James H Donell v. Tahmineh Rashidi Ghadrdan et al

Filing 30

ORDER by Judge Dean D. Pregerson: denying 17 Plaintiff James. H. Donell, Receiver for NewPoint Financial Services Inc Motion for Summary Judgment. (lc). Modified on 2/26/2013 (lc).

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1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 JAMES H. DONELL, RECEIVER FOR NEWPOINT FINANCIAL SERVICES, INC., 13 Plaintiff, 14 15 16 17 v. TAHMINEH RASHIDI GHADRDAN aka TAHMINEH RASHIDI and FRUIT ATLANTIC, LLC, a California limited liability company, 18 19 20 Defendants. ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 11-10517 DDP (AJWx) ORDER DENYING MOTION FOR SUMMARY JUDGMENT [Dkt. No. 17] Presently before the court is a Motion for Summary Judgment 21 brought by Plaintiff James. H. Donell, Receiver for NewPoint 22 Financial Services Inc. (“Donell” or “the Receiver”). 23 considered the parties’ submissions1 and heard oral argument, the 24 court adopts the following order. 25 I. BACKGROUND 26 27 The following facts are not in dispute. Having John Farahi was the co-owner, president, secretary, and treasurer of NewPoint Financial 28 1 The Opposition was due on February 4 but filed at 12 am on February 5. 1 Services, Inc. (“NewPoint”). 2 Agreement for Defendant John Farahi (“Farahi Plea Agreement”), at 3 28.) 4 dollars of debentures to numerous investors. 5 (Decl. Davidson, Exh. D, Plea NewPoint, controlled by Farahi, offered and sold millions of (Id. at 29.) Farahi generally used investor funds to make interest and 6 principal repayments to previous investors, to pay personal 7 expenses, and to finance higher-risk futures options. 8 In other words, Farahi was engaged in a Ponzi scheme, which is “any 9 sort of fraudulent arrangement that uses later acquired funds or (Id. at 30.) 10 products to pay off previous investors.” 11 re Agricultural Research Technology Group, Inc., 916 F.2d 528, 531 12 (9th Cir. 1990).) 13 NewPoint Entity investors lost millions of dollars. 14 (Decl. Grobstein ¶ 13; In As a result of the Ponzi scheme and fraud, In his plea agreement, Farahi admitted that the scheme began 15 “on a date unknown but at least as early as in or about November 16 2005.” 17 suffered approximately $30 million in losses resulting from options 18 trading. 19 pay back prior investors, among other things. 20 (Farahi Plea Agreement at 28.) In the fall of 2008, Farahi (Id. at 30.) Farahi continued to use investors funds to (Id.) Defendant Tahmineh Rashidi Ghadrdan (“Ghadrdan”) invested a 21 total of one million dollars between 2002 and 2003. Between 2003 22 and 2005, she received payments totaling $1,134,481.10, with the 23 last payment being made on January 24, 2005. (Exh. 4.) On November 24 11, 2008, she invested $200,000 with Parsi Investments LLC, one of 25 the entities through which Farahi conducted the fraud. 26 3.) 27 $206,468.15, including a payment of $198,856.39 on June 4, 2009. 28 Additionally, Defendant’s company Fruit Atlantic, LLC (“Fruit”), (Reply Exh. Between 2008 and 2009, Ghadrdan received payments totaling 2 1 also a Defendant, received payments totaling $4,590.31, although it 2 had made no investment. 3 (Decl. Grobstein ¶ 16., Exh. 2.) This court appointed Donell as Receiver of NewPoint and its 4 affiliates and subsidiaries on January 8, 2010. 5 II. LEGAL STANDARD 6 Summary judgment is appropriate where the pleadings, 7 depositions, answers to interrogatories, and admissions on file, 8 together with the affidavits, if any, show “that there is no 9 genuine dispute as to any material fact and the movant is entitled 10 to judgment as a matter of law.” 11 seeking summary judgment bears the initial burden of informing the 12 court of the basis for its motion and of identifying those portions 13 of the pleadings and discovery responses that demonstrate the 14 absence of a genuine dispute of material fact. 15 Catrett, 477 U.S. 317, 323 (1986). 16 the evidence must be drawn in favor of the nonmoving party. 17 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 242 (1986). 18 If the moving party does not bear the burden of proof at trial, it 19 is entitled to summary judgment if it can demonstrate that “there 20 is an absence of evidence to support the nonmoving party’s case.” 21 Celotex, 477 U.S. at 323. 22 Fed. R. Civ. P. 56(a). A party Celotex Corp. v. All reasonable inferences from See Once the moving party meets its burden, the burden shifts to 23 the nonmoving party opposing the motion, who must “set forth 24 specific facts showing that there is a genuine issue for trial.” 25 Anderson, 477 U.S. at 256. 26 party “fails to make a showing sufficient to establish the 27 existence of an element essential to that party’s case, and on 28 which that party will bear the burden of proof at trial.” Summary judgment is warranted if a 3 Celotex, 1 477 U.S. at 322. 2 that a reasonable jury could return a verdict for the nonmoving 3 party,” and material facts are those “that might affect the outcome 4 of the suit under the governing law.” 5 There is no genuine issue of fact “[w]here the record taken as a 6 whole could not lead a rational trier of fact to find for the non- 7 moving party.” 8 475 U.S. 574, 587 (1986). 9 A genuine issue exists if “the evidence is such Anderson, 477 U.S. at 248. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., It is not the court’s task “to scour the record in search of a 10 genuine issue of triable fact.” 11 1278 (9th Cir. 1996). Counsel has an obligation to lay out their 12 support clearly. 13 1026, 1031 (9th Cir. 2001). 14 file for evidence establishing a genuine issue of fact, where the 15 evidence is not set forth in the opposition papers with adequate 16 references so that it could conveniently be found." 17 III. DISCUSSION Keenan v. Allan, 91 F.3d 1275, Carmen v. San Francisco Sch. Dist., 237 F.3d The court “need not examine the entire Id. 18 A. Defendants’ Liability 19 The Ninth Circuit has adopted a two-step approach to determine 20 how much, if anything, a receiver can recover from a “winning” but 21 innocent investor in a Ponzi scheme. 22 762, 771 (9th Cir. 2008). Step one determines the investor’s 23 liability with the “netting rule”: “Amounts transferred by the 24 Ponzi scheme perpetrator to the investor are netted against the 25 initial amounts invested by that individual. 26 positive, the receiver has established liability, and the court 27 determines the actual amount of liability, which may or may not be 28 equal to the net gain, depending on factors such as whether 4 Donell v. Kowell, 533 F.3d If the net is 1 transfers were made within the limitations period or whether the 2 investor lacked good faith.” 3 actual amount of liability, the court permits good faith investors 4 to retain payments up to the amount invested, and requires 5 disgorgement of only the ‘profits’ paid to them by the Ponzi 6 scheme.” Id. In step two, “to determine the Id. at 772. 7 Both parties agree that this is the rule that should be 8 applied, but they differ on which transfers should be considered. 9 The Receiver argues that Ghadrdan invested a total of $1,200,000.00 10 and received payments on the investment totaling $1,340,949.25, 11 with a net profit of $140,949.25. 12 argues that because Ghadrdan received payments from Farahi within 13 the four-year statute of limitations period totaling more than 14 $140,949.25, he should be able to recover the full amount. (Decl. Grobstein ¶ 17.) Donell 15 Ghadrdan asserts that there is no evidence that Farahi was 16 running a Ponzi scheme at the time of her initial investment in 17 2002-03 or at the time of Farahi’s initial payments to her totaling 18 $134,481.10 as of January 2005. 19 defraud investors “[b]eginning on a date unkonwn but at least as 20 early as in or about November 2005.” (Farahi Plea Agreement at 28.) 21 The Receiver presents no evidence an earlier date of the beginning 22 of the scheme. 23 payments she received after the scheme began, meaning only the 24 $11,058.46 she received subsequent to her later investment of 25 $200,000. 26 Farahi pled that he began to Thus, she argues, the netting should cover only the The court agrees with Ghadrdan that there is a question of 27 fact as to when the Ponzi scheme began. 28 Farahi’s scheme was legitimate for several years before becoming a 5 It is possible that 1 Ponzi scheme. 2 keep the profits from her initial investment, if, for instance, 3 both the investment and that return on the investment took place 4 while the fund was legitimate. 5 $1,000,000 and by January 2–5, she had received payments totaling 6 $1,134,481.10, she appears to have been totally divested at that 7 point. 8 months later, then it appears that she should be able to keep the 9 profits from that initial investment. If that is the case, Ghadrdan may be entitled to Since her initial investment was If the scheme did not become fraudulent until several This is not a question of 10 “tracing,” which involves tracing transfers and demonstrating 11 whether the “payments that took place within the statute of 12 limitations periods were return of principal or profit.” 13 533 F.3d at 773. 14 investment of one million dollars was an investment into a Ponzi 15 scheme at all, and whether the profits she had received by January 16 2005 were not real profits but instead capital investments of new 17 investors. 18 Kowell, Here, the issue is whether Ghadrdan’s initial Alternatively, it is possible that the scheme was a Ponzi 19 scheme at an earlier date than the one admitted to by Farahi. 20 Receiver may be able to present records of NewPoint transactions 21 that indicate its fraudulent scheme had already commenced at the 22 time of Ghadrdan’s initial investment. The plea agreement is not 23 conclusive evidence for either party in this respect, but it does 24 create an issue of fact that makes summary judgment improper. 25 The [There is no factual dispute regarding Ghadrdan’s investment 26 of $200,000 in 2008. 27 received $6,468.15 in payments in addition to the return of her 28 investment or that her company Fruit received $4,590.31 although it Ghadrdan does not contest the fact that she 6 1 had not made any investment.2 2 netting rule, meaning that Ghadrdan and Fruit would appear to be 3 liable to the Receiver for $11,058.46. SHOULD THIS BE INCLUDED IF 4 NOT AT ISSUE?] 5 These profits are subject to the Because Defendants have demonstrated that there are material 6 issues of fact and law, the court DENIES the Motion for Summary 7 Judgment. 8 B. Receiver’s Standing to Sue 9 Defendants argue that the Receiver does not have standing to 10 sue them. 11 and is incorrect. 12 has standing to bring this suit because, although the losing 13 investors will ultimately benefit from the asset recovery, the 14 Receiver is in fact suing to redress injuries that Wallenbrock [the 15 entity for which it is receiver] suffered when its managers caused 16 Wallenbrock to commit waste and fraud.”). 17 IV. CONCLUSION 18 19 This is contradicted by explicit Ninth Circuit authority See, e.g. Kowell, 533 F.3d at 777 (“The Receiver For these reasons, the Motion is DENIED. IT IS SO ORDERED. 20 21 Dated: February 26, 2013 DEAN D. PREGERSON United States District Judge 22 23 24 25 26 27 28 2 These payments came from Parsi Investments, LLC, which was one of the entities through which Farahi conducted the fraud. Parsi is a receivership entity. See Reply Exh. 3. 7

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