FEDERAL JUDGE RULES THAT PRIVATE LITIGANTS CAN BRING STATE COURT CASES UNDER NEW YORK'S MARTIN ACT
In a marked departure from numerous decisions by judges in New York state courts and the Southern District of New York, a New York federal court judge ruled that private litigants are permitted to sue wrongdoers in connection with the sale of securities, and that the judges that have dismissed such cases as being foreclosed by New York's Martin Act are wrong.
In his July 29, 2010 decision in Anwar v. Fairfield Greenwich Limited, 09 Civ. 0118(VM), Judge Victor Marrero permitted a class action to proceed against Fairfield Greenwich Limited, a hedge fund in which the plaintiffs invested. Fairfield, in turn, invested most of the plaintiffs' money in the Bernard Madoff Ponzi scheme. Judge Marrero rejected the defendants' argument that common law claims, except for fraud, are preempted by New York's Martin Act. The Martin Act is the state law that grants the New York State Attorney General the power to prosecute fraud in the securities market.
Judge Marrero observed that errors sometimes enter into scientific theories and are mistakenly and repeatedly adopted until they become accepted. In his view, the same error occurred in years of court decisions as a result of judges' mistaken acceptance of the Martin Act as precluding common law causes of action. Judge Marrero expressed his hope that the federal and state appellate courts will correct the further misapplication of the Martin Act before it "fossilizes any further."