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)

Download PDF
Baker Hostetler r.::::::'" .. ~ ~rII S:DC S5N Y IDOCU:-'ltNT . ,I .i FL[CTRO:,\1CALLYFILr~D ,.)()C #; JDxrE FILLD: ['--- -.=-=====~===t~::U February 26, Baker&Hostetler LLP 45 Rockefeller Plaza New York, NY 10111 T 212.589.42QO F 212.589.4201 David J. Sheehan direct dial: 212.569.4616 ~013 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 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: i :>-- -~-/3 . DATE ~~~~~~:;~~~~­

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?