In re Sanctuary Belize Litig.
| Decision Date | 07 July 2022 |
| Docket Number | CIVIL PJM 18-3309 |
| Parties | In re SANCTUARY BELIZE LITIGATION |
| Court | U.S. District Court — District of Maryland |
The Court has received a Motion to Intervene by Right under Fed.R.Civ.P. 24(a)(2) from a group of “fourteen individuals (plus one of those individuals' family-owned corporations) who collectively invested $1.95 million in Newport Land Group (NLG), an entity whose assets have been placed into the Receivership” in the present litigation. ECF No. 1316, ¶ 1. Movants[1] here have contemporaneously filed a Motion for Relief from Judgment under Rules 55(c) and 60(b), ECF No. 1317, to set aside, in part, the Court's earlier judgment against NLG, ECF Nos 1020 and 1109, as well as the Court's order permitting the Receiver to take over NLG's assets, ECF No. 507. The Federal Trade Commission (FTC) opposes both Motions. For the reasons that follow, the Motions are DENIED.
As explained in the Court's prior Opinions, this case is an enforcement action brought by the FTC under Section 13(b) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 53(b) and the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarking Act”) 15 U.S.C. §§ 6101-6108. See ECF Nos. 1020, 1109. The FTC alleged that Defendants engaged in a years-long scheme to defraud American consumers by selling investment property at “Sanctuary Belize,” a supposed top-tier resort in Belize, Central America, that did not exist as advertised. The scheme was carried out through numerous shell companies and affiliated organizations, several of which operated out of the same office at 3333 Michelson Drive in Irvine, California. One of these companies was NLG.
NLG's purpose, say Movants, was to develop a real estate project in Costa Rica called Rancho del Mar. It is this Costa Rica project in which Movants say they sought to invest in when they gave their money to NLG. But in fact, NLG was part of the common enterprise of Sanctuary Belize (which the Court will refer to as “SBE”). NLG not only conducted business out of the Irvine, California office; when the premises was searched the Receiver found that SBE funds had been transferred to NLG for no apparent legitimate business purpose and that, moreover, SBE and NLG funds had been commingled.[2] At hearings in this case, the Receiver presented evidence of the interlocking relationships among NLG and SBE principals, including among others, Defendant Andris Pukke (who also claimed to be an NLG owner), and Defendants Rod Kazazi, Michael Santos, and Brandi Greenfield, as well as evidence of NLG's active involvement in SBE operations, including marketing Sanctuary Belize properties on NLG's website. Indeed, the prospectus of NLG submitted by Movants in connection with its present filing notes NLG's relationship with an entity described as “Buy International,” which appears to be “Buy International, LLC,” another Defendant in the present case.
Shortly after the FTC filed the instant case in October 2018, the same individuals who are Movants here filed suit in California against NLG and ten “Doe” defendants, seeking declaratory judgment and return of their funds based on theories of constructive trust, breach of contract, and unjust enrichment. See Complaint, Santos et al. v. Newport Land Group, LLC et al., Case No. 30-2018-01031882-CV-BC-CJC (Cal. Sup. Ct. Nov. 13, 2018) (available at ECF No. 1323-1, Exhibit 6).
In the case before this Court, on May 14, 2019, the Receiver filed a Motion seeking approval to use NLG funds for general receivership purposes. ECF No. 435. Present Movants were served through their counsel in the California lawsuit, ECF No. 453-5, and Movant Darren Christian in fact responded to the Receiver to object. ECF No. 485.
On June 24, 2019, the Court approved the Receiver's takeover of NLG assets- approximately $3.8 million. See ECF No. 507. No objection or Motion to Intervene was filed in response to the Receiver's Motion or the Court's Order at that time. This Court's Order, it should be noted, was filed by Bank of America in the California action; thereafter, the Orange County Superior Court dismissed the California case with prejudice. See ECF No. 1323-1, Attachment 8. Movants here-who were Plaintiffs there-did not appeal.
Beginning January 21, 2020, the Court held a seventeen-day bench trial. In its August 28, 2020 Memorandum Opinion, which Movants (who were in no way involved in the trial) seek to challenge now, the Court found that SBE had violated the Section 5(a) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 45(a)[3] and the Telemarketing Sales Rules (TSR), 16 C.F.R. Part 310[4] in connection with the marketing and sale of real estate investments and related services, and granted default judgment as to all individual Defendants and Corporate Defendants who were served with process but had not appeared, with the exception of NLG. See ECF No. 1020 at 178. The Court imposed a restitution award of $120.2 million against Defendants for violation of the FTC Act as well as a concurrent contempt sanction of $120.2 million against certain Defendants for violations of the TSR. ECF No. 1020 at 161; ECF No. 1109 at 2-3.
After trial concluded, present Movant David Heiman sought to challenge the Receiver's seizure of NLG's assets. Although the Court had found NLG to be part of SBE and therefore jointly and severally liable for violations of the FTC Act and the TSR, it nevertheless granted Heiman and the other NLG investors an additional opportunity to be heard regarding the inclusion of their investments in the Receivership. See Memorandum Opinion, ECF No. 1020 at 139-141. In response, the Court received eleven virtually identical submissions from other NLG investors. ECF No. 1032 (Court Order collecting investor submissions). These submissions argued that the NLG investors had sought to become limited investors in the Costa Rica project, had no control over NLG's funds, and did not intend for the funds to be tied up in the SBE enterprise - a possibility which the Court had already acknowledged. See ECF No. 1020 at 140. In its Second Memorandum Opinion, dated January 13, 2021, ECF No. 1109, which Movants also seek to challenge, the Court concluded that the NLG investors had failed to provide a persuasive reason to unfreeze NLG's assets, none of which had been held in trust, and declined to return Movants' investments, which in effect, would have provided the investors relief ahead of any Sanctuary Belize victims. ECF No. 1109 at 4. No NLG investor sought to intervene in this litigation or took any steps to challenge the Court's ruling at that time. On the other hand, Defendants Usher, Baker, and Pukke filed notices of appeal to the Fourth Circuit. See ECF Nos. 1200, 1208, 1210.
Shortly thereafter, the FTC submitted a Proposed Redress Plan. ECF No. 1117. All interested parties, the NLG investors (Movants) included, had the opportunity to oppose or object to the FTC's proposed plan. While several consumers did object to the plan, see, e.g., ECF Nos. 1141-48, the NLG investors did not. The Redress Plan remains under consideration by the Court.
On July 22, 2021, a group of Defendants, NLG included, did file a motion to vacate the Court's judgment. ECF No. 1267. The Court denied the Motion. ECF Nos. 1278, 1279. Certain SBE Defendants have appealed this denial as well. See ECF No. 1280.
Then, on November 12, 2021, Movants filed the present Motion to Intervene (ECF No. 1316), alongside their Motion for Relief from Judgment (ECF No. 1317). Movants allege that it was SBE Defendant Michael Santos, who has since settled with the FTC in this case, who sold them the purported investment property in Costa Rica and argue that they should be permitted to intervene in this case to challenge this Court's rulings that impacted NLG's assets and their investments. Movants argue, inter alia, that AMG Cap. Mgmt., LLC v. Fed. Trade Comm'n, 141 S.Ct. 1341 (2021), in which the Supreme Court held that the FTC may not seek monetary relief under its § 13(b) “permanent injunction” power, invalidates the Court's prior rulings in this case. Accordingly, they ask the Court to vacate its order permitting the Receiver to hold or to use NLG assets, ECF No. 507, its judgment against NLG in its August 28, 2020 Memorandum Opinion, ECF No. 1020, and Second Opinion, ECF No. 1109, and order that the Receiver to return to Movants the $1.95 million they claim they invested in NLG. Movants also assert claims for constructive trust;[5] breach of contract;[6] and equitable relief against the Receiver.
The FTC opposes both Movants' Motions. It contends that the Court lacks jurisdiction to grant the motion to intervene and that, even if the Court had jurisdiction, Movants would fail to meet intervention requirements: their claims are unrelated to the facts at issue in this case and the motion is untimely. As for Movants' claims for relief from judgment under Rule 60(b), the FTC contends that the AMG case provides no basis for such relief. As for Movants' constructive trust and breach of contract claims, even if viable, the FTC argues that they have already had two opportunities to raise them and should not be given another. Movants, the FTC argues, “are a mix of insiders and consumers who had special access to Pukke and his cohorts before nonetheless choosing to invest in a Pukke-run development.” They should not be permitted to “leap-frog” the victims of the Sanctuary Belize fraud.
The Court addresses the FTC arguments.
The Court begins with the FTC's contention that it lacks jurisdiction to entertain the present motions. Movants have not addressed this issue, but the Court agrees with the FTC.
The...
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