A significant decision for Cayman Islands liquidators pursuing Cayman-law claims in the United States.

On 29 September 2026, the U.S. District Court for the Southern District of New York granted a Motion for Reconsideration in the case of Martin Nicholas John Trott and Christopher James Smith v. Deutsche Bank AG, setting aside its earlier conclusion that the Joint Official Liquidators lacked prudential standing.

The proceedings concern a claim brought by the Joint Official Liquidators of Madison Asset LLC (In Official Liquidation) under section 147 of the Cayman Islands Companies Act.

In September 2025, the Court had granted summary judgment in favour of Deutsche Bank on prudential standing grounds, applying the Second Circuit’s Wagoner rule¹. Following that decision, the JOLs filed a Motion for Reconsideration, challenging the application of Wagoner to a claim brought under Cayman Islands law.

The Court has now granted that motion and vacated the part of its summary judgment ruling that concluded that the JOLs lacked prudential standing under Wagoner.

Judge Dale Ho concluded that it was not appropriate to apply Wagoner without considering the underlying principles of Cayman Islands law. More specifically, the Court held that Wagoner does not operate independently of the substantive law governing the claim.

The decision confirms that Wagoner cannot be applied to a Cayman-law claim solely on the basis that the company’s former management participated in the underlying wrongdoing, without first considering the applicable principles of Cayman Islands law.

Some uncertainty remains as to how the U.S. Courts will ultimately approach this issue. The Court expressly declined to determine whether defences including in pari delicto, ex turpi causa or illegality may ultimately apply, and the Second Circuit has not yet considered Judge Ho’s interpretation.

For the time being, however, the decision removes a significant threshold obstacle for Cayman liquidators and may have important implications for cross-border recoveries pursued in the United States.

Martin Trott and Chris Smith act as Joint Official Liquidators of Madison Asset LLC (In Official Liquidation). Reid Collins Tsai acts for the Joint Official Liquidators. A copy of the Order can be found at https://www.casemine.com/judgement/us/6abdf9a7975bb0e0caf62e4c

¹ Shearson Lehman Hutton, Inc. v. Wagoner, 944 F.2d 114 (2d Cir. 1991).

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