Bernard L. Madoff Investment Securities LLC v. Picard

Background

The Public Institution for Social Security (PIFSS), identified in the opinion as a Kuwaiti governmental agency, sought leave to appeal two parts of an August 17, 2022 order by the Bankruptcy Court. That court had denied PIFSS’s motion to dismiss and ruled that the commercial-activity exception to the Foreign Sovereign Immunities Act (FSIA) prevented PIFSS from claiming sovereign immunity. It also ruled that Irving H. Picard, the trustee, had presented enough allegations and evidence to make a preliminary showing that the court had personal jurisdiction over PIFSS.

The trustee’s claims arose from money that PIFSS allegedly received from Fairfield Sentry Limited, whose investments allegedly included funds placed with Bernard L. Madoff Investment Securities LLC. The bankruptcy court considered allegations and additional evidence concerning payments sent through New York accounts and meetings in New York involving PIFSS’s offshore subsidiary, Wafra. PIFSS initially also sought to appeal a ruling concerning a defense under Section 546(e) of the Bankruptcy Code, but withdrew that request after another judge rejected the same argument in a related case.

Sovereign-immunity appeal

The district court held that PIFSS could immediately appeal the bankruptcy court’s FSIA ruling. Under the collateral-order doctrine—a rule allowing immediate review of certain important issues separate from the main case—an order denying immunity under the FSIA is immediately appealable before final judgment. The court therefore granted PIFSS leave to appeal the bankruptcy court’s denial of its motion to dismiss based on the FSIA.

This ruling granted permission to appeal the sovereign-immunity issue; it did not decide whether the FSIA ultimately gives PIFSS immunity.

Personal-jurisdiction appeal

The district court denied PIFSS leave to appeal the bankruptcy court’s personal-jurisdiction ruling. Because that ruling was not final, PIFSS had to satisfy the standards for an interlocutory appeal under 28 U.S.C. § 1292(b). Those standards generally require a controlling legal question, substantial grounds for disagreement about the correct legal rule, and a likelihood that immediate review will materially advance the litigation.

The court concluded that PIFSS met none of those requirements. The bankruptcy court had decided only that the trustee made a prima facie showing—a preliminary showing sufficient at that stage—that personal jurisdiction existed. The determination depended on the complaint and additional evidence, making it a fact-sensitive question rather than a pure legal question that could be resolved quickly without reviewing the record. The district court also found that PIFSS had not identified conflicting authority or shown that the issue was unusually difficult or new. It further concluded that an immediate appeal was unlikely to shorten the case and might delay it.

The court separately found that the issue was not ripe for immediate appeal because jurisdictional discovery had not yet occurred. Further factual development could change the jurisdictional analysis. The court stated that PIFSS could later move to dismiss for lack of jurisdiction if the facts developed during discovery did not support jurisdiction.

Disposition

The court granted in part PIFSS’s motion for leave to appeal the Bankruptcy Court’s August 17, 2022 order. It granted leave to appeal the denial of PIFSS’s motion to dismiss based on the FSIA, and denied leave to appeal the denial of that motion based on alleged lack of personal jurisdiction. Judge Gregory H. Woods ordered that any appeal of the sovereign-immunity issue be filed and served within three weeks of the order, with opposition due two weeks after service and any reply due one week after the opposition.