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In re American International Group

July 17, 2008


The opinion of the court was delivered by: John E. Sprizzo, D.J.



The above-captioned actions come before the Court by the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, and the Ohio Police and Fire Pension Fund's (collectively, "Ohio Funds" or "lead plaintiff") Motion for Leave to Amend the Complaint dated June 9, 2008. Defendants American International Group, Inc. ("AIG") and Richmond Insurance Company Ltd. ("RIC") filed an Opposition dated June 26, 2008. Defendants Maurice R. Greenberg, Starr International Company, Inc., and C.V. Starr & Co., Inc. filed an Opposition on July 1, 2008. Intervenor Maine Public Employees Retirement System filed an Opposition dated June 20, 2008. Plaintiff-Intervenors Jacksonville Police & Fire Pension Fund ("Jacksonville") and James Connolly filed Oppositions dated June 30, 2008. For the reasons set forth below, lead plaintiff's Motion is hereby denied.


This litigation was commenced more than three-and-a-half years ago when putative class actions were filed in this Court on October 15, 2004. The putative class actions alleged that AIG and certain of its officers and directors violated the securities laws by failing to disclose AIG's participation in bid-rigging and contingent commission schemes (alleged in a complaint by the New York Attorney General against Marsh & McLennan Companies, Inc.). See Compl. ¶¶ 1-16. The proposed class period in these actions was October 28, 1999 through October 13, 2004. See id. ¶ 1. On February 8, 2005, this Court consolidated the cases and appointed Ohio Funds as lead plaintiff. On April 19, 2005, lead plaintiff filed a Consolidated Amended Class Action Complaint, which included allegations pertaining to the same bid-rigging and contingent commission schemes, see Consolidated Am. Class Action Compl. ("Am. Compl.") ¶¶ 80-139, as well as newly-disclosed allegations of accounting improprieties involving defendant General Reinsurance Corp. See id. ¶¶ 140-95. The Amended Complaint extended the class period an additional five months to March 30, 2005. See id. ¶ 1.

On September 27, 2005, Ohio Funds filed a Second Amended Complaint, incorporating all of the allegations from the first Amended Complaint, see Consolidated Second Am. Class Action Compl. ("Second Am. Compl.") ¶¶ 225-581, plus additional allegations of improper accounting based on AIG's May 31, 2005 restated financial statements for 2000 through 2003 and the first three quarters of 2004, see id. ¶¶ 25-27, 582-605. Subsequently, defendants filed Motions to Dismiss, which the Court denied. See Order, dated April 21, 2006; Order, dated May 25, 2006; Memorandum Opinion & Order, dated March 2, 2007. On December 15, 2006, Ohio Funds filed a Third Amended Complaint, which is the current operative pleading in this action. The Third Amended Complaint only extended the class period by two days, to April 1, 2005, and left the underlying claims and allegations unchanged. See Consolidated Third Am. Class Action Complaint ("Third Am. Compl.") ¶ 1. Defendants subsequently filed their Answers in January 2007. See Decl. of Darren W. Johnson, dated June 26, 2008 ("Johnson Decl."), Ex. 8.

Since April 2006, discovery has proceeded regarding the alleged bid-rigging and accounting fraud. After twenty months and four million pages of documents from more than 400 different custodians, lead plaintiff sent a letter on February 28, 2008 to AIG confirming that AIG's document production was substantially complete and that no further document requests were necessary.*fn1 See Johnson Decl., Ex. 9. Indeed, on May 23, 2008, the Court entered an Order requiring all merits discovery to be completed by December 1, 2009 and expert discovery to be completed by February 1, 2010. See Order, dated May 28, 2008.

On February 20, 2008, lead plaintiff filed a Motion for Class Certification proposing a class period from October 28, 1999 to April 1, 2005. See Lead Pl.'s Mem. in Supp. of Mot. for Class Cert., dated Feb. 20, 2008, at 6. Defendants have taken nineteen depositions on class certification issues, all of which were premised on the alleged class period. See Mem. of Law of Defs. AIG and RIC in Opp'n to Ohio Funds' Mot. for Leave to Amend the Compl., dated June 26, 2008, ("Defs.' Opp'n Mem.") at 7-8.

Lead plaintiff now seeks to add new and unrelated claims as well as new defendants, based on AIG's alleged writedowns in February and May 2008 of more than $20 billion stemming from losses in its portfolio of credit default swaps written by its subsidiary, AIG Financial Products Corp. ("AIGFP"). See Decl. of Zachary M. Ratzman in Supp. of Lead Pl.'s Mot. to Amend the Compl., dated June 9, 2008, Ex. A, Proposed Consolidated Fourth Am. Class Action Compl. ("Proposed Fourth Am. Compl.") ¶¶ 775-865. These claims concern events which took place more than three years after the transactions at issue in the Third Amended Complaint. The Third Amended Complaint and the proposed amendments concern different time periods, different divisions of the company, different management, different alleged objectives, different disclosures, and different shareholders. Compare Third Am. Compl. with Proposed Fourth Am. Compl. ¶¶ 1, 775-865 .

Lead plaintiff knew the basis for the proposed amendment no later than February 11, 2008, before they filed their motion for class certification, before they sent their letter confirming that discovery was substantially complete, before they had defended over a dozen class certification depositions, before they stipulated to a class certification scheduling order which required AIG to file its opposition by June 16, 2008, and before they stipulated to a scheduling order which required merits discovery to be completed within eighteen months. See Def.'s Opp'n Mem. at 9; Johnson Decl. ¶¶ 17, 20 & Exs. 9-11, 13, 14.*fn2 In light of these facts, lead plaintiff's Motion is hereby denied.


Once a party has filed a responsive pleading, leave to amend is only allowed "when justice so requires." See Fed. R. Civ. P. 15(a). A district court has the discretion to deny leave to amend when there is undue delay in bringing the amendment; bad faith or dilatory motive on the part of the movant; repeated failure to cure deficiencies by previous amendments; undue prejudice to the opposing party; or futility of amendment. See Foman v. Davis , 371 U.S. 178, 182 (1962); John Hancock Mut. Life Ins. Co. v. Amerford Int'l Corp. , 22 F.3d 458, 462 (2d Cir. 1994). These "considerations of undue delay, bad faith, and prejudice to the opposing party" are the "touchstones of a district court's discretionary authority to deny leave to amend." Barrows v. Forest Laboratories, Inc., 742 F.2d 54, 58 (2d Cir. 1984).

Though not argued by the parties, this proposed new pleading is properly a supplemental complaint rather than an amendment to the original complaint because it avers acts occurring after the date of the complaint. See United States v. Int'l Bus. Machines Corp., 66 F.R.D. 223, 227 (S.D.N.Y. 1975). Federal Rule of Civil Procedure 15(d) provides for service of a supplemental pleading "setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." Fed. R. Civ. P. 15(d). Amended pleadings, which are governed by Rule 15(a), set forth matters occurring prior to the date of the original pleading. The proposed amendment involves new claims concerning actions by AIGFP regarding its portfolio of credit default swaps, which took place in 2007 and 2008-more than three years after the transactions at issue in the Third Amended Complaint. Thus, the Motion to Amend will be treated as a Motion to Serve a Supplemental Pleading pursuant to Federal Rule of Civil Procedure 15(d). See Lerman v. Chuckleberry Publ'g, Inc., 521 F. Supp. 228 (S.D.N.Y. 1981), rev'd on other grounds, 745 F.2d 123 (2d Cir. 1984). As is the case with an amended pleading, a district court can, in the exercise of its discretion, deny a motion to serve a supplemental pleading when there is undue delay, bad faith, dilatory tactics, undue prejudice to the party to be served with the proposed pleading, or futility. See Quaratino v. Tiffany & Co., 71 F.3d 58, 66 (2d Cir. 1995).

Defendants oppose lead plaintiff's Motion, claiming that granting the Motion would cause undue prejudice and would be futile. In determining what constitutes "prejudice," the Court considers "whether the assertion of the new claim would: (i) require the opponent to expend significant additional resources to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the dispute; or (iii) prevent the plaintiff from bringing a timely action in another jurisdiction." Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir. 1993). Additionally, a proposed amendment causes undue prejudice if, at an advanced stage of litigation, the amendment concerns "an entirely new set of operative facts ...

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