Irving Picard is seeking to block a $270 million state enforcement action brought by California Attorney General Kamala Harris against investment adviser Stanley Chais’ estate. Picard argues that pursuant to federal bankruptcy laws, only the trustee can recoup funds on behalf of Madoff’s former customers. Harris, in turn, contends that her lawsuit is an exception to the federal bankruptcy laws because she is exercising her police powers under state law. Picard has rebutted this argument, alleging that because Harris is suing for money, rather than to preserve public safety or welfare, her lawsuit remains subject to federal bankruptcy rules. According to Picard, “[w]hen the focus of the third party action is not to prevent acts that threaten public safety and welfare but instead to obtain pecuniary benefit for a private party, the automatic stay applies.” Harris brought her lawsuit against Chais’ estate in 2009 in California state court. Picard, in turn, brought his suit against Harris on January 4, 2012, in the U.S. Bankruptcy Court in the Southern District of New York. Picard’s suit alleges that Harris’ lawsuit interferes with the collection of assets needed to help compensate Madoff victims. (“California Madoff Investor Suit is Illegal, Picard Says,” Bloomberg Businessweek, June 7, 2012).
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Picard contends California lawsuit violates federal bankruptcy law
- Sedgwick LLP
- Jennifer Q. Broda, Matthew M. Ferguson, Jennifer Hamilton, Thomas R. Orofino and Eric C. Scheiner
- June 29 2012
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