Ashmore v. Dodds

Filing 95

ORDER AND OPINION denying in part 71 MOTION for Summary Judgment filed by Jim Dodds. Signed by Honorable J Michelle Childs on 7/5/17. (jtho, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
ANDERSON/GREENWOOD DIVISION
Beattie B. Ashmore, in his capacity as
)
court-appointed receiver for Ronnie Gene )
Wilson and Atlantic Bullion and Coin, Inc., )
)
Plaintiff,
)
)
v.
)
)
Jim Dodds,
)
)
Defendant.
)
____________________________________)

Civil Action No.: 8:15-cv-00561-JMC

ORDER AND OPINION

Plaintiff Beattie B. Ashmore (“the Receiver”), in his capacity as court-appointed receiver
for Ronnie Gene Wilson (“Wilson”) and Atlantic Bullion and Coin, Inc. (“AB&C”), filed the
instant action against Defendant Jim Dodds (“Defendant”) to recover grossly excessive payments
received by Defendant as a return on his investment in the Wilson-AB&C Ponzi scheme. 1 Before
the court are the parties’ cross-motions for summary judgment (ECF Nos. 70, 71) and the
accompanying responses and replies (ECF Nos. 73, 74, 77, 79). For the reasons that follow, the
court DENIES IN PART Defendant’s motion for summary judgment (ECF No. 71), disposing of
seven arguments he raises in support of a ruling in his favor. As explained more thoroughly below,

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“A Ponzi scheme is a fraudulent investment program in which funds are paid in by investors and
later investors[’] funds are used to pay out nonexistent phantom profits to the original investors,
thus creating the illusion that the fraudulent investment program is a successful, profit generating
enterprise which, in turn attracts new investment funds that are used to sustain the fraudulent
program.” United States v. Wilson, No. 8:12-cr-00320-JMC, ECF No. 1-1 at 2 ¶ 6 (D.S.C. Apr. 4,
2012). In Wilson, the United States alleged that Wilson, through AB&C, “orchestrated a Ponzi
scheme whereby he led investors to believe that he was investing their money in silver, when, in
fact, Wilson was not buying silver but using the money for his personal gain . . . [and] [t]o keep
the Ponzi scheme going, Wilson also made payments to earlier investors to whom Wilson made
representations that their investments were earning high rates of return–sometimes in excess of
200 percent.” Id., ECF No. 17 at 1.
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the court determines that it should certify to the Supreme Court of South Carolina questions
regarding whether the substantive law of Florida or of South Carolina should apply to the claims
brought by the Receiver. As a result, the court reserves ruling on the remainder of Defendant’s
motion and on the Receiver’s motion for summary judgment until after the Supreme Court answers
or otherwise disposes of the certified questions.
I. RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
A full recitation of the relevant factual and procedural background, customary for most
orders addressing summary judgment motions, is unnecessary. Accordingly, the court provides an
abridged version of the general posture of this matter here and provides further details where
necessary in its analysis below.
The Receiver is the court appointed receiver in In Re: Receiver for Ronnie Gene Wilson
and Atlantic Bullion & Coin, Inc., No. 8:12-cv-02078-JMC, ECF No. 1 (D.S.C. July 25, 2012), a
case related to the instant matter. The Receiver alleges that “[o]n February 29, 1996, Defendant
made an initial ‘investment’ [in the Wilson-AB&C Ponzi scheme] of $28,300.00.” (ECF No. 1 ¶
24.) “Subsequently, Defendant made eight additional ‘investments’ totaling $306,500.00 between
December 2000 and April 2009, for a total investment of $334,800.00.” (Id. ¶ 27.) Plaintiff further
alleges that “Defendant received $1,532,983.00 in returns [from the Wilson-AB&C Ponzi scheme]
between March 2004 and December 2011, resulting in a profit of $1,198,183.00.” (Id. ¶ 26.)
Based on his appointment as the receiver tasked with “locating, managing, recouping, and
distributing the assets of the Wilson-AB&C investment scheme,” the Receiver commenced the
instant action against Defendant on February 6, 2015, asserting claims for fraudulent conveyance
(in violation of the Statute of Elizabeth, S.C. Code Ann. § 27-23-10 (2014) and/or the Florida

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Uniform Fraudulent Transfer Act (“FUFTA”), Fla. Stat. Ann. §§ 726.101–726.201) and unjust
enrichment. (ECF No. 1 ¶¶ 1, 38-52.)
Pursuant to the court’s fifth amended scheduling order, absent an exception described in
the order, discovery was to be completed by April 25, 2017, and motions for summary judgment
were to be filed by May 15, 2017. (See ECF No. 67 at 1.) On May 19, 2017, the parties filed their
motions for summary judgment. 2 As relevant here, the Receiver argues that, under South Carolina
choice of law rules, South Carolina law applies to both his claim for fraudulent conveyance and
his claim for unjust enrichment and that Florida law does not apply to these claims (see ECF No.
73 at 6-9; see also ECF No. 70 at 6-12 (applying only South Carolina law to claims)) while
Defendant argues that, under South Carolina choice of law rules, Florida law governs both claims
and that South Carolina law is inapplicable (see ECF No. 71 at 6-8; ECF No. 74 at 4; ECF No. 77
at 3-5). Also relevant here, the court perceives in Defendant’s arguments seven issues that may be
decided without first deciding the choice of law issue.
II. LEGAL STANDARD
Summary judgment is appropriate when the materials in the record show that “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). A dispute is genuine “if the evidence is such that a reasonable jury could

2

In his motion, Defendant also seeks dismissal, pursuant to Fed. R. Civ. P. 12(b)(6), of the
Receiver’s fraudulent conveyance claim under FUFTA on the ground that the complaint fails to
plead sufficient factual matter to state a facially plausible claim for relief under FUFTA. (See ECF
No. 71 at 3-6.) In response, the Receiver argues that a Rule 12(b)(6) motion to dismiss is untimely
and that the motion is otherwise meritless. (See ECF No. 73 at 4-6.) Because the court determines
that it will certify a question to the South Carolina Supreme Court as to whether Florida law applies
to the Receiver’s fraudulent conveyance claim, the court declines at this stage to address the Rule
12(b)(6) aspect of Defendant’s motion.
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return a verdict for the nonmoving party,” and a fact is material if it “might affect the outcome of
the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
When faced with cross-motions for summary judgment, “‘[courts] consider each motion
separately on its own merits to determine whether either of the parties deserves judgment as a
matter of law.’” Defenders of Wildlife v. N.C. Dep’t of Transp., 762 F.3d 374, 392 (4th Cir. 2014)
(quoting Bacon v. City of Richmond, 475 F.3d 633, 638 (4th Cir. 2007)). “In considering each
motion, [courts] ‘resolve all factual disputes and any competing, rational inferences in the light
most favorable to the party opposing that motion.’” Id. (quoting Rossignol v. Voorhaar, 316 F.3d
516, 523 (4th Cir. 2003)).
The party seeking summary judgment shoulders the initial burden of demonstrating to the
court that there is no genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317,
323 (1986). Once the movant has made this threshold demonstration, the non-moving party, to
survive the motion for summary judgment, may not rest on the allegations averred in his pleadings.
Rather, the non-moving party must demonstrate that specific, material facts exist which give rise
to a genuine issue. See id. at 324.
III. ANALYSIS
A. Preliminary Issues
Before turning to the two claims at issue, the court must first address a number of
arguments raised by Defendant that do not appear to be specifically directed at either of the claims
or that the court believes are appropriate to address preliminarily for other reasons. Specifically,
Defendant argues that the court should rule in his favor because (1) the Receiver lacks standing to
bring the claims; (2) the Receiver’s claims are barred because the Receiver is in pari delicto with
Defendant; (3) the Receiver’s claims are barred because other investors in the Ponzi scheme are in

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pari delicto with Defendant; (4) the Receiver should be equitably estopped from pursuing his
claims; (5) the recovery the Receiver seeks should be denied because Defendant is protected by
the Bankruptcy Code’s safe harbor provisions in 11 U.S.C. § 546(e); (6) Defendant is entitled to
an equitable set-off with respect to investments he made prior to Wilson commencing his Ponzi
scheme; and (7) there is no evidence that Defendant received a certain check from AB&C. (See
ECF No. 71 at 2-6, 9-11, 13-16, 20-23, 28-29; ECF No. 74 at 6-7, 17-26, 30-31; ECF No. 77 at 23, 6, 9-10, 13-15.) The court addresses each of these arguments in turn.
1. Standing
The Fourth Circuit has concisely explained both the constitutional and the prudential
dimensions of standing:
The standing doctrine has both constitutional and prudential components. In
order to satisfy the constitutional component of standing, a party must meet
three requirements:
(1) the party has suffered an injury in fact that is (a)
concrete and particularized and (b) actual or imminent, not
conjectural or hypothetical; (2) the injury is fairly traceable
to the challenged action of the defendant; and (3) it is
likely, as opposed to merely speculative, that the injury will
be redressed by a favorable decision.
With regard to the prudential component of standing, courts generally
recognize [some] self-imposed constraints[, including that] . . . the plaintiff
generally must assert his own legal rights and interests, and cannot rest his
claim to relief on the legal rights or interests of third parties.
Bishop v. Bartlett, 575 F.3d 419, 423 (4th Cir. 2009) (internal citations, quotation marks, and
brackets omitted) (citing, inter alia, Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc.,
528 U.S. 167 (2000); Allen v. Wright, 468 U.S. 737 (1984); Valley Forge Christian Coll. v. Ams.
United for Separation of Church & State, Inc., 454 U.S. 464 (1982); Warth, 422 U.S. 490). “In
determining whether a party has standing to bring suit, the party invoking the jurisdiction of the

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court bears the burden of establishing standing.” Id. at 424. “The standing requirement applies to
each claim that a plaintiff seeks to press.” Bostic v. Schaefer, 760 F.3d 352, 370 (4th Cir. 2014)
(citing DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006)).
Defendant appears to assert that the Receiver lacks standing to bring the two claims at issue
because, in Defendant’s view, the Receiver has capacity to bring suit only to recover assets on
behalf of AB&C, Wilson, and the Receivership Entities they controlled. (See ECF No. 71 at 2-3,
20-21; ECF No. 74 at 6-7, 30; ECF No. 77 at 6, 11.) The assets that the Receiver seeks to clawback by bringing the two claims, Defendant argues, never belonged to AB&C, Wilson, or the
Receivership Entities because all assets held by AB&C were held in trust for investors and were
never assets owned by AB&C, Wilson, or the Receivership Entities. (See ECF No. 71 at 2-3, 2021; ECF No. 74 at 6-7, 30; ECF No. 77 at 6, 11.) Thus, Defendant asserts, the claims by the
Receiver to recover assets must be brought, if at all, by the investors and cannot be brought by the
Receiver, who may only bring claims on behalf of AB&C, Wilson, and the Receivership Entities.
(See ECF No. 71 at 2-3, 20-21; ECF No. 74 at 6-7, 30; ECF No. 77 at 6, 11.) In other words,
Defendant asserts that the Receiver lacks standing to bring the claims. (See ECF No. 71 at 2.)
In response (see ECF No. 79 at 3), the Receiver points out that, in a related case, this court
already determined that he had standing, noting that “multiple federal courts of appeals and district
courts have held that ‘a federal equity receiver has standing to assert the claims of a receivership
entity against third-party recipients of the entity’s assets that have been fraudulently transferred by
the principal of the Ponzi scheme,’” Ashmore v. Owens, No. 8:15-cv-02373-JMC, ECF No. 62 at
4 (D.S.C. June 2, 2017) (brackets and ellipsis omitted) (quoting Janvey v. Democratic Senatorial
Campaign Comm., Inc., 712 F.3d 185, 191 (5th Cir. 2013) (collecting cases)). The Receiver also

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disputes Defendant’s characterization of the assets at issue, asserting that the monies given by
investors for the purchase of silver became assets of AB&C. (See ECF No. 79 at 3.)
The court notes that Defendant’s arguments regarding standing are not entirely clear. First,
it is not clear whether his arguments are directed to both the fraudulent conveyance and unjust
enrichment claims or to only the fraudulent conveyance claim. To the extent it is necessary to
address the Receiver’s standing to bring both claims in his complaint, the court’s analysis below
applies to both. Second, it is not clear whether Defendant argues that the Receiver has failed to
demonstrate an injury in fact (an element of constitutional standing) or that he has only asserted
legal claims of third parties (a matter of prudential standing) or instead asserts some amalgamation
of these arguments. Accordingly, the court’s analysis addresses both these arguments.
The court begins its analysis by looking to Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995),
the Seventh Circuit’s leading case on standing issues raised in circumstances like those in play
here. In Scholes, a Ponzi schemer, Michael Douglas, created three corporations, caused the
corporations to create limited partnerships, and then caused the corporations to sell interests in the
partnerships to investors. Id. at 752. In reality, the monies given by the investors in exchange for
an interest in the partnerships were not used for the business for which the partnerships were
ostensibly created but, instead, were used by Douglas to run a Ponzi scheme. Id. In a later civil
enforcement action, the district court appointed a receiver on behalf on both Douglas and the three
corporations. Id. When the receiver brought fraudulent conveyance actions against winning
investors, they argued that he was attempting to bring a claim on behalf of the losing investors but
lacked standing to do so and that he could not bring a claim on behalf of Douglas and the three
corporations because they were the perpetrators, not the victims, of the Ponzi scheme. Id. at 75354.

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The Seventh Circuit began by noting the baseline principle that “an equity receiver may
sue only to redress injuries to the entity in receivership.” Id. at 753 (citing, inter alia, Caplin v.
Marine Midland Grace Trust Co., 406 U.S. 416 (1972)). The Seventh Circuit then pointed out that
the three corporations the receiver represented, which were legal entities separate from Douglas,
sustained injuries when Douglas caused them to take money that “should have been used for the
stated purpose of the corporations[]” and instead conveyed the money to further the ends of
Douglas’ Ponzi scheme. Id. at 754. As a result, Douglas “removed assets from the corporations for
an unauthorized purpose and by doing so injured the corporations,” and the investors became “tort
creditors of the corporations from which they had been inveigled into buying limited-partner
interests.” Id. Once Douglas was removed from the picture, the corporations were “[f]reed from
his spell” and “became entitled to the return of the moneys—for the benefit not of Douglas but of
innocent investors—that Douglas had made the corporations divert to unauthorized purposes.” Id.
(citing, inter alia, McCandless v. Furlaud, 296 U.S. 140, 159-61 (1935); Texas & Pacific Ry. v.
Pottorff, 291 U.S. 245, 260-61 (1934)). “That the return would benefit the limited partners is just
to say that anything that helps a corporation helps those who have claims against its assets.” Id.
Assuming that the Receiver is correct that the assets that were allegedly wrongfully
transferred to, and retained by, Defendant were assets belonging to AB&C, then the Receiver, who
brings this action on behalf of AB&C, has standing under the theory espoused in Scholes. AB&C
was harmed when Wilson caused its assets to be used in his Ponzi scheme rather than to be used
for the legitimate business purpose for which AB&C had been created, and the Receiver has
standing to claw-back funds that were wrongfully diverted by Wilson. That the ultimate purpose
of the action is to benefit losing investors in the Ponzi scheme (who are tort creditors of AB&C)
has no impact on the Receiver’s standing. This view—that a federal equity receiver representing a

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corporate entity used to perpetrate a Ponzi scheme has standing to bring claims against third-party
recipients of the entity’s assets that were wrongfully transferred by the Ponzi scheme’s principal—
has been accepted by a number of the federal courts of appeals, see Janvey, 712 F.3d at 191 n.4
(collecting cases), by a district court within the Fourth Circuit, see Bell v. Disner, No. 3:14cv91,
2014 WL 6978690, at *5 (W.D.N.C. Dec. 9, 2014), and has been viewed favorably by both South
Carolina courts, see Myatt v. RHBT Fin. Corp., 635 S.E.2d 545, 547-48 (S.C. 2006), and Florida
courts, see Freeman v. Dean Witter Reynolds, Inc., 865 So. 2d 543, 550-53 (Fla. Dist. Ct. App.
2003).
As explained above, however, Defendant attempts to distinguish Scholes on the ground
that the assets that are alleged to have been wrongfully transferred to, and retained by, Defendant
were not the assets of AB&C. Defendant points out that, in Scholes, the assets appear to have
belonged to the three corporations that Douglas used to perpetrate his Ponzi scheme, as the
investors paid the monies at issue to the corporations in exchange for interests in the partnerships
that were owned by the corporations. Here, on the other hand, Defendant argues, the investors
caught up in Wilson’s Ponzi scheme provided AB&C their assets to hold in trust, and the assets
never became the property of AB&C because the parties agreed that AB&C would make
investments on behalf of the investors using assets that remained the investors’ property. (See ECF
No. 74 at 7.) In Defendant’s view, the fact that the assets alleged to have been wrongfully
transferred and retained never belonged to AB&C precludes the Receiver from asserting that he is
bringing claims to recover AB&C’s assets, because he is, instead, bringing claims to recover assets
that always belonged to the investors. (Id. (citing Fleming v. Lind-Waldock & Co., 922 F.2d 20,
22 (1st Cir. 1990)).)

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Assuming, without deciding, that Defendant’s characterization of the assets at issue—that
they were assets owned by the investors and not by AB&C—is correct, the court nevertheless
concludes that the Receiver has standing to assert the claims in his complaint. At first blush,
Defendant’s argument seems appealing. After all, if the theory underlying Scholes’ approach is
that a receiver may seek recovery for an injury to the corporate entity and if the injury of which
the receiver complains is a wrongful transfer and retention of assets, then its seems natural to
assume that the receiver would seek the recovery of the corporate entity’s assets and not some
third party’s assets. However, this assumption overlooks the fact that a corporate entity in which
investors have deposited their assets (without transferring an ownership interest in the assets) not
only incurs legal obligations to the investors (whether as a trustee, fiduciary, bailee, or otherwise)
with respect to the assets but also obtains legal rights with respect to the assets as against third
parties. When a Ponzi scheme principal, such as Wilson, causes AB&C to wrongfully divert the
assets by paying off winning investors, the corporate entity, here AB&C, is injured in two ways:
(1) it is exposed to liability for wrongfully transferring losing investors’ assets to a winning
investor because doing so deprived the losing investors of their assets and their opportunity to
otherwise invest those assets, and (2) it is deprived of its non-ownership rights, including its rights
to use the assets in a legitimate way in the business for which it was created, a use that might have
generated profits in the form of fees or commissions. See Marion v. TDI Inc., 591 F.3d 137, 14849 (3d Cir. 2010). These injuries are fairly traceable to Defendant, a winning investor to whom
transfers were made, because, once he was made aware of the wrongful nature of those transfers
and of his retention of the assets, he failed to return them. See Wuliger v. Mfrs. Life Ins. Co., 567
F.3d 787, 794-95 (6th Cir. 2009). And the injuries can be redressed by a court order to return the
assets to the Receiver who represents AB&C and who will distribute the assets back to the losing

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investors as AB&C’s tort creditors. See id. at 795. In seeking such an order, the Receiver would
be asserting AB&C’s rights and not the rights of the losing investors, notwithstanding the
Receiver’s express purpose of benefitting the losing investors. See id.
The court notes that other courts have had no trouble applying Scholes’ approach where,
as here, the principal Ponzi schemer represents to investors that their assets will be invested into
some commodity, account, or other investment vehicle, such that the investors ostensibly retain
ownership interest in the assets they deliver to the corporate entity the schemer uses. See Wiand v.
Lee, 753 F.3d 1194, 1197-99, 1202-03 (11th Cir. 2014); Marion, 591 F.3d at 141-43, 147-49;
Zayed v. Associated Bank, N.A., No. 13-232(DSD/JSM), 2015 WL 4635789, at *1-2, *5 (D. Minn.
Aug, 4, 2015). The cases Defendant cites to support his view do not persuade the court that
Scholes’ approach should not apply here. Defendant cites McCandless, 296 U.S. 140, and Scholes
v. Ames, 850 F. Supp. 707 (N.D. Ill. 1994), for the proposition that the Receiver may not bring
claims on behalf of the investors, but, as explained above, the Receiver has brought the claims in
this action on behalf of AB&C. Similarly, although the prohibition on a receiver’s bringing claims
on behalf of investors in Fleming, 922 F.2d 20, might be read to support Defendant’s understanding
of Scholes’ approach, Fleming more clearly stands for the general proposition that a corporate
entity’s receiver may not bring claims on behalf of a corporate entity’s investors, as that is precisely
what the receiver in Fleming attempted to do. Because the court believes Scholes’ approach is
correct and applies here, the court concludes that the Receiver has standing to bring the claims in
his complaint.

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2. In pari delicto with the Receiver
Defendant next asserts that he is entitled to summary judgment on both claims because the
Receiver is barred from bringing the claims under the doctrine of in pari delicto. 3 In the first
iteration of this argument, Defendant asserts that the Receiver is bringing a claim on behalf of
AB&C and that the claim should be barred, under the doctrine of in pari delicto, based on AB&C’s
own wrongful conduct. (See ECF No. 71 at 13; ECF No. 74 at 18; ECF No. 77 at 9.) Anticipating
the Receiver’s response, Defendant further asserts that the exception to an in pari delicto defense,
the adverse interest exception—in which the wrongs committed by a principal’s agent (here,
Wilson) are not imputed to the principal (here, AB&C)—does not apply due to an exception to the
exception in which an agent’s wrongs are imputed to the principal when the agent is the sole actor
or representative for a corporate principal. (ECF No. 71 at 13-14 (citing In re Derivium Capital
LLC, 716 F.3d 355, 367 (4th Cir. 2013)).)
The court has already decided this matter. In a February 1, 2017 order (ECF No. 62) 4
addressing Defendant’s motion to reconsider a previous order denying his motion to compel, the
court expressly concluded that “in pari delicto does not bar the Receiver’s claims in this action
because he is not seeking tort damages, but has asserted claims of fraudulent conveyance and

3

The common law doctrine of in pari delicto “derives from the Latin, in pari delicto potior est
conditio defendentis: ‘In a case of equal or mutual fault the position of the defending party is the
better one.’” Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 306 (1985) (internal
brackets and ellipsis omitted) (quoting Black's Law Dictionary 711 (5th ed. 1979)). The doctrine
reflects the beliefs that “courts should not lend their good offices to mediating disputes among
wrongdoers” and that “denying judicial relief to an admitted wrongdoer is an effective means of
deterring illegality.” Id. Thus, the defense “prohibits a party from recovering damages arising from
misconduct for which the party bears responsibility” such that the relief that party seeks “will be
denied,” and “[t]he law will leave the parties just in the condition in which it finds them.” 27A
Am. Jur. 2d Equity § 103 (2017).
4

The order may be found at Ashmore v. Dodds, No. 8:15-cv-00561-JMC, 2017 WL 427484
(D.S.C. Feb. 1, 2017).
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unjust enrichment to obtain equitable relief for victims of the Wilson-AB&C Ponzi scheme from
Defendant who is alleged to have profited from the illegal scheme” (id. at 8). In reaching this
conclusion, the court determined that, under South Carolina law, an in pari delicto defense is
inapplicable when a receiver seeks recovery of diverted funds wrongfully transferred in a Ponzi
scheme by asserting claims for fraudulent conveyance and unjust enrichment rather than claims
for tort damages. (Id. at 7-8 (citing In re Worldwide Wholesale Lumber, Inc., 372 B.R. 796, 810
(Bankr. D.S.C. 2007); Myatt, 635 S.E.2d at 548).)
Although Defendant has previously moved for reconsideration of the court’s decisions in
these proceedings, he has failed to seek reconsideration of the court’s ruling with respect to his in
pari delicto defense. Defendant has not offered any reason for the court to reconsider its ruling,
and no reason for which reconsideration of an interlocutory order may be granted appears in
Defendant’s arguments. See In re Receiver, No. 8:12-cv-02078-JMC, 2017 WL 2536913, at *2
(D.S.C. June 12, 2017) (citing Carlson v. Bos. Sci. Corp., 856 F.3d 320, 325 (4th Cir. 2017); Am.
Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 514-15 (4th Cir. 2003); South Carolina v.
United States, ___ F. Supp. 3d ___, No. 1:16-cv-00391-JMC, 2017 WL 491694, at *4 (D.S.C. Feb.
7, 2017)). The court remains persuaded by its previous analysis that South Carolina law precludes
an in pari delicto defense when a receiver for a corporate entity used in a Ponzi scheme seeks
equitable recovery of diverted funds, rather than tort damages, regardless of whether the sole actor
exception to the adverse interest exception would otherwise apply. Moreover, to the extent that
Defendant asserts that he would be able to raise an in pari delicto defense to the fraudulent
conveyance and unjust enrichment claims under Florida law, he is again precluded by the same
rule that, in the context of a case such as this one, the doctrine of in pari delicto is inapplicable to
claims seeking the recovery of diverted funds rather than claims seeking tort damages. See In re

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Skyway Comm’ns Holding Corp., 389 B.R. 801, 809 (Bankr. M.D. Fla. 2008) (“[U]nder Florida
law, it appears that the defense may be asserted against common law tort claims, but not against
statutory claims to recover fraudulent transfers.”); see also Iglesia Cristiana el Buen Samaritano,
Inc. v. Guardian Servs., LLC, No. 11-21888-civ, 2011 WL 5854640, at *5-6 (S.D. Fla. Nov. 21,
2011); In re Wiand, Nos. 8:05-cv-156-T-27MSS et al., 2007 WL 963165, at *6-7 (M.D. Fla. March
27, 2007).
Defendant lastly asserts that he should be permitted to raise the in pari delicto defense
because either the fraudulent conveyance claim should be dismissed or else he should be granted
summary judgment on the fraudulent conveyance claim. (See ECF No. 71 at 14-15.) Defendant
appears to rely on the language in Myatt that indicates that its preclusion of the defense only applies
“in the absence of a fraudulent conveyance case.” 635 S.E.2d at 397. The court rejects this
argument. First, as explained more fully below, the fraudulent conveyance claim has not been
disposed, and, therefore, Defendant’s argument, even if it were sound, would not warrant
application of the in pari delicto defense at this stage. Second, and more fundamentally, the court
concludes that Defendant’s interpretation of Myatt is incorrect. As the court’s previous order
explained, in the court’s view, Myatt precludes the defense when a receiver seeks the equitable
recovery of wrongfully diverted funds, whether under a fraudulent conveyance claim or an unjust
enrichment claim, instead of seeking damages in tort. The language in Myatt that Defendant cites
appears to be the result of the Myatt court’s interpretation of Scholes and Knauer v. Jonathan
Roberts Fin. Grp., Inc., 348 F.3d 230 (7th Cir. 2003), which did not involve unjust enrichment
claims.

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3. In pari delicto with investors
In the second iteration of Defendant’s argument that he is entitled to summary judgment
based on the doctrine of in pari delicto, Defendant asserts that he merely made the same mistakes
as all other investors in the Wilson-AB&C Ponzi scheme, and that all investors are equally at fault
in trusting Wilson with their investments. (See ECF No. 71 at 15-16; ECF No. 74 at 21-22; ECF
No. 77 at 10.) Defendant explains that the doctrine of in pari delicto stands for the general rule
that “where parties are . . . equally wrong, no affirmative relief will be given to one against the
other and no one shall be permitted to profit by his own wrong.” (ECF No. 71 at 15 (quoting
Proctor v. Whitlark & Whitlark, Inc., 778 S.E.2d 888, 893 (S.C. 2015) (citing Whitelock v. Geiger,
368 So. 2d 372, 374 (Fla. Dist. Ct. App. 1979) (“[W]hen both parties are in pari delicto the court
will leave them to settle their disputes without aid of court.”)).)
The Receiver responds that, “on its face, this argument is wholly without merit” (ECF No.
73 at 11), and the court agrees. The doctrine of in pari delicto, like the related doctrine of unclean
hands, “prohibits a party from recovering damages arising from misconduct for which the party
bears responsibility, bears fault, or which resulted from his or her wrongdoing.” 27A Am. Jur. 2d
Equity § 103 (2017) (emphasis added) (footnotes omitted); see 1 Am. Jur. 2d Actions § 40 (2017)
(“The equitable defense of in pari delicto . . . is rooted in the common-law notion that a plaintiff’s
recovery may be barred by his or her own wrongful conduct.”). Thus, these equitable defenses
“require[] unconscionable, bad faith, or inequitable conduct by the plaintiff in connection with the
matter in controversy.” 27A Am. Jur. 2d Equity § 104 (emphasis added). Put another way, the
doctrine “applies to facts involving only two parties, plaintiff and defendant, and one transaction
involving both parties.” Id. In the court’s view, then, the doctrine of in pari delicto has no

15

application where the defendant asserts that some third party, and not the plaintiff seeking recovery
for a wrong, was equally at fault with (or equally without fault as) the defendant for that wrong.
Here, as explained above, the Receiver brings his claims on behalf of AB&C and not the
losing investors. Thus, for purposes of an in pari delicto defense, the relative culpability of other
investors is irrelevant. Defendant has pointed to no authority supporting a position contrary to the
one the court has taken and, thus, has not persuaded the court that it should exercise its equitable
powers under the doctrine of in pari delicto to deny the Receiver relief on the ground that a nonparty bears as much culpability as Defendant for any wrongs that occurred.
4. Equitable estoppel
Next, citing to both Florida and South Carolina law on the issue, Defendant argues that he
is entitled to summary judgment on both claims because he has met the elements necessary for the
court to equitably estop the Receiver from seeking recovery. (See ECF No. 71 at 22; ECF No. 74
at 17; ECF No. 77 at 13-14.) Defendant explains that Wilson represented to him that he would
invest Defendant’s money in silver, which turns out to have been a material misrepresentation, and
later represented that the investment had turned a profit which, a part of which would be placed in
Defendant’s account; that Defendant reasonably relied on this representation, as Wilson had the
appearance of operating a legitimate business; that Defendant had no reasonable means of knowing
that Wilson’s representations were false; and that Defendant had changed position, by investing
his money with AB&C and withdrawing and spending the false profits, in reliance on the
representations. (See ECF No. 71 at 22.)
As the court already pointed out, the Receiver has brought his claim only on behalf of
AB&C and not on behalf of Wilson. All of Defendant’s arguments are directed at equitably
estopping Wilson from seeking recovery and are therefore inapplicable to the claims the Receiver

16

actually brings. Further, even assuming that Defendant could raise equitable estoppel, the burden
is on Defendant to prove each element, see Dozier v. Am. Red Cross, 768 S.E.2d 222, 231 (S.C.
Ct. App. 2014); Goodwin v. Blu Murray Ins. Agency, Inc., 939 So. 2d 1098, 1104 (Fla. Dist. Ct.
App. 2006), and the court would conclude that there remains a genuine dispute whether
Defendant’s reliance on Wilson’s representations were justified and whether Defendant lacked a
means of knowing that the representations were false. For these reasons, the court denies
Defendant’s motion for summary judgment in this respect.
5. Bankruptcy safe harbor provision
Next, Defendant argues that he is entitled to protection from the Receiver’s claims under a
safe harbor exception to a bankruptcy trustee’s power to avoid and claw back certain securitiesrelated payments made by the bankruptcy estate found in the Bankruptcy Code, 11 U.S.C. § 546(e).
The court has no trouble rejecting this argument. In enacting the Bankruptcy Code, federal
lawmakers decided to make § 546(e)’s safe harbor provision apply only to bankruptcy trustees,
such that, unless bankruptcy proceedings have been initiated for AB&C, the Receiver is not barred
from bringing avoidance actions under § 546(e). No bankruptcy trustee has been named here, and,
thus, the Receiver is not barred.
In only one case does it appear that the safe harbor provision indirectly barred a party other
than the trustee from pursuing a fraudulent conveyance claim. See In re Tribune Co. Fraudulent
Conveyance Litig., 818 F.3d 98 (2d Cir. 2016). Even in that case, which represents the most
extravagant expansion of the safe harbor provision, the Second Circuit seems to have relied heavily
on the fact that the non-trustee plaintiffs sought to avoid transfers made by a corporation for which
a bankruptcy trustee had been appointed and for which bankruptcy proceedings were ongoing. See
id. at 111 (“Once a party enters bankruptcy, the Bankruptcy Code constitutes a wholesale

17

preemption of state laws regarding creditors’ rights.” (emphasis added)) Thus, even accepting
arguendo the Second Circuit’s view of § 546(e), the court would still conclude that its safe harbor
provision is inapplicable here.
6. Equitable set-off
Next, Defendant argues that, assuming the Receiver succeeds on one or both of his claims,
Defendant is entitled to an equitable set-off. (See ECF No. 71 at 28-29; ECF No. 77 at 15.)
Defendant explains that courts of equity liberally allow equitable set-off to prevent injustice where
a party is unable to make out a claim for legal set-off. (See ECF No. 71 at 28-29 (citing Epstein v.
Epstein, 915 So. 2d 1272, 1274 (Fla. Dist. Ct. App. 2005); Carwile v. Metro. Life Ins. Co., 134
S.E. 275, 284 (S.C. 1926)); ECF No. 77 at 15 (citing Okla. Dep’t of Secs. ex rel. Faught v. Blair,
231 P.3d 645 (Okla. 2010)).) Aside from this and similarly vague general principles underlying
the doctrine of equitable set-off, Defendant provides no other legal analysis. Defendant asserts that
Wilson admitted to commencing his Ponzi scheme in January 2001 but that, prior to that time,
Wilson had already represented to Defendant that Wilson had purchased 11,300 ounces of silver
under Defendant’s account, which was worth $84,976 at the time Defendant made his first
withdrawal from the account in March 2004. (ECF No. 71 at 28 (citing ECF Nos. 71-13, 71-15).)
Based on this evidence, Defendant asserts he is entitled to a set-off in the amount of cash that he
invested with AB&C, an amount that Defendant does not specify, and in “the amount of the
increase of the value of silver that AB&C had purchased for him,” again an amount that Defendant
does not specify. (ECF No. 71 at 29.)
As a legal matter, the court concludes that Defendant has not shown that he is entitled to
equitable set-off. As stated in the previous paragraph, Defendant does little more than cite the
general rule that a court exercising equitable powers, such as this court, has the authority to permit

18

a set-off when doing so prevents injustice. This hardly demonstrates that Defendant is entitled to
summary judgment on his equitable set-off claim as a matter of law. Under Florida law, it appears
Defendant has not yet laid the groundwork for an equitable set-off. “Florida recognizes that to
avail oneself of set-off in equity, the defendant must show an existing debt or demand against the
complainant in favor of the defendant, and that the debt arose and existed under circumstances
where disallowing it would be inequitable.” Wiand v. Dancing $, LLC, 919 F. Supp. 2d 1296, 1317
(M.D. Fla. 2013) (citing Durham Tropical Land Corp. v. Sun Garden Sales Co., 151 So. 327, 328
(Fla. 1932)), rev’d on other grounds, 578 F. App’x 938 (11th Cir. 2014); see also Kearney v. AutoOwners Ins. Co., No. 8:06-cv-595-T-24-TGW, 2007 WL 2298031, at *8 (M.D. Fla. Aug. 7, 2007)
(“Florida cases hold[] that the principle of equitable set-off is limited to the situation where two
parties each have a claim against the other” (citing Everglade Cypress Co. v. Tunnicliffe, 148 So.
192, 193 (Fla. 1932))). Defendant has not argued that he has some independent legal or equitable
claim that he might assert against the Receiver qua AB&C; rather, it appears Defendant argues
that the Receiver has failed to prove that the principal Defendant placed in his account with AB&C
and the profits his account earned prior to the Ponzi scheme’s commencement in January 2001
should be subject to the Receiver’s fraudulent conveyance and unjust enrichment claims. Such an
argument might be sound reason for denying the Receiver’s motion for summary judgment on
portions of his claims, but it offers no reason to grant summary judgment to Defendant on his claim
for equitable set-off. 5

5

South Carolina law on equitable set-off is much less developed than its Florida counterpart, and
the cases appear to simply repeat the same vague general principles on which Defendant relies.
Assuming South Carolina law governs the equitable set-off claim Defendant raises, this paucity
would, of course, excuse Defendant’s undeveloped legal analysis.
19

Even assuming Defendant has provided an adequately developed legal analysis for an
equitable set-off claim, the court would still conclude that the record makes summary judgment at
this stage impossible. Although Defendant’s argument appears to be that the Receiver has failed
to show that the pre-2001 amounts in principal and profit in Defendant’s AB&C account should
be subject to the claims in the complaint, Defendant might instead be arguing that, assuming the
pre-2001 principal and profits are subject to the Receiver’s claims, then Defendant is entitled to
an equitable set-off because that principal and those profits had no involvement with Wilson’s
Ponzi scheme. There are three factual problems with this argument. First, the Receiver is not
seeking disgorgement of any of the principal amounts Defendant deposited into the AB&C account
over the years but, instead, only the fictitious profits Wilson caused AB&C to pay Defendant above
the principal amounts. (See ECF No. 70 at 2-3.) Thus, the court cannot conceive how equity
requires a set-off for the principal amounts Defendant deposited in the account prior to 2001; those
amounts are already not subject to the claims the Receiver asserts in his complaint. Providing
Defendant a set-off for those amounts would be akin to double recovery, a result repugnant to
equity.
Second, to the extent Defendant argues that he is entitled to an equitable set-off for profits,
not principal, prior to 2001, the court notes that some authority supports a set-off for real profits
(as opposed to fictitious profits) made before a corporation became a Ponzi schemer’s utensil.
Under FUFTA, for example, courts have held that there can be no equitable set-off for any
fictitious profits, see Wiand v. Cloud, 919 F. Supp. 2d 1319, 1339-40 (M.D. Fla. 2013), implying
that equitable set-off for real profits would be permitted. And, as Defendant points out, other
jurisdictions have approved equitable set-offs for real profits when a winning investor’s total
profits are pursued by a receiver. See Blair, 231 P.3d 645. Here, however, the evidence to which

20

Defendant points demonstrates that AB&C did not transfer any profits to Defendant until March
2004, more than three years after the Ponzi scheme commenced, according to Wilson. No transfers
were made to Defendant prior to 2001; thus, there are no transfers of purely real profit, and the
only transfers that can be avoided necessarily include, at least in part, fictitious profit. Defendant
has provided the court no means of separating out the real profit from the fictitious profit in any
of the transfers subject to the Receiver’s complaint. The court would deny summary judgment on
this basis.
Third, it is not clear that Defendant made any real profit prior to 2001. Assuming that
Wilson only began to use AB&C for his Ponzi scheme beginning in 2001, the record reflects the
following trade transactions on the account prior to 2001: in February 1996, AB&C purchased
5,000 ounces of silver on Defendant’s account for $28,300 at a price of $5.66 per ounce and sold
the same amount for $29,300 in January of 1997 at a price of $5.86 per ounce. (ECF No. 17-13 at
2.) AB&C made two more purchases: 6,300 ounces in July 1997 at $4.65 per ounce and 5,000
ounces December 2000 at $4.70 per ounce, for a total purchase price of $52,795. (Id.) AB&C did
not sell Defendant’s silver again until September 2001, after the Ponzi scheme commenced, when
the 11,300 ounces were sold for $54,805. (Id.) With these facts, how should Defendant’s “profits”
be determined? If one refers to amounts received in accounts controlled by Defendant, then he
made no profits prior to 2001. If one refers to gains realized on the AB&C account from a sale
before 2001, then the only profits Defendant made prior to 2001 amount to $1,000. If one refers
to all gains realized on the account from sales of all silver purchased prior to 2001, then Defendant
only made $3,010 in profits. If one refers to the amount of the increase of the value of silver that
AB&C had purchased, as Defendant does, the amount is indeterminate at this stage. The
conjectural nature of the existence and extent of real profits leads the court to conclude that

21

summary judgment on Defendant’s claim for equitable set-off is simply premature See Kearney,
2007 WL 2298031, at *8 n.6.
7. Evidence of receipt of a certain check
As the last preliminary issue, Defendant seeks partial summary judgment that he did not
receive from AB&C a March 20, 2004 check in the amount of $55,986 that is listed as a withdrawal
in Defendant’s account statement from AB&C. (See ECF No. 71 at 29; ECF No. 71-13 at 1.)
Defendant asserts that the only evidence on record that he received the check is a copy of the
account statement and, because the Receiver’s claims are premised on the assertion that the
account statement is false, there is no evidence in the record on which the Receiver can rely to
show that Defendant received the check. (See ECF No. 71 at 29.) In response, the Receiver first
points to Defendant’s deposition. (See ECF No. 73 at 19 (citing ECF No. 73-3 at 5).) At his
deposition, upon being presented with the account statement, Defendant testified that he had no
reason to challenge, and could not disagree with, any of the payouts to Defendant reflected in the
account statement. (See ECF No. 73-3 at 5.) The Receiver asserts that he has produced further
evidence that Defendant received the check in question. (See ECF No. 73 at 19.) The Receiver
explains that around the time he filed his reply he submitted to Defendant in a supplemental
discovery production a copy of the check. (See id. (citing ECF No. 73-4).) In reply, Defendant
does not address the Receiver’s arguments regarding Defendant’s deposition testimony. Regarding
the recently produced copy of the check, however, Defendant asserts that he “is troubled by the
fact that the Receiver has produced new evidence on May 24, 2017, after the discovery deadline
had passed.” (ECF No. 77 at 4 n.4.)
As the parties have not adequately addressed the matter, the court declines to decide
whether it is proper to consider the lately produced copy of the check. The court need not do so

22

now in any event because the evidence on record is sufficient to dispose of Defendant’s request
for partial summary judgment. Defendant argues that the Receiver cannot rely on the account
statement because the Receiver’s claims are premised on the account statement’s falsity. That is
only half-true. The Receiver’s claims are that the purchases and sales of silver listed on the account
statements are false, but the Receiver could hardly bring claims for fraudulent conveyance and
unjust enrichment if his theory of liability was that the payouts listed on the account statement
were also false. The court sees no reason why the Receiver could not rely on the account statement
as evidence that AB&C paid to Defendant a $55,986 withdrawal on March 20, 2004. A reasonable
inference, which here must be drawn in the Receiver’s favor, is that, when Defendant made a
withdrawal and AB&C paid it, Defendant received that payment. If the account statement itself
were not enough—and it is enough—Defendant’s deposition testimony provides further
corroborative evidence that he received the check. Because, at a minimum, the Receiver has
produced sufficient evidence to raise a genuine dispute of fact as to whether Defendant received
the payment, the court must deny Defendant’s request for partial summary judgment.
B. Fraudulent Conveyance
Before assessing the parties’ motions with respect to the fraudulent conveyance claim, the
court must first determine the substantive law to apply to that claim. As an initial matter, both
parties assert that, because the court is exercising its diversity jurisdiction over state law claims, it
is obligated to apply the choice of law rules of South Carolina, the state in which it is situated. (See
ECF No. 74 at 4 (citing Klaxon v. Stentor, 313 U.S. 487, 496 (1941)); ECF No. 73 at 6 (citing
Michelin N. Am., Inc. v. Inter City Tire & Auto Ctr., Inc., Nos. 6:13-2752-HMH; 6:14-1254-HMH,
2018 WL 12843916, at *3 (D.S.C. Jan. 20, 2015) (citing Klaxon, 313 U.S. at 496-97)).) In fact,
although the court is adjudicating state law claims, the court’s authority to adjudicate is grounded

23

on its supplemental or ancillary jurisdiction to decide matters over which it had federal question
jurisdiction, rather than directly on its diversity jurisdiction. (See ECF No. 1 at 2; ECF No. 56 at
3); see generally Terry v. June, No. A.304cv00064, 2006 WL 736861, at *2-5 (W.D. Va. March
23, 2006); Quilling v. Cristell, No. A.304cv252, 2006 WL 316981, at *4 (W.D.N.C. Feb. 9, 2006).
Nevertheless, for the reasons stated in Terry v. Walker and because the parties are in agreement on
this point, the court is satisfied that it should apply South Carolina’s choice of law rules. See In re
Merritt Dredging Co., Inc., 839 F.2d 203, 206 (4th Cir. 1988) (“Because no overwhelming federal
policy requires us to formulate a choice of law rule as a matter of independent federal judgment,
we adopt the choice of law rule of the forum state, South Carolina.”); see also 19 Charles Alan
Wright et al., Federal Practice and Procedure § 4520 (3d ed. 2016).
Defendant assumes, without citation to any authority, that, under South Carolina law, a
fraudulent conveyance claim sounds in tort. (See ECF No. 71 at 7.) Defendant then points to the
well-known South Carolina choice of law principles applicable to tort claims: for substantive law,
lex loci delicti, meaning the law of the state where the injury occurred applies; for procedural law,
lex fori, meaning the law of the forum (here, South Carolina) applies. See Stern v. Shelley, 781 F.
Supp. 2d 281, 284 (D.S.C. 2011) (citing Thornton v. Cessna Aircraft Co., 886 F.2d 85, 87 (4th Cir.
1989)). Citing non-South Carolina authorities, Defendant asserts that an injury occurs in the place
where the last act necessary to make the defendant liable for the tort at issue occurs and that, for a
claim of fraudulent conveyance, the last act giving rise to liability occurs when the transferee
accepts the transferred property. (See ECF No. 71 at 7 (citing Terry v. Walker, 2006 WL 736861,
at *6; Restatement (First) of Conflict of Laws § 377 (1934)).) Because the vast majority of checks
Defendant received from AB&C were cashed or deposited in Florida, Defendant argues that
Florida substantive law should apply to the fraudulent conveyance claim.

24

The Receiver asserts that South Carolina law should apply to the fraudulent conveyance
claim. (See ECF No. 73 at 6.) The Receiver appears to assume for argument’s sake that
Defendant’s premise—that, under South Carolina law, a claim for fraudulent conveyance claim
sounds in tort and that the place of injury determines the substantive law to apply—is correct, and
the Receiver never comes round to challenge that premise. (See id. at 7.) Instead, the Receiver
points out that, under South Carolina law, the place where the injury occurred is defined not
necessarily by reference to the place where the last act giving rise to liability occurs but, instead,
by reference to the place “where the plaintiff, as a result of the [delict], suffered a loss.” Lister v.
NationsBank of Del., N.A., 494 S.E.2d 449, 455 (S.C. Ct. App. 1997); (see ECF No. 73 at 7
(quoting Lister).) The Receiver argues that, in this case, he, standing in the shoes of AB&C
suffered the loss at issue in South Carolina, “where the company was located and operated the
Ponzi scheme on a daily basis,” and that, therefore South Carolina substantive law applies. (ECF
No. 73 at 7.) 6
In deciding which state’s law should apply to the adjudication of a claim, the
characterization of that claim is determined by reference to the law of the forum. See Colonial Life
& Acc. Ins. Co. v. Hartford Fire Ins. Co., 358 F.3d 1306, 1309-10 (11th Cir. 2004); Fahs v. Martin,
224 F.2d 387, 396 (5th Cir. 1955); Restatement (First) of Conflict of Laws § 7. Here, then, South
Carolina law determines how a fraudulent conveyance claim should be characterized for choice of
law purposes. Whether a fraudulent conveyance claim should be characterized as a tort action is

6

But see Rogers v. Lee, 777 S.E.2d 402, 405 (S.C. Ct. App. 2015) (“In Lister, the injury that
occurred was the misappropriation of the plaintiffs’ money and this injury was directly to their
money, which occurred in South Carolina. In Lister, the injury was not considered to have occurred
in South Carolina simply because the plaintiffs resided in South Carolina and therefore felt the
financial consequences of it there. Rather, as noted by this court in Lister, ‘South Carolina was the
place where the money was wrongfully appropriated.’” (quoting Lister at 145, 494 S.E.2d at 456)).
25

uncertain and disputed among American jurisdictions. See Sheehan v. Saoud, 650 F. App’x 143,
154 (4th Cir. 2016); MainStreet Bank v. Nat’l Excavating Corp., 791 F. Supp. 2d 520, 529 n.14
(E.D. Va. 2011); Roanoke Cement Co., LLC v. Chesapeake Prods., Inc., No. 2:07cv97, 2007 WL
2071731, at *7 (E.D. Va. July 13, 2007); Terry v. June, 420 F. Supp. 2d 493, 502-03 (W.D. Va.
2006). Although Defendant assumes without support, and the Receiver assumes without acceding,
that a fraudulent conveyance claim sounds in tort for purposes of South Carolina choice of law
rules, no South Carolina court appears to have reached this conclusion, and the parties point to no
decision that supports such a characterization. If South Carolina courts had not spoken on choice
of law principles for fraudulent conveyance claims, the court might have embarked on a
determination of whether South Carolina would view a fraudulent conveyance claim as one
sounding in tort. See Roanoke Cement, 2007 WL 2071731, at *7. However, the South Carolina
Supreme Court has addressed the choice of law rules to be applied when a court is confronted with
a fraudulent conveyance claim in Sheldon v. Blanvelt, 7 S.E. 593 (S.C. 1888). 7
In Sheldon, one Blanvelt, who was a New York citizen and domiciled there, transferred,
by means of an assignment, some of his personal property to Asa Dicksinson, who represented
certain of Blanvelt’s creditors. Id. at 593. The assignment transferring the personal property was
executed in New York. Id. The personal property that became the subject of the law suit was
located in South Carolina at the time the assignment was executed. Id. at 593-94. The transfer
provided for the payment of debts for wages and salaries that Blanvelt owed to his employees. Id.
at 593. Under New York law, a preferential transfer to such creditors was permitted and, in fact,
required. Id. Under South Carolina law, a preferential transfer to such creditors over others who

7

Subsequent authorities have cited to this case using the case names Sheldon v. Blauvelt and Ex
Parte Dickenson. See Ayers v. Des Portes, 35 S.E. 218, 219 (S.C. 1900); Hughes v. Edisto Cypress
Shingle Co., 28 S.E. 2 (S.C. 1897).
26

held priority was not permitted, and a statute expressly made assignment accomplishing such
transfers null and void. Id. at 594. Blanvelt’s other creditors, who presumably held priority over
the employee-creditors, sued in South Carolina state court to avoid the assignment. Id. at 593.
After failing in the trial court, the creditors appealed to the South Carolina Supreme Court.
The Supreme Court explained that “[t]he fundamental question . . . is as to the validity of
the assignment . . . [and] whether it is sufficient to pass the title of property found in this state.”
Id. at 594. In a variety of ways, the Supreme Court explained that the law of New York would
govern the validity of a transfer like the one presented to it, unless the application of New York
law would result in a violation of the public policy of South Carolina:
The general rule undoubtedly is that, in regard to all contracts of which the
subject–matter is personal property, their validity is to be tested by the law of
the place where the contract is made. If valid there, they will be sustained
everywhere, upon principles of international or interstate comity. But to this
rule there is a well–defined exception that, where the contract is in violation of
established public policy of the state whose courts are called upon to enforce
the contract, especially if it is in violation of some express statutory enactment
of such state this rule of comity is no longer recognized or acted upon; and in
such case the contract, though valid where made, cannot be enforced in the
state in violation of whose laws it was made; for, . . . this principle of comity
always yields when the laws and policy of the state where the property is
located has prescribed a different rule of transfer from that of the state where
the owner lives. . . . [A] transfer of personal property located in one state, by
the owner in the state of his domicile, valid according to the laws of the latter
state; but such was not the domicil, valid according to the laws of that state,
but in violation of the laws of the state where the latter state, and that is the
extent to which we go.
. . . . The true rule, as we understand it, is that while, on principles of
comity, the transfer or assignment of personal property located here, made by
the owner in accordance with the laws of his domicile, will be recognized here,
yet . . . [t]here is no comity which required us to give force to laws of another
state which directly conflict with the laws of our own. . . . [A]n assignment of
personal property for the benefit of creditors, made in accordance with the laws
of the debtor’s domicile, is good in the state where the property is actually
located only in the absence of express enactment of such state to the contrary.
Hence where, as in this case, it is sought to set up an assignment directly in
conflict with our express statutory enactment, . . . we think it clear that no
27

principles of comity require us to recognize such an assignment, even though
it be in strict conformity with the law of the debtor’s domicile.
Id. at 594-96 (internal quotation marks and citations omitted). The upshot of Sheldon, then, may
be stated so: unless doing so would violate the forum’s public policy, the validity of a preferential
transfer of personal property located within the forum by an assignment that is executed outside
the forum by a party domiciled outside the forum is not governed by the law of the forum.
Sheldon, despite its age, is still the law of South Carolina that appears to govern choice of
law for fraudulent conveyance and preferential assignment claims, and this court must follow its
ruling. See Klaxon, 313 U.S. at 496-97 (1941). Nevertheless, eliciting a straightforward choice of
law rule applicable to similar cases has proved difficult. There are three interpretations of
Sheldon’s holding that can be distilled from subsequent case law and secondary sources. First,
some authorities interpret Sheldon’s choice of law rule to turn on where the assignment transferring
the personal property is executed, and thus conclude that South Carolina would apply the law of
state where such assignment was executed. See 17A William Meade Fletcher et al., Fletcher
Cyclopedia of the Law of Corporations § 8548 (perm. ed., rev. vol. 1999 & 2016 update); 111
A.L.R. 787, parts iii.b.1-2 (Orig. Pub. 1937); 2 Harvard L. Rev. 386, 386 (March 15, 1889). Other
authorities seem to interpret Sheldon’s choice of law rule to direct the application of the law of the
state where the assignor or transferor is domiciled. See Adams v. Fellers, 70 S.E. 722 (S.C. 1911);
Ayers v. Des Portes, 35 S.E. 218, 218 (S.C. 1900); 111 A.L.R. 787, supra. Still other authorities
interpret Sheldon as applying the law of the situs of the personal property. See Adams, 70 S.E. 722;
Ayers, 35 S.E. at 218; 111 A.L.R. 787, supra. Of course, all of the authorities agree that, whatever
general choice of law principle should be drawn from Sheldon, it remains subject to the traditional
exception applying South Carolina law where following the law of a foreign forum would be
repugnant to South Carolina public policy. Though there may be a good deal of uncertainty as to
28

the precise choice of law principle to be drawn from Sheldon, it seems clear that Sheldon does not
adopt the view of the parties that a fraudulent transfer claim is essentially a tort and that the law to
be applied is the law of the state where the harm occurs. Under Sheldon, lex loci delicti does not
apply to fraudulent transfers.
Although the court’s review of Sheldon helps clarify what choice of law rule should not be
applied here, it does not directly answer which law—South Carolina’s or Florida’s—should apply
to the instant fraudulent conveyance claim. The court notes in this regard that, unlike in Sheldon,
the transferor in the instant action (AB&C) was domiciled in South Carolina at the time of the
transfers. The court also notes that, although it appears undisputed that all transfers from AB&C
to Defendant were completed in Florida when Defendant deposited or cashed checks he received
from AB&C there, it is not clear whether the completion of a transfer is equivalent to an execution
of an assignment for purposes of deciding choice of law issues for a fraudulent conveyance claim,
and for similar reasons it is not clear where the assets were located at the time of transfer. The
differences between the facts in Sheldon and the facts of this case, therefore, may require here a
choice of law ruling different from that in Sheldon. In any event, because Sheldon only clearly
applies when the transferor is domiciled outside South Carolina and transfers personal property by
an assignment executed outside of South Carolina, Sheldon does not appear to control here.
The South Carolina Appellate Court Rules provide that the South Carolina Supreme Court
in its discretion may answer questions of law certified to it by any federal court
of the United States . . . when requested by the certifying court if there are
involved in any proceeding before that court questions of law of this state
which may be determinative of the cause then pending in the certifying court
when it appears to the certifying court there is no controlling precedent in the
decisions of the Supreme Court.
S.C. App. Ct. R. 244(a).

29

In the court’s view, the question of which law should apply to the Receiver’s fraudulent
conveyance claim under South Carolina choice of law rules is a question of South Carolina state
law that may be determinative of the fraudulent conveyance claim pending in this matter, and it
appears that there is no controlling precedent on the question in the Supreme Court’s decisions.
Accordingly, the court intends to certify a question of law on the issue to the Supreme Court.
C. Unjust enrichment
Defendant asserts that, under South Carolina choice of law rules, the Receiver’s unjust
enrichment claim is governed by Florida law. (See ECF No. 71 at 7-8; ECF No. 74 at 4; ECF No.
77 at 4-5.) He posits two reasons for his assertion. First, he argues that choice of law for unjust
enrichment claims is decided by the five-factor “most significant relationship test” found in
Restatement (Second) of Conflict of Laws § 221 (1971). (See ECF No. 71 at 7-8 (citing Hadidi v.
Intracoastal Land Sales, Inc., No. 4:12-cv-535-RBH, 2014 WL 2881875 (D.S.C. June 25, 2014));
ECF No. 77 at 4-5 (same).) In applying the test, Defendant argues that Florida has the most
significant relationship to the transactions giving rise to the claim because the act conferring the
allegedly unjust benefit was completed in Florida when Defendant deposited or cashed checks
from AB&C there, because Defendant received account statements in Florida, because Defendant
requested withdrawals from outside South Carolina, and because Defendant is a resident of
Florida. (See ECF No. 71 at 8; ECF No. 77 at 5.) Second, in his response to the Receiver’s summary
judgment motion, without explaining why the most significant relationship test should now be
jettisoned, Defendant presumes, without citation to any authority that the unjust enrichment claim
sounds in tort and, again without citation to any authority, argues that the normal choice of law
rule, lex loci delicti for substantive law, applies to the unjust enrichment claim. (See ECF No. 74

30

at 4.) Defendant argues that, because he deposited checks from AB&C in Florida, the harm at issue
occurred in Florida, and the substantive law of Florida should apply. (See id.)
The Receiver asserts that South Carolina substantive law governs his unjust enrichment
claim. (See ECF No. 73 at 6, 8-9; see also ECF No. 70 at 10-12 (applying only South Carolina
law).) The Receiver appears to accept that the Restatement’s most significant relationship test
determines which law should apply (See ECF No. 73 at 8 (citing Hadidi).) In the Receiver’s view,
however, South Carolina has the most significant relationship to the transactions giving rise to the
claim because the parties entered into the relationship in South Carolina, the Ponzi scheme was
commenced and orchestrated in South Carolina, Wilson and Defendant met in South Carolina and
began a relationship centered on the silver investment at issue, the two maintained their
relationship by meeting in South Carolina, the fraudulent account statements were created in South
Carolina, and the act of conferring the allegedly unjust benefit occurred in South Carolina because
all the checks sent to Defendant were executed and sent from South Carolina. (Id. at 8-9.)
The court is not persuaded by either party’s argument. As an initial matter, the court
concludes that the most significant relationship test found in the modern Restatement has not been
adopted by South Carolina courts and is inapplicable here. Although both parties cite to Hadidi for
the proposition that South Carolina would employ the most significant relationship test to a claim
for unjust enrichment, Hadidi is inapposite. In that case, the original action had been filed in New
Jersey state court before being removed to the federal district court in New Jersey and then
transferred, pursuant to 28 U.S.C. § 1404(a), to the federal district court in South Carolina. See
2017 WL 2881875, at *1, *3-4. The district court in South Carolina explained that “the transferee
court must follow the choice-of-law rules that prevailed in the transferor court” and therefore
determined that it must employ New Jersey’s choice of law rules rather than South Carolina’s

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choice of law rules. Id. at *4 (citing Van Dusen v. Barrack, 376 U.S. 612 (1964)). New Jersey has
adopted the modern Restatement’s most significant relationship test, see id. (citing P.V. v. Camp
Jaycee, 962 A.2d 453, 455 (N.J. 2008)), and that is the only reason the Hadidi court employed it.
The parties do not cite any South Carolina court decision adopting the test, and the court has
unearthed no authority whatsoever supporting the proposition that South Carolina has adopted the
test. In fact, the South Carolina Court of Appeals has expressly stated that “South Carolina has not
adopted the modern choice of law test found in the Restatement,” Lister, 494 S.E. 2d at 456, and
any application of the most significant relationship test by a South Carolina court has been
preceded by the statement that the result of the court’s choice of law analysis would be no different
if it employed that test, see id.; Unisun Ins. Co. v. Hertz Rental Corp., 436 S.E.2d 182, 184 n.1
(S.C. Ct. App. 1993). In short, South Carolina does not use the most significant relationship test,
and the parties’ arguments regarding its application here will be ignored.
The only other argument from the parties regarding South Carolina’s choice of law rules
for unjust enrichment claims, advanced only by Defendant, is that that unjust enrichment is
essentially a tort and, therefore, the choice of law rules applicable for tort claims apply to unjust
enrichment claims. Unfortunately, Defendant’s argument is devoid of any citation to supporting
authority. That is not surprising, as the court’s own research has uncovered no support in South
Carolina case law for the proposition that South Carolina law would treat an unjust enrichment
claim as a tort for purposes of choice of law analysis. In fact the court has located only three
authorities that touch upon the issue, and all of them are decisions by federal courts. 8

8

The court notes that, in South Carolina law, the terms contract implied-in-law, quantum meruit,
quasi-contract, restitution, and unjust enrichment have often been used interchangeably to refer to
the same type of claim for equitable relief. See Gignilliat v. Gignilliat, Savitz & Bettis, L.L.P., 684
S.E.2d 756, 764 (S.C. 2009); Williams Carpet Contractors, Inc. v. Skelly, 734 S.E.2d 177, 180
32

An 1888 decision suggests that, where an express contract for an agent’s compensation is
absent, the law of the state where the agency was accepted and performed should apply to a claim
seeking compensation. See Martin v. Roberts, 36 F. 217, 219 (C.D.S.C. 1888). The persuasiveness
of Martin is doubtful because it is unclear whether the lex loci contractu rule that it incorporates
was applied because the claim at issue was one for an implied-in-fact contract rather than an
implied-in-law contract, see Myrtle Beach Hosp., Inc. v. City of Myrtle Beach, 532 S.E.2d 868,
872 (S.C. 2000) (distinguishing the two claims), and more importantly because the decision
predates Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) (requiring federal district courts to apply law
of the states in which they are situated), and thus is unlikely to reflect South Carolina choice of
law rules.
In a more recent case, Joye v. Heuer, 813 F. Supp. 1171 (D.S.C. 1993), the district court
was faced with a claim between attorneys in South Carolina and an attorney in California. 813 F.
Supp. at 1172-73. The South Carolina attorneys alleged that they entered into an oral contract with
the California attorney, in which the California attorney would undertake to represent in California
court a client of the South Carolina attorneys, and the attorneys would split any fee if the California
attorney succeeded in a California law suit on behalf of the client. Id. The South Carolina attorneys
also asserted, in the alternative, a claim for quantum meriut in the event they did not succeed on
their contract claim. Id. at 1173-74. In analyzing choice of law rules for the contract claim, the
court applied South Carolina’s lex loci contractu rule, and determined that California law governed
the question whether the contract existed. Id. at 1173. After finding that the contract existed, the
court determined that it was valid and entered judgment in favor of the South Carolina attorneys

(S.C. Ct. App. 2012); QHG of Lake City, Inc. v. McCutcheon, 600 S.E.2d 105, 108 (S.C. Ct. App.
2004).
33

on their contract claim. Id. at 1173-75. The court next addressed the quantum meruit claim and
determined, without any choice of law analysis, that California law also governed that claim. Id.
at 1174. The court determined that, in the event its decision to grant judgment in favor of the South
Carolina attorneys’ contract claim was overturned on appeal, it would enter judgment in their favor
on the quantum meruit claim as well. Id. at 1174-75.
In this court’s view, the Joye decision is of little aid to the choice of law issue confronted
here. First, as in the Martin case, it is not clear whether the Joye court viewed the quantum meruit
claim as a legal one, such as an implied-in-fact contract claim, or as an equitable one, such as an
implied-in-law contract claim; and, if the court viewed the claim as one asserting an implied-infact contract, it is not clear what bearing the case has on the choice of law rules to be applied to an
equitable claim of unjust enrichment. In this regard, the court notes that Joye was decided during
a time when a good deal of confusion surrounded the distinction between legal and equitable
claims of this nature. See Myrtle Beach, 532 S.E.2d at 872. More importantly, the decision is
devoid of any explanation as to why California law applied to the quantum meruit claim. For these
reasons, the court believes that Joye is of limited value in deciding the issue confronting the court
here.
The last case touching upon South Carolina choice of law rules for an unjust enrichment
claim is found in Gentry Tech. of S.C., Inc. v. Baptist Health S. Fla., Inc., No. 1:14-cv-02127JMC, 2016 WL 403879 (D.S.C. Feb. 3, 2016). In making its choice of law decision, the Gentry
court noted the South Carolina rules applicable to tort claims—for substantive issues, the law of
the state where the injury occurred governs; for procedural issues, the law of the forum governs—
and the South Carolina rules applicable to contract—for issues of formation, interpretation, or
validity, the law of the state where the contract was formed governs; for issues of performance,

34

the law of the state where performance is to occur applies. See Gentry, 2016 WL 403879, at *4
(citing Thornton v. Cessna Aircraft Co., 886 F.2d 85, 87 (4th Cir. 1989); Witt v. Am. Trucking
Ass’ns., Inc., 860 F. Supp. 295, 300 (D.S.C. 1994)). Without any further explanation, the court
ruled that “Florida’s substantive law is applicable to [the] claim for unjust enrichment.” Id.
In this court’s view, the Gentry decision is also of little aid. The reasons for the truncated
choice of law analysis in Gentry become clearer upon closer inspection. First, it appears that the
parties did not dispute that Florida substantive law governed the unjust enrichment claim. The
defendant expressly offered a view on all fours with the position subsequently taken by the court,
see id., at *3 n.4, and the plaintiff’s arguments, as summarized by the court, appear to accede to
the defendant’s view, see id., at *4. Adverse parties’ express or implicit agreement as to what law
governs particular issues between them provides a valid basis for the court to apply that law, see
Companion Prop. & Cas. Ins. Co. v. U.S. Bank Nat’l Ass’n, No. 3:15-cv-01300-JMC, 2016 WL
6525478, at *9 n.5 (D.S.C. Nov. 3, 2016) (citing, inter alia, Cosey v. Prudential Life Ins. Co., 735
F.3d 161, 169 n.7 (4th Cir. 2013)), and, thus, the Gentry court had no reason to apply any
substantive law other that of Florida. Here, on the other hand, the parties sharply disagree as to the
law that should apply to the Receiver’s unjust enrichment claim.
Second, it appears that the Gentry court accepted the parties’ express or implied arguments
that the unjust enrichment claim necessarily falls under the choice of law rules applicable to either
tort claims or contract claims, see Gentry, 2016 WL 403879, at *3 n.4, and then drew the logical
conclusion that, because all events of consequence occurred in Florida, the choice of law rules
applicable to tort and contract claims both pointed toward Florida substantive law. The view that,
so long as both contract and tort choice of law principles point toward the same law, the court may
apply that law is not without some support. See Yeager v. Md. Cas. Co., 868 F. Supp. 141, 143

35

(D.S.C. 1994) (“South Carolina’s choice of law principles generally have turned on whether the
principal claim is characterized as one in contract or tort.”). However, this court is not persuaded
that such a principle should apply here. As the discussion in the previous section regarding choice
of law rules for fraudulent conveyance claims amply demonstrates, the analysis does not always
boil down to a neat determination of whether the claim sounds more in tort or more in contract.
Further, unlike in Gentry, the instant case is not one in which all signs point to Florida or to South
Carolina. Here, activities necessary to the completion of the transfers at issue took place in both
Florida and South Carolina, and the parties have been sure to point out these activities.
Third, as in Joye, the court in Gentry did not offer much in the way of explanation for its
decision to apply Florida law to the unjust enrichment claim. Although it appears to have been
occasioned by the parties’ agreement and the obviousness of the result, the brevity of the Gentry
court’s analysis cautions against viewing it as very useful here.
As authority on South Carolina choice of law rules with respect to an unjust enrichment
claim is even scarcer than it is with respect to a fraudulent conveyance claim, the court has no
trouble concluding that it should certify to the South Carolina Supreme Court a question as to the
choice of law rules to be applied in such circumstances. More specifically, in the court’s view, the
question of which law should apply to the Receiver’s unjust enrichment claim under South
Carolina choice of law rules is a question of South Carolina state law that may be determinative
of the unjust enrichment claim pending in this matter, and it appears that there is no controlling
precedent on the question in the Supreme Court’s decisions. Accordingly, the court intends to
certify a question of law on the issue to the Supreme Court.

36

IV. CONCLUSION
For the foregoing reasons, Defendant’s motion for summary judgment (ECF No. 71) is
hereby DENIED IN PART with respect to the seven issues raised therein as set out more fully in
the order above. By a separate order that complies with the requirements of Rule 244, the court
will certify to the South Carolina Supreme Court the questions of law regarding South Carolina
choice of law rules for fraudulent conveyance and unjust enrichment claims as set out more fully
in the order above. 9 The court will reserve its decision on the Receiver’s motion for summary
judgment and on the portions of Defendant’s motion for summary judgment that have not been
disposed by this order.
IT IS SO ORDERED.

United States District Court Judge
July 5, 2017
Columbia, South Carolina

9

Because the parties’ briefing on the choice of law issues overlooked much of the court’s analysis
and because the parties do not appear to have contemplated certification regarding the issues,
before entering the certification order, the court might seek the parties’ input by directing briefing
on the form of the questions to be certified. The court notes here, however, that such an order
would not be an invitation to seek certification of other questions. The court also expressly states
here that nothing in this order prevents the parties from stipulating or otherwise reaching
agreement on the law to be applied to the Receiver’s claims prior to the entry of the certification
order. Once the certification order is entered, however, the court would likely stay the proceedings
in this matter, and the parties will be unable to avoid adjudicating the issues in the Supreme Court.
37