Judge Burton Lifland, the bankruptcy judge overseeing the liquidation proceedings of Bernard L. Madoff Investment Securities LLC (“BLMIS”) made a shrewd decision last week in appointing, on his own initiative, former Governor Mario Cuomo to act as mediator in the lawsuit brought byIrving Picard, the BLMIS trustee, against Fred Wilpon and Saul Katz, the owners of the New York Mets, and their families and affiliated enterprises (the “Wilpon/Katz Group”).

Judge Lifland has a history of acting on his own to bring highly regarded individuals in to mediate seemingly intractable situations. Many years ago, for example, he asked former Secretary of State Cyrus Vance to step into the Macy’s chapter 11 case. Bringing in a neutral party of Cuomo’s stature at this early stage can only help tone down the rhetoric on both sides and perhaps get a derailed settlement process back on track.

A review of the 365 page complaint filed by Picard, unsealed last week after its contents were leaked to the news media, makes clear the enormous complexity of the case and the risks facing both sides.

Although enormous media attention has focused on Picard’s efforts to seek recovery of at least $300 million in “fictitious profits” and perhaps as much $1 billion for amounts withdrawn from BLMIS by the Wilpon/Katz Group, only $162 million represents fictitious profits over the six years prior to the bankruptcy case – the maximum “look back” period. Even if Picard is able to prove fully his allegations regarding the willful disregard by the Wilpon/Katz Group of the red flags concerning BLMIS, it would be an aggressive (and questionable) expansion of the fraudulent transfer provisions of the Bankruptcy Code and New York State law to recover any fictitious profits or other withdrawals going back more than six years.

For the Wilpon/Katz Group, on the other hand, the possible turnover of hundreds of millions withdrawn from BLMIS constitutes only part of its exposure. As Picard’s lawyers begin conducting discovery in earnest in anticipation of trial, the full costs will be staggering -- both in terms of legal fees, and the time and attention that will be required of so many individual members of the Wilpon/Katz Group to the detriment of other interests. In addition, the inner workings of the Wilpon/Katz Group’s businesses will be fully exposed. As embarrassing as the disclosures in Picard’s complaint doubtless have been to Wilpon and Katz, they are likely only a portion of what would be revealed during the course of full blown litigation.

Accordingly, both sides have strong incentives to settle, rather than have this case proceed to trial. Moreover, with a case docket that includes some of the largest and most complex bankruptcy cases in the country, such as Blockbuster, JudgeLifland in all likelihood was not relishing the prospect of a single trial tying up his courtroom for the better part of several weeks at a minimum. The appointment of former Gov. Cuomo serves everyone’s interests here.