Securities Investor Protection Corporation v. Bernard L. Madoff Investment Securities, LLC. et a

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------X
SECURITIES INVESTOR PROTECTION
CORPORATION, 	FOR PUBLICATION
Adv. Pro. No. 08-01789 (BRL)
Plaintiff,
SIPA LIQUIDATION
v.
(Substantively Consolidated)
BERNARD L. MADOFF INVESTMENT
SECURITIES LLC,
Defendant.
------------------------------------------------------------X
In re:
BERNARD L. MADOFF,
Debtor.
------------------------------------------------------------X
ARGUING ON THE MOTION1
Before: Hon. Burton R. Lifland
United States Bankruptcy Judge
MEMORANDUM DECISION AND ORDER GRANTING, TO THE EXTENT SET
FORTH HEREIN, THE TRUSTEE’S MOTION FOR AN ORDER AFFIRMING THE
TRUSTEE’S CALCULATIONS OF NET EQUITY AND DENYING TIME-BASED
DAMAGES
Before the Court is the motion (the “Motion”) of Irving H. Picard, Esq. (the “Trustee”),
trustee 	for 	the 	substantively 	consolidated 	Securities 	Investor 	Protection 	Act2 (“SIPA”)
liquidation of Bernard L. Madoff Investment Securities LLC (“BLMIS”) and Bernard L. Madoff
1 Attached hereto as Exhibit A is a list of parties who have submitted briefs in connection with the instant Motion.
2 15 U.S.C. §§ 78aaa et seq. Hereinafter, “SIPA” shall replace “15 U.S.C.” when referencing sections of SIPA.
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(“Madoff”) seeking an order affirming the Trustee’s determination that BLMIS customers’
claims for “net equity,” as defined in SIPA section 78lll(11), do not include interest, time value
of 	money, 	or 	inflation 	adjustments 	such 	as 	constant 	dollar 	(collectively, 	“Time-Based
Damages”).
The Trustee’s instant Motion raises an issue of first impression: whether to adjust
customers’ net equity claims to account for any form of Time-Based Damages under SIPA. At
stake in the instant Motion is a distribution formula that impacts not only the extent of the
entitlements of every single BLMIS claimholder to the limited customer property fund but also
whether the approximately $1.4 billion cash reserve may be released.3
Broadly speaking, the Trustee has determined that excluding Time-Based Damages from
the net equity calculus is appropriate because it is not only correct legally, but also assures that
no customer is entitled to recover profits before other customers recover their principal
investment. 	In contrast, the objecting claimants contend that the inclusion of Time-Based
Damages is more consistent with SIPA’s protective aims and takes the economic reality of
inflation into account by not penalizing earlier customers in an arbitrary fashion.
This Court recognizes that choosing any method for calculating net equity is particularly
challenging in light of the complex and unique facts of Madoff’s Ponzi scheme, and each method
will benefit some victims at the expense of others. Indeed, in this zero sum game “whe[re] funds
are limited, hard choices must be made.” In re The Reserve Fund Secs. & Derivative Litig., 673
F. Supp. 2d 182, 195 (S.D.N.Y. 2009) (quotations omitted). 	However, the plain language,
3 See Affidavit of Matthew Cohen in Support of the Trustee’s Motion for an Order Approving the Third Allocation
of Property to the Fund of Customer Property and Authorizing Third Interim Distribution to Customers
(Dkt. No. 5231), ¶ 17 (stating that “the Trustee will hold the $1,357,903,492.06 in reserve pending the outcome of
the Time-Based Damages Motion”).
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purpose, framework and distribution scheme of SIPA, as well as Second Circuit precedent,4 all
support the method chosen by the Trustee. 	Moreover, permitting the inclusion of Time-Based
Damages in the net equity calculus will likely have significant unintended consequences,
including favoring certain investors who have already recovered their principal investments at
the expense of other investors who have yet to recoup their principal, and potentially providing a
windfall for claims traders who were never victims of Madoff’s fraud. 5
Accordingly, for the reasons set forth below, all of the objecting claimants’ objections are
hereby OVERRULED, and the Trustee’s Motion is hereby GRANTED to the extent set forth
herein.
BACKGROUND 6
SIPA aims to protect customers of an insolvent or financially unstable broker-dealer by
expediting the return of customer property. See In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d
229, 239–40 (2d Cir. 2011). In order to do so, SIPA grants customers prioritized claims which
permit them to share pro rata in customer property to the extent of their net equity. See SIPA §
78lll(2), (4), (11). For each customer with a valid net equity claim, SIPC advances funds to the
SIPA trustee up to the amount of the customer’s net equity, not to exceed $500,000. See SIPA §
78fff-3(a).
4 Informatively, the Second Circuit recently considered the fairness of including adjustments for inflation in a Ponzi
scheme distribution formula. 	See Commodity Futures Trading Comm’n v. Walsh, 712 F.3d 735 (2d Cir. 2013)
[hereinafter “Walsh”]. As such, resort to the central query in the familiar Snow White fable may be helpful, in one
key way, to frame the issue here: Mirror, Mirror on the Walsh Wall, Which is the Fairest Distribution of Them All?
See S NOW W HITE AND THE S EVEN D WARFS (Disney 1937); see also infra at Section II, Part C.
5 Claims traders, using current dollars, commenced investing in Madoff claims after the December 11, 2008 filing
date.
6 A comprehensive discussion of the facts underlying this SIPA liquidation and Madoff’s notorious Ponzi scheme is
set forth in this Court’s decision of March 1, 2010. See Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec.
LLC (In re Bernard L. Madoff Inv. Sec. LLC), 424 B.R. 122, 125–33 (Bankr. S.D.N.Y. 2010) [hereinafter “Net
Equity Decision”].
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In the instant SIPA liquidation proceedings of BLMIS, the Trustee is tasked with
recovering and distributing customer property to BLMIS’s customers, assessing claims, and
liquidating any other assets of the firm for the benefit of the estate and its creditors. In 2009, the
Trustee determined that the net equity claims of BLMIS customers should be calculated based
upon the monies that customers deposited into their BLMIS accounts, less any amounts they
withdrew from their BLMIS accounts (the “Net Investment Method”). 	On March 1, 2010, this
Court upheld the Trustee’s Net Investment Method, finding it was an interpretation of net equity
consistent with the plain language of SIPA, its legislative history, controlling Second Circuit
precedent, and considerations of equity and practicality. See Net Equity Decision, 424 B.R. 122
(Bankr. S.D.N.Y. 2010), aff’d 654 F.3d 229 (2d Cir. 2011), cert. denied, 133 S. Ct. 24 (June 25,
2012), 133 S. Ct. 25 (June 25, 2012).7
At such time, both this Court and the Second Circuit explicitly declined to address the
issue of whether the Net Investment Method should be adjusted to account for Time-Based
Damages. See Net Equity Decision, 424 B.R. at 125 n.8; In re Bernard L. Madoff Inv. Sec., 654
F.3d at 235 n.6. Therefore, following the denial of certiorari, the Trustee moved this Court for a
briefing schedule and hearing on the Time-Based Damages issue. 	See Notice of Motion for
Order Scheduling Hearing on Trustee’s Motion Affirming Denial of Time-Based Damages
Adjustment to Customer Claims (Dkt. No. 4920). The Court approved the Trustee’s motion and
entered an order on September 5, 2012, narrowly defining the Time-Based Damages issue as,
“whether the Objecting Claimants are entitled to time-based damages adjustments to their net
7 Certiorari was also dismissed with respect to one petition. See Sterling Equities Assocs. v. Picard, 132 S. Ct. 2712
(June 4, 2012).
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equity customer claims to be paid from the fund of customer property.”8 Scheduling Order (Dkt.
No. 5022), p. 4.
The Trustee subsequently filed the instant Time-Based Damages Motion [hereinafter “Tr.
Motion”] (Dkt. No. 5038), 9 which returns the Court to this novel SIPA issue. In his Motion, the
Trustee seeks an order: (i) affirming the Trustee’s determinations of the claims listed on
Exhibit A to the Cheema Declaration, to the extent they relate to the recalculation of net equity
customer claims based on Time-Based Damages; (ii) affirming the Trustee’s denial of the claims
to the extent these claims seek amounts in excess of net equity calculated using the Net
Investment Method; (iii) affirming the Trustee’s interpretation of net equity under SIPA as
excluding Time-Based Damages; (iv) expunging the objections to the Trustee’s determinations
listed on Exhibit A to the Cheema Declaration, insofar as they relate to the recalculation of net
equity customer claims based on Time-Based Damages; and (v) allowing the Trustee to release
any funds previously reserved for the Time-Based Damages issue.10 See Tr. Motion, p. 1. The
Securities Investor Protection Corporation (“SIPC”) submitted a brief in support of the Trustee’s
Time-Based Damages Motion [hereinafter “SIPC Br.”] (Dkt. No. 5036).
Objecting to the Trustee’s Motion, certain claimants (collectively, the “Objecting
Claimants”), consisting of both individuals who withdrew more than they deposited with BLMIS
8 Certain claimants have raised issues in their objections to this Motion that are beyond the scope of the Scheduling
Order, such as (i) when Madoff’s Ponzi scheme began, (ii) whether Madoff ever actually purchased securities, (iii)
whether Time- Based Damages provide a “value” defense under section 548(c) of the Bankruptcy Code in
avoidance actions commenced by the Trustee [currently pending before Judge Rakoff, see 12-MC-0015, Dkt. Nos.
107, 199] and (iv) factual issues regarding specific accounts. See, e.g., Dkt. Nos. 5118, 5122. As the Court has
limited its determination to the narrow issue of whether to include Time-Based Damages in calculating BLMIS
customers’ net equity claims, the Court will refrain from addressing these extraneous issues.
9 Along with his Motion, the Trustee filed (i) a memorandum of law [hereinafter “Tr. Br.”] (Dkt. No. 5039), (ii) the
Declaration of Bik Cheema [hereinafter “Cheema Decl.”] (Dkt. No. 5040), and (iii) the Declaration of Robert J.
Rock (Dkt. No. 5041).
10 The Trustee is holding a total of $4,686,277,486.33 on reserve pending, inter alia, resolution of ongoing litigation.
Of this sum, $1,357,903,492.06 relates to the Time-Based Damages issue (the “Time-Based Damages Reserve”),
which is arguably best put promptly into the hands of waiting distributees.
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(“Net Winners”), as well as ones who withdrew less (“Net Losers”), seek Time-Based Damages
for the period of time during which their funds were deposited with BLMIS. 	Specifically,
certain Objecting Claimants seek interest-based adjustments to their net equity claims based on,
inter alia: (i) federal claims against BLMIS for securities fraud under the Securities Act of 1933
(the “1933 Act”) and rule 10b-5 promulgated under section 10(b) of the Securities Exchange Act
of 1934 (the “1934 Act”), which entitle them to prejudgment interest, (ii) state law claims against
BLMIS for conversion, which entitle them to prejudgment interest of 9% per annum under
section 5001 of the New York Civil Practice Law and Rules (“CPLR”), and (iii) general claims
for lost investment opportunities over time. Others seek inflation-based adjustments to their net
equity claims in reliance on the basic economic precept that the value of the dollar changes over
time.
On December 10, 2012, the Securities and Exchange Commission (the “SEC”) submitted
a brief [hereinafter “SEC Br.”] (Dkt. No. 5142) supporting “the application of constant dollars11
when determining the value of customers’ net equity claims for nonexistent securities positions
in a SIPA liquidation proceeding,” but maintaining that this Court “should determine the ultimate
appropriateness of using constant dollars based on the Court’s own evaluation of the benefits and
costs of making an inflation adjustment.” See SEC Br., pp. 18, 2.
Thereafter, certain parties (collectively, the “Customer Group”) requested discovery from
the Trustee and his professionals to address whether the costs and burden of calculating and
implementing an inflation adjustment to customers’ net equity claims would be as significant as
suggested by the Trustee. 	To accommodate such discovery, on January 23, 2013, this Court
entered an amended scheduling order. See Dkt. No. 5212. Following the close of discovery, on
11 The concept of “constant dollars” or “real dollars” refers to dollar values after adjustment for inflation. 	See
Current versus 	Constant (or 	Real) Dollars, 	U.S. CENSUS BUREAU, 	http://www.census.gov 	(last 	visited
Sept. 10, 2013).
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April 29, 2013, the Customer Group submitted a supplemental opposition brief [hereinafter
“Customer Supp. Br.”] (Dkt. No. 5332), as well as the Declaration of Timothy H. Hart, CPA,
CFE [hereinafter “Hart Decl.”] (Dkt. No. 5331), to address “precisely the question the SEC left
open: 	whether 	the 	costs 	outweigh 	the 	benefits 	of 	an 	inflation 	adjustment.”
Customer Supp. Br., p. 1.
On July 18, 2013, the Trustee filed his reply memorandum (Dkt. No. 5415), along with
the Declaration of Vineet Sehgal [hereinafter “Sehgal Decl.”] (Dkt. No. 5416). That same day,
SIPC also filed its reply memorandum [hereinafter “SIPC Reply Br.”] (Dkt. No. 5413). Finally,
on August 12, 2013, the Customer Group filed the Customers’ Opposition to Trustee’s Request
for 	Exclusion 	of 	Hart 	Expert 	Testimony 	(Dkt. 	No. 	5444). 	A 	hearing 	was 	held 	on
September 10, 2013.
DISCUSSION
As a preliminary matter, there is no basis to extend deference to the SEC’s “constant
dollar” position. Further, under the present circumstances, this Court finds that the Trustee’s Net
Investment Method unadjusted for Time-Based Damages is legally sound in light of the plain
language, purpose, framework and distribution scheme of SIPA, as well as Second Circuit
precedent. 	Finally, if Time-Based Damages are to be included in the net equity calculus under
SIPA, it is for Congress to enact such a law, not this Court.
I. 	THE 	SEC’S 	CONSTANT 	DOLLAR 	POSITION 	IS 	NOT 	ENTITLED 	TO
DEFERENCE
The issue of whether to award Time-Based Damages under SIPA was first brought
formally before this Court by the SEC in 2009 during briefing for the Net Equity Decision. 	At
that time, the SEC asserted that the net equity calculus should include a constant dollar
adjustment. 	See SEC Memorandum on Net Equity Issue, (Dkt. No. 1052), p. 1 (“The
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Commission believes . . . that in determining customer claims under the cash-in/cash-out method,
the amount of the payment should be calculated in constant dollars by adjusting for the effects of
inflation (or deflation).”). With respect to the instant Motion, however, the SEC seems to have
retreated from its earlier position, maintaining that the net equity calculus should include a
constant dollar adjustment, but leaving resolution of whether to include constant dollars at the
Court’s discretion.12 See SEC Br., p. 2 (“The Commission believes that the Court should
determine the ultimate appropriateness of using constant dollars based on the Court’s own
evaluation of the benefits and costs of making an inflation adjustment.”). 	If not completely
deferring to this Court, the SEC’s position seems to be that the SIPA statute permits, but does not
require, an adjustment for constant dollars. Specifically, the SEC advocates the use of constant
dollars “under the narrow set of factual circumstances presented here, where customers have
claims for fictitious securities or securities positions that cannot be valued except by reference to
the customer’s net investment” so long as such an adjustment makes sense in light of the
“Court’s consideration of the costs and benefits of doing so.” SEC Br., p. 4. This position is not
entitled to either Chevron or Skidmore deference. 13
To determine whether an agency’s interpretation of a statute is entitled to either Chevron
or Skidmore deference, a court must first ascertain “whether Congress has directly spoken to the
precise question at issue.” New Times, 371 F.3d at 80 (quotation omitted). Where the statutory
12 Pouncing on this open question left by the SEC, the Customer Group submitted their supplemental brief and the
Hart Declaration, in an effort to demonstrate that the Trustee’s costs are minimal in comparison to the potential
benefits to customers of an inflation adjustment. As this Court is adjudicating the instant Motion as a matter of
law, see infra Section II, there is no need to address the cost/benefit analysis raised by the Trustee, SEC or
Customer Group, nor any briefing related to this cost/benefit issue.
13 Chevron U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984), and Skidmore v. Swift & Co., 323 U.S.
134 (1944) delineate two separate levels of deference to be accorded to agency statutory interpretations. Agency
interpretations formally promulgated through notice-and-comment rulemaking or formal adjudication are generally
accorded the higher, near mandatory deference envisioned by Chevron. See In re New Times Secs. Servs., Inc., 371
F.3d 68, 80 (2d Cir. 2004); see also U.S. v. Mead Corp., 533 U.S. 218, 230 (2001). Even if not entitled to the higher
level of Chevron deference, agency interpretations may still be granted a more limited, non-mandatory level of
Skidmore deference in appropriate circumstances. See New Times, 371 at 82–83.
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text is clear or congressional intent can be discerned from the face of the statute, courts “must
give effect to the unambiguously expressed intent of Congress,” and the agency’s interpretation
is not entitled to deference. 	Chevron, 467 U.S. at 842–43; see also Gen. Dynamics Land Sys.,
Inc. v. Cline, 540 U.S. 581, 600 (2004) (finding that there is “no need to choose between
Skidmore and Chevron” where the statute is clear). 	Conversely, where the statute at issue is
silent or ambiguous, a court must then determine whether an agency’s interpretation of a statute
is entitled to either Skidmore or Chevron deference. See New Times, 371 F.3d at 80, 83. Here,
no 	one 	disputes 	that 	SIPA 	is 	silent 	with 	respect 	to 	whether 	any 	form 	of Time-
Based Damages should be included in the net equity calculus. See SIPA § 78lll(11).
A. The SEC’s Position is Not Entitled to Chevron Deference
As both the Supreme Court and the Second Circuit have recognized, the overwhelming
majority 	of 	agency 	interpretations 	accorded 	Chevron 	deference 	are 	formally 	promulgated
“regulations issued through notice and comment or adjudication, or in another format authorized by
Congress for use in issuing ‘legislative’ rules.” 	See Estate of Landers v. Leavitt, 545 F.3d 98, 106
(2d Cir. 2008) (quotation omitted). 	While an agency interpretation that is not formally
promulgated in such a manner “does not alone determine the applicability of Chevron,” such
informality taken together with other factors may lead a court to determine that Chevron
deference is inappropriate. New Times, 371 F.3d at 81.
For example, in New Times, the Second Circuit looked at several factors in determining
whether the SEC’s interpretation of SIPA, as set forth in an amicus brief, was entitled to Chevron
deference. See 371 F.3d at 80–82. Specifically, the court found that the SEC interpretation was
not entitled to deference, as it (i) was not “expressed in the form of a rule or regulation,” (ii) had
not been previously “articulated in any form” and was inconsistent with the SEC’s previous
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interpretation, and (iii) disagreed with the interpretation of SIPC, which “arguably [has] greater
familiarity with the provisions of SIPA.” Id.
Here, similar factors weigh against according Chevron deference to the position of the
SEC. 	First, the SEC failed to introduce its position through notice and comment procedures,
instead, setting it forth in a brief in litigation. Second, the SEC’s position is certainly novel. As
SIPC pointed out, “[o]ver the course of more than forty years and more than three hundred SIPA
liquidations prior to this one, the Commission has not once suggested that the amount of any
customer claim subject to satisfaction with cash should be expressed in ‘constant dollars,’ or,
indeed, adjusted in any way to reflect inflation or any other measure of the time value of
money.” 	See SIPC Reply Br., p. 7. 	Moreover, the SEC seems to espouse a constant dollar
adjustment here in light of the “unusually long duration of Madoff’s Ponzi scheme” where “the
effects of inflation may be more pronounced than in a scheme of shorter duration” and “the
benefits of an adjustment here may be significant.” See SEC Br., pp. 16–17. However, the SEC
explicitly opposed such an adjustment in Walsh, a case which involved a Ponzi scheme that
lasted for over 13 years, and supported a net investment distribution without even considering a
constant dollar adjustment in New Times, a SIPA case which involved a Ponzi scheme that lasted
for 17 years. 	See Walsh, 712 F.3d at 744; New Times, 371 F.3d at 88. 	Finally, the SEC’s
position is at odds with SIPC’s interpretation of net equity under SIPA. 	See SIPC Br., p. 4
(“SIPC submits that the customer’s [net equity] claim is not subject to recalculation for time-
based damages . . . .”).
Accordingly, this Court will not accord Chevron deference to the position of the SEC.
B. The SEC’s Position is Not Entitled to Skidmore Deference
Even if ineligible for Chevron deference, an agency’s statutory interpretation may still be
accorded some deference under the Supreme Court’s decision in Skidmore. See Mead, 533 U.S.
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at 234–35. 	When determining whether an agency interpretation is entitled to Skidmore
deference, courts in the Second Circuit look at “the agency’s expertise, the care it took in
reaching its conclusions, the formality with which it promulgates its interpretations, the
consistency of its views over time, and the ultimate persuasiveness of its arguments.” 	New
Times, 371 F.3d at 83 (quotation omitted); see also Cmty. Health Ctr. v. Wilson-Coker, 311 F.3d
132, 138 (2d Cir. 2002). 	A reviewing court may conclude that no deference under Skidmore is
owed to an agency interpretation that is deficient in one or more of these characteristics. 	See,
e.g., English v. Ecolab, Inc., No. 06-CIV-5672, 2008 WL 878456, at *5 (S.D.N.Y. Mar. 31,
2008) (“Weight and deference need not be given to interpretations that are inconsistent, not
contemporaneous to enactment of the statute, or stale.”).
In the present case, the majority of these considerations weigh against according
Skidmore deference to the SEC’s position. 	As discussed above, the SEC’s novel position that
SIPA permits but does not mandate the inclusion of Time-Based Damages in the definition of net
equity is inconsistent with its prior interpretations, as the SEC has never espoused the “constant
dollar” approach in any of its prior positions on this issue. 	Rather, the SEC informally
announced this position in briefing for this litigation, without formal promulgation. Further, the
SEC has not demonstrated the level of care in reaching its conclusion that would warrant even
Skidmore deference, as “the thoroughness evident in [the interpretation’s] consideration [and] the
validity of its reasoning” are questionable. Skidmore, 323 U.S. at 140. Indeed, the SEC does not
commit to constant dollar adjustments. 	Instead, the SEC makes the vague observation that
including such adjustments is limited to certain “circumstances such as [those that] exist in a
Ponzi scheme,” SEC Br., p. 16, but then never specifies which circumstances warrant including
that inflation factor. Instead, it leaves it to this Court to determine whether the circumstances are
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present here. 	Such a position is unprecedented, unsupported by the law, and creates confusion
for the administration of this and future liquidations under SIPA. As such, the SEC’s arguments
are ultimately unpersuasive.
Accordingly, the SEC’s position does not warrant either Chevron or Skidmore deference.
II. 	THE 	TRUSTEE’S 	UNADJUSTED 	NET 	INVESTMENT 	METHOD 	FOR
CALCULATING NET EQUITY IS SOUND AS A MATTER OF LAW UNDER
SIPA
Turning to the merits of the instant Motion, this Court finds that the Trustee’s unadjusted
Net Investment Method is legally sound in light of the plain language, purpose, statutory
framework and distribution scheme under SIPA, as well as Second Circuit precedent.
A. The Plain Language of SIPA Supports Upholding The Trustee’s Unadjusted
Net Investment Method
It is well established that “courts must presume that a legislature says in a statute what it
means and means in a statute what it says there.” Connecticut Nat’l Bank v. Germain, 503 U.S.
249, 253–54 (1992). 	As such, typically, the absence of statutory language indicates lack of
intent. See Dole Food Co. v. Patrickson, 538 U.S. 468, 476 (2003).
SIPA defines net equity as:
The dollar amount of the account or accounts of a customer, to be determined by
calculating the sum which would have been owed by the debtor to such customer if the
debtor had liquidated, by sale or purchase on the filing date, all securities positions of
such customer . . . minus any indebtedness of such customer to the debtor on the filing
date . . . .
SIPA § 78lll(11). As seen above, the statutory definition of net equity does not contain any
language supporting the inclusion of interest, inflation or other Time-Based Damages.
This statutory silence in the definition of net equity supports the inference that Congress
did not intend to award Time-Based Damages for two reasons. 	First, Congress knows how to
include interest or inflation adjustments when they are intended. 	Specifically, Congress has
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made such adjustments in (i) various non-SIPA statutes, see, e.g., 11 U.S.C. § 104 (explicitly
providing adjustment for inflation); 12 U.S.C. § 1712a (same), 10 U.S.C. § 2306a(7) (finding
adjustment must be “equal to the fiscal year 1994 constant dollar value of the amount set forth”),
(ii) certain provisions of SIPA, see SIPA § 78jjj(a) (interest provision for late payments by
brokers to SIPC); SIPA § 78ddd(f)–(h) (interest provision on loans from the SEC to SIPC) and
(iii) recent amendments to SIPA, see Dodd-Frank Act14 (amending SIPA to increase certain
statutory limits on account of inflation). 	Yet, Congress has never included any allowances for
the time value of money in the definition of net equity, despite amending SIPA multiple times.
Second, when Congress includes time-based adjustments in the SIPA context, it has done
so with a high level of specificity. 	For example, Congress recently increased the limit of
protection for SIPA cash claims from $100,000 to $250,000. See Dodd-Frank Act § 929H. In so
doing, Congress added highly specific statutory requirements concerning such increases going
forward. See id. In particular, SIPC’s Board of Directors must determine whether to adjust the
cash claim limit for inflation no later than January 1, 2011, and every five years thereafter. See
SIPA § 78fff-3(e)(1). 	In making such a determination, SIPC’s Board must consider certain
factors, including the economic conditions affecting SIPC member broker-dealers, the potential
problems impacting SIPC members, and any other factors the Board deems appropriate. 	See
SIPA § 78fff-3(e)(5). Should the Board find that such an adjustment is appropriate, the standard
amount of the adjustment must be (i) calculated according to a formula, including certain
consumer price index figures published by the Department of Commerce, see SIPA § 78fff-
3(e)(1), (ii) rounded down to the nearest $10,000, see SIPA § 78fff-3(e)(2), (iii) published in the
Federal Register by the SEC, see SIPA § 78fff-3(e)(3), and (iv) presented to Congress in a report
14 Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 929H(A), 124 Stat. 1856,
1931 (2010) [hereinafter “Dodd-Frank Act”].
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by SIPC’s Board of Directors, see SIPA § 78fff-3(e)(3). Furthermore, any finding by the SIPC
Board that an adjustment is warranted must be submitted to the SEC for approval, which itself is
a multi-step process. 	See SIPA § 78ccc(e)(2). 	The SEC must first publish SIPC’s proposal to
provide interested persons with an opportunity to submit “written data, views, and arguments
with respect to such proposed rule change.” 	See SIPA § 78ccc(e)(2)(A). 	Then, the SEC may
either approve SIPC’s proposed changes based on a finding that it is in the public interest and
consistent with SIPA, or disapprove them following (i) public notice of the reasons for
disapproval, (ii) an opportunity for a hearing, and (iii) publication of those reasons. 	See SIPA
§ 78ccc(e)(2)(A)–(D). 	All of the foregoing procedures serve to show that in the SIPA context,
inflation adjustments are carefully and clearly delineated.
Accordingly, the omission of specific provisions for inflation and interest adjustments in
the net equity definition bolsters the Trustee’s position that there should be no reallocation of net
equity based on Time-Based Damages.
B. SIPA’s 	Purpose 	Supports 	Upholding 	The 	Trustee’s 	Unadjusted 	Net
Investment Method
One of SIPA’s primary purposes is to promote investor confidence in the market. 	See
New Times, 371 F.3d at 84. 	In order to do so, SIPA, inter alia, strives to satisfy “customers’
legitimate expectations” by returning customer accounts “in the form they existed on the filing
date.” In re New Times Secs. Servs., Inc., 463 F.3d 125, 128–129 (2d Cir. 2006) (quoting S. REP.
NO. 95-763, at 2 (1978), reprinted in 1978 U.S.C.C.A.N. 764, 765). 	The Objecting Claimants
argue that awarding Time-Based Damages is necessary to satisfy their legitimate expectations
because “[n]o reasonable investor would expect cash held by a third party for decades to be
unadjusted, completely exposed to inflation.” See Customers’ Brief Opposing Trustee’s Motion
for an Order Rejecting an Inflation Adjustment to the Calculation of “Net Equity” [hereinafter
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“Customer Br.”] (Dkt. No. 5133), p. 17. SIPA, however, satisfies customer expectations, only so
long as the customer accounts “necessarily have [a] relation to [market] reality.” 	New Times,
371 F.3d at 88 (emphasis added); see also SIPA § 78fff-2(b) (stating that “all securities shall be
valued as of the close of business on the filing date”). 	Indeed, SIPA will satisfy such
expectations, even where no securities were ever purchased, provided that the customer accounts
reflect “what would have happened [in the market] had the given transaction been executed,”
whether the value of the securities at issue increase or decrease. New Times, 371 F.3d at 74; see
also SEC v. Albert & Maguire Sec. Co., 560 F.2d 569, 572 (3d Cir. 1977) (noting that SIPA does
not provide protection “against the vagaries of the market”).
Here, in the context of the Madoff Ponzi scheme, however, where the last account
statements that Madoff sent to customers were complete fabrications, there is no way of having
customer claims reflect market reality because it is impossible to determine the true securities
positions of Madoff customers. 	In other words, there is no way to know how much each
customer’s account balance would have been had securities actually been purchased in the
market. 	Consequently, even though the Objecting Claimants stress that an inflation adjustment
“uses an objective, universally applicable methodology that is entirely independent of the
fraudulent Madoff Securities account statements,” Customer Br., p. 17, there is no way to know
whether adding any Time-Based Damages adjustments to customers’ net equity claims would
result in their claim amounts more closely approximating what would have transpired in the
market. 	Indeed, adding such inflation adjustments could very well increase the difference
between net equity claim amounts and market realities in contravention of SIPA’s purpose.
See, e.g., Sehgal Decl., ¶ 7 (testifying that “[i]f the accounts used in the Hart Report had invested
in the S&P 500 Index, the vast majority of those accounts would show a performance balance
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that is lower than the [net equity claim amounts] adjusted for inflation”); In re Stratton Oakmont,
Inc., 01-CV-2812, 2003 WL 22698876, at **1, 8 (S.D.N.Y. Nov. 14, 2003) (net equity claimants
granted only “worthless” securities that had declined dramatically in value between their
unlawful conversion and the commencement of the SIPA liquidation).
Moreover, the Objecting Claimants cannot posit that their legitimate expectations will be
defied if they don’t receive Time-Based Damages because they never bargained for any such
protection. When they invested in Madoff, they bargained for a market-driven investment
designed to fluctuate with the performance of the market; they did not bargain for a
contractually guaranteed interest rate or an inflation-protected investment vehicle. Indeed,
SIPC “is not an insurer” and does not “guarantee that customers will recover their investments
which may have diminished as a result of, among other things, market fluctuations or broker-
dealer fraud.” See SIPC v. Associated Underwriters, Inc., 423 F. Supp. 168, 171 (D. Utah 1975).
The inclusion of Time-Based Damages, however, would eliminate the market risks that are
inherent in securities and other market-based investment vehicles. This would yield an outcome
for which the Objecting Claimants never bargained and SIPA never intended to protect.
For these reasons, the exclusion of Time-Based Damages from the calculation of net
equity is more consonant with the purposes of SIPA. Accordingly, the purpose of SIPA militates
in favor of adopting the Trustee’s unadjusted Net Investment Method.
C. The Holding in Walsh Supports Upholding The Trustee’s Unadjusted Net
Investment Method
As a preliminary matter, none of the SIPA cases relied upon by the Trustee directly
addresses the issue of whether the application of Time-Based Damages to the net equity calculus
is appropriate under SIPA.15 The Objecting Claimants have also failed to cite a single SIPA case
15 Specifically, the cases the Trustee cites in support of the proposition that SIPA does not provide for payment of
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in which Time-Based Damages were awarded.16
A very recent Second Circuit, non-SIPA, securities receivership case involving a long-
running Ponzi scheme, however, provides direct guidance to this Court regarding whether the
Trustee’s 	determination 	that 	net 	equity 	excludes 	any 	form 	of 	Time-Based 	Damages 	is
appropriate under the instant circumstances. See Walsh, 712 F.3d 735 (2d Cir. 2013).
In Walsh, defendants ran an investment business as a Ponzi scheme for over 13 years. Id.
at 738–39. 	The defendants sent fabricated account statements to their investors, used investor
funds to live lavishly and funded investor redemptions with money received from earlier
investors when there were no earnings. Id. at 739. After the scheme collapsed, the Commodity
Futures Trading Commission (the “CFTC”) and the SEC initiated civil enforcement actions
against the defendants and their related entities, alleging violations of various federal securities
laws. Id. at 739–40. Thereafter, the district court appointed a receiver (the “Receiver”) to collect
the defendants’ assets and propose a distribution plan, and approved a claims administration
procedure specifying (i) parties in interest were permitted to submit proposals to the court for the
distribution of money collected by the Receiver and (ii) the CFTC and the SEC could comment
interest to customers do not address the prejudgment interest sought by certain Objecting Claimants here. Instead,
they address only whether net equity includes fictitious profits as a form of interest or whether claimants can obtain
a post-judgment interest award directly from SIPC based on the delay between the filing date and SIPC’s payment of
claims. See, e.g., In re Old Naples Sec., Inc., 311 B.R. 607, 617 (Bankr. M.D. Fla. 2002) (rejecting a claim for
interest based on fictitious profits and holding that only the return of principal was appropriate); In re C.J. Wright &
Co., 162 B.R. 597, 610 (Bankr. M.D. Fla. 1993) (finding that “the most that claimants are entitled to receive is the
return of the principal invested” and not any fictitious profits); SEC v. Ambassador Church Fin./Dev. Grp., Inc., 788
F.2d 1208, 1210–13 (6th Cir. 1986) (finding claimants were not entitled to an interest award against SIPC “for the
seven and one-half year period that SIPC withheld funds”).
16 Instead, the Objecting Claimants argue that two cases in the non-SIPA context support an inflation adjustment.
See Customer Br., p. 22–23 (citing In re Carrozzella & Richardson, 286 B.R. 480, 484 n.7 (Bankr. D. Conn. 2002);
In re Unified Commercial Capital, Inc., 260 B.R. 343, 351 (Bankr. W.D.N.Y. 2001)). 	Neither of these cases,
however, is on point because both courts relied exclusively on the fact that the relevant investment contracts
specifically provided for the payment of interest. See In re Carrozzella & Richardson, 286 B.R. at 483–84; In re
Unified Commercial Capital, Inc., 260 B.R. at 345–47. In contrast, in the instant SIPA proceeding, no one argues
that BLMIS customers were ever promised a guaranteed rate of interest or inflationary factor in connection with
their investments.
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on any distribution plan submitted. Id. at 739–42.
In relevant part, the Kern County Employees’ Retirement Association (“KCERA”)
proposed that the Receiver implement a “constant dollar” approach, “which would distribute
larger shares to earlier investors than to more recent investors in order to account for inflation.”
Id. at 743. 	The CFTC and the SEC submitted a joint recommendation to the district court in
favor of a net investment, pro rata distribution plan without an adjustment for inflation, which
they believed to be “the most fair and equitable method of distribution of the assets held by the
Receiver.” 	Id. at 743, 745. 	Consistent with this joint recommendation, the Receiver moved
before the district court for approval of a pro rata distribution that would not “include any
interest, earnings, or other compensation based on the time value of money.” 	Id. at 745. 	The
district court approved the Receiver’s distribution plan, concluding that it was equitable because
it “most closely mirrors what would be an equal and equitable distribution of the principal
contributions of each of the investors.” Id. at 749 (emphasis added).
On cross-appeal to the Second Circuit, KCERA contended that the district court erred by
not implementing a constant dollar adjustment to the Receiver’s distribution plan, reasoning, like
the Objecting Claimants here, “that the real value of a dollar invested long ago is greater than the
value of a dollar invested more recently” and long-term investors should not be treated
dissimilarly from the short-term investors simply “because they have been in longer.” Id. at 747.
Certain victims of the Ponzi scheme objected to KCERA’s constant dollar proposal in favor of
the Receiver’s proposed pro rata distribution because, inter alia, such an adjustment would
result in certain investors receiving millions of dollars above their principal at the expense of
other investors who had not yet recovered their principal. Id.
The Second Circuit found “no abuse of discretion in the district court’s approval of the
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Receiver’s plan of distribution without requiring the requested inflation adjustment.”17 Id. at
754–55. 	The Second Circuit pointed out the importance of making victims “whole” by first
returning their principal. 	See id. at 755 (highlighting the SEC and CFTC’s joint position that
inflation should not be awarded because funds collected were “insufficient to make all of the
victims whole”) (emphasis added); see also In re Bernard L. Madoff Inv. Sec. LLC, 654 F.3d at
238 (favoring Trustee’s Net Investment Method because it prevents “[Madoff customers] who
had already withdrawn cash deriving from imaginary profits in excess of their initial investment
[from] deriv[ing] additional benefit at the expense of those customers who had not withdrawn
funds before the fraud was exposed.”). 	Indeed, the Second Circuit emphasized that KCERA
failed to cite even one case finding that awarding an inflation adjustment “was required as a
matter of law when there is to be a distribution of assets to a group of similarly situated victims
and those assets are insufficient to make all of the victims whole.” 	Walsh, 712 F.3d at 755
(emphasis added); see also id. (finding none of KCERA’s cases on point because they did not
involve “numerous victims and insufficient assets to provide complete compensation”) (emphasis
added). 	Finally, the Second Circuit suggested that the district court would be “free to consider
whether to approve an inflation adjustment” if the Receiver ultimately recovers enough money to
provide all of the victims with their principal. Id.
At bottom, Walsh is highly persuasive, as the facts, issue and arguments before the Walsh
court tend to mirror those present here. 	Indeed, like Walsh, (i) the instant Motion involves the
distribution of limited assets following a long-running Ponzi scheme, (ii) the Court must
determine 	whether 	the 	Trustee’s 	unadjusted 	Net 	Investment 	Method 	for 	distribution 	is
17 While many of the Objecting Claimants anticipated this ruling in their opening brief, see Customer Br., p. 23, in
light of the Second Circuit’s ruling thereafter, it is not surprising that these claimants merely attempted to
distinguish Walsh in a footnote in their supplemental brief, see Customer Supp. Br., p. 3 n.2.
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appropriate under the circumstances, and (iii) the Trustee has argued, inter alia, that any Time-
Based Damages adjustment would come at the expense of victims who had yet to recover their
principal. 	In accord with the holdings of the District Court and the Second Circuit, this Court
finds that the Trustee’s unadjusted Net Investment Method is proper, as it is “equal and
equitable” and “most closely mirrors” a distribution of the principal contributions of each
investor. 	Walsh, 712 F.3d at 749.18 By returning principal to Net Losers first, the Trustee
attempts to make victims whole by bringing the greatest number of investors closest to their
positions prior to the hatching of Madoff’s nefarious scheme. 	Accordingly, the Walsh case
appears to this Court to weigh in favor of adopting the Trustee’s Net Investment Method,
unadjusted for any Time-Based Damages.
D. SIPA’s Statutory Framework and Distribution Scheme Support Upholding
the Trustee’s Unadjusted Net Investment Method
While SIPA was designed to protect customers from the losses caused by the insolvency
or financial instability of broker-dealers by expediting the return of customer property, see In re
Bernard L. Madoff Inv. Sec. LLC, 654 F.3d at 239–40, it was not meant to fully compensate
customers for all losses, id. at 236 (stating “SIPA does not—and cannot—protect an investor
against all losses”). 	Indeed, beyond including converted property as a customer claim, SIPA
provides no protection for any other losses caused by “conversion, fraud, or other broker
wrongdoing.” 	In re Stratton Oakmont, Inc., 2003 WL 22698876, at *5 (“SIPA brings those
whose property was unlawfully taken within the preferred status of ‘customer,’ and the property
unlawfully taken within the definition of ‘customer property,’ but those are the only inclusion of
conversion, fraud, or other broker wrongdoing in the legislation.”). 	Thus, it is well settled that
18 Indeed, permitting Time-Based Damages may provide an unseemly benefit to certain groups, including current
dollar claims traders.
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claims are not protected under SIPA when they are for “damages resulting from a broker's
misrepresentations, fraud or breach of contract.” In re Klein, Maus & Shire, Inc., 301 B.R. 408,
421 (Bankr. S.D.N.Y. 2003); see also In re Stratton Oakmont, Inc., 257 B.R. 644, 652 (Bankr.
S.D.N.Y. 2001) (“Because of [SIPA’s] statutory requirements, any demand by the Claimants for
‘damages’ for conversion based on state law damage theories must be rejected. Many cases have
held SIPA permits only the satisfaction of net equities and not the payment of damages.”), rev’d
on other grounds, 2003 WL 22698876 (S.D.N.Y. Nov. 14, 2003); In re MV Sec., Inc., 48 B.R.
156, 160 (Bankr. S.D.N.Y. 1985) (noting that SIPA’s intent is to protect customers having cash
or securities on deposit with the broker-dealer and not to act as a vehicle for the litigation of
fraud claims and securities law violations). Instead, such claims must be satisfied by the general
estate. In re John Dawson & Assoc., Inc., 289 B.R. 654, 662 (Bankr. N.D. Ill. 2003) (“[C]laims
based on fraud or breach of contract are not . . . part of a customer’s net equity claim . . . . Such
claim must be satisfied from the general estate, not SIPC funds.”) (quotation omitted).
In the instant Motion, the time-based adjustments requested by the Objecting Claimants
seek damages stemming from Madoff’s wrongdoings, which are not protected by SIPA. 	No
matter 	how 	these 	claimants 	couch 	their 	requests, 	they 	are 	actually 	seeking 	additional
compensation for the losses arising from the period of time their money was tied up in Madoff’s
fraud. 	Specifically, their interest-based adjustment requests are, in fact, seeking compensation
for the lost use of their funds while invested with Madoff. See Carter v. Shop Rite Foods, Inc.,
503 F. Supp. 680, 688 (N.D. Tex. 1980) (defining interest adjustments as “compensation for
deprivation of the use of funds”); 44B AM. J UR.2D I NTEREST & USURY § 39 (defining
prejudgment interest as “compensation allowed by law as additional damages for lost use of
money due as damages during the lapse of time between the accrual of the claim and the date of
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judgment.”). 	And their inflation-based adjustment requests are, in fact, seeking compensation
for the diminished purchasing power of the money they invested with Madoff. See Carter, 503
F. Supp. at 688 (defining an “inflation factor” as “compensation for the diminution over time in
the purchasing power of the funds”).
All of this additional compensation, however, must be excluded from customer net equity
claims because it amounts to damages stemming from Madoff’s wrongdoing, which are not
covered by SIPA. See In re Klein, Maus & Shire, 301 B.R. at 421 (“Because claims for damages
do not involve the return of customer property entrusted to the broker they are not the claims of
‘customers’ under SIPA.”). Indeed, it was Madoff’s continuous fraudulent activity, including the
fabrication of BLMIS customer account statements, that misled customers into leaving their
investments with BLMIS for extended periods of time.
Accordingly, in the event that the Objecting Claimants are entitled to any pre-judgment
interest19 or inflation-based payments, such claims arising therefrom do not constitute net equity
claims to be paid out from the customer fund; at best, they may constitute general claims to be
satisfied by payment from the general estate fund.
Taking all of the above in tandem, the Court finds that SIPA’s plain language, purpose,
framework and distribution scheme, as well as Second Circuit precedent, all favor the Trustee’s
distribution methodology. 	Accordingly, this Court upholds the Trustee’s Net Investment
Method, unadjusted for Time-Based Damages.
19 Some of the claimants have requested that their net equity claims be adjusted for the prejudgment interest
provided under New York CPLR section 5001. However, at the present juncture, such request is unfounded because
CPLR section 5001: (i) at best, is relevant only to distributions from the general estate fund and not from the
customer fund; and (ii) requires a verdict, judgment or decision to be rendered in the state court in favor of the
plaintiff before the statutory prejudgment interest may be applied, see In re Arcade Publ’g, Inc., 455 B.R. 373, 379–
80 (Bankr. S.D.N.Y. 2011), which has not been obtained here.
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III. 	IF TIME-BASED DAMAGES ARE TO BE AWARDED AS PART OF THE
NET 	EQUITY 	CALCULUS 	UNDER 	SIPA, 	IT 	IS 	FOR 	CONGRESS 	TO
ENACT SUCH A LAW, NOT THIS COURT
It is clear that the plain language of SIPA does not address whether to include an
adjustment for Time-Based Damages in the calculation of net equity. The Objecting Claimants
attempt to explain this statutory silence, arguing that Congress has never had to accommodate a
long-running Ponzi scheme, such as this one, where it is alleged that no securities were actually
purchased.20 See Customer Br., p. 22. 	Instead, the Objecting Claimants suggest that Congress
has addressed the typical broker-dealer insolvency where the customer’s net equity claim is
based on the then-current value of the securities. 	See SIPA § 78fff-2(b) (stating that “all
securities shall be valued as of the close of business on the filing date”). 	In such a context, an
inflation adjustment would be unnecessary because the customer receives the benefit of current
stock pricing, which would reflect inflation or deflation. 	Therefore, the Objecting Claimants
essentially argue that the Court should fill this statutory gap by permitting Time-Based Damages
under the present circumstances.
Regardless of the statute’s silence or whether Congress has ever had occasion to consider
this issue, it is not for this Court to amend SIPA to fill legislative lacunae. 	See In re Stratton
Oakmont, Inc., 2003 WL 22698876, at *5 (“It is equally true that the change in value between
the date the stocks were converted and the time when the claim is paid must be addressed by
20 These Claimants also emphasize that SIPA was drafted in 1970, which was several decades prior to the emergence
of Ponzi-type frauds of the scale and duration of that of Madoff. See Customer Br., p. 13 n.5. However, New Times,
a case decided by the Second Circuit in 2004, addressed how to value net equity claims of victims of a 17-year
Ponzi scheme that resulted in the loss of $32.7 million where closing statements could not be used. See New Times,
371 F.3d at 71. The court endorsed the Net Investment Method and made no mention of any form of time based
damages. See id. Since the issuance of New Times, Congress has amended SIPA several times. 	See, e.g., Dodd–
Frank Act; Financial Netting Improvements Act of 2006, Pub.L. No. 109–390, 120 Stat. 2692, (2006); Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109–8, 119 Stat. 23 (2005). Thus, it is difficult
to accept the position that Congress never contemplated the contours of net equity claims based on the Net
Investment Method in long-running Ponzi schemes.
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Congress and not the courts.”). 	This is especially so since there are too many unknowns, such
as: (i) which index should be applied, (ii) which inflation factor should be applied, (iii) whether
to apply the inflation factor to each and every deposit and withdrawal or to only final account
balances, (iv) whether to apply the inflation factor daily, monthly, quarterly or yearly, and (v)
whether amounts are to be rounded up or down. 	These unknowns can, and should be, clarified
only by Congress. Indeed, were the Court to fill this gap, “[b]y forcing the square peg” of Time-
Based Damages “into the round holes” of SIPA “in order to accomplish a further reallocation
and redistribution to implement a policy of equality of distribution in the name of equity,” this
Court will have “done a substantial injustice” to SIPA and will “have made policy decisions that
should be made by Congress.” In re Unified Commercial Capital, Inc., 260 B.R. at 350.
Accordingly, if Time-Based Damages are to be included in the calculation of net equity
under SIPA, only Congress can enact such a law.
CONCLUSION
For the reasons set forth above, the Court upholds the Trustee’s determination that net
equity should be calculated based on the Trustee’s Net Investment Method, without any
adjustments/enhancements for Time-Based Damages. 	Specifically, the Court affirms: (i) the
Trustee’s determinations of the claims listed on Exhibit A to the Cheema Declaration, to the
extent they relate to the recalculation of net equity customer claims based on Time-Based
Damages; (ii) the Trustee’s denial of the claims to the extent these claims seek amounts in excess
of net equity calculated using the Net Investment Method; (iii) the Trustee’s interpretation of net
equity under SIPA as excluding Time-Based Damages. In addition, the Court hereby expunges
the objections to the Trustee’s determinations listed on Exhibit A to the Cheema Declaration,
insofar as they relate to the recalculation of net equity customer claims based on Time-Based
Damages, and permits the Trustee to release any funds previously reserved for the Time-Based
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Damages issue in accordance with the Court’s direction below.
In view of the factors contained in 28 U.S.C. section 158(d)(2)(A)(i)–(iii), as well as the
obvious need for a release of approximately $1.4 billion to parties entitled to a prompt return of
their funds, see supra n.10, this Court will upon appropriate request or motion consider favorably
a request to certify a direct appeal to the United States Court of Appeals for the Second Circuit.
Accordingly, distribution of the approximately $1.4 billion Time-Based Damages Reserve by the
Trustee shall be stayed for a period of 10 days from entry of this Memorandum Decision and
Order to grant the parties time to consider whether to certify a direct appeal to the United States
Court of Appeals for the Second Circuit.
Thus, the Trustee’s Motion is hereby GRANTED to the extent set forth herein.
IT IS SO ORDERED.
Dated: New York, New York 	/s/ Burton R. Lifland
September 10, 2013 	United States Bankruptcy Judge
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EXHIBIT A – ARGUING ON THE MOTION
BAKER & HOSTETLER LLP
45 Rockefeller Plaza
New York, NY 10111
Telephone: (212) 589-4200
Facsimile: (212) 589-4201
By: 	David J. Sheehan
Jorian L. Rose
Seanna R. Brown
Bik Cheema
Brian A. Bash
Thomas D. Warren
Wendy J. Gibson
Attorneys for Irving H. Picard, Trustee for the Substantively Consolidated SIPA Liquidation of
Bernard L. Madoff Investment Securities LLC and Bernard L. Madoff
SECURITIES INVESTOR PROTECTION CORPORATION
805 Fifteenth Street, N.W., Suite 800
Washington, DC 20005
Telephone: (202) 371-8300
Facsimile: (202) 371-6728
By: 	Josephine Wang
Kevin H. Bell
Christopher H. LaRosa
Lauren T. Attard
Attorneys for the Securities Investor Protection Corporation
SECURITIES AND EXCHANGE COMMISSION
100 F Street, NE
Washington, D.C. 20549
Telephone: (202) 551-5143
By: 	John W. Avery
Dominick V. Freda
New York Regional Office
3 World Financial Center, Suite 400
New York, NY 10281
Telephone: (212) 336-0163
By: 	Alistaire Bambach
Patricia Schrage
Attorneys for the Securities and Exchange Commission
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BECKER & POLIAKOFF LLP
45 Broadway
New York, NY 10006
Telephone: (212) 599-3322
By: 	Helen Davis Chaitman
Julie Gorchkova
Attorneys for Claimants listed at Amended Exhibit A to the Amended Declaration of Helen Davis
Chaitman in Support of Customers’ Objection to Trustee’s Motion for an Order Denying Time-
Based Damages, Dec. 7, 2012 (Dkt. No. 5140)
DAVID GROSS, pro se
7248 Ballantrae Ct.
Boca Raton, FL 33496
Telephone: (561) 483-4543
LAW OFFICES OF JOEL L. HERZ
3573 E. Sunrise Drive, Suite 215
Tucson, AZ 85718
Telephone: (520) 529-8080
By: 	Joel L. Herz
Attorneys for Samdia Family, LP
ROBERT J. KAPLAN
15 Maiden Lane, Suite 703
New York, NY 10038
Telephone: (212) 964-0600
By: 	Robert J. Kaplan
Attorney for MUUS Independence Fund LP and Michael W. Sonnenfeldt
K&L GATES LLP
1601 K Street NW
Washington, DC 20006
Telephone: (202) 778-9000
Facsimile: (202) 778-9100
By: 	Richard A. Kirby
Laura K. Clinton
Scott P. Lindsay
Attorneys for individual customers listed at Schedule A to the Customers’ Brief Opposing
Trustee’s Motion for an Order Rejecting an Inflation Adjustment to the Calculation of “Net
Equity,” Dec. 3, 2012 (Dkt. No. 5133) as being represented by K&L Gates LLP
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KRAMER LEVIN NAFTALIS & FRANKEL LLP
1177 Avenue of the Americas
New York, NY 10036
Telephone: (212) 715-9100
Facsimile: (212) 715-8000
By: 	Philip Bentley
Elise S. Frejka
Jason S. Rappaport
Attorneys for individual customers listed at Schedule A to the Customers’ Brief Opposing
Trustee’s Motion for an Order Rejecting an Inflation Adjustment to the Calculation of “Net
Equity,” Dec. 3, 2012 (Dkt. No. 5133) as being represented by Kramer Levin Naftalis & Frankel
LLP
LOEB & LOEB LLP
345 Park Avenue
New York, NY 10154
Telephone: (212) 407-4000
Facsimile: (212) 407-4990
By: 	P. Gregory Schwed
Walter H. Curchack
Daniel B. Besikof
Attorneys for individual customers listed at Schedule A to the Customers’ Brief Opposing
Trustee’s Motion for an Order Rejecting an Inflation Adjustment to the Calculation of “Net
Equity,” Dec. 3, 2012 (Dkt. No. 5133) as being represented by Loeb & Loeb LLP
DENTONS
1221 Avenue of the Americas
New York, NY 10020
Telephone: (212) 768-6700
Facsimile: (212) 768-6800
By: 	Carole Neville
Attorneys for individual customers listed at Schedule A to the Customers’ Brief Opposing
Trustee’s Motion for an Order Rejecting an Inflation Adjustment to the Calculation of “Net
Equity,” Dec. 3, 2012 (Dkt. No. 5133) as being represented by SNR Denton
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MILBERG LLP
One Pennsylvania Plaza
New York, NY 10119
Telephone: (212) 594-5300
Facsimile: (212) 868-1229
By: 	Matthew Gluck
Matthew A. Kupillas
Jennifer L. Young
Joshua E. Keller
Attorneys for individual customers listed at Schedule A to the Customers’ Brief Opposing
Trustee’s Motion for an Order Rejecting an Inflation Adjustment to the Calculation of “Net
Equity,” Dec. 3, 2012 (Dkt. No. 5133) as being represented by Milberg LLP
SEEGER WEISS LLP
77 Water Street, 26th Floor
New York, NY 10005
Telephone: (212) 584-0700
Facsimile: (212) 584-0799
By: 	Parvin K. Aminolroaya
Attorneys for individual customers listed at Schedule A to the Customers’ Brief Opposing
Trustee’s Motion for an Order Rejecting an Inflation Adjustment to the Calculation of “Net
Equity,” Dec. 3, 2012 (Dkt. No. 5133) as being represented by Seeger Weiss LLP
LOWENSTEIN SANDLER PC
65 Livingston Avenue
Roseland, NJ 07068
Telephone: (973) 597-2500
Facsimile: (973) 597-2400
1251 Avenue of the Americas, 18th Floor
New York, NY 10020
Telephone: (212) 262-6700
Facsimile: (212) 262-7402
By: 	Bruce Buechler
Nicole Stefanelli
Attorneys for the Irrevocable Charitable Remainder Trust of Yale Fishman and the Glenn Akiva
Fishman Charitable Remainder Unitrust
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MORGAN, LEWIS & BOCKIUS LLP
101 Park Avenue
New York, NY 10178
Telephone: (212) 309-6000
By: 	Bernard J. Garbutt III
Attorneys for The Kostin Co.
SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, NY 10022
Telephone: (212) 756-2000
Facsimile: (212) 593-5955
By: 	Marcy Ressler Harris
Jennifer M. Opheim
Mark D. Richardson
Attorneys for HHI Investment Trust #2
SILLS CUMMIS & GROSS P.C.
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 643-7000
By: 	Andrew H. Sherman
Attorneys for Claimants listed at Exhibit 1 to the Joinder in Opposition to Trustee’s Motion for
an Order Affirming Trustee’s Calculations of Net Equity and Denying Time-Based Damages,
Dec. 3, 2012 (Dkt. No. 5126)
STIM & WARMUTH, P.C.
2 Eighth Street
Farmingville, NY 11738
Telephone: (631) 732-2000
Facsimile: (631) 732-2662
By: 	Paula J. Warmuth
Glenn P. Warmuth
Attorneys for Michael Most
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