In re Herald, Primeo and Thema Funds Securities Litigation

Filing 57

REPLY MEMORANDUM OF LAW in Support re: #41 MOTION to Appoint Repex Ventures S.A. to serve as lead plaintiff(s). MOTION to Appoint Counsel. MOTION to Consolidate Cases 1:09-cv-02032, 1:09-cv-02558. MOTION to Appoint Repex Ventures S.A. to serve as lead plaintiff(s).. Document filed by Repex Ventures S.A. (Burke, Timothy)

Repex Ventures S.A v. Madoff et al

Doc. 57

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

______________________________________ REPEX VENTURES S.A, on Behalf of Itself ) and All Others Similarly Situated, ) ) Plaintiff, ) ) v. ) ) BERNARD L. MADOFF; BANK MEDICI ) S.A.; SONJA KOHN; PETER ) SCHEITHAUER; HERALD USA FUND; ) HERALD LUXEMBURG FUND; BANK ) AUSTRIA CREDITANSTALT; UNICREDIT ) S.A.; PRIMEO SELECT FUND; PRIMEO ) EXECUTIVE FUND; PIONEER ) ALTERNATIVE INVESTMENTS; THEMA ) INTERNATIONAL FUND PLC, ERNST & ) YOUNG S.A., and HSBC SECURITIES ) SERVICES, S.A., ) ) Defendants. ) ______________________________________ )

Civil Action No. 09-cv-289 (RMB) CLASS ACTION ECF CASE

[Additional caption on next page]

REPEX VENTURES, S.A.'S REPLY MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF ITS MOTION TO BE APPOINTED LEAD PLAINTIFF

Dockets.Justia.com

______________________________________ HORST LEONHARDT, on Behalf of Himself ) and All Others Similarly Situated, ) ) Plaintiff, ) ) v. ) ) BERNARD L. MADOFF, BANK MEDICI ) S.A., SONJA KOHN, PETER ) SCHEITHAUER, HERALD USA FUND, ) HERALD LUXEMBURG FUND, BANK ) AUSTRIA CREDITANSTALT, UNICREDIT ) S.A., PRIMEO SELECT FUND, PRIMEO ) EXECUTIVE FUND, PIONEER ) ALTERNATIVE INVESTMENTS, THEMA ) INTERNATIONAL FUND PLC, HELMUTH ) E. FREY, FRIEDRICH PFEFFER, FRANCO ) MUGNAI, ALBERTO BENBASSAT, ) STÉPHANE BENBASSAT, GENEVALOR, ) BENBASSAT & CIE, DAVID T. SMITH, ) GERALD J. P. BRADY, DANIEL ) MORRISSEY, ERNST & YOUNG S.A., ) ERNST & YOUNG GLOBAL LIMITED, ) HSBC HOLDINGS PLC, HSBC ) INSTITUTIONAL TRUST SERVICES ) (IRELAND) LIMITED, HSBC SECURITIES ) SERVICES (IRELAND) LIMITED, HSBC ) SECURITIES SERVICES, S.A., ) PRICEWATERHOUSECOOPERS, ) CHARTERED ACCOUNTANTS, ) PRICEWATERHOUSECOOPERS ) INTERNATIONAL LIMITED; and ) FRIEHLING & HOROWITZ, ) ) Defendants. ) ______________________________________ ) [Additional caption on next page]

Civil Action No. 09-cv-2032 (RMB) CLASS ACTION ECF CASE

______________________________________ FABIAN PERRONE and CHIA-HUNG KAO, ) ) Plaintiff(s), ) ) v. ) ) ALBERTO BENBASSAT, STÉPHANE ) BENBASSAT, GERALD J.P. BRADY, ) NICOLA A. CORSETTI, NIGEL H. ) FIELDING, HELMUTH E. FREY, JOHN ) HOLLIWELL, KARL E. KANIAK, SONJA ) KOHN, ALBERTO LA ROCCA, DANIEL ) MORRISSEY, FRANCO MUGNAI, DECLAN ) MURRAY, HERALD C. NOGRASEK, ) JAMES. E. O'NEILL, FRIEDRICH PFEFFER, ) URSULA RADELLESZCZYNSKI, HANNES ) SALETA, PETER SCHEITHAUER, ALFRED ) SIMON, DAVID T. SMITH, JOHANNES P. ) SPALEK, WERNER TRIPOLT, MICHAEL ) WHEATON, BA WORLDWIDE FUND ) MANAGEMENT, LTD, BANK AUSTRIA ) CREDITANSTALT, BANK OF BERMUDA ) (CAYMAN) LIMITED, BANK OF ) BERMUDA (LUXEMBOURG) S.A., BANK ) MEDICI AG, ERNST & YOUNG, PRIMEO ) FUND, HERALD FUND SPC, HSBC ) HOLDINGS PLC, HSBC INSTITUTIONAL ) TRUST SERVICES (IRELAND) LTD., HSBC ) SECURITIES SERVICES (IRELAND) LTD., ) HSBC SECURITIES SERVICES ) (LUXEMBURG) S.A., PIONEER ) ALTERNATIVE INVESTMENT ) MANAGEMENT LIMITED, ) PRICEWATERHOUSECOOPERS, THEMA ) INTERNATIONAL FUND PLC, and ) UNICREDIT S.A., ) ) Defendant(s). ) ______________________________________ )

Civil Action No. 09-cv-2558 (SHS) CLASS ACTION ECF CASE

I.

INTRODUCTION This securities class action has three different issuer defendants: Bank Medici,

which issued the Herald USA Fund and Herald Luxemburg Funds (collectively, "Herald Funds"); Pioneer Alternative Investments ("Pioneer") which issued the Primeo Select Fund and Primeo Executive Fund (collectively, "Primeo Funds"); and Genevalor, Benbassat & Cie, which promoted the Thema International Fund plc, ("Thema Fund"). Recognizing that at least one plaintiff who had purchased securities from each issuer would need to be appointed co-lead plaintiff, Repex Ventures S.A. originally moved in Repex Ventures S.A. v. Madoff, et al., No. 09 Civ. 289, (S.D. N.Y., filed Jan. 12, 2009) to serve as co-lead plaintiff with Radovan Fijember as part of the Repex Group. Repex invested $700,000 in the Herald (LUX) U.S. Absolute Return Fund and Radovan Fijember invested $133,617.85 in the Primeo Executive Fund during the class period. The Repex Group did not contain any investors who purchased securities from Pioneer. Dr. Cabilly, who suffered a $3,665,200 loss as a result of his investment in Primeo also moved to be appointed lead plaintiff in Repex Ventures S.A. v. Madoff. Recognizing that Dr. Cabilly had suffered the largest losses of the Primeo investors, the Repex Group disbanded. However, Repex is still seeking to be appointed co-lead plaintiff to represent Herald purchasers, same as it always has been. Per the Court's Endorsement of March 12, 2009 (Docket Entry #9), the May 4, 2009 deadline for application for appointment as lead plaintiff in the Leonhardt action was undisturbed. Both Repex and a new movant, the Foxton Group, moved to be appointed lead plaintiffs in the Leonhardt Action. The Foxton Group has as its members investors who purchased securities from each of the three issuers--Bank Medici, Pioneer, and Genevalor,

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Benbassat & Cie. However, as shown by Repex's Opposition to the Foxton Groups' Motion, the only member of the Foxton Group who suffered the largest losses caused by one of the three issuers is Neville Seymour Davis ("Davis"), who claims to have losses of $1,131,441.20 from his purchases in the Thema Fund. See Certification of Proposed Lead Plaintiff Neville Seymour Davis, attached as Exhibit "A" to Declaration of Gregory B. Linkh in Support of the Foxton Group's Motion to Consolidate, To Be Appointed Lead Plaintiff and for Approval of its Selection of Lead and Liaison Counsel (hereinafter, the "Davis Cert."). Repex believes it is

appropriate for this Court to appoint Davis as co-lead plaintiff to represent Thema Fund purchasers. As Dr. Cabilly has suffered a $3,665,200 loss as a result of his investment in Primeo, he should be appointed co-lead plaintiff to represent the investors in Pioneer's Primeo Funds. And completing the tri-lead plaintiff structure, Repex, with its $700,000 in losses due to its investment in the Herald Funds, should be appointed co-lead plaintiff to represent the purchasers of Bank Medici's Herald Funds. II. ARGUMENT A. All of the Lead Plaintiff Motions are Timely

Oddly, Dr. Cabilly continues to deny the existence of the Court's Endorsement of March 12, 2009 (Docket Entry #9), which left the May 4, 2009 deadline for application for appointment as lead plaintiff in the Leonhardt action undisturbed. Dr. Cabilly has not moved the Court to reconsider its Order. Nor has he sought relief from the Second Circuit. Instead, Dr. Cabilly continues to argue, contrary to the Court's March 12 Order, that both Repex and the Foxton Groups' motions are untimely. This argument is absurd. While Dr. Cabilly may disagree with

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the Court's order, he cannot simply ignore its existence and claim that acts done in full compliance of the Court's order are untimely. B. Different Co-Lead Plaintiff Should be Appointed to Represent Purchasers From Each Issuer

Dr. Cabilly has been unable to cite to a single case where a sole lead plaintiff has been appointed to represent purchasers of securities from different issuers. That is because such a case does not exist. Instead, investors who purchased securities from one issuer do not have standing to represent purchasers who purchased from a different issuer. Ont. Pub. Serv. Emples. Union Pension Trust Fund v. Nortel Networks Corp., 369 F.3d 27, 31 (2d Cir. 2004). In Nortel the district court held that the JDS shareholders did not have standing to sue because they did not purchase or sell any Nortel stock. 369 F.3d at 31. The Second Circuit upheld the dismissal, holding that investors do not have standing to sue under Section 10(b) and Rule 10b-5 when the company whose securities they purchased is negatively impacted by the material misstatement of another company, whose securities they do not purchase. 369 F.3d at 34. The same reasoning holds true in the present case. Furthermore, different lead plaintiffs have already been appointed to represent investors who purchased securities from different issuers of Madoff feeder funds. As show on the chart on the following page, each separate issuer has had either lead or co-lead plaintiffs appointed to represent their investors. Simply because this suit has three different issuers is no reason to appoint a single investor who did not purchase securities from each issuer as the sole lead plaintiff. Following Dr. Cabilly's argument to its logical conclusion, all of the Madoff cases should be consolidated, and a sole investor appointed lead plaintiff of the consolidated action. Of course, this makes no sense, and is completely unworkable. 3

Madoff Feeder Fund Cases Action Inversiones Mar Octava Limitada, et al. v. Banco Santander S.A., et al., No. 09cv20215 Feeder Funds Optimal Multiadvisors, Ltd. and Optimal Strategic US Equity Ltd. Advisors Optimal Investment Services, S.A. Marketed by Banco Santander S.A. thru Bankco Santander International (U.S.) J. Ezra Merkin Lead Plaintiff and Lead Counsel Santander Investor Group by Labaton Sucharow LLP and Coughlin Stoia Geller Rudman & Robbins LLP

In re J. Ezra Merkin and BDO Seidman Securities Litigation, No. 08cv10922 (S.D.N.Y. filed Dec. 16, 2008)

Limited Partnership interests in Ascot Partners, L.P.

Co-Lead Plaintiffs New York Law School and Scott Berrie by Abbey Spanier Rodd & Abrams, LLP Securities Action: Lead Plaintiffs Arthur M. Brainson, Yvette Finkelstein, and Group Defined Pension Plan by Bernstein Liebhard LLP Both actions coordinated for pre-trial purposes

In re Tremont Securities American Masters Law, State Law and Broad Market Prime Insurance Litigation, No. Fund, L.P. 08cv111212 (S.D.N.Y. filed Dec. 23, 2008)

Tremont Group Holdings, Inc.

Newman, et al. v. Family Management Corporation, et al., No. 08cv11215 (S.D.N.Y. filed Dec. 23, 2009) Wolff Living Trust et al v. FM Multi-Strategy Investment Fund, L.P. et al., No. 09cv1540 (S.D.N.Y. filed Feb. 19, 2009)

Limited Partnership interests in FM Low Volatility Fund, L.P.

Family Management Corporation

Limited Partnership Family interests in FM Management Multi-Strategy Corporation Investment Fund, L.P.

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Action In re Beacon Associates Litigation, No. 09cv0777 (S.D.N.Y. filed Jan. 27, 2009)

Feeder Funds

Advisors

Lead Plaintiff and Lead Counsel Pipe Trades Group by Lowey Dannenberg Cohen & Hart P.C.

Beacon Associates LLC Beacon I Associates Management Corp.

Finally, there is no requirement that this Court appoint a single investor as lead plaintiff. Instead, courts in this district have the authority to appoint co-lead plaintiffs to represent investors who purchase the same securities from the same issuer, never mind when different securities from different issuers are involved. In Metro Servs. v. Wiggins, 158 F.3d 162, (2d Cir., 1998) the Second Circuit dismissed an appeal by the lead plaintiff movant with the largest losses challenging an order appointing three co-lead plaintiffs. Id. at 164. The Second Circuit dismissed the appeal because, same as this Court should do, the district court reserved the right to alter the lead plaintiff structure "at any time and for any reason, and will do so if it finds that the progress of the litigation is being delayed, that expenses are being unnecessarily enlarged, or if the structure established proves detrimental, in any way, to the best interests of the proposed class." Id. at 165.; See also Davidson v. E*Trade Fin. Corp., No. 07 Civ 10400, 2008 U.S. Dist. LEXIS 61265 (S.D.N.Y. July 16, 2008)(group of 3, along with additional individual appointed co-lead plaintiffs); In re Oxford Health Plans, Inc. Sec. Litig., 182 F.R.D. 42, 49 (S.D.N.Y. 1998)(appointing three co-lead plaintiffs and noting that diverse representation ensures that the interests of all class members will be adequately represented). III. CONCLUSION

This case requires three different co-lead plaintiffs to represent purchasers. This Court should appoint Davis of the Foxton Group as co-lead plaintiff to represent Thema Fund investors, Dr. 5

Cabilly to represent investors in Pioneer's Primeo Funds, and Repex to represent purchasers of Bank Medici's Herald Funds. Dated: June 1, 2009 Respectfully submitted, STULL, STULL & BRODY

By:

s/ Timothy J. Burke Timothy J. Burke (Admitted Pro Hac Vice) 10940 Wilshire Boulevard, Suite 2300 Los Angeles, CA 90024 Tel: [phone] Fax: [phone] STULL, STULL & BRODY Jules Brody (JB-9151) Patrick K. Slyne (PS-1765) 6 East 45th St. New York, NY 10017 Tel: [phone] Fax: [phone] Counsel for Movant Repex Ventures, S.A. and Proposed Lead Counsel For Plaintiffs and The Class

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CERTIFICATE OF SERVICE I hereby certify, this 1st day of June, 2009, that I caused a true and correct copies of the REPEX VENTURES, S.A.'S REPLY MEMORANDUM OF POINTS AND UTHORITIES IN SUPPORT OF ITS MOTION TO BE APPOINTED LEAD PLAINTIFF to be served via First Class Mail on all parties listed on the attached service list. Dated: June 1, 2009 STULL, STULL & BRODY

By:

s/ Timothy J. Burke Timothy J. Burke (Admitted Pro Hac Vice) 10940 Wilshire Boulevard, Suite 2300 Los Angeles, CA 90024 Tel: [phone] Fax: [phone]

SERVICE LIST William P. Hammer, Esq. ERNST & YOUNG LLP 5 Times Square 36th Floor New York, NY 10036-6530 Tel: [phone] Fax: [phone] Lawrence J. Zweifach, Esq. GIBSON, DUNN & CRUTCHER LLP 200 Park Avenue New York, NY 10166-0193 Tel: [phone] Direct Fax: [phone] William J. O'Brien, Esq. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, NY 10036-6522 Tel: [phone] Fax: [phone] Steven J. Toll Daniel S. Sommers COHEN MILSTEIN SELLERS & TOLL PLLC 1100 New York Avenue, N.W. Suite 500, West Tower Washington, DC 20005 Tel: [phone] Fax: [phone] Catherine A. Torell COHEN MILSTEIN SELLERS & TOLL PLLC 150 East 52nd Street 30th Floor New York, NY 10022 Tel: [phone] Fax: [phone] Samuel H. Rudman David A. Rosenfeld COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 58 South Service Road Suite 200 Melville, NY 11747 Tel: [phone] Fax: [phone] Sabrina E. Tirabassi COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP DOUGLAS WILENS 120 E. Palmetto Park Road Suite 500 Boca Raton, FL 33432-4809 Tel: [phone] Fax: [phone] Frank A. Bottini JOHNSON BOTTINI, LLP 655 W. Broadway Suite 1400 San Diego, CA 92101 Tel: [phone] Fax: [phone] Jacob Sabo, Esq. The Tower # 3 Daniel Frisch St. Tel Aviv Israel Tel: [phone] Fax: [phone]