933 F. Supp. 2d 365
D. Conn.2013Background
- This case is ancillary to an SEC enforcement action against Illarramendi for securities violations and involves a receivership estate with a named Receiver seeking to recover funds for investors and creditors.
- The HVP Partners entity, its fiduciaries Lopez, Luth, and Chong, and others allegedly facilitated a Ponzi-like scheme diverting approximately $35.5 million from receivership assets.
- Peláez and Barrantes are Costa Rican residents with bank accounts in Florida and New York linked to transfers from receivership entities; they were served in Connecticut under Rule 4(k) targeting in a three-step personal jurisdiction analysis.
- The Receiver asserts nine counts including fraudulent transfers (actual and constructive), breach of fiduciary duty, unjust enrichment, constructive trust, conversion, and accounting; several claims relate to a Ponzi scheme led by Illarramendi.
- Defendants move to dismiss for lack of personal jurisdiction and pleading sufficiency, and also move to strike portions of the complaint.
- The court grants in part and denies in part the motions, addressing jurisdiction, Rule 9(b) applicability, unclean hands, fraud claims, remedies, and statutes of limitations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court has personal jurisdiction over Peláez and Barrantes | Receiver relies on federal receivership statute §754 and service under Rule 4(k). | Statute cannot confer jurisdiction because property not properly identified or located; concerns about in rem jurisdiction. | Receiver established personal jurisdiction over Peláez and Barrantes; service complied with §754 and §1692. |
| Whether Rule 9(b) applies to the fraud claims and which counts require it | Rule 9(b) applies to actual fraud; constructive fraud not subject; some counts lack fraud claims. | Purported need for particularity for all fraud claims; some claims require higher pleading. | Rule 9(b) applies to actual fraud; Counts Two and Three (constructive fraud) are not subject; Counts Five and others with no fraud claim are not governed by 9(b). |
| Whether unclean hands/in pari delicto bars Receiver's claims | Insiders’ conduct cannot bar Receiver’s claims against entities controlled by the fiduciaries. | In pari delicto applies to insiders and could bar claims. | Defense denied; in pari delicto does not bar fiduciary-receiver claims at this stage; issue of fact remains. |
| Standing and pleading for CUFTA actual fraud and constructive fraud claims | Receiver, as creditor/representative, pleads transfers during Ponzi-like scheme with actual/constructive fraud; Ponzi presumption may apply. | Receiver lacks precise standing shoes and needs more specific timing; needs more explicit fraudulent intent or value analysis. | Standing found; actual fraud timely under discovery rule; constructive fraud pled with reliance on Ponzi presumption and sufficient badges of fraud; insolvency and value elements addressed. |
| Remedy theory for constructive trust; sufficiency of other claims (conversion, accounting, unjust enrichment) | Constructive trust sought as remedy; claims for unjust enrichment and accounting are viable; conversion properly pled. | Constructive trust is mischaracterized as independent claim; some arguments require dismissal. | Constructive trust treated as remedy (not standalone); conversion and unjust enrichment survive; accounting claim denied on statute/scope for now but may renew. |
Key Cases Cited
- Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779 (2d Cir. 1999) (personal jurisdiction considerations in pleading context)
- Ensign-Bickford Co. v. ICI Explosives USA Inc., 817 F. Supp. 1018 (D. Conn. 1993) (informing pleading standards and jurisdictional analysis)
- In re Sharp Int’l, 403 F.3d 43 (2d Cir. 2005) (badges of fraud and scope of fraudulent conveyance claim)
- In re Manhattan Inv. Fund Ltd., 397 B.R. 1 (Bankr. S.D.N.Y. 2008) (Ponzi scheme characterization and fraudulent transfer analysis)
- In re Mediators, Inc., 105 F.3d 826 (2d Cir. 1997) (in pari delicto and fiduciary-insider limitations)
- Hi-Ho Tower, Inc. v. Com-Tronics, Inc., 255 Conn. 20 (Conn. 2000) (fiduciary duties and factual determinations in contract/ownership context)
- Cendant Corp. v. Shelton, 474 F. Supp. 2d 377 (D. Conn. 2007) (constructive fraud, pleading standards and remedies)
- Waters v. Indus. & Commercial Bank of China, 651 F.3d 280 (2d Cir. 2011) (statute-of-limitations considerations in pleading)