Anwar et al v. Fairfield Greenwich Limited et al
Filing
1075
REPLY MEMORANDUM OF LAW in Support re: #1032 MOTION for Settlement Notice of Motion for Final Approval of the Proposed Partial Settlement and Plan of Allocation.. Document filed by Julia Anwar, Pasha S. Anwar. (Attachments: #1 Exhibit 1 - Final Judgement, #2 Exhibit 2 - Fee Order)(Barrett, David)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PASHA ANWAR, et al.,
Plaintiffs,
v.
FAIRFIELD GREENWICH LIMITED, et al.,
Master File No. 09-cv-118 (VM) (FM)
Defendants.
This Document Relates To: 09-cv-118 (VM)
PLAINTIFFS’ SUPPLEMENTAL MEMORANDUM
CONCERNING REQUESTED CHANGES IN FINAL JUDGMENT
WOLF POPPER LLP
Robert C. Finkel
James A. Harrod
Natalie M. Mackiel
845 Third Avenue
New York, NY 10022
Telephone: (212) 759-4600
Facsimile: (212) 486-2093
BOIES, SCHILLER & FLEXNER LLP
David A. Barrett
Howard L. Vickery, II
575 Lexington Avenue
New York, NY 10022
Telephone: (212) 446-2300
Facsimile: (212) 446-2350
LOVELL STEWART HALEBIAN JACOBSON LLP
Christopher Lovell
Victor E. Stewart
61 Broadway, Suite 501
New York, NY 10006
Telephone: (212) 608-1900
BOIES, SCHILLER & FLEXNER LLP
Stuart H. Singer
Carlos Sires
Sashi Bach Boruchow
401 East Las Olas Boulevard, #1200
Ft. Lauderdale, Florida 33301
Telephone: (954) 356-0011
Facsimile: (954) 356-0022
The Representative Plaintiffs respectfully submit this Supplemental Memorandum to
address changes in the Final Judgment that are being requested by the Non-Settling Defendants,
and by Plaintiffs in light of developments since the Court granted preliminary approval of the
Settlement on November 30, 2012.1 Submitted herewith as Exhibit 1 is the form of the proposed
Final Judgment and Order of Dismissal with Prejudice (“Final Judgment”) that Plaintiffs, based
on the matters discussed in this Memorandum, respectfully request the Court to enter.2
ARGUMENT
The Non-Settling Defendants raise objections only to certain terms of paragraphs 17 and
21 of the Preliminary Approval Order, which are now included in identical form as paragraphs
28 and 29 of the proposed Final Judgment.3 Neither objection has merit, nor justifies changing
the relevant provisions of the Final Judgment.
As an initial matter, the Non-Settling Defendants claim that the provisions at issue are
“inequitable” (Citco Mem. at 2), but in fact the inequity would occur if the provisions at issue
were to be changed. The Non-Settling Defendants raised these same objections to paragraphs 17
and 21 of the Preliminary Approval Order at the November 30, 2012 Preliminary Approval
hearing. See Nov. 30, 2012 Transcript (“Tr.”) at 20-23, 28-30. Those paragraphs had been
incorporated into the Preliminary Approval Order just prior to the hearing at the request of many
of the financial institutions that are record holders of the Funds. The principal concern was that
1
Capitalized terms not defined herein shall have the meanings defined in the Stipulation of
Settlement (Nov. 6, 2012) Dkt. No. 996.
2
3
A separate Final Judgment and Order Awarding Fees and Expenses is appended as Exhibit 2.
See PWC Defendants’ Limited Objections to Plaintiffs’ Motion for Final Settlement Approval
(Feb. 15, 2013) Dkt. No. 1044 (“PwC Mem.”), which Defendant GlobeOp joins as to the
confidentiality objections, id. at 10-12; and The Citco Defendants’ Joinder in the Limited
Objections of the PwC Defendants (Feb. 15, 2013) Dkt. No. 1046 (“Citco Mem.”). PwC, Citco,
and GlobeOp are referred to collectively as the “Non-Settling Defendants.”
many Fund shareholders are defendants in “clawback” actions brought by the BLMIS Trustee or
the BVI Liquidator of the Fairfield Sentry Funds. Understandably, the shareholders did not want
to prejudice their ability to defend those actions by participating (or not) in the Settlement, and
counsel for Plaintiffs and the Settling Defendants believed it was unfair to require them to do so.
See Tr. at 23-28.
The Court considered and denied Non-Settling Defendants’ objections on November 30
and, more importantly, ordered that Notice be given – in Court-approved form – to over one
thousand Class Members beginning on December 17, 2012. See Tr. at 31; Preliminary Approval
Order (Dkt. No. 1008), ¶ 8(b). As ordered by the Court, that Notice specifically referenced the
substance of paragraphs 17 and 21. See Affidavit of Daniel Polizzi (Jan. 31, 2013), Ex. A at 12.
If the Non-Settling Defendants had wanted to contest the Court’s denial of their
objections, it was incumbent upon them to do so promptly, before the Notice was distributed, and
certainly within the 14-day period prescribed by Local Rule 6.3. There was sufficient time –
over two weeks – to seek rehearing on full briefing, and if that was unsuccessful, filing a
mandamus petition. Indeed, if the Non-Settling Defendants believed that the issues were
sufficiently important, they could have sought to stay distribution of the Notice until a final
decision was made. But the Non-Settling Defendants did none of this. They were content to let
the Class Notices go out. As a result, Class Members relied upon the terms of the Notice in
deciding whether to file Exclusion Notices (which were due on the same day as Non-Settling
Defendants’ Objections were filed), and Proofs of Claim (of which some 176 already have been
filed).
Under these circumstances, the Non-Settling Defendants’ objections to the paragraphs at
issue are now untimely. See, e.g., Hamilton v. Atlas Turner, Inc., 197 F.3d 58, 61 (2d Cir. 1999)
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(waiver is the “intentional relinquishment of a known right,” and forfeiture is “the failure to
make the timely assertion of a right”); Merrill Lynch Inv. Managers v. Optibase, Ltd., 337 F.3d
125, 132 (2d Cir. 2003) (laches applies where a party has inexcusably slept on its rights and the
unreasonable delay will cause prejudice). In addition, as shown below, the Non-Settling
Defendants’ objections should be denied on the merits.
I.
SUBMISSION TO JURISDICTION (PARAGRAPH 17/28)
Citing virtually no law, the Non-Settling Defendants argue that Class Members should
not be allowed to “have their cake and eat it too,” allegedly by participating in the Settlement
“without submitting to the jurisdiction of this Court for all matters arising from or related to this
case.” See PwC Mem. at 1, 8.
PwC asserts that “[t]here can be no question that under well-established law that
Settlement Class Members not already subject to the general jurisdiction of this Court who act in
this proceeding will become subject to the specific jurisdiction of this Court for all matters
arising from this case.” PwC Mem. at 6. On the contrary, the filing of a proof of claim would
not necessarily subject the claimants to New York long-arm jurisdiction. See, e.g., Beacon
Enters., Inc. v. Menzies, 715 F.2d 757, 764 (2d Cir. 1983) (“Beacon’s defensive declaratory
judgment action is not one that the courts of New York have regularly linked to section 302(a)(1)
jurisdiction.”); Kimco Exchange Place Corp. v. Thomas Benz, Inc., 34 A.D.3d 433, 434, 824
N.Y.S.2d 353, 354 (2d Dep’t 2006) (“The defendants’ acts of faxing the executed contracts to
New York and of making a few telephone calls do not qualify as purposeful acts constituting the
transacting of business.”). The point of paragraph 17 is simply to maintain the status quo, and
thereby encourage injured investors to file claims.
3
Of course, settlements in complex class actions are highly favored. See, e.g., Wal-Mart
Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116-17 (2d Cir. 2005) (“We are mindful of the
strong judicial policy in favor of settlements, particularly in the class action context. The
compromise of complex litigation is encouraged by the courts and favored by public policy”)
(internal quotation marks and citation omitted). In this case, paragraph 17 was included, as
counsel for the Settling Defendants told the Court, because
We are gravely concerned that many, many, many beneficial owners who are
entitled to recover under this settlement will in fact decide not to participate in the
settlement but will opt out for that reason alone because of these clawback
concerns and other concerns regarding jurisdiction in the United States.
Tr. at 28. In sufficient numbers, this could “potentially torpedo[ ] this entire settlement.” Id.
Thus, the provision was important to both sides to make the Settlement work.
Furthermore, as the Non-Settling Defendants’ papers demonstrate, the real reason for
their objection is that they are trying to gain an advantage over certain class members who have
sued them separately in the Netherlands. See PwC Mem. at 9; Citco Mem. at 2. The NonSettling Defendants have argued to the Dutch court “that the claims against them should be
dismissed or stayed because the [Dutch] plaintiffs . . . are putative class members in [Anwar].”
Id. But that argument is not affected one way or the other by paragraph 28. By its terms, the
argument does not depend on the extent of this Court’s jurisdiction over Class Members. The
Non-Settling Defendants are free to argue to the Dutch court – for whatever value it has – that
Class Members are receiving compensation for part of their losses from the Settlement. The
Non-Settling Defendants can argue now that a class has been certified against them which
includes investors in the Netherlands. Nothing in the Dutch Court’s decision (id. at 2) suggests
that the court’s refusal to dismiss or stay the Dutch action turned on whether this Court has
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jurisdiction over Class Members; rather, the issue was whether the Dutch plaintiffs had been
fully compensated for their losses in this Action.
In any event, if the Non-Settling Defendants violated both U.S. and New York law, as
well as Dutch law, there is nothing inherently unfair about Plaintiffs seeking to recover a portion
of their losses in each legal system. Nor is there any basis to change the heavily negotiated,
judicially sanctioned and widely relied upon Settlement terms, merely to afford a vaguelydescribed possible benefit to non-parties to the Settlement in separate litigation overseas. In
short, there was good reason to include paragraph 17 in the Preliminary Approval Order and to
carry it over as paragraph 28 of the Final Judgment, and the Non-Settling Defendants suffer no
cognizable harm as a result.4
II.
CONFIDENTIALITY OF CLAIMS AND OPT-OUTS
(PARAGRAPH 21/29)
The Non-Settling Defendants argue that paragraph 21 of the Preliminary Approval Order
should not be carried forward as paragraph 29 of the Final Judgment to the extent that it prevents
them from having access to “exclusion and claim information provided by the members of the
proposed Settlement Class . . . so that . . . Defendants can know who is, and who is not, bound
by the Court’s orders and judgments.” See PwC Mem. at 1-2. The Non-Settling Defendants
ignore, however, that paragraph 29 contains not only customary provisions providing that claims
4
Moreover, if the Non-Settling Defendants believed that in granting preliminary approval, the
Court should have required Class Members to opt in or out of the entire case for all purposes as
to all Defendants, (which presumably would have supported their position in the Dutch courts),
rather than just opt-out of the partial Settlement, they had the right to raise that argument in
opposition to the Preliminary Approval Motion. But again, they failed to do so. It is perfectly
proper for the Court to allow separate opt-out rights for a partial Settlement while the remainder
of the case proceeds. See, e.g., In re Enron Corp. Litig., 2008 U.S. Dist LEXIS 24656 at *65 n.
21 (S.D.Tex. Sept. 8, 2008) (class member opted out of certain partial settlements, but remained
in class with respect to other partial settlements).
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data is confidential, but also an express exception which allows access to that information upon
“a further order of this Court upon a showing of necessity.”
Particularly in light of the reliance that Class Members and Opt-outs have placed on this
provision as it was contained in the Notice and Preliminary Approval Order, Plaintiffs believe
that it strikes the right balance between the need for confidentially and Defendants’ asserted
interests.5 The “necessity” exception in Paragraph 29 allows the Non-Settling Defendants to
gain access to the information upon an appropriate showing. It may well be that such a showing
could be made at an appropriate stage in the litigation if, for example, the Non-Settling
Defendants need to know which, if any, of the parties who are suing them in the Netherlands
have filed Proofs of Claims, or need, for purposes of reducing their damages liability, to confirm
the amount that a shareholder receives from the Settlement. Those issues can easily be addressed
as they arise by the Magistrate Judge.
III.
CERTIFICATION OF THE SETTLEMENT CLASS
The proposed Final Judgment also references (in paragraph 6) the Court’s March 6, 2013
Order (Dkt. No. 1068) clarifying that the February 25, 2013 Decision and Order granting class
certification in part and denying it in part (Dkt. No. 1052), leaves undisturbed the definition of
the Settlement Class contained in the Preliminary Approval Order. Accordingly, Settlement
Class Members in the 25 countries that the Court excluded from the definition of the litigation
class in the February 25, 2013 Order can make claims in the Settlement and be paid on the same
basis as all other Settlement Class Members. As stated by Plaintiffs in their letter to the Court of
March 4, 2013 (Dkt. No. 1067), where, as here, the FG Defendants have settled to buy peace
5
Because of this reliance by Class Members on the specific terms of the Preliminary Approval
Order and Class Notice, Plaintiffs do not believe it is appropriate to grant the Non-Settling
Defendants access to this material under the current Confidentiality Order (see PwC Mem. at 2).
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from further litigation, have consented to a worldwide class, and Settlement Class Members from
the Excluded Countries are required to execute individual releases as part of the claims process, a
worldwide class is properly certified for settlement purposes.
CONCLUSION
For the reasons stated herein, the Non-Settling Defendants’ objections to the Final
Judgment should be rejected and paragraphs 28 and 29 included therein as proposed by
Plaintiffs. Paragraph 6 of the proposed Final Judgment should be modified as set forth therein.
March 8, 2013
Respectfully submitted,
By:
Robert C. Finkel
James A. Harrod
Natalie M. Mackiel
WOLF POPPER LLP
845 Third Avenue
New York, NY 10022
Telephone: 212.759.4600
Facsimile: 212.486.2093
/s/ David A. Barrett
David A. Barrett
Howard L. Vickery, II
BOIES, SCHILLER & FLEXNER LLP
575 Lexington Avenue
New York, NY 10022
Telephone: (212) 446-2300
Facsimile: (212) 446-2350
Stuart H. Singer
Carlos Sires
Sashi Bach Boruchow
BOIES, SCHILLER & FLEXNER LLP
401 East Las Olas Boulevard, #1200
Ft. Lauderdale, Florida 33301
Telephone: (954) 356-0011
Christopher Lovell
Victor E. Stewart
LOVELL STEWART HALEBIAN
JACOBSON LLP
61 Broadway, Suite 501
New York, NY 10006
Telephone: 212.608.1900
Co-Lead Counsel for Plaintiffs and Lead
Counsel for PSLRA Plaintiffs
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