SEC v. Stanford International Bank, et al
Filing
REVISED UNPUBLISHED OPINION FILED. [6697747-2] [09-10963]
SEC v. Stanford International Bank, et al Document: 00511327377 Case: 09-10963
Page: 1 Date Filed: 12/20/2010
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REVISED DECEMBER 20, 2010 IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
December 17, 2010 N o . 09-10963 Lyle W. Cayce Clerk
S E C U R I T I E S AND EXCHANGE COMMISSION, P la in tiff R . ALLEN STANFORD, DefendantAppellant v. R A L P H S. JANVEY, Appellee
A p p e a l from the United States District Court for the Northern District of Texas USDC No. 3:09-CV-0298-N
B e fo r e STEWART, PRADO, and ELROD, Circuit Judges. P E R CURIAM:* T h e Securities and Exchange Commission (SEC) brought an action against
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
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Case: 09-10963 Document: 00511327377 Page: 2 Date Filed: 12/20/2010
No. 09-10963 s e v e r a l defendants, including R. Allen Stanford (hereinafter Stanford). Later, t h e district court, at the SEC's request, appointed Ralph Janvey as receiver for S t a n fo r d 's assets (hereinafter Janvey or the Receiver), as well as those of S t a n fo r d -c o n tr o lle d entities. Subsequently, Janvey filed two motions seeking a p p r o v a l of the judicial sale of assets from the Receivership Estate, which S t a n fo r d opposed. The district court granted the motions. We granted
S t a n fo r d 's petition for interlocutory appeal of the district court's judgments. For t h e following reasons, we DISMISS this appeal as moot. I. This appeal arises out of an alleged multi-billion dollar Ponzi scheme p e r p e t r a t e d by a network of some 130 entities, spanning 14 countries, controlled b y Stanford. On February 16, 2009, the SEC filed suit against Stanford. Concurrent to filing suit, the SEC sought a temporary restraining order and p r e lim in a r y injunction to freeze all of Stanford's assets. The district court g r a n t e d the order and later appointed Janvey receiver of the assets. Pursuant t o the district court's order, Janvey has broad powers to "[p]erform all acts n e c e s s a r y to conserve, hold, manage, and preserve the value of the Receivership E s t a t e , in order to prevent any irreparable harm." The district court also
g r a n t e d Janvey's subsequent request for the appointment of a private-equity a d v is o r , Park Hill Group (PHG), to manage Stanford's investment portfolio. After Janvey and PHG conducted their preliminary valuation of Stanford's in v e s t m e n t portfolio, they determined that many of Stanford's investments had a negative equity and "a number include contractual commitments that would r e q u ir e the Receivership Estate to contribute additional millions of dollars or fa c e significant dilution or total loss of the investment." At issue in this case are in t e r e s t s in three limited partnerships--Israel Opportunity Fund I, L.P. (IOF I); I s r a e l Opportunity Fund II, L.P. (IOF II); and Midway CC Hotel Partners, L.P. (M id w a y or Midway Interest). 2
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No. 09-10963 I n July 2009, Janvey filed two motions with the district court. In the first m o t io n , Janvey asked the district court to confirm the sale of IOF I and IOF II (c o lle c t iv e ly , the IOF Interests) because the Receivership Estate could not afford t h e $61 million additional funds that the IOF Interests would require. Janvey a ls o explained that the Receivership Estate was already past due on a pending c a p it a l contribution to IOF II of $2.5 million and risked dilution of its initial in v e s t m e n t of approximately $14.3 million to approximately $400,000. Similarly, Janvey filed a second motion asking the district court to confirm the s a le of Midway because the Receivership Estate could not afford the pending c a p it a l call, which would require it to choose between investing an additional $ 3 .2 million into the partnership or face having its limited partnership interest d ilu t e d from 71.83% to approximately 59.30% pursuant to Midway's partnership a g r e e m e n t. In both motions, Janvey explained that liquidation of the IOF and M id w a y Interests would achieve the maximum benefit from the holdings and w a s in the best interest of the Receivership Estate. In response to the motions, S t a n fo r d argued that the sales constitute a breach of the Receiver's fiduciary d u t y , were not in the best interests of the Estate, and should not occur until the c a s e is resolved on its merits. On August 25, 2009, in two separate orders, the district court approved the s a le of the IOF and Midway Interests. In both orders, the district court
s u m m a r ily held that "the transactions . . . are in the best interests of the R e c e iv e r s h ip Estate." We granted Stanford's petition for an interlocutory
a p p e a l. At issue on appeal is: (1) whether this court has jurisdiction to review t h e district court's orders and (2) whether the district court had subject matter ju r is d ic t io n to confirm the sale of the IOF and Midway Interests. We hold that a lt h o u g h we have statutory jurisdiction over this appeal, the appeal is moot.
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No. 09-10963 II. We review "questions of law as to jurisdiction de novo." Ramirez-Molina v . Ziglar, 436 F.3d 508, 513 (5th Cir. 2006). Janvey makes two claims regarding o u r jurisdiction. He argues that: (1) we do not have statutory jurisdiction
p u r s u a n t to 28 U.S.C. § 1292(a)(2) and (2) we do not have constitutional ju r is d ic t io n because this appeal is moot. We address each of these challenges in tu rn . A. Stanford contends that we have jurisdiction to hear his appeal pursuant t o 28 U.S.C. § 1292(a)(2), which grants this court jurisdiction over certain in t e r lo c u t o r y appeals involving receivers. Janvey acknowledges that we have ju r is d ic t io n pursuant to our interpretation of section 1292(a)(2) in United States v . "A" Manufacturing Co., 541 F.2d 504 (5th Cir. 1976). However, Janvey claims t h a t we incorrectly interpreted section 1292(a)(2), and thus, this panel should r e c o n s id e r its decision in that case. In "A" Manufacturing, we explained that " [s ]e c t io n 1292(a)(2) provides for appeals from interlocutory orders which take s t e p s to accomplish the purpose of receiverships such as directing the sale or d is p o s a l of property. It logically follows that if an order directing a sale is a p p e a la b le then an order confirming a sale after the fact is likewise appealable." 541 F.2d at 50506. I t is well-established that a panel does not have the authority to overrule a previous panel's decision absent an intervening, contrary, or superseding d e c is io n by this court, sitting en banc, or by the Supreme Court.1 United States
Janvey also claims that the Supreme Court's decision in Mohawk Industries, Inc. v. Carpenter, 130 S. Ct. 599, 60405 (2009), calls into question this court's decision in "A" Manufacturing. In Mohawk, an employment case, the employer sought a "collateral order appeal" of the district court's order to disclose information related to the employee's pretermination interview with the employer's attorney. 130 S. Ct. at 603. The Eleventh Circuit dismissed the appeal for want of jurisdiction. Id. The primary question before the Supreme Court was "whether disclosure orders adverse to the attorney-client privilege qualify for
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No. 09-10963 v . Setser, 607 F.3d 128, 131 (5th Cir. 2010) (citing Burge v. Parish of St. T a m m a n y , 187 F.3d 452, 466 (5th Cir. 1999). Thus, pursuant to our decision in " A " Manufacturing, we have jurisdiction to hear Stanford's interlocutory appeal. B. J a n v e y also argues that, even if we have statutory jurisdiction, we lack c o n s t it u t io n a l jurisdiction because Stanford's appeal is moot. See United States v . Lares-Meraz, 452 F.3d 352, 355 (5th Cir. 2006) ("Whether an appeal is moot is a jurisdictional issue because it implicates Article III's requirement of a live c a s e or controversy."). Janvey contends that, because Stanford failed to seek a s t a y of either sales transaction, this court cannot grant Stanford the relief he s e e k s . Thus, Janvey argues, Stanford's inaction rendered moot an appeal of the d is t r ic t court's judgments confirming the sales. In response, Stanford argues t h a t a stay was not necessary because the district court lacked subject matter ju r is d ic tio n , as the sale of the IOF and Midway Interests were conducted without fo llo w in g the statutorily mandated procedural requirements of 28 U.S.C. § 2001, w h ic h governs the sale of real property, or 28 U.S.C. § 2004, which governs the s a le of personal property. For the following reasons, we conclude that this a p p e a l is moot. There is little authority discussing the effect of failing to seek a stay p e n d in g appeal on a party's right to challenge a district court's order confirming a judicial sale pursuant to § 2001 or § 2004. However, we are not without
immediate appeal under the collateral order doctrine." Id. The Supreme Court explained that the collateral order doctrine, articulated in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546 (1949), allows a "`small class' of collateral rulings that, although they do not end the litigation, are appropriately deemed `final'" pursuant to section 1291. Mohawk, 130 S. Ct. at 605. Ultimately, the court cautioned that the doctrine should be applied on a limited basis, and held that the appeal was properly dismissed by the Eleventh Circuit. Id. at 609. Janvey contends that the analysis in Mohawk undermines the analysis in "A" Manufacturing because "A" Manufacturing was based primarily on cases interpreting section 1291. However,"A" Manufacturing does not rely on the collateral order doctrine. Thus, Mohawk is not applicable to our interpretation of section 1292(a)(2) in "A" Manufacturing.
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No. 09-10963 g u id a n c e . Judicial sales often occur during the course of bankruptcy
p r o c e e d in g s , in which a stay pending appeal is statutorily mandated. See 11 U .S .C . § 363(m) (explaining that, unless a party obtains a stay pending appeal o f an order confirming the sale of property in a bankruptcy proceeding, an appeal c a n n o t effect the sale to a good faith purchaser). In those cases, we have had the o p p o r t u n it y to opine on the importance of seeking a stay. See, e.g., Am. Grain A s s o c . v. Lee-Vac, Ltd., 630 F.2d 245, 247 (5th Cir. 1980). Moreover, there is a p le t h o r a of case law discussing the consequences of failing to stay or enjoin the s a le of property. In these situations, we generally hold that the appeal is moot w h e r e the action sought to be enjoined by this court has occurred. See Seafarers I n t e r n . Union of N. Am. v. Nat'l Marine Servs., 820 F.2d 148, 151 (5th Cir. 1 9 8 7 ), abrogated on other grounds by Litton Fin. Printing Div., a Div. of Litton B u s . Sys., Inc. v. Nat'l Labor Relations Bd., 501 U.S. 190, 198 (1991). The p u r p o s e of a stay or injunction, pursuant to Federal Rule of Civil Procedure 62 o r Federal Rule of Appellate Procedure 8, is to prevent a party's claim from being m o o t by preserving the status quo pending resolution of an appeal. Neeley v. B a n k e r s Trust Co. of Tex., 848 F.2d 658, 661 (5th Cir. 1988). If proceedings are n o t stayed, then an event may occur while a case is pending appeal that makes it impossible for the court to grant any effectual relief. Tex. Midstream Gas S e r v s ., LLC v. City of Grand Prairie, 608 F.3d 200, 20405 (5th Cir. 2010) (c it a t io n s and internal quotation marks omitted). These basic principles are an important part of our jurisprudence because, r e le v a n t to this case, the judicial sale of property often involves the rights of a " g o o d faith purchaser"--a party who purchases assets for value, in good faith, a n d without notice of adverse claims. Hardage v. Herring Nat'l Bank, 837 F.2d 1 3 1 9 , 1323 (5th Cir. 1988); see also Black's Law Dictionary 1355 (9th ed. 2009). A good faith purchaser, like the purchasers of the IOF and Midway Interests, are a ffo r d e d special protection. The importance of securing the rights of good faith 6
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No. 09-10963 p u r c h a s e r s is so fundamental that the Supreme Court explained almost 200 y e a r s ago: "Strong as a plaintiff's equity may be, it can in no case be stronger t h a n that of a purchaser, who has put himself in peril by purchasing a title, and p a y in g a valuable consideration, without notice of any defect in it, or adverse c la im to it." See Boone v. Chiles, 35 U.S. 177, 210 (1836). Accordingly, with few e x c e p t io n s , good faith purchaser status trumps a challenge to an order c o n fir m in g the sale of property. See generally In re Bleaufontaine, Inc., 634 F.2d 1 3 8 3 , 1388 n.7 (5th Cir. 1981) (explaining that in bankruptcy proceedings a p a r ty 's good faith purchaser status should be revoked if the party's conduct in v o l v e d "fraud, collusion between the purchaser and other bidders or the t r u s t e e , or an attempt to take grossly unfair advantage of other bidders." (c it a t io n and internal quotation marks omitted)). As Stanford did not seek to s t a y the sale of the IOF and Midway Interests and the investments were sold to g o o d faith purchasers, we conclude that Stanford's appeal is moot. III. For the foregoing reasons, we DISMISS this appeal as moot.
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