Anwar et al v. Fairfield Greenwich Limited et al

Filing 1235

ENDORSED LETTER: addressed to Magistrate Judge Frank Maas from Diane L. McGimsey dated 11/27/2013 re: Standard Chartered thus requests that it be permitted to replace Mr. Zask with another expert, with the understanding that the opinions expressed by any replacement for Mr. Zask may not go beyond the scope of Mr. Zask's report. ENDORSEMENT: The plaintiffs' Sleery Committee is requested to respond to this letter by December 6, 2013. (Signed by Magistrate Judge Frank Maas on 11/27/2013) (js)

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Anwar v. Fairfield Greenwich Ltd.,
No. 09-CV-118 (S.D.N. Y.) - Standard Chartered Cases

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Dear Judge Maas:
We write on behalf of the Standard Chartered Defendants ("Standard Chartered")
in cormection with expen discovery in the above-captioned cases.
Standard Chartered previously served on plaintiffs the expert report of Ezra Zask,
a fonner hedge food manager and consultant_ Mr. Zask's report responded to opinions expressed
by plaintiffs' due diligence experts. On Thursday, November 21,2013, Standard Chartered
learned through news reports that Mr. Zask appeared in New York State Supreme Court in
Manhattan on November 20, 2013 to plead guilty to one COoot of possessing a sexual
perfonnance of a child, a class E felony under New York law. According to the news reports,
Mr. Zask is scheduled to be sentenced in March 2014_ Neither Standard Chartered nor its
cooosel were aware of the pendency of such charges; Mr, Zask did not inform us. In light of
these events, Mr. Zask cannot serve as an expert witness in these proceedings. Standard
Chartered respectfully requests leave of the Comt to modifY the scheduling order to allow
Standard Chartered to submit a replacement expert report that wil1 not go outside the areas on
which Mr. Zask had opined. Standard Chartered has informed a member of the Standard
Chartered Plaintiffs' Steering Committee that it would be bringing this matter to the Court's
attention, and we understand that plaintiffs need some time to confer and consider the
circumstances before submitting any response. One possible path fOIVlard that Standard
Chartered believes would cause minimal disruption to the current schedule would be to extend
the current expert discovery deadline of January 31, 2014 by 28 days, during which time
Standard Chartered would submit a replacement expert report by no later than February 14,
2013, and produce that expert for deposition by no later than February 28, 2013. Standard

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S&C LLP 125 BD 28FL

The Honorable Frank Maas
November 27,2013

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Chartered lS, of course, willing to meet and confer aboul olher pos:'i~blc tirncL."lblOS for oom.~letiM.g
expert discovery as soon as practicable. l
We understand that plaintiffs and the Court may be concerned about further
delays to these proceedings, but this request is necessary to avoid subjecting Standard Chartered
to the manifest injustice ofproceed.ing toward trial without expert testimony on subjects that are
central to plaintiffs' claims. Plaintiffs' claims in these cases arise from their investments in
Fairfield Sentry Ltd. ("Sentry") and related funds (the "Funds"), which purported to implement
Bernard Madoffs "split-strike conversion strategy." A central aspect of plaintiffs' claims is
whether Standard Chartered misled plaintiffs to believe that it had conducted sufficient due
diligence to confinn that Sentry actually executed its stated investment strategy and delivered its
reported returns. As such, plaintiffs have proffered both George Martin and Robert Picard as
experts who seek to opine on the subj ect of due diligence?
Standard Chartered has served expert reports by Mr. Zask and Charles Porten.
Messrs. Zask and Porten' s reports overlap in certain areas, but there are important differences
such that the opinions of Mr. Porten alone are not sufficient to provide a jury with the
infonnation necessary to consider the due diligence issues raised by plaintiffs' experts and the
reasonableness of Standard Chartered's conduct. 3 Mr. Zask' s report also addressed issues not
discussed in Mr. Porten's report, including a discussion ofthe bases for viewing Sentry as a
relatively conservative investment, and a section addressing plaintiff Teresa Barbachano's
suitability aJlegations.
"A party's request to substitute a new expen is considered a request to modify a
scheduling order and, as such, is governed by Rule 16(b) of the Federal Rules of Civil
Procedure." TIC-Thelndus. Co. Wyoming, Inc. v.FactoryMut.lns. Co., No. 4:10CV3153,
2012 WL 2830867, at *8 (D. Neb. July 10,2012). Under Rule 16, this Court holds "broad
authority to manage the schedule of litigation." Coursey v. City ofCamden, No. 05-2820-RBK­
AMD, 2009 WL 961537, at *3 (D.N.J. April 7, 2009); see also Eichorn v. AT&T Carp.• 484
F.3d 644,650 (3d Cir. 2007) ("Rule 16 gives the district courts wide latitude to manage
discovery and other pretrial matters, and to set deadlines for amending pleadings, filings
motions, and completing discovery.").

On November 22. plaintiffs submitted a letter to the Court requesting the
production of certain additional documents from Mr. Zask. Although Stlllldard Chartered
previously requested such materials from Mr. Zask, we do not believe that under the current
circumstances they are likely to be forthcoming.
2

Plaintiff Teresa Barbachano has proffered an additional expert witness,

Robert Lowry.
For example, Mr. Porten' s expert report addressed some of the putative "red
flags" that plaintiffs' experts have identified as indicia of fraud. Mr. Zask's expert report,
however, provided a 23-page discussion of plaintiffs' experts' reliance on these "indicia" as
grounds for their opinions regarding Standard Chartered's due diligence.

11/27/2013 13:38 FAX

1212 558 3358

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The Honorable Frank Maas
November 27, 2013
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expert witnesses in a variety of circumstances, including where an expert was unable to continue
work on a case because ofa personal conflict or issue. E.g., GtllfCoast Shippers Ltd. P'ship v.
DHL Exp. (USA), Inc., No. 2:09-cv-221, 2013 WL 5739781, at *1 CD. Utah Oct. 22, 2013)
(alJowing substitution where expert "no longer want[ed] to work on the case" and would suffer
burden if forced to perform additional expert work): Doctor 's Assocs.. Inc. v. QIP Holder LLC,
No. 3:06-cv-1710 (VLB), 2009 WL 5184404, at *4 (D. Conn. Dec. 23, 2009) (allowing
substitution where expert, a year after serving his report, took a job that created a conflict of
interest for the expert); see also Whiteside v. State Farm Fire and Cas. Co., No. 11-10091,2011
WL 5084981, at "'2 (E.D. Mich. Oct. 26, 2011) (allowing substitution where expert suffered
physical and mental injuries from motorcycle accident); Lincoln Nat. Life Ins. Co. v.
Transamerica Fin. Life ins. Co., 1:04-CV-396, 2010 WL 3892860, at "'2 (N.D. Ind. Sept. 30,
2010) (allowing substitution where, during pendency of the case, expert was criminally
convicted and incarcerated).
Here, Mr. Zask's criminal conduct was both unforeseeable and undisclosed to
Standard Chartered. Standard Chartered would suffer manifest injustice if forced either to
proceed with Mr. Zask, whose testimony no juror can be expected to credit, or to forego
proffering expert testimony in response to substantial portions of plaintiffs' expert reports that go
to the core of plaintiffs' claims. See TIC The Indus Co. Wyoming. Inc., 2012 WL 2830867,
at +8 (pennitting substitution of expert witness when party otherwise would suffer prejudice);
Park v. CAS Enter., Inc., Civ. No. 08cv385 DMS (NLS), 2009 WL 4057888, at *3 (S.D. CaL
Nov. 19,2009) (same). Standard Chartered has moved expeditiously to inform plaintiffs and the
Court of Mr. Zask's guilty plea. See Doctor's Assocs., 2009 WL 5184404, at *4 (plaintiff's
effort to inform court and defendant within two months of learning of expert conflict supported
finding of good cause). Standard Chartered also will move quickly to replace Mr. Zask with a
comparable expert, and will provide plaintiffs with a new expert report, limited to the subject
matter and theories already offered by Mr. Zask. See Lincoln Nat. Life Ins., 2010 WL 3892860,
at "'2 (recognizing that substitute expert reports and testimony are "frequently limited to the
subject matter and theories already espoused by the fonner expert").
Although we regret having to raise this matter with the Court, we believe there is
good cause under Rule 16(b) for pennitting Standard Chartered to replace Mr. Zask with another
expert. The parties have not yet conducted depositions of their principal due diligence experts,
and Standard Chartered will work with plaintiffs to minimize the dela.y resulting from allowing a
substitution. Standard Chartered thus requests that it be permitted to replace Mr. Zask with
another expert, with the understanding that the opinions expressed by any replacement fOr
Mr. Zask may not go beyond the scope of Mr. Zask's report.

~~
Diane L. McGimsey

cc:

Standard Chartered Plaintiffs' Steering Committee (via E-mail)