13-1581

Lomeli v. Fairfield Greenwich

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED

ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE

PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A

DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX 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.

1 At a stated term of the United States Court of Appeals

2 for the Second Circuit, held at the Thurgood Marshall United

3 States Courthouse, 40 Foley Square, in the City of New York,

on the 26th 4 day of November, two thousand thirteen.

5

6 PRESENT: DENNIS JACOBS,

7 BARRINGTON D. PARKER,

8 DENNY CHIN,

9 Circuit Judges.

10

11 - - - - - - - - - - - - - - - - - - - -X

12 MIGUEL LOMELI, MORNING MIST HOLDINGS

13 LIMITED, 

14 Plaintiffs-Appellants,

15

16 AXA PRIVATE MANAGEMENT,

17 Lead Plaintiff,

18

19 PASHA S. ANWAR, ON BEHALF OF

20 THEMSELVES AND ALL OTHERS SIMILARLY

21 SITUATED INVESTORS IN THE GREENWICH

22 SENTRY, L.P. PRIVATE INVESTMENT

23 LIMITED PARTNERSHIP, JULIA ANWAR, ON

24 BEHALF OF THEMSELVES AND ALL OTHERS

25 SIMILARLY SITUATED INVESTORS IN THE

26 GREENWICH SENTRY, L.P. PRIVATE

27 INVESTMENT LIMITED PARTNERSHIP, ET

28 AL.,

1
1 Plaintiffs,

2

3 SHIMON LAOR, ET AL.,

4 Consolidated Plaintiffs,

5

6 ARJAN MOHANDAS BHATIA, ET AL.,

7 All Plaintiffs,

8

9 -v.- 13-1581

10

11 SECURITIES & INVESTMENT COMPANY

12 BAHRAIN, ET AL., 

13 Plaintiff-Appellees,

14

15 -v.-

16

17 FAIRFIELD GREENWICH LIMITED, A CAYMAN

18 ISLAND COMPANY, ET AL.,

19 Defendants-Appellees,

20

21

22 FAIRFIELD GREENWICH ADVISORS L.L.C.,

23 AMIT VIGAYVERGIA, CITCO FUND SERVICES

24 (EUROPE) B.V.,

25 Defendants - Consolidated 

26 Defendants - Appellees,

27

28 YANKO DELLAW SCHIAVA, ET AL.,

29 Consolidated Defendants - 

30 Appellees,

31

32 FAIRFIELD GREENWICH CORP.,

33 Consolidated Counter 

34 Defendant - Appellee,

35

36 1-20 JOHN DOES,

37 Defendants,

38

39 - - - - - - - - - - - - - - - - - - - -X

40

2
1 FOR APPELLANT: ROBERT A. WALLNER, Milberg LLP,

2 New York, New York (Jennifer L.

3 Young, Kristi Stahnke McGregor,

4 Milberg LLP, Stephen Weiss,

5 Parvin Aminolroaya, Seeger Weiss

6 LLP, on the brief), for

7 Plaintiffs-Appellants Miguel

8 Lomeli and Morning Mist Holdings

9 Limited.

10

11 FOR APPELLEES: DAVID A. BARRETT, Boies, Schiller

12 & Flexner LLP, New York, New

13 York (Howard L. Vickery, II,

14 Stuart H. Singer, Boies,

15 Schiller & Flexner LLP, Robert

16 C. Finkel, James A. Harrod,

17 Natalie M. Mackiel, Wolf Popper

18 LLP, Christopher Lovell, Victor

19 E. Stewart, Lovell Stewart

20 Halebian Jacobson LLP, on the

21 brief), for Plaintiffs22 Appellees.

23

24 MARK G. CUNHA, Simpson Thacher &

25 Bartlett LLP, New York, New York

26 (Peter E. Kazanoff, Jeffrey L.

27 Roether, Jeffrey E. Baldwin, and

28 Nicholas S. Davis, on the

29 brief), for Fairfield Greenwich

30 Limited, Fairfield Greenwich

31 (Bermuda) Limited, Fairfield

32 Heathcliff Capital LLC,

33 Fairfield Risk Services Limited,

34 Lourdes Barreneche, Vianney

35 d’Hendecourt, Yanko Della

36 Schiava, Harold Greisman,

37 Jacqueline Harary, Richard

38 Landsberger, Daniel E. Lipton,

39 Julia Luongo, Mark McKeefry,

40 Charles Murphy, Corina Noel

41 Piedrahita, Maria Teresa Pulido

42 Mendoza, Santiago Reyes, Andrew

43 Smith, Philip Toub, and Amit

44 Vijayvergiya.

3
1 MARC E. KASOWITZ, Kasowitz Benson

2 Torres & Friedman LLP, New York,

3 New York (Daniel J. Fetterman,

4 on the brief), for Jeffrey H.

5 Tucker.

6

7 BRUCE A. BAIRD, Covington &

8 Burling LLP, Washington, D.C.,

9 for Gregory Bowes.

10

11 ANDREW J. LEVANDER, Dechert LLP,

12 New York, New York (Neil A.

13 Steiner, on the brief), for

14 Andres Piedrahita.

15

16 ANDREW HAMMOND, White & Case LLP,

17 New York, New York (Glenn M.

18 Kurtz, on the brief), for Walter

19 M. Noel, Jr.

20

21 EDWARD M. SPIRO, Morvillo

22 Abramowitz Grand Iason & Anello

23 P.C., for David B. Horn and

24 Robert A. Blum.

25

26 SEAN F. O’SHEA, O’Shea Partners

27 LLP, New York, New York, for

28 Cornelis Boele.

29

30 Appeal from a judgment of the United States District

31 Court for the Southern District of New York (Marrero, J.).

32

33 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED

34 AND DECREED that the judgment of the district court be

35 AFFIRMED. 

36

37 Miguel Lomeli and Morning Mist Holdings Limited appeal

38 from the judgment of the United States District Court for

39 the Southern District of New York (Marrero, J.), approving a

40 partial class action settlement. The underlying class

4
1 action (the “Anwar action”) alleges that the defendants made

2 material misstatements concerning their due diligence while

3 investing with Bernard L. Madoff Investment Securities LLC. 

4 During the district court proceedings, the plaintiffs and

5 the Fairfield Greenwich defendants settled on a basis that

6 requires the plaintiffs to release any derivative claims on

7 behalf of the Fairfield Greenwich funds. The appellants

8 filed a derivative claim in New York state court on behalf

9 of one of the funds, Fairfield Sentry Limited (“Sentry”)

10 (the “Morning Mist action”). That action was removed to the

11 Southern District of New York and then remanded back to

12 state court. Sentry is undergoing a liquidation proceeding

13 in the British Virgin Islands, however, and the Morning Mist

14 action therefore has been stayed by the Bankruptcy Court for

15 the Southern district of New York. Additionally, Sentry has

16 filed a direct action against the Fairfield Greenwich

17 defendants, also in the Bankruptcy Court for the Southern

18 District of New York. See Fairfield Sentry Ltd. V.

19 Fairfield Greenwich Grp., Adv. Pro. No. 10-03800 (Bankr.

20 S.D.N.Y. Oct. 27, 2011). The appellants object to the

21 settlement insofar as it requires them to release their

22 derivative claims, and cites deficiencies in the settlement

5
1 notice. They also appeal the district court’s decision not

2 to reconsider the approval in light of the Supreme Court’s

3 decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426

4 (2013). We assume the parties’ familiarity with the

5 underlying facts, the procedural history, and the issues

6 presented for review. 

7 We review the approval of a class action settlement for

8 abuse of discretion. Charron v. Wiener, 731 F.3d 241, 247

9 (2d Cir. 2013). “A district court abuses its discretion

10 when its decision rests on an error of law or a clearly

11 erroneous factual finding, or when its decision cannot be

12 located within the range of permissible decisions.” Id.

13 “We review factual findings relating to the settlement for

14 clear error and issues of law de novo.” Id. A district

15 court’s denial of a motion for reconsideration is also

16 reviewed for abuse of discretion. RJE Corp. v. Northville

17 Indus. Corp., 329 F.3d 310, 316 (2d Cir. 2003). 

18 1. Scope of the Release

19 “[I]n order to achieve a comprehensive settlement that

20 would prevent relitigation of settled questions at the core

21 of a class action, a court may permit the release of a claim

22 . . . even though the claim was not presented and might not

6
1 have been presentable in the class action.” TBK Partners,

2 Ltd. v. Western Union Corp., 675 F.2d 456, 460 (2d Cir.

3 1982). The “[p]laintiffs’ authority to release claims is

4 limited by the ‘identical factual predicate’ and ‘adequacy

5 of representation’ doctrines.” Wal-Mart Stores, Inc. v.

6 Visa U.S.A., Inc., 396 F.3d 96, 106 (2d Cir. 2005); see also

7 TBK Partners, 675 F.2d at 460-62. 

8 The claims in the Anwar action and the derivative

9 claims in the Morning Mist action share a single factual

10 predicate: the alleged misconduct of the Fairfield Greenwich

11 defendants in failing to conduct adequate due diligence, and

12 misrepresentations regarding their due diligence. The

13 district court recognized this identity when it initially

14 agreed to consolidate the two actions. See Anwar v.

15 Fairfield Greenwich Grp., No. 1:09-cv-00118,(S.D.N.Y. June

16 9, 2009, ECF No. 167). The appellants do not contest this

17 identity. 

18 “Adequate representation of a particular claim is

19 established mainly by showing an alignment of interests

20 between class members.” Wal-Mart Stores, 396 F.3d at 106-

21 07. Since the plaintiff class is composed of equity holders

22 in the Fairfield Greenwich funds (including Sentry), every

7
1 member of the class has an interest in claims that may be

2 made derivatively on behalf of the funds. Nor do the

3 appellants claim that the release disproportionately affects

4 them relative to other class members. Therefore, adequate

5 representation exists to release derivative claims that may

6 be pursued by the settling class.

7 We are unpersuaded that Sentry’s absence from the class

8 nullifies the settlement. The settlement only limits the

9 settling class from bringing a derivative action, an action

10 that belongs to the corporation. See Scalisi v. Fund Asset

11 Mgmt., L.P., 380 F.3d 133, 138 (2d Cir. 2004). Nothing in

12 the settlement limits the ability of Sentry to pursue an

13 action for its benefit or the ability of class members who

14 opt out to pursue derivative claims. Furthermore, the

15 appellants’ reliance on National Super Spuds, Inc. v. New

16 York Mercantile Exchange is misplaced: in that case, the

17 factual predicate and adequate representation tests were not

18 satisfied. 660 F.2d 9, 18 n.7, 19 (2d Cir. 1981); see also

19 Wal-Mart Stores, 396 F.3d at 110-11. 

20 2. The Settlement Notice

21 A settlement notice must be reasonable. Fed. R. Civ.

22 P. 23(e)(2). “There are no rigid rules to determine whether

8
1 a settlement notice to the class satisfies constitutional or

2 Rule 23(e) requirements.” Masters v. Wilhelmina Model

3 Agency, Inc., 473 F.3d 423, 438 (2d Cir. 2007) (quoting Wal4 Mart Stores, 396 F.3d at 114). “[T]he settlement notice

5 must ‘fairly apprise the prospective members of the class of

6 the terms of the proposed settlement and of the options that

7 are open to them in connection with the proceedings.’” Id. 

8 This notice informed the class members that they would

9 not be able to participate in any other proceeding against

10 the Fairfield Greenwich defendants in any forum. The notice

11 warned class members to seek counsel if they were involved

12 in any litigation against the defendants, directed them to

13 the stipulation, and explained how to opt out if they wanted

14 to preserve their claims. 

15 The settlement notice here did not specifically refer

16 to the Morning Mist derivative action. While this Court

17 encourages settlement notices to include “specific

18 reference[s] to pending actions,” we have never held this to

19 be a requirement. Wal-Mart Stores, 396 F.3d at 116 n.22. 

20 The settlement notice was reasonable and could be

21 “understood by the average class member.” Id. at 114. 

22

9
1 3. Reconsideration of the Settlement Approval

2 The appellants sought reconsideration of the district

3 court’s settlement approval in light of the Supreme Court’s

4 decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426

5 (2013). We conclude that the district court did not abuse

6 its discretion in denying reconsideration for the reasons

7 articulated in its decision and order. See Anwar v.

8 Fairfield Greenwich Ltd., No. 1:09-cv-00118 (S.D.N.Y. Apr.

9 4, 2013, ECF No. 1104).

10

11 For the foregoing reasons, and finding no merit in the

12 appellants’ other arguments, we hereby AFFIRM the judgment

13 of the district court.

14

15 FOR THE COURT:

16 CATHERINE O’HAGAN WOLFE, CLERK

17

10