A&G Goldman PA v. Picard

Clever pleading failed to evade an anti-suit injunction entered as part of a settlement.

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Case Type:
Case Status:
17-512-bk (2nd Circuit, Jun 27,2018) Not Published
SUMMARY ORDER WITH NO PRECEDENTIAL EFFECT. Held that purported securities claim for control person liability asserted by customers in Florida action was instead a disguised claim for the fraudulent withdrawal of assets from the estate that was derivative of the Trustee's fraudulent transfer claims and was appropriately enjoined.
Procedural context:
Appeal from judgment of United States District Court for the Southern District of New York (Woods, J.) affirming decision by the United States Bankruptcy Court for the Southern District of New York (Bernstein, J.) that securities fraud action brought in United States District Court for the Southern District of Florida should be permanently enjoined.
In the Securities Investor Protection Act liquidation of Ponzi scheme perpetrator Bernard L. Madoff Investment Securities LLC ("BLMIS"), the Trustee had brought an adversary proceeding against the "Picower Parties" for fraudulent transfers, avoidable preferences, and turnover, including with respect to $6.7 billion in withdrawals Picower made from BLMIS. Picower paid over $7.2 billion to resolve that matter and, in connection with such settlement, the bankruptcy court issued a permanent injunction precluding BLMIS customers and creditors from bringing any claim against Picower "that is duplicative or derivative of the Trustee's claims that were settled. Certain former customers had previously brought two actions in the bankruptcy court seeking to bring securities law claims against Picower on the theory that Picower somehow controlled BLMIS. The court held in both of these matters that the asserted claims were derivative estate claims subject to the injunction. The first such decision was not appealed, and the second was appealed but then the appeal was withdrawn when the customers instead brought an action against Picower in federal court in Florida. The customers again purported to assert a securities fraud claim and added some allegations regarding Picower's specific conduct in connection with BLMIS.
Pierre N. Leval, Gerard E. Lynch, and Christopher F. Droney, Circuit Judges

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