Janvey v. Democratic Senatorial Campaign Committee, Inc.

Case: 11-10704 Document: 00512029502 Page: 1 Date Filed: 10/23/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 23, 2012
No. 11-10704 Lyle W. Cayce
Clerk
RALPH S. JANVEY, as Court-Appointed Receiver for the Stanford
International Bank, Ltd., et al.,
Plaintiff-Appellee,
v.
DEMOCRATIC SENATORIAL CAMPAIGN COMMITTEE, INC.;
DEMOCRATIC CONGRESSIONAL CAMPAIGN COMMITTEE, INC.;
NATIONAL REPUBLICAN CONGRESSIONAL COMMITTEE;
REPUBLICAN NATIONAL COMMITTEE; and NATIONAL REPUBLICAN
SENATORIAL COMMITTEE,
Defendants-Appellants.
Appeals from the United States District Court
for the Northern District of Texas
Before JOLLY, BENAVIDES, and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
Ralph Janvey, the Receiver over Allen Stanford and his companies’ assets
(collectively, the Stanford Defendants),1 brought this case under the Texas
Uniform Fraudulent Transfer Act (“TUFTA”), TEX. BUS. & COM. CODE § 24.001
1
Stanford ran a Ponzi scheme through his companies, one of the largest in U.S. history.
See Juan A. Lozano, Allen Stanford Gets 110 Years in Prison for $7B Ponzi Scheme, CHRISTIAN
SCIENCE MONITOR, June 14, 2012, http://www.csmonitor.com/Business/Latest-News-Wires/
2012/0614/Allen-Stanford-gets-110-years-in-prison-for-7B-Ponzi-scheme.
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et seq., to recover approximately $1.6 million in political contributions made to
various political committees by the Stanford Defendants between 2000 and 2008.
There are two Democratic committees—the Democratic Senatorial Campaign
Committee (“DSCC”) and the Democratic Congressional Campaign Committee
(“DCCC”) (“the Democratic Committees”)—and three Republican
committees—the Republican National Committee (“RNC”), the National
Republican Senatorial Committee (“NRSC”), and the National Republican
Congressional Committee (“NRCC”) (“the Republican Committees”)—which, for
convenience, we collectively refer to as “the Committees.” The district court
granted summary judgment in favor of the Receiver, and the Committees
appealed.
On appeal, the Committees advance three arguments. They are that (1)
the Receiver may not stand in the shoes of the creditors of the Stanford
Defendants as to the TUFTA claims, (2) the Receiver’s action was untimely
under TUFTA, and (3) federal campaign finance law preempts the Receiver’s
TUFTA claims. Because we conclude that (1) the Receiver may stand in the
shoes of the creditors of the Stanford Defendants, (2) the Receiver’s TUFTA
claims were brought “within one year after the transfer[s] . . . w[ere] or
reasonably could have been discovered by the claimant,” TEX. BUS. & COM. CODE
§ 24.010(a)(1), and (3) they are not preempted, we reject the Committees’
arguments and, therefore, AFFIRM the judgment of the district court.
BACKGROUND
The Securities Exchange Commission (“SEC”) brought suit against the
Stanford Defendants in 2009 for perpetrating an enormous Ponzi scheme. See
Janvey v. Adams, 588 F.3d 831, 833 (5th Cir. 2009). The district court appointed
Janvey to be Receiver over the assets and the records of the Stanford Defendants
(the Receivership Estate). The court “specifically directed and authorized [the
Receiver] to . . . [c]ollect, marshal, and take custody, control, and possession of
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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.” The Receiver was
also directed to file “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” with the
same court.
On February 19, 2009 and pursuant to its directive, the Receiver filed the
instant lawsuit to recover approximately $1.6 million worth of contributions
made by the Stanford Defendants to the Committees. It is undisputed that the
Stanford Defendants gave $950,500 to the DSCC; $238,500 to the NRCC;
$200,000 to the DCCC; $128,500 to the RNC; and $83,345 to the NRSC. The
Receiver contends that the Committees have to disgorge the above funds because
the contributions were fraudulent transfers, given “with actual intent to hinder,
delay, or defraud” creditors of the Stanford Defendants. See TEX. BUS. & COM.
CODE § 24.005(a).
The Committees each filed a motion to dismiss, and the Receiver and the
Republican Committees moved for summary judgment. The district court
granted the Receiver’s motion for summary judgment and denied the motions to
dismiss and the Republican Committees’ motion for summary judgment. The
court ruled that the Receiver stands in the shoes of the creditors of the Stanford
Defendants and therefore may bring the TUFTA claims and determined that the
Receiver’s TUFTA actions were timely. The district court also concluded that
federal campaign finance law2 does not preempt the Receiver’s state law claim.
On the merits, the district court determined that summary judgment in favor of
2
Specifically, the Committees refer to the Federal Campaign Act of 1971 (“FECA”), 86
Stat. 3 (1972), amended by Bipartisan Campaign Reform Act of 2002 (“BCRA”), 116 Stat. 81,
2 U.S.C. § 431 et seq., and the regulations implementing the FECA and BCRA.
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the Receiver was warranted because he had demonstrated that the Stanford
Defendants gave contributions to the Committees with actual intent to defraud,
as required by TUFTA. The district court was unconvinced that the statutory
defense available for contributions taken “in good faith and for a reasonably
equivalent value,” TEX. BUS. & COM. CODE § 24.009(A), applied because the
Committees failed to create a genuine issue of material fact regarding whether
the contributions were given for a reasonably equivalent value.
The Committees timely appealed, raising three issues: (1) whether the
Receiver may stand in the shoes of the creditors of the Stanford Defendants as
to the TUFTA claims; (2) whether the Receiver’s action was untimely under
TUFTA; and (3) whether federal campaign finance law preempts the Receiver’s
TUFTA claims.
STANDARD OF REVIEW
We review de novo a district court’s disposition of motions to dismiss and
motions for summary judgment. E.g., LeClerc v. Webb, 419 F.3d 405, 413 (5th
Cir. 2005).
DISCUSSION
A.
The Committees first dispute the district court’s conclusion that the
Receiver stands in the shoes of the creditors of the Stanford Defendants and that
he is therefore empowered to bring the TUFTA claims. We disagree and
conclude that the Receiver has the authority to pursue the instant action on
behalf of the creditors.
The Committees highlight that the district court relied on language from
Janvey v. Alguire, 628 F.3d 164 (5th Cir. 2010) (Alguire I), in reaching its
conclusion that the Receiver may bring claims on behalf of the creditors of the
Stanford Defendants. The Committees correctly note that this language does not
appear in Janvey v. Alguire, 647 F.3d 585 (5th Cir. 2011) (Alguire II), the opinion
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that replaced and superseded Alguire I. Nonetheless, although we reached a
different conclusion in Alguire II, id. at 603-04, this is not because we concluded
that the Receiver represented the company rather than the creditors.3 Thus,
although Alguire II does not include the language on which the district court
relied, it also does not reject this language or the reasoning underpinning it.4
Moreover, we subsequently recognized, in Jones v. Wells Fargo Bank, N.A., 666
F.3d 955 (5th Cir. 2012), that under Texas law—which also governs this
appeal—“[a] receiver is ‘the representative and protector of the interests of all
persons, including creditors, shareholders and others, in the property of the
receivership.’” Id. at 966 (quoting Sec. Trust Co. of Austin v. Lipscomb Cnty.,
180 S.W.2d 151, 158 (Tex. 1944)). Thus, “‘when the receiver acts to protect
innocent creditors . . . he can maintain and defend actions done in fraud of
creditors even though the corporation would not be permitted to do so.’” Id.(quoting Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. E-Court, Inc., 2003 WL
21205030 at *5 (Tex. Ct. App. 2003)).5 Not only is Jones controlling, but its
reasoning finds support in the decisions of several other circuits. See, e.g.,
Marion v. TDI Inc., 591 F.3d 137, 148 (3d Cir. 2010); Wulliger v. Man. Life Ins.
3
Rather, we concluded that we did not have jurisdiction to decide whether the
receiver’s claims were subject to arbitration because the district court had not issued an order
deciding the defendants’ motion to compel arbitration. Id.4
Notably, in Alguire II, we continued to refer to the receiver as representing the
interests of the creditors in the TUFTA context. Id. at 601.
5
The Committees submit that Jones is distinguishable because we further noted that
the receiver in that case was authorized by the order appointing him “to pursue actions for the
benefit of ‘all investors who may be the victims of the fraudulent conduct’” of the receivership
entities, id. at 966, and that this language does not appear in the appointment order here. We
disagree. Jones does not require that such language appear in an appointment order before
a receiver may exercise the authority given to him under Texas law. Regardless, the order
appointing the Receiver in this case included language even broader than that cited in Jones;
the Receiver is authorized to institute actions to recover any “assets . . . traceable to the
Receivership Estate,” and it is undisputed that the contributions at issue are traceable to the
Receivership Estate.
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Co., 567 F.3d 787, 795 (6th Cir. 2009); Donell v. Kowell, 533 F.3d 762, 776-77
(9th Cir. 2008); Eberhard v. Marcu, 530 F.3d 122, 132-33 (2d Cir. 2008); Scholes
v. Lehmann, 56 F.3d 750, 753-54 (7th Cir. 1995). Accordingly, we conclude that
the Receiver represents the creditors, via the Stanford corporations, in pursuing
the TUFTA claims.
B.
1.
Given that the Receiver may represent the creditors in pursuit of the
TUFTA claims, the next question we must answer is whether the Receiver filed
the instant action “within one year after the transfer[s] . . . w[ere] or reasonably
could have been discovered by the claimant.” TEX. BUS. & COM. CODE
§ 24.010(a)(1).
“A defendant moving for summary judgment on the affirmative defense of
limitations has the burden to establish that defense conclusively.” Johnston v.
Crook, 93 S.W.3d 263, 269 (Tex. App. 2002) (citing KPMG Peat Marwick v.
Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex.1999)). “Thus, the
defendant must (1) conclusively prove when the cause of action accrued, and (2)
negate the discovery rule, if it applies and has been pleaded or otherwise raised,
by proving as a matter of law there is no genuine issue of material fact about
when the plaintiff discovered, or in the exercise of reasonable diligence should
have discovered, the nature of its injury.” Id. (citing KPMG Peat Marwick, 988
S.W.2d at 748). “If the movant establishes that the statute of limitations bars
the action, the non-movant must then adduce summary judgment proof raising
a fact issue in avoidance of the statute of limitations.” Id. (citing KMPG Peat
Marwick, 988 S.W.2d at 748).
“The discovery rule [in TEX. BUS. & COM. CODE § 24.010] defers the accrual
of a cause of action until the plaintiff knew or, through the exercise of reasonable
diligence, should have known of the facts giving rise to the cause of action.”
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Cadle Co., 136 S.W.3d at 350. “When a plaintiff knew or should have known of
an injury is generally a question of fact.” Id. at 352. “However, if reasonable
minds could not differ about the conclusion to be drawn from the facts in the
record, then the start of the limitations period may be determined as a matter
of law.” Id.
2.
The Committees argue that the Receiver reasonably could have discovered
the fraudulent transfers, at the very latest, by February 18, 2009.6 They contend
that the existence of the donations was not “inherently undiscoverable” because
records of the donations were available online (for instance, on the websites of
the Federal Election Commission (“FEC”) and Open Secrets) and because the
donations were discussed in the media.
The Committees’ argument misses the mark. Even if the existence of the
donations was discoverable, their fraudulent nature was not. Moreover, when
the Receiver was first appointed on February 16, 2009, he had a number of
duties to attend to, which involved the many Stanford offices, systems, and
employees, and, because February 16, 2009 fell on Presidents’ Day, he was not
able to enter the Stanford offices until February 17, 2009. Given the extent of
the Stanford enterprises, the Receiver’s duties with regard to them, and the
extent of the fraudulent transfers, it would not have been reasonable to expect
him to immediately discover the fraud. Moreover, the Political Committees
submitted no summary judgment evidence indicating that the Receiver actually
discovered the transfers earlier than February 20, 2009. The burden is on the
Committees to “(1) conclusively prove when the cause of action accrued, and (2)
negate the discovery rule, if it applies and has been pleaded or otherwise raised,
by proving as a matter of law there is no genuine issue of material fact about
6
Because the Receiver filed suit on February 19, 2010, accepting the Committees’
argument would mean that the Receiver failed to bring suit within the limitation period.
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when the plaintiff discovered, or in the exercise of reasonable diligence should
have discovered, the nature of its injury.” Cadle, 136 S.W.3d at 352.
Accordingly, we reject their argument and conclude that, based on the record
made in support of summary judgment, the Receiver exercised reasonable
diligence and thus brought the action within one year of when the transfers
reasonably could have been discovered.
3.
Finally, and related to their argument regarding to the discovery rule, the
Committees assert that the district court abused its discretion in denying their
discovery request (a motion to compel) and that they were prejudiced as a result.
Specifically, the Committees requested that the Receiver be compelled to
produce correspondence relating to, and several drafts of, documents that he had
issued regarding the contributions made to the Committees. The Committees
claim that the documents may contain metadata indicating that they were
created before February 19, 2009. The Receiver refused on multiple grounds,
but a common thread was that the requested documents and correspondence
were protected by attorney-client privilege and work-product doctrine. However,
the Receiver provided the Committees with a log of the documents that were
withheld, and the district court reviewed the documents in camera and
determined that they did not fall under the exception to the privilege and the
doctrine outlined in Conkling v. Turner, 883 F.2d 431 (5th Cir. 1989).7
On appeal, the Committees do not dispute that the documents are
privileged. Rather, the Committees contend that the Conkling exception applies
because the materials sought will help determine when the Receiver discovered,
7
In Conkling, the plaintiff claimed that a statute of limitations should be equitably
tolled because he did not know that a defendant’s statement was false until his (the plaintiff’s)
attorney informed him of such. Id. at 434. Because the plaintiff “injected into [the] litigation
the issue of when he knew or should have known of the falsity of [the defendant’s] assertion,”
we permitted the defendants to conduct a limited deposition of the plaintiff’s attorney. Id.8
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or reasonably could have discovered, the contributions made to the Committees.
However, the ultimate question is when the Receiver knew or should have
known about the fraudulent nature of the contributions, not just their existence.
Thus, the district court would have been obliged to find the Conkling exception
inapplicable if none of the sealed documents tended to show that the Receiver,
prior to the crucial date, not only knew that the contributions had been made but
also that they had been made with fraudulent intent.
Even if we assume, for the sake of argument, that the district court erred
in not applying the Conkling exception, the Committees have failed to preserve
this issue for appeal by failing to provide any meaningful way to review the
disputed documents. Had the Committees wished to pursue this argument, they
should have moved to have the documents, along with any metadata, made
available for review. See, e.g., Miss. Pub. Employees’ Retirement Sys. v. Boston
Scientific Corp., 649 F.3d 5, 30 n.22 (1st Cir. 2011). The district court examined
the documents, determined that it was not necessary to look at the metadata
they may have contained, and concluded that they did not fit the criteria for the
Conkling exception to apply. Absent a meaningful way to review the disputed
documents, it is not possible to examine whether the district court abused its
discretion by denying the Committees’ discovery request as to the documents.
Furthermore, insofar as the Committees suggest that the district court’s
in camera review of the hardcopy documents was inadequate because it did not
include the metadata itself, their argument is waived because they did not raise
it until their reply brief. E.g., Medina Cnty. Envtl. Action Ass’n v. Surface
Transp. Bd., 602 F.3d 687, 702 (5th Cir. 2010). Consequently, we cannot say
that the district court abused its discretion in denying the Committees’ discovery
request.
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C.
The Committees’ third defense is that federal campaign finance law
preempts the Receiver’s TUFTA claims. “Preemption can take multiple forms:
Congress can expressly preempt state law in federal statutory language, or it can
impliedly preempt state law.” Castro v. Collecto, Inc., 634 F.3d 779, 785 (5th Cir.
2011). Implied preemption may take two forms: field preemption and conflict
preemption. Id. Field preemption applies “where federal law ‘is sufficiently
comprehensive to make reasonable the inference that Congress ‘left no room’ for
supplementary state regulation,’ or ‘the federal interest [in the field] is so
dominant’ that it ‘preclude[s] enforcement of state laws on the same subject.’” Id.(quoting Hillsborough Cnty., Fla. v. Automated Med. Labs., Inc., 471 U.S. 707,
713 (1985)) (citations omitted). Conflict preemption applies “(1) where
complying with both federal law and state law is impossible; or (2) where the
state law ‘creates an unacceptable obstacle to the accomplishment and execution
of the full purposes and objectives of Congress.’” Id. (quoting Wyeth v. Levine,
555 U.S. 555, 563-64 (2009) (internal quotation marks omitted)). Reviewing
each form of preemption, we conclude that none applies and that, therefore, the
Receiver’s TUFTA claim is not preempted.
1.
The Committees argue that FECA expressly preempts the Receiver’s
TUFTA claim because it preempts “any provision of State law with respect to
election to federal office.” 2 U.S.C. § 453. We disagree.
TUFTA is a general state law that happens to apply to federal political
committees in the instant case. In cases like this one, we have rejected express
preemption arguments and construed § 453 narrowly. For instance, in Karl
Rove & Co. v. Thornburgh, 39 F.3d 1273 (5th Cir. 1994), we rejected a federal
candidate’s argument that FECA preempted a company’s state law cause of
action against him for the debts of his campaign committee:
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Although Thornburgh attempts to stretch § 453 far enough to
create a preemptive bar to applying state law to hold federal
candidates personally liable, we cannot read FECA as extending
that far. First, a “strong presumption” exists against preemption,
and “courts have given section 453 a narrow preemptive effect in
light of its legislative history.” In addition, nowhere in the text of
FECA or accompanying regulations is the personal liability of a
candidate addressed. Finally, the Federal Election Commission
(“FEC”) has opined that state law supplies the answer to the
question who may be held liable for campaign committee debts.
Accordingly, in light of the FEC’s view, the strong presumption
against preemption, the historically narrow reading of § 453, and
FECA’s silence on the issue of candidate liability, we conclude that
Thornburgh’s argument for express preemption must fail.
Id. at 1280 (footnotes and citations omitted); see also Stern v. Gen. Electric Co.,
924 F.2d 410 (2d Cir. 1991) (holding that § 453 does not preempt a state law
establishing a company’s directors’ fiduciary duty to shareholders, including not
wasting corporate assets, and explaining that “the narrow wording of [§ 453]
suggests that Congress did not intend to preempt state regulation with respect
to non-election-related activities”); Reeder v. Kans. City Bd of Police Comm’ers,
733 F.2d 543 (8th Cir. 1984) (holding that § 453 did not preempt a state law
prohibiting officers or employees of the Kansas City Police Department from
making any political contribution); Friends of Phil Gramm v. Ams for Phil
Gramm in ‘84, 587 F. Supp. 769 (E.D. Va. 1984) (holding that § 453 did not
preempt a state law prohibiting unauthorized use of a person’s name for
advertising or commercial purposes).
The cases that the Committees cite are all inapposite because they pertain
to state laws that specifically regulated federal campaign finance in
contravention of FECA’s preemption provision. See Teper v. Miller, 82 F.3d 989(11th Cir. 1996) (state law effectively prohibiting Georgia legislators from
accepting donations for a federal campaign while the state General Assembly
was in session); Bunning v. Ky., 42 F.3d 1008 (6th Cir. 1994) (state law
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authorizing investigation of campaign expenditures of a federal political
committee); Weber v. Heaney, 995 F.2d 872 (8th Cir. 1993) (state law
establishing system under which federal congressional candidates could agree
to limit their federal expenditures in exchange for state funding for their
campaigns).
Nor does TUFTA implicate the “core concerns” of FECA. As the Receiver
correctly explains, he does not seek a refund of the contributions. Rather, the
TUFTA claims are brought on behalf of the creditors of the Stanford Defendants
and assert that the contributions should not have been made in the first place.
Accordingly, § 453 does not expressly preempt the Receiver’s TUFTA claims.
2.
The Committees next argue that field preemption applies. However,
because Congress has not occupied the field with regard to claims like those
brought under TUFTA and because courts have consistently indicated that
FECA’s preemptive scope is narrow in light of its legislative history, see, e.g.,
Karl Rove, 39 F.3d at 1281; Stern, 924 F.2d at 475 n.3; Weber, 995 F.2d at 876,
we conclude that field preemption does not apply.
First, the Committees contend that § 441a-k of FECA states a
“comprehensive list” of illegal sources for campaign contributions8 and that
TUFTA impermissibly designates another source of “illegal” contributions.
This, the Committees argue, is consistent with “[t]he primary purpose of FECA,
[which] . . . is to regulate campaign contributions and expenditures in order to
eliminate pernicious influence—actual or perceived—over candidates by those
who contribute large sums.” Karl Rove, 39 F.3d at 1281. But, as the Receiver
8
These provisions establish: limitations on the amount that may be given, § 441a;
restrictions on who may give, § 441b-f; limitations on the contribution of currency, § 441g;
regulation of soft money, § 441i; and a prohibition on fraudulent misrepresentation of
campaign authority, § 441h.
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correctly observes, this appeal pertains to an impermissible source of funds for
the contributor (the Stanford Defendants), not the Committees, and § 441a-k
only pertains to the latter. Moreover, as the district court noted, neither
Congress nor the FEC “has ever attempted to graft any of these potential uses
of erstwhile campaign contributions onto the purportedly exclusive list of
prohibited limitations on contributions and expenditures.” Finally, the
Committees’ argument would lead to absurd results: under their interpretation,
they would be allowed to keep funds that were, for example, stolen by force or
fraud so long as the contributions did not run afoul of § 441a-k.
Second, the FEC, in advisory opinions cited by the district court, has ruled
that candidates and political committees remain subject to state contract law.
FEC Adv. Op. 1989-02 at 2 (Apr. 25, 1989); FEC Adv. Op. 1975-102 at 1 (Jan. 29,
1976). This suggests that Congress had no intention to “occupy the field” with
regard to campaign finance such that state fraudulent transfer laws would be
preempted. Given this, field preemption does not apply.
3.
Finally, we conclude that conflict preemption does not apply here. First,
the Committees argue that because FECA does not designate fraudulent
transfers as illegal, TUFTA must conflict with FECA. This is a rehashing of the
Committee’s argument regarding field preemption—namely, that because
§ 441a-k of FECA states a “comprehensive list” of illegal sources for campaign
contributions, TUFTA impermissibly designates another source of “illegal”
contributions by allowing the Receiver’s claims—which we have already rejected.
Accordingly, for the same reason that field preemption does not apply on this
basis, neither does conflict preemption.
Second, the Committees maintain that the Receiver’s TUFTA claims
conflict with the BCRA’s soft money provisions. They submit that because the
BCRA requires them to dispose of all soft money, they may not be compelled,
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under state law, to return that money. We find this argument unpersuasive. It
depends on characterizing the Receiver’s TUFTA claim as a refund, which as
previously discussed is inaccurate because the TUFTA claim is brought on behalf
of the creditors of the Stanford Defendants and alleges that the contributions
should not have been made in the first place. Furthermore, the Receiver does
not seek recovery of the exact soft money funds that the Committees asserts
have now been spent. See TEX. BUS. & COM. CODE § 24.009(b) (“[T]he creditor
may recover judgment for the value of the asset transferred . . . or the amount
necessary to satisfy the creditor’s claim, whichever is less.”). Nor does the fact
that the original funds have been spent preclude the Receiver from asserting his
claim. See, e.g., Donell v. Kowell, 533 F.3d 762, 776 & n.9 (9th Cir. 2008) (noting,
in a fraudulent transfer case, that claims may often arise “years after the money
has been received and spent” by the recipient but explaining that such claims
are nonetheless permitted). Accordingly, conflict preemption does not apply.
CONCLUSION
For these reasons, we AFFIRM the district court’s judgment.
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