Janvey v. Democratic Senatorial Campaign Comm. Inc.

• Decision Date: 22 June 2011
• Docket Number: Civil Action No. 3:10–CV–0346–N.
• Citation: 793 F.Supp.2d 825
• Parties: Ralph S. JANVEY, Plaintiff,v.DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

793 F.Supp.2d 825

Ralph S. JANVEY, Plaintiff,

v.DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE, INC., et al., Defendants.

Civil Action No. 3:10–CV–0346–N.

United States District Court, N.D. Texas, Dallas Division.

June 22, 2011.

Kevin M. Sadler, Brendan A. Day, David T. Arlington, Robert I. Howell, Scott Daniel Powers, Timothy S. Durst, Baker Botts LLP, Austin, TX, for Plaintiff.Matthew C. Acosta, Jackson Walker LLP, Robert P. Latham, Jackson Walker, Mark A. Shank, Bridget A. Blinn, Demarron A. Berkley, G. Michael Gruber, Gruber Hurst Johansen & Hail LLP, Dallas, TX, Brian G. Svoboda, John M. Devaney, John K. Roche, Marc E. Elias, Perkins Coie LLP, Washington, DC, for Defendants.

ORDER

DAVID C. GODBEY, District Judge.

This Order addresses Defendants the Democratic Senatorial Campaign Committee, Inc. (“DSCC”), and the Democratic Congressional Campaign Committee, Inc.'s (“DCCC”), (collectively, the “Democratic Committees”) motion to dismiss [19], and Defendants the National Republican Congressional Committee (“NRCC”), the National Republican Senatorial Committee (“NRSC”), and the Republican National Committee's (“RNC”) (collectively, the “Republican Committees” and, together with the Democratic Committees, the “Political Committees”) motion to dismiss [16] and motion for summary judgment [91], as well as the Receiver's motion for summary judgment [36]. For the reasons that follow, the Court denies the Political Committees' motions to dismiss, denies the Republican Committees' motion for summary judgment, and grants the Receiver's motion for summary judgment.

I. Origins of the Receiver's Fraudulent Transfer Claims

This dispute presents another episode related to the Securities and Exchange Commission's (the “SEC”) ongoing securities fraud action against R. Allen Stanford, his associates, and various entities under Stanford's control (the “Stanford Defendants”). As part of that litigation, this Court “assume[d] exclusive jurisdiction and t[ook] possession of the” “Receivership Assets” and “Receivership Records” (collectively, the “Receivership Estate”). See Second Am. Order Appointing Receiver, July 19, 2010 [1130] (the “Receivership Order”), in SEC v. Stanford Int'l Bank, Ltd., Civil Action No. 3:09–CV–0298–N (N.D.Tex. filed Feb. 17, 2009). The Court appointed Ralph S. Janvey to serve as Receiver of the Receivership Estate and vested him with “the full power of an equity receiver under common law as well as such powers as are enumerated” in the Receivership Order. Id. at 3.

Among these enumerated powers, the Court “authorized [the Receiver] to immediately take and have complete and exclusive control, possession, and custody of the Receivership Estate and to any assets traceable to assets owned by the Receivership Estate.” Id. at 4. Additionally, the Court “specifically directed and authorized [the Receiver] to ... [c]ollect, marshal, and take custody, control, and possession of all the funds, accounts, mail, and other assets of, or in the possession or under the control of, the Receivership Estate, or assets traceable to assets owned or controlled by the Receivership Estate, wherever situated,” id., and to file in this Court “such actions or proceedings to impose a constructive trust, obtain possession, and/or recover judgment with respect to persons or entities who received assets or records traceable to the Receivership Estate.” Id. at 5.

Pursuant to those powers, the Receiver filed this fraudulent transfer suit to recover approximately $1.6 million in contributions made by R. Allen Stanford, James Davis, and the Stanford Financial Group Company (“SFGC”) to the Political Committees over a period of about eight years. The parties agree that the Stanford Defendants allocated their contributions as follows: $950,500 to the DSCC; $200,000 to the DCCC; $238,500 to the NRCC; $83,345 to the NRSC; and $128,500 to the RNC. See, e.g., Compl. at 7[1]. Nothing suggests that the Political Committees acted in bad faith. But, according to the Receiver, the Political Committees nonetheless must disgorge an amount equal to the contributions because they received Ponzi scheme proceeds without providing consideration of reasonably equivalent value in exchange. The Receiver now moves for summary judgment.

The Political Committees raise two primary objections to the Receiver's claims. First, the Political Committees argue that the Receiver untimely filed this action. Because Texas courts treat the time-bar provisions of the Texas Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com.Code § 24.001, et seq., as a statute of repose rather than a statute of limitations, the Political Committees contend that the Receiver cannot rely on equitable tolling doctrines to establish that he timely brought suit. Second, the Political Committees argue that federal campaign finance laws preempt the Receiver's claims. See Federal Election Campaign Act of 1971 (“FECA”), Pub. L. 92–225, 86 Stat. 3 (1972) (codified as amended at 2 U.S.C. § 431, et seq.); Bipartisan Campaign Reform Act of 2002 (“BCRA”), Pub. L. 107–155, 116 Stat. 81 (2002) (codified in scattered sections of FECA), abrogated in part by Citizens United v. FEC, ––– U.S. ––––, 130 S.Ct. 876, 175 L.Ed.2d 753 (2010), and by FEC v. Wisconsin Right to Life, Inc., 551 U.S. 449, 127 S.Ct. 2652, 168 L.Ed.2d 329 (2007). The Republican Committees move for summary judgment on these two defenses, which the Court analyzes in turn before addressing the Receiver's motion for summary judgment.

II. Summary Judgment Standard ¹

Courts “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In making this determination, courts must view all evidence and draw all reasonable inferences in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). Courts, however, need not sift through the record in search of triable issues. Adams v. Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir.2006).

The moving party bears the initial burden of informing the court of the basis for its belief that there is no genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the movant has made this showing, the burden shifts to the nonmovant to establish that there is a genuine issue of material fact such that a reasonable jury might return a verdict in its favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Moreover, “[c]onclusory allegations, speculation, and unsubstantiated assertions” will not suffice to satisfy the nonmovant's burden. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir.1996) (en banc). Indeed, factual controversies are resolved in favor of the nonmoving party “ ‘only when an actual controversy exists, that is, when both parties have submitted evidence of contradictory facts.’ ” Olabisiomotosho v. City of Houston, 185 F.3d 521, 525 (5th Cir.1999) (quoting McCallum Highlands, Ltd. v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir.1995)).

III. Texas Fraudulent Transfer Law Does Not “Extinguish” This Action

The Court first addresses the Political Committees' argument that TUFTA's limitations provision “extinguished” the Receiver's cause of action prior to filing. In general, TUFTA operates to void certain fraudulent “transfers,” which the statute defines in relevant part as “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money.” Tex. Bus. & Com.Code § 24.002(12).² TUFTA considers several types of transfers to be fraudulent. See id. §§ 24.005(a) (three types); 24.006 (two types). Despite some ambiguity in the Receiver's complaint, the parties agree that this dispute concerns only one type of fraudulent transfer. See, e.g., Democratic Committees' Mot. to Dismiss Br. at 5 n. 2 [19–1].

The Receiver brings his claim under section 24.005(a)(1), which provides that a transfer “is fraudulent as to a creditor, whether the creditor's claim arose before or within a reasonable time after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation ... with actual intent to hinder, delay, or defraud any creditor of the debtor.” “In determining [a debtor's] actual intent,” courts may consider, “among other factors[,] ... whether ... the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred” and if “the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred.” Id. § 24.005(b)(8) & (b)(9). Notably, TUFTA considers a debtor to be insolvent “if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation.” Id. § 24.003(a).

As the Political Committees point out, TUFTA does not preserve indefinitely a plaintiff's cause of action. TUFTA “extinguish[es]” claims brought under section 24.005(a)(1) unless filed “within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant.” Id. § 24.010(a)(1). Because the Receiver almost exclusively seeks the return of funds contributed to the Political Committees more than four years before his appointment, the parties agree that the Receiver timely filed suit only if he did so within the “discovery rule” in section 24.010(a)(1)'s second clause.³ Cadle Co. v. Wilson, 136 S.W.3d 345, 350 (Tex.App.-Austin 2004, no pet.) (“It is...