REPLY IN SUPPORT OF JOINT MOTION FOR LEAVE TO FILE A FOREIGN LAW DECLARATION

Transcription

1 Case , Document 1209, 05/29/2018, , Page1 of 19 UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT IN RE IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF BERNARD L. MADOFF INVESTMENT SECURITIES LLC Case No (L) REPLY IN SUPPORT OF JOINT MOTION FOR LEAVE TO FILE A FOREIGN LAW DECLARATION

2 Case , Document 1209, 05/29/2018, , Page2 of 19 TABLE OF CONTENTS ARGUMENT... 1 I. The Unique Path of This Case Explains Why the Declaration Is Appropriately Submitted on Reply... 2 II. Appellees Set Forth No Persuasive Arguments as to Why This Court Should Not Consider the Declaration... 7 A. Movants are not trying to supplement the record on appeal... 7 B. Movants are not introducing new arguments on reply... 9 C. Federal Rule of Civil Procedure 44.1 permits the filing of the Declaration CONCLUSION i

3 Case , Document 1209, 05/29/2018, , Page3 of 19 TABLE OF AUTHORITIES Page(s) Cases Ancile Inv. Co. Ltd. v. Archer Daniels Midland Co., 538 F. App x 19 (2d Cir. 2013) Bayway Refining Co. v. Oxygenated Mktg. & Trading A.G., 215 F.3d 219 (2d Cir. 2000)... 9 Bristol-Myers Squibb Co. v. Matrix Labs., Ltd., 655 F. App x 9 (2d Cir. 2016) Eastman Kodak Co. v. STWB, Inc., 452 F.3d 215 (2d Cir. 2006) Europema, S.A. v. Emserian, Inc., 154 F.3d 24 (2d Cir. 1998) Fairfield Sentry Ltd. v. Migani, [2014] UKPC 9 (Ct. App. British Virgin Is.)... 4, 5 Grand Entm t Grp., Ltd. v. Star Media Sales, Inc., 988 F.2d 476 (3d Cir. 1993) Guadagni v. New York City Transit Auth., 387 F. App x 124 (2d Cir. 2010) Huynh v. Chase Manhattan Bank, 465 F.3d 992 (9th Cir. 2006)... 8, 9 Okoi v. El Al Israel Airlines, 378 F. App x 9 (2d Cir. 2010)... 8 Rana v. Islam, 887 F.3d 118 (2d Cir. 2018)... 7 Rationis Enter. Inc. of Panama v. Hyundai Mipo Dockyard Co., 426 F.3d 580 (2d Cir. 2005) United States v. Litvak, 808 F.3d 160 (2d Cir. 2006)... 9 ii

4 Case , Document 1209, 05/29/2018, , Page4 of 19 Weinstock v. Columbia Univ., 224 F.3d 33 (2d Cir. 2000)... 8 Rules Federal Rule of Appellate Procedure Federal Rule of Civil Procedure Other Authorities C.C. Bjorklund, Law of Foreign Jurisdiction, 21 Am. Jur. Proof of Facts 2d (2010) Moore s Federal Practice (3d ed. 1999) A Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. (3d ed. 2018) iii

5 Case , Document 1209, 05/29/2018, , Page5 of 19 Appellant-Trustee Irving H. Picard and statutory intervenor SIPC (together, Movants ) respectfully submit this reply in support of their Motion for leave to file the Declaration of Mark Phillips, QC. ECF Nos. 1093, ARGUMENT The Declaration sets forth the laws of the BVI and Cayman relevant to this appeal from the view of a practitioner in those jurisdictions. It attaches the foreign law decisions cited to in the Declaration as well as those cited to by the Cayman and BVI insolvency professionals that filed amicus briefs supporting Appellees. It does not provide new facts. Rather, the Declaration supplies additional information about the content of foreign law to assist this Court in resolving complex issues presented by this appeal. Admittedly, parties do not often file declarations of foreign law on reply in an appeal before this Court. That such an event is infrequent, however, does not mean it is unwarranted. Here, the Declaration is the natural outgrowth of how this complex, multi-party litigation developed in the courts below and before this Court. Because certain arguments were raised for the first time in opposition to the Trustee s appeal to this Court, the natural time to provide more detail about foreign law was on reply.

6 Case , Document 1209, 05/29/2018, , Page6 of 19 Appellees object. They engage in misdirection by claiming that Movants are attempting to supplement the record on appeal, citing to cases where parties seek to introduce documents or evidence not in the record below. Here, by contrast, Movants are putting relevant points of law before the Court. Appellees next argue that Movants have waived or forfeited their right to make legal arguments by not raising them sooner. Essentially, Appellees oppose this motion because they believe it is unfair to allow Movants to have the last word. But in all appeals appellants are expected to respond to issues raised by the opposition and amicus briefs and their reply filings constitute the last word until oral argument. That is precisely what happened here. I. The Unique Path of This Case Explains Why the Declaration Is Appropriately Submitted on Reply This appeal arrives at this Court on somewhat of an unusual path, which underscores why the submission of the Declaration is timely and proper. The Trustee filed complaints in the bankruptcy court in On Defendants- Appellees motion, the reference was withdrawn to the district court on extraterritoriality (but not comity) grounds. SPA6 7. Unsurprisingly then, in briefing before the district court, all parties focused primarily on extraterritoriality rather than comity. Without explicitly seeking a dismissal based on comity, Defendants- Appellees cited several cases that discussed comity, arguing that the Trustee s 2

7 Case , Document 1209, 05/29/2018, , Page7 of 19 actions interfered with Fairfield s liquidation proceedings. 1 They also submitted a judgment of the BVI court rejecting the Fairfield liquidators claims seeking rescission of redemption payments. 2 In response, the Trustee and SIPC distinguished those cases, arguing that there was no conflict requiring a comity dismissal. 3 SIPC also argued that the Trustee s recovery actions did not conflict with laws of foreign nations. 4 On reply, Defendants-Appellees argued that the Trustee s recovery actions would conflict with BVI law and that BVI law should apply to the unwinding of those transfers. 5 The district court issued its opinion, primarily focusing on extraterritoriality but also determining that comity provided an alternative basis for dismissal. SPA The district court reasoned that the Trustee s recovery actions against 1 Def. s Br. 9 11, SIPC v. BLMIS (In re Madoff Sec.), No. 12-mc-115 (JSR) (S.D.N.Y. July 13, 2012), ECF No Subsequent citations to the district court proceeding will reference District Court Docket. 2 See Declaration of Marco E. Schnabl and Ex. C, A Appellees represent that the Schnabl Declaration submitted below is a foreign law declaration, implying that Movants should have filed a counter-declaration below, but the Schnabl Declaration is merely a carrier declaration to submit a foreign court decision. Opposition A ; Trustee Br. 15 n.16, District Court Docket, ECF No. 310; SIPC Br , District Court Docket, ECF No SIPC Br , District Court Docket, ECF No Def. s Reply Br , District Court Docket, ECF No

8 Case , Document 1209, 05/29/2018, , Page8 of 19 Defendants-Appellees who received transfers from feeder funds in foreign liquidation proceedings should be dismissed because those foreign jurisdictions have a greater interest in applying their own laws than does the United States. SPA221. The only foreign authority the district court relied upon statutory or otherwise was Quilvest, a decision by a BVI court of appeals. SPA220. Although Fairfield Sentry Ltd. v. Migani, [2014] UKPC 9 (Ct. App. British Virgin Is.), SPA967, was decided in April 2014, it was not mentioned in the district court s ruling dated July 6, Upon return to the bankruptcy court, Defendants-Appellees argued in their moving papers that the district court s comity reasoning should extend beyond Fairfield subsequent transferees to include any Defendant-Appellee, whether or not the transferor was in liquidation, because of the mere possibility of interference with foreign insolvency proceedings. 6 Defendants-Appellees referenced Migani in a footnote, describing it as affirming Quilvest on somewhat different grounds. 7 6 Def. s Br , SIPC v. BLMIS (In re Madoff), No (SMB) (Bankr. S.D.N.Y. Dec. 31, 2014), ECF No Subsequent citations to the bankruptcy court proceeding will reference Bankruptcy Court Docket. 7 Id. at 14 n.9. 4

9 Case , Document 1209, 05/29/2018, , Page9 of 19 In response, the Trustee again argued that there was no conflict requiring a comity dismissal and that U.S. law applied. 8 On reply before the bankruptcy court, Defendants-Appellees made broad allegations that the district court had identified a true conflict. 9 They did not argue why or how Cayman law might provide a basis for dismissal of the Harley transfers, except that Harley was in liquidation. Defendants-Appellees did not submit foreign authority to the bankruptcy court. Their reply was the first time they advanced any substantive arguments concerning Migani. Despite the focus on extraterritoriality by all parties in their briefing, the bankruptcy court flipped the primacy of the issues in its decision, determining that comity was the primary bar to the Trustee s actions, with extraterritoriality coming in second. On appeal to this Court, the Trustee argued that comity-based dismissals require a true conflict between U.S. and foreign law, and that no such showing was made below. 10 Although Appellees argue that the Trustee did not reference Migani in his opening brief, the Trustee specifically relied on the analysis of the Eastern 8 Trustee Br , Bankruptcy Court Docket, ECF No Def. s Reply Br n.26, Bankruptcy Court Docket, ECF No Trustee Br

10 Case , Document 1209, 05/29/2018, , Page10 of 19 Caribbean Court of Appeal of Migani, including the scope of Migani s holding, to counter the lower courts conflicts analysis. 11 The Trustee also argued that there was no conflict between U.S. and Cayman law that would suggest a comity-based dismissal of claims against Harley transferees. 12 SIPC likewise argued that the bankruptcy court did not properly analyze foreign law. 13 Appellees and their amici 14 raised new arguments in response to Movants arguments that no conflict exists between the applicable U.S. and foreign law. As is appropriate, their amici set forth their views that differed from the focus of Appellees arguments. The amici argued that allowing the Trustee s actions to go forward would affect future cross-border insolvencies and disrupt international business, 15 and addressed Cayman insolvency law that was not meaningfully briefed below. 16 These are new arguments. Movants are entitled to respond. 11 Trustee Br. 40; SPA Trustee Br SIPC Br Br. of Amici Curiae Cayman Finance, ECF No. 1024; Br. of Amici Curiae of the BVI Rest. Profs., ECF No BVI Rest. Profs. Br ; Cayman Finance Br See generally Cayman Finance Br. 6

11 Case , Document 1209, 05/29/2018, , Page11 of 19 Rather than leave the Court to determine foreign law on its own, Movants submitted the Declaration of a foreign law practitioner to explain the issues of foreign law raised by Appellees and amici. See C.C. Bjorklund, Law of Foreign Jurisdiction, 21 Am. Jur. Proof of Facts 2d 1, 13 n.25 (2010) (the best source of foreign law is said to be an expert who has studied the foreign law, has practiced law in the country of its origin, and can translate and interpret it in the idiom of the American attorney ). Although foreign law has been at issue in this case from the outset, Opposition 10, it was not until Appellees opposition and amici briefs that certain arguments and issues were brought to the fore. Once they were, Movants appropriately responded. Although Appellees claim that they are prejudiced by this filing, the submission of the Declaration with Movants reply briefs was nothing more than a natural outgrowth of how the issues were litigated and decided below and how the issues were developed before this Court. II. Appellees Set Forth No Persuasive Arguments as to Why This Court Should Not Consider the Declaration Appellees throw up scattered arguments against the Declaration. None of those arguments should dissuade this Court from considering it. A. Movants are not trying to supplement the record on appeal First, Appellees argue that the Trustee and SIPC are improperly trying to supplement the record on appeal in violation of Federal Rule of Appellate 7

12 Case , Document 1209, 05/29/2018, , Page12 of 19 Procedure 10. Opposition 4. Appellees attack a straw man. Movants have not sought to supplement the record on appeal with new facts or evidence that were not before the district court, and therefore the cases Appellees cite are inapposite. See Opposition 4 5 (citing Rana v. Islam, 887 F.3d 118, 122 (2d Cir. 2018) (attempting to submit copies of phone statements, passports and correspondence); Okoi v. El Al Israel Airlines, 378 F. App x 9, 11 n.1 (2d Cir. 2010) (denying pro se appellant s attempt to submit Papers in Support of Appeal ); Weinstock v. Columbia Univ., 224 F.3d 33, 46 (2d Cir. 2000) (denying attempt to expand record to include statistical data)). Appellees point to Huynh v. Chase Manhattan Bank, 465 F.3d 992, 1000 (9th Cir. 2006), to suggest that filing a foreign law declaration for the first time on appeal is improper. Opposition 4. But the holding in Huynh is not nearly as broad as Appellees suggest. In Huynh, appellee filed an uncontested foreign law declaration in the district court. Appellants waited until the appeal to file their own foreign law declaration in response. The Ninth Circuit refused to consider appellants declaration because they did not adequately develop the record below. Id. Here, Appellees did not file a foreign law declaration in either the district or the bankruptcy court, although it was their burden to establish a true conflict between U.S. and any foreign law. Instead, Appellees relied on their foreign amici 8

13 Case , Document 1209, 05/29/2018, , Page13 of 19 on appeal to set out the statutory insolvency law in the BVI and the Cayman Islands, and to argue that the Trustee s actions will disrupt the foreign insolvency proceedings and irrevocably harm international cooperation in cross-border insolvency proceedings. Huynh does not preclude the Trustee from replying to these foreign law arguments made for the first time on appeal with a foreign law declaration. B. Movants are not introducing new arguments on reply Appellees argue that Movants have waived or forfeited their opportunity to present new foreign law arguments. But foreign law has been at issue in this case from the outset. Opposition 10. Thus, Appellees claim of waiver with respect to foreign law issues is not credible. See United States v. Litvak, 808 F.3d 160, 175 n.17 (2d Cir. 2006) (rejecting government s waiver argument, which was based on a narrow view of defendant s argument, noting that defendant was not limited to the precise arguments he made before the District Court ) (citations omitted); see also 21 Moore s Federal Practice (3d ed. 1999) (waiver occurs when an argument is mentioned only in passing, such as a footnote, presented in the appendix rather than the brief, or newly raised in a reply brief). Under Appellees reasoning, an appellant could never respond to arguments raised in opposition or by amici a facetious claim this Circuit has expressly rejected. Bayway Refining Co. v. Oxygenated Mktg. & Trading A.G., 215 F.3d 9

14 Case , Document 1209, 05/29/2018, , Page14 of , (2d Cir. 2000) ( [R]eply papers may properly address new material issues raised in the opposition papers so as to avoid giving unfair advantage to the answering party. ) (citation omitted); Guadagni v. New York City Transit Auth., 387 F. App x 124, 125 (2d Cir. 2010) (same). Movants are responding to issues properly raised by Appellees and their amici, making the replies and Declaration merely continuations of arguments previously raised. Eastman Kodak Co. v. STWB, Inc., 452 F.3d 215, 221 (2d Cir. 2006) (citing Yee v. City of Escondido, 503 U.S. 519, 534 (1992) ( Once a federal claim is properly presented, a party can make any argument in support of that claim; parties are not limited to the precise arguments they made below )). C. Federal Rule of Civil Procedure 44.1 permits the filing of the Declaration As noted in the Motion, Federal Rule of Civil Procedure 44.1 permits parties to submit foreign law materials to appellate courts to assist the court in determining questions of law. But Courts of Appeals may invoke Rule 44.1 to consider any 10

15 Case , Document 1209, 05/29/2018, , Page15 of 19 relevant source, including... affidavits. Europema, S.A. v. Emserian, Inc., 154 F.3d 24, 28 n.2 (2d Cir. 1998). 17 Courts of Appeals, including this Court, have therefore accepted and considered materials like the Declaration. Ancile Inv. Co. Ltd. v. Archer Daniels Midland Co., 538 F. App x 19, 21 n.3 (2d Cir. 2013) (accepting foreign law materials under Rule 44.1 submitted on appeal); Grand Entm t Grp., Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 489 n.10 (3d Cir. 1993) (considering foreign law affidavits presented on appeal because court s inquiry is not limited to the evidence properly presented in proceedings in the district court ). And leading treatises endorse that practice. E.g., 9A Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc (3d ed. 2018) (parties should be permitted to present new foreign-law materials on appeal). 17 Appellees claim that they were not provided with sufficient notice under Rule As noted by this Court, however, the function of the notice is not to spell out the precise contents of foreign law but rather to inform the court and litigants it is relevant to the lawsuit. Thus a high degree of specificity is not required. Rationis Enter. Inc. of Panama v. Hyundai Mipo Dockyard Co., 426 F.3d 580, 585 (2d Cir. 2005) (citing Wright & Miller, Fed. Prac. & Proc (2d ed. 1994)); see also Bristol-Myers Squibb Co. v. Matrix Labs., Ltd., 655 F. App x 9, 12 (2d Cir. 2016). Since Appellees concede foreign law has been at issue in this case from the outset, as is necessarily the case when international comity is at issue, Opposition 10, lack of notice is not an issue here. 11

16 Case , Document 1209, 05/29/2018, , Page16 of 19 CONCLUSION Movants respectfully request that the Court grant their motion and consider the Declaration. Dated: May 29, 2018 New York, New York /s/ Kevin H. Bell JOSEPHINE WANG KEVIN H. BELL NATHANAEL S. KELLEY SECURITIES INVESTOR PROTECTION CORPORATION 1667 K Street, N.W., Suite 1000 Washington D.C (202) Attorneys for Statutory Intervenor Securities Investor Protection Corporation Respectfully submitted, /s/ David J. Sheehan DAVID J. SHEEHAN SEANNA R. BROWN TORELLO H. CALVANI CATHERINE E.WOLTERING BAKER & HOSTETLER LLP 45 Rockefeller Plaza New York, New York (212) Attorneys for Appellant Irving H. Picard, as Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and the Estate of Bernard L. Madoff ROY T. ENGLERT, JR. ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER & SAUBER LLP 1801 K Street, NW, Suite 411L Washington, D.C (202) HOWARD L. SIMON WINDELS MARX LANE & MITTENDORF, LLP 156 West 56th Street New York, New York (212)

17 Case , Document 1209, 05/29/2018, , Page17 of 19 MATTHEW B. LUNN YOUNG CONAWAY STARGATT & TAYLOR, LLP Rockefeller Center 1270 Avenue of the Americas Suite 2210 New York, New York (212) Special Counsel for Trustee 13

18 Case , Document 1209, 05/29/2018, , Page18 of 19 CERTIFICATE OF COMPLIANCE This brief complies with the type-volume limitations of Federal Rule of Appellate Procedure 27(d)(2)(C) because it contains 2447 words. This brief complies with the typeface requirements of Rule 32(a)(5) and the type style requirements of Rule 32(a)(6) because it has been prepared in a proportionally spaced typeface using Microsoft Word in Times New Roman 14- point font. Dated: May 29, 2018 New York, New York Respectfully submitted, /s/ Kevin H. Bell JOSEPHINE WANG KEVIN H. BELL NATHANAEL S. KELLEY SECURITIES INVESTOR PROTECTION CORPORATION 1667 K Street, N.W., Suite 1000 Washington D.C (202) Attorneys for Statutory Intervenor Securities Investor Protection Corporation /s/ David J. Sheehan DAVID J. SHEEHAN SEANNA R. BROWN TORELLO H. CALVANI CATHERINE E.WOLTERING BAKER & HOSTETLER LLP 45 Rockefeller Plaza New York, New York (212) Attorneys for Appellant Irving H. Picard, as Trustee for the Substantively Consolidated SIPA Liquidation of Bernard L. Madoff Investment Securities LLC and the Estate of Bernard L. Madoff

19 Case , Document 1209, 05/29/2018, , Page19 of 19 ROY T. ENGLERT, JR. ROBBINS, RUSSELL, ENGLERT, ORSECK, UNTEREINER & SAUBER LLP 1801 K Street, NW, Suite 411L Washington, D.C (202) HOWARD L. SIMON WINDELS MARX LANE & MITTENDORF, LLP 156 West 56th Street New York, New York (212) MATTHEW B. LUNN YOUNG CONAWAY STARGATT & TAYLOR, LLP Rockefeller Center 1270 Avenue of the Americas Suite 2210 New York, New York (212) Special Counsel for Trustee