INDEX NO. 651117/2011
FILED: NEW YORK COUNTY CLERK 10/18/2013
NYSCEF DOC. NO. 237
RECEIVED NYSCEF: 10/18/2013
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
AIG FINANCIAL PRODUCTS CORP.,
Plaintiff,
-against-
No. 651117 / 2011
ICP ASSET MANAGEMENT, LLC, ICP
SECURITIES, LLC, INSTITUTIONAL
CREDIT PARTNERS, LLC, ICP
STRATEGIC CREDIT INCOME FUND,
LTD., TRIAXX PRIME CDO 2007-1, LTD.,
TRIAXX FUNDING HIGH GRADE I, LTD.,
MOORE CAPITAL MANAGEMENT, LP,
SEYCHELLES LTD., and JOHN DOES 1-10,
Defendants.
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S MOTION FOR LEAVE TO
FILE AND UNSEAL SECOND AMENDED COMPLAINT
QUINN EMANUEL URQUHART
& SULLIVAN, LLP
Jonathan E. Pickhardt
Rex Lee
Jeffrey L. Benner
Haley Plourde-Cole
51 Madison Avenue, 22nd Floor
New York, New York 10010
Telephone: (212) 849-7000
Facsimile: (212) 849-7100
Attorneys for Plaintiff AIG Financial
Products Corp.
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT .........................................................................................1
BACKGROUND FACTS ....................................................................................................4
A.
The Proposed SAC .......................................................................................4
B.
The SEC’s Investigation of and Settlement with the Moore Defendants ....4
C.
Dispute Over Confidentiality of Portions of the SAC, Including Reference
to the SEC Investigation of and Settlement With the Moore Defendants ...5
D.
Procedural Posture .......................................................................................5
ARGUMENT .......................................................................................................................6
I.
II.
LEAVE TO FILE THE PROPOSED SAC SHOULD BE GRANTED ..................6
A.
Proposed Amendments To The FAC Are Neither Surprising Nor
Prejudicial To The Moore Defendants .........................................................7
B.
The Proposed SAC Is Not Patently Devoid Of Merit ..................................9
C.
The Additional Claim Against The Master Fund Is Not Prejudicial,
Surprising, Or Without Merit And Therefore Should Be Permitted ..........11
LEAVE SHOULD BE GRANTED TO FILE THE SAC PUBLICLY AND
WITHOUT REDACTIONS...................................................................................12
A.
The Allegations In The SAC Are Not “Confidential” Under The Protective
Order ..........................................................................................................12
B.
The Allegations In The SAC Do Not Meet the Standard For Sealing Under
New York Law ...........................................................................................15
CONCLUSION ..................................................................................................................17
ii
TABLE OF AUTHORITIES
Page
CASES
Adler v. Helman,
169 A.D.2d 925 (3d Dep’t 1991) ...................................................................................... 10
AIG-Financial Products Corp. v. ICP Asset Management, LLC, et. al,
No. 651117/11, at 15-16 (1st Dep’t Jan. 23, 2013)........................................................... 13
Castor Petroleum Ltd. v. Petroterminal de Panama, S.A.,
90 A.D.3d 424 (1st Dep’t 2011); ........................................................................................ 7
Day v. Zwirn,
No. 0122493/2001, 2005 WL 6165944, at *1 (Sup. Ct. N.Y. Cnty. July 20, 2005)........... 8
Digital Broadcast Corp. v. Ladenburg, Thalmann & Co., Inc.,
2008 WL 1990945, at *3 (Sup. Ct. N.Y. Cnty. April 21, 2008) ....................................... 10
Edenwald Contracting Co. v. City of New York,
60 N.Y.2d 957 (1983) ......................................................................................................... 8
Eusini v. Pioneer Elecs. (USA), Inc.,
29 A.D.3d 623 (2nd Dep’t 2006) ...................................................................................... 16
Gotham Boxing Inc. v. Finkel,
18 Misc.3d 1114(A) (N.Y. Sup. Jan. 8, 2008) ................................................................. 10
Gryphon Dom. VI, LLC, v. APP Intern. Finance Co., B.V.,
28 A.D.3d 322 (1st Dep’t 2006) ....................................................................................... 16
Jacobson v. Croman,
No. 600886/07, 2008 WL 4641997, at *2 (Sup. Ct. N.Y. Cnty. Oct. 6, 2008) ................ 10
Jacobson v. McNeil Consumer & Specialty Pharm.,
68 A.D.3d 652 (1st Dep’t 2009) ......................................................................................... 7
Jeffer v. Jeffer,
No. 7649/04, 2010 WL 3652981, at *4 (Sup. Ct. Kings Co. Sept. 21, 2010) .................. 10
Kocourek v. Booz Allen Hamilton Inc.,
85 A.D.3d 502 (1st Dep’t 2011) ......................................................................................... 7
Liapakis v. Sullivan,
290 A.D.2d 393 (1st Dep’t 2002) ..................................................................................... 16
Loomis v. Civetta Corinno Constr. Corp.,
54 N.Y.2d 28 (1981) ........................................................................................................... 7
Lowenthal v. European Soaps, LLC,
No. 602347/2009, 2010 WL 3384717, at *1 (Sup. Ct. N.Y. Co. Aug. 13, 2010) .............. 9
iii
Mancheski v. Gabelli Group Capital Partners,
39 A.D.3d 499 (2nd Dep’t 2007) ...................................................................................... 16
Masterwear Corp. v. Bernard,
3 A.D.3d 305 (1st Dep’t 2004) ........................................................................................... 8
MBIA Ins. Co. v. Greystone & Co.,
74 A.D.3d 499 (1st Dep’t 2010) ..................................................................................... 7, 9
Mosallem v. Berenson,
76 A.D.3d 345 (1st Dep’t 2010) ................................................................................. 15, 16
News America Marketing, Inc. v. Lepage Bakeries, Inc.
16 A.D.3d 146, 148 (1st Dep’t 2005)……………………………………………………10
Noe v. Friedberg,
No. 600884/08, 2009 WL 569276, at *2 (Sup. Ct. N.Y. Cnty. Feb. 24, 2009) .................. 9
Norwood v. City of New York,
610 N.Y.S.2d 249 (1st Dep’t 1994) .................................................................................... 9
Otis Elevator Co. v. 1166 Avenue of Americas Condominium,
166 A.D.2d 307 (1st Dep’t 1990) ..................................................................................... 10
Rutz v. Kellum,
144 A.D.2d 1017 (1st Dep’t 1988) ..................................................................................... 7
Seidman v. Indus. Recycling Props., Inc.,
83 A.D.3d 1040 (2d Dep’t 2011) ........................................................................................ 8
Stow v. City of New York,
122 A.D.2d 45 (2d Dep’t 1986) .......................................................................................... 9
STATUTES
22 NYCRR 216.1(a) ..................................................................................................................... 15
RULES
N.Y. Civ. P. § 3025(b) .................................................................................................................... 1
N.Y. Civ. P. § 3025(b)(2) ............................................................................................................... 1
iv
Plaintiff AIG Financial Products Corp. (“AIG-FP”) respectfully submits this
memorandum of law in support of its motion seeking an order: (1) granting leave to file the
accompanying proposed Second Amended Complaint (“SAC”)1 pursuant to New York Civil
Practice Law and Rules § 3025(b); (2) granting AIG-FP permission to file the SAC and the
documents filed herewith supporting this motion publicly and without redaction; and (3) for such
other further relief as the Court deems proper.
PRELIMINARY STATEMENT
AIG-FP’s proposed Second Amended Complaint (the “SAC”) is based on the same
transactions, events and misconduct underlying the First Amended Complaint (the “FAC”). It
adds two new claims and re-pleads one other based on the existing discovery record. As the
transactions and events alleged in the SAC are the same as those already alleged in the FAC, it
will not significantly expand required discovery in the case and does not prejudice or surprise
defendants in any way. As a result, the SAC more than satisfies the liberal standard in New
York for amendments. In addition, while AIG-FP has preliminarily filed certain portions of
these papers under seal at the request of defendants Moore Capital Management, L.P. and
Seychelles Ltd. (the “Moore Defendants”), the information contained in the SAC is not
confidential or proprietary and thus should be filed on the public docket.
This suit arises out of the misconduct of the Moore Defendants, ICP Asset Management,
LLC, and several of ICP’s affiliates (with ICP Asset Management, LLC, “ICP”). That
misconduct involved a scheme to defraud AIG-FP through the execution of off-market trades
with the “Triaxx CDOs” that had the effect of improperly shifting investment losses from the
1
The proposed Second Amended Complaint is attached as Exhibit A to the Affirmation of
Jonathan Pickhardt (“Pickhardt Aff.”), filed concurrently herewith. A “redline” version of the SAC
marking proposed changes relative to the FAC is attached as Exhibit B.
1
Moore Defendants to AIG-FP. The FAC asserted claims for fraud, among others, against ICP,
and claims for aiding and abetting fraud and unjust enrichment against the Moore Defendants.
AIG-FP has since settled with ICP. With respect to the Moore Defendants, AIG-FP’s unjust
enrichment claim was dismissed without prejudice but its aiding and abetting claim was upheld
on appeal to the First Department, and the parties have been proceeding with document
discovery.
Based upon the document discovery record, AIG-FP seeks leave to make amendments to
its pleading that (i) describe new evidence detailing the Moore Defendants’ knowing and
substantial involvement in the fraudulent scheme alleged in the FAC, (ii) assert an additional
fraud claim against the Moore Defendants as vicariously liable for the actions of ICP while
acting as the lawful agent to the Moore Defendants, and (iii) re-pleads the previously-dismissed
claim for unjust enrichment. The SAC also asserts a claim for unjust enrichment against one
new party, ICP Strategic Credit Income Master Fund, Ltd. (the “Master Fund”), which is the
parent of ICP Strategic Credit Income Fund, Ltd. (“SCIF”), a defendant in this case.
These new allegations and claims satisfy the liberal standards for amendment in New
York. First, there is no prejudice or surprise to defendants. This case is still in a relatively early
stage, with fact depositions not even having begun. In addition, while the need for additional
discovery does not constitute prejudice or surprise, it is nonetheless worth noting that the SAC—
which is based on the same exact events and transactions underlying the FAC—would not
require much, if any, additional discovery.
Second, the additional claims under the SAC are not patently devoid of merit. The repleaded unjust enrichment claim against the Moore Defendants is supported by substantial new
allegations demonstrating that the Moore Defendants unfairly profited at AIG-FP’s expense.
2
Further, the new claim against the Moore Defendants for vicarious liability is supported by the
Defendants’ plainly-worded agency agreements with ICP and their own assertions that ICP acted
on their behalf and for their benefit. Finally, the claim for unjust enrichment against the Master
Fund is based on new allegations showing that the currently-pleaded unjust enrichment claim
against SCIF is more appropriately directed at the Master Fund.
AIG-FP should also be granted leave to file the SAC on the Court’s public docket. In
connection with this motion, AIG-FP has preliminarily filed a number of the allegations under
seal at the request of the Moore Defendants as required under the protective order in the case.
This includes allegations concerning the Moore Defendants’ settlement with the U.S. Securities
and Exchange Commission (the “SEC”) arising from the same transactions alleged in the SAC,
the Moore Defendant’s investments in the Triaxx CDOs and ICP-related entities, and virtually
any internal Moore Defendants communication. However, none of this information should
remain under seal. Rather, much of the information supporting the SAC is not confidential to the
Moore Defendants as it was not obtained from them. For example, documents relating to the
Moore Defendants’ settlement with the SEC originated with the SEC and were produced to AIGFP by ICP without any confidentiality designation. Further, certain information—the SEC
settlement, in particular—has already been publicly disclosed with the Moore Defendants’
consent, including in connection with their First Department appeal. The remaining information
in the SAC presently filed under seal does not involve any proprietary matter; it is merely
information embarrassing to the Moore Defendants, which falls far short of the “good cause”
required to keep the information under seal in New York.
3
BACKGROUND FACTS
A.
The Proposed SAC
AIG-FP initiated this action on April 28, 2011, and filed the FAC on August 1, 2011,
adding defendant Seychelles and an allegation of aiding and abetting fraud against the Moore
Defendants. (FAC ¶ 3.)
The SAC seeks to amend the FAC in four primary ways: (1) providing additional detail
regarding the misconduct of the Moore Defendants alleged in the FAC; (2) adding a claim of
vicarious liability for fraud against the Moore Defendants based on the fraudulent actions of ICP,
committed while acting as the lawful agent of the Moore Defendants; (3) re-pleading a claim of
unjust enrichment against the Moore Defendants; and (4) adding a claim of unjust enrichment
against a new party, the Master Fund. These proposed amendments arise out of information that
came to light after the FAC was filed, primarily through document discovery in this case or
based upon facts made public through filings in the matter of Securities and Exchange
Commission v. ICP Asset Management, LLC, ICP Securities, LLC, Institutional Credit Partners,
LLC, and Thomas C. Priore, No. 10-4791 (S.D.N.Y., June 21, 2010, complaint amended June
30, 2011) (Kaplan, J.) (the “SEC Action”).
B.
The SEC’s Investigation of and Settlement with the Moore Defendants
Among the new evidence uncovered in discovery is the correspondence between the
Moore Defendants and the SEC which occurred in the first half of 2010, just prior to the start of
the SEC Action. These letters show that the SEC investigated the Moore Defendants’ role in the
fraudulent transactions at issue here, and concluded that “as a result of these various transactions,
as well as other evidence, the staff is concerned that Moore Capital may have aided and abetted
violations of the federal securities laws … and appears to hold funds that are the ill-gotten
proceeds of misconduct by other parties or entities, and to which Moore has no legitimate
4
claim.” (Proposed SAC ¶¶ 1, 105; Pickhardt Aff. at Ex. C.) The correspondence also shows that
the Moore Defendants paid $15.9 million to settle the matter quietly and to avoid a public civil
lawsuit. (Pickhardt Aff. at Ex. D.)
This new evidence contradicts the position the Moore Defendants have taken from the
very beginning of this case, which is that they “do not belong in this lawsuit” because they are
merely “two bystanders” to the alleged wrongdoing of ICP.
(Moore Defendants’ Mot. to
Dismiss FAC at 1.) A May 4, 2010 letter from the SEC to counsel for the Moore Defendants
tells a quite different story. It identifies numerous “areas of concern” the SEC had identified
regarding Moore Capital’s conduct. (See Pickhardt Aff. at Ex. C.) These “areas of concern”
included “The Validity of the Purported Forward-Purchase Agreement” (Proposed SAC ¶ 18),
and the “Sale of Several ‘Swapped’ Securities to the [Triaxx CDO] Vehicles” (Proposed SAC ¶
19).
C.
Dispute Over Confidentiality of Portions of the SAC, Including Reference to
the SEC Investigation of and Settlement With the Moore Defendants
Before filing this motion, AIG-FP met and conferred with the Moore Defendants over
their purported confidentiality concerns with the SAC. The Moore Defendants asserted that
numerous portions of the SAC were protected from disclosure under the protective order in this
case. Those portions fall into three categories: (1) information regarding the Moore Defendants’
settlement with the SEC, (2) information regarding the Moore Defendants’ investments in the
Triaxx CDOs and ICP-related entities, and (3) virtually every allegation referring to the Moore
Defendants’ internal communications.
D.
Procedural Posture
The Moore Defendants, ICP and Triaxx Prime CDO 2007-1, Ltd. (“Triaxx 3”) moved to
dismiss all claims against them in the FAC on October 19, 2011, and AIG-FP opposed the
5
motions. In a Decision and Order delivered from the bench on May 30, 2012 (the “Order”), this
Court granted ICP’s motion to dismiss claims for breach of fiduciary duty, negligent
misrepresentation, and civil conspiracy, but denied their motion to dismiss claims for breach of
contract, common law fraud, and unjust enrichment. The Order dismissed AIG-FP’s claim for
unjust enrichment against Triaxx-3. As to claims against the Moore Defendants, the Order
dismissed without prejudice AIG-FP’s claim for unjust enrichment, and upheld a claim of aiding
and abetting fraud. The New York Supreme Court Appellate Division, First Department denied
the Moore Defendants’ appeal, upholding the aiding and abetting claim. AIG Financial Products
Corp. v. ICP Asset Management, LLC, 108 A.D.3d 444 (1st Dep’t 2013). Prior to a ruling on its
appeal, ICP reached a settlement with AIG-FP. The production of documents among the parties
started in August 2012 and continues to the present. (Pickhardt Aff. at ¶ 4.) Depositions have
not yet started.2 The close of discovery remains undetermined as a pre-trial case management
order has not been issued in this matter, and the parties disagree on the scope of remaining
document discovery.3
ARGUMENT
I.
LEAVE TO FILE THE PROPOSED SAC SHOULD BE GRANTED
Pursuant to CPLR 3025(b), a party may amend a pleading “at any time by leave of
court,” which “shall be freely given upon such terms as may be just.” The First Department has
explained that motions for leave to amend “should be freely granted, absent prejudice or surprise
2
On September 11, 2013, AIG-FP noticed depositions of certain of the Moore Defendants’
witnesses. (Pickhardt Aff. at ¶ 5.) The Moore Defendants have asserted that they will not produce a
single witness for deposition until after the Court rules on this motion, and if leave is granted, then a
motion to dismiss the SAC. (Id.)
3
The parties submitted to the Court a proposed scheduling order on March 18, 2013 (Docket
No. 197), but it has not been so ordered. Pickhardt Aff. at ¶ 4. The parties subsequently agreed to
amendments to the proposed order, but do not presently have an agreement regarding the schedule. (Id.)
6
resulting therefrom, unless the proposed amendment is palpably insufficient or patently devoid
of merit.” MBIA Ins. Co. v. Greystone & Co., 74 A.D.3d 499, 499 (1st Dep’t 2010) (citation
omitted); accord Castor Petroleum Ltd. v. Petroterminal de Panama, S.A., 90 A.D.3d 424, 425
(1st Dep’t 2011); Kocourek v. Booz Allen Hamilton Inc., 85 A.D.3d 502, 505 (1st Dep’t 2011).
The SAC satisfies this standard, and leave to file should be granted.
A.
Proposed Amendments To The FAC Are Neither Surprising Nor Prejudicial
To The Moore Defendants
Under New York law, “prejudice occurs when the party opposing amendment ‘has been
hindered in the preparation of his case or has been prevented from taking some measure in
support of his position.’” Jacobson v. McNeil Consumer & Specialty Pharm., 68 A.D.3d 652,
654–55 (1st Dep’t 2009) (quoting Loomis v. Civetta Corinno Constr. Corp., 54 N.Y.2d 28, 23
(1981)) (internal citations omitted). The mere need for additional discovery or additional time to
prepare a defense does not constitute prejudice. Rutz v. Kellum, 144 A.D.2d 1017, 1018 (4th
Dep’t 1988), quoted in Jacobson v. McNeil Consumer & Specialty Pharmaceuticals, 68 A.D.3d
652, 654 (1st Dep’t 2009). Also, “[m]ere lateness is not a barrier to the amendment. It must be
lateness coupled with significant prejudice to the other side, the very elements of the laches
doctrine.” Edenwald Contracting Co. v. City of New York, 60 N.Y.2d 957, 959 (1983); see
Masterwear Corp. v. Bernard, 3 A.D.3d 305, 306 (1st Dep’t 2004) (same). Here, the SAC does
not result in any prejudice or surprise to the Moore Defendants.
First, the Moore Defendants can hardly claim either surprise or prejudice as both the repled unjust enrichment claim and the new allegation of fraud based on vicarious liability arise
from the same underlying fraudulent transactions that are the subject of the FAC, in which
unauthorized and off-market sales were executed with Triaxx CDOs to benefit the Moore
Defendants (and others) at the expense of AIG-FP. See Seidman v. Indus. Recycling Props., Inc.,
7
83 A.D.3d 1040, 1041 (2d Dep’t 2011) (“[T]he [opposing party] will not be prejudiced or
surprised by the amendment, which does not allege new or different transactions”); Day v.
Zwirn, No. 0122493/2001, 2005 WL 6165944, at *5 (Sup. Ct. N.Y. Cnty. July 20, 2005) (“[T]he
complaint will not prejudice defendants because the factual allegations are connected with the
same transactions alleged in the initial complaint.”).
Second, even the newly added factual allegations in the SAC cannot cause any surprise to
the Moore Defendants as they were already aware of all of the information and its relevance to
AIG-FP’s claims. See Stow v. City of New York, 122 A.D.2d 45, 46 (2d Dep’t 1986) (“plaintiff
cannot claim surprise as he had actual knowledge” of the subject-matter of defendant’s proposed
amendment); Norwood v. City of New York, 610 N.Y.S.2d 249, 251 (1st Dep’t 1994) (“[Plaintiff]
cannot claim surprise since the facts and circumstances with respect to [the defense in question]
were fully explored during discovery.”). For example, the Moore Defendants have long known
that AIG-FP views the Moore Defendants’ settlement with the SEC as highly relevant as it was
the subject of specific document requests by AIG-FP and was highlighted by AIG-FP in briefing
and oral argument to the First Department. Similarly, the Moore Defendants knew from AIGFP’s allegations in the FAC that ICP’s fraudulent conduct to benefit the Moore Defendants is
central to AIG-FP’s claims. It thus also cannot be surprising to the Moore Defendants that their
own documents showing that ICP was acting as the Moore Defendants’ lawful agent at the time
the fraud occurred would be highly relevant information for demonstrating the Moore
Defendants’ knowledge of, and responsibility for, ICP’s fraudulent conduct.4
4
The fact that these facts are being marshaled in support of a new legal theory, i.e., that
the Moore Defendants were vicariously liable for the conduct of ICP, does not create surprise or
prejudice. See McKinneys CPLR 3025, Commentary 3025:8 (“If the amendment sought does
not add any new facts to the case, but seeks only to add a new or additional ground or theory in
support of a claim or defense, the amendment is all the more likely to be allowed.”).
8
Third, the SAC will not hinder the Moore Defendants’ preparation of their defense. This
case is still in a relatively preliminary stage. Document discovery is still ongoing and fact
depositions have yet to begin. Moreover, the SAC will not require much, if any, new discovery.
Rather, because the SAC is based on the same events and transactions alleged in the prior
complaint, the documentary record is already largely complete. Even as to any new factual
allegations in the SAC—including the Moore Defendants’ settlement with the SEC and their
agency relationship with ICP—the existing document discovery requests and responses have
been broad enough to cover any documents relevant to those subjects. This case can therefore
proceed on its current anticipated schedule, including the imminent start of depositions, even if
leave to file the SAC is granted
B.
The Proposed SAC Is Not Patently Devoid Of Merit
In determining whether a proposed pleading is so devoid of merit to deny leave to amend,
the First Department explained that “plaintiff need not establish the merit of its proposed new
allegations.” MBIA Ins. Corp. v. Greystone & Co., Inc., 74 A.D.3d 499, 500 (1st Dep’t 2010)
(citing Lucido v Mancuso, 49 A.D.3d 220, 229 (2d Dep’t 2008)); see also Lowenthal v.
European Soaps, LLC, No. 602347/2009, 2010 WL 3384717, at *4 (Sup. Ct. N.Y. Co. Aug. 13,
2010) (“Cases involving CPLR 3025(b) that place a burden on the pleader to establish the merit
of the proposed amendment erroneously state the applicable standard.”) (citing MBIA, 74 A.D.3d
at 499). Rather, the plaintiffs’ only burden is “simply [to] show that the proffered amendment is
not palpably insufficient or clearly devoid of merit.” MBIA, 74 A.D. 3d at 500. Put differently,
“the proponent of the amendment must establish a prima facie cause of action by alleging facts
that are congruent with the legal theory in the amendment: that is, the amended complaint must
contain legally sufficient causes of action.” Noe v. Friedberg, No. 600884/08, 2009 WL 569276,
at *5 (Sup. Ct. N.Y. Cnty. Feb. 24, 2009) (Lowe, J.).
9
Under this standard, “the sufficiency of the proposed pleading is reviewed under the
standard applied to a motion to dismiss under CPLR 3211(a)(7) for ‘failure to state a cause of
action’” and “no evidentiary showing of merit is required.” Jeffer v. Jeffer, No. 7649/04, 2010
WL 3652981, at *4 (Sup. Ct. Kings Co. Sept. 21, 2010) (quoting Lucido, 49 A.D.3d at 225, 229).
But, a proposed amended pleading “is entitled to a ‘heavy presumption’ of validity,” Jacobson v.
Croman, No. 600886/07, 2008 WL 4641997, at *4 (Sup. Ct. N.Y. Cnty. Oct. 6, 2008) (Lowe, J.)
(quoting Otis Elevator Co. v. 1166 Avenue of Americas Condominium, 166 A.D.2d 307, 307 (1st
Dep’t 1990)), and “[t]he court’s purpose is not to resolve disputed factual issues, but simply to
ensure that the amended allegations establish a prima facie cause of action.” Digital Broadcast
Corp. v. Ladenburg, Thalmann & Co., Inc., 2008 WL 1990945, at *3 (Sup. Ct. N.Y. Cnty. April
21, 2008).
The new claims in the proposed SAC more than satisfy this standard. First, the SAC sets
forth a legal theory of the Moore Defendants’ vicarious liability for the fraudulent acts of ICP
based on the well-established doctrine that a principal shall be liable for the tortious action of its
agent. News America Marketing, Inc. v. Lepage Bakeries, Inc. 16 A.D.3d 146, 148 (1st Dep’t
2005) (“Generally, principals are liable for the acts of their agents performing within the scope of
their apparent authority.”); Gotham Boxing Inc. v. Finkel, 18 Misc.3d 1114(A), 2008 WL 104155
(N.Y. Sup. Jan. 8, 2008) (same); Adler v. Helman, 169 A.D.2d 925, 926 (3d Dep’t 1991)
(holding that a principal “is liable … for the fraudulent acts of her agent committed within the
scope of his authority.”). Here, the Moore Defendants’ contracts with ICP along with the
statements by the Moore Defendants and ICP make clear that they had a principal-agent
relationship and that, in executing off-market trades with the Triaxx CDOs for the benefit of
Moore Capital, ICP was acting in its agency capacity. The SAC therefore alleges facts sufficient
10
to state a claim for the Moore Defendants’ vicarious liability for ICP’s conduct under wellestablished principals of New York law.
Second, the re-pleaded claim for unjust enrichment is supported by a multitude of new
allegations based on evidence obtained in discovery establishing the “nexus” between what AIGFP lost and what the Moore Defendants improvidently received, which the Court found lacking
in the FAC. For example, while the Moore Defendants argued in support of this Court’s
dismissal of the originally plead unjust enrichment claim that there were no allegations
demonstrating the Moore Defendants’ knowledge of AIG-FP’s role in the Triaxx CDOs, the
SAC includes new allegations detailing the fact that AIG-FP’s role as the largest senior investor
in the Triaxx CDOs was specifically disclosed to the Moore Defendants by ICP in a November
2007 meeting. SAC ¶ 91. These allegations establish a prima facie claim for unjust enrichment.
Moreover, the SAC also includes highly pertinent allegations regarding the findings of an SEC
investigation into the conduct of the Moore Defendants and a $16 million payment to settle those
claims, including the fact that the SEC concluded that Moore Defendants were holding “illgotten proceeds” to which they “ha[d] no legitimate claim.” (Ex. C at SEC-ICP 24365; Proposed
SAC ¶ 105.)
The SEC’s conclusion that the Moore Defendants were holding “ill-gotten
proceeds” to which they had “no legitimate claim” is tantamount to a statement that they had
been unjustly enriched by the fraudulent conduct.
C.
The Additional Claim Against The Master Fund Is Not Prejudicial,
Surprising, Or Without Merit And Therefore Should Be Permitted
The SAC adds a claim of unjust enrichment against a new party, the Master Fund. The
addition is based upon AIG-FP’s receipt of information subsequent to the filing of the FAC that
SCIF, a current defendant, is actually a “feeder fund” to the Master Fund, meaning that all of
SCIF’s assets, including proceeds from transactions AIG-FP has alleged unjustly enriched SCIF,
11
have been transferred to and are held by the Master Fund. (Pickhardt Aff. at Ex. F, at 1-3.)
Thus, the SAC proposes to assert the unjust enrichment claim against the Master Fund instead of
SCIF. There is no prejudice to the Master Fund given that this litigation is still at a preliminary
stage, the documentary record on relevant issues is readily available to it and fact depositions
have not yet begun. The Master Fund no doubt has also been fully aware of these proceedings
given the pending unjust enrichment claim against SCIF.
II.
LEAVE SHOULD BE GRANTED TO FILE THE SAC PUBLICLY AND
WITHOUT REDACTIONS
Before filing this motion, AIG-FP provided a copy of the SAC to the Moore Defendants
and met and conferred with them over their purported confidentiality concerns. The Moore
Defendants requested numerous redactions pursuant to the protective order in this case. The
requested redactions generally into three categories: (1) information regarding Moore’s $16
million settlement with the SEC (¶¶ 1, 2, 10, 18, 19, 20, 21, 22, 53, 82, 87, 91, 99, 100, 103,
104, 105, 106); (2) information regarding Moore Capital’s investments in the Triaxx CDOs and
ICP-related entities (¶¶ 8, 9, 50, 54, 55, 56, 88, 89); and (3) virtually every allegation referring to
an internal Moore communication (¶¶ 20, 52, 84, 85, 86, 88, 89, 90, 91, 98). In compliance with
its obligations under the protective order triggered by the Moore Defendants’ request, AIG-FP
filed certain portions of the SAC, this motion and the supporting papers under seal. Nonetheless,
the SAC does not contain any information that is appropriately maintained under seal both
because it is not properly considered “Confidential” under the protective order and, in any event,
because it does not meet the standards for sealing court documents under New York law.
A.
The Allegations In The SAC Are Not “Confidential” Under The Protective
Order
The allegations in the SAC that the Moore Defendants seek to keep out of the public
record are not “Confidential” within the terms of the protective order, either because (a) they
12
have been previously disclosed, or (b) they do not meet the definition of “Confidential
Information” because they concern proprietary or commercially sensitive matters.
As an initial matter, much of the information is available from non-confidential sources
or has already been publicly disclosed. For example, the Moore Defendants’ settlement with the
SEC, which comprises the largest portion of the requested redactions, is not properly deemed
“Confidential” for several reasons. First, all of the documents upon which those allegations were
based, including the SEC’s formal notice letter to the Moore Defendants (referenced in ¶¶ 1, 18,
19, 20, 21, 53, 82, 87, 99, 104, 105), were produced to AIG-FP in this action without any
Confidentiality designation by ICP, which obtained the documents from the SEC.5 The Moore
Defendants cannot claim as Confidential information that was obtained from an alternate nonconfidential source.6 Second, the existence and amount of the Moore Defendants’ settlement
with the SEC has already been publicly disclosed by AIG-FP—with the consent of the Moore
Defendants—in connection with the Moore Defendants’ appeal to the First Department.7
In any event, the fact of the Moore Defendants’ settlement with the SEC cannot properly
be designated as “Confidential Information” by the Moore Defendants under the protective
order. At the meet and confer, the Moore Defendants attempted to justify such a designation on
the ground that information that is “detrimental to the conduct of [the Moore Defendants’]
5
See Ex. C at SEC-ICP 24364. Despite the fact that this information was produced to AIG-FP
without a “Confidential” designation, which is required for the limitations on disclosure under the express
terms of the protective order to apply, in an abundance of caution AIG-FP has still filed these documents
under seal.
6
See Ex. D at SEC-ICP 00024178; Ex. E at SEC-ICP 00024197-199.
7
Specifically, AIG-FP noted in its Response Brief that “the SEC and the Moore Defendants
entered into an undisclosed settlement agreement pursuant to which the Moore Defendants paid
approximately $15 million to the SEC,” and referenced Moore executive Richard Axilrod’s sworn
testimony that the Moore Defendants entered into that settlement to “make good” on “some transactions
that were maybe not appropriate.” See Brief for Plaintiff-Respondent, AIG-Financial Products Corp. v.
ICP Asset Management, LLC, et. al, No. 651117/11, at 15-16 (1st Dep’t Jan. 23, 2013).
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business” can be designated as “Confidential” under the protective order.8 That argument is
unpersuasive. The protective order protects against the disclosure of information that, because of
its commercially sensitive nature, can harm the designating party’s business; the order does not
protect all information that, because of its embarrassing nature, can be detrimental to that party’s
reputation or business. Even if the order did protect such information, the Moore Defendants’
argument still misses the point because the information they claim could be detrimental to their
business is already in the public record.
Regarding other information that the Moore Defendants seek to redact in the SAC, many
of the documents referenced in the allegations are again publicly available, notably appearing in
both AIG-FP’s sur-reply to the Moore Defendants’ motion to dismiss the FAC, and the joint
record for the Moore Defendants’ appeal to the First Department. These include, for example,
references to Moore Capital’s investments in SCIF (¶¶ 8, 50), the purported forward purchase
agreement (¶¶ 88, 89), emails regarding Seychelles’ trades (¶ 90), and emails between Thomas
Priore, ICP’s founder, and Richard Axilrod, a senior executive for the Moore Defendants (¶¶ 86,
91, 98). This information is thus no longer “Confidential,” if it ever was.9
The information that has not been previously disclosed still does not warrant being kept
under seal because it does not fall under the definition of “Confidential Information” in the
protective order.
The protective order defines “Confidential Information” as “Discovery
Material” that:
contains, reflects, or reveals trade secrets, proprietary business information,
competitively sensitive information, nonpublic personal information within the
meaning of the Gramm-Leach-Bliley Act . . . and documents or data that
constitute “consumer reports” . . . or other information the disclosure of which
8
See Sept. 17, 2012 Protective Order at ¶ 3(a).
9
See Sept. 17, 2012 Protective Order at ¶ 3(a) (“Confidential Information does not include
information that is available in the public domain ….”).
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would, in the good faith judgment of the party designating the material as
confidential, be detrimental to the conduct of that party’s business or the business
of any of that party’s customers or clients.
The undisclosed information that the Moore Defendants seek to keep from public disclosure do
not satisfy this standard. This information, which concerns Moore Capital’s investment in
Seychelles (¶¶ 9, 52), the performance of the Triaxx CDOs and Seychelles (¶¶ 55, 56) or
investments in AIG, Inc. that Moore Capital made in 2007 (¶¶ 20, 54), reveals no trade secrets,
no trading models, no competitively sensitive or nonpublic personal information, or any
information that could be harmful to the Moore Defendants’ businesses. Furthermore, much of
this information references trading positions which were terminated five years ago and have no
continuing relevance to the Moore Defendants’ business today.
B.
The Allegations In The SAC Do Not Meet the Standard For Sealing Under
New York Law
Separate and apart from the Protective Order, the materials that the Moore Defendants
seeks to shield from disclosure do not meet the standard for sealing papers in New York, which
requires “good cause.” New York courts are reluctant to allow the sealing of court records, and
information that is merely embarrassing, as here, does not warrant the sealing of court records.
See Mosallem v. Berenson, 76 A.D.3d 345, 350-51 (1st Dep’t 2010). The party seeking to seal
court records has the burden to demonstrate compelling circumstances warranting such action.
Id. at 346.
Indeed, New York courts have long recognized that its proceedings should be “open to
the public in order to ensure that they are conducted efficiently, honestly, and fairly.” Id. at 348.
Section 216.1(a) of the Uniform Rules for Trial Courts states:
Except where otherwise provided by statute or rule, a court shall not enter an
order in any action or proceeding sealing the court records, whether in whole or in
part, except upon a written finding of good cause, which shall specify the grounds
15
thereof. In determining whether good cause has been shown, the court shall
consider the interests of the public as well as of the parties.
22 NYCRR 216.1(a). In applying that “good cause” standard, courts have been hesitant to allow
the sealing of court records and has authorized sealing only in strictly limited circumstances. See
Gryphon Dom. VI, LLC, v. APP Intern. Finance Co., B.V., 28 A.D.3d 322, 324-25 (1st Dep’t
2006) (noting such exceptions include protecting the confidentiality of trade secrets or preserving
the privacy of an infant). That one party has designated materials as “confidential” or “private”
“is not controlling on the court’s determination whether there is good cause to seal the record.”
Mosallem, 76 A.D.3d at 350 (reversing motion to seal exhibits arising out of a cover-up of bidrigging, kickbacks, and other corrupt practices at advertising agency, even if they were obtained
improperly) (quoting Eusini v. Pioneer Elecs. (USA), Inc., 29 A.D.3d 623, 626 (2nd Dep’t
2006)).
The information referenced in the SAC does not meet the “good cause” standard under
New York law. Much of that information—such as the SEC settlement—has already been
disclosed and is part of the public record.
The rest, which includes primarily internal
communications—do not concern trade secrets, models proprietary to the Moore Defendants, or
personal information.
Put differently, its disclosure would not unjustly benefit the Moore
Defendants’ competitors; it would only embarrass the Moore Defendants among their peers, a
reason which falls well short of being “good cause” for continued sealing. See Mosallem, 76
A.D.3d at 351 (“[N]either the potential for embarrassment or damage to reputation, nor the
general desire for privacy, constitutes good cause to seal court records”) (denying defendants’
motion to seal exhibits); see also Mancheski v. Gabelli Group Capital Partners, 39 A.D.3d 499,
502 (2nd Dep’t 2007) (“A finding of ‘good cause’ presupposes that public access to the
documents at issue will likely result in harm to a compelling interest of the movant [to seal]”).
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Finally, public policy dictates that this proceeding remain open to the public, for “there is
a broad presumption that the public is entitled to access to judicial proceedings and court
records.” Mosallem, 76 A.D.3d at 348 (reversing decision to seal so that exhibits remained
available for public inspection); Liapakis v. Sullivan, 290 A.D.2d 393, 394 (1st Dep’t 2002)
(prejudice to defendants’ reputations caused by plaintiff’s allegations of unethical and criminal
conduct did not outweigh public interest in transparency). The public’s interest is particularly
acute here as much of the redacted information concerns a settlement by the Moore Defendants
with the SEC following its investigation into claims that the Moore Defendants had committed
fraud under the federal securities laws. It can hardly be gainsaid that the public has an interest in
knowing that a United States company has entered into a $16 million settlement with the
government agency entrusted with the enforcement of federal securities laws. Accordingly, the
Moore Defendants cannot meet their burden of showing compelling circumstances to justify
keeping the SAC under seal.
CONCLUSION
The Court should grant AIG-FP’s motion.
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