Anwar et al v. Fairfield Greenwich Limited et al

Filing 1060

ENDORSED LETTER: addressed to Judge Victor Marrero from David A. Barrell dated 2/28/2013 re: Counsel for Plaintiffs write for the foregoing reasons,a motion by the Trustee to intervene could not succeed, and the request to file it should be denied. ENDORSEMENT: The Clerk of Court is directed to enter into the public record of this action the letter above submitted to the Court by the Anwar plaintiffs. (Signed by Judge Victor Marrero on 2/28/2013) (js)

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BOIES SCHILLER

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575 I..EXINGTON AVENUE' 7TH F"1..00R· NEW

February 28. 2013
DOCC.~lEN-r

VIA FACSIMILE

~ IELECTRO!'lCALLY FfLED

Judge Victor Marrero
United States District Court
Southern District of New York
500 Pearl Street
New York. New York 10007

~I~~~:~LEOO &]'t tlL

Re: Anwar, et aL, v. Fairfield Greenwich Limited, et al.,
Master file No. 09-CV-OOIIS (VM) (FM)
Dear Judge Marrero:
On behalf of Plaintiffs, we respond to the letter of Febmary 26,2013, from David J.
Sheehan, counsel for the BLMIS Trustee (the "Letter"). The Trustee seeks to file a motion to
intervene for the purpose of objecting to the proposed Settlement of this Action. Plaintiff)
respectfully submit that any such motion plainly would be meritless, and therefore no pre-molion

conference is necessary.
First, intervention by the Trustee would be grossly untimely and could delay
implementation of the Settlement to the great detriment of the Settling Parties. Second, the
Trustee lacks standing to object. Third. intervention is unnecessary because an objection would
merely rai~e the same sub~tantive arguments that the Trustee has made in his pending,
exhaustively briefed. motion to e~ioin (he Settlement. Fourth, the Trustee cannot meet thc Rule
24 requirements for intervention.

Intervention, Trustee cannot show that he meets the governing standards under Rule
24(a), Fed. R. C1v. P.:
(1) the motion is timely: (2) the applicant asserts an interest relating to the
property or transaction that is the subject of tIle action; (3) the applicant is so
situated that without intervention, disposition of the aclion may, as a practical
matter, impair or impede the applicant's ability to protect its interest; and (4) the
applicant's interest is not adequately represented by the other parties.

MasterCard Int'l Inc v. Visa Int'l Servo Ass'n. Inc" 471 F.3d 377,389 (2d Cir.2006). "Failure to
satisfy anyone of these requirements is a sufficient ground to deny the application." Farmland
Dairiesv. C()mm'rl~f'N.Y Stale Dep'tofAgric. & Mkts., 847 F.2d 1038,1043 (2dCir. 199~
(emphasis in original). Permissive intervention is allowable if the application is timciy and
would not "·unduly delay or prejudice the adjudication of the rights' of the existing parties:'
Fed. R. Civ. P. 24(b). In re Holocaust Victim Assets Litig, 225 F.3d 191,202 (2d Cir. 2000).

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Standing. Rule 23(e)(5} provides that "any class member may object to the propos[ed)"
settlement, but ... [n]onparties ... generally do not have standing to object to a settlement of a
class action. '" Cent. States We?fare Fund v, Merck-Medco. LLe, 504 FJd 229, 244 (2d Cir.
2007) (citation omitted). Among other reasons, because the only issue before the Court is
whether the proposed settlement is "fair, reasonable, and adequate," Rule 23(e)(2), court,!;
"usually reject ... outsiders' attempts to enter the litigation during the settlement phase." Gould
v. Aileen. Inc., ~Hn F.2d 281,285 (4th Cir. 19R9). Since the Trustee is not a class member, he
lacks standing, i.e., any protectable interest in the settlement. See. e.g.. 1n re Am. In!'1 Grp" Inc.
Sec. Litig., 2013 WL 68928, at *3 (S.D.N.V. Jan. 7, 2013) (as a non-class member, New York
Attorney General lacks standing under Rule 23(e) to object to proposed class action settlement).
Timeliness. The Trustee's delay in seeking intervention, standing alone. precludes the
motion. Tht: Court must consider "the totality of the circumstances," such a.<; "how long the
applicant had notice of its interest in the action before making its motion" and potential prejudice
to the parties. See In re Holocaust Victim Assets Lilig.. 225 F.3d at 198. Here, the Trustee filed
his fraudulent conveyance action in Apri12009, just four months after Anwar in December 2008.
The Trustee knew then that he was suing the same defendants "on much of the same conduct and
many of the same occurrences" (Letter at 1), yet he waited nearly four years to seek intervention,
all the while knowing that the parties and the Court were devoting enonnOU$ resources to press
thn litiuntinn fnmrnrrl 'hlnr hnn thn Tmntnn I'nrJlloinr"lri nrhlf hn foiTnn. hlr nnor1Jr rnro 111881m Illron

to comply with the Court's deadline of February 15, 2013, for filing objections to the Settlement,
which had been set eleven weeks earlier.
However timeliness is measured, the Trusree's motion to intervene is too late. See e.g.,
In re Bank ofAm. Corp. Sec. Litig., 09 MD 2058 (PKC), 2012 WL 1674299 (S.D.N.Y. May 14,
2012) (intervention untimely where "[tJhe derivative action before this Court was filed in
January 2009 ... and the Proposed Intervenors do not deny knowledge of its pendency");
MaSferCard Inr 'f, 471 F.3d at 390·91 ('·Considering that Visa argued ... that it ha.., a significant
interest in this litigation that will be gravely prejudiced if the maHer proceeds in its absence, the
district court could properly find Visa's delay unjustified."); In re Holocaust, 225 F.3d at 198-89
(intervention denied due to eight month delay). Even if"the order that triggered the need to
intervene came ,IS a 'total surprise'" to the Trustee (Letter at 1-2), the delay is inexcusable. 1d at
198. And as noted, the Trustee ignored the Court's deadline for filing objections to the
Settlement. seeking intervention less than four weeks before the March 22, 2013 final fairness
hearing.'

Impairment and Representation of Interests. The Trustee cannot show thal absent
intervention "disposition of the action may a<; a practical matter impair or impede [his} ability to
protect [his 1interest." MasterCard Int'l, 471 F.3d at 389. The reason is simple - the Trustee
I Because th~ Trust~e not explained his delay. one can only speculate that the Trustee may fear losing the
prehminary injunction motion, whIch would allow the Set! lement. if approvc<.l. to he irnp!.:m.:nted abSent a stay
pending appe,d. If the Trustc\: wcre permitted tn inh:rvcnc. however. he could appeal a~ of right from an approval
order. and under the Stipulation of Settlemem that appeal would delay implementalion of the Settlement (because
the approval would nOt be «nnal"). thereby enabling (he Tr'llst~e to block implementation without having IO make
the rigorous shOWing necessary to obtain a stay pending appeal.

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effectively elected his remedy by moving in the Bankruptcy Court for injunctive relief to stop the
Settlement. As the Trustee's letter makes clear, his grounds for opposing the Settlement will be
identical 10 the arguments he has already made in the injunction motion - that he has "superior
claims" to the FG Defendants' ac;sets due to alleged SJPA preemption of state law claims and
·'displace[ment]" of Exchange Act claims (Letler at 2). Because the Trustee's arguments are
already before the Court, and can be decided before objections to the Settlement are addressed,
"as a practical matter" the disposition of the Settlement will have no further impact whatever on
the Trustee's interests. Intervention is certainly not intended to give a litigant, such as the
Trustee, two bites at the same apple.
The Trustee's assertions that "the Settlement would leave insufficient funds to satisfy the
Trustee '5 claims" and that Plaintiffs would "benefit from stolen customer property" (Letter at 2)
do not justifY intervention. The Trustee doe.s not deny that Plaintiffs, as feeder fund investors.
are in a far worse position in terms oflikely recoveries under his administration of the SIPA
regime than are direct Madoff investors. even though common sense tells us that - having hired
experienced investment managers, big-four auditors and a market-leading administrator and
custodian - the Fund investors should be better protected from loss. The Settlement will reduce
that unfair imbalance to some degree. Moreover, the Settlement specifically sets aside $30
million in an Escrow Fund (much of which is othetV.!ise unreachable in an offshore trust) that the
Trustee can collect ifhe can seHle or win his case against the FG Defendantc;. Given that (i) the
Trustee is limited to a claim of $154 million in two-year transfta"s (see Picard v. FUL, No. 12
eiv. 940R(VM), Trustee's Reply Brief (ECF no. 38) at 25-26 ($154 million); Picard v. Katz, 462
B.R. 447 (S.D.N.Y. 2011); SfPC v. BLMIS, No. 12 Me 115 (S.D.N.Y. Feb. 13,2013). ECF no.
4)c) (Rakoff, J.) (two~year limitation); Picardv. HSBC. 454 B.R. 25, 36 (S.D.N.Y. 2011)
(Trustee lacks standing to bring assigned customer claims); (ii) only some 30 percent of that
amount (about $46 million) i!'> traceable to BLMIS distributions (see Picard v. FGL. McKeefrey
Dcc!. (ECF. no. 24) at 3); (iii) the Defendants will have asset~ remaining after funding the
Settlement; and (iv) any reasonable settlement would discoLml the Trustee's claim significantly
for litigation risk, the $30 million which Plaintiffs negotiated to make availabl~ to the Truste~ is
"sufficient to satisfy the Trustee's claims" without disrupting the Settlement.
Pre.iudice to Parties. "[J]eopardizing a settlement agreement [by moving to "intervene
at such a late stage in the litigation"] causes prejudice to the existing parties." U.S. v. Pitney
Bowe.\', {nc .. 25 F.3d 66. 72 (2d Cir. 1994): see, e.g., New York Naws. Inc. v. Kheel, 972 F.2d

482.487 (2d Cir. 1992) (allowing intervention would up!iet settlement, re~mlting in substantial
prejudice to settling parties): Farmland Dairies, 847 F.2d at, 1044 (interv~ntion would
prejudice parties' interest in "avoiding continuing litigation" and realizing fruits of settlement).
For the foregoing reasons, a motion by the Trustee to intenrene could nO! succeed, and
the request to file it should be denied.

The Clerk of Court is directed to enter into the public record
oft i~ action the letter above submitted to t Court by
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¢-~r-/3
DATE

David A. Barrett

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BOIES SCHILLER

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All Counsel in Anwar

David j,

Sheehan~

Esq.

Kevin H. Bell, Esq.

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F'LEXNER

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