Georgelas v. Desert Hill Ventures, Inc.

• Decision Date: 22 August 2022
• Docket Number: 21-4036, No. 21-4037
• Parties: Tammy B. GEORGELAS, as Receiver for Roger S. Bliss, an individual, and Roger S. Bliss d/b/a Roger Bliss and Associates Equities, LLC, a Utah limited liability company, Roger Bliss and Associates Club LLC, and Bliss Club LLC, Plaintiff - Appellee, v. DESERT HILL VENTURES, INC., Defendant - Appellant. Tammy B. Georgelas, as Receiver for Roger S. Bliss, an individual, and Roger S. Bliss d/b/a Roger Bliss and Associates Equities, LLC, a Utah limited liability company, Roger Bliss and Associates Club LLC, and Bliss Club LLC, Plaintiff - Appellee, v. David Hill, Defendant - Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

45 F.4th 1193

Tammy B. GEORGELAS, as Receiver for Roger S. Bliss, an individual, and Roger S. Bliss d/b/a Roger Bliss and Associates Equities, LLC, a Utah limited liability company, Roger Bliss and Associates Club LLC, and Bliss Club LLC, Plaintiff - Appellee,

v.DESERT HILL VENTURES, INC., Defendant - Appellant.

Tammy B. Georgelas, as Receiver for Roger S. Bliss, an individual, and Roger S. Bliss d/b/a Roger Bliss and Associates Equities, LLC, a Utah limited liability company, Roger Bliss and Associates Club LLC, and Bliss Club LLC, Plaintiff - Appellee,

v.David Hill, Defendant - Appellant.

No. 21-4036

No. 21-4037

United States Court of Appeals, Tenth Circuit.

FILED August 22, 2022

Stephen K. Christiansen, Christiansen Law, PLLC (Joshua B. Cutler with him on the briefs), Salt Lake City, Utah, for Defendant-Appellants.

Julianne P. Blanch, Parsons Behle & Latimer (Katherine E. Venti with her on the brief), Salt Lake City, Utah, for Plaintiff-Appellees.

Before MORITZ, EBEL, and EID, Circuit Judges.

EBEL, Circuit Judge.

These consolidated cases arose from a 2015 Securities and Exchange Commission ("SEC") civil enforcement action against Roger Bliss, who ran a Ponzi scheme through his investment entities (collectively, "the Bliss Enterprise").¹ Mr. Bliss was ordered to repay millions of dollars to the victims of his fraudulent scheme, and the district court appointed Plaintiff-Appellee Tammy Georgelas as Receiver to investigate the Bliss Enterprise's books and seek to recover its property.

Defendant-Appellant David Hill was employed by the Bliss Enterprise from 2011 to 2015, providing administrative and ministerial services to the company. He received salary payments from the Bliss Enterprise both directly and through Defendant-Appellant Desert Hill Ventures, Inc. ("Desert Hill"), of which Mr. Hill was president. After the district court ordered Mr. Bliss to disgorge funds from his scheme, the Receiver brought these actions against Mr. Hill and Desert Hill. The Receiver asserted that the Bliss Enterprise estates were entitled to recover the $347,000 in wages paid to Defendants, in addition to $113,878 spent by the Bliss Enterprise on renovations to Mr. Hill's house, under Utah's Uniform Fraudulent Transfers Act ("UFTA"), Utah Code Ann. § 25-6-1 et. seq. (2016).²

The district court granted summary judgment to the Receiver, finding that the wages received by Defendants from the Bliss Enterprise and the funds paid by the Bliss Enterprise for the renovations were recoverable by the estates under the UFTA. Defendants appealed to this court, asserting that the district court erred in denying their affirmative defense under Utah Code Ann. § 25-6-9(1) and in finding that the renovations were made for Mr. Hill's benefit, as required under Utah Code Ann. § 25-6-9(2)(a). The court agrees with Defendants and, accordingly, REVERSES the district court's summary judgment order and REMANDS for further proceedings.

I. BACKGROUND

A. Factual History

The facts relevant to this appeal are largely undisputed, at least for the purposes of summary judgment, and any disputes will be construed in favor of the non-movant Defendants. See Banner Bank v. First Am. Title Ins. Co., 916 F.3d 1323, 1326 (10th Cir. 2019).

Roger Bliss operated the Bliss Enterprise through various entities from August 2008 through February 2015. Mr. Bliss told investors that his day-trading could earn them at least 100% profits on their investments with minimal risk, and he presented falsified statements about his current accounts to back up those claims. Over the course of the scheme, Mr. Bliss recruited more than 100 investors and raised approximately $27.3 million, but he only invested $14 million of those funds in the stock market. Of the funds raised, Mr. Bliss lost about $3.5 million in trading, spent about $6.7 million on himself or family members, and returned about $16.3 million to investors.

In 2011, Mr. Bliss hired David Hill, through Mr. Hill's company Desert Hill, to perform "administrative and ministerial services" for the Bliss Enterprise. App'x Vol. III at 481. Mr. Hill worked full-time for the Bliss Enterprise from September 2011 to February 2015. His regular tasks included updating investor spreadsheets with figures provided to him by Mr. Bliss, circulating statements and investor spreadsheets to investors, receiving and maintaining investor agreements between Mr. Bliss and investors, handling withdrawal requests and questions from investors to send to Mr. Bliss, coordinating Mr. Bliss's schedule, and maintaining Mr. Bliss's website.

The Bliss Enterprise paid Mr. Hill a monthly salary for his work, starting at $5,000 per month and increasing to as much as $8,000 per month. In total, Mr. Hill received $347,000 in salary payments from the Bliss Enterprise, $317,000 of which was paid to Desert Hill and $30,000 of which was paid to Mr. Hill directly.

In 2014, several years into Mr. Hill's employment at the Bliss Enterprise, Mr. Hill's wife was diagnosed with Amyotrophic Lateral Sclerosis

("ALS"). Mr. Bliss then hired third-party contractors to renovate Mr. Hill's house to make it accessible for his wife's wheelchair. In total, Mr. Bliss paid $113,878 to the contractors for these renovations.

B. Procedural History

On February 11, 2015, the SEC filed a civil enforcement action against the Bliss Enterprise in federal district court for several counts of securities fraud. On June 10, 2015, the court appointed Ms. Georgelas as Receiver. She took control of and investigated the Bliss Enterprise's books and records in an effort to identify and recover the estates’ property. On April 19, 2016, the district court entered final judgment against Mr. Bliss in the civil enforcement action, enjoining him from violating securities laws and ordering him to disgorge $13,880,909.20 in profits he made from the scheme.³

On June 8, 2016, the Receiver filed the first of the lawsuits on appeal here against Defendant Desert Hill, and on March 30, 2017, the Receiver filed the second lawsuit against David Hill.⁴ She alleged that the Bliss Enterprise operated as a Ponzi scheme and that both Defendants received fraudulent transfers from the Bliss Enterprise as defined by the UFTA, meaning the amounts paid to Defendants were recoverable by the estates. On February 28, 2020, the Receiver filed Motions for Summary Judgment against the Defendants. The district court granted the Receiver's Motions for Summary Judgment, holding that Defendants were liable to repay $460,878—the combined amount of the salary payments and renovation costs—to the estates. Defendants then appealed.⁵

II. STANDARD OF REVIEW

This court "review[s] a summary judgment decision de novo." Banner Bank, 916 F.3d at 1326. "[S]ummary judgment will not lie if [a] dispute about a material fact is ‘genuine,’ that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court must draw all reasonable inferences in favor of the non-movant when examining the record. Id. The movant bears the initial burden of demonstrating the absence of a genuine issue of material fact, but once the moving party has done so, the burden shifts to the non-movant to establish a genuine issue of fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

III. DISCUSSION

The UFTA allowed creditors to avoid a debtor's fraudulent transfer "to the extent necessary to satisfy the creditor's claim." Utah Code Ann. § 25-6-8 (2016) ; see also Utah Code Ann. §§ 25-6-5, 6 (2016) (defining fraudulent transfers). Under the UFTA, "once it is established that a debtor acted as a Ponzi scheme, all transfers by that entity are presumed fraudulent." Wing v. Dockstader, 482 F. Appx 361, 363 (10th Cir. 2012) (unpublished) (citing Donell v. Kowell, 533 F.3d 762, 770 (9th Cir. 2008) ). Where avoidance of a fraudulent transfer is appropriate, the creditor may recover the value of the transfer from "(a) the first transferee of the asset or the person for whose benefit the transfer was made; or (b) any subsequent transferee other than a good faith transferee who took for value or from any subsequent transferee." Utah Code Ann. § 25-6-9(2) (2016) (emphasis added). But at the same time, the UFTA provided an affirmative defense to transferees "who took in good faith and for a reasonably equivalent value," so that funds may not be recovered from them. Utah Code Ann. § 25-6-9(1) (2016).

Here, the Receiver asserted in her Motion for Summary Judgment that the payments to Defendants and for the renovations to their house by a third-party contractor were fraudulent transfers by the Bliss Enterprise, recoverable from Defendants as first transferees or persons for whose benefit the transfer was made. The Defendants in turn argued that the Receiver had not adequately proven that the Bliss Enterprise was a Ponzi scheme; that Defendants were entitled to an affirmative defense under § 25-6-9(1) of the UFTA for the salary payments received in good faith for reasonably equivalent value; and that the funds for the renovations were not recoverable under the UFTA because they were paid to the contractors for the benefit of Mr. Hill's wife, not Mr. Hill. See Utah Code Ann. § 25-6-9(2)(a).

The district court held that the Bliss Enterprise did operate as a Ponzi scheme, and so it applied the "Ponzi presumption" that all of its transfers—including those to Defendants—were fraudulent. App'x Vol. III at 492. It further rejected Defendants’ asserted defense under § 25-6-9(1) and held that Mr. Hill was the person for whose benefit the transfer for the renovations was made under § 25-6-9(2)(a), justifying summary judgment on both of the Receiver's claims.

On appeal, Defendants no longer contest that the Bliss Enterprise is properly considered a Ponzi scheme, but they challenge the district court's conclusions that (1) the salary payments to Defend...