Anwar et al v. Fairfield Greenwich Limited et al

Filing 1357

DECISION AND ORDER: For the reasons discussed above, it is hereby: ORDERED that the motion (Docket No. 775) of lead plaintiffs AXA Private Management, Pacific West Health Medical Center Employees Retirement Trust, Harel Insurance Company Ltd., Martin and Shirley Bach Family Trust, Natalia Hatgis, Securities & Investment Company Bahrain, Dawson Bypass Trust, and St. Stephen's School for class certification of their remaining claims against defendants The Citco Group Ltd., Citco Fund Services (Europe) B.V., Citco (Canada), Inc., Citco Global Custody N.V., Citco Bank Nederland N.V. Dublin Branch, and Citco Fund Services (Bermuda) Ltd. (collectively, the "Citco Defendants") ; and PricewaterhouseCoopers, LLP, and PricewaterhouseCoopers Netherlands Accountants N.V. (collectively, the "PwC Defendants") pursuant to Federal Rule of Civil Procedure 23 is GRANTED as modified herein. (Signed by Judge Victor Marrero on 3/3/2015) (lmb)

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PASHAS. ANWAR, et al.,

09 Civ. 0118 (VM)

Plaintiffs,
DECISION AND ORDER

-againstFAIRFIELD GREENWICH LIMITED,
et al.,
Defendants.

----------------------------- x
VICTOR MARRERO, United States District Judge.

By Decision and Order dated February 22,
Decision,"

Dkt.

No.

1052),

the

Court

2013

certified

a

( "2013
class

comprised of "all shareholders/limited partners in Fairfield
Sentry Limited,

Fairfield Sigma Limited,

L.P. and Greenwich Sentry Partners L.P.
December

10,

2008

who

suffered

a

Greenwich Sentry,
(the 'Funds') as of

net

loss

of

principal

invested in the Funds." 1 Anwar v. Fairfield Greenwich Ltd.,
289 F.R.D.
1

105,

110

(S.D.N.Y.

2013).

Defendants The Citco

Excluded from this class were members whose investments in the
Funds were made in the following countries: Switzerland, France,
Luxembourg, Israel, Kuwait, Korea, North Korea, Picairn, Tokelau,
Mongolia, China, Liechtenstein, Japan, Oman, Taiwan, United Arab
Emirates, Qatar, Saudi Arabia, Bosnia, Andorra, San Marino,
Namibia, Monaco, Germany and South Africa (collectively, the
"Excluded Countries"). Also excluded from the Class definition are
the Defendants, and any entity in which the Defendants have a
controlling interest, and the officers, directors, affiliates,
legal
representatives,
immediate
family
members,
heirs,
successors, subsidiaries, and/or assigns of any such individual or
entity.

Group

Citco

Ltd.,

(Canada),

Inc.,

Nederland

N.V.

(Bermuda)

Ltd.

Fund

Citco

Global

Dublin

Branch,

(collectively,

Custody
and

the

LLP,

PricewaterhouseCoopers,

(Europe)

Services

N.V.,

Citco

Citco

Citco

Fund

Bank

Services

"Ci tco Defendants") ;

and

PricewaterhouseCoopers

and

the

Accountants

Defendants")

appealed to the Second Circuit. The Citco and
challenged

the

(collectively,

"PwC

Netherlands

PwC Defendants

N.V.

B.V.,

Court's

certification of

a

class of investors in the Funds created and managed by the
Fairfield Greenwich Group

( "FGG") . Specifically,

the Citco

Defendants argued that Plaintiffs could not prove reliance by
common

evidence

and,

therefore,

could

not

satisfy

the

predominance requirement of Federal Rule of Civil Procedure
23 (b) ( 3)
argued

("Rule
that

23 (b) ( 3) ") ;

plaintiffs

further,

failed

to

the
meet

Ci tco Defendants
Rule

23(b) (3) 's

superiority requirement with respect to their holder claims.
The

PwC Defendants

argued

that

the

plaintiffs

could

not

satisfy Rule 23(b) (3) because individual issues predominated
with respect to the duty of care PwC owed to class members
and those members' reliance on PwC audits.
By Summary Order dated June 19, 2014, the Second Circuit
vacated the 2013 Decision insofar as it applied to the Citco
and PwC Defendants and remanded for consideration of certain
questions set forth in the discussion section below. See St.
2

Stephen's Sch.

v.

570 F. App'x 37,
Second

PricewaterhouseCoopers Accountants N.V.,
39-40

Circuit

found

(2d Cir.
that

2014).

the

In so holding,

2013

Decision

the

"focused

primarily on the claims asserted against FGG" -- claims which
were

the

Court's

subject

of

preliminary

a

settlement

approval

and

agreement
was

that

thereafter

had

the

formally

approved. Id. at 39.
On remand, the Court has reviewed the record of the Citco
and PwC Defendants and finds the requirements of Rule 23(b)
are satisfied. Therefore,

the Court certifies the Proposed

Class, subject to the modification excluding certain foreign
investments.
I.

BACKGROUND

A. FACTUAL BACKGROUND
Lead plaintiffs AXA Private Management,
Health

Medical

Center

Employees

Pacific West

Retirement

Trust,

Harel

Insurance Company Ltd., Martin and Shirley Bach Family Trust,
Natalia

Hatgis,

Securities

& Investment

Company

Bahrain,

Dawson Bypass Trust, and St. Stephen's School (collectively,
"Plaintiffs"),

brought

this

class

action

on

behalf

of

individuals and entities who invested large sums of money in
the

Funds

created and

operated

by

FGG.

The

overwhelming

majority of Plaintiffs' money was in turn invested by FGG in
the Ponzi scheme operated by Bernard Madoff ("Madoff") under
3

the auspices of Bernard L. Madoff Investment Securities, Inc.
("BLMIS"), and for which Madoff was sentenced to 150 years in
prison

following

his

See United States v.

guilty plea.

Madoff, No. 09 Cr. 0213 (S.D.N.Y. June 29, 2009).
Plaintiffs
and

executives,
including

are

the

suing

other

Citco

a

number

PwC

FGG

entities,

service

professional

and

of

Defendants,

providers,

who

audited,

administered, or served as custodians of the Funds.
B. PROCEDURAL BACKGROUND
In
"SCAC")

the

Second

filed

I

Consolidated

September

29,

Amended
2009,

Complaint

Plaintiffs

(the
allege

violations of federal securities law and common law tort,
breach
against

of

contract

and

quasi-contract

FGG and associated entities

"Fairfield
("GlobeOp"),

Defendants") , 2

GlobeOp

and

causes

of

action

individuals

Financial

Services,

and the Citco and PwC Defendants.

(the
LLC

Plaintiffs'

allegations are detailed more fully in this Court's prior
opinions in this action, Anwar v. Fairfield Greenwich Ltd.,
728 F. Supp. 2d 354 (S.D.N.Y. 2010)

2

("Anwar I") and Anwar v.

In addition to FGG, these entities and individuals include
Fairfield Greenwich Advisors LCC ("FGA"), Fairfield Greenwich Ltd.
("FGL"),
and three wholly-owned FGL subsidiaries:
Fairfield
Greenwich (Bermuda) Ltd. ( "FGBL"), Fairfield Risk Services Ltd.
("FRS"), Fairfield Heathcliff Capital LCC ("FHC"), Walter M. Noel
Jr. ("Noel"), Jeffrey H. Tucker ("Tucker"), Andres Piedrahita
("Piedrahita"), Amit Vijayvergiya ("Vijayvergiya"), Daniel E.
Lipton ("Lipton"), and Mark McKeefry ("McKeefry").
4

Fairfield Greenwich Ltd., 728 F. Supp. 2d 372 {S.D.N.Y. 2010)
{"Anwar II"). For purposes of this decision,

the Court will

focus on the allegations and discovery pertaining to the Citco
and PwC Defendants.
As alleged in the SCAC, Citco served as administrator,
custodian, bank, and depository for the Funds.

~~

{SCAC

327,

330.) Additionally, through its Fund Services division, Citco
provided financial services to its fund clients,

including

independent pricing of funds portfolio, independent portfolio
verification,
According

and

to

compliance

the

{Id.

monitoring.

SCAC,

however,

Citco

~

326.)

"undertook

responsibilities beyond that of a typical Fund administrator"
-- including "reconciliation of cash and other balances at
brokers," "independent reconciliation of the Fund's portfolio
holdings," and "calculation of the Net Asset Value and the
Net Asset Value per Share on a monthly basis in accordance
with

the

Fund

Documents."

according to the SCAC,
for

communications

to

including

from

sending

investors.

"undertook

additional

custodian,

bank,

Fairfield

Sigma.

{Id.

and
~

328.)

discretionary

and depository
(Id.

Additionally,

investors,"

documents

confirmations

327.)

Citco was "specifically responsible

with

subscription

~

{Id.

~

330.)
5

for

Citco

receiving
investment
allegedly

responsibilities"

as

Fairfield Sentry and

Those

responsibilities

in the selection

allegedly included taking "due care .

and ongoing appropriate level of monitoring of any
subcustodian"

appointed

by

the

Fund,

securities held by any subcustodian,

and

agreeing

like BMIS,

that

"shall be

recorded in and ascertainable from the books and/or ledgers
of the Custodian."
Plaintiffs
services,

Citco

(Id.

argue
was

~

330.)

that
a

in

providing

fiduciary

to

these

financial

Plaintiffs,

and

that

because Citco was aware that investors knew and relied on
these services, Citco owed Plaintiffs a duty of care.

(Id.

~~

332-33.) For example, the SCAC alleges that, "[t] he NAV, which
was to be independently calculated and reported by Citco, was
fundamental
decisions
maintain

to
to

the

according
fulfilling

to
its

Plaintiffs'
invest

additional

investments
the

SCAC,

duties

initial

over

funds,
time."

Citco
to

investment

was

and
(Id.

grossly

Plaintiffs,

decisions,

decisions
~

335.)

But,

deficient

including,

but

to

in
not

limited to, failing to take reasonable steps to calculate the
Funds' NAV,

to independently reconcile the Funds' portfolio

holdings with Madoff, and to reconcile information provided
by Madoff as the Funds' prime broker with information provided
by the Investment Manager.

(Id.

~

337.)

Further, the SCAC alleges that Citco knowingly provided
substantial assistance to the Fairfield Defendants in the
6

fraud and breaches of fiduciary duty to investors, as well as
collected unearned fees calculated on the basis of fictitious
(Id. ~ 341-43.)

profits reported by Madoff.

At the Motion to Dismiss stage, the Court granted Citco's
motion to dismiss

Plaintiffs'

(1)

third-party beneficiary

breach of contract claim as it relates to certain contracts
entered into with the

Custodians;

individual defendants;

(3)

against Citco Group Ltd.

( 2)

claims against

two

breach of fiduciary duty claims

and Citco Fund Services

(Bermuda)

Ltd.; and (4) negligence and gross negligence claims against
Citco Fund Services (Bermuda) and the Custodians. Anwar II,
728 F.

Supp.

2d at 422.

In all other respects,

the Court

denied the Citco Defendants' Motion to Dismiss.
As to the PwC Defendants,

Plaintiffs allege that PwC

failed to audit the Funds according to both United States and
International

standards

condition

the

of

and

Funds.

misrepresented

According

to

the

the

financial

SCAC,

the

PwC

Defendants "reaffirmed that the financial information in the
certified financial statements,

both past and present,

prepared

GAAP,

in

accordance

Accounting

Standards,

standards,

and

representation of
(SCAC

~

that
the

with
and

the

all

International

applicable

statements

financial

GAAS,

were

condition of

was

accounting
an
the

accurate
Funds."

260.) Further, the SCAC alleges that, "PwC expressly
7

undertook to conduct 'tests of physical existence, ownership
and recorded value of selected assets' ,

'tests of selected

recorded transactions with documentation required by law and
good

business

practice',

selected third parties

and

'direct

confirmation

with

banks, customers, suppliers) of

(~_:_g_:_.1

amounts due to or by them and other relevant information'"
but that "PwC misrepresented that it performed these tests,
when it did not,
from

and fraudulently concealed its misconduct

Plaintiffs,

thereby

discovering that the Funds'
and misleading."

(Id.

~

preventing

Madoff's

to

PwC's

260.)

therefore

reconciliations
(Id.

~

are

despite meeting with Madoff in

audits,

representations

electronic,

from

financial statements were false

The SCAC alleges that,
connection

Plaintiffs

PwC

that

records

accepted

"99%
are

performed daily

of

at
all

updated

face

value

trades

daily

and

are
all

(automated process)."

272.) According to the SCAC, PwC "did not perform any

independent confirmation or analysis of the purported trades,
or

even

review

the

purported

electronic

confirmations,

despite the fact that it knew that Madoff did not provide
electronic confirmations to the Funds that he managed,
instead gave them delayed,
trades." (Id.

~

and

paper confirmation of supposed

272.) The SCAC continues by alleging numerous

other instances where PwC accepted Madoff's representations
8

such as

representations

intervention,
under

and representations

management

confirm

those

~'

(See,

The

duties

to

without

~~

of

the

of

trader

value

the

lack

of

assets

investigating

representations

id.

SCAC

Plaintiffs.

regarding

with

or

seeking

documentary

to

evidence.

273-74.)

alleges

that

Specifically,
shareholders

of

PwC

breached

Plaintiffs

duties

claim

that

Fairfield Sentry and

owed
PwC

to

owed

Fairfield

Sigma because PwC knew -- as supported by internal reports,
marketing plans, and engagement letters

that shareholders

and potential shareholders would rely on the audit reports in
acquiring and holding shares of the Funds.

(Id.

~~

275-79.)

The SCAC claims that under various auditing standards,

as

well

to

as

PwC' s

own Audit

Plan,

exercise due professional care,

that

PwC was

which necessarily included

obtaining independent verification that
existed.
in

its

(Id.

~~

required

the

funds'

assets

280-303.) The SCAC alleges that PwC failed

obligation

to

obtain

reasonable

assurance

of

the

purported Funds' assets or the existence of the transactions
which constituted the split-strike conversion strategy.
~~

(Id.

304-311.) In so doing, the SCAC contends that PwC breached

its duties as the independent auditor of the Funds.
315.)

9

(Id.

~

Not only did PwC

fail

to adequately

investigate and

confirm Madoffs' claims, according to the SCAC, but PwC also
made misrepresentations regarding the funds that constituted
substantial assistance

to

Fairfield Defendants'

breaches of fiduciary duty.
that

PwC

knew

that

~

(Id.

Madoff

was

316.)

fraud and

The SCAC alleges

responsible

for

managing,

trading and holding the Funds' assets, but failed to conduct
audits in accordance with various accounting standards. (Id.)
The

audit

reports,

"misrepresented

that

compliance with GAAS
Funds'

financial

in
PwC

turn,
had

according

SCAC,
in

and ISA and misrepresented that

the

set

out

the

the

audits

statements

conducted

to

the

true

financial

condition of the Funds." (Id.) Additionally, the SCAC alleges
that PwC was willfully blind to Fairfield Defendants' lack of
monitoring or verifying the investments purportedly made by
Madoff.

(Id.

~

317.)

At the Motion to Dismiss stage,

the Court found that

Plaintiffs did not establish a strong inference of conscious
recklessness necessary for federal securities fraud claims,
and the Court also dismissed Plaintiffs'
third-party
enrichment,

beneficiary

breach

of

gross negligence,
contract,

and aiding and abetting a breach of

unjust
fiduciary

duty and fraud claims. Anwar II, 728 F. Supp. 2d at 449-62.

10

The Court, however, denied the PwC Defendants' motion seeking
to dismiss negligence and negligent misrepresentation claims.
Plaintiffs then moved, pursuant to Rule 23,

to certify

a class (the "Class" or "Proposed Class") comprised of:
all shareholders/limited partners in Fairfield Sentry
Limited, Fairfield Sigma Limited, Greenwich Sentry, L.P.
and Greenwich Sentry Partners, L.P. (the "Funds") as of
December 10, 2008 who suffered a net loss of principal
invested in the Funds.
(Pls.' Mem. of Law in Supp. of Mot. for Class Cert. at 1.) 3
By Decision and Order dated February 25, 2013, this Court
certified the Plaintiffs' proposed class, with the exclusion
of members whose investments were made in certain countries.
Anwar v.

Fairfield Greenwich Ltd.,

certifying the class,

the Court

289

F.R.D.

at

110.

In

found that Plaintiffs had

satisfied all four of the requirements of Rule 23(a) and the
relevant

portions

of

Rule

23(b) (3)

necessary

for

class

certification. See In re Livent Noteholders Sec. Litig., 210
F.R.D.
class

512,

514

(S.D.N.Y.

certification

order

2002)
applied

3

("Livent").
to

FGG

This

and

Court's

associated

Excluded from the Class definition are the Defendants, and any
entity in which the Defendants have a controlling interest, and
the officers,
directors,
affiliates,
legal
representatives,
immediate family members, heirs, successors, subsidiaries, and/or
assigns of any such individual or entity.

11

entities and individuals,

GlopeOp Financial Services,

LLC,

and the Citco and PwC Defendants. 289 F.R.D. at 109.
On appeal, the Second Circuit vacated the 2013 Decision
insofar

as

it

applied

to

the

Citco

Defendants

and

PwC

Defendants and remanded for consideration as to "how common
evidence

can

show

( 1)

the

existence

of

a

duty

of

care

applicable to the class either under the standard identified
in Credit Alliance Corp. v. Arthur Andersen & Co., 65 N.Y.2d
536, 493 N.Y.S.2d 435, or otherwise; or (2) reliance by the
class

on

Defendants

alleged
and

(b)

misrepresentations
the

by

PwC Defendants,

(a)
either

the

Citco

under

the

presumption identified in Affiliated Ute Citizens of Utah v.
United States,

406 U.S.

128,

153-54

(1972),

or otherwise."

St. Stephen's Sch., 570 F. App'x at 39-40 (footnotes omitted).
On remand,

this Court will only revisit the Rule 23(b)

predominance requirement as it relates to the PwC and Citco
defendants.

The

Court

will

assume

familiarity

with,

and

explicitly reaffirms and adopts, its earlier factual findings
pertaining to Rule 23(a) and the superiority requirement of
Rule 23(b)

as applied to the PwC and Citco defendants. The

Second Circuit did not direct this Court to consider those
requirements on remand,

so the Court will not discuss them

here and finds its earlier factual findings regarding Rule

12

and

23 (a)

the

superiority

requirement

of

Rule

23(b)

sufficient for class certification in the instant review.
The Court finds

that the Proposed Class,

modified as

indicated (see supra n. 1), satisfies all of the requirements
of Rule 23(a) and the pertinent requirements of Rule 23(b).
This

Class

is

subject

to

further

adjustment

or

decertification as warranted as facts develop.
II.

DISCUSSION

A. STANDARD OF REVIEW

To

certify

the

Proposed

Class,

the

Plaintiffs

satisfy all four of the requirements of Rule 23(a)

must

and the

reevlant portions of Rule 23(b) (3). To satisfy the Rule 23(a)
prerequisites,
class

is

so

impracticable;

Plaintiffs must
numerous

that

demonstrate
joinder

of

that:
all

" ( 1)

members

the
is

(2) there are questions of law or fact common

to the class; (3) the claims or defenses of the representative
parties are typical of the claims or defenses of the class;
and (4) the representative parties will fairly and adequately
protect the interests of the class." Fed. R. Civ. P. 23(a).
Rule 23 (b) ( 3)

further requires that Plaintiffs demonstrate

that common questions of law or fact "predominate over any
questions affecting individual members" and that maintaining
a class action is "superior" to other available methods of
adjudication. Fed. R. Civ. P. 23(b) (3).
13

"Rule 23(b) (3),

however,

does not require a plaintiff

seeking class certification to prove that each element of her
claim is susceptible to classwide proof. What the rule does
require

is

questions

that

common

questions

predominate

affecting only individual

over

class members."

any
Amgen

Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S. Ct. 1184,
1196

(2013)

(internal

citations omitted) .

quotation

Importantly,

marks,
a

alterations,

and

trial court should not

"put the cart before the horse" by essentially requiring a
plaintiff to "first establish that it will win the fray." Id.
at 1191. Instead, a Rule 23 (b) (3) certification ruling is to
"select

the

method

best

suited

to

adjudication

controversy fairly and efficiently." Id.

of

the

(internal quotation

marks and alterations omitted) .
Additionally,
discretion

in

trial

courts

determining

are

whether

given
to

substantial
grant

class

certification because "'the district court is often in the
best position to assess the propriety of the class and has
the

ability

to alter or modify

the

class,

create

subclasses, and decertify the class whenever warranted.'" In
re Nigeria Charter Flights Contract Litig., 233 F.R.D. 297,
301

(E.D.N.Y.

2006)

(quoting In re Sumitomo Copper Litig.,

262 F.3d 134, 139 (2d Cir. 2001)

("Sumitomo III")

(alteration

in original)). The Second Circuit has directed courts to adopt
14

a liberal interpretation of Rule 23 in order to maximize the
benefits to private parties and, in cases that involve alleged
manipulation of public markets,

to maximize the benefits to

the public provided by class actions.
Copper

Litig.,

("Sumitomo I");

182

F.R.D.

85,

See

In re Sumitomo
(S.D.N.Y.

88-89

1998)

see also In re Sumitomo Copper Litig.,

F.R.D. 480, 481 (S.D.N.Y. 2000)

194

("Sumitomo II"). As the Second

Circuit stated in Green v. Wolf Corp., "'if there is to be an
error made, let it be in favor and not against the maintenance
of the class action, for it is always subject to modification
should later developments during the course of the trial so
require."'

406 F.2d 291, 298 (2d Cir. 1968)

(quoting Esplin

v. Hirshi, 402 F.2d 94, 99 (10th Cir. 1968)).
As discussed supra,

this Court has already determined

that the Rule 23(a) and the relevant Rule 23(b) requirements
apart

from

Plaintiffs,

predominance

have

been

satisfied

by

and thus will limit the current inquiry to the

Rule 23(b) (3) predominance requirement as applicable to the
PwC and Citco Defendants.
B. DUTY OF CARE
Under New York law,
(a)

accountants owe a duty of care to

parties with whom they have contracted,

and

(b)

third

parties with whom they have a "relationship so close as to
approach

that

of

privity."

BHC
15

Interim

Funding,

L.P.

v.

Finantra Capital,
2003)
483

Inc.,

283 F.

Supp.

(quoting Parrott v. Coopers
(2000)).

Here,

Plaintiffs

&

do

2d 968,

Lybrand,
not

984

(S.D.N.Y.

95 N.Y.2d 479,

contend

that

they

contracted directly with either the PwC or Citco Defendants,
but rather that they are owed a duty of care because they had
a

"relationship so close as to approach that of privity."

Parrott, 95 N.Y.2d at 483. For accountants to be held liable
in negligence to noncontractual parties "who rely to their
detriment on inaccurate

financial

reports,"

the defendant

must have been (1) "aware that the financial reports were to
be used for a particular purpose or purposes;

( 2)

in the

furtherance of which a known party or parties was intended to
rely; and (3) there must have been some conduct on the part
of the accountants linking them to that party or parties,
which evinces the accountants' understanding of that party or
parties' reliance." Credit Alliance Corp. v. Arthur Andersen
&

Co.,

65

N.Y.2d

initially applied

536,
to

551

(1985).

accountants,

Although the
the

New

York

standard
Court

of

Appeals has stated that the Credit Alliance requirements "do
not apply to accountants only."

Sykes v. RFD Third Ave. 1

Associates, LLC, 15 N.Y.3d 370, 373 (2010).
On

the

particular

facts

before

the

Court,

common

evidence can show the existence of such duty of care by both
the PwC and Citco Defendants to the Proposed Class.
16

First,

common evidence can show that Defendants were "aware that the
financial reports were to be used for a particular purpose or
purposes." Credit Alliance,
requisite awareness,

65 N.Y.2d at 551. To show this

Plaintiffs must

demonstrate

that

the

particular use of the financial reports "was not merely one
possibility

among

many,

but

the

'end

and

aim

of

the

transaction.'" Id. at 549. See also Pension Comm. of Univ. of
Montreal Pension Plan v. Banc of Am. Sec., LLC, 592 F. Supp.
2d 608, 641 (S.D.N.Y. 2009)

(finding that the first prong of

the Credit Alliance test was satisfied when Citco,
defendant there,

also a

had indicated in a procedure manual that

"[t]he net asset value is an important indicator for a fund"
and that "[s]hareholders and partners will make decisions to
invest or redeem based on the net asset value"); Glanzer v.
Shepard,

233

N.Y.

236,

239

(1922)

(finding

that

the

law

imposed a duty on defendant who contracted with seller to
weigh

goods

before

sale

toward

defendant had, among other factors,

third

party

buyer

when

"held themselves out to

the public as skilled and careful in their calling,"

"knew

that the [goods] had been sold, and that on the faith of their
certificate payment would be made," and "sent a copy to the
plaintiffs

for

the

very

Prudential

Ins.

Co.

of Am.

purpose
v.

of

Dewey,

Palmer & Wood, 80 N.Y.2d 377, 385 (1992)
17

inducing

action");

Ballantine,

Bushby,

(finding that Credit

Alliance

criteria

"clearly

support

the

imposition

of

liability" when the "end and aim" of an opinion letter was to
provide a

third party with the

"financial

information it

required" ) .
The Court now explicitly finds that Plaintiffs can show
sufficient

common

evidence

to

demonstrate

that

the

transmission of PwC's audit opinions to the Funds' investors
was the "end and aim of the transaction." The record includes
emails from FGG employees directly to PwC requesting Fund
audits

as

soon

as

possible

because

"investors

have

requesting the audits for the past couple months."
Supp. Mem. of Law in Supp. of Mot.

for Class Cert.

been
(Pls.'

( "Pls. '

Supp. Mot.") Ex. 32. See also Pls.' Supp. Mot. Ex. 33 (email
from the FGG Chief Financial Officer to PwC noting that their
"flagship funds" have "[thousands] of investors who will be
asking for the financials")). Other emails show that PwC was
informed of,

and even directly involved in,

the process of

distributing audit statements to shareholders.
Mot.

Exs.

35,

36.)

Further,

(Pls.'

Supp.

audit plans to the investment

manager indicated that the first of three audit objectives
was

to

provide

"[i] ndependent

opinions

and

reports

that

provide assurance on financial information released by the
funds"

specifically

stakeholders."

"[f] or

shareholders

(Pls.' Supp. Mot. Ex. 2.)
18

and

other

The Court,

at the Motion to Dismiss stage,

found that

the PwC Defendants "failed to present any compelling argument
that the alleged facts fall short of leading to the plausible
inference that they were aware that the financial

reports

they produced for the Funds were to be used for the particular
purpose of evaluating investments in the Funds." Anwar II,
728

F.

Supp.

certification

2d

at

455

(emphasis

stage,

the

Court

added) . 4

again

finds

At

the

that

class

the

PwC

Defendants have not shown sufficient evidence to rebut this
inference.
Similarly, as to the Citco Defendants,
shown sufficient common evidence that

Plaintiffs have

the NAV statements,

among other financial statements, were to be used by investors

4

Among the allegations in the SCAC that supported the Court's
finding were: SCAC ~ 442 ("[The] PwC [Member Firms] ... kn[ew] that
Plaintiffs would use and rely upon [their] representations for the
particular purpose of determining whether to hold their assets in
the Funds and whether to purchase additional interests in the
Funds."); id. ~ 277 ("[The] PwC [Member Firms] acknowledged in the
Audit Plan that [their] audit engagement involved delivering to
shareholders and other stakeholders in the funds independent
opinions
and reports
that
provide
assurance
on
financial
information released by the Funds." (citation and quotation marks
omitted). The Court also noted: "A finding of the PwC Member Firms'
awareness of the financial
reports'
particular purpose of
evaluating investments in the Funds is further supported by
Plaintiffs' allegation that the PwC Member Firms 'knew that there
was no independent market mechanism or evidence to value the shares
and limited partnership interests in the Funds, and that there was
no other independently-verified third party financial information
about the Funds besides [the PwC Member Firms•] audited financial
statements.'" Anwar II, 728 F. Supp. 2d at 455.
19

(See,~'

making investment decisions.

Pls.' Supp. Mot. Ex.

53.)
Second, common evidence can show that Fund investors are
"known parties" who were intended to rely on audits and other
financial statements. Credit Alliance,

65 N.Y.2d at 551. As

this Court has stated before, the "known parties" prong "does
not require an auditor know a

'particular'

third party by

name." Anwar II, 728 F. Supp. 2d at 456. "Rather it recognizes
that while an accountant does not owe a duty to members of an
'indeterminate class,' Ultramares Corp. v. Touche,
170, 174

255 N.Y.

(1931), an accountant owes a duty to '[members] of

a settled and particularized class among the members of which
the report would be circulated.

.' White v. Guarente, 43

N.Y.2d 356, 401 (1977) ." Id. As the Court noted in Anwar IV,
the

"known

party"

prong

of

Credit

Alliance

"cannot

be

satisfied when the claim pertains to inducement of an initial
investment,"
Plaintiffs,

as

"Defendants,

who were not in pri vi ty with

cannot owe a duty to prospective investors who

were unknown to Defendants at the time they made the alleged
misrepresentations." Anwar v.

Fairfield Greenwich Ltd.,

F. Supp. 2d 92, 97 (S.D.N.Y. 2012)
this

Court

dismissed

without

884

("Anwar IV"). Accordingly,
prejudice

the

Plaintiffs'

negligence-based initial investment claims against PwC. Id.

20

Plaintiffs'
existing
(Pls.'

Fund

Supp.

sufficient

remaining claims

investors
Mot.

common

at

who made

PwC now concern

to

investments. 5

subsequent

Plaintiffs

10.)

evidence

against

show

have

that

PwC

presented
knew

the

identities of investors who made subsequent investments. For
example, the Record shows PwC reviewed and audited documents
containing investors' names, purchases and redemptions.
Pls.' Supp. Mot. Exs. 39-43.)

6

(See

Indeed, part of PwC's procedure

was to audit the "client's detailed shareholder listing" and
"verify" that the share register "contains the names of all
the investors."
Plaintiffs'
however,

still

(See,~·

claims
include

Pls.' Supp. Mot. Ex. 45.)
against
both

the
initial

Citco

Defendants,

investments

and

5

In Anwar IV, the Court discussed the implication of Stephenson
v. PricewaterhouseCoopers, LLP, 482 F. App'x 618, 620 (2d Cir.
2012), and Meridian Horizon Fund, LP v. KPMG (Cayman) (In re Tremont
Sec. Law), 487 F. App' x 636, 642 (2d Cir. 2012) ("Tremont") . The
Court found that Stephenson and Tremont did not preclude
satisfaction of the "known party" prong as the plaintiffs in
Stephenson did not appear to have made subsequent investments, and
the Second Circuit did not discuss plaintiffs'
subsequent
investments in its Tremont Summary Order.
6

The PwC Defendants argue that some of these Exhibits show only
"some nominal owners who bought or sold during a given period" or
that, despite emails indicating that a shareholder register should
be made available to auditors, there is no document showing that
such
a
register
was
actually
obtained.
(See
Opp.
Of
PricewaterhouseCoopers Accountants N.V. to Pls.' Supp. Mot. for
Class Cert. ( "PwC Opp. Mot.") at 2-3.) However, the Court has
determined that the Plaintiffs' evidence is sufficient at the class
certification stage. Insofar as warranted, such factual disputes
can continue to be litigated at the summary judgment stage or
thereafter.
21

subsequent

investments

because

Citco

allegedly

received

subscription documents from initial investors and provided
financial
Pls.'

statements

Supp.

Mot.

to

Exs.

subsequent
51,

52.)

investors.
Among

those

(See,
forms

~,

were

confirmations and monthly statements, on Citco's letterhead,
containing NAV-based valuations that the Citco Administrators
had calculated.
Third,

(See Pls.' Supp. Mot. Ex. 3.)

common evidence can show "some conduct on the

part of the accountants linking them to that party or parties,
which evinces the accountants' understanding of that party or
parties' reliance." Credit Alliance,
linking

conduct

does

not

require

65 N.Y.2d at 551. Such
actual

face-to-face

or

similar contact between an auditor and a third party. 7 Anwar
II,

728 F.

Supp.

United States,

2d at 456.

76 F.3d 1261,

See also Darking Genetics v.
1270

(2d Cir.

1996)

(stating

that "[w]e do not think that the [New York] Court of Appeals
intended the term 'linking conduct'

to be read so narrowly"

and interpreting Credit Alliance to permit an action "even if
the

plaintiff

had

never

interacted

directly

with

the

defendant"). As this Court has stated before, both in Anwar

7

In Anwar
from those
"that PwC'
purpose of
the Funds'

IV, the Court also distinguished the facts before it
in Tremont. The Court noted that Plaintiffs here allege
s 'Audit Plan' contained an acknowledgment that the
their engagement was to deliver information directly to
investors." Anwar IV, 884 F. Supp. 2d at 97.

22

IV and in its order denying reconsideration of Anwar II, the
"Linking Conduct" requirement can be satisfied "if auditors
recognized that their reports would be communicated directly
to

shareholders,

who

might

thus

rely

on

those

financial

statements to make investment decisions." Anwar IV,
Supp.
800

2d at 98
F.

Supp.

(quoting Anwar v.
2d 571,

573

884 F.

Fairfield Greenwich Ltd.,

(S.D.N.Y.

2011) . 8

See also

SEC

Investor Prot. Corp. v. BDO Seidman, LLP, 222 F.3d 63, 75 (2d
Cir.

2000)

(indicating

that

linking

conduct

could

be

established if the accountant had provided its audit report
directly to plaintiff,

or mentioned plaintiff in the audit

engagement letter with client,

or had shown awareness that

the audit would benefit primarily the plaintiff); Dinerstein
v. Anchin, Block & Anchin,
(denying

defendant's

defendant "admit[ted]

LLP,

motion

838 N.Y.S.2d 46,
for

summary

47

(2007)

judgment

when

it knew that its audit reports, which

were addressed to 'the Stockholders and Directors . . . 'were
to

be

used

by

particular purpose of

stockholder

and

directors

'managing and overseeing'") ;

for

the

Cromer

Fin. Ltd. v. Berger, No. 00 Civ. 2498, 2001 WL 1112548, at *5

Evidence uncovered during discovery might determine whether
Plaintiffs ultimately have proved all the elements of the Credit
Alliance test, and Defendants are free to raise Stephenson and
Tremont at the motion for summary judgment phase, when their
argument may benefit from a fuller record. See Anwar IV, 884 F.
Supp. 2d at 98.

23

(S.D.N.Y.

Sept.

addressed

'to

19,
the

("[Defendant's]

shareholders,'

sufficient

to

audit

constitute

[defendant]

between

communication'
shareholders

2001)

satisfy

and
the

reports,

'substantial

the

plaintiff-

'linking

conduct'

requirement discussed.").
Similarly,

here,

satisfied as to PwC.
existing

the

linking

conduct

requirement

is

Its audit opinions were addressed to

"shareholders."

(Pls.'

Supp.

at

Mot.

11.)

Significantly, the Record makes clear that PwC recognized or
should have recognized that their audits were designed or
served primarily to benefit the known investors.
Ex.

38 at 3

(See,

~,

(letter from FGG to PwC discussing benefits to

the "users of the financial statements --

[the] investors");

see also Ex. 2.)
Likewise as to Citco,

Plaintiffs have provided common

evidence showing Citco's understanding that investors relied
on Citco' s

NAV

statements.

For

example,

Citco' s

internal

procedures manual states explicitly that "[s]hareholders and
partners will make decisions to invest or redeem based on the
net asset value," and for that reason it is "very important"
that the calculated net asset value is "correct," "reliable,"
and "timely."

(Pls.' Supp. Mot. Ex. 53.)

24

C. RELIANCE
The second basis for the Second Circuit remand was for
this Court to indicate how common evidence can show reliance
by the class on alleged misrepresentations by the Citco and
PwC Defendants, either under the Affiliated Ute presumption
or otherwise.

See St.

Stephen's Sch.,

570 F.

App'x at 40.

When this Court first considered Plaintiffs' motion for class
certification, it concluded that common questions of law and
fact

clearly predominate over any indi victual

issues,

even

absent a "fraud created the market" theory or the Affiliated
Ute presumption of
Ltd.,

289 F.R.D.

reliance.

at 113.

Anwar v.

On remand,

Fairfield Greenwich

the Court again finds

that common evidence can show reliance by the class on alleged
misrepresentations by both the Citco and PwC defendants.
1. Common Evidence Can Show Reliance by the Class
The Court "cannot - - and does not - - presume, as a matter
of law,

that the element of reliance is satisfied for each

putative class member." Ge Dandong v.

Pinnacle Performance

Ltd., No. 10 Civ. 8086 JMF, 2013 WL 5658790, at *11 (S.D.N.Y.
Oct. 17, 2013). Instead, courts can conclude,

"based on the

evidence in the record at this stage of the proceedings, that
a

reasonable

factfinder

could

conclude

beyond

[sic]

a

preponderance of the evidence that each individual plaintiff
relied

on

the

defendants'

uniform
25

representations."

Id.

(internal quotation marks

and alterations

omitted)

Where

"reliance is too individualized to admit of common proof,"

class certification is inappropriate. In re U.S. Foodservice
Inc. Pricing Litig.,

729 F.3d 108, 119 (2d Cir. 2013)

denied sub nom. U.S. Foods,

cert.

Inc. v. Catholic Healthcare W.,

134 S. Ct. 1938 (2014). However, "the fact that class members
will show causation by establishing reliance on a defendant's
misrepresentations
entirely

beyond

. does not place fraud-based claims
the

reach

of

Rule

23,

provided

that

individualized issues will not predominate." Id.
Courts in this District have used this standard to show
that plaintiffs would "not have purchased a product but for
a defendant's uniform misrepresentations and omissions." Ge
Dandong,

2013 WL 5658790,

at *9. And "in the context of a

financial transaction -- which does not usually implicate the
same type or degree of personal idiosyncratic choice as does
a

consumer

purchase

circumstantial

proof

representation." Id.

payment
of

alone

reliance

upon

may

constitute

a

financial

(internal quotation marks omitted). See

also In re U.S. Foodservice, 729 F.3d at 119-20 ("[P]ayment,
as

we

have

said,

may

constitute

circumstantial

proof

of

reliance upon a financial representation" (internal quotation
marks omitted)).

26

Here, as in In re U.S. Foodservice, the evidence in the
record "does not raise the concern of issues of individual
knowledge

predominating."

omitted) .
"actual

individual

Emps.'

knowledge

on

marks

Ret.

part

of

a

specific

Sys. Of Miss v. Merrill Lynch & Co.,

'must have'

insufficient

the

(internal quotation marks omitted). See also

F.R.D. 97, 119 (S.D.N.Y. 2011)
members

(quotation

121

The record does not contain evidence suggesting

customer." Id.
Pub.

at

Id.

("Sheer conjecture that class

discovered

to

277

def eat

[the misrepresentations]
Plaintiff's

showing

is
of

predominance.").
Plaintiffs have demonstrated that common evidence can
show reliance for the misrepresentation claims against the
PwC

Defendants.

Plaintiffs

claim

that

misrepresented the value of the Funds'

the

audit

reports

assets and that PwC

had verified these facts through proper auditing processes.
(See

Pls.'

Supp.

Mot.

at

22.)

Moreover,

Plaintiffs

have

provided numerous deposition transcripts and declarations in
which

investors

have

testified

that

they

relied

on

the

financial statements and audits in making their investment
decisions.

(See Pls.'

Supp.

Mot.

Exs.

54-61,

67,

68,

71.)

Further, as in Ge Dandong, payment constitutes circumstantial
proof

of

reports.

reliance
Here,

upon

the

representations

in

the

audit

investors chose to invest and continued to
27

make

subsequent

supposedly

investments

"clean"

audit

after

being

statements.

provided

Plaintiffs'

with
expert

opined that "[a] rational investor would not invest money in
a fund that did not have an audit opinion from a recognized
accounting

firm

in

made

accordance

with

professional

standards." (Pls.' Supp. Mot. Ex. 74 at 13-14.)
Plaintiffs have also demonstrated that common evidence
can show reliance on the NAV statements for the remaining
claims

against

the

Citco

Defendants.

Again,

Plaintiffs

provide numerous declarations and deposition transcripts from
investors

claiming

that

in

deciding

to

purchase

or

hold

investments in the Funds, they relied on the calculations and
representations in the NAV statements.

(See Pls.' Supp. Mot.

Exs. 54, 55, 56, 57, 58, 59, 60, 72.)
Further, it is clear that common issues predominate over
any individual issues. As this Court stated in its initial
class

certification

decision,

"even

assuming

Defendants'

claims that certain 'communications to class members may not
have been uniform, they allegedly were uniformly misleading.
The variations are therefore immaterial and will not defeat
class certification.'

Bresson v. Thomson McKinnon Sec. Inc.,

118 F.R.D.

(S.D.N.Y.

339,

343

1988) ."

289

F.R.D.

at

113.

Further, even if some individual plaintiffs have stated that
they did not receive or read audit reports or NAV statements
28

~'

(see,

Citco Defs.' Memo. of Law in Opp. to Pls.' Mot.

for Class Cert.
21) ,

this

requires
issues.

("Citco Opp. Mot.") at 5, 7; PwC Opp. Mot. at

does
that

not

preclude

common

issues

class

certification,

predominate

over

which

individual

Individual issues can still exist beyond the class

certification stage,
later stage. See,
Cir. 2010)

and the Court can address those at a

~'

Brown v. Kelly, 609 F.3d 467, 483 (2d

("We acknowledge that the district court will be

required to make

individualized inquiries with respect

to

some of the plaintiffs and some of the claims. We conclude,
however,

that it was within the district court's discretion

to find that common issues predominated.").
2. Affiliated Ute Presumption Applies to
Federal Securities Claims Against Citco

Plaintiffs'

The Court also finds that the Affiliated Ute presumption
further supports its holding as it relates to the federal
securities
Defendants.

claims
The

Plaintiffs

Affiliated

assert

Ute

against

rebuttable

the

Citco

presumption

of

reliance applies "if there is an omission of a material fact
by one with a duty to disclose" such that "the investor to
whom the duty was owed need not provide specific proof of
reliance."

Stoneridge

Inv.

Partners,

LLC

v.

Scientific

Atlanta, 552 U.S. 148, 159 (2008). A fact is material if there
is

"a

substantial

likelihood

29

that

the

disclosure

of

the

omitted fact would have been viewed by the reasonable investor
as having significantly altered the total mix of information
made available." Harkavy v. Apparel Indus.,

Inc.,

571 F. 2d

737, 741 (2d Cir. 1978).
Courts in this District have found consistently that the
Affiliated Ute presumption applies only to federal securities
laws,

but is

"not appropriate in the common law context."

Int'l Fund Mgmt. S.A. v. Citigroup Inc., 822 F. Supp. 2d 368,
387

(S.D.N.Y.

2011)

(collecting cases). As such,

the Court

will address the Affiliated Ute presumption only as it applies
to

the

federal

securities

claims

asserted

by

Plaintiffs

against Citco Defendants.
As

to

such

claims,

the

Citco

Defendants

argue

that

Affiliated Ute is inapposite because Plaintiffs' claims turn
predominately
omissions.

on

alleged

misrepresentations

rather

than

(Citco Opp. Mot. at 11.) Indeed, courts generally

apply the presumption "primarily" to omission claims. Starr
ex rel.

Estate of Sampson v. Georgeson S'holder,

F.3d 103,

109 n.5

(2d Cir.

2005).

Inc.,

412

See also In re Interbank

-- ---

Funding Corp. Sec. Litig., 629 F.3d 213, 215 (D.C. Cir. 2010)
(declining to apply the presumption when the "gravamen of the
[plaintiffs']

complaint"

consisted

misrepresentations) .

30

of

affirmative

Courts in this District,
approach

as

a

considers

"flexible

whether

reliance

where

a

and

case

would

however,

practical

"primarily

be

have described this
approach"

involv [es]
to

difficult

that

omissions

prove

because

Plaintiffs' claim is based on a negative." In re UBS Auction
Rate Sec. Litig., No. 08 Civ. 2967 (LMM), 2010 WL 2541166, at
*26

(S.D.N.Y.

June 10,

2010).

The Supreme Court explained

these evidentiary concerns in Basic Inc. v. Levinson, noting
that "[r]equiring a plaintiff to show a speculative state of
facts,

i.e.,

how he would have acted if omitted material

information had been disclosed" would "place an unnecessarily
unrealistic evidentiary burden" on the plaintiff.
224, 245
Ute

(1988). As such,

presumption

concealed,

"the theory behind the Affiliated

that,

plaintiffs

485 U.S.

when

should

material

only have

to

information
prove

that

is
'a

reasonable investor might have considered the omitted facts
important in the making of

[her]

investment decision'

-- is

not undermined simply because a defendant makes misstatements
at the same time it omits material information." Fogarazzao
v.

Lehman

Bros.,

232

F.R.D.

176,

186

make

arguments

(S.D.N.Y.

2005)

(alteration in original) .
The

Citco Defendants

here

similar

to

those advanced by the defendants in In re Beacon Associates
Litigation,

in which one

defendant
31

provided research and

advice about investment managers to a co-defendant investment
advising company as well as to a co-defendant who operated a
fund

investing

in

Madoff

and

BLMIS.

See

282

F.R.D.

315

(S.D.N.Y. 2012). In Beacon, the court determined that common
questions

were

defendants,

when

"central"
"[a]t

to

the

the
heart

claims
of

against

those

Plaintiffs'

claims

against both sets of defendants is their assertion that they
withheld the

same material

information from all

of

their

clients or investors: namely, that neither they nor [a third
defendant]

were

performing

due

diligence

on

Madoff's

operations any longer." Id. at 327. Further, the Beacon court
applied

the Affiliated Ute

rejecting

presumption of

argument

defendants'

that

reliance
the

after

"proposed

representatives are subject to unique defenses" because the
class

representatives

testified

in their depositions

they "did not actually read or rely upon the

that

[defendant's

offering memoranda] when they chose to invest in the [fund] ,
and/or did not decide to invest in the [fund] on the basis of
[defendant's]
that

the

agents,

advice."

disclosure

Id.

at 328.

obligations

The Beacon court noted

also

ran

to

Plaintiffs'

and that evidence that some of the proposed class

representatives did not read the offering memoranda or rely
on

the

defendants'

investment

32

advice

does

not

relieve

defendants of disclosure duties towards these plaintiffs. See
id. at 329.
Similarly,
113

(S.D.N.Y.

in Cromer Fin.

2001),

the

court

Ltd. v. Berger,
applied

a

205 F.R.D.

presumption of

reliance to misrepresentations in NAV statements relating to
an offshore investment fund. There, the Fund's administrator
and auditor argued that the market for Fund shares was not
"open"

or

"developed"

and

thus

not

entitled

to

a

Basic

presumption of reliance. Id. at 130. The court noted, however,
that

the

"principles

supporting

rebuttable presumption in Basic . .

the

application

of

a

are not that the market

need be 'open' and 'developed' per se, but that those features
are

typical

publicly

of

markets

available

information,

misrepresentations."
court

noted

that

Id.

"an

scheme

share
and,

price

audit

'reflects

hence,

Turning to the
accurate

immediate impact on .
fraudulent

where

any

facts,
would

all

material

the Cromer

have

had

an

. calculation of the NAV," and "the

alleged

here

depended

upon

a

regular

recalculation of the NAV at an inflated value." Id. at 131.
Here,

among the material omissions Plaintiffs allege,

and support with common evidence, are that Citco Defendants
did not disclose that:

(1)

"its internal auditors had grave

doubts about the veracity of the Funds' financial information
and

whether

the

Funds'

assets
33

existed";

( 2) "it

was

not

following its own, or industry-standard procedures, but was
basing the NAV solely on unverified information from Madoff,
never

reconciling

source";

(3)

that

information

with

an

independent

its attempts to verify that the Funds'

assets

existed failed due to Madoff's lack of cooperation in meetings
with Citco"; (4) "it was doing nothing to supervise Madoff as
Citco' s

sub-custodian";

Citco' s internal

and

(5)

'Watch List'

"Fairfield Sentry was

as a

'high risk fund.'"

on
(See

Pls.' Supp. Mot. at 18.) The omissions alleged here are common
to all Plaintiffs; none of these Plaintiffs were made aware
of the auditors' doubts, the failure to reconcile information
used to calculate NAV as required by internal and industrystandard procedures, the break-down of meetings with Madoff,
or of Fairfield Sentry's

placement on Citco's "Watch List."9

The Citco Defendants argue that "[l]abeling these items
as

omissions

is

representations

just
about

another way of
the

Funds'

NAV

saying
did

that

not

Citco' s

accurately

reflect the Funds' assets." (Citco Opp. Mot. at 12.) The Court
is not persuaded by the Citco Defendants' semantic argument.
Instead, as in Beacon, Plaintiffs have provided evidence that
the Citco Defendants "withheld the same material information
from all of their clients or investors: namely, that neither

9

Plaintiffs provide common evidence in the record to support each
of these omissions. See Pls.' Supp. Mot. at 3-5.
34

they nor

[another party]

were performing due diligence on

Madoff's operations any longer." Beacon, 282 F.R.D. at 327.
Once plaintiffs have successfully invoked the Affiliated
Ute presumption, the burden shifts to defendants to rebut it
by demonstrating that the plaintiffs did not in fact rely
upon the omission when they made their investment decisions.
DuPont v. Brady, 828 F.2d 75 (2d Cir. 1987). In order to meet
this burden, defendants must prove, by a preponderance of the
evidence,

that disclosure of the information omitted would

not have altered the plaintiffs' investment decision. See id.
at 78. Here, as in Cromer,

"[i]t is difficult to imagine an

investor putting money into any fund without relying on the
integrity of the process for calculating the fund's NAV, as
supported
similarly,

by

auditor

review."

205

F.R.D.

at

131.

And

"the theory advanced by the plaintiffs in this

case also presumes that investors rely on the integrity of a
process -- namely, the processes by which the NAV of a private
fund is determined and then confirmed by that fund's auditor."
Id.
Accordingly,
this

action,

at

this

stage of

both common evidence

class certification in
and the Affiliated Ute

presumption are sufficient to show reliance as to Plaintiffs'
federal securities claims against the Citco Defendants.

35

III. ORDER

For the reasons discussed above, it is hereby:
ORDERED

plaintiffs

that
AXA

the

motion

Private

(Docket

Management,

No.

775)

Pacific

Medical Center Employees Retirement Trust,

of

West

lead
Health

Harel Insurance

Company Ltd., Martin and Shirley Bach Family Trust, Natalia
Hatgis,

Securities

Bypass

Trust,

& Investment

and

St.

Company

Bahrain,

School

Stephen's

Dawson

for

class

certification of their remaining claims against defendants
The Citco Group Ltd., Citco Fund Services (Europe) B.V., Citco
(Canada),

Inc.,

Nederland

N.V.

(Bermuda)

Ltd.

Citco
Dublin

Accountants

Custody

Branch,

(collectively,

PricewaterhouseCoopers,
Netherlands

Global

LLP,

and

the

Citco

Citco

Fund

Bank

Services

"Ci tco Defendants") ;

and

N.V.

N.V.,

and

Pricewaterhousecoopers

(collectively,

the

"PwC

Defendants") pursuant to Federal Rule of Civil Procedure 23
is GRANTED as modified herein.
SO ORDERED.

Dated: New York, New York
3 March 2015

J

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U.S.D.J.

36