Anwar et al v. Fairfield Greenwich Limited et al

Filing 861

MEMORANDUM OF LAW in Support re: (158 in 1:10-cv-00920-VM) MOTION for Reconsideration re; (853 in 1:09-cv-00118-VM-THK, 853 in 1:09-cv-00118-VM-THK, 155 in 1:10-cv-00920-VM, 155 in 1:10-cv-00920-VM) Order on Motion for Leave to File Document, Order on Motion to Amend/Correct,,,, filed by Maridom, Caribe MOTION for Reconsideration re; (853 in 1:09-cv-00118-VM-THK, 853 in 1:09-cv-00118-VM-THK, 155 in 1:10-cv-00920-VM, 155 in 1:10-cv-00920-VM) Order on Motion for Leave to File Document, Order on Motion to Amend/Correct,,,, filed by Maridom, Caribe. Document filed by Abbot Capital, Inc.. Filed In Associated Cases: 1:09-cv-00118-VM-THK, 1:10-cv-00920-VM(Brodsky, Richard)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MASTER NO. 09-cv-118 (VM) (THK)
PASHA ANWAR, et al.,
v.

Plaintiffs,

FAIRFIELD GREENWICH LIMITED,
et al.,
Defendants.
This filing relates to Maridom Ltd., et al.,
v. Standard Chartered Bank International
(Americas), Ltd.
____________________________________________/
MEMORANDUM OF LAW IN SUPPORT OF
MARIDOM PLAINTIFFS’
NOTICE OF MOTION FOR RECONSIDERATION OF ORDER
DENYING LEAVE TO AMEND COMPLAINT

Richard E. Brodsky
The Brodsky Law Firm, PL
Suite 1930
200 South Biscayne Boulevard
Miami, Florida 33131
(786-220-3328)
Counsel for Maridom, Ltd.,
Caribetrans, S.A., and Abbot Capital,
Inc.

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The Maridom Plaintiffs request reconsideration of the Court’s Decision
and Order dated April 13, 2012, DE 853, denying the motions of the Maridom
Plaintiffs for leave to amend their complaint.
The facts are undisputed: (i) the proposed amendment would engender
no new discovery, (ii) no summary judgment motion has been filed, (iii) no
trial date has been set, and (iv) discovery is still ongoing at the time of filing
of this Motion. The only prejudice to the Defendants that the Court found
were leave granted would be some delay if the Defendants file a motion to
dismiss. On these undisputed facts, there was no basis under Rule 15(a) (or
Rule 21(a)) to have denied leave to amend.1 E.g., Bridgeport Music, Inc. v.
Universal Music Group, Inc., 248 F.R.D. 408 (S.D.N.Y. 2008) (Marrero, J.).
The grounds for this Motion for Reconsideration are that this Court’s
Decision and Order was clear error and, if unchanged, will create manifest
injustice for the Plaintiffs.2 Respectfully, there is no basis under Rule 15(a) or
Rule 21(a) for the Court’s Decision and Order.

The Court recognizes in its Decision and Order that leave to amend is
to be freely granted. In effect, “all ties go to the runner,” to use a baseball
analogy. See, e.g., Margel v. E.G.L. Gem Lab Ltd., No. 04 cv 1514 (PAC/HBP),
2010 WL 445192 (S.D.N.Y. Feb. 8, 2010) (court permits amendment after
“[d]rawing all inferences in [movants’] favor”). Here, the runner was called
out even though it appears he beat the throw to first.
1

As this Court explained in RST (2005) Inc. v. Research in Motion Ltd.,
597 F. Supp. 2d 362, 365 (S.D.N.Y. 2009), “The major grounds justifying
reconsideration are an intervening change in controlling law, the availability
2

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1.
The Court’s October 4, 2010 order on the Defendants’
original motion to dismiss should not be read as establishing a
deadline to file all amendments by October 25, 2010, and thereafter
only by showing “good cause.”
In the Court’s October 4, 2010 order, granting in part and denying in
part the Defendants’ motion to dismiss, the Court gave certain of the
Plaintiffs twenty-one days to come back to the Court to seek to justify curing
the defects found by the Court in their original complaints (in the case of the
Maridom Plaintiffs, the failure to identify the specific individuals who made
misrepresentations to the Plaintiffs and where these misrepresentations
were made). Anwar v. Fairfield Greenwich Ltd., 745 F. Supp. 2d 360, 379
(S.D.N.Y. 2010). The Maridom Plaintiffs chose not to do so. (They seek to add
this allegation now, but it is one small part of the amendment they seek.)
The Court has now ruled that the deadline in the October 4, 2010 order
bars any amendment with respect to any matter, whether or not the
amendment relates to a previously determined pleading defect, without a
showing of “good cause” to overlook “undue delay. ” This cannot logically have
been the Court’s intention in issuing the October 4, 201 order, but this is
surely the effect of the Decision and Order.
As this Court noted in Bridgeport Music, 248 F.R.D. at 412, a
scheduling order of the type referred to in the “good cause” cases refers to an

of new evidence, or the need to correct a clear error or prevent manifest
injustice.” (citations and quotation marks omitted).
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order establishing a date by which parties may amend their pleadings issued
pursuant to Fed.R.Civ.P. 16. The Second Amended Scheduling Order, DE
609, issued in this case by Magistrate Judge Katz on February 22, 2011, at
the outset of discovery, contains no deadline for filing amended pleadings.
Treating the October 4, 2010 order as enacting a deadline for all
amendments, including those unrelated to the earlier short deadline, months
before discovery was permitted to begin, is out of tune with the spirit and
letter of Rule 15(a), without having to show “good cause.” The “good cause”
standard should not be applied because, manifestly, it is inapplicable.
2.
The Plaintiffs cannot fairly be considered to be guilty of
“undue delay,” and, even if they need to show good cause to amend,
they have plainly done so.
The Court found that the Maridom Plaintiffs engaged in “undue
delay.” Decision and Order at 6. Respectfully, there was no factual basis for
this finding, so that, even if “good cause” rule were required, the Maridom
Plaintiffs unquestionably can satisfy that standard.
a.
The discovery deadline was not “extended several times.”
There was one two-month extension.
As an initial matter, the Court states that “[t]he discovery deadline has
been extended several times” in the Standard Chartered cases, Decision and
Order at 2, but this is simply not the case. The Standard Chartered cases
have been operating under Scheduling Orders independent of the Anwar
case. Here, there was but one short extension, from March 2 to May 4, which

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the Standard Chartered Defendants consented to in broad terms, despite
disagreeing on certain conditions. The Magistrate Judge ordered the
extension over those objections. That is the only extension of discovery in this
case. A two-month extension supported by both sides hardly evidences undue
delay by the Maridom Plaintiffs.
b.

No Delay in Conducting Discovery

The Plaintiffs have been exceedingly diligent in conducting discovery
in this case. Discovery has lasted from February 2011 to May 2012. After
answers were filed, initial time was spent on negotiating scheduling and
confidentiality orders and seeking the appointment of a Plaintiffs’ Steering
Committee. Those orders were entered in February 2011. After which the
Magistrate Judge permitted discovery to begin. Initial written discovery was
promptly promulgated by the Plaintiffs in February 2011. Standard
Chartered dribbled out their documents and did not conclude producing
documents until March 2012. Moreover, while this process wended its way to
conclusion, Standard Chartered refused to produce many of the critical
documents requested, requiring the Plaintiffs, over and over, to seek the
assistance of Judge Katz. Standard Chartered objected to producing a vast
array of documents, resulting in substantial delays in the Plaintiffs’ ability to
obtain discovery.3 Nevertheless, even before receiving plainly important

Perhaps the most significant and outrageous of these delays was
caused by the Defendants’ long-standing refusal to conduct a diligent search
3

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documents, such as the all-important Swiss-based due diligence documents,
see n. 4, the Plaintiffs began depositions – but only after having to wait three
weeks after their original proposed start because Judge Katz agreed to the
Defendants’ illogical, if not plainly cynical, request to delay the depositions of
the Defendants’ former employees because the Defendants had not yet
produced all of their documents.
In sum, the Plaintiffs cannot fairly be accused of any delay in discovery
proceedings, let alone undue delay. And if good cause for any perceived delay
needs to be shown, it is clear that the Maridom Plaintiffs have done so. Even
had the Standard Chartered Defendants not fought hard to prevent fair
discovery, there can be no finding that the Maridom Plaintiffs, or any of the
Plaintiffs, dawdled in any manner or form.
b.

No “Undue Delay” in Naming Other Defendants

The Maridom Plaintiffs sued American Express Bank International
(“AEBI”), the Miami-based Edge Act bank that was their family and business
bank since the 1980s, and which recommended that they buy Fairfield

of the documents in their office in Switzerland, where the “due diligence” of
Fairfield Sentry was conducted. (This case is, in substantial part, about
whether Standard Chartered did an adequate job of due diligence respecting
Fairfield Sentry.) Finally, in January 2012, Magistrate Judge Katz ordered a
search to be made, and a raft of responsive documents were finally produced,
for the first time, on March 2, 2012, over a year after they were requested.
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Sentry.4 The Court has found that the Maridom Plaintiffs engaged in undue
delay because they did not earlier name two other corporations owned by
American Express Company, and later Standard Chartered PLC, that they
now propose to sue: American Express Bank, Ltd., now known as Standard
Chartered International (USA) Ltd. (“SCI”), the parent of AEBI, and
Standard Chartered Bank. Respectfully, there is no basis in fairness or logic
to draw the conclusion that they waited too long.
Until well into discovery, neither the Plaintiffs nor counsel knew
anything about the role played by SCI, other than its status as the owner of
the operating subsidiary, AEBI, and by Standard Chartered Bank, other than
its role as owner of SCI. There is, of course, a profound difference between
knowing the identity of an entity and concluding, through discovery, that
there is a factual and legal basis to sue that entity. The Court appears to
have overlooked this significant difference. The Court appears to be saying
that the Maridom Plaintiffs should have sued American Express Bank and
Standard Chartered Bank without being satisfied (or even suspecting) that
there was a basis in fact and law to name these parties as defendants - or be
forever barred from doing so absent a showing of good cause. Requiring an
earlier attempt to sue these companies ignores the basic concept underlying
the existence of private corporations, limited liability for a subsidiary’s debt
The three plaintiffs are corporations under the common control of two
families in the Dominican Republic related by marriage.
4

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or other obligation, and further encourages the prudent plaintiff disregard
the strictures of Rule 11 in determining whom to sue and when, just to avoid
a finding that it waited too long to sue.
Nor does the fact that other Plaintiffs had already sued Standard
Chartered Bank or SCI have any real significance. There is no authority of
which we are aware that suggests that this is a basis to deny leave to amend.
The Maridom Plaintiffs were not working with the other Plaintiffs that sued
Standard Chartered when these cases were being brought, and vice versa.
Whatever those Plaintiffs who did sue SCI or Standard Chartered Bank
knew about these parties is in no way imputable to the Maridom Plaintiffs or
their counsel. If the judgment of the Maridom Plaintiffs’ counsel that there
was not enough basis to sue the parent corporations at the outset, absent
discovery, that judgment should not be deemed flawed simply because other
Plaintiffs’ counsel appear to have reached a different conclusion.
This Court, in Bridgeport Music, faced a somewhat similar situation
where one defendant sought to convince the Court to deny leave to amend to
add a new defendant. The Court found that “the mere knowledge that
MusicNet offered white label service would not have established that it was
engaged in licensing Bridegport’s compositions specifically. Bridgeport
reasonably waited until it could inquire further into the extent of MusicNet’s
activities with respect to Bridgeport’s compositions before moving to add

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MusicNet as a defendant.” 248 F.R.D. at 413-14. By analogy, the same
rationale should apply here.
c.

No Delay in Bring Florida Blue Sky Act Claim.

Similarly, the Maridom Plaintiffs should not be penalized for waiting
to seek to bring a Florida Blue Sky Act claim does not show delay of any kind,
undue or otherwise, on the part of the Maridom Plaintiffs. The interests of
judicial economy would have been violated had they sought to amend their
complaint on a piecemeal basis – i.e., first, to file a Blue Sky Act claim,
second, to add additional defendants, etc.
Moreover, the decision whether to bring an available action is not as
simple as simply being aware of the possibility of bringing such an action;
knowing the results of discovery may very well influence the decision
whether it is the clients’ best interest to seek to invoke this statute.
Ordinarily, under Rule 15, there is no penalty for waiting until discovery is
not even over to seek to bring a new claim, when it is undisputed that no
additional discovery will be engendered by the new claim. There is no basis to
vary from that course.
In sum, the finding of undue delay on the part of the Maridom
Plaintiffs is plainly in error and is manifestly unjust.

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3.
The Court erred in finding “undue prejudice” to the
Defendants.
Even if the Court were not in error in finding “undue delay” and in
invoking the “good cause” standard, the Court concludes without basis that
the amendment would cause “significant delay,” thereby causing the
Defendants “undue prejudice.” The sole basis for this conclusion would be the
fact that allowing an amendment might require the Defendants to file a
motion to dismiss. Decision and Order at 8. The possible delay caused by
“inevitable” motions to dismiss is simply not the kind of “significant delay”
that constitutes “undue prejudice” and therefore justifies denial of leave to
amend. Far more serious effects have been deemed not to cause prejudice.
There is no requirement under the Federal Rules of Civil Procedure
that a defendant move to dismiss a complaint it finds defective. All defenses
that could be asserted in a motion to dismiss are preserved in properly
asserted affirmative defenses. Motions for summary judgment, which clearly
will be filed whether leave to amend is granted or not, can test the sufficiency
of the newly pleading claims. (Surely a defendant without the means of a
major international bank might be quite content to do so and avoid the
expense of filing a new motion to dismiss and a motion for summary
judgment.) Moreover, this process need not be lengthy. The federal rules
provide for responding within fourteen days. Fed.R.Civ.P. 15(a)(3). Local Rule
6.1(a) provides for filing of a response within seven days and for the filing of a

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reply within another seven days. The month that would be spent on motion
practice, if the Defendants in good faith saw a basis to file a motion to
dismiss, is not “significant” delay in a case such as this.
In any event, it is the Plaintiffs who are primarily hurt by delay, not
the Defendants. The Defendants can be expected to claim that they want this
matter handled expeditiously, but when one takes into account the fact that
they have not filed counterclaims, the businesses involved have long since
been sold, the corporate witnesses involved are, almost to the last person, no
longer employees or officers of the defendants, the Defendants are not
significantly harmed by giving the Plaintiffs an opportunity to frame the
pleadings the way they wish.
Finally, the Court’s finding overlooks the fact that it is impossible to
determine at this stage where or when this case will be tried, so it is
therefore essentially speculative to determine that any delay in proceeding
would be “undue.” We do not even know where this case will be tried, since
the parties, or some of them, may ask the Southern District of Florida to
transfer the action back to this Court, even after a remand by the Judicial
Panel on Multi-District Litigation, because of this Court’s familiarity with
this case. See Manual for Complex Litigation, Fourth, at § 20.132, at 223-25.
Also, the parties may stipulate to this Court’s trying the case. See In Re
Carbon Dioxide Indus. Antitrust Litig., 229 F.3d 1321, 1325 (11th Cir.2000)
(describing ways in which courts have “remained faithful to the Lexecon
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limitations” while recognizing policy reasons that militate in favor of
transferee court’s trying the case). Thus, it is not possible even to measure
the relative impact on trying this case by granting leave to amend.
CONCLUSION
For the reasons stated above, the Maridom Plaintiffs respectfully
request that this Court grant their motion for reconsideration and enter an
order permitting the proposed amendment.
Respectfully submitted,
/s/ Richard E. Brodsky
_________________________
Richard E. Brodsky
Florida Bar No. 322520
The Brodsky Law Firm, PL
200 South Biscayne Blvd., Suite 1930
Miami, FL 33131
[e-mail]
786-220-3328
Attorney for Maridom Plaintiffs
Admitted pro hac vice
CERTIFICATE OF SERVICE
I hereby certify that on March 8, 2012, I electronically filed the foregoing
document with the Clerk of the Court using CM/ECF.
/s/ Richard E. Brodsky
_________________________
Richard E. Brodsky

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