Lomeli v. Securities & Investment Co. Bahrain

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