Preview
FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021
NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
Index No. 651295/2021
CLASS ACTION
In re INFINITY Q DIVERSIFIED ALPHA FUND
SECURITIES LITIGATION Part 53: Justice Andrew S. Borrok
DOMINUS MULTIMANAGER FUND, LTD., Index No. 652906/2022
Individually and on Behalf of All Others Similarly
Situated, CLASS ACTION
Plaintiff, Part 53: Justice Andrew S. Borrok
v.
INFINITY Q CAPITAL MANAGEMENT LLC,
et al,
Defendants.
U.S. BANCORP FUND SERVICES, LLC’S MEMORANDUM OF LAW
IN OPPOSITION TO INTERVENOR SHERCK’S ORDER TO SHOW CAUSE
VEDDER PRICE P.C.
Joshua A. Dunn
1633 Broadway, 31st Floor
New York, New York 10019
T: (212) 407-7700
F: (212) 407-7799
Thomas P. Cimino, Jr.,
pro hac vice application forthcoming
222 N. LaSalle St, Ste 2400
Chicago, Illinois 60601
T: (312) 609-7500
F: (312) 609-5005
Attorneys for U.S. Bancorp Fund Services,
LLC
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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT ................................................................................................1
STATEMENT OF FACTS AND PROCEDURAL HISTORY ...................................................3
LEGAL ARGUMENT ...............................................................................................................5
I. Sherck Is Not Entitled to the Documents He Seeks ..............................................5
A. Legal Standard ........................................................................................5
B. Lead Class Counsel Has Provided Detailed Testimony Regarding
Their Review of The USBFS (And Other) Documents .............................6
C. Sherck Fails to Demonstrate a Need to Review the Documents He
Seeks .......................................................................................................6
D. The Cases Relied upon by Sherck Are Distinguishable ............................9
II. The OSC Is Procedurally Improper and Untimely ............................................. 12
CONCLUSION ........................................................................................................................ 13
-i-
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TABLE OF AUTHORITIES
Page(s)
Cases
Charron v. Wiener,
731 F.3d 241 (2d Cir. 2013) ................................................................................................ 10
Da Silva Moore v. Publicis Groupe,
287 F.R.D. 182 (S.D.N.Y. 2012) ........................................................................................... 6
Ho v. Duoyuan Global Water, Inc.,
887 F. Supp. 2d 547 (S.D.N.Y. 2012) .................................................................................... 7
In re Community Bank of North Virginia,
418 F.3d 277 (3d Cir. 2005) ........................................................................................... 10-11
In re Frontier Commc’ns Corp. Stockholders Litig.,
No. 3:17-cv-01617-VAB, 2022 WL 4080324 (D. Conn. May 20, 2022) ................................ 6
In re General Motors Corp. Engine Interchange Litigation,
594 F.2d 1106 (7th Cir. 1979) ............................................................................................. 11
In re Global Crossing Ltd. Sec. Litig.,
No. 02 Civ. 910 (GEL), 2005 WL 1907005 (S.D.N.Y. Aug. 8, 2005) .................................... 8
Girsh v. Jepson,
521 F. 2d 153 (3d Cir. 1975) ............................................................................................... 11
Greenfield v. Villager Industries, Inc.,
483 F.2d 824 (3d Cir. 1973) ................................................................................................ 11
Lee v. Ocwen Loan Servicing, LLC,
101 F. Supp. 3d 1293 (S.D. Fla. 2015) ............................................................................... 5, 9
Newman v. Stein,
464 F.2d 689 (2d Cir. 1972) ................................................................................................ 10
Saylor v. Lindsley,
456 F. 2d 896 (2d Cir. 1972) ........................................................................................... 9, 10
Tomes v. Bank of Am. (In re Checking Account),
830 F. Supp. 2d 1330 (S.D. Fla. 2011) ............................................................................ 5-6, 9
Wal-Mart Stores, Inc. v. Visa U.S.A., Inc.,
396 F.3d 96 (2d Cir. 2005) .................................................................................................... 5
ii
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Statutes
15 U.S.C. § 80a-10(a) ................................................................................................................. 7
iii
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U.S. Bancorp Fund Services, LLC (“USBFS”), by and through its attorneys, Vedder Price
P.C., hereby submits this Memorandum of Law in support of its Opposition to intervenor Charles
Sherck’s (“Sherck”) Order to Show Cause (“OSC”),1 for an order directing USBFS to produce any
and all documents in response to the Subpoena Duces Tecum attached to the Morris Affirmation
as Exhibit 1 (the “Subpoena”) within three (3) days of the date the OSC is signed.
PRELIMINARY STATEMENT
Sherck is a class member who, along with five other class members, has filed a 49-page
objection (the “Objection”) to the pending settlement in this matter (the “Settlement”). In
furtherance of his efforts to disrupt the Settlement process in this case, Sherck now seeks an order
from the Court compelling USBFS to produce to him the almost-20,000 documents that USBFS
previously produced to court-appointed class counsel (“Class Counsel”)2 in this case and the
related federal class action.3 Sherck’s OSC should be denied because it completely fails to satisfy
the standard for entitlement to discovery by a settlement objector. For example, it does not:
identify the specific types of documents sought, explain why they are needed, or demonstrate that
extensive review of the documents conducted by Class Counsel was inadequate. Simply put,
1
The OSC is comprised of the Affirmation of Aaron Morris in Support of Proposed Order to Show
Cause (“Morris Affirmation”) (NYSCEF No. 262) and Exhibits 1 and 2 thereto (NYSCEF Nos.
263 and 264).
2
On April 15, 2021, the Court appointed Scott + Scott Attorneys at Law and The Rosen Law Firm,
P.A. as co-lead counsel for the plaintiffs in this case. (NYSCEF No. 12.) On March 31, 2022, the
United States District Court for the Eastern District of New York named Robbins Geller Rudman
& Dowd LLP and Boies Schiller Flexner LLP as co-lead counsel in the federal class action. See
In re Infinity Q Diversified Alpha Fund and Infinity Q Volatility Alpha Fund L.P. Securities
Litigation, Case No. 1:21-cv-01047-FB-MMH (E.D.N.Y) (ECF No. 55).
3
In total, as set forth in sworn testimony, Class Counsel has reviewed over 300,000 documents
received from the Defendants.
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Sherck wants these documents to second guess the work and conclusions of Class Counsel. This
is not a valid basis for obtaining such discovery.
Moreover, Sherck’s counsel does not need these documents and they will add nothing to
the process to approve the Settlement. In the Objection, Sherck argues that USBFS has substantial
liability under Sections 11 and 15 of the Securities Act of 1933 (the “‘33 Act”). as fund
administrator to the Infinity Q Diversified Alpha Fund (the “Fund”). However, as USBFS will
further demonstrate in its response to the Objection, it is well-settled that Section 11 liability is
strictly limited to a narrow group of statutorily-enumerated defendants. USBFS does not fall into
any of these statutory categories, as clearly demonstrated by the numerous publicly-filed
documents that govern both the Fund and the services USBFS performed for the Fund. Similarly,
publicly-filed documents demonstrate that USBFS did not control the Fund for purposes of
Section 15 liability. Sherck and his counsel already have all of these documents.
The OSC is also undercut by Sherck’s own Objection. In the Objection, Sherck touts the
extensive factual investigation undertaken by his counsel prior to the filing of his Wisconsin case
and a related Delaware derivative lawsuit. Nowhere in the Objection does he contend that
additional documents are needed to support the Objection, nor does he explain why the detailed
review chronicled in the lengthy affidavits submitted by Class Counsel was insufficient.
Sherck’s OSC is also procedurally improper and untimely. Sherck’s counsel presented
lengthy oral argument at the October 17, 2022 hearing to preliminarily approve the Settlement
(“Preliminary Approval Hearing”) and had the opportunity to provide input into the schedule set
in this case. However, Sherck never requested leave to seek discovery, notwithstanding the fact
that the preliminary approval motion made clear that Class Counsel had been given access to
thousands of pages of confirmatory discovery from the Defendants, including USBFS. Moreover,
2
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the October 17, 2022 order preliminarily approving the Settlement (“Preliminary Approval
Order”) expressly stayed this case pending the hearing on the final approval of the Settlement
(“Final Approval Hearing”). Sherck also never requested that this Court modify that stay to allow
him to seek to issue a subpoena to USBFS.
Simply put, the OSC seeks approval for a fishing expedition in an effort to disrupt and,
ultimately, derail the Settlement so that he and his counsel may pursue a competing Wisconsin
class action. This request goes beyond the bounds of the process established by the Court in the
Preliminary Approval Order and, as shown below, is both factually and legally baseless.
Moreover, it would set a precedent for other absent class members in this case to seek those same
documents from USBFS, or the over 300,000 documents produced by all of the Defendants, for
that matter. For all of these reasons, the Court should deny the OSC.
STATEMENT OF FACTS AND PROCEDURAL HISTORY
This case was originally filed on February 24, 2021, naming as a putative class those
investors in the Fund and asserting violations of the ‘33 Act.4 By order dated April 15, 2021, the
Court appointed two law firms as co-lead counsel for the plaintiffs in this case. (NYSCEF No. 12.)
A consolidated class action complaint was then filed on April 16, 2021 and was amended on
May 2, 2022.
After extensive, arm’s-length settlement negotiations lasting over nine months under the
direction of an experienced mediator, Robert A. Meyer, Esq. of JAMS, the Settlement was
reached. The Settlement was memorialized in a stipulation filed with the Court on August 17,
2022. (NYSCEF No. 160.) The Settlement originally applied to some, but not all, defendants in
4
The Fund is one of a series of the Trust For Advised Portfolios, a Delaware statutory trust (the
“Trust”).
3
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this and the various other related class action cases. The stipulation was amended on September 7,
2022 to reflect that the Settlement had been expanded to include all Defendants in this case and in
the federal class action. (NYSCEF No. 177.) Beginning on or about August 11, 2022, USBFS
provided Class Counsel with access to the non-public USBFS documents at issue here and
provided credentials for over 30 attorneys associated with Class Counsel in this case and the
related federal class action to review this confirmatory discovery. (See the accompanying
Affirmation of Thomas P. Cimino, Jr. (“Cimino Aff.”) at ¶¶ 3-4.) On August 17, 2022, an order
to show cause seeking preliminary approval of the Settlement was filed. (NYSCEF No. 158.)
On October 17, 2022 the Court held the Preliminary Approval Hearing. Sherck was
represented by his counsel, Aaron Morris (“Mr. Morris”), at that hearing, and Mr. Morris made
lengthy substantive arguments in support of Sherck’s objections to the terms of the Settlement. At
the end of that hearing, the Court entered the Preliminary Approval Order and set a January 31,
2023 hearing to determine, e.g., “whether the [Settlement] is fair, reasonable and adequate and
should be approved by the Court.” (NYSCEF No. 181.) Among other things, the Preliminary
Approval Order stayed this case, and enjoined all class members from instituting or prosecuting
further proceedings pending the Final Approval Hearing. (Id.)
Almost two months later, on December 9, 2022, Mr. Morris sent the Subpoena to counsel
for USBFS. (NYSCEF No. 263.) Following various meet-and-confer communications, USBFS
timely served its objections to the Subpoena on December 29, 2022. (NYSCEF No. 264.)
Class Counsel filed its motion for final approval of the Settlement (the “Final Approval
Motion”) on December 27, 2022. (NYSCEF Nos. 210, 211, 212, 213, 214, 215, 216, 217, 218,
219, 220, 221.) On January 10, 2023, Mr. Morris filed the Objection on behalf of his clients,
including Sherck. (NYSCEF No. 254.) On January 11, 2023, Mr. Morris filed the OSC, seeking
4
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an order compelling USBFS to produce documents within three (3) days of the Court’s entry of
same. (NYSCEF Nos. 262, 263, 264.)
LEGAL ARGUMENT
I. Sherck Is Not Entitled to the Documents He Seeks
A. Legal Standard
It is well-settled that objectors to a class action settlement have no absolute right to
discovery. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 120 (2d Cir. 2005).5 Moreover,
requests to conduct discovery should be denied where, as here, “the Court has sufficient
information before it to enable the Court to determine whether to approve the Settlement.” Lee v.
Ocwen Loan Servicing, LLC, 101 F. Supp. 3d 1293, 1296 (S.D. Fla. 2015) (emphasis in original);6
see also In re Frontier Commc’ns Corp. Stockholders Litig., No. 3:17-cv-01617-VAB, 2022 WL
4080324, at *19 (D. Conn. May 20, 2022) (denying motion to lift discovery where the court already
had a sufficient basis to intelligently approve the settlement offer); Tomes v. Bank of Am. (In re
5
Sherck attempts, unsuccessfully, to distinguish Wal-Mart Stores in the OSC. (NYSCEF No. 262
at ¶ 11.) He argues that in Wal-Mart Stores there was evidence that plaintiffs engaged in extensive
discovery, and that in this case there allegedly is “no meaningful record” that Class Counsel
reviewed the documents made available to them. However, as explained below, Class Counsel
have provided sworn affidavits to the Court demonstrating that they reviewed each of the over
300,000 documents produced by the Defendants, including USBFS (NYSCEF No. 212 at ¶¶ 97–
99, n.7.), and engaged in myriad other efforts to ensure that the Settlement is appropriate. Sherck
may not defeat this evidence by suggesting without any basis that it is not true.
6
Sherck fails to distinguish Lee in the OSC. (NYSCEF No. 262 at ¶ 10.) The fact that the movant
in Lee had not yet formally lodged her objection made no difference to the court’s ultimate
conclusion, as the court found that “even if [the movant] did formally and timely object . . . her
discovery request would still be denied.” Id. at 1296. That was because, as in this case, the movant
did not establish why the requested discovery (which—as here— had already been produced to
class counsel) was necessary for the court’s inquiry. Id. The court concluded that there was
sufficient evidence to satisfy the court about the issue the movant purportedly needed discovery to
probe. The same logic must apply here, where Sherck has not even attempted to articulate a need
for discovery, let alone why the Court does not have a sufficient basis to assess the reasonableness
of the Settlement.
5
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Checking Account), 830 F. Supp. 2d 1330, 1337 n.6 (S.D. Fla. 2011) (denying motion for discovery
where the record “was more than sufficient to enable [the court] to decide all of the issues” related
to approval and “thus discovery would have served no proper purpose”).
As demonstrated below, Sherck fails to meet this standard because he fails to show that,
unless he is provided with the documents sought by the OSC, the Court will lack a sufficient basis
to intelligently rule on the final approval of the Settlement.
B. Lead Class Counsel Has Provided Detailed Testimony Regarding Their Review of
The USBFS (And Other) Documents
In support of his effort to second-guess the work already done by Class Counsel, Sherck
baldly asserts that Class Counsel’s review of the documents “appears suspect at best.” (NYSCEF
No. 262 at ¶¶ 6–7.) However, Sherck’s conjecture is directly contradicted by Class Counsel’s
sworn affidavit in support of the Final Approval Motion which demonstrates that Class Counsel
conducted a linear review of all 159,281 documents they received from the Trust, all 19,700
documents they received from USBFS, and all 1,410 documents they received from EisnerAmper.
(NYSCEF No. 212 at 97–99, n.7.)7 Accordingly, Sherck’s only basis for seeking the documents
from USBFS is demonstrably false.
C. Sherck Fails to Demonstrate a Need to Review the Documents He Seeks
Moreover, Sherck has not established any need for the documents he seeks. His primary
basis for opposing the Settlement is his theory that USBFS is not paying enough to resolve his
claims against it under Sections 11 and 15 of the ‘33 Act. However, all of the facts relevant to his
meritless claims are found in publicly-filed documents relating to the Fund and the Trust. For
7
Class Counsel also used a technology-assisted “continuous active learning model” to review an
additional 149,495 documents from other parties to the Settlement. (Id. at ¶¶ 97–99, n.7.) See Da
Silva Moore v. Publicis Groupe, 287 F.R.D. 182, 183 (S.D.N.Y. 2012) (holding that computer-
assisted review is an acceptable way to review relevant ESI).
6
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example, Sherck’s Section 11 claim against USBFS is based on the strict liability of signatories to
a fund’s registration statements for misrepresentations contained therein. (See NYSCEF No. 254
at 23.) Publicly-available documents—such as the very registration statements themselves (the
“Registration Statements”)—demonstrate that USBFS did not sign the Registration Statements.
(See Cimino Aff. at Exh. A, p. 117.) The same documents also show that no one signed the
Registration Statements in their capacity as an employee of USBFS. (See id.) Instead, Sherck
claims that USBFS is liable under a theory of respondeat superior for the conduct of its employees
who signed the Registration Statements while serving in a separate capacity as officers of a
separate entity (the Trust). (See NYSCEF No. 254 at 23.) Again, the publicly-available
registration statements themselves show that this argument is fatally flawed: they explicitly state
that the individuals who signed the Registration Statements did so exclusively in their capacity as
officers or directors of the Trust.8 All that is left of Sherck’s Section 11 claim, then, is the legal
issue of whether the doctrine of respondeat superior can be extended to impose Section 11 liability
on USBFS under these publicly-available facts. (It cannot.)9 The facts underlying Sherck’s
Section 15 control person liability claim against USBFS are similarly provided by publicly-filed
8
See Cimino Aff. at Exh. A, p. 117. Other publicly-filed documents make it clear that these
individuals were appointed to their officer positions by the Trust’s board (a majority of which was
independent consistent with the Investment Company Act of 1940), were supervised by the Trust’s
board, and were subject to removal by the Trust’s board. (See 15 U.S.C. § 80a-10(a); Cimino Aff.
at Exh. A, p. 69; Exh. B, pp. 4, 6.)
9
See, e.g., Ho v. Duoyuan Global Water, Inc., 887 F. Supp. 2d 547, 580 (S.D.N.Y. 2012)
(dismissing Section 11 claim based on respondeat superior absent allegations that the defendant
corporation controlled the actions of its employee who signed a registration statement for another
company in her capacity as director of the other company); In re Global Crossing Ltd. Sec. Litig.,
No. 02 Civ. 910 (GEL), 2005 WL 1907005, at *11 (S.D.N.Y. Aug. 8, 2005) (dismissing Section 11
claim where corporate defendants’ employees signed another company’s registration statement but
the plaintiff was unable to set forth “allegations substantiating a concrete connection between those
signatures and any direction from [the defendant corporations]”).
7
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documents. These documents conclusively demonstrate that the Fund was controlled by the
Trust’s board and the Fund’s investment adviser, and that USBFS “does not have any
responsibility or authority for the management of the Fund . . . .” (Cimino Aff. at Exh. A, pp. 23,
78 (emphasis added); Exh. B, p. 4.) In short, all of the documents needed by the Court to assess
the appropriateness of the Settlement are already contained in the public record.10
Sherck’s own Objection further underscores this point. For example, he does not identify
any specific categories of documents that the Court is missing or that he has been unable to bring
to the Court’s attention through the Objection. In fact, the 49-page Objection makes no reference
to any missing information needed by the Court to rule on whether the Settlement should be
approved. To the contrary, the Objection claims that Mr. Morris undertook an “extensive
investigation of the facts and circumstances” prior to asserting claims against USBFS on behalf of
Sherck in Wisconsin state court. (NYSCEF No. 254 at 11; see also NYSCEF No. 163 (stating, in
support of Sherck’s motion to intervene, that Mr. Morris conducted “an extensive investigation of
the facts and circumstances of the Fund’s collapse” and that Mr. Morris had filed a derivative
complaint against USBFS on behalf of the Trust “based on an extensive years-long investigation”
that included “non-public documents obtained through an inspection demand to the Fund,” among
other things11).) Sherck also clearly does not view the documents he now seeks as necessary to
assert his Objection to the Settlement.
10
It is telling that Sherck does not provide any of these documents to the Court in his Objection or
in the OSC.
11
The fact that Mr. Morris is also counsel in the derivative suit asserting claims on behalf of the
Trust raises the specter that any documents produced to Sherck here will find their way into the
derivative suit in Delaware. Mr. Morris’s willingness to enter into a protective order to not use
the documents in any other action does not relieve Sherck from demonstrating a need in this action.
8
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In short, Sherck’s untimely OSC is nothing more than a fishing expedition, intended to
ultimately derail the settlement process so he can pursue his Wisconsin case as a class action.
Unsurprisingly, this is not an appropriate basis for discovery. See, e.g., Tomes v. Bank of Am., 830
F. Supp. 2d 1330, 1337 n.6 (S.D. Fla. 2011) (denying objectors’ motions seeking discovery, and
characterizing them as a “fishing expedition,” where “[t]he motions were untimely and would have
unduly and unnecessarily disrupted the schedule this Court set for the Settlement-related
proceedings [and] . . . in neither instance did the Objectors make any attempt to identify
specifically or narrowly the precise discovery they were seeking or the reasons they were seeking
such discovery”).
Moreover, allowing discovery by an absent class member under these circumstances would
set a disruptive precedent in this case, and in future cases, that would undermine class counsel,
increase the discovery costs associated with class action settlements, and increase the amount of
time it takes to finalize class action settlements and thereby provide recovery to class members.
See, e.g., Lee, 101 F. Supp. 3d at 1297–98 (expressing concern that allowing discovery for one
absent class member would open the floodgates to discovery from other class members and thereby
derail settlement). Here, such a precedent might well encourage other absent class members to
seek the same documents from USBFS, or even the over 300,000 documents produced by all
Defendants. This would hopelessly confuse and disrupt the approval process of the Settlement,
which is exactly what Sherck seeks by his Objection and the current OSC.
D. The Cases Relied upon by Sherck Are Distinguishable
None of the cases Sherck cites support the relief requested in his OSC, particularly in light
of his failure to articulate any need for such discovery. Saylor v. Lindsley, 456 F. 2d 896
(2d Cir. 1972), is a case in which, unlike here, there was a legitimate reason to be concerned about
the quality of the work done by plaintiff’s counsel: they had entered into the stipulation of
9
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settlement without their client’s (the lead plaintiff’s) authorization. Id. at 904. Here, as noted
above, the OSC identifies no basis to conclude that the reputable attorneys appointed as Class
Counsel by the Court are acting contrary to the interests of the class or without authorization from
the class representative plaintiffs to proceed with the Settlement.
In Newman v. Stein, 464 F.2d 689 (2d Cir. 1972), the Second Circuit affirmed the final
approval of a class action settlement over objectors’ appeals. In doing so, the court merely stated,
in dicta, the general proposition that “courts have rejected approval of settlements where the trial
court acted without sufficient facts concerning the claim . . . or failed to allow objectors to develop
on the record facts . . . .” Id. at 692–93. Here, the Court has a more than adequate record and the
Objectors fail entirely to identify any specific facts or documents that the Court needs, or why the
Court would need them.
Charron v. Wiener, 731 F.3d 241 (2d Cir. 2013), actually supports USBFS’s position.
There, the Second Circuit again affirmed final approval of a settlement, reiterating that “[o]bjectors
to a settlement have no automatic right to discovery” and noting that the trial court denied
discovery requests where—like here—the objectors “could not articulate why they needed the
information to substantiate their objections.” Id. at *248 (emphasis added). Additionally, the
district court (whose decision was affirmed by the Second Circuit) specifically found that there
was “sufficient discovery” where class counsel undertook a “comprehensive pre-suit
investigation,” reviewed documents produced by defendants, and researched potential claims.
Charron v Pinnacle Group N.Y. LLC, 874 F Supp 2d 179, 195 (S.D.N.Y. 2012). The same is true
of Class Counsel in this case.
With respect to In re Community Bank of North Virginia, 418 F.3d 277 (3d Cir. 2005), the
Third Circuit noted that it was likely that the appealing objector had already “developed sufficient
10
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facts . . . such that it would be able to present a cogent and supportable objection at the fairness
hearing.” Id. at 316. Here, similarly, the objectors have filed a 49-page Objection, boasting of the
extensive investigation and factual development that has already been done, and identifying no
reason that the requested documents are necessary for their objection.
The remaining cases cited by Sherck are inapposite. 12 In Girsh v. Jepson, 521 F. 2d 153
(3d Cir. 1975), an appellate court remanded the case back to the trial court for further development
of the record where an objector was denied the opportunity to develop such a record because she
was, among other things, not given sufficient opportunity to review the affidavits supporting the
fairness of the settlement and was therefore unable to “meaningfully participate” in the settlement
hearing. Id. at 157. Here, by contrast, Sherck does not (and cannot) claim a lack of access to the
Final Approval Motion and supporting documentation and affidavits (which, unlike when Girsh
was decided in 1975, were electronically filed and promptly available to Sherck and Mr. Morris).
Sherck also has already meaningfully participated in the settlement approval process. Sherck has
intervened in this case, was heard (through counsel) at the Preliminary Approval Hearing, has filed
his lengthy Objection, and will presumably have every opportunity to be heard at the Final
Approval Hearing.
Finally, as for In re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106
(7th Cir. 1979), the court was faced with a distinct instance in which the objectors sought specific,
limited discovery relating to potentially collusive settlement negotiations that took place between
a defendant and a co-class counsel, to the exclusion of the other co-class counsel in violation of a
12
Sherck’s reliance on Greenfield v. Villager Industries, Inc., 483 F.2d 824 (3d Cir. 1973) is
unavailing because Greenfield does not involve any issues of discovery. Instead, the court in that
case was presented with the question of whether notice to the prospective class members met the
requirements of Federal Rule of Civil Procedure 23.
11
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court order, and where the resulting settlement contemplated abandonment of the claims of an
entire subclass of plaintiffs. No such concerns exist here, where a well-respected JAMS securities
mediator conducted arm’s-length negotiations among all the parties over a lengthy period.
II. The OSC Is Procedurally Improper and Untimely
Sherck’s Subpoena and OSC directly contravene the Preliminary Approval Order. First,
the Preliminary Approval Order states that “[u]nless and until the Stipulation is terminated
pursuant to its terms, all proceedings in the State Action, other than such proceedings as may be
necessary to carry out the terms and conditions of the Settlement, are hereby stayed and suspended
until further order of the Court.” (NYSCEF No. 181 at ¶ 20.) Second, the Preliminary Approval
Order provides that “[p]ending final determination of whether the Settlement should be approved,
Lead Plaintiffs, all Class Members, and each of them, and anyone who acts or purports to act on
their behalf, shall not institute, commence, maintain, or prosecute, and are hereby barred and
enjoined from instituting, continuing, commencing, maintaining, or prosecuting, any action in any
court or tribunal that asserts Released Claims against any of the Released Defendant Parties.”
(NYSCEF No. 181 at ¶ 20) (emphasis added.)
Mr. Morris, on Sherck’s behalf, was present at the Preliminary Approval Hearing on
October 17, 2022, and argued extensively in opposition to the Settlement. Yet—despite knowing
that (1) the Preliminary Approval Order would stay this case and (2) Class Counsel had received
access to numerous documents from USBFS13—Sherck never alerted the Court to his purported
need to conduct discovery.
Following the entry of the Preliminary Approval Order, Sherck also never asked the Court
to modify the stay so he could issue a subpoena to USBFS, notwithstanding the fact that he
13
(NYSCEF No. 160 at Exhibit A-1, p. 13.)
12
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concedes in his OSC that he is not entitled to discovery as a matter of right.14 In light of the above,
the Court also should deny the OSC as procedurally improper and untimely.
CONCLUSION
For the foregoing reasons, USBFS respectfully requests that this Court enter an Order
(i) denying Sherck’s OSC and (ii) granting USBFS such other and further relief as this Court
deems just and proper.
Dated: New York, New York Respectfully submitted,
February 7, 2023
VEDDER PRICE P.C.
By: /s/ Joshua A. Dunn
Joshua A. Dunn
jdunn@vedderprice.com
1633 Broadway, 31st Floor
New York, New York 10019
T: (212) 407-7700
F: (212) 407-7799
Thomas P. Cimino, Jr., pro hac vice
application forthcoming
tcimino@vedderprice.com
222 N. LaSalle Street, Ste 2400
Chicago, Illinois 60601
T: (312) 609-7500
F: (312) 609-5005
Attorneys for Non-Party U.S. Bancorp
Fund Services, LLC
14
Sherck did file a motion to modify the Preliminary Approval Order to allow him to file his
response to the previously-filed Motion to Dismiss by USBFS in Sherck’s Wisconsin case.
(NYSCEF No. 181.) However, Sherck withdrew that motion on November 17, 2022. (NYSCEF
No. 198.)
13
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CERTIFICATE OF COMPLIANCE
The undersigned counsel hereby certifies that pursuant to Rule 17 of the Rules of the
Commercial Division of the Supreme Court of the State of New York, the annexed Memorandum
of Law contains 4,256 words, which is fewer than the limits imposed under Rule 17. Counsel
relied upon the Word Count feature of Microsoft Word to prepare this Certificate of Compliance.
Dated: New York, New York
February 7, 2023
By:/s/ Joshua A. Dunn
Joshua A. Dunn
18 of 18
Preview
FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK Index No. 651295/2021 CLASS ACTION In re INFINITY Q DIVERSIFIED ALPHA FUND SECURITIES LITIGATION Part 53: Justice Andrew S. Borrok DOMINUS MULTIMANAGER FUND, LTD., Index No. 652906/2022 Individually and on Behalf of All Others Similarly Situated, CLASS ACTION Plaintiff, Part 53: Justice Andrew S. Borrok v. INFINITY Q CAPITAL MANAGEMENT LLC, et al, Defendants. U.S. BANCORP FUND SERVICES, LLC’S MEMORANDUM OF LAW IN OPPOSITION TO INTERVENOR SHERCK’S ORDER TO SHOW CAUSE VEDDER PRICE P.C. Joshua A. Dunn 1633 Broadway, 31st Floor New York, New York 10019 T: (212) 407-7700 F: (212) 407-7799 Thomas P. Cimino, Jr., pro hac vice application forthcoming 222 N. LaSalle St, Ste 2400 Chicago, Illinois 60601 T: (312) 609-7500 F: (312) 609-5005 Attorneys for U.S. Bancorp Fund Services, LLC 1 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 TABLE OF CONTENTS Page PRELIMINARY STATEMENT ................................................................................................1 STATEMENT OF FACTS AND PROCEDURAL HISTORY ...................................................3 LEGAL ARGUMENT ...............................................................................................................5 I. Sherck Is Not Entitled to the Documents He Seeks ..............................................5 A. Legal Standard ........................................................................................5 B. Lead Class Counsel Has Provided Detailed Testimony Regarding Their Review of The USBFS (And Other) Documents .............................6 C. Sherck Fails to Demonstrate a Need to Review the Documents He Seeks .......................................................................................................6 D. The Cases Relied upon by Sherck Are Distinguishable ............................9 II. The OSC Is Procedurally Improper and Untimely ............................................. 12 CONCLUSION ........................................................................................................................ 13 -i- 2 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 TABLE OF AUTHORITIES Page(s) Cases Charron v. Wiener, 731 F.3d 241 (2d Cir. 2013) ................................................................................................ 10 Da Silva Moore v. Publicis Groupe, 287 F.R.D. 182 (S.D.N.Y. 2012) ........................................................................................... 6 Ho v. Duoyuan Global Water, Inc., 887 F. Supp. 2d 547 (S.D.N.Y. 2012) .................................................................................... 7 In re Community Bank of North Virginia, 418 F.3d 277 (3d Cir. 2005) ........................................................................................... 10-11 In re Frontier Commc’ns Corp. Stockholders Litig., No. 3:17-cv-01617-VAB, 2022 WL 4080324 (D. Conn. May 20, 2022) ................................ 6 In re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106 (7th Cir. 1979) ............................................................................................. 11 In re Global Crossing Ltd. Sec. Litig., No. 02 Civ. 910 (GEL), 2005 WL 1907005 (S.D.N.Y. Aug. 8, 2005) .................................... 8 Girsh v. Jepson, 521 F. 2d 153 (3d Cir. 1975) ............................................................................................... 11 Greenfield v. Villager Industries, Inc., 483 F.2d 824 (3d Cir. 1973) ................................................................................................ 11 Lee v. Ocwen Loan Servicing, LLC, 101 F. Supp. 3d 1293 (S.D. Fla. 2015) ............................................................................... 5, 9 Newman v. Stein, 464 F.2d 689 (2d Cir. 1972) ................................................................................................ 10 Saylor v. Lindsley, 456 F. 2d 896 (2d Cir. 1972) ........................................................................................... 9, 10 Tomes v. Bank of Am. (In re Checking Account), 830 F. Supp. 2d 1330 (S.D. Fla. 2011) ............................................................................ 5-6, 9 Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005) .................................................................................................... 5 ii 3 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 Statutes 15 U.S.C. § 80a-10(a) ................................................................................................................. 7 iii 4 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 U.S. Bancorp Fund Services, LLC (“USBFS”), by and through its attorneys, Vedder Price P.C., hereby submits this Memorandum of Law in support of its Opposition to intervenor Charles Sherck’s (“Sherck”) Order to Show Cause (“OSC”),1 for an order directing USBFS to produce any and all documents in response to the Subpoena Duces Tecum attached to the Morris Affirmation as Exhibit 1 (the “Subpoena”) within three (3) days of the date the OSC is signed. PRELIMINARY STATEMENT Sherck is a class member who, along with five other class members, has filed a 49-page objection (the “Objection”) to the pending settlement in this matter (the “Settlement”). In furtherance of his efforts to disrupt the Settlement process in this case, Sherck now seeks an order from the Court compelling USBFS to produce to him the almost-20,000 documents that USBFS previously produced to court-appointed class counsel (“Class Counsel”)2 in this case and the related federal class action.3 Sherck’s OSC should be denied because it completely fails to satisfy the standard for entitlement to discovery by a settlement objector. For example, it does not: identify the specific types of documents sought, explain why they are needed, or demonstrate that extensive review of the documents conducted by Class Counsel was inadequate. Simply put, 1 The OSC is comprised of the Affirmation of Aaron Morris in Support of Proposed Order to Show Cause (“Morris Affirmation”) (NYSCEF No. 262) and Exhibits 1 and 2 thereto (NYSCEF Nos. 263 and 264). 2 On April 15, 2021, the Court appointed Scott + Scott Attorneys at Law and The Rosen Law Firm, P.A. as co-lead counsel for the plaintiffs in this case. (NYSCEF No. 12.) On March 31, 2022, the United States District Court for the Eastern District of New York named Robbins Geller Rudman & Dowd LLP and Boies Schiller Flexner LLP as co-lead counsel in the federal class action. See In re Infinity Q Diversified Alpha Fund and Infinity Q Volatility Alpha Fund L.P. Securities Litigation, Case No. 1:21-cv-01047-FB-MMH (E.D.N.Y) (ECF No. 55). 3 In total, as set forth in sworn testimony, Class Counsel has reviewed over 300,000 documents received from the Defendants. 5 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 Sherck wants these documents to second guess the work and conclusions of Class Counsel. This is not a valid basis for obtaining such discovery. Moreover, Sherck’s counsel does not need these documents and they will add nothing to the process to approve the Settlement. In the Objection, Sherck argues that USBFS has substantial liability under Sections 11 and 15 of the Securities Act of 1933 (the “‘33 Act”). as fund administrator to the Infinity Q Diversified Alpha Fund (the “Fund”). However, as USBFS will further demonstrate in its response to the Objection, it is well-settled that Section 11 liability is strictly limited to a narrow group of statutorily-enumerated defendants. USBFS does not fall into any of these statutory categories, as clearly demonstrated by the numerous publicly-filed documents that govern both the Fund and the services USBFS performed for the Fund. Similarly, publicly-filed documents demonstrate that USBFS did not control the Fund for purposes of Section 15 liability. Sherck and his counsel already have all of these documents. The OSC is also undercut by Sherck’s own Objection. In the Objection, Sherck touts the extensive factual investigation undertaken by his counsel prior to the filing of his Wisconsin case and a related Delaware derivative lawsuit. Nowhere in the Objection does he contend that additional documents are needed to support the Objection, nor does he explain why the detailed review chronicled in the lengthy affidavits submitted by Class Counsel was insufficient. Sherck’s OSC is also procedurally improper and untimely. Sherck’s counsel presented lengthy oral argument at the October 17, 2022 hearing to preliminarily approve the Settlement (“Preliminary Approval Hearing”) and had the opportunity to provide input into the schedule set in this case. However, Sherck never requested leave to seek discovery, notwithstanding the fact that the preliminary approval motion made clear that Class Counsel had been given access to thousands of pages of confirmatory discovery from the Defendants, including USBFS. Moreover, 2 6 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 the October 17, 2022 order preliminarily approving the Settlement (“Preliminary Approval Order”) expressly stayed this case pending the hearing on the final approval of the Settlement (“Final Approval Hearing”). Sherck also never requested that this Court modify that stay to allow him to seek to issue a subpoena to USBFS. Simply put, the OSC seeks approval for a fishing expedition in an effort to disrupt and, ultimately, derail the Settlement so that he and his counsel may pursue a competing Wisconsin class action. This request goes beyond the bounds of the process established by the Court in the Preliminary Approval Order and, as shown below, is both factually and legally baseless. Moreover, it would set a precedent for other absent class members in this case to seek those same documents from USBFS, or the over 300,000 documents produced by all of the Defendants, for that matter. For all of these reasons, the Court should deny the OSC. STATEMENT OF FACTS AND PROCEDURAL HISTORY This case was originally filed on February 24, 2021, naming as a putative class those investors in the Fund and asserting violations of the ‘33 Act.4 By order dated April 15, 2021, the Court appointed two law firms as co-lead counsel for the plaintiffs in this case. (NYSCEF No. 12.) A consolidated class action complaint was then filed on April 16, 2021 and was amended on May 2, 2022. After extensive, arm’s-length settlement negotiations lasting over nine months under the direction of an experienced mediator, Robert A. Meyer, Esq. of JAMS, the Settlement was reached. The Settlement was memorialized in a stipulation filed with the Court on August 17, 2022. (NYSCEF No. 160.) The Settlement originally applied to some, but not all, defendants in 4 The Fund is one of a series of the Trust For Advised Portfolios, a Delaware statutory trust (the “Trust”). 3 7 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 this and the various other related class action cases. The stipulation was amended on September 7, 2022 to reflect that the Settlement had been expanded to include all Defendants in this case and in the federal class action. (NYSCEF No. 177.) Beginning on or about August 11, 2022, USBFS provided Class Counsel with access to the non-public USBFS documents at issue here and provided credentials for over 30 attorneys associated with Class Counsel in this case and the related federal class action to review this confirmatory discovery. (See the accompanying Affirmation of Thomas P. Cimino, Jr. (“Cimino Aff.”) at ¶¶ 3-4.) On August 17, 2022, an order to show cause seeking preliminary approval of the Settlement was filed. (NYSCEF No. 158.) On October 17, 2022 the Court held the Preliminary Approval Hearing. Sherck was represented by his counsel, Aaron Morris (“Mr. Morris”), at that hearing, and Mr. Morris made lengthy substantive arguments in support of Sherck’s objections to the terms of the Settlement. At the end of that hearing, the Court entered the Preliminary Approval Order and set a January 31, 2023 hearing to determine, e.g., “whether the [Settlement] is fair, reasonable and adequate and should be approved by the Court.” (NYSCEF No. 181.) Among other things, the Preliminary Approval Order stayed this case, and enjoined all class members from instituting or prosecuting further proceedings pending the Final Approval Hearing. (Id.) Almost two months later, on December 9, 2022, Mr. Morris sent the Subpoena to counsel for USBFS. (NYSCEF No. 263.) Following various meet-and-confer communications, USBFS timely served its objections to the Subpoena on December 29, 2022. (NYSCEF No. 264.) Class Counsel filed its motion for final approval of the Settlement (the “Final Approval Motion”) on December 27, 2022. (NYSCEF Nos. 210, 211, 212, 213, 214, 215, 216, 217, 218, 219, 220, 221.) On January 10, 2023, Mr. Morris filed the Objection on behalf of his clients, including Sherck. (NYSCEF No. 254.) On January 11, 2023, Mr. Morris filed the OSC, seeking 4 8 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 an order compelling USBFS to produce documents within three (3) days of the Court’s entry of same. (NYSCEF Nos. 262, 263, 264.) LEGAL ARGUMENT I. Sherck Is Not Entitled to the Documents He Seeks A. Legal Standard It is well-settled that objectors to a class action settlement have no absolute right to discovery. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 120 (2d Cir. 2005).5 Moreover, requests to conduct discovery should be denied where, as here, “the Court has sufficient information before it to enable the Court to determine whether to approve the Settlement.” Lee v. Ocwen Loan Servicing, LLC, 101 F. Supp. 3d 1293, 1296 (S.D. Fla. 2015) (emphasis in original);6 see also In re Frontier Commc’ns Corp. Stockholders Litig., No. 3:17-cv-01617-VAB, 2022 WL 4080324, at *19 (D. Conn. May 20, 2022) (denying motion to lift discovery where the court already had a sufficient basis to intelligently approve the settlement offer); Tomes v. Bank of Am. (In re 5 Sherck attempts, unsuccessfully, to distinguish Wal-Mart Stores in the OSC. (NYSCEF No. 262 at ¶ 11.) He argues that in Wal-Mart Stores there was evidence that plaintiffs engaged in extensive discovery, and that in this case there allegedly is “no meaningful record” that Class Counsel reviewed the documents made available to them. However, as explained below, Class Counsel have provided sworn affidavits to the Court demonstrating that they reviewed each of the over 300,000 documents produced by the Defendants, including USBFS (NYSCEF No. 212 at ¶¶ 97– 99, n.7.), and engaged in myriad other efforts to ensure that the Settlement is appropriate. Sherck may not defeat this evidence by suggesting without any basis that it is not true. 6 Sherck fails to distinguish Lee in the OSC. (NYSCEF No. 262 at ¶ 10.) The fact that the movant in Lee had not yet formally lodged her objection made no difference to the court’s ultimate conclusion, as the court found that “even if [the movant] did formally and timely object . . . her discovery request would still be denied.” Id. at 1296. That was because, as in this case, the movant did not establish why the requested discovery (which—as here— had already been produced to class counsel) was necessary for the court’s inquiry. Id. The court concluded that there was sufficient evidence to satisfy the court about the issue the movant purportedly needed discovery to probe. The same logic must apply here, where Sherck has not even attempted to articulate a need for discovery, let alone why the Court does not have a sufficient basis to assess the reasonableness of the Settlement. 5 9 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 Checking Account), 830 F. Supp. 2d 1330, 1337 n.6 (S.D. Fla. 2011) (denying motion for discovery where the record “was more than sufficient to enable [the court] to decide all of the issues” related to approval and “thus discovery would have served no proper purpose”). As demonstrated below, Sherck fails to meet this standard because he fails to show that, unless he is provided with the documents sought by the OSC, the Court will lack a sufficient basis to intelligently rule on the final approval of the Settlement. B. Lead Class Counsel Has Provided Detailed Testimony Regarding Their Review of The USBFS (And Other) Documents In support of his effort to second-guess the work already done by Class Counsel, Sherck baldly asserts that Class Counsel’s review of the documents “appears suspect at best.” (NYSCEF No. 262 at ¶¶ 6–7.) However, Sherck’s conjecture is directly contradicted by Class Counsel’s sworn affidavit in support of the Final Approval Motion which demonstrates that Class Counsel conducted a linear review of all 159,281 documents they received from the Trust, all 19,700 documents they received from USBFS, and all 1,410 documents they received from EisnerAmper. (NYSCEF No. 212 at 97–99, n.7.)7 Accordingly, Sherck’s only basis for seeking the documents from USBFS is demonstrably false. C. Sherck Fails to Demonstrate a Need to Review the Documents He Seeks Moreover, Sherck has not established any need for the documents he seeks. His primary basis for opposing the Settlement is his theory that USBFS is not paying enough to resolve his claims against it under Sections 11 and 15 of the ‘33 Act. However, all of the facts relevant to his meritless claims are found in publicly-filed documents relating to the Fund and the Trust. For 7 Class Counsel also used a technology-assisted “continuous active learning model” to review an additional 149,495 documents from other parties to the Settlement. (Id. at ¶¶ 97–99, n.7.) See Da Silva Moore v. Publicis Groupe, 287 F.R.D. 182, 183 (S.D.N.Y. 2012) (holding that computer- assisted review is an acceptable way to review relevant ESI). 6 10 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 example, Sherck’s Section 11 claim against USBFS is based on the strict liability of signatories to a fund’s registration statements for misrepresentations contained therein. (See NYSCEF No. 254 at 23.) Publicly-available documents—such as the very registration statements themselves (the “Registration Statements”)—demonstrate that USBFS did not sign the Registration Statements. (See Cimino Aff. at Exh. A, p. 117.) The same documents also show that no one signed the Registration Statements in their capacity as an employee of USBFS. (See id.) Instead, Sherck claims that USBFS is liable under a theory of respondeat superior for the conduct of its employees who signed the Registration Statements while serving in a separate capacity as officers of a separate entity (the Trust). (See NYSCEF No. 254 at 23.) Again, the publicly-available registration statements themselves show that this argument is fatally flawed: they explicitly state that the individuals who signed the Registration Statements did so exclusively in their capacity as officers or directors of the Trust.8 All that is left of Sherck’s Section 11 claim, then, is the legal issue of whether the doctrine of respondeat superior can be extended to impose Section 11 liability on USBFS under these publicly-available facts. (It cannot.)9 The facts underlying Sherck’s Section 15 control person liability claim against USBFS are similarly provided by publicly-filed 8 See Cimino Aff. at Exh. A, p. 117. Other publicly-filed documents make it clear that these individuals were appointed to their officer positions by the Trust’s board (a majority of which was independent consistent with the Investment Company Act of 1940), were supervised by the Trust’s board, and were subject to removal by the Trust’s board. (See 15 U.S.C. § 80a-10(a); Cimino Aff. at Exh. A, p. 69; Exh. B, pp. 4, 6.) 9 See, e.g., Ho v. Duoyuan Global Water, Inc., 887 F. Supp. 2d 547, 580 (S.D.N.Y. 2012) (dismissing Section 11 claim based on respondeat superior absent allegations that the defendant corporation controlled the actions of its employee who signed a registration statement for another company in her capacity as director of the other company); In re Global Crossing Ltd. Sec. Litig., No. 02 Civ. 910 (GEL), 2005 WL 1907005, at *11 (S.D.N.Y. Aug. 8, 2005) (dismissing Section 11 claim where corporate defendants’ employees signed another company’s registration statement but the plaintiff was unable to set forth “allegations substantiating a concrete connection between those signatures and any direction from [the defendant corporations]”). 7 11 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 documents. These documents conclusively demonstrate that the Fund was controlled by the Trust’s board and the Fund’s investment adviser, and that USBFS “does not have any responsibility or authority for the management of the Fund . . . .” (Cimino Aff. at Exh. A, pp. 23, 78 (emphasis added); Exh. B, p. 4.) In short, all of the documents needed by the Court to assess the appropriateness of the Settlement are already contained in the public record.10 Sherck’s own Objection further underscores this point. For example, he does not identify any specific categories of documents that the Court is missing or that he has been unable to bring to the Court’s attention through the Objection. In fact, the 49-page Objection makes no reference to any missing information needed by the Court to rule on whether the Settlement should be approved. To the contrary, the Objection claims that Mr. Morris undertook an “extensive investigation of the facts and circumstances” prior to asserting claims against USBFS on behalf of Sherck in Wisconsin state court. (NYSCEF No. 254 at 11; see also NYSCEF No. 163 (stating, in support of Sherck’s motion to intervene, that Mr. Morris conducted “an extensive investigation of the facts and circumstances of the Fund’s collapse” and that Mr. Morris had filed a derivative complaint against USBFS on behalf of the Trust “based on an extensive years-long investigation” that included “non-public documents obtained through an inspection demand to the Fund,” among other things11).) Sherck also clearly does not view the documents he now seeks as necessary to assert his Objection to the Settlement. 10 It is telling that Sherck does not provide any of these documents to the Court in his Objection or in the OSC. 11 The fact that Mr. Morris is also counsel in the derivative suit asserting claims on behalf of the Trust raises the specter that any documents produced to Sherck here will find their way into the derivative suit in Delaware. Mr. Morris’s willingness to enter into a protective order to not use the documents in any other action does not relieve Sherck from demonstrating a need in this action. 8 12 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 In short, Sherck’s untimely OSC is nothing more than a fishing expedition, intended to ultimately derail the settlement process so he can pursue his Wisconsin case as a class action. Unsurprisingly, this is not an appropriate basis for discovery. See, e.g., Tomes v. Bank of Am., 830 F. Supp. 2d 1330, 1337 n.6 (S.D. Fla. 2011) (denying objectors’ motions seeking discovery, and characterizing them as a “fishing expedition,” where “[t]he motions were untimely and would have unduly and unnecessarily disrupted the schedule this Court set for the Settlement-related proceedings [and] . . . in neither instance did the Objectors make any attempt to identify specifically or narrowly the precise discovery they were seeking or the reasons they were seeking such discovery”). Moreover, allowing discovery by an absent class member under these circumstances would set a disruptive precedent in this case, and in future cases, that would undermine class counsel, increase the discovery costs associated with class action settlements, and increase the amount of time it takes to finalize class action settlements and thereby provide recovery to class members. See, e.g., Lee, 101 F. Supp. 3d at 1297–98 (expressing concern that allowing discovery for one absent class member would open the floodgates to discovery from other class members and thereby derail settlement). Here, such a precedent might well encourage other absent class members to seek the same documents from USBFS, or even the over 300,000 documents produced by all Defendants. This would hopelessly confuse and disrupt the approval process of the Settlement, which is exactly what Sherck seeks by his Objection and the current OSC. D. The Cases Relied upon by Sherck Are Distinguishable None of the cases Sherck cites support the relief requested in his OSC, particularly in light of his failure to articulate any need for such discovery. Saylor v. Lindsley, 456 F. 2d 896 (2d Cir. 1972), is a case in which, unlike here, there was a legitimate reason to be concerned about the quality of the work done by plaintiff’s counsel: they had entered into the stipulation of 9 13 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 settlement without their client’s (the lead plaintiff’s) authorization. Id. at 904. Here, as noted above, the OSC identifies no basis to conclude that the reputable attorneys appointed as Class Counsel by the Court are acting contrary to the interests of the class or without authorization from the class representative plaintiffs to proceed with the Settlement. In Newman v. Stein, 464 F.2d 689 (2d Cir. 1972), the Second Circuit affirmed the final approval of a class action settlement over objectors’ appeals. In doing so, the court merely stated, in dicta, the general proposition that “courts have rejected approval of settlements where the trial court acted without sufficient facts concerning the claim . . . or failed to allow objectors to develop on the record facts . . . .” Id. at 692–93. Here, the Court has a more than adequate record and the Objectors fail entirely to identify any specific facts or documents that the Court needs, or why the Court would need them. Charron v. Wiener, 731 F.3d 241 (2d Cir. 2013), actually supports USBFS’s position. There, the Second Circuit again affirmed final approval of a settlement, reiterating that “[o]bjectors to a settlement have no automatic right to discovery” and noting that the trial court denied discovery requests where—like here—the objectors “could not articulate why they needed the information to substantiate their objections.” Id. at *248 (emphasis added). Additionally, the district court (whose decision was affirmed by the Second Circuit) specifically found that there was “sufficient discovery” where class counsel undertook a “comprehensive pre-suit investigation,” reviewed documents produced by defendants, and researched potential claims. Charron v Pinnacle Group N.Y. LLC, 874 F Supp 2d 179, 195 (S.D.N.Y. 2012). The same is true of Class Counsel in this case. With respect to In re Community Bank of North Virginia, 418 F.3d 277 (3d Cir. 2005), the Third Circuit noted that it was likely that the appealing objector had already “developed sufficient 10 14 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 facts . . . such that it would be able to present a cogent and supportable objection at the fairness hearing.” Id. at 316. Here, similarly, the objectors have filed a 49-page Objection, boasting of the extensive investigation and factual development that has already been done, and identifying no reason that the requested documents are necessary for their objection. The remaining cases cited by Sherck are inapposite. 12 In Girsh v. Jepson, 521 F. 2d 153 (3d Cir. 1975), an appellate court remanded the case back to the trial court for further development of the record where an objector was denied the opportunity to develop such a record because she was, among other things, not given sufficient opportunity to review the affidavits supporting the fairness of the settlement and was therefore unable to “meaningfully participate” in the settlement hearing. Id. at 157. Here, by contrast, Sherck does not (and cannot) claim a lack of access to the Final Approval Motion and supporting documentation and affidavits (which, unlike when Girsh was decided in 1975, were electronically filed and promptly available to Sherck and Mr. Morris). Sherck also has already meaningfully participated in the settlement approval process. Sherck has intervened in this case, was heard (through counsel) at the Preliminary Approval Hearing, has filed his lengthy Objection, and will presumably have every opportunity to be heard at the Final Approval Hearing. Finally, as for In re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106 (7th Cir. 1979), the court was faced with a distinct instance in which the objectors sought specific, limited discovery relating to potentially collusive settlement negotiations that took place between a defendant and a co-class counsel, to the exclusion of the other co-class counsel in violation of a 12 Sherck’s reliance on Greenfield v. Villager Industries, Inc., 483 F.2d 824 (3d Cir. 1973) is unavailing because Greenfield does not involve any issues of discovery. Instead, the court in that case was presented with the question of whether notice to the prospective class members met the requirements of Federal Rule of Civil Procedure 23. 11 15 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 court order, and where the resulting settlement contemplated abandonment of the claims of an entire subclass of plaintiffs. No such concerns exist here, where a well-respected JAMS securities mediator conducted arm’s-length negotiations among all the parties over a lengthy period. II. The OSC Is Procedurally Improper and Untimely Sherck’s Subpoena and OSC directly contravene the Preliminary Approval Order. First, the Preliminary Approval Order states that “[u]nless and until the Stipulation is terminated pursuant to its terms, all proceedings in the State Action, other than such proceedings as may be necessary to carry out the terms and conditions of the Settlement, are hereby stayed and suspended until further order of the Court.” (NYSCEF No. 181 at ¶ 20.) Second, the Preliminary Approval Order provides that “[p]ending final determination of whether the Settlement should be approved, Lead Plaintiffs, all Class Members, and each of them, and anyone who acts or purports to act on their behalf, shall not institute, commence, maintain, or prosecute, and are hereby barred and enjoined from instituting, continuing, commencing, maintaining, or prosecuting, any action in any court or tribunal that asserts Released Claims against any of the Released Defendant Parties.” (NYSCEF No. 181 at ¶ 20) (emphasis added.) Mr. Morris, on Sherck’s behalf, was present at the Preliminary Approval Hearing on October 17, 2022, and argued extensively in opposition to the Settlement. Yet—despite knowing that (1) the Preliminary Approval Order would stay this case and (2) Class Counsel had received access to numerous documents from USBFS13—Sherck never alerted the Court to his purported need to conduct discovery. Following the entry of the Preliminary Approval Order, Sherck also never asked the Court to modify the stay so he could issue a subpoena to USBFS, notwithstanding the fact that he 13 (NYSCEF No. 160 at Exhibit A-1, p. 13.) 12 16 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 concedes in his OSC that he is not entitled to discovery as a matter of right.14 In light of the above, the Court also should deny the OSC as procedurally improper and untimely. CONCLUSION For the foregoing reasons, USBFS respectfully requests that this Court enter an Order (i) denying Sherck’s OSC and (ii) granting USBFS such other and further relief as this Court deems just and proper. Dated: New York, New York Respectfully submitted, February 7, 2023 VEDDER PRICE P.C. By: /s/ Joshua A. Dunn Joshua A. Dunn jdunn@vedderprice.com 1633 Broadway, 31st Floor New York, New York 10019 T: (212) 407-7700 F: (212) 407-7799 Thomas P. Cimino, Jr., pro hac vice application forthcoming tcimino@vedderprice.com 222 N. LaSalle Street, Ste 2400 Chicago, Illinois 60601 T: (312) 609-7500 F: (312) 609-5005 Attorneys for Non-Party U.S. Bancorp Fund Services, LLC 14 Sherck did file a motion to modify the Preliminary Approval Order to allow him to file his response to the previously-filed Motion to Dismiss by USBFS in Sherck’s Wisconsin case. (NYSCEF No. 181.) However, Sherck withdrew that motion on November 17, 2022. (NYSCEF No. 198.) 13 17 of 18 FILED: NEW YORK COUNTY CLERK 02/07/2023 06:38 PM INDEX NO. 651295/2021 NYSCEF DOC. NO. 266 RECEIVED NYSCEF: 02/07/2023 CERTIFICATE OF COMPLIANCE The undersigned counsel hereby certifies that pursuant to Rule 17 of the Rules of the Commercial Division of the Supreme Court of the State of New York, the annexed Memorandum of Law contains 4,256 words, which is fewer than the limits imposed under Rule 17. Counsel relied upon the Word Count feature of Microsoft Word to prepare this Certificate of Compliance. Dated: New York, New York February 7, 2023 By:/s/ Joshua A. Dunn Joshua A. Dunn 18 of 18