Court Opinion

ID: 2644048
Source: CourtListenerOpinion
Date Created: 2013-11-26 15:16:11.682685+00
Date Added: 2024-06-11T11:54:24.234249
License: Public Domain

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,
 4       on the 26th 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 Plaintiffs-
22                    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 Wal-

4    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