Anwar et al v. Fairfield Greenwich Limited et al

Filing 309

RESPONSE re: (307 in 1:09-cv-00118-VM-THK) Objection to Report and Recommendations,. Document filed by David I. Ferber, Frank E. Pierce, Frank E. Pierce Ira, Miguel Lomeli, Morning Mist Holdings Limited, David I. Ferber. (Attachments: #1 Exhibit A, #2 Exhibit B)Filed In Associated Cases: 1:09-cv-00118-VM-THK, 1:09-cv-02366-VM, 1:09-cv-02588-VM(Wallner, Robert)

Anwar et al v. Fairfield Greenwich Limited et al

Doc. 309 Att. 1

EXHIBIT A

Dockets.Justia.com

Case 1 :09-cv-00118-VM-THK Document 237 Filed 09/14/2009 Page 1 of 10

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
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ANAR, et al. v. FAIRFIELD GREENWCH
LIMITED, et al.

Master File No. 09 CV 0118 (VM) 09 CV 5012 (VM) (Morng Mist Action) 09 CV 2366 (VM) (Ferber Action) 09 CV 2588 (VM) (Pierce Action)
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DERIVATIVE PLAINTIFFS' SUR-SUR-REPLY MEMORADUM OF LAW IN FURTHER SUPPORT OF THEIR MOTIONS TO REMA

MILBERGLLP
One Pennsylvania Plaza New York, New York 10119 Tel. [phone]
Fax: [phone]

SEEGER WEISS LLP One Wiliam Street New York, New York 10004
TeL.: [phone]

Fax: [phone]
Attorneys for Derivative Plaintiff

Case 1 :09-cv-00118-VM- THK Document 237 Filed 09/14/2009 Page 2 of 10

TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ......................................................................................................... ii

PRELIMARY STATEMENT .....................................................................................................1
ARGUMENT...................................................................................................................................1

A. FGA Does Not Satisfy CAFA's 100-Person Requirement......................................1

B. FGA Mischaracterizes GSP's Subscription Agreements.........................................4
C. FGA Misconstrues CAFA's Internal Affairs Provision...........................................4
D. FGA Misconstres the 100-Person Monetary Relief

Claim Requirement ..............5

CONCLUSION................................................................................................................................5

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TABLE OF AUTHORITIES
CASES

Page
In re Am. Intl Group, Inc.,
965 A.2d 763 (DeL. Ch. 2009)....................................................................................................4

Anwar v. Fairfield Greenwich Ltd, 2009 U.S. Dist. LEXIS 37077 (S.D.N.Y. May 1, 2009) ...........................................................1
Furtado v. Bishop,

604 F.2d 80 (1st Cir. 1979)........................................................................................................2
La. ex reI. Caldwell v. Allstate Insurance Co., 536 F.3d 418 (5th Cir. 2008) .....................................................................................................2
LaSala v. Bank of Cyprus Public Co. Ltd,

510 F. Supp. 2d 246 (S.D.N.Y. 2007)........................................................................................3

LaSala v. Bordier et Cie, 519 F.3d 121 (3d Cir.), cert. denied, 129 S. Ct. 593 (2008)......................................................3
Liman v. Midland Bank

Ltd,

309 F. Supp. 163 (S.D.N.Y. 1970).............................................................................................5
Puglisi v. Citigroup Alternatives Invs. LLC, 08 CV 09774, 2009 WL 1515071 (S.D.N.Y. May 29, 2009)....................................................

Ross v. Bernhard, 396 U.S. 531 (1970)...................................................................................................................5
State of Oregon v. Oppenheimerfunds, Inc., 09 CV 6135, 2009 WL 2517086 (D. Or. Aug. 14, 2009) ..........................................................2

STATUTES AND RULES

15 U.S.C. § 77p(f)(2)(A)..................................................................................................................3 15 U.S.C. § 78bb(f)(5)(d) ................................................................................................................3

28 U.S.C. § 1332(d).................................................................~...................................................4,5
Fed. R. Evid. 803 .............................................................................................................................1

11

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Fed. R. Evid. 804 .............................................................................................................................1 Fed. R. Evid. 807 .............................................................................................................................1

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PRELIMINARY STATEMENT
Derivative Plaintiffs reply to FGA's 9/8/09 Sur-Reply Brief ("S-R Brf."). Rather than
support removal, the brief confirms that the Derivative Actions should be remanded.

ARGUMENT

A. FGA Does Not Satisfy CAFA's lOO-Person Requirement
FGA admts that, in the Pierce case, it improperly counted, even under its own
(erroneous) theory, non-curent investors in the fud's limited parers. It has now reduced its

count to 109. S-R Brf. at 2; 9/8/09 Furer Supplemental Declaration of

Paul J. Sirkis ("Sirkis
"curent" beneficial owners of

Furer Decl.") ii 5. But that number -- purortedly of

the fud's

investors -- includes deceased persons, see 8121109 Plaintiffs' Reply Brief ("Reply") at 7, thus

undermng the integrty ofFGA's revised count.

Moreover, despite plaintiffs' earlier objection to FGA's reliance on hearsay, and the fact

1 FGA stil relies on
that the Cour permtted FGA to take discovery to cure the objection,

inadmssible hearsay. See, e.g., Sirkis Furher Decl. at Exhs. 1,2 (attching unsworn letters of
non-paries); 7/31/09 Amended Declaration of Paul J. Sirkis ("Sirkis Am. Decl. ").
Claimg that Federal Rule of

Evidence 807 converts inadmssible documents into

admssible documents simply because they were produced in response to a subpoena, FGA

misstates the law. Rule 807 -- the so-called "residual exception" to the hearsay rule -- permts
admssion of statements having "equivalent circumstantial guarantees of trstworthiess" to the

statements covered by Rules 803 and 804. For a statement to.

be admssible under Rule 807,

however, the Cour must additionally determne that "the statement is more probative on the
1 See Anwar v. Fairfeld Greenwich Ltd., 2009 U.S. Dist. LEXIS 37077, at *16-17 (S.D.N.Y.
May 1,2009) (Katz, 1.).

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point for which it is offered than any other evidence which the proponent can procure through

reasonable efforts." Fed. R. Evid. 807 (emphasis supplied). FGA's reliance on letters and
emails from non-parties fails to satisfy the "circumstantial guarantees" requirement. And, at a

minimum, FGA needed to submit sworn affdavits from the non-parties.2 See Furtado v. Bishop,
604 F.2d 80, 91 (1st Cir. 1979) (cited in S-R Brf. at 4) (admitting affdavit of

"'emient

attorney'" and noting its "many indicia of ... trstwortiness").

Additionally, CAF A does not permt the counting of investors in a fud (for puroses of

the Ferber and Morning Mist derivative cases), or the number of

purorted beneficial holders
the Pierce derivative case). As shown in
in its 7/27/09 Opposition Brief

with interests in the investors in a fud (for puroses of

our Reply Brief (at 2-3) -- and as FGA conceded

("Opp. Brf.") at

11-12 (quoting La. ex rei. Caldwell v. Allstate Ins. Co., 536 F.3d 418,428,430 (5th Cir. 2008)),

CAF A counts only the real parties in interest. FGA does not dispute that, in a derivative case,

the only real part in interest is the entity (i.e., the fud).3 For that reason, the CAF A count in
each case is one.4

Unable to cite any CAF A case adopting its improper counting method, FGA now relies
on a SLUSA case, State of Oregon v. Oppenheimer

funds, Inc., 09 CV 6135,2009 WL 2517086

(D. Or. Aug. 14,2009). To determne whether that case involved a class action on behalf of

2 FGA proffered an affidavit of

just one non-party, see Sirkis Am. Decl. at Exh. 56, even though it had more than four months to pursue its jurisdictional discovery and obtain affdavits.

3 FGA misrepresents that "Derivative Plaintiffs claim that the 'real part in interest' in a

derivative suit is the named plaintiff." S-R Brf. at 2 (citing Reply Brf. at 2-3). As plaintiffs
actually noted, the real part in interest is the fund, not the plaintiffs. See Reply Brf. at 2-3.

4 The notion that a fud's investors (or their beneficial holders) may incidentally benefit by a

monetary recovery to the fud does not make those persons the real paries in interest (much less
ones pursuing their own monetary relief claims) for purposes of CAF A.

2

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more than 50 persons (and thus would be subject to SLUSA), the cour counted a trst -- which

had thousands of

beneficiares -- as one person. SLUSA, as FGA notes, contains a provision

permtting a single entity to be counted as multiple persons under a limted condition;5 however,
the condition was not met in that case. See 2009 WL 2517086, at *4-5.

Accepting, for arguent sake, FGA's contention that SLUSA and CAF A cover "similar

subject matter and passed in a simlar time period," and that Congress employed different
counting methods in the two statutes, see S-R Brf. at 3-4, FGA's reliance on SLUSA backfires.

As shown by SLUSA, when Congress wanted to count multiple persons associated with a single

entity (rather than just the entity itself), it drafted the statute accordingly. See LaSala v. Bordier
et Cie, 519 F.3d 121, 132-33 (3d Cir.), cert. denied, 129 S. Ct. 593 (2008) (for SLUSA counting,

"the court is to follow the usual rule of not looking through an entity to its constituents unless the
entity was established for the purposes of

bringing the action") (emphasis supplied); LaSala v.

Bank of

Cyprus Public Co. Ltd, 510 F. Supp. 2d 246, 268 (S.D.N.Y. 2007) ("the beneficiares of

damages that would accrue to an entity wil only be counted towards the 50-person limit under
circumstaces where the entity was established to participate in the action").

When it subsequently drafted CAF A, however, Congress included no provision

permtting the counting of multiple investors in an entity (or any beneficial holders of interests in

such investors). Thus, in each derivative case, only one entity (the fud) may be counted,

makg the final CAF A count 99 persons short.
5 Specifically, SLUSA provides that

a corporation, investment company, pension plan, partership, or other entity,
shall be treated as one person or prospective class member, but only if

the entity is

not established for the purose of participating in the action.
15 U.S.c. § 78bb(f)(5)(d); 15 U.S.C. § 77p(f)(2)(A).

3

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B. FGA Mischaracterizes GSP's Subscription Agreements
As shown in the Reply Brief, GSP subscription agreements require the general parer's

consent to the creation of any beneficial interests. FGA's response -- i.e., that consent is required
only in cases involving transfers of limted parter interests -- mischaracterizes the agreements.

Because FGA has failed to show the required consent, FGA has not established beneficial

interests, and thus may not rely upon such purorted interests for counting puroses.
/

C. FGA Misconstrues CAFA's Internal Affairs Provision
CAF A's internal affairs provision applies where the claim "relates to the internal affairs

of. .. the corporation." 28 U.S.C. § 1332( d)(9)(B). FGA argues that the PwC claims "do not
relate to internal affairs" (S-R Brf. at 6), but its own authority rejects the arguent. In re Am.
Intl Group, Inc., 965 A.2d 763,817 (DeL. Ch. 2009) (cited in S-R Brf. at 6; Opp. Brf. at 17)
("PwC's role as an auditor relates to the internal affairs of

the corporation.. .."). Thus, the PwC

claims are covered by the plain language ofCAFA's internal affairs provision.
FGA's reliance on Puglisi v. Citigroup Alternatives Invs. LLC, 08 CV 09774, 2009 WL
1515071 (S.D.N.Y. May 29,2009), is misplaced. There, the cour held that the internal affairs
provision did not apply where the complaint challenged representations that the fud was a

"'safe, , 'secure, , and 'low-risk' investment" that "would provide guaranteed income." Id. at *2

(emphasis in original). In contrast, the Pierce allegations quoted by FGA (S-R Brf. at 7) relate

to the fud's due diligence -- i.e., a classic internal affairs fuction. The Puglisi complaint also
alleged that class members "suffered damages" that they could have avoided by "withdrawing

their fuds from the Fund.,,6 In contrast, plaintiffs here assert derivative claims and allege
damages to the

funds, thus placing these cases within the "internal affairs" provision.

6 Puglisi Complaint ii 70 (Exh. A to Dkt. 1,08 CV 9774 (S.D.N.Y.)).

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D. FGA Misconstrues the lOO-Person Monetary Relief Claim Requirement
To address CAF A's "monetary relief' requirement, FGA seems to argue that plaintiffs
are seekig monetary relief on behalf of

the derivative entity, i.e., the fud. But such a claim stil
claim of the

would be a monetar relief

fund, not the plaintiffs. Ross v. Bernhard, 396 U.S. 531,

542 (1970) (cited in S-R Brf. at 8) (derivative case, in which the "corporation's claim" was for
money damages); see also Liman v. Midland Bank Ltd., 309 F. Supp. 163, 168 (S.D.N.Y. 1970)

(cited in S-R Brf. at 8) ("A derivative suit is an equitable action and the relief granted in it must
be in favor of

the corporation whose priar right is enforced derivatively."). To qualify as a

"mass action," the case must involve "monetary relief claims of 100 or more persons (that) are
proposed to be tred

jointly .. .." 28 U.S.C. § 1332(d)(11)(B) (emphasis supplied). Here, FGA

points to claims for relief (monetary or otherwise) of just one person (the fud), not 100 or more

persons. That fact defeats CAF A jursdiction.

CONCLUSION
The remand motions should be granted.

Dated: September 14, 2009

Respectfully submitted,

lsI Robert A. Wallner Robert A. Wallner Kent A. Bronson Jean Lee

MILBERGLLP
One Pennsylvania Plaza New York, New York 10119
TeL.: [phone]
Fax: [phone]

rwallnercÐmilberg.com kbronsoncÐmilberg.com jleecÐmilberg.com

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Case 1 :09-cv-00118-VM-THK Document 237 Filed 09/14/2009 Page 10 of 10

Stephen A. Weiss
James E. O'Brien II

Chrstopher M. Van de Kieft

SEEGER WEISS LLP One Wiliam Street New York, New York 10004
TeL.: [phone]

Fax: [phone] sweisscÐseegerweiss.com jobriencÐseegerweiss.com cvandekieftcÐseegerweiss.com
Attorneys for Plaintif

DOCS\486157vl

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