Anwar et al v. Fairfield Greenwich Limited et al

Filing 1100

ENDORSED LETTER: addressed to Judge Victor Marrero from David J. Sheehan dated 3/27/2013 re: the Trustee respectfully requests a conference on his motion for an injunction or stay pending appeal or. in the alternative, that the Court forgo that conference and grant such relief on the grounds presented in this letter. In light of the Settlement's deadlines, the Trustee intends to appeal to seek such interim relief from the Second Circuit on April 5, 2013, as may be necessary to protect his interests. ENDORSEMENT: The parties are directed to respond by 4/12/2013 by letter not to exceed three (3) pages to the request above submitted by the SIPA Trustee. So Ordered. (Signed by Judge Victor Marrero on 3/28/2013) (js)

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Baker &Hostetler LLP
45 Rockefeller Plaza
New YorK. NY 10111

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F 212,5694201
W\flMI,bakerfaw,com

March 27,2013

VIA FACSIMILE [phone]

David J. Sheahan
direct dial: 212.589.4616
dsheehan@bakerlaw,com

The Honorable Victor Marrero
United States District Court
Southern District of New York
500 Pearl Street
New York, NY 10007-1312

Re:

Trustee's Request for a Stay or Injunction Pending Appeal in Picard v. Fairfield
Greenwich Ltd.. No. 12-cv-940a (S.D,N,Y,), or Anwar v, Fairfield Greenwich
Limited, No, 09-cv-118 (S,D.N.Y,)

Dear Judge Marrero:
Pursuant to your Individual Practice Rule ILA, I write as counsel to Irving Picard,
the court-appointed Trustee in the liquidation of Bernard L. Madoff Investment
Securities LlC ("BlMIS"), to advise the Court that the Trustee intends to file a motion
for an injunction or stay pending appeal against entry of final approval of the Settlement
in Anwar v. Failfield Greenwich Limited, No. 09-cv-118. Copies of this letter are being
simultaneously delivered to all counsel.
An injunction or stay pending appeal IS warranted due to the hardship that entry
of final approval of the Settlement, and dissipation of the Fairfield Defendants' assets,
will cause to the BlMIS estate. The four factors to be considered in issuing such relief
are (1) whether the stay applicant has made a strong showing that he is likely to
succeed on the merits; (2) whether the applicant will be irreparably injured absent a
stay; (3) whether issuance of the stay will substantially injure the other parties
interested in the proceeding; and (4) where the public interest lies." In re World Trade
Ctr, Disaster Site Litig., 503 F.3d 167, 170 (2d Cir. 2007) (quotation marks and footnote
omitted). These factors are assessed on a sliding scale: "more of one excuses less of
the other: Mohammed v. Reno, 309 F.3d 95. 101 (2d Cir. 2002). (quotation marks
omitted). A stay is warranted even where the applicant has demonstrated only "some
possibility of success" on appeal if IJthe balance of hardships tips decidedly in his favor."
Thapa v. Gonzales, 460 F.3d 323,335 (2nd Cir. 2006),
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The Honorable Victor Marrero
March 27,2013
Page 2
In this case, the "balan e of hardships" merits relief pending appeal. Final.
approval of the Settlement wililinexorably lead to dissipation of a portion of the F~lrfi7ld
Defendant's limited assets, the very same assets that are sought by the Trustee In his
avoidance action. That is per $e irreparable harm. Brenntag Int'l Chems., Inc. v. Bank
of India, 175 F.3d 245, 249 (2~ Cir. 1999) (holding and citing cases in support of the
principle that "insolvency suppbrts [a] finding of ir;eparable h~rm"): In any c~se, courts
routinely find irreparable harm iwhere, as here, third party actions Interfere wIth the
recovery of assets by an estat~. See, e.g., In re United Health Care Org., 210 B.R.
228,233-34 (S.D. N.Y. 1997);jin re Probulk Inc., 407 B.R, 56, 63 (8ankr. S.D. N.Y.
2009); In re Lines, 81 8,R. 26 ,270 (8ankr. S.D.N.Y. 1988).
At the same time, an i junction or stay would substantially further the public
interest as identified by Congress in the Securities Investor Protection Act ("SIPA").
SIPA was enacted specifically Ito facilitate the expedient and equitable return of
customer property to custome~ts of failed brokerages. The Settlement undermines that
purpose by allowing a set of in estors to achieve a double recovery: first, through their
pro rata share of the Fairfield unds' approved claims in the SIPA proceeding, and
second, through the Sett'eme~t action. This second recovery comes at the expense of
other investors-8LMIS custo~ers-to whom Congress chose to provide special
protections in SIPA so as to fukher the overriding public interest in maintaining
confidence in vital capital markets.

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On the other side of th~ ledger, an injunction or stay pending appeal would
cause no injury to the other p~rties. The other parties maintain that the Fairfield
Defendants have sufficient assets to fund the Settlement and satisfy the Trustee's
claims. and if they are correct on that point, interim relief should not affect the amount
of any payments to the Anwar/Plaintiffs.' Moreover, the Settlement itself does not allow
disbursement of any funds prici>r to the completion of any appeals. (Stipulation of
Settlement ~ A.1.q, Anwar v.1airfield Greenwich Ltd., 09-cv-118 (S.D.N.Y), ECF No.
996 (Nov. 6,2012).) Given the several objections to the Settlement, there is a
substantial likelihood that one lor more appeals may be filed, thereby delaying
disbursements. While interim reliefwould provide the Trustee valuable assurance that
no funds will be dissipated-assurance that he presently lacks, being unable to enforce
the terms of the Settlement-it should therefore not delay any payments to the Anwar
Plaintiffs.
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Finally, the Trustee rejpeCtfUIl Y submits that he has, at the least, "some
possibility of success" in seeking on appeal to obtain an injunction or stay of the
Settlement pending resolution of his avoidance action against the Fairfield Defendants.
For the reasons stated in our riering, the Trustee believes that he is entitled to a
§ 105(a) injunction to preserv~ property necessary to the 8LMIS liquidation under SIPA
and that, to the extent that the~ conflict with the Trustee's claims under SIPA, the
Anwar Plaintiffs' claims again~t the Fairfield Defendants are barred. While the Trustee
___________________ 1

See, e.g., Letter from David A. Barrett, Counsel to the Anwar Plaintiffs, to the Honorable Victor
Marrero, Judge. United States Di~trict Court for the Southern District of New York. at 3 (Feb. 28,

1

2013).

The Honorable Victor Marrero
March 27,2013
Page 3

recognizes that the Court disagrees on these pOints, there is at least "some possibility"
that the Second Circuit will see things differently and allow the Trustee to be "first in
line" with his claims against the Fairfield Defendants.

Accordingly. the Trustee respectfully requests a conference on his motion for an
injunction or stay pending appeal or. in the alternative, that the Court forgo that
conference and grant such relief on the grounds presented in this letter. In light of the
Settlement's deadlines, the Trustee intends to appeal to seek such interim relief from
the Second Circuit on April 5, 2013, as may be necessary to protect his interests.

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Cc: Kevin H. 8e/l, Esq.

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