Anwar et al v. Fairfield Greenwich Limited et al

Filing 1413

DECISION AND ORDER: For the reasons stated above, it is hereby ORDERED that the request of New Greenwich Litigation Trustee, LLC, as Successor Trustee of the Greenwich Sentry and Greenwich Sentry Partners Litigation Trusts ("Trustee") for a pre-motion conference concerning its proposed motion to intervene in this action for the purpose of objecting to the Proposed Citco Settlement is DENIED. (As further set forth in this Order) (Signed by Judge Victor Marrero on 9/15/2015) (lmb) Modified on 9/15/2015 (lmb).

i •r >lT\'.l \T

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-----------------------------------x
09-cv-0118 (VM)

PASHA ANWAR, et al.,
Plaintiffs,

DECISION AND ORDER

- against FAIRFIELD GREENWICH LIMITED,
et al.,
Defendants.
--------------------------------~--x

VICTOR MARRERO, United States Didtrict Judge.
I

On

August

13,

2015,

this

Court

issued

an

order

preliminarily approving a partial settlement of this action
("August

13

Order")

(Dkt.

No.

1402),

resolving

claims

asserted by the Representative Plaintiffs on their own behalf
and on behalf of the Settlement .class

(collectively,

"Anwar

Plaintiffs") against the Citco Defendants, as embodied in the
Stipulation

of

Settlement

("Proposed

Citco

Settlement").

(Dkt. No. 1398.)
In the August 13 Order,
Stipulation

resulted

negotiations; and (b)

from
the

the Court found that "(a)
good

Stipul~tion

faith,

the

arm's-length

is sufficiently fair,

reasonable and adequate to the $ettlement Class Members to
warrant

providing notice

of

th~

Settlement

to

Class Members and holding a Settlement Hearing."
1402.) The Court set a

Settleme~t

Settlement
(Dkt. No.

Hearing for November 20,

2015 to determine "whether the prpposed partial Settlement of

the Action on the terms and conditions provided for in the
!

Stipulation

is

and

reasonable,

fair,

adequate

to

the

Settlement Class and should be apwroved by the Court; whether
a Final Judgment and Order of Disimissal with Prejudice .
as provided in Exhibit B to the Stipulation should be entered
herein;

whether the proposed Plan of Allocation should be

approved; to determine the amount of fees and expenses that
should be awarded to Plaintiffs'

Counsel; and to rule upon

such other matters as the Court may deem appropriate."
By

letter

Litigation

dated

Trustee,

August

LLC,

as

2015,

21,

New

Successor

(Id.)

Greenwich

Trustee

of

the

Greenwich Sentry and Greenwich Sentry Partners Litigation
Trusts
regarding

("Trustee")
the

requested

Trustee's

pre-motion

proposed

conference

motion

a

intervene,

to

pursuant to Fed. R. Civ. P. 24, for the purpose of objecting
to

the

Letter").

Proposed

Citco

Settlement

("August

21

Trustee

(Dkt. No. 1408.) The Trustee argues that Paragraph

19 of the Proposed Final Judgment and Order of Dismissal with

Prejudice

("Proposed

(Dkt.

Order")

No.

1398

Ex.

5)1

is

objectionable as it implies that the Court has determined
that

Citco has

"colorable rights

to offset

the Trustee's

1 The relevant portion of Paragraph 19 $tates:
" . . . Nothing in this
paragraph precludes the Citco Defendant~ from arguing that the
settlement proceeds in this case are an! off set against claims that may
be made against them in other proceedings.
" (Dkt. No. 1398 Ex. 5,
, 19.)

2

claims."

(Dkt.

No.

14 08.)

that the Proposed Citco

Furth~rmore,

Settlem~nt,

the Trustee claims

including the proposed

class notice, does not indicate the basis of the offset nor
how such an offset would be calculated. This Court ordered
'

the Parties to respond to the Aµgust

21 Trustee Letter by

September 3, 2015.
By letter dated September 3, 2015, the Anwar Plaintiffs
responded to the August 21 Trustee Letter ("September 3 Anwar
Plaintiffs Letter") .

(Dkt.

No.

1411.)

The Anwar Plaintiffs

argue that the Proposed Citco Settlement "expressly states
that it does not operate to release 'any claims asserted or
which may be asserted by the Funds,
dismissed)

or the pending

(though

derivative litigation brought in connection with

the Funds.'" 2 (Id.) The Anwar Plaintiffs also assert that the
Trustee does not have standing to object to the Proposed Citco
Settlement because "the Trustee is not a class member and
cannot show 'formal legal prejudice.'"
v.

Piedrahita,

756 F.3d 211,

219

(Id.)

(2d Cir.

(quoting Bhatia
2014)).

Finally,

the Anwar Plaintiffs contend that the Trustee could not meet
the requirements for intervention under Fed. R. Civ. P. 24.
By letter dated September 3, 2015, the Citco Defendants
also responded to the August 21 Trustee Letter ("September 3

2 This language is included in both the Proposed Citco Settlement (Dkt.
No. 1398, , 16) and the Proposed Order ~(Dkt. No. 1398 Ex. 5, , 16).

3

Citco Letter").

(Dkt.

No.

1410.)

The Citco Defendants join

the September 3 Anwar Plaintiffs Letter in full and further
argue

that

the

Trustee

~tanding

lacks

to

object

to

the

Proposed Citco Settlement. In adqition, the Citco Defendants
argue that the Trustee's allegation that the class notice was
deficient

th~

for not reflecting

Citco Defendants'

offset

rights is inaccurate as the notice fully complies with Fed.
R. Civ. P. 23(2).
The Trustee responded by letter dated September 3, 2015
("September 3 Trustee Letter") and reiterates that while the
Trustee agrees that the Proposed Citco Settlement does not
release the Trustee's claims, it could be read to offset the
Trustee's damages, resulting in prejudice and providing the
basis for the Trustee's standing to object.

(Dkt. No. 1409.)

A "non-settling defendant generally lacks standing to
object to a court order approving a partial settlement because
a non-settling defendant is ordinarily not affected by such
a settlement." Bhatia,

756 F. 3d at 218

Fogel, 989 F.2d 93, 98

(2d Cir. 1993)). However, there is a

recognized

exception

to

this

defendant can "demonstrate that

rule
~t

(citing Zupnick v.

when

a

non-settling

will sustain some formal

legal prejudice as a result of the settlement." Id.

(citing

Zupnick, 989 F.2d at 98).
Formal legal prejudice exists in rare circumstances such
4

as

when

a

"settlement

agreemen:t

formally

strips

a

non-

settling party of a legal claim 9r cause of action, such as
a

cross-claim

for

contribution

or

indemnification,

invalidates a non-settling party's contract rights,
right to present relevant evidence at a trial." Id.
omitted) .

In

Bhatia,

the

settlement which does not

Secqnd
preve~t

Circuit

or the

(emphasis

held

that

"a

the later assertion of a

non-settling party's claims (although it may spawn additional
litigation to vindicate such claims) , does not cause the nonsettling party 'formal' legal prejudice." Id. at 219.
The dispute here focuses on Paragraph 19 of the Proposed
Order,

which

states

in

relevant

part:

"Nothing

in

this

paragraph precludes the Citco Defendants from arguing that
the settlement proceeds in this case are an off set against
claims that may be made against them in other proceedings."
(Dkt. No. 1398 Ex. 5,

~

19.) The language of this provision

in no way prevents the Trustee from asserting the claims or
defenses
("Nothing

available
in

the

to
Final

it.

See

Order

Bhatia,
precludes

756
the

F.3d

at

218

Non-Settling

Defendants from asserting in the district court or in other
litigation any claims or defenses that may be available to
them."). The Trustee concedes as much, stating: "The settling
parties and the Trustee agree that the proposed settlement
does not release the Trustee's claims."
5

(Dkt. No. 1409.)

Further,

the

Trustee's

argument

that

it

prejudice because the Proposed Citco Settlement
read

to

somehow

unavailing.

(Id.)

'offset'

the

Trustee's

(emphasis

omitted) .

suffers
"could be

damages"

is

argument

is

This

speculative and thus not sufficient to demonstrate
legal

prejudice.

See,

In

~,

re

Commodities Litig., No. 10-CV-3617,
(S.D.N.Y.

July 15,

2014),

Platinum

formal

& Palladium

2014 WL 3500655, at *6

appeal dismissed

(Oct.

6,

2014)

("The trustee has not shown formal legal prejudice here and
does not have standing to object.

Courts do not typically

prognosticate about the res judicata effect of current orders
in some future circumstance.").
The Court therefore finds that the Trustee does not
have standing to object to the Proposed Citco Settlement.
ORDER

For the reasons stated above, it is hereby
ORDERED

Trustee,

LLC,

that the request of New Greenwich Litigation
as Successor Trustee of the Greenwich Sentry

and Greenwich Sentry Partners Litigation Trusts

6

("Trustee")

for a pre-motion conference concerning its proposed motion to
intervene in this action for the .purpose of objecting to the
Proposed Citco Settlement is DEN:I;ED.

SO ORDERED.

Dated:

New York, New York
15 September 2015

Victor Marrero
U.S.D.J.

7