In re Herald, Primeo and Thema Funds Securities Litigation

Filing 289

REPLY MEMORANDUM OF LAW in Support re: #234 MOTION to Approve Approval of Partial Settlement.. Document filed by Neville Seymour Davis. (Bottini, Francis)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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This Document Relates to:
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NEVILLE SEYMOUR DAVIS,
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Plaintiff, )
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vs.
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ALBERTO BENBASSAT et al.,
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Defendants. )
IN RE HERALD, PRIMEO, AND
THEMA FUNDS SECURITIES
LITIGATION

ECF Case
Case No. 09 Civ. 0289 (RMB)
Class Action

Case No. 09 Civ. 2558 (RMB)
Class Action

Reply Memorandum
In Further Support of Lead Plaintiff Neville Seymour Davis’s
Motion for Preliminary Approval of Partial Settlement With HSBC
Of Counsel:
CHAPIN FITZGERALD SULLIVAN & BOTTINI LLP
Francis A. Bottini, Jr. (pro hac vice)
Albert Y. Chang (AC-5415)
550 West C Street, Suite 2000
San Diego, California 92101
Telephone: [phone]
Facsimile: [phone]
Lead Counsel for Lead Plaintiff Neville Seymour Davis and the Class
[Additional counsel listed on signature page]
Dated: July 11, 2011

TABLE OF CONTENTS
Page
I.

INTRODUCTION ...............................................................................................................1

II.

ARGUMENT.......................................................................................................................2
A.

Objectors Lack Standing to Object to Most Aspects of the Settlement...................2

B.

The Objection Based on the Contribution Bar Order Is Without Merit ..................2

C.

The Jurisdictional Objections Are Meritless............................................................3

D.

The Remaining Objections Provide No Basis to Deny Preliminary
Approval ..................................................................................................................3
1.

2.

The Assignments Contemplated by the Settlement Are Valid ....................5

3.

There Is No Conflict of Interest Between Mr. Davis and the
Settlement Class...........................................................................................8

4.

The Proposed Settlement is Superior to Other Methods of
Proceeding....................................................................................................8

5.
III.

Mr. Davis Is a Member of the Settlement Class Because He Has
Suffered Injury as a Result of His Beneficial Ownership of Thema
Shares...........................................................................................................4

The Proposed Opt-Out and Objection Procedures Are Adequate .............10

CONCLUSION..................................................................................................................10

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TABLE OF AUTHORITIES
Page
CASES
Advanced Magnetics v. Bayfront Partners,
106 F.3d 11 (2d Cir. 1997).........................................................................................................5
Broderick v. Adamson,
270 N.Y. 260 (N.Y. 1936) .........................................................................................................4
Cromer Fin. Ltd. v. Berger,
205 F.R.D. 113 (S.D.N.Y. 2001) ...........................................................................................8, 9
Drachman v. Harvey,
453 F.2d 722 (2d Cir. 1971).......................................................................................................4
Druck Corp. v. Macro Fund Ltd., IIU,
No. 07-0744-cv, 290 Fed. App’x 441 (2d Cir. Aug. 26, 2008) .................................................5
First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba,
462 U.S. 611 (1983)...................................................................................................................5
Florida Power Corp. v. Granlund,
82 F.R.D. 690 (M.D. Fla. 1979).................................................................................................6
Green v. Wolf Corp.,
406 F.2d 291 (2d Cir. 1968).......................................................................................................9
In re “Agent Orange” Prod. Liab. Litig.,
818 F.2d 145 (2d Cir.1987)........................................................................................................8
In re Blech Sec. Litig.,
187 F.R.D. 97 (S.D.N.Y. 1999) .................................................................................................8
In re Currency Conversion Fee Antitrust Litig.,
MDL No. 1409, 2006 U.S. Dist. LEXIS 81440
(S.D.N.Y. Nov. 8, 2006) ............................................................................................................4
In re Lloyd’s Am. Trust Fund Litig.,
No. 96 Civ. 1262 (RWS), 1998 U.S. Dist. LEXIS 1199
(S.D.N.Y. Feb. 6, 1998) .............................................................................................................9
In re Michael Milken & Assocs. Sec. Litig.,
150 F.R.D. 57 (S.D.N.Y. 1993) .................................................................................................4

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Page
In re NASDAQ Market-Makers Antitrust Litig.,
187 F.R.D. 465 (S.D.N.Y. 1998) ...............................................................................................8
In re Nortel Networks Corp. Sec. Litig.,
No. 01 Civ. 1855 (RMB), 2006 U.S. Dist. LEXIS 93390
(S.D.N.Y. Dec. 26, 2006) ..........................................................................................................3
In re Real Estate Title & Settlement Servs. Antitrust Litig.,
869 F.2d 760 (3d Cir. 1989).....................................................................................................10
In re State St. Bank & Trust Co. ERISA Litig.,
No. 07 Civ. 8488 (RJH), 2009 U.S. Dist. LEXIS 100971
(S.D.N.Y. Oct. 28, 2009) ...........................................................................................................4
In re Telik, Inc. Sec. Litig.,
576 F. Supp. 2d 570 (S.D.N.Y. 2008)........................................................................................9
In re Viatron Computer Sys. Corp. Litig.,
614 F.2d 11 (1st Cir. 1980)........................................................................................................2
Phillips Petroleum Co. v. Shutts,
472 U.S. 797 (1985)...................................................................................................................3
SIPC v. Bernard L. Madoff Inv. Sec. LLC,
No. 08-01789 (BRL), 2011 Bankr. LEXIS 2482
(Bankr. S.D.N.Y. June 28, 2011)...............................................................................................7
Sprint Commc’ns Co., L.P. v. APCC Servs.,
554 U.S. 269 (2008)...................................................................................................................6
Zupnick v. Fogel,
989 F.2d 93 (2d Cir. 1993).........................................................................................................2
STATUTES AND RULES
Federal Rules of Civil Procedure
Rule 23 ...............................................................................................................................2, 6, 8
New York General Obligations Law
§ 15-108 .................................................................................................................................2, 3

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I.

INTRODUCTION
Led by Thema’s directors, auditors (PwC), and lawyers (William Fry), who facilitated

Thema’s role as one of the largest Madoff feeder funds, certain non-settling defendants
(“Objectors”) challenge the merits of the Settlement despite having no standing to do so.1 In
addition to being procedurally defective, such objections are meritless. Contending that Thema’s
case against HTIE in Ireland holds a prospect for greater recovery than that provided by the
Settlement, Objectors ignore that any recovery Thema obtains would presumably first be applied to
paying its creditors. Chief among them is the Trustee, who stands to recover at least $355 million
and up to $692 million from Thema in claimed avoidable transfers. None of that money would go to
the Settlement Class, as the bankruptcy court upheld the Trustee’s decision to only pay BMIS’s
direct clients. In addition, Thema and its directors are among the most culpable parties here because
they, not HTIE, appointed Madoff to be Thema’s broker, investment advisor, and sub-custodian. As
the Irish court has noted, Thema’s claims against HTIE are subject to reduction or denial if it finds,
as is probable, that Thema bears substantial liability. See Dkt. No. 281-6 at 9.
In light of these complex realities, including that Thema has not recovered – and might not
recover – anything in its case against HTIE and probably cannot recover more than $692 million, the
$62.5 million partial settlement is an excellent result for the Settlement Class.
The Settlement also offers innovative solutions that are highly beneficial to the Settlement
Class. The assignment of non-settled claims to Mr. Davis enables Thema investors to protect their
downside if, even though venue is proper as defendants’ and Madoff’s misconduct emanated from
New York, this action is dismissed on forum non conveniens. The assignment is voluntary, and does

1

This reply adopts all defined terms in the Stipulation and Agreement of Partial Settlement and
Mr. Davis’s moving brief. Dkt. Nos. 234-1, 235.

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not violate Rule 23 because the Court will decide whether to certify a settlement class.
Accordingly, this Court should reject the objections and allow Thema’s investors to receive
notice of the Settlement and to determine for themselves whether the Settlement is fair.
II.

ARGUMENT
A.

Objectors Lack Standing to Object to Most Aspects of the Settlement

As courts have consistently held, non-settling defendants in a multiple-defendant litigation
have no standing to object to the fairness or adequacy of the settlement by other defendants, except
to any terms precluding them from seeking indemnification from the settling defendants. E.g.,
Zupnick v. Fogel, 989 F.2d 93, 98 (2d Cir. 1993); In re Viatron Computer Sys. Corp. Litig., 614 F.2d
11, 14 (1st Cir. 1980) (“[a] nonsettling defendant does not ordinarily have standing to object to . . . a
partial settlement”). Thus, the Court should reject all objections that go beyond the Settlement’s
indemnification provision.2
B.

The Objection Based on the Contribution Bar Order Is Without Merit

The Settlement contemplates a mutual contribution bar. The Settlement bars Objectors
against seeking contribution from the HSBC Defendants. Dkt. No. 234-1 § 5.1. Because New York
General Obligations Law § 15-108(c) imposes mutuality on all bar orders, the HSBC Defendants
cannot seek future contribution from Objectors. Should the Court deem it necessary to include an
explicit mutual contribution bar in the judgment, Mr. Davis will consent to it.3

2

The Court should also reject as meritless Repex Ventures, S.A.’s (“Repex”) two objections (Dkt. No.
277). First, Repex seeks to add redundant words to the release and assignment clauses under the guise of
ensuring that they apply only to Thema. But the clear language of these clauses already says what Repex
wants them to say. With notice to Repex and before filing the motion for preliminary approval, the settling
parties amended the Stipulation to address a similar concern raised by Shmuel Cabilly. See Dkt. No. 234-10.
The amendment emphasizes that the release and assignment are limited to the “Fund,” which is clearly
defined as the Thema Fund only. Id. No additional amendment is needed. Second, Repex’s request as a nonclass member for discovery is not only frivolous, but unrelated to the merits of the Settlement and therefore
should be rejected outright.
3

The HSBC Defendants have indicated their consent as well.

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C.

The Jurisdictional Objections Are Meritless

Although subject matter jurisdiction cannot be disputed, Objectors ask the Court to deny
preliminary approval of the Settlement for want of personal jurisdiction over some defendants and
absent class members. Objectors’ Br. at 20. As to absent class members, the Settlement’s robust
mail and publication notice provisions and customary opt-out procedures are more than sufficient to
satisfy due process. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985). Thus,
absent class members who do not opt out, including foreign citizens, will be bound by the judgment.
See, e.g., In re Nortel Networks Corp. Sec. Litig., No. 01 Civ. 1855 (RMB), 2006 U.S. Dist. LEXIS
93390, at *10 (S.D.N.Y. Dec. 26, 2006) (Berman, J.) (approving similar provisions in a case
involving foreign (Canadian) residents).
Moreover, the HSBC Defendants will consent to personal jurisdiction for purposes of settling
the claims. Personal jurisdiction also exists over Objectors and other non-settling defendants.4 And
even if personal jurisdiction did not exist as to a particular non-settling defendant, New York law
does not require personal jurisdiction over all parties to whom a settling defendant is relieved of
liability for contribution. N.Y. GEN. OBLIG. LAW § 15-108(b).
D.

The Remaining Objections Provide No Basis to Deny Preliminary
Approval

The Court should reject the remaining objections not only because Objectors lack standing to
assert them, but also because the objections impermissibly request a full-blown class certification or
final approval analysis at this preliminary approval stage. Contrary to the elevated standard
advanced by Objectors, the Court need only conduct “‘a preliminary evaluation’ as to whether the

4

All Objectors have appeared in this case. Thema and its directors have submitted to the jurisdiction
of the bankruptcy court in this District by submitting a SIPA claim; JP Morgan is headquartered in New York;
William Fry has an office here; and UniCredit and PwC engage in systematic and regular business here. See,
e.g., Dkt. No. 76 ¶¶ 27, 43-48, 58-59, 84-91, 128.

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settlement is fair, reasonable and adequate.” In re Currency Conversion Fee Antitrust Litig., MDL
No. 1409, 2006 U.S. Dist. LEXIS 81440, at *13 (S.D.N.Y. Nov. 8, 2006) (citation omitted). The
Court’s task is to decide whether the Settlement “‘fits within the range of possible approval.’” In re
State St. Bank & Trust Co. ERISA Litig., No. 07 Civ. 8488 (RJH), 2009 U.S. Dist. LEXIS 100971, at
*14 (S.D.N.Y. Oct. 28, 2009) (citation omitted). A strong presumption of fairness attaches to the
Settlement because it was reached by experienced counsel after arm’s-length negotiations. In re
Michael Milken & Assocs. Sec. Litig., 150 F.R.D. 57, 66 (S.D.N.Y. 1993). Tested under this
standard, the objections are meritless, as discussed below.
1.

Mr. Davis Is a Member of the Settlement Class Because He
Has Suffered Injury as a Result of His Beneficial Ownership of
Thema Shares

Rubicon repeatedly acknowledged Mr. Davis as the beneficial owner of Thema shares it held
“on [his] behalf and to [his] order.” Dkt. No. 236 ¶¶ 3-4. A beneficial shareholder has standing to
assert claims under the Securities Exchange Act of 1934 and the common law. Drachman v.
Harvey, 453 F.2d 722, 727 (2d Cir. 1971) (holding that federal securities law “confers standing upon
beneficial shareholders”); Broderick v. Adamson, 270 N.Y. 260, 264 (N.Y. 1936) (beneficial
shareholders acquire all rights and obligations of record shareholders).
Unable to dispute Rubicon’s acknowledgements of Mr. Davis’s beneficial ownership of
Thema shares, Objectors assert Rubicon transferred Mr. Davis’s Thema shares to another entity.
Objectors’ Br. at 9-10.5 But the purported transfer failed because Thema rejected Rubicon’s request

5

After Thema raised its meritless standing argument at the June 8, 2011 status conference, Mr. Davis’s
counsel requested that Rubicon’s president, John O’Kelly-Lynch, produce all documents relating its trading in
Thema shares. Rubicon never produced the requested documents. Declaration of Francis A. Bottini, Jr.
(“Bottini Decl.”) ¶ 4. Rubicon’s failure to produce documents confirms that neither Thema nor Rubicon has
any documents disputing Mr. Davis’s beneficial ownership of Thema shares. Moreover, by e-mail dated June
14, 2011, Mr. O’Kelly-Lynch acknowledged that Energy Claims Ltd. held certain Thema shares “in trust” for
Mr. Davis. See id. Ex. 2. Thus, all evidence shows that Mr. Davis is a beneficial owner of Thema shares.

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to transfer shares. Dkt. No. 236-5. Moreover, even if Rubicon’s purported transfer of shares was
consummated (it was not), it would not affect Mr. Davis’s rights as a beneficial owner because Mr.
Davis never agreed to any transfer or assignment of any of his litigation rights. Dkt. No. 236 ¶ 6.
Accordingly, Mr. Davis retains the right to seek recovery for his losses. See Advanced Magnetics v.
Bayfront Partners, 106 F.3d 11, 17 (2d Cir. 1997) (invalidating an assignment of claim absent a
showing of the assignor’s intent to assign).
Objectors also argue that under the so-called “internal affairs doctrine,” Thema’s articles and
Irish law do not recognize beneficial owners as shareholders. But this doctrine only applies to
claims arising from internal corporate matters between the company and its officers and directors.
See Druck Corp. v. Macro Fund Ltd., IIU, No. 07-0744-cv, 290 Fed. App’x 441, 443 (2d Cir. Aug.
26, 2008) (applying the law of the state of incorporation only after finding that the claims were
owned by the company and thus derivative). Mr. Davis’s claims have nothing to do with Thema’s
internal affairs; he asserts direct claims against multiple third parties, such as the HSBC Defendants.
Thus, the doctrine is inapplicable here. See First Nat’l City Bank v. Banco Para El Comercio
Exterior de Cuba, 462 U.S. 611, 621-22 (1983) (holding internal affairs doctrine inapplicable “where
the rights of third parties external to the corporation are at issue”).
2.

The Assignments Contemplated by the Settlement Are Valid

Objectors’ vociferous complaints about the assignment of the Settlement Class’s non-settled
claims to Mr. Davis highlight the value of the assignment. The Objectors’ and other defendants’
pending motion to dismiss based on forum non conveniens (Dkt. No. 252) lacks merit. Were the
Court to grant the motion, however, the assignment would allow Mr. Davis to litigate the assigned
claims elsewhere for the Settlement Class’s benefit with a $10 million fund for paying expenses and

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hiring foreign lawyers. Thus, the assignment protects the Settlement Class.6
The assignment is voluntary. Litigants are free to choose assignment over class action as a
method to aggregate claims. Sprint Commc’ns Co., L.P. v. APCC Servs., 554 U.S. 269, 291 (2008).
In Sprint, the Supreme Court has squarely rejected an argument similar to what Objectors advance
here: the assignment of claims for the purpose of aggregation violates Rule 23. Id. In any event, the
assignment here does not – and cannot – violate Rule 23 because Mr. Davis seeks certification of a
settlement class. This objection therefore lacks merit.7
Equally meritless is Objectors’ argument that they will be prejudiced by the assignment
because their motion to dismiss has not yet been tested. Objectors contradict themselves: they say
on one hand that Mr. Davis “has no legitimate right to pursue claims in the United States,” and on
the other hand that Mr. Davis should be forced to “bring all of the class members’ separate claims
together as one action in federal court.” Objectors’ Br. at 15-16. Contradictions aside, Objectors are
wrong. The assignment does not create any rights class members do not already have, nor does it
prevent the non-settling defendants from asserting any defenses to the assigned claims. The
assignment of claims is indisputably permitted under applicable law, and assigned claims are
routinely litigated in Europe despite the absence of a class action procedure. Thus, as in Sprint, the
assignment is legal and indeed a highly beneficial part of the Settlement to class members.

6

In addition to the absence of class actions, the “loser pays” provisions in European law raise the
stakes in litigation and impose a hurdle on Thema investors, many of whom lack the funds to litigate
individual cases after having lost their life savings due to defendants’ misconduct. Indeed, only dozens of
cases have been filed against Thema in Ireland. The assignment and litigation fund simply protect the class’s
interests in light of these potential adversities.
7

Objectors’ reliance on a single case – Florida Power Corp. v. Granlund, 82 F.R.D. 690 (M.D. Fla.
1979) – is misplaced. In rejecting the settlement, the Granlund court was concerned that (a) the putative
assignee was a defendant; (b) the assignment aimed to circumvent Rule 23; and (c) the assignment conflicted
with the “policy against indemnification in antitrust actions.” Id. at 693-94. Here, none of these concerns
exist.

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With respect to the Settlement Class’s assignment of any recovery it might receive from
Thema’s case against HTIE in Ireland to the HSBC Defendants, it became clear during the mediation
with Judge Weinstein that such assignment was necessary to induce the HSBC Defendants to settle.
The HSBC Defendants were not willing to pay $62.5 million to settle this action, only to face the
risk of paying additional millions in Ireland. Although dismissal of Thema’s case in Ireland is
contemplated by the Settlement, in the event dismissal does not occur or Thema recovers money
before dismissal, the assignment of the Settlement Class’s interests in such recovery protects the
HSBC Defendants.
Finally, both the Settlement and the assignments are in the best interests of the Settlement
Class for two additional reasons. First, Thema is nearly insolvent and therefore has no funds to
pursue the Irish case. See Bottini Decl. Ex. 1. Nor is Thema likely to succeed because, as the Irish
court found, it faces the prospect of contribution. See Dkt. No. 281-6 at 9. Second, even if Thema is
successful in Ireland, it filed a SIPC claim for only $312 million in net loss. Thema faces a $692
million claim from the Trustee for avoidable transfers that, if successful and collected, could easily
wipe out any recovery to Thema shareholders.8 Because the Trustee has determined any recovery he
obtains will go exclusively to direct investors in BMIS,9 and not to indirect investors, such as Mr.
Davis and the Settlement Class, any recovery by Thema would be worthless to the Settlement Class.

8

Significantly, the Trustee’s $355.5 million claim against Thema pertains to withdrawals by Thema
from BLMIS that occurred within the 90-day preference period under the Bankruptcy Code, for which Thema
has no defense. See Bottini Decl. ¶ 8.
9

The bankruptcy court has upheld the Trustee’s decision. See SIPC v. Bernard L. Madoff Inv. Sec.
LLC, No. 08-01789 (BRL), 2011 Bankr. LEXIS 2482 (Bankr. S.D.N.Y. June 28, 2011). But this decision is
unfair. Not only have Madoff’s direct investors already recovered over $7.5 billion, they also had greater
reason to discover the fraud than indirect investors like Thema investors, who did not even know Madoff had
any involvement with Thema. Moreover, by allowing only claims of direct investors, the Trustee has denied
66.45% of all submitted SIPC claims. See https//: www.madofftrustee.com/status.aspx (last viewed July 8,
2011).

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3.

There Is No Conflict of Interest Between Mr. Davis and the
Settlement Class

Contrary to the “conflict of interest” asserted by Objectors, the Settlement proceeds are not
limited to investors who suffered out-of-pocket losses. The proposed plan of allocation sets aside
5% of the Settlement proceeds for loss of interest and reported NAV value (see Dkt. No. 234-3). Net
winner class members who have already recouped all their principal and are not happy with a 5%
allocation have the right to opt out. In any event, this purported conflict of interest concerns the
Settlement’s plan of allocation, the consideration of which is properly deferred until after final
approval. In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465, 480 (S.D.N.Y. 1998)
(quoting In re “Agent Orange” Prod. Liab. Litig., 818 F.2d 145, 170 (2d Cir.1987)). Moreover,
even when “conflicts among class members [do] arise at the settlement or damages stage of the
litigation[, it] does not require the denial of class certification or the disqualification of . . .
representatives.” Cromer Fin. Ltd. v. Berger, 205 F.R.D. 113, 127 (S.D.N.Y. 2001). Thus, this
objection is not grounds to deny preliminary approval.
4.

The Proposed Settlement is Superior to Other Methods of
Proceeding

Here, “a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy.” FED. R. CIV. P. 23(b)(3). Only as a class can every investor share in
the substantial recovery and other benefits of the Settlement. No competing, let alone comparable,
recoveries are in view. To no surprise, the vast majority of Thema investors have not brought
individual claims because (1) the costs and expenses of individual actions are prohibitive; (2)
recovery is uncertain; and (3) many class members lack funds to litigate as they lost their life savings
in Madoff’s Ponzi scheme. See In re Blech Sec. Litig., 187 F.R.D. 97, 107 (S.D.N.Y. 1999) (class
action superior in cases of “economic injury on large numbers of geographically dispersed persons
such that the cost of pursuing individual litigation . . . is often not feasible”). The interests of those

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individuals who brought claims in Ireland cannot outweigh the “interest of the class as a whole”
served by the significant recovery achieved in the Settlement. In re Telik, Inc. Sec. Litig., 576 F.
Supp. 2d 570, 584 (S.D.N.Y. 2008). And all class members are free to opt out of the Settlement and
pursue their individual claims. Thus, this action embodies all the hallmarks, both in form and
substance, of classes routinely certified. Accordingly, a class action is superior to other available
methods. Green v. Wolf Corp., 406 F.2d 291, 296 (2d Cir. 1968).
Objectors contend that a class action is not superior because courts in Ireland might not
recognize the judgment of this Court. Objectors’ Br. at 22. Mr. Davis disagrees. But since
recognition of the judgment in Ireland is a condition of the Settlement (see Dkt. No. 234-1 §§ 5.5,
8.1(d)), the Settlement cannot be effectuated without achieving this condition.

Objectors’

speculation about whether this condition will be satisfied does not change the fact that certification is
warranted here because a class action is superior to individual actions. See Cromer, 205 F.R.D. at
135 (“[e]ven where all the available evidence indicates that foreign plaintiffs who lose in the United
States will be able to sue the defendant a second time in their own country, a class action may
remain the superior means for litigating the dispute”). Contrary to this Objection, a judgment
achieved in this Court, even if not recognized, may still provide “guidance” to foreign courts, “have
evidentiary value in any subsequent proceedings,” and “discourage relitigation,” “thereby
contributing to the superiority of the class action procedure.” See In re Lloyd’s Am. Trust Fund
Litig., No. 96 Civ. 1262 (RWS), 1998 U.S. Dist. LEXIS 1199, at **44-45 (S.D.N.Y. Feb. 6, 1998).
In any event, litigating this issue in a motion for preliminary approval is premature and
inappropriate. Under the Settlement, the Irish High Court will decide this issue after final approval
here. Indeed, only a small number of investors have filed suits in Ireland, and they will recover
nothing for the rest of the class. Moreover, Thema’s case in Ireland has achieved no recovery for

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class members, asserts claims against only one solvent defendant (HTIE) as opposed to the 25 plus
defendants in this action, and holds little realistic prospect for any recovery in light of (1) the
Trustee’s $692 million clawback claim, as discussed supra; and (2) the Irish court’s potential finding
that Thema bears “some or all of the losses” because of its own misconduct. Dkt. No. 281-6 at 9.
5.

The Proposed Opt-Out and Objection Procedures Are
Adequate

Contrary to Objectors’ contention, the notice period is 39 days, not 24. And, although this is
longer than the 30-day period routinely approved, Mr. Davis and the HSBC Defendants have agreed
to extend the period to 60 days to ensure class members receive adequate time to review the
Settlement. Also, Objectors ignore the robust notice that will be published in newspapers around the
world, the fact that the Settlement has already received significant international press, and the fact
that the settlement documents have been available on the Web sites of Lead Counsel and the HSBC
Defendants since June 7, 2011.10
As to opt out procedures, the Settlement already contains strong provisions safeguarding any
personal financial information submitted by opt-outs. See Dkt. No. 234-6 ¶ 29. But to obviate any
further concerns about European Union privacy laws, Mr. Davis has agreed that Gilardi, the Claims
Administrator, will use a European company to process the opt-outs so that any opt out plaintiffs do
not have to disclose their financial information to a U.S.-based entity.11
III.

CONCLUSION
For the reasons set forth above, the Court should preliminarily approve the Settlement.

10

Objectors’ additional contention that registered shareholders rather than beneficial owners should be
required to submit claims is meritless. Beneficial owners are the real owners of the shares and settlements in
securities fraud class action cases uniformly require claim forms to be submitted by beneficial owners.
11

Further, merely opting out of the Settlement does not, contrary to Objectors’ contention, require
individuals to submit to the jurisdiction of the Court. See In re Real Estate Title & Settlement Servs. Antitrust
Litig., 869 F.2d 760, 770-71 (3d Cir. 1989).

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Dated: July 11, 2011

Respectfully submitted,
CHAPIN FITZGERALD
SULLIVAN & BOTTINI LLP
Francis A. Bottini, Jr. (pro hac vice)
Albert Y. Chang (AC-5415)
s/ Francis A. Bottini, Jr.
Francis A. Bottini, Jr.
550 West C Street, Suite 2000
San Diego, California 92101
Telephone: [phone]
Facsimile: [phone]
Lead Counsel for Lead Plaintiff
Neville Seymour Davis and the Class
ROBBINS GELLER RUDMAN & DOWD LLP
Darren J. Robbins
Keith F. Park (pro hac vice)
James I. Jaconette (pro hac vice)
David W. Hall
655 West Broadway, Suite 1900
San Diego, California 92101
Telephone: [phone]
Facsimile: [phone]
MURRAY, FRANK & SAILER LLP
Brian P. Murray (BM-9954)
Gregory B. Linkh (GL-0477)
275 Madison Avenue, Suite 801
New York, New York 10016
Telephone: [phone]
Facsimile: [phone]
Counsel for Lead Plaintiff
Neville Seymour Davis and the Class

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