(Reuters) -Bank of Montreal ( BERZ ) persuaded a U.S. appeals court on Thursday to throw out a $564 million jury verdict against a subsidiary over its role in an approximately $3.65 billion Ponzi scheme run by convicted Minnesota businessman Tom Petters.

Citing a similar case involving Bernard Madoff, the 8th U.S. Circuit Court of Appeals said a court-appointed trustee for the now-bankrupt Petters Co could not recover on behalf of its creditors because that firm had helped orchestrate the fraud.

The 3-0 decision by the St. Paul, Minnesota-based court overturned a November 2022 jury verdict, and directed that trustee Douglas Kelley's case against BMO be dismissed.

Lawyers for the trustee did not immediately respond to requests for comment.

BMO said it was pleased with the decision. It expects to reverse a C$1.19 billion loss provision including interest for the case, resulting in a C$875 million (US$644 million) fourth-quarter after-tax benefit for its corporate services business.

Petters, 67, is serving a 50-year prison term after being convicted in 2009 on 20 criminal counts including fraud and money laundering.

Kelley claimed that Petters' former bank, Milwaukee-based Marshall & Ilsley, knew about the Ponzi scheme and ignored red flags of money laundering, enabling Petters to withdraw large sums he wasn't entitled to.

BMO bought M&I in 2011, and Kelley sought to hold it liable.

But the appeals court said the trustee effectively stood in the shoes of Petters Co because that company was equally or more at fault than M&I.

It said that meant BMO was not liable under a legal doctrine known as "in pari delicto."

"Bankruptcy law does not provide a vehicle for PCI or its trustee to proceed unbound by PCI's own wrongdoing," Chief Judge Steven Colloton wrote, referring to Petters Co.

Colloton cited a similar 2013 decision by the federal appeals court in New York that rejected claims that the trustee liquidating Bernard L. Madoff Investment Securities made against JPMorgan Chase ( JPM ) and other banks that Madoff used.

The case is Kelley v BMO Harris Bank NA, 8th U.S. Circuit Court of Appeals, No. 23-2551.

(US$1 = C$1.358)