Anwar et al v. Fairfield Greenwich Limited et al

Filing 1408

ENDORSED LETTER addressed to Judge Victor Marrero from Robert A. Wallner dated 8/21/2015 re: We write pursuant to Your Honor's local rules to request a pre-motion conference regarding the Trustee's proposed motion to intervene, pursuant to Fed. R. Civ. P. 24, for the limited purpose of objecting to the Anwar plaintiffs' settlement with the Citco Defendants. ENDORSEMENT: The parties are directed to respond by 9-3-15, by letters not to exceed three (3) pages to the matter set forth above by the New Greenwich Litigation Trustee. (Signed by Judge Victor Marrero on 8/28/2015) (lmb)

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NEW YORK
LOS ANGELES
DETROIT

Robert A. Wallner
Direct Dial: 212-946-9335
[e-mail]

August 21, 2015
VIA FAX
The Honorable Victor Marrero
United States District Judge
Southern District of New York
Daniel Patrick Moynihan United States Courthouse
500 Pearl Street
New York, New York 10007

Re: Anwar v. Fairfield Greenwich Ltd., 09.;CV-118 (VM)
Dear Judge Marrero:
We represent New Greenwich Litigation Trustee, LLC, as Successor Trustee ("Trustee")
of the Greenwich Sentry and Greenwich Sentry Partners Litigation Trusts. We write pursuant to
Your Honor's local rules to request a pre-motion conference regarding the Trustee's proposed
motion to intervene, pursuant to Fed. R. Civ. P. 24, for the limited purpose of objecting to the
Anwar plaintiffs' settlement with the Citco Defendants. The deadline for objections is October
16, 2015, and a fairness hearing is scheduled for November 20, 2015. See Order Preliminarily
Approving Settlement and Providing for Notice for Prop<l)sed Settlement, dated August 13, 2015,
Doc. No. 1402, ,, 6, 23.
The Trustee is prosecuting actions in New York state court against Citco Fund Services
(Europe) BV, Citco (Canada) Inc., and other entities who are also defendants in Anwar.'
Although not a party to the Anwar action, the Trustee has number of objections to the proposed
settlement and, accordingly, seeks to intervene in order lo present its objections. See generally
Marino v. Ortiz, 484 U.S. 301, 304 (1988); Brennan v. New York City Bd of Educ., 260 F.3d
123, 130-33 (2d Cir. 2001).
For example, the [Proposed] Final Judgment and Order of Dismissal with Prejudice, Doc.
No. 1398-5,, 19, states in part: "Nothing in this paragraph precludes the Citco Defendants from
arguing that the settlement proceeds in this case are an Offset against claims that may be made
against them in other proceedings." This provision is objectionable insofar as, inter alia, it may
1

See New York County Clerk's Index Nos. 600469/2009 and 600498/2009. The actions were
dismissed by the lower court, and the Trustee has appealed those dismissals to the First
Department.

One Pennsylvania Plaza · New York, NY 10119 · T 212.594 5300 · F 212.868.1229 · milberg.com

The Honorable Victor Marrero
August 21, 2015
Page2

imply that this Court has determined that Citco has coloral;>le rights to offset the Trustee's claims.
Moreover, the settlement documents, including the propo~ed class notice, fail to articulate (i) the
basis of any offset, and (ii) how any offset would be calcuilated from the gross and net settlement
amounts and allocated among the various proceedings. Tb make matters worse (and confusing),
Citco has represented that "discovery has confirmed that any alleged Citco misconduct injured
the Funds, and injured Fund investors (if at all) only derivatively .... ," see Citco Defendants'
Memorandum of Law in Opposition to Plaintiffs' Motion for Class Certification, dated
September 15, 2014, at 18 n.24 (emphasis in original; excerpt attached as Exhibit A hereto)); see
generally Nat'! Super Spuds, Inc. v. N.Y. Mercantile Exch., 660 F.2d 9, 17 (2d Cir. 1981), while
the Anwar plaintiffs have represented that they sued "to recover their own losses .... " See Anwar
v. Fairfield Greenwich Ltd., Case No. 13-936-cv, Oppos?tion to Rule 23(f) Petition of the Citco
Group Defendants, Doc. 38, at 18 (2d Cir. Apr. 15, 2013) (emphasis in original).
We have unsuccessfully attempted to resolve fully our objections with the settling
parties. Accordingly, we seek intervention at this time in order to avoid any dispute concerning
the timeliness of an intervention request. See generally Order dated March 7, 2013, Doc. No.
1071, at 3 (denying intervention request on timeliness grounds where, inter alia, request was
made "less than one month prior to the final fairness hearing").

7&'~
Robert A. Wallner
Attachment
cc (via email):
David A. Barrett, Esq.
Sarah L. Cave, Esq.
Timothy A. Duffy, Esq.
Robert C. Finkel, Esq.
Andrew G. Gordon, Esq.
Victor E. Stewart, Esq.

709590vl

EXHIBIT A

645, 648 (2d Cir. 2009) (same).

II.

A Class Action Is Not A Superior Method Of Adjudicating Plaintiffs'
Holder Claims Because Those Claims Are Derivtitive, Not Direct, In Nature
If purportedly direct claims asserted in a putative class action are derivative in

nature, a class action is not "superior to other available methods for fairly and efficiently
adjudicating the controversy." Fed. R. Civ. P. 23{b)(3).

22

Instead, a derivative action or a direct

action by the entity is more appropriate. 23 · Here, plaintiffs' common-law holder claims are
derivative in nature. 24 Accordingly, those claims do not satisfy the superiority requirement.

A.

25

The Direct/Derivative Issue Is Governed by Delaware Law for the
Onshore Funds and British Virgin Islands Law for the Otl'shore Funds
Under the applicable New York choice-of-law principles, see, e.g., Licci ex rel.

Licci v. Lebanese Canadian Bank, SAL, 672 F.3d 155, 157 (2d Cir. 2012), whether plaintiffs'
22

See In re Sonus Networks, Inc. Sec. Litig., 247 F.R.D. 244, 253 (D. Mass. 2007); City P 'ship Co. v. Jones
Intercable, Inc., 213 F.R.D. 576, 589-91 (D. Colo. 2002); Farrie v. Charles Town Races, Inc, 901
F. Supp. 1101, 1110-11 (N.D. W. Va. 1995).

23

In fact, actions brought on behalf of the Funds that are substantiidly similar to this one arc pending in other
forums. A bankruptcy trustee for the Onshore Funds sued Citco ~nd PwC, among others, in state court in New
York (Exs. 115-16); those cases were originally brought as derivMive actions. Investors in one of the Offshore
Funds brought a derivative action against Citco and PwC that wi$ later transferred to bankruptcy court in New
York. (Ex. 110.) The liquidator for the Offshore Funds has sued PwC Canada in the Ontario courts for the
same claims. (Ex. 118). The same liquidator for the Offshore Funds has also sued PwC Netherlands in
Amsterdam. See Rb. Amsterdam 30 mei 2012 (Krys I PricewatethouseCoopers Accountants) (Neth.).

24

In ruling on defendants' motions to dismiss, this Court stated that whether plaintiffs' common-law claims were
direct or derivative was "ripe for forther factual development" ar)d thus "more properly decided at the class
certification or summary judgment stage of this proceeding" and!:that further factual development could "change
the premise for the Court's ruling on" this issue. Anwar II, 728 F. Supp. 2d at 402. Although Citco maintains
that the question of whether plaintiffs' holder claims are direct ot derivative is a legal one, see Buckley v.
Control Data Corp., 923 F.2d 96, 98 (8th Cir. 1991), discovery has confirmed that any alleged Citco
misconduct injured the Funds, and injured Fund investors (if at all) only derivatively, as explained below. See
infra 21 n. 30.

25

Plaintiffs are wrong to suggest that this Court is somehow precluded from considering whether the superiority
requirement of Rule is satisfied. (See PB 25 n.23.) That requirement must be met to certify any class.
Furthermore, the Second Circuit remanded for further proceedinSs consistent with the Court's order and with
the developed record, and stated that this Court should consider ~·any facts revealed by discovery that has taken
place since the original certification order." St. Stephen's School, 2014 WL 2766174, at *2. Nothing in the
Court's opinion limits the scope of further proceedings in this C(>urt, and certainly the opinion cannot be fairly
read to suggest that plaintiffs are relieved of their obligation to satisfy all of the requirements of Rule 23.

18
CONFIDENTIAL