Anwar et al v. Fairfield Greenwich Limited et al

Filing 128

MEMORANDUM OF LAW in Support re: #127 MOTION to Appoint Fairfield Investor Group to serve as lead plaintiff(s). MOTION to Appoint Counsel.. Document filed by Fairfield Investor Group. (Torell, Catherine)

Anwar et al v. Fairfield Greenwich Limited et al

Doc. 128

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ANWAR, et al., Plaintiffs, v. FAIRFIELD GREENWICH LIMITED, et al., Defendants. MEMORANDUM OF LAW IN SUPPORT OF MOTION OF THE FAIRFIELD INVESTOR GROUP FOR APPOINTMENT AS LEAD PLAINTIFF AND APPOINTMENT OF LEAD COUNSEL I. INTRODUCTION Pursuant to Section 21D(a)(3)(B) of the Securities and Exchange Act of 1934 (the "Exchange Act"), as amended by the Private Securities Litigation Reform Act of 1995 ("PSLRA"), 15 U.S.C. § 78u-4(a)(3)(B), and for the reasons set forth below, Madanes Investment & Enterprise Ltd., Carling Investment Ltd., Shimon Laor, and Arie and Dafna Gruber (collectively, the "Fairfield Investor Group" or "Movant") respectfully move this Court for an Order appointing the Fairfield Investor Group to serve as Lead Plaintiff on behalf of itself and all others similarly situated who, between March 11, 2004 and December 10, 2008, inclusive (the "Class Period"), acquired shares of Fairfield Sentry Limited ("Fairfield" or the "Fund") and incurred damages as a result of the Defendants' violations of the federal securities laws. Movant also seeks appointment of the law firm of Cohen Milstein Sellers & Toll PLLC ("Cohen Milstein") as Lead Counsel. On March 11, 2009, a complaint was filed in this Court against Fairfield for violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5, captioned Knight Services Master File No. 09-CV-118-VM This Document Relates To: 09-CV-2269-VM (Knight Action)

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Holdings Ltd. v. Fairfield Sentry Limited, et al., No. 09-CV-2269-VM (the "Complaint").1 The Complaint is predicated on Fairfield's material misstatement or omission, throughout the Class Period, of critical facts regarding its financial condition. The Fairfield Investor Group suffered losses2 of approximately $916,890.53 during the Class Period as a result of Defendants' misleading conduct. Movant is unaware at this time of any other movant with a greater loss. Thus, under Section 21D of the Exchange Act, Movant is presumptively the "most adequate plaintiff" and should be appointed as lead plaintiff because it has "the largest financial interest in the relief sought by [the] class." 15 U.S.C. § 78u4(a)(3)(B)(iii)(I)(bb). Movant is represented in this action by Cohen Milstein, which is seeking appointment as lead counsel and is eminently qualified to prosecute securities class action claims such as this one. II. BACKGROUND This litigation arises from a massive, fraudulent scheme perpetrated by Bernard L. Madoff ("Madoff") through his investment firm, Bernard L. Madoff Investment Securities, LLC ("BMIS"), and others, and facilitated by other named defendants. The Complaint alleges that during the Class Period, the defendants issued to the investing

On March 24, 2009, the Court consolidated the Knight action with Anwar v. Fairfield Greenwich Limited, et al., No. 09-CV-118-VM (S.D.N.Y. filed Jan. 7, 2009), a case alleging, inter alia, fraud, negligent misrepresentation, and breach of fiduciary duty against Fairfield Greenwich Limited, the Placement Agent and Investment Manager of Fairfield, and various other defendants. See Consolidated Amended Complaint, Anwar v. Fairfield Greenwich Limited, et al., No. 09-CV-118-VM (Docket Entry No. 116), at ¶ 53. 2 The losses suffered by Movant, as detailed herein, are not the same as legally compensable damages, measurement of which is often a complex legal question that generally cannot be determined at this stage of the litigation. The approximate losses can, however, be determined from the executed certifications required under Section 21D of the Exchange Act and based upon reference to information concerning the market the Fund's shares. See Declaration of Catherine A. Torell in Support of Motion of the Fairfield Investor Group ("Torell Decl."), at Ex. B. 2

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public false and misleading financial statements and press releases concerning, among other things, the Fund's reported net asset value, the manner in which the Fund's assets were invested, the extent of the defendants' due diligence of Madoff and BMIS, and the true state of supervision and oversight over the Fund's assets. Defendants caused and permitted $7.5 billion of the Fund's total assets to be handed over to Madoff to be "invested" for the benefit of the Class. Class members' investments with the Fund were decimated as a direct result of the fraud perpetrated by Madoff and BMIS and the complete failure of the defendants to properly discharge their fiduciary duties despite the existence of a myriad of "red flags" indicating a high risk to Fairfield from concentrating its investment exposure in Madoff. On December 10, 2008, Madoff informed certain senior BMIS employees that BMIS' investment advisory business was an utter fraud. Madoff also stated that he estimated the losses from this fraud to be approximately $50 billion. On December 11, 2008, SEC and criminal charges were brought against Bernard Madoff. One of Madoff's clients was defendant Fairfield, which, unknown to Class members, and notwithstanding assertions to the contrary, failed to monitor or supervise the investments made with Madoff and BMIS, and failed to perform adequate due diligence. Investors who entrusted their savings are now ruined. Indeed, scores of charities were destroyed and have either closed their doors or cancelled their proposed grants. III. ARGUMENT As discussed below, Movant satisfies each of the requirements of the PSLRA and is therefore qualified for appointment as Lead Plaintiff. Additionally, Movant seeks appointment of Cohen Milstein as Lead Counsel for the Class.

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A.

Movant Satisfies the Procedural Requirements For Appointment as Lead Plaintiff Section 21D of the Exchange Act, 15 U.S.C. § 78u-4, establishes a procedure for the

appointment of a lead plaintiff in "each private action arising under the [Securities Act or Exchange Act] that is brought as a plaintiff class action pursuant to the Federal Rules of Civil Procedure." 15 U.S.C. § 78u-4(a)(1). First, the plaintiff who files the initial action must publish a notice to the class within 20 days of filing the action, informing class members of their right to file a motion for appointment as lead plaintiff. 15 U.S.C. § 78u-4(a)(3)(A)(i). The first such notice here was published on March 11, 2009 (see Torell Decl., Ex. A). The PSLRA further provides that within 90 days after the publication of the notice of pendency, or as soon as practicable after the actions have been consolidated, the Court shall consider any motion made by a class member and "shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members." 15 U.S.C. § 78u-4(a)(3)(B)(i). The 60-day time period provided by the PSLRA in which applications for appointment as lead plaintiff must be filed expires on May 11, 2009. Movant has moved within the statutory 60day time period. The motion contains the required certifications setting forth, inter alia, Movant's transactions in the Fund during the Class Period, and indicates that Movant has reviewed a complaint filed in the Action and is willing to serve as a representative party on behalf of the Class. See Torell Decl., Ex. B. In addition, Movant has selected and retained competent and experienced counsel, as set forth in counsel's resume. See Cohen Milstein resume at Torell Decl., Ex. C. As noted in the resume, the firm has developed an excellent reputation for successfully prosecuting federal securities law claims.

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B.

Movant Satisfies the Legal Prerequisites For Appointment as Lead Plaintiff 1. Movant is Presumptively the Most Adequate Plaintiff

The PSLRA sets forth procedures for the appointment of a lead plaintiff in class actions brought under the Exchange Act. 15 U.S.C. § 78u-4(a)(1). The PSLRA provides that this Court: shall appoint as lead plaintiff the member or members of the purported plaintiff class that the court determines to be most capable of adequately representing the interests of class members (hereafter in this paragraph referred to as the "most adequate plaintiff") in accordance with this subparagraph. 15 U.S.C. § 78u-4(a)(3)(B)(i). In adjudicating this motion, the Court must be guided by a presumption that the most adequate plaintiff is the person or group of persons who (a) has filed the Complaint or made a motion to serve as lead plaintiff, (b) has the largest financial interest in the relief sought by the class, and (c) otherwise satisfies the requirements of Fed. R. Civ. P. 23 and 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I). This presumption may be rebutted by proof that the presumptively most adequate plaintiff "will not fairly and adequately protect the interests of the class" or "is subject to unique defenses that render such plaintiff incapable of adequately representing the class." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(II). Movant satisfies each of these requirements. During the Class Period, Movant suffered losses of approximately $916,890.53 from its purchases of Fairfield shares.3 Movant believes it has the largest financial interest in the relief sought by the Class. Further, Movant is willing to actively participate in the leadership of this litigation through both personal involvement and consultation with its chosen counsel. Moreover, because Movant possesses a significant interest in the outcome of this litigation, it is presumed to be the "most adequate" plaintiff. 15 U.S.C. § 78u4(a)(3)(B)(iii)(I)(bb). Movant is both qualified to represent the class and willing to serve as a
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Copies of Movant's certifications are attached to the Torell Decl. as Exhibit B. 5

representative party. In addition, Movant has selected counsel that is highly experienced in prosecuting securities class actions such as this one. Accordingly, Movant satisfies the requirements for appointment as Lead Plaintiff under the PSLRA and the instant motion should be granted. 2. Movant Satisfies The Requirements of Rule 23

In addition to requiring that the lead plaintiff have the largest financial interest, the PSLRA requires that the lead plaintiff must "otherwise satisf[y] the requirements of Rule 23 of the Federal Rules of Civil Procedure." 15 U.S.C. § 78u-4(a)(3)(B)(iii)(I)(cc); see also In re Elan Corp. Sec. Litig., 2002 WL 31720410, at *3 (S.D.N.Y. Dec. 3, 2002); Albert Fadem Trust v. Citigroup Inc., 239 F. Supp. 2d 344, 347 (S.D.N.Y. 2002). Rule 23(a) requires that (1) the class be so numerous that joinder of all members is impracticable; (2) there be questions of law or fact common to the class; (3) such claims be typical of those of the class; and (4) the representatives fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a). Typicality and adequacy of representation are the only provisions relevant to the determination of lead plaintiff under the PSLRA. In re Crayfish Co. Sec. Litig., No. 00 Civ. 6766 (DAB), 2002 WL 1268013, at *4 (S.D.N.Y. June 6, 2002) (citing In re Olsten Corp. Sec. Litig., 3 F. Supp. 2d 286, 296 (E.D.N.Y. 1998) and Weltz v. Lee, 199 F.R.D 129, 133 (S.D.N.Y. 2001)). The typicality requirement of Fed. R. Civ. P. 23(a)(3) is satisfied where "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). A "claim will meet the typicality requirement if `each class member's claim arises from the same course of conduct, and each class member makes similar legal arguments to prove the defendants' liability.'" Olsten, 3 F. Supp. 2d at 296 (quoting In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 291 (2d Cir. 1992)); see also Fields v. Biomatrix, Inc., 198

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F.R.D. 451, 456 (D.N.J. 2000). The typicality standard is met even where minor distinctions exist. Id. As one court noted: "The premise of the typicality requirement is simply stated: as goes the claim of the named plaintiff, so go the claims of the class. Complete identification between the claims constituting each individual action is not required." Chisholm v. Transouth Fin. Corp., 184 F.R.D. 556, 563 (E.D. Va. 1999). The typicality requirement is plainly satisfied in the instant case, where Movant seeks the same relief and advances the same legal theories as other class members. The adequacy of representation requirement of Rule 23(a)(4) is satisfied where it is established that a representative party "will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). Representation is adequate when "(1) class counsel is qualified, experienced and generally able to conduct the litigation; (2) the class members do not have interests that are antagonistic to one another; and (3) the class has a sufficient interest in the outcome of the case to ensure vigorous adequacy." Weltz, 199 F.R.D. at 133 (citing Olsten, 3 F. Supp. 2d at 296). Movant is an adequate representative for the class. Movant purchased the Fund's shares during the Class Period and, like other putative class members, suffered a loss in the form of diminution in the value of its shares of the Fund. Moreover, Movant has retained counsel highly experienced in prosecuting securities class actions vigorously and efficiently, and has timely submitted its choice to the Court for approval pursuant to 15 U.S.C. § 78u-4(a)(3)(B)(v). C. The Court Should Appoint Cohen Milstein as Lead Counsel The PSLRA vests authority in the lead plaintiff to select lead counsel, subject to approval by the Court. 15 U.S.C. § 78u-4(a)(3)(B)(v). Thus, a court should not disturb the lead plaintiff's selection of counsel unless such interference is necessary "to protect the interests of the class."

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15 U.S.C. § 78u-4(a)(3)(B)(iii)(II)(aa). Movant has selected Cohen Milstein to serve as Lead Counsel, and appointing Cohen Milstein as Lead Counsel would be prudent to protect the interests of the class. As detailed in its firm resume,4 Cohen Milstein has extensive expertise and experience in the field of securities litigation and has successfully prosecuted numerous securities fraud class actions and obtained excellent recoveries on behalf of defrauded investors. Thus, the Court may be confident that the class will receive the highest caliber of legal representation in full compliance with the mandates of the PSLRA. See 15 U.S.C. § 78u-4(a)(3)(B)(v); Albert Fadem Trust, 239 F. Supp. 2d at 348 (approving as lead counsel law firm with "substantial experience and success in prosecuting securities fraud actions"). IV. CONCLUSION Based on the foregoing, Movant respectfully requests that the Court: (i) appoint it as Lead Plaintiff; (ii) appoint Cohen Milstein as Lead Counsel; and (iii) grant such other relief as the Court may deem to be just and proper.

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A copy of Cohen Milstein's firm resume is attached to the Torell Decl. as Exhibit C. 8

Dated: New York, New York May 11, 2009

Respectfully submitted, COHEN MILSTEIN SELLERS & TOLL PLLC

By:

/s/ Catherine A. Torell Catherine A. Torell (CAT-0905) 150 East 52nd Street, 30th Floor New York, New York 10022 Tel.: [phone] Fax: [phone] -andSteven J. Toll Daniel S. Sommers S. Douglas Bunch 1100 New York Avenue, N.W. Suite 500, West Tower Washington, D.C. 20005 Tel.: [phone] Fax: [phone]

Proposed Lead Counsel for Movant Of Counsel: Jacob Sabo, Esq. The Tower # 3 Daniel Frisch St. Tel Aviv Israel Tel.: [phone] Fax: [phone]

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