Anwar et al v. Fairfield Greenwich Limited et al

Filing 1225

ENDORSED LETTER: addressed to Judge Victor Marrero from David A. Barrett dated 11/19/2013 re: Counsel write on behalf of Plaintiffs We have reviewed the November 12, 2013 letter ("Letter") from Sharon L. Nelles, Esq., on behalf of the Standard Chartered Bank Defendants ("SCB"), requesting a pre-motion conference to discuss SCB's contemplated motion to dismiss under the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") and Rule 12(c) in light of In re Herald, Primeo, & Thema Sec. Litig., 730 F.3d 112 (2d Cir. 2013). This Court, in Anwar v, Fairfield Greenwich, 728 F.Supp.2d 372, 397-99 (S.D.N.Y. 2010) ("Anwar If'), properly overruled Defendants' SLUSA arguments, and SCB offers no basis to reconsider that decision. Because SCB's contemplated motion could potentially impact the Anwar Plaintiffs' claims, however, we respectfully request that the Court consider our position on these matters. 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 11/20/2013) (js)

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Anwar, et al. v. Fait:field Greenwich Limited, et al.
Master File No. 09-CV-00118 (VM) (FM)

Dear Judge Marrero:
We are writing on behalf of the Anwar Plaintiffs. We have reviewed the November 12,
2013 letter ("Letter") from Sharon L. Nelles, Esq., on behalf of the Standard Chartered Bank
Defendants ("SCB"), requesting a pre-motion conference to discuss SCB's contemplated motion
to dismiss under the Securities Litigation Uniform Standards Act of 1998 ("SLUSA") and Rule
12(c) in light of In re Herald, Primeo, & Thema Sec. Litig., 730 F.3d 112 (2d Cir. 2013). This
Court, in Anwar v, Fairfield Greenwich, 728 F.Supp.2d 372, 397-99 (S.D.N.Y. 2010) ("Anwar
If'), properly overruled Defendants' SLUSA arguments, and SCB offers no basis to reconsider
that decision. Because SCB's contemplated motion could potentially impact the Anwar
Plaintiffs' claims, however, we respectfully request that the Court consider our position on these
matters.
First, any motion based on In re Herald is premature. A petition for panel rehearing and
rehearing en banc is pending in Herald. On October 16,2013, the Court of Appeals determined
"to postpone the decision on the pending petition for panel rehearing until the United States
Supreme Court decides Chadbourne & Parke LLC v. Troice, [Nos. 12-79; 12-86; 12-88], which
was argued on Monday, October 7, 2013." See Exhibit 1 attached hereto. Troice involves the
Supreme Court's review of the Fifth Circuit's decision that SLUSA does not preclude class
claims brought against certain service providers to the Ponzi scheme operated by Allen Stanford.
See Rolandv. Green, 675 F.3d 503 (5th Cif. 2012) (the decision on appeal in Troice). It is fully
understandable that the Second Circuit has decided to hold the petition for rehearing in Herald
until the Supreme Court decides Troice, and the same logic calls for denying reconsideration
now of this Court's SLUSA rulings. Moreover, also sub judice in the Court of on Appeals is In
re Kingate, No. 11-1397, which was argued April 9, 2013, four days after Herald. The Kingate
appeal involves the application of SLUSA to claims against Madoff feeder fund managers and
service providers. Under these circumstances, reconsideration of SLUSA' s application to this
case is unwarranted at this time.

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BOIES.

SCHILLER

&

FLEXNER

LLP

Judge Victor Marrero
November 19,2013
Page 2

Second, In re Herald, which applied SLUSA to affirm dismissal of state law aiding and
abetting and conspiracy claims brought by investors in Madoff feeder funds against lPMorgan
Chase and Bank of New York (the "Banks"), is clearly distinguishable and provides no basis for
the Court to reconsider its well-reasoned decision in Anwar 1l
The Banks in Herald provided services solely and directly to Madoff; they provided no
services whatever to the separate feeder funds or to the funds' investors. As the Second Circuit
found, "the liability of JPMorgan and BNY is predicated not on these banks' relationship with
plaintiffs or their investments in the feeder funds but on the banks' relationship with ... Madoff
Securities' Ponzi scheme." In re Herald, 730 F.3d at 118-19. Conversely in Anwar, the
Defendants were not service providers to Madoff and Plaintiffs' fraud and misrepresentation
claims are based on Defendants' misstatements to Plaintiffs with whom they had direct
relationships. The Court of Appeals in Herald simply had no need to consider or address
decisions including Anwar 11 and Pension Committee v. Bane ofAm. Securities, 750 F.Supp.2d
450 (S.D.N.Y. 2010) - which address SLUSA's inapplicability to claims against managers and
service providers to offshore hedge funds. 1
Indeed, the Banks in Herald had no relationship whatever to feeder fund investors, such
as the Anwar plaintiffs. Unlike the Defendants in Anwar, the Banks did not make any statements
directly to the plaintiffs regarding their investments in the feeder funds. Thus, there was no basis
in Herald to consider this Court's analysis of "layers of separation" between the Anwar
Plaintiffs' investments in non-SLUSA-covered hedge funds and Madoffs purported transactions
in covered securities. Moreover, another Second Circuit decision reinforces the reasoning
underlying this Court's "layers of separation" analysis. The decision In re Bernard L. MadoJJ
Inv. Securities LLC, 708 F.3d 422 (2d Cir. 2013), affirmed the bankruptcy court's holding that
feeder funds investors, like the Anwar Plaintiffs, have no right to receive distributions from the
SIPC liquidation of Bernard L. Madoff Investment Securities because these investors were not
direct "customers" of Madoff. In reaching this conclusion, the Second Circuit reasoned in part
that feeder fund investors "(1) had no direct financial relationship with BLMIS, (2) had no
property interest in the assets that the Feeder Funds invested with BLMIS, (3) had no securities
accounts with BLMIS, (4) lacked control over the Feeder Funds' investments with BLMIS, and
(5) were not identified or otherwise reflected in BLMIS's books and records." Id. at 426-27.

1 The SLUSA analysis in Anwar 11 and Pension Committee has been followed by a number of
courts, see Grund v. Delaware Charter Guarantee & Trust Co., 788 F.Supp.2d 226,243
(S.D.N.Y. 2011); In re RefcoSee. Litig., 2011 WL 4035819, at *8-9 (S.D.N.Y. Sept. 6, 2011),
and was briefed in the Herald and in Kingate appeals. Given the critical factual distinctions
between these cases and Herald. there is no basis to conclude, as SCB suggests, that the Herald
decision meant to overrule these multiple district court holdings sub silentio with no discussion
at all.

BOIES,

SCHILLER

&

FLEXNER

LLP

Judge Victor Marrero
November 19,2013
Page 3

Third, as this Court held, even if SLUSA were applicable to the facts of Anwar, "only the
fraud and negligent misrepresentation common law causes of action would be dismissed."
Anwar I!, 728 F.Supp.2d at 399 n.7. This is a further reason why the Court should not allow
SCB's contemplated motion at this time, since it would result in piecemeal litigation of SLUSA
issues before further appellate decisions are rendered.
The Anwar Plaintiffs oppose SCB's contemplated motion and respectfully request that
the Court allow the Anwar Plaintiffs to participate in any pre-motion conference or further
briefing on the issue of SLUSA that may occur in the Standard Chartered cases.
Respectfully yours, _ - - - ­

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David A. Barrett

cc:

All counsel in Anwar (by email)
Sharon L. Nelles, Esq. (by email)
Richard E. Brodsky, Esq. (by email)

The ~Ierk. of Court is directed to enter into the public record
Of~ actl,? the let:er above sU):)Initted to t e Court by
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DATE

EXHIBIT 1

12-156

Document: 474

Page: 1

10/16/2013

1067158

1

UNITED STATES COURT OF APPEALS
THURGOOD MARSHALL UNITED STATES COURTHOUSE
40 FOLEY SOU ARE
NEW YORK. NY 10007
CATHERINE O'HAGAN WOLFE
CLERK Of" CoURT

FAX

(212) 857·8585
(2121857·8710

October 16, 2013

Francis A. Bottini, Jr., Esq.
Bottini & Bottini, Inc.
7817 Ivanhoe Avenue, Suite 102
La Jolla, CA 92037

Timothy Joseph Burke, Esq.

Stull, Stull & Brody

9430 Olympic Boulevard, Suite 400

Beverly Hills, CA 90212

Re: In Re: Herald Primeo and Them, Docket Nos. 12-156, 12-162
Dear Counsel,
This letter is to advise you that the panel has determined to postpone the decision on the pending
petition for panel rehearing until the United States Supreme Court decides Chadbourne & Parke LLP v.
Troice, No. 12-179, which was argued on Monday, October 7,2013.
If either counsel is of the view that this postponement causes undue harm to his or her client,
please advise me by letter. Also, I am available to answer any questions you may have.
Very truly yours,

~O(U:
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UCatherine O'Hagan Wolfe
cc: Susan L. Saltzstein, Esq.

Michael Edward Wiles, Esq.

Thomas J. Moloney, Esq.

Patricia M. Hynes, Esq.

Thomas G. Rafferty, Esq.

James C. Dugan, Esq.

Price O. Gielen, Esq.

Franklin B. Velie, Esq.

Brett S. Moore, Esq.

Joseph Serino, Jr., Esq.

JeffG. Hammell, Esq.

Lewis J. Liman, Esq.

Sanford M. Litvack, Esq.

Michael S. Flynn, Esq.

Fraser L. Hunter, Jr., Esq ..

William R. Maguire, Esq.

Richard A. Martin, Esq.

Claudius O. Sokenu, Esq.