Anwar et al v. Fairfield Greenwich Limited et al

Filing 1205

DECLARATION of LEAD COUNSEL in Support re: #1203 MOTION for Settlement Notice of Motion for Final Approval of the Proposed GlobeOp Settlement and Plan of Allocation and an Award of Attorneys' Fees and Reimbursement of Expenses.. Document filed by Pacific West Health Medical Center, Inc. Employee's Retirement Trust. (Attachments: #1 Exhibit A - Affidavit of Daniel J. Polizzi Regarding (A) Mailing of the Notice and Proof of Claim Form; and (B) Publication of the Summary Notice, #2 Exhibit B)(Finkel, Robert)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ANWAR, et al.,
Plaintiffs,
v.
FAIRFIELD GREENWICH LIMITED, et al.,

File No. 09 CV 118 (VM)

Defendants.
This Document Relates To: 09 cv 118 (VM)

JOINT DECLARATION OF LEAD COUNSEL IN SUPPORT OF THE
PROPOSED GLOBEOP CLASS ACTION SETTLEMENT
AND FEE AND EXPENSE REQUESTS

David A. Barrett, Robert C. Finkel and Victor E. Stewart, being duly admitted to the
practice of law in the State of New York and to the Bar of this Court, do hereby declare under
the penalties of perjury of the State of New York and the United States of America, as follows:
I.

INTRODUCTION
1.

We are members of the law firms Boies, Schiller & Flexner LLP, Wolf Popper

LLP, and Lovell Stewart Halebian Jacobson LLP, respectively, Co-Lead Counsel for the
Representative Plaintiffs (“Lead Counsel”).1 Our firms are responsible for the prosecution of
the claims in this Action.
2.

We make this Joint Declaration in support of the Representative Plaintiffs’

motion pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, for final approval of (i)
certification of the GlobeOp Settlement Class2 for purposes of the Settlement; (ii) the GlobeOp
Stipulation of Settlement, dated as of August 27, 2013 ( the “Stipulation”), providing for
payment of $5,000,000 to establish a settlement fund (the “GlobeOp Settlement Fund”); (iii)
the proposed Plan of Allocation of the Net Settlement Fund among Settlement Class Members
who submit valid claims; and (iv) Lead Counsel’s application for an award of attorneys’ fees
and reimbursement of expenses. Also submitted herewith is a Memorandum of Law In
Support of Plaintiffs’ Motion for Final Approval of the GlobeOp Settlement and an Award of
Attorneys’ Fees and Expenses.

1

The Representative Plaintiffs are: Pacific West Health Medical Center Employees Retirement Trust,
Harel Insurance Company Ltd., Martin and Shirley Bach Family Trust, Natalia Hatgis, Securities &
Investment Company Bahrain, Dawson Bypass Trust, and St. Stephen’s School. The Representative
Plaintiffs are referred to herein as “Plaintiffs.”

2

Unless otherwise indicated, all capitalized terms are defined in the August 27, 2013 GlobeOp
Stipulation of Settlement filed with the District Court on August 29, 2013.

3.

The Stipulation is between the Representative Plaintiffs, on behalf of the

GlobeOp Settlement Class, on the one hand, and defendant GlobeOp Financial Services LLC
(“GlobeOp”) and the Insurance Carriers, on the other hand. Plaintiffs’ claims against (i) the
PwC Defendants (PricewaterhouseCoopers LLP Canada and PricewaterhouseCoopers
Accountants N.V.) (Netherlands) (collectively, “PwC”); and (ii) the Citco Defendants (Citco
Fund Services (Europe) B.V., Citco (Canada) Inc., Citco Bank Nederland N.V. Dublin Branch,
Citco Global Custody N.V., Citco Fund Services (Bermuda), and The Citco Group Limited)
(collectively, “Citco”) are not resolved by the GlobeOp Settlement and will continue to be
prosecuted.
4.

This Settlement resolves all claims against GlobeOp that were asserted or could

have been asserted against GlobeOp by limited partners in the two investment funds Greenwich
Sentry L.P., and Greenwich Sentry Partners, L.P. (together the “Domestic Funds”).
5.

The GlobeOp Settlement is the second partial settlement in this Action, separate

from the previously approved settlement of Plaintiffs’ claims against the Fairfield Greenwich
(“FG”) Defendants (the “FG Settlement”). The FG Settlement provided for a minimum cash
payment of $50,250,000 and an additional contingent cash consideration of up to $30,000,000,
as well as other consideration. The Court approved the FG Settlement by Final Judgment and
Order dated March 25, 2013. The Final Judgment is now on appeal to the Second Circuit Court
of Appeals.
6.

The Stipulation defines as the GlobeOp Settlement Class to include “all Persons

who purchased or held interests in the Domestic Funds from October 31, 2003 through

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September 1, 2006,3 who were investors in the Domestic Funds as of December 10, 2008 and
who suffered a Net Loss of principal invested in the Domestic Funds, excluding (i) those
Persons who timely and validly requested exclusion from the GlobeOp Settlement Class and
who did not validly revoke such exclusion; (ii) those Persons who have been dismissed from
this Action with prejudice; and (iii) the FG Defendants, GlobeOp, and the Non-Settling
Defendants, and any entity in which those Persons have a controlling interest, and their
officers, directors, affiliates, employees, legal representatives and immediate family members,
and heirs successors, subsidiaries and assigns of such Persons.”
7.

As part of a joint settlement, and to achieve global peace from further litigation,

the Insurance Carriers agreed to pay on behalf of GlobeOp an additional $5,000,000 to resolve
a parallel state court action brought by the Litigation Trust for the Domestic Funds. That state
court settlement will benefit GlobeOp Settlement Class Members by increasing recoveries that
they obtain through the bankruptcy proceedings for the Domestic Funds.
8.

Lead Counsel have identified approximately fifty-five investors who are

members of the GlobeOp Settlement Class. Notice of the GlobeOp Settlement was provided to
those GlobeOp Settlement Class Members pursuant to Notice mailed to class members on
September 24, 2013, as well as a press release issued over PR Newswire on September 30,
2013.

Pursuant to 28 U.S.C. § 1715, GlobeOp sent notice of the settlement to the appropriate

State and Federal officials on September 24, 2013.

3

Although GlobeOp ceased acting as the administrator effective August 31, 2006, new limited
partnership interests were not issued until the first day of the following month. Plaintiffs consider that
given the totality of circumstances, it is appropriate to end the class period on September 1, 2006 rather
than August 31, 2006.

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9.

The last date to file objections to the proposed Settlement or the request for fees

and expenses is October 25, 2013. To date, there have been no objections filed to the proposed
settlement or to the request for fees and expenses.
10.

In the Second Consolidated Amended Complaint (“SCAC”), Plaintiffs asserted

claims against GlobeOp under New York law and common-law theories for breach of fiduciary
duty (Count 29), gross negligence (Count 30), and negligent misrepresentation (Count 31). See
SCAC, ¶¶ 344-47 and 541-56. Those claims arose out of GlobeOp’s role as the administrator
of the Domestic Funds during the period October 31, 2003 through August 31, 2006. Plaintiffs
contend that the administrator of the Domestic Funds, GlobeOp had fiduciary and professional
responsibilities to verify the existence of the Domestic Funds’ assets, including by contacting
sources that were independent of Madoff. Plaintiffs contend that GlobeOp’s failure to verify
the existence of those assets contributed to plaintiffs’ losses.4
11.

By order of the Court dated August 18, 2010, the Court granted GlobeOp’s

motion to dismiss Count 30 (gross negligence), and denied GlobeOp’s motion to dismiss
Counts 29 and 31 (breach of fiduciary duty and negligent misrepresentation). See 728 F. Supp.
2d 372, 446-49 (S.D.N.Y. 2010).
12.

Although this Court sustained those two claims on the motion to dismiss,

GlobeOp continued to argue, among other things, that (i) plaintiffs’ claims were derivative and
owned by the Domestic Funds, which were in bankruptcy, and that the Domestic Funds,
through a litigation trust, were actively prosecuting those claims against GlobeOp, (ii) GlobeOp

4

Plaintiffs had also brought a separate Count (Count 33) against all defendants for unjust enrichment.
Plaintiffs discontinued that claim against GlobeOp during briefing on the motion to dismiss, among
other reasons, because GlobeOp had been the administrator of the Domestic Funds for less than three
years and the value of the unjust enrichment claim against GlobeOp was less than $1 million.

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acted with due care and did not act negligently, (iii) GlobeOp did not owe fiduciary duties to
investors in the Domestic Funds, (iv) the administrative agreements between GlobeOp and the
Domestic Funds absolved GlobeOp of all liability except in cases of “fraud, gross negligence,
or willful misconduct,” (v) as stated on account statements disseminated to investors, GlobeOp
was entitled to rely on the accuracy of investment information provided to it by the FG
Defendants, the Funds, and Madoff and had no duties to make further inquiries, (vi) plaintiffs’
exclusively state law claims against GlobeOp were barred by the Securities Litigation Uniform
Standards Act (“SLUSA”), (vii) class certification was not warranted, among other things,
because plaintiffs had failed to establish numerosity on their claims against GlobeOp, and
individual issues of reliance predominated over common issues of law or fact, (viii) GlobeOp
had no liability to any investor who acquired shares in the Domestic Funds before or after
GlobeOp acted as administrator of those Funds, (ix) investors had conducted their own due
diligence and were contributorily negligent in failing to recognize the Madoff Ponzi scheme,
(x) other persons, including Madoff, the FG Defendants, the Domestic Funds’ auditors, and
Citco had a much greater percentage of culpability for plaintiffs’ losses than GlobeOp, and (xi)
plaintiffs’ losses were mitigated by the recovery in the FG Settlement, tax benefits and the
anticipated recovery in bankruptcy proceedings. GlobeOp vigorously maintains that the
administrative services it performed for the Domestic Funds were a very small part of its
overall business, and that GlobeOp did not know about Madoff’s wrongdoing until it was
revealed to the public in December 2008.
13.

Although plaintiffs had significant arguments in opposition to GlobeOp with

respect to all of the foregoing issues, plaintiffs recognized that they could lose one or more of
these issues on summary judgment, at trial, or on appeal, and that there was a possibility that

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class members would obtain no recovery whatever. The Settlement was reached after four and
one-half years of hard-fought litigation and two full days of mediation, as a result of which
Lead Counsel were fully familiar with the issues, strengths and weaknesses of plaintiffs’
claims, among other things, having (i) litigated the initial motions to dismiss the SCAC,
motions to reargue the Court’s decision on that motion and a motion for class certification, (ii)
having reviewed the documents produced by GlobeOp in litigation, and conducted four
depositions of GlobeOp witnesses, and (iii) having prepared two mediation statements, and
analyzed the separate mediation statements of GlobeOp and the Insurance Carriers.
14.

The Settlement, if consummated, will provide an immediate cash benefit to the

Settlement Class defined in the Stipulation, which counsel and the Representative Plaintiffs
believe significantly outweighs the risks and certain delay of continued litigation against
GlobeOp.
15.

Lead Counsel estimate that the $5,000,000 cash settlement is equivalent to

approximately 11% of provable damages against GlobeOp, and will add to the benefits that
GlobeOp Settlement Class members will receive from the FG Settlement, and from the
settlement of the state court litigation against GlobeOp and recoveries from the Funds’
bankruptcy proceedings. It is an excellent recovery given the legal and factual obstacles to any
recovery against GlobeOp in this Action.
II.

HISTORY OF THE ACTION
A.

The Domestic Funds

16.

GlobeOp was hired on October 31, 2003 by Fairfield Greenwich (Bermuda) Ltd.

(“FGBL”) and Greenwich Sentry L.P. and on May 1, 2006 by FGBL and Greenwich Sentry

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Partners L.P., to act as the Funds’ third-party administrator. FGBL, as general partner,
controlled the Funds.
17.

Among the services provided by GlobeOp to investors on a monthly basis was

the calculation of the value of investors’ limited partnership interests in the Funds and the
dissemination of account statements reflecting those calculations.
18.

GlobeOp was terminated as the administrator of both funds effective August 31,

2006. GlobeOp was succeeded as the Domestic Funds’ administrator by Citco Fund Services
(Europe) B.V. effective September 1, 2006. GlobeOp never acted as the Domestic Funds’
Custodian.
19.

The Domestic Funds invested virtually all of the limited partners’ assets with

Bernard L. Madoff Investment Securities (“BLMIS”). These investments were lost because, as
revealed in December 2008 when Madoff was arrested, BLMIS was operating a Ponzi scheme
and the assets purportedly controlled by BLMIS did not exist.
B.

The Action and Consolidation

20.

Plaintiffs’ claims against GlobeOp are part of the consolidated Anwar class

action, the first of constituent action of which was filed on December 19, 2008, by plaintiffs
Pasha S. Anwar and Julia Anwar, on behalf of themselves and all others similarly situated, in
the Supreme Court of the State of New York, entitled Anwar v. Fairfield Greenwich Group, et
al., No. 603769/2008 (“Anwar”). On January 7, 2009, Anwar was removed by Defendants to
this Court. Numerous other actions against Defendants were filed and consolidated by this
Court under the Anwar action.

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21.

On January 30, 2009 the Court appointed Boies, Schiller & Flexner LLP, Wolf

Popper LLP, and Lovell Stewart Halebian Jacobson LLP as Interim Co-Lead Counsel to act on
behalf of all Plaintiffs in the Action pursuant to Fed. R. Civ. P. 23(g)(3).
C.

The Initial Consolidated Complaint

22.

Lead Counsel conducted a detailed investigation of the facts, including the

disclosures and statements made to investors in the Domestic Funds and the conduct of the
various defendants in their duties in connection with the offering and management of the
Funds. Among other things, Lead Counsel investigated GlobeOp’s relationship with Madoff,
Madoff’s role in the management and custody of the Domestic Funds’ assets and indicators of
potential fraud in Madoff’s investment advisory and asset management operation that could
have been known to GlobeOp. Lead Counsel also analyzed GlobeOp’s legal obligations and
duties and the potential causes of action available to Plaintiffs.
23.

On April 24, 2009, Lead Counsel filed the Consolidated Amended Complaint

(the “Consolidated Complaint”), asserting common law claims under New York law against the
FG Defendants, Citco and GlobeOp.
24.

On September 29, 2009, Representative Plaintiffs filed the SCAC, which

consolidated federal securities claims and claims against PwC and asserted claims in one
consolidated complaint on behalf of a proposed class of investors in the Domestic Funds and
two other off-shore funds against the FG Defendants, PwC, Citco and GlobeOp. Plaintiffs
asserted claims against GlobeOp in the SCAC under common-law theories for breach of
fiduciary duty (Count 29), gross negligence (Count 31), and negligent misrepresentation (Count
33). The SCAC alleged that investors in the Domestic Funds would have avoided their
ultimate losses if GlobeOp had not violated its fiduciary duties and acted negligently in failing

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to detect and alert plaintiffs to material facts evidencing a Ponzi scheme. The claims asserted
against GlobeOp included claims on behalf of investors who held shares in the Domestic Fund
as of August 31, 2006, when GlobeOp ceased acting as the administrator.
D.

Defendants’ Motions to Dismiss

25.

On December 22, 2009, all Defendants moved to dismiss the SCAC, filing

voluminous briefing and exhibits in support. In particular, GlobeOp’s motion to dismiss
asserted multiple arguments including:
a.

Plaintiffs’ state law non-fraud claims were barred by the New York State Martin
Act;

b.

Plaintiffs failed to allege facts sufficient to support a claim of gross negligence;

c.

Plaintiffs failed to adequately allege that GlobeOp owed them a duty (fiduciary
or otherwise), which is an essential element of breach of fiduciary duty,
negligence and gross negligence claims;

d.

Plaintiffs’ claims were derivative and belonged to the Funds, and as such
Plaintiffs were required either to make a demand on the Funds or plead facts
demonstrating that such demand would be futile;

e.

Plaintiffs’ claims were subject to an arbitration clause contained in the
administrative services agreement between GlobeOp and Greenwich Sentry;

f.

The New York State economic loss rule barred Plaintiffs’ tort claims.

26.

On March 23, 2010, plaintiffs filed a 107-page opposition to all Defendants’

motions to dismiss the SCAC, as well as separate oppositions to the motions of GlobeOp, Citco
and PwC. The principal opposition brief addressed the issues in common among defendants’
motions, including GlobeOp’s motion.

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27.

On May 21, 2010, GlobeOp filed a Reply Memorandum In Further Support of

its Motion to Dismiss, and plaintiffs filed a Sur-Reply Brief.
E.

The Court’s Decisions on the Motions to Dismiss

28.

By Orders dated July 29, 2010 and August 18, 2010, the Court granted in part

and denied in part the motions to dismiss the SCAC. The July 29, 2010 Order, 728 F.Supp.2d
354, rejected defendants’ arguments that the Martin Act preempted Plaintiffs’ common law
negligence claims. The August 18, 2010 Order, 728 F.Supp.2d 372, addressed the balance of
defendants’ motion to dismiss arguments, ruling, inter alia, that Plaintiffs adequately pled
negligence claims under New York law against certain defendants, including GlobeOp and that
Plaintiffs had adequately pleaded claims for breach of fiduciary duty against certain defendants
including GlobeOp. This Court, however, dismissed plaintiffs’ claims against GlobeOp for
gross negligence (Count 31).
29.

The Court subsequently denied two separate motions to reargue the August 18,

2010 Order (800 F. Supp. 2d 571 and 2012 WL 345478) (insofar as the motions applied to
GlobeOp). The Court granted the second motion to the extent of limiting the claims against
PwC to subsequent investor and holder claims asserted by existing investors in the Funds at the
times PwC issued its audit reports.
F.

Plaintiffs’ Motion for Class Certification

30.

On March 1, 2011, the Representative Plaintiffs served a motion for class

certification requesting the Court to certify the Action as a class action and to appoint them as
class representatives.
31.

Defendants, including GlobeOp, sought extensive discovery in connection with

the class certification motion, including from both the proposed Representative Plaintiffs and

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additional non-class representative Named Plaintiffs who had joined the SCAC in an
individual capacity.
32.

Plaintiffs opposed discovery of the Named Plaintiffs other than the

Representative Plaintiffs and the parties exchanged letter briefs to Magistrate Judge Katz on
Defendants’ entitlement to take discovery of the non-Representative Plaintiffs.
33.

At a discovery hearing conducted on April 19, 2011, Judge Katz ordered that

Defendants be limited to identifying twenty non-Class Named Plaintiffs to respond to paper
discovery. Plaintiffs subsequently agreed to produce seven of those twenty Named Plaintiffs
for deposition.
34.

Following the extensive discovery on class certification issues, all defendants,

including GlobeOp, opposed the Motion for Class Certification, filing a joint brief in
opposition, as well as separate opposition briefs and voluminous exhibits on January 13, 2012.
35.

Defendants, including GlobeOp, in opposing class certification, repeated many

of the same arguments as on the motion to dismiss, including that certain of Plaintiffs’ claims
were derivative and belonged to the Funds. In addition, GlobeOp argued that (i) plaintiffs
failed to establish numerosity as to the claims against GlobeOp, but rather had impermissibly
lumped those claims in with their much larger claims against the other defendants;5 (ii)
individual issues of reliance and damages precluded class certification; and (iii) individual
issues precluded certification of fiduciary duty or negligence claims.

5

Whereas the purported asset balances of the Domestic Funds approximated $140 million as of August
2006, the reported assets of the off-shore funds at times exceeded $7 billion.

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36.

On April 27, 2012, the Class Representatives made their reply submissions in

further support of class certification. Defendants subsequently were permitted to file a SurReply.
37.

In a Decision and Order of February 25, 2013 (289 F.R.D. 105), this Court

certified a litigation class consisting of investors who had asserted claims against GlobeOp and
the other defendants as follows:
All shareholders/limited partners in Fairfield Sentry Limited, Fairfield Sigma Limited,
Greenwich Sentry, L.P. and Greenwich Sentry Partners, L.P. as of December 10, 2008
who suffered a net loss of principal invested in the Funds.6
38.

On March 11, 2013, GlobeOp filed a Rule 23(f) Petition in the Second Circuit

Court of Appeals arguing, among other things, that the District Court had not considered the
state law negligence and breach of fiduciary duty claims against GlobeOp separately from the
securities and common law fraud claims asserted against the other Defendants.7
39.

As part of the Settlement, GlobeOp agreed to withdraw its Rule 23(f) Petition

and to consent to certification of a GlobeOp Settlement Class as defined herein in Paragraph 5.
40.

The GlobeOp Settlement Class separates out the claims against GlobeOp from

the Class certified by this Court in the February 25, 2013 Class Certification Decision, but is
otherwise substantively identical to the class certified by the Court. The GlobeOp Settlement

6

The class certification decision excluded from the class investors from certain foreign countries. Those
exclusions, however, do not apply to the claims against GlobeOp, in that all investors in the Domestic
Funds are from the United States.

7

The Non-Settling Defendants filed similar Rule 23(f) Petitions in the Court of Appeals. Those
Petitions were granted on June 14, 2013 and accordingly, appeals from the certification of claims
against PwC and Citco are proceeding through the appellate process.

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Class satisfies the requirements of Fed. R. Civ. P. 23(a) and (b)(3), as previously determined by
this Court.
G.

Merits Discovery

41.

Upon substantial denial of the motions to dismiss, and while the class

certification motion was pending, the parties engaged in extensive discovery. Among other
things, the parties exchanged their initial disclosures pursuant to Rule 26(a), and Plaintiffs
served requests for the production of documents on the Defendants.
42.

Plaintiffs engaged in extensive negotiations with defense counsel (including

GlobeOp’s counsel) concerning the scope, timing and procedure for the production of
documents, including the search terms to be used in conducting electronic discovery.
43.

Defendants subsequently produced, and Plaintiffs’ Counsel reviewed, more than

nine million pages of documents, including approximately 230,000 documents produced by
GlobeOp. Plaintiffs’ Lead Counsel reviewed and produced to defense counsel more than
75,000 pages of documents on behalf of the Representative Plaintiffs and other Named
Plaintiffs.
44.

Because of the volume of defendants’ document production, Plaintiff’s Counsel

established an electronic database with an outside vendor that allowed Plaintiffs’ Counsel to
review, code, organize, search, and retrieve the documents electronically. Examination and
analysis of the documents required a massive effort by teams of attorneys to review the
millions of pages of documents, to analyze, code, and organize them, to identify the documents
that proved Plaintiffs’ allegations, to identify relevant witnesses, and to establish and execute
procedures to identify and ascertain additional necessary information.

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45.

As of June 14, 2013, when Plaintiffs and GlobeOp and the Insurers reached a

settlement in principle, Plaintiffs had conducted or participated in approximately ninety
depositions of defendants and third-party witnesses, including conducting four depositions of
GlobeOp personnel. Plaintiffs were scheduled to conduct an additional six GlobeOp
depositions prior to the June 30, 2013 completion date for fact discovery.
46.

Merits discovery with respect to plaintiffs’ claims against PwC and Citco is

complete (except for limited matters still in dispute), and Plaintiffs and the Non-Settling
Defendants currently are engaged in expert discovery.
II.

SETTLEMENT NEGOTIATIONS AND TERMS OF THE SETTLEMENT
A.

The Negotiations

47.

Beginning in July 2012, and then more intensively between November 2012 and

June 11, 2013, while discovery was ongoing, the Settling Parties engaged in extensive, arms’length negotiations in an attempt to resolve the claims against GlobeOp.
48.

A formal mediation process supervised by Judge Daniel Weinstein (ret.) under

the aegis of JAMS, took place and included two day-long, in-person negotiating sessions on
January 31, 2013 and June 11, 2013, as well as numerous telephone conferences with the
mediator. The Insurance Carriers also participated in the mediation.
49.

The Litigation Trustee appointed by the U.S. Bankruptcy Court for the Southern

District of New York pursuant to the Funds’ First Amended Plan of Reorganization under
Chapter 11 of the Bankruptcy Code, Case No. 10-16229 [Dkt. No. 211 (September 26, 2011)]
(the “Bankruptcy Proceedings”), also participated in the mediation process. The Litigation
Trustee, as successor in interest to the Funds, had asserted direct claims on behalf of the
Domestic Funds against GlobeOp in New York State court. See Walker, Truesdell, Roth &

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Associates, Inc. v. GlobeOp Financial Services LLC, et al., Index Nos. 600498/2009 and
600469/2009 (Sup. Ct. N.Y. County) (the “State Court Action”).
50.

All parties, including the Representative Plaintiffs, the Litigation Trustee,

GlobeOp, and the Insurance Carriers submitted detailed mediation and supplemental mediation
statements. The parties strenuously argued their respective legal and factual positions
throughout the mediation process.
B.

The Cash Settlement Terms

51.

At the conclusion of the mediation, the Insurance Carriers agreed, on behalf of

GlobeOp, to pay $10,000,000 to obtain a global settlement fully resolving all claims asserted
against it in both this Action and the State Court Action. Of this amount, $5,000,000 was
allocated to the Anwar action for the benefit of the GlobeOp Settlement Class and $5,000,000
to the Litigation Trustee, subject in each case to the condition that the other settlement be
consummated.
III.

THE STIPULATION AND PRELIMINARY APPROVAL ORDER
A.

The Stipulation and Preliminary Approval Hearing

52.

On August 27, 2013, the Settling Parties executed a Stipulation of Settlement,

which was filed August 29, 2013, providing for the settlement of all claims asserted against
GlobeOp by Plaintiffs in this action, and a motion seeking preliminary approval of the
Settlement. This Court entered a Preliminary Approval Order providing for class notice and
scheduling a hearing to consider final approval of the Settlement for November 22, 2013.
B.

The Terms of the Stipulation

53.

Under the terms of the proposed Settlement, the aggregate amount of $5,000,000

will be paid into the GlobeOp Settlement Fund. These funds (less Court-approved attorneys’

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fees and reimbursement of expenses) will be paid to the GlobeOp Settlement Class pursuant to
the Plan of Allocation. As noted above, the GlobeOp Settlement Class was defined in the
Stipulation ¶ 1(u) to include “all Persons who purchased or held interests in the Domestic
Funds from October 31, 2003 through September 1, 2006, who were investors in the Domestic
Funds as of December 10, 2008 and who suffered a Net Loss of principal invested in the
Domestic Funds.”
54.

In addition to amounts that they would receive under the GlobeOp Settlement,

eligible GlobeOp Settlement Class Members who have submitted claims in Bankruptcy Court
are likely to receive additional cash distributions from the Bankruptcy Proceedings. These
additional distributions may include proceeds from the separate $5,000,000 settlement with
GlobeOp that the Litigation Trustee made contemporaneously with this Settlement, as well as
distributions to the Funds from the bankruptcy proceedings of Bernard L. Madoff Investment
Securities.
55.

This is a partial settlement only. Plaintiffs will continue to prosecute pending

claims against (i) the PwC Defendants (PricewaterhouseCoopers LLP Canada,
PricewaterhouseCoopers Accountants Netherlands N.V), and (ii) the Citco Defendants (Citco
Fund Services (Europe) B.V., Citco (Canada) Inc., Citco Bank Nederland N.V. Dublin Branch,
Citco Global Custody N.V., Citco Fund Services (Bermuda), The Citco Group Limited)).
56.

The Settlement with GlobeOp will simplify the prosecution of the Action and

enable Plaintiffs to concentrate their efforts on litigating their substantial claims against PwC
and Citco.8
8

PwC audited the Domestic Funds’ financial statements beginning in fiscal 2005 and Citco began
acting as the administrator of the Domestic Funds effective September 2006.

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57.

The GlobeOp Settlement provides for a court order barring the Non-Settling

Defendants and other similarly situated Persons from asserting claims for contribution,
indemnification or other similar claims against GlobeOp and other Released Parties. In light of
the release of these potential claims against GlobeOp, the Stipulation provides that “[a]ny final
verdict or judgment that may be obtained [by a Settlement Class Member against such Persons]
shall be reduced, to the extent permitted by applicable law, by the greater of (i) the amount that
corresponds to the percentage of responsibility attributed to the Released Parties; or (ii) the
gross monetary consideration provided to such Representative Plaintiff or other GlobeOp
Settlement Class Member or Members pursuant to this Settlement.” See Stipulation, ¶ 17.
Provisions of this nature are customary and were approved by this Court in entering the Final
Judgment approving the FG Settlement.
C.

GlobeOp’s Right to Terminate the Settlement

58.

The GlobeOp Stipulation provides GlobeOp Settlement Class Members the right

to request exclusion from the Settlement on or before October 25, 2013.
59.

GlobeOp did not want to settle Plaintiffs’ claims for substantial consideration

only to be named as defendants by investors with significant net losses who request exclusion
from the Settlement Class.
60.

Accordingly, the Stipulation provides for a customary “blow” provision that

allows GlobeOp to terminate the Settlement in the event that Settlement Class Members with
aggregate Net Losses above a certain threshold request exclusion from the Class.
61.

To date, no GlobeOp Settlement Class Members have sought exclusion from the

Settlement Class.

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D.

Plaintiffs’ Percentage Recovery from the Settlement

62.

Estimates of the percentage recovery on the potential claims that may

be filed vary depending on a number of factors. The proposed Plan of Allocation for the
Settlement provides that claims by Class Members based on investments in the Fund after
September 1, 2006 (when GlobeOp ceased acting as the administrator) shall be discounted by
approximately 4% per month for each month after September 2006. Plaintiffs’ analyses of
Proofs of Interest filed in the Domestic Funds’ bankruptcy proceedings, Proofs of Claim
submitted in the prior FG Settlement, other information available through discovery, and the
terms of the Plan of Allocation, indicate that the aggregate amount of Recognized Losses of all
Authorized Claimants is likely to be approximately $46 million.9
63.

Based on the $46 million estimate, Plaintiffs approximate (assuming that all

GlobeOp Settlement Class Members file claims) that GlobeOp Settlement Class Members will
receive from the Settlement Fund, before deduction of Court-awarded attorneys’ fees and
expenses, approximately 11% of their Recognized Loss computed pursuant to the Plan of
Allocation (excluding the benefits that Settlement Class Members may receive from the
separate FG Settlement, the $5,000,000 settlement of the State Court Action and other
distributions from the Bankruptcy Proceedings, and any tax benefits or other recoveries from
third parties). That percentage recovery, however, could be greater if GlobeOp Settlement
9

Plaintiffs’ estimate of the potential claims that may be submitted by class members is based
on the Plan of Allocation for the Settlement Fund. The Plan of Allocation provides a
Recognized Loss formula that weighs the 2003-06 investor and holder claims at 100% of their
Net Losses and the post-September 1, 2006 investor claims from 96% to 4% of their Net
Losses depending on the length of time that had passed after GlobeOp’s August 31, 2006
termination as administrator until the subsequent investment was made. The reduced weighting
for subsequent investor claims reflects GlobeOp’s defenses that those investments were made
while Citco, rather than GlobeOp, was acting as the administrator of the Funds.

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Class Members file claims valued in the aggregate at less than $46 million and could be lower
to the extent that the aggregate Recognized Losses of Settlement Class Members who file
claims exceeds $46 million.
E.

This Court’s Preliminary Approval Order

64.

On August 29, 2013, Plaintiffs filed a motion in the District Court to

preliminarily approve the GlobeOp Settlement. The Court entered the Preliminary Approval
Order on September 10, 2013.
65.

The Preliminary Approval Order appointed Rust Consulting, Inc. as the Claims

Administrator and directed the mailing of a Notice and Proof of Claim forms and the
publication of Summary Notice in PR Newswire.
66.

The Mailed Notice was mailed by the Claims Administrator on September 24,

2013. It provided investors with detailed information with respect to the proposed GlobeOp
Settlement, and the request of Plaintiffs’ Counsel for payment of fees and expenses. Among
other things, Class Members were advised of the dates to request exclusion from the Class
(October 25, 2013), to object to the proposed GlobeOp Settlement or fee and expense requests
(October 25, 2013) and to file a Proof of Claim (December 23, 2013).
67.

Accompanying this Joint Declaration as Exhibit A is the Affidavit of Mailing of

Daniel Polizzi of Rust Consulting, attesting to the mailing and publication of the Notice and
Summary Notice pursuant to the Preliminary Approval Order.
68.

To date, Lead Counsel have received no objections to the proposed GlobeOp

Settlement or requests for exclusion from the Class. The Preliminary Approval Order directs
that Lead Counsel respond to all objections no later than November 8, 2013. Lead Counsel will
address any objections at that time, if necessary.

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IV.

REASONS FOR THE SETTLEMENT
69.

All seven Representative Plaintiffs and all of Plaintiffs’ Lead Counsel, who have

extensive experience in securities and complex shareholder class-action litigation, believe that
the GlobeOp Settlement provides the GlobeOp Settlement Class with real and certain benefits
now and eliminates the risk of coming up empty-handed following what would be years of
further uncertain litigation, including disposition of class certification appeals on the claims
against GlobeOp, motions for summary judgment, and if summary judgment is not granted, a
contested trial and likely appeals involving GlobeOp.
70.

Plaintiffs, in proposing that the Court approve the GlobeOp Settlement as fair,

reasonable and adequate to the Settlement Class, have considered, among other factors,
Plaintiffs’ ability to prevail on the contested factual and legal issues summarized herein (see,
e.g., ¶ 12, supra). In addition, Plaintiffs’ Lead Counsel considered that, by reducing the
number of defendants and defense counsel in the litigation, and the factual and legal issues in
dispute, the GlobeOp Settlement will have a beneficial effect on Plaintiffs’ ability to
successfully litigate the remaining claims against the Non-Settling Defendants.
71.

Plaintiffs’ Lead Counsel determined, based on their assessment of the legal and

factual risks of continuing the Action against GlobeOp and proving their claims at trial, that the
proposed settlement is in the best interests of the GlobeOp Settlement Class.
V.

THE PLAN OF ALLOCATION
72.

Pursuant to the Order Preliminarily Approving Settlement and Providing for

Notice of Proposed Settlement entered by this Court on September 10, 2013, and as set forth in
the Notice of Proposed GlobeOp Partial Settlement of Class Action and Settlement Fairness
Hearing (at 8), all Class Members who wish to participate in the distribution of the GlobeOp

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Settlement Fund must submit a valid Proof of Claim form so that it is received by the Claims
Administrator no later than December 23, 2013.
73.

Under the Plan of Allocation, the Net Loss for each Settlement Class Member

who submits a valid Proof of Claim is the Net Loss of principal with respect to each Fund. Net
Loss is defined in the Plan of Allocation as “the total cash investment made by a Claimant in a
[Domestic] Fund, directly or indirectly through one or more intermediaries, less the total
amount of any redemptions or withdrawals or recoveries by that Claimant from or with respect
to the same Fund.” If approved, the Plan of Allocation will govern how the proceeds of the Net
Settlement Fund will be distributed among Class Members who submit timely, valid Proof of
Claim forms.
74.

The Plan of Allocation also considers that class members who held Domestic

Fund shares as of September 1, 2006, and subsequently acquired additional shares, would
arguably have valid claims against GlobeOp arising from those subsequent purchases made in
reliance upon previous account statements received from GlobeOp. Thus, the Plan of
Allocation contains a Recognized Loss formula that provides for a 4% decrease per month in
the amount counted toward calculation of a Class Member’s Recognized Loss with respect to
subsequent investments made after September 2006 in the Domestic Funds.
75.

Lead Counsel submit that the Plan of Allocation is fair, reasonable, and adequate

and should be approved by the Court.
VI.

LEAD COUNSEL’S APPLICATION FOR ATTORNEYS’ FEES AND REQUEST
FOR REIMBRUSEMENT OF EXPENSES IS REASONABLE
A.
76.

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Request for Attorneys’ Fees and Reimbursement of Expenses
The Class Notice informed Settlement Class Members that Plaintiffs’

21

Lead Counsel would ask the Court to approve payment from the Settlement Fund of attorneys’
fees of up to 25% of the Settlement Fund and for reimbursement of expenses that were
advanced by Plaintiffs’ Counsel directly relating to litigation of the claims against GlobeOp not
to exceed $25,000. To date, plaintiffs have received no objections to that fee or expense
request.
77.

The attorneys’ fees and expenses requested represent payment to Plaintiffs’

Lead Counsel and other counsel involved in the Action for their efforts in achieving this
Settlement and the risk in undertaking this representation on a wholly contingent basis. Since
the case began in 2008, Plaintiffs’ Counsel have undertaken enormous work necessary to
prepare the case for trial.
78.

Because the legal and factual issues with respect to Plaintiffs’ claims were

litigated in a single consolidated action, Plaintiffs’ Counsel did not keep separate time records
by defendant. Lead Counsel believe, however, that a great percentage of the work expended on
the Action since its inception contributed to the resolution of the claims against GlobeOp.
During this time, Lead Counsel have, inter alia: (i) conducted an extensive investigation of
public and non-public information with respect to the Class’ claims including the claims
against GlobeOp; (ii) prepared initial complaints, the Consolidated Amended Complaint, and
the subsequent SCAC; (iii) overcome in large part Defendants’ motions to dismiss the SCAC;
(iv) secured entry of a case management plan and scheduling order; (v) conducted extensive
discovery including serving and responding to demands, including third party subpoenas, and
obtaining and producing documents; (vi) responded to detailed interrogatories served on the
Representative Plaintiffs and some 20 additional named plaintiffs, (vii) conducted over ninety
depositions of persons affiliated with Defendants to date, including four depositions of

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GlobeOp witnesses, and defended 20 depositions of Representative and other Named Plaintiffs,
including two depositions of GlobeOp Settlement Class Members; (vii) successfully litigated
the class certification motion, including filing a Memorandum and Reply Memorandum in
Support of Plaintiffs’ motion for class certification, accompanied by a compendium of 62
factual exhibits; (viii) briefed two motions by Defendants to reargue denial of dismissal of the
SCAC; (ix) participated with defense counsel in dozens of meet and confer sessions with
respect to document, deposition, and other aspects of merits discovery; (x) prepared letterbriefs and argued to Magistrate Judges Katz and Maas multiple discovery disputes; (xi)
retained and consulted with experts on investment fund administration; (xii) successfully
negotiated the settlement with GlobeOp and its insurance carriers and (xiii) otherwise
vigorously represented the interests of putative class members in this extraordinarily complex
dispute.
79.

In conjunction with the FG Settlement, Lead Counsel submitted a fee

application reflecting a combined lodestar of all Plaintiffs’ Counsel of $31.2 million through
July 31, 2012. See the Declaration of Lead Counsel in Support of Motion for Final Approval of
the Proposed Partial Settlement and Plan of Allocation, Attorneys’ Fees and Reimbursement of
Expenses [Dkt No. 1038].
80.

By order entered March 27, 2013, this Court awarded Plaintiffs’ Counsel fees of

$12.56 million and reimbursement of $1,279,242 in expenses incurred through July 31, 2012.
Although those fees and expenses have not yet been disbursed because of the pendency of the
appeals from the Final Judgment approving the FG Settlement, assuming that those fees will be
paid in the future, the unreimbursed lodestar of Plaintiffs’ Counsel would still exceed $18.6
million with respect only to fees incurred prior to July 31, 2012. The $1.25 million fee request

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is thus a small percentage (approximately 6.7%) of Counsel’s combined unreimbursed lodestar
through July 31, 2012, and a still smaller percentage of their lodestar through June 14, 2013,
when the Settling Parties signed an agreement in principle.10
81.

The fee application for 25% of the $5,000,000 GlobeOp Settlement Fund is well

within the range of fees awarded in these types of actions and is entirely justified in light of the
substantial benefits conferred on the Class, the exceptional risks undertaken, the quality of
representation, and the nature and extent of legal services performed.
82.

Lead Counsel also are requesting reimbursement of $19,825.42 in unreimbursed

expenses directly relating to the prosecution of the claims against GlobeOp. These expenses
consist primarily of deposition expenses, including transcripts, video recordings, and travel
expenses incurred subsequent to July 31, 2012 and attributable only to the claims against
GlobeOp. The expenses for which reimbursement is requested are detailed in Exhibit B.
83.

Plaintiffs’ Counsel made every reasonable attempt to allocate the work among

them, working closely to avoid duplication of effort and to ensure efficient prosecution. They
also worked to limit expenses.
84.

A portion of the travel expenses ($2,250) was to defray Hans Hufschmid’s costs

to travel to New York for his deposition. Hufschmid was GlobeOp’s former CEO and if not for
that agreement, Plaintiffs’ counsel would have had to travel to London for his deposition at
comparable expense and are far greater expenditure of time and inconvenience.
85.

Such sums as may be approved by the Court will be paid from the

10

Based on review of the respective firms’ financial records, Lead Counsel have incurred additional
lodestar from July 31, 2012 through June 14, 2013, in excess of $10 million. Accordingly, Plaintiffs’
total unreimbursed lodestar through June 14, 2013 exceeds $28.6 million, and the instant fee request of
$1.25 million is 4.4% of that amount.

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GlobeOp Settlement Fund.
86.

Plaintiffs' Counsel may seek additional attorneys' fees at a later date based on

any other recoveries. GlobeOp Settlement Class Members are not personally liable for any
such fees or expenses.
VII.

CONCLUSION
87.

Lead Counsel submit that this is an excellent settlement taking into

consideration all of the circumstances and we respectfully request the Court to approve the
GlobeOp Settlement as fair, reasonable, and adequate to the GlobeOp Settlement Class.
Dated: October 11,2013

.

David A. Barrett

Victor E. Stewart

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