In Re: Bernard L. Madoff Investment Securities LLC

Background

Banque Lombard Odier & Cie SA was the defendant in a related lawsuit brought by bankruptcy trustee Irving H. Picard in connection with the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS). The trustee sought to recover funds paid by BLMIS to Fairfield Sentry Limited and later transferred to investors. Lombard Odier invested in Fairfield Sentry and received 131 redemption payments totaling $95 million.

Lombard Odier moved to dismiss the trustee’s complaint for lack of personal jurisdiction. It argued that it was a Swiss private bank with no contacts with New York and that its knowledge that Fairfield Sentry would reinvest money with BLMIS in New York was insufficient. The Bankruptcy Court denied that motion, finding that the trustee’s allegations made a preliminary showing of personal jurisdiction. The Bankruptcy Court’s ruling was non-final.

Issue and standard

Lombard Odier asked the District Court for permission to appeal the Bankruptcy Court’s interlocutory, or non-final, order. Under 28 U.S.C. § 1292(b), permission could be granted only if Lombard Odier established all three of these requirements: the order involved a controlling question of law; there was substantial ground for disagreement about that question; and an immediate appeal could materially advance the litigation’s ultimate termination. A party seeking such permission also must show exceptional circumstances justifying an appeal before final judgment.

Court’s analysis

The court held that Lombard Odier had not established any of the three requirements.

First, the proposed questions were either hypothetical or depended on applying settled law to the specific facts and allegations of this case. The court said the Bankruptcy Court had relied not only on Lombard Odier’s alleged knowledge, but also on allegations that Lombard Odier intentionally directed its investment to New York-based BLMIS. The trustee also alleged that Lombard Odier directed investments into funds managed by a New York entity, sent investment documents to New York, communicated with the investment manager there, wired money through a New York account, and derived significant revenue from New York. The court concluded that these fact-bound issues did not present a controlling legal question suitable for immediate appeal.

Second, the court found no substantial ground for disagreement. It agreed with the Bankruptcy Court that the trustee had adequately alleged that Lombard Odier purposefully directed its conduct toward New York by intentionally investing in a fund alleged to be a pass-through to BLMIS. The court also found no substantial disagreement concerning whether the claim arose from Lombard Odier’s New York-related conduct or whether exercising jurisdiction was reasonable. Lombard Odier’s argument about international comity was raised only in a footnote and reply brief and was also inadequately developed.

Third, the court found little likelihood that an immediate appeal would advance the end of the litigation. The Bankruptcy Court’s finding was only a preliminary determination based on the pleadings. Lombard Odier could still challenge the jurisdictional facts later, when the trustee would have to support and prove them by a greater-than-50-percent standard. An appeal therefore might not finally resolve personal jurisdiction or shorten the trial process.

Disposition

Judge Lorna G. Schofield denied Lombard Odier’s motion for permission to appeal. The court also stated that an additional issue Lombard Odier mentioned in a footnote would not be addressed because permission to appeal was denied. The Clerk was directed to close the motion at Dkt. No. 4 and close the case.