Anwar et al v. Fairfield Greenwich Limited et al

Filing 1349

ENDORSED LETTER addressed to Judge Victor Marrero from Richard E. Brodsky dated 11/17/2014 re: For the reasons stated, SC is not entitled to summary judgment, and the Court should not exalt form over substance by permitting SC to file a futile motion. ENDORSEMENT: The Clerk of Court is directed to enter into the public record of this action the letter above submitted to the Court by Standard Chartered plaintiffs. (Signed by Judge Victor Marrero on 1/7/2015) (lmb)

THE BRODSKY LAW FIRM,
RICHARD

PL

E. BRODSKY, ATTORNEY AT LAW

November 17, 2014

By email with the permission of Chambers
Honorable Victor Marrero
United States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York 10007-1312

Re:

US.fiCSD~Y

.DOCUMENT

·u

ECTRO:\ICALLY FILED
DOC#: ~~---J.~-1-~--_:_

JJATE fTLrn:

-t--J,.,-f..,_,..'--'.___,,__

Anwar, et al. v. Fairfield Greenwich Limited, et al.,
09-cv-118 (VM) (THK)
Standard Chartered Cases

Dear Judge Marrero:
The Standard Chartered Plaintiffs ("Plaintiffs") respond to the October 31, 2014
letter ("SC Letter") from the Standard Chartered Defendants ("SC") concerning
summary judgment.
At the September 29, 2014 hearing, SC's lead counsel admitted that SC did not
dispute the facts in the Plaintiffs' September 9, 2014 letter ("Plaintiffs' Letter"), just
their "import," Transcr., 9/29/14 hrg., 17, and confirmed that "[no facts are) disputed
that are material." Id., 49. Counsel's admissions, of course, are binding on her clients.
Haywood v. Bureau of Immigration, 372 FedAppx. 122, 124 (2d Cir. 2010) (admissions by
counsel during pendency of litigation ordinarily binding on client); Kregler v. City of New
York, 770 F. Supp. 2d 602, 607 (S.D.N.Y. 2011) (same). These admissions were
confirmed when the SC Letter failed to dispute a single fact asserted in the Plaintiffs'
Letter or at the hearing.
Accordingly, SC's complaint that it "has not been afforded the same opportunity
[as the Plaintiffs) to present the law and facts which entitle it to summary judgment,"

200 S. BISCAYNE BOULEVARD, STE. 1930 •MIAMI, FLORIDA 33131
WWW. THEBRODSK YLAWFIRM.COM

786-220-3328 • [e-mail]

Hon. Victor Marrero
November 17, 2014
Page 2
SC Letter, 20 n. 19, is groundless.1 At the September 29 hearing, the Court discussed
treating SC's letters as a motion for summary judgment, Transcr., 9/29/14 hrg., 48, and,
with full awareness of what was at stake, SC conceded that the only issues were legal in
nature, which it confirmed in its Letter by contesting none of the facts. It has been
given every opportunity to show why, on the uncontested facts, no reasonable jury could
rule in favor of the Plaintiffs on any of their claims.2 The Court, therefore, need not
exalt form over substance by extending SC the opportunity to make a formal, yet futile,
motion.

I.
SC WAIVED THE RIGHT TO MOVE FOR SUMMARY JUDGMENT
ON LIMITATIONS GROUNDS BECAUSE IT NEVER
ALLEGED LIMITATIONS AS AN AFFIRMATIVE DEFENSE
SC claims it will be able to show that some if not all of the Plaintiffs' claims are
time-barred, but it has waived this defense by failing to assert it as an affirmative
defense in any of the SC Cases. "A claim that a statute of limitations bars a suit is an
affirmative defense, and, as such, it is waived if not raised in the answer to the
complaint." Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc., 967 F.2d 742, 751-52 (2d
Cir.1992) (citing Fed.RCiv.P. 8(c)). SC, therefore, may not move for summary judgment

1

SC complains that the Plaintiffs submitted a 10-page letter in response to SC's initial 3-page letter. The
fact is, however, that, before any letters were sent, SC expressly agreed to the Plaintiffs' request that the
Court allow them 10 pages to respond to its initial letter, and SC did not ask to submit a longer letter.
Then, at the September 29, 2014 hearing, after being specifically being told by the Court about the
required scope of its reply letter, SC volunteered to the Court a limit of 25 double spaced pages on its letter
("I would think we can do that in 25 pages !double-spaced!.'') Transcr., 9/29/14 hrg., 49.
2The Court may consider SC's argument on the Securities Litigation Uniform Standards Act ("SLUSA"),
Pub. L. No. 105-353, 112 Stat. 3227 (1998) (codified as amended in scattered sections of 15 U.S.C.), as a
motion for judgment on the pleadings under Fed.R.Civ.P. 12(c). SC in essence agreed to that procedure at
the September 29 hearing ("we will be responding to the SLUSA which I agree can be deemed whatever
a motion. It doesn't require summary judgment.)" Transcr., 9/29/14 hrg., 49.

Hon. Victor Marrero
November 17, 2014
Page3

on an affirmative defense it has not asserted. United States v. Landau, 155 F.3d 93 (2d Cir.
1998).3
We further note that SC's limitations argument is contained solely in Exhibit B
to its Letter. The Court should not consider that argument because it would enable SC,
without seeking leave, to exceed the very 25-page limitation that SC itself suggested.
(The SC Letter itself is 25 pages long.) The same goes for Exhibit D, which contains a
purported analysis of the relevance of statements made in the Plaintiffs' Letter. Because
of SC's violation of the page limitation, we do not believe we are obligated to respond to
the argument contained in Exhibit B. However,

if the Court concludes that it will consider

Exhibit B despite SC's exceeding the 25-page limit, we request an additional seven days from being so
notified to respond to SC's argument (and up to five pages in which to do so).

II.
SC'S CANNOT DEMONSTRATE THAT IT IS ENTITLED TO JUDGMENT AS
A MATTER OF LAW ON THE PLAINTIFFS'
BREACH OF FIDUCIARY DUTY AND NEGLIGENCE CLAIMS
A.

Introduction

SC claims that it is entitled to summary judgment on the Plaintiffs' breach of
fiduciary duty and negligence claims (hereafter referred to as "Due Diligence Claims").
At the September 29 hearing, the Court stated its preliminary view that showing an
entitlement to summary judgment on those claims would be an "uphill battle."
Transcr., 9/29/14 hrg., 47. The SC Letter proves it will be unable to win that battle.

3

It is far too late in this litigation-over 29 months since fact discovery was completed in the SC Cases,
after the Plaintiffs and SC exchanged almost a dozen expert reports, and after the deposition of four
experts, three of whom were deposed twice-to permit SC to amend its answers to assert this defense. SC
not possibly justify the delay in seeking to assert this defense, and, in any event, the Plaintiffs would be
severely prejudiced if this defense were allowed at this late stage, since it conducted discovery and
submitted expert reports without this defense being in the case.

Hon. Victor Marrero
November 17, 2014
Page4

B.

The Evidence that SC's Own Due Diligence Chief

Distrusted BLMIS and Thought it Would "Explode"
Dooms SC's Claim that it is Entitled to Summary Judmient.

As set forth in the Plaintiffs' Letter, 6, the trial testimony of Sebastian
Gonzalez, an SC "relationship manager" (client liaison), will alone be a showstopper.
Mr. Gonzalez will testify that, concerned that he might be doing something wrong by
not recommending Fairfield Sentry to his clients, he asked Samuel Perruchoud, who

was in charge of SC's due diligence of Sentry and BLMIS, whether this was okay. In
response, Mr. Perruchoud advised Mr. Gonzalez "not to recommend Fairfield because
there is something wrong with the fund," told him that the "manager," Madoff, "does
not let us see the books," said that he, Mr. Perruchoud, "believe[di it's going to explode
one of these days," and stated that he felt that way because "it is not possible to achieve
such high returns with such low volatility" and "that something was wrong." Plaintiffs'
Letter, 9/12/14, 6.
The statement by Mr. Perruchoud is admissible under Rule 80l(d)(2)(D)
because, as required, it clearly "was made by [SC'sl agent or employee on a matter
within the scope of that relationship and while it existed." SC claims that this evidence
would be inadmissible and should be suppressed on another ground. SC Letter, 24 n.
24. But its argument on admissibility is based on inapposite cases, 4 and its reason for
suppressing the evidence-that Mr. Gonzalez was never disclosed as a witness-is not

4

InLitton Sys., Inc. v. Am. Tel. & Tel. Co., 700 F.2d 785, 816 (2d Cir. 1983), the court upheld the trial court's
refusal to admit notes made by a corporate attorney investigating possible wrongdoing by company
employees. The notes contained multiple hearsay and the proponent made no showing that the
employees' statements recounted in the memorandum were made within the "scope of !their] agency or
employment," as required under Rule 801(d)(2)(D). In Thomas v. Stone Container Corp., 922 F. Supp. 950,
957 (S.D.N.Y. 1996), the trial court excluded the testimony of a temporary employee of a supplier of the
defendant company to the effect that an unidentified employee of the defendant company told the witness
that the company did not have certain required equipment. There was no evidence that the statement
was made by a person authorized to make it or that it concerned a matter within the scope of the that
person's employment.

Hon. Victor Marrero
November 17, 2014
Page 5

borne out by the record. 5 SC does not dispute, however, that this evidence, alone, could
cause a reasonable jury to rule against SC. The jury could reasonably conclude either
that Mr. Perruchoud never told his superiors, in which case he acted in bad faith by
not reporting his concerns to them, or that he did, in which case they acted in bad faith
by continuing to recommend Sentry and not advise those who had invested to pull out.
Either way, SC will have been shown to have acted in bad faith, which would prevent
summary judgment in favor of SC on the Due Diligence Claims.
C.

SC Fails to Show that on the Other Evidence it is Entitled to_
Summarv Judgment on the Due Diligence Claims.

On the basis of the fatal evidence just discussed, the Court need not go further.
Nevertheless, SC has failed to show that is entitled to summary judgment on the
remaining evidence.
1.

SC's Argument Concerning the Nature of the Duties
it Owed to its Clients Misstates Florida Law.

SC argues that the Plaintiffs' "argument is based on a false due diligence duty of
plaintiffs' own creation." It further argues that "[t]here is only one Florida common law
duty to conduct due diligence on an investment before recommending it." SC Letter, 19.
It then cites Anwar [v. Fairfield Greenwich Ltd.], 891 F. Supp. 2d (548,] 557 [(S.D.N.Y. 2012)],
quoting Ward v. Atlantic Sec. Bank,

m

So.2d 1144, 1147 (Fla. Dist. Ct. App. 2001), for the

proposition that "whether couched in terms of fiduciary duty, negligence or gross
negligence claims, that duty is 'to recommend an investment only after studying it
sufficiently to become informed as to its nature, price, and financial prognosis.'" SC

5

See Plaintiff Headway's Supplemental Responses to the Standard Chartered Defendants' First Set of
Interrogatories, served on SC on March 2, 2012, listing Mr. Gonzalez among "the persons with
knowledge of any of the allegations contained in the Headway Complaint." (Fact discovery in the SC
Cases ended May 2, 2012.)

Hon. Victor Marrero
November 17, 2014
Page6
Letter, 22. 6
This argument is wide of the mark on a number of grounds.
First, SC conflates "duty" and "standard of care". "'In negligence law, the
concept of "duty" has two components: (1) the relationship that justifies placing a
requirement of care upon the defendant, and (2) the general standard of care that
defines the risks to be foreseen by the defendant and the level of care to be imposed
upon the defendant.'" Flynn v. Polk Cnty., No. 8:11-CV-2054-T-33AEP, 2013 WL 718747, at
*3 (M.D. Fla. Feb. 27, 2013) (applying Florida law) (quoting Monroe v. Sarasota Cnty. Sch.

Bd., 746 So. 2d 530, 534 n. 6 (Fla. Dist. Ct. App. 1999)). See Prosser and Keeton on Torts,§
53 (5th ed.) ("'(d]uty' is a question of whether the defendant is under any obligation for
the benefit of the particular plaintiff," and "[w]hat the defendant must do, or must not
do, is a question of the standard of conduct required to satisfy the duty."
In negligence cases, the existence of a duty of care is a question of law, while
the exact nature of the duty owed to the plaintiff (or "standard of care") is a jury
question. Selvin v. DMC Regency Residence, Ltd., 807 So. 2d 676, 682 (Fla. Dist. Ct. App.
6

SC also states, without citing any authority, that SC's duty when making recommendations "[was!
breached in the context of fraudulent investments only if plaintiffs can establish the Bank acted in bad
faith or willful ignored obvious 'red flags' of BLMIS's Ponzi scheme." Letter, 22. It cites no authority for
this audacious proposition, which makes no sense in the context of breach of the Due Diligence Claims,
which do not require scienter. SC also resurrects its false argument that "all of plaintiffs' Due Diligence
Claims fail because plaintiffs cannot establish that the Bank conducted no due diligence." Letter, 19
(emphasis added). This is a plain misreading of the complaints and of the Court's decision in Anwar v.
Fairfield Greenwich, Ltd., 745 F.Supp.2d 360, 369 (S.D.N.Y. 2010) ("SC I"), which recognized that the
Plaintiffs' Due Diligence Claims were based on insufficient due diligence, as opposed to no due diligence
at all.
Likewise, SC's asserts, Letter, 23, that Rich v. Wachovia Bank, NA., 9:08-cv-81575-WPD, 2010 U.S. Dist.
LEXIS 59483, at *24 n.5 (S.D. Fla. Apr. 7, 2010) stands for the general proposition that "under Florida
law, banks have no due diligence duty to be "clairvoyant in [their! investment recommendations." This
assertion is simply not borne out. The Rich court found no breach of fiduciary duty when a bank put its
customer in auction rate securities (ARS) when, at the time, no ARS auction had ever failed. The court
concluded that "ltlo hold otherwise, [sicl would impose a fiduciary duty upon Wachovia to be clairvoyant
in its investment recommendations." The facts in these cases are wholly distinguishable from those in
Rich. Tasking a bank to conduct reasonable due diligence and chase down known "red flags" imposes no
duty on it to be "clairvoyant."

Hon. Victor Marrero
November 17, 2014
Page 7

2001) ("How the duty of due care should be met in a given case is for the jury;"
"peculiarly a jury function to determine what precautions are reasonably required in
the exercise of a particular duty of due care .... [w]hat is and what is not reasonable
care under the circumstances is, as a general rule, simply undeterminable as a matter
of law.") (citations omitted).
By contrast, in fiduciary duty cases, "lilt is a question for the jury to determine
whether a fiduciary relationship arose; the nature of that relationship; and whether as a
result of the ... [d)efendants' conduct, there was a breach of the ... [d]efendants' duty
as fiduciaries to [the plaintiffl." Doe v. Evans, 814 So.2d 370, 375 (Fla. 2002).
Second, SC does not discuss how the issues of duty and standard of care should
be treated on a motion for summary judgment. "The specific standard of care owing
under a duty typically involves a factual question which must be submitted to a jury...
[On summary judgment], a trial judge is authorized to determine the standard of care as
a matter of law under undisputed facts in those rare cases in which the movant carries
its heavy burden of proof and convinces the judge that no reasonable jury could decide
in favor of the plaintiff on the disputed standard of care." Dennis v. City of Tampa, 581 So.
2d 1345, 1350 (Fla. Dist. Ct. App. 1991). Accord Flynn v. Polk Cnty., supra, 2013 WL 718747,
at •3 (quoting Dennis). See Hill v. Bache Halsey Stuart Shields Inc., 790 F.2d 817, 824 (10th
Cir. 1986) (applying Colorado law).
It is, of course, undisputed that SC owed the each Plaintiffs a duty of ordinary
care and fiduciary duties. The next question is the precise nature of those duties, i.e.,
the standard of care, or how the duty "should be met in a given case." Selvin, supra, 807
So.2d at 682.7
7

The only question, SC has admitted from the outset, is "ltlhe scope of the fiduciary duties owed to
plaintiffs." SC's memorandum in support of motion to dismiss, DE 385 (Mar. 10, 2010), 43.

Hon. Victor Marrero
November 17, 2014
Page8

SC argues that this Court has already decided the case in three decisions on
motions to dismiss filed against different complaints filed by different Plaintiffs: "SC I",

Anwar v. Fairfield Greenwich Ltd., 826 F. Supp. 2d 578, 590 (S.D.N.Y. 2011), and Anwar v.
Fairfield Greenwich Ltd., 891 F. Supp. 2d 548, 556 (S.D.N.Y. 2012). Not only are decisions
on motions to dismiss fundamentally different from those on summary judgment-the
former are decided on the pleadings, the latter on a fully developed factual record-but
it is apparent that the Court did not prejudge this issue in ruling on SC's motion to
dismiss. In SC I, which the Court followed in its other two decisions, the Court held:
"Plaintiffs sufficiently state causes of action for breach of fiduciary duty. All Plaintiffs
allege that Standard Chartered's recommendation that they invest in the Fairfield
Funds without conducting proper diligence was a breach of fiduciary duty." 745
F.Supp.2d at 376. The Court then stated that "[elven nondiscretionary broker-dealers have a
duty to 'recommend [investments] only after studying [them] sufficiently to become
informed as to [their] nature, price, and financial prognosis'" (citing Ward, 777 So.2d at
1147), Id. (emphasis added). The quotation from Ward shows that the Court intended not
to establish the standard of care for trial but to establish a minimum, or floor, of the
duty owed by SC ("even non-discretionary brokers") on a motion to dismiss. Likewise, in
its 2012 Anwar decision, the Court noted that "Plaintiffs allege that Standard Chartered
was far more than a passive broker who gave advice only on particular occasions," 891
F.Supp., at 557. It is apparent that the Court has not held that Ward establishes the
standard of care SC owed to its clients when it recommended Sentry.

Ward was a bank case but relied on cases involving stockbrokers, Gochnauer v.
A.G. Edwards & Sons, Inc., 810 F.2d 1042, 1049 (11th Cir.1987), and Leib v. Merrill Lynch,

Pierce, Fenner & Smith, 461 F.Supp. 951(E.D.Mich.1978), aff'd, 647 F.2d 165 (6th Cir.

Hon. Victor Marrero
November 17, 2014

Page9
1981). One of the questions before this Court at this stage is whether a reasonable jury
could find that a private bank such as SC has a significantly deeper relationship with
its clients than does a stockbroker with a nondiscretionary client. Brokers are generally
there to take and execute orders and, from time to time, to provide investment advice,
and Leib, the case in which the language preferred by SC was first used, is limited to
just such "one-off' stockbroker-customer relationships. See Leib, 461 F.Supp. at 451-2
("[T)he customer has a non-discretionary account with his broker.... In such cases all

duties to the customer cease when the transaction is closed." (emphasis added).
By contrast, private banks like SC promote themselves as providing a far higher
level of white-glove services to their wealthy clients. "Private banking activities are
generally defined as providing personalized services to higher net worth customers (e.g.,
estate planning, financial advice, lending, investment management, bill paying, mail
forwarding, and maintenance of a residence)." Federal Financial Institutions
Examination Council, Bank Secrecy Act Anti-Money Laundering Examination Manual, available

at https://www.ffiec.gov/bsa_aml_-infobase/pages_manual/OLM_081.htm. The record in
this case is replete with evidence that SC's posture with its clients was of such a nature.
SC had procedures, on paper at least, that, as an acknowledged fiduciary, it was to
follow in approving and monitoring financial "products" for recommendation to its
clients, and by "evaluating, on an initial and ongoing basis, certain investment products
offered to private banking customers at, among other affiliated banks, AEBI and
SCBI." SC's responses to Plaintiffs' First Set of Interrogatories, March 28, 2011, at 1516 (emphasis added).
After a bench trial, a New Jersey court held that the scope of fiduciary duty set
forth in Leib was inapplicable. "Brokers are engaged to execute stock transactions and

Hon. Victor Marrero
November 17, 2014
Page 10

are paid sales commissions. Investment advisers are engaged to give advice and are paid
based on the value of the portfolio." Erlich v. First Nat. Bank of Princeton, 505 A.2d 220, 235
n.5 (N.J. Ch. Div. 1984) ("Case law, including Leib, ... analyzing the relationship
between brokers and their customers is distinguishable from the case at bar. Brokers
are engaged to execute stock transactions and are paid sales commissions. Investment
advisers are engaged to give advice and are paid based on the value of the portfolio.").
Instead, a "higher standard, "the obligation of the investment manager to give prudent
advice[,) is the standard of care to be applied in this case." Id. at 35. See Ryan K
Bakhtiari et. al., The Time for A Uniform Fiduciary Duty Is Now, 87 St. John's L. Rev. 313,
319 (2013) (Congress has recognized that investment advisers are held to a higher
standard than stockbrokers when making investment recommendations).
Nevertheless, even if the duty as described in Ward and Leib were applicable to a
private bank with ongoing responsibilities, neither case establishes the standard of care,
which, under Florida law, is a fact question.8 Moreover, under Florida law, a jury has
assistance in the form of either fact or expert evidence to determine both the standard
of care and whether the defendant had met it. Ins. Co. of the W. v. Island Dream Homes, Inc.,
679 F.3d 1295, 1298 (11th Cir. 2012) (applying Florida law, holding that plaintiff "was
required to present evidence on the standard of care in the roofing industry-either by
expert testimony or by presenting testimony of roofing custom"). 9 In fact, contrary to

8

1t is plain, in any event, that the exact wording in Leib was only a shorthand summary of the well
established standard governing brokers making recommendations. Leib, 461 F.Supp. at 953, relies
onHanly v. Sec. & Exch. Comm'n, 415 F.2d 589, 597 (2d Cir. 1969) (stockbroker "cannot recommend a
security unless there is an adequate and reasonable basis for such recommendation. He must disclose
facts which he knows and those which are reasonably ascertainable. By his recommendation he implies
that a reasonable investigation has been made and that his recommendation rests on the conclusions
based on such investigation"), and Hanly itself cites a 1962 SEC release, 34-6721 (Feb. 2, 1962), available at
1962 WL 69442.
9

In this respect, it is noteworthy that the Leib Court cautioned that "the precise manner in which a
broker performs these duties will depend to some degree upon the intelligence and personality of his

Hon. Victor Marrero
November 17, 2014
Page 11

the entire thrust of SC's argument, Florida law not only permits, but actually requires,
expert testimony to help the jury understand the duties of persons in a profession or
industry where practices and standards are beyond the ken of an average lay person. Id.
(applying Florida law, holding that plaintiff "was required to present evidence on the
standard of care in the roofing industry-either by expert testimony or by presenting
testimony of roofing custom") (quoting AMH Appraisal Consultants, Inc. v. Argov Gavish'ship,
919 So.2d 580, 581-82 (Fla. 4th Dist.Ct.App.2006) (holding that the standard of care for
a property appraiser was "too esoteric to be understood by the average layperson")).
Plainly, a jury, unaided by expert and fact testimony, cannot be expected to answer the
relevant questions in these cases. Accordingly, SC's complaint that the Plaintiffs rely on
their experts (as well as SC's own documents and the testimony of its former key
officer) to define the applicable standard of care is to no avail because it is contrary to
Florida law .10

2.

There is Ample Evidence to Support
the Plaintiffs' Theorv of the Case.

The only avenue open to SC, therefore, is to show that no reasonable jury could
decide the Fiduciary Duty Claims in the Plaintiffs' favor on the basis of the standard of
care outlined in the complaints and in the evidence on which they rely. SC has not
made that showing.
SC tries to meet this challenge by mischaracterizing the nature of the Plaintiffs'
customer." 461 F.Supp. at 953. It follows that other factors will also affect "the precise manner in which
a broker performs these duties." This is a further indication that expert and fact testimony would be
needed to flush out the nature of the duties owed by SC to its clients.
10

In re Old Naples Sec, Inc., 343 B.R. 310, 323-24 (M.D. Fla. Bankr. 2006), cited in the SC Letter, 22 "(citing
evidence, not expert opinions, establishing that certain red flags were obvious signs of fraud)," is not to
the contrary. SC Letter, 22. Old Naples found that a stockbroker breached fiduciary duties and was
negligent in failing to investigate "red flags" that should have indicated "something was wrong" in an
investment that turned out to be a Ponzi scheme. Despite SC's parenthetical notation to the citation,
however, Old Naples does not indicate one way or the other whether the court, at trial, heard expert
testimony.

Hon. Victor Marrero
November 17, 2014
Page 12
claims as being based on a duty to have concluded that BLMIS was engaged in a Ponzi
scheme. SC Letter, 22, 24 & n. 24. This is not the first time the Plaintiffs have had to
correct this characterization of these claims. See response to motion to dismiss, May 3,
2010, DE 445, 32-33 ("the Plaintiffs have not alleged that Standard Chartered was at
fault for not discovering that Madoff was conducting a Ponzi Scheme: the allegations
are that the bank was at fault for not recognizing from the numerous red flags that flew
all around Madoff that an investment with Madoff was overly risky.").11
On summary judgment, the question is whether any evidence exists on which a
reasonable jury could find that SC failed to fulfill its duties insofar as its due diligence
of Sentry and BLMIS was concerned, and that its actions and omissions caused the
Plantiffs' losses. There is a mountain of evidence supporting such a finding,
summarized in the Plaintiffs' Letter-undisputed fact evidence and admissible12 sworn

1

1To try to buttress the point, SC cites to 10 cases that it says have held "that the supposed 'red flags'
surrounding BLMIS and the SSC strategy were not obvious indicia that BLMIS was operating a Ponzi
scheme," and claims that "plaintiffs' experts did not dispute" this assertion. SC Letter, 23 n. 24. The cases
cited are inapposite. First, as noted, the Plaintiffs have not alleged that SC had an absolute duty to
discover that BLMIS was running a Ponzi scheme. Second, the plaintiffs did nothing more than allege
that the defendant could have or should have seen the red flags, but that they failed to do so. Here, in
contrast, there is evidence that SC had actual knowledge of red flags and should have caused it to walk
away or conduct further investigation, and having not satisfactorily resolved those issues, should not
placed its clients in Sentry. Finally, SC points to no testimony or report that indicates or implies the
supposed agreement of the Plaintiffs' experts with this position.
1
2The only weak parry offered by SC at the Plaintiffs' expert witnesses is that they did not review BLMIS'
(phony) trading records. SC Letter, 22 & n. 21. For the dual propositions that this disqualifies them as
experts and results in there being "no admissible evidence that the trading reported by BLMIS was
implausible," SC cites no legal authority, nor could it. An expert may base an opinion on even inadmissible
facts or data "of a type reasonably relied upon by experts in the particular field in forming opinions or
inferences upon the subject." Fed.R.Evid. 703. The Plaintiffs' experts relied on records ("tear sheets")
supplied by FGG to SC summarizing and analyzing Sentry's monthly trading results from 1990 on to,
eventually, the fall of2008, and so did all three ofSC's purported experts, including the one SC dropped
after his criminal conviction; they looked at only a very small number of trade tickets. Porten Report,
12/2/12, 17, 44; Zask Report, 12/1/12, 40; Ziff Report, 3/3/14, App. B, 16. What is more, in 2003, SC itself
relied on the same tear sheets in deciding whether to approve Sentry for recommendation to its clients.
Plts.Dep.Ex. 10. Thus, there is no question this is the very kind of evidence on which experts of this type
rely, and, assuming they are deemed qualified to offer expert testimony, the Plaintiffs' experts' testimony
will be able to opine on whether BLMIS's trading results were implausible even ifthat testimony is based
on the tear sheets and not individual trading tickets. See Garnac Grain Co. v. Blackley, 932 F.2d 1563,

Hon. Victor Marrero
November 17, 2014
Page 13

testimony of the Plaintiffs' two expert witnesses-and by the Plaintiffs' undersigned
Liaison Counsel at the September 29, 2014 hearing. Transc., 9/29/14, 38-42.
SC has no effective response, but as a final salvo, claims that "[tlhat duty [stated
in Leibl is breached in the context of fraudulent investments only if plaintiffs can
establish the Bank acted in bad faith or willful ignored obvious 'red flags' of BLMIS's
Ponzi scheme." SC Letter, 22. SC follows that statement with nothing more than the
citation to In re Old Naples Sec, Inc., 343 B.R. 310 (M.D. Fla. Bankr. 2006) discussed inn.
11, supra. Old Naples says nothing of the sort, and SC offers no other authority.
On the other hand, Old Naples, which involved a broker-dealer's
recommendations that its clients invest in what turned out to be a Ponzi scheme, serves
as a primer for why SC is not entitled to summary judgment on the Due Diligence
Claims. The Trustee of the firm sued the President and President and CEO of the firm
for negligence and breach of fiduciary duty. The claim that was certain "red flags ...
put[ I [the defendant) on notice of the questionable nature of the [fraudulent)
Transactions." The evidence at the bench trial showed that normal clearing procedures
were not followed, customary transaction documentation was not available, the claimed
rate of return was very high, client funds went to the wrong entity, etc. 343 B.R. at 322.
The Court concluded: "Given these 'red flags,' and confronted with these issues, [the
President and CEO) should have investigated the Transactions and taken steps to
ensure that the investments he was recommending to his clients were proper... before
recommending the investment to his clients. Failing to do this, !he) breached his
fiduciary duty to his clients." Id., at 323, 324.

1567 (8th Cir. 1991 ), opinion modified on denial of reh 'g_(Ju1y 30, 1991) (holding admissible expert
testimony attacking defendant accounting firm's audit although expert reviewed only another CPA's report
on defendant's audit and only later reviewed).

Hon. Victor Marrero
November 17, 2014
Page 14

The details of the specific "red flags" aside, this is a perfect description of the
Due Diligence Claims the Plaintiffs have asserted against SC, and mandate the Court's
finding that a reasonable jury could find that SC liable, as described in the Plaintiffs'
Letter. 13

III.
SLUSA DOES NOT BAR THE PLAINTIFFS' CLAIMS
SC is not entitled to judgment under SLUSA for three separate reasons: (i) the
Complaints are not a "covered class action;" (ii) the nub of the breach of fiduciary duty
and negligence claims is not that SC, or anyone, made material misrepresentations or
omissions; and (iii) any alleged misrepresentations and omissions were not made "in
14

connection with the purchase or sale of covered securities." We deal with these issues
in tum.
A.

The SC Cases Are Not a Covered Class Action

1.

Introduction

To be covered by SLUSA, the cases must be a "covered class action." This term
covers three kinds of suits. The first two are a single lawsuit in which damages are
sought on behalf of more than 50 persons or class representatives, and a single lawsuit
13

SC also claims that, if given a chance, it can show that those Plaintiffs who have sued SC for fraud or
negligent misrepresentation cannot defeat summary judgment on those claims. SC Letter, 24-5. SC makes
no reference to any of the Plaintiffs who have brought these claims other than Plaintiff Joquina Teresa
Barbachano and does not cite to any evidence that it could muster. This is an insufficient showing to
enable the Plaintiffs to respond to this claim. Further, the statement, id., 25 n. 26, that "only one
plaintiff ever pled a fraud or negligent misrepresentation claim based on the nondisclosure of [trailer!
fees" ignores the fact that the Court denied motions to amend at least one complaint so to allege. Anwar v.
Fairfield Greenwich Ltd., No. 09-cv-CIV-118, 2012 WL 1415621 (S.D.N.Y. Apr. 13, 2012), reconsideration denied.
283 F.RD. 193 (S.D.N.Y. 2012).
14

SLUSA is decided on a claim-by-claim basis, so claims not barred by SLUSA are not precluded. Dabit v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 395 F.3d 25, 47 (2d Cir. 2005) (holding that claims not triggering
preemption under SL USA are not precluded), vacated on other grounds sub nom. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 547 U.S. 71 (2006). Accord, In re Lord Abbett Mut. Funds Fee Litig., 553 F.3d 248, 253 (3d Cir.
2009). As a result, even if the Court deems some of the Plaintiffs' claims precluded, it may not, under
Dabit, dismiss the remaining claims under SLUSA.

Hon. Victor Marrero
November 17, 2014
Page 15

in which one or more named parties seek damages in a representative capacity on
behalf of unnamed persons. 15 U.S.C. § 78bb(f)(5)(B)(i). The third, which SC argues is
applicable, is "any group of lawsuits filed in or pending in the same court and
involving common questions of law or fact, in which-(!) damages are sought on behalf
of more than 50 persons; and (II) the lawsuits are joined, consolidated, or otherwise
proceed as a single action for any purpose." 15 U.S.C.

§

78bb(t)(5)(B)(ii).

Citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71, 86 (2006),
which broadly construed SLUSA's "in connection with" provision, SC argues that
SLUSA's "covered class action" provision should be read broadly, too. SC Letter, 7. As
this Court recognized in Anwar v. Fairfield Greenwich Ltd., 728 F.Supp.2d 372, 387
(S.D.N.Y. 2010) ("Anwar II"), however, Dabit said that SLUSA's "in connection with"
must be read broadly, as had always been the case with the identical language in
section lO(b) of the Securities Exchange Act, 15 U.S.C.

§

78j(b) and rule lOb-5

thereunder, 17 C.F.R. § 240.lOb-5. The "covered class action" provision in question,
however, has no counterpart elsewhere in the securities laws. And because that
provision could interfere with "individual lawsuits"-which, as we show below,
Congress expressly stated it did not intend to preclude-it demands a strict or narrow
reading. See, Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (recognizing presumption

.
.
agamst congress1onal'mtent to preempt state 1aw cl' ).15
rums
15

In Dabit, the Supreme Court acknowledges the established presumption that Congress intended to
preempt state-law causes of action, citing Medtronic v. Lohr, supra, but then adds: "But that presumption
carries less force here than in other contexts because SLUSA does not actually pre-empt any state cause
of action. It simply denies plaintiffs the right to use the class-action device to vindicate certain claims. The
Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to
enforce any state-law cause of action that may exist." 547 U.S. at 87. The Court was not addressing,
however, the kind of "covered class action" that SC claims is involved here, where a broad reading of the
statute necessary to rope in these cases would conflict with the presumption acknowledged in Dabit
against preempting state law claims and the stated Congressional intent in SLUSA not to interfere with
individual lawsuits. This reinforces the need for a narrow reading of 15 U.S.C. § 78bb(f)(5)(B)(ii).

Hon. Victor Marrero
November 17, 2014
Page 16

2.

"Grouo of Lawsuits" Does Not Encompass These Cases

The first issue, of course, is the meaning of the provision in question, and, in
particular, of the phrase "group of lawsuits."16 The Court should look not only to the
words by themselves but also to the context in which they appear. McNeill v. United States,
131 S. Ct. 2218, 2221 (2011); Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997). 17
The Court should start with the findings contained in section 2 of SLUSA, an
integral part of the statute. 18 Subsections 2(2) and (3) of SLUSA state that, since the
passage of the PSLRA, "a number of securities class action lawsuits have shifted from
Federal to State courts," which "has prevented that Act from fully achieving its
objectives." (This speaks to a determined, coordinated attempt in class actions filed as such
to evade the effects of the PSLRA.) In Subsection 2(5), Congress determined the need
to "enact national standards for securities class action lawsuits involving nationally

traded securities, while preserving the appropriate enforcement powers of State
securities regulators and not changing the current treatment of individual lawsuits." (emphasis

1

6I'he Court should not be influenced in interpreting this provision by SC's speculative and inaccurate
assertions concerning the circumstances surrounding the filing of the various SC Cases and the
motivations of the Plaintiffs and their counsel. Thus, SC asserts that the Plaintiffs and their lawyers
collectively schemed to evade the strictures of the Private Securities Litigation Reform Act by purposely
filing only state law claims. SC adds that the Plaintiffs' "claims here are based on alleged wrongdoing
originally pled as federal securities fraud claims," and that "knowing" that they could not sue under
section lO(b) and Rule lOb-5, "evaded the dictates of the PSLRA" by bringing only state law claims.
Finally, SC states that "SLUSA's remedial purpose would be undermined completely if plaintiffs could
evade it simply by engaging separate counsel and claiming lack of intent to 'join.'" SC Letter, 8-9, 11-12.
There is no evidence to support these assertions, and, as set forth infra, 19-21, and in Ex. 1 hereto, the
facts are totally to the contrary.
If the Court needs confirmation, enclosed as Ex. 2 are letters to the Court from each of the Plaintiffs'
attorneys (other than the undersigned) attesting to the fact that there was no concerted action among the
various Plaintiffs' counsel in filing the complaints that were filed. The undersigned attorney so
represents in this letter.
18

Even in the case of an unambiguous statute, courts review legislative findings to divine legislative
intent. Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 589-90 (2004); Sutton v. United Air Lines, Inc., 527
U.S. 471, 484 (1999). See McCreary Cnty., Ky. v. Am. Civil Liberties Union of Ky., 545 U.S. 844, 861 (2005)
("Examination of purpose is a staple of statutory interpretation that makes up the daily fare of every
appellate court in the country.").

Hon. Victor Marrero
November 17, 2014
Page 17
added). This means that a court should be careful not to encompass individual lawsuits
within SLUSA's reach, i.e., construe this provision narrowly.
The word "group" is not defined in the statute, thus ordinarily requiring it to be
given its ordinary meaning. Sebelius v. Cloer, 133 S. Ct. 1886, 1893 (2013). Resort to a
dictionary is, of course, an accepted method of determining ordinary meaning.
Pertinent definitions19 strongly point to a purposeful gathering together. The issue is not,
as SC suggests, SC Letter, 10, simply whether the Plaintiffs were involuntarily thrown
together, at SC's insistence, after they were filed, but rather whether the filing of the
different lawsuits was part of a joint purposeful plan. Otherwise, each separate plaintiff
(or those combining in one lawsuit) will be penalized just because, as it turned out, SC
injured so many of its clients by recommending they invest in Sentry, some of whom
were willing to sue to vindicate their rights. That, indeed, would be "a result
demonstrably at odds with the intentions of its drafters." United States v. Ron Pair Enter.,

Inc., 489 U.S. 235, 242 (1989).
Finally, to the extent that the statutory language is ambiguous-"capable of
being understood in two or more possible senses or ways," Chickasaw Nation v. United
1

9The pertinent definitions of "group" in the online edition of the authoritative Webster's Third New
International Dictionary, http://unabridged.merriam-webster.com, are as follows:
2.b: an assemblage of objects regarded as a unit because of their comparative
segregation from others
3: a number of individuals bound together by a community of interest, purpose, or
function: such as
a(l): a social unit comprising individuals in continuous contact through
intercommunication and shared participation in activities toward some commonly
accepted end
(2): class
(3): a relatively small number of persons associated formally or informally for a
common end or drawn together through an affinity of views or interests.

See also The New International Webster's Comprehensive Dictionary of the English Language (1996), at 559, defining
"group" to mean "a number of persons ... existing or brought together; an assemblage; cluster"; defining
"assemblage" to mean "an assembling," id., at 87; and defining "assemble" to mean "to collect or convene;
come together; congregate, as a group or meeting." Id.

Hon. Victor Marrero
November 17, 2014
Page 18

States, 534 U.S. 84, 90 (2001)-resort to legislative history is appropriate. The phrase
"group of lawsuits," as used here, is, at worst, ambiguous. Therefore, this Court can and
should look to SLUSA's legislative history to interpret the phrase. That history
reinforces the interpretation arising from examining the words in context.
The Conference Report on SLUSA, contained in H.R Conf. Rep. No. 803,
105th Cong., 2d Sess. 1998, makes the legislative intent behind SLUSA's passage clear:
"The purpose of this title is to prevent plaintiffs from seeking to evade the protections that Federal

law provides against abusive litigation by filing suit in State, rather than in Federal, court. The
legislation is designed to protect the interests of shareholders and employees of public
companies that are the target of meritless 'strike' suits." Id. at 13 (emphasis added).
There is, of course, no evidence of any such purpose or scheme here.
The Report's discussion of "covered class action" further supports the conclusion
that, in expanding the definition of class action beyond those labeled or otherwise
pleaded as such, Congress did not intend to cover the SC cases:
'Class actions' that the legislation bars from State court include actions
brought on behalf of more than 50 persons, actions brought on behalf of
one or more unnamed parties, and so-called 'mass actions,' in which a
group of lawsuits filed in the same court are joined or otherwise proceed as a
single action. (emphasis added) Id.
While the actual language of SLUSA is "filed in or pending in the same court," the
wording in the Conference Report is additional evidence of Congress's true intent,
which is inhibiting plaintiffs' class action lawyers' ability to scheme to "beat" the
PSLRA. 20
The Conference Report then specifically zeros in on "plaintiffs' lawyers [who)
have sought to circumvent the Act's provisions by exploiting differences between
~he "mass action" reference is to "mass actions and all other procedural devices that might be used to
circumvent the class action definition." S. REP. 105-182, S. Rep. No. 182, lOSTH Cong., 2d Sess. 1998,
1998 WL 226714 (Leg.Hist.), 8 (emphasis added).

Hon. Victor Marrero
November 17, 2014
Page 19
Federal and State laws by filing frivolous and speculative lawsuits in State court, where
essentially none of the Reform Act's procedural or substantive protections against
abusive suits are available." Id. at 15. This is further evidence that Congress intended to
cover evasive collusive or collective action, not a situation like this, where, as is set forth
next, unrelated, different parties represented by different lawyers filed separate actions
against SC at different times and got involuntarily thrown into a foreign court of the
defendant's choosing. SC's attempt to manufacture such evasive collusive or collection
action out of whole cloth does not make it so.
3.

The SC Cases are Separate Actions Wholly Independent
of One Another and Not the Product of Collusion
or even Cooperation among the Plaintiffs or their Counsel.

Ex. 1 hereto lists, chronologically, all of the pending SC Cases (and those cases
in which SC was sued over Sentry and that were dismissed or stayed pending
arbitration.) The original four cases were brought by four different lawyers in two
different jurisdictions on behalf of different clients at different times in three different
jurisdictions: state courts in Florida and California (removed by SC to federal courts),
and federal courts in Florida, California and New York. Later, numerous other cases
were filed at various times against Standard Chartered, either directly in this Court or
in the Southern District of Florida, and the Florida cases were transferred to this
Court. 41 such cases, involving 54 named Plaintiffs, were filed by one lawyer, Laurence
E. Curran II, who had filed one of the four original cases (Lopez). 21 6 cases were filed
by a second lawyer, 1 by a third lawyer, 1 by a fourth lawyer, 2 by a fifth lawyer, and 1
21

The SC Plaintiffs, other than those Plaintiffs represented by Mr. Curran, are constrained to point out
that the actions brought by Mr. Curran, which exceed 50 plaintiffs, are far closer to being "covered class
action" than the remaining SC Cases. None of the other counsel had anything to do with the bringing of
those actions. Mr. Curran is separately addressing whether his clients' actions should be aggregated in
this manner. Of course, even if they were, they still would not be barred by SLUSA because their claims,
like those in the remaining SC Cases, do not satisfy the "in connection with" test.

Hon. Victor Marrero
November 17, 2014
Page 20
by a sixth lawyer. The 56 pending cases22 were thus filed by 9 different lawyers from
April 2009 (Headway) to December 2012 (Optic Blue). And, contrary to SC's statement
that the Plaintiffs' cases "are based on alleged wrongdoing originally pled as federal
securities fraud claims," SC Letter, 8, only one, Lopez, ever involved a federal securities
law claim, which was dismissed long before discovery began.
One additional fact is highly significant. 39 lawsuits were filed before the
number of individual Plaintiffs exceeded 50 in number-the 39th being filed on July 12,
2011, about 27 months after the first SC lawsuit was filed. This alone dispels the notion
that these cases were brought with a common intention of avoiding the PSLRA.
At SC Letter, 9, SC cites cases holding that some individuals' lawsuits were part
of a group of more than 50 lawsuits and thus were a "covered class action." Each case is
inapposite. They were either joined with actual class actions making identical
accusations (not the case here, since Anwar and the SC Cases are fundamentally
different, with non-overlapping sets of defendants and claims), or involved multiple
lawsuits making identical accusations, all brought by the same lawyers. 23 Thus, they are
all factually distinguishable from these cases.

22

5 other cases, brought by 4 different lawyers, have been dismissed or stayed pending arbitration and
thus are no longer "SC Cases." See Ex. 1.
23
Markey v. Citigroup, Inc., No. 09 MD 2070 (SHS), 2013 WL 6728102, at •5 (S.D.N.Y. Dec. 20, 2013),
involved a state law claim by two employees of a corporation alleging misrepresentations and omissions
by the corporation in touting the stock to its employees. Without the plaintiffs' objection, the action was
consolidated with pending class actions with similar allegations. Here, the SC Plaintiffs objected to
transfer and consolidation and, while consolidated for pretrial purposes with Anwar, proceed on
fundamentally different theories against different defendants than those sued in Anwar, in recognition of
which they are proceeding on a different procedural track from Anwar, with separate discovery scheduling
orders, confidentiality orders, etc. In Amorosa v. Ernst & Ernst LLP, 682 F.Supp. 2d 351 (S.D.N.Y. 2010), a
state law claim was filed by a single plaintiff alleging misrepresentations and omissions. When the action
was filed, the Plaintiff noted a pending class action making the same allegations as a "related action."
His second amended complaint "incorporated by reference" 650 paragraphs from a pending class action
and his lawyer stealthily coordinated his case with similar actions brought one law firm on behalf of over
50 people. In re WorldCom, Inc. Sec. Litig., 308 F.Supp.2d 236 (S.D.N.Y. 2004) involved 10 actions alleging
misrepresentations and omissions by a company. All 10 actions were filed by the same attorneys in
Mississippi state courts and involved 293 plaintiffs, each complaint a verbatim copy of the others, and
consolidated, without the plaintiffs' objection, with class actions.

Hon. Victor Marrero
November 17, 2014
Page 21
B.

The "In Connection with" Test is not Satisfied

Even if the SC Cases are a "covered class action," they do not satisfy the "in
connection with" test. That test consists of two parts: first, misrepresentations or
omissions of material fact (or a manipulative and deceptive device), and second, "in
connection with the purchase or sale of a security."
To try to satisfy the first leg of the test, SC contends that the "fundamental
allegation" or "gravamen" of the SC Cases is "omissions and representations about the
Fairfield Funds and BLMIS." SC Letter, 2, 11. It is obvious, however, that the nub of
the various breach of fiduciary duty and negligence claims is that SC breached its duty
to conduct proper inquiry into Sentry and BLMIS before it recommended that its
clients invest in Sentry, and failed thereafter to monitor these investments. "Breach of
fiduciary duty and fraud are different claims.... [B]reach of fiduciary duty claims need
not be based on an actionable misstatement or omission, but may rest on a charge that
the fiduciary has failed to fulfill its duty." Xpedior Creditor Trust v. Credit Suisse First Boston
(USA) Inc., 399 F. Supp. 2d 375, 383 (S.D.N.Y. 2005). To determine whether a claim is
eligible to be dismissed under SLUSA,
a court must determine whether the state law claim relies on
misstatements or omissions as a 'necessary component' of the claim. In
this context, 'necessary component' encompasses both technical elements
of a claim as well as factual allegations intrinsic to the claim as alleged.
Thus, under the necessary component test, a complaint is preempted
under SLUSA only when it asserts (1) an explicit claim of fraud (e.g.,
common law fraud or fraudulent inducement), or (2) other gardenvariety state law claims that 'sound in fraud.' But SLUSA does not
preempt claims 'which do not have as a necessary component
misrepresentation[s], untrue statements, or omissions of material facts'
made in connection with the purchase or sale of a security.
Xpedior Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F. Supp. 2d 258, 266
(S.D.N.Y. 2004) (holding claims not barred by SLUSA because fraud not "necessary

Hon. Victor Marrero
November 17, 2014
Page 22

component" of breach of fiduciary claims). Accord LaSala v. Lloyds TSB Bank, PLC,
514 F. Supp. 2d 447, 473 (S.D.N.Y. 2007) (citing Xperdior and holding breach of contract
claims not involving fraud not precluded); Paru v. Mut. of Am. Life Ins. Co., No. 04-cv-6907,
2006 WL 129828, at* (S.D.N.Y. May 11, 2006) (citing Expedior; breach of fiduciary
claim not founded in fraud). See also Santa Fe Indus., Inc. v. Green, 430 U.S. 462, 472 (1997)
(absent manipulation or deception, breaches of fiduciary duty not within ambit of
securities laws).
Fraud is not a "necessary component" of the Due Diligence Claims. They are
based on SC's failure to adhere to industry standards concerning pre-recommendation
and ongoing due diligence. And SC cannot show that the misrepresentation and
omissions claims that are pending-not all Plaintiffs have brought such claims; see Ex.
1-are founded on misrepresentations and omissions of material fact that "relate to the
nature of the securities, the risks associated with their purchase or sale, or some other
factor with similar connection to the securities themselves," and therefore come within
the reach of the "in connection with" language. Grund v. Delaware Charter Guarantee &

Trust Co., 788 F. Supp. 2d 226, 241 (S.D.N.Y. 2011) on reconsideration, No. 09 CIV. 8025,
2011 WL 3837146 (S.D.N.Y. Aug. 30, 2011) (omitting citations) (citing Xpedior). The
fraud or negligent misrepresentation claims that SC failed to disclose that BLMIS, not
Sentry/FGG, made all the investment decisions were about operational risks faced by
Sentry, not about the nature or risk of investing in "covered securities" per se. And the
fraud or negligent misrepresentation claims that SC failed to disclose kickbacks from
FGG are about the relationship between SC and FGG and SC's self-interest in
recommending Sentry.

Hon. Victor Marrero
November 17, 2014
Page 23

With respect to the second ("connectivity") leg of the test, SC's argument is
based on the two Herald cases, In re Herald, 730 F.3d 112 (2d Cir. 2013) ("Herald I")
(dismissing state law claims against BLMIS's banks under SLUSA), and In re Herald,
753 F.3d 110 (2d Cir. 2014) ("Herald II") (denying the request for rehearing and
rehearing en bane of Herald I). According to SC, the Second Circuit "held that
investments in feeder funds to BLMIS's SSC strategy are sufficient to satisfy SLUSA's
'covered securities' element." SC Letter, 11-12. 24
Manifestly, however, SC misapprehends the holdings in the two Herald
decisions. Herald I held that the allegations "that JPMorgan and BNY knew of the
fraud, failed to disclose the fraud, and helped the fraud succeed-in essence, that
JPMorgan and BNY were complicity [sic] in Madoffs fraud"-satisfied the "in
connection with" test. 730 F.3d at 119. As the court further explained, "on the very face
of plaintiffs' complaints, the liability of JPMorgan and BNY is predicated not on these
banks' relationship with plaintiffs or their investments in the feeder funds but on the banks'
relationship with, and alleged assistance to, Madoff Securities' Ponzi scheme." 730 F.3d
at 117-18 (emphasis added).

Herald II focused on whether a different result was required after Chadbourne &
Parke LLP v. Troice, _U.S._, 134 S.Ct. 1058 (2014), in which the Supreme Court
held that "[a] fraudulent misrepresentation or omission is not made 'in connection with'
... a 'purchase or sale of a covered security' unless it is material to a decision by one or
more individuals (other than the fraudster) to buy or to sell a 'covered security.'" Id.,
134 S.Ct. at 1066. The Herald II court concluded that Herald I survived Troice: "Madoff
24

SC's reliance on a pre-Troice case, Romano v. Kazacos, 609 F.3d 512 (2d Cir. 2010), is to no avail. Romano
applies the rule lOb-5 "coincide" test of connectivity set forth in two pre-Troice Supreme Court decisions,
SEC v. Zandford, 535 U.S. 813 (2002), and United States v. O'Hagan, 521 U.S. 642 (1997), and, of course,
precedes Troice. Romano is also distinguishable because the misrepresentations and omissions about the
purchase and sale of covered securities were made by the fraudsters directly to the plaintiffs.

Hon. Victor Marrero
November 17, 2014
Page 24
Securities, by contrast [with the bank in Troice), fraudulently induced attempted
investments in covered securities, albeit through feeder funds (not alleged in the instant
complaints as anything other than intermediaries) and the defendant banks are alleged to have

furthered that scheme." 753 F.3d, at 113 (emphasis added).
Herald I and Herald II are thus inapposite. First, Herald turned on the defendant
banks' complicity with BLMIS, but in the SC Cases, no such relationship or complicity is
alleged. Curiously, SC studiously ignores the fact that both Herald decisions were
grounded on the alleged complicity of the Banks with BLMIS. Second, the Herald II
court referred to the feeder funds through which the plaintiffs invested as "not alleged
in the instant complaints as anything other than intermediaries." 753 F.3d at 113. This
Court has already found that the Sentry funds cannot be so characterized. In its August
28, 2010 decision in Anwar II, supra, 728 F.Supp.2d at 398, this Court found that "the
[Sentry] Funds were not a cursory, pass-through entity. The Funds also placed up to 5
percent of their assets in non-Madoff investments, a relatively small portion overall but
representing many millions of dollars." 25 By contrast, the two complaints involved in
the appeal in Herald both alleged that all of the feeder funds in those cases were 100%
invested in BLMIS. 1:09-cv-00289-RMB-HBP Document 193-7 (Davis); Case 1:09-cv00289-RMB-HBP Document 193-1 (Repex/Trezziova). What is more, one of SC's own
purported expert itself asserts that FGG provided substantive protection to investors. 26
Thus, this Court, in Anwar II, after noting that the Funds were not mere pass
25

Documents produced by SC in discovery show that the Court was absolutely correct in concluding that
Sentry was not a "cursory, pass-through entity." Each year's Sentry financial statements showed between
$66 million and $219 million invested in non-BLMIS-related investments.
76

According to the Rule 26 report of Bradley Ziff, one of SC's purported expert witnesses, Sentry and its
sponsor, Fairfield Greenwich, had substance. Thus, Mr. Ziff stated that FGG "overs[awl operations, assets
and trading activities at BLMIS, including having 'full transparency on a daily basis to the holdings level
data in the portfolio,'" and "FGG added [value[ for investors in its funds" by supposed extensive due
diligence on its managers).

Hon. Victor Marrero
November 17, 2014

Page 25
through entities, held that the "in connection with" test was not met because
"stretching SLUSA to cover this chain of investment-from Plaintiffs' initial
investment in the Funds, the Funds' reinvestment with Madoff, Madoffs supposed
purchases of covered securities, to Madoffs sale of those securities and purchases of
Treasury bills-snaps even the most flexible rubber band." Given that the Plaintiffs are
one step further removed from BLMIS than the plaintiffs in Anwar SLUSA, if applying
SLUSA to that case would have snapped the SLUSA "rubber band," applying SLUSA
here would positively shred it. 'l:l
SLUSA, therefore, does not preclude any of the Plaintiffs' claims.
CONCLUSION
For the reasons stated, SC is not entitled to summary judgment, and the Court
should not exalt form over substance by permitting SC to file a futile motion.
Sincerely yours,

Attachments as noted

The Clerk of Court is directed to enter into the p blic record
of this action the letter above submitted to the Court by

~4rt'&if~//~~~
SO ORDERED.

cc:

Counsel of record in SC Cases

1-/~/!P
DATE

ZITo try to distinguish Anwar from this case, SC argues that "lulnlike the allegedly misleading investment
advice in SCB Cases the Anwar Class Action focused on allegations that FGG, PwC and Citco ignored
obvious 'red flags' or' BLMIS's fraud in their roles as the Fairfield Funds' creator, manager and service
.
providers. Id. at 389. But this argument falls fl,at because, desp~te the dogged effo~ by SC 1?
mischaracterize the gravamen of the Plaintiffs breach of fiduciary duty and negligence chums, such 1s
the very essence of these claims.

EXHIBIT 1 TO LETTER TO
HONORABLE VICTOR MARRERO
FROM STANDARD CHARTERED PLAINTIFFS
09-cv-118

Noveinber17,2014

PENDING STANDARD CHARTERED CASES

Plaintiffs

unningTota
Of Plaintiffs
In All Cases
• Breach o fiduciary
duty
• Negligence
• Uniwt Enrichment
• Sedion 10(b) of the

(amended)

8/1912009
(original)

•

•
•
•
•

•

Exchange Act15 U.S.C. §
78Xb! and Rule lOb-5
promulgated thereunder
Section 20(a) of the
Exchange Act, 15 U.S.C. §
78t(a)
Rescission under the
Investment Adviso" Act,
15 U.S.C. § BOb-1 et seq.
Breach of Fiduciary
Duty
Gross Negligence
Uniwt Enrichment and
Constructive Trust
Fraud

• Breach of fiduciary
duty
• Negligence
• Unjust Enrichment
w

Breach of fiduciary
duty
• Negligent
misre~resentation

• Fraud
ones

ams,

P.A.

Fla. Stat. § 517.301
• Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Unjust Enrichment and
Constructive Trust
a.

ones

ams,

P.A.

• Fla. Stat.§ 517.301
• Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Uniwt Enrichment and
Constructive Trust
rico, nc., et a v. tan ar

Chartered Bank I nt'L
(Americas) Ltd., No. 11-cv0909

a.

ar
Magolnick, P.A.

• Breach of Fiduciary
Duty
• Fraud in the Inducement
• Fraudulent Concealment
• Negligent
Misrepresentation
• Negligence

'Underlined claims were dismissed in Anwar IV, DE 744, but were subsequently allowed to be re-pleaded as a uniform negligence claim. See DE 1137.
Italicized claims were dismissed.
Removed from the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida.
4
Removed from the Superior Court of the State of California, County of Los Angeles.
5Negligence was pleaded in the alternative if it were determined that SC did not owe the Plaintiffs fiduciary duties.
6
Removed from the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida.
7
Removed from the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida.

2
3

Plaintiffs
ay
nvs. • v.
Standard Chartered Bank
lnt1. (Americas) Ltd., No. ll-

•

CV-7649

• Negligence

Breach of Fiduciary
Duty

• Fraudulent Concealment

• Breach of Fiduciary
Duty

• Fraudulent Conctalment
• Negligence

a.

• Breach of Fiduciary
Duty

• Fraudulent Concealment
• Negligence
a.

• Breach of Fiducl'llry
Duty

• Fraudulent Concealment
• Negligence
a.

• Breach of Fiduciary
Duty

• Fraudulent Concealment
• Negligence
m
tates
District Court for
the Southern
District of New
York ("S.D.N.Y.")

r c ano errero v.
Standard Chartered Bank
lnt'L (Americas) Ltd., No.11CV-3553

• Negligent
Misreprestntation
•

tz,

(amended)

arron,

Squitero, Faust,
Friedberg, English
& Allen, P.A.

12/9/2010
(original)

Negligence

• Breach of Fiduciary
Duty
• Gross Negligence

• Investment Fraud - Fla.
Stat.§§ 517.301, 517.211
• Breach of Fiduciary
Duty

• Fraud
• Gross Negligence

• Negligent
Misrepresentation
a.

• Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
a.

• Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
• Breach of Fiduciary
Duty
• Negligence
• Negligent
Misrepresentation

• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust

ase

ston o ings
., et v.
StJJndard Chartered Bank
Int'L (Americas) Ud., No. 11-

Date

a.

cv-0901

• Breach of Fiduciary
Duty
• NegljRnce
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
a.

• Breach of Fiduciary
Duty
• Negligence
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
erez v. tan ar
arter
Bank lnt'L (Americas) Ud.,
No.11-CV-0903

a.

• Breach of Fiduciary
Duty
• Negligence
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
a.

Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
a.

• Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
a.

Breach of Fi uciary
Duty
• Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust

Date ile

District
Filed
a.

a.

..

ia
io,
Standard Chartered Bank
Int'!. (Americas) Ud., No. 11CV-5716

a.
(amended)
6/16/2011
(original)

a.

a.
(amended)
6/16/2011
(original)

a.

a.
(amended)
6/1712011
(original)

.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.
.
.

Breach of Fiduciary
Duty
Ns:Klimi~

Negligent

Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and
Constructive Trust
Breach of Fiduciary
Duty

NcKliacng:
Negligent
Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and
Constructive Trust
Breach o Fiduciary
Duty
!::ls:iliiicn~s:

Negligent
Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and
Constructive Trust
Breach of Fiduciary
Duty
Nt:ldiGDl:C

Negligent
Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and
Constructive Trust
Breach of Fiduciary
Duty
!::ls:diiicn~

Negligent
Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and
Constructive Trust
Breach of Fiduciary
Duty

Ncaliw:ng:
Negligent
Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and
Constructive Trust

.
.
.
. Nc&lim:ng:
.
.
.

Breach of Fiduciary
Duty

Negligent
Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and
Constructive Trust

ase

.
.
.
.
.

e Q5SOS rrrra ima v.
Standard Chartered Bank
Int'I. (AmeriCllS) Ltd., No. 11CV-5722

.

a.

a.
(amended)
6/17/2011
(original)

a.

..

CV-5727

merant orp. v. tan al'.
Chartered Bank Int'I.
(Americas) Ltd., No. 11-CV5728

a•
(amended)
6/1712011
(original)

a.

Negligent

Misrepresentation
Fraud
Gross Negligence

Unjwl Enrichment
andComtn1ctiw: Trust
Breach o Fiduciary
Duty

.
.
.
.
.
.
.
.
.

.
.
.

.

, et a
an
Standard Chartered Bank
Int'I. (Americas) Ltd., No. 11-

Ni:ldim:ni:c

.
.
. N1:KliBDi:t

.
.

a.

Breach of Fiduciary
Duty

.
.
.

.
.
.
.
.
.
.
.
.

Negligent
Misrepresentation
Fraud
Gross Negligence

Unjust Enrichment and
Constn1ctive Tn1st
Breach o Fiduciary
Duty

Ni:idilll:Dl:C
Negligent
Misrepresentation
Fraud
Gross Negligence

Unjwt Enrichment and
Comtn1ctiw: Trust
Breach of Fiduciary
Duty
N~idiGm;s:

Negligent
Misrepresentation
Fraud
Gross Negligence

Unjwt Enrichment and
Constn1ctive Trust
Breach o Fiduciary
Duty
N1:Wi~n~

Negligent
Misrepresentation
Fraud
Gross Negligence

Unjwt Enrichment and
Comtn1ctiw: Trust
Breach of Fiduciary
Duty

Ns:diBng:
Negligent
Misrepresentation
Fraud
Gross Negligence

Unjust Enrichment and
Comtn1ctive Trust

.
.
. Ns:dhieoa:
.
.
.

Breach of Fiduciary
Duty

Negligent
Misrepresentation
Fraud
Gross Negligence

Unjwt Enrichment and
Constn1ctiw: Trust

• Breach of Fiduciary
Duty
• Negljgence
• Negligent
Misrepresentation
• Fraud
• Gross Negligence
• Unjust Enrichment and
Comtructive Trwt
a.

urran

Associates

• Breach of Fiduciary
Duty .
• Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence
• Unjust Enrichment and
Constructive Trwt
• Breach of Fiduciary
Duty
• Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence
• Unjust Enrichment and
Constructive Trwt
• Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence
• Unjust Enrichment and
Constructive Trwt
a.

• Breach of Fiduciary
Duty
• Negljgence
• Negligent
Misrepresentation
• Fraud
• Gross Negligence
• Unjust Enrichment and
Comtructive Trwt

a.

Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
• Fraud
• Gross Negligence
• Unjust Enrichment and
Constructive Trwt
ositano nvs.
. v.
Standard Chartered Bank
Int'!. (Americ111) Ud., No. 11CV-8371

a.

• Breach of Fiduciary
Duty
•

Negligence

• Negligent
Misrepresentation
•

Fraud

• Gross Negligence
• Unjust Enrichment and
Comtructive Trwt

• Breach of Fiduciary

Duty
• Negligence
• Negligent

Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
an
seas . v.
Standard Chartered Bank
Int'I. (Americas) Ud., No.

a.

• Breach of Fiduciary

Duty
• NegHiu:nce

12-CV-0148

• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
e c nters. . v.
Standard Chartered Bank
Int1. (Americas) Ud., No.

a.

• Breach of Fiduciary

Duty
• Negligence
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

12-CV-03969

• Unjust Enrichment and
Constructive Trust
• Breach of Fiduciary

Duty
• Negligence
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

• Unjust Enrichment and
Constructive Trust
• Breach of Fiduciary

Duty
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

urran
Associates

• Breach of Fiduciary

Duty
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

urran
Associates

• Breach of Fiduciary

Duty
• Negligent
Misrepresentation
• Fraud
• Gross Negligence
• Breach of Fiduciary

Duty
• Negligent
Misrepresentation
• Fraud
• Gross Negligence

Running ota
Of Plaintiffs
In All Cases
•

v. ta

• Breach of Fiduciary
Duty
• Negligent
Misrepresentation

a

Chartered Bonk Int'!.
(Americas) l.Jd., No. 12-CV9425

• Fraud
• Gross Negligence

• Breach of Fiduciary
Duty
• Negligent
Misrepresentation
• Fraud
• Gross Negligence
a.

• Fraud
• Breach of Fiduciary
Duty

DISMISSED OR STAXED CASES AGAINST STANDARD CHARTERED

rowe
Moring LLP

• Section lO(b) of the Exchange Act, 1 U.S.C. §
78j(b) and Rule lOb-5 promulgat.ed thereunder
• Section 20(a) of the Exchange Act, 15 U.S.C. §
78t(a)
• Rescission under the Investment Advisors Act, 15
U.S.C. § 80b-l et seq.
• Breach of Fiduciary Duty
• Gross Negligence
• Unjust Enrichment and Constructive Trust
• Fraud
• Specific Performance
•

Conversion

• Breach of contract
• Unjust Enrichment

• Section lO(b) of the Exchange Act, 15 U.S.C. §
78j(b) and Rule lOb-5 promulgated thereunder
• Section 20(a) of the Exchange Act, 15 U.S.C. §
78t(a)
• Rescission under the Investment Advisors Act, 15
U.S.C. § 80b-l et seq.
• Breach of Fiduciary Duty
• Gross Negligence
• Unjust Enrichment and Constructive Trust
• Fraud
• Specific Performance

a.
(amended)

9127/2010
(original)

•
•
•
•
•
•

Conversion
Breach of Fiduciary Duty
Breach of Duty of Care
Fraud
Gross Negligence
Unjust Enrichment and Constructive Trust

• Breach of Fiduciary Duty
• Negligence
reac o
• Negligence
Negligent Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment and Constructive Trust
• Conversion

rea o 1 uc1ary uty
Negligence
Negligent Misrepresentation
Fraud
Gross Negligence
Unjust Enrichment andConstructive Trust
Conversion

8

This case was dismissed in its entirety with leave to re-file in Singapore. DE 521.
This case was dismissed in its entirety. DE 763.
0
' This case was dismissed in its entirety with leave to re-file in Singapore. DE 521.
11
These cases were dismissed in their entirety. DE 744.
12
This case has been stayed pending arbitration. DE 882.

9

EXHIBIT 2 TO LETTER TO
HONORABLE VICTOR MARRERO
FROM STANDARD CHARTERED PLAINTIFFS
09-cv-118

November 17, 2014

RIVERO MESTRE
November 17, 2014
By fax to (212 )805-6382

Honorable Victor Marrero
United States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York 10007-1312
Re:

Anwar, et al. v. Fairfield Greenwich Limited, et al.,
09-cv-118~)(TJIJ()

Dear Judge Marrero:
We write as counsel for Headway Investment Corp. ("Headway"). This letter is
sent to supplement today's letter from Richard E. Brodsky, Liaison Counsel for the
Standard Chartered Plaintiffs. We write this letter with the full intent of preserving intact
the confidentiality of communications protected by the attorney-client privilege and of
attorney work-product.
Counsel for Standard Chartered, in her October 31, 2014 letter to the Court, made
the following statements:
Finally, plaintiffs' claims here are based on alleged wrongdoing originally
pied as federal securities fraud claims. Knowing that their allegations fail
to meet the requirements of the PSLRA, plaintiffs have tried to avoid
dismissal by filing complaints asserting only state law claims. This is
precisely what SLUSA says you cannot do-it is SLUSA's purpose 'to
negate the artful pleading by which certain plaintiffs evaded the dictates of
thePSLRA.'
October 31, 2014 Letter, 8-9. The letter further stated that:
Indeed, SLUSA's remedial purpose would be undennined completely if
plaintiffs could evade it simply by engaging separate counsel and claiming
lack of intent to 'join.'

Id at 11-12.

Rivero Mestre LLP
www.riveromestre.com

T3os 44s2soo

F3os 4452505

MIA

2525 Ponce de Leon
Suite 1000
Miami, FL 33134

Blvd.N'0C

We wish to reaffirm that. as Mr. Brodsky's letter states. undersigned counsel did
not coordinate with any lawyer for any other SC Plaintiff in filing suit for Headway.

··-·-··

~·Jorge

2

A. Mestre

CURRAN LAW, PL
Attorneys at Law
701 Brickell Avenue - Suite 1550
Miami, Florida 33131

Laurence E. Curran Ill

Telephone [phone]
Telefax 305-728-5288
Email [e-mail]

November 17, 2014
Honorable Victor Marrero, United States District Judge
Daniel Patrick Moynihan United States Courthouse
500 Pearl Street
New York, New York 10007-1312
Re:

Anwar, et al. v. Fairfield Greenwich Ltd, et al., No. 09-CV-118 (S.D.N.Y.) Standard Chartered Cases

Dear Judge Marrero:
I write as counsel for the individual parties known as the Standard Chartered Plaintiffs.
This letter is sent to supplement the letter of even date from Richard E. Brodsky, Liaison
Counsel for the Standard Chartered Plaintiffs. I write this letter with the full intent of
preserving intact the confidentiality of communications protected by the attorney-client
privilege and of attorney work-product.
Counsel for Standard Chartered, in her October 31, 2014 letter to the Court, made the
following statements:
Finally, plaintiffs' claims here are based on alleged wrongdoing originally
pied as federal securities fraud claims. Knowing that their allegations fail
to meet the requirements of the PSLRA, plaintiffs have tried to avoid
dismissal by filing complaints asserting only state law claims. This is
precisely what SLUSA says you cannot do-it is SLUSA's purpose 'to
negate the artful pleading by which certain plaintiffs evaded the dictates of
the PSLRA.' (Letter, 8-9)
Indeed, SLUSA's remedial purpose would be undermined completely if
plaintiffs could evade it simply by engaging separate counsel and claiming
lack of intent to 'join.' (Letter, 11-12)
I wish to reaffirm to this Court, as Mr. Brodsky's letter states, that the undersigned
counsel did not coordinate with any lawyer for any other SC Plaintiff in bringing the
cases brought by the undersigned.

On August 19, 2009, I originally independently brought an action on behalf of Ricardo
Lopez, an individual investor in Fairfield Sentry Ltd., when a complaint was filed with
the United States District Court for the Southern District of Florida against various
Standard Chartered defendants. I did not file any other complaints against the Standard
Chartered defendants until after the Court's Decision and Order on SLUSA and related
issues in the Anwar case on August 18, 2010 (Document 509) and following the Court's
Decision and Order issued on October 4, 2010 denying the Motion to Dismiss the four
initial complaints (Headway, Maridom, Lopez and Valladolid) filed by the Standard
Chartered Defendants (Document 543).
Thereafter various investors · in Fairfield Sentry Ltd. and/or Fairfield Sigma Ltd.
approached me with factual allegations similar in nature to those alleged by my client
Ricardo Lopez. Accordingly, in December 2010, I filed 14 complaints in the Southern
District of Florida on behalf of 18 Fairfield Funds investors. Following those filings in
December 2010, I filed additional complaints in a random fashion over the following two
years for various investors in the Fairfield Funds so that, as I informed the Court in my
letter submission of October 21, 2014 (Document 13 31 ), I am now counsel for plaintiffs
in 42 Standard Chartered actions where 48 plaintiffs have an economic interest in this
case.
There was never any coordination among my individual clients (except those joined in a
single lawsuit). Individual decisions were made to bring separate lawsuits predominantly
alleging breach of fiduciary duty and negligence. I also did not realize that there would be
over 50 plaintiffs in the consolidated Standard Chartered actions until years after filing a
complaint in the Southern District of Florida on behalf of my initial client Ricardo Lopez
on August 19, 2009.
While I do not believe that my client's cases should be aggregated with the other
Standard Chartered cases for all of the reasons set forth in Mr. Brodsky's letter to the
Court on behalf of the Standard Chartered Plaintiffs, I also submit again to the Court as I
did in my letter of October 21, 2014 that SLUSA is not applicable to my clients' cases as
I represent only 48 plaintiffs with an economic interest in the outcome of this case. In my
letter to the Court of October 21, 2014, I requested a pre-motion conference regarding the
contemplated motions of seven plaintiffs for permission of the Court to either have them
dropped as plaintiffs or to have their cases dismissed. ln that letter, I advise the Court that
as a matter of fact, 5 of the plaintiffs that I represent should in retrospect not have been
named as plaintiffs because they were gifted shares of Fairfield Sentry by co-plaintiffs
and did not actually invest in Fairfield Sentry because they did not purchase any shares of
Fairfield Sentry and never made any direct investments themselves in Fairfield Sentry
and thus have no financial stake in the case.
In regard to another case, Juan D. Quiroz Stone v. Standard Chartered Bank
international (America:i) Limited, No. l l-cv-22835, as I pointed out to the Court in my
letter of October 21, 2014, it has became apparent based on holding letters issued by
Standard Chartered regarding the account of Ponciana Holdings Ltd. ("Ponciana") well

2

described in the complaint in the Quiroz Stone case was likely made through Ponciana, a
company that is not named as a plaintiff, and not by Mr. Quiroz personally. Although Mr.
Quiroz, who is in his eighties and has not been in the best health, had originally believed
that the investments in Fairfield Sentry were made through his personal account at SCB,
it has been clarified that the investment he thought he made was actually made by
Ponciana. Accordingly, Mr. Quiroz wishes to have his complaint dismissed as he was not
an investor in Fairfield Sentry.
Hence, even if the Court considers SLUSA relevant at this stage of the proceedings
regarding these cases, this Court has found that the possibility of a SL USA argument by a
defendant should not preclude the dismissal from the action of plaintiffs with "no actual
interest in the litigation." See Lee v. Marsh & McLennan Companies, Inc., et al., 2007
WL 704033 (SDNY 2007). Accordingly, I again submit that for the purposes of the
Standard Chartered defendants' SLUSA argument, it should be considered that I
represent only 48 plaintiffs with an economic interest and that the 6 plaintiffs with no
economic interest should be dropped or dismissed as plaintiffs as per my request set forth
in my letter to the Court of October 21.
Thank you for consideration of this letter.
Respectfully submitted,

.
Laurence E. Curran III

3

KATZ BARRON
SQUITERO FAUST

MIAMI
2699 S. BAYSHORf. DRIVF.
SEVENTH FLOOR

MIAMI. FL 33133-5408
305-856-2444
305-285-9227 FAX
www.katzbsrron.com

November 17, 2014
Honorable Victor Marrero
United States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York 10007-1312
Re:

Anwar, et al. v. Fairfield Greenwich Limited, et al.,
Case No. 09-cv-118 (VM)(THK), Standard Chartered Cases
This correspondence relates to: Barbachano v. Standard Chartered Bank
International (Americas) Limited, et al., 1: 11-cv-03553-VM

Dear Judge Marrero:
We write on behalf of Plaintiff, Teresa Barbachano, one of the Plaintiffs in the
Standard Chartered Cases ("SC Cases"), and, in particular, to supplement the
correspondence, also dated today, from Richard E. Brodsky, Liaison Counsel for the
Standard Chartered Plaintiffs. We write this letter in response to speculative and
incorrect statements made in Standard Chartered's October 31, 2014 correspondence to
the Court and with the full intent of preserving intact the confidentiality of
communications protected by the attorney-client privilege and of attorney work-product.
Specifically, in her October 31, 2014 letter to the Court, counsel for Standard
Chartered makes the following statements:
Finally, plaintiffs' claims here are based on alleged wrongdoing originally
pied as federal securities fraud claims. Knowing that their allegations fail
to meet the requirements of the PSLRA, plaintiffs have tried to avoid
dismissal by filing complaints asserting only state law claims. This is
precisely what SLUSA says you cannot do-it is SLUSA's purpose 'to
negate the artful pleading by which certain plaintiffs evaded the dictates of
the PSLRA.' (Letter, 8-9)
Indeed, SLUSA's remedial purpose would be undermined completely if
plaintiffs could evade it simply by engaging separate counsel and claiming
lack of intent to 'join.' (Letter, 11-12)
Standard Chartered is mistaken. Neither in Ms. Barbachano's original complaint
nor in her amended complaint did undersigned counsel seek to avoid or evade the
pleading requirements of the PSLRA. To the contrary, the complaints filed on behalf of

KATZ. BARR.ON. SQUITERO. FAUST. FR.If.OBERG. ENGLISH &. All_EN. p.A.
MIAMI • FT. LAUDERDALE

Honorable Victor Marrero
November 17, 2014
Page Two

Ms. Barbachano contained detailed allegations and it has been, and continues to be,
undersigned counsel's belief that all counts of those complaints state claims for relief.
Indeed, Ms. Barbachano's complaints were based not only on the lack of Standard
Chartered's due diligence with regard to the investment in Fairfield Sentry, but also on,
among other things, the lack of the overall suitability of the investments in her entire
portfolio - allegations that we believe, and continue to believe, are especially well-suited
for state law claims for breach of fiduciary duty and negligence.
In addition, undersigned counsel did not coordinate with counsel for any other SC
Plaintiff in bringing Ms. Barbachano's case and counsel brought that case with no
knowledge, or the ability to know or believe, that, eventually, there would be more than
fifty individual SC Plaintiffs.
Finally, undersigned counsel objected to the inclusion of Ms. Barbachano's case
in this multidistrict litigation and has requested remand of her case on several occasions.
Simply put, as set forth in undersigned counsel's prior correspondence to the Court, dated
November 19, 2013 [DE 1224]:
[H]aving engineered the transfer of this case, Defendants now seek to
profit by it, claiming that Ms. Barbachano's case should be considered
part of a "covered class action" because her case is part of this
multidistrict litigation. See Defendants' November 12, 2013 Letter, at 1
n. l. However, if Defendants had made that claim to the multidistrict panel
when it sought transfer, the panel would surely have denied the request,
especially given the panel's acknowledgment that this Court could revisit
the transfer order whenever it saw fit. The panel, we respectfully submit,
did not order the transfer of Ms. Barbachano's action only to see her case
dismissed because of that decision. Cf 28 U.S.C. § 1407(a) ("[T]ransfers
shall be made by the judicial panel on multidistrict litigation authorized by
this section upon its determination that transfers for such proceedings will

be for the convenience ofparties and witnesses and will promote the just
and efficient conduct of such actions.") (emphasis supplied).
Thank you for consideration of this letter.
Respectfully submitted,

KATZ. BARRON. SQUITERO. FAUST. FRIEDBERG. ENGLISH

2699 S. BAVSHOR.E. DRIVE.. SE.VFNTH

FIOOR

&. ALLEN. P.A.

MIAMI F1rn1 lnA ~~l~'l.t;.d.0A • ~rii:;_iii:;,::;_')A

AA·"'""'" "o" """...,,

r• ..

JONES & ADAMS, P.A.
. ATIORNEYS AT LAW
999 Ponce De Leon Boulevard
Suite 925
..
Coral Gables, FL 33134
TELEPHONE [phone]
FACSIMILE [phone]
EMAIL: [e-mail]
WEBSITE: www.jones-adams.com
· [e-mail]
[e-mail]
[e-mail]
[e-mail]
[e-mail]
[e-mail]

W. STEVEN ADAMS
MATTHEW L. JONES
JESSICA HMYEN
JORGE E. PORRO
GIOVANNA A. ABREU
MICHELLE GARRIDO

November 17, 2014
Honorable Victor Marrero
United· States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York 10907

RE:

Ricardo Almiron v. Standard Chartered Bank Int'/ (Americas) Ltd, Case No.:
10-CV-06186

Carlos Carrillo v. Standard Chartered Bank Int'/ (Americas) Ltd, Case No.:
10-CV-06187
Dear Judge Marrero:
.

.

We write as counsel for the Ricardo Almiron and Carlos Carrillo. This letter is sent to
supplement the letter from Richard E. Brodsky, Liaison Counsel for the Standard Chartered
Plaintiffs. We write this letter with the full intent of preserving intact the confidentiality of .
communications protected by the attorney-client privilege anci of attorney work-product.
Counsel for Standard Chartered, in l:ier October 31, 2014 letter to the Court, made the
following statements:
Finally, plaintiffs' claims here are based on alleged wrongdoing originally.pled as
federal securities fraud claims. Knowing that their allegations fail to meet the
requirement~ of the PSLRA, plaintiffs have tried to avoid dismissal by filing
complaints asserting only state law claims. This is. precisely what SLUSA says
you cannot d~it is SLUSA's purpose 'to negate the .artful pleading by which
certain plaintiffs evaded the dictates of the PSLRA.' (Letter, 8-9)

Indeed, SLUSA's remedial purpose would be undermined. completely if plaintiffs
could evade it simply by engaging separate counsel-and claiming lack of intent to
'join.' (Letter, 11-12)
We wish to reaffirm to this Court the following. As Mr. Brodsky's' letter states, the
undersigned counsel did not coordinate with the lawyer for any other SC Plaintiff in brillging the
cas_es brought by the undersigned. Furthermore, despite the fact that our ·firm has filed t\vo
lawsuits against the Standard .Chartered defendants, there was no coordination among the
individual clients to file their claims. Individu81 decisions were made by Messrs. Almiron and
Carrillo to bring separate lawsuits. In addition, Messrs. Almiron and Carrillo's state law claims
were filed well before this Court's Octoher 2010 decision regarding the Private Securities
Litigation Reform Act of 1995 ("PLSRA") and, in fact, were initially filed .in the Eleventh
Circuit Court in and fqr Miami-Dade County, Florida ~thout any knowledge that over fifty
plaintiffs had been consolidated in the Standard Chartered action in the District Court for the
Southern District of New York. For the foregoing reasons, the Court should not dismiss Messrs.
Almiron and Carrillo's claims pursuant to the SLUSA and the position of the Standard Chartered
Defendants must be rejected.
Thank you for consideration of this letter.
Sincerely,

MLJ/jh

Marko · Magolnick
ATTORNEYS

AT LAW

vi1caya Professional Building

300! Southwest 3rd Avenue
Miorni, FJur\ou 33 129

iel: 305.285.2000
Fax: [phone]
Toil Free: 888.893.5723
www.mrn-po.com

November 17, 2014

VIA FACSIMILE
Honorable Victor Marrero
United States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York 10007-1312

Re: Anwar, et al. v. Fairfield Greenwich Limited, et al -Standard Chartered Cases
(Gerico Investments, Inc., et al v. Standard Chartered Bank International
(Americas) Limited; Blockbend Ltd. v. Standard Chartered Bank International
(Americas) Limited; Bayman Investments Ltd. v. Standard Chartered Bank
International (Americas) Limited; Eastfork Assets Ltd. v. Standard Chartered
Bank International (Americas) Limited; Eduardo Child Escobar, et al. v. Standard
Chartered Bank International (Americas) Limited; Mailand Investments Inc. v.
Standard Chartered Bank International (Americas) Limited)
Dear Judge Marrero:
The undersigned firm is counsel for the Plaintiffs in each of the above-referenced matters.
This letter is sent to supplement the letter of even date from Richard E. Brodsky, Liaison
Counsel for the Standard Chartered Plaintiffs.
Counsel for Standard Chartered, in her October 31, 2014 letter to the Court, made the
following statements:
Finally, plaintiffs' claims here are based on alleged wrongdoing originally pled as
federal securities fraud claims. Knowing that their allegations fail to meet the
requirements of the PSLRA, plaintiffs have tried to avoid dismissal by filing
complaints asserting only state law claims. This is precisely what SLUSA says
you cannot do-it is SLUSA's purpose 'to negate the artful pleading by which
certain plaintiffs evaded the dictates of the PSLRA.' (Letter, 8-9)
Indeed, SLUSA's remedial purpose would be undermined completely if plaintiffs
could evade it simply by engaging separate counsel and claiming lack of intent to
'join.' (Letter, 11-12)

Letter to Honorable Victor Marrero
November 17, 2014

As Mr. Brodsky's letter states, my firm did not coordinate with the lawyer for any other
SC Plaintiff in connection with the filing of any of the above-referenced matters. Without
waiving confidentiality of communications protected by the attorney-client privilege and of
attorney work-product, the undersigned states that the decision to file these actions, and to assert
the breach of fiduciary duty and negligence claims set forth therein, were decisions made solely
by my firm in consultation with our clients.
Thank you for consideration of this letter.
Very truly yours,

MARKO & MAGOLNICK, PA

r~

Joel S. Magolnick, Esq.
magolnick(iUmm-pa.com
JSM/sc

2

AGUIRRE & SEVERSON LLP
A'ITORNEYS AT LAW

Maria C. Severson, Esq.
[e-mail]

501 West Broadway, Suite 1050
San Diego, CA 92101
Telephone (619) 876·5364
Facsimile (619) 876·5368

November 17, 2014
By fax to [phone]

Honorable Victor Marrero
United States District Judge
Daniel Patrick Moynihan U.S. Courthouse
500 Pearl Street
New York, New York 10007-1312
Re:

Anwar, et al. v. Fairfield Greenwich Limited, et al., 09-cv-118(VM)(THK)
Maria Akriby Valladolid v. American Express Bank, et al., C.D. California,
C.A. No. 2:09-6937 (conditionally transferred by MDL 2088)

Dear Judge Marrero:
Dear Judge Marrero:
We write as counsel for Maria Akriby Valladolid. This letter is sent to supplement the
letter of even date from Richard E. Brodsky, Liaison Counsel for the Standard Chartered
Plaintiffs. We write this letter with the full intent of preserving intact the confidentiality of
communications protected by the attorney-client privilege and of attorney work-product.
Counsel for Standard Chartered, in her October 31, 2014 letter to the Court, made the
following statements:
Finally, plaintiffs' claims here are based on alleged wrongdoing originally pied
as federal securities fraud claims. Knowing that their allegations fail to meet the
requirements of the PSLRA, plaintiffs have tried to avoid dismissal by filing
complaints asserting only state law claims. This is precisely what SLUSA says
you cannot do-it is SLUSA's purpose 'to negate the artful pleading by which
certain plaintiffs evaded the dictates of the PSLRA.' (Letter, 8-9)
Indeed, SLUSA's remedial purpose would be undermined completely if plaintiffs
could evade it simply by engaging separate counsel and claiming lack of intent to
'join.' (Letter, 11-12)
We wish to reaffirm to this Court the following. As Mr. Brodsky's letter states, the
undersigned counsel did not coordinate with the lawyer for any other SC Plaintiff in bringing the

November 17, 2014
Page2
cases brought by the undersigned. We made an individual decision to bring a lawsuit for our
client predominantly alleging breach of fiduciary duty and negligence.
Indeed, Plaintiff was an American Express customer who was induced by American
Express' reputation as a highly reputable and trustworthy company to transfer approximately $1
million to and for investment by American Express affiliates, Defendants American Express
Bank Ltd and American Express Bank International. On September 18, 2007, Defendant
Standard Chartered PLC entered into an agreement to purchase AEB from the American Express
Company. This acquisition was completed in February 2008.
Prior to Standard Chartered PLC's acquisition, AEB serviced plaintiff's accounts from its
offices at 501 West Broadway, Suite 1360, San Diego, California, 92101. Plaintiff's accounts
were opened and serviced in San Diego, California.
Plaintiff filed in California district court, and was only transferred upon an order of the
JPML. Plaintiff did not know of other plaintiffs at the time of her filing.
Thank you for consideration of this letter.

Sincerely yours,
Aguirre & Severson LLP

Maria C. Severson, Esq.
cc:

SC Plaintiffs' Counsel
SC Defendants' Cotmsel