Anwar et al v. Fairfield Greenwich Limited et al

Filing 1339

ENDORSED LETTER addressed to Judge Victor Marrero from Walter Rieman dated 11/17/2014 re: We represent the Citco Defendants in the action referenced above. A recent precedential decision of the Second Circuit, Pennsylvania Public School Employees' Retirement System v. Morgan Stanley & Co., Inc., No. 13-2095-cv(L), 2014 WL 5487 666 (2d Cir. Oct. 31, 2014) (copy enclosed), further demonstrates that plaintiffs' pending motion for class certification should be denied. ENDORSEMENT: Plaintiffs are directed to respond by 11-25-14 by letter no to exceed three (3) pages, to the matter set forth above by Citco Defendants. (Signed by Judge Victor Marrero on 11/20/2014) (lmb)

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I PAUC, WEISS, RIFKIND, WHARTON & GARRISON LLP UNIT 3601 , OFFICE TOWER A , BEIJING FORTUNE PLAZA _..... 1285 1VENUEOFTHEAMERICAS NEW ~ORK , NO 7 DONGSANHUAN ZHONGLU NEW YORK 10019-6064 CHAOYANG DISTRICT BEIJING 100020 TELEPHONE ( 212 } 373 - 3000 PEOPLE ' S REPUBLIC OF CHINA TELEPHONE ( 86· t Ol 5828 - 6300 LLOYD K . GARRISON ( 1946- 1991 ) RANDOLPH E . PAUL ( 1946- 1956 ) SIMON H . RIFKIND ( 1950- 1995 ) LOUIS S . WEISS ( 1927-1950) JOHN F. WHARTON ( 1927 · 1977) 12TH FLOOR , HONG KONG CLUB BUILDING 3A CHATER ROAD . CENTRAL HONG KONG TELEPHONE (852) 2846 -0300 ALDER CASTLE 10 NOBLE STREET LONDON EC2V 7JU , U K . WRITER ' S DIRECT DIAL NUMBER TELEPHONE ( 44 20 ) 7367 1 600 212-373-3260 FUKOKU ~EIMEI BUILDING 2 · 2 UCHISAIWAICHO 2 -CHOME WRITER ' S DIRECT FACSIMILE CHIYODA- KU , TOKYO 100-0011 , JAPAN TELEPHONE (81-3 ) 3597 - 8101 212-492-0260 TORONTO-DOMINION CENTRE WRITER ' S DIRECT E·MAIL ADDRESS 77 KING STREET WEST, SUITE 3100 P.O. BOX 226 TORONTO, ONTARIO M5K 1J3 TELEPHONE ( 416 ) 504 · 0520 2001 K STREET, NW WASHINGTON , DC 20006- 1047 TELEPHONE ( 202 ) 223-7300 500 DELAWARE AVENUE , SUITE 200 POST OFFICE BOX 32 WILMINGTON , DE 19899-0032 November 17, 2014 TELEPHONE ( 302) 655 - 4410 BRADS . K A RP PATRIC K N . K ARSNITZ JOHN C . KENNEDY BRIAN KIM ALAN W . KORNBERG DANIEL J . KRAMER DAVID K . LAKHDHIR STEPHEN P. LAMB * JOHN E . LANGE DANIEL J . LEFFELL XIAOYU GREG LIU JEFFREY D . MARELL MARCO V. MASOTTI EDWIN S . MAYNARD DAVID W MAYO ELIZABETH R. MCCOLM MARK F MENDELSOHN WILLIAM B . MICHAEL TOBY $ . MYERSON CATHERINE NYARADY JANE B . O ' BRIEN ALEX YOUNG K . OH BRAD R. OKUN KELLEY D . PARKER MARC E PERLMUTTER VALERIE E . RAOWANER CARLL. REISNER LORIN L. REISNER WALTER G . RICCIARDI WALTER RIEMAN RICHARD A . ROSEN ANDREW N . ROSENBERG JACQUELINE P. RUBIN RAPHAEL M . RUSSO ELIZABETH M . SACKSTEDER JEFFREY D . SAFERSTEIN JEFFREY B . SAMUELS DALE M SARRO TERRYE . SCHIMEK KENNETH M . SCHNEIDER ROBERT B . SCHUMER JAMES H . SCHWAB JOHN M . SCOTT STEPHEN J . SHIMSHAK DAVID R. SICULAR MOSES SILVERMAN STEVEN SIMKIN JOSEPH J . SIMONS MARILYN SOBEL AUDRA J . SOLOWAY SCOTT M . SONTAG TARUN M . STEWART ERIC ALAN STONE AIDAN SYNNOTT ROBYN F. TARNOFSKY MONICA K . THURMOND DANIEL J . TOAL LIZA M . VELAZQUEZ MARIA T. VULLO ALEXANDRA M . WALSH * LAWRENCE G . WEE THEODORE V. WELLS . JR. BETH A . WILKINSON STEVEN J . WILLIAMS LAWRENCE I. WITDORCH\C MARK B . WLAZLO JULIA MASON WOOD JORDAN E . YARETT KAYE N . YOSHINO TONG YU TRACEY A . ZACCONE T. ROBERT ZOCHOWSKI , JR. MATTHEW W . ABBOTT ALLAN J . ARFFA ROBERT A . ATKINS DAVID J . BALL JOHN F. BAUGHMAN LYNN B . BAYARD DANIEL J . BELLER CRAIG A . BENSON MITCHELL L BERG MARKS . BERGMAN BRUCE BIRENBOIM H CHRISTOPHER BOEHNING ANGELO BONVINO JAMES L. BROCHIN RICHARD J . BRONSTEIN DAVID W . BROWN SUSANNA M . BUERGEL PATRICK S . CAMPBELL • JESSICA 5 . CAREY JEANETTE K . CHAN YVONNE Y. F. CHAN LEWIS R . CLAYTON JAY COHEN KELLEY A . CORNISH CHRISTOPHER J . CUMMINGS CHARLES E . DAVI DOW DOUGLAS R. DAVIS THOMAS V. DE LA BASTIDE Ill ARIEL J . DECKELBAUM ALICE BELISLE EATON ANDREW J . EHRLICH GREGORY A . EZRING LESLIE GORDON FAGEN MARC FALCONE ROSS A . FIELDSTON ANDREW C . FINCH BRAD J . FINKELSTEIN BRIAN P. FINNEGAN ROBERTO FINZI PETER E . FISCH ROBERT C . FLEDER MARTIN FLUMENBAUM ANDREW J . FOLEY HARRIS B . FREIDUS MANUEL S . FREY ANDREW L. GAINES KENNETH A . GALLO MICHAELE. GERTZMAN ADAM M . GIVERTZ SALVATORE GOGLIORMELLA ROBERT D . GOLDBAUM NEIL GOLDMAN ERIC GOODISON CHARLES H . GOOGE , JR ANDREW G . GORDON UDIGROFMAN NICHOLAS GROOMBRIDGE BRUCE A GUTENPLAN GAINES GWATHMEY. 111 ALAN S . HALPERIN JUSTIN G . HAMILL CLAUDIA HAMMERMAN GERARD E . HARPER BRIAN S . HERMANN ROBERT M . HIRSH MICHELE HIRSHMAN MICHAELS . HONG DAV IDS . HUNTINGTON LORETTA A . IPPOLITO JAREN JANGHORBANI MEREDITH J . KANE ROBERTA A . KAPLAN - ~~~---- - - - -- - ---'-'"""-'"""'I' ---·-'>- ---------~-............ · T. [ ,~ O-< E NEW Y AR . LJS.D'-' S DNY By Hand D OCl'\ lL\ I' The Honorable Victor Marrero I l EC! !~ O '." IC:\ L LY Fl U Z D United States District Judge DOC # · Daniel Patrick Moynihan D :\ T E I [LEO: United States Courthouse 500 Pearl Street, Room 1040 ·Ji I ,.tz:=-= New York, New York 10007-1312 'r , ....... L' L ,, uL.. Anwar, et al. v. Fairfield Greenwich Limited, et al., No. 09-cv-118 (S.D.N.Y.) (VM)(FM) Dear Judge Marrero: We represent the Citco Defendants in the action referenced above. A recent precedential decision of the Second Circuit, Pennsylvania Public School Employees' Retirement System v. Morgan Stanley & Co., Inc., No. 13-2095-cv(L), 2014 WL 5487 666 (2d Cir. Oct. 31, 2014) (copy enclosed), further demonstrates that plaintiffs' pending motion for class certification should be denied. In particular, Pennsylvania Public School further supports the Citco Defendants' argument that the issue ofreasonable reliance raises numerous individual Ph..UL, WEISS, RIFKIND, WHARTON & GARRISON LLP The Honorable Victor Marrero United States District Judge 2 issues of fact and thus precludes any finding that common issues predominate. 1 In 2 Pennsylvania Public School, the Second Circuit affirmed the denial of class certification. Three plaintiffs brought a putative class action alleging claims for common-law fraud under New York law against ratings agencies and Morgan Stanley. According to plaintiffs, the defendant ratings agencies knowingly used outdated models and data to rate certain securities. Plaintiffs argued that the commonality element required for class certification under Rule 23 was satisfied by the "recently created ' fraud-created-themarket' theory, i.e., but for the defendant's fraud, no market for the notes would have existed at all." Id. at *6. Judge Winter, writing for a unanimous panel, rejected plaintiffs' argument, noted that four other Circuits have rejected or questioned the fraud-createdthe-market theory, and held that New York law would not recognize that theory as a substitute for proof of actual reliance by each member of the putative class. See id. (noting that fraud-created-the-market theory has been rejected or questioned by the Third, Sixth, Seventh, and Ninth Circuits). As Judge Winter explained: While the [fraud-created-the-market] theory is used to argue that none of the notes would have been sold but for the fraud, that argument establishes only "but-for" causation; it does not establish reliance. It is quite possible that some buyers of the notes might have known the underlying facts, believed in the models, and held the same rosy view of the residential housing market as did many government and private financial officers. Appellants thus seek to use the theory to eliminate the need to prove reliance, a traditional element of common law fraud. No hint has been offered by New York courts that such a radical doctrinal shift is in the offing. Id. Because the fraud-created-the-market theory could not overcome individual issues of reliance, the Second Circuit affirmed the district court' s denial of class certification. Those individual issues of reliance arose from, among other factors, "significant differences in the investment decision processes of the various putative class members," id. at *7, "the sophistication of the parties," and "the variances in each putative class member' s investment strategy and decision-making process," id. at *7 n.4. See the Citco Defendants' Memorandum of Law in Opposition to Plaintiffs' Motion for Class Certification ("Citco' s Opposition Brief' or "Citco Opp. Br."), filed under seal on Sept. 15, 2014, at 2-7, ECF No. 1323. 2 Citco's Opposition Brief, at pp. 4, 9, and 13, cites the district court' s underlying class-certification decision, Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc., 269 F.R.D. 252 (S.D.N.Y. 2010). PAUL, WEISS , RIFKIND, WHARTON & GARRISON LLP 3 The Honorable Victor Marrero United States District Judge Plaintiffs here have argued that the shares at issue would have been unmarketable if Citco' s NAV statements had been accurate. (See Citco Opp. Br. 13.) Pennsylvania Public School holds that such an argument cannot displace the requirement that each member of the putative class must prove actual and reasonable reliance in support of the putative class member's claims under New York law. The reasoning and language of Pennsylvania Public School indicates that this proposition is also true for claims by members of the putative class under the federal securities laws. Finally, Pennsylvania Public School demonstrates that where, as here, significant differences among the members of the putative class exist concerning, among other factors, the putative class member's investment decision process, sophistication, investment strategy, and knowledge concerning the investment at issue, reasonable reliance presents individual issues, and class certification should accordingly be denied. Respectfully submitted, lUOtbt-°' ~ ~ Walter Rieman Enclosure cc: All counsel in Anwar (by e-mail) SO OIUH. RED.

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