Anwar et al v. Fairfield Greenwich Limited et al

Filing 1244

ENDORSED LETTER addressed to Judge Victor Marrero, from Richard E. Brodsky, dated 2/27/2014, re: chain of correspondence to the Court last fall concerning the application of the Securities Litigation Uniform Standards Act ("SLUSA") to the Standard Chartered Cases, all of which involve state law claims... ENDORSEMENT: The Clerk of Court is directed to enter into the public record of this action the letter above submitted to the Court by Standard Chartered Plaintiffs. (Signed by Judge Victor Marrero on 2/27/2014) (ja)

From: Richard E. Brodsky

Fa~:

To:

Fax: ISB8) 391-5819

+1 \212, 805·6382

THE BRODSKY LA W FIRM,
RICHARD

E.

Page 2 of 4 212712014 11 :34

PL

BRODSKY, ArrORNEY AT LAW

February 27,2014

By fax to [phone]
Honorable Victor Marrero
United States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York 10007-1312

Re: Anwar, et al. v. Fairfield Greenwich Limited, et at.,
No.09-cv-118(VM)(FM)
Dear Judge Marrero:
I write as the Liaison Counsel for, and on behalf of, the Standard
Chartered Plaintiffs III the Standard Chartered Cases.
This letter deals with a chain of correspondence to the Court last fall
concerning the application of the Securities Litigation Uniform Standards Act
("SLUSA") to the Standard Chartered Cases, all of which involve state law
claims involving Standard Chartered's recommendation to its private
banking clients that they invest in Fairfield Sentry Fund. The
correspondence started with a letter from the Standard Chartered
Defendants dated November 12, 2013, and included the Standard Chartered
Plaintiffs' response to that letter dated November 19, 2013 (DE 1223).
In their letter, the Standard Chartered Defendants asked for a pre­
motion conference in advance of a motion for judgment on the pleadings
under SLUSA. The Standard Chartered Plaintiffs explained in their letter
that SLUSA did not apply because (i) the Standard Chartered Cases were not
a "covered class actiDn" and (ii) the "in connection with" requirement of
SLUSA1 was not satisfied. The Plaintiffs also suggested to the Court that it
1 In pertinent part, SLUSA bars private state-law class actions involving "a
misrepresentation or omission of a material fact in connection with the purchase or sale of a
covered security." 15 U.S.C. § 78bb(t)(1)(A). "Covered securities" are securities listed on a
national securities exchange. 15 U.S.C. § 78bb(f)(5)(E), incorporating 15 U.S.C. § 77r(b)(l).

200 S. 13ISCAYNl:

BOUll-YA!U>.

Sn:. 1930 . MIAMI, fWHIDA:B131

\YW'fV .THl:BHOOSK Y L.-\V\,~ lHil1.COM

786-220-3328 •

HBKOnsKY@lIIHllH)\)~KYlAWIIIUvt.COM

From: Richard E. Brodsky

Fax: (aaS) 391·5819

To:

Fax [phone]

Page 3 of 4 212712014 11 :34

Honorable Victor Marrero
February 27, 2014
Page 2

might wish to defer ruling on the request by the Standard Chartered
Defendants for a pre-motion conference until the Supreme Court decided
Chadbourne & Parke LLP v. Troice, No. 12-79. DE 1223 at 11-12.
The Supreme Court has now decided Chadbourne. In a 7-2 decision,
Justice Breyer, writing for the Court, held that "[aJ fraudulent
misrepresentation or omission is not made 'in connection with' ... a
'purchase or sale of a covered security' unless it is material to a decision by
one or more individuals (other than the fraudster) to buy or to sell a 'covered
security.'" Chadbourne & Parke LLP u. Troice, No. 12-79, __ U.S. - ' 2014
WL 714697, at *7 (Feb. 26, 2014). The Court based its decision on the "focus"
of SLUSA on the purchase and sale of covered securities, the language of the
Act, prior Supreme Court decisions interpreting "in connection with" as used
in SLUSA and in the Securities Exchange Act, consistency with the purposes
of the latter Act and the Securities Act, and preservation of state remedies for
victims of state law frauds. Id., at *7-10_
In Chadbourne, an Antiguan bank issued certificates of deposit
(uncovered securities) to investors based on the bank's misrepresentation
that it would buy, inter alia, securities issued by major international
companies (which the Court, id., at *13, interpreted to mean covered
securities), and thereby make the CDs "more secure." Id., at *6. This, the
Court held, was not sufficient to supply "the necessary 'connection' between
the materiality of the misstatements and the statutorily required 'purchase
or sale of a covered security.'" Id., at *13.
Here, the Plaintiffs, on the recommendation of their "private bank,"
Standard Chartered, bought stock in Fairfield Sentry Fund. There is no
dispute that this was the purchase of an uncovered security. Bernard L.
Madofflnvestment Securities, LLC ("BLMIS"), to which the money raised by
the sale of Fairfield Sentry stock was entrusted, misrepresented that this
money would be used to buy covered securities. Under Chadbourne, BLMIS'
misrepresentation that it would buy covered securities was not made "in
connection with the purchase and sale of a covered security." Like the
Antiguan bank's lie that it would buy covered securities, BLMIS' lie was not
"material to a deciSIOn by one or more individuals (other than the fraudster)
to buy or to sell a 'covered security,'" thus failing to meet SLUSA's threshold
"in connection with" requirement. Id., at *7. No purchases of covered
securities were made hy anyone; the only prospective purchaser of such
securities was BLMIS, an unquestioned "fl'audster".

From: Richard E. Brodsky

Fax: 188B) 391-5819

To:

Fa,,: [phone]

Page 4 of 4 212712014 11 :34

Honorable Victor Marrero
February 27,2014
Page 3

Chadbourne unquestionably means that that SLUSA does not preempt
the Standard Chartered Plaintiffs' state law claims. Therefore, this Court
should deny t.he St.andard Chartered Plaintiffs' request for a conference; any
motion for judgment on the pleadings based on SLUSA would be futile_ 2
Thank you for your consideration of this letter.
Sincerely yours,

The Brodsky Law Firm, PL

Richard E. Brodsky

cc:

Counsel for Standard Chartered Defendants
Counsel for all Standard Chartered Plaintiffs

The Clerk of Court is directed to enter into the public record
of this actipn th; l<;.,tt5f a~e su~m.i~. by
the Co rt

S-fr-~~ a~.~

-.

~

so ORDERED.

/'

~TARRER:ilSbi

,;L- ?-7-/ t.j'
DATE'

2 The

Standard Chartered Plamtlffs expressly presel've their argument, expressed in their
November 19. 2013 letter at pp. 4·8. that SLUSA does not apply for a second reason: that
these cases are not a "covered class action." This is an issue the Court need not reach in light
of the Supreme Court's decision in Chadbourne.