Ralph Janvey v. Libyan Investment Authority
840 F.3d 248
| 5th Cir. | 2016Background
- The SEC placed Allen Stanford’s entities (including Stanford International Bank, SIB) into receivership; Ralph Janvey was appointed receiver to recover assets for defrauded investors.
- LFICO (Libyan Foreign Investment Company) bought $138 million of SIB-issued CDs and later redeemed/received about $50 million in redemption proceeds; LFICO is wholly owned by LIA, which is majority-owned by Libya.
- LFICO’s CD transactions were executed via accounts in Libya and Switzerland; SIB and related Stanford entities operated from Antigua, Canada, England, and the United States (the Ponzi scheme had U.S. bases).
- The receiver sued LFICO and LIA for fraudulent transfer and unjust enrichment (alleging LFICO was LIA’s alter ego or agent) seeking to disgorge CD proceeds; LIA/LFICO moved to dismiss asserting FSIA immunity.
- After jurisdictional discovery, the district court held LIA immune under FSIA but denied immunity for LFICO under the FSIA’s commercial-activity exception (finding LFICO’s foreign acts had a direct U.S. effect).
- The Fifth Circuit affirmed that the district court lacked jurisdiction over LIA, vacated the ruling as to LFICO, and remanded to decide whether LFICO qualifies as an “organ” (and thus a foreign state) under the FSIA before reaching the commercial-activity question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LIA and LFICO are “foreign states” under the FSIA | Janvey assumed both are FSIA foreign states and argued exceptions apply | LIA/LFICO (and parties) agreed they qualify; but court must independently decide | Court: LIA is an agency/instrumentality (majority-owned by Libya); status of LFICO as an "organ" of Libya unresolved — remand for factual development |
| Whether LFICO’s CD transactions fall within FSIA commercial-activity exception (third clause: foreign act causing direct U.S. effect) | Janvey: LFICO’s redemptions furthered Stanford’s U.S.-based Ponzi scheme and thus had a direct U.S. effect | LFICO: transactions occurred abroad under SIB contracts and did not obligate or cause an immediate U.S. effect | Court: District erred — LFICO’s foreign acts did not cause the requisite direct U.S. effect; third-clause nexus not satisfied |
| Whether first/second clauses of commercial-activity exception apply (acts in U.S. or acts in U.S. connected to foreign commercial activity) | Janvey: some LFICO personnel visited U.S. and SIB was effectively U.S.-based (scheme) | LFICO: CDs are contracts with SIB (Antigua); no required U.S. activity; visits unrelated to CD redemptions | Court: No basis shown that LFICO carried on commercial activity in U.S. or performed relevant acts in U.S.; exception does not apply absent more |
| Whether LIA is liable as LFICO’s alter ego/agent or as a TUFTA transfer beneficiary | Janvey: LFICO was LIA’s alter ego/agent and transfers to LFICO were for LIA’s benefit under TUFTA | LIA: LFICO operated independently; LIA did not control LFICO’s CD decisions and did not receive the transfers | Court: District correctly found LFICO not LIA’s agent/alter ego; LIA not a TUFTA transfer beneficiary — LIA immune under FSIA |
Key Cases Cited
- Janvey v. Adams, 588 F.3d 831 (5th Cir. 2009) (precluded receiver’s prior disgorgement claims against investors in Stanford scheme)
- Dole Food Co. v. Patrickson, 538 U.S. 468 (2003) (majority ownership—not mere control—is the FSIA ownership benchmark)
- Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (1983) (FSIA provides sole basis for jurisdiction over foreign states; exceptions supply jurisdictional nexus)
- First Nat’l City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611 (1983) (treatment of separate juridical status of state instrumentalities)
- Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992) (defining “direct effect” for FSIA commercial-activity analysis)
- Arbaugh v. Y & H Corp., 546 U.S. 500 (2006) (subject-matter jurisdiction cannot be waived)