[ by Howard Haykin and Melanie Gretchen ] Two investors sued J. Ezra Merkin in federal court, hoping to directly collect more than $10 million from the manager of a Madoff-feeder fund.  The courts rejected their private bids, although both can still recover some of their losses from Madoff trustee Irving Picard. Last month, Merkin agreed to pay $410 million to settle a lawsuit with New York Attorney General Eric Schneiderman that accused Merkin of secretly steering client money to Madoff. First Investor - U.S. citizen Joshua Berman. Berman, a partner at Kramer Levin Naftalis & Frankel LLP, and a former director of Tyco International Ltd., now lives in Switzerland.  He sought to recover over $1.25mn.  Prior to filing a lawsuit in NYS court, Berman tried arbitration to collect, but the panel denied all his claims for losses in Merkin's Ascot Partners fund. Second Investor - Real Estate Developer Richard Born. A principal of BD Hotels, he sought over $10.5mn and punitive damages based on his losses in Merkin's Ascot Partners and Gabriel Capital funds. He first went to arbitration to collect, but the panel only awarded him a fraction of his losses - $1mn plus interest, according to papers filed in New York state court Wednesday. Both are represented by David Bamberger, whose clients could still recover losses from Irving Picard, the trustee seeking money for all Madoff victims.  According to the arbitration panel ruling, Born must reimburse Merkin if he collects money from Picard. Born and Berman may also be able to participate in the Attorney General's settlement despite having gone to arbitration, said Bamberger.  Schneiderman's office anticipates that investors may receive in excess of 40% of their losses. Levander, attorney for Merkin, disagreed saying "a claimant who loses or obtains less than they would have under the settlement is not entitled and will not receive the higher settlement amount." "They rolled the dice and lost," he added.   [Reuters, 7/12/12]