107 F. Supp. 3d 216
D. Conn.2015Background
- This case is an ancillary action by the court-appointed Receiver (John J. Carney) to recover funds transferred from Illarramendi’s receivership entities in connection with a Ponzi-style securities fraud scheme exceeding $300 million.
- The Receiver alleges Mawad, M. Holding, Horion, Montelli and related entities received/assisted in transferring over $71 million of receivership funds via shell companies set up to conceal ownership and move cash offshore.
- Mawad and M. Holding moved to dismiss raising defects in service, personal jurisdiction, subject-matter jurisdiction/standing (including Wagoner and CUFTA challenges), forum non conveniens, statute of limitations, and insufficiency of pleadings.
- Mawad initially contested in-person service but withdrew that challenge; he still disputes service on Horion and M. Holding and denies control of those entities.
- The Receiver pleads CUFTA claims (actual and constructive fraudulent transfer), unjust enrichment, money had and received, and accounting; Receiver withdrew common-law fraudulent transfer and conversion counts in opposition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Service of process on corporate defendants | Service on Mawad and on companies via Mawad as managing/general agent was proper; corporations are alter egos | Mawad was not present for personal service; he lacked authority to accept service for Horion and M. Holding; Horion was dissolved | Court denied dismissal for inadequate service as Receiver made a prima facie showing that Mawad exercised control and that veil-piercing/alter-ego allegations warrant discovery and preclude dismissal |
| Personal jurisdiction under federal receivership statutes (28 U.S.C. §§754,1692) | Nationwide service/statutory filing + alleged U.S./Florida assets and presence of receivership cash in Florida support jurisdiction | Statutes don’t confer jurisdiction absent property located in U.S.; insufficient particularization of U.S.-located receivership property | Court found plausible allegations that receivership cash or assets purchased with it are in Florida; statutory nationwide service and alleged contacts suffice and Due Process concerns not shown |
| Standing / subject-matter jurisdiction (Wagoner rule; CUFTA creditor status) | Receiver has standing to assert claims on behalf of receivership entities (creditors); Ponzi presumption supports fraudulent intent/insolvency | Wagoner and in pari delicto bar claims because entities were involved with wrongdoer; Receiver was not a creditor at time of transfers | Court followed Scholes/Eberhard line: Receiver has standing to sue on behalf of dominated/controlled entities; Receiver alleges receivership entities were creditors when scheme began, so CUFTA standing is satisfied |
| Forum non conveniens | Receiver’s Connecticut forum entitled to substantial deference; related centralized proceedings in Connecticut; foreign litigation would be inefficient/inconsistent | Venezuela is an adequate and more convenient forum; deference to plaintiff’s choice is limited | Court denied dismissal: gave substantial deference to Receiver’s forum choice and found defendants failed to show balance of private/public interests favors Venezuela |
| Statute of limitations on equitable claims | Unjust enrichment is equitable; court may relax strict statutes of limitations | Common-law fraudulent transfer, conversion and tort claims are time-barred under Conn. Gen. Stat. §52-577 | Receiver withdrew common-law fraudulent transfer and conversion claims; court denied dismissal of unjust enrichment as equitable and not strictly time-barred |
| Sufficiency of pleading under CUFTA (actual & constructive fraud) | Complaint pleads transfers, creditor relationship, Ponzi presumption of intent and presumptive insolvency; adequate factual detail | Allegations are conclusory; fail to plead specific fraudulent intent or lack of reasonably equivalent value for particular transfers | Court held allegations plausible: Ponzi presumption supplies intent; Receiver sufficiently pleaded constructive and actual CUFTA claims for pleading-stage purposes |
Key Cases Cited
- Scholes v. Lehmann, 56 F.3d 750 (7th Cir.) (receiver for entities dominated by wrongdoer may assert fraudulent-transfer claims)
- Eberhard v. Marcu, 530 F.3d 122 (2d Cir.) (distinguishes Scholes; receiver may sue on behalf of coerced/dominated transferor entities)
- In re Bernard L. Madoff Inv. Sec. LLC, 721 F.3d 54 (2d Cir.) (Wagoner/in pari delicto can bar claims where entity is indistinguishable from wrongdoer)
- U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., 241 F.3d 135 (2d Cir.) (when federal statute authorizes nationwide service, court may consider contacts with the U.S. as a whole)
- Int’l Shoe Co. v. Washington, 326 U.S. 310 (U.S.) (minimum contacts due process standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S.) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S.) (pleading must contain factual content to state plausible claim)