The People of the State of New York by Eric T. Schneiderman,, Respondent,v.Maurice R. Greenberg, et al., Appellants.BriefN.Y.May 3, 2016To be Argued: FOR MAURICE R. GREENBERG BY DAVID BOIES BOIES, SCHILLER & FLEXNER LLP (Time Requested: 30 Minutes) FOR HOWARD I. SMITH BY VINCENT A. SAMA KAYE SCHOLER LLP (Time Requested: 30 Minutes) APL-2015-00172 New York County Clerk’s Index No. 401720/05 Court of Appeals of the State of New York THE PEOPLE OF THE STATE OF NEW YORK by Eric T. Schneiderman, Attorney General of the State of New York, Plaintiff-Respondent, – against – MAURICE R. GREENBERG and HOWARD I. SMITH, Defendants-Appellants. JOINT REPLY BRIEF FOR DEFENDANTS-APPELLANTS SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, New York 10036 Tel.: (212) 735-3000 Fax: (212) 735-2000 CHARLES FRIED, ESQ. 1545 Massachusetts Avenue Cambridge, Massachusetts 02138 Tel.: (617) 495-4636 Fax: (617) 496-4865 BOIES, SCHILLER & FLEXNER LLP 333 Main Street Armonk, New York 10504 Tel.: (914) 749-8200 Fax: (914) 749-8300 – and – 575 Lexington Avenue New York, New York 10022 Tel.: (212) 446-2300 Fax: (212) 446-2350 Attorneys for Defendant-Appellant Maurice R. Greenberg (For Continuation of Appearances See Inside Cover) Date Completed: October 22, 2015 KAYE SCHOLER LLP 250 West 55th Street New York, New York 10019 Tel.: (212) 836-8000 Fax: (212) 836-8689 – and – ANDREW M. LAWLER, P.C. 641 Lexington Avenue, 27th Floor New York, New York 10022 Tel.: (212) 832-3160 Fax: (212) 832-3158 Attorneys for Defendant-Appellant Howard I. Smith i TABLE OF CONTENTS PRELIMINARY STATEMENT .................................................................... 1 ARGUMENT .................................................................................................. 6 I. THE ISSUES ON THIS APPEAL HAVE NOT BEEN RULED ON BY THIS COURT. ........................................................................ 6 II. CONTARY TO NYAG’S SUGGESTION, THIS COURT SHOULD ADDRESS THE VIABILITY OF NYAG’S REMAINING REQUESTS FOR RELIEF NOW. ............................... 9 A. NYAG’s Assertion That It Will Easily Establish A Martin Act Violation Is Both Irrelevant To The Issues On This Appeal And Belied By The Record. .......................................... 9 B. NYAG’s Effort To Defer A Ruling On The Viability Of The Remedies It Seeks Should Be Rejected. ........................... 11 III. NYAG CANNOT SEEK REMEDIES NOT AUTHORIZED BY THE STATUTES AT ISSUE. ............................................................ 13 IV. APPELLANTS ARE ENTITLED TO SUMMARY JUDGMENT ON NYAG’S DISGORGEMENT CLAIM. ....................................... 17 A. NYAG Is Not Entitled To Disgorgement Under The Martin Act Or Executive Law § 63(12). .............................................. 17 1. Neither The Martin Act Nor Executive Law § 63(12) Authorizes NYAG To Seek Disgorgement. .................. 17 2. Section 353-a Of The Martin Act Does Not Authorize NYAG To Seek Disgorgement In This Action. ............................................................................ 18 3. The Expressio Unius Doctrine Precludes The Remedy Of Disgorgement. ............................................ 21 ii B. In This Case, Even If NYAG Had Statutory Authority To Seek Disgorgement, Appellants Are Entitled To Summary Judgment. . ............................................................................... 23 1. Appellants’ Settlement With AIG Bars NYAG From Pursuing Disgorgement In This Action. ........................ 25 2. NYAG’s Pursuit Of Disgorgement From Appellants Does Not Satisfy Any Sovereign Interest. ..................... 27 3. NYAG Has Not Rebutted Appellants’ Prima Facie Showing Of The Lack Of A Causal Connection Between The Bonuses AIG Paid To Appellants And The Two Transactions Remaining At Issue. ................. 28 V. NYAG IS NOT ENTITLED TO THE PERMANENT INJUNCTIVE RELIEF IT SEEKS IN THIS ACTION. .................... 31 A. The Statutes At Issue Do Not Authorize NYAG To Seek The Permanent Injunctive Relief Requested. ........................... 31 B. Appellants Are Entitled To Summary Judgment On NYAG’s Claim For A Permanent Injunction. ......................... 34 VI. NYAG’S CLAIMS FOR DISGORGEMENT AND INJUNCTIVE RELIEF ARE BARRED BY THE SUPREMACY CLAUSE OF THE UNITED STATES CONSTITUTION. ..................................... 37 VII. APPELLANTS PRESERVED THE ARGUMENTS RAISED IN THEIR OPENING BRIEF. ................................................................ 42 CONCLUSION ............................................................................................. 46 iii TABLE OF AUTHORITIES Cases Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592 (1982) ................................................................................. 41 Am. Sugar Ref. Co. of N.Y. v. Waterfront Comm’n of N.Y. Harbor, 55 N.Y.2d 11 (1982) ................................................................................ 43 Andon v. 302-304 Mott St. Assocs., 94 N.Y.2d 740 (2000) .............................................................................. 30 Balbuena v. IDR Realty LLC, 6 N.Y.3d 338 (2006) ................................................................................ 38 Bourquin v. Cuomo, 85 N.Y.2d 781 (1995) .............................................................................. 15 Brill v. City of New York, 2 N.Y.3d 648 (2004) ............................................................................ 7, 13 City of New York v. FCC, 486 U.S. 57 (1988) ................................................................................... 39 Cmty. Bd. 7 of Manhattan v. Schaffer, 84 N.Y.2d 148 (1994) ......................................................................... 11-12 Conboy v. AT&T Corp., 241 F.3d 242 (2d Cir. 2001) .................................................................... 22 CTS Corp. v. Waldburger, 134 S. Ct. 2175 (2014) ............................................................................. 15 Cuomo v. Long Island Lighting Co., 71 N.Y.2d 349 (1988) .............................................................................. 11 East Midtown Plaza Housing Co. v. Cuomo, 20 N.Y.3d 161 (2012) .............................................................................. 33 iv EEOC v. Abercrombie & Fitch Stores, Inc., 135 S. Ct. 2028 (2015) ............................................................................. 23 Elezaj v. P.J. Carlin Constr. Co., 89 N.Y.2d 992 (1997) .............................................................................. 44 Feinberg v. Saks & Co., 56 N.Y.2d 206 (1982) .............................................................................. 44 First Energy Leasing Corp. v. Attorney-Gen., 68 N.Y.2d 59 (1986) ..................................................................... 18, 32-33 FTC v. Bronson Partners, 654 F.3d 359 (2d Cir. 2011) .................................................................... 19 In re Hayes’ Will, 263 N.Y. 219 (1934) ................................................................................ 30 In re Koch, 116 F.2d 243 (2d Cir. 1940) .................................................................... 21 Madrid v. Perot Systems Corp., 130 Cal. App. 4th 440 (Cal. App. 3d Dist. 2005) .................................... 25 Majewski v. Broadalbin-Perth Cent. Sch. Dist., 91 N.Y.2d 577 (1998) .............................................................................. 16 Meghrig v. KFC W., Inc., 516 U.S. 479 (1996) .......................................................... 17-18, 20, 22, 34 Middlesex County Sewerage Authority v. National Sea Clammers Ass’n, 453 U.S. 1 (1981) ..................................................................................... 18 Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960) ................................................................................. 22 Mo., Kan., & Tex. Ry. Co. v. Hickman, 183 U.S. 53 (1901) ................................................................................... 42 Morales v. County of Nassau, 94 N.Y.2d 218 (1999) .............................................................................. 14 v Myers v. Merrill Lynch & Co., No. C-98-3532 WHO, 1999 WL 696082 (N.D. Cal. Aug. 23, 1999) ..... 41 New York v. Seneci, 817 F.2d 1015 (2d Cir. 1987) ............................................................ 28, 33 New York Pub. Interest Research Group, Inc. v. Carey, 42 N.Y.2d 527 (1977) .............................................................................. 11 People v. Albany & Susquehanna R.R. Co., 57 N.Y. 161 (1874) .................................................................................. 42 People v. Apple Health & Sports Clubs, Ltd., 80 N.Y.2d 803 (1992) .............................................................................. 10 People v. Applied Card Systems, Inc., 11 N.Y.3d 105 (2008) .................................................................. 25, 26, 27 People v. Bunge Corp., 25 N.Y.2d 91 (1969) ................................................................................ 19 People v. Federated Radio Corp., 244 N.Y. 33, 154 N.E. 655 (1926) .......................................................... 17 People v. Frink Am., Inc., 2 A.D.3d 1379 (4th Dep’t 2003) .............................................................. 32 People v. Grasso, 54 A.D.3d 180 (1st Dep’t 2008) .................................................. 13, 27, 28 People v. Greenberg, 21 N.Y.3d 439 (2013) ....................................................................... passim People v. Greenberg, 95 A.D.3d 474 (1st Dep’t 2012) ........................................................ 11, 45 People v. Greenberg, No. 401720/05, 2010 WL 4732745, 2010 N.Y. Slip Op. 33216(U) (N.Y. County, October 10, 2010) ........................................... 11 vi People v. Lexington Sixty-First Assocs., 38 N.Y.2d 588 (1976) ...................................................... 12, 14, 15, 21, 32 People v. McCann, 3 N.Y.2d 797 (1957) ................................................................................ 33 People v. Photocolor Corp., 156 Misc. 47 (Sup. Ct. N.Y. County 1935) ............................................. 32 People v. Royal Sec. Corp., 5 Misc. 2d 907 (Sup. Ct. N.Y. County 1955) .......................................... 32 Porter v. Warner Holding Co., 328 U.S. 395 (1946) ................................................................................. 20 Richardson v. Fiedler Roofing, 67 N.Y.2d 246 (1986) .............................................................................. 43 Riggs v. Palmer, 115 N.Y. 506 (1889) ................................................................................ 29 Rocovich v. Consolidated Edison Co., 78 N.Y.2d 509 (1991) .............................................................................. 21 SEC v. Bilzerian, 29 F.3d 689 (D.C. Cir. 1994) ................................................................... 28 SEC v. Commonwealth Chem. Sec., Inc., 574 F.2d 90 (2d Cir. 1978) ...................................................................... 28 SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801 (2d Cir. 1975) .................................................................... 35 SEC v. Patel, 61 F.3d 137 (2d Cir. 1995) ...................................................................... 36 SEC v. Princeton Economic Int’l, Ltd., Nos. 99 CIV 9667 RO & 99 CIV 9669 RO, 2001 WL 1023331 (S.D.N.Y. Feb. 7, 2001) ........................................................................... 39 vii In re Shannon, 25 N.Y.3d 345 (2015) .............................................................................. 16 State v. Cortelle Corp., 38 N.Y.2d 83 (1975) ................................................................................ 32 State v. Fine, 72 N.Y.2d 967 (1988) .............................................................................. 34 Steinberg v. Steinberg, 46 A.D.2d 684 (2d Dep’t 1974) ............................................................... 14 Tull v. United States, 481 U.S. 412 (1987) ................................................................................. 36 Whistler Invs., Inc. v. Depository Trust & Clearing Corp., 539 F.3d 1159 (9th Cir. 2008) ................................................................. 38 William J. Jenack Estate Appraisers & Auctioneers, Inc. v. Rabizadeh, 22 N.Y.3d 470 (2013) .............................................................................. 29 Statutes 15 U.S.C. § 77r ............................................................................................. 41 15 U.S.C. § 77t .............................................................................................. 42 15 U.S.C. § 78a ............................................................................................. 33 15 U.S.C. § 78u ............................................................................................. 42 15 U.S.C. § 78bb ........................................................................................... 41 Cal. Bus. & Prof. Code, § 17200 .................................................................. 25 Executive Law § 63(12) ......................................................................... passim Martin Act .............................................................................................. passim N.Y. Gen. Bus. Law § 353 ...................................................... 5, 17, 20, 31, 34 N.Y. Gen. Bus. Law § 353-a ................................................. 17, 18, 19, 20, 21 viii N.Y. Not-For-Profit Corp. Law § 720 .......................................................... 20 N.Y. Stat. § 92……………………………………………..……….…. 22, 23 N.Y. Stat. § 98……………………………………………..……………….21 N.Y. Stat. § 240……..………………………………………………….22, 23 Other Authorities 22 Carmody-Wait 2d § 138:83 ................................................................ 19-20 22 Carmody-Wait 2d § 138:84 ..................................................................... 19 3A West’s McKinney’s Forms Civil Practice Law and Rules § 9:85 ...................................................................................... 30 4 N.Y. Jur. 2d Appellate Review § 596 ........................................................ 30 1920 Report of the Special Committee Appointed by the Governor to Provide Proper Supervision and Regulation in Connection with Securities Offered to the Public for Investment, Bill Jacket, L. 1921, ch. 649 ...................................................................................................... 32 Paul Tharp, AG snit has hit the fan, New York Post, June 10, 2012 .............. 9 1 Defendants-Appellants Maurice R. Greenberg and Howard I. Smith (“Appellants”) respectfully submit this Reply Memorandum of Law in further support of their appeal from the April 16, 2015 Decision and Order of the Appellate Division, First Department (the “Decision”) affirming the May 28, 2014 Decision and Order of the Supreme Court, New York County (Ramos, J.) (“the motion court”) denying Appellants’ July 26, 2013 motion for summary judgment. PRELIMINARY STATEMENT The New York Attorney General (“NYAG”) seeks to hold a multi- month trial, with more than three dozen witnesses, to try to establish a violation of the Martin Act by Appellants (NYAG calls it “a public reckoning”) in a case in which no relief is available to NYAG. This is the ultimate exercise in futility – an exercise that the summary judgment procedure is designed to prevent but that NYAG seeks to subvert. NYAG’s opposition brief thus fails to meaningfully engage on the central points on appeal and does nothing to buttress the sparse reasoning of the erroneous decisions below. Instead, NYAG: (a) incorrectly argues that this Court previously directed that the case proceed to trial; (b) distorts the meaning of the statutory language in both the Martin Act and Executive Law § 63(12) in an effort to import remedies into those statutes that the Legislature never 2 provided; and (c) tries to distract the focus of the Court away from the issues on appeal and onto issues that are not before it, such as whether there is record evidence giving rise to a triable issue of fact concerning Appellants’ knowledge of the allegedly fraudulent aspects of the two transactions remaining at issue. But those hotly contested issues simply are not before this Court on this appeal. See Point II.A, infra. The only issue before this Court is whether Appellants were entitled to summary judgment where the only remaining remedies sought by NYAG against Appellants are not available on the record below that is now before this Court. NYAG first tries to side-step the real issues by asserting that this Court’s prior statements when remanding this action to the motion court dispose of the issues on this appeal. Although NYAG succeeded in getting the lower courts to misread this Court’s remand order, its current effort to convince this Court to misread its own order is astounding. This Court’s remand order was not a directive to proceed to trial. At NYAG’s urging, this Court simply instructed the lower courts to “decide” the issue of whether equitable relief was available “in the first instance,” leaving it to those courts and the parties to use any appropriate procedural mechanism, including a motion for summary judgment, to do so. See Point I, infra. 3 Similarly, this Court should reject NYAG’s effort to hold a lengthy trial before a determination is made as to whether any relief could be granted at the end of that trial. As explained below, not only is this a colossal waste of judicial and party resources, but unless relief is available, NYAG lacks standing or any sovereign interest in the continued pursuit of the action. See Point II.B, infra. When NYAG finally turns to the actual question before this Court – whether its claims for relief are available on this record – it implicitly acknowledges that neither the Martin Act nor Executive Law § 63(12) expressly provides for the remedies NYAG now seeks. It does not point to any language in those statutes that authorizes: (1) disgorgement or (2) a permanent injunction barring Appellants from (a) serving as directors officers of a public company; or (b) participating in the securities industry. In an effort to avoid the natural outcome of its implied concession – summary judgment to Appellants – NYAG devotes a significant portion of its brief to arguments that this Court should ignore the plain language of the statutes at issue, the intent of the Legislature expressed in those statutes, canons regarding statutory interpretation, and this Court’s prior opinions on statutory interpretation. See Points III, IV.A and V.A, infra. This Court should decline NYAG’s invitation. 4 Moreover, even if the relevant statutes authorized disgorgement (which they do not), NYAG’s claims for disgorgement here would still fail because NYAG did not offer any evidence at the summary judgment stage of this action, long after discovery had closed, showing a connection between the allegedly fraudulent acts committed by Appellants and their AIG bonuses that NYAG seeks to have disgorged. In contrast, Appellants offered undisputed evidence showing that: (1) their bonuses were not paid by the State or the investing public; and (2) AIG (which actually paid their bonuses) and AIG’s shareholders have expressly released any and all claims against Appellants as part of global settlements reached by Appellants with these parties. In response to that concrete evidence, NYAG offered nothing but conjecture and supposition, which does not come close to creating a genuine issue of material fact for trial. Moreover, even NYAG’s speculation that Appellants would have been fired if AIG’s Board had been aware of allegations of fraud with respect to the two transactions remaining at issue (and thus would not have received any bonuses) is rebutted by the Board’s actual behavior after NYAG made its allegations. See Point IV.B, infra. NYAG’s claim for permanent injunctive relief fares no better. NYAG seeks a sweeping permanent injunction barring Appellants from participating in the securities industry, serving as an officer or director of a public company, 5 or engaging in future fraudulent behavior. But the relevant statutes limit any permanent injunctive relief to prohibitions on “continuing … fraudulent practices” or “selling or offering for sale … any securities issued or to be issued.” N.Y. Gen. Bus. Law § 353(1). Here, NYAG seeks far broader injunctive relief, well beyond the carefully circumscribed limits in the relevant statutory text. Worse still, NYAG seeks that permanent injunctive relief without making the requisite showing of irreparable harm. NYAG’s claim for permanent injunctive relief is also factually deficient because the requested relief is redundant, punitive, and unnecessary. In response, NYAG does not offer any evidence that would create a triable issue of fact. See Point V, infra.1 The simple reality is that when NYAG was forced to withdraw its claim for damages before this Court over two years ago, NYAG was left only with an abstract and legally untethered pursuit of a “public reckoning.” That is not a business that courts are in. The time has come for this Court to end this civil action. There simply is no legitimate sovereign interest in its continued 1 NYAG’s arguments against preemption are similarly ineffective. NYAG relies on generalized principles regarding state blue sky laws, but fails to address head-on the direct conflicts that exist in this matter between NYAG’s requested remedies and (1) actions already taken by the federal regulator (the SEC) with respect to Appellants and these transactions; and (2) the overall framework of the federal securities laws. See Point VI, infra. NYAG also argues that Appellants did not properly preserve certain arguments for appeal. As set forth in Point VII, infra, NYAG’s argument is legally wrong and contradicted by the record in this case. 6 pursuit, and Appellants are entitled to summary judgment in their favor. It was clear error for the courts below not to enter such judgment. ARGUMENT I. THE ISSUES ON THIS APPEAL HAVE NOT BEEN RULED ON BY THIS COURT. NYAG’s Opposition Brief (“Opp. Br.”) begins with the argument (Opp. Br. 1-2, 25-29), contrary to fact, that Appellants are asking this Court to re- decide questions it already has decided. NYAG’s argument not only is without merit, but is directly contrary to the position advanced to this Court by the Solicitor General two years ago when she asserted that Appellants’ arguments regarding “non-damages remedies” were “not properly before the Court.” R. 198. What the Solicitor General was referring to was the fact that the issues of disgorgement and injunctive relief had not been briefed on the prior appeal precisely because NYAG had not indicated any intention to pursue those remedies until a month before (and even during) the prior oral argument before this Court.2 2 On April 25, 2013, approximately a month before the May 28, 2013 oral argument on the prior appeal, NYAG voluntarily withdrew its damages claims and asserted that it intended to “pursue vigorously” a claim for injunctive relief. R. 197. NYAG also stated for the first time at oral argument that it was “looking into” pursuing disgorgement. R. 221-22; Appellants’ Opening Brief (“App. Br.”) 15. Although NYAG had included boilerplate demands for injunctive relief and disgorgement under the Wherefore clause of its Amended Complaint (R. 140), NYAG did not pursue that relief until after it withdrew its damages claim on April 25, 2013. NYAG never took discovery on those claims for relief and did not include disgorgement as a remedy sought in its January 20, 2011 Note of Issue. R. 167-68. 7 This Court adopted NYAG’s position and ruled that: “There is no doubt room for argument about whether the lifetime bans that the Attorney General proposes would be a justifiable exercise of a court’s discretion; but that question, as well as the availability of any other equitable relief that the Attorney General may seek, must be decided by the lower courts in the first instance.” People v. Greenberg, 21 N.Y.3d 439, 448 (2013) (emphasis added). See also App. Br. 15-16.3 A lower court’s consideration of an issue “in the first instance” can, of course, encompass a wide range of different procedural vehicles, including a motion for summary judgment, trial, or post-trial judgment notwithstanding the verdict. Indeed, the very purpose of a motion for summary judgment is to permit lower courts to decide issues regarding claims “in the first instance” without a trial. See, e.g., Brill v. City of New York, 2 N.Y.3d 648, 651 (2004) (“Summary judgment permits a party to show, by affidavit or other evidence, that there is no material issue of fact to be tried, and that judgment may be directed as a matter of law, thereby avoiding needless litigation cost and delay.”). 3 The reasoning of the Court was dictated by the state of the record at the time. The only relief NYAG said that it was going to pursue was injunctive relief; it said it was merely “looking” into whether to pursue disgorgement. R. 197-98, 221-22. 8 Once the case had been remanded, Appellants moved for summary judgment on NYAG’s newly asserted claims for disgorgement and injunctive relief at the first opportunity to do so. App. Br. 19-23.4 In opposing Appellants’ motion, NYAG distorted (and the courts below misunderstood) this Court’s remand directive. As a result, the courts below failed to address “in the first instance” whether NYAG’s newly asserted claims for relief were viable based on the record. R. 21, 587-89; App. Br. 24-28. Appellants request that this Court now: (1) determine, on the present record, that summary judgment should be granted on both (a) NYAG’s demand for disgorgement and (b) NYAG’s demand for permanent injunctive relief; or (2) in the alternative, remand this action to the courts below to determine “in the first instance” the availability of disgorgement and injunctive relief as remedies in this action based on the record below. 4 In light of the history of this case, it would have been highly unusual (as well as procedurally inappropriate) for this Court to instruct the motion court to hold a trial on the question of equitable relief. Equitable relief had been, at most, a tangential factor when this case was previously before this Court. Indeed, this Court noted in its previous opinion that the question of equitable relief “was not a major focus of any party’s attention below.” People v. Greenberg, 21 N.Y.3d at 448. When the prior appeal was briefed, NYAG was still seeking damages – a remedy that NYAG withdrew only after the settlement of the federal class action against Appellants made clear that such relief could not be obtained. R. 197. 9 II. CONTARY TO NYAG’S SUGGESTION, THIS COURT SHOULD ADDRESS THE VIABILITY OF NYAG’S REMAINING REQUESTS FOR RELIEF NOW. A. NYAG’s Assertion That It Will Easily Establish A Martin Act Violation Is Both Irrelevant To The Issues On This Appeal And Belied By The Record. NYAG asserts that a finding of liability is assured in this action and even goes so far as to insist that a trial should be held “due to defendants’ persistent refusal to accept responsibility for their role in the Gen Re and CAPCO transactions.” Opp. Br. 76. NYAG assumes too much. As this Court knows, this action is a pale shadow of its original self. It began in a blaze of publicity when then Attorney General Spitzer went on national television and accused Appellant Greenberg of criminal wrongdoing5 all in retaliation for Appellant Greenberg having stated, when asked on a securities analysts call in early 2005 about the prevailing regulatory environment that he was concerned that excessive regulation could put a drag on the U.S. economy and also criticized overzealous prosecutors who “look at foot faults and turn them into a murder charge.”6 Since that time, the lawsuit has shrunk to just two remaining 5 On the Friday after Thanksgiving 2005 – when the least public notice would be given to the announcement – NYAG publicly acknowledged that no criminal charges would be brought against Appellant Greenberg. 6 Former Attorney General Dennis Vacco had earlier witnessed “derogatory, deeply personal and highly inappropriate expletive-laden comments about [Hank] Greenberg and his son Jeffrey in front of several assistants.” Paul Tharp, AG snit has hit the fan, New York Post, June 10, 2012, available at http://nypost.com/2012/07/10/ag-snit-has- hit-the-fan/ (alteration in original). 10 transactions, neither of which was material to AIG or had any impact on net income or shareholders equity. App. Br. 1, 11-12. NYAG spends a significant portion of its brief discussing a series of facts relating to claims that are no longer in this litigation, to settlements that AIG entered into after Appellants ceased to be officers and directors of AIG, and to a criminal trial involving defendants other than Appellants where the convictions were reversed on appeal. None of that is relevant to this case or admissible evidence against Appellants.7 Ironically, NYAG does not recognize that the only legal significance of the other proceedings on this action is that the settlements of some of those proceedings in the decade since this action was commenced compel the conclusion that this action no longer can be maintained. See Point IV.B.1, infra. With regard to the two remaining transactions at issue, Appellants deny that they participated in or knew of the allegedly fraudulent aspects of those transactions, and in the absence of such participation or knowledge, they cannot be held liable. See People v. Apple Health & Sports Clubs, Ltd., 80 N.Y.2d 803, 807 (1992). While NYAG asserts that it assuredly will prevail on 7 Moreover, NYAG misrepresents certain of the events underlying this litigation. For example, NYAG tells this Court that Appellants Greenberg and Smith invoked their Fifth Amendment privilege (Opp. Br. 14), but does not also inform the Court that Appellants later revoked their invocation of the Fifth Amendment and testified fully in depositions that lasted five days and two days. 11 liability, NYAG ignores its previous failure to obtain summary judgment on liability regarding either transaction. See People v. Greenberg, No. 401720/05, 2010 WL 4732745, 2010 N.Y. Slip Op. 33216(U), at *82-83 (N.Y. County, October 10, 2010) (denying summary judgment regarding the Gen Re transaction); People v. Greenberg, 95 A.D.3d 474, 485 (1st Dep’t 2012) (reversing grant of summary judgment in favor of NYAG regarding the CAPCO transaction). B. NYAG’s Effort To Defer A Ruling On The Viability Of The Remedies It Seeks Should Be Rejected. NYAG argues that Appellants’ challenges to NYAG’s remaining claims for relief are “premature” prior to a determination of liability at trial, and suggests that this Court “decline to consider” the issues raised on this appeal. Opp. Br. 2-3, 28-29. NYAG’s argument fails because, without a viable remedy, NYAG lacks standing to pursue this case. First, absent an available remedy, this case should not proceed to trial because courts “may not issue judicial decisions that ‘can have no immediate effect and may never resolve anything.’” Cuomo v. Long Island Lighting Co., 71 N.Y.2d 349, 354 (1988) (quoting N.Y. Pub. Interest Research Grp., Inc. v. Carey, 42 N.Y.2d 527, 531 (1977)). Here, a trial on the merits where no relief can be awarded would not “resolve anything” and therefore should not be permitted to occur. See Cmty. Bd. 7 of Manhattan v. Schaffer, 84 12 N.Y.2d 148, 155 (1994) (“the standing analysis is, at its foundation, aimed at advancing the judiciary’s self-imposed policy of restraint, which precludes the issuance of advisory opinions”). Second, NYAG cannot manufacture standing by asserting a “compelling public interest” in a “public reckoning” (whatever that means) of Appellants’ conduct independent of whether a viable remedy exists. Opp. Br. 28-29. No “public interest” exists in the absence of an available remedy under the statutes at issue, particularly where AIG and its shareholders have settled and released any claims they may have had against Appellants, including disgorgement. App. Br. 16-19. Third, even if the Martin Act and Executive Law § 63(12) permit NYAG to sue “for the purposes of preventing fraud and defeating exploitation,” as NYAG contends (Opp. Br. 73-74 & n.23, quoting People v. Lexington Sixty- First Associates, 38 N.Y.2d 588, 598 (1976)), that purpose does not override any concerns about NYAG’s standing. NYAG does not cite any precedent to support its argument that standing rules do not apply to a government official who believes he is acting with a “compelling” public purpose at heart. It is not logical to have standing questions in statutory cases turn on the subjective 13 views of NYAG concerning the nature of the public interest protected by the statute at issue.8 Fourth, considerations of judicial economy and the availability of summary judgment as a procedural remedy under New York law compel the determination now of whether the absence of viable remedies leads to the conclusion that the multi-month trial of this action would be a pointless waste of scarce resources.9 This substantial investment of time and effort by the trial court, the parties, and non-parties would be wasted if no remedies are available. See, e.g., Brill, 2 N.Y.3d at 651. III. NYAG CANNOT SEEK REMEDIES NOT AUTHORIZED BY THE STATUTES AT ISSUE. NYAG argues that “statutory authority is not necessary” for the remedies it seeks because NYAG can seek “relief as broad as equity and justice require,” “a broad range of remedies . . . even when those remedies were not 8 NYAG argues (Opp. Br. 74 n.23) that the standing analysis in People v. Grasso, 54 A.D.3d 180 (1st Dep’t 2008), should be disregarded because that case was not brought under the Martin Act or Executive Law § 63(12), statutes that NYAG contends permit NYAG to seek relief “in the public interest.” But NYAG filed the Grasso action under the Not-For Profit Corporations Law, which protects the public’s interest in charitable and other not-for-profit entities. Grasso, 54 A.D.3d at 194. 9 The parties have identified more than three dozen live trial witnesses (including more than a dozen expert witnesses), designated more than eighty hours of deposition testimony to be played or read at trial, and included more than 1100 exhibits on their exhibit lists. The parties have also filed ten motions in limine and one cross-motion in limine. See NYAG’s June 22, 2015 Memorandum of Law in Support of Motion to Confirm that Defendants’ Fraud Trial Is Not Automatically Stayed By Operation of CPLR 5519(e), or in the Alternative to Vacate Any Continuing Stay of Trial Proceedings 10. 14 specifically mentioned,” “relief beyond those remedies authorized in the underlying statutes,” and whatever “full relief” NYAG desires whenever NYAG believes that the case involves “harms to the public interest.” Opp. Br. 32, 37-39, 43 (internal quotation marks omitted). NYAG’s characterization of its powers (to which neither legal nor constitutional principles apparently apply) should be rejected as fundamentally inconsistent with established principles of statutory interpretation and separation of powers. As this Court recognized in Morales v. County of Nassau, 94 N.Y.2d 218, 224 (1999), “Where the Legislature has spoken, indicating its policy preferences, it is not for courts to superimpose their own.” As discussed elsewhere (App. Br. 42-43 and Point IV.A.3, infra) in “an area comprehensively covered by the legislature, the courts may not fashion remedies not provided by statute.” Steinberg v. Steinberg, 46 A.D.2d 684, 684 (2d Dep’t 1974). NYAG repeatedly mischaracterizes People v. Lexington Sixty-First Associates, 38 N.Y.2d 588 (1976). NYAG claims that the Lexington Court authorized “relief beyond those remedies authorized in the underlying statutes.” Opp. Br. 39. But the relief ordered was an injunction authorized by the statute at issue. See Lexington, 38 N.Y.2d at 589, 591 (appeal was from injunction issued pursuant to the Martin Act). NYAG also claims that 15 Lexington affirmed the courts’ equitable powers “to enforce regulatory statutes . . . even when those remedies were not specifically mentioned in any statute” (Opp. Br. 38), but the Court explicitly stated that the injunction it upheld was “authorized by [the] remedial legislation.” 38 N.Y.2d at 598. Finally, NYAG argues that Lexington established that the Martin Act should be “liberally construed.” Opp. Br. 47 (quoting 38 N.Y.2d at 595). But a liberal construction of a statute is not a license to import into the statute remedies not provided by the legislature. Courts should not “substitute” the “proposition that remedial statutes should be interpreted in a liberal manner” for “a conclusion grounded in the statute’s text and structure,” because “almost every statute might be described as remedial in the sense that all statutes are designed to remedy some problem.” CTS Corp. v. Waldburger, 134 S. Ct. 2175, 2185 (2014). As this Court held in Bourquin v. Cuomo, 85 N.Y.2d 781, 784 (1995), “The constitutional principle of separation of powers . . . requires that the Legislature make the critical policy decisions, while the executive branch’s responsibility is to implement those policies.” (Internal quotation marks and citations omitted). Yet NYAG argues that the “public interest” permits it to seek any remedies it likes unless the statute under which it is operating explicitly states otherwise. See Opp. Br. 55 (“Defendants identify no clear statement of legislative intent to preclude disgorgement or the injunctive relief 16 proposed by the Attorney General here.”); see also Opp. Br. 37-38. That is not the law.10 NYAG must implement the laws set forth in the statutory text – the “clearest indicator of legislative intent.” Majewski v. Broadalbin-Perth Cent. Sch. Dist., 91 N.Y.2d 577, 583 (1998); see also In re Shannon, 25 N.Y.3d 345, 351 (2015) (same). This Court should not permit NYAG to usurp the Legislature’s constitutionally assigned role and should not permit NYAG to seek remedies not authorized by the statutes at issue.11 The Martin Act and Executive Law 10 NYAG relatedly argues (Opp. Br. 56-58) that statements made by the then Attorney General Louis Lefkowitz concerning proposed amendments to the Martin Act to permit restitution and certain types of injunctions show that the amendments were merely intended to express recognition of pre-existing remedies. NYAG itself acknowledges, however, that there was a legal dispute regarding whether such remedies were in fact available in the absence of a statutory amendment. Id. More importantly, NYAG’s argument actually supports Appellants’ position. If those Legislative amendments were “intended to codify existing powers of the Attorney General and the courts under various equitable doctrines,” see Memorandum from Attorney General Louis J. Lefkowitz for the Governor of New York, dated July 9, 1976, reprinted in Bill Jacket for ch. 559 (emphasis added), the remedies NYAG now seeks in the case at bar could not be among the then “existing powers of the Attorney General,” or they would have been listed in the powers that Attorney General Lefkowitz sought to codify. In any event, NYAG should not be able to bootstrap its argument on its own public statements about what the Legislature intended. 11 This Court’s statement on the prior appeal that “On the merits, we cannot say as a matter of law that no equitable relief may be awarded,” People v. Greenberg, 21 N.Y.3d at 447, did not imply that questions of pure statutory interpretation are not properly before this Court. The Court’s prior statement necessarily was limited to the record before it at the time, which did not include briefing regarding the availability of disgorgement and injunctive relief under the statutes at issue. Moreover, with respect to disgorgement, at the time of oral argument before the Court, NYAG had not even made a decision to seek disgorgement, but was merely “looking” into whether it would do so. R. 221-22. 17 § 63(12) contain specific and detailed remedial schemes. NYAG’s policy preferences cannot be substituted for the Legislative intent clearly expressed in that comprehensive statutory framework. IV. APPELLANTS ARE ENTITLED TO SUMMARY JUDGMENT ON NYAG’S DISGORGEMENT CLAIM. A. NYAG Is Not Entitled To Disgorgement Under The Martin Act Or Executive Law § 63(12). 1. Neither The Martin Act Nor Executive Law § 63(12) Authorizes NYAG To Seek Disgorgement. This Court has long recognized that although the Martin Act has a remedial purpose, the statute achieves that purpose through a series of specific authorizations to the Attorney General.12 Nothing in the text of the Martin Act or Executive Law § 63(12) authorizes NYAG to seek a disgorgement remedy. App. Br. 29-34. That should be the end of the matter: “It is an elemental canon of statutory construction that where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it.” Meghrig 12 See, e.g., People v. Federated Radio Corp., 244 N.Y. 33, 37-38 (1926) (“The primary purpose of the law is remedial in its character. It provides (section 352) for the investigation by the Attorney General of the fraudulent practices therein enumerated in respect to the sale of bonds, stocks, and other securities and commodities, and authorizes him (section 353) to bring suit to enjoin persons and corporations from engaging therein and (section 353–a) to obtain the appointment of a receiver to take title to all property derived by defendants by means of such fraudulent practices and liquidate the same for the benefit of persons intervening in the action and establishing an interest in the property.”). 18 v. KFC W., Inc., 516 U.S. 479, 488 (1996) (citing Middlesex County Sewerage Authority v. National Sea Clammers Ass’n, 453 U.S. 1, 14-15 (1981)). The New York Legislature has amended the Martin Act and Executive Law multiple times to add new remedies, such as restitution (but notably, not disgorgement). Those amendments would not have been necessary if NYAG already had inherent authority to seek whatever remedy it deemed appropriate in a particular case. App. Br. 34-38. The broad remedial purpose of the Martin Act provides “no sanction to ignore the plain language” and structure of the statute. See First Energy Leasing Corp. v. Attorney-Gen., 68 N.Y.2d 59, 63-64 (1986) (rejecting NYAG’s argument that “for reasons of policy, the statute should not be read literally – i.e., that a strict construction would limit his broad statutory powers of investigation, increase expense and calendar congestion, and frustrate the remedial purpose of the statute”). 2. Section 353-a Of The Martin Act Does Not Authorize NYAG To Seek Disgorgement In This Action. NYAG argues (Opp. Br. 32-36), without citing any New York State case law, that the language in § 353-a of the Martin Act authorizing courts to order “such other and further relief as may be proper” applies to the entire Martin Act, and not just to the sub-section in which it is found, which indisputably 19 applies only to “Receivers.”13 For the reasons set forth below, that argument is without merit. First, § 353-a authorizes the court to appoint a receiver of fraudulently derived property for the benefit of defrauded persons. That provision cannot be plausibly construed as expanding the equitable remedies available to NYAG. See generally 22 Carmody-Wait 2d § 138:84 (“A Martin Act receivership does not contemplate a liquidation for creditors . . . . Rather, the receivership is for the benefit of defrauded persons who establish their rights as owners of the property seized by the receiver.”); cf. FTC v. Bronson Partners, 654 F.3d 359, 372 (2d Cir. 2011) (distinguishing disgorgement from the distinct remedy of equitable trust). As this Court has explained, “the primary purpose of a suit brought under the Martin Act is to enjoin the defendant’s fraudulent activity; the sequestration of property is merely incidental to such an action.” People v. Bunge Corp., 25 N.Y.2d 91, 100 (1969). The phrase “other and further relief as may be proper” must accordingly be read in the context in which it appears – i.e., the use of a receivership to return property to fraud victims. See 22 Carmody-Wait 2d § 138:83 (“as may be proper” language simply means that “[t]he judgment in the action may provide that such receiver 13 NYAG apparently concedes that the Martin Act does not expressly identify disgorgement as a permissible remedy and that Executive Law § 63(12) does not expressly authorize courts to order disgorgement as a remedy. 20 will take title to any or all such property and books or account and papers relating to the same”). Second, in the ninety years since § 353-a was enacted, no case has applied the construction now urged by NYAG. Third, the decision of the Legislature to place that residual relief clause in § 353-a (which relates to “Receivers”), rather than with the other authorizations of relief (penalties, injunctive relief, and restitution) in the three subsections of § 353, manifests the intention of the Legislature to confine the effect of that clause to “Receivers.” Fourth, Porter v. Warner Holding Co., the principal federal case cited by NYAG, is distinguishable because, in that case, the residual relief clause was located in the general powers section of the statute. 328 U.S. 395, 397, 399 (1946). Furthermore, Porter was distinguished by Meghrig v. KFC W., Inc., 516 U.S. 479, 487-88 (1996), which recognized that remedies should not be implied where legislation comprehensively covers the subject matter. Fifth, if NYAG’s interpretation of § 353-a were valid, the 1976 addition of restitution as an enumerated remedy in § 353(3) would have been a redundancy, since the Martin Act already would have authorized any form of relief (including restitution) since 1925. Such a result would violate the basic canon of statutory construction that all parts of a statute should be given effect. 21 See Rocovich v. Consol. Edison Co., 78 N.Y.2d 509, 515 (1991); N.Y. Stat. § 98. Sixth, NYAG’s position is inconsistent with the overall goal of the Martin Act to protect citizens of New York (injunction) and compensate victims (restitution) rather than to punish wrongdoers (disgorgement). See Lexington, 38 N.Y. 2d at 597. Finally, even if § 353-a were applicable, it cannot be interpreted to authorize disgorgement, since the relief actually specified in § 353-a with regard to Receivers rejects disgorgement as a remedy and provides that any property seized by a Receiver that cannot be connected to an identifiable victim “shall be returned to the defendant.” In the case at bar, because AIG has released its claim to the repayment of any bonuses paid to Appellants (see App. Br. 17-19), if (as NYAG argues) § 353-a applies, those bonuses cannot be repaid to AIG and must “be returned to the defendant.” See In re Koch, 116 F.2d 243, 246 (2d Cir. 1940). 3. The Expressio Unius Doctrine Precludes The Remedy Of Disgorgement. NYAG argues (Opp. Br. 54-60) that (1) the expressio unius doctrine does not apply “when the scope of the courts’ equitable powers is at issue” and (2) the specific grants of statutory authority to pursue remedies of penalties, injunctive relief, and restitution under the two statutes at issue were only 22 “intended to confirm” the court’s intrinsic equitable powers, not to limit the courts’ powers to issue other remedial orders. For the reasons set forth below, those arguments are without merit. First, as described at App. Br. 31-34, where a statute expressly provides a particular remedy or remedies, a court must be wary of reading additional remedies into it. Meghrig, 516 U.S. at 488. Indeed, N.Y. Stat. § 240 provides that where a law is specific, “an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded.” Second, NYAG argues (Opp. Br. 54-56) that the statutes at issue do not satisfy the test of Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960), which provides that a clear statement is required to limit the courts’ inherent equitable powers. But that test is satisfied here, where the statutes at issue displace the court’s inherent equitable powers precisely because they are “not silent on the remedies available” but instead establish “a comprehensive scheme of remedies available” that does not include the remedies sought. Conboy v. AT&T Corp., 241 F.3d 242, 255 (2d Cir. 2001). Otherwise, an expansion of statutory remedies would run afoul of N.Y. Stat. § 92, which identifies the “primary consideration of the courts in the construction of statutes” as “to ascertain and give effect to the intention of the Legislature.” See App. Br. 34. 23 Third, as the United States Supreme Court recently observed, asking courts “to add words to the law to produce what is thought to be a desirable result” is the problem “that inheres in most incorrect interpretations of statutes” and courts should construe legislative “silence as exactly that: silence.” EEOC v. Abercrombie & Fitch Stores, Inc., 135 S. Ct. 2028, 2033 (2015). While NYAG apparently believes that the statutes at issue would be improved if disgorgement were added as an available remedy, amending a statute is not the role of the courts, whose role is limited to interpreting the Legislature’s intent, as manifested in the statutes at issue. See App. Br. 33-34. Finally, as previously discussed (App. Br. 34-38), NYAG’s efforts to argue that “statutory authority is not necessary” because the Legislature could not “identify every form of equitable relief that might be appropriate” (Opp. Br. 32, 55) cannot be the law because it turns statutory interpretation on its head by ignoring N.Y. Stat. §§ 92 and 240. B. In This Case, Even If NYAG Had Statutory Authority To Seek Disgorgement, Appellants Are Entitled To Summary Judgment. As detailed previously (App. Br. 46-54), even if NYAG were authorized to pursue disgorgement, that remedy is not available in this action. First, AIG, which paid the funds sought to be disgorged, fully released Appellants from any possible disgorgement claims. See App. Br. 48-51. In reality, NYAG is 24 pursuing an impermissible penalty rather than disgorgement. See App. Br. 46- 48. Second, because the funds sought to be disgorged were paid by AIG rather than by the State or the investing public, NYAG is not advancing a sovereign or quasi-sovereign interest and thus lacks the authority to prosecute this claim. See App. Br. 51-54. Finally, NYAG fails to suggest that there is any evidence establishing a causal link between the two transactions at issue and the bonuses received by Appellants.14 App. Br. 54-56. 14 NYAG also fails to address Appellants’ payment of $8.25 million in disgorgement as part of their SEC settlement, except to assert vaguely that NYAG is seeking “different relief.” Opp. Br. 71 n.22. Nor does NYAG dispute that Appellants were not on notice that it intended to seek disgorgement until the May 28, 2013 oral argument before this Court, which was eight years after this action was commenced and after discovery had been completed. Opp. Br. 69 n.21. From 2005 to 2013, NYAG only pursued its claim for damages. NYAG does not dispute the evidence put forth by Appellants that: (a) NYAG failed to take any discovery on disgorgement; (b) all relevant discovery has been completed; (c) NYAG omitted disgorgement from its Note of Issue; and (d) NYAG did not take issue with the motion court’s statement that NYAG was not seeking disgorgement. App. Br. 12-13. Although NYAG asserts that “It is conventional to look at remedies after you have liability,” and “that the scope of additional fact-finding or discovery on remedies would be a matter for the trial court to determine in the first instance” (Opp. Br. 19), this argument fails because the motion court decided not to bifurcate the trial of this action into liability and remedies phases. See R. 566-67. The alteration of the State’s theory of relief years into the litigation violates fundamental principles of due process (see App. Br. 56), an argument that NYAG also fails to meaningfully address. 25 1. Appellants’ Settlement With AIG Bars NYAG From Pursuing Disgorgement In This Action. AIG (and its shareholders) released Appellants from any and all claims they had against them, including any disgorgement claims related to the two transactions at issue in this action. App. Br. 17-19. NYAG has not disputed that the funds it seeks to disgorge from Appellants were the subject of those releases. Accordingly, under the principles of res judicata discussed by this Court in People v. Applied Card Systems, Inc., 11 N.Y.3d 105 (2008), NYAG cannot prevail on its disgorgement claim. See App. Br. 48-51. NYAG attempts to avoid the clear import of Applied Card by pointing to this Court’s dicta therein that other forms of equitable relief, including disgorgement, might have been available in that case. NYAG ignores that Applied Card concerned the principles of res judicata and “duplicative recovery.” The holding in that case was not based on the type of relief sought, but on NYAG’s attempt to seek relief on a claim that had already been pursued “to a final and binding judgment.”15 15 Applied Card involved the application of res judicata in the context of an NYAG action following a settlement and release of a private consumer class action. No claim for disgorgement was asserted in that action, see Complaint, Allec v. Cross Country Bank, No. 802894 (Cal. Super. Ct., Orange Cty. Dec. 4, 1998), and in fact the statute the private consumers sued under does not allow a claim for disgorgement. See Cal. Bus. & Prof. Code, § 17200 et. seq.; see also Madrid v. Perot Systems Corp., 130 Cal. App. 4th 440, 460 (Cal. App. 3d Dist. 2005) (“nonrestitutionary disgorgement is not an available remedy in a UCL class action”). As a result, claims for disgorgement were not covered by the settlement in that action and the class could not have asserted such a claim as a 26 In the case at bar, NYAG correctly recognized that its claim for damages is barred under Applied Card due to AIG and its shareholders’ releases of any damages claims.16 What NYAG refuses to acknowledge is that its claim for disgorgement of Appellants’ bonuses is also a claim that AIG released (R. 142- 52), and is thus barred under the principles of res judicata articulated in Applied Card. NYAG asserts that disgorgement is justified here because NYAG should be permitted to pursue alleged “wrongdoers” and to deter future “wrongdoers.” See Opp. Br. 70-72; see also R. 225. But this Court squarely rejected that very argument in Applied Card, 11 N.Y.3d at 124-25 (“Although we recognize the importance of permitting petitioner to seek restitution to deter Executive Law and Consumer Protection Act violations, we cannot allow him to do so at the expense of undermining a validly-entered judgment.”). matter of law even if it had wanted to do so. Thus, principles of res judicata could not be applied to NYAG’s possible claim for disgorgement in Applied Card. In contrast, in this case, AIG – the party who had potential rights to disgorgement – released Appellants from any and all claims, including any claims for disgorgement. See R. 146- 47; Order and Final Judgment, Am. Int’l Grp., Inc. Consol. Derivative Litig., No. 769- VCS (Del. Ch. Jan 25, 2011); see also Delaware Derivative Action, Stipulation and Notice of Voluntary Dismissal with Prejudice, DOC No. 2046, Trans. ID 37047854 (Feb. 5, 2010). 16 NYAG withdrew “its claim for damages because a recent settlement of a federal class action against AIG, Greenberg, Smith, and others likely precluded such monetary relief under” Applied Card. See Opp. Br. 17. 27 This Court should also reject NYAG’s argument (Opp. Br. 71) that res judicata should not prevent NYAG from seeking to substitute its judgment for the judgment of AIG and its shareholders concerning the terms of their settlements with Appellants. In Applied Card, this Court also rejected that very same argument. See Applied Card, 11 N.Y.3d at 124-125 & n.16, 125 (“absent exceptional circumstances such as duress, illegality, fraud or mutual mistake, a settlement must be enforced according to its terms” where, as here, the settling parties “have already compromised their entitlement to a full measure of make- whole relief in a proper judicial forum” (citation omitted)). 2. NYAG’s Pursuit Of Disgorgement From Appellants Does Not Satisfy Any Sovereign Interest. NYAG argues that the Martin Act and Executive Law allow NYAG “to sue on behalf of the public” (Opp. Br. 74), but NYAG is not pursuing disgorgement on behalf of the State or the investing public. As Appellants established (App. Br. 51-54), NYAG is pursuing the disgorgement of bonuses paid to Appellants by a private party (AIG) that released any claims it had to repayment. Consequently, NYAG’s pursuit of disgorgement does not vindicate any sovereign or quasi-sovereign interest. As in People v. Grasso, 54 A.D.3d 180, 194-95 (1st Dep’t 2008), NYAG is not attempting to vindicate the interests of the investing public. 28 NYAG acknowledges that neither the State nor the investing public paid the bonuses at issue to Appellants, but argues (of necessity) (Opp. Br. 72-73) that the source of funds sought to be disgorged is irrelevant. NYAG’s forced argument (a) ignores the applicable authority cited by Appellants (App. Br. 51 n.21); and (b) relies on federal decisions interpreting federal statutes that expressly authorize the SEC to seek disgorgement, thus undercutting, rather than assisting, NYAG’s arguments here.17 NYAG also fails in its attempt to distinguish People v. Grasso and New York v. Seneci as cases “concern[ing] the Attorney General’s common-law parens patriae authority.” Opp. Br. 74 n.23. Grasso involved NYAG’s statutory authority under N.Y. Not-For-Profit Corp. Law § 720(b), not its parens patriae authority. Grasso, 54 A.D.3d at 183. Similarly, Seneci involved NYAG’s statutory authority under the Executive Law and the RICO Act. New York v. Seneci, 817 F.2d 1015, 1016 (2d Cir. 1987). 3. NYAG Has Not Rebutted Appellants’ Prima Facie Showing Of The Lack Of A Causal Connection Between The Bonuses AIG Paid To Appellants And The Two Transactions Remaining At Issue. Appellants made a prima facie showing that they are entitled to summary judgment because the record is “bereft” of any evidence to support a 17 See SEC v. Bilzerian, 29 F.3d 689, 696 (D.C. Cir. 1994) (SEC action for violation of numerous federal securities laws); SEC v. Commonwealth Chem. Sec., Inc., 574 F.2d 90, 102 (2d Cir. 1978) (same). 29 causal link between the two transactions at issue and any bonuses paid by AIG to Appellants.18 See App. Br. 54-56; William J. Jenack Estate Appraisers & Auctioneers, Inc. v. Rabizadeh, 22 N.Y.3d 470, 475-76 (2013). Even though NYAG conceded, during the April 29, 2014 motion court argument on Appellants’ motion for summary judgment, that it has the burden to prove such a causal link,19 NYAG did not even attempt to demonstrate, at the summary judgment phase of this action, the existence of evidence establishing this required causal link that might require a trial.20 Consequently, Appellants were (and are) entitled to summary judgment on NYAG’s disgorgement claim.21 In response, NYAG argues that “the record below contains evidence that defendants would not have received those bonuses had AIG’s board known of 18 Because of that prima facie showing, the burden shifted to NYAG to demonstrate the existence of an issue of fact as to a causal connection between the transactions at issue and the bonuses paid by AIG. See App. Br. 75-83. 19 See R. 527 (“So basically, what we will have to establish . . . is that there is a nexus between the frauds that Mr. Greenberg and Mr. Smith committed on behalf of AIG or AIG committed at their direction, and a segment of the bonuses that they received.”). 20 NYAG’s failure to demonstrate a causal link between Appellants’ bonuses and the transactions at issue renders inapposite NYAG’s reliance on Riggs v. Palmer, 115 N.Y. 506 (1889), for the proposition that “no one shall be permitted to profit by his own fraud.” Opp. Br. 44, 48 (quoting Riggs). 21 NYAG also argues (Opp. Br. 65-66) that Appellants failed to meet their burden on summary judgment by failing to show that the two transactions at issue did not impact their bonuses. But Appellants could not have addressed the specific allegations of NYAG concerning their bonuses because NYAG did not identify what it sought to disgorge (Appellants’ bonuses) until it submitted its January 29, 2015 pre-trial memorandum – seven months after the motion court denied Appellants’ motion for summary judgment and almost two months after the appeal was argued to the Appellate Division. 30 their fraudulent misconduct” (Opp. Br. 62) and asserts, without citation to the record, that “the Attorney General has developed additional support for his disgorgement claim.” Opp. Br. 68. As for the supposed record evidence,22 because none of that “evidence” was presented at summary judgment, it is not properly before this Court. See Opp. Br. 65; see also 3A West’s McKinney’s Forms Civil Practice Law and Rules § 9:85 (“under no circumstances should any party to an appeal refer to matters outside the Record, unless the appellate court may take judicial notice of them”);23 4 N.Y. Jur. 2d Appellate Review § 596; Andon v. 302-304 Mott St. Assocs., 94 N.Y.2d 740, 746-747 (2000); In re Hayes’ Will, 263 N.Y. 219, 221 (1934). In sum, NYAG’s argument, based on unsupported speculation and non- record “evidence,” was and is insufficient to defeat Appellants’ motion for summary judgment. 22 NYAG premises its unsupported theory of causation on speculation about what AIG’s Board of Directors would have done if it had known of NYAG’s allegations at the time that bonuses were paid. But that speculation is irrelevant because the record is clear as to what AIG’s Board did after it became aware of NYAG’s allegations in this case: the AIG Board did not attempt to claw back (disgorge) the bonuses that had been paid, and agreed with Appellants on November 25, 2009 to mutually release all claims between AIG and Appellants, which resulted in the payment of $150 million to Appellants. See R. 142-52. 23 NYAG does not cite any New York law to support its effort to supplement the record with AIG’s proxy statements nor did it move to enlarge the record. Opp. Br. 63 n.18. 31 V. NYAG IS NOT ENTITLED TO THE PERMANENT INJUNCTIVE RELIEF IT SEEKS IN THIS ACTION. A. The Statutes At Issue Do Not Authorize NYAG To Seek The Permanent Injunctive Relief Requested. Contrary to NYAG’s argument (Opp. Br. 49-54), the Martin Act and Executive Law § 63(12) only authorize NYAG to seek very specific forms of injunctive relief, and the injunctive relief sought here does not fall within the authorized limits. Permanent injunctive relief available under the Martin Act is limited to a ban on “selling or offering for sale to the public within this state, as principal, broker or agent, or otherwise, any securities issued or to be issued.” N.Y. Gen. Bus. Law § 353(1). Executive Law § 63(12) authorizes only injunctions against future fraudulent or illegal actions in the context of “repeated” or “persistent” fraud, and does not authorize restrictions on a defendant’s otherwise legal business activities. NYAG argues for a more expansive reading of these acts that contradicts both the legislative history and purpose of those statutes. The Martin Act’s history shows its principal concern with two “evils”: the sale of securities to the public that are “either worthless or have so little value that those purchasing them at the prices for which they are offered 32 immediately sustain a severe loss,” and the “negotiation and sale by swindlers of worthless securities to individuals.”24 Indeed, the lower court cases relied on by NYAG (Opp. Br. 51) involved public offerings of securities. See People v. Photocolor Corp., 156 Misc. 47, 48-49 (Sup. Ct. N.Y. County 1935) and People v. Royal Sec. Corp., 5 Misc. 2d 907, 910 (Sup. Ct. N.Y. County 1955). The case at bar, by contrast, does not involve a public offering by AIG.25 People v. Lexington, which NYAG cites repeatedly for the proposition that a court may award relief beyond that set forth in the Martin Act and Executive Law (Opp. Br. 37-39, 47, 74), actually reversed a part of the lower court’s judgment precisely because that part was not authorized by the Martin Act and “contravene[d] the statute.” 38 N.Y.2d at 597. Similarly, First Energy 24 Report of the Special Committee Appointed by the Governor to Provide Proper Supervision and Regulation in Connection with Securities Offered to the Public for Investment, at 7 (1920), reprinted in New York Legislative Service, Inc., NYLS Legislative History ch. 649 (1921). 25 The statutory aims to which the Martin Act is directed are not augmented by Executive Law § 63(12), which does not provide NYAG with a standalone cause of action, but rather expands upon the remedies available to NYAG for the violation of another statute, such as the Martin Act, but only so long as the alleged “fraudulent or illegal acts” are “repeated” or “persistent.” See State v. Cortelle Corp., 38 N.Y.2d 83, 85 (1975) (Executive Law § 63(12) “did not ‘make’ unlawful the alleged fraudulent practices, but only provided standing in the Attorney-General to seek redress and additional remedies for recognized wrongs which pre-existed the statutes.”); People v. Frink Am., Inc., 2 A.D.3d 1379, 1380 (4th Dep’t 2003) (“Section 63(12) does not create any new causes of action, but does provide the Attorney General with standing ‘to seek redress and additional remedies for recognized wrongs’ based on the violation of other statutes.” (citation omitted)). 33 Leasing Corp. v. Attorney-General, 68 N.Y.2d 59, 63-64 (1986), rejected NYAG’s argument that “for reasons of policy, the statute should not be read literally” because “a strict construction would … frustrate the remedial purpose of the statute.” NYAG seeks a permanent injunction barring Appellants from serving as directors or officers of a public company. R. 220. The bar sought by NYAG against Appellants’ service as public company directors and officers is not authorized by the Martin Act or Executive Law § 63(12). As explained at App. Br. 60-61, the only New York case on the subject, People v. McCann, 3 N.Y.2d 797 (1957), is inapplicable. NYAG attempts to rely on federal law, but as NYAG observed in attempting to distinguish Seneci (Opp. Br. 74), “because the case was brought in federal court and sought to enforce federal law,” it is not relevant to “whether, as here, the Attorney General had state-law statutory authority to pursue relief.” That is particularly true where, as NYAG conceded (Opp. Br. 53-54), Congress specifically amended the Securities Exchange Act of 1934, 15 U.S.C. § 78a, et seq. (“Exchange Act”), in 1990 to authorize such bars.26 26 Although, as NYAG observes (Opp. Br. 40), East Midtown Plaza Housing Co. v. Cuomo, 20 N.Y.3d 161, 170 (2012) states that the federal securities laws may guide the interpretation of the Martin Act, that principle was applicable there because the federal law and the Martin Act used the same language, but is inapplicable here because the federal law authorizes a director and officer bar while state law does not. 34 To the extent certain federal courts ordered director and officer bars before the 1990 amendment, they did so largely before the Supreme Court decided Meghrig v. KFC W., Inc., 516 U.S. 479, 487-88 (1996), which NYAG concedes held that a remedy cannot be implied where the remedies “were comprehensively addressed by another statute.” Opp. Br. 59-60 n.17. NYAG also seeks to bar Appellants from “directly or indirectly participating in the securities industry.” Opp. Br. 49. But there is no support for such broad injunctive relief from the statute, which authorizes only bans on “selling or offering for sale to the public within this state, as principal, broker or agent, or otherwise, any securities issued or to be issued.” N.Y. Gen. Bus. Law § 353(1). B. Appellants Are Entitled To Summary Judgment On NYAG’s Claim For A Permanent Injunction. NYAG argues that it need not show the existence of irreparable harm to obtain injunctive relief because this case is brought in the public interest. Opp. Br. 83-84. But, as set forth at App. Br. 63-64, NYAG (like any other plaintiff) must demonstrate the existence of irreparable harm to obtain injunctive relief. NYAG correctly notes (Opp. Br. 84 n.27) that State v. Fine, 72 N.Y.2d 967 (1988), involved a preliminary injunction, but both preliminary and permanent injunctions require a showing of irreparable harm. NYAG cites only one New York County case and several federal cases to support its 35 position. Opp. Br. 84-85. The state case cited does not explain its rationale, and NYAG’s principal federal case actually says that “the statutory imprimatur given SEC enforcement proceedings is sufficient to obviate the need for a finding of irreparable injury at least where the statutory prerequisite – the likelihood of future violation of the securities laws – has been clearly demonstrated.” SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801, 808 (2d Cir. 1975) (emphasis added). NYAG’s only response (Opp. Br. 77-83) to Appellants’ evidence demonstrating the lack of any probability of irreparable harm (App. Br. 21-24, 63-68) is pure speculation about what Appellants may someday do.27 This is insufficient to oppose Appellants’ summary judgment motion. NYAG also assumes that it has already prevailed at trial, in arguing that Appellants’ “refusal to accept any responsibility” for alleged frauds (Opp. Br. 76) demonstrates the need for injunctive relief. NYAG attempts to reverse the burden of establishing the predicates for injunctive relief by arguing (Opp. Br. 80-81) that injunctive relief should not concern Appellants if they have no intention of serving as directors and officers of a public corporation or 27 As an example, NYAG argues that Appellants are participating in the securities business through control of certain entities that sell securities. Opp. Br. 52. Appellants submitted affidavits attesting that they have no personal involvement in the solicitation of investments or investment advice rendered to third parties by those entities. R. 37, 100; App. Br. 22. NYAG submitted no evidence to the contrary. 36 participating in the securities industry.28 Under NYAG’s logic, there is no reason not to enjoin every New York resident from engaging in every form of activity, which turns the normal presumptions upside down and totally ignores the “stigma” that accompanies an injunction. See SEC v. Patel, 61 F.3d 137, 141-42 (2d Cir. 1995).29 NYAG’s argument that Appellants’ existing SEC injunctions should be irrelevant in determining the likelihood of a future violation also lacks merit. Although NYAG claims to have an independent interest from the SEC in enforcing the securities laws in this case (Opp. Br. 86- 87), NYAG has failed to articulate any such interest. The permanent injunctions obtained by the SEC enjoining Appellants from committing securities fraud obviate any need for NYAG to secure an injunction against Appellants “committing securities fraud in the future.” Opp. Br. 49. 28 NYAG has not responded to – and thus concedes – Appellants’ argument (App. Br. 61- 63) that the injunctive relief sought here constitutes an improper request for a penalty. As noted in Appellants’ opening brief, penalties are “intended to punish culpable individuals,” not “to extract compensation or restore the status quo.” Tull v. United States, 481 U.S. 412, 422 (1987). The officer and director bar and the ban on participating in the securities industry would constitute penalties not authorized by the New York statutes at issue. 29 As Appellants demonstrated (App. Br. 22), they have not served as public company directors and officers for over ten years and have never been involved in the securities industry and have no intention of engaging in those activities in the future. 37 VI. NYAG’S CLAIMS FOR DISGORGEMENT AND INJUNCTIVE RELIEF ARE BARRED BY THE SUPREMACY CLAUSE OF THE UNITED STATES CONSTITUTION. NYAG’s claims for relief are preempted because they conflict with the purpose and intended effects of federal law. As previously explained (App. Br. 68-69), NYAG’s claim for disgorgement is preempted by the prior action of the SEC – the federal securities regulator – which already has determined the appropriate disgorgement for Appellants with respect to the transactions at issue.30 In addition, to the extent NYAG brings this case to benefit private parties such as AIG (App. Br. 53, 72 n.34), its claim for disgorgement is further preempted by SLUSA, NSMIA, and PSLRA, which Congress enacted to provide uniform standards for regulating the securities markets and nationally marketed securities. App. Br. 69-72. Similarly, NYAG’s claim for permanent injunctive relief that bears no nexus to the conduct alleged to be fraudulent is preempted by the federal securities regime, which expressly: (1) permits the SEC to apply to courts for an officer and director bar (unlike the Martin Act and Executive Law, which do 30 NYAG argues that, even though Appellants paid the disgorgement sought by the SEC, Appellants may still be in possession of monies that should be disgorged. (Opp. Br. 71.) This argument epitomizes the conflict between NYAG’s demands here and the federal securities regime. The SEC took into account all the circumstances involved, including the difficulty of proving a causal nexus between any alleged conduct by Appellants and any monies received by them, and entered into a consent judgment with Appellants in which they agreed to an appropriate disgorgement. If various state Attorneys General are permitted to second-guess the SEC’s judgment under such circumstances, it would eviscerate the SEC’s ability to enter into such consent judgments in the future. 38 not); and (2) regulates the information that must be disclosed regarding executive officers and candidates for the board of directors of public companies (including their involvement in any regulatory enforcement litigation). App. Br. 72-74. In response, NYAG asserts (Opp. Br. 89-91) the unremarkable proposition that federal law does not preempt all “blue sky” laws. But NYAG fails to acknowledge that permitted state enforcement is limited in the securities area when a state seeks to regulate conduct that already is subject to federal law or, as here, that has already been dealt with by federal regulators. Courts assessing preemption claims must determine “whether imposing the requirements implicated by [the] state law claims on Defendants is inconsistent with [the federal law]’s purpose” and “intended effects.” Whistler Invs., Inc. v. Depository Trust & Clearing Corp., 539 F.3d 1159, 1166 (9th Cir. 2008) (emphasis added) (finding state-law fraud claims preempted by the Exchange Act); see also Balbuena v. IDR Realty LLC, 6 N.Y.3d 338, 356 (2006) (preemption “where the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress” (internal quotation marks omitted)). Such a conflict exists here. The SEC is “the sole architect[]” of its “enforcement proceedings,” and it has made considered and final judgments 39 here as to what the uniform federal regulation of the national securities markets demands of Appellants. SEC v. Princeton Economic Int’l, Ltd., Nos. 99 CIV 9667 RO & 99 CIV 9669 RO, 2001 WL 102333, at *1 (S.D.N.Y. Feb. 7, 2001). A “federal agency acting within the scope of its congressionally delegated authority may pre-empt state regulation and hence render unenforceable state or local laws,” even when those state laws “are otherwise not inconsistent with federal law.” City of New York v. FCC, 486 U.S. 57, 63- 64 (1988) (internal quotation marks omitted). With respect to disgorgement, the SEC already obtained disgorgement from each of the Appellants through consent decrees approved by a federal court. R. 86-97, 102-116. NYAG’s demand for additional disgorgement undermines the SEC’s determination of the appropriate remedies and thus directly conflicts with the federal regulatory scheme. The same is true for NYAG’s demand for injunctive relief. NYAG seeks a permanent injunction barring Appellants from serving as directors or officers of a public company, selling securities to members of the public, or committing future acts of fraud. The SEC already considered the propriety of such bars and made a considered decision to seek an officer and director bar only from Appellant Smith (and only for three years from August 2009 to August 2012, which he already served and complied with), and not to seek any 40 such bar from Appellant Greenberg. The SEC further made a considered decision not to seek to ban either Appellant from participating in the securities industry. These federal decisions were agreed to by Appellants and approved by a federal court. R. 86-97, 102-116. NYAG’s request for a permanent injunctive relief against both Appellants conflicts with the SEC’s decisions. The rationale for having federal regulation of the securities industry is self-evident; nearly all public companies operate in interstate commerce, necessitating federal – rather than state – regulation of those activities. Permitting NYAG to seek injunctive relief in an area where the SEC has a pervasive regulatory scheme – that it has actually applied with respect to Appellants – would improperly encroach on the federal regulatory regime. NYAG’s other arguments against preemption similarly fail. First, while preemption may be disfavored if a traditional state power is involved (Opp. Br. 89-90), regulating the national securities market – as NYAG seeks to do by supplanting the SEC’s considered judgment with NYAG’s own notions of appropriate relief – is not a “traditional state power.” Second, to the extent that NYAG seeks to disgorge the bonuses paid to Appellants by AIG, the savings clauses in the federal statutes are irrelevant 41 because NYAG is not the “real party in interest.” Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592, 602 (1982). Third, NYAG is incorrect in its contention that NSMIA covers only “registration rules for national securities offerings.” Opp. Br. 93 (emphasis in original). Rather, “NSMIA, by its own terms, covers far more than the registration of securities offerings.” Myers v. Merrill Lynch & Co., No. C-98- 3532 WHO, 1999 WL 696082, at *10 n.14 (N.D. Cal. Aug. 23, 1999) (holding NSIMA preempted California unfair competition claims), aff’d, 249 F.3d 1087 (9th Cir. 2001). NSMIA expressly regulates “other myriad matters,” including certain “practices that occur after the security is registered.” Id. NSMIA also instructs that no State “shall directly or indirectly prohibit, limit, or impose conditions, based on the merits of such offering or issuer, upon the offer or sale of any [covered] security.” 15 U.S.C. § 77r(a)(3). The relief sought by NYAG would “impose conditions” on the sale of securities by encroaching on the federal regulatory regime. As explained previously (App. Br. 70-71), NYAG’s claims interfere with the federal scheme and are preempted because they apply state law standards of proof that are less stringent than federal law standards. Fourth, NYAG cannot avoid preemption under the provision of SLUSA, 15 U.S.C. § 78bb(f)(5)(B), that bars a disguised claim for damages. See App. Br. 45-48, 53, 72 n.34. Although SLUSA refers to actions brought by private 42 parties, where the action brought by the State does not assert particularized injury and instead advances only the claims of private parties, the State is “not . . . , as an organized political community, a party in interest in the litigation.” Mo., Kan., & Tex. Ry. Co. v. Hickman, 183 U.S. 53, 59-60 (1901); see also People v. Albany & Susquehanna R.R. Co., 57 N.Y. 161, 168, 170-71 (1874); App Br. 72 n.34. Finally, NYAG’s claim for a director-and-officer bar directly conflicts with the SEC’s considered judgment on that issue. NYAG argues (Opp. Br. 97) that “this action is brought against two individuals,” rather than companies. But the SEC made a determination on the issue of officer and director bars with respect to Appellants, and the SEC – not NYAG – is empowered to determine the scope of the federal regulatory interest and to seek officer and director bars where necessary under the uniform federal regulatory scheme. See 15 U.S.C. §§ 77t(3), 78u(d)(2). Moreover, to the extent that federal regulations subject an individual to an officer and director bar, they are exclusive and cannot be supplanted by state law injunctions. See App. Br. 72-74 and cases cited therein. VII. APPELLANTS PRESERVED THE ARGUMENTS RAISED IN THEIR OPENING BRIEF. Contrary to NYAG’s assertion (Opp. Br. 29-31), Appellants properly preserved all arguments raised in their opening brief. 43 First, Appellants properly preserved the argument that NYAG’s claim for disgorgement is preempted by federal law. App. Br. 69-72. At oral argument before the motion court, Appellants’ counsel argued that “the disgorgement claim is preempted by federal law; that is, if you were to interpret disgorgement the way they now claim to interpret disgorgement, that would be preempted . . . .” R. 522. Counsel made clear that it raised the point expressly to “preserve the record for ultimate appellate review.” Id. Preservation of an argument in the motion court is sufficient to preserve the argument regardless of whether it was raised to the Appellate Division. See People v. Greenberg, 21 N.Y.3d 439, 448 (2013) (“It is irrelevant to the preservation issue whether the argument was made in the Appellate Division.”). Moreover, even had Appellants had not raised the issue below, the Court may now address it as an issue of pure statutory interpretation. See Richardson v. Fiedler Roofing, 67 N.Y.2d 246, 250 (1986) (“The argument raises solely a question of statutory interpretation, however, which we may address even though it was not presented below.”); Am. Sugar Ref. Co. of N.Y. v. Waterfront Comm’n of N.Y. Harbor, 55 N.Y.2d 11, 25 (1982) (even if interpretation of Waterfront Commission Compact raised a new argument, “it would nonetheless be proper for us to consider it because it is not a contention 44 that could have been ‘obviated or cured by factual showings or legal countersteps’” (citation omitted)).31 Second, Appellants preserved the argument that the Martin Act and Executive Law do not authorize the injunctive relief sought. In the motion court, Appellants argued: “Indeed the fact that the Martin Act authorizes neither remedy” (referring to the two forms of injunctive relief) “sought by NYAG . . . further confirms that NYAG is seeking to achieve a regulatory objective through litigation.” See July 26, 2013 Memorandum of Law in Support of Defendants’ Motion for Summary Judgment 22 n.11, Mot. Seq. 49 (emphasis added). NYAG responded to that argument (see September 7, 2013 NYAG Memorandum of Law in Opposition to Summary Judgment 17-18, Mot. Seq. 49), and the motion court ruled on it (R. 21-22). Both parties briefed the issue to the Appellate Division. See NYAG’s October 1, 2014 Response Br. 38-39; Appellants’ October 10, 2014 Reply Br. 14-15. In addition, as discussed in the previous paragraph, even had Appellants had not raised the issue below, the Court may now address it as an issue of pure statutory interpretation. 31 NYAG’s cases to the contrary are inapposite because they do not involve questions of pure statutory interpretation. See Elezaj v. P.J. Carlin Constr. Co., 89 N.Y.2d 992, 994- 95 (1997) (challenge to court’s exercise of discretion); Feinberg v. Saks & Co., 56 N.Y.2d 206, 210-11 (1982) (appeal related to unpreserved objections made in the course of trial). 45 Finally, Appellants did not waive their preemption challenge to NYAG’s claim for injunctive relief. At the prior oral argument before this Court, counsel for Appellant Greenberg acknowledged only that the preemption issue briefed to the Court – which expressly was limited to NYAG’s effort to “recover money damages”32 – was no longer at issue in the appeal because NYAG had “withdrawn the damage[s] claim.” R. 200 (emphasis added). This Court thus recognized in its opinion only that the particular preemption issue “discussed in the majority and dissenting opinions at the Appellate Division, is out of the case.” Greenberg, 21 N.Y.3d at 447 (citing Greenberg, 95 A.D.3d at 479-82, 489-92). When the propriety of NYAG’s new claims for equitable relief were briefed before the motion court, Appellants raised and briefed the issue of federal preemption of NYAG’s claim for injunctive relief. See Defendants’ July 26, 2013 Memorandum of Law in Support of Motion for Summary Judgment 17-22. As discussed above, this briefing in the motion court is sufficient to preserve the argument for this Court. Greenberg, 21 N.Y.3d at 448. 32 See September 24, 2012 Appellants’ Brief 4 (Issue presented No. 2: “Is the NYAG’s use of the Martin Act and Executive Law in this action to pursue a securities fraud class action to recover money damages on behalf of a class of private shareholders preempted by federal laws intended to provide uniform national standards governing such claims for securities fraud?” (emphasis added)). CONCLUSION For the reasons set forth above and in their opening brief, Appellants respectfully request that this Court enter summary judgment in Appellants' favor and dismiss this action. In the alternative, this Court should reverse the decisions below and remand the action to the motion court with a direction to follow the procedure set forth in this Court's June 25, 2013 Order by reviewing the evidence submitted on summary judgment and issuing a new decision considering that evidence. Dated: New York, New York October 22, 2015 BOIES, SCHILLER & FLEXNER LLP David Boies 333 Main Street Armonk, New York 10504 Telephone: (914) 749-8200 Nicholas A. Gravante, Jr. Robert J. Dwyer ~.t\my L. Neuhardt 57 5 Lexington A venue New York, New York 10022 Telephone: (212) 446-2300 SKADDEN, ARPS, SLATE, MEAGHER & FLOMLLP 46 John L. Gardiner Four Times Square New York, New York 10036 Telephone: (212) 735-3000 CHARLES FRIED (of the bar of the State of Massachusetts) By Permission of the Court 1545 Massachusetts A venue Cambridge, Massachusetts 0213 8 Telephone: ( 617) 495-4636 Attorneys for Appellant Maurice R. Greenberg Catherine B. Schumacher 250 West 55th Street New York, New York 10019 Telephone: (212) 836-8000 ANDREW M. LAWLER, P.C. Andrew M. Lawler 641 Lexington A venue New York, New York, 10022 Telephone: (212) 832-3160 Attorneys jar Appellant Howard 1. Smith 47