Anwar et al v. Fairfield Greenwich Limited et al
Filing
987
ENDORSED LETTER addressed to Judge Victor Marrero from H. Eugene Lindsey, III dated 10/3/2012 re: Counsel for plaintiff we respectfully submit this correspondence to request leave to file an amended complaint. ENDORSEMENT: The Clerk of Court is directed to enter into the public record of this action the letter above submitted to the Court by plaintiff Teresa Barbachano. So Ordered. (Signed by Judge Victor Marrero on 10/12/2012) (pl)
I_~~~·-~MIAMI • FT. LAUDERDALE
---
Honorable Victor Marrero
October 3, 2012
Page2
Consistent with Fed. R. Civ. P 15(a)(l)(B), and this Court's April 13, 2012 Order,
Barbachano now requests leave to file an amended complaint, "once as a matter of course,"
within 21 days of receiving service of a motion to dismiss. That is, Barbachano seeks leave to
file an amended complaint within 21 days of this Court's September 12, 2012 order, which
notified the parties that the Court was deeming SCBI's August 1, 2012 letter to be a motion to
dismiss. For the Court's convenience, the proposed amended complaint accompanies this letter.
Barbachano should also be permitted to file an amended complaint pursuant to Rule
15(a)(2), as "[t]he court should freely give leave when justice so requires." Specifically, as SCBI
has yet to even answer Barbachano's original complaint, granting leave to amend should not
unfairly prejudice SCBI in any respect. In contrast, to deny leave to amend would result in
dismissal of claims contained in Barbachano's original complaint without Barbachano ever
having had the right to file an amended complaint in response to a motion to dismiss, to
substantively respond to the arguments contained in a motion to dismiss, or to address pleading
deficiencies identified by the Court in an order on a motion to dismiss.
Further, the proposed amended complaint addresses those pleading deficiencies identified
by the Court in its April 13, 2012 Order. In particular, with respect to Barbachano's claims for
violations of Florida's state securities laws, Fla. Stat. §§ 517.301 & 517.211(2), the proposed
amended complaint sets forth in greater detail the facts giving rise to SCBI's failure to render
suitable investment advice, demonstrating that Barbachano's suitability claim goes far beyond
SCBI' s negligent failure to conduct due diligence of the Fairfield investment. See, e.g.,
Proposed Am. Complaint at ~~ 11, 15-16, 23-24, 29, 34, and 35-38 (alleging that SCBI
recommended investments to Barbachano that resulted in an aggressive portfolio unsuited to
Barchachano's risk tolerance of moderate-conservative, including recommendations that resulted
in asset allocations of 89 percent of her portfolio in equities and alternative investments and only
9% in cash or bonds); id. at~~ 41-42 & Ex. G (alleging that the new relationship manager that
SCBI assigned to Barbachano advised her in September 2009 that her portfolio was "aggressive"
and that the portfolio had been mismanaged by Barbachano's prior relationship manager and
attaching SCBI' s October 2009 proposal to re-allocate the assets in Barbachano' s portfolio). See
also Newsom v. Dean Witter Reynolds, Inc., 558 So. 2d 1076, 1077 (Fla. 1st DCA 1990) (stating
that unsuitable trading constitutes statutory fraud under Fla. Stat. § 517.301 ( 1) ).
Similarly, with regard to Fairfield, the proposed amended complaint sets forth facts
demonstrating SCBI's fraudulent and/or negligent scienter for purposes of a state securities law
violation and sufficient to satisfy the pleading requirements under Rule 9(b), Fed. R. Civ. P. In
particular, the proposed amended complaint sets forth that SCBI ignored obvious red flags and
only agreed to recommend the Fairfield investment to its clients, including Barbachano,
following Fairfield's agreement to pay SCBI a "trailer fee." See, e.g. at~~ 15-16 and 23-24. It
further alleges that SCBI never disclosed the "trailer fee" to Barbachano to conceal its material
misrepresentations, lack of due diligence, hidden financial incentive, and breach of fiduciary
duties in connection with Barbachano's purchase of, and continued investment in the Fairfield
securities. !d. at~ 25.
KATZ. BARRON. SQUITERO. FAUST. FRIEDBERG. ENGLISH & ALLEN. P.A.
2699 S. BAYSHORE DRIVE. SEVENTH FLOOR. MIAMI. FLORIDA 33133-5408 • 305-856-2444 • 305-285-9227 FAX
Honorable Victor Marrero
October 3, 2tH2
Page 3
Likewise, with regard to the claim for breach of fiduciary duty, the proposed amended
complaint sets forth that SCBI breached the duties of care and loyalty that it owed to Barbachano
by accepting "trailer fees" from Fairfield and by failing to disclose the same to Barbachano and
that, in so doing, the SCBI acted as an agent of Fairfield and under a conflict of interest that the
Defendants had a duty to disclose to Barbachano. !d. at 'II 73, 83. The proposed amended
complaint also makes plain that SCBI breached its duty to monitor investments and sets forth the
factual allegations giving rise to that duty with respect to Barbachano, consistent with the
Court's September 12, 2012 Order. See id. at '11'11· Further, the proposed amended complaint sets
forth in detail the factual allegations supporting SCBI' s breach of fiduciary with regard to the
unsuitable investment advice it rendered to Barbachano, including the allocation of investment in
her portfolio inconsistent with her investment objectives and moderate-conservative risk
tolerance. !d. at 'll'l!l3-14, 53 and 73.
The proposed amended complaint also states claims for common law fraud, including
fraudulent concealment, and negligent misrepresentation with regard to the investment
recommendations rendered by SCBI. See id. (Counts III & V). It further demonstrates SCBI's
fraudulent and/or negligent intent by, among other things, SCBI's failure to disclose the "trailer
fee" to Barbachano. Those claims, we respectfully submit, are not barred by Florida's economic
loss rule. See, e.g., Maliner v. Wachovia Bank, N.A., 2005 WL 670293, at *9 (S.D. Fla. 2005)
(rejecting bank's argument that the economic loss rule barred a negligent misrepresentation
claim relating to unsuitable investment advice).
Finally, as with the original complaint, the
proposed amended complaint also contains a claim for gross negligence based on the unsuitable
investment advice rendered by SCBI and its tortious conduct with regard to the investment in
Fairfield. See id. (Count IV).
For all the foregoing reasons, Ms. Barbachano respectfully requests that the Court grant
her leave to file the proposed amended complaint. Ms. Barbachano should at least "once a
matter of course" be permitted to file an amended complaint and the Court should exercise its
discretion to grant such lease, as "justice so requires."
Undersigned counsel and counsel for SCBI conferred via email, on September 27, 2012,
October 1, 2012, and on October 3, 2012, and by telephone on October 2, 2012, with regard to
this request. Counsel for SCBI states that it wishes to review the proposed amended complaint
and will determine whether or not to oppose-this request after filing.
The Clerk of Court is directed to enter into the public record
of this action the ter above submitted to the Court by
~ Flset
.
Respectfully submitted,
SO ORDERED.
cc:
KATZ. BARRON. SQUITERO. fAUST. FRIEDBERG. ENGLISH & ALLEN. P.A.
2699
s.
BAYSHORE DRIVE. SEVENTH FLOOR. MIAML FLOR!DA 3il33-5408 • 305-856-2444 • 305-285-9227 FAX
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