Anwar et al v. Fairfield Greenwich Limited et al
Filing
1054
ENDORSED LETTER addressed to Judge Victor Marrero from David J. Sheehan dated 2/26/2013 re: The Trustee requests a conference on his motion to intervene, or that the Court waive this requirement so that the Trustee may file his motion, and lodge his objections to the proposed settlement, as early as possible in advance of the fairness hearing. ENDORSEMENT: The parties are directed to respond by 2-28-13, by letters not to exceed three (3) pages, respectively to the matter set forth above by the SIPA Trustee. (Signed by Judge Victor Marrero on 2/26/2013) (ft)
Baker Hostetler
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February 26,
Baker&Hostetler LLP
45 Rockefeller Plaza
New York, NY 10111
T 212.589.42QO
F 212.589.4201
www.bakerfaw.com
David J. Sheehan
direct dial: 212.569.4616
dsheehan@bakerlaw.com
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YlA FACSIMILE (212) 805-6382
Honorable Victor Marrero
United States District Court for the Southern District of New York
Daniel Patrick Moynihan United States Courthouse
Suite 660
500 Pearl. Street
New York, New York 10007-1312
Re: Trustee's Request for Limited Intervention in Anwar v. Fairfield Greenwich
Limited, Case No. 09-cv-118 (S.D.N.Y.)
Dear Judge Marrero:
I write as counsel to Irving Picard, the court-appointed Trustee in the
liquidation of Bernard L. Madoff IDvestment Securities LLC ("BLMIS"), to advise
the court that the Trustee intends to file a motion, for limited intervention in Anwar
v. Fairfield Greenwich Limited, No. 09-cv-118, and to request, in accordance with
your Honors standing order, a pre-motion confer.ence. Copies of this letter will be
simultaneously delivered to aU counseL
It is the Trustee's duty under the Securities Investor Protection Act, 15
U.S.C. §78aaa et s.eq. ("SIPA"), to recover pr.operty wrongly transferred from the
BLMIS estate and to distribute that property ratably to BLMIS customers,
according to SIPA's statutory priority scheme. In furtherance of that duty, the
Trustee has filed actions against a number of the Anwar defendants to recover
property transferred to them from the BLMIS estate. The Trustee's claims involve
much of the same conduct and many of the same occurrences as those that are the
subject of the Anwar action. Through November of last year, the Trustee was led to
Honorable Victor Marrero
February 25,2013
believe that the Anwar defendants would only go forward with a "global settlement~
resolving both his claims against the Anwar defendants and those of the Anwar
plaintiffs in a mutually agreeable fashion. On November 6,2012, however, counsel
to the Trustee first learned that the parties to Anwar had reached and filed a
proposed settlement that would dissipate much of the same customer property that
the Trustee seeks in his pending actions against the defendants. Accordingly,
counsel to the Trustee notified the Anwar parties of the Trustee's objection to the
settlement, and the Trustee filed a collateral action, as part of the ongoing SIPA
liquidation proceedings, to enjoin the settlement.
On February 6,2013, this Court granted the Injunction Defendants' motion
to withdraw the reference from the Bankruptcy Court of the Trustee's Injunction
Application. On February 19. 2013, the Trustee filed his reply brief in support of
the Application. In the interests ofjudkial and party economy, the Trustee now
timely seeks to intervene directly in Anwar and to assert at the March 22, 2013,
fairness hearing his position that he has supedor claims to the assets that are the
su~ject of the settlement. The Trustee is entitled to intervene as of right because
the proposed settJement, if approved, would d.rain money from the same limited pool
of assets on which the Trustee has first claim under SIPA. The Anwar parties have
effectively con.ceded, in their b.riefing opposing the Trustee's injunction action, that
the settlement would leave insufficient funds to satisfy the Trusteets claims. In this
respect, the Trustee has a direct "interest relating to the property or transaction
that is the subject of the action,"" and it is plain that consummation of the
settlement would therefore "as a practical matter impair or impede the movanes
ability to protect its interest." Fed. R. Civ. P. 24(a)(2).
It is also plain, from the face of the proposed settlement; that no existing
party represents the Trustee's interest in this litigation. The Trustee's position,
supported by the Securities Investor Protection Corporation, is that the Anwar
plaintiffs' state Jaw claims are preem.pted, and their Exchange Act claims displaced,
by SIPA, to the ex'ie.nt that they impinge upon the Trustee's rights and obligations
under SIPA. This does not mean that those claims mu.st ultimately fail, but only
that they may not be resolved in a way that conflicts with SIPA. The Anwar
pJaintiffs concede that they will benefit from distributions made to the Funds by the
Trustee in the SIPA liquidation, see Anwar Plaintiffs' Supplemental Memorandum
at 4 (the Funds' investors will recover only a tiny fraction of their losses through
any distributions that the Funds migbt get from the Trustee"), and that at least
some portion of the monies sought originated from BLMIS converted. customer
funds. Id. at 4. Their conjecture as to the size of any distribution to the Funds
notwith.standing, the Trustee submits that any approval of the proposed settlement
must be deferred until the Trustee's superior claims are resolved, at which point
there win no longer be any conflict. To do other.wise would create an irreconcilable
conflict with SIPA by allowing feeder fund investors to benefit from stolen customer
property at the expense of the owners of such property.
Honorable Victor Marrero
February 25, 2013
The Trustee also seeks to intervene, in the alternative, on per.missive
interve.n.tion grounds under Rule 24(b). His action shares with the maio. action
common questions oflaw and fact, and his intervention will not unduly delay or
prejudice the adjudica.tion of the rights of the existing parties, who have been aware
of the Trustee's objection to their settlement aDd whose settlement is, in any case,
challenged on similar grounds in the Trustee's injunction action.
Accordingly, the Trustee respectfully requests a conference on his motion to
intervene, or that the Court waive this requirement so that the Trustee may file his
motion, and Jodge his objections to the proposed settlement, as early as possible in
advance of the fairness hearing.
Cc:
Kevin H. Bell, Esq.
All Counsel of Record (By Email)
so ORDERED:
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