Janvey v. Alguire

• Decision Date: 31 January 2017
• Docket Number: No. 14-10857,CONSOLIDATED WITH 14-10945, CONSOLIDATED WITH 14-11014, CONSOLIDATED WITH 14-11093,14-10857
• Citation: 847 F.3d 231
• Parties: Ralph S. JANVEY, Plaintiff–Appellee, v. James R. ALGUIRE; Victoria Anctil; Tiffany Angelle; Sylvia Aquino; Jonathan Barrack; Mark Tidwell ; Charles Rawl; Susana Anguiano; Teral Bennett; Lori Bensing; Susana Cisneros; Ron Clayton, John D. Orcutt, et al., Defendants–Appellants. Ralph S. Janvey, in his capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, et al., Plaintiff–Appellee, v. Oreste Tonarelli, Defendant–Appellant. Ralph S. Janvey, in his capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, et al., Plaintiff–Appellee, v. Juan Alberto Rincon, Defendant–Appellant. Ralph S. Janvey, in his capacity as Court Appointed Receiver for the Stanford International Bank Limited, et al.; Official Stanford Investors Committee, Plaintiffs–Appellees, v. Luis Giusti, Defendant–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

847 F.3d 231

Ralph S. JANVEY, Plaintiff–Appellee,

v.James R. ALGUIRE; Victoria Anctil; Tiffany Angelle; Sylvia Aquino; Jonathan Barrack; Mark Tidwell ; Charles Rawl; Susana Anguiano; Teral Bennett; Lori Bensing; Susana Cisneros; Ron Clayton, John D. Orcutt, et al., Defendants–Appellants.

Ralph S. Janvey, in his capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, et al., Plaintiff–Appellee,

v.Oreste Tonarelli, Defendant–Appellant.

Ralph S. Janvey, in his capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, et al., Plaintiff–Appellee,

v.Juan Alberto Rincon, Defendant–Appellant.

Ralph S. Janvey, in his capacity as Court Appointed Receiver for the Stanford International Bank Limited, et al.; Official Stanford Investors Committee, Plaintiffs–Appellees,

v.Luis Giusti, Defendant–Appellant.

No. 14-10857

CONSOLIDATED WITH 14-10945, CONSOLIDATED WITH 14-11014, CONSOLIDATED WITH 14-11093

United States Court of Appeals, Fifth Circuit.

Filed January 31, 2017

Kevin M. Sadler, Baker Botts, L.L.P., Palo Alto, CA, Stephanie Frederique Cagniart, Attorney, Scott Daniel Powers, Baker Botts, L.L.P., Austin, TX, for Plaintiff–Appellee.

Bradley Wayne Foster, Esq., Counsel, Matthew Griffith Nielsen, Esq., Andrews Kurth, L.L.P., Carolyn Ruth Raines, Esq., Godwin, P.C., Monroe David Bryant, Jr., Dykema Cox Smith, Dallas, TX, Kim Bernard Battaglini, Strong Pipkin Bissell & Ledyard, L.L.P., Michael John Stanley, Stanley, Frank & Rose, L.L.P., Walter Perry Zivley, Jr., Chandler, Mathis & Zivley, P.C., Houston, TX, Michael L. O'Brien, Mike O'Brien P.C., Washington, TX, John C. Porter, Jr., Esq., Brian N. Smiley, Smiley Bishop & Porter, L.L.P., Jason Wayne Graham, Esq., Attorney, Graham & Jensen, L.L.P., Theodore Brandon Welch, Stillman Welch, L.L.C., Atlanta, GA, Mark Joseph Barrera, Dykema Cox Smith, Edward C. Snyder, Castillo Snyder, P.C., San Antonio, TX, for Defendants–Appellants.

John J. Little, Esq., Little Pedersen Fankhauser, L.L.P., Dallas, TX, for Amicus Curiae John J. Little, Court-Appointed Examiner.

Paul Gerard Alvarez, Attorney, U.S. Securities & Exchange Commission, Washington, DC, for Amicus Curiae Securities and Exchange Commission.

Dennis L. Roossien, Jr., Esq., Munsch Hardt Kopf & Harr, P.C., Dallas, TX, for Amicus Curiae National Association of Federal Equity Receivers.

Before HIGGINBOTHAM, OWEN, and ELROD, Circuit Judges.

PER CURIAM:

This case is the latest in a number of appeals arising from the collapse of Allen Stanford's massive Ponzi scheme. Ralph Janvey, the Receiver for the Stanford entities, seeks to use the Texas Uniform Fraudulent Transfer Act to take back money paid to employees of various Stanford entities. The district court denied these employees' motions to compel arbitration based on arbitration agreements included in the terms of contracts with the Stanford Group Company. We AFFIRM.

I.

R. Allen Stanford created a large network of interconnected companies that sold certificates of deposit to investors through the Stanford International Bank, Ltd. (the "Bank"). These certificates of deposit promised favorable returns and drew over $7 billion in investments in the nearly ten years that the scheme operated. Stanford generated the promised returns not by wisely managing the investors' money but by using payments from new investors to cover the gains paid to older investors—a classic Ponzi scheme. Stanford and his Chief Financial Officer, James Davis, pleaded guilty to a number of federal offenses and are currently incarcerated.

In an effort to unwind the scheme, the Securities and Exchange Commission sued Stanford, the Stanford Group Company (the "Company"), and numerous other Stanford entities. At the SEC's request, the district court appointed Janvey as Receiver and "charged him with preserving corporate resources and recovering corporate assets that had been transferred in fraudulent conveyances." Janvey v. Brown , 767 F.3d 430, 433 (5th Cir. 2014).

The Receiver sued a large group of individuals who profited from the Stanford scheme and froze assets in Stanford entity accounts tied to those individuals. The district court severed the Receiver's claims against investor-defendants from the Receiver's claims against employee-defendants. This court has dealt separately with various claims against the investor-defendants and they are not at issue here.¹

The defendants in the present action all previously worked in various capacities for the Stanford enterprises and received salary, commissions, bonuses, or later-forgiven loans from the Stanford entities.

Shortly after the Receiver initiated his claims against these former employees, they moved to compel arbitration. The motions to compel arbitration relied on arbitration agreements between the Company or Stanford Group Holdings, Inc. (another Stanford entity) and the former employees.² The agreements were contained in: (1) promissory notes between the defendants and the Company that governed the upfront loan payments that the Company awarded to the defendants when they joined Stanford; (2) the broker-dealer forms that the Company submitted to the Financial Industry Regulation Authority (FINRA) when registering the employee-defendants as brokers; (3) FINRA's internal rules governing disputes between brokers and their employers; and (4) Stanford Group Holdings, Inc.'s Performance Appreciation Rights plan. The arbitration clauses in the promissory notes provide that: "any controversy arising out of or relating to this Note, or default on this Note, shall be submitted to and settled by arbitration pursuant to the constitution, by-laws, rules and regulations of the National Association of Securities Dealers (NASD)...."³ The other arbitration clauses are materially indistinguishable for purposes of this case.

While the motions to compel arbitration were pending, the district court issued a preliminary injunction preventing the employees from accessing the frozen assets. The defendants challenged the injunction in an interlocutory appeal. We held that:

(1) the district court had power to consider the preliminary injunction before deciding the motion to compel arbitration; (2) the district court did not abuse its discretion by issuing the preliminary injunction; (3) the preliminary injunction was neither an attachment nor overly broad; and (4) although the district court had not yet ruled on the motion to compel arbitration, the Receiver's claims were not subject to the arbitration agreement because the Receiver was suing not on behalf of the Stanford entities, but rather on behalf of creditors who were not parties to the arbitration agreements. Janvey v. Alguire (Alguire I ), 628 F.3d 164, 185 (5th Cir. 2010). We then withdrew that opinion and replaced it with another opinion that repeated the first three holdings but concluded that we lacked jurisdiction over the still-pending motion to compel arbitration and remanded to the district court for consideration of the motion in the first instance. Janvey v. Alguire (Alguire II ), 647 F.3d 585, 605 (5th Cir. 2011).

The district court, although not bound by our decision in Alguire I , agreed with its reasoning and denied the motions to compel arbitration. As we had in Alguire I , the district court reasoned that the Receiver's claims, brought on behalf of third-party creditors, were not affected by the promissory notes between the defendants and the Company. Janvey v. Alguire , No. 3:09–cv–724, 2011 WL 10893950, at *4 (N.D. Tex. Aug. 26, 2011).

While the appeal from that decision was pending, we held in another Stanford scheme appeal that the Receiver represented the creditors, not the Stanford entities. Janvey v. Democratic Senatorial Campaign Committee, Inc. (DSCC I ), 699 F.3d 848 (5th Cir. 2012). We withdrew that opinion and issued another, concluding instead that:

[A] federal equity receiver has standing to assert only the claims of the entities in receivership, and not the claims of the entities' investor-creditors, but the knowledge and effects of the fraud of the principal of a Ponzi scheme in making fraudulent conveyances of the funds of the corporations under his evil coercion are not imputed to his captive corporations. Thus, once freed of his coercion by the court's appointment of a receiver, the corporations in receivership, through the receiver, may recover assets or funds that the principal fraudulently diverted to third parties without receiving reasonably equivalent value.

Janvey v. Democratic Senatorial Campaign Committee, Inc. (DSCC II ), 712 F.3d 185, 190 (5th Cir. 2013). This holding invalidated the basis for the district court's denial of the motions to compel arbitration. As a result, we vacated the denial of the motion to compel and remanded once again for the district court to reconsider the motions in light of DSCC II . Janvey v. Alguire (Alguire III ), 539 Fed.Appx. 478, 480–81 (5th Cir. 2013).

The district court once again denied the motions to compel, resting its result on three major conclusions. First, the district court rejected the Receiver's argument that he can choose the Stanford entity on whose behalf he sues, instead requiring the Receiver to sue on behalf of the Company, which was party to the arbitration agreements. Janvey v. Alguire (Denial Order), No. 3:09–cv–724, ECF No. 1093, at 9–10 (N.D. Tex. July 30, 2014) (order denying motions to compel arbitration).

Second, the district court concluded that the Receiver had rejected the arbitration agreements and that such rejection was permissible. Id . at 16–25. The district court, drawing from well-established bankruptcy law, determined that an equity receiver, like a bankruptcy trustee, has the power to assume or reject any executory contract. The district court concluded that executory arbitration agreements are analyzed as separable from the contracts in which they are contained. Turning to the arbitration agreements in this case, the district court rejected the defendants' argument that the...