IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION JAMES ROLAND, ET AL.

, Plaintiffs, v. JASON GREEN, ET AL., Defendants.

CIVIL ACTION NO. 3-10-CV -00224-N

______________________________________________________________________________

THE OFFICIAL STANFORD INVESTORS COMMITTEE'S AMICUS CURIAE BRIEF ADDRESSING THE SECURITIES LITIGATION UNIFORM STANDARDS ACT ______________________________________________________________________________ CASTILLO SNYDER, P.C. 300 Convent Street, Suite 1020 San Antonio, Texas 78205 Telephone: (210) 630-4200 Facsimile: (210) 630-4210 EDWARD C. SNYDER State Bar No. 00791699 esnyder@casnlaw.com JESSE R. CASTILLO State Bar No. 03986600 jcastillo@casnlaw.com

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STRASBURGER & PRICE, LLP 300 Convent Street, Suite 900 San Antonio, Texas 78205 Telephone: (210) 250-6000 Facsimile: (210) 250-6100 EDWARD F. VALDESPINO State Bar No. 20424700 edward.valdespino@strasburger.com ANDREW L. KERR State Bar No. 11339500 andrew.kerr@strasburger.com MORGENSTERN & BLUE, LLC 885 Third Avenue New York, New York 10022 (212) 750-6776 (212) 750-3128 (Facsimile) PETER D. MORGENSTERN (admitted pro hac vice) pmorgenstern@mfbnyc.com ATTORNEYS FOR THE OFFICIAL COMMITTEE

STANFORD

INVESTORS

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TABLE OF CONTENTS TABLE OF CONTENTS ...................................................................................................................i TABLE OF AUTHORITIES .............................................................................................................ii I. II. PRELIMINARY STATEMENT ...........................................................................................1 ARGUMENT AND AUTHORITIES ....................................................................................2 A. B. Practical Effect of SLUSA Application: Procedural Nightmar ................................2 The Madoff Decisions................................................................................................5 1. 2. 3. C. Madoff Cases that Applied SLUSA ...............................................................6 Madoff Cases that Rejected SLUSA..............................................................8 The Facts in Stanford Are Easily Distinguishable .........................................10

CAUSES OF ACTION WHERE A MISREPRESENTATION OR OMISSION ARE NOT A NECESSARY COMPONENT ARE NOT SUBJECT TO SLUSA ............................................................................13

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TABLE OF AUTHORITIES CASES Anwar v. Fairfield Greenwich Ltd., 728 F.Supp.2d 372 (S.D.N.Y.2010).............................................................................. 8, 13 Barron v. Igolnikov, 2010 WL 882890 (S.D.N.Y. Mar. 10, 2010) ...................................................................... 7 Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994) ............................................................................................................ 3 Chick Kam Choo v. Exxon Corp., 821 S.W. 2d 190 (Tex. App. Hous. [14th Dis.] 1991) ...................................................... 5 Exxon Corp. v. Chick Kam Choo, 881 S.W. 2d 301 (Tex. 1994) .............................................................................................. 5 Gavin, v. AT&T Corp., 464 F.3d 634 (7th Cir. 2006) ............................................................................................. 13 Grund v. Delaware Charter Guarantee & Trust Co., 2011 WL 2118754 (S.D.N.Y. 2011) ......................................................................... 6, 9, 14 In re Enron Corp. Securities Der. & ERISA Litigation, 535 F. 3d 325 (5th Cir. 2008) .......................................................................................... 3, 4 In re Kingate Management Litigation, 2011 WL 1362106 (S.D.N.Y. Mar. 30, 2011) .............................................................. 6, 12 In re Lord Abbett Mutual Funds Fee Litigation, 553 F. 3d 248 (3rd Cir. 2009) .................................................................................. 2, 13, 14 Levinson v. PSCC Services, Inc., 2010 WL 5477250 (D. Conn. 2010) ............................................................................. 9, 14 Paru v. Mutual of America Life Ins. Co., No. 04 Civ. 6907, 2006 WL 1292828 (S.D.N.Y. May 11, 2006) ..................................... 14 Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities LLC, 2010 WL 546964 (S.D.N.Y. 2010) ..................................................................................... 9 Regents of Univ. of Cal. v. Credit Suisse First Boston (USA), 482 F.3d 372 (5th Cir.2007) ............................................................................................... 3 Scala v. Citicorp Inc., 2011 WL 900297 (N.D. Cal. Mar. 15, 2011) ...................................................................... 7

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Xpeditor Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F. Supp. 2d 258 (S.D.N.Y. 2004)............................................................................... 14

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MAY IT PLEASE THE COURT: Comes now The Official Stanford Investors Committee (the Committee), which was formed and recognized by this Court on August 10, 2010 (See SEC v. Stanford Intl Bank, Ltd., et al., Civil Action No. 3-09-CV-0298-N [ Docket No. 1149] (the Committee Order),1 and respectfully present this its Amicus Curiae Brief addressing the applicability of the Securities Litigation Uniform Standards Act of 1998 (SLUSA) to the various class action cases now pending in this Court. This Motion is filed pursuant to this Courts Order dated May 10, 2011. I. PRELIMINARY STATEMENT

As a preliminary matter, the Committee is cognizant of the Courts desire not to be overloaded with briefing from different parties, all saying the same thing. Therefore, the

undersigned counsel for the Committee, who also serve as class counsel in many of the class action cases pending before this Court, reached out to several of the other class action counsel in order to consolidate arguments and file one brief.2 As the Court is aware, SLUSA has already been briefed in the (1) C.A. No. 3:09-cv-01600; Troice v. Proskauer Rose case (Dckt #50) and more recently in the (2) C.A. No. 3:09-cv-01274; Troice v. Willis case (Dckt #137), and the Committee adopts and incorporates by reference the arguments made in those briefs, as well as the arguments made in the briefs filed in the instant Roland case opposing the application of SLUSA, including the briefs concurrently being filed by

Unless otherwise stated, citations to Court records herein are from the case styled SEC v. Stanford Intl Bank, Ltd., et al., Civil Action No. 3-09-CV-0298-N. 2 Besides the Proskauer and Willis class cases, the Committee is further joined in the present Brief by counsel representing the respective putative classes in the following class cases: (1) C.A. No. 3:09-cv02165; Joan Gale Frank, et al. v. The Commonwealth of Antigua and Barbuda; (2) C.A. No. 3:10-cv00304; Steven Queyrouze, et al. v. Bank of Antigua, et al. (3) C.A. No. 3:09-cv-02384; Peggy Roif Rotstain, et al. v. Trustmark National Bank, et al.; (4) C.A. No. 3:09-cv-2198; Turk v. Pershing and (5) C.A. No. 3:11-cv-00314; Mendez v. Pershing (which two cases will shortly be consolidated into one action); (6) C.A. No. 3:11-cv-01115; Wilkinson v. BDO; and the (7) C.A. No. 3:11-cv-00329; Mendez v. Adams & Reese.
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the Examiner and the Receiver. So as not to be repetitive, the purpose of this Brief is to solely address and contrast the conflicting decisions that have recently emerged in the Madoff case pending in the Southern District of New York, as well as to alert the Court to the practical, procedural and logistical effects the application of SLUSA would create were the Court to rule that way. The Committee begins with the latter. II. A. ARGUMENT AND AUTHORITIES

Practical Effect of SLUSA Application: Procedural Nightmare As a preliminary matter, SLUSA is frequently described as pre-empting state law

claims, but it actually does nothing of the sort. As the Third Circuit explained in a 2009 opinion, SLUSA merely denies plaintiffs the right to use the class action device to sue defendants under state law causes of action in state court and on behalf of more than 50 persons. In re Lord Abbett Mutual Funds Fee Litigation, 553 F. 3d 248 (3rd Cir. 2009). As more fully explained by the Examiner in his Brief, the goal of SLUSA was to require that all nationwide securities class actions involving nationally traded securities be litigated in the federal courts via federal securities 10b causes of action under the aegis of rules adopted by the Private Securities Litigation Reform Act (PSLRA). But SLUSA was simply not designed to absolutely deny defrauded investors their day in court.3 Yet SLUSA, if applied in the Stanford case, has the very real potential of achieving

See Remarks by Senator Dodd, 144 Cong. Rec. S4789 (May 13, 1998) (SLUSA is a very narrow bill. It is not designed to be all encompassing and all-sweeping .); Remarks of Representative Bliley, 144 Cong. Rec. H6055 (Jul. 21, 1998) (SLUSA will permit meritorious claims to continue to be filed while preventing the migration of baseless class actions to state courts).
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precisely that -- denying thousands of Stanford victims their day in Court. This is because, if SLUSA were to apply, the Stanford investors would not be able to utilize federal law causes of action to sue responsible third parties who are alleged to have aided and abetted Stanfords fraud because the federal courts have held that there is no aider and abettor or conspiracy-type liability under the federal securities laws. See Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 191 (1994) (no aider abettor liability under federal securities laws); Regents of Univ. of Cal. v. Credit Suisse First Boston (USA), 482 F.3d 372 (5th Cir.2007) (rejecting "scheme" liability under federal securities laws). As a result, the investors only avenue for recovery against those third parties who are alleged to have aided and abetted, participated or conspired with Stanford is through state law causes of action. That is where SLUSA, and its 50 plaintiff-per-case limit, rears its ugly head. Since there are 28,000 defrauded investors in the Stanford case, SLUSAs 50 plaintiffs-per-case limitation will wreak procedural havoc and result in gross judicial inefficiencies. Lawyers with vast groups of clients (as just an example, Strasburger Price has over 2,000 Stanford victim clients) will be forced to refer or farm out virtually all of their clients (all those above 50) to other law firms so that those clients can still qualify to bring state law claims against alleged aiders and abettors. This is because the Fifth Circuit ruled in Enron that plaintiffs cannot get around the 50 person limitation by filing multiple lawsuits of 50 plaintiffs to the extent all of the cases are controlled by the same law firm and proceed on a coordinated basis. In re Enron Corp. Securities Der. & ERISA Litigation, 535 F. 3d 325 (5th Cir. 2008). Putting aside the ethical and moral dilemma SLUSA will create for investor counsel when they are forced to pick and choose which 50 clients they will retain to file suit, this 50 plaintiff limit will result in literally hundreds of 50 plaintiff lawsuits being filed in this Court

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against each of the above named defendants that are currently the subjects of class action suits. Just hypothetically, if all 28,000 investors were lucky enough to find counsel to represent them and get lumped into separate 50 plaintiff cases, the result would be 560 separate lawsuits filed per each third party defendant a potential for literally thousands of separate lawsuits flooding this Court. Moreover, based on the Fifth Circuits decision in Enron, none of those cases could be consolidated; discovery could not be coordinated; and all of the cases would have to proceed independently of each other or risk dismissal. Enron, 535 F. 3d at 339-342 (ten separate cases dismissed under SLUSA where the complaints were nearly identical; discovery was coordinated; motions and responses were filed jointly; and the same experts were used). The result will be either: (1) per the Enron decision, a complete dismissal of all investors lawsuits except the first 50 investors who are lucky enough to file first; or (2) if the thousands of cases are allowed to proceed in an uncoordinated fashion, a procedural and logistical nightmare for this or any other court, as well as for counsel and for the defendants themselves that are presently urging this absurd result. Of course, realistically, not all investors will be able to find counsel to represent them in groups of 50. The investors that will be left out will be the smaller investors, e.g., those that lost less than, say, a hundred thousand dollars in the Stanford Ponzi scheme. Given the complexity of the Stanford litigation, very few lawyers would agree to represent the smaller Stanford investors on a contingency fee basis, even in groups of 50. The result would be to effectively deny those smaller investors their day in court and the right to vindicate their claims against those that allegedly injured them, which itself raises all kinds of constitutional issues, including

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access to the courts provided by the Open Courts provision of the Texas Constitution.4 And that is exactly what the class action defendants asserting the application of SLUSA are hoping to achieve --- to bar the Stanford investors (or as many of them as possible) from accessing the court to vindicate their rights. Not based on the facts or the substantive law, but based on a procedural device that was never intended to render this result and which the defendants are spinning way beyond its logical import. B. The Madoff Decisions Given the potential catastrophic results described above, coupled with the magnitude of the Stanford Ponzi scheme, it makes little sense to let defendants who knowingly and/or recklessly participated in one of the greatest frauds in financial history escape liability through strained interpretations of a procedural statute, and the Court should not preempt the investors claims in the absence of clear and binding authority which compels such a harsh result. In support of their argument that SLUSA should apply to the Stanford cases, a number of defendants have pointed to decisions rendered by district courts in the Southern District of New York and elsewhere in the Madoff case as somehow constituting clear and binding authority upon which this Court can premise a decision to apply SLUSA to dismiss all of the Stanford class action cases. What defendants fail to point out is that the courts considering these SLUSA issues as they relate to the Madoff fraud are actually divided in their decisions. As described in a SLUSA decision rendered just last month (May 2011) by a judge in the Southern District of New York, SLUSA has created difficult issues for the courts and [d]istinguished judges of this circuit and others have reached differing conclusions in the factual settings with which they have
See e.g., Chick Kam Choo v. Exxon Corp., 821 S.W. 2d 190, 192 (Tex. App. Hous. [14th Dis.] 1991), affirmed Exxon Corp. v. Chick Kam Choo, 881 S.W. 2d 301 (Tex. 1994)(reversing trial courts dismissal of action and finding that the Open Courts provision of Texas Constitution is not preempted by federal maritime law).
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been presented. Grund v. Delaware Charter Guarantee & Trust Co., 2011 WL 2118754 (S.D.N.Y. 2011). The Madoff decisions cited by defendants all involve investors who invested money in so-called feeder-funds, which are mutual or hedge funds that, in turn, invested their investors money with Madoffs brokerage firm. It is undisputed that Madoffs investment strategy was to invest his clients money in covered securities; specifically his brokerage firm BMIS, acting on behalf of its clients, purportedly purchased 45 to 50 stocks underlying the S&P 100 index, while concurrently selling call options and buying put options on the S&P 100 as a hedge. See In re Kingate Management Litigation, 2011 WL 1362106 at *1-2 (S.D.N.Y. Mar. 30, 2011). But in the end, Madoff never actually purchased any securities for anyone but instead just fabricated account statements telling people he had purchased covered securities (i.e., the stocks in the S&P 100) for their accounts. Thus, unlike the present case, there is no dispute that Madoffs fraud was directly linked to covered securities and that anyone that invested with Madoff intended to invest directly in covered securities, because Madoff purported to invest the clients money directly into stocks underlying the S&P 100. Such is not the case here. 1. Madoff Cases that Applied SLUSA5

In In re Kingate Management Litigation, the investors that invested into the Kingate feeder funds were informed in writing that all of their money was going to be managed and invested by Madoff through his BMIS brokerage. In re Kingate Management Litigation, 2011 WL 1362106 (S.D.N.Y. 2011). In holding SLUSA preemption, the court emphasized that the

The two Madoff decisions discussed herein were cited to this Court by the Proskauer Rose Defendants in their Notice of Supplemental Authority filed as docket no. 90 in the Troice v. Proskauer Rose et al case, No. 3:09-cv-01600-N.

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Kingate Funds were nothing short of cursory pass-through vehicles by which the investors could place their assets with Madoff (and thereby into covered securities), and also emphasized that the Funds invested all of their assets with Madoff and made no other, nonMadoff, investments at all. Id., at *8. As a result, the court held that the Madoff fraud was at the heart of the case because the investor plaintiffs themselves in their Complaint characterized their case as such: the sole purpose of investing in the Funds was to invest in the United States and in United States equities that are part of the S&P 100. Id., at *9 (quoting plaintiffs own Complaint). Kingate just screams out for SLUSA coverage. The other Madoff case widely cited by Defendants is Barron v. Igolnikov. In that case the investors purchased interests in Feeder Funds that they knew also invested with Madoffs brokerage. Barron v. Igolnikov, 2010 WL 882890 (S.D.N.Y. Mar. 10, 2010). The Court in that case based its decision to apply SLUSA on the fact that Madoff had committed fraud against the Feeder Funds by falsely representing to the funds that he had purchased covered securities for their account, when he hadnt. As a result, the fraud causing the injury to the investors (albeit, indirectly) was connected to covered securities. Id., at *5. In another, non-Madoff case cited by the Proskauer Defendants, Scala v. Citicorp Inc., a California court applied SLUSA to a case wherein investors put their money into bank accounts based on misrepresentations by the primary tortfeasor that he would invest their money by trading in futures contracts based on the S&P 500. Scala v. Citicorp Inc., 2011 WL 900297 (N.D. Cal. Mar. 15, 2011). Not surprisingly, the Court held that SLUSA applied because the plaintiffs had chosen to enter into purported transactions in covered securities. Id., at *7, note 6. In other words, the heart of the fraud in Scala was direct investments in covered securities,

which has no similarity to the Stanford case at all.

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What all of these cases have in common is that the injured investors knew about and intended for their money to be invested in covered securities. 2. Madoff Cases that Rejected SLUSA

Like the Madoff decisions applying SLUSA, the Madoff decisions rejecting the application of SLUSA have turned on the intent of the investors and whether they knew and intended that their investment in an intermediate or feeder fund was just a mechanism to get their money invested into Madoffs S&P 100 covered securities trading strategy. In Anwar v. Fairfield Greenwich Ltd., 728 F.Supp.2d 372 (S.D.N.Y.2010) (Anwar II), the district court held that an investment in a Madoff feeder fund was too attenuated to be considered a direct investment in a covered security for purposes of SLUSA. The court noted that: The allegations in this case present multiple layers of separation between whatever phantom securities Madoff purported to be purchasing and the financial interests Plaintiffs actually purchased. First, Plaintiffs invested their money in the Funds, with one of the Citco Defendants receiving the actual deposits. The Citco Defendants then placed this money with Madoff, a transaction which Plaintiffs allege did not occur instantaneously; the Funds were not a cursory, pass-through entity. The Funds also placed up to 5 percent of their assets in non-Madoff investments, a relatively small portion overall but representing many millions of dollars..stretching SLUSA to cover this chain of investment -- from Plaintiffs initial investment in the Funds, the Funds reinvestment with Madoff, Madoffs supposed purchases of covered securities, to Madoffs sale of those securities and purchases of Treasury bills --- snaps even the most flexible rubber band. Anwar II at 398-399 (emphasis supplied). The Anwar decision was premised on the same logic applied by another S.D.N.Y. court in a case with facts that are by far the most similar to the facts in Stanford. In Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities LLC, the court rejected the argument that claims arising from investments in an offshore hedge fund were governed by SLUSA simply because the hedge funds, in turn, invested in covered securities.
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Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities LLC, 2010 WL 546964 (S.D.N.Y. 2010). The Court in Pension Committee rejected the

application of SLUSA because the covered securities were not at the heart of the fraud in that the alleged fraud relates to those hedge funds rather than to the covered securities in the portfolio. Id. at *2-3. A more recent non-Madoff case from the S.D.N.Y, Grund v. Delaware Charter Guarantee & Trust Co., takes a similar tack. In Grund, the court adopted the logic of the Anwar and Pension Committee decisions and rejected the application of SLUSA to a intermediate fund case because it found no allegation of fraud made in connection with the purchase or sale of a covered security, noting that in construing SLUSA a court must determine whether fraud is a necessary component of the claim. Grund v. Delaware Charter Guarantee & Trust Co., 2011 WL 2118754 at *9 (S.D.N.Y. 2011). The court concluded that since the securities at issue were non-covered interests in an intermediate fund, SLUSA did not apply. Finally, in another Madoff feeder fund case from Connecticut, Levinson v. PSCC Services, the court held that it was not persuaded by the analysis in Barron and instead ruled that, for SLUSA to apply, the allegations against the named defendants must sound in fraud, i.e., the named defendants themselves must be accused of committing fraud in the sale of covered securities. Levinson v. PSCC Services, Inc., 2010 WL 5477250 at *8 (D. Conn. 2010). The court went on to hold that, irrespective of whether Madoff committed fraud, SLUSA did not apply because there were no allegations that the named defendants, the feeder funds, committed fraud on the investors. Id., at *9-10. Similarly the Stanford class cases do not accuse the Defendants of directly committing fraud on any of the investors in connection with the sale of covered securities.

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3.

The Facts in Stanford Are Easily Distinguishable

It is clear that the courts in the Madoff litigation are divided on whether SLUSA applies and that the decisions vary depending on the facts of the individual case. But the trend that appears to be emerging is that (1) if the investors sole purpose in investing in a Feeder Fund was to get his money to Madoff so the investor could take advantage of Madoffs unique trading strategy of trading in S&P 100 covered securities, then SLUSA applies; but (2) if the investors did not know or intend to invest their money with Madoff, but rather just wanted to buy shares of an unregistered (and thus non-covered) mutual or hedge fund, then the courts have ruled that SLUSA does not apply. In other words, the question becomes: what was the purpose behind the investment to buy covered securities or not? The circumstances of the Madoff cases bear no resemblance to the type of investment at issue in the Stanford cases. The Stanford investors bought SIBL CDs, which are not covered securities. That is not in dispute. These non-covered securities were the only relevant

securities ever bought, held, or sold by the Stanford investors. By pointing to the Madoff Feeder Fund cases, the defendants appear to be asking this court to view Stanford and his bank, SIBL, like a Madoff Feeder Fund. The problem with that comparison is that, unlike Madoff and his feeder funds, the Stanford fraud began and ended with the SIBL CDs; SIBL was not a feeder fund sending money to a secondary Ponzi actor that dealt in covered securities the SIBL CDs are the Ponzi scheme. Unlike the feeder fund cases, the buck literally stopped with Stanford because Stanford did not invest the money with anyone else who traded in covered securities and, unlike the situation in Barron, there are no allegations that Stanford (the feeder fund in defendants analogy) was defrauded by a secondary Madofftype actor when Stanford sought to invest in covered securities. Defendants comparisons to the

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Madoff feeder fund cases fall flat and should be rejected. But defendants comparisons to Madoff become even more unpersuasive upon closer inspection, which necessitates an examination of the Stanford scheme from the perspective of both the defrauded investors and the defrauder, Stanford. From the investors perspective, and as alleged in the various class actions, the Stanford investors deposited their money with Stanfords Bank, SIBL, because they were told that an investment in the SIBL CD was a safe and secure and (importantly) highly liquid investment product. Unlike the Madoff feeder fund cases, there have been no allegations that any investor bought the SIBL CDs so he could get his money invested into the stock market or into the S&P 100 or 500 or any other type of covered securities. Indeed, the notion is absurd: who would go buy a bank CD from an Antiguan bank in order to invest in securities publicly traded on United States securities markets? Instead, the class actions uniformly allege that the investors deposited money with SIBL for steady, fixed interest rate returns and for the explicit purpose of capital preservation. At bottom, the Stanford CDs were marketed as vehicles for savings, not speculation on national markets. Moreover, another important distinction is that, unlike the Madoff cases, Stanford never told anyone that he was going to directly invest their money into covered securities; i.e., purchase covered securities directly for the individual accounts of the investors. Again,

Madoffs Ponzi scheme revolved around a brokerage that managed peoples brokerage accounts based on a purportedly unique trading strategy that invested the clients money solely in covered securities. Madoff lied when he told investors (or the feeder funds the investors went through to get to Madoff) that he had purchased covered securities for their accounts when he had not.

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In contrast, Stanfords Ponzi scheme revolved around a bank that issued Certificates of Deposit. Stanfords fraud consisted of his telling investors that their deposits in the Bank were safe, secure and highly liquid, without disclosing that, in fact, he was taking the money and doing whatever he pleased with it, including making unsecured loans to himself and investing the money heavily into illiquid real estate holdings. Importantly, and in contrast to the Madoff case, Stanford never promised any investor he was going to take their money and directly buy covered securities for the investors individual account. Moreover, and again following the defendants request that the court compare Stanford or SIBL to the Madoff feeder funds, even if Stanford represented to investors that the Banks own investment portfolio included some small fraction of stock investments,6 there is no allegation that Stanford or SIBL were defrauded when they purchased said covered securities, thereby indirectly injuring the investors (like the Feeder Fund in Barron was defrauded by Madoff, thereby indirectly injuring the Barron investors); nor are there any allegations that the investors were injured because Stanford or SIBL did not purchase covered securities like they had promised (as is the basic fact pattern in Madoff). There is simply no allegation that any fraud occurred in connection with Stanfords separate purchase of covered securities for SIBLs separate portfolio account, and consequently there is no link between the claimed injuries of the Stanford investors and the existence (or not) of any covered securities. The interpretation of SLUSA and the in connection with requirement urged by the defendants stretches the statute beyond its plain meaning and if accepted, would subsume any tort or contract claim involving any securities firm, no matter what the product that was being

Of course, Stanford represented that he invested SIBLs portfolio in many other types of investments as well that would not qualify as covered securities, and in their SLUSA determinations the New York courts have focused on this issue of whether the feeder funds invested solely and exclusively in Maddoffs covered securities. See Kingate, 2011 WL 1362106 (SDNY 2100).
6

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peddled.7 Unlike Madoff, covered securities just arent at the heart of the Stanford case Stanford and the SIBL CDs are at the heart of this case. C. Causes of Action Where a Misrepresentation or Omission Are Not a Necessary Component Are Not Subject to SLUSA. Finally, any application of SLUSA necessarily depends on the particular factual allegations in each case, and the Court must analyze the cases on a case by case and, indeed, claim by claim basis.8 The Third Circuit reached this conclusion in Lord Abbet, where it held that a complaint should not be dismissed in its entirety if it includes state law claims that are not precluded by SLUSA as well as state law claims that are precluded. In re Lord Abbott Mutual Funds Fee Litigation, 553 F.3d 248, 254 (3d Cir. 2009)(holding that neither the statutory language, the legislative history nor relevant case law supports the complete dismissal of such an action). For instance, state law causes of action under the Texas Securities Act based on registration violations cannot be preempted by SLUSA because SLUSA applies to, only claims that include misstatements or omissions as a necessary component. Anwar v. Fairfield Greenwich Ltd., 728 F.Supp.2d 372, 399 (S.D.N.Y. 2010) (emphasis added) (citation omitted). Misrepresentations or omissions are not an essential element of a registration violation (whether securities or dealer registration); therefore such claims are not subject to SLUSA. A court, after considering both technical elements of a claim as well as factual allegations intrinsic to the claim as alleged, must dismiss under SLUSA only claims that include misstatements or omissions as a necessary component. Anwar v. Fairfield Greenwich Ltd.,
Gavin, v. AT&T Corp., 464 F.3d 634, 639-40 (7th Cir. 2006)(the connection requirement must be taken seriously. [O]f course there is a literal sense in which anything that happens that would not have happened but for some prior event is connected to that event in the same sense the fraud is connected to the Big Bang.). 8 Many defendants have not even alleged that SLUSA applies.
7

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728 F.Supp.2d 372, 399 (S.D.N.Y. 2010) (emphasis added) (citing to Xpeditor Creditor Trust v. Credit Suisse First Boston (USA) Inc., 341 F. Supp. 2d 258, 266-70 (S.D.N.Y. 2004)); see also Levinson v. PSCC Services, Inc., 2010 WL 5477250 at *8 (D. Conn. 2010)(SLUSA does not apply where there are no allegations that the named defendants committed fraud in the sale of covered securities); Grund v. Delaware Charter Guarantee & Trust Co., 2011 WL 2118754 at *9 (S.D.N.Y. 2011) (SLUSA does not apply absent allegations that sound in fraud or allege fraud-based causes of action); Paru v. Mutual of America Life Ins. Co., No. 04 Civ. 6907, 2006 WL 1292828, at *3 (S.D.N.Y. May 11, 2006) (denying defendants motion to dismiss under SLUSA where it was clear plaintiffs allegations were not based on misstatements or omissions). Causes of action based on registration violations do not sound in fraud and do not require any misstatement or omission to be viable. It would be improper to lump these causes of action together with those alleging fraud as part of a determination of whether SLUSA applies to all claims before the Court in all cases. In re Lord Abbott Mutual Funds Fee Litigation, 553 F.3d 248, 254 (3d Cir. 2009). Dated: June 2011 Respectfully submitted,

CASTILLO SNYDER, P.C. By: /s/ Edward C. Snyder Edward C. Snyder Texas Bar No. 00791699 esnyder@casnlaw.com Bank of America Plaza, Suite 1020 300 Convent Street San Antonio, Texas 78205 (210) 630-4200 (210) 630-4210 (Facsimile)

STRASBURGER & PRICE, LLP

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By: /s/ Edward F. Valdespino Edward F. Valdespino edward.valdespino@strasburger.com Andrew L. Kerr andrew.kerr@strasburger.com 300 Convent Street, Suite 900 San Antonio, Texas 78205 Telephone: (210) 250-6000 Facsimile: (210) 250-6100

MORGENSTERN & BLUE, LLC By: /s/ Peter D. Morgenstern Peter D. Morgenstern (admitted pro hac vice) pmorgenstern@mfbnyc.com 885 Third Avenue New York, New York 10022 (212) 750-6776 (212) 750-3128 (Facsimile) ATTORNEYS FOR THE OFFICIAL STANFORD INVESTORS COMMITTEE

CERTIFICATE OF SERVICE On June____ 2011, I electronically submitted the foregoing document with the clerk of the court of the U.S. District Court, Northern District of Texas, using the electronic case filing system of the Court. I hereby certify that I will serve all counsel of record, electronically, or by other means authorized by the Court or the Federal Rules of Civil Procedure. /s/ Edward C. Snyder Edward C. Snyder

BRIEF IN SUPPORT OF MOTION FOR LEAVE TO FILE BRIEF AS AMICUS CURIAE

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