Picard May Be Betting The Farm In Calif. AG Fight

June 12, 2012 – In The News

Bernard L. Madoff Investment Securities LLC liquidating trustee Irving Picard’s fight with California Attorney General Kamala Harris over her right to sue a Madoff-related entity represents the biggest territory clash in the case so far. Some attorneys believe that this is a major test for the trustee’s dependence on the automatic bankruptcy stay.

Picard has upped his bid to get Harris’ California suit against Madoff feeder fund manager Stanley Chais dismissed on the grounds that it’s barred by the automatic stay. Still, many believe that Picard faces an uphill battle in proving his powers as trustee make his right to bring such a suit stronger than hers.

The conflict’s implications go beyond the Chais case, however. If Harris is successful, it could make Picard vulnerable to inroads from other parties who’d be happy to seize on the opportunity to seek some Madoff money for themselves.

Michael J. Kline spoke to Law360 about the situation. “I’ve got to believe that that is a situation that he’s trying to somehow avoid, because if California is successful, there may be others who are not even attorneys general who will try to establish theories that the automatic stay in bankruptcy can be penetrated.”

Furthermore, Kline said, “The last thing he needs is to deflect his attention to collateral cases where he’s not the movant.”

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