In re Herald, Primeo and Thema Funds Securities Litigation

Filing 342

DECLARATION of Lewis J. Liman re: #333 Reply Memorandum of Law in Support of Motion,,,,, #252 JOINT MOTION to Dismiss.. Document filed by The Bank of New York Mellon. (Liman, Lewis)

CLEARY GOTTLIEB STEEN & HAMILTON LLP
One Liberty Plaza
New York, New York 10006
[phone]
[phone] (facsimile)
[e-mail]

Attorneys for The Bank ofNew York Mellon Corporation
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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Master File No.:
IN RE: HERALD, PRIMEO AND THEMA FUNDS
SECURITIES LITIGATION

No. 09 Civ. 289 (RMB)

This Document Relates To: No. 09 Civ. 2558 (RMB)

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DECLARATION OF LEWIS J. LIMAN IN FURTHER SUPPORT OF THE BANK OF NEW
YORK MELLON CORPORATION'S MOTION TO DISMISS THE THEMA COMPLAINT
I, Lewis J. Liman, declare as follows:
1.

I am a member of the Bar of this Court and a member of the firm of Cleary

Gottlieb Steen & Hamilton LLP, counsel for The Bank of New York Mellon Corporation ("BNY
Mellon"). I submit this declaration in further support ofBNY Mellon's motion to dismiss the four
claims asserted against it in Davis v. Benbassat et aI., No. 09 Civ. 2558 (RMB), for aiding and
abetting gross negligence and negligence (Count 11); aiding and abetting various defendants'
breaches of fiduciary duties (Count 15); unjust enrichment (Count 19); and derivatively, for aiding
and abetting gross negligence and negligence (Count 12). I make this declaration based solely on
my review of the allegations in Plaintiffs Second Amended Complaint in the Thema-related action
("TC"), Plaintiffs Joint Opposition ("Opp'n") and applicable law, and do not purport to offer
evidence on any subject.
2.

In addition to the arguments previously adopted, BNY Mellon adopts the

arguments set forth in Sections Il(A), (B), (C), (F), and IlI(B) of the Reply Memorandum of Law.
3.

Plaintiff does not respond to the substance ofBNY Mellon's argument.

Notably, in his Opposition, Plaintiff does not identify a single allegation that BNY Mellon provided

any services to or had any business dealings whatsoever with any other defendants in this case.
(Liman Dec!. 1 ~ 3-4.) Nor does Plaintiffs Opposition dispute that he had no contact with BNY
Mellon whatsoever. To the contrary, he does not dispute that his entire case against BNY Mellon is
predicated solely on the fact that BLMIS (of which he was not a customer, Securities Investor
Protection Corp. v. Bernard L. MadoffInv. Secs. LLC, 454 B.R. 285,295 (Bankr. S.D.N.Y. 2011)
(holding that investors in "feeder funds" are not BLMIS customers)), kept certain of its operating
funds in an account at BNY Mellon. (See Opp'n at 6 n. 2 ("BNY Mellon, is named in the Thema
Complaint for its misconduct in connection with accounts maintained by BLMIS.").)
4.

Except generally in respect of all defendants, Plaintiff does not respond to the

arguments in my June 29,2011 Declaration that (i) his claims are barred by the Martin Act, (ii) his
class claims (Counts 11, 15 and 19) are preempted by SLUSA, and (iii) he lacks standing to assert
derivative claims against BNY Mellon (Count 15).
5.

Plaintiff ignores entirely BNY Mellon's argument that it was not unjustly

enriched, identifying nothing that BNY Mellon ever received from him and offering no explanation
of why any supposed "enrichment" was "unjust" (Count 19). (See Liman Dec!.
6.

~

12.)

In response to BNY Mellon's arguments in respect of Plaintiffs aiding and

abetting claims, Plaintiff does not deny that he does not allege that BNY Mellon had any knowledge,
much less the requisite "actual knowledge," of the underlying conduct at issue in this case - indeed,
Plaintiff does not refute that his Complaint fails to allege BNY Mellon's knowledge that the Thema
Fund even existed. (Liman Dec!. Ex. 10.) Rather, Plaintiff concedes that the failure to plead actual
knowledge is fatal to any aiding and abetting claim. (Opp'n at 32 n. 19 ("[T]he aider must have
actual knowledge that he is aiding.").) Nor does Plaintiff dispute that the only conduct that BNY
Mellon is accused of committing - permitting BLMIS to have a depository ban1( account - does not

"Liman Decl." refers to my Declaration of June 29, 201l.

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constitute the required "substantial assistance" as a matter oflaw. (See Liman Decl. ~ 12.) That is
independently fatal to Counts 11, 12, 15 and 19.
7.

The only argument that Plaintiff even addresses is that there is no such tort as

aiding and abetting negligence, because aiding and abetting is by definition a knowing violation.
(Liman Decl. ~ 9; Opp'n at 32 n.l9.) In light of Plaintiffs failure to otherwise respond to BNY
Mellon's arguments, his argument that aiding and abetting negligence is a cognizable cause of action
is irrelevant. However, Plaintiff is also wrong on the law. Indeed, he does not distinguish the
authority cited by BNY Mellon from this district and circuit. See United Nat. Ins. Co. v. Tunnel.
Inc., 988 F.2d 351,353 (2d Cir.

1993)~

In re Bayou Hedge Funds Inv. Litig., 472 F. Supp. 2d 528,

532 (S.D.N.Y. 2007). Instead, Plaintiffmischaracterizes the two New York cases that he cites, each
of which involved intentional (rather than negligent) underlying violations.2 To the extent it
supports his argument at all, the other authority on which Plaintiff relies, decentially out-of-date
authority from other states - reflects a minority rule not followed in this state, as Judge McMahon
recognized in In re Bayou, 472 F. Supp. 2d at 532 ("Few states recognize aiding and abetting
liability predicated on a third party's negligence.").
8.

Accordingly, for the reasons stated herein, in my Declaration of June 29,

2011, in the Joint Memorandum of Law, and in the Joint Reply Memorandum of Law, the claims
against BNY Mellon should be dismissed.
I declare under penalty of perjury that the foregoing is true and correct.

Dated: October 28,2011
New York, New York

II'

Lewis J. Liman

Lindsay v. Lockwood, 625 N.Y.S.2d 393, 397 (N.Y. Sup. ct. 1994), was not a case of negligence, as the court
in that case observed, id. at 396 ("However it may be disguised, the real issue here is intentional rather than negligent
conduct."). Likewise, Herman v. Westgate, 464 N.Y.S.2d 315, 316 (N.Y. App. Div. 1983), involved intentional conduct
- the primary violator was accused of purposely throwing the plaintiff off a barge. Id. at 316.
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