Anwar et al v. Fairfield Greenwich Limited et al

Filing 1260

ENDORSED LETTER addressed to Judge Victor Marrero from David A. Barrett dated 4/17/2014 re: Counsel requests a pre-motion conference to address Plaintiffs' proposed motion to amend the Second Consolidated Class Action Complaint ("SCAC") to reassert negligence-based claims against the Citco Administrator defendants with respect to initial investments. ENDORSEMENT: The Clerk of Court is directed to enter into the public record of this action the letter above submitted to the Court by Anwar plaintiffs. (Signed by Judge Victor Marrero on 4/25/2014) (tn) Modified on 4/28/2014 (tn). (Main Document 1260 replaced on 4/28/2014) (mt).

B 0

IE S.

SCHILLER

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F L E X N E R

L L P

575 LEXINGTON AVENUE • 7TH FLOOR • NEW YORK, NY 10022 • PH. 212.446.2300 • FAX [phone]

Aprill7, 2014
BY HAND
Judge Victor Marrero
United States District Court
Southern District ofNew York
500 Pearl Street
New York, New York 10007

Re:

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

Dear Judge Marrero:
We write on behalf of the Anwar Plaintiffs to request a pre-motion conference to address
Plaintiffs' proposed motion to amend the Second Consolidated Class Action Complaint
("SCAC") to reassert negligence-based claims against the Citco Administrator defendants with
respect to initial investments.
Background. In August 2010, the Court sustained the SCAC's negligence and negligent
misrepresentation claims against, among others, PwC, Citco Group Ltd., Citco Fund Services
(Europe), B.V., and Citco (Canada) Inc. ("Citco Administrators"), arising from initial and
subsequent investments in the Fairfield funds. Anwar II, 728 F. Supp. 2d 372,431-36 (S.D.N.Y.
2010) (citing SCAC ~~ 328, 333, 335, 534-35 and 538).
On May 29,2012, PwC requested reconsideration of the negligence-based claims against
them in light of two summary orders from the Second Circuit. PwC's letter (Dkt. No. 886) stated
that Citco joined in this request, but Citco proffered no supporting facts or additional legal
argument. In response, Plaintiffs acknowledged that the SCAC did not support negligence-based
claims against PwC for initial investments, but specifically argued that the Second Circuit
decisions did not require dismissal of the claims against Citco because- while PwC was not
aware of specific investors' identities at the time of initial investments - Citco dearly was aware
due to its participation in the subscription process. See Dkt. No. 908 at 1-2 fn.2 (quoting Anwar
II at 434: "potential investors ... were known parties" to Citco). In Anwar III, 884 fl. Supp. 2d
92 (Aug. 6, 2012), the Court stated that "Plaintiffs' negligence-based initial investment claims
are dismissed without prejudice. Such claims may be repled only if Plaintiffs ... can show that
they were, in fact, known to the Defendants prior to their initial investment in the Funds.'' !d. at
97.
Although the Court used the defined term "Defendants" in the Anwar Ill opinion, its
discussion of the facts and law was limited to PwC. Relying on this ratio decidendi and the tact
that Plaintiffs' concession (referenced by the Court, id at 97) was limited to PwC, Plaintiffs did
not understand that Anwar JII had etTectively reversed Anwar If's rejection of Citco's Credit

WWW.BSFLLP.COM

BOIES,

SCHILLER

&

FLEXNER

LLP

Judge Victor Marrero
Aprill7, 2014
Page 2
Alliance argument. And while Citco subsequently made passing footnote references in unrelated
briefing indicating that Anwar Ill applied to initial investment claims against all Defendants, the
issue only came to a head in expert discovery on damages. Plaintiffs instructed their expert to
compute damages including initial investment claims, while Citco asserted that such amounts
must be excluded. When the parties were unable to resolve the disagreement in correspondence,
Citco raised the issue with the Court. See Dkt. No. 1253 (Mar. 19, 2014), and Plaintiffs
responded (Dkt. No. 1255, Mar. 24, 2014). The Court then clarified that Anwar III "dismissed
all of Plaintiffs' negligence-based initial investment claims against all of the defendants who
were included in the defined term 'defendants' in the Order." See Dkt. No. 1256 at 1 (Mar. 27,
2014).

In light of the March 27 Order, Plaintiffs seek leave to amend the SCAC to clarify
allegations showing that Plaintiffs were known to the Citco Administrators prior to their initial
investments, thereby stating negligence claims as to those investments. As directed in Anwar II,
Plaintiffs also include allegations supporting their Morrison argument. 1 These proposed
amendments would be made to Paragraphs 180 and 335 ofthe SCAC as shown in Exhibit A?
Applicable Law. "Rule 15 of the Federal Rules of Civil Procedure provides that courts
should 'freely give' leave to amend 'when justice so requires."' Alexander Interactive, lnc. v.
Adorama, Inc., 2014 WL 113728, at* I (S.D.N.Y. Jan. 13, 2014). Further, a party seeking to
amend under Rule 16(b) must demonstrate "good cause." See Kassner v. 2nd Avenue
Delicatessen Inc., 496 F.3d 229,243-44 (2d Cir. 2007). The Court should grant Plaintiffs leave
to amend here to reassert these claims because (i) Plaintiffs have not acted with undue delay, bad
faith or dilatory motive; (ii) the proposed amendments do not cause undue prejudice because
they are based on operative facts that have already been the subject of discovery; and (iii) the
amendments present well-founded, viable claims. See Williams v. Citigroup Inc., 659 F.3d 208,
213-14 (2d Cir. 2011).
Timeliness. As discussed above and in Plaintiffs' letter of March 24,2014 (Dkt. No.
1255), Plaintiffs reasonably believed that Anwar Ill did not limit claims against Citco; and
Plaintiffs are seeking to amend within the 21-day period that was prescribed in Anwar II, 728 F.
Supp. 2d at 462. See, e.g., Duling v. Gristede 's Operating Corp., 265 F.R.D. 91, 97-98
(S.D.N.Y. 2010) ("Although some explanation must be provided to excuse a delay, even vague
or 'thin' reasons are sufficient, in the absence of prejudice or bad faith.") (emphasis in original)
(citations omitted); Oneida Indian Nation of NY State v. Cnty. OJ Oneida, NY, 199 F.R.D. 61, 77
1

"In the event that Plaintiffs move to replead any claims dismissed by this Decision and Order,
they should include in the proposed amendments the facts they submitted via letter-brief to
support their Morrison argument, as well as any additional particulars that the record may
develop in this regard." Anwar II, 728 F. Supp. 2d at 405.
2

Because this action has been dismissed against the Fairfield and GlobeOp defendants by
settlements, Plaintiffs do not seek to amend as to those defendants, but reserve the right to do so
against the Fairfield defendants if that settlement does not become final.

BOIES,

SCHILLER

&

FLEXNER

LLP

Judge Victor Marrero
April 17, 2014
Page 3
(N.D.N.Y. 2000) (crediting plaintiffs' explanation although it was "not entirely to the court's
satisfaction."). Indeed, "[w]ithout prejudice to the opposing party or some other reason, even an
extended delay does not mandate denial ofleave to amend." Hinds Cnty., Mi. v. Wachovia Bank,
N.A., 885 F. Supp. 2d 617,631-32 (S.D.N.Y. 2012) (Marrero, J.); see State Teachers Ret. Bd. v.
Fluor Corp., 654 F .2d 843, 856 (2d Cir. 1981) ("Mere delay, however, absent a showing of bad
faith or undue prejudice, does not provide a basis for a district court to deny the right to
amend."). Nor would progress of this case be impeded; the sufficiency of the new allegations
can be addressed in summary judgment motions that will be filed early this summer.
No Undue Prejudice. As to undue prejudice, courts consider whether the proposed
amendments would "(i) require the opponent to expend significant additional resources to
conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or
(iii) prevent the plaintiffs from bringing a timely action in another jurisdiction." Monahan v. NY
City Dep't ofCorrs., 214 F.3d 275,284 (2d Cir. 2000). Here, "although discovery has already
closed, the grounds that" are proposed as amendments "arise from the same set of operative facts
that were the subject of discovery." RST (2005) Inc. v. Research in Motion Limited, 597 F.
Supp. 2d 362, 369 (S.D.N.Y. 2009) (granting motion to amend) (Marrero, J.); see Hemphill v.
Schott, 141 F .3d 412, 420 (2d Cir. 1998) (reversing denial of motion to amend to "allege
additional facts in support" of existing claims); Lehman v. Garfinkle, 2013 WL 857739, at *9
(S.D.N.Y. Mar. 7, 2013) (no undue prejudice where "operative facts underlying [plaintiffs]
accounting-malpractice claim ... would give rise to no need for additional discovery"); Mahar v.
US Xpress Enters., Inc., 688 F. Supp. 2d 95, 106 (N.D.N.Y. 201 0) (allowing amendment that
"derive[d) from the same set of operative facts" as claims previously alleged). 3 The proposed
amendments would thus not require additional discovery. The amendments also would not delay
the resolution of the dispute; indeed, the sufficiency of these factual allegations can be tested at
summary judgment.
Claims Well-Founded. Plaintiffs' proposed amendments demonstrate that prior to
Plaintiffs' initial investments in the Funds, Citco Administrators knew the identities of the
investors; and engaged in linking conduct including communications with investors. See Ex. A
~~ 335(a)-(c); Anwar Il, at 431-36. Therefore, the amendments "state[] a viable claim." Slay v.
Target Corp., 2011 WL 3278918, at *2 (S.D.N.Y. July 20, 2011). "Ifthe amendments are
colorable, especially where they are based upon disputed facts, they should be allowed, and a
comprehensive legal analysis deferred to subsequent motions ... for summary judgment."
Adorama, 2014 WL 113728, at *4 (quotation omitted). Accordingly, the proposed amendments,
along with Plaintiffs' many other causes of action that are now strongly supported by evidence
obtained through discovery, can be addressed as necessary on summary judgment in the near
future.

3

Indeed, because claims involving initial investments were sustained in Anwar lJ as to other
causes of action (e.g., federal securities claims, 728 F. Supp. 2d at 423-428), Citco has addressed
facts concerning initial investments in discovery and in its briefing on the class certification
appeal, see, e.g., SecondCircuitCaseNo.13-2340,Dkt.l31 at35-37.

BOIES,

SCHILLER

&

FLEXNER

LLP

Judge Victor Marrero
April 17, 2014
Page4

Respe~ull~

e.arretl
cc:

All counsel in Anwar (by email)

The Clerk of Court is directed to enter into the public record
of is action the letter aboye submitted the Court by