Anwar et al v. Fairfield Greenwich Limited et al

Filing 904

TRANSCRIPT of Proceedings re: CONFERNCE held on 6/1/2012 before Judge Victor Marrero. Court Reporter/Transcriber: Karen Gorlaski, [phone]. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 8/13/2012. Redacted Transcript Deadline set for 8/23/2012. Release of Transcript Restriction set for 10/19/2012.Filed In Associated Cases: 1:09-cv-00118-VM-FM et al.(McGuirk, Kelly)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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PASHA S. ANWAR, ET AL,

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Plaintiffs,

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v.

09 CV 118 (VM)

FAIRFIELD GREENWICH LTD., ET
AL.,

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Defendants.
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New York, N.Y.
June 1, 2012
2:17 p.m.

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Before:
HON. VICTOR MARRERO

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District Judge
APPEARANCES
LEVINE KELLOGG LEHMAN SCHNEIDER & GROSSMAN LLP
BY: LAWRENCE A. KELLOG
JASON KELLOG
-andCOHEN KINNE VALICENTI COOK
BY: DAVID VALICENTI
Attorneys for Plaintiffs Lorrene and Arlete Da Silva Ferreira
GREENBERG TRAURIG
Attorney for Defendant EFG Capital International Corp.
BY: JOSEPH C. COATES, III

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SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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(In open court; case called)

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THE COURT:

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This is a proceeding in the matter of Anwar v.

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Good afternoon.

Fairfield Greenwich docket number 09 Civil 0118.
We are here to consider final approval of a settlement

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of one of the actions that is a component of that umbrella MDL

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litigation.

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International Corp. originally docketed as 11 Civil 0813.

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It is the Da Silva Ferreira v. EFG Capital

The Court authorized the parties to provide notice of

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this settlement and schedule this proceeding in order to

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consider final approval of the proposed terms of the

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settlement.

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The Court's determination is whether the terms of the

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settlement are fair and adequate and reasonable.

That

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determination in this circuit is made pursuant to the Second

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Circuit standard set forth in City of Detroit v. Grinnell, the

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so-called Grinnell factors, of which there are at least nine

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that the parties should address in some form.

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Who leads for the plaintiff, Mr. Kellog.

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MR. L. KELLOG:

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My name is Lawrence Kellog.

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With me is Jason Kellog of Levine Kellog Lehman

Yes, sir.

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Schneider & Grossman.

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of this court, is also with me.

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Good afternoon, your Honor.

My cocounsel, David Valicenti, a member

time to do this.

I appreciate you giving us the

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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I'd like to discuss the Grinnell factors and just go
through them one by one.

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We've -- just so you know, we have given notice to

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everyone both by -- there's an affidavit to this effect -- both

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by mail, some by hand delivery, and the vast majority also by

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e-mail.

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So three different ways.
The claims administrator, who is the defendant.

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defendant, in this case, most of the class members remain

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customers of the defendant EFG Capital International.

The

Spoke to

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well over 70 of the class members.

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Spoke to most of them.

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Each class member has been given a determination already of

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what their net investment losses are as calculated by EFG.

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there was any issue as to that, it was worked out between them.

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And we have no objections to the settlement.

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additionally, some arbitration claimants, twelve of them, who

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were initially members of the class.

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opt into the class if they wanted to.

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in.

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to this settlement, the very same terms as we had.

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not bound by this class determination.

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separately.

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There are 249 of them.

Or a number of them who had questions.

If

We had,

They had the ability to
They decided not to opt

But they settled on the exact same terms after we had come
But they're

They've already settled

We have opt-outs of six class members.

Totaling about

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two-and-a-half percent of the net investment loss facility.

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The reaction of the class overall of this settlement has been
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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overwhelmingly positive in my view.
Now going through the Grinnell factors as to why we're

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asking the Court to find that this is a fair and reasonable

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settlement under the circumstances.

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complexity, expense, and likely duration of this litigation.

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This litigation began in the Southern District of Florida

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before Judge Martinez.

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is that he immediately scheduled it for trial.

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He allowed us to do class certification discovery at the same

The first factor is the

And he did us all a favor in a sense,
Within a year.

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time we did merits discovery.

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defendant filed to stay discovery while their motion to dismiss

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was pending.

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He denied every motion that the

And he said go at it.

Initially we had two defendants.

We had a small

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broker-dealer EFG Capital International down in Miami and their

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parent which is EFG Bank, which is a Swiss bank in Switzerland.

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We sued them both.

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The Swiss bank had in their papers a forum selection
clause requiring litigation to be in Switzerland.
And ultimately Judge Martinez agreed with them and

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dismissed EFG Bank from the case but said go forward with EFG

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Capital International.

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So we were able to discover the case, both

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documentary-wise.

We took depositions of all their key

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officers, their top officers.

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we reviewed over 125,000 documents.

From the plaintiffs' perspective
We took the depositions.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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We hired expert witnesses, consulted with them.

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reports that we exchanged with the other side.

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Had expert

From our perspective, we were almost ready for trial.
And trial was scheduled for August of 2011.

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At the end of 2010, the case was moved up here.

And

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at that point we got pulled into the larger case involving

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Fairfield Century which slowed -- the defendants wanted to take

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the depositions of all of the Fairfield Century executives, so

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forth.

That slowed things down.

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From our perspective, we knew this case.

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Now we thought we were going to have a trial in 2011

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and we were looking forward to it.

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we wouldn't.

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case, and the expense of the case changed dramatically when we

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moved up here.

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Once we got up here we knew

The complexity of the case, the duration of the

Was the case complex?

Yes.

Because it involved us --

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when our particular class are customers of a feeder into the

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feeder fund into Madoff.

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customers of Madoff.

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bankruptcy estate.

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liquidation in the BVI.

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Their assets, of course, the Fairfield Century assets are far

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less than the potential claims worldwide that have been

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asserted against Fairfield Century.

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Madoff -- they were not direct

So they had no claim against the Madoff

Fairfield Century, of course, is in
And you have class actions filed here.

So our class was directed to go to the bank that had
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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introduced them to the Fairfield Century; ergo, to Madoff.
And to make that complex, we had some legal issues

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such as duty.

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members, or do they have to look at them one by one to see what

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the duty is?

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Do they really have a duty to all of these class

The SLUSA preemption issue looms all the time.

Once

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this case was shifted to the Second Circuit, while your Honor

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has found the SLUSA preemption doesn't apply to these Madoff

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cases, other district courts have held differently.

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issue is still in front of the Second Circuit.

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know, they still haven't ruled on it.

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And the

may end up in the Supreme Court.

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As far as I

And ultimately I think

So we had some class certification issues.

We had --

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we were looking at a defendant who was third tier, if you will,

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from Madoff.

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do discovery, we were able to find evidence that we thought

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created -- showed that:

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diligence.

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employees about problems with Madoff beyond what you'd read in

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the paper about the accounting firm, the small -- the custody

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of the securities was held by Madoff.

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pretty sophisticated analysis of Madoff.

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divisions of the bank -- our defendant is simply one division

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of the bank -- other divisions said we're not touching this guy

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for these reasons.

But we were able, because Judge Martinez let us

A. the bank didn't conduct due

In fact, they had indications from internal

Beyond that we had some
And different

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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We also had -- were able to develop evidence that with

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respect to the broker-dealer in Miami, they dealt uniformly

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with every one of their customers with respect to this Madoff

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Fairfield Century investment.

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discretionary account where the financial adviser was the one

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making the decisions or whether the customer was, whether or

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not there was simply a recommendation, they sent out

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communications uniformly without regard to their relationship

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as to things that the customer should know about Madoff -- or

Whether or not it was a

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about Fairfield Century and Madoff.

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was able to unilaterally decide to redeem all investments in

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Fairfield Century without even talking to the customer.

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So we thought we had a uniform duty.

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And eventually the bank

We thought we

had a lack of due diligence.
We would have to show gross negligence here.

That was

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the standard.

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than negligence.

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confronted with comparative negligence which might have an

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effect on the class certification?

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with each of the class members?

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Gross negligence is a much different standard
If we argue negligence, are we going to be

Are each of these different

So we had complex legal issues, and there are more of
them than that even.
We had a count for unfair trade practices.

We ended

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up abandoning that when we figured we couldn't prove it.

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wouldn't fly under the law in Florida.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

It

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So, it was a complex case.

The duration was -- once

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we got up here, we knew, the duration of the case, we were not

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going to get a quick trial.

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So where are we?

We have a situation where the customers, most of them,

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remain customers of EFG.

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They are either in South America or Mexico.

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marketed.

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All of them are non-U.S. citizens.
That's who was

Not too many of them, if any -- there was only twelve
that actually brought an arbitration -- not too many of them

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wanted to either litigate in the United States in a FINRA

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arbitration or litigate in Switzerland against the bank which

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is what they had to do.

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members were not going to be compensated at all from EFG

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Capital if we didn't do something.

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have to wait until the underlying Fairfield Century class

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action was before you, all get resolved, whenever that might

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be, someday down the line in the future, or when a BVI

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liquidation of Fairfield Century comes to pass.

So the vast majority of these class

We were probably going to

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So, the possibility and the opportunity of getting the

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class members money now, cash money -- as far as I know this is

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the first one that's settled before you -- getting some cash

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money, substantial cash money, substantial percentage from the

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introducing broker for the ability to continue as class members

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through EFG Bank of the Fairfield Century class actions was a

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good thing to try to accomplish, if we could get a nice enough
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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number to make it satisfactory to those class of customers.

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We mediated this case two times.

Once before Judge

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Weinstein here in New York and once before Judge Stretton down

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in Florida.

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tough, hard-fought negotiations among counsel.

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And these were not easy negotiations.

This was

And counsel on the other side are excellent.

They

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raised every conceivable legal and factual argument that you

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could raise.

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Mr. Coates, who represents the defendant, and I,

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between the two mediations did a lot of negotiating; the reason

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being, once we were here, there was no other discovery we could

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do.

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case better.

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the time we mediated it.

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all of the discovery that we wanted to do.

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There was nothing more we could really do to learn the
I think both sides knew the case intimately by
Because as I say, we did practically

So the complexity of this case was huge.

The expense

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I'll get to in a minute.

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we had taken this thing all the way to trial with you, whenever

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that would happen, my -- in my mind, what was going to happen

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was no matter who wins or loses, there were going to be appeals

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that had legal issues that could -- I didn't know how they were

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going to go.

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The duration of the litigation -- if

I don't know how this SLUSA preemption is ultimately
going to come out.
I don't know whether class certification indeed would
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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have withstood a legal challenge before the Second Circuit.

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And there might have been an appeal before we ever got

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to trial if you had certified the class, because they could do

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an interlocutory appeal.

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So I thought the duration of this litigation was
unknowable once we got up here.

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The second factor is adequate notice and the reaction

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of the class.

As I said, we have an affidavit.

Every class

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member knows about this settlement at least two if not three

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ways.

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it, to talk about whether their claims are as they've been

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calculated.

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to ask.

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one, with the exception of six, agrees.

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So the reaction speaks for itself in my mind.

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They've had an opportunity, and many of them have taken

They've been able to ask any questions they want

We've had some contact with class members.

And every

And no one objects.

The Grinnell factor stage of the proceedings.

We

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were, as I say, from the plaintiffs' perspective, practically

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fully discovered.

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I wanted to take the chairman of the board of the Swiss bank's

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deposition.

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before we got moved up here.

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some point.

I wanted to take at least maybe one other

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deposition.

But that was it.

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knew what my case was going to be, and I fully discovered it.

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I hadn't done their expert depositions yet.

And they had agreed to produce him ultimately
And it was going to happen at

I knew what the case was.

I

The risks of establishing liability and damages, I
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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touched on those.

This was -- this was a case that had, in my

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mind, substantial factual merit and substantial legal risks,

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legal issue risks, as being treated as a class-wide basis

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because of the claims asserted being negligence.

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thought there were risks with the SLUSA preemption.

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also have been risks with whether or not there's a common duty

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of EFG Capital International to the class members.

I also
There may

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Is this within the range of reasonableness?

We cited

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to the Court various cases which show the -- what we're going

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to be recovering here is 16.7 percent of the net investment

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losses.

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cases similar to this in size and in complexity.

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That is well within the range of settlement amounts in

We cited the Court -- if you got 90 percent, there

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would be no question.

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ability for the class to get more, if the class lawyers here

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for you are ultimately successful in settling or in trying the

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case against Fairfield Century.

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But we have 16.7 percent plus the

Did we have arm's length negotiations?

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With two different mediators.

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impasse.

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Yes, we did.

were able to get it done.

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We negotiated some more.

We came back and finally

An important consideration, and one of the Grinnell

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factors, is:

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judgment hearing?

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One of whom there was an

What is EFG Capital's ability to withstand a full
Here is what we were faced with.

EFG Bank was dismissed from the case because they had
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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a forum selection clause in Switzerland.
EFG Capital International is a relatively tiny

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broker-dealer in Miami that caters to South Americans and

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foreign investors.

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Lloyds of London had a policy that would potentially

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cover these claims, insurance policy, but they denied coverage.

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They denied coverage at the eleventh hour right before our

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first mediation.

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So, I have no confidence that EFG Capital

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International had the ability to pay any judgment were we to

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win, at least an entire judgment.

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the insurance coverage, we would have to be arbitrating in

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London because that's what the policy required.

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actually would have to arbitrate in London with the carrier

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defined coverage.

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If we were going to go after

The bank

So collectibility was an issue here.

So for these reasons we believe this to be, and I'm

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proud really to recommend this as fair and reasonable

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settlement of this case.

And ask that you approve it.

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THE COURT:

All right.

Thank you.

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Mr. Coates.

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MR. COATES:

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I represent EFG Capital International.

Thank you, your Honor.
And we join

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with the plaintiff and request that the Court approve the --

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finally approve the settlement.

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In addition, your Honor, we submitted an affidavit of
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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Mr. Steven Vogel which lays out in great detail the notice, how

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it was accomplished in this case, which is truly remarkable for

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a class action in that EFG Capital was able to identify,

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through its records, the addresses, the current addresses of

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the vast majority of the class members.

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We also communicated with them by e-mail and/or

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telephone to let the class members know that they would be

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receiving the class notice.

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As Mr. Kellog pointed out, approximately 20 of the

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class plaintiffs requested that we deliver to them by courier,

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by hand, the class notice for reasons of security in various

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countries.

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And we did that.

And we also, in addition, of course, sent by mail to
all the class members the notice.
Unlike typical cases, we did not need to rely upon

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publication.

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Mr. Kellog mentioned, generally well-off persons who had

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accounts at EFG Capital.

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has been truly remarkable.

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This class was a defined set of persons.

As

And for that, your Honor, the notice

In response to that notice, we only received six

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requests for exclusion representing a small percentage of the

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overall net investment loss at issue.

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Your Honor, based on those factors and the ones

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mentioned earlier by Mr. Kellog, we request the Court enter the

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final judgment as presented in the motion.
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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THE COURT:

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Mr. Kellog you also have an application for an award

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of attorneys' fees.

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All right.

Thank you.

Would you address that application as

well.

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MR. L. KELLOG:

Yes, sir.

Thank you.

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We are requesting 33 percent of the settlement fund

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plus reimbursement of our expenses.

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small incentive fee to be paid to the class plaintiffs.

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would like to address each of those issues.

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And we're asking for a
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With respect to the fee, the Goldberger factors, of
course, apply here.
The first factor being the time and labor expended on

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this case.

We have filed declarations and -- which reflect

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that collectively the plaintiffs' lawyers have now spent over

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3,500 hours prosecuting this case.

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not only investigated it, filed the complaint.

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briefed motions to dismiss.

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requests for productions -- requests for production, motions to

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compel, litigation of Bank Secrecy Act issues in Switzerland,

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combating motions to stay the prosecution of the case, motions

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to continue the trial, a fairly heavy motion practice as you

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would expect in a case proceeding towards trial.

As part of that, we have
We fully

We did a full discovery, including

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We reviewed over 125,000 documents and analyzed them,

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and were able to use them in depositions, key depositions that

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we took of the top EFG Capital officers, the chairman, the
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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president, board members.

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We fully briefed class certification.

That was ripe

for determination by this Court.

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Took them by video.

We conducted two full mediations and hours and hours
of negotiation between myself and Mr. Coates.

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We hired, retained, consulted with expert witnesses.

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And when I look at the time I was kind of surprised that's all

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it was because really I think of it as a very efficient

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prosecution of this case in terms of 3,500 hours.

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So the time and labor expended, what we're asking for

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totals at our ordinary time value a little over a million

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dollars.

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And the lodestar check that you would do here, we

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would be asking for a multiplier of 2.4 percent of what would

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be our ordinary hourly rate applied to the actual hours that we

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spent.

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But of course we did this on a contingency basis.

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The second factor being the magnitude and complexity

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of the litigation.

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mentioned before, are simply unsettled.

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It's not clear where SLUSA preemption is going to come down on

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these Madoff class actions and similar class actions.

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Some of the legal issues here, as I
They are unsettled.

And EFG was not a participant in the Madoff fraud.

So

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this was something that we had to prove liability under common

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law theories of gross negligence and breach of fiduciary duty
SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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that in this context were fairly complex, both factually and

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legally.

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Litigating with a Swiss bank which is protected by

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Swiss bankruptcy laws was not an easy task.

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that.

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We had to brief

magistrate judge in Florida.

And we had to argue it several times in front of a

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We had excellent opposing counsel.

And as I say, they

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raised every conceivable legal and factual defense.

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think their key move in this case was getting it transferred

And I

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here and thereby derailing the trial date that I'm confident we

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would have had, knowing this judge as I do.

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to where the SLUSA preemption issue was quite unsettled.

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And also moving it

The third factor, the risks of litigation.

We took

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this on a full risk, full contingency fee risk.

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a dollar from any of the plaintiffs.

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ourselves out of our pockets; well over a hundred thousand

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dollars in expert witness fees, deposition transcripts,

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videographers, copying and creating documents and so forth.

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We didn't get

We funded the costs

We took on the full risk of getting nothing.

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firm is fifteen lawyers.

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that.

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And my

me to take this case.

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Mr. Valicenti's firm is smaller than

And so this was a true financial risk for my firm, for

The quality of the representation.

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of the work that we did.

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supported our legal theories.

I mean I'm proud

We developed factual evidence that
We got this Swiss bank to the

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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table.

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don't have -- these class members do not have -- I won't say

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the incentive.

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most of them, and do a FINRA arbitration.

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people who would not have received money from either EFG

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Capital or EFG Bank.

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happened without our focused efforts.

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And they were planned.

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And we got substantial money for class members who

They don't want to come to the United States,
We got money for

I'm convinced this would not have
And they were focused.

And they were executed.

The amount of the requested fee in relation to the

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settlement.

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size or smaller size of which 33 percent or a little more is

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totally appropriate in the Second Circuit.

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here.

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representation of a number of clients.

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We've cited to the Court various cases of similar

And I think it is

Dealing with a contingency fee and a total risk

What are the public policy considerations that will be

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in play here?

I think -- and I'm not shy to say -- that this

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is the way that class actions should work.

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not an illusory, but a real recovery for class members.

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done efficiently and quickly.

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People got money who otherwise wouldn't have gotten it because

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they're not going to go to Switzerland and litigate with the

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bank and they don't want to come to the U.S. and subject

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themselves to U.S. discovery.

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not used to having, as our class plaintiffs were, they're not

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used to having themselves deposed, their financial paths being

There is a real,
It was

As quickly as you can do it.

They're not used to it.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

They're

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looked at, their sophistication being criticized, and the

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things that happen in American litigation.

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have done it, and they wouldn't have gotten any money from EFG

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Bank.

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an important consideration.

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actions ought to work.

So I think public policy really plays high here.

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They just wouldn't

It is

I think this is the way that class

So for that reason we're asking for a fee of a third,
a third of the recovery.

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The expenses.

I've filed my declaration which has a

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list of the expenses that we actually -- these are

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out-of-pocket expenses that the firms shouldered here including

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travel and expert witnesses, court reporters, mediators' fees,

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translation.

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that you have class members who speak other languages such as

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Portuguese or Spanish.

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notices.

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that we had to hire translators for.

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You know, that's one thing we should mention is

We had translations done of all the

And we had translations done of various documents

The amount of the expenses that the firms are seeking

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collectively is $114,100.05.

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that we had to spend.

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As I say, the amount of money

Finally, we're asking for an incentive fee for the two

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plaintiffs, mother and daughter, from Uruguay.

Out of all the

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EFG class members, they're the ones who stepped forward.

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initially they had asked EFG Bank and EFG Capital to simply

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give their money back and were denied.

And they came to

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

And

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c619anws
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Mr. Valicenti's partner who represented them in the past and

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decided rather than file an arbitration just for themselves

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that they would file a class action.

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contacted us about joining the class and as class

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representatives, they were wary of doing it because of the

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reasons I've said.

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and be deposed.

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United States for the first time in her life.

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only for her deposition, where she was raked through the coals

And while others

They'd have to come to the United States

Ms. Lorrene Da Silva Ferreira came to the
She came not

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pretty good, but also for mediation.

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and she participated in the settlement decision, in the

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settlement negotiations in a real way.

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commented on key pleadings in the case.

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the complaint was.

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She looked over and --

She looked over and
She understood what

She understood what the case was about.

So rather than arbitrating the case for themselves,

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they decided to do it on behalf of the entire class.

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effort.

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this class.

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notified the class that we're going to be asking for this.

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the class I think owes them a little bit of a thank you and

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that's what we're asking for here.

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It took

They're not getting anymore money than anybody else in
And for that reason I think the class -- and we've
And

So for that reason we would ask you to approve and

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grant our application for attorneys' fees, incentive

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compensation for the plaintiffs, and reimbursement of expenses.

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THE COURT:

Thank you.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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The Court has considered the application for approval,

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final approval, and judgment settling this case in accordance

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with the proposed settlement agreement prepared by the parties,

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advertised to the members of the class.

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Having examined the submissions by the parties and the

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settlement agreement and the accompanying papers and heard

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arguments today, I am satisfied that the settlement is fair,

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reasonable and adequate and will approve it in accordance with

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the terms of the agreement.

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I find that the various factors under the Grinnell

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case have been satisfied in the litigation in terms of the

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complexity and expense of the litigation and its duration, the

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reaction of the class members overwhelmingly in favor, the

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state of the proceedings and discovery taken to date and

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implications of that, the risks involved in establishing

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liability.

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Grinnell factors have been satisfied.

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approve the settlement.

And in other respects, the Court finds that the
Accordingly, I will

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I also am persuaded that the application for

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attorneys' fees and costs as outlined by Mr. Kellog is fair and

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reasonable for the reasons that he articulated with which the

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Court concurs.

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So I will approve that application as well.

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Is there anything else?

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MR. L. KELLOG:

No, sir.

Thank you very much.

SOUTHERN DISTRICT REPORTERS, P.C.
[phone]

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THE COURT:

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MR. COATES:

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THE COURT:

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Mr. Coates.
That's all.
Thank you.

Thank you.

Have a good day and a good

weekend.
(Adjourned)

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SOUTHERN DISTRICT REPORTERS, P.C.
[phone]