Anwar et al v. Fairfield Greenwich Limited et al
Filing
1249
ENDORSED LETTER addressed to Judge Victor Marrero from Richard E. Brodsky dated 3/5/2014 re: This letter replies to the March 3, 2014 letter to Your Honor from counsel for the Standard Chartered Defendants. 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 3/6/2014) (tn)
From: Richard E. Brodsky
Fax: (888) 391-5819
To:
Fay: + 1 (212, 805-6382
Page 2 of 6 03/0512014 3:29
THE BRODSKY LAW FIRM, PL
RICHARD E. BRODSKY, ArrORNEY AT LAW
March 5, 2014
By fax to (212) 805-6382
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 ale v. Fairfield Greenwich Limited, et al.•
09-cv-118 (VM) (THK)
Standard Chartered Cases
Dear Judge Marrero:
I write as the LiaIson Counsel for, and on behalf of, the Standard
Chartered Plaintiffs ("SC Plaintiffs"), in the Standard Chartered Cases (the
"SC Cases"). This letter replies to the March 3, 2014 letter to Your Honor
from counsel for the Standard Chartered Defendants ("SC Defendants"). We
request that this Court consider this letter in conjunction with our prior
letters on SLUSA of November 19, 2013 and February 27, 2014.
The se Defendants' March 3 letter goes to great lengths to avoid
discussing the actual opinion in Chadbourne & Parke LLP v. Troice, No. 12
79, _ U.s.
2014 WL 714697 (Feb. 26, 2014), especially the holding: the
facts essential to the decision, the decision of law and the reasoning that was
essential to its decision. The rest is dictum interesting, and perhaps even
weighty, surplusage, but surplusage nevertheless.!
This is the holding in Chadbourne:
The question before us concerns the scope of the Litigation Act's phrase
'misrepresentation or omission of a material fact in connection with the
iSee Pierre N. Leva}, Ju.dging Under the Constitution: Dicta About Dicta, 81 N.Y.U. L. Rev.
1249, 1256, 1257 (2006) (discussing the difference between a holding and dictum and
explaining the reasons for understanding the difference; dictum is "superfluous" language in
an opinion).
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From: Richard E, Brodsky
Fax: (SeS) 391.5S19
To:
Fs¥: +1 (212,805·6382
Page 3 of 6 0310512014 3:29
Han. Victor Marrero
March 5, 2014
Page 2
purchase or sale of a covered security.' § 78bb(f)(1)(A). How broad is
that scope? Does it extend further than misrepresentations that are
material to the purchase or sale of a covered security?
In our view, the scope of this language does not extend further. To put
the matter more specifically: A fraudulent misrepresentation or
omission is not made "in connection with" such 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.'
Id., at *7.
Tellingly, and not surprisingly, the SC Defendants neither refer to nor
quote from the holding, because to do so would make obvious the validity of
the SC Plaintiffs' argument. Nor do they refer to or quote from an earlier
phrasing of the issue before the Chadbourne Court, which could also be
deemed a rephrasing of the holding: "The question before us is whether the
Litigation Act encompasses a class action in which the plaintiffs allege (1)
that they 'purchase[d]' uncovered securities (certificates of deposit that are
not traded on any national exchange), but (2) that the defendants falsely told
the victims that the uncovered securities were backed by covered securities.
We note that the plaintiffs do not allege that the defendants'
misrepresentations led anyone to buy or to sell (or to maintain positions in)
covered securities. Under these circumstances, we conclude the Act does not
apply." ld., at *3 (emphasis in original).
The SC Defendants' latest letter studiously avoids the unavoidable:
that none of the SC Plaintiffs has alleged that a misrepresentation by anyone
caused BLMIS to buy or sell covered securities (or to say that it was going to
do so, if, after Chadbourne, a non-purchase of covered securities is a purchase
of covered securities). But that would be precisely what, after Chadbourne,
SLUSA would require for that statute to apply. For this reason a]one, SLUSA
does not apply here.
Rather than deal with the holding, the SC Defendants engage in the
side-show of emphasizing such irrelevancies as the SC Plaintiffs' alleged
statement in their February 27, 2014 letter to this Court that "they expected
the money they invested 'would be used to buy covered securities.' (Pls' Feb.
27, 2014 Letter at 2.)" (Defs' Letter at 2). Not only does this paraphrase take
undue liberties with what the SC Plaintiffs actually said in their letter
("Bernard L. Madoff Investment Securities, LLC ('BLMIS'), to which the
money raised by the sale of Fairfield Sentry stock was entrusted,
From: Richard E. Brodsky
Fax: (888) 391·5819
To:
Fay: +1 (2121 805-6382
Page 4 of 6 03105120143:29
Hon. Victor Marrero
March 5, 2014
Page 3
misrepresented that this money would be used to buy covered securities."),
but also this is no different from the facts in Chadbourne. As the Court
stated: "The plaintiffs expected that Stanford International Bank would use
the money it received to buy highly lucrative assets," id., at *5, including
"highly marketable securities issued by ... strong multinational companies
and major international banks." [d., at 13 (citations and internal quotation
marks omitted).
The SC Defendants also ignore this Court's opinion in Anwar v.
Fairfield Greenwich ("Anwar I!'), 728 F.Supp.2d 372,397·99 (S.D.N.Y. 2010)
plainly would. There, the Court held that that the "in connection with" test in
SLUSA was not satisfied as to the Anwar II class action, because "[t]he
allegations in this case present multiple layers of separation between
whatever phantom securities Madoff purported to be purchasing and the
financial interests Plaintiffs actually purchased." Anwar IL 728 F.Supp. at
398 (emphasis added). (The SC Plaintiffs' letter to this Court of November 19,
2013 discusses Anwar II at 8-11.) If, for argument's sake, Chadbourne does
not foreclose the SC Defendants' argument, Anwar II plainly does. 2 Indeed,
Anwar II requires denial of the SC Defendants' SLUSA argument since, as
we reiterate, the Standard Chartered Cases are one entire defendant
(Standard Chartered) removed from Madofrs fraud.
We close with an important point overlooked in all of the SC
Defendants' arguments about SLUSA: the drastic effect on the position of the
SC Plaintiffs if the Court were to hold that this statute applies to the
Standard Chartered Cases. Assuming, for argument's sake, the Court chooses
to reverse its holding in Anwar II and, in our view, ignore or misread
Chadbou.rne and hold that the "in connection with" test applies, the Court
would still have to find that these separate cases of fifty-nine otherwise
unrelated investors forty-five represented by one attorney, six by another
attorney, two by a third lawyer, and all the rest by six different lawyers
who filed separate complaints at separate times, and alleged different causes
of action,3 constituted a "covered class action." The "covered class action"
issue is discussed at pp. 4-8 of the SC Plaintiffs' November 19, 2013 letter to
2 In this respect we join in the February 28, 2014 letter to this Court from counsel for the
class action plaintiffs, Boies Schiller, in the main Anwar case. We must respectfully remind
the Court, however, that in the Standard Chartered Cases, there is one additional, and
highly significant "layer [ 1of separation": each of the Standard Chartered Plaintiffs is suing
Standard Chartered, their "private bank," which recommended that each invest in Fairfield
Sent.ry.
3 See SC Plaintiffs' Nov. 19, 2013 letter, at 1-3 (describmg Standard Chartered Plaintifla'
actions).
From: Richard E. Brod.ky
Fax: (SSS) 391-5819
To:
Fa.: +1 (21:2) 805-6382
Page 5 of 6 0310512014 3:29
Hon. Victor Marrero
March 5, 2014
Page 4
this Court. The Standard Chartered Defendants have totally ignored the
cogent and persuasive analysis that shows that Congress did not intend these
cases to be considered a "covered class action."4
The extreme nature of such a putative ruling is relevant precisely
because it would sound the death knell to the se Plaintiffs' purely state law
claims, including breach of fiduciary duty claims that do not import fraud
claims. That was not the purpose of Congress in passing SLUSA. As the
Supreme Court stated in explaining the scope of the "in connection with"
requirement in another context, "SLUSA does not actually pre-empt any
state cause of action. It simply denies plaintiffs the right to use the class
action device to vindicate certain claims. The Act does not deny any
individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right
to enforce any state-law cause of action that may exist." Merrill Lynch, Pierce,
Fenner & Smith Inc. v. Dabit, 547 U.S. 71,87 (2006). Accord, Fisher v.
Kanas, 288 F. App'x 721,723 (2d Cir. 2008) (citing Dabit) ("[Neither] SLUSA
nor Dabit has deprived [the plaintiff, who brought a state law breach of
fiduciary duty class action based on misrepresentations in a proxy
solicitation] or others similarly situated of a state law cause of action for
securities fraud, or breach of fiduciary duty. , . In this particular case, Fisher
was free to bring her state law claim as an individual (or on behalf of fewer
than 50 others). Because she did not, however, her state law claim -- as
framed .- falls within SLUSA's scope."),
But this is exactly what each of the se Plaintiffs already did -. bring
state law claims as an individual, stand-alone case. Is each of the se
Plaintiffs now to be punished because so many other Standard Chartered
private banking clients (over fifty of them) also were improperly induced to
invest in Fairfield Sentry and brought claims against the Bank -- with
different lawyers and separate complaints? This would be an absurd and
The new cases on this point cited by the SC Defendants in their March 3, 2014lettel' to the
Court are distinguishable. Sec. [nv. Prot. Corp. v. Bernard L. Madoff lnv. Sec. LLC, No. 12
MC 115 (JSR) , 2013 WL 6301415 (S.D.N.Y. Dec. 5, 2013) involved a "single lawsuit" brought
by the Madoff Trustee as assignee of the claims of Madoff investors. In re Citigroup Inc. Sec.
Litig, No. 11 Civ. 3827(SHS), 2013 WL 6569875 (S.DNY. Dec. 13, 2013), and In re Bank of
Am. Corp. Sec, Derivative, and ERISA Litig" No. 12 Civ. 521O(PKC), 2013 WL 6504801
(S.D.N.Y. Dec. 11, 2013), involved suits that was found to be meritless whether or not
SLUSA applied. Moreover, both cases involved suits that were transferred by the JPML for
coordination with pending class action against the same defendants and involving the same
claims. Here. however. not Oldy has this Court upheld almost all of the Standard Chartered
Cases against motions to dismiss, but the SC Plaintiffs, with the exception of one Plaintiff,
sue none of the same defendants sued in the Anwar class action and therefore do not bring
.j
the same claims that were advanced in Anwar.
From: Richard E Brodsky
Fax: (8613) 391·5819
To:
Fay: +1 (212) 805·6382
Page
I)
0' 6
0310512014 3:29
Hon. Victor Marrero
March 5, 2014
Page 5
unduly harsh result. We question how the Constitution could permit an
interpretation of SLUSA that Congress intended to deprive these individual
plaintiffs, whose claims stand alone and apart from Anwar and even from
each other, from suing their banker under state law for recommending they
invest in Fairfield Sentry. Only through a severely contorted, and now
discredited, reading of SLUSA could this be accomplished. The Court should
not and need not perpetrate such an injustice.
In summary, Chadbourne and Anwar II require this Court to deny the
request for a conference and to deny leave to file a motion for judgment on
the pleadings. As to the se Plaintiffs, an additional reason, which the Court
need not face if it decides in favor of the SC Plaintiffs on the first point, is
that the Standard Chartered Cases are not a "covered class action."
Thank you for your attention to this letter.
Sincerely yours,
cc:
Counsel in Standard Chartered Cases
SO ORDERED.
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