Preview
FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021
NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: COMMERCIAL DIVISION
In re INFINITY Q DIVERSIFIED ALPHA FUND Index No. 651295/2021
SECURITIES LITIGATION
Part 53: Justice Andrew S. Borrok
REPLY MEMORANDUM OF LAW IN SUPPORT OF
CHARLES SHERCK’S MOTION TO INTERVENE
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ......................................................................................................... iii
I. INTERVENTION IS ALLOWED UNDER
THE CPLR AND NOT OPPOSED BY PLAINTIFFS ........................................................... 2
II. U.S. BANCORP WILL NOT BE ENTITLED TO INDEMNIFICATION ............................ 3
III. PLAINTIFFS’ OTHER ASSERTIONS ARE MERITLESS .................................................. 5
CONCLUSION ............................................................................................................................... 7
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TABLE OF AUTHORITIES
Cases Page
HSBC Bank U.S.A., N.A., Checking Account Overdraft Litig.,
49 Misc. 3d 1211(A), 29 N.Y.S.3d 847, 2015 WL 6698518 (N.Y. Sup. Ct. 2015) ................ 2
Casey v. Citibank,
No. 1:13-CV-353, 2014 WL 3468188 (N.D.N.Y. Mar. 21, 2014) .......................................... 2
In re Facebook, Inc. Derivative Litig.,
No. CV 2018-0307, 2021 WL 4552158 (Del. Ch. Oct. 5, 2021) ............................................ 6
iii
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The Plaintiffs’ Response to Proposed Intervenor Charles Sherck’s Motion for Intervention
(“Plaintiffs’ Response”) is heavy on hyperbole and light on facts. Neither Mr. Sherck nor his
counsel are engaged in a “wide-ranging campaign to sow misinformation” (Resp. at 1, 8 & 12),
nor do they seek to disrupt or delay the proposed settlement with respect to any defendant other
than U.S. Bancorp. Rather, they were diligently pursuing the first-filed securities class action
against U.S. Bancorp (a defendant with hundreds of millions of dollars of liability exposure) when
this proposed settlement was announced purporting to release those claims for $250,000. The
amount is so facially inadequate in view of U.S. Bancorp’s role and potential liability that Mr.
Sherck was required to intervene to protect the interests of the class members he represents in the
Wisconsin action. As explained below, the CPLR allows intervention here (Plaintiffs do not even
oppose the motion and their citations do not hold otherwise), and intervention is timely now
because the settlement, if provided to class members, will create a Hobson’s choice: class members
will be asked to (a) give away their rights to a material recovery against U.S. Bancorp (a primary
defendant) in exchange for settlement payments from other defendants; or (b) opt-out of the
settlement in its entirety as to all defendants. This structural flaw is not necessary, and was created
only by Plaintiffs’ insistence in including U.S. Bancorp in the settlement despite having chosen
not to pursue substantive litigation against it.
Plaintiffs’ Response, at best, confirms the suspicions that led to this motion in the first
place: the paltry sum agreed to by Plaintiffs with respect to U.S. Bancorp stems from a fundamental
misunderstanding of the firm’s contractual relationship with the Fund. U.S. Bancorp’s agreements
include indemnification provisions, but they expressly provide that U.S. Bancorp will be liable
(with no right of indemnification) for its own ordinary negligence—a showing that can be made
easily even as of today and will only be aided by discovery. U.S. Bancorp was the only service
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provider with contractual, front-line responsibility for securities valuation in the largest
misvaluation case ever, and no number of vague references to nonexistent conflicts or ulterior
motives of counsel can explain away the inadequacy of the proposed settlement. It should not be
presented to class members as currently designed.
I. INTERVENTION IS ALLOWED UNDER
THE CPLR AND NOT OPPOSED BY PLAINTIFFS
Plaintiffs’ citations to various non-binding cases do not preclude Mr. Sherck’s intervention
motion (which Plaintiffs ultimately do not oppose in any event). In HSBC Bank U.S.A., N.A.,
Checking Acct. Overdraft Litig., 49 Misc. 3d 1211(A), 29 N.Y.S.3d 847, 2015 WL 6698518 (N.Y.
Sup. Ct. 2015)—the only case Plaintiffs cite applying the CPLR—the Court denied the motion to
intervene because the interveners did not have plausible objections relevant at the preliminary
approval stage. Id. at *10-11. The Court noted that the “goal of preliminary approval is for a court
to determine whether notice of the proposed settlement should be sent to the class,” and that “courts
will grant preliminary approval where the proposed settlement is neither illegal nor collusive and
is within the range of possible approval.” Id. In that case, the Court found that “there is no doubt
that the proposed settlement is fair and within the range of possible approval. Even if the Court
accepts the [intervenors’] calculation of total damages . . . the $30 million in recovery here still
represents approximately 40% of the class members' total losses, again, a fair, adequate and
reasonable settlement, and well-within the possible range.” Id. at *11 (emphasis added).1
This case is quite different than HSBC. Under any calculation of damages, the proposed
settlement with respect to U.S. Bancorp reflects less than 1% of losses and does not even approach
1
Plaintiffs’ citations to Casey v. Citibank, N.A., 2014 WL 3468188, at *1 (N.D.N.Y. Mar. 21,
2014) and other non-binding federal cases are distinguishable on similar grounds: the courts in
those cases do not appear to have found the objections relevant to the legal standard at the
preliminary approval stage.
2
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a fair “range of possible approval.” Moreover, the proposed settlement here, by design, is
structurally coercive and the opt-out mechanism will not help: If preliminary approval is granted,
class members will be forced choose between (a) accepting the settlement with all defendants
(including U.S. Bancorp) and waiving valid claims against U.S. Bancorp for a wholly inadequate
recovery from that defendant; or (b) opting out of the settlement in its entirety and forgoing
participation in the recovery against the other defendants. Class members should not be required
to give away their rights to a meaningful class-wide recovery against U.S. Bancorp in order to
receive the benefits of a material settlement with other parties. Thus, unlike in HSBC, Mr. Sherck’s
objections in this case are directly relevant to the Court’s consideration of preliminary approval,
and his motion should be granted.
II. U.S. BANCORP WILL NOT BE ENTITLED TO INDEMNIFICATION
Plaintiffs’ only substantive justification for the proposed settlement with U.S. Bancorp is
that “pursuant to applicable indemnification agreements, this defendant can seek indemnification
from the Funds.” (Resp. at 5.) Plaintiffs notably do not cite or attach the purported “indemnification
agreements,” and their contention is contrary to the express terms of the relevant contracts between
U.S. Bancorp and the Trust.
U.S. Bancorp has two relevant agreements with the Trust: a Fund Administration Servicing
Agreement and a Fund Accounting Servicing Agreement, each dated January 1, 2014 (the
“Agreements”). Both Agreements contain the following provision with respect to the Trust’s
indemnification of U.S. Bancorp (referred to as USBFS below), which is expressly limited to
liability for non-negligent conduct:
3
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It is implausible that U.S. Bancorp will be able to show that it satisfied its ordinary duty of
care in calculating the value of the Fund’s derivative securities: the securities were overvalued by
hundreds of millions of dollars for four years or more; they were reported at mathematically
impossible prices according to the SEC; they did not match prices reported by other parties for the
same securities; and the SEC figured out the ruse from the outside without nearly the access to
information that U.S. Bancorp had. As to the specific misrepresentations at issue in the Wisconsin
action, U.S. Bancorp was contractually responsible for preparing the Fund’s public filings and, in
particular, the sections regarding its oversight of securities valuation; it controlled the Fund with
respect to those filings; its senior employees signed the Fund’s registration statement; and its
representations regarding its process for valuing securities were false for years. It is implausible
that U.S. Bancorp would be indemnified for any liability it may incur.
Plaintiffs’ conclusion that U.S. Bancorp’s Agreements would “render any judgment against
it in the Actions a pyrrhic victory” (Resp. at 10) is confusing at best given that any judgment would
necessarily entail a finding of at least negligence if not worse. For that reason, it is considerably
more likely that U.S. Bancorp will be required to indemnify the Trust for the monetary losses
caused by the Fund’s implosion pursuant to provisions in the same Agreements:
4
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Given that U.S. Bancorp’s purported indemnification right apparently was a material factor
in negotiation, the proposed settlement is fundamentally flawed with respect to U.S. Bancorp. That
Plaintiffs have negotiated material recoveries from other defendants does not excuse the
inadequacy of the settlement with U.S. Bancorp, nor should class members be forced to accept a
wholly inadequate settlement as to a primary defendant merely because it has been bundled with
settlements with others.
III. PLAINTIFFS’ OTHER ASSERTIONS ARE MERITLESS
Plaintiffs’ remaining contentions are neither here nor there:
• Mr. Sherck has not “moved for lead plaintiff in the Federal Action or sought to join the
State Action” (Resp. at 3) because neither case named U.S. Bancorp when the
Wisconsin case was filed. For the same reason, the Wisconsin case is not a “redundant
proceeding” (Resp. at 11), but rather the first-filed case against a primary defendant.
• Mr. Sherck does not propose, at this late stage, to “add U.S. Bancorp as a defendant”
in this case (Resp. 12) because the Wisconsin case is already being litigated. Plaintiffs
could have pursued litigation against U.S. Bancorp in this case but chose not to.
• The fact that Plaintiffs have been negotiating a settlement since December 2021 does
not undercut the Wisconsin case but rather draws into question the quality of the
negotiations, given that they began even before the SEC filed its complaint in February
2022, which revealed significant additional information about the valuation issues.
5
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• Plaintiffs’ claims that the proposed settlement is “extraordinary” and “excellent” (Resp.
at 5, 11) are based only on recoveries from other parties (which Mr. Sherck does not
oppose), and Plaintiffs concede that the U.S. Bancorp settlement is immaterial.
• While “continued litigation” is allegedly the “primary obstacle to releasing” the Fund’s
cash reserve (Resp. at 6), Mr. Sherck does not seek to prevent the resolution of claims
against other parties, which will result in an additional distribution to investors.
Moreover, even if U.S. Bancorp had a plausible indemnification right (it does not), a
material recovery against it will more than offset any delay in distributions.
• Plaintiffs do not dispute that there has been no fact discovery in this case, but they argue
that they have obtained “over 171,000 documents” (Resp. at 9), presumably in
connection with mediation. Without disclosing what the documents are, where they
came from, or whether they relate to U.S. Bancorp, Plaintiffs should not be entitled to
an inference in their favor.
• Mr. Sherck’s counsel has no conflict because the parties in the Wisconsin and Delaware
cases do not overlap other than as to U.S. Bancorp (a defendant in both cases), and
Plaintiffs do not articulate any particular conflict. Neither case seeks a recovery against
the Fund or the Trust, both cases seek to put money back into the pot for investors, and
there is no blanket rule against representation in cases based on format of the action.2
2
For example, in Facebook, Inc. Derivative Litig., 2021 WL 4552158 (Del. Ch. Oct. 5, 2021), the
court found that counsel (including counsel for Plaintiffs in this case) were not conflicted by
representations in a direct case and derivative case because counsel was not asserting “internally
inconsistent” claims. Id. at *4. Moreover, in that case—unlike here—counsel had even sued the
corporation in the direct case that it sought to represent in the derivative case, but the court still
found no conflict. Id.
6
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• There is no “significant confusion” among class members other than as to why the
proposed settlement is immaterial with respect to U.S. Bancorp, and counsel has not
“publish[ed] a misleading class notice” or engaged in any improper “ex parte
communications.” (Resp. at 1.) The purported “misinformation” cited by Plaintiffs
(Resp. at 10) consists of literally true information regarding the proposed settlement
with respect to U.S. Bancorp as set forth in Plaintiffs’ own filings. Plaintiffs articulate
no theory as to how publicly disclosing facts about the proposed settlement are
“prejudicing their due process rights.” (Resp. at 1.)
CONCLUSION
Mr. Sherck appreciates the Court’s time and attention to this matter and respectfully
requests that the Court grant his motion.
Dated: August 31, 2022
New York, New York
By: /s/ Aaron T. Morris
Aaron T. Morris
aaron@moka.law
Andrew W. Robertson
andrew@moka.law
MORRIS KANDINOV LLP
1740 Broadway, 15th Floor
New York, NY 10019
Tel. (877) 216-1552
7
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RULE 17 STATEMENT
Pursuant to 22 N.Y.C.R.R. §202.70(g), Rule 17, the undersigned counsel certifies that the
foregoing brief was prepared using Microsoft Word with the following proportionally spaced
typeface: Times New Roman, 12 point, double spacing.
The total number of words in the brief, inclusive of point headings and footnotes and
exclusive of the caption, table of contents, table of authorities, signature block, and this
Certification, is 1,859 words. By operation of Microsoft Word’s word count function, this number
includes legal citations and certain forms of punctuation.
Dated: August 31, 2022 By: /s/ Aaron T. Morris
Aaron T. Morris
aaron@moka.law
MORRIS KANDINOV LLP
1740 Broadway, 15th Floor
New York, NY 10019
Tel. (877) 216-1552
8
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Preview
FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION In re INFINITY Q DIVERSIFIED ALPHA FUND Index No. 651295/2021 SECURITIES LITIGATION Part 53: Justice Andrew S. Borrok REPLY MEMORANDUM OF LAW IN SUPPORT OF CHARLES SHERCK’S MOTION TO INTERVENE 1 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 TABLE OF CONTENTS Page TABLE OF AUTHORITIES ......................................................................................................... iii I. INTERVENTION IS ALLOWED UNDER THE CPLR AND NOT OPPOSED BY PLAINTIFFS ........................................................... 2 II. U.S. BANCORP WILL NOT BE ENTITLED TO INDEMNIFICATION ............................ 3 III. PLAINTIFFS’ OTHER ASSERTIONS ARE MERITLESS .................................................. 5 CONCLUSION ............................................................................................................................... 7 ii 2 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 TABLE OF AUTHORITIES Cases Page HSBC Bank U.S.A., N.A., Checking Account Overdraft Litig., 49 Misc. 3d 1211(A), 29 N.Y.S.3d 847, 2015 WL 6698518 (N.Y. Sup. Ct. 2015) ................ 2 Casey v. Citibank, No. 1:13-CV-353, 2014 WL 3468188 (N.D.N.Y. Mar. 21, 2014) .......................................... 2 In re Facebook, Inc. Derivative Litig., No. CV 2018-0307, 2021 WL 4552158 (Del. Ch. Oct. 5, 2021) ............................................ 6 iii 3 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 The Plaintiffs’ Response to Proposed Intervenor Charles Sherck’s Motion for Intervention (“Plaintiffs’ Response”) is heavy on hyperbole and light on facts. Neither Mr. Sherck nor his counsel are engaged in a “wide-ranging campaign to sow misinformation” (Resp. at 1, 8 & 12), nor do they seek to disrupt or delay the proposed settlement with respect to any defendant other than U.S. Bancorp. Rather, they were diligently pursuing the first-filed securities class action against U.S. Bancorp (a defendant with hundreds of millions of dollars of liability exposure) when this proposed settlement was announced purporting to release those claims for $250,000. The amount is so facially inadequate in view of U.S. Bancorp’s role and potential liability that Mr. Sherck was required to intervene to protect the interests of the class members he represents in the Wisconsin action. As explained below, the CPLR allows intervention here (Plaintiffs do not even oppose the motion and their citations do not hold otherwise), and intervention is timely now because the settlement, if provided to class members, will create a Hobson’s choice: class members will be asked to (a) give away their rights to a material recovery against U.S. Bancorp (a primary defendant) in exchange for settlement payments from other defendants; or (b) opt-out of the settlement in its entirety as to all defendants. This structural flaw is not necessary, and was created only by Plaintiffs’ insistence in including U.S. Bancorp in the settlement despite having chosen not to pursue substantive litigation against it. Plaintiffs’ Response, at best, confirms the suspicions that led to this motion in the first place: the paltry sum agreed to by Plaintiffs with respect to U.S. Bancorp stems from a fundamental misunderstanding of the firm’s contractual relationship with the Fund. U.S. Bancorp’s agreements include indemnification provisions, but they expressly provide that U.S. Bancorp will be liable (with no right of indemnification) for its own ordinary negligence—a showing that can be made easily even as of today and will only be aided by discovery. U.S. Bancorp was the only service 4 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 provider with contractual, front-line responsibility for securities valuation in the largest misvaluation case ever, and no number of vague references to nonexistent conflicts or ulterior motives of counsel can explain away the inadequacy of the proposed settlement. It should not be presented to class members as currently designed. I. INTERVENTION IS ALLOWED UNDER THE CPLR AND NOT OPPOSED BY PLAINTIFFS Plaintiffs’ citations to various non-binding cases do not preclude Mr. Sherck’s intervention motion (which Plaintiffs ultimately do not oppose in any event). In HSBC Bank U.S.A., N.A., Checking Acct. Overdraft Litig., 49 Misc. 3d 1211(A), 29 N.Y.S.3d 847, 2015 WL 6698518 (N.Y. Sup. Ct. 2015)—the only case Plaintiffs cite applying the CPLR—the Court denied the motion to intervene because the interveners did not have plausible objections relevant at the preliminary approval stage. Id. at *10-11. The Court noted that the “goal of preliminary approval is for a court to determine whether notice of the proposed settlement should be sent to the class,” and that “courts will grant preliminary approval where the proposed settlement is neither illegal nor collusive and is within the range of possible approval.” Id. In that case, the Court found that “there is no doubt that the proposed settlement is fair and within the range of possible approval. Even if the Court accepts the [intervenors’] calculation of total damages . . . the $30 million in recovery here still represents approximately 40% of the class members' total losses, again, a fair, adequate and reasonable settlement, and well-within the possible range.” Id. at *11 (emphasis added).1 This case is quite different than HSBC. Under any calculation of damages, the proposed settlement with respect to U.S. Bancorp reflects less than 1% of losses and does not even approach 1 Plaintiffs’ citations to Casey v. Citibank, N.A., 2014 WL 3468188, at *1 (N.D.N.Y. Mar. 21, 2014) and other non-binding federal cases are distinguishable on similar grounds: the courts in those cases do not appear to have found the objections relevant to the legal standard at the preliminary approval stage. 2 5 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 a fair “range of possible approval.” Moreover, the proposed settlement here, by design, is structurally coercive and the opt-out mechanism will not help: If preliminary approval is granted, class members will be forced choose between (a) accepting the settlement with all defendants (including U.S. Bancorp) and waiving valid claims against U.S. Bancorp for a wholly inadequate recovery from that defendant; or (b) opting out of the settlement in its entirety and forgoing participation in the recovery against the other defendants. Class members should not be required to give away their rights to a meaningful class-wide recovery against U.S. Bancorp in order to receive the benefits of a material settlement with other parties. Thus, unlike in HSBC, Mr. Sherck’s objections in this case are directly relevant to the Court’s consideration of preliminary approval, and his motion should be granted. II. U.S. BANCORP WILL NOT BE ENTITLED TO INDEMNIFICATION Plaintiffs’ only substantive justification for the proposed settlement with U.S. Bancorp is that “pursuant to applicable indemnification agreements, this defendant can seek indemnification from the Funds.” (Resp. at 5.) Plaintiffs notably do not cite or attach the purported “indemnification agreements,” and their contention is contrary to the express terms of the relevant contracts between U.S. Bancorp and the Trust. U.S. Bancorp has two relevant agreements with the Trust: a Fund Administration Servicing Agreement and a Fund Accounting Servicing Agreement, each dated January 1, 2014 (the “Agreements”). Both Agreements contain the following provision with respect to the Trust’s indemnification of U.S. Bancorp (referred to as USBFS below), which is expressly limited to liability for non-negligent conduct: 3 6 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 It is implausible that U.S. Bancorp will be able to show that it satisfied its ordinary duty of care in calculating the value of the Fund’s derivative securities: the securities were overvalued by hundreds of millions of dollars for four years or more; they were reported at mathematically impossible prices according to the SEC; they did not match prices reported by other parties for the same securities; and the SEC figured out the ruse from the outside without nearly the access to information that U.S. Bancorp had. As to the specific misrepresentations at issue in the Wisconsin action, U.S. Bancorp was contractually responsible for preparing the Fund’s public filings and, in particular, the sections regarding its oversight of securities valuation; it controlled the Fund with respect to those filings; its senior employees signed the Fund’s registration statement; and its representations regarding its process for valuing securities were false for years. It is implausible that U.S. Bancorp would be indemnified for any liability it may incur. Plaintiffs’ conclusion that U.S. Bancorp’s Agreements would “render any judgment against it in the Actions a pyrrhic victory” (Resp. at 10) is confusing at best given that any judgment would necessarily entail a finding of at least negligence if not worse. For that reason, it is considerably more likely that U.S. Bancorp will be required to indemnify the Trust for the monetary losses caused by the Fund’s implosion pursuant to provisions in the same Agreements: 4 7 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 Given that U.S. Bancorp’s purported indemnification right apparently was a material factor in negotiation, the proposed settlement is fundamentally flawed with respect to U.S. Bancorp. That Plaintiffs have negotiated material recoveries from other defendants does not excuse the inadequacy of the settlement with U.S. Bancorp, nor should class members be forced to accept a wholly inadequate settlement as to a primary defendant merely because it has been bundled with settlements with others. III. PLAINTIFFS’ OTHER ASSERTIONS ARE MERITLESS Plaintiffs’ remaining contentions are neither here nor there: • Mr. Sherck has not “moved for lead plaintiff in the Federal Action or sought to join the State Action” (Resp. at 3) because neither case named U.S. Bancorp when the Wisconsin case was filed. For the same reason, the Wisconsin case is not a “redundant proceeding” (Resp. at 11), but rather the first-filed case against a primary defendant. • Mr. Sherck does not propose, at this late stage, to “add U.S. Bancorp as a defendant” in this case (Resp. 12) because the Wisconsin case is already being litigated. Plaintiffs could have pursued litigation against U.S. Bancorp in this case but chose not to. • The fact that Plaintiffs have been negotiating a settlement since December 2021 does not undercut the Wisconsin case but rather draws into question the quality of the negotiations, given that they began even before the SEC filed its complaint in February 2022, which revealed significant additional information about the valuation issues. 5 8 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 • Plaintiffs’ claims that the proposed settlement is “extraordinary” and “excellent” (Resp. at 5, 11) are based only on recoveries from other parties (which Mr. Sherck does not oppose), and Plaintiffs concede that the U.S. Bancorp settlement is immaterial. • While “continued litigation” is allegedly the “primary obstacle to releasing” the Fund’s cash reserve (Resp. at 6), Mr. Sherck does not seek to prevent the resolution of claims against other parties, which will result in an additional distribution to investors. Moreover, even if U.S. Bancorp had a plausible indemnification right (it does not), a material recovery against it will more than offset any delay in distributions. • Plaintiffs do not dispute that there has been no fact discovery in this case, but they argue that they have obtained “over 171,000 documents” (Resp. at 9), presumably in connection with mediation. Without disclosing what the documents are, where they came from, or whether they relate to U.S. Bancorp, Plaintiffs should not be entitled to an inference in their favor. • Mr. Sherck’s counsel has no conflict because the parties in the Wisconsin and Delaware cases do not overlap other than as to U.S. Bancorp (a defendant in both cases), and Plaintiffs do not articulate any particular conflict. Neither case seeks a recovery against the Fund or the Trust, both cases seek to put money back into the pot for investors, and there is no blanket rule against representation in cases based on format of the action.2 2 For example, in Facebook, Inc. Derivative Litig., 2021 WL 4552158 (Del. Ch. Oct. 5, 2021), the court found that counsel (including counsel for Plaintiffs in this case) were not conflicted by representations in a direct case and derivative case because counsel was not asserting “internally inconsistent” claims. Id. at *4. Moreover, in that case—unlike here—counsel had even sued the corporation in the direct case that it sought to represent in the derivative case, but the court still found no conflict. Id. 6 9 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 • There is no “significant confusion” among class members other than as to why the proposed settlement is immaterial with respect to U.S. Bancorp, and counsel has not “publish[ed] a misleading class notice” or engaged in any improper “ex parte communications.” (Resp. at 1.) The purported “misinformation” cited by Plaintiffs (Resp. at 10) consists of literally true information regarding the proposed settlement with respect to U.S. Bancorp as set forth in Plaintiffs’ own filings. Plaintiffs articulate no theory as to how publicly disclosing facts about the proposed settlement are “prejudicing their due process rights.” (Resp. at 1.) CONCLUSION Mr. Sherck appreciates the Court’s time and attention to this matter and respectfully requests that the Court grant his motion. Dated: August 31, 2022 New York, New York By: /s/ Aaron T. Morris Aaron T. Morris aaron@moka.law Andrew W. Robertson andrew@moka.law MORRIS KANDINOV LLP 1740 Broadway, 15th Floor New York, NY 10019 Tel. (877) 216-1552 7 10 of 11 FILED: NEW YORK COUNTY CLERK 08/31/2022 01:14 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 174 RECEIVED NYSCEF: 08/31/2022 RULE 17 STATEMENT Pursuant to 22 N.Y.C.R.R. §202.70(g), Rule 17, the undersigned counsel certifies that the foregoing brief was prepared using Microsoft Word with the following proportionally spaced typeface: Times New Roman, 12 point, double spacing. The total number of words in the brief, inclusive of point headings and footnotes and exclusive of the caption, table of contents, table of authorities, signature block, and this Certification, is 1,859 words. By operation of Microsoft Word’s word count function, this number includes legal citations and certain forms of punctuation. Dated: August 31, 2022 By: /s/ Aaron T. Morris Aaron T. Morris aaron@moka.law MORRIS KANDINOV LLP 1740 Broadway, 15th Floor New York, NY 10019 Tel. (877) 216-1552 8 11 of 11