Pastore & Dailey has been named to the American Lawyer’s Top Rated Attorneys for 2015 for Commercial Litigation, and Labor and Employment. This is the Second Year in a row the Firm has received such an award.
Author: Liam Mennitt
Motion to Strike Successful
Pastore & Dailey recently brought a successful motion to strike in Connecticut Superior Court against a former employee of a client (a major world-wide insurance company). The Court’s decision included a finding that the former employee failed to articulate facts sufficient to support a claim of a fiduciary duty by an employer to an employee for a long-term incentive plan (“LTIP”).
PROCEDURE – The former employee sued the client over a year ago for further payments pursuant to the LTIP (the employee had already received several years of payments under the LTIP). Pastore & Dailey first sent the former employee’s counsel a Request to Revise the Complaint, as we perceived the pleadings to be legally insufficient as written. Opposing counsel for the former employee objected to the Request to Revise, but the Court overruled all of same, agreeing with Pastore & Dailey that the former employee needed to revise the Complaint per Pastore & Dailey’s Request to Revise.
The former employee’s counsel then revised the Complaint, but Pastore & Dailey filed a Motion to Strike with the court, again alleging that the pleadings in the Complaint were legally insufficient, as revised. The parties had oral argument with the court a few months ago.
RESULT – Just recently, the court issued its decision, striking one of the counts per Pastore & Dailey’s motion, and indicating that another count is likely to fail, if Connecticut state law is found to apply.
In the count that was stricken, the Court stated that a mere “conclusory allegation” that the employer owed the employee a fiduciary duty under the LTIP was insufficient to overcome the Motion to Strike that count in the Complaint.
Regarding the count for an allegation of breach by the employer of an implied covenant of good faith and fair dealing, the Court stated such claim would also fail, should the Court ultimately determine that Connecticut law is the applicable law in this case. (The Court stated that the choice of law question was not yet “ripe” at this stage of the proceedings. But both the client and the employee are domiciled in Connecticut.)
Only a breach of contract claim otherwise remains in the Complaint.
Florida Gators Retake Top Spot in Law School Rankings
Mr. Two Bits Would be Proud.
Florida Gators Retake Top Spot in Law School Rankings
Julie Kay, Daily Business Review
University of Florida’s Levin College of Law was ranked Florida’s best law school by U.S. News & World Report, taking back the position it lost last year to Florida State University.
The Gainesville law school was ranked 24th among public law schools and 47th overall. Additionally, its law school tax program ranked first among public law schools and tied with Georgetown University for second place overall.
UF interim law dean George Dawson was pleased that the school regained its longtime position as Florida’s top law school.
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2nd Circuit to Madoff Fraud Victims: Winners Keepers, Losers Weepers
If you invested money with Bernard Madoff, were a net investment “loser” with him in his Ponzi scheme, but had hope to claw back some of your losses from other Madoff victims who were net “winners,” you just lost again.
In a decision proving yet again that justice is indeed blind, the 2d Circuit Court of Appeals this week affirmed an earlier decision by SDNY Judge Jed Rakoff in ruling that victims of Madoff who were profitable in the balance need not hand back their profits (a.k.a., suffer a “clawback”) for the benefit of other victims who had losses in the balance.
Madoff trustee Irving Picard had sued net profitable victims for their profits, so as to return them to other victims who were net unprofitable. The decision in In re: Bernard L. Madoff Investment Securities LLC turned on whether Madoff’s Ponzi payouts (which came after he took in investors’ money into his broker-dealer, never invested it, and then distributed some of it back out to investors on demand) amounted to “a transfer made by [a] . . . stockbroker . . . in connection with a securities contract,” which is excepted under Section 546(e) of the Bankruptcy Code from clawback. Clawback defendants successfully argued to the Court that their account opening documents (customer agreement, trading authorization and options agreement) amounted to such a “securities contract,” even though no securities were ever bought by Madoff with the funds provided him by clawback defendants.
The Court agreed with the Madoff trustee (the plaintiff in the case) that the purpose of Congress in enacting such an exception to the Bankruptcy Code was to safeguard markets from suffering a domino effect and make them unstable, should completed and cleared securities transactions in the markets suddenly be called into question. The Court also generally agreed with the trustee that no such risk existed here since no trades were actually effected. However, the Court emphasized the expansive reach of the wording in the above clawback exception, going to the dictionary to discuss the broad meaning of terms like “any,” “similar” and “connection” that were found in the relevant sections of the Bankruptcy Code, and thus finding that the broad language of the statutory exception applied to this fact pattern (no matter how unfair it may seem to some).
Interestingly (and perhaps with no small amount of purposeful irony on Judge Rakoff’s part, given his legal battles with the SEC), the court cited various SEC-related decisions to support its decision. It cited a series of cases where defendants were held liable for SEC Rule 10b-5 fraud (which requires the fraud to be “in connection with the purchase or sale of any security”) in cases where securities were never actually bought with victims’ money.
It is now up to trustee Picard if he wants to seek review by the U.S. Supreme Court of this decision. Stay tuned….
Defeated Emergency Motion to Stay
Pastore & Dailey recently defeated an emergency motion by a client’s competitor in the financial services industry (including a FINRA member firm) to stay our client’s lawsuit in NYS Supreme Court (New York County) against the competitor and its principals while a related FINRA arbitration was in process. (Our client is suing the competitor and its principals for tortiously interfering with our client’s contracts with its ex-employees, among other things.)
Pastore Appointed to Pace Board of Visitors
Joseph M. Pastore III has been appointed to the Pace University School of Law Board of Visitors by the unanimous vote of that board. Similarly, Susan Bysiewicz, the former Secretary of State of Connecticut and a former U.S. Senate candidate who leads the Firm’s Glastonbury office, has served on the Duke University Board of Visitors for the past year. The Pace University School of Law Board of Visitors already includes among its many distinguished members Congresswoman Nita Lowey and Westchester County District Attorney Janet DiFiore. Pastore & Dailey is honored to have two of its leading attorneys serving the law school community in such an important and vibrant way.
Mr. Pastore is a 1991 graduate of Pace University School of Law, where he served as the Managing Editor of one of the school’s distinguished Law Reviews. He attended the law school on a Law Trustee Scholarship, and had the great privilege of learning from the school’s world class faculty, including at the time the former Chief Judge of the New York Court of Appeals, the highest court in New York.
Pastore & Dailey is honored to serve both Duke and Pace Law Schools. Mr. Pastore has been named a Super Lawyer for New York and New England for the past several years and a top national attorney by a leading law firm publication. Pastore & Dailey is growing national law firm, founded in 2012, with offices in New York, Connecticut and Florida.
Pastore & Dailey LLC Secures Over $60 Million for Clients
Pastore & Dailey LLC is pleased to announce that the Firm has, to date, secured over $60 Million in grants and low-interest loans for Connecticut businesses through various programs with the State of Connecticut Department of Economic and Community Development.
Through the work of Attorney Susan Bysiewicz, a former Secretary of the State of Connecticut and former candidate for the United States Senate, the Firm has enabled Connecticut business owners to create over 425 private-sector jobs in manufacturing, precision engineering, green and renewable energy, and many other industries.
Pastore & Dailey LLC credits these successes to the Firm’s client-centered approach and comprehensive application process. To date, all clients that have applied for assistance through these programs have received funding. Assistance packages range from $60,000 to $48 Million. Loan packages include various levels of loan-forgiveness and carry interest rates as low as 2%.
For more information, contact Atty. Susan Bysiewicz in the Firm’s Glastonbury office: 860.266.6870 or by email, sbysiewicz@psdlaw.net.
Nathan Zezula Joins Pastore & Dailey LLC
Pastore & Dailey LLC welcomes Nathan Zezula as Counsel in the Firm’s Stamford and Glastonbury offices. Nathan is well-versed in commercial litigation, including breach of contract claims, unfair trade practice claims, real estate disputes, and fraud and breach of fiduciary duty claims. Nathan has extensive experience in securing pre-judgment relief, including temporary injunctions and restraining orders. He has represented clients in federal patent infringement disputes and bankruptcy adversarial proceedings.
Nathan has been named a “Rising Star” by Connecticut Super Lawyers, and is a veteran of the United States Army, having spent four years on active duty in Germany and Kosovo, leaving with the rank of Captain. He is a 2007 graduate of Pace Law School, where he graduated Magna Cum Laude while working as managing editor of the Pace Law Review.
From Forbes: Attention Inside Traders! These Wall Street Vets May Have the Tech to Nail You
As part of his punishment for what authorities call the most profitable insider trading scheme in history, Mathew Martoma consumed his Thanksgiving meal at FCI Miami—the prison that he checked into on November 20th. The former hedge fund manager for S.A.C. Capital Advisors had generated a $275 million profit in 2008, which New York federal judge Paul G. Gardephe called “hundreds of millions of dollars more than ever seen in an insider trading prosecution.” He’ll be serving nine years—that’s about an hour for every $3,500 he stole—unless released sooner for wholesome behavior.
In sentencing Martoma in September, the judge called his illegal trading edge “deeply corrosive to our markets,” and noted that “the conduct was well-planned and Mr. Martoma knew the amount of avoided losses or profits were likely to be staggering.”
But what if the S.E.C. and FBI had been able to utilize cutting-edge software that could have detected illegal trading at the company as it was starting to materialize in 2008? For one thing, Martoma wasn’t alone. Former S.A.C. trader Michael Steinberg was also convicted for inside trading, and the firm itself pled guilty and paid a $1.8 billion penalty for failing to prevent its employees from engaging in the illegal activity. Could all of this skulduggery have been spotted sooner?
In recent years, there’ve been gigabytes of chatter inside Wall Street’s compliance departments about the need for better surveillance technology (employed by the firms, or regulators—or both) to keep a closer tab on traders. FINRA, the country’s largest independent securities regulator, recently proposed a rule that would require the production of trading information on a granular level at financial service firms, including from customer accounts. There’s no question that the firms and regulators have access to ever-expanding mountains of data they didn’t have in the past, but creating software to sift through it all (especially on a real-time basis) and presenting the findings in a visually understandable format is the ultimate challenge.
Now a year-old startup called AIMPaaS, which develops trading execution platforms, has come up with what may be a viable solution: A comprehensive software system that appears to be unique in the financial services industry. It not only executes the stock orders, but it also employs sophisticated behavorial modeling of traders and portfolio managers that can detect insider trading and other nefarious or impermissable activities. Moreover, it ranks and rates analysts in a simulated environment that can also guard against insider trading. This three-pronged approach, combined with deep expertise on Wall Street, is the key thing that differentiates AIMPaaS from competitors.
AIMPaaS’s tech triggers alerts if patterns are altered that could indicate insider trading—for example, larger dollar trades; greater quantities of stock; buying more aggressively almost regardless of price; or perhaps suddenly trading in nontransparent venues such as dark pools.
The concept of behavorial variance tracking in and of itself is nothing new. Such modeling started nearly a decade ago in the fraud and financial crimes arena, with companies such as NICE Actimize, Oracle Mantas, Detica (BAE Systems), and IBM. All of them have some form of profile-driven monitoring of patterns in order to find abnormal activities. In geek-speak, such analytics are designed to detect unknown behaviors that are anomalous and deviate statistically from historical (or expected) activity—as opposed to algorithm-driven monitoring which is designed to detect a known behavior. “I call that a rifle shot, because they are targetted on specific, defined behaviors,” says James Heinzman, one of the industry’s top experts on regulatory compliance technology. (Heinzman developed compliance and money-laundering solutions for NICE Actimize, a leading player.)
In addition, firms such as Thompson Reuters have created a data feed that identifies the impact of news events on the price of publicly-traded securities that’s known as “directional news sentiment.” Put simply, for news stories that cover corporate announcements of, say, takeovers or clinical trials for drugs, they can determine the (positive or negative) impact of the stories on the stock price. They do this with algorithms designed to detect trading activity prior to that announcement that may have benefitted from the impact of the news article—a form of insider trading.
Read the full article here.
Originally Posted on Forbes.com on December 2, 2014
Richard Behar is the Contributing Editor, Investigations, for Forbes magazine. He can be reached at rbehar@forbes.com
Motion to Strike Victory
Pastore & Dailey recently succeeded in defending their client’s claims against a motion to strike in Connecticut Superior Court. Pastore & Dailey was successful on the majority of their counts, including fraud, multiple counts for breach of contract and breach of the covenant of good faith and fair dealing, CUTPA and breach of fiduciary duty. While most of Pastore & Dailey’s successful rulings came from the bench, the Judge did issue a written opinion as to the breach of fiduciary duty claims. Pastore & Dailey prevailed in arguing that their client, a co-owner and co-manager of a successful hedge fund, was in fact owed a fiduciary duty by the other co-owner/manager, despite their equal ownership interests. The court agreed with Pastore & Dailey’s arguments that the existence of a fiduciary relationship depends on several factors and simply because there is equal ownership does not preclude one party from operating as a fiduciary to the other in their management and control. Thus, the court allowed the breach of fiduciary duty claim to survive the motion to strike and remain a valid cause of action in the case along with the majority of their claims, including their most important claims.