative or duplicative of claims that are the property of the estate. These doctrines do not apply in this case. Because the automatic stay bars the Florida Actions, the Bankruptcy Court’s determination in that regard is AFFIRMED.
B.
The Appellants also appeal the Bankruptcy Court’s extension of the Automatic Stay to cover the Florida Actions pursuant to § 105(a). Preliminary injunctions entered by the Bankruptcy Court pursuant to § 105(a) are reviewed for abuse of discretion. See, e.g., In re Calpine Corp.,
As an initial matter, because the Bankruptcy Court correctly found that the Florida Actions were void ab initio because they violated the Automatic Stay Order, any error in entering the preliminary injunction was harmless, because there was nothing left of the Florida Actions to enjoin under § 105(a). Indeed, the Bankruptcy Court only issued the § 105(a) injunction “[t]o the extent section 362(a) and the District Court Stay Orders do not apply in their own right to stay the Florida Actions.” Automatic Stay Decision,
Nevertheless, the Bankruptcy Court was well within its powers under § 105(a) in enjoining the Florida Actions. Under § 105(a), a bankruptcy court may “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code].” 11 U.S.C. § 105(a). “The Bankruptcy Court has authority under section 105 broader than the automatic stay provisions of section 362 and may use its equita
The Bankruptcy Court found that a § 105(a) injunction was proper in this case because the Florida Actions posed a threat to the BLMIS estate. The Bankruptcy Court reasoned that the Florida Actions threatened to hamper the Trustee’s ability to collect on any judgment he might obtain in the pending New York Action against the Picower defendants, because “[b]oth the Trustee and Florida Plaintiffs target the same limited pool of funds originating with BLMIS.” Automatic Stay Decision,
The Appellants do not challenge that reasoning. Rather, they appear to argue that the potential that they might recover assets that might otherwise be recovered by the estate is irrelevant, because the Florida Actions were independent and thus the Bankruptcy Court lacked jurisdiction over them. This argument simply rehashes those arguments made against the application of the automatic stay, and is unpersuasive.
The Bankruptcy Court also found that a § 105(a) injunction was warranted because the Florida Actions interfered with the Bankruptcy Court’s jurisdiction, because allowing their “further prosecution could ultimately result in another court’s determining how potential estate funds are distributed among certain BLMIS eustom
In short, as the Bankruptcy Court correctly recognized, its broader powers under § 105(a) could appropriately enjoin the Appellants from prosecuting the Florida Actions even if the claims asserted in those actions were not the property of the estate, because “the overlap between the claims” asserted in the New York Action and the Florida Actions is “so closely related that allowing the [Appellants] to convert the bankruptcy proceeding into a race to the courthouse would derail the bankruptcy proceedings.” Fisher v. Apostolou,
IY.
A.
The Appellants also appeal the Bankruptcy Court’s January 13, 2011 Order approving the Settlement between the Pi-cower defendants and the Trustee, and permanently enjoining any duplicative actions against the Picower defendants pursuant to § 105(a).
A Bankruptcy Court’s approval of a settlement agreement is reviewed for abuse of discretion. See, e.g., In re Iridium Operating LLC,
The factors that courts in the Second Circuit consider when approving bankruptcy settlements are well established. These interrelated factors are:
(1) the balance between the litigation’s possibility of success and the settlement’s future benefits; (2) the likelihood of complex and protracted litigation, with its attendant expense, inconvenience, and delay, including the difficulty in collecting on the judgment; (3) the paramount interests of the creditors, including each affected class’s relative benefits and the degree to which creditors either do not object to or affirmatively support the proposed settlement; (4) whether other parties in interest support the settlement; (5) the competency and experience of counsel supporting, and [t]he experience and knowledge of the bankruptcy court judge reviewing, the settlement; (6) the nature and breadth of releases to be obtained by officers and directors; and (7) the extent to which the settlement is the product of arm’s length bargaining.
With regard to permanent injunctions of creditor suits against a third party issued in connection with a settlement agreement between the third party and the trustee, a bankruptcy court generally may not enjoin creditor claims against the third party when those claims are independent and “personal to the creditor.” See In re Mrs. Weinberg’s Kosher Foods, Inc.,
B.
As an initial matter, the Appellants argue that the settlement amount— over $7.2 billion including the amounts to be forfeited to the Government — is insufficient, and that the settlement is unfair to the creditors for this reason, among others. The Appellants’ argument with regard to the financial terms of the settlement agreement borders on the frivolous. The Bankruptcy Court found, and the Appellants do not contest, that the total amount forfeited by the Picower defendants for payment to the Madoff victims is “one hundred percent of the net withdrawals received by the Picower BLMIS Accounts.” Settlement Order at 4. Indeed, the agreement also provides for the extinguishment of the Picower defendants’ claims against the estate, which increases the likelihood that additional sums may be available to other customers and creditors. Settlement Order at 5. The Bankruptcy Court considered the various Iridium factors, including whether the settlement negotiations were at arm’s length, the possibility of success if the Trustee were to litigate the New York Action, or on the other hand the possibility of costly and protracted litigation, and the paramount interest of BLMIS’ customers and creditors. See Settlement Order at 6. More
The Appellants’ core arguments against the settlement, however, concern the injunction entered by the Bankruptcy Court in its Settlement Order. The Appellants object in particular to the portion of the Settlement Order that provides that:
“[A]ny BLMIS customer or creditor of the BLMIS estate who filed or could have filed a claim in the liquidation ... is hereby permanently enjoined from asserting any claim against the Picower BLMIS Accounts or the Picower Releasees that is duplicative or derivative of the claims brought by the Trustee, or which could have been brought by the Trustee against the Picower BLMIS Accounts or the Picower Releasees.”
Settlement Order at 7. The Settlement Order also noted that “Objectors Fox and Marshall are creditors of BLMIS over whom the Court has personal jurisdiction and against whom this Court can issue a permanent injunction.” Id.
The Appellants’ arguments in this regard track closely their arguments against the Automatic Stay Order. They argue that, because the Florida Actions assert independent claims that are not the property of the estate and that the Trustee may not properly assert, the Bankruptcy Court lacked jurisdiction to permanently enjoin those claims. These arguments have already been discussed, and found unpersuasive, in the present case.
The Appellants argue that the permanent injunction is an improper nondebtor release. See Metromedia,
Moreover, to the extent that the injunction does constitute a nonconsensual non-debtor release, this case presents the type of “truly unusual circumstances” that would justify such a release. See Metromedia,
More broadly, the Court of Appeals has noted that the injunction must “play[ ] an important part in the debtor’s reorganization plan.” Metromedia,
The availability of the $7.2 billion is itself an important component of the liquidation plan, because those funds represent the single largest source of funds for BLMIS customers. If the injunction were stricken, it is not clear that the agreement would still bind the Picower defendants; indeed, the Picower defendants have asserted that the funds can still revert to them. Cf. In re Johns-Manville Corp.,
Allowing the Florida Actions to go forward would carry real risks to the estate, implicating the viability of the current settlement and the possibility of future settlements, and providing an avenue for BLMIS customers who are displeased with the Net Equity Decision to undermine that decision by directly pursuing claims that are wholly derivative of claims already
In sum, the settlement agreement is fair and reasonable, and the permanent injunction that was issued in connection with the settlement agreement was a proper use of the Bankruptcy Court’s power under § 105(a) to protect the BLMIS estate and the Bankruptcy Court’s continuing jurisdiction over this massive SIPA liquidation. Accordingly, the Bankruptcy Court’s January 13 Order is AFFIRMED.
CONCLUSION
The Court has considered all of the arguments raised by the parties. To the extent not specifically addressed, the arguments are either moot or without merit.
The Bankruptcy Court’s Automatic Stay Order, and its Order approving the settlement between the Trustee and the Picower defendants and permanently enjoining certain duplicative or derivative actions against the Picower Defendants is AFFIRMED.
This Opinion and Order finally disposes of the above captioned appeals.
The Clerk is directed to close these cases and to close any open motions.
SO ORDERED.
Notes
. The Bankruptcy Court did purport to strike certain documents in its Striking Order. However, it did so because it was striking issue number five, and the relevant documents were alleged to be related to issue five. To the extent that this Court is considering issue five, the basis for the Bankruptcy Court's striking the documents — their lack of relevance — no longer applies. Moreover, "[t]here is authority for the proposition that even though matters were not considered by the court below, an application may still be made to the appellate court to supplement the record, for background, clarifications, or the like.” Ames,
. The Appellants argue that St. Paul does not apply in this case because in St. Paul the creditors had asserted a fraudulent transfer claim, while the appellants here did not assert such a claim in the Florida Actions. This argument is unpersuasive because, as explained more fully below, the Florida Actions are duplicative and derivative of the Trustee’s fraudulent transfer claim.
. Courts look to state law to determine whether a claim is the property of the estate and so should be asserted by the trustee. See, e.g., Hirsch v. Arthur Andersen & Co.,
. The Appellants’ reliance on Cumberland Oil v. Thropp,
. While the Appellants did not argue that the Trustee lacked standing to assert the claims asserted in the New York Action, Appellant Marshall, in a letter to the Court after oral argument, asserted that the Bankruptcy Court lacked the authority to enter final judgment on the Trustee's fraudulent conveyance claims under the Supreme Court's recent decision in
Appellant Marshall also points to the reliance in Stern on Granfinanciera, S.A. v. Nordberg,
. The Appellants additionally argue that, unlike in other cases where § 105(a) was properly used to enjoin litigation by a creditor against a non-debtor third party, see, e.g., Fisher v. Apostolou,
. The Appellants also argue that the Bankruptcy court erred because it did not allow discovery in connection with the approval of the settlement. However, discovery is not required for the approval of a settlement. See, e.g., In re Chemtura Corp.,
. The settlement agreement in this case required the Trustee to use his reasonable efforts to obtain approval of a "Final 9019 Order” that "shall include” the permanent injunction about which the Appellants complaint. Settlement Agreement at 5.