Anwar et al v. Fairfield Greenwich Limited et al

Filing 1117

ENDORSED LETTER: addressed to Judge Victor Marrero from Jorge A. Mestre dated 4/22/2013 re: Counsel fro Plaintiff requests a pre-conference motion to discuss its request to move for leave to amend, and an appropriate briefing schedule. ENDORSEMENT: The Standard Chartered defendants are directed to respond by 4/25/2013, by letter not to exceed four (4) pages, to the matter set forth above by plaintiff Headway Investment Corp. So Ordered. (Signed by Judge Victor Marrero on 4/22/2013) (js)

RIVERO MESTRE

April 22.2013

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By fax to (21.2)805-63B.2

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Honorable Victor Marrero
United States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York ]0007-1312

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Anwar, et al. v. Fairfield Greenwich Limited, et ut,
09-cv-118(VM)(THK)

Dear Judge Marrero:

r write Oil behalf of Plaintiff Headway Investment Corp. to request a pre-motion conference to

permit Headway to renew its request to amend its complaint.! The Court. denied a prior request,1 but

current circumstances are sufficiently different to warrant a different result. Most importantly, the

Standard Chartered Cases are not materially closer to trial than they were a ye·ar ngo, as the parties and the

Court discussed on the March 6, 2013 telephonic hearing regarding pending requests for admtssions_ We

respectfully submit that the Court's previously expressed concern about unfairly delaying the progress of

these cases jf leave to amend were granted has not been borne out, and allowing Headway to amend

would not materially (if at all) delay the case, but would promote the ends ofjustice.

Moreover, on April 19. 2013, certain other Standard Cbartered Plaintiffs requested a conference
[D.E. J 114] to permit them to move to reconsider the Court's dismissal oftheir negligence claims based

on Florida's economic loss ruJe in light ofthe recent Florida Supreme Court decision definitively limiting

that rule to product Iiabi Iity claims. Tiara Condo_ Ass 'n, Inc. \/. Marsh & McLennan Cos_ 2013 WL

828003 (Fla. 20]3). Although Headway does not seek that exact relief, granting leave to amend would

cause no material delay, and if the Court is inclined to grant the other plaintiffs' request, there would be

no prejudice to the Standard Chartered Defendants3 if the Court also permitted Headway to amend.

Because of Rule 15(a)'s liberal amendment standard, and the other plaintiffs' pending,

meritorious requests to move for leave to amend. we respectfully submit that this is the ideal time for

Headway to amend and refine its claims. based on the original, common nucleus of operative facts that

J We understand that plaintiffs Maridom Limited, Caribetrans, S.A., and Abbott Capital, Inc. (the "Maridom

Plaintiffs") also will be making a request to move for leave to amend their Complaint.

2 The Maridom Plaintiffs moved for leave to amend on February 9, 2012 [D.E. 815]. Headway did so on March 16,

2012 [D.E. 831-838). The Court denied both motions, and a sim..ilar motion from PlaintiffBarbachano (D.E. 853], as

well as Headway's and the Maridom Plaintiffs' motions for reconsideration [D.E. 897).

l1l1e "SCB Defendants" are Standard Chartered BlUlk Inl'J (Amel;cas) Ltd. ti'kla American Express Bank Int'l

("SCBf'), Standard Chartered Int'] (USA) Ltd. Ok/a American. Express Bank Ltd. ("SCr"), and Standard Chartered

Bank ("SCB!I).

Rivero f\!1estre LLP
www.riveromestre.(om
T3054452500

F30S 4452505

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Honorable Victor Marrero
April 22, 2013

Page - 2 ~
gaVi: rise to its Origillal c{)mplaint. For these and other reasons, more fully discussed below, Headway
requests a conference to discuss the appropriate way to handle a motion tor leave to amend its Complaint.

Hew:lway's proposed amendment will: (1) drop the illdividual SCB Defendants4; (2) clarify the
names of the institutional SCB Defendants5; (3) add claims against those defendants for Aiding and
Abetting Breach of Fiduciary Duty, Fraudulent Misrepresentation, Negligent Misrepresentation(\ and
violations of the Florida's Securities and Investor Protection Act, Fla. Stat. §§ 517.011 - 517.32
1
("FSIPA"); and add PricewaterhouseCoopers N.V. ("PwC Netherlands") 1t9 a defendant.
The standard for this request is liberalJy construed. "The court should freely give leave [to
amend] when justice so requires." Fed. R. Civ. P. 15(a). "A mqtion to llmend should be denied only for
such reasons as 'undue delay, bad faith, futility of the amendment, and perhaps most important, the
resulting prejudice to the opposing party." Richardson GreeT/shields Sees., Inc. v. Lau• .825 F.2d 647. 653
n. 6 (2d Cir. 1987). Accord Abbatiello v. Monsanto Co., 571 F. Supp.2d 548. 552 (S.D.N.Y. 2008)
(Marrero, 1.). Further, "Rule 21 states that a party may be added to an action 'at any time, on just terms.'
In deciding whether to permit joinder. courts apply the 'same standard of liberality afforded to motions to
amend pleadings under Rule 15.'" Bridgeport lv/usie, II'Ic. v. Universal Music Group, Inc., 248 F.R.D.
408, 412 (S.D.N.Y. 2008) (Marrero, J.).
Our request satisfies applicable standards. First, as noted above. this case is not materially closer
to trial than it was a year ago.' Second, if the Court grants (as it should) the other plaintiffs' pending
4 Headway seeks to drop individual SCB Defendants Robert Friedman, Rodolfo Pages, John Dutkowski, Carlos
Gadala-Maria, and Raul N. Mas.
, Headway's Original Complaint sued American Express Bank: Ltd. d/b/a Standard Chartered Private Bank alkla
Standard Clw1ered Bank International (Americas) Limited and Standard Chartered Bank. During discovery, we
learned the proper identities of these defendants, which are SCBI, SCI, and SCD. Because SCI already is a party to
the Standard Chartered cases, it cannot credibly claim prejudice from Headway's proposedjoioder.
6 The SCB Defendants cannot be prejudiced by Headway's proposed fraud and negligent misrepresentation claims
because both claims were brought by the Maridom Plaintiffs and have survived a motion to dismiss. Because
coordinated discovery relevant to these claims already was conducted, no fllrther discovery is necessary.
7 Adding PWC Netherlands will correct a clerical error, which the rules contemplate to prevent injustice. It was
omitted from our original complaint because the only clue to which PWC entity did whicb audit was an address. The
PwC logo did notreveal which "member firm" did an audit. or even that PwC h3d "member firms." Further. PWC
Netherlands was on notice that it would be made /I defendant, because Headway sued PricewaterhouseCoopers LLP
("PwC Canada"), and both are defendants {nAnwar. nle non-SCB defendants. including PwC Canada. have argued
that they need not respond to Headway's complaint because of the Consolidation Order and Order ror Appointment
of Interim Co-Lead Counsel [D.E. 21-2], and Civil Case Management Plnn and Scheduling Order [D.E. 69]. Thus,
there can be no prejudice from joinder ofPwC Netherlands. which need. not lift a finger to respond to Headway's
complaint until "cousin" PwC Canada is required to, lit some indeterminate time in the future.
8 Newly discovered evidence further demonstrates that SCB's hedge fund personnel knew or had reason to know of
serious risks with the Fairlield Sentry and Sigma funds, which SCB never disclosed to investors. including tbe
ultimate risk that the funds would "explode." In his second declaration, former SCB broker Sebastian Gonzalez
testifies that Samuel Perruchoud·-former SeB hedge fund due diligence director-has confirmed the accuracy of aU
statements attributed to him in Gonzalez' fint declaration. including Perruchoud's 2005 statement that "something
[wa~1 wrong" with Fairfield Sentry, which was "going to explode one of these days." See S. Gonzalez Declarations I
& n. attached as Exhibit A. Moreover, in his second declaration. Gonzalez testifies tbat in 2008, Arnaud Heymann.
Perruchoud's successor at SCB, met with his boss, Robert Friedman, head of SCB's worldwide hedge fund
operations, and told him Sen1ry and Sigma were "a sCaln" and that they could "explode" at any time. See id. Mr.
Friedman did nothing, and nothing was disclosed to investors, who lost everything when the funds "exploded"
shortly thereafter. This evidence underscores the merit in Headway's request to brief a motion lor leave to amend.

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Honorable Victor Marrero
Apri122) 2013
Page - 3 ­
request to replead their negligence claims, the SCB Defendants will be unable; to credibly claim any
prejudi<.:e from Headway's proposed amendmenls, because other plaintiffs will have filed amended
complaints. Lastly, we note that the Court, on October 24, 2012, allowed plaintiff Barbachano to amend,
despite having denied an earlier request, along with the requests of Headway and the Maridom Plaintiffs.
[D.E. 995]. Headway should not be treated differently than Barbachano.

Headway has acted expeditiously in all respects. After the SeB Defendants answered the
Complaint. the Standard Chartered Plaintiffs Steering Committee ("PSG"), to which Headway and the
Maridom Plaintiffs belong, commenced robust discovery, analyzed hundreds of thousands of pages of
documents, and took numerous depositions. All the while, the SCB Defendants did everything possible to
impose expense on us, string us out, and delay this action, ritually invoking any formalistic argument that
it could invoke. TIle first time Headway and the Maridom Plaintiffs moved to amend, the sea
Defendants argued that amendment would significantly disrupt a coordinated case schedule, even though
there was and is no such schedule.
Headway appreciates the Court's concern that "permitting the proposed amendment9 at this late
date would inevitably result in significant deJay in resolving these complex, consolidated actions." [D.E.
853 at 6]. But the year that has passed does not bear out this concern, and the Standard Chartered cases
are only marginally. if at all, closer to trial. The only procedural milestones these cases ha.ve passed are a
discovery cutoff and the exchange of some expert reports (the SCB Defendants are scheduled to provide
their surrebuttal reports on May 1, 2013). Expert witness depositions have not yet been schedu led and no
conference with the Court regarding possible summary jlldgment motions has been scheduled. Moreover,
the case is nowhere near remand, since the Court bas stated its intention to resolve all pretrial matters,
including possible summary judgment motions, before remand to the transferor court. Only after remand
will the transferor court give us an indication of when (and where) this case will be tried. It is reasonable
to expect that trial is still at least a year away.
One could not credibly argue that this request is dilatory or made in bad faith. Further, it is
indisputable that even a delayed trilll resulting from allowing an amendment is of no import when the
party opposing amendment will not be prejudiced by allowing it Indeed, in the recent March 6.2013
telephonic heating. seB cowlsel argued that because these cases are not near trial, SCB should not now
have to address the authenticity ofdocuments in our pending requests for admissions. As noted above, the
newly added counts are based on the same, common nucleus of operative fact as ollr original complaints.
They reflect knowledge gained from discovery. and the recent revelation that the Bank's top hedge-fund
due dil igence personnel knew or had reason to know of serious, even ultimate risks, which were never
disclosed to Headway or anyone else whose investment money SeB funneled into a Ponzi scheme.

The Court previously held that denying Headway's Motion to Amend was not prejudicial or a
manifest injustice, because our proposed misrepresentation claims are the same, or very similar, to
"omissions and misrepresentations 0 alleged in many of the consolidated Standard Chartered cases
(indeed, in claims that have survived challenge, the Maridom Plaintiffs allege fraud and negligent
misrepresentation due to defendants' failure to disclose that Sentry was a funnel to Madoff)." [D.E. 897 at
10]. The Court held that "if those ftaud·based claims survive a potential summary judgment motion, and
at the subsequent trial admissible evidence is presented encompassing the same actions or omissions
Plaintiffs rely upon as their grounds for aJleging fraud., Plaintiffs may then seek to amend the pleadings to
conform to the evidence." Id On the recent telephonic hearing, the COLlrt stated its intent to prepare a
clean, easily understood record in cases the MOL panel transferred here, including resolving summary
judgment motions before remand. With respect,. leaving as huge an open issue as this to be resolved not
only after remand, but after trial, is neither the most efficient nor fairest way to resolve a request to amend

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Honorable Victor Marrero
April 22, 2013
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an original complaint in a case as far away from trial as this one. Nor does it address the possibility of one
case remaining in the transferee court and another beinS remanded.
For the foregoing reasons, Headway respeotfully requests a pre-conference motion to discuss its
request to move for leave to amend, and an appropriate briefing schedule.
Respectfully submitted,

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Enclosure

co:

Counsel lor all parties (bye-mail)

I460,Ol\coRREs\LTR 1. MARRERO 04.22.13

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Jorge A. Mestre