ALERT:

APRIL 2nd DEADLINE FOR WITHDRAWAL OF REFERENCE

An important message for those seeking removal of their clawback case from the Lifland bankruptcy court to the District Court

A joint order has been issued by the United States District Court and the Bankruptcy Court setting April 2, 2012 as a cut-off date to file Withdrawal of Reference motions in Madoff Liquidation claw back cases.

This is potentially a very significant issue for all claw back defendant. We urge all clawback victims to promptly explore with counsel whether to seek such relief in your case.

A withdrawal of reference motion is simply a motion to the District Court to take away certain issues from the Bankruptcy Court (in this case under Judge Lifland) and have them decided in the District Court by a Federal District Court Judge. In the Madoff claw back cases, withdrawal motions have already been brought by over 400 victim defendants.

Please read, below, a more in-depth discussion of this issue offered by attorney David Bernfeld.

If you are a clawback victim, have not yet filed a withdrawal of reference motion with the court, we again urge you to contact your attorney immediately about this issue. If you do not have an attorney, we encourage you to go to the NIAP Professional Marketplace.

Ron Stein, CFP
www.investoraction.org
admin@investoraction.org
(631) 425-0770

 

MORE INFORMATION REGARDING THE WITHDRAWAL OF REFERENCE

Attorney David Bernfeld has been kind enough to offer the following information for NIAP members and clawback victims.

The primary basis for the withdrawal of reference is that the handling of the Madoff case presents a significant question of non-bankruptcy federal law. To date, the District Court has granted removal for a number of issues of significance to Madoff victims who are claw back defendants.

    One issue, for example, has already resulted in a ruling by the District Court dismissing all six year claims by the Trustee based on a “safe harbor” provision in the Bankruptcy Code that exempts certain securities transactions from avoidance actions.1
    Other significant issues include whether (a) the Madoff withdrawals qualify as good faith payments on account of an antecedent debt — a defense to a claw back claim; (b) required minimum distributions taken by customers from their IRA Madoff accounts to satisfy IRS requirements are exempt from claw back; (c) the Trustee may use his “cash in/cash out” net equity formulation in claw back cases to effectively circumvent the applicable Statute of Limitations; (d) the Trustee has standing to assert the claims in the complaint; and (e) the Bankruptcy Court is barred, on Constitutional grounds, from determining these claw back claims by virtue of a recent Supreme Court decision (Stern v. Marshall) which imposed certain limitations on the Bankruptcy Court’s jurisdiction to decide certain types of cases.

There are fact and case specific reasons, pro and con, concerning whether Withdrawal should be sought in any particular case. We are not in a position to provide legal advice to you or tell you the best way to proceed. We do, however, urge that you review these issues promptly with your counsel so that you do not wind up time barred if you ultimately decide to seek withdrawal but it is then after the cut-off date fixed by the court.

For more information, click here for a lengthier discussion of the withdrawal of motion issue.

1The section is Code Section 546 (e) which the Trustee claimed would be inapplicable in a SIPC liquidation. The Court disagreed and applied that section to dismiss all six year claims, leaving only a single two year claim.

David Bernfeld
davidbernfeld@bernfeld-dematteo.com
Bernfeld, DeMatteo & Bernfeld, L.L.P
600 Third Avenue, 15th Floor
New York, NY 10016
Office: 212.661.1661
Fax: 212.557.9610

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