Anwar et al v. Fairfield Greenwich Limited et al

Filing 844

MEMORANDUM OF LAW in Opposition re: #837 MOTION to Amend/Correct Complaint.. Document filed by Pricewaterhousecoopers L.L.P.. (Attachments: #1 Exhibit)(Duffy, Timothy)

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
__________________________________________
ANWAR, et al.
)
)
)
Plaintiffs,
)
)
v.
)
)
FAIRFIELD GREENWICH LIMITED, et al.,
)
)
Defendants.
)
)
This filing relates to Headway Investment Corp.
)
v. Standard Chartered Bank Int’l (Americas), Ltd., )
et al.
)
__________________________________________)

Case No: 09-CV-118 (VM)
ECF Case

PRICEWATERHOUSECOOPERS LLP’S OPPOSITION TO HEADWAY INVESTMENT
CORPORATION’S MOTION FOR LEAVE TO AMEND COMPLAINT
Headway Investment Corporation’s motion for leave to amend its complaint should be
denied.1 Among other things, Headway’s proposed amended complaint seeks to add
PricewaterhouseCoopers N.V. (“PwC Netherlands”) as a defendant and add claims against various
Fairfield Greenwich defendants. But Headway has no right to pursue any claims except those
against the Standard Chartered defendants. All of its claims against the non-Standard Chartered
defendants, including any claims against PwC Canada, are proceeding in the Anwar case. Headway
offers no justification for prosecuting separate claims against PwC Canada, much less for
attempting to do so three years after the Court’s Orders precluding such efforts. First, Headway has
never even served PwC Canada with any complaint, and its failure to take any action in this regard
should preclude any motion to amend (or otherwise prosecute claims separate from Anwar).
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PricewaterhouseCoopers LLP (“PwC Canada”), in submitting this opposition, preserves all rights and defenses,
including any defense it may have to the personal jurisdiction or subject matter jurisdiction of the District Court for
the Southern District of Florida, and does not waive service of process. PwC Canada, by submitting this
opposition, does not intend to make an appearance in any action separate and apart from the Anwar consolidated
action.

Second, Headway’s motion fails to demonstrate any basis for amending its complaint to reflect
information that has been readily available to Headway for years. Third, even if Headway is
permitted to amend its complaint against PwC Canada, the Court should clarify that PwC Canada
(and the other defendants in Anwar) need not answer or otherwise respond to the amended
complaint either prior to being served or during the pendency of Anwar.
BACKGROUND
The Anwar complaint was removed to this Court on January 7, 2009. (Anwar Dkt. #1,
1/7/09 Notice of Removal) After several related cases were consolidated with Anwar, on January
30, 2009, the Court entered an order finding “that it would be appropriate to consolidate with the
Anwar Consolidated Action any additional related actions filed in or transferred to this Court . . . for
pre-trial and trial purposes and also to provide for an organization of Plaintiffs’ counsel to
coordinate the efforts of counsel in the Consolidated Action.” (Dkt. # 40, 1/30/09 Order at 2) On
March 11, 2009, the Court entered its Civil Case Management Plan and Scheduling Order in the
consolidated Anwar action. The order provided that “[a]ll subsequently filed or transferred
cases…concerning losses by or on behalf of Fairfield Greenwich investors arising from or relating
to the facts and claims alleged in the Consolidated Action…shall be consolidated, for all purposes,
with Consolidated Action.” (Dkt. #69, 3/11/09 Order at 2) The order stated that “Defendants shall
respond only to the Consolidated Amended Complaint; no response by Defendants is due to any
individual complaints that are consolidated into the Consolidated Action.” (Id. at 3)
On April 6, 2009, Headway, a Fairfield Sentry investor since 2003, filed its initial complaint
in Florida state court. The complaint alleged that Standard Chartered Bank and several related
individuals and entities involved in managing Headway’s funds breached their fiduciary duties to
Headway by recommending that Headway invest in Fairfield Sentry despite not having performed
adequate diligence on the fund. The complaint also named as defendants Fairfield Greenwich
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Group and various related individuals and entities, Citco Fund Services (Europe), B.V., and PwC
Canada, asserting negligence and related claims.
The case was removed to the United States District Court for the Southern District of Florida
on May 22, 2009. On June 19, 2009, Fairfield Greenwich Advisors LLC filed a motion with the
Judicial Panel on Multidistrict Litigation to transfer the Headway case to this Court for
consolidation with Anwar and other related actions. The motion asserted that consolidation was
warranted because “Headway and Anwar involve numerous ‘common questions of fact,’” and that
“[t]he Headway plaintiff is already part of the putative Anwar class,” as well as the putative class in
the already-consolidated case of Bhatia, et al. v. Standard Chartered Int’l (USA) Ltd., et al., 09-CV2410. (Dkt. #170-1, 6/18/09 Mot. to Transfer, at ¶¶ 2-3) Although Headway argued
(unsuccessfully) that its claims against the Standard Chartered defendants should be severed and
retained by the Florida courts, it conceded that consolidation of its claims against the other
defendants, including PwC Canada, was appropriate. (Ex. A, 7/16/09 Resp. at 2) On October 14,
2009, this Court ordered that the Headway case be consolidated with Anwar. (Dkt. #282)
At no point did Headway serve summons and the complaint on PwC Canada or provide an
excuse for its failure to do so. On December 30, 2009, more than eight months after filing the
complaint, Headway’s counsel wrote to the Court seeking “a 120-day extension to serve process on
the defendants in Headway who have not yet been served.” (Dkt. #374, 1/5/10 Endorsed 12/30/09
J. Mestre Ltr. at 1) Headway noted that it “needs to serve its Complaint (as opposed to the Second
Amended Consolidated Complaint in Anwar) to foreclose any potential challenge upon remand by
[any] yet unserved defendants that they are not subject to the jurisdiction of the Southern District of
Florida or were otherwise not properly served.” (Id. at 2) On January 5, 2010, the Court
responded: “The Court sees no reason why it should take an additional 120 days to resolve service

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issues, and no justification has been provided. Service issues should be resolved by March 5,
2010.” (Id.)
On March 5, 2010, Headway’s counsel again wrote to the Court, requesting a 60-day
extension to effect service of summons on several foreign defendants, including PwC Canada. The
letter noted that PwC Canada did not agree to waive service, and that Headway’s “application for
service made to Canadian authorities is presently outstanding.” (Dkt. #395, 3/10/10 Endorsed
3/5/10 P. Dans Ltr. at 2) The Court ordered: “Service issues must be resolved by May 10, 2010.”
(Id.) But May 10, 2010 came and went without any response from Headway. To this day, PwC
Canada has never been served with summons in the Headway action. As Headway concedes in its
motion, and consistent with this Court’s March 3, 2009 Order specifying that the defendants in
Anwar need not respond to other complaints, only the Standard Chartered defendants have
answered Headway’s complaint; PwC Canada, Citco, and the Fairfield defendants have never
answered or otherwise responded to the Headway complaint. (Dkt. #838, 3/16/12 Mot. at 6 n.4)
Neither Headway’s original or proposed amended complaint alleges any involvement by
PwC Canada unique to either Headway itself or to the Standard Chartered defendants. Put another
way, any potential claims by Headway against PwC Canada are indistinguishable from the potential
claims of any investor in any of the Fairfield Greenwich funds. Any litigation against PwC Canada
spearheaded by Headway would be no different in scope than the Anwar litigation.
ARGUMENT
I.

Headway’s Failure to Serve PwC Canada Bars Its Motion to Amend and Warrants
Dismissal of any Claims Against PwC Canada.
In the three years since this action commenced, Headway has made no apparent effort to

effect service on PwC Canada. After Headway failed to effect service in the first year that the
action was pending, the Court imposed a reasonable deadline of May 10, 2010 to effect service on
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foreign defendants, but Headway still did not comply. Nearly two years have elapsed since that
deadline. Headway’s lack of diligence should not only preclude its motion to amend, but also
justifies the formal dismissal of its claims against PwC Canada.
Federal Rule of Civil Procedure 4(m) provides that defendants must be served within 120
days of the filing of the complaint, but contains an exception for foreign defendants. The Second
Circuit has held that Federal Rule of Civil Procedure 4(m)’s exception of foreign defendants from
the 120-day service requirement is inapplicable where, as here, there was no attempt to serve the
foreign defendant within 120 days. USHA (India), Ltd. v. Honeywell Int’l, Inc., 421 F.3d 129, 13334 (2d Cir. 2005); Montalbano v. Easco Hand Tools, Inc., 766 F.2d 737, 740 (2d Cir. 1985).
Further, setting Rule 4 aside, plaintiffs do not have an indefinite period within which to effect
service. Accordingly, many courts have dismissed actions in which plaintiffs failed to effect service
on a foreign defendant in a prompt manner. Plantation Gen. Hosp., L.P. v. Cayman Islands, 2010
WL 731853, at *1 (S.D. Fla. Feb. 26, 2010); United States ex rel. Thomas v. Siemens AG, 708 F.
Supp. 2d 505, 521-23 (E.D. Pa. 2010); Quantum Color Graphics, L.L.C. v. Fan Ass’n Event Photo
GmbH, 185 F. Supp. 2d 897, 906 (N.D. Ill. 2002); Thayer v. Dial Indus. Sales, Inc., 85 F. Supp. 2d
263, 266 (S.D.N.Y. 2000); James v. Rutil (S.R.L.), 1997 WL 151174, at *5 (S.D. Ind. Mar. 14,
1997) (dismissing foreign defendant where plaintiff did not meet court’s “‘flexible due diligence’
standard as measured by the reasonableness of Plaintiff's effort as well as the prejudice to the
defendant from any delay”).
The dismissal of Headway’s negligence claim against PwC Canada will not prejudice
Headway because Headway is a member of the putative class in Anwar, and any claims it might
have against PwC Canada are proceeding in that action. Headway has no separate claims against
PwC Canada, and the effect of the Anwar consolidation Order was to render its individual pleading
moot. Where, as here, there is no basis for a separate suit, parties to consolidated proceedings
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rightly treat such pleadings as moot. Headway now seeks to use its complaint as a vehicle to
commence its own separate litigation against PwC Canada and others. Dismissal will properly put a
stop to this effort, and is certainly called for here given Headway’s failure to serve its complaint.
II.

Headway Fails to Justify Its Delay in Seeking Leave to Amend.
Headway should also not be permitted to amend its complaint because there is no

justification for Headway’s undue delay in seeking to amend. For example, Headway seeks to add
PwC Netherlands to its complaint, purportedly “correct[ing] an inadvertent mistake in identifying
the PwC entities.” (Dkt. #838, 3/26/12 Mot. ¶ 2) Headway asserts that it did not know that two
different PwC firms served as Fairfield Sentry’s auditors from 2003 to 2008 until it “review[ed]
documents produced by” the Standard Chartered defendants. As an initial matter, this assertion
belies any notion that Headway saw or relied on any audit reports in making or retaining its
investment. In addition, Headway’s ignorance is no excuse for its delay, when the Second
Consolidated Amended Complaint filed on September 29, 2009 clearly alleged that PwC
Netherlands audited the year-end financial statements of Fairfield Sentry “for the years 2002, 2003,
2004, and 2005,” and alleged that PwC Canada audited Fairfield Sentry’s financial statements “for
the years 2006 and 2007.” (SCAC ¶¶ 154-55)
Headway has not offered any justification for waiting more than two years after the filing of
the operative complaint to correct this “inadvertent mistake” or others that should have been
apparent months if not years ago. Grochowski v. Phoenix Constr., 318 F.3d 80, 86 (2d Cir. 2003)
(no abuse of discretion to deny leave to amend based on a state court decision issued over a year
before plaintiffs’ attempt to amend). Headway’s motion for leave to amend should be denied.

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III.

If Headway Is Allowed to Amend Its Complaint, the Court Should Clarify that PwC
Canada Has No Obligation to Answer During the Pendency of the Consolidated
Action.
If the Court grants Headway’s motion for leave to amend its complaint, the Court should

reaffirm the Civil Case Management Plan, which states that “Defendants shall respond only to the
Consolidated Amended Complaint; no response by Defendants is due to any individual complaints
that are consolidated into the Consolidated Action.” (Dkt. #69, 3/11/09 Order at 3) Requiring PwC
Canada (or any of the non-Standard Chartered defendants) to answer related and overlapping
complaints in the consolidated action would create confusion and duplication of effort, undermining
the very purpose of consolidation. Headway is a member of the putative Anwar class, and its claims
against PwC Canada and the other defendants to the Anwar action are entirely duplicative of the
claims in Anwar. Thus, the Headway case should be stayed upon the filing of any amended
complaint.
CONCLUSION
For the foregoing reasons, PwC Canada respectfully requests that the Court deny Headway’s
motion for leave to amend its complaint and dismiss Headway’s action against PwC Canada.
Should Headway’s motion for leave to amend its complaint be granted, PwC Canada respectfully
requests that the Court order that PwC Canada and the other defendants to the consolidated Anwar
action not be required to answer or otherwise respond to Headway’s complaint pending resolution
of the Anwar action.

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Dated: April 2, 2012
Respectfully submitted,

/s/ Timothy A. Duffy
Andrew M. Genser
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, New York 10022
Telephone: [phone]
Emily Nicklin, P.C.
Timothy A. Duffy, P.C.
KIRKLAND & ELLIS LLP
300 North LaSalle
Chicago, Illinois 60654
Telephone: [phone]
Email: [e-mail]
Attorneys for Defendant
PricewaterhouseCoopers LLP

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