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Paul, Weiss is widely recognized as having one of the nation’s preeminent securities litigation and regulatory practices. For two decades, our lawyers have guided global corporations and financial institutions through a series of “bet-the-company” securities-related crises, consistently reducing or eliminating their most damaging claims and negotiating favorable resolutions.
Ending eight years of litigation against The Citco Group Limited and several affiliates, Paul, Weiss won an appeal affirming the dismissal of all claims against Citco in a dispute with three Louisiana public pension funds. In a unanimous decision, a panel of the Fifth Circuit affirmed the district court’s ruling granting summary judgment to Citco.
The litigation stems from the plaintiffs’ $100 million investment in 2008 in a hedge fund managed by Alphonse “Buddy” Fletcher Jr. Citco, the world’s largest hedge fund administrator, had provided administrative services to the fund. Following the financial crisis, Fletcher’s fund collapsed and the plaintiffs were unable to redeem their investment. In 2013, they filed suit in Louisiana against Fletcher, Citco and others, alleging that the Citco defendants knew, and failed to disclose, material information about their investment prior to and during their investment.
In January 2019, a federal district court in Baton Rouge, Louisiana, granted summary judgment for Citco on all claims. The plaintiffs appealed only the dismissal of their securities claim under Louisiana’s blue sky law, arguing that Citco was liable for all their losses under control person liability.
In affirming the district court, the Fifth Circuit held that the Citco affiliates’ provision of back-office administrative services and banking services to Fletcher’s hedge fund did not convert them into a “control person” with the ability to control the hedge fund’s management and policies. The Fifth Circuit also held that Citco could not be liable as a control person simply because a non-defendant Citco affiliate, Millennium Foundation, held the hedge fund’s voting shares for administrative convenience.March 31, 2021