Irving Picard
Irving Picard ()

The U.S. Supreme Court has finally put an end to Irving Picard’s quest to recover billions of dollars from HSBC Bank plc, UniCredit SpA and other banks he accused of facilitating Bernard Madoff’s fraud.

The high court declined Monday to review a ruling that Picard, the trustee tasked with recovering funds for Madoff investors, doesn’t have standing to sue the banks for common law causes of action like unjust enrichment and aiding and abetting fraud. Picard, a partner at Baker & Hostetler, had sought more than $8 billion in damages from the banks.

The Securities Investor Protection Corporation, a federally mandated nonprofit that protects brokerage firm clients, appointed Picard to serve as liquidation trustee for Madoff’s defunct investment firm in December 2008. One of Picard’s main endeavors as SIPC trustee has been to sue big banks that serviced Madoff’s banking needs, arguing that they turned a blind eye to red flags that he was running a massive Ponzi scheme.

The banks countered that Picard lacked standing to sue, arguing that SIPC trustees can’t bring common law claims against third parties. U.S. District Judge Jed Rakoff agreed in a 2011 ruling, writing that Picard is limited to bringing bankruptcy-related claims. As we’ve reported, Rakoff delivered his ruling in a case targeting HSBC and UniCredit, but it also doomed claims against JPMorgan and UBS. The U.S. Court of Appeals for the Second Circuit affirmed the decision in June 2013.

Picard’s law partners at Baker Hostetler urged the high court to weigh in, arguing in an October 2013 cert petition that “the Second Circuit’s decision guarantees that when third parties collaborate with a broker to defraud its customers—something that is inevitable given a Ponzi scheme’s unquenchable thirst for more investors and more money—there will never be enough funds available to compensate investors’ losses.”

In a joint brief opposing cert, HSBC’s lawyers at Cleary Gottlieb Steen & Hamilton and UniCredit’s lawyers at Skadden, Arps, Slate, Meagher & Flom argued that Picard adopted a creative and novel interpretation of his powers. They also downplayed the idea that there is a circuit split for the high court to resolve, asserting that appeals courts around the country have unanimously rejected the notion that SIPC trustees can bring common law claims against third parties.

JPMorgan, which Picard sued for $19 billion, resolved the common law claims against it as part of a $543 million settlement approved in February 2014. John Savarese of Wachtell, Lipton, Rosen & Katz represented JPMorgan.

HSBC’s team at Cleary includes Thomas Maloney and David Brodsky. UniCredit turned to Skadden’s Marco Schnabl and Susan Saltzstein. UBS had a Gibson Dunn & Crutcher team including Thomas Hungar and Marshall King.