Summary
This Second Circuit opinion addresses appeals arising from Chapter 15 bankruptcy proceedings involving liquidators of British Virgin Islands investment funds that collapsed due to the Bernard Madoff Ponzi scheme. The court resolves disputes over whether a forum selection clause in subscription agreements establishes personal jurisdiction over foreign defendants and whether the bankruptcy code’s securities transaction safe harbor under § 546(e) bars the liquidators’ claims to recover inflated redemption payments. The court holds that the forum selection clause confers personal jurisdiction and that the statutory safe harbor applies extraterritorially to bar all avoidance claims, reversing the lower court’s allowance of constructive trust claims while otherwise affirming.
Topics
Practice areas
Questions Presented
- Whether the forum‑selection clause in the Funds’ Subscription Agreements establishes personal jurisdiction over the defendants.
- Whether 11 U.S.C. § 546(e) safe‑harbor applies extraterritorially via § 561(d) and therefore bars the liquidators’ claims.
Holdings
- The forum‑selection clause does establish personal jurisdiction over all of the defendants.
- § 546(e) applies extraterritorially through § 561(d) and bars the liquidators’ claims, including the constructive‑trust claims.
Key quotations
“We conclude that the forum‑selection clause established personal jurisdiction over all of the defendants.” (*8-14)
“We conclude that § 546(e) applies extraterritorially through § 561(d) and bars the liquidators’ claims.” (at 489-90)
Factual background
Investment funds organized in the British Virgin Islands (Fairfield Sentry, Fairfield Sigma, Fairfield Lambda) invested billions with Bernard L. Madoff Investment Securities. After the Ponzi scheme collapsed in 2008, the funds were liquidated in the BVI. Liquidators filed roughly 300 actions in the United States to recover redemption payments made to investors, alleging unjust enrichment, money‑had‑and‑received, mistaken payment, constructive trust, and other claims.
Procedural history
The bankruptcy court in the Southern District of New York recognized the BVI foreign proceeding under Chapter 15, dismissed most claims, and sustained constructive‑trust claims. The district court affirmed that judgment. The liquidators appealed seeking reversal of the dismissal of non‑constructive‑trust claims; the defendants appealed seeking reversal of the allowance of constructive‑trust claims.