Anwar et al v. Fairfield Greenwich Limited et al

Filing 1255

ENDORSED LETTER addressed to Judge Victor Marrero from David A. Barrett dated 3/24/14 re: In sum, the August 6, 2012 Order was clear, and there was no basis then, nor is there now, for Citco to avail itself of a ruling applicable only to the PwC Defendants. ENDORSEMENT: The Clerk of Court is directed to enter into the public record of this action the letter above submitted to the Court the Anwer Plaintiffs. (Signed by Judge Victor Marrero on 3/27/2014) (mro)

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BY FACSIMIL~:
Judge Victor Mdrrero

United States Distri(;t Court

Southern District of New York

500 Pearl Street

New York, New York 10007

Re:

Anwar, et al. v. Fairfield Greenwich Limited, et a/.
Master File No. 09-CV -00118 (VM) (FM)

Dear Judge Marrero:
We wrik on behalf of The An-war Plaintiffs in response to the Citeo Defendants' Mareh

19, 20141etter (the "Letter") to Your Honor requesting "clarification" of the Court's August 6,
2012 Decision and Ordcr. 884 F. Supp. 2d 92 (S.D.N.Y 2012) (the "Order"). The Order
modified the Cou.rt's decision in Anwar 11. in light ofThe Second Circuit's then-recent decision in
Stephenson v. PricewaterhouseCoopers. LLP, 482 Fed. App'x 618 (2d Cir. June 13.2012), to

limit negJigence-based claims against the pwC Defendants to subsequent investments made by
existing investors in the Fair±ield Funds.
In this regard, the Order relied on PlaintiH's' al:knowledgement that the PwC Defendants
did not know the identity of prospective investors and thus Plaintiffs could not satisfy the Credit
Alliance test as to PwC w1th respect to Plaintiffs' initial investments. Order at 97. Plaintiffs'
concession was explicitly limited, however, to the PwC Defendants, and did not apply to the
eiteo or Fairfield Defendants, all of v.,;hom had joined in P\,,,'C's letter brief. We believe that the
Order - which contains no discussion oftacts concerning the Citco Or Fairfield Defendants on
this issue clearly applics only to claims against "defendants PwC Canada and PwC
Netherlands," whose motion was "granted in part." Id. at 100.
Thus, Citco is wrong in arguing that the reasoning of the Order supportS dismissal of
negligence-based claims against Citco arising from Plaintiffs' initial investments on grounds that
Citco was not in near-privity ·'hejiJre those investors made their initial investment decisions to
invest in the fLlDds." See l.etter at 4 (emphasi::; in original). rfCitco believes that the factual
record now availahle through discovery suppons its position - and Plaintiffs belicve thal the
record shows exactly the opposite - it can make that argument in a summary .i udgment motion
due to be .tiled wilhin a couple of months.

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Judge Victor ~'larn.:ro
March 24. 2014

P3gc 2
A. The Order Granted, in Part, the Motion of the PwC Defendants, Not All

Defend.mts
I·hc Orck:r granced the motion to di.srniss, in part. only d.') to the PwC Dcfendant~. Near
the beginning of the Order, the Court stated: "For the reasons discussed helow. the PwC
Defendants' motion tor reconsideration is GRANTED in part and DENIED in part." Order at
95. This was repealed at the cnd of the Order: "Ordered thattht> motion (Docket Nos. 8&6 and
901) of defendants PwC Canada and PwC NerheTlands for reconsideration is hereby GRANTED
in part and DENIED in part in accordance with this Decision and Order," Jd. at 100. The Order
contains no language that grants any motion made by the Citeo Defendant<; or "Detendants"
generally.
This distinction is meaningful. While "Defendants" was defined in the Order as
including Citca and the Fairfield Detendants (ld. at 94), in neither of the two operative decretal
sentences quoted above did the Court use the term '"Defendants" - rather, it specifically referred
to the PwC Defendants. Moreover, it would have made no sense to grant relief to all
"Defendants," since that term included the Fairtic!d Deitmdants who indisputably solicited and
were directly involved in the initial investment process.
Nor would it have made sense to grant such relief to Cilco without discussion. The Order
referred to Plaintiffs' June 4.2012 Jetter [Dkt. No. 908), which conceded that damages arc not
available "from PwC for the class negligent misrepresentation cause of action with respect to
new investors making initial investments:' See Order at 97. Plaintiffs' letter expressly
distinguished claims relating to Citco, arguing that, although the Fairfield Defendants and Citeo
hadjoined in the PwC letter, the Stephenson case "says nothing inconsistent "vith the Court's
holding in Anwar ff that Plaintiffs have properly alleged initial investment claims againsllhe
Fund administrators to whom' potential investors ... were known parties. ", Dkt. No. 908 at 1-2
n.2 (cilingAnwar lJ, 728 F. Supp. 2d 372, 434 (SD.N.Y. 2010». Citco never disputed this, and
nowhere did the Order discuss Plainrirrs' claims against Citco. Indeed, the discovery record now
confinns Plaintiffs' allegations that Citco knew and communicated with investors in connection
with initial investments in the Funds, and investors necessarily relied, among other things, on
Citco's utterly false calculation of Net Asset Value.

B. The Reasoning of the Order Does Not Apply to Cilco
Citco's letter ignores that the Court pre\'iously rejected precisely the same arguments
raised by Citco \\I'hen it denied Citco's initial motion to dismiss "prospective investor"
claim.'; as part of the Am'lIar II decision addressing Plainti frs' Second Consolidated Amended
Complaint ("SCAC"). In Anwar If. the Court sustain~d Plaintiff:;' claims against th<: Citco
Administrators arising hom both initial and :'tlbscq L1ent imestments:

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The Cum! 11m)" that Plaintiffs sufficiently .::tllegc thm these pru:::>Pl:C!l \'e investors.
to which the Administrators sent certain linancial documents, were "known" Jor

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Judge Victor Mamero
March 24, 2014
Pagl: 3

the purpose:> of the Credit Alliance test. Plaintith allege that the Administrators
c'induced Plaintitls to make their initial investments in the Funds" (SCAC f' 534)
and that "Plaintiffs sent their subscription documents directly to Citco , , , ." (/d '1
328.) Plaintiffs also allege that the Administrator::; "knt'w that Plaintiffs would
rely upon the 1~1lsc NA V and account balance statements for the particular
purpose of deciding whether to invest in the Funds." (ld. 'ii 535.) At this point,
thc Court finds that Plaintiffs adequately allege that there was a discrete group of
potential investors, not simply a faceless mob. who were known parties to the
Administralor~, and that the Administrators intended those inve~tors to rely upon
the N A V and account balance statements to invest in the Funds."

Anwar II. 728 F. Supp. 2d at 434 (citation omitted): see Jd at 424 ("The Administrators
disagree with Plalntitls' allegations, claiming that they did not communicate with
prospective investors and that therefore Plaintiffs could not possibly have relied upon the
Administrators' statements in their decisions (0 invest in [he Funds. But given that the
Court must accept Plaintiffs' factual allegations as true and resolve doubts in their tavor.
the A.dministrators' factual protests arc irrelevant at this time.") (citing SCAC ~ 333;
emphasis added),

or

Thus, the SCAC pleaded that all aspects
the Credit Alliance test were ~atisfied as to
Citco \.vith respect to initial a..... well as subsequent investments. Citeo knew the specific identity

or investors prior to their initial investments in the Funds because Citco received and processed

their subscription documents and payments for Fund subscriptions. If Citeo seeks to argue
otherwise, it may do so in upcoming summary judgment motion practice.
In sum, the August 6,2012 Order Wa'l clear. and there was no ha.<;i~ then, nor is there
now, for Citco to avail it5elf of OJ. ruling applicable only to the PwC Defendants.

Respectfully yours,~

M(l{jJm4
David l\.. Barrett

CC:

All counsel in Anwar (by email)

SO ORDERED.

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FACSIMILE COVER SHEET
PRIVILEGED AND CONFIDENTIAL
[phone]

TO:

Judge Victor Marrero

FAX:

FROM:

David A. Barrett

CLIENTIMA.TIER:

DATE:

March 24, 2014

5579.001

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