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No.

11IN THE

Supreme Court of the United States


THERESA ROSE RYAN, et. al., Petitioners, v. IRVING H. PICARD, as trustee for the liquidation proceeding of Bernard L. Madoff Investment Securities LLC AND SECURITIES INVESTOR PROTECTION CORPORATION, Respondents. ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF A PPEALS FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI


CAROLE NEVILLE SNR DENTON US LLP 1221 Avenue of the Americas New York, NY 10020 (212) 768-6700 Attorneys for Petitioners Listed in Appendix F (b) MATTHEW J. GOLD DAVID PARKER KLEINBERG K APLAN WOLFF COHEN 551 Fifth Avenue New York, NY 10176 (212) 986-6000 Attorneys for Petitioners Listed in Appendix F (c)
240303

HELEN DAVIS CHAITMAN Counsel of Record BECKER & POLIAKOFF LLP 45 Broadway New York, NY 10006 (212) 599-3322 HChaitman@ becker-poliakoff.com Attorneys for Petitioner Theresa Rose Ryan and all Petitioners Listed in Appendix F (a)

i QUESTION PRESENTED FOR REVIEW Did the Court of Appeals for the Second Circuit err in holding that a trustee, appointed under the Securities Investor Protection Act (SIPA) for the liquidation of a broker, has unlimited discretion to deny SIPC insurance to securities customers by dening net equity (i.e., a customers claim) in different ways, depending upon the particular circumstances of the case, despite (a) SIPAs clear and unambiguous denition of net equity; (b) SIPAs prohibition of the Securities Investor Protection Corporation (SIPC) changing the denition of net equity; and (c) the absence in SIPA, of any delegation of discretion to a SIPA trustee to change the denition of net equity.

ii PARTIES TO PROCEEDING BELOW The following individuals and entities are parties in the court below as reected on the Court of Appeals electronic ling docket: Irving H. Picard, Trustee of Bernard L. Madoff Investment Securities LLC (the Trustee), Securities and Exchange Commission, Securities Investor Protection Corporation, Sterling Equities Associates, Arthur Sidney Friedman, David Katz, Gregory Katz, Michael Katz, Saul Katz, L. Thomas Osterman, Marvin Tepper, Fred Wilpon, Jeff Wilpon, Richard Wilpon, Mets Limited Partnership, Theresa Rose Ryan, Diane Peskin, Roger Peskin, Maureen Ebel, Michael Epstein, Joan Epstein, Donald A. Benjamin, David Wingate, Sandra Busel Revocable Trust, Martin Lifton, Robert F. Ferber, Armand Lindenbaum, Linda Waldman, Mike Stein, Norman Feinberg, Sondra Feinberg, Ronald Gene Wohl Credit Shelter Trust, Thomas A. Sherman, Barbara Vogel, Robert J. Vogel, Howard Israel, Nancy Feldman, David Glodstein, Susan Glodstein, Brad E. Avergon, Cynthia B. Avergon, Ronnie Sue Ambrosino, Gross Associates, Sanford Harwood, Stephen Ehrlich, Leslie Ehrlich, Dara Norman Simons, Hannah P. Norman Revocable Trust, Paul Allen, Allen Family Trust, Cynthia Arenson, Ted Arenson, Jacqueline Avergon, Robert Avergon, William I. Bader, BerkowitzBlau Foundation, Inc., Morrey Berkowitz, Roz Bessel, Hemy Bessel, Michael Brillante, Anna Cohn, Russell Dusek, Sabra and Marvin Englebardt Retirement Plan, Alan English, Rita English, Mark Feldman, Leonard Forrest Revocable Trust, Barbara Gaba, Richard Gaba, Sol Ganes, Kuntzman Family LLC, Carla Ginsburg, Sidney Glodstein, Elaine Glodstein, Leslie Goldsmith, Susan Greer, WDG Associates Inc. Retirement Trust,

iii Robert Halio, Estelle Hardwood Family LP, Sanford Harwood Family LP, Toby Harwood, Annette Jungreis Trust, Irving Jungreis Trust, Saulius Kajota, Carol Kamenstein, Sloan Kamenstein, Tracy Kamenstein, Ken Kohl, Myrna Kohl, Miller Partnership, Miller Trust Partnership, Mishkin Family Trust, Grace Mishkin, William Mishkin, Carol Nelson, Stanley Nelson, Martin R. Harnick, Steven Norton, Preffer Family Trust, Realty Negotiators Inc. Dened Benet Plan, Marvin Plateis, Roberta Plateis, Alan Rosenthal, Linda Rosenthal, Helen Saren-Lawrence, Elaine Schaffer Revocable Trust, Elaine Ruth Schaffer, Alice Schindler, Jeffrey Shankman, Herbert Silvera, Shirley Stone, Gunther Unflat, Carla Szymanski Revocable Trust, Whitman Partnership, Wohl George Partners LP, Robert Yaffe, Triangle Properties #39, R.R. Rosenthal Associates, Michael Schur, Edith A. Schur, Lawrence Elins, Malibu Trading and Investing, L.P., Mary Albanese, The Brown Family Partnership, Allen Goldstein, Laurence Kaye, Rose Less, Gordon Bennett, The Aspen Company, Ann Denver, Norton Eisenberg, Export Technicians Inc., Stephen R. Goldenberg, Judith Rock Goldman, Albert J. Goldstein, U/W FBO Ruth E. Goldstein, Jerry Guberman, Anita Karimian, Michael Mathias, Stacey Mathias, Martin Rappaport, Paul J. Robinson, Bernard Seldon, Harold A. Thau, Herbert Barbanel, Alice Barbanel, Carl J. Shapiro, Andrew Jaffe Trust, U/D/T DTD 5/12/75 As Amended Appellant, Andrew N. Jaffe 1993 Irrev. Trust, U/D/T DTD 6/11/93 As Amended Appellant, Carl Shapiro Trust, U/D/T 4/9/03, Carl Shapiro and Ruth Shapiro Family Foundation, Ellen Jaffe Trust, U/D/T DTD 5/8/03 As Amended Appellant, Jaffe Family 2004 Irrevocable Trust, Jaffe GC-1 LLC, Jennifer Segal Herman Trust, U/D/T DTD 5/1/67 As Amended Appellant, Jennifer Segal

iv Herman 1985 Trust Dated 4/16/84 As Amended Appellant, Jonathan M. Segal 2007 Trust, Kimberly Strauss 1988 Trust, Kimberly Strauss 2006 Irrevocable Trust, L. Shapiro Family Trust, Linda Shapiro Family Trust Dated 12/03/76, Linda Shapiro Waintrup 1992 Trust, LSW 2006 Irrevocable Trust, Michael S. Jaffe Trust, U/D/T 9/25/71 As Amended Appellant, Michael Jaffe 1989 Trust, U/D/T DTD 8/24/89 As Amended Appellant, Michael S. Jaffe 2007 Trust, Rhonda Shapiro Zinner 1993 Trust, U/D/T DTD 7/7/93 As Amended Appellant, RSZ-JSH Partnership, Ruth Shapiro Trust, U/D/T 4/9/03, Samantha Strauss 1985 Trust, Samantha L. Strauss 2003 Irrevocable Trust, Shapiro Family CLAT Joint Venture, Shapiro Family Ltd. Partnership, Shapiro GGC-1 LLC, Steven C. Jaffe Trust, U/D/T DTD 9/25/71 As Amended Appellant, Steven Jaffe 1989 Trust, U/D/T DTD 8/24/89 As Amended Appellant, Steven C. Jaffe 2007 Trust, Michael Mann, Meryl Mann, Barry Weisfeld, Marsha Peshkin IRA, Ellen G. Victor, in her capacity as holder of Bernard L. Madoff Investment Securities LLC Accounts 1-ZA128-3 and 1-ZA128-4, Donald G. Rynne, Jeffrey A. Berman, Russell deLucia, Normal I. Lesser Rev. 11/97 Rev. Trust, Paula E. Lesser 11/97 Rev. Trust, Lawrence R. Velvel, Lee Mellis, Jean Pomerantz, and Bonnie Savitt. This list includes all Petitioners (set forth in Appendix F), as well as all appellants who have not joined in this Petition and who are being served as Respondents herein.

v RULE 29.6 STATEMENT None of the corporate Petitioners has a parent corporation and no publicly held company owns 10% or more of any corporate Petitioners stock.

vi TABLE OF CONTENTS Page QUESTION PRESENTED FOR REVIEW . . . . . PARTIES TO PROCEEDING BELOW . . . . . . . . . RULE 29.6 STATEMENT . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . TABLE OF APPENDICES . . . . . . . . . . . . . . . . . . . TABLE OF CITED AUTHORITIES . . . . . . . . . . . OPINIONS BELOW. . . . . . . . . . . . . . . . . . . . . . . . . . JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . STATUTORY PROVISIONS INVOLVED . . . . . . . STATEMENT OF THE CASE . . . . . . . . . . . . . . . . A. Nature of the Case . . . . . . . . . . . . . . . . . . . . . B. Proceedings Below . . . . . . . . . . . . . . . . . . . . . 1. 2. The Bankruptcy Courts Decision. . . . . The Court of Appeals Decision . . . . . . i ii v vi vii viii 1 1 2 3 5 6 7 8 9 12

REASONS TO GRANT THE PETITION . . . . . . . CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

vii TABLE OF APPENDICES Page APPENDIX A OPINION OF THE UNITED STAT E S C OU RT OF A PPEA LS FOR T H E SEC ON D CI RCU I T, DECI DED AUGUST 16, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .

1a

A PPEN DI X B CERT IFICAT ION OF NET EQUITY ORDER OF THE UNITED S TA T E S B A N K RU P T C Y C OU R T, SOUTHERN DISTRICT OF NEW YORK, DATED MARCH 8, 2010. . . . . . . . . . . . . . . . . . . . 28a APPENDIX C ORDER OF THE UNITED S TA T E S B A N K RU P T C Y C OU R T, SOUTHERN DISTRICT OF NEW YORK, DATED MARCH 8, 2010. . . . . . . . . . . . . . . . . . . . APPENDIX D MEMORANDUM DECISION IN THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK DECIDED MARCH 1, 2010 . .

36a

41a

A P P E N DI X E O R D E R D E N Y I N G PETITION FOR PA NEL REHEA RING AND REHEARING EN BANC OF THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT, DATED NOVEMBER 8, 2011 . . . . . . . . . . . . . . . . . . . . . . . 88a APPENDIX F ADDITIONAL PETITIONERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90a

viii TABLE OF CITED AUTHORITIES Page CASES Clark v. Martinez, 543 U.S. 371 (2005) . . . . . . . . . . . . . . . . . . . . . . . . . Conn. Natl Bank v. Germain, 503 U.S. 249 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . Greenery Rehab Group, Inc. v. Hammon, 150 F.3d 226 (2d Cir. 1998) . . . . . . . . . . . . . . . . . . . 10 9 10

In re Bernard L. Madoff Investment Securities, LLC, 654 F. 3d 229 (2d Cir. 2011) . . . . . . . . . . . . . . . . passim In re Bernard L. Madoff Investment Securities, LLC, 424 B. R. 122 (Bankr. S.D.N.Y. 2010) . . . . . . . . . 1, 7, 8 In re New Times Services, Inc., 371 F.3d 68 (2d Cir. 2003). . . . . . . . . . . . . . . . . . . . Kmart Corp. v. Cartier, Inc., 486 U.S. 281 (1988) . . . . . . . . . . . . . . . . . . . . . . . . . Securities and Exchange Commission v. Alan F. Hughes, Inc., 461 F.2d 974 (2d Cir. 1972) . . . . . . . . . . . . . . . . . . . 10 9

10

ix Cited Authorities Page Securities Exchange Commission v. Bernard L. Madoff Investment Securities LLC et al., No. 08 CV 10791 . . . . . . . . . . . . . . . . . . . . . . . . . . . SIPC v. Barbour, 421 U.S. 412 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . Tyler v. Douglas, 280 F.3d 116 (2d Cir. 2001) . . . . . . . . . . . . . . . . . . . United States v. Santos, 553 U.S. 507 (2008) . . . . . . . . . . . . . . . . . . . . . . . . . STATUTES AND RULES 15 U.S.C. 78ccc(b)(4)(A) . . . . . . . . . . . . . . . . . . . . . . 15 U.S.C. 78eee(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . 15 U.S.C. 78eee(a)(4)(A) . . . . . . . . . . . . . . . . . . . . . . 15 U.S.C. 78eee(b)(4) . . . . . . . . . . . . . . . . . . . . . . . . 15 U.S.C. 78eee(b)(5)(C). . . . . . . . . . . . . . . . . . . . . . 15 U.S.C. 78fff(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . 15 U.S.C. 78fff-3(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 5 6 6 6 5 5 5

6 10 10 10

15 U.S.C. 78lll(11) . . . . . . . . . . . . . . . . . . . . . . . . . 2, 5, 11

x Cited Authorities Page 28 U.S.C. 158(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 28 U.S.C. 158(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 28 U.S.C. 158(d)(2)(A)(i) . . . . . . . . . . . . . . . . . . . . . . 28 U.S.C. 1254(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . SIPCs Series 500 Rules, 17 C.F.R. 300.502 . . . . . OTHER AUTHORITY H.R. REP. 95-746 at 21 (1977) . . . . . . . . . . . . . . . . . . . Richard Nixon: Statement on Signing the Securities Investor Protection Act of 1970, THE A MERICAN PRESIDENCY PROJECT (Dec. 30, 1970), http://www.presidency.ucsb.edu/ws/? Pid =2870 .......................................... 11 2 2, 8 8 1 10

1 Petitioners respectfully petition for a writ of certiorari to review the order of the United States Court of Appeals for the Second Circuit (the Court of Appeals) in this case. OPINIONS BELOW The order of the Court of Appeals denying rehearing and rehearing en banc is not reported. (App. E, 88a). The opinion of the Court of Appeals is reported at In re Bernard L. Madoff Investment Securities, LLC (In re Madoff Securities), 654 F. 3d 229 (2d Cir. 2011). (App. A, 1a). The opinion of the Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) is reported at In re Madoff Securities, 424 B. R. 122 (Bankr. S.D.N.Y. 2010). (App. D, 41a). JURISDICTION This Court has jurisdiction under 28 U.S.C. 1254(1). The Court of Appeals entered judgment on August 16, 2011 pursuant to an August 16, 2011 order. (App. A, 1a). Petitioners timely led a motion for rehearing or rehearing en banc, which was denied on November 8, 2011. (App. E, 88a). The nal order of the Court of Appeals afrmed a nal order of the Bankruptcy Court (App. C, 36a) that, inter alia, af rmed a determination that Petitioners right to SIPC insurance was determined by their net investment (deposits less withdrawals) over the life of their accounts in some instances going back 40 years. (App. C, 39a). The order of the Bankruptcy Court recited that it was

2 a nal order pursuant to 28 U.S.C. 158(a)(1). (App. C, 39a). The Bankruptcy Court certied that an immediate appeal pursuant to 28 U.S.C. 158(d)(2) was appropriate because this proceeding involves a matter of public importance, and an immediate appeal may materially advance the progress of this proceeding. (App. B, 30a). The Court of Appeals also certied that the Bankruptcy Courts order met the criteria of 28 U.S.C. 158(d)(2)(A)(i), which permits direct appeal of a nal decision or order of a bankruptcy court where the order involves a question of law as to which there is no controlling decision of the court of appeals for the circuit or of the Supreme Court of the United States, or involves a matter of public importance. STATUTORY PROVISIONS INVOLVED 15 U.S.C. 78lll(11) provides in relevant part: (11) NET EQUITY. The term net equity means the dollar amount of the account or accounts of a customer, to be determined by (A) 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 ling date (i) all securities positions of such customer; minus (B) any indebtedness of such customer to the debtor on the ling date[.]

3 15 U.S.C. 78ccc(b)(4)(A) provides in relevant part: (b) POWERS In addition to the powers granted to SIPC elsewhere in this chapter, SIPC shall have the power **** (4) to adopt, amend, and repeal, by its Board of Directors, such rules as may be necessary or appropriate to carry out the purposes of this chapter, including rules relating to --(A) the denition of terms used in this chapter, other than those terms for which a de nition is provided in section 78lll of this title[.] STATEMENT OF THE CASE Congress established in SIPA a pervasive statutory scheme for the liquidation of a brokerage rm regulated by the Securities and Exchange Commission (the SEC), with the purpose of providing SIPC insurance to customers of a failed broker and thereby instilling condence in the capital markets. On December 30, 1970, when President Nixon signed SIPA into law, he made the following statement: I am signing today the Securities Investor Protection Act of 1970. This leg islation establishes the Securities Investor Protection Corporation (SIPC), a private nonprofit

4 corporation, which will insure the securities and cash left with brokerage rms by investors against loss from financial difficulties or failure of such rms. . . . Just as the Federal Deposit Insurance Corporation protects the user of banking services from the danger of bank failure, so will the Securities Investor Protection Corporation protect the user of investment services. Richard Nixon: Statement on Signing the Securities Investor Protection Act of 1970, THE AMERICAN PRESIDENCY PROJECT (Dec. 30, 1970), http://www.presidency.ucsb.edu/ ws/? Pid =2870. The issue in this case is whether SIPAs fundamental protection to investors through SIPC insurance can be abrogated by the judicial grant of unlimited discretion to a SIPC-appointed trustee to deny SIPC insurance by changing the de nition of net equity, where no such discretion exists in the statute. The Court of Appeals held that SIPAs clear and unambiguous denition of net equity does not prescribe a single means of calculation in the myriad circumstances that may arise in a SIPA liquidation and that [d]iffering fact patterns will inevitably call for differing approaches to ascertaining the fairest method for approximating net equity. In re Madoff Securities, 654 F.3d at 235. (App. A, 10-11a). The court concluded that, under the extraordinary facts of this case, a customers net equity priority claim may be calculated by wip[ing] out all events of a customers investment history except for cash deposits and withdrawals, even though a customers last account statement will likely be the most appropriate means of

5 calculating net equity in more conventional cases. Id. at 238. (App. A, 18a). The promise of SIPC insurance, which Congress mandated to instill condence in the capital markets, is thus purely illusory because no investor could ever know, until after he suffers a loss, whether the trustee will dene net equity in such a way as to entitle him to SIPC insurance. Moreover, the SIPA statutory scheme provides that a SIPC trustees legal fees are paid by SIPC. See 15 U.S.C. 78eee(b)(5)(C). Thus, the trustee, who is beholden to SIPC for payment of his legal fees, is given discretion to decide whether or not SIPC is obligated to pay insurance to each investor. The Court of Appeals, then, has retroactively destroyed a customers ability to rely upon SIPC insurance for his investment as indicated on the account statements issued by his broker which, in this era of electronic trading, is the only evidence any investor has of what he owns. A. Nature of the Case This case arises out of the SIPA liquidation of Bernard L. Madoff Investment Securities LLC (Madoff Securities), an SEC-regulated broker, a member of SIPC, and a contributor to the SIPC fund that Congress created to provide for prompt payment and satisfaction of net equity claims of customers, usually by replacing missing securities. See 15 U.S.C. 78fff-3(a); 78fff(a)(1). SIPA denes net equity as the amount the broker owes a customer for the customers securities positions, minus any indebtedness of the customer to the broker, on the date of the brokers SIPA ling. See 15 U.S.C. 78lll(11). SIPA prohibits SIPC from changing the denition of net equity. 15 U.S.C. 78ccc(b)(4)(A).

6 Yet, the Court of Appeals held that the term net equity has no single fixed meaning; rather, net equity may be de ned differently depending on the circumstances. See In re Madoff Securities, 654 F. 3d at 235. (App. A, 10a). In this case, the Trustee could dene net equity so as to deprive more than half of Madoff Securities customers of SIPC insurance by limiting coverage to a customers net investment over the life of the account, including the transferor accounts of the customers parents and grandparents. The customers nal statement was deemed irrelevant; the customers balance on which he paid federal income taxes was deemed irrelevant. B. Proceedings Below The proceeding was initiated by the SEC, which led an action in the United States District Court for the Southern District of New York captioned Securities Exchange Commission v. Bernard L. Madoff Investment Securities LLC et al., No. 08 CV 10791. On December 15, 2008, pursuant to 15 U.S.C. 78eee(a)(4)(A), the SEC consented to a combination of the action with an action led by SIPC pursuant to 15 U.S.C. 78eee(a)(3) in which SIPC alleged, inter alia, that Madoff Securities was not able to meet its obligations to securities customers as they came due and, accordingly, its customers needed the protection afforded by SIPA. Also on December 15, 2008, the District Court entered an order which, inter alia, referred the case to the Bankruptcy Court pursuant to 15 U.S.C. 78eee(b)(4). Pursuant to an order entered by the Bankruptcy Court on December 23, 2008, Petitioners led written

7 statements of claim for the market value of their securities positions, as reected on the last account statements received from Madoff Securities. The Trustee denied the claims to the extent they exceeded the Petitioners historical net investment, going back through generations of account holders.1 Petitioners led timely objections to the Trustees determinations. 2 On September 16, 2009, the Bankruptcy Court entered an order providing for brie ng on the Trustees interpretation of net equity. All rights were reserved as to other issues and the customers were specically denied the right to take any discovery. 3 1. The Bankruptcy Courts Decision

The Bankruptcy Court issued its decision on March 1, 2010 (App. D, 41a) followed by an order on March 8, 2010. (App. C, 36a). The Bankruptcy Court held that the net equity denition may be susceptible to differing formulations depending upon the underlying factual disparities of a brokers fraud. In re Madoff Securities, 424 B.R. at 137. (App. D, 72a). Because astounding sums were lost in the brokers fraud, the Bankruptcy Court concluded that [e]quality is achieved in this case by employing the Trustees method, which looks solely to
1. Declaration of Helen Davis Chaitman dated November 13, 2009, Appellants Joint Appendix (J.App.) at 565-66 (V. I); Transaction History Charts annexed to Notice of Trustees Determination of Claim, J.App.- 658 and 690 (V. II.). 2. ECF Docket Report for Adv. Pro. No. 08-01789 (Bankr. S.D.N.Y.) (BRL) (the Docket Report), J.App.-19 to 128 (V. I.). 3. Docket Report, J.App.-115 (V. I.).

8 deposits and withdrawals that in reality occurred and that honoring customer statements would improperly distribute customer funds based on Madoffs arbitrary design. Id. at 142. (App. D, 83a). The Bankruptcy Court held that the Trustees Net Investment Method is the more equitable and appropriate way to determine Net Equity. Id. (App. D, 85a). The Bankruptcy Court certified its order under 28 U.S.C. 158(d)(2) as involving a matter of public importance, as to which an immediate appeal may materially advance the progress of this proceeding. (App. B, 30a). 2. The Court of Appeals Decision

The Court of Appeals also certied that the Bankruptcy Courts order met the criteria of 28 U.S.C. 158(d)(2)(A)(i). The Court of Appeals af rmed the Bankruptcy Courts order. In re Madoff Securities, 654 F. 3d at 242. (App. A, 27a). It recognized that customers of Madoff Securities have claims for securities based on their statements, but ruled that their net equity claims, for purposes of determining entitlement to SIPC insurance and distributions from the fund of customer property, could be calculated based upon the net cash deposited over the course of their relationship with their broker, rather than in accordance with SIPAs denition of net equity. The Court held that its ruling was appropriate because no securities were purchased by Madoff Securities and because payment by SIPC out of funds assessed from its members would diminish the funds available to other customers (a presumed fact which is insupportable based upon SIPA). See In re Madoff Securities, 654 F. 3rd at 240. (App. A, 21-22a).

9 REASONS TO GRANT THE PETITION This Court should grant the writ of certiorari because the Court of Appeals has decided an important question of federal law that is one of rst impression and that has not been, but should be, settled by this Court. With the stroke of its pen and in deance of this Courts precepts of legislative interpretation, the Court of Appeals abrogated the entire SIPA statutory scheme and nullied a federal law fundamental to the successful operation of the capital markets. Contrary to the clear language of SIPA, the Court of Appeals has given every SIPC trustee the authority to determine, after a loss, the extent (if at all) to which SIPC shall be required to provide the promised SIPC insurance to each injured investor. Unless this Court settles this critical federal issue, all securities investors will lose the condence that SIPA was intended to instill in the capital markets. No longer can any securities customer rely upon SIPC insurance because a customer cannot know, until after a loss, whether the trustee appointed in his particular case will chose to follow the SIPA denition of net equity or devise some other formulation of distribution based upon his own sense of fairness and/or SIPCs desire to conserve its funds. Congress, not the Second Circuit, determines the law. And when, as in this case, the words of a statute are unambiguous, then, this rst canon is also the last: judicial inquiry is complete. Conn. Natl Bank v. Germain, 503 U.S. 249, 253-54 (1992) (internal citations omitted); see Kmart Corp. v. Cartier, Inc., 486 U.S. 281, 281 (1988) (If the statute is clear and unambiguous, courts must give effect to Congress unambiguously expressed intent[.]);

10 see Tyler v. Douglas, 280 F.3d 116, 122 (2d Cir. 2001) (same); accord Greenery Rehab Group, Inc. v. Hammon, 150 F.3d 226, 231 (2d Cir. 1998) (If the statutory terms are unambiguous, our review generally ends and the statute is construed according to the plain meaning of its words.). Congress clear intent to instill condence in the capital markets by protecting a customers legitimate expectations has been destroyed by the Second Circuits decision. See SIPC v. Barbour, 421 U.S. 412, 415 (1975) (Congress enacted the SIPA . . . to restore investor condence in the capital markets . .); In re New Times Services, Inc., 371 F.3d 68, 87 (2d Cir. 2003) (SIPA is intended to promot[e] investor condence in the securities markets and protec[t] broker-dealer customers.); Securities and Exchange Commission v. Alan F. Hughes, Inc., 461 F.2d 974, 977 (2d Cir. 1972) (SIPA was enacted by Congress in 1970 to afford protection to securities customers in the event broker-dealers with whom they transact business encounter nancial difculties and are unable to satisfy their obligations.); see also, SIPCs Series 500 Rules, 17 C.F.R. 300.502 (protecting customers legitimate expectations). The Court of Appeals has also violated this Courts precept that giving the same statutory text different meanings in different cases is a dangerous principle that would render [a statute] a chameleon. Clark v. Martinez, 543 U.S. 371, 382 (2005); see United States v. Santos, 553 U.S. 507, 522 (2008) (plurality opinion) ([T]he meaning of words in a statute cannot change with the statutes application.). Yet, here, the Court of Appeals has decreed that every SIPC trustee can invent his own distribution scheme.

11 SIPAs net equity denition assures customers that they can rely on the statements they receive from their brokers because it requires SIPC insurance to be paid based upon the amount the broker owes them, as reected on their last statement. See 15 U.S.C. 78lll(11). The Court of Appeals reliance on the fact that Madoff Securities did not purchase the securities reected on the customer statements cannot justify abrogating the statute. Indeed, in enacting the net equity denition, Congress clearly intended to replace customer securities even if those securities were never purchased. A customer generally expects to receive what he believes is in his account at the time the stockbroker ceases business. But because securities may have been lost, improperly hy pothecat ed, misappropriated , never purchased, or even stolen, this is not always possible. Accordingly, [when this is not possible, customers] will receive cash based on the market value as of the ling date. H.R. REP. 95-746 at 21 (1977) (emphasis added). Thus, the Cour t of Appeals decision v iolates fundamental precepts of legislative interpretation, the clear and unambiguous language of SIPA, and the clear intent of Congress in enacting SIPA. This Courts review of the Court of Appeals decision is necessary to prevent judicial nullification of a statute on which investors reasonably relied.

12 CONCLUSION In order to avoid a judicial nullication of SIPA, the Petitioners respectfully request that this Court grant their petition for a writ of certiorari. Dated: New York, New York February 3, 2012 Respectfully submitted, HELEN DAVIS CHAITMAN Counsel of Record BECKER & POLIAKOFF LLP 45 Broadway New York, NY 10006 (212) 599-3322 HChaitman@ becker-poliakoff.com Attorneys for Parties Listed in Appendix F (a) CAROLE NEVILLE SNR DENTON US LLP 1221 Avenue of the Americas New York, NY 10020 (212) 768-6700 Attorneys for Parties Listed in Appendix F (b)

13 MATTHEW J. GOLD DAVID PARKER KLEINBERG K APLAN WOLFF COHEN 551 Fifth Avenue New York, NY 10176 (212) 986-6000 Attorneys for Parties Listed in Appendix F (c)