Firefighters' Retirement System et al v. Citco Group Limited et al

Filing 433

RULING : Motion for Reconsideration 338 AND 339 Motion for Reconsideration are DENIED. Signed by Judge Shelly D. Dick on 08/08/2017. (ELW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

FIREFIGHTERS’ RETIREMENT
SYSTEM, ET. AL.

CIVIL ACTION

VERSUS

13-373-SDD-EWD

CITCO GROUP LIMITED, ET. AL.

RULING
This matter is before the Court on the Motions for Reconsideration1 filed by
Defendants, Citco Banking Corporation, N.V., et al., and Citco Technology Management,
Inc. The Plaintiffs, Firefighters’ Retirement System, et al.2 (collectively, the “Louisiana
Funds” or “Plaintiffs”) have filed an Opposition3 to these motions, to which Citco Banking
Corporation, N.V., et al., and Citco Technology Management Inc. have filed a Reply.4 For
the following reasons, the Court DENIES these motions.
I.

FACTUAL BACKGROUND5
On September 30, 2016, the Court issued a Ruling denying Citco Fund Services

(Cayman Islands) Limited’s (“CFS Cayman”) 12(b)(2) motion to dismiss for lack of

1

Rec. Docs. 338 and 339.
Firefighters’ Retirement System; Municipal Employees Retirement System of Louisiana, and New Orleans
Firefighters’ Pension and Relief Fund.
3
Rec. Doc. 349.
4
Rec. Doc. 353.
5
The Court adopts the factual background, as it applies to the Citco Defendants, by reference to the factual
background in the Ruling of Rec. Docs. 325 and 327.
2

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personal jurisdiction and granted and denied in part CFS Cayman’s 12(b)(6) motion to
dismiss for failure to state a claim for relief.6 In a separate Ruling, also issued on
September 30, 2016, the Court made the following determinations regarding the
remaining Citco Defendants: 1) Denied Citco Technology Management, Inc.’s (“CTM”)
12(b)(2) motion to dismiss; 2) Granted Citco Canada Inc.’s (“Citco Canada”) and Citco
Fund Services (Bermuda) Limited’s (“Citco Bermuda”) 12(b)(2) motion to dismiss and
dismissed with prejudice the claims against Citco Canada and Citco Bermuda; 3) Granted
Citco Bank Nederland N.B. Dublin Branch’s (“CBN Dublin”) and Citco Global Custody
N.V.’s (“Citco Global Custody”) motion to dismiss for lack of personal jurisdiction and
dismissed with prejudice the claims against CBN Dublin and Citco Global Custody; 4)
Denied Citco Banking Corporation, N.V.’s (“Citco Banking”) and Citco Group Ltd.’s (“Citco
Group”) motion to dismiss for lack of personal jurisdiction; and 5) Granted Citco Fund
Services’ (Europe)(“CFS Europe”) motion to dismiss for lack of personal jurisdiction and
dismissed with prejudice the claims against CFS Europe.7 The Court granted CTM’s,
Citco Banking’s, and Citco Group’s 12(b)(6) motion as to Counts One (with respect to
liability under La. R.S. 51:712(D) only), Two, and Three of Plaintiffs’ claims and denied
their 12(b)(6) claims in all other respects.8 Accordingly, Count One, (claims under La.
R.S. 51:712(D), Count Two (claims of Unjust Enrichment), and Count Three, (claims of
Unfair Trade Practices) were dismissed with prejudice.9

6

Rec. Doc. 327, p. 11.
See Rec. Doc. 325, pp. 35-36.
8
Id. at pp. 36-37.
9
Id. at 37.
7

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On November 16, 2016, CTM filed a Motion for Reconsideration pursuant to
Federal Rule of Civil Procedure 54(b) alleging the Court committed manifest errors in its
Ruling because it denied CTM’s seller and control person liability, negligent
misrepresentation, and holder claims.10 Citco Banking, et al. also filed a Motion for
Reconsideration pursuant to Federal Rule of Civil Procedure 54(b) alleging the Court
committed manifest errors in its Ruling because the Court denied its negligent
misrepresentation, and holder claims.11 The Plaintiffs have opposed these motions.12
II.

LAW AND ANALYSIS
A. Motion for Reconsideration
FRCP 54(b) grants the Court discretion to reconsider interlocutory orders and

rulings. “The exact standard applicable to the granting of a motion under Rule 54(b) is not
clear, though it is typically held to be less exacting than would be under a motion under
Rule 59(e), which is in turn less exacting than the standards enunciated in Rule 60(b).”13
Though less exacting, courts have looked to the grounds for reconsideration under other
procedure rules for guidance.14
Looking to Rule 59(e) for guidance, there are three grounds for altering or
amending a judgment): “(1) an intervening change in controlling law, (2) the availability of
new evidence not previously available, or (3) the need to correct a clear error of law or
prevent manifest injustice.”15 A motion to alter or amend “serves ‘the narrow purpose of

10

Rec. Doc. 339, p. 1.
Rec. Doc. 338-1, p. 1.
12
Rec. Doc. 349.
13
Livingston Downs Racing Ass’n, Inc. v. Jefferson Downs Corp., 259 F.Supp.2d 471, 475 (M.D. La. Sep.
23, 2002).
14
Bragg v. Robertson, 183 F.R.D. 494, 496 (S.D.W.Va.1998); Livingston Downs Racing Ass'n, Inc. v.
Jefferson Downs Corp., 259 F.Supp.2d 471, 475 (M.D. La., 2002)
15
Williamson Pounders Architects, P.C. v. Tunica County, 681 F.Supp.2d 766, 767 (N.D. Miss. 2008).
11

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allowing a party to correct manifest errors of law or fact or to present newly discovered
evidence’ and is not the proper vehicle for rehashing evidence, legal theories, or
arguments that could have been offered or raised before the entry of the judgment.’”16
The Court “must strike a proper balance between two competing interests: the need to
bring litigation to an end and the need to render just decisions.”17
The Court finds that CTM and Citco Banking, et al. have failed to satisfy the
standards set forth above, even when considered under the less exacting Rule 54(b)
standard. Citco Banking, et al.’s argument that the Court overlooked the negligent
misrepresentation and holder claims in its Ruling does not compel a different result, and
Citco Banking, et al.’s offered jurisprudential support does not suggest that the Court was
clearly erroneous in denying CTM’s 12(b)(6) motion. Likewise, CTM’s argument that the
Court overlooked their argument that the Petition “lacks any factual allegations
whatsoever that CTM itself was involved with any of the conduct at issue”18 in its Ruling
does not mandate a different result or suggest that the Court was clearly erroneous in its
Ruling.
B. Citco Banking, et al.’s Motion for Reconsideration
Citco Banking, et. al’s motion alleges the Court’s holding was clearly erroneous
because “the Court appears to have overlooked [the fact that the negligent
misrepresentation and holder claims are derivative and that Plaintiffs lack standing to

16

Knight v. Kellogg Brown & Root Inc., 333 Fed. Appx. 1, 8 (5th Cir. 2009)(quoting Templet v. HydroChem
Inc., 367 F.3d 473, 478-79 (5th Cir. 2004)).
17
Livingston Downs Racing Ass’n, 259 F.Supp. 2d at 476 (quoting Ford v. Elsbury, 32 F.3d 931, 937 (5th
Cir. 1994)).
18
Rec. Doc. 339-1, p. 2.

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bring them].”19 To the extent that the Court did not specifically address Citco Banking, et.
al’s argument that the Louisiana Funds’ holder and negligent misrepresentation claims
are derivative and, therefore, the Louisiana Funds lack standing to bring the claims, the
Court herein addresses and rejects that argument.
Citco Banking, et al. argue that “[n]umerous cases have held that this type of claim
is a derivative claim, not a direct claim.”20 The assertion is overly simplistic and fails to
recognize the nature of a derivative claim. To assert that the Louisiana Funds’ claims are
derivative begs the question: derivative to whom? According to the Petition, in April 2008
the Louisiana Funds21 purchased $100 million of Series N shares in Leveraged.22 The
Petition alleges that Leveraged was liquidated by order of the Cayman Island Courts
resulting in the Louisiana Funds’ loss of their entire investment.23 Plaintiffs, Louisiana
Funds, bring state law securities claims alleging misrepresentations and omissions made
in connection with their purchase of the Series N shares offer by Leveraged. The
Louisiana Funds were the purchasers of the security at issue, the N Series shares in
Leveraged. The Louisiana Funds sustained injury allegedly as a result of
misrepresentations regarding the value of Leveraged. This is not a claim by the individual
retirement plan participants; it is claim by the pension funds, the purchasers of the
securities at issue. Hence, if the Plaintiffs’ pension funds claims are derivative, as argued
by Citco Banking, et al., the question is: to whom are the claims derivative? It was certainly

19

Rec. Doc. 338-1, p. 2.
Rec. Doc. 156-1, p. 17.
21
Firefighters’ Retirement System; Municipal Employees Retirement System of Louisiana and New Orleans
Firefighters’ Pension and Relief Fund, defined benefit pension plans covering various municipal employees.
22
Rec. Doc. 1-3, ¶ 34.
23
Rec. Doc. 1-3, ¶¶ 44, 45.
20

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not to Leveraged. Leveraged received financial benefit in the form of a $100 million
investment. A derivative claim is a claim of injury which is derivative to another’s injury.
The Broyles v. Cantor Fitzgerald & Co.24 case cited by Citco Banking, et al. is
inapplicable to the facts of this case. In Broyles, the plaintiffs were individuals and
pension funds whose investments were aggregated as part of pooled asset hedge funds.
The hedge funds then invested in mortgage-backed securities which failed. The court in
Broyles held that the hedge funds were the real parties in interest because the hedge
funds were the purchasers of the securities.25 In Broyles, the “Plaintiffs were injured
because of their ownership of shares in the funds, and Plaintiffs ‘cannot prove [their] injury
without also simultaneously proving an injury to the [Funds].’”26 These are not the facts,
as pled, in this case. Taking the allegations of the Petition as true, Louisiana Funds
purchased Series N Shares in Leveraged. Leveraged subsequently failed and was
liquidated, resulting in the Louisiana Funds’ loss of their investments. As pled, this is not
a derivative claim.
This Court ruled that the Plaintiffs’ allegations of “numerous representations, [by
the Citco Defendants] taken as true, state a plausible claim for negligent
misrepresentation.”27 On the holder claims, the Court is unable to conclude that there is
no plausible basis, as a matter of law, for a holder claim under Louisiana law.

28

As

addressed herein, the Court rejects the argument that the Plaintiffs’ claims are derivative

24

10-864, 10-857, 2013 WL 1681150, at * (M.D. La. Apr. 17, 2013).
Id. at *10.
26
Id. at *9.
27
Rec. Doc. 325, p. 35.
28
Id. at p. 35.
25

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thereby defeating standing.

Accordingly, Citco Banking, et al.’s Motion for

Reconsideration of Plaintiffs’ negligent misrepresentation and holder claims is DENIED.29
C. CTM’s Motion for Reconsideration
CTM also seeks reconsideration of the Court’s denial of its 12(b)(6) motion to
dismiss Plaintiffs’ seller and control person liability, negligent misrepresentation, and
holder claims. CTM argues that the Court did not consider CTM’s additional arguments
that there were no specific allegations in the Petition as to how CTM was a substantial
factor in the sale of the relevant securities and an alleged implausibility in attaching control
person liability to CTM given the lack of specific facts.30 The Court examined and held
that Plaintiffs have sufficiently pled their seller and control personal liability claim as it
relates to CTM being a substantial factor in the sale of the securities.31 CTM argues that
the discrepancy between Plaintiffs’ pleading and the “Offering Memorandum,” which
identifies CFS Cayman as the fund administrator, requires the Court to reconsider its
Ruling.32 The Court examined this discrepancy and found as follows:
It is not lost on the Court that this allegation conflicts with the
allegations in paragraphs 9 and 20, inter alia, of the complaint
wherein plaintiffs quote the Offering Memorandum which
specifies that “Citco Fund Services (Cayman Islands) Limited”
is the Administrator. However, a “well-pleaded complain may
proceed even if it strikes a savvy judge that actual proof of
those facts is improbable, and ‘that a recovery is very remote
and unlikely.’”33
CTM cites Scott v. Performance Contractors, Inc. for the proposition that, “when

29

Rec. Doc. 339.
See Rec. Doc. 339-1, pp. 4-5.
31
Rec. Doc. 325 pp. 29-30.
32
See Rec. Doc. 339-1, p. 6, n. 2.
33
Rec. Doc. 325, p. 27, n. 142 (quoting Bell Atlantic Corp v. Twombly, 127 S.Ct. 1955, 1965, 550 U.S. 544,
556 (2007)).
30

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conclusions of fact made in the complaint are contradicted by an attached exhibit, the
appended document controls and dismissal is appropriate.”34

The Scott case is

distinguishable from the instant case for several reasons. First, Scott involved a plaintiff
citing the incorrect date of filing of an EEOC complaint in her pleading but attaching an
exhibit that showed the correct date.35 In Scott, the court held that the date in the exhibit
controlled.36 The Court is not examining a date discrepancy between the pleading and a
document incorporated by reference. The Court is examining a discrepancy within the
pleading. Accordingly, the jurisprudence37 cited by CTM is factually inapposite. CTM’s
Motion for Reconsideration of the Court’s Ruling on Plaintiffs’ seller and control person
liability claims is DENIED.
CTM also argues that the Court should reconsider its Ruling regarding Plaintiffs’
negligent misrepresentation claim because “the Petition fails to allege that CTM provided
any statements or representations to Plaintiffs.”38 The Ruling specifically states that the
Petition “alleges numerous representations by the Citco Defendants, based on which the
Plaintiffs invested.”39 CTM does not dispute that it is a Citco Defendant. The Court
considered all arguments of counsel and applied the law thereto in its Ruling. CTM
presents no new facts or controlling jurisprudence in support of its motion. Absent a
showing of clear error, or new facts or controlling jurisprudence to prevent manifest
injustice, the Court cannot grant a motion for reconsideration. Accordingly, CTM’s Motion
34

Rec. Doc. 339-1, p. 6, n. 2 (quoting Scott v. Performance Contractors, Inc., 166 F.R.D. 372, 374 (M.D.
La. 1996).
35
Scott v. Performance Contractors, Inc., 166 F.R.D. 372 (M.D. La. 1996).
36
Id.
37
See Rec. Doc. 339-1, p. 6, n. 2 (see also Nitimatsu Const. Co. v. Houston Nat’l Bank, 515 F.2d 1200,
1206 (5th Cir. 1975)).
38
Rec. Doc. 339-1, p. 7 (emphasis original).
39
Rec. Doc. 325, p. 34.

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for Reconsideration of the Court’s Ruling on Plaintiffs’ negligent misrepresentation claim
is DENIED.
CTM’s remaining argument urges the Court to reconsider its Ruling denying its
dismissal of Plaintiffs’ holder claims. Specifically, CTM argues that the Court “appears to
have overlooked the additional dispositive argument CTM raised in its motion to dismiss,
namely, that even in the few jurisdictions in which holder claims are recognized, there
must be ‘some kind of direct communication or privity and actual reliance’ pleaded.”40
This argument was previously considered by the Court in its Ruling.41 CTM presents no
new facts or controlling jurisprudence in support of its motion. Absent a showing of clear
error, or new facts or controlling jurisprudence to prevent manifest injustice, the Court
cannot grant a motion for reconsideration.

Accordingly, CTM’s Motion for

Reconsideration of the Court’s Ruling on Plaintiffs’ holder claim is DENIED.

40
41

Rec. Doc. 339-1, p. 8.
Rec. Doc. 325, pp. 34-35.

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III.

CONCLUSION
For the above reasons, Citco Banking Corporation, N.V., et al’s Motion for

Reconsideration is DENIED.42 Citco Technology Management Inc.’s Motion for
Reconsideration is also DENIED.43
Signed in Baton Rouge, Louisiana on August 8, 2017.

S
JUDGE SHELLY D. DICK
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

42
43

Rec. Doc. 338.
Rec. Doc. 339.

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