In re: Picard, No. 17-2992 (2d Cir. 2019)Annotate this Case
The trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC alleged that Madoff Securities transferred property to foreign entities that subsequently transferred it to other foreign entities, including the hundreds of appellees. The trustee claimed that the Madoff Securities' transfers were avoidable as fraudulent under 11 U.S.C. 548(a)(1)(A), and sought to recover the property from appellees under section 550(a)(2). The district court dismissed the actions based on the presumption against extraterritoriality and international comity principles.
The Second Circuit vacated and held that neither the presumption against extraterritoriality nor international comity principles barred recovery. In this case, the focus of section 550(a) was on debtor's fraudulent transfer of property to the initial transferee, and these actions involved domestic applications of the Bankruptcy Code because section 550(a) focused on regulating domestic conduct. Therefore, the lower courts erred by dismissing these actions under the presumption against extraterritoriality. The court also held that the district court erroneously dismissed these actions on international comity grounds where the United States' interest in applying its law to these disputes outweighed the interest of any foreign state and prescriptive comity posed no bar to recovery.