19-995

In Re: Bernard L. Madoff Investment Securities LLC (Marshall v. Capital Growth Co.)

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. 

CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS 

PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 

32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER 

IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE 

FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION 

ASUMMARY ORDER@). A PARTY CITING TO A SUMMARY ORDER MUST SERVE 

A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 

At a stated term of the United States Court of Appeals for the Second Circuit, 

held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the 

City of New York, on the 16th day of June, two thousand twenty.

PRESENT:

PIERRE N. LEVAL,

PETER W. HALL,

GERARD E. LYNCH,

Circuit Judges.

_____________________________________

IN RE: BERNARD L. MADOFF INVESTMENT 

SECURITIES LLC,

Debtor, 19-995-bk

_____________________________________

SUSANNE STONE MARSHALL, ADELE FOX, 

MARSHA PESHKIN, RUSSELL OASIS,
2

Appellants,

v.

CAPITAL GROWTH COMPANY, DECISIONS 

INCORPORATED, FAVORITE FUNDS, JA PRIMARY 

LIMITED PARTNERSHIP, JA SPECIAL LIMITED 

PARTNERSHIP, JAB PARTNERSHIP, JEMW PARTNERSHIP, 

JF PARTNERSHIP, JFM INVESTMENT COMPANIES, JLN 

PARTNERSHIP, JMP LIMITED PARTNERSHIP, JEFFRY M.

PICOWER SPECIAL COMPANY, JEFFRY M. PICOWER, P.C., 

THE PICOWER FOUNDATION, THE PICOWER INSTITUTE 

OF MEDICAL RESEARCH, THE TRUST F/B/O GABRIELLE 

H. PICOWER, BARBARA PICOWER, individually, and as 

Executor of the Estate of Jeffry M. Picower, and as Trustee for 

the Picower Foundation and for the Trust f/b/o Gabrielle H. 

Picower, IRVING H. PICARD, Trustee for the Liquidation of 

Bernard L. Madoff Investment Securities LLC,

Appellees,

_____________________________________

For Appellants: LANCE GOTTHOFFER, (Helen Davis 

Chaitman, on the brief), Chaitman

LLP, New York, New York.

For Appellees the “Picower Parties”*: GARY STEIN (William D. Zabel, 

Jennifer M. Opheim, Randall T. 

Adams, Abigail F. Coster, on the 

* The “Picower Parties” refers to Appellees Capital Growth Company, Decisions 

Incorporated, Favorite Funds, JA Primary Limited Partnership, JAB Partnership, JEMW 

Partnership, JF Partnership, JFM Investment Companies, JLN Partnership, JMP Limited 

Partnership, Jeffry M. Picower, P.C., The Picower Foundation, The Picower Institute of 

Medical Research, The Trust f/b/o Gabrielle H. Picower, Barbara Picower, individually, 

and as Executor of the Estate of Jeffry M. Picower, and as Trustee for the Picower 

Foundation and for the Trust f/b/o Gabrielle H. Picower.
3

brief), Schulte Roth & Zabel LLP, 

New York, NY.

For Appellee Irving H. Picard, 

Trustee for the Liquidation of Bernard 

L. Madoff Investment Securities LLC: AMY E. VANDERWAL (David J. 

Sheehan, Keith R. Murphy, Ferve 

Khan, on the brief), Baker & Hostetler 

LLP, New York, NY.

1

2 Appeal from a judgment of the United States District Court for the Southern

3 District of New York (Broderick, J.).

4 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, 

5 ADJUDGED, AND DECREED that the judgment of the District Court is 

6 AFFIRMED.

7 I. BACKGROUND

8 Appellants Susanne Stone Marshall, Adele Fox, Marsha Peshkin, and 

Russell Oasis 1 9 (the “Fox Plaintiffs”)—former clients of Bernard L. Madoff 

10 Investment Securities LLC (“BLMIS”)—filed a complaint in the United States 

11 Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) 

12 seeking a declaration that their Third Amended Complaint (“TAC”) asserted 

13 claims that were not barred by an automatic stay and permanent injunction 

1 Individually and on behalf of similarly situated parties.
4

1 resulting from a global settlement (the “Settlement”) approved by the Bankruptcy 

2 Court. The Fox Plaintiffs’ TAC—which they seek to file in the United States 

3 District Court for the Southern District of Florida—asserts claims against a number 

of parties affiliated with Jeffrey M. Picower2 4 (collectively, the “Picower Parties”), 

5 a former business associate of Bernard L. Madoff (“Madoff”).

6 In 2008, after Madoff’s Ponzi scheme came to light and he was arrested, 

7 BLMIS entered into liquidation proceedings pursuant to the Securities Investor 

8 Protection Act (“SIPA”). 15 U.S.C. § 78aaa et seq. The liquidation trustee for the 

9 BLMIS estate, Irving H. Picard (the “Trustee”), initiated adversary proceedings 

10 against the Picower Parties to recover fraudulent transfers made by BLMIS to the 

11 Picower Parties during the operation of Madoff’s Ponzi scheme. In 2011, the 

12 Trustee, the Picower Parties, and the government entered into the Settlement, 

13 under which the Picower Parties agreed to pay $5 billion to the Trustee and forfeit 

14 $2.2 billion to the government.

15 In their TAC, the Fox Plaintiffs assert a control person claim pursuant to 

16 § 20(a) of the Securities Exchange Act, 15 U.S.C. § 78t(a), alleging that Picower

17 controlled Madoff and BLMIS in the creation and perpetuation of the Ponzi 

2 Picower died in October 2009.
5

1 scheme. The dispositive issues on appeal are whether the Fox Plaintiffs have 

2 adequately alleged a control person claim and whether that claim is derivative of 

3 claims that were or could have been brought by the Trustee during the SIPA 

4 liquidation proceedings.

5 A. Madoff’s Ponzi Scheme

6 Madoff’s Ponzi scheme is detailed in numerous decisions of the Bankruptcy 

7 Court, the district courts, and this Court. E.g., Picard v. Ida Fishman Revocable Trust

8 (In re BLMIS), 773 F.3d 411, 414–15 (2d Cir. 2014), cert. denied, 135 S. Ct. 2859 (2015). 

9 To summarize:

10 Madoff claimed he was investing BLMIS’s customers’ funds in stocks 

11 and then hedging with option trades. In reality, Madoff never 

12 invested any of the funds. Instead, BLMIS generated fictitious 

13 account statements reflecting trades that were never actually 

14 completed and profits that were never actually generated. Because 

15 BLMIS was not actually generating profit, it paid customers who 

16 withdrew funds with the proceeds of other customers’ investments. 

17 Eventually, BLMIS was unable to meet its customers’ demands for 

18 withdrawals, and the scheme collapsed.

19

20 A & G Goldman P’ship v. Picard (In re BLMIS) (“Goldman III”), 739 F. App’x 679, 681 

21 (2d Cir. 2018) (summary order) (internal citations omitted).
6

1 B. The Settlement with the Picower Parties

2 In May 2009, the Trustee initiated adversary proceedings in the SIPA 

3 liquidation against Jeffry Picower and the Picower Parties to recover money that 

4 BLMIS had fraudulently transferred to the Picower Parties between 1995 and 2008. 

5 In those actions, the Trustee alleged that the Picower Parties benefited from the 

6 Ponzi scheme and either knew or should have known that BLMIS was a Ponzi 

7 scheme; the Trustee also alleged that the Picower Parties directed BLMIS 

8 employees to create fictitious trading records for their accounts, enabling them to 

withdraw billions of dollars from BLMIS before the scheme collapsed. 3 9 In 

10 January 2011, the Bankruptcy Court approved the Settlement, whereby the 

11 Picower Parties agreed to pay $5 billion to the Trustee and forfeit $2.2 billion to 

12 the government. Pursuant to Section 105(a) of the Bankruptcy Code, the 

13 Bankruptcy Court issued a permanent injunction when it approved the 

Settlement.4 14 The relevant portion of the injunction states:

15 [A]ny BLMIS customer or creditor of the BLMIS estate . . . is hereby 

16 permanently enjoined from asserting any claim against the Picower 

17 [Parties] that is duplicative or derivative of the claims brought by the 

3 The Government separately pursued a civil forfeiture action against the Picower 

Parties. See 18 U.S.C. § 981(a)(1)(C).

4 The permanent injunction was in addition to the automatic stay that already existed 

during the course of the liquidation proceedings. See 11 U.S.C. § 362.
7

1 Trustee, or which could have been brought by the Trustee against the 

2 Picower [Parties] . . . .

3

4 App’x 499.

5 Two of the Fox Plaintiffs—Adele Fox and Susanne Marshall—objected to 

6 the Settlement and permanent injunction, but their challenges were overruled by 

7 the Bankruptcy Court. The District Court affirmed the Bankruptcy Court’s 

8 ruling, as did we. Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 429 B.R. 

9 423 (Bankr. S.D.N.Y. 2010), aff’d Fox v. Picard, (In re Madoff), 848 F. Supp. 2d 469 

10 (S.D.N.Y. 2012), aff’d Fox v. Picard, (In re BLMIS) (“Fox I”), 740 F.3d 81 (2d Cir. 2014).

11 C. Prior Attempts to Sue the Picower Parties

12 Prior to and since the issuance of the permanent injunction, two groups of

13 putative class-action plaintiffs—the Fox Plaintiffs and another group of former 

14 Madoff clients, the “Goldman Plaintiffs”—have repeatedly attempted to assert 

15 claims, independent of the bankruptcy proceedings, against the Picower Parties to 

16 recover lost investments. A total of twelve decisions has been issued rejecting 

those claims.5 17 In several of these prior actions, the Fox and Goldman Plaintiffs 

5 See Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Bernard L. Madoff), 429 

B.R. 423 (Bankr. S.D.N.Y. 2010), aff’d Fox v. Picard (In re Bernard L. Madoff), 848 F. Supp. 2d 

469 (S.D.N.Y. 2012), aff’d Fox v. Picard, (In re BLMIS), 740 F.3d 81 (2d Cir. 2014); and Sec. 

Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 477 B.R. 351 (Bankr. S.D.N.Y. 2012), aff’d 

In re Bernard L. Madoff Inv. Sec., LLC, No. 12 CIV. 6109 RJS, 2013 WL 5511027 (S.D.N.Y. 
8

1 have attempted to circumvent the permanent injunction through claims against 

2 the Picower Parties, asserting that Picower is liable as a “control person” under 

3 § 20(a) of the Securities Exchange Act. Every court that has considered these 

4 claims has ruled that the complaints against the Picower Parties were barred by 

the permanent injunction.6 5

6 D. The Third Amended Complaint

7 The Fox Plaintiffs’ TAC, which they attached to their complaint for 

declaratory judgment, 7 8 seeks compensatory and punitive damages from the

9 Picower Parties. The TAC asserts six claims against the Picower Parties, 

10 including a claim for control person liability under § 20(a) of the Securities 

Sept. 30, 2013); and Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 511 B.R. 375 

(Bankr. S.D.N.Y. 2014), aff’d In re Bernard L. Madoff Inv. Sec. LLC, 531 B.R. 345 (S.D.N.Y. 

2015); and Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 546 B.R. 284 (Bankr. 

S.D.N.Y. 2016), aff’d In re Bernard L. Madoff Inv. Sec. LLC, 565 B.R. 510 (S.D.N.Y. 2017), aff’d, 

739 F. App’x 679 (2d Cir. 2018); and Sec. Inv’r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC, 

568 B.R. 203 (Bankr. S.D.N.Y. 2017), aff’d, 598 B.R. 102 (S.D.N.Y. 2019) (decision below).

6 See 477 B.R. 351 (Bankr. S.D.N.Y. 2012), aff’d No. 12 CIV. 6109 RJS, 2013 WL 5511027 

(S.D.N.Y. Sept. 30, 2013); and 511 B.R. 375 (Bankr. S.D.N.Y. 2014), aff’d 531 B.R. 345 

(S.D.N.Y. 2015); and 546 B.R. 289 (Bankr. S.D.N.Y. 2016), aff’d 565 B.R. 510 (S.D.N.Y. 2017), 

aff’d, 739 F. App’x 679 (2d Cir. 2018); and 568 B.R. 203 (Bankr. S.D.N.Y. 2017), aff’d, 598 

B.R. 102 (S.D.N.Y. 2019).

7 The Fox Plaintiffs’ complaint for a declaratory judgment, filed pursuant to Rule 7001 

of the Federal Rules of Bankruptcy Procedure, seeks a declaration that neither the 

permanent injunction nor the automatic stay provisions of 11 U.S.C. § 362 prohibit them 

from filing and prosecuting their proposed TAC.
9

1 Exchange Act, as well as claims for violations of both federal and Florida RICO 

2 statutes, and Florida common law. On appeal, the Fox Plaintiffs have confined 

3 their arguments to whether their control person claim is properly pleaded and 

4 whether that claim alleges a particularized injury so that the claim is not barred by 

5 the permanent injunction. We, therefore, limit our analysis to resolving those 

6 issues. See, e.g., United States v. Joyner, 313 F.3d 40, 44 (2d Cir. 2002) (“It is well 

7 established that an argument not raised on appeal is deemed abandoned . . . .” 

8 (internal quotation marks omitted)).

9 1. New Allegations

10 Before the district court, the Fox Plaintiffs argued that the TAC differs from 

11 their prior complaints because it makes two new allegations relevant to the control 

12 person claim: first, that Picower made loans to BLMIS to support the Ponzi 

13 scheme; and second, that Picower agreed to be listed as a counterparty in various 

14 fictitious options trades. These allegations have already been considered and 

15 found insufficient in Goldman III and the Fox Plaintiffs do not rely on them on 

16 appeal. See id., 739 F. App’x at 685–86. We therefore deem them abandoned. 

17 See Joyner, 313 F.3d at 44. Instead, they advance arguments grounded in two new 

18 sources of evidence.
10

1 2. New Sources of Evidence

2 (a) The Madoff Deposition

3 The Fox Plaintiffs rely on two new sources of information that pertain to 

4 Picower’s alleged control of BLMIS; they assert these new sources distinguish their 

5 TAC from the complaint in Goldman III. First, the TAC references a deposition of 

6 Madoff taken in 2012 during an unrelated case, In re Optimal U.S. Litig., 837 F. 

7 Supp. 2d 244 (S.D.N.Y. 2011) (the “Madoff Deposition”), which the Fox Plaintiffs 

8 attached to their TAC. In the Madoff Deposition, Madoff generally describes the 

9 origins and operation of his fraud.

10 There are also sections of the deposition in which Madoff discusses 

11 Picower’s relationship with the Ponzi scheme. Madoff describes how it was 

12 “primarily Picower” and another client who pressured Madoff into assuming a 

13 risky investment position that would later lead to Madoff becoming billions of 

14 dollars in debt which in turn spurred the creation of the Ponzi scheme. App’x 96. 

15 Madoff also relates that he was personally very close to Picower—Madoff was the 

16 executor of Picower’s estate—and he alludes to the fact that he had information 

17 implicating Picower in some sort of illegal activity. Aside from asserting that tax 
11

1 laws were broken, however, Madoff did not elaborate on any other information he 

2 may have about any alleged illegality committed by Picower.

3 In the deposition, Madoff also takes responsibility for the creation of the 

4 Ponzi scheme. He describes his decisions in the first person. See App’x 97 (“So 

5 I foolishly decided that I would step in, and I would take their position on the short 

6 side of the option . . . .”); id. at 98 (“I decided to take this [hedge fund] money in.”); 

7 id. at 100 (“So I made my second blunder, and I said, okay. Look, I’ll shorten the 

8 position goal . . . .”); id. (“I wasn’t executing the transaction correctly. So the 

9 transaction is now a bogus transaction.”). More directly, when asked why he 

10 created his giant Ponzi scheme, Madoff responded:

11 Well, because I allowed myself foolishly, as I said, to be trapped 

12 into something. And what I looked at as being a temporary 

13 situation, that was going to work out well for everyone, my clients, as 

14 well as myself, I, you know, decided to take the risk and convinced 

15 myself that it was going to work out.

16

17 I then, after awhile, became aware of the fact that I was not 

18 going to be able to extricate myself from this mess, and then didn’t 

19 have the courage or the character, you know, to—to fess up to it.

20

21 App’x 111.
12

1 (b) The Madoff Declaration

2 The second new source of information that the Fox Plaintiffs rely on as a 

3 basis for their control person claim is a declaration by Madoff (the “Madoff 

4 Declaration”) made on November 17, 2015, in connection with another unrelated 

5 case. In it, Madoff asserts that “[p]ost 1990, I was put under enormous financial 

6 pressure by Jeffry Picower, who created the fraud I perpetrated and who was, by 

7 far, the primary beneficiary of the fraud. In order to raise money, I began to 

8 defraud my customers but I never sent checks to customers who did not request 

9 withdrawals in writing.” App’x 1484. Madoff went on to state, “the 

10 government and the Trustee have placed great reliance on the testimony of Frank 

11 DiPascali who, after Picower and me, bore the most responsibility for the fraud we 

12 perpetrated.” Id.

13 E. Procedural History

14 On March 7, 2017, the Bankruptcy Court (Bernstein, B.J.) dismissed the Fox 

15 Plaintiffs’ complaint for a declaratory judgment, concluding that their TAC 

violated the permanent injunction because it contained only derivative claims.8 16 

8 Although the Fox Plaintiffs also challenged the automatic stay in place pursuant to 11 

U.S.C. § 362, the Bankruptcy Court did not reach that issue because it found that the 

permanent injunction independently barred the Fox Plaintiffs’ claims. See Fox v. Capital 

Growth Co., 568 B.R. at 217 n.16 (Bankr. S.D.N.Y. 2017).
13

1 See 568 B.R. at 217 (holding that the Fox Plaintiffs “failed to identify a 

2 particularized injury suffered by any putative class member” because “[a]ll of the 

3 BLMIS investors suffered the same indirect injury resulting from the theft of the 

4 customer property and the demise of BLMIS and could assert the same claim”).

5 After the Bankruptcy Court ruled that the Fox Plaintiffs’ TAC sought to 

6 assert duplicative claims and dismissed their complaint for declaratory judgment, 

7 the plaintiffs appealed to the District Court. On March 20, 2019, the District Court 

8 (Broderick, J.) entered a judgment affirming the decision of the Bankruptcy Court. 

9 The Fox Plaintiffs timely appealed.

10 II. Discussion

11 “In an appeal from a district court’s review of a bankruptcy court decision, 

12 we review the bankruptcy court decision independently, accepting its factual 

13 findings unless clearly erroneous but reviewing its conclusions of law de novo.” 

14 Ball v. A.O. Smith Corp., 451 F.3d 66, 69 (2d Cir. 2006) (internal quotation marks 

omitted).9 15

9 There appears to be some confusion over which standard of review to apply in these 

types of appeals:

There is an apparent tension in our case law regarding the standard of 

review for the bankruptcy court’s determination that the claim at issue in 

the complaint is derivative of the Trustee’s claims. In [Fox I], a case 
14

1 In deciding whether the Fox Plaintiffs’ TAC asserts a § 20(a) control person 

2 claim that is derivative or duplicative of the claims that the Trustee asserted (or 

3 could have asserted) against the Picower Parties, and is thus enjoined, we must 

4 determine if their claim “arise[s] from harm done to the estate and . . . seek[s] relief 

5 against third parties that pushed the debtor into bankruptcy.” In re Tronox Inc., 

6 855 F.3d 84, 100 (2d Cir. 2017) (internal quotation marks omitted). If a creditor’s 

7 claim “is a general one, with no particularized injury arising from it, and if that 

involving the same exact injunction at issue here and a similar procedural 

posture, we noted that “[t]he standard of review for the grant of a 

permanent injunction, including an anti-suit injunction, is abuse of 

discretion.” 740 F.3d 81, 87 (2d Cir. 2014) (quoting Paramedics 

Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs., Inc., 369 F.3d 645, 

651 (2d Cir. 2004)) (alteration in original). More recently, in In re Tronox 

Inc., we articulated the distinction that, although the lower court’s 

interpretation of the scope of the injunction was “entitled to deference[,]”

the purely legal question of whether the claims at issue were derivative of 

the trustee’s claims was subject to de novo review. 855 F.3d 84, 99 & n.20 

(2d Cir. 2017). We need not resolve this apparent tension, however, 

because we would affirm the bankruptcy court under the more demanding 

de novo review.

Goldman III, 739 F. App’x at 683 n.1. Here, however, there is no confusion over which 

standard to employ. It is well settled that a court abuses its discretion when it makes an 

error of law in deciding how to exercise that discretion. See In re Aquatic Development 

Group, Inc., 352 F.3d 671, 678 (2d Cir. 2003). A bankruptcy court’s determination of 

whether a claim is derivative is a question of law reviewed de novo. See Tronox, 855 F.3d 

at 99; see also id. at n.20. In this case, neither party questions the scope of the injunction, 

and therefore we review the Bankruptcy Court’s decision de novo. Id.; Ball, 451 F.3d at 

69.
15

1 claim could be brought by any creditor of the debtor, the trustee is the proper 

2 person to assert the claim, and the creditors are bound by the outcome of the 

3 trustee’s action.” Id. (internal quotation marks omitted); accord 598 B.R. at 111 

4 (decision below); Goldman III, 739 F. App’x at 684. By contrast, a non-derivative 

5 claim arises from injury that is particularized to the creditor. Id.

6 We have said that “[i]n distinguishing derivative claims from particularized 

7 claims exclusive to individual creditors, labels are not conclusive, since plaintiffs 

8 often try, but are not permitted, to plead around a bankruptcy.” In re Tronox Inc., 

9 855 F.3d at 100. To determine whether a plaintiff’s claim is derivative, we will 

10 “inquire into the factual origins of the injury and, more importantly, into the 

11 nature of the legal claims asserted.” Id. (internal quotation marks omitted). 

12 Here, our job is thus to peek behind the label of the Fox Plaintiffs’ § 20(a) control 

13 person claim to determine whether the Fox Plaintiffs have alleged a particularized 

14 injury—one that is separate from and not covered by the claims already brought 

(or those that could have been brought) by the Trustee.10 15

16 Section 20(a) is a creature of securities law. See Janus Capital Grp., Inc. v. 

10 As we explained in Goldman III, a fraudulent conveyance claim is “a claim commonly 

arising in bankruptcy proceedings” and “is ‘usually brought by the trustee, for the benefit 

of all creditors.’” 739 F. App’x at 684 (quoting Fox I, 740 F.3d at 91).
16

1 First Derivative Traders, 564 U.S. 135, 146 (2011) (explaining that Congress 

2 established liability in § 20(a) for violations of the securities laws); Morrison v. Nat’l 

3 Australia Bank Ltd., 561 U.S. 247, 253 n.2 (2010) (“Liability under § 20(a) is obviously 

4 derivative of liability under some other provision of the [Securities] Exchange Act 

5 [of 1934].”). The relevant portion of the statute provides:

6 [e]very person who, directly or indirectly, controls any person liable 

7 under any provision of this chapter or of any rule or regulation 

8 thereunder shall also be liable jointly and severally with and to the 

9 same extent as such controlled person to any person to whom such 

10 controlled person is liable . . ., unless the controlling person acted in 

11 good faith and did not directly or indirectly induce the act or acts 

12 constituting the violation or cause of action.

13

14 15 U.S.C. § 78t(a). “To establish a prima facie case of control person liability, a 

15 plaintiff must show (1) a primary violation by the controlled person, (2) control of 

16 the primary violator by the defendant, and (3) that the defendant was, in some 

17 meaningful sense, a culpable participant in the controlled person’s fraud.” ATSI 

18 Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 108 (2d Cir. 2007). “Control over a 

19 primary violator may be established by showing that the defendant possessed ‘the 

20 power to direct or cause the direction of the management and policies of a person, 

21 whether through the ownership of voting securities, by contract, or otherwise.’” 
17

1 S.E.C. v. First Jersey Sec., Inc., 101 F.3d 1450, 1472–73 (2d Cir. 1996) (quoting 17 

2 C.F.R. § 240.12b-2); see also 17 C.F.R. § 230.405 (defining control the same way).

3 The Fox Plaintiffs contend that evidence contained in Madoff’s Deposition 

4 and Declaration establish Picower’s control and support a bona fide control person 

claim. 5 11 We disagree.

6 Instead, we agree with the Bankruptcy Court that Madoff’s Deposition and 

7 Declaration do not provide any evidence that Picower directed the actions of 

8 Madoff and BLMIS in the facilitation of the Ponzi scheme. The Fox Plaintiffs 

9 point to certain self-serving statements made by Madoff during the Deposition, 

10 but those statements are conclusory and non-specific. For example, Madoff’s 

11 assertion that “Picower . . . created the fraud I perpetrated” provides no facts 

12 whatsoever about what Picower allegedly did to “create[]” the scheme. App’x 

13 1484. To the contrary, Madoff’s deposition details how the scheme evolved, and 

14 the thrust of his explanation is that he resorted to fraud because Picower and other 

11 As previously discussed, Goldman III considered the loan and counterparty allegations 

that the Fox Plaintiffs advanced before the district court here and concluded that they did 

not “demonstrate that Picower controlled BLMIS within the meaning of § 20(a).” 739 F. 

App’x at 685; see also id. at 686 (“[The loan and counterparty] allegations demonstrate only 

Picower’s understanding that his participation would result in the dissemination of false 

information, not that he actually directed that the dissemination of false information 

occur or otherwise had control of the primary violator of the securities laws.” (internal

quotation marks omitted)). We see no reason to conclude otherwise in this case.
18

1 investors demanded high returns that Madoff could not supply, and that the 

2 pressure of those demands led him to pretend that he had indeed achieved such 

3 returns. At no point does Madoff ascribe to Picower so much as a suggestion that 

4 he should falsify the results of his investment decisions, still less does he describe 

5 any plan that Picower “created” to execute any such scheme.

6 The allegations contained in the TAC, augmented by these new sources, at 

7 best establish that Picower and Madoff were close, both personally and as business 

8 associates, that Picower put pressure on Madoff to deliver large returns, and that 

9 Picower was aware of and at times profited from the fraud. That is a far cry from

10 demonstrating that Picower exercised “control” over Madoff and BLMIS to 

11 perpetuate the infamous fraud. See 17 C.F.R. § 230.405; First Jersey Sec., Inc., 101 

12 F.3d at 1472–73. In fact, in the Madoff Deposition, Madoff takes sole 

13 responsibility for creating the Ponzi scheme. See App’x 97–98 (Madoff explaining 

14 the decisions that precipitated his debt of billions of dollars); id. at 99–101 (Madoff 

15 explaining how he started and orchestrated the Ponzi scheme); id. at 111 (Madoff 

16 taking responsibility for the Ponzi scheme). Ultimately, the Fox Plaintiffs’ 

17 allegations of “control” do not rise to the level of a colorable control person claim 

18 pursuant to § 20(a).
19

1 The fact remains that the TAC fails to adequately allege particularized 

2 injuries suffered by the Fox Plaintiffs that were distinct from the harm suffered by 

3 the BLMIS estate in general. Under our basic bankruptcy analysis, the alleged 

4 harm here was the same across all creditors, and therefore the Fox Plaintiffs have 

not alleged a particularized injury.12 5 See In re Tronox Inc., 855 F.3d at 100. As a 

6 matter of law, the Bankruptcy Court did not err in concluding that “[a]ll of the 

7 BLMIS investors suffered the same indirect injury resulting from the theft of the 

8 customer property and the demise of BLMIS and could assert the same claim.” 

9 568 B.R. 203, 217 (Bankr. S.D.N.Y. 2017), aff’d, 598 B.R. 102 (S.D.N.Y. 2019); see also 

10 Ball, 451 F.3d at 69. Because the Fox Plaintiffs lack “a claim for injury that is 

11 particularized as to them,” In re Tronox Inc., 855 F.3d at 99 (internal quotation 

12 marks omitted), the claim they seek to assert “could be brought by any creditor of 

13 the debtor” and therefore “the trustee is the proper person to assert the claim,” id.

12 What is more, the Fox Plaintiffs, in their TAC, assert class action allegations that

undermine their particularized injury argument. See App’x 64 (“‘Class’ in this action is 

all Customers who entrusted securities or cash to Madoff, either directly or indirectly, 

pursuant to the Madoff Investment Program between December 1, 1992, the approximate 

date that Picower first became a control person of Madoff, and December 11, 2008, the 

date that Madoff confessed.”); id. at 65 (“Among the questions of law and fact common 

to the Class are: (i) whether section 20(a) of the Exchange Act (‘Section 20(a)’) was violated 

by Picower as alleged herein . . . .”); id. (“[A]ll members of the Class were similarly 

affected by Picower’s wrongful conduct in violation of federal and state law as alleged 

herein.”).
20

1 at 100 (internal quotation marks omitted). Accordingly, the Fox Plaintiffs are 

2 barred by the permanent injunction from bringing their claim. See App’x at 499 

3 (enjoining “any claim against the Picower [Parties] that is duplicative or derivative

4 of the claims brought by the Trustee, or which could have been brought by the 

5 Trustee against the Picower [Parties]”).

6 We have considered the Fox Plaintiffs’ remaining arguments and conclude 

7 that they are without merit. For the foregoing reasons, the judgment of the 

8 District Court is AFFIRMED.

9 FOR THE COURT: 

10 Catherine O’Hagan Wolfe, Clerk of Court