Broker-Dealer Litigation - Greenberg Traurig LLP

E.
In re J.P. Jeanneret Assocs., Inc., 769 F. Supp. 2d 340 (S.D.N.Y. 2011).
In a state law class action that was removed to federal court, the district court granted
defendants’ motion to dismiss plaintiffs’ state law claims as precluded by the Securities
Litigation Uniform Standards Act of 1998 (“SLUSA”). Plaintiffs brought various state law
claims against their investment advisors, an asset management consultant, an accounting firm,
and associated individuals seeking to recover losses incurred as a result of “feeder funds’”
investments in the Madoff ponzi scheme. In determining that plaintiffs’ state law claims were
precluded, the court relied upon the decision in In re Beacon Associates Litig., 745 F.Supp. 2d
386 (S.D.N.Y. 2010), where Judge Leonard Sand had dismissed similar state law claims
involving the Madoff ponzi scheme as precluded by SLUSA. The court added that the
preclusion of plaintiffs’ state law claims was unrelated to the viability of their federal securities
laws claims against certain defendants. While state law claims for breach of contract and
negligence against the accountant defendants were not precluded by SLUSA, the court declined
to exercise supplemental jurisdiction over these claims and dismissed them as well.
Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 454 B.R. 307 (S.D.N.Y. 2011).
This case was an adversary action brought by Irving Picard (“Picard”), the bankruptcy
trustee for Bernard L. Madoff (“Madoff”) and Bernard L. Madoff Investment Securities, LLC
(“BMIS”), against J.P. Morgan Chase & Co. and numerous related entities (collectively, “JPM”)
in bankruptcy court alleging various common law and clawback causes of action for the putative
benefits of BMIS investors. The district court granted JPM’s motion to withdraw the bankruptcy
reference because it determined that the case raised issues of first impression under federal law
including, inter alia, whether Picard’s common law claims were preempted by the Securities
Litigation Uniform Standards Act of 1998 (“SLUSA”). It is mandatory to withdraw a
bankruptcy reference under § 157(d) when the case will require a bankruptcy court to interpret,
not merely apply, a federal law outside of Title 11. The issue at hand was whether the
underlying case was a “covered class action” under SLUSA. This question turned on whether
Picard, as the Trusteee, was a single entity not established for the purpose of participating in the
action or whether he was acting in a representative capacity respecting the interests of the many
investors in BMIS. The court first acknowledged that the issue had not yet been addressed by
the Second Circuit. The court then reasoned that “because the Trustee’s common-law claims are
on behalf of BMIS customers, and not the BMIS estate, determining whether the Trustee’s action
is preempted by SLUSA requires substantial interpretation of federal non-bankruptcy law” and,
therefore, held that the bankruptcy reference was subject to mandatory withdrawal.
In re Kingate Mgmt. Ltd. Litig., 2011 WL 1362106 (S.D.N.Y. Mar. 30, 2011).
In an action arising from the Madoff Ponzi scheme brought by classes of investors in two
feeder funds, the district court dismissed all of plaintiffs’ state law claims pursuant to the
E.
E.
210