Anwar et al v. Fairfield Greenwich Limited et al

Filing 1295

LETTER addressed to Magistrate Judge Frank Maas from Andrew Gordon dated August 4, 2014 re: Request for pre-motion conference. Document filed by CITCO Bank Nederland N.V. Dublin Branch, CITCO Fund Services (Europe) B.V., Citco Canada Inc., Citco Fund Services (Bermuda) Limited, Citco Global Custody N.V., Citco Group Limited. (Attachments: #1 Exhibit A, #2 Exhibit B, #3 Exhibit C)(Gordon, Andrew)

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MATTHEW W ABBOTT
A L L A N J ARFFA
ROBERT A A T K I N S
DAVID J B A L L
JOHN F BAUGHMAN
L Y N N B BAYARD
DANIEL J SELLER
CRAIG A B E N S O N
M I T C H E L L L BERG
MARK S B E R G M A N
BRUCE BIRENBOIM
H CHRISTOPHER BOEHNING
ANGELO BONVINO
JAMES L BROCHIN
RICHARD J BRONSTEIN
DAVID W B R O W N
SUSANNA M BUERGEL
PATRICK S C A M P B E L L *
J E S S I C A S CAREY
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YVONNE Y F CHAN
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JAY C O H E N
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HARRIS B FREIDUS
M A N U E L S FREY
ANDREW L GAINES
KENNETH A GALL0
MICHAEL E GERTZMAN
A D A M M GIVERTZ
SALVATORE GOGLIORMELLA
ROBERT D G O L D B A U M
NEIL GOLDMAN
ERIC GOODISON
C H A R L E S H GOOGE, JR
A N D R E W G GORDON
UD1 G R O F M A N
NICHOLAS GROOMBRIDGE
BRUCE A G U T E N P L A N
G A I N E S GWATHMEY, HI
ALAN S HALPERIN
JUSTIN G HAMILL
CLAUDIA HAMMERMAN
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DAVIDS HUNTINGTON
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STEPHEN P L A M B *
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DANIEL J LEFFELL
XIAOYU GREG L I U
JEFFREY D MARELL
MARCO V MASOTT1
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ELIZABETH R McCOLM
MARK F M E N D E L S O H N
WILLIAM B MICHAEL
TOBY S MYERSON
C A T H E R I N E NYARADY
JANE B O'BRIEN
A L E X Y O U N G K OH
BRAD R OKUN
K E L L E Y D PARKER
MARC E P E R L M U T T E R
VALERIE E RADWANER
CARL L REISNER
W A L T E R G RICCIARDI
WALTER RIEMAN
R I C H A R D A ROSEN
ANDREW N ROSENBERG
JACQUELINE P RUBIN
R A P H A E L M RUSSO
JEFFREY D SAFERSTEIN
JEFFREY B SAMUELS
D A L E M SARRO
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KENNETH M SCHNEIDER
ROBERT B SCHUMER
JAMES H SCHWAB
J O H N M SCOTT
STEPHEN J SHIMSHAK
DAVID R S I C U L A R
MOSES SILVERMAN
STEVEN SIMKIN
JOSEPH J SIMONS
MARILYN SOBEL
A U D R A J SOLOWAY
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ALEXANDRA M W A L S H *
LAWRENCE G WEE
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MARK B W L A Z L O
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J O R D A N E YARETT
KAYE N Y O S H I N O
T O N G YU
T R A C E Y A ZACCONE
T ROBERT ZOCHOWSKI, JR

*NOT ADMITTED TO THE NEW YORK BAR

By ECF and By Hand
The Honorable Frank Maas
United States Chief Magistrate Judge
United States Courthouse
500 Pearl Street
New York, NY 10007
Anwar, et al v. Fairfield Greenwich Limited, etal, 09-cv-0118 (VM)(FM)
Dear Chief Judge Maas:
We represent Citco in the above-captioned matter. We respectfully submit
this letter pursuant to Local Rule 37.2 and Your Honor's Individual Rules of Practice to
request a pre-motion conference to address plaintiffs' refusal to answer a very limited
number of contention interrogatories and requests for admission (the "Requests")
concerning their negligence-based initial investment claims. The parties have conferred
in good faith but have been unable to resolve this dispute.
As we discuss below, there is no good reason for plaintiffs' refusal to
respond to the Requests on the purported ground that the Requests were "untimely."
While the Requests were served after fact discovery closed, there was good cause for
this: until recently, plaintiffs' negligence-based initial investment claims had been
dismissed by the Court. After the Court ruled in its May 2014 Order (nearly one year
after fact discovery closed) that plaintiffs could amend their complaint to reassert those
claims, however, Citco - relying on plaintiffs' prior representation to the Court "not [to]

PAUL, WEISS, RIFKIND, W H A R T O N & GARRISON LLP

The Honorable Frank Maas
oppose" limited discovery on those claims - promptly (within two weeks) served the
Requests. Because the negligence-based initial investment claims had been dismissed
when fact discovery closed, it would now be unfair to preclude Citco from obtaining
critical information concerning those claims on purported timeliness grounds.
Background to the Current Dispute
In its August 7, 2012 Order, this Court dismissed plaintiffs' negligencebased initial investment claims against all of the defendants, including Citco. (ECF No.
910; see also ECF No. 1256 (ruling on Citco's motion to clarify the August 7, 2012
Order that 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. These parties are as follows: . . . . the Citco Defendants . . . .").) As a
result of that Order, Citco focused their efforts in the next year of fact discovery on
plaintiffs' surviving nine claims. Importantly, while some limited discovery on the
negligence-based initial investment claims took place prior to the issuance of the August
Order, because the claims were dismissed "30 days prior to the discovery cut-off date"
(Local Civil Rule 33.3(c)), Citco did not serve, prior to the end of fact discovery in June
2013, contention interrogatories - as they had with respect to each of plaintiffs' other
surviving claims - concerning the negligence-based initial investment claims.
On May 13, 2014, nearly one year after the close of fact discovery, the
Court granted plaintiffs' motion to amend their complaint to reassert the then-dismissed
negligence-based initial investment claims against certain of the Citco defendants.
Significantly, in support of that motion, plaintiffs represented to the Court that Citco
would not be prejudiced if the amendment was permitted since plaintiffs "would not
oppose reasonable, specific requests by Citco for additional discovery or supplemental
expert reports concerning this issue." (ECF No. 1265 at 2 (emphasis added).)
Taking plaintiffs at their word, on May 23, 2014, Citco promptly served
limited discovery requests concerning the recently reasserted negligence-based initial
investment claims. In particular, Citco served a total offour contention interrogatories on
plaintiffs, seeking (i) plaintiffs' position on whether they were claiming they relied on a
net asset value ("NAV") statement received directly from Citco in deciding whether to
invest in the Fairfield Funds; (ii) the identification of any communications between
plaintiffs and Citco which were sent before plaintiffs decided to invest in the Funds;
(iii) confirmation that plaintiffs made any decision to invest in the Funds before sending
their subscription materials to Citco; and (iv) the facts underlying plaintiffs' contention
that Citco knew plaintiffs' identity before plaintiffs decided to invest in the Funds. (A
copy of the contention interrogatories is attached hereto as Exhibit A.)
In addition, two of the Citco defendants each served two separate requests
for admission on plaintiffs (thus four in all) requesting that plaintiffs admit that plaintiffs
(i) did not receive a NAV statement directly from Citco before deciding to invest in the
Funds, and (ii) decided to invest in those Funds before the date on which they sent their

PAUL, WEISS, RIFKIND, W H A R T O N & GARRISON LLP

The Honorable Frank Maas
fund subscription materials to Citco. (A copy of the requests for admission is attached
hereto as Exhibit B.)
In their June 24, 2014 letter response to the Requests, plaintiffs refused to
provide any substantive answers, claiming the Requests were "untimely fact discovery
that [was] precluded by the Court's May 13, 2014 Order granting Plaintiffs' motion to
amend the [complaint]." (A copy of plaintiffs' June 24, 2014 letter is attached hereto as
Exhibit C.) Plaintiffs are wrong, and should thus be directed to answer the Requests
promptly.
Plaintiffs Should Be Compelled to Answer the Requests
In their response to the Requests, plaintiffs do not object to the limited
number of contention interrogatories or requests for admission on burden grounds. Nor
do they argue that the Requests seek irrelevant information. Nor could they. The
Requests - which seek information regarding the communications between Citco and
potential investors in the Funds before any investment was made, what in particular was
said in those communications, and how plaintiffs relied on them in making their initial
investment decisions - go to the heart of the Credit Alliance test. See Anwar v. Fairfield
Greenwich Ltd., 728 F. Supp. 2d 372, 432 (S.D.N.Y. 2010) (describing Credit Alliance
test). Instead, plaintiffs assert that the Requests were "untimely" because (i) the Requests
were served after the close of fact discovery, (ii) the Requests are somehow "precluded"
by Judge Marrero's May 13, 2014 Order, and (iii) "Citco had both ample reason and
ample opportunity to conduct fact discovery on initial investments."1
First, Citco's Requests are not "untimely." Plaintiffs' negligence-based
initial investment claims were dismissed nearly two years ago. As such, while the Citco
Defendants conducted a limited amount of discovery into these claims prior to the
Court's issuance of its August 7, 2012 Order (such as by questioning class representatives
at their depositions in 2011 and requesting documents in 2010), Citco did not have a full
opportunity to conduct discovery concerning whether plaintiffs could show that a duty of
care was owed to them by Citco under the Credit Alliance test before the negligencebased initial investment claims were dismissed. Indeed, under Local Rule 33.3(c), Citco
was not even permitted to serve contention interrogatories prior to the Court's dismissal
of those claims, since contention interrogatories may be served only "[a]t the conclusion
of other discovery, and at least 30 days prior to the discovery cut-off date." Further,
Citco had no reason to serve any requests for admission (which may be served by rule at
any point during fact discovery) after August 2012 as the negligence-based initial

1

Because plaintiffs have objected only on these narrow grounds, they have waived any other
objections to the Requests they may seek to assert. See Fed. R. Civ. P. 34(b) ("Any ground
not stated in a timely objection is waived unless the court, for good cause, excuses the
failure."); see, e.g., Pegoraro v. Marrero, 281 F.R.D. 122, 130 (S.D.N.Y. 2011).

PAUL, WEISS, RIFKIND, W H A R T O N & GARRISON LLP

The Honorable Frank Maas
investment claims were no longer in the case. After the Court permitted plaintiffs to
amend their complaint, Citco promptly served the Requests.
Second, plaintiffs incorrectly suggest that because their "non-negligence
causes of action, including federal securities fraud claims against the Citco
Administrators based on initial investments, continued to be part of the case for all
purposes including discovery," they are justified in refusing to answer the Requests. As
New York courts have consistently held, however, plaintiffs' federal securities claims are
fundamentally different from their negligence-based initial investment claims and require
different proof. See, e.g., Westpac Banking Corp. v. Deschamps, 484 N.E.2d 1351, 1353
(N.Y. 1985). As noted, the Requests seek information - such as whether Citco knew
plaintiffs' identity before any plaintiff made their initial investment decision and
evidence of "linking conduct" between Citco and plaintiffs - that goes solely to the
Credit Alliance test, which does not apply to plaintiffs' federal securities claims.
Accordingly, discovery related to plaintiffs' federal securities claims is not relevant.
Third, nothing in the Court's May 13, 2014 Order precludes the Requests.
That Order simply grants plaintiffs' motion to amend the complaint. The Court did not
even address this issue, let alone rule that Citco could not serve additional fact discovery
following the reinstatement of plaintiffs' claims. And given that plaintiffs actually
agreed to such additional discovery in their moving papers, there was no cause for the
Court to address whether additional fact discovery would be permitted. Plaintiffs'
contrary reading of the May 13, 2014 Order, we respectfully submit, is not only
supported by the text of the Court's decision. Plaintiffs should simply not be permitted to
take a position directly at odds with the one they took before the Court.
Finally, plaintiffs' refusal to respond to the Requests will prejudice Citco.
For nearly two years, plaintiffs' negligence-based initial investment claims were not in
the case; Citco understandably did not seek discovery concerning those claims as a result.
The Requests target specific issues unique to these claims and would provide evidence
that is directly relevant to Citco's defenses. In contrast, plaintiffs have identified no
prejudice they would suffer if they answered these limited Requests. Nor could they.

PAUL, WEISS, RIFKIND, W H A R T O N & GARRISON LLP

The Honorable Frank Maas
Accordingly, for the reasons set forth above, we respectfully submit that
plaintiffs should be compelled to answer the Requests.

Andrew Gordon
Enclosures
cc:

All counsel of record (by ECF)