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RETIREMENT PROGRAM FOR EMPLOYEES OF THE TOWN OF FAIRFIELD ET AL. v. BERNARD L. MADOFF ET AL. (AC 32216)
Bishop, Robinson and Peters, Js. Argued May 19--officially released August 16, 2011

(Appeal from Superior Court, judicial district of Stamford-Norwalk, Complex Litigation Docket, Blawie, J.)

Richard C. Robinson, with whom were Megan Youngling Carannante, and, on the brief, David S. Golub, for the appellants (plaintiffs). Stanley A. Twardy, Jr., with whom were Thomas D. Goldberg, and, on the brief, Daniel J. Fetterman, pro hac vice, and Adam K. Grant, pro hac vice, for the appellee (defendant Jeffrey H. Tucker). Stanley A. Twardy, Jr., with whom were Frank J. Silvestri, Jr., and, on the brief, Madeleine F. Grossman, Glenn M. Kurtz, pro hac vice, and Andrew W. Hammond, pro hac vice, for the appellee (defendant Walter M. Noel, Jr.). H. Daniel Pickerstein, with whom, on the brief, were Daniel J. Klau, Charles T. Spada, pro hac vice, and Jeannie Rose Rubin, pro hac vice, for the appellee (defendant Peter B. Madoff).

Opinion

BISHOP, J. The plaintiffs, the town of Fairfield and two employee retirement programs,1 appeal from the trial court's judgment granting the motions to dismiss filed by the defendants Walter M. Noel, Jr., Jeffrey H. Tucker and Peter B. Madoff.2 On appeal, the plaintiffs claim that the court improperly concluded that it lacked subject matter jurisdiction on the ground that the plaintiffs' claims were derivative in nature. We affirm the judgment of the trial court. The following factual and procedural history, as set forth by the trial court, is relevant to the resolution of the issues on appeal. Bernard L. Madoff (Madoff) is the former investment manager and founder of Bernard L. Madoff Investment Securities, LLC. In December, 2008, Madoff admitted, in connection with certain criminal charges brought against him, that he orchestrated a massive Ponzi scheme in which funds entrusted to him were not actually invested, but, rather, were utilized to pay other investors' requests for the redemption of principal and profits and to fund his extravagant lifestyle.3 Madoff is currently incarcerated as a result of his fraudulent conduct and a bankruptcy stay is in effect as to the claims against him in this action.4 For many years, Tremont Partners, Inc. (Tremont Partners) served as the plaintiffs' investment advisor.5 Sandra L. Manzke, who was the president of Tremont Partners, was the individual with whom the plaintiffs dealt in investing their money. Relying on Manzke's counsel, the plaintiffs invested their funds in a hedge fund established by Tremont Partners, which, in turn, invested its assets with Madoff. The plaintiffs did not invest their funds directly with Madoff. When Manzke left Tremont Partners in 2005, she formed a new investment and consulting firm, Maxam Capital Management, LLC, which established the Maxam Absolute Return Fund, LP (Maxam Fund). Pursuant to Manzke's advice, the plaintiffs withdrew their funds from the Tremont Partners hedge fund and invested them in the Maxam Fund, which, in turn, invested the plaintiffs' funds with Madoff.6 Noel and Tucker (Fairfield Greenwich defendants) are partners, principals and members of the executive committee or board of directors of the Fairfield Greenwich Group, an asset management company that manages and solicits investments for its own hedge funds and other hedge funds that invested with Madoff. Because the Maxam Fund and Fairfield Greenwich Group made their investments solely through other funds, they are referred to as ``feeder funds.'' Unlike the Maxam defendants; see footnote six of this opinion; the Fairfield Greenwich defendants did not have any contact with the plaintiffs or any involvement with their funds or investments.

Peter B. Madoff is Bernard Madoff's brother. He was a coowner of Madoff's investment firm and served as its senior managing director, director of trading and chief compliance officer. The plaintiffs commenced this litigation by way of a twenty-nine count complaint filed March 30, 2009. The plaintiffs claim that several of the defendants wrongfully participated in ``feeding'' funds to Madoff, which enabled him to continue running his Ponzi scheme. Although the plaintiffs allege that the Maxam defendants dealt directly with the plaintiffs in inducing them to invest in the Maxam Fund, which, in turn, invested with Madoff, they make no similar allegations regarding the Fairfield Greenwich defendants. The plaintiffs claim, nevertheless, that the actions of the Fairfield Greenwich defendants furthered Madoff's scheme. The plaintiffs allege that Peter B. Madoff intentionally utilized his management authority at Madoff's firm to further Madoff's fraudulent scheme. The plaintiffs make similar claims as to Madoff's sons, Andrew H. Madoff and Mark D. Madoff. The Maxam defendants, the Fairfield Greenwich defendants, Peter B. Madoff, Mark D. Madoff and Andrew H. Madoff moved to dismiss the plaintiffs' claims on the basis that the court lacked subject matter jurisdiction. These defendants asserted that the plaintiffs lacked standing to pursue their claims because they are derivative in nature. The court denied the motion to dismiss as to the Maxam defendants on the basis of its conclusion that the plaintiffs had alleged a sufficiently individualized harm against the Maxam defendants to distinguish them from other investors because of their long-term relationship with Manzke and their reliance on her investment advice. The court determined, however, that the plaintiffs lacked standing to pursue their claims as to the Fairfield Greenwich defendants and Peter B. Madoff, Mark D. Madoff and Andrew H. Madoff because they were derivative. The court, therefore, granted the motions to dismiss as to those parties. The plaintiffs have appealed the trial court's judgment dismissing their claims as to the Fairfield Greenwich defendants and Peter B. Madoff, contending that the court improperly concluded that their claims against those defendants were derivative.7 Specifically, the plaintiffs assert that their claims were not derivative because they had alleged in their complaint that the Fairfield Greenwich defendants acted in concert not only with Madoff, but also with the Maxam defendants and other feeder funds, in inducing them to invest in the Maxam Fund. We do not agree. ``The issue of standing implicates subject matter jurisdiction and is therefore a basis for granting a motion to dismiss. Practice Book

Download Retirement Program for Employees of the Town of Fairfield v. Madoff.pdf

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