A New York federal judge on Tuesday tossed a multibillion-dollar action against more than 60 defendants, brought by a putative class of investors in foreign funds that fed Bernard L. Madoff's doomed Ponzi scheme, saying the claims belonged in courts outside the U.S.
U.S. District Judge Richard M. Berman dismissed claims against JPMorgan Chase & Co. and its affiliates and Bank of New York Mellon Corp. as barred by the Securities Litigation Uniform Standards Act of 1998. The judge then nixed the case against the remaining defendants, including Austrian financier Sonja Kohn, Italian bank UniCredit SpA and auditing firm Ernst & Young SA, on the basis of inconvenient forum.
The plaintiffs are foreign investors whose claims relate to their investment in five funds — Herald SPC, Herald Lux, Primeo Select Fund, Primeo Executive Fund and Thema Fund — that allegedly fed into Madoff's scheme.
The 66-count litigation accuses a slew of defendants that provided services to the funds or were affiliated with them of failing to identify red flags that should have caused them to discover Madoff's fraud.
The defendants filed a joint motion to dismiss the suit in June, arguing that the suit should be dismissed for inconvenient forum because the plaintiffs are foreign investors, the funds are foreign funds not open to American investors, and the defendants are primarily foreign entities that provided services to the funds in foreign countries.
Judge Berman agreed, dismissing the plaintiffs' complaints and saying that claims relating to Thema belong in Ireland while claims related to Herald and Primeo belong in Luxembourg.
However, Judge Berman granted HSBC's request to stay the effect of the dismissal as to HSBC Holdings PLC and its affiliates, as the bank is working out a deal with the plaintiffs.
The judge, who previously rejected a $62.5 million proposed settlement between HSBC and the investors, and said his decision to stay the dismissal did not bear on whether the new deal would be accepted.
The plaintiffs are represented by Francis A. Bottini Jr. and Albert Y. Chang of Chapin Fitzgerald Sullivan & Bottini LLP, Timothy J. Burke, Jules Brody and Patrick Slyne of Stull Stull & Brody, Brian P. Murray and Gregory B. Linkh of Murray Frank LLP, Samuel H. Rudman, Jack Reise and David A. Rosenfeld of Robbins Geller Rudman & Dowd LLP, and Steven J. Toll, Daniel S. Sommers, Joshua S. Devore and Catherine C. Torell of Cohen Milstein Sellers & Toll PLLC.
UniCredit and subsidiary Pioneer Global Asset Management SpA are represented by Susan L. Saltzstein, Marco E. Schnabl, William J. O'Brien and Jason C. Vigna of Skadden Arps Slate Meagher & Flom LLP. JPMorgan Chase is represented by Patricia M. Hynes, Andrew Rhys Davies and Laura R. Hall of Allen & Overy LLP. Ernst & Young is represented by Richard A. Martin of Orrick Herrington & Sutcliffe LLP. Kohn is represented by Price O. Gielen of Neuberger Quinn Gielen Rubin & Gibber PA. HSBC is represented by Evan A. Davis of Cleary Gottlieb Steen & Hamilton LLP. Herald Fund SPC is represented by Joseph Serino, Jay Lefkowitz and David Flugman of Kirkland & Ellis LLP.
The case is In re: Herald, Primeo and Thema Funds Securities Litigation, case number 1:09-cv-00289, in the U.S. District Court for the Southern District of New York.
REPRINTED WITH PERMISSION FROM THE NOVEMBER 29, 2011 EDITION OF LAW360 © 2011 PORTFOLIO MEDIA INC. ALL RIGHTS RESERVED. FURTHER DUPLICATION WITHOUT PERMISSION IS PROHIBITED. WWW.LAW360.COM