Anwar et al v. Fairfield Greenwich Limited et al

Filing 1263

ENDORSED LETTER addressed to Judge Victor Marrero from Andrew G. Gordon dated 4/23/2014 re: Counsel for Citco Defendants submit this letter in opposition to the 4/17/2014 letter submitted by Plaintiffs. ENDORSEMENT: The Clerk of Court is directed to enter into the public record of this action the letter above submitted to the Court by the Citgo Defendants. (Signed by Judge Victor Marrero on 5/13/2014) (tn)

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PAUL , WEISS, RIFKIND, WHARTON & GARRISON L-:.. :L:c.P
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agordon@paulweiss com

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The Honorable Victor Marrero
United States District Judge
Southern District of New York
500 Pearl Street
New York, New York 10007

BEIJING 100020

PEOPLE ' S REPUBLI C O F CHINA

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Anwar, et al. v. Fairfield Greenwich Limited, et al., 09-cv-0118 (VM)(FM)
Dear Judge Marrero :
We represent the Citco Defendants. We respectfully submit this letter in
opposition to the April 17, 2014 Letter submitted by Plaintiffs in which they belatedly seek
permission to file a motion to amend the Second Consolidated Amended Complaint ("SCAC"),
purportedl y " to clarify allegations showing that Plaintiffs were known to [Citco] prior to their
initial investments, thereby stating negligence claims as to those investments ." (Letter at 2.)

Preliminary Statement
Plaintiffs' request comes more than/our y ears after the filing of the SCAC, nearly
two years after this Court dismissed Plaintiffs ' negligence-based initial investment claims, nearly
ten months after the conclusion of fact discovery, and with only one month left to complete
expert discovery under this Court ' s current scheduling order. Despite this extraordinary delay,
and the obvious prejudice to Citco from any amendment at this point, Plaintiffs' Letter does not
provide a single good reason for why such delay occurred.
Instead , Plaintiffs casually assert that the proposed amendments are based on their
misunderstanding of the "ratio decidendi" of Your Honor' s August 6, 2012 Decision and Order
(the "Order"). As Your Honor recently noted, that Order could not have been any clearer: the
Order 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" (March 27, 2014
Order at 1), which definition expressly included Citco. Despite this, Plaintiffs continue to insist
they did not "understand" that the Order "had effectively reversed [this Court's prior] rejection
of Citco ' s Credit Alliance argument." (Letter at 1-2.) Plaintiffs ' own misreading of the Order's
plain language, however, is simply not a sufficient ground on which to permit them to amend the
SCAC at this late date. Accordingly, the application should be denied .

Argument
Leave to amend should be denied where there is "undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments

PAUL, WEISS , RIFKIND, WHARTON & GARRISON LLP

The Honorable Victor Marrero

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previously allowed, undue prejudice to the opposing party by virtue of allowance of the
amendment, [or] futility ofamendment[.]" Farnan v. Davis, 371 U.S. 178,182 (1962). As we
discuss below, Plaintiffs' proposed amendments are untimely, prejudicial and futile.

1.
The Proposed Amendments Are Untimely. Plaintiffs' extraordinary delay
weighs heavily in favor of denying their request to amend. Plaintiffs have waited over four years
to propose factual allegations of which they clearly have been aware since the very inception of
this litigation, namely, when Citco first learned the identities of investors in the funds. Notably,
when confronted with far less periods of undue delay, the Second Circuit has repeatedly and
consistently found that District Courts act well within their discretion in denying requests for
leave to amend. See, e.g., Zahra v. Town of Southold, 48 F.3d 674, 685-86 (2d Cir. 1995)
(finding undue delay where request was made two and one-half years after filing action).
It is well settled that the "burden is on the party who wishes to amend to provide a
satisfactory explanation for the delay." Cresswell v. Sullivan & Cromwell, 922 F.2d 60, 72 (2d
Cir. 1990). Plaintiffs do not, and cannot, meet this burden. As noted, Plaintiffs do not even
attempt to offer a persuasive reason why they seek to amend at such a late stage. Plaintiffs' only
excuse is that they misread a perfectly clear ruling of this Court. But, as Plaintiffs also
acknowledge, Plaintiffs have known for more than one year at the very least that Citco
understood those claims had been dismissed in the Order, since Citco stated as much in its Rule
23(f) petition filed in March 2013 (and in its moving brief, which was filed with the Second
Circuit in August 2013). Yet, Plaintiffs still did nothing. Such dilatory conduct simply does not
warrant leave to amend .

At bottom, Plaintiffs seek "leave to amend now simply because [their] original
causes of action have failed ." Nanopierce Techs., Inc. v. Southridge Capital Mgmt. , 2008 WL
1882702, at *3 (S.D.N.Y. Apr. 21, 2008). But that is not a proper basis for seeking to amend
where Plaintiffs had knowledge of the facts they seek to add when they originally filed the
SCAC. See id.
2.
The Proposed Amendments, if Allowed, Will Substantially Prejudice
Citco . "The longer the period of an unexplained delay, the less will be required .. . in terms of a
showing of prejudice." Evans v. Syracuse City Sch. Dis!., 704 F.2d 44, 47 (2d Cir. 1983)
(citation omitted). Even still, permitting an amendment at this late stage will cause extreme
prejudice to Citco. Fact discovery closed over nine months ago, and expert discovery is now
nearly complete. The proposed amendments would not only require additional fact discovery,
but also would require significant additional expert discovery as well. For example, because the
negligence-based initial investment claims against Citco had long been dismissed, Citco's
experts never addressed them. Nor were Plaintiffs' experts questioned about those claims.
Because it would be impossible to complete such additional expert discovery by the May 30
cutoff, allowing the pleadings to be amended now would be prejudicial. See Krumme v.
Westpoint Stevens Inc. , 143 F.3d 71, 88 (2d Cir. 1998) (affirming denial of motion to amend
where "discovery had been completed").
3.

The Proposed Amendments Are Futile. "An amendment to a pleading is

PAUL, WEISS , RIFKIND, WHARTON & GARRISON LLP

The Honorable Victor Marrero

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futile if the proposed claim could not withstand a motion to dismiss pursuant to [Rule] 12(b)(6)."
Lucente v. IBM, 310 F.3d 243 , 258 (2d Cir. 2002). Plaintiffs' proposed amendments are futile
because they seek to reassert the negligence-based initial investment claims already pleaded in
the SCAC that this Court already dismissed. Indeed, Plaintiffs offer no new allegations that
would permit the Court to find that they have now stated a claim for relief.
Relying on the Second Circuit's decision in Stephenson v. PwC, LLP, 482 F.
App'x 618 (2d Cir. 2012), this Court previously rejected Plaintiffs ' negligence-based initial
investment claims: "Defendants, who were not in privity with Plaintiffs, cannot owe a duty to
prospective investors who were unknown to Defendants at the time they made the alleged
misrepresentations." (Order at 8-9.) In Stephenson, the Second Circuit affirmed the dismissal of
certain negligence-based inducement claims brought by an investor in Greenwich SentrY-Dne
of the very same funds at issue in this case-against PwC Canada, holding that the investor
could not satisfy the "known party" prong of the Credit Alliance test and explaining as follows:
As the New York Court of Appeals recently reiterated , the words known party in
the Credit Alliance test mean what they say, and where the complaint does not
allege that the defendant knew the identity of the specific non-privity party who
would be relying, a negligence claim fails. Because Stephenson was nothing
more than a prospective limited partner, unknown at the time and who might be
induced to join the partnership, he was not a known party to PWC prior to his
investment in Greenwich Sentry and thus cannot maintain a claim for malpractice
against PWC under an inducement-to-invest theory.
482 F. App'x at 622 (internal quotation marks, alterations and citations omitted).
As Your Honor correctly recognized in the Order, the same is true with respect to
Citco, the administrator of celtain of the funds at issue. As in Stephenson, Citco neither knew
the identity of, nor communicated with, prospective investors in the Fairfield funds-with whom
they unquestionably were not in privity-before those investors made their initial investment
decisions. Indeed, Citco did not even know Plaintiffs' identities until after Plaintiffs had already
decided to invest in the funds and submitted their SUbscription documents to Citco.
Plaintiffs' proposed amendments do not alter this conclusion. Under Plaintiffs'
proposed allegations, Citco still received a potential investor's subscription documents-and,
thus, did not know of, or communicate with, such an investor until-after that investor had made
the decision to invest. Moreover, as Plaintiffs themselves have made clear, the proposed
amendments are virtually the same as the allegations already asserted in the SCAC and rejected
as insufficient by this Court. In their letter in response to our motion to clarify, Plaintiffs
argued--citing to paragraphs 328, 333, and 534-35 of the SCAC-that the SCAC already
alleged "that all aspects of the Credit Alliance test were satisfied as to Citco with respect to
initial as well as subsequent investments ... because Citco received and processed [investors']
subscription documents and payments for Fund subscriptions." (ECF No. 1255 at 3.) Because
Plaintiffs offer no new factual allegations on which the Court should revisit its prior ruling, the
proposed amendments are futile for all of the reasons set forth in the Order.

PAUL, WEISS, RIFKINO, WHARTON & GARRISON LLP

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The Honorable Victor Marrero

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For all these reasons, the Court should deny Plaintiffs ' request to amend the
SCAC.

Respectfully,

142 ;1. }i-­
Andrew G. Gordon
cc:

All counsel of record (by email)

The Clerk of Court is directed to enter into the public record
of thi s action the letter above sUCJmit!ed !<) the ourt by

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