Irving H. Picard v. Saul B. Katz et al

Filing 159

MEMORANDUM OF LAW in Opposition re: 147 FIRST MOTION in Limine To Exclude All Evidence And References To The Fees Paid To The Trustee And His Counsel... Document filed by Charles 15 Associates, Charles 15 LLC, Charles Sterling LLC, Charles Sterling Sub LLC, College Place Enterprises LLC, Coney Island Baseball Holding Company LLC, Estate of Leonard Schreier, FFB Aviation LLC, FS Company LLC, Fred Wilpon Family Trust, Arthur Friedman, Ruth Friedman, Iris J. Katz and Saul B. Katz Family Foundation, Inc., Judy and Fred Wilpon Family Foundation, Inc., Amy Beth Katz, David Katz, Dayle Katz, Gregory Katz, Howard Katz, Iris Katz, 157 J.E.S. LLC, Air Sterling LLC, BAS Aircraft LLC, Jason Bacher, Bon Mick Family Partners LP, Bon-Mick, Inc., Brooklyn Baseball Company LLC, C.D.S. Corp., Michael Katz, Saul B. Katz, Todd Katz, Katz 2002 Descendants' Trust, Heather Katz Knopf, Natalie Katz O'Brien, Mets II LLC, Mets Limited Partnership, Mets One LLC, Mets Partners, Inc., Minor 1 (REDACTED), Minor 2 (REDACTED), L. Thomas Osterman, Phyllis Rebell Osterman, Realty Associates Madoff II, Red Valley Partners, Robbinsville Park LLC, Ruskin Garden Apartments LLC, Saul B. Katz Family Trust, Michael Schreier, Deyva Schreier Arthur, See Holdco LLC, See Holdings I, See Holdings II, Sterling 10 LLC, Sterling 15C LLC, Sterling 20 LLC, Sterling Acquisitions LLC, Sterling American Advisors II LP, Sterling American Property III LP, Sterling American Property IV LP, Sterling American Property V LP, Sterling Brunswick Corporation, Sterling Brunswick Seven LLC, Sterling Dist Properties LLC, Sterling Equities, Sterling Equities Associates, Sterling Equities Investors, Sterling Heritage LLC, Sterling Internal V LLC, Sterling Jet II Ltd., Sterling Jet Ltd., Sterling Mets Associates, Sterling Mets Associates II, Sterling Mets LP, Sterling Pathogenesis Company, Sterling Third Associates, Sterling Thirty Venture LLC, Sterling Tracing LLC, Sterling Twenty Five LLC, Sterling VC IV LLC, Sterling VC V LLC, Edward M. Tepper, Elise C. Tepper, Jacqueline G. Tepper, Marvin B. Tepper, Valley Harbor Associates, Kimberly Wachtler, Philip Wachtler, Bruce N. Wilpon, Daniel Wilpon, Debra Wilpon, Fred Wilpon, Jeffrey Wilpon, Jessica Wilpon, Judith Wilpon, Richard Wilpon, Scott Wilpon, Valerie Wilpon, Wilpon 2002 Descendants' Trust, Robin Wilpon Wachtler. (Wise, Robert)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
IRVING H. PICARD,
:
:
Plaintiff,
:
:
11-CV-03605 (JSR) (HBP)
- against :
:
SAUL B. KATZ, et al.,
:
:
Defendants.
:
:
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MEMORANDUM OF LAW IN OPPOSITION TO TRUSTEE’S
MOTION IN LIMINE NO. 1 TO EXCLUDE ALL EVIDENCE
AND REFERENCES RELATING TO THE FEES PAID TO THE
TRUSTEE AND HIS COUNSEL

DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, New York 10017
[phone]
Attorneys for Defendants

Defendants respectfully submit this memorandum of law in opposition to the
Trustee’s motion in limine seeking to exclude all evidence and references relating to the
fees paid to the Trustee and his counsel.
ARGUMENT
The Trustee seeks to bar Defendants from referring to the amount of fees charged
by him and his counsel in this and other actions. As well he might. Those fees have been
staggering. Fees and expenses to the Trustee’s law firm alone totaled nearly $275 million
just through September 30, 2011. That sum has undoubtedly grown substantially over
the last six months. An additional $100 million plus has been spent by the Trustee in fees
paid to FTI Consulting, non-testifying consultants assisting the Trustee and his counsel
with their investigation of the bankrupt Madoff securities firm. Notwithstanding that all
of these fees are public knowledge, and indeed must be submitted to and approved by the
Bankruptcy Court, the Trustee apparently fears, perhaps justifiably, that if the jury is told
how much money his lawyers and consultants are making on this and other cases arising
out of the Madoff collapse, it may prejudice the jury against the Trustee.
At the same time, however, the Trustee proposes to inundate the jury with
evidence pointing to how wealthy the Defendants are and how much they allegedly
profited from their Madoff securities accounts. The Trustee has publicly argued that
Defendants’ wealth is itself evidence that somehow bears on their alleged “willful
blindness”—which it most certainly does not. The Trustee appears not to have any
qualms about the extent to which such references to Defendants’ wealth might similarly
evoke juror prejudice against them having nothing to do with the factual or legal merits
of the claims in issue.

If the Trustee is permitted nonetheless to argue Defendants’ wealth to the jury at
trial, then Defendants should in fairness be entitled to have the jury consider the hundreds
of millions of dollars the Trustee has incurred—spending no more than reasonably
necessary, one presumes—to investigate and unravel the Madoff fraud. If Madoff’s fraud
scheme were as easy to uncover and recognize as the Trustee now contends it was when
accusing the Defendants of willful blindness, then the Trustee’s own investigation would
presumably have been considerably shorter and less costly. That it took his counsel and a
large team of certified fraud investigators and forensic analysts that much money over
multiple years to untangle Madoff’s fraud, even with the considerable benefit of
hindsight and multiple criminal confessions not available to Defendants before December
2008, makes it far less probable, if not entirely implausible, that Defendants’ failure to
discover that same fraud was a result of their turning a blind eye to easily accessible
information that would have confirmed it.
At a minimum, if the Trustee’s motion to bar reference to his and his counsel’s
fees is granted, the Court should likewise bar the Trustee from making any reference at
trial to his supposed representation or work on behalf of other victims of the Madoff
fraud or the amount of recoveries that he has achieved to date for the estate. He cannot
have it both ways, at once portraying himself before the jury as a tireless champion of the
defrauded victims—putting on the white hat, as it were—while keeping from them the
fact that the trusteeship has been a very lucrative assignment indeed for him and his law
firm. Moreover, this trial does not concern any of the other potential claimants in the
Madoff bankruptcy, and the jury will have no evidence before it regarding the relative
culpability or innocence of any of the other investors. Consequently, to the extent

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references to the Trustee and his counsel’s fees are irrelevant because they do not make
the facts the jury must find more or less probable, references to the Trustee’s efforts on
behalf of other victims are equally irrelevant and non-probative of anything at issue.
Finally, Defendants are certainly entitled to question the Trustee’s testifying
expert witnesses with respect to their fees and expenses and the fees and expenses of any
experts or consultants on whose work they relied. Defendants do not understand
anything in the Trustee’s motion to challenge that right, but would of course object to the
extent that it did. Fees paid to a testifying witness are and have always been relevant for
purposes of impeachment so that, in assessing the weight and credibility of the testimony,
the jury may consider any financial incentive to the witness in providing that testimony.
CONCLUSION
For the reasons set forth above, Defendants respectfully request that the Court
deny the Trustee’s motion in limine seeking to exclude all evidence and references
relating to the fees paid to the Trustee and his counsel.
Dated: New York, New York
March 12, 2012
DAVIS POLK & WARDWELL LLP
By: /s/ Robert F. Wise, Jr.
Robert F. Wise, Jr
Karen E. Wagner
Dana M. Seshens
450 Lexington Avenue
New York, New York 10017
Telephone:
[phone]
Facsimile:
[phone]
Attorneys for Defendants

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