In a little noticed filing last Friday, Sterling Equities Associates, the umbrella organization of the Wilpon family and other team owners, asked the nation's high court to review a major ruling by a federal appeals court over which Madoff investors can recover some of their losses from a special fund.
It will likely take about four or five months for the Supreme Court to decide if it will take the case, a process known as granting certiorari, legal experts said. If the court takes the case, it likely wouldn't be argued until early 2013. In the meantime, trustee Irving Picard's lawsuit against the Wilpons and Sterling for well over $300 million -- including about $84 million in Madoff profits -- is scheduled to go to trial on March 19 in federal court in Manhattan.
Sterling is trying to challenge last year's ruling by the Second Circuit Court of Appeals that backed the method Picard has used in calculating the "net equity" in Madoff accounts. Picard decided to allow Madoff investors who didn't withdraw more from their accounts than they had invested -- so called "net losers" -- to get as much as $500,000 from a recovery fund administered by the nonprofit Securities Investor Protection Corp. Other investors like Sterling and the Wilpons, who Picard said took out more from their accounts than they put in -- "net winners" -- weren't eligible for the cash.
Under Picard's calculation of account "net equity" there are about 2,736 investors like the Wilpons who were denied SIPC money and are affected, although they can ultimately file a claim in the Madoff bankruptcy as general creditors, court records show. Many net winners have argued that Picard should have relied on the last, admittedly fraudulent, account statements they received from Madoff in November 2008 to decide who was eligible to recover from SIPC.
"The net equity definition must be read to give customers priority claims based on their statements," Sterling said in papers filed with the Supreme Court.
John Coffee, a securities law expert and professor who teaches at Columbia University School of Law, said the Supreme Court seems unlikely to grant the Wilpons a full hearing. The net equity issue isn't a constitutional issue, said Coffee. He explained that the Supreme Court only takes nonconstitutional issues if they are part of an emergency situation or involve disagreements among a number of federal appeals courts. Neither situation exists with the net equity issue, Coffee said.
A spokeswoman for Picard declined to comment Wednesday on the Supreme Court filing. A spokesman for Sterling could not be reached for comment.