Janvey v. Alguire et al

Filing 2850

MEMORANDUM OPINION AND ORDER: In this action, the Receiver represents creditors defrauded by Stanford's scheme in their recovery efforts. The Receiver states claims under Rule 12(b)(6). Accordingly, the Court denies the Defendants' #2174 Motion to Dismiss for Failure to State a Claim. (Ordered by Judge David C Godbey on 9/11/2018) (epm)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
RALPH S. JANVEY,
Plaintiff,
v.
JAMES R. ALGUIRE, et al.,
Defendants.

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Civil Action No. 3:09-CV-0724-N-BG

MEMORANDUM OPINION AND ORDER
This Order addresses Defendants Jeffrey E. Adams (“Adams”), Timothy W.
Baughman (“Baughman”), and Thomas G. Rudkin’s (“Rudkin”) Motion to Dismiss
Receiver’s Third Amended Complaint Against Former Stanford Employees (the “Employee
Complaint”) [2174]. For the reasons set forth below, the Court denies the motion in full.
I. ORIGINS OF THE RECEIVER’S ASSET RECOVERY ACTION
This dispute arises out of the Securities and Exchange Commission’s (the “SEC”)
ongoing securities fraud action against R. Allen Stanford, his associates, and various entities
under Stanford’s control. As part of that litigation, this Court appointed a receiver (the
“Receiver”) and authorized him to commence any actions necessary to recover assets of the
Receivership Estate. See Second Am. Order Appointing Receiver, July 19, 2010 [1130] (the
“Receivership Order”), in SEC v. Stanford Int’l Bank Ltd., Civil Action No. 3:09-CV-0298-N
(N.D. Tex. filed Feb. 17, 2009). Pursuant to those powers, the Receiver filed this action to
recover approximately $760 million in alleged Stanford International Bank, Ltd. (“SIB”)

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certificate of deposit (“CD”) proceeds paid to certain Stanford investors and Stanford
employees. First Am. Compl. Against Certain Stanford Investors (“the Investor Complaint”)
[128]; Investor Compl. App. [129]; Employee Compl. [1532]; Emp. Compl. App. [1533].
The Receiver alleges that Stanford made various transfers to Stanford employees to
perpetuate and conceal its fraudulent Ponzi scheme. Employee Compl. at ¶ 34. Such
transfers took the form of payments of loans, SIB CD Commissions, SIB Quarterly Bonuses,
Performance Appreciation Rights Plan Payments, Branch Managing Director Quarterly
Compensation, Severance Payments, and payments to Stanford Employees of purported CD
interest and principal, redemptions, and/or loans from the Stanford Employees’ SIB CD
and/or other SIB accounts. Employee Compl. at ¶ 3. The Receiver alleges that Stanford
made approximately $289 million in such transfers to the former Stanford employees named
in the Employee Complaint. Employee Compl. at ¶ 68. Three former Stanford employees
now move to dismiss the Employee Complaint under Federal Rule of Civil Procedure
12(b)(6).
II. THE RECEIVER STATES VALID CLAIMS
Defendants Adams, Baughman, and Rudkin (collectively, “Defendants”) move to
dismiss under Rule 12(b)(6), arguing that the Receiver fails to state fraudulent transfer and
unjust enrichment claims.
A. The Rule 12(b)(6) Legal Standard
When faced with a Rule 12(b)(6) motion to dismiss, the Court must determine whether
the plaintiff has asserted a legally sufficient claim for relief. Blackburn v. City of Marshall,

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42 F.3d 925, 931 (5th Cir. 1995). To survive dismissal, a complaint must include “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570 (2007). To satisfy this standard, a plaintiff must plead factual content “that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A plaintiff must provide
“more than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do.” Twombly, 550 U.S. at 555. A complaint, however, need not contain
“detailed factual allegations.” Ashcroft, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555).
The plaintiff’s factual allegations “must be enough to raise a right to relief above the
speculative level on the assumption that all the allegations in the complaint are true (even if
doubtful in fact).” Twombly, 550 U.S. at 555.
In ruling on a 12(b)(6) motion, the court generally limits its review to the face of the
pleadings, accepting as true all well-pleaded facts and viewing them in the light most
favorable to the plaintiff. Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir. 1999). A court
does not, however, accept as true “conclusory allegations, unwarranted factual inferences,
or legal conclusions.” Ferrer v. Chevron Corp., 484 F.3d 776, 780 (5th Cir. 2007).
B. The Receiver States a Fraudulent Transfer Claim
The Texas Uniform Fraudulent Transfer Act (“TUFTA”) operates to void certain
fraudulent “transfers,” which the statute defines as “every mode, direct or indirect, absolute
or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest
in an asset, and includes payment of money, release, lease, and creation of a lien or other

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encumbrance.” TEX. BUS. & COM. CODE ANN.§ 24.002(12). TUFTA considers several types
of transfers to be fraudulent. Under section 24.005(a)(1), a transfer is fraudulent where “the
debtor made the transfer or incurred the obligation . . . with actual intent to hinder, delay, or
defraud any creditor of the debtor.” Similarly, under section 24.005(a)(2), a transfer is
fraudulent where the debtor did not receive reasonably equivalent value and the debtor:
(A) was engaged or was about to engage in a business or a transaction for
which the remaining assets of the debtor were unreasonably small in relation
to the business or transaction; or
(B) intended to incur, or believed or reasonably should have belied that the
debtor would incur, debts beyond the debtor’s ability to pay as they became
due.
A transfer is also fraudulent where the debtor did not receive reasonably equivalent value and
“the debtor was insolvent at that time or the debtor became insolvent as a result of the
transfer or obligation.” Id. at § 24.006(a).
In the Complaint, the Receiver alleges fraudulent transfer under section 24.005(a)(1)
and alternatively under sections 24.005(a)(2) and 24.006(a). Because the Receiver states a
claim under section 24.005(a)(1), the Court need not address these alternative grounds.
1. The Receiver’s TUFTA Claim Satisfies Rule 12(b)(6). — Defendants argue that
the Complaint should be dismissed because the Receiver fails to allege any facts
demonstrating that the severance payments Stanford paid to Defendants qualify as fraudulent
transfers under TUFTA. Brief in Supp. at 7 [2175]. First, Defendants argue that the
Employee Complaint contains only conclusory allegations that the severance payments were
made with actual intent to hinder, delay, or defraud, or that they were made in furtherance

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of any alleged Ponzi scheme. Id at 8. Second, Defendants allege that the Receiver makes
no more than conclusory allegations that the debtor (Stanford) failed to receive reasonably
equivalent value from Defendants. Id.
The Receiver pleads sufficient facts showing that Stanford transferred the severance
payments with actual intend to defraud. In the Fifth Circuit, the Receiver may establish
actual intent to defraud under section 24.005(a)(1) by showing that the Stanford enterprise
operated as a Ponzi scheme. Janvey v. Alguire, 647 F.3d 585, 598 (5th Cir. 2011); see also
Janvey v. Brown, 767 F.3d 430, 439 (5th Cir. 2014) (“In this circuit, proving that [a
transferor] operated as a Ponzi scheme establishes the fraudulent intent behind the transfers
it made.”) (quotations and citations omitted).
In the Employee Complaint, the Receiver pleads that fraudulent “CD sales generated
substantially all of the income” for Stanford and that the money generated from these sales
funded the severance payments Stanford transferred to Defendants. Employee Compl. at
¶¶ 2–4. The Receiver alleges that “Stanford orchestrated and operated a wide-ranging Ponzi
scheme” and that “transfers from the fraudulent Ponzi scheme . . . were transferred by
Stanford to the Former Employees solely for the purpose of concealing and perpetuating the
fraudulent scheme.” Id. at ¶¶ 22, 34. The Receiver further alleges that Stanford made these
transfers “with actual intent to hinder, delay, or defraud Stanford’s creditors.” Employee
Compl. at ¶ 64. Accordingly, the Receiver alleged facts showing that Stanford transferred
the severance payments to Defendants as part of a Ponzi scheme, satisfying the actual-intent-

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to-defraud element necessary to state a claim under section 24.005(a)(1) of TUFTA. Id. at
¶¶ 22, 34, and 64.
Defendants next argue that the Receiver made only conclusory allegations that the
debtor failed to receive reasonably equivalent value from Defendants. However, for
Defendants facing a section 24.005(a)(1) “actual intent” to defraud claim, Defendants have
the burden to show that they “took [the transfer] in good faith and for a reasonably equivalent
value.” TEX. BUS. & COM. CODE § 24.009(a). Defendants have the burden to show both
objective good faith and the exchange of reasonably equivalent value. See, e.g., Hahn v.
Love, 321 S.W.3d 517, 526 (Tex. App. – Houston [1st Dist.] 2009, pet. denied) (citations
omitted). The transferee’s knowledge is irrelevant to determining whether transfers were
made with an intent to defraud. See, e.g., Schonsky, 247 F. App’x at 586. The Defendants
do not establish that they qualify for TUFTA’s affirmative defense. Clark v. Amoco Prod.
Inc., 794 F.2d 967, 970 (5th Cir. 1986) (nothing that a court should grand dismissal under
Rule 12(b)(6) “if a successful affirmative defense appears clearly on the face of the
pleadings”) (citations omitted).

The Receiver’s fraudulent transfer claim survives

Defendants’ Rule 12(b)(6) challenge.
C. The Receiver Adequately Claims that He Is Entitled to Unjust Enrichment
Disgorgement
“Unjust enrichment is an equitable principle holding that one who receives benefits
unjustly should make restitution for those benefits,” regardless of whether the defendant
engaged in any wrongdoing. Texas Integrated Conveyor Sys., Inc. v. Innovative Conveyor
Concepts, Inc., 300 S.W.3d 348, 367 (Tex. App. – Dallas 2009, pet. denied) (citations

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omitted). “Unjust enrichment occurs when the person sought to be charged has wrongfully
secured a benefit or has passively received one which it would be unconscionable to retain.”
Id. (citation omitted). “A party may recover under the unjust enrichment theory when one
person has obtained a benefit from another by fraud, duress, or the taking of an undue
advantage.” Heldenfels Bros. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992)
(citations omitted).
The Receiver pleads unjust enrichment as an equitable doctrine that entitles him to
disgorgement pursuant to unspecified “applicable law.” Employee Compl. at ¶ 65. Some
Texas authorities hold that plaintiffs cannot state a claim for unjust enrichment as an
independent cause of action under Texas law. See, e.g., Casstevens v. Smith, 269 S.W.3d
222, 229 (Tex. App. – Texarkana 2008, pet. denied). However, other Texas courts –
including the Supreme Court of Texas – have suggested otherwise. See, e.g., Fortune
Production Co. v. Conoco, Inc., 52 S.W.3d 671, 682–86 (Tex. 2000) (upholding summary
judgment on some of plaintiff’s unjust enrichment claims); see also McAfee, Inc. v. Agilysys,
Inc., 316 S.W.3d 820, 828 (Tex. App. – Dallas 2010, pet. denied) (upholding trial court’s
grant of summary judgment on claims for both unjust enrichment and money had and
received); Texas Integrated, 300 S.W.3d at 367, 380–81 (discussing plaintiff’s “unjust
enrichment claim” and “elements” comprising such a claim); accord Biliouris v. Sundance
Res., Inc., 559 F. Supp. 2d 773, 739 (N.D. Tex. 2008) (Godbey, J.) (noting that “it is unclear
under Texas law whether unjust enrichment is an independent cause of action”) (citations
omitted).

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Given this varied authority, the Receiver’s failure to identify the specific cause of
action that provides an unjust enrichment remedy is not fatal to his alternative claim. Texas
courts have read claims for “unjust enrichment” as pleading an equitable common law claim
for money had and received. See, e.g., London v. London, 192 S.W.3d 6, 12–14 (Tex. App.
– Houston [14th Dist.] 2005, pet. denied) (noting, in case where pro se plaintiff brought
unjust enrichment claim, that an “action for money had and received is an equitable doctrine
that courts apply to prevent unjust enrichment”) (citation omitted). Indeed, the two claims
are substantively identical. See id. (“[A claim for money had and received] is not premised
on wrongdoing, but looks to the justice of the case and inquires whether the party has
received money that rightfully belongs to another.”) (citation omitted); see also Staats v.
Miller, 243 S.W.2d 686, 687–88 (Tex. 1951) (“The question, in an action for money had and
received, is to which party does the money, in equity, justice, and law, belong. All plaintiff
need show is that defendant holds the money which in equity and good conscience belongs
to him.” (quoting 58 C.J.S. MONEY RECEIVED § 4a, at 913) (internal quotations omitted)).
Regardless of whether Texas law allows an “unjust enrichment” claim or requires pleading
a claim for money had and received, the Receiver states claims under either “applicable law.”
Employee Compl. at ¶ 65.
1. The Receiver’s Unjust Enrichment Claim Satisfies Rule 12(b)(6). — Defendants
argue that the Receiver fails to state a claim for unjust enrichment because the subject matter
of the suit – the severance payments – were paid pursuant to an express separation
agreement. Brief in Supp. at 8. Defendants next allege that the Receiver fails to allege any

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facts showing fraud, duress, or the taking of undue advantage by Defendants. Id. The Court
rejects both arguments.
Defendants’ separation agreements do not bar the Receiver’s claim for unjust
enrichment. The Defendant cites to Baxter v. PNC Bank Nat. Ass’n, 541 Fed. Appx. 395,
397 (5th Cir. 2013) for the proposition that there can be no recovery based on unjust
enrichment when the same subject matter is governed by an express contract. Brief in Supp.
at 8. Under Texas law, generally speaking, “when a valid, express contract covers the
subject matter of the parties’ dispute, there can be no recovery under a quasi-contract theory
. . . because parties should be bound by their express agreements.” Fortune Prod. Co., 52
S.W.3d at 684 (“When a valid agreement already addresses the matter, recovery under an
equitable theory is generally inconsistent with the express agreement.”) (emphasis added).
Here, the Receiver alleges that Stanford’s separation agreements with Defendants are “void
and unenforceable,” as Defendants “either performed no services in exchange for the
[severance payments] or performed only services that were in furtherance of the Ponzi
scheme . . . .” Employee Compl. at ¶¶ 35, 36. This Court rejected a similar argument that
such contracts preclude a claim for unjust enrichment because fact issues existed as to the
validity of the contracts. See Case No. 3:11-cv-00297-N-BG, Dkt. 62 at 2–3 (denying
motion for summary judgment where defendant failed to demonstrate that employment
contract precluded Receiver’s unjust enrichment claim, stating “that genuine issues of
material fact exist concerning Romero’s involvement in promoting, protecting, and
participating in the Stanford Ponzi scheme, which leaves multiple questions unanswered

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relating to the validity of any such employment contract”). Accordingly, Defendants’
separation agreements do not preclude Receiver’s claim for unjust enrichment.
The Receiver likewise pleads sufficient facts showing that Defendants received the
severance payments by fraud, duress, or undue advantage. Defendants allege that the
Employee Complaint contains no facts showing any fraud, duress, or the taking of undue
advantage by Defendants. Brief in Supp. at 8. Unjust enrichment, however, is an equitable
principle holding that one who receives benefits unjustly should make restitution for those
benefits, regardless of whether the defendant engaged in wrongdoing. Texas Integrated, 300
S.W.3d at 367 (“Unjust enrichment occurs when the person sought to be charged has
wrongfully secured a benefit or has passively received one which it would be unconscionable
to retain.”). The Receiver alleges that proceeds from fraudulent CD sales funded the
transfers Stanford made to Defendants and that such transfers “from the fraudulent Ponzi
scheme . . . were paid by Stanford to the Former Stanford Employees solely for the purpose
of concealing and perpetuating the fraudulent scheme.” Employee Compl. at ¶¶ 2–4, 34.
Thus, according to the Receiver, the Defendants’ severance payments effectively constituted
“little more than stolen money” properly belonging to the Receivership Estate. Id. at ¶ 3.
These claims allege that Defendants obtained a benefit from the Stanford Ponzi scheme that
equity dictates they cannot retain justly.

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CONCLUSION
In this action, the Receiver represents creditors defrauded by Stanford’s scheme in
their recovery efforts. The Receiver states claims under Rule 12(b)(6). Accordingly, the
Court denies the Defendants’ motion to dismiss.

Signed September 11, 2018.

_________________________________
David C. Godbey
United States District Judge

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