Irving Picard pulled out all the stops in a bid to revive mega-billions claims against big banks that allegedly played a role in Bernie Madoff’s massive Ponzi scheme. But it wasn’t enough. On Thursday, a unanimous three-judge panel of the U.S. Court of Appeals for the Second Circuit rebuffed every single one of Picard’s arguments in a 60-page opinion, ruling that the Baker & Hostetler partner’s role as liquidation trustee for Madoff’s firm bars him from targeting the banks.
Picard has built up an impressive track record recovering funds on behalf of Madoff investors, but he hit a brick wall in the federal courts with accusations that major banks should be held liable for facilitating Madoff’s fraud. In a series of rulings in 2011 and 2012 (see our coverage here, here, and here), U.S. District Judges Jed Rakoff and Colleen McMahon in Manhattan threw out close to $80 billion in claims that Picard brought against HSBC, JPMorgan Chase, UBS, UniCredit S.p.A., HSBC Bank, and others.
The Second Circuit affirmed those rulings on Thursday, ruling that Picard can’t sue the banks under the Securities Investor Protection Act and can’t bring common law claims such as fraud or unjust enrichment. Citing the doctrine of in pari delicto, which holds that bad actors can’t recover money from others that participated in the same wrongdoing, the panel concluded that while Picard didn’t commit Bernie Madoff’s crimes, his position as trustee puts him in Madoff’s shoes.
Our colleagues at New York Law Journal have more on the decision.
Picard, who was represented by Baker & Hostetler’s Oren Warshavsky, had argued that the in pari delicto doctrine doesn’t apply because he did nothing wrong, but the panel found plenty of precedent holding that it does. Picard asserted that a trustee is exempt from the doctrine under SIPA, but the panel said he cited no authority to support his position. He also maintained that he could bring claims against the banks on behalf of Madoff customers, but the court didn’t find his arguments on standing persuasive.
“Picard’s scattershot responses are resourceful, but they all miss the mark,” chief judge Dennis Jacobs wrote for the panel.
The banks, as you might expect, were backed by plenty of legal muscle for the appeal. The lineup included Thomas Moloney of Cleary Gottlieb Steen & Hamilton (for HSBC); John Savarese of Wachtell, Lipton, Rosen & Katz (for JPMorgan Chase); Marco Schnabl of Skadden, Arps, Slate, Meagher & Flom (for UniCredit); and Marshall King of Gibson, Dunn & Crutcher (for UBS AG).
“We’re pleased with today’s well-reasoned decision from the Second Circuit,” said Skadden’s Susan Saltzstein, who represented UniCredit along with Schnabl.
Amanda Remus, a spokesperson for Picard, said he was still reviewing Thursday’s ruling. She added that Picard intended to continue pursuing claims against the defendants in bankruptcy court totaling over $4 billion.
