Anwar et al v. Fairfield Greenwich Limited et al

Filing 1050

FILING ERROR - WRONG EVENT TYPE SELECTED FROM MENU - MOTION Set aside Magistrate Judge's Order of Feb. 15, 2013 re: #1045 Order, On behalf of Standard Chartered Plaintiffs. Document filed by Maridom Limited.(Brodsky, Richard) Modified on 2/20/2013 (db).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Master File No. 09-CV-118 (VM)
PASHA ANWAR, et al.,
Plaintiffs,
v.
FAIRFIELD GREENWICH LIMITED,
et al.,
Defendants.
This document relates to:
The Standard Chartered Cases
______________________________________/
STANDARD CHARTERED PLAINTIFFS’
OBJECTION TO ORDER DATED FEB. 15, 2013 (DE 1045)
Pursuant to Fed.R.Civ.P. 72(a) and 28 U.S.C. § 636(b)(1)(A), the
Standard Chartered Plaintiffs, by the Plaintiffs’ Steering Committee, object
to Magistrate Judge Maas’ Order dated February 15, 2013 (DE 1045)
(“Order”) and request that it be set aside.1

This Objection has been timely served and filed under Rule 72(a)(1)
because the Order was served on the Plaintiffs on February 15, 2013 and an
objection must be served and filed within 14 days, i.e., by March 1, 2013.

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SUMMARY
In February 2011, the Standard Chartered Plaintiffs and Defendants
jointly submitted a proposed Scheduling Order for these cases, which
Magistrate Judge Katz entered without modification.2 It has since governed
these cases, without amendment. The Scheduling Order, Paragraph 12,
provides for two rounds of expert reports: an initial report, covering each
party’s expert(s) on those issues on which that party bore the burden of proof;
and a rebuttal report. Depositions are to follow. There is no provision for
surrebuttal reports. In these respects, the Scheduling Order exactly parallels
the reports called for under Fed.R.Civ. 26(a)(2).
Accordingly, if, as here, the Plaintiffs submitted initial reports and the
Defendants submitted only rebuttal reports, then Rule 26(a)(2) and the
Scheduling Order would expect and require the Defendants to depose the
Plaintiffs’ experts to learn what they have to say about Defendants’ experts’
rebuttal reports. This unremarkable result would conserve party resources by
sparing Plaintiffs the expense of paying their experts to prepare surrebuttal
reports. There would be no suggestion that Plaintiffs’ experts could not
comment on the Defendants’ experts’ rebuttal reports without having first
submitted surrebuttal reports. Otherwise, the Scheduling Order would have

Second Amended Scheduling Order Regarding Standard Chartered
Cases (“Scheduling Order”) DE 602, Feb. 4, 2011). By clerical error, the
Scheduling Order was combined with an agreed Confidentiality Stipulation
Order in DE 602. The Scheduling Order was separately entered on February
22, 2011 (DE 609).

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said so.
But this is exactly what the February 15th Order requires. The Order
effectively3 requires Plaintiffs’ experts to prepare and serve surrebuttal
reports (to Defendants’ experts’ rebuttal reports) or be denied the right to
testify in deposition and at trial regarding points the Defendants’ experts
made in their rebuttal reports. The Magistrate Judge’s Order thus has
completely ignored the regime proposed by the Plaintiffs and the Defendants
and previously approved by Magistrate Judge Katz, and has injected a new
requirement that is not only not found in the Scheduling Order or Rule
26(a)(2), but also has no justification.
By creating this requirement, the Magistrate Judge has not only
committed manifest error, but also seriously prejudiced the Plaintiffs by
causing delay and adding greatly to their expense (the texts of the two
Defendants’ expert reports, absent exhibits, total 112 pages), and has
delivered an unwarranted advantage to the Defendants by giving them an
otherwise unavailable preview of the what Plaintiffs’ experts would say in
response to their experts’ reports before deposing them.
To restore a fair playing field, the Court must set aside the Order.

Technically, the Order states only that if the Plaintiffs do not submit
surrebuttal reports, “they may find that Judge Marrero or I preclude them
from proffering testimony that they wish to adduce.” (emphasis added).
Obviously, this is a risk that, realistically, cannot be borne by the Plaintiffs
or their counsel. Therefore, the Order must be read as issuing a flat-out
requirement that surrebuttal reports be submitted if the Plaintiffs want their
experts to be able to comment on the Defendants’ experts’ rebuttal reports.

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STANDARD OF REVIEW
Fed.R.Civ.P. 72 divides objections to Magistrate Judge’s decisions into
two categories: decisions having to do with “dispositive” and “non-dispositive”
matters. This Objection deals with an order of the Magistrate Judge dealing
with expert reports under Fed.R.Civ.P. 26(a)(2). As such, a “non-dispositive”
matter is involved. “Matters concerning discovery generally are considered
‘nondispositive’ of the litigation” under Rule 72. Thomas E. Hoar, Inc. v. Sara
Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990).
The review of a non-dispositive matter is governed by Fed.R.Civ.P.
72(a), which provides, in pertinent part:
A party may serve and file objections to the order within 14 days
after being served with a copy. A party may not assign as error a
defect in the order not timely objected to. The district judge in
the case must consider timely objections and modify or set aside
any part of the order that is clearly erroneous or is contrary to
law.
The issue before the Court is not based on a factual finding. The
“clearly erroneous” standard is inapplicable because it is used to review
factual findings. Pippins v. KPMG LLP, 279 F.R.D. 245, 253 (S.D.N.Y. 2012)
(citations omitted). Accord Gandee v. Glaser, 785 F. Supp. 684, 686 (S.D. Ohio
1992) (“The ‘clearly erroneous’ standard applies only to factual findings made
by the Magistrate Judge, while her legal conclusions will be reviewed under
the more lenient ‘contrary to law’ standard.”), aff’d, 19 F.3d 1432 (6th Cir.
1994) (citing Fogel v. Chestnutt, 668 F.2d 100, 116 (2d Cir.1981), cert. denied
sub nom. Currier v. Fogel, 459 U.S. 828, 103 S.Ct. 65, 74 L.Ed.2d 66 (1982)).

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Therefore, the “contrary to law” standard applies. An order is
“contrary to law” when it “fails to apply or misapplies relevant statutes, case
law or rules of procedure.” Pippins v. KPMG, supra; Collens v. City of New
York, 222 F.R.D. 249, 251 (S.D.N.Y. 2004). “[W]hen reviewing a question of
law, the standard is de novo. Thus, the Court owes no deference to the
magistrate’s legal conclusions. Here, the Court has conducted a de novo
review of those portions of the magistrate’s legal conclusions that Plaintiffs
challenge.” Ctr. for Biological Diversity v. Norton, 336 F. Supp. 2d 1155, 1158
(D.N.M. 2004) (citation omitted). Accord PowerShare, Inc. v. Syntel, Inc., 597
F.3d 10, 15 (1st Cir. 2010) (citing cases) (“When, as in this case, review of a
non-dispositive motion by a district judge turns on a pure question of law,
that review is plenary under the ‘contrary to law’ branch of the Rule 72(a)
standard. . . . This means that, for questions of law, there is no practical
difference between review under Rule 72(a)’s ‘contrary to law’ standard and
review under Rule 72(b)’s de novo standard.”).4
BACKGROUND
The Standard Chartered Cases involve actions brought by various
former private banking clients of Standard Chartered Bank International
(Americas), Ltd., formerly known as American Express Bank International,
which will be referred to as “Standard Chartered,” arising from

As discussed by the Plaintiffs below at n.5, even if the appropriate
standard is “abuse of discretion,” which is not mentioned in Rule 72(a), the
same legal analysis is involved: did the Magistrate Judge fail to apply or
misapply Rule 26(a)(2) and the Scheduling Order?

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recommendations by Standard Chartered to invest in Fairfield Sentry or
Fairfield Sigma, both Madoff “feeder funds.” Almost all of the Standard
Chartered Cases were filed either in federal court in Miami or Los Angeles,
but were transferred to this Court by the Judicial Panel on Multidistrict
Litigation and consolidated for pretrial purposes under Anwar. The Standard
Chartered Cases have proceeded on an independent track from the main
Anwar cases, with their own confidentiality order and other pretrial orders.
The previously mentioned Scheduling Order Regarding Standard
Chartered Cases (“Scheduling Order”) covers, among other matters, expert
witness reports and discovery. The pertinent paragraph of the Scheduling
Order is paragraph 12:
Expert Witness Disclosures & Discovery
12.
The required disclosures under Fed. R. Civ. P. 26(a)(2)
regarding expert testimony on each issue to which a party bears
the burden of proof at trial shall be made not later than 30 days
after completion of the period for fact discovery. Rebuttal reports
pursuant to Fed. R. Civ. P 26(a)(2) shall be served within 45
days after the other parties’ disc1osures. The period for expert
witness deposition shall commence upon the filing or rebuttal
experts reports and shall conclude 90 days thereafter.
(emphasis added).
Thus, the Scheduling Order establishes a deadline for reports
“regarding expert testimony on each issue to which a party bears the burden
of proof at trial.” Discovery was concluded on May 4, 2012 and by agreement
of the parties, initial expert reports were due on August 2, 2012. The
Plaintiffs submitted two initial expert reports. The Defendants submitted
none.
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PROCEEDINGS AFTER THE INITIAL REPORTS
For the Court to understand how the Order came to be, the
following is a brief review of the previous proceedings after the
Plaintiffs submitted their initial reports. Of key importance is the fact
that the pretrial order, as is customary, required service of initial
reports on any issue on which a party had the burden of proof.
1.

After the Defendants served no initial reports but before

rebuttal reports were due, the Plaintiffs sought to bar the Defendants
from issuing a “rebuttal” report on any issue on which they had the
burden of proof. The Magistrate Judge deferred ruling on this issue
until after the Defendants had submitted their rebuttal reports. Letter
endorsement, Sept. 12, 2012 (DE 938).
2.

The Defendants submitted their expert reports on

December 12, 2012. The two reports, totaling 112 pages exclusive of
exhibits) dealt in substantial part with an issue on which the Plaintiffs
contended (and continue to contend) that the Defendants bore the
burden of proof—that is, reliance on third parties’ representations or
reputation – and that was one of their “additional defenses” in every
Answer they filed. The Plaintiffs asked for a conference to strike those
portions of the two reports.
3.

The Magistrate Judge denied the Plaintiffs’ request to

strike. DE 1020, Jan. 10, 2013. The entirety of the Magistrate Judge’s
ruling was as follows: “I decline to strike the relevant portions of
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Standard Chartered’s expert reports or to bar them from introducing
testimony regarding reliance on third parties. The plaintiffs, however,
shall be permitted to serve one or more reply expert reports limited to
the issue of Standard Chartered’s reliance on third-parties. The
plaintiffs’ reply reports must be served by February 8, 2013.”
(emphasis added).
4.

The Magistrate Judge’s January 10, 2013 Order did not

require the Plaintiffs to submit surrebuttal reports in order for their
experts to be permitted to testify in response to the Defendants’
experts’ comments on Standard Chartered’s reliance on third parties.
5.

The Plaintiffs informed the Defendants’ counsel that they

do not intend to submit rebuttal reports and attempted to start the
required consultation with counsel with respect to expert depositions.
6.

In response, the Defendants’ counsel stated the following

in an email: “Plaintiffs were given the opportunity to file rebuttal
reports and they can elect not to, but if plaintiffs’ experts intend to
offer any opinions on the topic of reliance on third parties beyond what
is set forth in their reports they should comply with Rule 26.”
7.

Initially, the Plaintiffs, to be reasonable and avoid

unnecessarily burdening the Magistrate Judge, agreed to put off
scheduling depositions of the experts until the Magistrate Judge ruled
on Defendants’ position. When, after two weeks, the Magistrate Judge
had not ruled, the Plaintiffs, cognizant of the need to schedule the
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depositions promptly, asked the Defendants to schedule the
depositions tentatively and to schedule the deadlines for submitting
document subpoenas to the other side’s experts. The Defendants
refused to schedule depositions until the Magistrate Judge ruled on the
“surrebuttal” issue and insisted on a three-week delay for issuing
subpoenas.
8.

The Plaintiffs then asked the Magistrate Judge for a brief

status conference, explaining the situation. The result was the Order
in question.
SPECIFIC OBJECTIONS TO ORDER
The Order states, in pertinent part:
I have reviewed Mr. Brodsky’s letter dated February 13, 2013,
and see no need for a conference. On the plaintiffs’ view of the
parties’ respective burdens, the defendants’ rebuttal reports
should have been served on August 2, 2012, because they related
to affirmative defenses. For reasons previously recited on the
record, I do not necessarily agree. If, however, the reports had
been served on the schedule the plaintiffs deem appropriate, the
plaintiffs would have had to submit opposition reports in order
to have their experts testify to any additional opinions not set
forth in their experts’ original reports.
The January 10 Order permitted the plaintiffs to submit
surrebuttal reports. My use of the word ‘permitted’ was
intentional. If there is nothing that the plaintiffs expect to
proffer in opposition to the defendants’ expert reports that is not
contained in their own experts’ initial reports, there is nothing
further they need include in a surrebuttal report. On the other
hand, if there is such additional material, they would be well
advised to include it in a further report. Should they fail to do
so, they may find that Judge Marrero or I preclude them from
proffering testimony that they wish to adduce.

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The Magistrate Judge departed from the plain requirements of the
Scheduling Order and Rule 26(a)(2)(D) in requiring the Plaintiffs to submit
surrebuttal reports or risk having their experts’ testimony in response to the
Defendants’ expert reports muzzled. Absent a substantial reason for doing so,
the Magistrate Judge’s decision cannot stand. See Benedict v. Zimmer, Inc.,
232 F.R.D. 305 (N.D. Iowa 2005) (setting aside as clearly erroneous and
contrary to law Magistrate Judge’s order permitting Plaintiffs to submit
expert report after deadline established therefor in scheduling order because
failure to adhere to deadline not “substantially justified”).5

This Court has stated in other cases that an “abuse of discretion”
standard applies to review of a Magistrate Judge’s order concerning
discovery. E.g., R.F.M.A.S., Inc. v. So, 748 F. Supp. 2d 244, 248 (S.D.N.Y.
2010). Even under the far more deferential “abuse of discretion” standard,
the Order cannot stand: the Court lacks the discretion to impose this
unfounded and unauthorized burden on the Plaintiffs. As Judge Friendly
summarized his observations about judicial discretion in his famous lecture,
Indiscretion About Discretion, published at 37 Emory L.J. 747 (1982):

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A good note on which to end is Chief Justice Marshall’s
statement in the Burr case that discretionary choices are not left
to a court’s ‘inclination, but to its judgment; and its judgment is
to be guided by sound legal principles.’148 Although Marshall was
there talking to himself as the trial judge, his remark embodies
an appropriate standard for review of many ‘discretionary’
determinations often claimed to lie beyond meaningful appellate
scrutiny.
148. United States v. Burr, 25 F. Cas. 30, 35 (C.C. Va. 1807)
(No. 14,692d).
31 Emory L.J. at 784 (emphasis added). See Bridgeport Guardians, Inc. v.
Delmonte, 602 F.3d 469, 473 (2d Cir. 2010) (“A district court has abused its
discretion if it has (1) based its ruling on an erroneous view of the law, (2)
made a clearly erroneous assessment of the evidence, or (3) rendered a
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The Plaintiffs have no quibble with the Magistrate Judge’s first point: “If,
however, the [defendants’] reports had been served on the schedule the
plaintiffs deem appropriate, the plaintiffs would have had to submit
opposition reports in order to have their experts testify to any additional
opinions not set forth in their experts’ original reports.”
But the Defendants did not serve their reports “on the schedule the
plaintiffs deem appropriate,” and the Magistrate Judge, in his discretion, did
not strike the portions of the report that the Plaintiffs believed should have
been submitted in August 2012, when initial reports were due. Since the
Magistrate Judge upheld the decision of the Defendants to include these
opinions in a rebuttal report, rather than in an initial report, the only logical
result would be that the situation would simply revert to the procedures
outlined in Rule 26(a) and the Scheduling Order, with no mention of a
surrebuttal report. In other words, the hypothetical scenario discussed by the
Magistrate Judge did not eventuate and therefore is completely irrelevant
and has no bearing.
Unfortunately, however, the Magistrate’s Order proceeds as if the
hypothetical scenario – that the Defendants had submitted their reports “on
the schedule the plaintiffs deem appropriate” – had eventuated. But this
make-believe premise conflicts with reality and with common sense. It has
led the Magistrate Judge to prescribe a procedure that is nowhere contained
decision that cannot be located within the range of permissible decisions.”)
(emphasis added).

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in Rule 26(a)(2) or the Scheduling Order: that the Plaintiffs may be at risk of
not having their experts be permitted to comment on the rebuttal reports
without first submitting a surrebuttal report. The Magistrate Judge gives no
hint as to the source of this requirement, nor does he seek to justify it on any
basis whatsoever. Respectfully, there is, in fact, no basis for this decision.
The Plaintiffs ask the Court to consider what would have transpired
had the Plaintiffs not questioned what they regarded as the Defendants’
initial gaming of the system, and thus had not sought to strike portions of the
Defendants’ expert reports. There would have been no ruling by the Court on
the issue. The Plaintiffs would not be required to submit surrebuttals to the
Defendants’ experts’ rebuttal reports because the issue would not have come
up and because neither the Federal Rules nor the Scheduling Order contain
any provision for surrebuttals. The Magistrate Judge having ruled the way it
did on the Plaintiffs’ request that the scope of the Defendants’ experts’
testimony be limited -- i.e., denying that request – he had no choice but to
leave the parties where they would have been if this issue had never arisen.
The mere fact that the Plaintiffs unsuccessfully sought that relief simply
cannot and does not justify inventing a requirement for surrebuttal reports.6
ADVERSE EFFECTS ON PLAINTIFFS
Not only would the Order impose a requirement that nowhere appears
Another issue is that the Plaintiffs sought to strike only the portions of
the Defendants’ experts’ reports that dealt with their additional defense of
reliance on third parties, but the Order can be read as requiring surrebuttals
to the entire panoply of arguments included in the Defendants’ experts’
reports.

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in the Scheduling Order or Rule 26(a), but also it will prejudice the Plaintiffs
and will deliver an unwarranted advantage to the Defendants.
The prejudice to the Plaintiffs is two-fold. First, complying with the
Order will require the expenditure of tens of thousands of dollars in
additional fees to the Plaintiffs’ experts. Plaintiffs’ two experts, like the
Defendants’ experts, charge $700 or more per hour for their time. (Mr.
Picard’s rate will drop to $500 per hour when his incurred fees reach
$100,000. This level has not yet been reached.) Second, it will cause
additional delay in these cases. It will also provide the Defendants a
litigation advantage to which they are plainly not entitled: they will have an
advance look at the Plaintiffs’ experts’ responses to the Defendants’ experts’
reports before the Plaintiffs’ experts are deposed. This advantage is
unwarranted and unfair because neither the Federal Rules nor the
Scheduling Order provide for surrebuttal reports.
CONCLUSION
The Magistrate Judge’s February 15, 2013 Order does not stand up to
the most deferential review and should be set aside.
Respectfully submitted,
/s/ Richard E. Brodsky
_________________________
Richard E. Brodsky
The Brodsky Law Firm, PL
200 South Biscayne Blvd., Suite 1930
Miami, FL 33131
[e-mail]
Tel: [phone]
Fax: [phone]
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Attorney for Maridom Plaintiffs
Member, Standard Chartered Plaintiffs’
Steering Committee
On behalf of the Standard Chartered
Plaintiffs
Admitted pro hac vice
CERTIFICATE OF SERVICE
I hereby certify that on February 19, 2013, I electronically filed the foregoing
document with the Clerk of the Court using CM/ECF.
/s/ Richard E. Brodsky
_________________________
Richard E. Brodsky

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