Ritchie Capital Mgmt., L. L.C. v. JP Morgan Chase & Co.

• Decision Date: 03 June 2020
• Docket Number: No. 18-1130,18-1130
• Parties: RITCHIE CAPITAL MANAGEMENT, L.L.C.; Ritchie Special Credit Investments, Ltd.; Rhone Holdings II, Ltd.; Yorkville Investment I, L.L.C.; Ritchie Capital Management, SEZC, Ltd., Plaintiffs - Appellants v. JP MORGAN CHASE & CO.; JP Morgan Chase Bank, N.A., Defendants - Appellees J.P. Morgan Private Bank, Defendant Wells Fargo & Co., as successor by merger to Wachovia Capital Finance (Central); Wells Fargo Bank N.A.; Wachovia Capital Finance Corporation (Central); UBS Loan Finance, L.L.C. ; UBS AG; UBS AG Stamford Branch; Merrill Lynch Business Financial Services, Inc.; Lasalle Business Credit, L.L.C.; Bank of America Business Capital; Bank of America Corporation; The CIT Group Inc.; The CIT Group/Business Credit, Inc.; PNC Bank, N.A.; Fifth Third Bank; Webster Business Credit Corporation; Associated Commercial Finance, Inc.; Chase Lincoln First Commercial Corporation ; Richter Consulting, Inc.; J.P. Morgan Europe Ltd., Defendants - Appellees Douglas A. Kelley, Trustee of the PCI Liquidating Trust; Randall L. Seaver, Trustee of Petters Capital, LLC; John R. Stoebner, Trustee of Polaroid Corp, et al., Intervenors Below - Appellees
• Court: U.S. Court of Appeals — Eighth Circuit

960 F.3d 1037

RITCHIE CAPITAL MANAGEMENT, L.L.C.; Ritchie Special Credit Investments, Ltd.; Rhone Holdings II, Ltd.; Yorkville Investment I, L.L.C.; Ritchie Capital Management, SEZC, Ltd., Plaintiffs - Appellants

v. JP MORGAN CHASE & CO.; JP Morgan Chase Bank, N.A., Defendants - AppelleesJ.P. Morgan Private Bank, DefendantWells Fargo & Co., as successor by merger to Wachovia Capital Finance (Central); Wells Fargo Bank N.A.; Wachovia Capital Finance Corporation (Central); UBS Loan Finance, L.L.C. ; UBS AG; UBS AG Stamford Branch; Merrill Lynch Business Financial Services, Inc.; Lasalle Business Credit, L.L.C.; Bank of America Business Capital; Bank of America Corporation; The CIT Group Inc.; The CIT Group/Business Credit, Inc.; PNC Bank, N.A.; Fifth Third Bank; Webster Business Credit Corporation; Associated Commercial Finance, Inc.; Chase Lincoln First Commercial Corporation ; Richter Consulting, Inc.; J.P. Morgan Europe Ltd., Defendants - AppelleesDouglas A. Kelley, Trustee of the PCI Liquidating Trust; Randall L. Seaver, Trustee of Petters Capital, LLC; John R. Stoebner, Trustee of Polaroid Corp, et al., Intervenors Below - Appellees

No. 18-1130

United States Court of Appeals, Eighth Circuit.

Submitted: November 12, 2019

Filed: June 3, 2020

James W. Halter, RASCO & KLOCK, New York, NY, Kelly A. Lelo, Patrick Henry O'Neill, Jr., LARSON & KING, Saint Paul, MN, Jeffrey L. Liddle, LIDDLE & ROBINSON, New York, NY, for Plaintiffs - Appellants.

Kevin Martin Decker, John R. McDonald, TAFT & STETTINIUS, Minneapolis, MN, Isaac Rethy, Thomas Charles Rice, Alan C. Turner, David Woll, SIMPSON & THACHER, New York, NY, Christopher K. Shields, SULLIVAN & WORCESTER, New York, NY, for Defendants - Appellees JP Morgan Chase & Co., JP Morgan Chase Bank, N.A., Chase Lincoln First Commercial Corporation, and J.P. Morgan Europe Ltd.

Kevin Martin Decker, John R. McDonald, TAFT & STETTINIUS, Minneapolis, MN, Isaac Rethy, Thomas Charles Rice, David Woll, SIMPSON & THACHER, New York, NY, Christopher K. Shields, SULLIVAN & WORCESTER, New York, NY, for Defendant J.P. Morgan Private Bank.

David H. Fry, MUNGER & TOLLES, San Francisco, CA, Elaine Janet Goldenberg, MUNGER & TOLLES, Washington, DC, Daniel Millea, ZELLE LLP, Minneapolis, MN, Roshan N. Rajkumar, BOWMAN & BROOKE, Minneapolis, MN, Bradley R. Schneider, MUNGER & TOLLES, Los Angeles, CA, for Defendants - Appellees Wells Fargo & Co., Wells Fargo Bank N.A., UBS Loan Finance, L.L.C., UBS AG, Bank of America Corporation, The CIT Group Inc., The CIT Group/Business Credit, Inc., PNC Bank, N.A., Fifth Third Bank, Webster Business Credit Corporation, and Bank of America Corporation.

David H. Fry, MUNGER & TOLLES, San Francisco, CA, Daniel Millea, ZELLE LLP, Minneapolis, MN, Roshan N. Rajkumar, BOWMAN & BROOKE, Minneapolis, MN, Bradley R. Schneider, MUNGER & TOLLES, Los Angeles, CA, for Defendants - Appellees Wachovia Capital Finance Corporation (Central), Merrill Lynch Business Financial Services, Inc., Lasalle Business Credit, L.L.C., Bank of America Business Capital, and Associated Commercial Finance, Inc.

Robert T. Kugler, STINSON, LLP, Minneapolis, MN, John Francis O'Sullivan, HOGAN & LOVELLS, Miami, FL, Allen P. Pegg, HOGAN & LOVELLS, Miami, FL, for Defendant - Appellee Richter Consulting, Inc.

J. David Jackson, DORSEY & WHITNEY, Minneapolis, MN, Jennifer Gene Lurken, GISLASON & HUNTER, Mankato, MN, Richard T. Thomson, BALLARD & SPAHR, Minneapolis, MN, for Intervenors below - Appellees Douglas A. Kelley, Randall L. Seaver, and John R. Stoebne.

Before SHEPHERD, GRASZ, and KOBES, Circuit Judges.

GRASZ, Circuit Judge.

The appellants — Ritchie Capital Management, L.L.C., Ritchie Special Credit Investments, Ltd., Rhone Holdings II, Ltd., Yorkville Investment I L.L.C., and Ritchie Capital Management, SEZC, Ltd. (collectively, the "Ritchie entities") — sued a collection of mostly banking institutions from which the Ritchie entities sought to recover millions of dollars they loaned Tom Petters, a convicted fraudster, and two of his companies. According to the Ritchie entities, the defendants helped conceal the fraud so that they could recover millions they had tied up with Petters’s companies. The Ritchie lawsuit meandered through various courts before the district court dismissed the claims as time-barred under Fed. R. Civ. P. 12(b)(6). On appeal, the Ritchie entities launch numerous attacks on the district court’s opinion. While most fall short, we agree that dismissing the claims brought by three Ritchie entities was premature. We therefore reverse in part.

I. Background

We are called once again to weigh in on a case involving the multibillion dollar Ponzi scheme perpetrated by Tom Petters, a Minnesota businessman. See United States v. Petters , 663 F.3d 375, 379 (8th Cir. 2011) (describing Petters’s criminal scheme).¹ Petters owned and/or controlled numerous businesses, including Petters Company, Inc. ("PCI"); Petters Group Worldwide, LLC ("PGW"); and Polaroid Corporation ("Polaroid Corp."). Id. at 379. Petters used PCI as the primary vehicle through which he swindled investors with empty promises of buying electronics and selling them to big-box stores at a profit. In 2008, government officials investigated and arrested Petters. A federal jury ultimately convicted him of twenty crimes, including wire fraud, mail fraud, and money laundering.

In January of 2008, before Petters was arrested and his Ponzi scheme fell apart, he sought out Thane Ritchie and solicited loans from the Ritchie entities. Between February 1 and May 9, the Ritchie entities loaned Petters, PCI, and PGW approximately $189 million. Most of these loans — ten loans for roughly $146 million — were made to Petters and PGW in February 2008. Two loans totaling $31 million were made to Petters and PCI in March 2008. And two final loans totaling $12 million were made to Petters, PGW, and PCI in May 2008. The Ritchie entities only recovered a small fraction of the amount loaned and claim they suffered damages in excess of $150 million.

In this lawsuit, the Ritchie entities seek to recover their damages from various entities, which can be separated into the following four groups: (1) JP Morgan Chase & Co. and JP Morgan Chase Bank, N.A. (collectively, "JP Morgan"); (2) JP Morgan Europe Ltd. ("JP Morgan Europe"); (3) a collection of banks and lending institutions² (collectively, the "Syndicate Lenders"); and (4) Richter Consulting, Inc. ("Richter Consulting"). Greatly summarized, the Ritchie entities allege the defendants, led by JP Morgan, were aware of Petters’s Ponzi scheme, but for their own financial benefit wrongfully allowed and encouraged the Ritchie entities to loan money to PCI.

Although the details of the Ritchie entities’ theory of the case are not necessary to resolve this appeal, a basic understanding of the theory is helpful. In July 2004, JP Morgan became the indirect, majority owner of Polaroid Corp. PCI had a license agreement that allowed it to use Polaroid’s brand name on electronic equipment. After PCI fell behind in its royalty payments and went into default, JP Morgan purportedly used this leverage to force PCI to purchase Polaroid Corp. In April 2005, through a series of complex deals, PGW became the owner of Polaroid Holding Company, which in turn owned Polaroid Corp. JP Morgan loaned $125 million to the Polaroid companies as a term loan, and the Syndicate Lenders loaned $250 million to the Polaroid companies as a revolving-credit agreement. JP Morgan served as the administrative agent for the U.S.-based Syndicate Lenders and JP Morgan Europe served in the same role for the Europe-based Syndicate Lenders.

Pursuant to its loan agreements, the Polaroid companies were required to provide audited financial statements to JP Morgan. Although the Polaroid companies failed to provide such statements, JP Morgan initially did not strictly enforce the requirement. This changed, however, in 2007, when JP Morgan declared a default and forced Polaroid Corp. and related companies to hire Richter Consulting as a consultant, which would make reports to JP Morgan about Polaroid Corp.’s financial situation. The Ritchie entities allege that JP Morgan definitively learned in January 2008 that Petters was perpetrating a fraudulent-transfer scheme. Worried Petters would get caught and become unable to repay the money owed to the Syndicate Lenders and itself, JP Morgan demanded immediate payment.

This allegedly caused Petters to seek out Thane Ritchie and criminally defraud the Ritchie entities into loaning money in order to pay back JP Morgan and the Syndicate Lenders. The Ritchie entities allege JP Morgan and Richter Consulting enabled Petters to facilitate this fraud. For example, the Ritchie entities claim Richter Consulting and JP Morgan knew that due diligence materials sent to the Ritchie entities were inaccurate. The Ritchie entities also claim Petters, again with the knowledge of JP Morgan, then laundered the proceeds of these loans through circuitous international accounts, including JP Morgan Europe’s London branch, in order to obscure the source of the funds. Petters thereby satisfied the debts owed to JP Morgan and the Syndicate Lenders with the money lent by the Ritchie entities.

After the Ponzi scheme collapsed and Petters was indicted, a number of his companies declared bankruptcy, including Polaroid Corp., PCI, and Petters Capital, LLC. Trustees were appointed to administer these estates (the "Trustees.").

In January 2014, the Ritchie entities brought suit against all of the defendants except JP Morgan Europe in the New York Supreme Court for the County of New York, New York.

A subset of the defendants removed the matter to the United States District Court for the Southern District of New York. The Ritchie entities moved to remand the case to state court, arguing the federal court lacked jurisdiction. In November 2014, the district court denied the Ritchie entities’ motion to remand, reasoning it had jurisdiction under the Edge...