Kelley v. College of Saint Benedict
Filing
34
ORDER granting 18 Motion to Dismiss, dismissing 13 Amended Complaint with prejudice. (Written Opinion). Signed by Judge Richard H. Kyle on 10/26/12. (kll)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Douglas A. Kelley,
Plaintiff,
v.
Civ. No. 12-822 (RHK/LIB)
MEMORANDUM OPINION
AND ORDER
College of St. Benedict,
Defendant.
James A. Lodoen, Mark D. Larsen, Kirstin D. Kanski, Jeffrey D. Smith, Adam C.
Ballinger, Lindquist & Vennum P.L.L.P., Minneapolis, Minnesota, for Plaintiff.
Jerome A. Miranowski, John B. Holland, Stephen M. Mertz, Megan S. Clinefelter, Faegre
Baker Daniels LLP, Minneapolis, Minnesota, for Defendant.
“Ponzi schemes leave no true winners once the scheme collapses.” Donell v.
Kowell, 533 F.3d 762, 779 (9th Cir. 2008). At its core, this case asks the Court to decide
between two “losers” in the lengthy Ponzi scheme orchestrated by Tom Petters. On one
hand are the creditors of Petters and his now defunct companies, including the United
States. On the other hand is the Defendant, the College of St. Benedict (the “College”), a
small liberal-arts college in St. Joseph, Minnesota, that received $2 million in donations
from Petters and entities he directed. Plaintiff Douglas Kelley, the Court-appointed
receiver for Petters and entities he once controlled, brought this action to recover the
donations under the Minnesota Fraudulent Transfer Act (“MFTA”), Minn. Stat. § 513.41 et
seq., and the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. § 3001 et seq.
Kelley also asserts a claim for unjust enrichment. The College now moves to dismiss.
For the reasons that follow, its Motion will be granted.
BACKGROUND
Petters and others orchestrated and participated in a Ponzi scheme lasting over a
decade. They laundered more than $40 billion through two companies Petters controlled,
Petters Company, Inc. (“PCI”) and Petters Group Worldwide, LLC (“PGW”), and other
affiliated entities.
During the Ponzi scheme, Petters founded a non-profit corporation known as the
Thomas J. Petters Family Foundation (the “Foundation”). Ponzi proceeds funded the
Foundation, which was “merely a facade [and] provided a vehicle for Petters to display a
false persona of wealth, success and altruism that allowed [him] to gain the additional
credibility he required to induce more victims to invest money.” (Am. Compl. ¶ 7.) On
January 31, 2003, Petters pledged $3,000,000 to the College in return for it agreeing to
name an auditorium after his parents. (Id. ¶ 38.) Over the next 2-1/2 years, he and the
Foundation paid $2 million to the College under the pledge, all of which came from fraud
proceeds. (Id. ¶¶ 38-44.) The remaining $1 million was never paid.
In late 2008, the FBI learned of the fraud and the Ponzi scheme imploded; Petters
was arrested and later convicted of 20 counts of mail fraud, wire fraud, money laundering,
and conspiracy. He is currently serving a 50-year prison sentence. Following his
conviction, the Court entered a criminal forfeiture money judgment against him for more
than $3.5 billion in fraud proceeds. (See Doc. No. 395 in Crim. No. 08-364.) That
judgment remains outstanding.
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Shortly after Petters was arrested, the United States filed an application under the
fraud injunction statute, 18 U.S.C. § 1345, asking this Court to place Petters, PCI, PGW,
and others into civil receivership. On October 6, 2008, the Court (Montgomery, J.)
granted that application and appointed Kelley as the equity receiver for these individuals
and companies, as well as the Foundation. He was granted the authority to “sue for,
collect, receive, take in possession, hold, liquidate, or sell and manage all assets of these”
individuals and entities. Kelley then placed PCI and PGW into bankruptcy and was
appointed the trustee of their bankruptcy estates.
Meanwhile, the United States sought to forfeit certain assets previously held by
Petters and others as part of the criminal proceedings against them. This resulted in
substantial overlap in the property subject to the bankruptcy proceedings, the receivership
action, and the government’s forfeiture efforts. To avoid stepping on each other’s toes, so
to speak, Kelley and the government entered into a “Coordination Agreement” approved
by both the Bankruptcy Court and Judge Montgomery. Under that agreement, the
government would use its forfeiture powers to recover assets fraudulently transferred by
the individuals to certain third parties. In return, Kelley would seek to recover from
“religious, charitable, educational and/or political institutions” any “donations and gifts”
made “on behalf of [Petters], [the] Foundation or other Receiver entities.” (Def. Mem.
Ex. B, § I(B)(3)(b).) 1
1
The Court may consider the Coordination Agreement when ruling on the instant Motion because
it was referenced throughout the Amended Complaint. See Fed. R. Civ. P. 10(c); Moses.com
Sec., Inc. v. Comprehensive Software Sys., Inc., 406 F.3d 1052, 1063 n.3 (8th Cir. 2005).
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The specter of such “clawback” litigation did not go unnoticed. Indeed, Kelley
once publicly estimated that more than $400 million in charitable contributions by Petters
and his associates were potentially subject to clawback. See http://www.startribune.com/
politics/statelocal/146014325.html (last visited October 22, 2012). Apparently concerned
that nonprofits, charities, religious organizations and the like would be unable to repay
donations long after they had been received and spent, Minnesota’s Governor signed
legislation on April 3, 2012, redefining the term “transfer” under the MFTA. While
claims under the statute were previously subject to a six-year statute of limitations, under
the new definition a transfer “does not include a contribution of money . . . made to a
qualified charitable or religious organization or entity unless the contribution was made
within two years of commencement of an action under [the MFTA].” Minn. Stat.
§ 513.41(12) (emphasis added). This amendment applies to any “cause of action existing
on, or arising on or after” its effective date, April 4, 2012 – that is, the amendment was
retroactively applicable. 2012 Minn. Laws 151.
Acting “in his capacity as the court-appointed Receiver of Thomas Joseph Petters
[and the] Thomas J. Petters Family Foundation” (Compl. at 1), Kelley commenced the
instant action on April 2, 2012, two days before the MFTA amendment took effect. In his
Complaint, Kelley asserted four fraudulent-transfer claims against the College, as well as a
claim for unjust enrichment, and sought to set aside the pledge in its entirety and recover
the $2 million the College had already received. The College moved to dismiss, arguing
that the MFTA claims were untimely, based upon the statutory amendment above.
In response, Kelley filed an Amended Complaint that is the subject of the instant
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Motion. The Amended Complaint asserts four claims under the FDCPA (Counts VI-IX),
alleging that the pledge and the funds given to the College were fraudulent transfers. He
also continues to assert four claims under the MFTA (Counts I-IV) and a claim for unjust
enrichment (Count V). The College now moves to dismiss all of these claims. The
Motion has been fully briefed, and the Court heard oral argument on October 4, 2012.
The Motion is now ripe for disposition.
STANDARD OF REVIEW
The Supreme Court set forth the standard for evaluating a motion to dismiss in Bell
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662
(2009). To avoid dismissal, a complaint must include “enough facts to state a claim to
relief that is plausible on its face.” Twombly, 550 U.S. at 547. A “formulaic recitation of
the elements of a cause of action” will not suffice. Id. at 555; accord Iqbal, 556 U.S. at
678. Rather, the party seeking relief must set forth sufficient facts to “nudge[] the[]
claim[] across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. “The
plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a
sheer possibility that a [party] has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting
Twombly, 550 U.S at 556).
When reviewing a motion to dismiss, the Court “must accept a plaintiff’s specific
factual allegations as true but [need] not . . . accept . . . legal conclusions.” Brown v.
Medtronic, Inc., 628 F.3d 451, 459 (8th Cir. 2010) (citing Twombly, 550 U.S. at 556).
The complaint must be construed liberally, and any allegations or reasonable inferences
arising therefrom must be interpreted in the light most favorable to the non-moving party.
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Twombly, 550 U.S. at 554–56. “Determining whether a complaint states a plausible
claim for relief will . . . be a context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.
ANALYSIS
I.
The FDCPA claims (Counts VI-IX)
The Court begins its analysis with the FDCPA claims, the crux of the instant
Motion. The College offers two reasons why these claims must be dismissed: (1) Kelley
lacks standing under the statute and (2) even if standing existed, the statute permits
recovery only of “debts to the United States.” (Def. Mem. at 7-11; Reply at 3-14.) As
the standing argument is sufficient to dispose of these claims, the Court need not reach the
second argument.
The College’s standing argument actually comprises two separate but related
contentions. First, it asserts that a federal equity receiver enjoys standing only to bring
claims on behalf of entities in receivership. Second, it asserts that only the United States
may bring claims under the FDCPA. Because the FDCPA is reserved for the
government’s exclusive use, and because the government is not in receivership, the
College argues that Kelley lacks standing to bring the FDCPA claims. The Court agrees.
A.
A receiver may sue only on behalf of receivership entities
The College is correct that an equity receiver may sue only on behalf of the entity
(or person) in receivership, not third parties. This is because a receiver “stands in the
shoes” of the receivership entity. Lank v. N.Y. Stock Exch., 548 F.2d 61, 67 (2d Cir.
1977) (receiver “can assert only those claims which the corporation could have asserted”);
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accord, e.g., Marion v. TDI Inc., 591 F.3d 137, 147 (3rd Cir. 2010) (collecting cases
holding that an “equity receiver may sue only to redress injuries to the entity in
receivership”); Goodman v. FCC, 182 F.3d 987, 991-92 (D.C. Cir. 1999) (“[A] receiver
has authority to bring a suit only if the entity in receivership could itself properly have
brought the same action.”). A federal equity receiver is akin to a bankruptcy trustee, e.g.,
Scholes v. Lehmann, 56 F.3d 750, 753 (7th Cir. 1995), a role that Kelley also happens to
play in this case. That role requires him to maximize the receivership estates’ assets for
the benefit of creditors, including the United States, 2 but contrary to Kelley’s assertion it
does not give him standing to sue on their behalf. See, e.g., Javitch v. First Union Sec.,
Inc., 315 F.3d 619, 627 (6th Cir. 2003) (“[A]lthough the stated objective of a receivership
may be to preserve the estate for the benefit of creditors, that does not equate to a grant of
authority to pursue claims belonging to the creditors.”); Goodman, 182 F.3d at 991
(“[N]othing . . . supports [the] expansive view of a receiver’s authority to sue on behalf of
. . . creditors of the company he represents.”); Scholes, 56 F.3d at 753 (“[A] receiver does
not have standing to sue on behalf of the creditors of the entity in receivership.”); Hays v.
Adam, 512 F. Supp. 2d 1330, 1341 (N.D. Ga. 2007) (“An equity receiver may sue only to
redress injuries to the entity in receivership. . . . [I]t is clear that the receiver cannot bring
claims directly on behalf of third-parties, [even though] those parties may nonetheless
indirectly benefit from the receiver’s actions as creditors of the receivership.”).
Presumably, this is why Kelley sued the College in his capacity as receiver and sought “to
2
The United States is a creditor due to both the criminal forfeiture money judgment and unpaid
tax liabilities by Petters and the other receivership individuals and entities.
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recover [the] transfers and preserve the property of the Receivership Individuals and the
Family Foundation.” (Am. Compl. ¶ 10 (emphasis added).)
Kelley suggests that he enjoys standing because Judge Montgomery’s Order
appointing him receiver authorized him to sue on the government’s (and other creditors’)
behalf. (Mem. in Opp’n at 3, 19 n.10.) He notes that the Order empowered him to
commence actions not only for the receivership individuals and entities, but also for “other
persons or entities whose interests” were held by them. He echoed this sentiment at oral
argument, suggesting that the receivership Order “provide[d] a lot of broad powers” to
him, including the power to sue on behalf of creditors. (10/4/12 Hear. Tr. at 26-27, 34.)
As the Court pointed out at the hearing, however, it is unclear whether Judge
Montgomery intended her order to sweep this broadly. (See id. at 33-34.) More
importantly, courts have rejected attempts by receivers to use appointment orders to create
standing to sue on behalf of non-receivership entities. This is because “the appointment
of a receiver is inherently limited by the jurisdictional constraints of Article III and all other
curbs on federal court jurisdiction.” Scholes v. Schroeder, 744 F. Supp. 1419, 1421 (N.D.
Ill. 1990). Granting a receiver authority to bring claims held by others would violate those
limitations, as “the ability to confer substantive legal rights that may create standing
[under] Article III is vested in Congress and not the judiciary.” Id. at 1421 n.6; accord,
e.g., Liberte Capital Grp. v. Capwill, 248 F. App’x 650, 657-58 (6th Cir. 2007); Marwil v.
Farah, No. 1:03-CV-0482, 2003 WL 23095657, at *5-6 (S.D. Ind. Dec. 11, 2003). As the
Sixth Circuit noted in Liberte Capital, if “a district court could confer individual creditors’
standing on a receiver simply by ordering it so, such an exception would completely
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swallow the general rule that receivers may only sue on behalf of the entity they are
appointed to represent, not on behalf of creditors . . . directly.” 248 F. App’x at 664.
Simply put, “in attempting to recover on behalf of [creditors], the Receiver purports to
assert rights of third parties. . . . [T]he Receiver lacks standing to do so.” In re Wiand, Civ.
A. No. 8:05-1856, 2007 WL 963165, at *2 (M.D. Fla. Mar. 27, 2007).
Relying upon SEC v. Cook, No. CA 3:00-CV-272, 2001 WL 256172, at *2 (N.D.
Tex. Mar. 8, 2001), Kelley also argues that although “the general rule is that a receiver may
only bring actions that could have been brought by the entity in receivership, there are
certain situations where the receiver is permitted to assert rights and defenses not available
to the” receivership entity. (Mem. in Opp’n at 20 (emphases added).) But applying this
principle here would cross a bridge too far.
Cook and Butcher v. Howard, 715 S.W.2d 601 (Tenn. Ct. App. 1986), upon which
Cook relied, stand for the unremarkable proposition that, generally speaking, a receiver is
subject to all defenses to which the receivership entity is subject. 2001 WL 256172, at *2.
At common law, this made it difficult for a receiver to recover a fraudulent transfer by a
corporation, since the corporation could not recover the transfer itself (as it was the
wrongdoer) under the doctrine of in pari delicto. See, e.g., Lustgraaf v. Behrens, 619 F.3d
867, 885 (8th Cir. 2010) (noting that the doctrine precludes a plaintiff from recovery where
“he participated in the alleged wrongdoing”). But when a receiver has been appointed for
a corporation, the wrongdoer (the corporation) is removed from the picture and, hence, in
pari delicto does not apply. See, e.g., Scholes, 56 F.3d at 754 (“[T]he defense of in pari
delicto loses its sting when the person who is in pari delicto is eliminated.”).
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A close reading of Cook reveals that this is what the court meant when stating that
receivers may “assert rights and defenses not available to” the receivership entity. A
receiver is not precluded from asserting claims that would be barred by a corporation’s
own fraud had the corporation brought the claims on its own behalf. 2001 WL 256172, at
*2. Nothing in Cook alters the general rule that a receiver may sue only on behalf of the
entity he represents.
B.
Only the Government may invoke the FDCPA
The College also correctly argues that the provisions of the FDCPA are available
only to the United States. The statute “was enacted, in part, to provide a uniform,
nationwide mechanism” for the collection of government debts. United States v.
Lawrence, 538 F. Supp. 2d 1188, 1193 (D.S.D. 2008); accord, e.g., Export-Import Bank of
U.S. v. Asia Pulp & Paper Co., 609 F.3d 111, 116 (2d Cir. 2010); Pierce v. United States,
232 B.R. 333, 334 (E.D.N.C. 1999) (“The FDCPA was enacted to provide a more
consistent means of debt collection for the United States and ‘bring an end to the present
situation whereby a crazy patchwork of laws in the fifty states dictate debt collection
remedies available to [the government] in collecting Federal debts.’”) (quoting H.R. Rep.
No. 101-825, at 12 (1990)). It provides “the exclusive civil procedures for the United
States to recover a judgment on a debt or to obtain, before judgment on a claim for a debt, a
remedy in connection with such claim.” 28 U.S.C. § 3001(a) (emphasis added). As the
emphasized text suggests, non-government plaintiffs cannot invoke the statute. E.g., MC
Asset Recovery, LLC v. Commerzbank AG, 441 B.R. 791, 804 (N.D. Tex. 2010) (“[T]he
FDCPA is a remedy for the exclusive use of the United States.”), vacated on other grounds,
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675 F.3d 530 (5th Cir. 2012); MC Asset Recovery, LLC v. So. Co., No. 1:06-CV-0417,
2008 WL 8832805, at *4 (N.D. Ga. July 7, 2008) (“[T]he FDCPA represents the exclusive
civil procedures for the United States, and no other entity, to utilize in collecting its
debts.”) (emphasis added); see also United States v. Elliott, 149 F. App’x 489, 494 (7th Cir.
2005) (“The Federal Debt Collection Procedures Act . . . allows the government to collect a
judgment owed to it.”) (emphasis added); United States v. Veal, No. 04-0755-CV, 2005
WL 1532748, at *1 (W.D. Mo. June 28, 2005).
The FDCPA contains a bevy of other provisions intimating that only the United
States may bring claims thereunder. For example, the subsection regarding service of
process provides that “[a]t such time as counsel for the United States considers appropriate,
. . . counsel for the United States shall exercise reasonable diligence to serve [] the debtor.”
28 U.S.C. § 3004(c) (emphases added). Similarly, § 3012 authorizes the United States to
join non-debtor defendants as parties. See also id. § 3104(b)(2) (listing matters “the
United States shall include in its application for a writ of garnishment”) (emphasis added);
id. § 3205(b)(1) (same). Nothing in the statute contemplates that a non-government entity
may invoke it. And notably, Kelley acknowledges that the “fraudulent transfer provisions
within the FDCPA allow[] the United States, as a creditor, also to avoid navigating and
complying with various fraudulent transfer laws adopted by the states.” (Mem. in Opp’n
at 13 n.9 (emphasis added).)
Kelley contends that courts have held “that a receiver may recover fraudulent
transfers under the FDCPA on behalf of the United States.” (Mem. in Opp’n at 15.) The
Court’s research, however, has failed to uncover any case so holding. The sole case
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Kelley cites ostensibly supporting this proposition, Lightfoot v. Miss Lou Properties, Inc.,
Civ. No. 05-3776-PB-SS, 2006 WL 4029569 (E.D. La. Sept. 1, 2006), aff’d, 292 F. App’x
298 (5th Cir. 2008), is inapposite. There, the receiver was appointed directly under the
FDCPA, which contains provisions for the appointment of receivers to collect debts owing
to the federal government. Here, by contrast, Kelley was not appointed under the FDCPA
to collect federal debts; the order appointing him makes no mention of government debts
whatsoever. Rather, he was appointed under the fraud injunction statute, 18 U.S.C.
§ 1345, to assume control of the receivership estates and marshal their assets for the benefit
of creditors. 3
Kelley also argues that the government has “effectively assigned” its FDCPA
claims to him under the Coordination Agreement. (Mem. in Opp’n at 21-22.) The word
“assignment,” however, is noticeably absent from the relevant portions of the agreement,
and nothing therein suggests that the United States intended to assign its rights to him.
The agreement simply provides that Kelley would bring claims “on behalf of the Individual
Defendants, Thomas J. Petters Family Foundation or other Receiver entities,” not on behalf
of third-parties such as the federal government. While Kelley might be correct that
“[n]othing prevents the United States from assigning or transferring its ability to pursue the
3
Kelley also cites Bartholomew v. Avalon Capital Group, Inc., 828 F. Supp. 2d 1019 (D. Minn.
2009) (Davis, J.), but that case, too, does not aid his cause. There, the receiver was appointed by
a state court under state law before the case was removed to this Court. Accordingly, state law
controlled his right to sue (or be sued). Here, by contrast, Kelley was appointed by this Court, and
federal law “govern[s] the capacity of a receiver appointed by a United States court to sue or be
sued in a United States court.” Fed. R. Civ. P. 17(b)(3)(B). The remaining cases Kelley cites in
his brief, FTC v. National Business Consultants, Inc., 376 F.3d 317 (5th Cir. 2004), and NLRB v.
EDP Medical Computer Systems, Inc., 6 F.3d 951 (2d Cir. 1993), did not address whether a
receiver has standing under the FDCPA, but rather concerned whether certain obligations were
“debts to the United States” under the statute.
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remedies available to it under the FDCPA” (id. at 21 (emphasis added)), there is no
indication that such an assignment occurred here. Notably, Kelley acknowledged at oral
argument that there was no “direct assignment” in the Coordination Agreement, but he
contended that an assignment was implicit in its terms. (10/4/12 Hear. Tr. at 18.) But the
Court perceives no reason to read into the agreement something that simply isn’t there –
had the government intended to assign to Kelley its rights under the FDCPA, it could have
(and should have) done so clearly and explicitly. The fact that it did not do so is telling.
C.
The end result
Putting two and two together, the Court reaches the same conclusion as the College.
Only the United States can bring FDCPA claims, and Kelley cannot sue on the United
States’ behalf because the government is not in receivership and has not assigned its rights
to him. Accordingly, Kelley lacks standing to sue under the FDCPA, and Counts VI
through IX must be dismissed.
II.
The MFTA claims
There does not appear to be any dispute that the MFTA claims (Counts I-IV) are
moot. Kelley acknowledges that these claims are not designed to recover the $2 million
already paid to the College (as in the FDCPA claims). Rather, they seek to set aside the
remaining $1 million of the pledge insofar as it can be construed “as an ‘obligation’” – that
is, were the College to attempt to recover the remaining funds. (Mem. in Opp’n at 7-8.)
Yet, the College has indicated that it will not “attempt[] to enforce the Pledge in order to
recover the remaining amounts that Petters promised to pay.” (Reply at 14.)
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In any event, the parties agree that the MFTA claims are relevant only to the
College’s defenses to the FDCPA claims. (See Mem. in Opp’n at 7 n.6.) As all of the
FDCPA claims have been dismissed for the reasons noted above, the MFTA claims will
also be dismissed.
III.
The unjust-enrichment claim
Kelley’s final claim asserts that the College was unjustly enriched by the $2 million
it received through the pledge. The College argues that an equitable claim, such as unjust
enrichment, cannot stand where “there is an adequate legal remedy or where statutory
standards for recovery are set by the legislature.” (Reply at 15 (quoting Southtown
Plumbing, Inc. v. Har-Ned Lumber Co., 493 N.W.2d 137, 140 (Minn. Ct. App. 1992)).)
The Court agrees. 4
In Southtown, the Minnesota Court of Appeals held that “[r]elief under the theory of
unjust enrichment is not available where there is an adequate legal remedy.” 493 N.W.2d
at 140. This is because when “a statute . . . provides a remedy by appeal or otherwise,
such remedy is generally exclusive and will preclude any resort to equity.” Munshi v.
J-I-T Servs., Inc., No. A06-346, 2007 WL 92852, at *2 (Minn. Ct. App. Jan. 16, 2007)
(quoting Adelman v. Onischuk, 135 N.W.2d 670, 678 (Minn. 1965)). Hence, “Minnesota
courts repeatedly have held that the availability of statutory claims (whether state or
federal) will preclude the assertion of an unjust-enrichment” claim. Cummins Law
4
This argument was not fully raised until the College filed its Reply brief, and hence the Court
afforded Kelley the opportunity to submit a supplemental brief on this issue. He declined, opting
instead to rely upon the cases discussed at the hearing. (See 10/4/12 Hear. Tr. at 16-17, 20-24,
27-28.) Accordingly, the Court will address this argument.
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Office, P.A. v. Norman Graphic Printing Co., 826 F. Supp. 2d 1127, 1132 (D. Minn. 2011)
(Kyle, J.) (collecting cases).
The MFTA provided Kelley with an adequate legal remedy here. “In order for a
legal remedy to be adequate it must be practical and efficient.” Munshi, 2007 WL 92852,
at *2. Kelley nowhere argues that is untrue of the MFTA, despite bearing the burden of
doing so. Id. Moreover, it makes no difference that Kelley did not timely avail himself
of the statute. See, e.g., Arena Dev. Grp., LLC v. Naegele Commc’ns, Inc., Civ. No.
06-2806, 2007 WL 2506431, at *11 (D. Minn. Aug. 30, 2007) (Montgomery, J.)
(dismissing unjust-enrichment claim under Southtown despite plaintiffs’ argument that “if
their fraudulent transfer claims fail, they will not have an adequate remedy at law”);
Munshi, 2007 WL 92852, at *2 (although a “remedy at law which is practically ineffective
is not an adequate legal remedy,” the mere fact that a plaintiff “fail[s] to pursue [an]
available legal remedy [does] not entitle [him] to relief”); Mon-Ray, Inc. v. Granite Re,
Inc., 677 N.W.2d 434, 440 (Minn. Ct. App. 2004); see also Drobnak v. Andersen Corp.,
561 F.3d 778, 787 (8th Cir. 2009) (affirming dismissal of equitable claims because
“plaintiffs would have had an adequate legal remedy . . . if they had adhered to the . . . Rule
9(b) pleading requirements”) (emphasis added). Indeed, to conclude otherwise would
permit Kelley to make an end-run around the recent amendments to the MFTA, which
appear to have been designed to preclude precisely the types of claims brought in this case.
Kelley points out that several cases have permitted fraudulent-transfer claims and
unjust-enrichment claims to coexist. (See 10/4/12 Hear. Tr. at 22-24.) This is perhaps
not surprising, given that the Federal Rules of Civil Procedure allow for pleading claims in
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the alternative. See Fed. R. Civ. P. 8(d)(2)-(3). But in any event, the Court has carefully
reviewed the cases Kelley has cited, 5 and none appears to have been confronted with the
argument made by the College here: the availability of an adequate legal remedy
precludes resort to unjust enrichment as a matter of law. By contrast, the Court recently
applied this principle in Cummins, and it perceives no reason to hold otherwise in this case.
See also Bartholomew v. Avalon Capital Group, Inc., 828 F. Supp. 2d 1019, 1030 (D.
Minn. 2009) (Davis, J.) (no unjust enrichment where receiver also brought claims under
MFTA).
CONCLUSION
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
ORDERED that the College’s Motion to Dismiss (Doc. No. 18) is GRANTED and
Kelley’s Amended Complaint (Doc. No. 13) is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: October 26, 2012
s/Richard H. Kyle
RICHARD H. KYLE
United States District Judge
5
United States v. Bame, Civ. No. 11-62, 2012 WL 3544762 (D. Minn. Aug. 16, 2012) (Kyle, J.);
Zayed v. Buysse, Civ. No. 11-1042, 2011 WL 2160276 (D. Minn. June 1, 2011) (Nelson, J.);
Hecht v. Malvern Preparatory School, 716 F. Supp. 2d 395 (E.D. Pa. 2010); SEC v. Brown, 643 F.
Supp. 2d 1077 (D. Minn. 2009) (Tunheim, J.); Kranz v. Koenig, 484 F. Supp. 2d 997 (D. Minn.
2007) (Magnuson, J.).
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