Professional Documents
Culture Documents
1
TABLE OF CONTENTS
Pages
ARGUMENT ...................................................................................................................................9
CONCLUSION ..............................................................................................................................25
i
TABLE OF AUTHORITIES
Cases
511 West 232nd Owners Corp. v. Jennifer Realty Corp., 98 N.Y.2d 144, (2002)............................9
Abrams v. Donati, 66 N.Y.2d 951, 498 N.Y.S.2d 782, 489 N.E.2d 751 (1985) ..........................10
AHA Sales, Inc. v. Creative Bath Products, Inc., 58 A.D.3d 6, 867 N.Y.S.2d 169
(N.Y. App. 2008) .....................................................................................................................16
Am. Tissue, Inc. v. Donaldson, Lufkin & Jenrette Sec. Corp., 351 F.Supp.2d 79
(S.D.N.Y. 2004) .......................................................................................................................15
Amfesco Industries, Inc. v. Greenblatt, 172 A.D.2d 261, 568 N.Y.S.2d 593 (1st Dept.
1991) ........................................................................................................................................16
Bd. of Educ. of Cold Spring Harbor Cent. Sch. Dist. v. Rettaliata, 78 N.Y.2d 128, 572
N.Y.S.2d 885 (1991) ................................................................................................................17
Board of Managers of the Arches at Cobble Hall Condominium v. Hicks & Warren,
LLC, 14 Misc. 1234 (2007) .....................................................................................................22
Bouhayer for Benefit of Gregovar Food Specialties, Inc. v. Georgalis, 169 Misc.2d
779 (1996) ................................................................................................................................16
Bridgestone/Firestone, Inc. v. Recovery Credit Serv., Inc., 98 F.3d 13 (2d Cir. 1996).................11
Bullmore v. Banc of America Secs. LLC, 485 F.Supp.2d 464 (S.D.N.Y. 2007) .................... Passim
Bullmore v. Ernst & Young Cayman Islands, 45 A.D.3d 461 (1st Dept. 2007). ................. Passim
Caboara, et al., v. Babylon Cove Development, LLC, 54 A.D3d 79 (2d Dept. 2008) ......................
Ceribelli v. Elshanayan, 990 F.2d 62 (2d Cir. 1993) ....................................................................10
Continental Ins. Co. v. Mercadante, 22 A.D. 181 (1st Dept. 1927) ...............................................11
Coronado Dev. Corp. v. Millikin, 175 Misc. 1, 22 N.Y.S.2d 670 (N.Y. Sup. Ct. N.Y.
County 1940) .................................................................................................................................11
Fraternity Fund, Ltd. v. Beacon Hill Asset Management LLC, et al., 376 F.Supp.2d
385 (S.D.N.Y. 2005) ....................................................................................................... Passim
Guggenheimer v. Ginzburg, 43 N.Y.2d 268 (1977) .......................................................................9
HF Mgmt. Servs. LLC v. Pistone, 34 A.D.3d 82, 818 N.Y.S.2d 40 (1st Dept. 2006) ..................15
Hochman v. LaRea, 789 N.Y.S.2d 300 (2d Dept. 2005) ...............................................................17
Hotaling v. A.B. Leach & Co., 247 N.Y. 84 (1928) ......................................................................11
Kimmell v. Schaefer, 89 N.Y.2d 257 (1996) ..................................................................................20
Kopel v. Bandwidth Tech. Corp., 56 A.D.3d 320, 868 N.Y.S.2d 16 (1st Dept. 2008) ..................15
Kramer v. W10Z/515 Real Estate Ltd. Partnership, 44 A.D.3d 457, 844 N.Y.S.2d 18
(1st Dept. 2007). ................................................................................................................23,24
Mandelblatt v. Devon Stores, 132 A.D.2d 162, 521 N.Y.S.2d 672 (1987) ..................................15
Oswego Laborers’ Local 214 Pension Fund v. Marise Midland Bank, 85 N.Y.S.2d
20, 25 (1995) ......................................................................................................................21,22
Pension Committee of University of Montreal Pension Plan v. Banc of America Securities,
446 F.Supp.2d 163 (S.D.N.Y. 2006).................................................................................18, 19
Primavera Familienstifung v. Askin, 130 F.Supp.2d 450 (S.D.N.Y. 2001) ......................... Passim
Rapoport v. Schneider, 29 N.Y.2d 396 (1972) ..............................................................................16
Rasmussen v. A.C.T. Envtl. Servs., 292 A.D.2d 710, 739 N.Y.S.2d 200 (3d Dept.
2002) ........................................................................................................................................15
Reuben H. Donnelley Corp. v. Mark I Mktg, Corp., 893 F.Supp. 285 (S.D.N.Y. 1995) ...............14
Richbell Information Servs v. Jupiter Partners, L.P., 309 A.D.2d 288, 765 N.Y.S.2d
ii
575 (1st Dept. 2003). ...........................................................................................................9, 11
Rosicki v. Cochems, __ N.Y.S.2d __, 2009 WL 323486 (N.Y.A.D. 2d Dept. Feb. 10,
2009). .......................................................................................................................................20
Scalp & Blade, Inc. v. Advest, Inc., 218 A.D.2d 882 (4th Dept. 2001) ............................15, 21, 24
State of New York v. Samaritan Asset Management Services, Inc., 2008 WL 4745487
(Oct. 29, 2008). ......................................................................................................................22
Stern Bros. v. New York Edison Co., 251 A.D. 379, 296 N.Y.S. 857 (1st Dept. 1937) ....................
Stutman v. Chemical Bank, 95 N.Y.S.2d 24 (2000) ......................................................................21
Tradewinds Fin. Corp. v. Refco Sec., Inc., 5 A.D.3d 229, 773 N.Y.S.2d 395 (1st Dept.
2004) ........................................................................................................................................15
United States v. Skilling, No. 06-20885, 2009 WL 22879 (5th Cir. Jan. 6, 2009). .......................12
Whitehall Tenants Corp. v. Estate of Olnick, 213 A.D.2d 200 (1st Dept. 1995) ...........................23
iii
Plaintiff, New York University (“NYU”) respectfully submits this Memorandum of Law
(“Gabriel”) Rule 3211(a) (1) and (7) motion to dismiss the First Amended Complaint (“Cmplt”)
filed on January 22, 2009. NYU is simultaneously filing a separate memorandum in opposition
to the motion to dismiss of Ariel Fund Limited (“Ariel” or the “Fund”), which is incorporated
herein.
PRELIMINARY STATEMENT
NYU, an investor in Ariel, states valid direct and derivative claims arising under New
York common law and New York statutory law against the investment manager, Merkin, who
controls Ariel, Gabriel, the corporation of which Merkin is 100% owner, BDO, the accounting
firm that purportedly audited Ariel’s records, and Fortis Bank (Cayman) Ltd., Fortis Prime
Solutions (Cayman) Ltd., Fortis Bank, and other Fortis Bank entities. As a result of Merkin’s
misconduct in turning over more than $300 million of Ariel assets (and in excess of $2 billion
overall of affiliated funds’ assets) to Bernard Madoff (“Madoff”), despite overwhelming “red
flags” that Madoff’s trading results were implausible and likely fraudulent, and other
wrongdoing in connection with the management and disclosures to investors about Ariel, NYU
seeks legal and equitable relief, including an accounting, an order restraining the continued
dissipation of Ariel Fund assets and the appointment of a receiver pursuant to §6401(a).
created by Merkin to serve as the depository for funds Merkin raised and purportedly managed
from his New York City offices.1 For the first years of Ariel’s existence, Merkin held Ariel’s
1
As discovery has shown, in reality, although Merkin charged investors a hefty annual “management fee” for his
services of 1% of the Fund balance and a 20% annual “incentive” fee on the Fund’s earnings and increase in value,
1
“founders shares,” the only shares with voting rights.2 At its inception, and for several years,
including through January 1994 when NYU made its first investments, the sole Ariel director
was the Company’s financial institution affiliate, MeesPierson Management (Cayman) Limited
(“MeesPierson”), 1993 Prospectus at p. 13. Some time thereafter, MeesPierson was replaced by
two individual directors, Don Seymour and Aldo Ghisletta. Cmplt, ¶¶19, 21. Ariel never had
formally appointed corporate officers, and Seymour and Ghisletta “delegated” their executive
responsibilities to the “Investment Advisor.” Id. According to the series of Ariel “prospectuses,”
the private placement memoranda furnished to its prospective investors, which were incorporated
by reference into the subscription contracts of purchasing investors, Ariel was required to use
Merkin’s company, Gabriel, as its “Investment Advisor”; indeed, in the case of Merkin’s death
or incapacity, the Ariel Fund would immediately terminate and all investors’ stock would be
redeemed. To persuade potential investors to purchase participating shares in Ariel, each of the
while remaining silent about the true “managers” exercising the investment discretion over
As discovery has shown, this was hardly surprising because at the time that Merkin was
peddling Ariel shares to NYU and others (in late 1993), Teicher had already been convicted of
several counts of federal securities fraud for, inter alia, using insider information in trading puts
and calls in registered securities, and was about to begin his incarceration in a federal jail in New
Jersey, from which he would continue to manage Ariel assets through phone calls made to his
Merkin secretly handed over the “management” of the Funds first to Victor Teicher (“Teicher”) and Teicher’s
employees (who shared offices with Merkin), and to Madoff, and later to Steven Feinberg of Cerberus. Teicher,
Madoff and Feinberg managed Ariel’s assets from their offices in New York City.
2
See the Prospectus dated November 30, 1993 (“1993 Prospectus”) included within Exhibit 1 to the Cmplt, at p. 14.
3
See the 1993 Prospectus at p. 11, the February 1996 Prospectus at pp. 14-15 and the October 2001 Prospectus at p.
16. The February 1996 Prospectus and October 2001 Prospectus are attached as exhibits to the Cmplt.
2
employees working at Merkin’s Park Avenue address. Moreover, by this time, Teicher himself
had warned Merkin that the trading results Madoff reported were not possible.4
The 1993 Prospectus permitted Merkin to “consult” with other professionals but provided
that he would retain “overall responsibility for funds invested with other persons.” Id. at p. 13.
The 1996 and 2001 Prospectuses explicitly permitted Merkin to use “Independent Money
Managers,” but required him to “exercise reasonable care in selecting such independent money
managers” and to “monitor the results of these money managers.”5 The prospectuses, which
would ultimately become the terms of the contracts with investors, explicitly recognized that
Ariel investors could directly sue the Investment Advisor (i.e., Gabriel and Merkin), but sought
to “exculpate” them for their acts and omissions, “unless such act or omission constitutes gross
negligence, fraud or willful misconduct,” see, e.g., the 1993 Prospectus at p. 9. The prospectuses
explicitly referred to Investment Advisory Agreements between Ariel and Gabriel. See 1993
Prospectus at p. 11. These prospectuses form the basis of NYU’s “direct” contract claims. The
Advisory Agreements as between Ariel and Gabriel, form the basis of NYU’s derivative contract
claims.
In 1994, following NYU’s first investment in Ariel, like all other investors in Ariel, NYU
began to receive quarterly reports authored and signed by Merkin which purported to inform
NYU of the current value of NYU’s interest in Ariel, the Fund’s earnings, its summary balance
sheet, investment categories, investment strategy and material events occurring over the quarter.
4
The deposition transcripts of Merkin’s and Teicher’s testimony are being filed under seal as Appendix 1 and 2 to
Plaintiff’s declaration. The facts relating to Teicher’s role and conviction are discussed at length in the depositions
of Merkin Tr. at pp. 25-71 and Teicher Tr. at pp. 121-22, 131-42, 174-79. The charges against Teicher, and the
chronology of his crimes, trial and conviction are described in Merkin Ex. 12 at pp. 199-201. Merkin admitted
contemporaneous knowledge of these facts during his testimony, Merkin Tr. at 202. Teicher’s testimony that he
continued to manage Ariel assets pursuant to telephone calls made from the New Jersey jail, appears at Teicher Tr.
121-22.
5
See the 1996 Prospectus at p. 12, 2001 Prospectus at p. 13.
3
See, e.g., Appendix C to Plaintiff’s Declaration. Each of these quarterly reports was false when
issued, in that the assets turned over to Madoff were stolen, but the value of these assets were
included in calculating NYU’s interest and the Fund’s balance sheet. The reported earnings on
these assets were similarly illusory and falsely reported. See Merkin Tr. at 302. Although each
quarterly report appeared to include an exhaustive description of the quarter’s events, none of the
reports mentioned Madoff or the use of the highly suspect, “split-strike conversion strategy.”
Merkin Tr. at 173. Every one of these reports were written to falsely imply that Merkin himself
was actively managing Ariel assets, and every quarterly report also omitted any reference
Following the example of suits brought in federal and New York courts to address other
similar frauds, NYU has sued, in its individual capacity, for violations of the terms of its own
contracts, i.e., the prospectuses that, inter alia, required Gabriel (and Merkin) to engage in
meaningful due diligence and professionally monitor Madoff’s activities and to calculate the
“management” and “incentive” fees based upon real, not illusory, assets and earnings; and NYU
has sued derivatively for Ariel’s own relationship with Merkin, in order to indirectly benefit all
Ariel investors. The contracts incorporating the prospectuses gave rise to confidential
investment advisory relationships between NYU and Merkin (much like a retainer contract
between an attorney and client), and NYU has sued for Merkin’s breach of his fiduciary duties
owed to NYU, as its investment advisor which arose after NYU made investments in Ariel. See,
e.g., Fraternity Fund Ltd. v. Beacon Hill Asset Mgmt., LLC, 376 F.Supp.2d 385, 407-08
(S.D.N.Y. 2005), and also Primavera Familienstifung v. Askin, 130 F.Supp.2d 450, 491
(S.D.N.Y. 2001)(recognizing that private placement memoranda may serve as the “contracts”
establishing the relationship on which corporate investors may sue). The false and misleading
4
statements and omissions, including with respect to the false statements of the value of Ariel
assets contained in the quarterly reports, and which induced NYU to retain its investments in
Ariel, also serve as the basis for NYU’s fraud and §349 deceptive practices claims. See, e.g.,
NYU has sued derivatively, under New York law, on behalf of Ariel as a nominal
defendant to recover on its behalf (i.e., indirectly on behalf of all Ariel current investors) for the
diminution of the value of Ariel shares, and to preserve the remainder of the Ariel res, in trust,
for Gabriel and Merkin’s violation of their investment advisory agreement with Ariel, breach of
(2) that the “Internal Affairs doctrine” requires this Court to apply Cayman Islands law
rather than New York law, and that Cayman Islands law does not recognize NYU’s
derivative claims;
(3) that NYU cannot simultaneously plead derivative claims and individual claims; and
(4) that the Martin Act pre-empts virtually all of NYU’s claims.
Defendants also contend that NYU has failed to satisfy the pleading requirements for one
or more elements of the various common law and statutory claims alleged.
All of Defendants’ arguments lack merit. New York cases have repeatedly recognized
that a contract may create a relationship of trust, including one between an investor and its
investment advisor, which gives rise to fiduciary obligations and causes of action for the
violations of those obligations. Fiduciary obligations may also arise without a formal written
agreement. New York does not mechanically apply the “internal affairs doctrine,” and here the
5
overwhelming cluster of contacts are in New York, and strong public policy concerns dictate that
New York apply its own laws to remedy the vast injuries to its citizens that occurred here.
Requiring NYU to defer to Ariel’s directors who are nothing more than figureheads who have
delegated their responsibilities to Merkin, is not countenanced under the derivative claim
provisions of either New York or Cayman Islands law (which applies English common law.)
There is no substantive conflict between NYU’s individual and derivative claims, because NYU
does not seek to recover any more than its allocable share of Ariel assets and seeks relief that, as
a practical matter, will benefit all Ariel investors. The Martin Act, a statute passed to enhance
not remove the protections for investors that otherwise already existed under state law, does not
“pre-empt” NYU’s claims, which have all been adequately pled, as is more fully described
below. Thus, each of the claims alleged in the Complaint should be sustained.
STATEMENT OF FACTS
In 1993 Merkin approached NYU to invest in Ariel Fund, a Cayman Islands open-ended
investment company that Merkin had created in 1988, to be used for United States tax-exempt
investors and foreign investors. In January 1994, NYU signed a subscription agreement, that
incorporated the 1993 Prospectus, and invested $20,000,000 (half from its Main Endowment
fund and half from a separate endowment fund of its Institute of Fine Arts). See Cmplt, Exhibit
1, at ¶14. The terms of the 1993 Prospectus created continuing rights and obligations as
6
Fund. (p. 5)
Under the Investment Advisory Agreement, the Investment Advisor has full
discretionary authority to invest the assets of the Fund. The Fund pays the
Investment Advisor, on a series by series basis, an investment advisory fee as
of the last business day of each fiscal year (in the case of Shares held on or
redeemed as of the end of such year) or (i) 1% per annum of the net asset
value attributable to each such series of shares as of the first day of the fiscal
year, or the date issued for shares issued during any year, (adjusted per annum
for any partial years) plus (ii) 20% of the increase, if any, in the net asset
value attributable to each series of shares as of the last business day of the
fiscal year from either the net asset value attributable to each such series as of
the first day of the fiscal year or, in the case of series of such Participating
Shares purchased during the fiscal year, the aggregate subscription price paid
for such series. (p. 11).
(Emphasis added)
On April 1, 1997, NYU invested another $10 million and signed another subscription
agreement, this time incorporating the February 1996 Prospectus. Cmplt ¶17, Cmplt Exhibit 2.
In December 2001, NYU acceded to Merkin’s request to amend the past “prospectuses,” in
accordance with the terms of an October 2001 Prospectus. Cmplt. ¶¶19-20, Exhibit 3. None of
these Prospectuses disclosed the facts that, for most of this 1993-2001 period, Victor Teicher, a
convicted felon, and his staff were the persons actively managing the majority of the Ariel assets,
and that hundreds of millions of dollars of Ariel’s funds had also been delivered for management
to Madoff -- even though Teicher had warned Merkin that Madoff’s returns were not possible,
7
and other “red flags” dictated that Madoff could not be trusted to manage these funds. Cmplt
¶¶26-32.
As discovery has shown, Merkin was paid more than $200 million for his purported
management of Ariel (and affiliated Funds), and as of December 31, 2007, Ariel recognized an
additional liability to Gabriel of $323 million as deferred “incentive fees” due to Merkin for his
purported efforts in increasing the value of NYU’s and other Ariel investors’ interests. See the
2007 annual financial statements, Appendix D at NYU00672. From 2004 through October 2008,
Merkin authored and signed quarterly reports sent to NYU and other investors to induce NYU
and the investors to retain their interests in Ariel. Each of these reports was false and misleading
in that it created the false impression that Merkin was managing NYU’s investment in Ariel
while concealing that, in fact, Ariel’s assets had instead been turned over to Teicher and Madoff
to manage. The quarterly statements also falsely reported the values of NYU’s investment, the
values of the assets on Ariel’s balance sheet and Ariel’s quarterly earnings, as a result of
In October 2008 at an otherwise routine meeting amongst Mr. Maertens and Tina Surh
from NYU’s investment office, and Merkin at Merkin’s Park Avenue office, Merkin mentioned
the name Bernard Madoff as a possible person to place some investments. As described in the
Maertens affidavit, filed in connection with NYU’s original Order to Show Case, Merkin
suggested to NYU that it consider investing some funds directly with Bernard Madoff. NYU
NYU, since Merkin represented that Madoff operated without oversight over his investment
activity. Merkin responded to that clear statement from his client, NYU, that under no
circumstances could NYU invest with a fund that lacked oversight, with -- silence. He failed to
8
reveal to NYU that in fact NYU was already heavily invested with Madoff, indirectly, through
its earlier investment in Ariel. In December 2008, NYU learned that Ariel assets had been
delivered to Madoff, when Merkin advised that they had all been “victims” of Madoff, and that
ARGUMENT
Rule 3026, CPLR requires that: “[p]leadings must be liberally construed.” Therefore, the
law is settled that in considering a motion to dismiss for failure to state a cause of action; the sole
criterion is whether “from [the complaint’s] four corners factual allegations are discerned which
taken together manifest any cause of action cognizable at law.” Guggenheimer v. Ginzburg, 43
N.Y.2d 268, 275 (1977) The trial court must construe the complaint liberally, and accept as true
the facts alleged in the complaint and any submissions in opposition to the dismissal motion,
“and accord Plaintiffs the benefit of every possible foreseeable inference.” 511 West 232nd
Owners Corp. v. Jennifer Realty Corp., 98 N.Y.2d 144, 151-52, (2002); see also Richbell
Information Servs v. Jupiter Partners, L.P., 309 A.D.2d 288, 765 N.Y.S.2d 575 (1st Dept. 2003).
II. Plaintiff Has Standing to Assert the Common Law Claims for Breach of Contract,
Breach of Fiduciary Duty, Negligence, Gross Negligence, Recklessness and Negligent
Misrepresentation
Defendants assert that NYU does not have standing to sue individually, rather than
derivatively, to assert common law claims of breach of contract, negligence and breach of
fiduciary duty against Merkin and/or Gabriel because NYU did not suffer an injury separate and
distinct from the injury suffered by Ariel. The series of cases arising from the collapse of funds
managed by Beacon Hill Management, is instructive on this point. In Fraternity Fund v. Beacon
Hill Asset Management, 376 F.Supp.2d 385 (S.D.N.Y. 2005) (Fraternity Fund I), plaintiffs-
9
investors in three feeder funds (one of which, like Ariel, was a Cayman Islands company)
brought claims under federal securities and common law against the investment managing
company, Beacon Hill, and its directors. The defendants made the identical argument in
Fraternity Fund I as being posed by Merkin and Ariel. The district court in Fraternity Fund I,
applying New York substantive law, specifically held that: “a shareholder may sue individually
‘when the wrongdoer has breached a duty owed to the shareholder independent of any duty
owing to the corporation wronged.’” Id. at 409, quoting Abrams v. Donati, 66 N.Y.2d 951, 953,
498 N.Y.S.2d 782, 489 N.E.2d 751 (1985). The court found that the harm that the Fraternity
Fund investors complained of, i.e., their reliance upon the misstatements contained in the
investor statements overstating the net asset values, the “NAVs” of the Fund, sent by the
investment advisor, was a wrong committed on the individual investors separate and apart from
Indeed, in a later case in the Fraternity Fund series, Bullmore v. Banc of America Secs.
LLC, 485 F.Supp.2d 464 (S.D.N.Y. 2007), a case brought by the fund’s liquidator to recover the
improperly paid management fees and suing for the decline in the portfolio value, defendants
argued that the Fund’s liquidator lacked standing, because “it was the investors, not the fund who
suffered losses when the Master Fund portfolio value dropped.” Id. at 469. The court rejected
this standing argument also, holding that, “[u]nder New York law, one may be liable both to a
corporation and its shareholders if he or she violates independent duties owed to each. Id., citing
Ceribelli v. Elshanayan, 990 F.2d 62, 63-64 (2d Cir. 1993) (citing cases). See also Primavera,
130 F.Supp at 491-92. There court in Primavera acknowledged that, depending upon the
parties’ intent, a corporate investor might have contract claims pursuant to private placement
memoranda, as well as common law fraud claims which, “can arise out of a contractual
10
relationship when the “‘fraudulent misrepresentation [is] collateral or extraneous to the
contract,’” citing Bridgestone/Firestone, Inc. v. Recovery Credit Serv., Inc., 98 F.3d 13, 20 (2d
Cir. 1996).
The heart of NYU’s claims against Merkin/Gabriel is that NYU’s retention of its
investment in Ariel was based upon its reliance on false and misleading quarterly reports and
statements of the growth in the NAV of the Fund, and other facts purporting to show that Merkin
was properly managing the Ariel Fund assets. New York courts have long recognized investors’
rights to sue for false statements inducing them to “retain” their investments. See, e.g.,
Continental Ins. Co. v. Mercadante, 22 A.D. 181 (1st Dept. 1927); Hotaling v. A.B. Leach & Co.,
247 N.Y. 84, 93 (1928) (“As long as the fraud continued to operate and to induce the continued
holding of the bond, all loss flowing naturally from that fraud may be regarded as proximate.”);
Stern Bros. v. New York Edison Co., 251 A.D. 379, 381, 296 N.Y.S. 857, 859 (1st Dept. 1937)
(“Fraud which induces non-action where action would otherwise have been taken is as culpable
as fraud which induces action which would otherwise have been withheld.”) See also Coronado
Dev. Corp. v. Millikin, 175 Misc. 1, 5, 22 N.Y.S.2d 670, 675 (N.Y. Sup. Ct. N.Y. County 1940).
III. The Amended Complaint States a Valid Cause of Action for Breach of Contract
The Amended Complaint alleges, and the documents show, that in January 1994, NYU
signed a subscription agreement that incorporated by reference the 1993 Prospectus. The
Defendants do not dispute that the Subscription Agreement constitutes a binding contract
between Ariel and NYU, but contend, in essence, that since there is no signature block for
Prospectus. New York law does not require there be a signed piece of paper -- or even a writing
-- to establish a binding contract. See Richbell Information Services v. Jupiter Partners, 309
11
A.D.2d 288, 765 N.Y.S.2d 575 (1st Dept. 2003). Even though the subscription agreement is
signed only by Ariel and NYU, the Prospectus fully sets out the obligations amongst Ariel, NYU
and Merkin, the investment advisor. Indeed, the 1993 Prospectus even recognizes, at page 9, that
the investors have a right of action against the Investment Advisor, and attempts to “exculpate”
it, by providing for indemnity unless the wrongful act or omission “constitutes gross negligence,
fraud or willful misconduct.” The prospectus further provides that, “As a result, investors in the
Fund may be more limited in their rights of action against the Investment Advisor than would
Under the terms of the contract entered into in 1993 amongst the investors, Ariel, and
1) the duty to use due diligence and to act reasonably when making investments on behalf
By handing over a substantial portion of the Ariel funds to Madoff, when Merkin either
knew or was “deliberately ignorant” of the fact that Madoff’s investment results were
implausible and likely fraudulent, Merkin breached his contract with investors as well as
engaging in gross negligence, fraud or willful misconduct. See, e.g., United States v. Skilling,
No. 06-20885, 2009 WL 22879, at *15 (5th Cir. Jan. 6, 2009). By taking or claiming
compensation based on illusory profits, Merkin falsely breached the contract terms regarding his
compensation. Therefore, an action lies for breach of the 1993 contract. These same provisions
In April 1997 when NYU entered into another $10 million subscription agreement for
12
Ariel, it again signed another subscription agreement that incorporated the terms of the 1996
Prospectus. The 1996 Prospectus, in addition to the terms set out in the 1993 contract, added a
new provision regarding “Other Investment Entities.” This provision required that the
Investment Advisor, “will exercise reasonable care in selecting such independent money
managers and … will monitor the results of those [other] money managers.” Cmplt Exh. 2 at p.
12. Clearly, in light of the “red flags” alleged in this case, the selection, and certainly the
Defendants argue that Plaintiff has failed to plead a direct or a derivative claim for breach
of fiduciary duty against Gabriel and Merkin because Plaintiff did not stand in a fiduciary
relationship with Defendants. See Defs. Gabriel and Merkin Motion to Dismiss at 11. In
arguing that no fiduciary relationship existed between NYU and Gabriel and Merkin, Defendants
attempt to claim that because Merkin and Gabriel had no written contractual relationship with
Plaintiff and were not “parties” to the subscription agreements, they therefore owed NYU no
duty. Id. at 11-12. First, as NYU has already shown, NYU did have contract rights from which
a confidential relationship arose with Gabriel and Merkin. Moreover, contrary to the cases
Defendants cite, New York courts routinely hold that there is a fiduciary relationship between an
investor and its investment advisor when the advisor exercises discretion over his client’s
investments.
For example, in Bullmore v. Ernst & Young Cayman Islands, 45 A.D.3d 461 (1st Dept.
2007), the Appellate Division, First Department, held that a fiduciary duty can be created
notwithstanding whether a contractual duty exists. Specifically, the court held that conduct
13
amounting to a breach of a contractual obligation may also constitute the breach of a duty arising
out of the relationship created by the contract which is nonetheless independent of such
contract.” Id. at 463. The facts of Bullmore involved claims, including breach of fiduciary
duties by a manager of a fund which held the assets, managed and valued securities and had
nearly complete discretion in making transactions on the fund’s behalf. Id. at 462. Thus, in
finding that a fiduciary duty existed as to the manager of the fund, the court in Bullmore held
that:
Id. at 463.
Likewise, in Fraternity Fund, Ltd., et al. v. Beacon Hill Asset Management LLC, et al.,
376 F.Supp.2d 385 (S.D.N.Y. 2005), the court noted that a fiduciary relationship can exist based
upon the actions of an investment advisor who had been alleged to have failed to monitor the
performance of the fund and prevent defendants’ fraudulent conduct. Id. at 413. The defendants
argued that the plaintiff’s fiduciary duty claim was inappropriate because it was duplicative of
the plaintiff’s contract claim. Id. In rejecting the defendants’ argument, the court held that
fiduciary duty claims could exist independent of the contract claim. Specifically in so holding
the court stated that “a fiduciary relationship arises when one has reposed trust or confidence in
the integrity or fidelity on another who thereby gains a resulting superiority of influence over the
first, or when one assumes control and responsibility over another.” Id. at 414, citing Reuben H.
Donnelley Corp. v. Mark I Mktg, Corp., 893 F.Supp. 285, 289 (S.D.N.Y. 1995). The court
further noted that the plaintiff alleged that he had justifiably relied upon the trust and confidence
of the investment advisor’s specific knowledge and his representations that he was to monitor the
14
status and performance of the fund. Id. at 414. Thus, like the facts here, the court in Fraternity
Fund, Ltd. held that a fiduciary relationship existed and denied the defendants’ motion to dismiss
on that basis.6
Clearly, Merkin’s acts demonstrate that he was acting in fiduciary capacity by providing
investment advice, and managing the assets of Ariel to which he had complete and unfettered
discretion over the assets. Merkin made representations to investors, including NYU, about
Ariel, including drafting and executing the quarterly statements on Ariel’s performance and by
holding meetings with NYU representatives and acting in the capacity as the Investment
Advisor. Thus, although Defendants claim that Gabriel and not Merkin was the Investment
Advisor, Merkin as the sole shareholder and General Partner of Gabriel was, in fact, in a
V. Plaintiff Has Stated a Claim Under New York’s Business Corporation Law §720
BCL §720 states: “[a]n action may be brought against one or more directors or officers of
a corporation for …. neglect of, or failure to perform, or other violation of his duties in the
management and disposition of corporate assets committed to his charge. BCL §720(a)(1)(A)-
6
Fraternity Fund, Ltd., relied upon a long line of cases which recognized the existence of fiduciary relationships
between clients and their investment advisors. Rasmussen v. A.C.T. Envtl. Servs., 292 A.D.2d 710, 712, 739
N.Y.S.2d 200 (3d Dept. 2002), citing Scalp & Blade, Inc. v. Advest, Inc., 218 A.D.2d 882, 883 (4th Dept. 2001) (an
investment advisor holds a position of trust and owes a fiduciary duty to its clients); Mandelblatt v. Devon Stores,
132 A.D.2d 162, 168, 521 N.Y.S.2d 672 (1987)(fiduciary relationship arises where one person is under a duty to act
or give advice for the benefit of another upon matters within the scope of the relationship); Am. Tissue, Inc. v.
Donaldson, Lufkin & Jenrette Sec. Corp., 351 F.Supp.2d 79, 102 (S.D.N.Y. 2004).
7
Defendants’ citations are otherwise inapplicable to the facts on this case. First, HF Mgmt. Servs. LLC v. Pistone,
34 A.D.3d 82, 94, 818 N.Y.S.2d 40 (1st Dept. 2006) does not concern the fiduciary relationships of an investment
advisor, rather it discusses that an underwriter does not automatically have a fiduciary obligation to an issuer. The
court in Kopel v. Bandwidth Tech. Corp., 56 A.D.3d 320, 868 N.Y.S.2d 16 (1st Dept. 2008) held that the plaintiff’s
fiduciary duty was barred by the statute of limitations and there were no specific allegations pled to support the
existence of a fiduciary duty. Tradewinds Fin. Corp. v. Refco Sec., Inc., 5 A.D.3d 229, 230, 773 N.Y.S.2d 395 (1st
Dept. 2004) is also distinguishable as the allegations concerned the relationship involving nondiscretionary
securities accounts, whereas here, Merkin had absolute and unfettered discretion to manage the monies NYU
invested in Ariel.
15
(B). Here, Ariel had no formally designated “officers”; the language in the prospectus clearly
provides that Merkin himself has full discretion over the assets and business of Ariel. Moreover,
§720(b) provides that such a claim may be brought directly or derivatively through BCL §626.
Id. at (b). The scope of acts covered by BCL §720 has been found to be quite broad.
Specifically, the New York Court of Appeals has held that BCL §720 “is broad and covers every
form of waste of assets and violation of duty whether as a result of intention, negligence, or
predatory acquisition.” Rapoport v. Schneider, 29 N.Y.2d 396, 400 (1972); see also Amfesco
Industries, Inc. v. Greenblatt, 172 A.D.2d 261, 568 N.Y.S.2d 593 (1st Dept. 1991)(reversing
dismissal of complaint which alleged that directors failed to discharge their duties and deprived
the shareholders of what was owed to them); Bouhayer for Benefit of Gregovar Food Specialties,
Inc. v. Georgalis, 169 Misc.2d 779, 780-85 (1996)(denying motion to dismiss derivative claims
where defendant was alleged to have converted money and property and engaged in waste
“where an officer of a corporation is found to have diverted corporate assets and opportunities,
he may be held accountable.”). Defendants’ cases are simply distinguishable on their facts. 8
NYU asserts a valid claim for unjust enrichment or money had and received against
Merkin and Gabriel. To state an unjust enrichment claim, “a plaintiff must allege that (1) the
other party was enriched, (2) at that party's expense and (3) it is against equity and good
conscience to permit [the other party] to retain what is sought to be recovered.” AHA Sales, Inc.
8
Indeed Defendants’ reliance upon Bildstein v. Atwater, 222 A.D.2d 545, 635 N.Y.S.2d 88 (2d Dept 1995) is
inapposite. The court in Bildstein specifically stated that there were no specific allegations of misconduct against
the defendants. Whereas NYU’s amended complaint contains detailed information describing Merkin’s improper
conduct in violation of BCL §720. Likewise, Abalon Precision Mfg. Corp. v. Flair Int’l Corp., 19 A.D.3d 338, 796
N.Y.S.2d 171 (2d Dept. 2005), is equally inapplicable as the plaintiff failed to allege that any of the defendants were
officers or director defendants, thus, the Appellate Division upheld trial court’s dismissal of the BCL §720 claim.
16
v. Creative Bath Products, Inc., 58 A.D.3d 6, 867 N.Y.S.2d 169, 180 (N.Y. App. 2008) (internal
quotations omitted). Likewise, money had and received is a quasi-contract or a contract implied-
in-law action based upon not permitting a party to keep what in equity and good conscience it
should return. See Bd. of Educ. of Cold Spring Harbor Cent. Sch. Dist. v. Rettaliata, 78 N.Y.2d
128, 138, 572 N.Y.S.2d 885 (1991). NYU alleges that (1) Merkin or Gabriel were enriched by
receiving both management and incentive fees; (2) at the expense of NYU and other investors in
Ariel; and (3) that allowing “Merkin or Gabriel to be paid fees for improperly placing assets with
Madoff, or based on illusory gains on those assets” constitutes unjust enrichment. (Cmplt, ¶¶ 99,
100).
Defendants argue out of both sides of their mouth by contending first, that the various
prospectuses do not constitute contracts with Merkin with respect to his compensation, and also
that NYU’s unjust enrichment claim should be dismissed because of the existence of a valid
contract. While Defendants correctly note that an unjust enrichment claim cannot be maintained
if a valid contract exists (see Defs. Br. at 21), “[w]here, as here, there is a bona fide dispute as to
the existence of a contract, or where the contract does not cover the dispute in issue, a plaintiff
may proceed upon a theory of quasi-contract as well as breach of contract and will not be
required to elect his or her remedies.” Id. (quoting Hochman v. LaRea, 789 N.Y.S.2d 300, 301
(2d Dept. 2005). Here, Defendants expressly argue: “There was no contract between NYU and
either Merkin or the Management Company.” Defs.’ Br. at 8. Accordingly, there is a bona fide
dispute as to the existence of a contract and NYU may proceed on its unjust enrichment claim.
See id. (reversing trial court’s decision to dismiss unjust enrichment claims on the grounds that
there was a bona fide dispute as to the existence of a valid contract covering the issue in dispute).
VII. Count VIII States a Valid Direct Claim Against Merkin for Fraud
17
NYU alleged Defendant Merkin made material misrepresentations or omissions year after
year in his quarterly reports where he: (a) falsely created the impression that he was actually
managing the Ariel funds and concealing that they were in fact being managed by Madoff and
Teicher, a convicted felon; and (b) falsely inflated NYU’s interest in Ariel, and the assets and
earnings of the Fund for monies stolen by Madoff and his illusory profits. Also in a face-to-face
October 23, 2008 meeting, Merkin defrauded NYU by failing to disclose the material fact that
the Ariel Fund was heavily invested with Madoff, after being told point-blank that NYU as an
Under New York law “to state a claim for fraud a plaintiff must demonstrate: (1) a
misrepresentation or omission of material fact, (2) which the defendant knew to be false; (3)
which the defendant made with the intention of inducing reliance; (4) upon which the plaintiff
reasonably relied, and (5) which caused injury to the plaintiff.” Pension Committee of University
of Montreal Pension Plan v. Banc of America Securities, 446 F.Supp.2d 163, 195 (S.D.N.Y.
2006)(citations omitted)(applying New York law). Merkin’s false representations with respect to
the managers and investment strategies for Ariel’s assets, and Ariel’s financial and operational
performance, was intended to, and did, induce NYU to retain its investment with the Ariel Fund
and therefore states a valid cause of action for fraud under New York law.
Although Merkin has argued that he was a “victim” and was unaware of Madoff’s Ponzi
scheme, his own inside expert, Victor Teicher, told him that Madoff’s returns were impossible.
Armed with this information as well as the other “red flags” alleged in the Cmplt, apart from a
series of discussion with Madoff, Merkin did nothing but deliver ever-increasing amounts of
money to Madoff for investment. Under these circumstances, “Merkin may fairly be said to be
suffering from “deliberate ignorance,” a condition that was found to satisfy even a criminal
18
standard of scienter. United States v. Skilling, supra.
VIII. The Amended Complaint States a Valid Cause of Action for Aiding and Abetting
Madoff’s Fraud and Conversion of Assets
“To state a valid claim for aiding and abetting fraud under New York law, a plaintiff
must plead facts showing the existence of fraud, defendants’ knowledge of the fraud, and that the
defendant provided substantial assistance to advance the fraud’s commission and damages.”
Pension Committee of University of Montreal Pension Plan v. Banc of America Securities, 446
F.Supp.2d 163.
While Merkin certainly does not dispute the existence of the Madoff fraud, he contends
that the Cmplt is devoid of allegations that Merkin knew of the fraud or substantially assisted it.
The Cmplt, however, is replete with allegations of the “red flags” that Merkin had to have
callously ignored to have not known that Madoff was a fraud. Discovery adduced to date,
including the deposition of Victor Teicher, shows even more evidence than is alleged in the
pleadings of Merkin’s knowledge of Madoff’s suspicious trading practices. The recent Fifth
Circuit opinion upholding use of the “deliberate ignorance” jury charge in the criminal trial of
If this type of “willful blindness” is sufficient to uphold a criminal conviction utilizing a “beyond
a reasonable doubt standard,” it is sufficient for a pleading of aiding and abetting a fraud.
19
incentive fees is exactly the type of “extraordinary economic incentive” that can establish a claim
of “willful blindness.” The Cmplt also sufficiently alleges that Merkin substantially assisted
Madoff in carrying out his fraud by acceding to Madoff’s demand that he remain invisible to the
investors in the Ariel Fund. Though Merkin denies making such an agreement with Madoff, the
complete absence of any reference to him or his trading strategies in any of the quarterly reports
IX. Plaintiff has Pled Claims for Negligent Misrepresentation, Gross Negligence and
Negligence
The Court of Appeals has held that, in determining whether a negligent misrepresentation
claim has been established, the court is required to “consider whether the person making the
relationship of trust and confidence existed between the parties; and whether the speaker was
aware of the use to which the information would be put and supplied it for that purpose.”
Kimmell v. Schaefer, 89 N.Y.2d 257, 259 (1996); Rosicki v. Cochems, __ N.Y.S.2d __, 2009 WL
In Fraternity Fund, Ltd., et al. v. Beacon Hill Asset Management LLC, et al., 376
F.Supp.2d 385 (S.D.N.Y. 2005) the court upheld the plaintiffs’ negligent misrepresentation
claims arising out of defendants’ failure to monitor the performance of the fund and prevent
defendants’ fraudulent conduct. Specifically the court noted that the “special relationship”
requirement to establish a negligent misrepresentation claim was satisfied based on the plaintiffs’
allegations of a relationship whereby the investors relied upon the fund managers’ expertise and
representations in managing the assets. Moreover the court noted that such a special relationship
was established due to the position which the managers held over the funds: “a duty to speak
with care exists when `the relationship of the parties, arising out of contract or otherwise, [is]
20
such that in morals and good conscience the one has the right to rely upon the other for
information.’” Id. at 411. Moreover the court in Fraternity Fund noted that a duty to speak with
care exists “only on those persons who possess unique or specialized expertise, or who are in a
special position of confidence and trust with the injured party such that reliance on the negligent
misrepresentation is justified.” Id. citing Kimmell v. Schaefer, 89 N.Y.2d 257, 263 (1996). See
also, Bullmore v. Ernst & Young Cayman Islands, 45 A.D.3d 461 (1st Dept. 2007).
except to argue the facts in the Cmplt. As such, all NYU’s claims involving negligence should
be sustained.
In order to state a claim under GBL §349, a plaintiff must establish three elements: “first,
that the challenged act or practice was consumer-oriented; second, that it was misleading in a
material way; and third, that the plaintiff suffered an injury as a result of the deceptive act.
Stutman, et al. v. Chemical Bank, 95 N.Y.S.2d 24, 29 (2000), citing Oswego Laborers’ Local
214 Pension Fund v. Marise Midland Bank, 85 N.Y.S.2d 20, 25 (1995). Plaintiff has alleged
In Scalp & Blade v. Advest, Inc. 281 A.D.2d 882 (4th Dept. 2001), in reversing the trial
court’s dismissal of the plaintiff’s GBL §349 claims, the court held, on similar facts to those
alleged in this case, that the plaintiff’s allegations concerning defendants’ actions as investment
21
Id. (internal citations omitted). See also Board of Managers of the Arches at Cobble Hall
Condominium v. Hicks & Warren, LLC, 14 Misc. 1234 (2007) (CBL §349, “applies to virtually
actions were directed at consumers at large and the massive wrongs alleged in this case clearly
have had an impact on consumers and the general public -- as well as being “deceptive” and
injuring NYU. See, e.g. Cmplt ¶¶13, 15-19, 35-45, 106-113. Moreover, Defendants actions, by
failing to protect the assets of NYU and others who invested in Ariel clearly has had an impact
on consumers, generally. See Oswego Laborers’ Local 214 Pension Fund, et al. v. Marine
Midland Bank, N.A., 85 N.Y.S. 2d 20, 25-6 (1995). Moreover, contrary to Defendants’
arguments, Plaintiff has alleged that Defendants’ conduct was deceptive, and that they made
Fund, its investments and the unsuitability of maintaining such a large percentage of the Fund’s
XI. Plaintiff’s Claims Are Not Preempted Under The Martin Act
It should be noted that Defendants Merkin and Gabriel do not argue and thereby concede
that Plaintiff’s breach of contract (Counts I and II), fraud (Count VIII), aiding and abetting fraud
(Count IX), unjust enrichment (Count X) and negligence claims (Count XI) are not preempted by
the Martin Act. Thus, as to Plaintiff’s other claims, the only question for the Court’s
consideration is whether the other causes of action are merely Martin Act claims in disguise.
Specifically, the Martin Act, GBL §352, only regulates the offer, sale or purchase of
securities within the State of New York. See GBL §352 and State of New York v. Samaritan
22
Given that Plaintiff has not predicated its claims on wrongs performed in connection with
its original purchase of the securities, as distinguished from claims arising after the investor-
advisor relationship was established, the Martin Act, by its terms has no bearing on NYU’s
claims. Moreover, even to the extent that some of the misconduct alleged in this case could be
considered to overlap with the powers provided to the Attorney General under the Martin Act,
those Court decisions that have “pre-empted” private claims on that basis, have misapplied New
York law.
In describing “pre-emption” under the Martin Act, the First Department in Kramer, et al.,
v. W10Z/515 Real Estate Limited Partnership, 44 A.D.3d 457, 844 N.Y.S.2d 18 (1st Dept. 2007),
observed that many New York courts were incorrectly interpreting its earlier decision in
Whitehall Tenants Corp. v. Estate of Olnick, 213 A.D.2d 200 (1st Dept. 1995). Kramer
specifically clarified that the Martin Act, a statute intended to enhance investor protection, did
not preempt otherwise properly pled private causes of action where they previously existed under
the common law, and where the private plaintiffs were not relying on the Martin Act to satisfy
one or more elements of those claims. Id. at 458-60. Kramer explicitly held that plaintiff’s
properly pled fraud claims were not pre-empted. Id. While Kramer did not similarly sustain
plaintiffs’ “aiding and abetting” and breach of fiduciary duty claim, its failure to do so was not
based upon “pre-emption” under the Martin Act. Rather the court held that the plaintiff had
simply failed to plead the necessary facts to satisfy the elements of each of the claims alleged.
Id. at 461.
LLC, et al., 54 A.D3d 79 (2d Dept. 2008), held that the plaintiffs’ common law fraud and breach
of contract claims were not preempted by the Martin Act. Id. at *80. The Court in Caboara
23
explained that the Martin Act was established to expand the protections afforded to consumers
by providing the Attorney General a right of action. Thus, it made no sense to assume that the
legislature, in creating the Martin Act, had intended to reduce investors’ already existing rights:
Here, nothing in the clear import of the language of the Martin Act requires a
conclusion that the Legislature intended to abrogate any common-law remedy
arising from conduct prohibited under the act. Nor are the remedies afforded the
Attorney General made exclusive by the Martin Act. Thus, the plaintiffs'
common-law fraud and breach of contract causes of action were neither abrogated
nor supplanted by the Martin Act.
Id. at *83.
Indeed, the Appellate Division in Caboara distinguished the very cases relied upon by
Defendants here and noted that “[n]o case from the Court of Appeals holds that the Martin Act
not only failed to provide, expressly or impliedly, for a private right of action, but also, abrogated
or supplanted an otherwise viable private cause of action whenever the allegations would support
a Martin Act violation.” Id., citing Kramer v. W10Z/515 Real Estate Ltd. Partnership, 44
The Fourth Department, in Scalp & Blade et al. v. Advest, Inc., et al., 281 A.D.2d 882,
722 N.Y.S.2d 639, 640 (4th Dept. 2001), in a case with claims remarkably similar to those pled
here, found that claims by investors against their investment advisor for breach of fiduciary duty,
negligent misrepresentation and GBL §349 were not preempted under the Martin Act.
Specifically, the Court, in reversing the trial court’s dismissal, stated that claims based upon a
broker’s and investment advisor’s improper investment of the plaintiffs’ “assets in various
speculative, risky and otherwise unsuitable investments” were not preempted under the Martin
Act. Id. at 882-83. See also Bridge Street Homeowners Assn., et al. v. Brick Condominium
Developers, LLC, 18 Misc.3d 1128 (2008) 2008 WL 344136 *1 (N.Y. Sup. 2008)(finding that
the plaintiff’s breach of contract, negligence and common law fraud claims were not preempted
24
by the Martin Act).
Defendants’ reliance on CPC Intl v. McKesson Corp., 70 N.Y. 208, 276-77 (1987) and
certain federal cases holding that various state law claims had been pre-empted, is misplaced.
First, McKesson did not “pre-empt” plaintiff’s fraud claim; it merely held that plaintiff could not
make out its case by relying upon the Martin Act. NYU respectfully submits that Kassover, et
al., v. UBS AG, et al., 2008 WL 5331812 (S.D.N.Y. Dec. 19, 2008) was incorrectly decided,
based upon the authorities and reasoning described above, but is, in any event, inapposite to the
facts alleged in this case. Kassover pre-empted claims based upon the “purchases” of auction
rate securities. NYU does not predicate its claims on false statements or breaches of duty in
connection with NYU’s purchases of Ariel shares. Thus, none of NYU’s claims are pre-empted
by the Martin Act, even under the authorities that Defendants cite.9
Conclusion
For the reasons stated herein, each of NYU’s claims should be sustained.
/s Joseph P. Guglielmo
BETH KASWAN
JUDY SCOLNICK
JOSEPH GUGLIELMO
29 West 57th Street, 14th Floor
New York, NY 10019
Telephone: (212) 223-6444
Fax: (212) 223-6334
Email: bkaswan@scott-scott.com
jscolnick@scott-scott.com
jguglielmo@scott-scott.com
and
9
Jana Master Fund v. JPMorgan Chase & Co., 19 Misc. 3d 1106 at *6 (2008), similarly found private claims
predicated on the purchase and sale of debt securities preempted under the Martin Act.
25
DAVID R. SCOTT
108 Norwich Avenue
P. O. Box 192
Colchester, CT 06415
Telephone: (860) 537-5537
Fax: (860) 537-4432
Email: drscott@scott-scott.com
26
CERTIFICATE OF SERVICE
I hereby certify that on February 11, 2009, a copy of the foregoing Plaintiff’s
Memorandum of Law in Opposition to the Motion to Dismiss of Defendants J. Ezra Merkin and
Gabriel Capital Corporation was filed electronically and served via the Court’s electronic system
on the following:
Harry Sandick
Howard Schiffman
Taleah Jennings
Schulte Roth & Zabel LLP
919 Third Avenue
New York, NY 10022
Andrew J. Levander
Dechert, LLP
1095 Avenue of the Americas
New York, NY 10036
27