Anwar et al v. Fairfield Greenwich Limited et al

Filing 825

MEMORANDUM OF LAW in Opposition re: (141 in 1:10-cv-00920-VM) MOTION for Leave to File Second Amended Complaint by Maridom, Caribetrans and Abbott.. Document filed by Standard Chartered Bank International (Americas) Limited. Filed In Associated Cases: 1:09-cv-00118-VM-THK, 1:10-cv-00920-VM(Nelles, Sharon)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

PASHA S. ANWAR, et al.,
Plaintiffs,
v.
FAIRFIELD GREENWICH LIMITED, et al.,

Master File No. 09-CV-118 (VM) (THK)

Defendants.
This Document Relates To: Maridom, et al.
v. Standard Chartered Bank International
(Americas) Limited, No. 10-CV-920.
DEFENDANT’S MEMORANDUM OF LAW IN OPPOSITION TO
THE MOTION OF MARIDOM LTD., CARIBETRANS, S.A. AND ABBOT
CAPITAL INC. FOR LEAVE TO FILE A SECOND AMENDED COMPLAINT
Sharon L. Nelles
Bradley P. Smith
Patrick B. Berarducci
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, New York 10004
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Diane L. McGimsey
(Admitted Pro Hac Vice)
SULLIVAN & CROMWELL LLP
1888 Century Park East
Los Angeles, California 90067
Attorneys for Defendant
Standard Chartered Bank
International (Americas) Ltd.

March 1, 2012

TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT .....................................................................................................1
BACKGROUND .............................................................................................................................2
A.

In Anwar I, the Court Dismissed Claims Asserted in
Maridom Plaintiffs’ Amended Complaint and Set a
Firm Deadline To Amend .......................................................................................3

B.

In Anwar II, the Court Rejected Additional FraudBased Claims, Negligence, and FSIPA Claims ......................................................5

C.

In Their Proposed Second Amended Complaint, Maridom
Plaintiffs Belatedly Seek To Add New Defendants and
Plead Futile Claims Already Considered and Dismissed
by the Court .............................................................................................................7

ARGUMENT ...................................................................................................................................9
I.

The Court Should Deny Leave To File the Second Amended
Complaint Because Maridom Plaintiffs’ Request Is Untimely
and Prejudicial ..................................................................................................................10

II.

The Court Should Deny Leave To File the Second Amended
Complaint Because Maridom Plaintiffs’ Proposed Amendments
Cannot Withstand a Motion To Dismiss ...........................................................................13
A.

Maridom Plaintiffs’ Negligence Claim Is Barred by the
Economic Loss Rule .............................................................................................14

B.

The Second Amended Complaint Does Not Satisfy Rule 9(b) .............................15

C.

The Alleged Omissions Identified in the Proposed Second
Amended Complaint Are Not Material .................................................................16

D.

Maridom Plaintiffs’ Proposed FSIPA Claim Fails As a Matter
of Law Because the Sales of Sentry Are Not Alleged To Have
Occurred in Florida ...............................................................................................17

CONCLUSION ..............................................................................................................................19

TABLE OF AUTHORITIES
Page(s)
CASES
380544 Canada, Inc. v. Aspen Tech., Inc.,
No. 07-CV-1204, 2011 WL 4089876 (S.D.N.Y. Sept. 14, 2011) .....................................11, 13
Anwar v. Fairfield Greenwich Ltd.,
745 F. Supp. 2d 360 (S.D.N.Y. 2010) ............................................................................. passim
Anwar v. Fairfield Greenwich Ltd.,
No. 09-CV-118, 2011 WL 5282684 (S.D.N.Y Nov. 2, 2011) ........................................ passim
Atl. Nat’l Bank of Fla. v. Vest,
480 So. 2d 1328 (Fla. Court App. 1985) ..........................................................................14, 17
Berman v. Morgan Keegan & Co., Inc.,
No. 10-CV-5866, 2011 WL 1002683 (S.D.N.Y. Mar. 14, 2011) ...........................................10
Castagna v. Luceno,
No. 09-CV-9332, 2011 WL 1584593 (S.D.N.Y. Apr. 26, 2011) .......................................9, 14
In re Eaton Vance Mutual Funds Fee Litig.,
380 F. Supp. 2d 222 (S.D.N.Y. 2005) .....................................................................................10
Kaufman v. Sirius XM Radio, Inc.,
No. 09-CV-9590, 2010 WL 4968049 (S.D.N.Y. Nov. 22, 2010) .............................................9
Leber v. Citigroup, Inc.,
No. 07-CV-9329, 2011 WL 5428784 (S.D.N.Y. Nov. 8, 2011) .......................................10, 11
Payne v. Malemathew,
No. 09-CV-1634, 2011 WL 3043920 (S.D.N.Y. July 22, 2011) ............................................10
Sly Magazine, L.L.C. v. Weider Publ’ns L.L.C.,
241 F.R.D. 527 (S.D.N.Y. 2007) ............................................................................................11
Thayil v. Fox Corp.,
No. 11-CV-4791, 2012 WL 364034 (S.D.N.Y. Feb. 2, 2012) ................................................13

-ii-

TABLE OF AUTHORITIES
(continued)
Page(s)
OTHER AUTHORITIES
FED. R. CIV. P. 9 .................................................................................................................... passim
FED. R. CIV. P. 15 ............................................................................................................................9

-iii-

Defendant Standard Chartered Bank International (Americas) Ltd. (“SCBI”)
respectfully submits this memorandum in opposition to the untimely motion brought by plaintiffs
Maridom Limited, Caribetrans, S.A. and Abbot Capital, Inc. (“Maridom plaintiffs”) for leave to
file a Second Amended Complaint.1
PRELIMINARY STATEMENT
More than fifteen months ago, this Court considered and dismissed many of the
claims asserted in Maridom plaintiffs’ first amended complaint (the “Amended Complaint”), and
gave Maridom plaintiffs a firm deadline to replead their claims. Anwar v. Fairfield Greenwich
Ltd. (“Anwar I”), 745 F. Supp. 2d 360, 379 (S.D.N.Y. 2010) Maridom plaintiffs chose not to
replead then, and set forth no compelling reason now why they should be allowed to replead at
this late juncture. In short, the Court should not grant Maridom plaintiffs leave to amend for
three reasons:
First, there is nothing that Maridom plaintiffs ask to do now that they could not
have done during the Court-ordered allotted time. Absent good cause, the deadlines set by Judge
Marrero should be enforced. Indeed, relying on Maridom plaintiffs’ choice not to amend, SCBI
answered Maridom plaintiffs’ Amended Complaint in November 2010, and discovery has
proceeded as framed by that complaint.
Second, allowing plaintiffs to replead complaints now will significantly disrupt
the coordinated case schedule established by this Court. These amendments will necessitate yet
another round of briefing on a motion to dismiss to determine the proper scope of Maridom
plaintiffs’ claims. Moreover, granting such leave will open the flood gates to similar requests

1

References to Maridom plaintiffs’ February 9, 2012 Notice of Motion for Leave to File
Second Amended Complaint, and its incorporated Memorandum of Law (Dkt. # 815) are
abbreviated herein as “Maridom Mem.”

from other plaintiffs in other actions pending against SCBI and its affiliates that arise out of
investments made in the Fairfield Sentry Ltd. fund (the “Standard Chartered Cases”).
According to Maridom plaintiffs, other plaintiffs “will likewise move to amend their complaints.”
(Maridom Mem. at 7 n.4.)
Third, and in any event, most of the claims Maridom plaintiffs seek to add already
have been considered and rejected by the Court as part of the mandated common issue motion
practice, Anwar v. Fairfield Greenwich Ltd. (“Anwar II”), No. 09-CV-1634, 2011 WL 5282684,
at *4-8 (S.D.N.Y. Nov. 2, 2011), and none of those claims would provide a basis for any relief
beyond that sought by the Amended Complaint. Thus, amendment is futile.
BACKGROUND
On September 24, 2009, Maridom plaintiffs filed a complaint against SCBI in the
Southern District of Florida seeking to recover $4.8 million that they placed in Fairfield Sentry
Ltd. (“Sentry”) through their investment accounts at SCBI. In their original complaint, Maridom
plaintiffs asserted three claims against SCBI: (i) breach of a “duty of care” based on an alleged
recommendation of Sentry to them without conducting any (or conducting only “grossly
inadequate”) due diligence (Compl. ¶¶ 43, 53, Maridom Ltd. v. Standard Chartered Bank
International (Americas) Ltd., 09-CV-22868 (S.D.Fla. Sept. 24, 2009) (Dkt. # 1)); (ii) negligent
misrepresentation (Compl. ¶¶ 55-61); and (iii) fraud (Compl. ¶¶ 62-65). The misrepresentation
and fraud claims relied on allegations that SCBI failed to disclose that Sentry was “nothing more
than a funnel to” Bernard L. Madoff Investment Securities LLC (“BLMIS”) (Compl. ¶ 57.), and
that the Sentry private placement memorandum was misleading in stating that an affiliate of
Sentry, not BLMIS, was to manage investments that Sentry made (Compl. ¶ 64). On October 13,
2009, Maridom plaintiffs filed the Amended Complaint, asserting the same three claims based on

-2-

essentially identical allegations. On February 3, 2010, the United States Judicial Panel on
Multidistrict Litigation transferred this action to the Southern District of New York, where it was
consolidated with other Standard Chartered Cases, including actions against SCBI’s affiliates
Standard Chartered International (USA) Ltd. (“SCI”), and Standard Chartered Bank (“SCB”),
(together with SCBI, “Standard Chartered”). (March 12, 2010 Consolidation Order, Dkt. # 398.)
A.

In Anwar I, the Court Dismissed Claims Asserted in Maridom Plaintiffs’
Amended Complaint and Set a Firm Deadline To Amend.
On January 29, 2010, this Court issued an Initial Scheduling Order Regarding

Standard Chartered Cases that provided for unified motions to dismiss in the Standard Chartered
Cases to address common legal issues in those actions. (Jan. 29, 2010 Initial Scheduling Order
Regarding Standard Chartered Cases, Dkt. # 375.) On March 10, 2010, SCBI moved to dismiss
the fraud and misrepresentation claims asserted in Maridom plaintiffs’ Amended Complaint (as
well as three other complaints) for, among other grounds, plaintiffs’ (i) failure to plead fraudbased claims with particularity under Rule 9(b) of the Federal Rules of Civil Procedure;
(ii) failure to allege any actionable misstatements or omissions of material fact; and (iii) failure
to adequately plead scienter. In addition, because Maridom plaintiffs’ accounts at SCBI were
nondiscretionary, SCBI moved to dismiss Maridom plaintiffs’ fiduciary duty claims on the
ground that SCBI did not owe a duty to uncover Madoff’s Ponzi scheme. Finally, SCBI sought
dismissal of all of Maridom plaintiffs’ claims based on Florida’s economic loss rule. (Mar. 10,
2010 Mem. in Supp. of Mot. to Dismiss, Dkt. # 385.)
On October 4, 2010, the Court dismissed all but one of Maridom plaintiffs’ fraud
and misrepresentation claims. Anwar I, 745 F. Supp. 2d at 372-73. The Court found that
Maridom plaintiffs’ allegations that SCBI falsely told them that Sentry, and not another entity
(BLMIS), would manage Sentry’s investment did not support a fraud or misrepresentation claim.
-3-

The Court noted that Amended Complaint failed to “specify the speaker of these statements, or
where and when these statements were made to each of the three Maridom Plaintiffs”—as
required by Rule 9(b). Id. at 372. The Court allowed a single fraud-based claim to go forward:
a claim that SCBI allegedly “fail[ed] to disclose that Fairfield Sentry was a funnel to Madoff’s
operation.” Id. at 372-73.2
Also in Anwar I, the Court dismissed fraud-based claims asserted by plaintiff
Ricardo Lopez (Lopez v. Standard Chartered Bank International (Americas) Ltd., No. 10-CV919), based on allegations that SCBI failed to conduct adequate due diligence of Sentry. There,
the Court noted that a fraud claim brought against an advisor for recommending an investment
requires, at a minimum, “allegations that there were obvious signs of fraud, or that the danger of
fraud was so obvious that [SCBI] must have been aware of it.” Id. at 371 (citation and internal
quotation marks omitted).
The Court granted both Maridom plaintiffs and Lopez twenty-one days from the
date of its Order to request leave to replead, which the Court was clear would be granted only
upon a showing that repleading would correct the pleading deficiencies identified by the Court:
The Court has determined that several of Plaintiffs’ allegations
failed to state a claim, due chiefly to failures of properly alleging
scienter in Lopez’s fraud-based claims and specificity in similar
claims of the Maridom Plaintiffs. It is therefore possible that as to
some of these matters repleading would be futile if based upon the
same or similar allegations. The Court will grant leave to replead
upon a prior request by Plaintiffs plausibly showing how such
repleading would correct the deficiencies identified in the Court’s
findings discussed above, and thus would not be futile. Plaintiffs
may submit any such request within twenty-one days of the date of
this Order.

2

The Court declined to dismiss Maridom plaintiffs’ breach of fiduciary duty claims based
on narrow allegations that SCBI failed to conduct (or conducted only “grossly inadequate”) due
diligence on Sentry before recommending it. Anwar I, 745 F. Supp. 2d at 376-77.
-4-

Id. at 379 (emphasis added). Twenty-one days passed, and Maridom plaintiffs did not seek leave
to replead their claims. Therefore, in accordance with the Initial Scheduling Order Regarding
Standard Chartered Cases, on November 24, 2010, SCBI filed an answer and affirmative
defenses to Maridom plaintiffs’ Amended Complaint. (Dkt. # 584.)
B.

In Anwar II, the Court Rejected Additional Fraud-Based
Claims, Negligence, and FSIPA Claims.
On February 3, 2010, in response to the filing of several additional complaints

against Standard Chartered that were transferred to this Court, the Court entered a Second
Amended Scheduling Order Regarding Standard Chartered Cases (Dkt. # 609). The Court
directed that “[t]he parties shall refrain from engaging in duplicative motion or pleading practice
on matters already considered by this Court, including on claims or issues on which this Court
has already issued guidance in [Anwar I].” (Id. at ¶ 15.) The Scheduling Order allows for
Standard Chartered to move to dismiss claims that are “the same or substantially similar to a
claim that was dismiss[ed] in [Anwar I]” or claims that “raise[] new or unique issues of law.” (Id.
at ¶ 16)
On March 21, 2011, SCBI moved to dismiss complaints brought by plaintiffs
Ricardo Almiron and Carlos Carrillo. (Mar. 21, 2011 Mem. in Supp. of Mot. to Dismiss, Dkt.
# 622; Almiron v. Standard Chartered Bank International (Americas) Ltd., No. 10-CV-6186;
Carillo v. Standard Chartered Bank International (Americas) Ltd., No. 10-CV-6187.) The
Almiron and Carrillo complaints asserted claims for breach of fiduciary duty, negligence,
negligent misrepresentation and violations of the Florida Securities and Investor Protection Act
(“FSIPA”), all based on allegations that SCBI made misrepresentations and omissions in
recommending Sentry and failed to conduct adequate due diligence of Sentry.

-5-

On November 2, 2011, the Court dismissed Almiron and Carrillo’s claims for
negligence and negligent misrepresentation, as well as the FSIPA claim. Anwar II, 2011 WL
5282684, at *4-8. With respect to Almiron and Carrillo’s fraud-based claims, the Court ruled
that the complaints did not “state with particularity the circumstances constituting fraud,” as
required by Rule 9(b). Id. at *4-8. In so doing, the Court specifically identified as insufficient
four alleged misrepresentations and omissions:


that “SCBI misrepresented that Fairfield Sentry was a safe, low-risk investment
with steady returns;”



that “SCBI misrepresented that it performed extensive due diligence on Fairfield
Sentry before SCBI recommended it to Plaintiffs;”



that “[t]he Private Placement Memorandums issued by Fairfield Sentry and
distributed by SCBI were misleading and falsely stated that an ‘affiliated
investment manager’ of Fairfield Sentry was managing the assets, and failed to
disclose the identity of BLMIS, a third-party unknown to Plaintiffs;” and



that “SCBI did not disclose that BLMIS—and, therefore, Madoff—was managing
the assets of Fairfield Sentry.”

Id. at *4. The Court found that these allegations failed to meet the heightened pleading standard
of Rule 9(b) because (i) plaintiffs did “not adequately allege the context of each alleged
misrepresentation with sufficient particularity,” including where and when those statements were
made, id. at *4; (ii) plaintiffs’ allegations that SCBI obtained fees from clients invested in Sentry
were insufficient to establish “what SCBI obtained through the fraud,” id. at *5; and
(iii) plaintiffs failed to plead “facts giving rise to a strong inference that a defendant acted with
the requisite state of mind,” since motives “such as collection of fees, which could be imputed to
almost any bank, are not sufficiently concrete for purposes of inferring fraudulent intent,” id.
at *5-6 (citation and internal quotation marks omitted).
The Court determined that Almiron’s and Carrillo’s FSIPA claims failed too
because plaintiffs had “not alleged facts sufficient to show that SCBI falls within the class of
-6-

entities or individuals” covered by FSIPA, in particular, the requirement of “buyer/seller privity.”
Id. at *7. The Court further noted that these plaintiffs “fail[ed] to allege that the purchase/sale of
Fairfield Sentry occurred in Florida,” and that “[t]his too is fatal to their claims under” the
FSIPA. Id. at *7 n.4.
Finally, the Court dismissed Almiron and Carrillo’s negligence claims based on
Florida’s economic loss rule, which bars most tort claims “where the parties are in contractual
privity and one party seeks to recover damages in tort for matters arising out of the contract.” Id.
at *12 (citation omitted).
C.

In Their Proposed Second Amended Complaint, Maridom
Plaintiffs Belatedly Seek To Add New Defendants and Plead
Futile Claims Already Considered and Dismissed by the Court.
On February 9, 2012, more than 15 months after the Court-imposed deadline for

Maridom plaintiffs to correct deficiencies in their Amended Complaint expired, Maridom
plaintiffs moved for leave to file a Second Amended Complaint. (Dkt. # 815.) In the proposed
Second Amended Complaint, Maridom plaintiffs do not seek to correct pleading deficiencies.
Rather, they seek to add SCI and SCB as defendants in the case and to add three new causes of
action: (i) a claim against SCI and SCB for aiding and abetting breach of fiduciary duty; (ii) a
claim against SCI, SCB and SCBI for negligence based on the alleged failure to conduct
adequate due diligence of Sentry; and (iii) a claim against SCI, SCB and SCBI for violations of
the FSIPA. Each of these claims is untimely and futile, and the second and third were already
considered and dismissed by the Court in Anwar II. In addition, the proposed Second Amended
Complaint seeks to convert all of Maridom plaintiffs’ claims into fraud-based claims by adding

-7-

allegations of omissions by Standard Chartered in recommending Sentry to them, thus subjecting
each to the heightened pleading standards of Rule 9(b).3
Specifically, the proposed Second Amended Complaint adds five alleged
omissions,4 which, in Maridom plaintiffs’ words, “merely fill out” (Maridom Mem. at 10) the
allegations that were made in the Amended Complaint:


that SCBI and SCI failed to disclose that Sentry’s private placement
memorandum was materially misleading since “[a]ll Sentry and its affiliates did
was receive the money from investors, take money off the top (which it split with
SCI), grabbed 20% of supposed annual profits, and send the rest of the money to
BLMIS.” (Second Am. Compl. ¶ 83.) This omission is equivalent to alleged
representations and omissions found to be insufficient under Rule 9(b) in Anwar I
and Anwar II. Anwar I, 745 F. Supp. 2d at 372; 2011 WL 5282684, at *4-8;



that SCBI, SCI and SCB failed to disclose that SCBI received “50% of the 1% per
annum fee the Plaintiffs were paying” to Sentry – i.e., that Standard Chartered
received a 0.5% per annum trailer fee (Second Am. Compl. ¶ 84(a-b));



that SCBI, SCI and SCB failed to disclose that “BLMIS’s reported results were so
extraordinary that there was a material doubt that they were real” (Id. ¶ 84(c));



that SCBI, SCI and SCB failed to disclose that BLMIS’s role in Sentry “created a
material risk to Sentry” (Second Am. Compl. ¶ 84(d)); and

3

Maridom plaintiffs also allege that Standard Chartered “failed to conduct proper due
diligence regarding Sentry” in support of their fiduciary duty and negligence claims. (Second
Am. Compl. ¶¶ 92(e), 101(e).) Although Maridom plaintiffs re-word some of their allegations,
in substance their “due diligence” claims remains the same. (Compare Am. Compl. ¶ 49 (SCBI
“never performed any due diligence, and, even if it did perform some due diligence, its effort
was grossly inadequate”) with Second Am. Compl. ¶ 94 (SCBI and SCI “never performed any
real due diligence, and, even if they did perform some due diligence, its effort was grossly
inadequate”).)
4

The proposed Second Amended Complaint’s only alleged affirmative representations (as
opposed to omissions) mirror those that the Court found insufficient to state a claim in Anwar II.
2011 WL 5282684, at *4-5. Specifically, the proposed Second Amended Complaint alleges that
“SCBI told plaintiffs that these would be safe investments with a steady return. SCBI referred to
the purchase of Sentry Shares as a ‘risk reducer,’ in that Sentry Shares would have lower
volatility and risk than common stocks.” (Second Am. Compl. ¶ 81.) These statements are not
alleged to have been false when made, and thus do not appear to be the basis for any of Maridom
plaintiffs’ proposed claims. Moreover, although the Second Amended Complaint identifies three
SCBI employees in a single paragraph, it does not allege who said what to plaintiffs or when and
where the alleged statements were made. (Second Am. Compl. ¶ 81.)
-8-



that SCBI, SCI and SCB failed to disclose that they did not follow their own due
diligence guidelines and that due diligence conducted on BLMIS by Sentry’s
sponsor, Fairfield Greenwich Group (“FGG”), was inadequate (Second Am.
Compl. ¶ 84(e-f)).
Further, with respect to the FSIPA claim, Maridom plaintiffs allege that “SCBI,

SCI and SCB solicited the purchases by Plaintiffs of Sentry shares for their financial gain,” and
that SCI and SCB were “acting as Sentry’s and Fairfield’s agent in soliciting these purchases.”
(Second Am. Compl. ¶¶ 122-23.) Maridom plaintiffs do not allege that any of their multiple
purchases of Sentry—or any particular statement or interaction concerning Sentry—occurred in
Florida. Instead, the Second Amended Complaint alleges, without more, that “the sales of the
shares of Sentry did not occur entirely outside the State of Florida.” (Second. Am. Compl.
¶ 120.)
ARGUMENT
The determination of whether to grant leave to amend a complaint is “within the
sound discretion of the district court . . . and a court may deny leave for good reason.” Kaufman
v. Sirius XM Radio, Inc., No. 09-CV-9590, 2010 WL 4968049, at *2 (S.D.N.Y. Nov. 22, 2010)
(denying plaintiff’s request for leave to amend) (quoting McCarthy v. Dun & Bradstreet Corp.,
482 F.3d 184, 200 (2d Cir. 2007)). Leave should be granted only “when justice so requires”
FED. R. CIV. P. 15(a), and not when there is “undue delay, bad faith or dilatory motive on the part
of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue
prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment,
etc.” Castagna v. Luceno, No. 09-CV-9332, 2011 WL 1584593, at *22-23 (S.D.N.Y. Apr. 26,
2011) (quoting Ruotolo v. City of N.Y., 514 F.3d 184, 191 (2d Cir. 2008)).
Here, Maridom plaintiffs were provided the opportunity to amend their complaint
more than a year ago, but they declined. Maridom plaintiffs should not be permitted to file an
-9-

amended pleading at this late stage that would disrupt and delay these coordinated proceedings—
especially because allowing amendment in this action will likely lead to dozens of requests by
other plaintiffs in the Standard Chartered Cases to do the same. This is, presumably, precisely
why Judge Marrero set firm deadlines for amendment. In addition, the proposed amendments
are futile, providing Maridom plaintiffs with no new claims that could survive a motion to
dismiss, and thus serve no purpose.
I.

The Court Should Deny Leave To File the Second Amended Complaint
Because Maridom Plaintiffs’ Request Is Untimely and Prejudicial.
Where a plaintiff has been afforded an opportunity to amend its complaint with

the knowledge of the complaint’s perceived deficiencies but chooses not to amend, denial of
subsequent leave to amend is warranted. In re Eaton Vance Mutual Funds Fee Litig., 380 F.
Supp. 2d 222, 242 (S.D.N.Y. 2005) (“The motion to amend is therefore denied because of the
plaintiffs’ failure to cure deficiencies despite the opportunities to do so, and the failure to show
how any amended complaint could cure the deficiencies.”); Payne v. Malemathew, No. 09-CV1634, 2011 WL 3043920, at *5-6 (S.D.N.Y. July 22, 2011) (denying leave to file second
amended complaint where plaintiff put on notice of deficiencies in amended complaint via letter
from defense counsel and court had granted previous leave.); Berman v. Morgan Keegan & Co.,
Inc., No. 10-CV-5866, 2011 WL 1002683, at *14-15 (S.D.N.Y. Mar. 14, 2011) (“Because
plaintiffs have already been afforded an opportunity to amend when they had knowledge of
Morgan Keegan’s perceived deficiencies and because they have failed to set forth any additional
facts indicating how the pleading deficiencies would be cured by amending the Complaint, leave
to amend . . . is denied.”). Here, Maridom plaintiffs simply delayed in asserting new claims or
joining new defendants, thus leave to amend should not be granted unless Maridom plaintiffs
provide substantive justification for the delay. Leber v. Citigroup, Inc., No. 07-CV-9329, 2011
-10-

WL 5428784, at *6 (S.D.N.Y. Nov. 8, 2011) (citation omitted) (denying leave to file amended
complaint asserting new claim where no justification provided); 380544 Canada, Inc. v. Aspen
Tech., Inc., No. 07-CV-1204, 2011 WL 4089876, at *2-3, 5-6 (S.D.N.Y. Sept. 14, 2011) (citing
MacDraw, Inc. v. The CIT Group Equipment Financing, Inc., 157 F.3d 956, 962 (2d Cir. 1998))
(denying leave to file amended complaint around close of discovery to amplify securities fraud
allegations and add new claim); Sly Magazine, L.L.C. v. Weider Publ’ns L.L.C., 241 F.R.D. 527,
533 (S.D.N.Y. 2007) (denying leave to join defendants pursuant to Rule 21 where plaintiff
provided no “substantive justification” for waiting six months after plaintiffs received notice of
the existence and identity of the parties proposed to be joined).
Maridom plaintiffs have provided no justification for their delay. It is not
justification that Maridom plaintiffs obtained materials through their discovery efforts that they
would like to append to their pleading.5 (Maridom Mem. at 2, 10.) In fact, the proposed Second
Amended Complaint adds few substantive allegations in support of Maridom plaintiffs’ claims
that were not available to them in October 2010 when the Court first granted leave to amend.
Maridom plaintiffs admit as much in support of their motion: “The additional factual allegations
stem from the initial allegations” in the Amended Complaint. (Maridom Mem. at 3.)
Maridom plaintiffs’ assertion that the additional allegations in the proposed
Second Amended Complaint are based on information gathered in discovery is, at best,
misleading. Of the five alleged omissions included in support of the claims asserted in the
proposed Second Amended Complaint, four concern circumstances that were either publicly
5

The exhibits Maridom plaintiffs’ seek to append to their Second Amended Complaint
were properly designated as “Confidential Material” under the Stipulation and Order Governing
Confidentiality of Discovery Material in the Standard Chartered Cases (Dkt. # 603). If the Court
were to grant Maridom plaintiffs’ amendments—which it should not for all the reasons stated
herein—Standard Chartered does not anticipate raising an objection to the unsealing of those
particular exhibits.
-11-

disclosed or known to Maridom plaintiffs without any discovery from Standard Chartered, while
the fifth merely concerns allegations already asserted that SCBI failed to conduct adequate due
diligence of Sentry. Specifically, the purported omissions in Sentry’s private placement
memorandum (Second Am. Compl. ¶ 83), and the supposed risks created by BLMIS’s role in
Sentry and BLMIS’s “extraordinary” results (Second Am. Compl. ¶ 84 (c-d)), could have been
alleged by Maridom plaintiffs well before October 2010—based on public information about the
Madoff fraud, or through Maridom plaintiffs’ own knowledge of their interactions with SCBI.
The purported omissions concerning fees that Standard Chartered received from FGG likewise
were no secret to Maridom plaintiffs by, at latest, 2009. (Second Am. Compl. ¶ 84(a-b).)
Another Standard Chartered Case plaintiff, Headway Investment Corporation, alleged in a
complaint filed on April 6, 2009 that “American Express Bank purposefully acted as an
intermediary between FGG and Headway to continually justify collecting commissions from
FGG.” (Headway Compl. ¶ 40, Headway Investment Corp. v. American Express Bank Ltd., No.
09-CV-8500.) Finally, Maridom plaintiffs’ allegations that Standard Chartered omitted to
inform them about the level of due diligence it and FGG performed (Second Am. Compl. ¶¶ 24,
84(e-f)), must have been known to Maridom plaintiffs well before discovery began in the
Standard Chartered Cases—for it was Maridom plaintiffs themselves who allegedly interacted
with representatives of SCBI.
Moreover, Maridom plaintiffs provide no justification for their delay in seeking to
name SCI and SCB as defendants in this action. (See Maridom Mem. at 11.) SCI and SCB are
named as defendants in complaints filed by other plaintiffs in the Standard Chartered Cases as
far back as 2009. (Headway, No. 09-CV-8500 (filed April 6, 2009); Valladolid v. American
Express Bank Ltd., et al., No. 10-CV-918 (filed Sept. 4, 2009).) By the time the Court granted

-12-

Maridom plaintiffs leave to amend the Amended Complaint in October 2010, they were well
aware of the existence of SCI and SCB and their alleged roles in matters concerning Sentry.
Moreover, Maridom plaintiffs’ delay in seeking to amend their complaint would
result in prejudice to Standard Chartered if leave to amend were granted. “Prejudice may result
where proposed amendments would . . . significantly delay the resolution of the dispute.”
380544 Canada, Inc., 2011 WL 4089876, at *2 (quoting Monahan v. N.Y. City Dep’t of
Corrections, 214 F.3d 275, 284 (2d Cir. 2000)). If Maridom plaintiffs are allowed to file a
Second Amended Complaint, other plaintiffs in the Standard Chartered Cases likely will seek to
do the same. Indeed, Maridom plaintiffs have stated so explicitly: “other Standard Chartered
Plaintiffs will likewise move to amend their complaints, and . . . some if not all will seek to adopt
the main substantive allegations against the Defendants . . . .” (Maridom Mem. at 7, n.4.)
Reopening of the pleadings to new claims and defendants means more rounds of costly (and
unnecessary, see infra, pp. 14-18) motion practice on the sufficiency of those claims, (see
Second Am. Scheduling Order Regarding Standard Chartered Cases ¶ 18 (“Nothing herein is
intended to preclude the Standard Chartered Defendants from moving against any amended
pleading . . . .”)), and undoubtedly delay the completion of discovery until motions to dismiss are
resolved and the scope of the claims asserted in the Standard Chartered Cases is established
anew by the Court.
II.

The Court Should Deny Leave To File the Second Amended Complaint Because
Maridom Plaintiffs’ Proposed Amendments Cannot Withstand a Motion To Dismiss.
“[W]here a plaintiff inadequately pleads a claim and cannot offer additional

substantive information to cure the deficient pleading, granting leave to replead is futile.” Thayil
v. Fox Corp., No. 11-CV-4791, 2012 WL 364034, at *4 (S.D.N.Y. Feb. 2, 2012). Thus, when a
proposed amended complaint “cannot withstand a motion to dismiss pursuant to Rule 12(b)(6),”
-13-

the amendment is futile and leave to file it should be denied. Castagna, 2011 WL 1584593,
at *22 (citations omitted).
Maridom plaintiffs’ proposed fiduciary duty, negligence, negligent
misrepresentation, fraudulent representation and FSIPA claims could not survive a motion to
dismiss under the law of the case established in Anwar I and Anwar II, and under Florida law.
The Court already has ruled that negligence claims asserted in the Second Amended Complaint
are barred by Florida’s economic loss doctrine. Anwar II, 2011 WL 5282684, at *11-12. And
although the proposed Second Amended Complaint includes fraud-based allegations that were
not part of the Amended Complaint, the additional allegations suffer from the precise lack of
particularity required by Rule 9(b) that led the Court to dismiss fraud-based claims in Anwar I
and Anwar II. Anwar I, 745 F. Supp. 2d at 372; Anwar II, 2011 WL 5282684, at *3. Further, the
proposed Amended Complaint does not adequately allege that any omissions were material to
Maridom plaintiffs’ decisions to purchase Sentry. Atl. Nat’l Bank of Fla. v. Vest, 480 So. 2d
1328, 1332 (Fla. Court App. 2d Dist. 1985). Finally, Maridom plaintiffs fail to state a claim
under the FSIPA because they have not adequately pled that any purchases or sales of Sentry
occurred in Florida. Anwar II, 2011 WL 5282684, at *7 n.4.
A.

Maridom Plaintiffs’ Negligence Claim Is Barred by the Economic Loss Rule.
The Second Amended Complaint’s proposed negligence claim cannot survive a

motion to dismiss under the Court’s ruling in Anwar II. In Anwar II, the Court recognized that
Florida’s economic loss rule bars negligence claims where the parties’ private banking
relationship is governed by written account agreements. 2011 WL 5282684, at *11-12.
Maridom plaintiffs’ private banking relationships were governed by written account agreements.
Anwar I, 745 F. Supp. 2d at 366-67 (“[Alt]hough the Maridom Complaint does not explicitly
refer to any agreements between the parties, it relies heavily upon the agreements’ terms and
-14-

effects because its core allegations—that Standard Chartered abused its relationship with the
Maridom Plaintiffs—necessarily flow from the contracts creating that relationship.”). Thus, their
negligence claims are plainly barred.
B.

The Second Amended Complaint Does Not Satisfy Rule 9(b).
Maridom plaintiffs seek to add alleged omissions in support of their fraud and

negligent misrepresentation claims, (Second Am. Compl. ¶¶ 105-106, 110-112) and their new
claim under the FSIPA (Second Am. Compl. ¶ 121). Maridom plaintiffs further seek to
shoehorn these same allegations of omissions into their fiduciary duty and negligence claims
(Second Am. Compl. ¶¶ 92, 101), thus converting those claims into fraud-based claims as well.
As the Court observed in Anwar II, “Rule 9(b) provides that ‘in alleging fraud or mistake, a party
must state with particularity the circumstances constituting fraud.’” 2011 WL 5282684, at *3
(quoting FED. R. CIV. P. 9(b)). Allegations of material omissions made in support of fraud-based
claims require particularized facts alleging “(1) what the omissions were; (2) the person
responsible for the failure to disclose; (3) the context of the omissions and the manner in which
they misled the plaintiff, and (4) what defendant obtained through the fraud.” Anwar I, 745 F.
Supp. 2d at 372 (citation omitted). To adequately plead the scienter element of a fraud-based
claim, “Rule 9(b) also requires a plaintiff to plead with particularity facts giving rise to a strong
inference that a defendant acted with the requisite state of mind.” Anwar II, 2011 WL 5282684,
at *5 (citation omitted).
The proposed Second Amended Complaint comes nowhere close to meeting these
requirements. It does not allege with particularity the circumstances surrounding SCBI’s alleged
recommendations of Sentry to each Maridom plaintiff. Instead, the Second Amended Complaint
merely lists the dates and amounts of Maridom plaintiffs’ Sentry purchases, and alleges that
three SCBI employees made recommendations. (Second Am. Compl. ¶¶ 78-81.) Nor does the
-15-

Second Amended Complaint identify the person(s) responsible for any alleged failures to
disclose information about Sentry. (Id.) In fact, Maridom plaintiffs do not allege with
particularity any single interaction between them and representatives of SCBI, SCI or SCB, and
thus have not even attempted to plead the context in which any alleged omissions occurred or the
manner in which they were misled by alleged omissions at the time they decided to purchase
Sentry. (Id.)
The proposed Second Amended Complaint also fails to allege what SCBI, SCI or
SCB obtained through the alleged fraud, or plead any other facts giving rise to a strong inference
that SCBI or any of its affiliates acted with the requisite state of mind. Maridom plaintiffs’
allegations that Standard Chartered received fees from FGG (Second Am. Compl. ¶ 44),
regardless of whether they were disclosed (Second Am. Compl. ¶ 84(a)), are insufficient. As the
Court held in Anwar II, allegations that Standard Chartered received fees for purchases its clients
made in Sentry do not “giv[e] rise to a strong inference that a defendant acted with the requisite
state of mind” because “generalized motives, such as the collection of fees, ‘which could be
imputed to almost any bank, are not sufficiently concrete for purposes of inferring fraudulent
intent.’” 2011 WL 5282684, at *6 (citation omitted). Given that Maridom plaintiffs now have
had the benefit of extensive discovery, their inability to plead any plausible reason why Standard
Chartered would defraud them demonstrates that Maridom plaintiffs cannot do so. Thus, their
proposed Second Amended Complaint does not, and cannot, meet the heightened pleading
standard of Rule 9(b).
C.

The Alleged Omissions Identified in the Proposed
Second Amended Complaint Are Not Material.
In addition to failing under Rule 9(b), the alleged omissions cannot support any

claim because Maridom plaintiffs plead no facts demonstrating that such omissions were
-16-

material at the time they made their decisions to invest in Sentry. In fact, the allegations in the
proposed Second Amended Complaint demonstrate the opposite to be true.
The proposed Second Amended Complaint alleges multiple omissions concerning
BLMIS’s role in Sentry, the supposed risks BLMIS posed to Sentry, and that Sentry and
BLMIS’s returns supposedly were “extraordinary.” (Second Am. Compl. ¶¶ 83, 84.) But
Maridom plaintiffs do not allege any facts, such as their own familiarity with Madoff or BLMIS
(or risks associated with Madoff or BLMIS) when they made their investments, to support an
inference that Maridom plaintiffs would have disregarded SCBI’s alleged recommendation to
invest in Sentry if they had known of Madoff’s involvement in the fund. See Atl. Nat’l Bank of
Fla., 480 So. 2d at 1332 (alleged misrepresentation not material where plaintiff would have
completed the transaction with or without the alleged misrepresentation).
The same is true of Standard Chartered’s alleged receipt of fees from FGG, or
Standard Chartered’s supposed internal policies and procedures concerning due diligence.
Maridom plaintiffs do not plead any facts demonstrating that they would have disregarded
SCBI’s alleged recommendation if they had known that Standard Chartered received trailer fees
from FGG, or if they were aware of Standard Chartered’s internal policies and procedures.
Indeed, they plead just the opposite—that they “justifiably accepted” statements of SCBI and
“relied on them because they were made by investment experts in whom they had placed their
trust.” (Second Am. Compl. ¶ 81.)
D.

Maridom Plaintiffs’ Proposed FSIPA Claim Fails As a Matter of Law
Because the Sales of Sentry Are Not Alleged To Have Occurred in Florida.
The proposed FSIPA claim asserted in the Second Amended Complaint, which

simply incorporates the same allegations as the other causes of action (Second Am. Compl.
¶ 121), fails for the same reason as Maridom plaintiffs’ other fraud-based claims, namely, the
-17-

failure to plead any alleged misrepresentations or omissions with the particularity required under
Rule 9(b). Anwar II, 2011 WL 5282684, at *6 (dismissing FSIPA claim under Rule 9(b)).
Maridom plaintiffs’ proposed FSIPA claim also fails to allege the location of any
alleged misrepresentation or omission made by Standard Chartered, including the alleged
recommendation to invest in Sentry. FSIPA does not apply to purchases of securities that occur
outside of Florida. Anwar II, 2011 WL 5282684, at *7 n.4. Maridom plaintiffs allege generally
that they met with SCBI representatives “from time to time” in Miami, Florida, and that SCBI
“formulated” recommendations in Miami, but they do not allege with particularity that the sales
of Sentry to Maridom plaintiffs (or alleged recommendations, misrepresentations or omissions)
occurred in Florida. Instead the Second Amended Complaint asserts only that “the sales of the
shares of Sentry did not occur entirely outside the State of Florida.”6 (Second. Am. Compl.
¶ 120.) This is insufficient to plead that the “purchase/sale of Fairfield Sentry occurred in
Florida.” Anwar II, 2011 WL 5282684, at *7 n.4.

6

Other allegations in the proposed Second Amended Complaint support a conclusion that
any alleged sales of Sentry to Maridom plaintiffs occurred outside of Florida, including that (a)
“SCBI is a corporation organized under the laws of the United States for the purpose of engaging
in international or foreign banking and international or foreign financial operations” (Second Am.
Compl. ¶ 12); (b) SCI is “engaged in international banking” (id. ¶ 14); (c) “SCB is an
international bank . . . organized under the laws of the United Kingdom” (id. ¶ 16); and (d)
plaintiffs “are affiliated, through common control, with persons who reside in the Dominican
Republic” (id. at 11).
-18-

CONCLUSION
For all the foregoing reasons, SCBI respectfully requests that the Court deny
Maridom plaintiffs’ request for leave to file the Second Amended Complaint.
Dated: March 1, 2012
New York, New York
/s/ Sharon L. Nelles
Sharon L. Nelles
Bradley P. Smith
Patrick B. Berarducci
SULLIVAN & CROMWELL LLP
125 Broad Street
New York, New York 10004
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Diane L. McGimsey
(Admitted Pro Hac Vice)
SULLIVAN & CROMWELL LLP
1888 Century Park East
Los Angeles, California 90067
Attorneys for Defendant
Standard Chartered Bank
International (Americas) Ltd.

-19-