ponzi scheme clawback litigation - strafford | cle and cpe

Ponzi Scheme Clawback Litigation Strategies for Bringing or Defending Trustee Clawback Claims

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WEDNESDAY, MARCH 14, 2012

Presenting a live 90-minute webinar with interactive Q&A

Corey R. Weber, Partner, Ezra Brutzkus Gubner, Woodland Hills, Calif.

Anthony L. Paccione, Partner, Katten Muchin Rosenman, New York

Jesse S. Finlayson, Partner, Finlayson Williams Toffer Roosevelt & Lilly, Irvine, Calif.

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Fraudulent Transfers: Ponzi Scheme Clawback Litigation in Bankruptcy

Strategies for Bringing or Defending

Trustee Clawback Claims

Sponsored by the Legal Webinar Group of Strafford Publications

Anthony L. Paccione, Chair NY Litigation Department, Katten Muchin Rosenman LLP Corey Weber, Partner, Ezra Brutzkus Gubner LLP Jesse S. Finlayson, Partner, Finlayson Williams Toffer Roosevelt & Lilly LLP

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Introduction

“When the financial tide goes out is when you will see who

is swimming naked”

6

Threshold Questions

What is a “Ponzi Scheme? When does it begin? SIPC Protected? Type of Receiver to Be Appointed

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Today’s Topics

Clawbacks – From the Trustee’s perspective and the Prima Facie case based on Fraudulent Conveyance

Clawbacks from a Transferee’s Perspective

“Mere Conduit,” Section 546(e) and Other Specific Clawback Defenses

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TRUSTEE’S CLAWBACK CLAIMS

• Preference Claims – Section 547 claims

• Fraudulent Transfer Claims

– Claims Under the Bankruptcy Code • Section 548 and 550 claims

– Claims Under State Statutes • Section 544 and UFTA state law claims

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PREFERENCE CLAIMS

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Preference Claims • Transfers in Ponzi schemes are more vulnerable to

attack as fraudulent transfers – In re Grafton Partners, L.P., 321 B.R. 527, 532 FN 5

(9th Cir. BAP 2005)

• However, transfers in Ponzi cases can still be recovered as preferences – See In re United Energy Corp, 102 B.R. 757 (9th Cir.

BAP 1989); Danning v. Bozek (In re Bullion Reserve of North America), 862 F.12 1214 (9th Cir. 1988)

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Defenses to Preference Claims

• Same defenses as to a normal preference claim • But, no ordinary course defense

– Henderson v. Buchanan, 985 F.2d 1021, 1025 (9th Cir. 1993)

– In re Bullion Reserve Co. of North America, 836 F.2d 1214, 1219 (9th Cir. 1988)

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FRAUDULENT TRANSFER CLAIMS

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Actual Intent Claims Under the Bankruptcy Code

• “The trustee may avoid any transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of the debtor in property, or any obligation (including any obligation to or for the benefit of an insider under an employment contract) incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition, if the debtor voluntarily or involuntarily—(A) made such transfer or incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted…” – 11 U.S.C. Section 548(a)(1).

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Actual Intent Claims Under State Statutes (California)

• “A Transfer made or obligation incurred by a debtor is

fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows: (1) With actual intent to hinder, delay, or defraud any creditor of the debtor.” – California Civil Code Section 3439.04(a).

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Actual Intent Claims with a Guilty Plea

• Guilty plea in criminal case for the Ponzi scheme principal can conclusively establish actual intent

• “[w]e now hold that a debtor’s admission, through guilty pleas and a plea agreement admissible under the Federal Rules of Evidence, that he operated a Ponzi scheme with the actual intent to defraud his creditors conclusively establishes the debtor’s fraudulent intent under 11 U.S.C. section 548(a)(1)(A) and California Civil Code section 3439.04(a)(1), and precludes relitigation of that issue…” Johnson v. Neilson (In re Slatkin), 525 F.3d 805, 814 (9th Cir. 2008) 16

Actual Intent Claims with No Guilty Plea

• Establish a Ponzi Scheme (the Ponzi Scheme Presumption) – If the Bankruptcy Court concludes that the

Debtor operated as a Ponzi scheme, actual intent to hinder, delay or defraud creditors will be established

• Donell v. Kowell, 533 F.3d 762, 770 (9th Cir. 2008) • Barclay v. Mackenzie (In re AFI Holding, Inc.), 525

F.3d 700, 704 (9th Cir. 2008)

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Constructive Fraud Claims Under the Bankruptcy Code

• “…(B)(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and (ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation; (II) was engaged in a business or transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; (III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor’s ability to pay as such debts matured; or (IV) made such transfer to or for the benefit of an insider, or incurred such obligation to or for the benefit of an insider, under an employment contract and not in the ordinary course of business.” – 11 U.S.C Section 548(a)(1)(B).

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Constructive Fraud Claims Under State Law (California)

• “A Transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation as follows:… (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor either: (A) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction. (B) Intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due.” – California Civil Code Section 3439.04(a). See also alternate test

under Section 3439.05.

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Constructive Fraud vs. Actual Intent Claims

• Constructive fraudulent transfer claims should have the same outcome as actual intent claims, but the burden of proof differs – Donell v. Kowell, 533 F.3d 762, 771 (9th Cir. 2008)

• In addition to differences re burden of proof, constructive

fraud claims will likely require an expert witness (e.g., forensic accountant)

• If there is no plea agreement, the insolvency tests in constructive fraud claims provide an alternate way to avoid and recover transfers

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Fraudulent Transfer Claims Under State vs. Federal Law

• 2 year pre-bankruptcy petition reach-back under Section 548

• There is normally a longer reach-back under state law – In California, the reach back period is up to 7 years

(Cal. Civil Code Section 3439, et seq.)

• Statute of limitations – Trustee has 2 years to file a complaint post-

bankruptcy

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Fictitious Profits

• General rule is that the Trustee’s recovery is limited to recovery of fictitious profits from net winners

• Withdrawals - Investments = Fictitious Profits in most circuits – Donell v. Kowell, 533 F.3d 762, 770 (9th Cir.

2008)

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Fictitious Profits in the Madoff Case

• “Equality is achieved in this case by employing the Trustee's method, which looks solely to deposits and withdrawals that in reality occurred. To the extent possible, principal will rightly be returned to Net Losers rather than unjustly rewarded to Net Winners under the guise of profits. In this way, the Net Investment Method brings the greatest number of investors closest to their positions prior to Madoff's scheme in an effort to make them whole.” In re Bernard L. Madoff Inv. Sec. LLC, 424 B.R. 122, 142 (Bankr. S.D.N.Y. 2010)

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Potential for the Trustee to Recover More than

Fictitious Profits • The Trustee can recover the total transfers from

the Debtor to the defendant (fictitious profits + return of principal) if: – The Trustee establishes his prima facie case;

and – The defendant does not establish his

defenses

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Recovering Fraudulent Transfers Made to Charities

• Limitation on avoiding transfers to charities – “A transfer of a charitable contribution to a qualified religious or

charitable entity or organization shall not be considered to be a transfer covered under paragraph (1)(B) in any case in which—(A) the amount of that contribution does not exceed 15 percent of the gross annual income of the debtor for the year in which the transfer of the contribution is made; or (B) the contribution made by a debtor exceeded the percentage amount of gross annual income specified in subparagraph (A), if the transfer was consistent with the practices of the debtor in making charitable contributions.”

• 11 U.S.C. Section 548(a)(2) • Limitation only applies to constructive fraudulent transfers, not as to

fraudulent transfers made with actual intent 25

Stern v. Marshall Issues • Are fraudulent transfer claims “core claims,” but

“unconstitutionally core”? • Following Stern, can bankruptcy courts enter final

judgments on fraudulent transfer claims? • Following Stern, can bankruptcy courts enter default

judgments on fraudulent transfer claims?

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Jesse S. Finlayson Finlayson Williams Toffer Roosevelt & Lilly LLP

15615 Alton Parkway, Suite 250 Irvine, CA 92618

Phone 949-759-3810 x23 / Fax 949-759-3812 [email protected]

Materials prepared by

Mark Kaufman McKenna Long LLP

For use in June 2011 Strafford program on this topic And used herein with his permission

mailto:[email protected]�

A. Defenses to the Prima Facie Case

Once the Trustee or DIP has established a prima facie case for a fraudulent conveyance by satisfying the criteria to demonstrate either actual or constructive fraud committed by the Transferor, the transferee may be able to defeat its liability as a recipient of a fraudulent conveyance by raising one or more defenses.

28 Finlayson Williams Toffer Roosevelt & Lilly LLP

B. Statutory Framework

1. 11 U.S.C. § 548(c) provides a defense to the “initial” transferee if it both received the transfer from the fraudulent transferor in good faith and for value. In re Bayou Group, LLC, 439 B.R. 284, 308 (S.D.N.Y. 2010) (“Bayou IV”).

2. State law essentially provides these same defenses to fraudulent conveyance claims pursued under 11 U.S.C. § 544.

3. The burden of proof in respect to the transferee’s defenses under § 548 and correlative state law is on the defendant transferee. In re Bennett Funding Corp., Inc., 232 B.R. 565, 573 (Bankr. S.D.N.Y. 1999).


B. Statutory Framework (cont.)

4. 11 U.S.C. § 550(b) provides further insulation against liability for a fraudulent conveyance to an “immediate” or “mediate” transferee of the initial transferee if that subsequent transferee can establish that it received the transfer: • In good faith; • For value; and • “without knowledge of the voidability of the

transfer avoided.”


B. Statutory Framework (cont.)

5. Observations about 550(b) defenses: (a) the focus of “good faith” and “for value” defenses

for an immediate or mediate transferee relate to the transfer between the initial transferee and the defendant subsequent transferee.

(b) the “without knowledge of the voidability” element, however, is directed to whether the immediate or mediate transferee defendant knew about the voidability of the initial transfer — i.e. does the second transferee have awareness that the initial transfer was either not in good faith or not for value or was lacking in both respects.


C. Good Faith

1. Not Likely To Be Decided On Summary Judgment: Defending one’s good faith, of course, is specific to

each avoidance action, so a trustee bringing claims to avoid transfers must be prepared to address the unique facts of what each recipient of a fraudulent conveyance knew or of which it was on inquiry notice. Because these are fact specific issues and involve the state of knowledge or awareness of the specific recipient, it will be a rare case where summary judgment to either party on this element of the defense is likely or appropriate.


C. Good Faith (cont.) 2. Objective Good Faith; Against Whom Inquiry Notice is to

be Measured: Where the awareness of facts that would, if established, prove lack of good faith are in dispute, as is true in the vast majority of cases, courts have grappled with whether the defendant’s good faith should be decided on a subjective test where the court attempts to adduce the actual mindset of the particular transferee who receives the transfer, or on an objective test where the court or jury decides whether a typical investor with the same acumen and sophistication of the actual defendant would have been put on inquiry notice that the transaction lacks good faith. Most courts have employed the objective test. In re Agric. Research & Tech. Corp., 916 F.2d 528, 535-36 (9th Cir. 1990).


C. Good Faith (cont.)

3. Frequently, courts place a “specific focus on the class or category of the transferee” and therefore whether a transferee is on inquiry notice is informed by “the standards, norms, practices, sophistication and experience generally possessed by participants in the transferee’s industry or class.” Bayou IV, 439 B.R. at 313.

4. What a person with defendant’s experience and sophistication should have been on inquiry notice to ascertain is itself almost always a fact issue for the trier of fact. Bayou IV, 439 B.R. at 320-327.


C. Good Faith (cont.) 5. The defendant may still be able to successfully defend

its good faith, even if it was under a duty of inquiry, if it can show that, as most courts formulate the test, it would not have been able to ascertain relevant facts about the debtor even if it had made reasonably diligent inquiry. In re Agric. Research & Tech. Grp., 916 F.2d at 536. This, too, is a factual issue to be decided case by case. Other courts have imposed a higher standard and require the defendant to have actually made diligent inquiry where it is found to be on inquiry notice. See e.g. In re Manhattan Inv. Fund III, 397 B.R. 1, 22-24 (S.D.N.Y. 2007).



6. Lack of Good Faith Is Premised On Knowledge or Inquiry Notice of Debtor’s Fraud or Insolvency:

There are two types of information, if possessed by the defendant, that courts have held to manifest lack of good faith: knowledge of a fraud or knowledge of the debtor’s insolvency. Bayou IV rejects the notion that inquiry notice awareness of other issues regarding the transferor’s operations that do not meaningfully bear on the debtor’s insolvency or its fraudulent practices do not give rise to a basis to challenge the defendant’s good faith.



7. Frequently present in Ponzi cases is the situation where the trustee argues that the transferee is put on notice of the likely fraudulent nature of the debtor because the purported returns to the transferee are substantially beyond typical market returns for similar investments. But arguing lack of good faith based on this proposition has its limits.



8. Red Flags In determining whether the transferee should be on

inquiry notice of a debtor’s fraudulent activities or insolvency, potential “red flags” identified by courts have included: a. statements by the debtor concerning its

improprieties and fraudulent conduct, see Armstrong v. Collins, No. 01 Civ. 2437 (PAC), 02 Civ. 2796 (PAC), 02 Civ. 3620 (PAC), 2010 WL 1141158, at *27-28 (S.D.N.Y. Mar. 24, 2010)


C. Good Faith (cont.) b. actual knowledge of the debtor’s financial problems, see

In re Grove-Merritt, 406 B.R. 778, 810 (Bankr. S.D. Ohio 2009)

c. knowledge of a tax lien filed against the debtor, see In re Armstrong, 259 B.R. 338, 344 (Bankr. E.D. Ark. 2001)

d. knowledge of an impending bankruptcy, see In re McLaren, 236 B.R. 882, 902 (Bankr. D.N.D. 1999)

e. knowledge of the debtor’s commingling of funds, acceptance of escrow checks in its personal account, and previous bounced checks, see Cannon v. J.C. Bradford & Co., 230 B.R. 546, 593-94 (Bankr. W.D. Tenn. 1999) (reversed on appeal)



f. promises of investment returns of 468% coupled with the debtor’s use of post-dated checks to investors, and checks returned to investors with insufficient funds, see Jobin, 84 F.3d at 1338-39

g. knowledge that the transfer received as “grossly in excess of the value” the transferee had provided, In re Agric. Res. & Tech. Grp., 916 F.2d at 539


D. For Value

1. 11 U.S.C. § 548(d)(2) defines value as “property, or satisfaction or securing of a present or antecedent debt of the debtor . . .”

2. “Property” means a reasonably equivalent exchange of consideration.

3. In the vast number of Ponzi scheme cases, defendants can establish “value” by arguing that the principal they recovered from the Ponzi debtor was in satisfaction of an antecedent debt because the nature of the initial investment In the Ponzi scheme gave rise to a claim.


D. For Value

4. Thus, attempts to argue in Stanford, that the unequal distribution of the Ponzi debtor’s assets creates an unjust enrichment of certain creditors relative to others warranting disgorgement by those who received more than others, creditors of a Ponzi scheme whose initial investment with the debtor gave rise to a claim against the debtor are entitled to recover up to the amount of principal they invested if they acted in “good faith”.


D. For Value (cont.)

5. False Profits: The cases are uniform, however, in concluding that incremental amounts recovered by the transferee over the face amount invested are subject to disgorgement. In essence, “fictitious profits” received by creditors can be disgorged because courts conclude that since the debtor’s operations were fraudulent, the defendant lacks the basis to maintain that it actually was entitled to any profits; thus amounts paid as such cannot be “for value.” Merrill v. Abbott (In re Independent Clearing House Co.), 77 B.R. 843 (D.Utah 1987) (en banc)



6. Contrasting Debt with Equity Investments: But what if the investment with the Ponzi entity does not give rise to a claim against the debtor, but instead is made as an equity infusion giving rise to an “interest in” the debtor, such as a limited partnership interest or limited liability membership. Many hedge funds and private equity funds are so structured.

If the investment is made as equity, how can the defendant establish “for value” based on satisfying an “antecedent debt”?



a. So how have the courts handled the “interest in” Ponzi cases as distinct from the “claims against” Ponzi cases.

b. Almost all the reported cases have involved claims, not interests.

c. Courts starting with Eby v. Ashley, 1 F.2d 971 (4th Cir. 1924), cert. denied, 266 U.S. 631, 45 S. Ct. 197, 69 L. Ed. 478 (1925), established the notion that distributions made to investors who lent money (i.e. creating a claim) also gave rise to a tort “claim” for fraud and rescission.



d. Two reported Ponzi cases, In re AFI Holding, Inc., 525 F. 3d 700 (9th Cir. 2008) and Perkins v. Haines, 661 F.3d 623 (11th Cir. 2011), have found that the result in equity investment cases should be the same.

e. Supporting distinction in treatment of claims vs. interests is: In re Terry Mfg. Co., Inc., 2007 WL 274319 (Bankr. M.D. Ala. 2007).


SPECIFIC DEFENSES

“Mere Conduit” Defense Section 546(e) Withdrawal of Reference Standing

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Mere Conduit: Who is an initial or mediate transferee under Sec. 448: “Initial” or “Mediate” Transferees –decision based definitions:

Judge Easterbrook’s seminal discussion in Bonded Fin.

Servs., 838 F.2d at 894 -- recipient can be found to be an “initial transferee” within the meaning of the statute only if transferred funds are received into the transferee’s unfettered “discretion and control,” such that the funds may be spent on, for instance, “lottery tickets or uranium stocks.”

Judge Lifland’s decision in Bear Sterns Sec. Corp. v. Gredd

(“Gredd II”), 397 B.R. 1, 14 (S.D.N.Y. 2007) (a) is a “mere conduit,” acting as “an uninterested agent between the transferor and another entity, or if it (b) lacks “dominion and control” over the funds.

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…Mere Conduit Defense

Dominion and Actual Control test is Widely Adopted: Bonded Fin. Servs, Inc. v.European Am. Bank remains the

starting point. 838 F.2d 890, 893 (7th Cir. 1998): a transferee must be capable of using funds “for its own purposes” to have transferee liability.

In re Finley, 130 F.3d at 59 (2d Cir. 1997) adopting Bonded Financial Test

Andreini & Co. v. Pony Express Delivery Servs. (In re Pony

Express Delivery Servs.), 440 F.3d 1296, 1303 (11th Cir. 2006) (requiring “unrestricted legal control” over funds)

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…Mere Conduit Defense

But one very fact-specific case from Judge Lifland in NY rejected a mere conduit defense suggesting right to control is the test and exercise of that control is not necessary. Bear, Stearns Sec. Corp. v. Gredd (In re Manhattan Inv. Fund III), 397 B.R. 1, 4-6 (S.D.N.Y. 2007).

Manhattan Investment’s reasoning has been rejected by other Courts: See, e.g., Grayson Consulting, Inc. v. Wachovia Securities LLC (In re Derivium Capital LLC), 437 B.R. 798, 808-09 (Bankr. D.S.C. 2010)

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Section 546(e) Defense

Section 546(e): the trustee may not avoid . . . a settlement or margin payment made by or to (or for the benefit of) a . . . stockbroker . . . [or] financial institution . . . in connection with a securities contract." 11 U.S.C. § 546(e).

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Section 546(e) Transactions

A "stockbroker" is a "person-(A) with respect to which there is a customer . . . and (B) that is engaged in the business of effecting transactions in securities." 11 U.S.C. § 101(53A). ”Financial Institution” is defined broadly to include an entity that is a commercial or savings bank. § 101(22)

A "securities contract," in turn, is defined at length in sections 741(7)(A)(i)-(xi) of the Code as, inter alia, "a contract for the purchase, sale, or loan of a security." § 741(7)(A)(i)-(xi).

“Settlement Payments”: Broadly defined and commonly construed to as any transfer that concludes a securities transaction. See, e.g., Alfa, S.A.B. de C.V. v. Enron Creditors Recovery Corp. (In re Enron Creditors Recovery Corp.), 422 B.R. 423, 436 (S.D.N.Y. 2009) (also noting the breadth of the term “securities transaction”); Enron Corp. v. Int’l Fin. Corp. (In Re Enron Corp.), 341 B.R. 451, 456 (Bankr. S.D.N.Y. 2006) (“in securities industry, any transfer of cash or securities to complete a securities transaction in considered a settlement payment”) (internal quotations omitted).

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Section 546(e) Transactions

Section 546(e) was intended to promote stability and instill investor confidence in the commodities and securities markets. See H. Rep. No. 97-420, at 1 (1982), reprinted in 1982 U.S.C.C.A.N 583, 583 (stating the purpose of 546(e), as amended, is to protect "the stability of the market").

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Section 546(e) Cases

Recent Cases: Picard v. Katz, 462 B.R. 447 (S.D.N.Y. 2011); Picard v. J. Ezra Merkin, 11 MC 0012 (KMW) (S.D.N.Y. Aug. 31, 2011)

Geltzer v. Mooney (In re: MacMenamin’s Grill Ltd.), 450 B.R. 414 (Bankr. S.D.N.Y. April 21, 2011) (RDD); Picard v. Merkin (In re BMIS), 2010 WL 4643102 (Bankr. S.D.N.Y. Nov. 17, 2010).

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Other Defenses: Jurisdiction/Venue, Withdrawal of Reference and Standing Where should claims be brought--

District Court vs. Bankruptcy Court? Other Choice of Forum and Choice of

Law Issues when Off-shore Investment Vehicles are Involved

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Withdrawal of the Reference

Motion to Withdraw: motions to withdraw cases from Bankruptcy court into Federal district court

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Grounds for Withdrawal

Mandatory Withdrawal Where movant shows that,

absent withdrawal, bankruptcy judge would be obliged “to engage in significant interpretation, as opposed to simple application, of federal laws apart from the bankruptcy statutes.”

Permissive Withdrawal Generally in the

court’s discretion.

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Withdrawal Decisions

A number of references have been withdrawn by two Judges in BLMIS case

Becoming less of a hotbed of dispute

(at least in Madoff cases)

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Withdrawal Decisions

Picard v. Alpha Prime Fund Ltd.,11 Civ. 836 (JSR), Order dated Mar. 25, 2011

Picard v. JPMorgan Chase, et al., No. 11 Civ. 913 (CM), Order Dated May 23, 2011

Picard v. HSBC Bank PLC et al., No. 11 Civ. 763 (JSR), Order dated June 6, 2011

Picard v. Katz, No. 11 Civ. 3605 (JSR), Order dated July 5, 2011

Picard v. Flinn Invs., LLC, 11 Civ. 5223 (JSR), Order dated Nov. 28, 2011

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To Date, Specific Grounds for Withdrawing

Whether Trustee has standing to bring common law claims.

Whether the Trustee’s action is a “covered class

action” that is preempted by SLUSA.

Whether § 546(e) prevents the Trustee from avoiding fraudulent transfers except under § 548(a)(1)(A)

Whether the reports BLMIS issued created an

antecedent debt

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To Date, Specific Grounds for Withdrawing Whether the Trustee can avoid mandatory

withdrawals from IRAs as fraudulent Whether under Stern v. Marshall, the bankruptcy

court has the authority to render a final judgment or preliminary findings of fact and conclusions of law in the avoidance actions

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STANDING

Applicable to common law claims asserted by Trustee’s (e.g., claims for common law fraud, aiding and abetting, conversion, breach of fiduciary duty, unjust enrichment)

Picard v. JP Morgan Chase & Co., 460 B.R. 84 (S.D.N.Y. 2011) and Picard v. HSBC Bank PLC, 454 B.R. 25 (S.D.N.Y. 2011) Key Rulings:

1. Trustee lacks standing to pursue claims that properly belong to creditors. He is only empowered to pursue claims that properly belonged to the debtor before it entered into Bankruptcy.

2. Debtor cannot pursue because of in pari delicto (see Kirschner v. KMPG LLP, 15 N.Y.3d 446, 464 (2010)).

3. Subrogation contribution theories will not work. o But see Colbalt Multifamily Investors I, LLC v. Shapiro, 6 Civ. 6468 (KMW)

(S.D.N.Y. March 7, 2012) (suggesting different result in Connecticut and N.J.)

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Thank You Anthony L. Paccione, Chair NY Litigation

Department, Katten Muchin Rosenman LLP [email protected] 212.940.8502

Corey Weber, Partner, Ezra Brutzkus Gubner LLP [email protected] 818-827-9122

Jesse S. Finlayson, Partner, Finlayson Williams

Toffer Roosevelt & Lilly LLP [email protected] 949-759-3810

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