Another Landmark Decision in Fairfield Liquidation: U.S. Bankruptcy Court Grants Time Extension to Assert Claims

Press Release–On 23 May 2011, in In re Fairfield Sentry Ltd., Bankruptcy Judge Lifland of the U.S. Bankruptcy Court for the Southern District of New York ruled that the provisions of Section 108 of the U.S. Bankruptcy Code, which grants a two-year extension of time for a trustee in bankruptcy (or a debtor in possession) to bring law suits provided that the applicable time period to commence action had not expired before the petition was filed, are self-executing and applicable to foreign representatives in a Chapter 15 case.

This is a milestone decision; it is the first written and reasoned opinion on whether Section 108’s two year extension applies in Chapter 15 cases. Fairfield Sentry Limited and its affiliated funds Fairfield Sigma Limited and Fairfield Lambda Limited (collectively, the “Fairfield Funds”) were the largest ‘feeder’ funds into the Bernard Madoff Ponzi Scheme. The U.S. Bankruptcy Court recognized the Funds’ liquidation proceedings in the British Virgin Islands as foreign main proceedings on 22 July 2010.

This decision ultimately provides foreign representatives with additional assistance for preserving a foreign debtor’s claims which may be asserted in the U.S. Furthermore, it may allow foreign representatives in connection with Chapter 15 proceedings the right to bring claims in the United States that otherwise might have become time barred under U.S. or Foreign Law. The Joint Liquidators of the Fairfield Funds, Mr. Kenneth Krys and Ms. Joanna Lau of KRyS Global, believe that there are significant strategic and economic benefits to the estates in obtaining the additional time provided by the tolling period extension under Section 108. They anticipate that this recent success will further encourage parties to approach the liquidators to settle therefore minimizing the burden on the estates.

The joint liquidators were represented in this matter by their U.S. Attorneys, David J. Molton and Daniel J. Saval of Brown Rudnick LLP.