Janvey v. Libyan Investment Authority, 102616 FED5, 15-10545

Docket Nº:15-10545, 15-10548
Opinion Judge:PER CURIAM
Party Name:RALPH S. JANVEY, In His Capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, Et Al, Plaintiff - Appellant v. LIBYAN INVESTMENT AUTHORITY, Defendant-Appellee RALPH S. JANVEY, In His Capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, Et Al, Plaintiff - Appellee v. LIBYAN FOREIGN INVEST...
Judge Panel:Before WIENER, PRADO, and OWEN, Circuit Judges.
Case Date:October 26, 2016
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

RALPH S. JANVEY, In His Capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, Et Al, Plaintiff - Appellant



RALPH S. JANVEY, In His Capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, Et Al, Plaintiff - Appellee



Nos. 15-10545, 15-10548

United States Court of Appeals, Fifth Circuit

October 26, 2016

Appeals from the United States District Court for the Northern District of Texas

Before WIENER, PRADO, and OWEN, Circuit Judges.


Ralph S. Janvey, the court-appointed receiver ("the receiver") for a Ponzi scheme orchestrated by Allen Stanford (the "Stanford scheme"), brought claims against the Libyan Investment Authority ("LIA") and the Libyan Foreign Investment Company ("LFICO") in the district court, seeking to recover the proceeds of certificates of deposit ("CDs") previously transferred to LFICO by the Stanford International Bank, Ltd. ("SIB"). LIA and LFICO moved to dismiss the receiver's claims, insisting that they were immune from the court's jurisdiction under the Foreign Sovereign Immunities Act ("FSIA"). The receiver opposed dismissal, asserting that the commercial activity exception to FSIA immunity applied. After the parties conducted limited jurisdictional discovery, the district court ruled that LIA was immune but that LFICO was not. Both the receiver and LFICO timely filed appeals, which have been consolidated. We affirm in part and vacate and remand in part.


Facts & Proceedings

Stanford and his associates perpetrated the Stanford scheme through a group of entities (collectively, the "Stanford entities") that, inter alia, sold sham CDs issued by SIB to unsuspecting investors. The Stanford entities promised those investors that the CDs from SIB would yield extraordinarily high rates of return. Rather than investing the funds they received from later investors, however, the Stanford entities paid those funds to earlier investors, redeeming their maturing CDs. In so doing, the Stanford entities made it appear that the CDs from SIB were producing the phenomenal rates of return they had promised.1

In early 2009, the Securities and Exchange Commission ("SEC") filed suit against the Stanford entities, including SIB. The Stanford entities were then placed in receivership, and Janvey was appointed their receiver. The receiver is responsible for bringing claims on behalf of the Stanford entities to recover assets for distribution to their defrauded investors.

The instant consolidated appeals relate to the Stanford entities' transfer of funds to LFICO, an earlier investor that had redeemed some of its maturing CDs.

In 2006, LFICO had developed relationships with SIB, a Stanford entity based in Antigua, and Stanford Group (Suisse) S.A. ("SGS"), a Stanford entity based in Switzerland. LFICO's relationship with SIB related solely to its purchase of $138 million in CDs from SIB. LFICO's relationship with SGS related solely to a discretionary management agreement between itself and SGS, under which SGS managed $100 million of LFICO's funds in an account it held in Switzerland. The agreement was formed in Libya and governed by Swiss law.

These relationships were ongoing when, in 2007, two SGS financial advisors accompanied two LFICO analysts on a training program conducted by SIB. The program began and ended in Switzerland but included visits to Antigua and the United States-in particular, to Houston, Memphis, Washington, and Miami. Otherwise, LFICO's relationship with the Stanford entities did not include any other acts or activities in the United States.[2]

In 2008, LFICO decided to divest its SIB-issued CDs, "given the size of [these] deposits and the problems facing the international financial market."3It instructed SGS in Switzerland to redeem its SIB-issued CDs as they matured rather than to repurchase them at that time. (In a single exception, LFICO instructed SGS to repurchase $50 million in CDs from SIB several months later.) SGS appears to have complied with these requests: As the CDs matured, SIB transferred their proceeds from its accounts in Canada and England to LFICO's accounts in Libya and Switzerland. None of these accounts was held in the United States.[4] When SIB entered receivership, LFICO had already received about $50 million in redemption proceeds, far less than it had paid for all of its CDs. As a result, it suffered a greater loss than any other investor in the Stanford scheme.

LFICO's only shareholder is LIA, whose only shareholder is Libya. Both LFICO and LIA are based in Libya. Unlike LFICO, LIA never purchased SIB-issued CDs, although it apparently considered doing so. LIA asserts that it was wholly uninvolved in LFICO's purchases and redemptions of the SIB-issued CDs.[5] LIA is not referenced in the discretionary management agreement between LFICO and SGS or in the CDs themselves, which were agreements between SIB and LFICO. After Stanford's arrest, the then-chief investment officer of LIA stated that LIA itself had not purchased any SIB-issued CDs but that he "suspect[ed] a[n] LIA affiliate or [s]ubsidiary may have [$]150 million at most" invested.6

In 2009, the receiver filed suit against investors, including LFICO, that had purchased SIB-issued CDs and later had redeemed them. He sought disgorgement of any proceeds of those CDs, but in Janvey v. Adams, this court precluded such claims, holding that the investors had a legitimate ownership interest in those proceeds.7 The receiver then made new claims against some of those investors for fraudulent transfer and unjust enrichment. Eventually, he asserted such claims against LFICO and LIA, too, alleging that LFICO was LIA's alter ego. The receiver filed a motion for a preliminary injunction on those claims. The district court denied the receiver's motion, and we affirmed the district court's denial.

LIA and LFICO eventually filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) and (2), claiming that the district court lacked personal and subject matter jurisdiction because (1) they had presumptive immunity under the FSIA as agents or instrumentalities of a foreign state and (2) the commercial activity exception to immunity under the FSIA did not apply. The parties conducted jurisdictional discovery regarding whether LIA and LFICO engaged in activities that fall within the scope of the commercial activity exception under the FSIA.

When that discovery was complete, the district court denied the motion to dismiss as to LFICO. In so doing, it ruled that (1) LFICO had engaged in commercial activity by purchasing, repurchasing, and redeeming the SIB-issued CDs and (2) this activity, which occurred outside the United States, had a "direct effect" on the United States because the Stanford scheme was based in the United States. The court concluded that the commercial activity exception to immunity under FSIA gave it personal and subject matter jurisdiction over LFICO.

The district court granted the motion to dismiss as to LIA. The court concluded that LIA had not engaged in commercial activity at all and that, although LFICO had engaged in such activity, its acts were not attributable to LIA. The court ruled that LFICO was not LIA's agent or alter ego in purchasing, repurchasing, or redeeming the SIB-issued CDs and that the proceeds of those CDs were not redeemed for LIA's benefit. Both LFICO and the receiver then appealed.



A. Standard of Review

We have appellate jurisdiction over any final order that grants immunity under the FSIA8 and over any collateral order that denies it.9 We also have pendant appellate jurisdiction over any closely related issues.10 In exercising that jurisdiction, we review the district court's conclusions of law de novo, [11] and, to the extent it makes any findings of fact, 12 we review them for clear error.13 A finding of fact is clearly erroneous if it is inconsistent with the record in its entirety.[14] Such a finding may be clearly erroneous if (1) it is not based on "substantial evidence, " (2) it is based on a misinterpretation of the evidence, or (3) it is inconsistent with "the preponderance of credible testimony."[15] If the district court's conclusions of law "affected" its findings of fact, "remand is the proper course unless the record permits only one resolution of the [fact]."[16]

These appeals require us to determine whether there is any basis for personal and subject matter jurisdiction over LIA and LFICO. The FSIA provides "the sole basis for obtaining jurisdiction over a foreign state in [federal and state] courts."[17] It furnishes both the immunity itself, which applies to any "foreign state, "[18] and the only exceptions to that immunity.19 If an exception applies, the FSIA also specifies the only basis for personal and subject matter jurisdiction over the foreign state. That jurisdiction extends to "any nonjury civil action against a foreign state . . . as to any claim for relief in personam . . . ."20 If no exception applies, there is no other basis for personal or subject matter jurisdiction over a foreign state.21

The parties claiming immunity under the FSIA-here, LIA and LFICO- have the initial burden of persuasion that they are foreign states and therefore entitled to a presumption of immunity.22 If they bear that burden, then the party opposing immunity-here, the receiver-has the burden of producing evidence that LIA and LFICO fall within an exception enumerated in the FSIA, refuting the presumption of immunity.[23] If the receiver bears his burden, LIA and LFICO then have the ultimate burden of persuasion that the exception does not...

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