13-1581 Lomeli v. Fairfield Greenwich 

### UNITED STATES COURT OF APPEALS **FOR THE SECOND CIRCUIT** 

## SUMMARY ORDER

**R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT**  **. C**  **ITATION TO A SUMMARY ORDER FILED ON OR AFTER**  **J ANUARY**  **1, 2007,**  **IS PERMITTED AND IS GOVERNED BY F**  **EDERAL R** **ULE OF A** **PPELLATE P**  **ROCEDURE 32.1**  **AND THIS COURT ’**  **S L**  **OCAL R** **ULE 32.1.1.**  **W HEN CITING A SUMMARY ORDER IN A**  **DOCUMENT FILED WITH THIS COURT ,**  **A PARTY MUST CITE EITHER THE F**  **EDERAL A** **PPENDIX OR AN ELECTRONIC DATABASE**  **( WITH THE NOTATION**  **“ SUMMARY ORDER**  **”). A**  **PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL**  **. At a stated term of the United States Court of Appeals**  1 **for the Second Circuit, held at the Thurgood Marshall United** 2 **States Courthouse, 40 Foley Square, in the City of New York,** 3 **on the 26 th** **day of November, two thousand thirteen.** 4 5 **PRESENT: DENNIS JACOBS,** 6 **BARRINGTON D. PARKER,** 7 **DENNY CHIN,** 8 **Circuit Judges .**  9 10 - - - - - - - - - - - - - - - - - - - -X 11 **MIGUEL LOMELI, MORNING MIST HOLDINGS** 12 **LIMITED,** 13 **Plaintiffs-Appellants ,**  14 15 **AXA PRIVATE MANAGEMENT,** 16 **Lead Plaintiff ,**  17 18 **PASHA S. ANWAR, ON BEHALF OF** 19 **THEMSELVES AND ALL OTHERS SIMILARLY** 20 **SITUATED INVESTORS IN THE GREENWICH** 21 **SENTRY, L.P. PRIVATE INVESTMENT** 22 **LIMITED PARTNERSHIP, JULIA ANWAR, ON** 23 **BEHALF OF THEMSELVES AND ALL OTHERS** 24 **SIMILARLY SITUATED INVESTORS IN THE** 25 **GREENWICH SENTRY, L.P. PRIVATE** 26 **INVESTMENT LIMITED PARTNERSHIP, ET** 27 **AL.,** 28
1**Plaintiffs ,**  1 2 **SHIMON LAOR, ET AL.,** 3 **Consolidated Plaintiffs ,**  4 5 **ARJAN MOHANDAS BHATIA, ET AL.,** 6 **All Plaintiffs ,**  7 8 **-v.- 13-1581** 9 10 **SECURITIES & INVESTMENT COMPANY** 11 **BAHRAIN, ET AL.,** 12 **Plaintiff-Appellees ,**  13 14 **-v.-** 15 16 **FAIRFIELD GREENWICH LIMITED, A CAYMAN** 17 **ISLAND COMPANY, ET AL.,** 18 **Defendants-Appellees ,**  19 20 21 **FAIRFIELD GREENWICH ADVISORS L.L.C.,** 22 **AMIT VIGAYVERGIA, CITCO FUND SERVICES** 23 **(EUROPE) B.V.,** 24 **Defendants - Consolidated** 25 **Defendants - Appellees ,**  26 27 **YANKO DELLAW SCHIAVA, ET AL.,** 28 **Consolidated Defendants -** 29 **Appellees ,**  30 31 **FAIRFIELD GREENWICH CORP.,** 32 **Consolidated Counter** 33 **Defendant - Appellee ,**  34 35 **1-20 JOHN DOES,** 36 **Defendants ,**  37 38 - - - - - - - - - - - - - - - - - - - -X 39 40

2**FOR APPELLANT:** R OBERT A. WALLNER , Milberg LLP, 1 New York, New York (Jennifer L. 2 Young, Kristi Stahnke McGregor, 3 Milberg LLP, Stephen Weiss, 4 Parvin Aminolroaya, Seeger Weiss 5 LLP, on the brief ), for 6 Plaintiffs-Appellants Miguel 7 Lomeli and Morning Mist Holdings 8 Limited. 9 10 **FOR APPELLEES:** DAVID A. BARRETT , Boies, Schiller 11 & Flexner LLP, New York, New 12 York (Howard L. Vickery, II, 13 Stuart H. Singer, Boies, 14 Schiller & Flexner LLP, Robert 15 C. Finkel, James A. Harrod, 16 Natalie M. Mackiel, Wolf Popper 17 LLP, Christopher Lovell, Victor 18 E. Stewart, Lovell Stewart 19 Halebian Jacobson LLP, on the 20 brief ), forPlaintiffs21 Appellees. 22 23 MARK G. C UNHA , Simpson Thacher & 24 Bartlett LLP, New York, New York 25 (Peter E. Kazanoff, Jeffrey L. 26 Roether, Jeffrey E. Baldwin, and 27 Nicholas S. Davis, on the 28 brief ), forFairfield Greenwich 29 Limited, Fairfield Greenwich 30 (Bermuda) Limited, Fairfield 31 Heathcliff Capital LLC, 32 Fairfield Risk Services Limited, 33 Lourdes Barreneche, Vianney 34 d’Hendecourt, Yanko Della 35 Schiava, Harold Greisman, 36 Jacqueline Harary, Richard 37 Landsberger, Daniel E. Lipton, 38 Julia Luongo, Mark McKeefry, 39 Charles Murphy, Corina Noel 40 Piedrahita, Maria Teresa Pulido 41 Mendoza, Santiago Reyes, Andrew 42 Smith, Philip Toub, and Amit 43 Vijayvergiya. 44

3MARC E. KASOWITZ , Kasowitz Benson 1 Torres & Friedman LLP, New York, 2 New York (Daniel J. Fetterman, 3 on the brief ), forJeffrey H. 4 Tucker. 5 6 B RUCE A. BAIRD , Covington & 7 Burling LLP, Washington, D.C., 8 forGregory Bowes. 9 10 ANDREW J. L EVANDER , Dechert LLP, 11 New York, New York (Neil A. 12 Steiner, on the brief ), for 13 Andres Piedrahita. 14 15 ANDREW HAMMOND , White & Case LLP, 16 New York, New York (Glenn M. 17 Kurtz, on the brief ), forWalter 18 M. Noel, Jr. 19 20 E DWARD M. S PIRO , Morvillo 21 Abramowitz Grand Iason & Anello 22 P.C., forDavid B. Horn and 23 Robert A. Blum. 24 25 S EAN F. O’S HEA , O’Shea Partners 26 LLP, New York, New York, for 27 Cornelis Boele. 28 29 Appeal from a judgment of the United States District 30 Court for the Southern District of New York (Marrero, J. ). 31 32 **UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED** 33 **AND DECREED**that the judgment of the district court be 34 **AFFIRMED**

. 35 36 Miguel Lomeli and Morning Mist Holdings Limited appeal 37 from the judgment of the United States District Court for 38 the Southern District of New York (Marrero, J. ), approving a 39 partial class action settlement . The underlying class 40

4action (the “Anwaraction”) alleges that the defendants made 1 material misstatements concerning their due diligence while 2 investing with Bernard L. Madoff Investment Securities LLC. 3 During the district court proceedings, the plaintiffs and 4 the Fairfield Greenwich defendants settled on a basis that 5 requires the plaintiffs to release any derivative claims on 6 behalf of the Fairfield Greenwich funds. The appellants 7 filed a derivative claim in New York state court on behalf 8 of one of the funds, Fairfield Sentry Limited (“Sentry”) 9 (the “Morning Mist action”). That action was removed to the 10 Southern District of New York and then remanded back to 11 state court. Sentry is undergoing a liquidation proceeding 12 in the British Virgin Islands, however, and the Morning Mist 13 action therefore has been stayed by the Bankruptcy Court for 14 the Southern district of New York. Additionally, Sentry has 15 filed a direct action against the Fairfield Greenwich 16 defendants, also in the Bankruptcy Court for the Southern 17 District of New York. See Fairfield Sentry Ltd. V. 18 Fairfield Greenwich Grp. , Adv. Pro. No. 10-03800 (Bankr. 19 S.D.N.Y. Oct. 27, 2011). The appellants object to the 20 settlement insofar as it requires them to release their 21 derivative claims, and cites deficiencies in the settlement 22

5notice. They also appeal the district court’s decision not 1 to reconsider the approval in light of the Supreme Court’s 2 decision in Comcast Corp. v. Behrend , 133 S. Ct. 1426 3 (2013). We assume the parties’ familiarity with the 4 underlying facts, the procedural history, and the issues 5 presented for review. 6 We review the approval of a class action settlement for 7 abuse of discretion. Charron v. Wiener , 731 F.3d 241, 247 8 (2d Cir. 2013). “A district court abuses its discretion 9 when its decision rests on an error of law or a clearly 10 erroneous factual finding, or when its decision cannot be 11 located within the range of permissible decisions.” Id. 12 “We review factual findings relating to the settlement for 13 clear error and issues of law de novo .” Id. A district 14 court’s denial of a motion for reconsideration is also 15 reviewed for abuse of discretion. RJE Corp. v. Northville 16 Indus. Corp. , 329 F.3d 310, 316 (2d Cir. 2003). 17 1. Scope of the Release 18 “[I]n order to achieve a comprehensive settlement that 19 would prevent relitigation of settled questions at the core 20 of a class action, a court may permit the release of a claim 21 . . . even though the claim was not presented and might not 22

6have been presentable in the class action.” TBK Partners, 1 Ltd. v. Western Union Corp. , 675 F.2d 456, 460 (2d Cir. 2 1982). The “[p]laintiffs’ authority to release claims is 3 limited by the ‘identical factual predicate’ and ‘adequacy 4 of representation’ doctrines.” Wal-Mart Stores, Inc. v. 5 Visa U.S.A., Inc. , 396 F.3d 96, 106 (2d Cir. 2005); see also 6

TBK Partners , 675 F.2d at 460-62. 7 The claims in the Anwaraction and the derivative 8 claims in the Morning Mist action share a single factual 9 predicate: the alleged misconduct of the Fairfield Greenwich 10 defendants in failing to conduct adequate due diligence, and 11 misrepresentations regarding their due diligence. The 12 district court recognized this identity when it initially 13 agreed to consolidate the two actions. See Anwar v. 14 Fairfield Greenwich Grp. , No. 1:09-cv-00118,(S.D.N.Y. June 15 9, 2009, ECF No. 167). The appellants do not contest this 16 identity. 17 “Adequate representation of a particular claim is 18 established mainly by showing an alignment of interests 19 between class members.” Wal-Mart Stores , 396 F.3d at 106- 20 07. Since the plaintiff class is composed of equity holders 21 in the Fairfield Greenwich funds (including Sentry), every 22

7member of the class has an interest in claims that may be 1 made derivatively on behalf of the funds. Nor do the 2 appellants claim that the release disproportionately affects 3 them relative to other class members. Therefore, adequate 4 representation exists to release derivative claims that may 5 be pursued by the settling class. 6 We are unpersuaded that Sentry’s absence from the class 7 nullifies the settlement. The settlement only limits the 8 settling class from bringing a derivative action, an action 9 that belongs to the corporation. See Scalisi v. Fund Asset 10 Mgmt., L.P. , 380 F.3d 133, 138 (2d Cir. 2004). Nothing in 11 the settlement limits the ability of Sentry to pursue an 12 action for its benefit or the ability of class members who 13 opt out to pursue derivative claims. Furthermore, the 14 appellants’ reliance on National Super Spuds, Inc. v. New 15 York Mercantile Exchange is misplaced: in that case, the 16 factual predicate and adequate representation tests were not 17 satisfied. 660 F.2d 9, 18 n.7, 19 (2d Cir. 1981); see also 18 Wal-Mart Stores , 396 F.3d at 110-11. 19 2. The Settlement Notice 20 A settlement notice must be reasonable. Fed. R. Civ. 21 P. 23(e)(2). “There are no rigid rules to determine whether 22

8a settlement notice to the class satisfies constitutional or 1 Rule 23(e) requirements.” Masters v. Wilhelmina Model 2 Agency, Inc. , 473 F.3d 423, 438 (2d Cir. 2007) (quoting Wal3

Mart Stores , 396 F.3d at 114). “[T]he settlement notice 4 must ‘fairly apprise the prospective members of the class of 5 the terms of the proposed settlement and of the options that 6 are open to them in connection with the proceedings.’” Id. 7 This notice informed the class members that they would 8 not be able to participate in any other proceeding against 9 the Fairfield Greenwich defendants in any forum. The notice 10 warned class members to seek counsel if they were involved 11 in any litigation against the defendants, directed them to 12 the stipulation, and explained how to opt out if they wanted 13 to preserve their claims. 14 The settlement notice here did not specifically refer 15 to the Morning Mist derivative action. While this Court 16 encourages settlement notices to include “specific 17 reference[s] to pending actions,” we have never held this to 18 be a requirement. Wal-Mart Stores , 396 F.3d at 116 n.22. 19 The settlement notice was reasonable and could be 20 “understood by the average class member.” Id. at 114. 21
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93. Reconsideration of the Settlement Approval 1 The appellants sought reconsideration of the district 2 court’s settlement approval in light of the Supreme Court’s 3 decision in Comcast Corp. v. Behrend , 133 S. Ct. 1426 4 (2013). We conclude that the district court did not abuse 5 its discretion in denying reconsideration for the reasons 6 articulated in its decision and order. See Anwar v. 7 Fairfield Greenwich Ltd. , No. 1:09-cv-00118 (S.D.N.Y. Apr. 8 4, 2013, ECF No. 1104). 9 10 For the foregoing reasons, and finding no merit in the 11 appellants’ other arguments, we hereby **AFFIRM** the judgment 12 of the district court. 13
14 FOR THE COURT: 15 CATHERINE O’HAGAN WOLFE, CLERK 16 17

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