Case , Document 69, 08/17/2017, , Page1 of United States Court of Appeals FOR THE SECOND CIRCUIT

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1 Case , Document 69, 08/17/2017, , Page1 of din THE United States Court of Appeals FOR THE SECOND CIRCUIT IN RE: BERNARD L. MADOFF INVESTMENT SECURITIES LLC, Debtor. A & G GOLDMAN PARTNERSHIP, PAMELA GOLDMAN, against Appellants, IRVING H. PICARD, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff, CAPITAL GROWTH COMPANY, DECISIONS INCORPORATED, FAVORITE FUNDS, JA PRIMARY LIMITED PARTNERSHIP, JA SPECIAL LIMITED PARTNERSHIP, JAB PARTNERSHIP, JEMW PARTNERSHIP, JF PARTNERSHIP, JFM INVESTMENT COMPANIES, JLN PARTNERSHIP, JMP LIMITED PARTNERSHIP, JEFFRY M. PICOWER SPECIAL CO., JEFFRY M. PICOWER P.C., THE PICOWER FOUNDATION, THE PICOWER INSTITUTE FOR MEDICAL RESEARCH, THE TRUST F/B/O GABRIELLE H. PICOWER, BARBARA PICOWER, individually and as Executor of the Estate of Jeffry M. Picower, and as Trustee for the Picower Foundation and for The Trust f/b/o Gabrielle H. Picower, Appellees. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK BRIEF FOR APPELLEE IRVING H. PICARD, TRUSTEE FOR THE LIQUIDATION OF BERNARD L. MADOFF INVESTMENT SECURITIES LLC AND BERNARD L. MADOFF THOMAS D. WARREN BAKER & HOSTETLER LLP Key Tower 127 Public Square, Suite 2000 Cleveland, Ohio (216) DAVID J. SHEEHAN DEBORAH H. RENNER FERVE E. OZTURK SAMUEL M. LIGHT BAKER & HOSTETLER LLP 45 Rockefeller Plaza New York, New York (212) Attorneys for Appellee Irving H. Picard, Trustee for the Liquidation of Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff

2 Case , Document 69, 08/17/2017, , Page2 of 61 TABLE OF CONTENTS Page STATEMENT OF THE ISSUE PRESENTED... 1 STATEMENT OF THE CASE... 1 STANDARD OF REVIEW... 4 STATEMENT OF FACTS... 5 I. THIS COURT S NET EQUITY DECISION... 5 II. THE GOLDMAN PLAINTIFFS PARTICIPATION IN THE BANKRUPTCY PROCEEDINGS... 6 III. THE TRUSTEE S AVOIDANCE ACTION... 7 IV. THE PICOWER SETTLEMENT AND ISSUANCE OF THE PERMANENT INJUNCTION... 8 V. THE SETTLMENT AND ISSUANCE OF THE PERMANENT INJUNCTION ARE AFFIRMED AND CLASS ACTIONS PLAINTIFFS ARE ENJOINED IN FOX/MARSHALL I... 9 VI. THE BANKRUPTCY COURT AND THE DISTRICT COURT ENFORCE THE PERMANENT INJUNCTION AGAINST APPELLANTS IN GOLDMAN I and II A. Goldman I B. Goldman II VII. THE FOX/MARSHALL II COMPLAINT: THE BANKRUPTCY AND DISTRICT COURTS HOLD THAT FOX/MARSHALL II VIOLATES THE PERMANENT INJUNCTION A. The Bankruptcy Court Decision B. The District Court Decision VIII. THE BANKRUPTCY COURT AND THE DISTRICT COURT ENFORCE THE PERMANENT INJUNCTION AGAINST APPELLANTS IN GOLDMAN III i -

3 Case , Document 69, 08/17/2017, , Page3 of 61 TABLE OF CONTENTS (continued) Page A. The Goldman III Complaint B. The Bankruptcy Court Holds the Goldman III Claims Derivative of the Trustee s Claims C. The District Court Holds that Goldman III Violates the Permanent Injunction SUMMARY OF ARGUMENT ARGUMENT: THE PERMANENT INJUNCTION SHOULD BE ENFORCED I. THE GOLDMAN III CLAIMS ARE DERIVATIVE AND DUPLICATIVE OF THE TRUSTEE S CLAIMS A. Most of Appellants Allegations Were Previously Held to Violate the Permanent Injunction B. The New Allegations Are Barred by the Injunction II. APPELLANTS RAISE NO COLORABLE CHALLENGE TO THE UNANIMOUS CONCLUSION OF THE COURTS BELOW.. 41 A. The Lower Courts Correctly Determined That the Proposed Complaint Is Derivative B. The Trustee s Standing to Assert a Section 20(a) Claim Has No Bearing on Whether It Is Derivative C. The Elements of a Section 20(a) Claim Are Not Relevant to Whether the Permanent Injunction Bars the Claim III. THE GOLDMAN PARTIES SEEK TO IMPROPERLY CIRCUMVENT THE NET EQUITY SCHEME CONCLUSION ii -

4 Case , Document 69, 08/17/2017, , Page4 of 61 TABLE OF AUTHORITIES Page(s) Cases A & G Goldman P ship v. Capital Growth Co. (In re Bernard L. Madoff Inv. Sec. LLC), 565 B.R. 510 (S.D.N.Y. 2017)...passim A & G Goldman P ship v. Picard (In re Bernard L. Madoff Inv. Sec. LLC), No. 12 Civ (RJS), 2013 WL (S.D.N.Y. Sept. 30, 2013)...passim Anwar v. Fairfield Greenwich Ltd., 728 F. Supp. 2d 372 (S.D.N.Y. 2010) Baker v. Dorfman, 239 F.3d 415 (2d Cir. 2000) In re Bernard L. Madoff Inv. Sec. LLC, 424 B.R. 122 (Bankr. S.D.N.Y. 2010)... 5 In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d 229 (2d Cir. 2011)...passim Bettis v. Kelly, 137 F. App x 381 (2d Cir. 2005) Buchwald v. The Renco Group, Inc. (In re Magnesium Corp. of Am.), 399 B.R. 722 (Bankr. S.D.N.Y. 2009) Caplin v. Marine Midland Grace Trust Co. of N.Y., 406 U.S. 416 (1972)... 44, 45 In re CitX Corp., Inc., 448 F.3d 672 (3d Cir. 2006) Diana Melton Trust v. Picard (In re Bernard L. Madoff Inv. Sec. LLC), 15 Civ (PAE), 2016 WL (S.D.N.Y. Jan. 14, 2016)... 37, 38 Fox v. Capital Growth Co., 568 B.R. 203 (Bankr. S.D.N.Y. 2017)... 2 Fox v. Picard (In re Bernard L. Madoff), 848 F. Supp. 2d 469 (S.D.N.Y. 2012)...passim - iii -

5 Case , Document 69, 08/17/2017, , Page5 of 61 TABLE OF AUTHORITIES (continued) Page(s) Fox v. Picard (In re Bernard L. Madoff Inv. Sec. LLC), 531 B.R. 345 (S.D.N.Y. 2015)...passim GAMCO Inv rs, Inc. v. Vivendi Universal, S.A., 838 F.3d 214 (2d Cir. 2016)... 4 Grieve v. Tamerin, 269 F.3d 149 (2d Cir. 2001) H & C Dev. Grp., Inc. v. Miner (In re Miner), 229 B.R. 561 (2d Cir. 1999)... 4 Hirsch v. Arthur Andersen & Co., 72 F.3d 1085 (2d Cir. 1995)... 25, 37 Johns-Manville Corp. v. Chubb Indem. Ins. Co. (In re Johns-Manville Corp.) 517 F.3d 52 (2d Cir. 2008) Lautenberg Foundation v. Peter Madoff, No (SRC), 2009 WL (D.N.J. Sept. 9, 2009) Legnani v. Alitalia Linee Aeree Italiane, S.P.A., 400 F.3d 139 (2d Cir. 2005) Major v. Sony Music Entm t. Inc., No. 92-CV-2826, 1992 WL (S.D.N.Y. Aug. 17, 1992) Marshall v. Capital Growth Co. (In re Bernard L. Madoff), 568 B.R. 203 (Bankr. S.D.N.Y. 2017)...passim Marshall v. Picard (In re Bernard L. Madoff Inv. Sec. LLC), 740 F.3d 81 (2d Cir. 2014)...passim In re Metromedia Fiber Network, Inc., 416 F.3d 136 (2d Cir. 2005) Picard v. A & G Goldman P ship (In re Bernard L. Madoff), 546 B.R. 284 (Bankr. S.D.N.Y. 2016)...passim - iv -

6 Case , Document 69, 08/17/2017, , Page6 of 61 TABLE OF AUTHORITIES (continued) - v - Page(s) Picard v. JPMorgan Chase & Co. (In re Bernard L. Madoff Inv. Sec. LLC), 721 F.3d 54 (2d Cir. 2013)...passim Picard v. Marshall (In re Bernard L. Madoff), 511 B.R. 375 (Bankr. S.D.N.Y. 2014)...passim Picard v. Merkin, 515 B.R. 117 (Bankr. S.D.N.Y. 2014) Picard v. Stahl (In re Bernard L. Madoff), 443 B.R. 295 (Bankr. S.D.N.Y. 2011) In re Radnor Holdings Corp., 353 B.R. 820 (Bankr. D. Del. 2006) Reneker v. Offil, No. 08-CV-1394, 2012 WL (N.D. Tex. Aug. 22, 2012) Sec. Inv r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Bernard L. Madoff), 429 B.R. 423 (Bankr. S.D.N.Y. 2010)...passim Sec. Inv r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Bernard L. Madoff), 477 B.R. 351 (Bankr. S.D.N.Y. 2012)...passim Shapiro v. JPMorgan Chase & Co., No. 11 Civ (CM), 2014 WL (S.D.N.Y. Mar. 24, 2014) Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir. 1991) St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688 (2d Cir. 1989)...passim Superintendent of Ins. v. Ochs (In re First Cent. Fin. Corp.), 377 F. 3d 209 (2d Cir. 2004)... 4 Teras Int l Corp. v. Gimbel, No. 13-CV-6788, 2014 WL (S.D.N.Y. Dec. 17, 2014)... 38

7 Case , Document 69, 08/17/2017, , Page7 of 61 TABLE OF AUTHORITIES (continued) Page(s) Tronox Inc. v. Kerr-McGee Corp. (In re Tronox Inc.), 855 F.3d 84 (2d Cir. 2017)...passim Visconsi v. Lehman Brothers, Inc., 244 F. App x. 708 (6th Cir. 2007) Statutes 15 U.S.C. 78fff-2(c)(1)... 6 Securities Exchange Act of (a)...passim Rules Fed. R. Bankr. P vi -

8 Case , Document 69, 08/17/2017, , Page8 of 61 STATEMENT OF THE ISSUE PRESENTED Whether the bankruptcy court properly held, in a decision affirmed by the district court, that Appellants putative class action complaint ( Goldman III ) was duplicative and derivative of the Trustee s action against Jeffry Picower ( Picower ) and related individuals and entities ( Picower Parties ) and was thus barred by a permanent injunction ( Permanent Injunction ) previously issued by the bankruptcy court and affirmed by this Court. STATEMENT OF THE CASE Appellants contend that securities claims are independent claims that cannot be enjoined under the Permanent Injunction. But that is not the question before this Court. Rather, the question here is whether the Goldman III complaint states an independent claim, or one that derives from allegations the Trustee brought or could have brought, no matter whether Appellants claim is styled as a securities claim or anything else. Several courts have considered the various iterations of the Goldman complaints five times since 2011, and each time, each court has held that despite being cloaked in the language of a securities claim, the Goldman complaints alleged little, if nothing, more than the Picower Parties conduct relating to their own account activity. Each time, the claims have been held barred by the Permanent Injunction as derivative of the Trustee s settled claims. 1 Any 1 Sec. Inv r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Bernard L. Madoff) (hereinafter, Goldman I Bankruptcy Court Decision), 477 B.R. 351 (Bankr. S.D.N.Y. 2012);

9 Case , Document 69, 08/17/2017, , Page9 of 61 other allegation has been held to be conclusory, or generalized as to all creditors, and thus derivative under this Court s well-settled law. Marshall v. Picard (In re Bernard L. Madoff Inv. Sec. LLC) (hereinafter, Fox/Marshall I Second Circuit Decision), 740 F.3d 81 (2d Cir. 2014); see Tronox Inc. v. Kerr-McGee Corp. (In re Tronox Inc.), 855 F.3d 84, (2d Cir. 2017). Similarly, no fewer than five courts have considered nearly identical claims brought by a competing cast of class action plaintiffs, the Fox/Marshall Plaintiffs, and each time, each court has held that those complaints, too, violate the Permanent Injunction for the same reasons. 2 Goldman III is no different. The bankruptcy court and the district court properly held that it alleges derivative and generalized claims that are barred by the Permanent Injunction. aff d sub nom., A & G Goldman P ship v. Picard (In re Bernard L. Madoff Inv. Sec. LLC) (hereinafter, Goldman I District Court Decision), No. 12 Civ (RJS), 2013 WL , at *1 (S.D.N.Y. Sept. 30, 2013); Picard v. Marshall (In re Bernard L. Madoff) (hereinafter, Fox/Marshall II Goldman II Bankruptcy Court Decision), 511 B.R. 375 (Bankr. S.D.N.Y. 2014); Picard v. A & G Goldman P ship (In re Bernard L. Madoff) (hereinafter, Goldman III Bankruptcy Court Decision), 546 B.R. 284 (Bankr. S.D.N.Y. 2016); A & G Goldman P ship v. Capital Growth Co. (In re Bernard L. Madoff Inv. Sec. LLC) (hereinafter, Goldman III District Court Decision), 565 B.R. 510 (S.D.N.Y. 2017). 2 Sec. Inv r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Bernard L. Madoff) (hereinafter, Fox/Marshall I Bankruptcy Court Decision), 429 B.R. 423 (Bankr. S.D.N.Y. 2010); Fox v. Picard (In re Bernard L. Madoff) (hereinafter, Fox/Marshall I District Court Decision), 848 F. Supp. 2d 469 (S.D.N.Y. 2012); Fox/Marshall I Second Circuit Decision, 740 F.3d 81 (2d Cir. 2014); Fox/Marshall II Goldman II Bankruptcy Court Decision, 511 B.R. 375 (Bankr. S.D.N.Y. 2014); Fox v. Picard (In re Bernard L. Madoff Inv. Sec. LLC) (hereinafter, Fox/Marshall II District Court Decision), 531 B.R. 345 (S.D.N.Y. 2015); Fox v. Capital Growth Co., 568 B.R. 203 (Bankr. S.D.N.Y. 2017). 2

10 Case , Document 69, 08/17/2017, , Page10 of 61 Appellants repeated attempts to circumvent the Permanent Injunction have an extensive history. Their initial action in 2011 ( Goldman I ) was held to be duplicative and derivative of the Trustee s claims against the Picower Parties by both the bankruptcy court and the district court. Goldman I Bankruptcy Court Decision, 477 B.R. at 358; Goldman I District Court Decision, 2013 WL , at *1. Appellants did not appeal the district court s enforcement of the Permanent Injunction in Goldman I to this Court. Instead, they sought to file a new complaint ( Goldman II ). Appellants were again enjoined by the bankruptcy court in Goldman II, appealed to the district court, and subsequently abandoned their appeal. Fox/Marshall II Goldman II Bankruptcy Court Decision, 511 B.R. at In Goldman III, Appellants repeat previous allegations already held multiple times to be barred by the Permanent Injunction, yet claim that two ostensibly new allegations change the equation. Those allegations are that Picower: (1) propped up the Ponzi scheme through purported loans to BLMIS; and (2) agreed to be listed as an options counterparty. But both the bankruptcy court and the district court properly held that these new allegations suffer from the same flaw they amount to claims of generalized harm to all creditors flowing from alleged acts that harmed the estate by deepening the insolvency and perpetuating 3

11 Case , Document 69, 08/17/2017, , Page11 of 61 the Ponzi scheme. As with the previously made allegations, the lower courts properly found these new allegations to be derivative of claims belonging to the Trustee, and therefore barred by the Permanent Injunction. Goldman III District Court Decision, 565 B.R. at ; Goldman III Bankruptcy Court Decision, 546 B.R. at There is nothing new here. The Court should affirm the holdings of the lower courts enforcing the Permanent Injunction. STANDARD OF REVIEW This Court owes deference to the lower courts interpretation of the Permanent Injunction, and must consider the merits only to determine whether the lower courts obviously misinterpreted the Permanent Injunction. See In re Tronox Inc., 855 F.3d at 107. The bankruptcy court s factual determinations are reviewed for clear error, and its legal conclusions are reviewed de novo. See Fed. R. Bankr. P. 8013; Superintendent of Ins. v. Ochs (In re First Cent. Fin. Corp.), 377 F. 3d 209, 212 (2d Cir. 2004). A party challenging a lower court s findings of fact bears a heavy burden. H & C Dev. Grp., Inc. v. Miner (In re Miner), 229 B.R. 561, 565 (B.A.P. 2d Cir. 1999). The Court must have a definite and firm conviction that a mistake has been committed. GAMCO Inv rs, Inc. v. Vivendi Universal, S.A., 838 F.3d 214, 219 (2d Cir. 2016). 4

12 Case , Document 69, 08/17/2017, , Page12 of 61 STATEMENT OF FACTS The details of Madoff s Ponzi scheme and the background of the bankruptcy proceedings have been set forth numerous times and need not be repeated here. See, e.g., Fox/Marshall I Second Circuit Decision, 740 F.3d at 84 86; Fox/Marshall I District Court Decision, 848 F. Supp. 2d at I. THIS COURT S NET EQUITY DECISION Appellants repeated attempts to circumvent the Permanent Injunction stem from their dissatisfaction with this Court s Net Equity Decision. In re Bernard L. Madoff Inv. Sec. LLC (hereinafter, Net Equity Decision ), 654 F.3d 229, 242 (2d Cir. 2011). In liquidation proceedings under the Securities Investor Protection Act ( SIPA ), customers with allowed claims may share pro rata in the estate s customer property to the extent of their net equity. In re Bernard L. Madoff Inv. Sec. LLC, 424 B.R. 122, (Bankr. S.D.N.Y. 2010). Consistent with SIPA, the Trustee determined that each customer s net equity should be calculated by crediting the amount of cash the customer deposited into its BLMIS account, less any amounts withdrawn from the customer s BLMIS account, referred to as the Net Investment Method. Id. at 125. The bankruptcy court approved the Trustee s use of the Net Investment Method to calculate net equity and this Court affirmed that order in its Net Equity Decision. Net Equity Decision, 654 F.3d at 235. Appellants and others argued that 5

13 Case , Document 69, 08/17/2017, , Page13 of 61 the Trustee should return their false profits to them, as reported on their last customer statements. But this Court reasoned that permitting customers their false profits would have the absurd effect of treating fictitious and arbitrarily assigned paper profits as real and would give legal effect to Madoff s machinations. Id. II. THE GOLDMAN PLAINTIFFS PARTICIPATION IN THE BANKRUPTCY PROCEEDINGS A & G Goldman Partnership ( A & G ) submitted a customer claim for its BLMIS account that was denied by the Trustee because A & G had withdrawn more funds than it deposited. (A502.) 3 Pamela Goldman submitted two customer claims for BLMIS accounts with which she was associated, which the Trustee allowed. (A ) Through advances from the Securities Investor Protection Corporation ( SIPC ), and an interim distribution from the fund of customer property, Pamela Goldman s allowed claims have been fully satisfied. (A472 3.) As creditors and customers, Appellants are represented by the Trustee. The customer claims of Pamela Goldman were satisfied. And although A & G s net equity claims were denied because it was a net winner, like all other net winners, it may still participate in the estate as a general creditor (as could Pamela Goldman, for an amount above her net equity) if the Trustee is able to recover more property than is required to satisfy net equity claims. SIPA 78fff-2(c)(1) ( Any customer 3 The Trustee refers to items contained in the Joint Appendix using the prefix A. 6

14 Case , Document 69, 08/17/2017, , Page14 of 61 property remaining after allocation in accordance with this paragraph shall become part of the general estate of the debtor.... ). III. THE TRUSTEE S AVOIDANCE ACTION The Trustee filed a complaint against Picower (since deceased) and the other Picower Parties on May 12, (A37 94.) The complaint identified more than $6.7 billion in net withdrawals (later increased to $7.2 billion) that the Trustee alleged the Picower Parties had received from BLMIS. (A39, 94.) The complaint alleged that the Picower Parties knew or should have known that BLMIS was engaged in fraud and the Trustee sought recovery of all amounts transferred from BLMIS to the Picower Parties throughout the time the Picower Parties were BLMIS customers. (A39, 46, 53, ) The Trustee s complaint contained numerous allegations that Picower directed backdating in the Picower Parties BLMIS accounts, had actual knowledge of the Ponzi scheme, was complicit[] in the fraud, and was compensated through the Picower Parties accounts for perpetuating the Ponzi scheme. (A60; see A54.) The Trustee s complaint also included allegations dealing with margin loans. (See, e.g., A61 ( In December 2005, BLMIS also created backdated purchases on margin.... ).) It addressed what Appellants now describe in Goldman III as a $125 million loan made in April As the Trustee alleged: On or about 7

15 Case , Document 69, 08/17/2017, , Page15 of 61 April 24, 2006, Decisions opened a sixth account with BLMIS ( Decisions 6 ) by wire transfer on April 18 of $125 million... [b]y the end of April... the purported net equity value of the account was over $164 million.... (A57.) The Trustee further contended, in opposing Picower s motion to dismiss, that Picower propped up the Ponzi scheme by accepting only a fraction of his requested redemptions when Madoff could not pay the full amount of the redemptions. (A ) In short, the Trustee brought and settled claims alleging that Picower knew of the Ponzi scheme, and knowingly invested and maintained funds in BLMIS in order to reap as many fictitious profits from his accounts as possible. IV. THE PICOWER SETTLEMENT AND ISSUANCE OF THE PERMANENT INJUNCTION After months of negotiations, the Trustee, the Picower Parties, and the Department of Justice reached a global settlement ( Settlement ). The Picower estate agreed to forfeit and return $7.235 billion, of which the Trustee received $5 billion for the benefit of the BLMIS estate and the government retained $2.235 billion for other Madoff victims. (A186.) Through the Settlement, one hundred percent of the net withdrawals received by the Picower Parties over the lifetime of their investments with BLMIS became available for eventual distribution to BLMIS victims, either through this SIPA liquidation or through the Department of 8

16 Case , Document 69, 08/17/2017, , Page16 of 61 Justice and the Madoff Victim Fund, 4 without the need for litigation. (Id.) The $7.235 billion settlement is, by a substantial margin, the single largest recovery of customer funds to both in the BLMIS bankruptcy and in any other SIPA case. On notice, the bankruptcy court approved the Settlement and issued the Permanent Injunction, which provides: [A]ny BLMIS customer or creditor of the BLMIS estate... is hereby permanently enjoined from asserting any claim against the Picower BLMIS Accounts or the Picower Releasees that is duplicative or derivative of the claims brought by the Trustee, or which could have been brought by the Trustee against the Picower BLMIS Accounts or the Picower Releasees.... (A212.) Appellants did not object to the Settlement. V. THE SETTLMENT AND ISSUANCE OF THE PERMANENT INJUNCTION ARE AFFIRMED AND CLASS ACTIONS PLAINTIFFS ARE ENJOINED IN FOX/MARSHALL I Both the district court and this Court affirmed the Settlement and the issuance of the Permanent Injunction, as well as enforcement of the Permanent Injunction against another set of third party plaintiffs represented by Adele Fox and Susanne Stone Marshall the Fox/Marshall Plaintiffs 5 who brought putative class actions against the Picower Parties in 2010 in a Florida district court 4 Established by United States Attorney for the Southern District of New York and the Asset Forfeiture and Money Laundering Section of the Department of Justice, the Madoff Victim Fund is separate from this SIPA liquidation and is administered by Special Master Richard C. Breeden. See MADOFF VICTIM FUND, (last visited Aug. 17, 2017). 5 In later iterations of Fox/Marshall, the Fox/Marshall Plaintiffs also included Marsha Peshkin and Russell Oasis. 9

17 Case , Document 69, 08/17/2017, , Page17 of 61 ( Fox/Marshall I ). See, e.g., Fox/Marshall I Second Circuit Decision, 740 F.3d at 96. The Fox/Marshall Plaintiffs asserted common law claims and sought damages as a result of the fraudulent transfers the Picower Parties received from BLMIS. Fox/Marshall I contained a conspiracy claim, which the Fox/Marshall Plaintiffs characterized as alleging the Picower Defendants work[ed] hand-inglove with Madoff and BLMIS to perpetuate the Ponzi scheme. Id. at 92. The bankruptcy court held that Fox/Marshall I violated the automatic stay and that the Fox/Marshall Plaintiffs violated the Permanent Injunction. Fox/Marshall I Bankruptcy Court Decision, 429 B.R. at 437. The Honorable John G. Koeltl of the district court affirmed, holding that the bankruptcy court was plainly correct in finding that the Florida Actions violated the automatic stay, because they were a transparent effort to pursue claims... that were duplicative of claims brought by the Trustee and that belonged to the Trustee on behalf of all creditors of BLMIS. Fox/Marshall I District Court Decision, 848 F. Supp. 2d at 473. On January 13, 2014, this Court upheld the enforcement of the Permanent Injunction against the Fox/Marshall Plaintiffs. Fox/Marshall I Second Circuit Decision, 740 F.3d at 96. The Court held that the Fox/Marshall I complaints impermissibly attempt to plead around the Permanent Injunction because they allege nothing more than steps necessary to effect the Picower [Parties ] 10

18 Case , Document 69, 08/17/2017, , Page18 of 61 fraudulent withdrawals of money from BLMIS, instead of particularized conduct directed at BLMIS customers. Id. at 84. VI. THE BANKRUPTCY COURT AND THE DISTRICT COURT ENFORCE THE PERMANENT INJUNCTION AGAINST APPELLANTS IN GOLDMAN I and II A. Goldman I 1. The Goldman I Complaint In the midst of the Fox/Marshall I injunction litigation, Appellants sought permission from the bankruptcy court in 2011 to file two putative class actions in Florida district court ( Goldman I ). (A277, 289, 316, 328.) While Pamela Goldman sought to represent so-called net losers customers who had not received back the amount of their investment with BLMIS, A & G sought to represent net winners customers who had received fictitious profits. (See id.) Together, they sought to represent customers already before the bankruptcy court, whose net equity had been determined by the Trustee using the method approved by this Court s Net Equity Decision. As demonstrated in Exhibit A annexed to the bankruptcy court s order in the Goldman I Bankruptcy Court Decision, 477 B.R. at 358, the Goldman I complaints were virtually carbon copies of Fox/Marshall I and the Trustee s complaint. The only thing different in Goldman I was the labeling of the claim as a securities fraud claim instead of a conspiracy claim. As they do now, Appellants claimed that Picower was a control person under the Securities Exchange Act of 1934 (the 11

19 Case , Document 69, 08/17/2017, , Page19 of 61 Exchange Act ) and was jointly and severally liable with Madoff for Madoff s violations of Rule 10b-5 of the Exchange Act. (See, e.g., A ) Goldman I alleged that Picower s ability to make enormous withdrawals and direct fraudulent recordkeeping within the Picower Parties own accounts demonstrated that he controlled cash flow and the cash distributions at BLMIS and exercised control over the day to day operations of BLMIS. (A303.) 2. The Bankruptcy Court Holds that Goldman I Violates the Permanent Injunction On June 20, 2012, the bankruptcy court held that Goldman I violated the Permanent Injunction and the automatic stay of the Bankruptcy Code. See Goldman I Bankruptcy Court Decision, 477 B.R. at The court rejected Appellants attempts to circumvent the Net Equity Decision by pleading around the injunction: It s déjà vu all over again. The Class Action Plaintiffs are attempting to use inventive pleading to sidestep the automatic stay and the Injunction. Id. at 354 (internal quotations omitted). The bankruptcy court emphasized that Appellants have simply repeated, repackaged, and relabeled the wrongs alleged by the Trustee [against the Picower Parties] in an attempt to create independent claims where none exist. Id. The bankruptcy court further held Appellants claims to be derivative of the Trustee s. Id. at 356. Indeed, the court found that the alleged harms are limited to general direction and control and action to the detriment of all [BLMIS s] 12

20 Case , Document 69, 08/17/2017, , Page20 of 61 creditors. Id. at 357. Thus, the court held that Appellants did not state a particularized injury against the Picower Parties. 3. The District Court Holds that Goldman I Violates the Permanent Injunction Judge Sullivan affirmed the bankruptcy court s order and upheld the enforcement of the Permanent Injunction against Appellants in Goldman I. Goldman I District Court Decision, 2013 WL , at *1. Rejecting a purely formalistic approach, id. at *11, that looks only at the nominal title of a cause of action, the district court determined that Appellants claims are not bona fide securities fraud claims. Id. at *6. The district court recognized that Goldman I pled conduct that was only incident to the Picower Parties fraudulent withdrawals, and alleged nothing more than that the Picower [Parties] traded on their own BLMIS accounts. Id. The court further held that the Complaints plead nothing more than that the Picower [Parties] fraudulently withdrew money from BLMIS. Id. at *7. See Fox/Marshall I Second Circuit Decision, 740 F.3d at 92 (relying on Judge Sullivan s reasoning in affirming the bankruptcy court s Permanent Injunction against the Fox/Marshall Plaintiffs). Tellingly, Judge Sullivan found that the parts of the Complaints that do discuss aspects of the BLMIS fraud [were] unconnected to the Picower [Parties ] accounts [and] noticeably lack any allegation that the Picower [Parties] were involved in such fraud. Goldman I District Court Decision, 2013 WL , at *7. 13

21 Case , Document 69, 08/17/2017, , Page21 of 61 Accordingly, the district court held that regardless of what Appellants titled their claims, the Goldman I claims are clearly derivative of the Trustee s alreadysettled claims. Id. at *9. Further, the court held that the claims came within the plain scope of the [Permanent] Injunction and that the bankruptcy court had jurisdiction to enjoin them. Id. at * Appellants did not appeal the district court s order and decision. B. Goldman II 1. The Goldman II Complaint On January 6, 2014, Appellants commenced a declaratory judgment action in a Florida district court and attached a proposed class action complaint ( Goldman II ). (A ) Appellants sought a declaration that Goldman II did not violate the Permanent Injunction or the automatic stay provision of the Bankruptcy Code. (See A410.) In substance, Goldman II was identical to Goldman I. It again attempted to assert a claim under 20(a) of the Exchange Act against the Picower Parties for loss in the value of the investments made by putative class members as BLMIS customers. (A428, ) The main difference was that Goldman II stated Appellants theory as to why Picower s conduct within his own BLMIS accounts demonstrated that he was a control person : the complaint attempted to allege that an action by Picower in his own accounts resulted directly in false records being 14

22 Case , Document 69, 08/17/2017, , Page22 of 61 created in other customers accounts and resulted in other customers receiving false information from BLMIS. (See, e.g., A414, ) Goldman II also contained conclusory allegations that Picower directly or indirectly induced BLMIS s misleading statements to others. (A436.) But it did not allege any specific action by Picower directed at other customers, other customer accounts, or indeed, that Picower engaged in any action at BLMIS outside of his own accounts. 2. The Bankruptcy Court Holds that Goldman II Violates the Permanent Injunction On June 23, 2014, the bankruptcy court held that Goldman II violated the Permanent Injunction. Fox/Marshall II Goldman II Bankruptcy Court Decision, 511 B.R. at 394. Setting aside Appellants conclusory allegations, the bankruptcy court held that Goldman II violated the Permanent Injunction because Goldman II, like its predecessors, relie[d] on the Picower [Parties ] fraudulent withdrawals and fictitious entries in their own accounts, and if these allegations are ignored, there is nothing left. Id. at 393. The court held that the Goldman II complaint only restated the legal standard for control person liability under 20(a), without including any particularized allegations that [the] Picower [Parties] did anything besides fraudulently withdraw money from BLMIS and cause BLMIS to make phony entries in the records of their accounts. Id. The bankruptcy court held such a claim to be derivative of the Trustee s claims. Id. Appellants appealed to the 15

23 Case , Document 69, 08/17/2017, , Page23 of 61 district court, but then voluntarily withdrew their appeal. Fox/Marshall II District Court Decision, 531 B.R. at 350 n.3 (S.D.N.Y. 2015). VII. THE FOX/MARSHALL II COMPLAINT: THE BANKRUPTCY AND DISTRICT COURTS HOLD THAT FOX/MARSHALL II VIOLATES THE PERMANENT INJUNCTION A. The Bankruptcy Court Decision A month after Goldman II was filed, the Fox/Marshall Plaintiffs tried again to bring an independent claim against the Picower Parties. The proposed Fox/Marshall II complaint was attached as an exhibit to a motion to re-open Fox/Marshall I in the Florida district court. The Trustee sought to enforce the Permanent Injunction against the Fox/Marshall Plaintiffs on March 11, The Fox/Marshall Plaintiffs took a page from Appellants playbook and purported to assert a 20(a) claim, along with federal and state RICO claims, aiding and abetting, and other common law claims. See Fox/Marshall II Goldman II Bankruptcy Court Decision, 511 B.R. at 383. In a combined hearing, the bankruptcy court heard oral argument on both Fox/Marshall II and Goldman II and issued one decision addressing both complaints. The bankruptcy court enforced the Permanent Injunction against the plaintiffs in Fox/Marshall II because [a]bsent particularized allegations that the Picower [Parties] directed BLMIS to send false financial information or participated in its dissemination, the Fox/Marshall Plaintiffs claims are based on 16

24 Case , Document 69, 08/17/2017, , Page24 of 61 the secondary effects of the fraudulent transfers to the Picower Defendants and are inseparable from the Trustee s claim. Id. at 394. The Fox/Marshall II complaint also included broader allegations about Picower s conduct, such as an allegation that [a]ccording to Madoff, Picower... actively encouraged people to enter into investment advisory agreements with BLMIS and induced Madoff to solicit customers for... BLMIS. Id. The bankruptcy court found these allegations to be wholly conclusory, and held that whether labeled a control person claim, a RICO claim or a common law claim, the complaint was an impermissible attempt to plead around the injunction. Id. at B. The District Court Decision While Appellants did not perfect their appeal of Goldman II to the district court, the Fox/Marshall Plaintiffs did appeal Fox/Marshall II. The Honorable John G. Koeltl of the district court affirmed the bankruptcy court s enforcement of the Permanent Injunction against the Fox/Marshall Plaintiffs. Fox/Marshall II District Court Decision, 531 B.R The district court held that the Fox/Marshall Plaintiffs 20(a) claim akin to those raised by Appellants was derivative of the Trustee s claims and properly barred under the Permanent Injunction because the Fox/Marshall Plaintiffs had merely repackaged the same facts as in Goldman I and Fox/Marshall I without [allegations of] any new particularized injuries of the appellants that are directly traceable to the Picower [Parties]. Id. at

25 Case , Document 69, 08/17/2017, , Page25 of 61 The district court agreed with the bankruptcy court that allegations regarding Picower s involvement in misrepresentations BLMIS made to its customers were entirely conclusory. Id. at 352. With respect to the other claims in Fox/Marshall II, the district court concluded that the bankruptcy court was plainly correct in finding those claims to be derivative. Id. at 353. It held that any allegations purporting to show an injury directly traceable to the Picower [Parties ] conduct [were] too conclusory to present a bona fide claim independent from the Trustee s action. 6 Id. VIII. THE BANKRUPTCY COURT AND THE DISTRICT COURT ENFORCE THE PERMANENT INJUNCTION AGAINST APPELLANTS IN GOLDMAN III A. The Goldman III Complaint As before, Goldman III alleges that Picower was a control person under 20(a) of the Exchange Act. (A441 1.) Goldman III makes six types of allegations: that Picower (1) backdated trades (A ); (2) took out margin loans (A ); (3) knew that there was false information in BLMIS financial disclosures (A ); (4) referred clients to BLMIS (A455 64); (5) made loans to BLMIS (A443 10, A ); and (6) 6 The Fox/Marshall Plaintiffs appealed Judge Koeltl s decision to this Court, but abandoned their appeal. Order, Marshall v. Picard (In re Bernard L. Madoff Inv. Sec. LLC), Docket No (2d Cir. Oct. 9, 2015), ECF No

26 Case , Document 69, 08/17/2017, , Page26 of 61 agreed to be listed as an options counterparty and to notify Madoff if regulators or anyone else asked him about his counterparty status. (A443 11, A ) The first three allegations were previously made in Goldman I and Goldman II, and were specifically held by the bankruptcy court (and, in the case of Goldman I, also by the district court) to be derivative. Fox/Marshall II Goldman II Bankruptcy Court Decision, 511 B.R. at ; Goldman I District Court Decision, 2013 WL at *9. Compare A , with A (alleging backdated trades); compare A , with A (alleging margin loans); compare A , 67 68, 71 with A (alleging knowledge of false financial disclosures). See A (chart comparing the allegations in Goldman III, Goldman II, and the Trustee s complaint against the Picower Parties). The fourth allegation is that Picower... used his extensive connections in Palm Beach and his stature on Wall Street to recruit and refer clients to the BLMIS scheme, despite his knowledge that it was a fraud. (A ) Yet no clients or other specifics about recruiting or referrals are identified in the complaint. This conclusory assertion was rejected by the bankruptcy and district courts in Fox/Marshall II, and held insufficient to create an independent basis for a control person claim. Compare Fox/Marshall II District Court Decision, 531 B.R. at , and Fox/Marshall II Goldman II Bankruptcy Court Decision, 511 B.R. at 19

27 Case , Document 69, 08/17/2017, , Page27 of , with A See A (Fox/Marshall II) ( Picower... actively encouraged people to enter into investment advisory agreements with BLMIS. ). Of all the allegations in Goldman III, only two had not previously been asserted, that: (1) Picower made purported loans to BLMIS (A443 10, A ) and (2) Picower agreed to be listed as an options counterparty (A443 11, A ) These two additions to Goldman III are purportedly based on the criminal testimony of Enrica Cotellessa-Pitz, Annette Bongiorno, and Frank DiPascali, Jr. (See A441.) Yet, as admitted by counsel for Appellants at oral argument, the loan allegations are not based on witness testimony, but rather, on the prosecutor s questions. (A ) B. The Bankruptcy Court Holds the Goldman III Claims Derivative of the Trustee s Claims On November 17, 2014, the Trustee and the Picower Parties each brought an adversary proceeding in the bankruptcy court to enforce the Permanent Injunction against Appellants. On February 17, 2016, the bankruptcy court enjoined Appellants from prosecuting Goldman III. Goldman III Bankruptcy Court Decision, 546 B.R The bankruptcy court considered whether the particularized factual allegations in the Complaint assert a claim that is derivative or duplicative of the Trustee s fraudulent transfer claims against the Picower Parties. Id. at 299. Following this Court s decision in Fox/Marshall I, the court defined derivative to mean claims that arise from harm done to the estate[,] seek 20

28 Case , Document 69, 08/17/2017, , Page28 of 61 relief against third parties that pushed the debtor into bankruptcy, [and] are based upon a secondary effect from harm done to the debtor.... Goldman III Bankruptcy Court Decision, 546 B.R. at 299 (internal citation omitted). Applying that standard, the bankruptcy court held that Appellants claims were generalized and derivative of the Trustee s claims. The alleged conduct, by perpetuating the Ponzi scheme, injured the BLMIS estate and indirectly affected all creditors in the same way. Id. at 301. The court reasoned that the allegation that Picower controlled BLMIS in order to steal $7.2 billion from other customers was the very claim the Trustee settled and that every investor could assert the same claim. Id. The bankruptcy court further held that Appellants allegations that attempted to link Picower to misrepresentations made by Madoff, and their allegations that Picower influenced customers decisions to invest in BLMIS, were entirely conclusory. Citing Judge Sullivan s decision in Goldman I, the court held that the only particularized allegations that Picower gave express directions to BLMIS employees concerning certain specific transactions... relate to transactions in the Picower Parties own accounts, and have been rejected as the basis for a bona fide section 20(a) claim. Id. at 303 (citing Goldman I District Court Decision, 2013 WL , at *6 7). 21

29 Case , Document 69, 08/17/2017, , Page29 of 61 With respect to the loan allegations, the court found as a factual matter that the first alleged loan in 1992 or 1993 was made more than two years before Appellants alleged Picower to be a control person, and the second alleged loan in 2006 was in fact a deposit by Picower into his own BLMIS account that was subsequently withdrawn (along with fictitious profits), and was part of the Trustee s settled claim that Picower had knowingly received fraudulent transfers. Id. The court likewise found that the allegations about Picower s alleged agreement to serve as a counterparty to phony options trades by BLMIS lacked particularity: the allegation doesn t say when this occurred, how often it occurred, whether Picower lied to anyone about the option trades or whether the phony counterparty information was ever shared with any customer. Id. The bankruptcy court held that Goldman III in reality, seeks to augment a shadow estate that will benefit all net losers the same way.... Id. at 304. The complaint sought to recover $18 billion in losses, which was the total amount of principal lost in the BLMIS fraud by customers who filed claims with the Trustee. Id. at The court stated that every net loser could assert the same claim. Id. at 305. And, the court held, allowing Goldman III to go forward could create risks for the BLMIS estate by implicating the viability of the Settlement and future settlements, providing an avenue for BLMIS customers who are displeased with the Net Equity Decision to undermine that decision by directly pursuing claims 22

30 Case , Document 69, 08/17/2017, , Page30 of 61 that are wholly derivative of claims already brought by the Trustee. Id. (quoting Fox/Marshall I District Court Decision, 848 F. Supp. 2d at ). The bankruptcy court also found Appellants reliance on this Court s decision in Picard v. JPMorgan Chase & Co., (In re Bernard L. Madoff Inv. Sec. LLC), 721 F.3d 54 (2d Cir. 2013) to be misplaced. Appellants argued that a 20(a) claim is a direct claim which the Trustee does not have standing to assert. Goldman III Bankruptcy Court Decision, 546 B.R. at But, the court held, the question was not whether the Trustee had standing to assert a 20(a) claim, but whether the Permanent Injunction barred Appellants claim as derivative or duplicative of claims the Trustee actually asserted. Id. at 304. Finally, the court admonished Appellants, stating that [t]he gatekeeping function has been expensive and time-consuming, but the Court is confident that the Goldman Parties will not cause any further needless expenditure of resources or time, and provided that the Trustee or the Picower Parties could seek appropriate sanctions if Appellants were to do so. Id. at 306. Appellants appealed the bankruptcy court s decision to the district court. C. The District Court Holds that Goldman III Violates the Permanent Injunction On January 24, 2017, the Honorable Gregory H. Woods of the district court affirmed the bankruptcy court s order, holding that the Permanent Injunction bars Appellants from proceeding with the Goldman III complaint. Goldman III District 23

31 Case , Document 69, 08/17/2017, , Page31 of 61 Court Decision, 565 B.R. 510 (S.D.N.Y. 2017). The district court found that Goldman III contained only two new allegations, the propping up loan allegations and the counterparty allegations. Id. at 523. It held that these two new allegations were pleaded to thread the eye of the needle outlined by prior decisions in this line of cases, but that nevertheless, the Goldman III complaint is functionally similar to prior complaints held to have been barred by the Permanent Injunction. Id. At its core, the court held, Goldman III alleges that Picower engaged in various categories of fraudulent conduct which had the purpose and effect of further effectuating Madoff s Ponzi scheme. Id. The new allegations in Goldman III relating to loans and counterparties amounted to two generalized categories of conduct that pushed the debtor into bankruptcy. Id. at 524 (quoting Fox/Marshall I Second Circuit Decision, 740 F.3d at 89). Further, the court held that Goldman III failed to allege any particular instances in which Picower, through the conduct described in the complaint, directed BLMIS to provide false or misleading information to Appellants (or the proposed class members) in particular, and instead alleged claims that are at bottom, general one[s].... Id. (quoting St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688, 701 (2d Cir. 1989) (internal quotations omitted)). Even though Appellants asserted that they suffered injuries from Picower s actions 24

32 Case , Document 69, 08/17/2017, , Page32 of 61 at different times because they each invested in BLMIS at different times, the court held that such a distinction does not serve to transform Picower s single set of actions into a set of actions particularly aimed at Appellants, nor does it support the conclusion that their claim was particularized rather than general. Id. As with the bankruptcy court below, Judge Woods addressed Appellants reliance on JPMorgan Chase & Co. and held that JPMorgan does not support Appellants position. Goldman III District Court Decision, 565 B.R. at 526. Judge Woods found that this Court s decision in JPMorgan Chase & Co. was based on the doctrine of in pari delicto, and that to apply the in pari delicto doctrine here, where the Trustee did not bring the claim asserted in the Goldman III complaint, would be an improper ruling on a hypothetical standing issue. Id. (quoting Fox/Marshall I District Court Decision, 848 F. Supp. 2d. at 485). Further, the court found that even if it were to engage in this hypothetical analysis, the Trustee s lack of standing to bring securities fraud claims, even if true, is irrelevant here, since the Goldman Complaints do not truly allege securities claims. Id. (quoting Goldman I District Court Decision, 2013 WL , at *10). Turning to Appellants argument based on this Court s decision in Hirsch v. Arthur Andersen & Co., 72 F.3d 1085 (2d Cir. 1995), the district court held that their reliance on Hirsch is misplaced. Goldman III District Court Decision, 565 B.R. at 525. The district court agreed with the bankruptcy court that, unlike the 25

33 Case , Document 69, 08/17/2017, , Page33 of 61 particularized allegations in Hirsch, Appellants allegations regarding financial statements sent to BLMIS customers or the influence they had on customers to invest or remain invested in BLMIS were wholly conclusory. Id. Relying on this Court s decision in Fox/Marshall I, the district court concluded that Goldman III lacked any allegations that the Picower Parties took any particularized actions aimed at BLMIS customers. Id. (quoting Fox/Marshall I Second Circuit Decision, 740 F.3d at 93). The district court thus affirmed the bankruptcy court s judgment holding that the Permanent Injunction bars Goldman III. This appeal followed. 7 SUMMARY OF ARGUMENT Numerous courts have enforced the Permanent Injunction against the Appellants and the Fox/Marshall Plaintiffs, 8 and no court to date has allowed Appellants or the Fox/Marshall Plaintiffs to proceed with their claims. The claims 7 The Fox/Marshall Plaintiffs filed yet another action seeking to sue the Picower Parties Fox/Marshall III. Marshall v. Capital Growth Co. (In re Bernard L. Madoff) (Fox/Marshall III Bankruptcy Court Decision), 568 B.R. 203, 205 (Bankr. S.D.N.Y. 2017). The bankruptcy court held that Fox/Marshall III asserts claims that are analogous to those in Goldman III and are derivative or duplicative claims in violation of the Permanent Injunction. Id. at 216. The Fox/Marshall Plaintiffs appeal to the district court is pending. Marshall v. Capital Growth Co., 17-cv (S.D.N.Y.). 8 See, e.g., Fox/Marshall I Second Circuit Decision, 740 F.3d 81 (2d Cir. 2014); Goldman III District Court Decision, 565 B.R. 510 (S.D.N.Y. 2017) (Woods, J.); Fox/Marshall II District Court Decision, 531 B.R. 345 (S.D.N.Y. 2015) (Koeltl, J.); Goldman I District Court Decision, 2013 WL (S.D.N.Y. 2013) (Sullivan, J.); Goldman III Bankruptcy Court Decision, 511 B.R. 375 (Bankr. S.D.N.Y. 2014) (Bernstein, J.); Goldman I Bankruptcy Court Decision, 477 B.R. 351 (Bankr. S.D.N.Y. 2012) (Lifland, J.). 26

34 Case , Document 69, 08/17/2017, , Page34 of 61 asserted are generalized, and derivative and duplicative of the claims brought by the Trustee. Regardless of how Appellants attempt to reframe their 20(a) claim, it is still, at its base, a claim that Picower engaged in acts that sought to maximize his fraudulent transfers from the BLMIS Ponzi scheme. Appellants allegations do not transform Picower from a BLMIS customer into a BLMIS control person under the securities laws. Nor do they succeed in morphing the generalized harm, which perpetuated the Ponzi scheme and deepened the insolvency, into particularized injuries to specific plaintiffs. Just as before, Appellants have failed to identify any misrepresentation or other act directed by Picower toward Appellants, or any particularized injury suffered by Appellants because of Picower s ostensible acts as a control person. Rather, what Appellants allege is a secondary harm to them from acts by Picower that allegedly perpetuated the Ponzi scheme, deepened the insolvency, and harmed the bankruptcy estate. Such a claim, arising from harm done to the estate and affecting all creditors, is quintessentially a derivative claim under the law of this Circuit. See In re Tronox Inc., 855 F.3d at ; Fox/Marshall I Second Circuit Decision, 740 F.3d at 89; St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc., 884 F.2d 688, 704 (2d Cir. 1989). Not only did this Court enforce the Permanent Injunction in Fox/Marshall I on these grounds, it recently embraced its reasoning in Fox/Marshall I and in Tronox. 855 F.3d at 102 ([ [W]e held that the damages 27