JPMorgan Wins Dismissal of Madoff Trustee's $19 Billion Common-Law Claims
By Linda Sandler and Bob Van Voris – Nov 2, 2011 12:01 AM ET
Trustee Irving Picard lacks standing to demand common-law damages on behalf of customers of Bernard L. Madoff Investment Securities LLC, U.S. District Judge Colleen McMahon ruled yesterday in New York. The decision also eliminated most of the $2 billion in claims Picard sought from UBS AG. (UBSN)
The ruling removes a potential liability for JPMorgan and chips away another chunk of the $100 billion Picard sought for the con man’s investors. U.S. District Judge Jed Rakoff in July threw out almost $9 billion in damages that Picard demanded from HSBC Holdings Plc (HSBA) and feeder funds, saying the trustee couldn’t bring common-law claims against them.
“We are pleased that Judge McMahon agreed with our arguments and has dismissed all of the trustee’s common law claims for damages,” Jennifer Zuccarelli, a JPMorgan spokeswoman, said in an e-mail.
Picard plans to appeal McMahon’s decision to the U.S. Court of Appeals in Manhattan, said Amanda Remus, a spokeswoman for the trustee. Picard claimed in the suits that New York-based JPMorgan and Zurich-based UBS aided in the fraud and are liable to the people who lost money.
“The trustee and his counsel remain confident in the cases brought against JPMorgan Chase and UBS and related entities as well as in the trustee’s standing to pursue all the claims in connection with those cases,” Remus said in an e-mailed statement.
The amount sought from JPMorgan, Madoff’s primary banker, represented Picard’s estimate of principal lost by all Madoff investors by the time the Ponzi scheme collapsed in December 2008, according to the complaint filed in June. The bank could have stopped the fraud if it had passed on its suspicions to regulators, he alleged.
JPMorgan said it didn’t know about, or in any way become a party to the fraud, and couldn’t be held responsible for a scheme orchestrated by Madoff alone.
McMahon removed the case from bankruptcy court to consider legal questions including whether Picard could bring common-law claims, such as unjust enrichment. The common-law claims must be dismissed and the rest of the case returned to the bankruptcy court, the judge said today.
Picard will return to bankruptcy court with remaining claims against JPMorgan for transfers and fees of $1 billion or less, according to court filings.
Madoff is serving a 150-year prison term following a guilty plea. Picard and his firm have made about $224 million in fees since Madoff’s 2008 arrest.
The cases are Picard v. JPMorgan Chase & Co., 11-cv-913; Picard v. UBS Fund Services (Luxembourg) SA, 11-cv-4212, U.S. District Court, Southern District of New York (Manhattan).
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