In re Herald, Primeo and Thema Funds Securities Litigation

Filing 341

REPLY to Response to Motion re: #252 JOINT MOTION to Dismiss. ("Supplemental Attorney Declaration of Antony L. Ryan in Further Support of the PwC Defendants' Motion to Dismiss"). Document filed by PriceWaterhouseCoopers LLP, Pricewaterhousecoopers (Dublin), Pricewaterhousecoopers Bermuda, Pricewaterhousecoopers International Ltd.. (Attachments: #1 Exhibit 1)(Ryan, Antony)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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IN RE HERALD, PRIMEO AND THEMA
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FUNDS SECURITIES LITIGATION
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This Document Relates to: All Actions
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Master File No. 09 Civ. 289
(RMB) (HBP)
ECF Case
Electronically Filed

SUPPLEMENTAL ATTORNEY DECLARATION OF ANTONY L. RYAN
IN FURTHER SUPPORT OF THE PWC DEFENDANTS’ MOTION TO DISMISS

I, ANTONY L. RYAN, under penalty of perjury, declare the following:
1.

I am a member of the firm of Cravath, Swaine & Moore LLP, counsel for PwC

Ireland. I have coordinated this declaration with counsel for PwC U.S., PwC Bermuda and
PwCIL, and submit this supplemental declaration in further support of the motions to dismiss by
each of the four PwC Defendants in the Thema-related action, Davis v. Benbassat.
2.

Plaintiff conflates the PwC Defendants and ignores the fact that PwC Ireland,

PwC U.S., PwC Bermuda and PwCIL are each separate legal entities. Only PwC Ireland was
engaged by the Thema Fund to audit its annual financial statements, and PwC Ireland did so in
Ireland. PwC U.S., PwC Bermuda and PwCIL were not retained by the Thema Fund, and did not
issue reports on Thema’s financial statements.
3.

Plaintiff does not respond to many of the points in my previous declaration.
Personal Jurisdiction and Venue

4.

PwC Ireland moved to dismiss under Fed. R. Civ. P. 12(b)(2) and submitted a

declaration from its partner Vincent MacMahon establishing that there is no general jurisdiction
over PwC Ireland in New York (MacMahon Decl. ¶¶ 9-15) and a declaration from its partner
Anthony Weldon establishing that PwC Ireland did not engage in conduct giving rise to specific
jurisdiction (Weldon Decl. ¶¶ 5-7). Plaintiff fails to address those declarations at all.
5.

Where PwC Ireland has submitted factual declarations directly contradicting

Plaintiff’s unsupported jurisdictional allegations, and Plaintiff has failed to come forward with
support, the allegations “may be deemed refuted”. GCG Int’l, 2005 WL 2647942, at *2. That is
particularly true where Plaintiff’s allegation that PwC Ireland “traveled to New York to meet
with Madoff” is made “[u]pon information and belief” (TC ¶ 241) and, as Magistrate Judge
Pitman found, Plaintiff “[did] not serve[] any discovery requests aimed at the specific factual
averments” in the PwC Ireland declarations (Order dated Sept. 8, 2011 [Dkt. No. 313], at 3).
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6.

Plaintiff’s allegation that PwC Ireland “traveled to New York to meet with

Madoff” (TC ¶ 241) is contradicted flatly by Anthony Weldon, who attests that no one from
PwC Ireland visited the U.S. in connection with the Thema audits. (Weldon Decl. ¶ 5.)
Similarly, Mr. Weldon contradicts Plaintiff’s allegations that PwC U.S. and PwC Bermuda acted
as agents for PwC Ireland or met with Madoff in connection with the Thema audits. (Id. ¶ 6.)
Plaintiff’s vague allegation of “substantial contacts with the United States” through “regular
visits and receipts of payments” is not only rebutted by PwC Ireland’s declarations (MacMahon
Decl. ¶¶ 9-15) but, even if true, would be insufficient to establish a “continuous and systematic
course of doing business” in New York. See Overseas Media, 407 F. Supp. 2d at 569.
7.

Accordingly, Plaintiff fails to make a prima facie showing that PwC Ireland has

sufficient contacts with New York to support general or specific jurisdiction over PwC Ireland.
Based on nearly identical allegations as here, another district court held that PwC Ireland is not
subject to personal jurisdiction in New York. Banco Santander, 732 F. Supp. 2d at 1326-29.
8.

Plaintiff makes no response to the showing in paragraph 7 of my initial

declaration that the derivative claims against PwC Ireland should be dismissed to enforce a
mandatory forum selection provision (the provision is at Dkt. No. 264-6, at 8).
Forum Non Conveniens
9.

All of the PwC Defendants move to dismiss for forum non conveniens. Plaintiff

fails to address the dismissal of a substantially similar action against the PwC Defendants on
forum non conveniens grounds in Banco Santander, 732 F. Supp. 2d at 1329-44, affirmed by the
Eleventh Circuit on appeal, 2011 WL 3823284. Yet in support of the proposed settlement with
HSBC, Plaintiff highlighted the risk of forum non conveniens dismissal in this action, and
acknowledged the similarity of Banco Santander. (Dkt. No. 235, at 10.) The Thema Action

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should be dismissed in favor of Ireland, where an action by the Thema Fund, and numerous
actions by Fund investors, are proceeding under the supervision of Justice Clarke.
Failure To State a Claim Under Irish Law
10.

The PwC Defendants also move to dismiss under Fed. R. Civ. P. 12(b)(6), under

both Irish and New York law. Plaintiff argues only under New York law, and does not respond
to the opinions in the Sanfey Declaration (Dkt. Nos. 274-1–274-3) regarding the results under
Irish law. Accordingly, if the Court decides to apply Irish law, the claims against the PwC
Defendants should be dismissed for the reasons set forth in my initial declaration, based on Irish
law as set out by Mr. Sanfey at ¶¶ 15.1–17.2. In particular, (a) the negligence-based claims fails
for lack of proximity under Caparo; (b) the unjust enrichment claim fails because PwC Ireland’s
contract was with the Thema Fund; (c) Irish law does not recognize causes of action for gross
negligence or aiding and abetting; and (d) the purported derivative claims are barred by Foss v.
Harbottle.
Failure To State a Claim Under New York Law
11.

On the negligence-based claims (Counts 1–4, 9–10), Plaintiff, despite contending

that New York law governs, ignores the recent controlling precedent from the New York courts
applying the Credit Alliance test which requires dismissal here. See Sykes, 938 N.E.2d 325
(N.Y. 2010); CRT, 925 N.Y.S.2d 439 (1st Dep’t 2011). Contrary to Plaintiff’s contention, the
facts that PwC Ireland’s audit reports were addressed to Thema Fund shareholders and were
made available to shareholders by Thema (see TC, Ex. 2 at 2, 19, Dkt. No. 193-8), are legally
insufficient to establish near privity. See CRT, 925 N.Y.S.2d at 441; Saltz, 782 F. Supp. 2d at
83-84. Moreover, there is no allegation, as required by Sykes, nor could there be, that PwC
Ireland knew which shareholders, if any, would rely on its audit reports, or that PwC Ireland’s
audits were conducted for the purpose of a specific, known transaction. See Sykes, 938 N.E.2d at
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326-27; Security Pacific, 597 N.E.2d at 1084; Credit Alliance, 483 N.E.2d at 119. Plaintiff does
not (and cannot) allege that he ever communicated with PwC Ireland or was specifically
identified to PwC Ireland. See id. The cases on which Plaintiff relies, Anwar II and Cromer
(Opp’n 52-54, 57-58), are at odds with the controlling precedent from the New York Court of
Appeals in Sykes. As another court in this District recently held in a Madoff fund case,
allegations that the plaintiffs “receive[d] annual and quarterly financial statements” and that the
auditors knew that “audited and other financial reports would be provided to the Fund’s
Members and potential investors in the Fund and would be relied on by them in making
investment decisions concerning the Funds” are insufficient to establish “near privity” under
New York law. Saltz, 782 F. Supp. 2d at 84.
12.

PwC U.S., PwC Bermuda and PwCIL were not auditors of Thema, and therefore

did not have a duty to the Thema Fund itself, let alone the Thema shareholders generally or
Plaintiff here. The grounds for dismissal of the negligence-based claims against PwC Ireland
apply with added force to the attenuated claims against PwC U.S., PwC Bermuda and PwCIL.
13.

Plaintiff fails to state a claim for unjust enrichment against the PwC Defendants

(Count 19) because (1) Plaintiff does not allege that he directly conferred a benefit on PwC
Ireland, as the Thema Fund paid the audit fees, which were fixed and unrelated to shareholder
payments to the Fund (unlike in Plaintiff’s cases, see Opp’n 59, which involved payments to an
intermediary that triggered additional benefit to the defendants); and (2) the contract between the
Thema Fund and PwC Ireland (the existence of which is undisputed) provides an adequate
remedy at law. As for PwC U.S., PwC Bermuda and PwCIL, those parties never received a
payment from Plaintiff or the Thema Fund, and Plaintiff does not allege otherwise.
14.

Plaintiff fails to state a claim for aiding and abetting breach of fiduciary duty

(Count 15), and the cause of action of aiding and abetting a third party’s negligence (Counts 11–
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