16-2547-bk 

FirstBank Puerto Rico v. James W. Giddens

 

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 “SUMMARY ORDER”). A PARTY CITING 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 

26th day of April, two thousand seventeen. 

Present: GUIDO CALABRESI, 

 ROSEMARY S. POOLER, 

 RICHARD C. WESLEY, 

 Circuit Judges. 

_____________________________________________________ 

FIRSTBANK PUERTO RICO, 

 

 Appellant, 

 v. 16-2547-bk 

JAMES W. GIDDENS, as Trustee for the SIPA Liquidation 

of Lehman Brothers Inc., SECURITIES INVESTOR 

PROTECTION CORPORATION, 

 Appellees. 

_____________________________________________________ 

 

Appearing for Appellant: Robert T. Honeywell, K&L Gates LLP (Brian D. Koosed, on the 

brief), New York, NY. 

 

Appearing for Appellee Sarah L. Cave, Hughes Hubbard & Reed LLP, New York, NY. 

James W. Giddens: 

 
2 

Appearing for Appellee Kenneth J. Caputo, Senior Associate General Counsel, Securities 

Securities Investor Investor Protection Corporation (Josephine Wang, General 

Protection Corporation: Counsel, on the brief), Washington, DC. 

Appeal from the United States District Court for the Southern District of New York (Rakoff, J.). 

ON CONSIDERATION WHEREOF, IT IS HEREBY ORDERED, ADJUDGED, 

AND DECREED that the order of said District Court be and it hereby is AFFIRMED. 

 FirstBank Puerto Rico appeals from the July 8, 2016 opinion and order of the United 

States District Court for the Southern District of New York (Rakoff, J.) affirming the December 

1, 2015 final order the United States Bankruptcy Court for the Southern District of New York 

(Chapman, B.J.). The bankruptcy court order granted the motion by James W. Giddens, Trustee 

for the SIPA Liquidation of Lehman Brothers Inc., to expunge FirstBank’s customer claim 

asserted under the Securities Investor Protection Act of 1970 (“SIPA”). The bankruptcy court 

order also denied FirstBank’s motion for summary judgment. We assume the parties’ familiarity 

with the underlying facts, procedural history, and specification of issues for review. 

 We affirm substantially for the reasons set forth in the thorough opinions of the 

bankruptcy and district courts below. The bankruptcy court correctly held, and the district court 

affirmed, that collateral estoppel barred FirstBank from asserting an interest in the securities at 

issue that would allow it to recover from Lehman Brothers Inc. (“LBI”). FirstBank’s effort to 

avoid collateral estoppel by claiming that it is asserting an interest in the securities positions also 

fails, as FirstBank’s customer claim seeks to recover the same interest that FirstBank asserted in 

the prior litigation: the return of the securities or their value. See App’x at 3313-14. 

 In any event, we agree that FirstBank was not a “customer” of LBI within the meaning of 

the Securities Investor Protection Act (“SIPA”). FirstBank cannot demonstrate that it entrusted 

securities to LBI to qualify for “customer” status. “[M]ere delivery is not entrustment. 

Entrustment . . . must bear the indicia of the fiduciary relationship between a broker and his 

public customer.” CarVal UK Ltd. v. Giddens (In re Lehman Bros., Inc.), 791 F.3d 277, 283 (2d 

Cir. 2015) (internal quotation marks and citation omitted). To “entrust” a broker-dealer with 

securities, a customer must turn over its securities to the broker-dealer “so that the broker-dealer 

may do business on the customer’s behalf.” Id. LBI was not a fiduciary of FirstBank, and 

FirstBank did not deliver the securities to LBI so that LBI could conduct business on FirstBank’s 

behalf. The courts below correctly granted the motion to expunge FirstBank’s SIPA claim. 

 We have considered the remainder of FirstBank’s arguments and find them to be without 

merit. Accordingly, the order of the district court hereby is AFFIRMED. 

 FOR THE COURT: 

 Catherine O’Hagan Wolfe, Clerk