Ritchie Capital Management, L.L.C. v. Jeffries
2011 U.S. App. LEXIS 18469
| 8th Cir. | 2011Background
- Ritchie Capital and related entities incurred losses from Petters's $3.65 billion Ponzi scheme; Petters and related entities are not named defendants here, but the case targets two officers, Jeffries and Chee-Awai, for alleged fraud and related torts.
- Ritchie loaned over $100 million to PGW with Polaroid assets as purported security; Ritchie alleges Jeffries and Chee-Awai misrepresented security interests and the legitimacy of Petters's businesses.
- Polaroid assets were placed in bankruptcy and a receivership with an anti-suit injunction froze assets and barred new actions interfering with the receiver's assets or documents.
- District court dismissed the action as barred by the Receivership Order's anti-suit provision; Ritchie appealed.
- Eighth Circuit reversed, holding the Receivership Order did not bar the action, rejected broad interpretation of the anti-suit clause, and remanded for proceedings; additional challenge to common law fraud pleading was sustained for pleading sufficiency.
- Ritchie’s common law fraud claim passed Rule 9(b)/Rule 12(b)(6 pleading standards; the court did not address abstention, causation, or absolute privilege defenses on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Receivership Order's anti-suit injunction bar this action? | Ritchie | Jeffries/Chee-Awai | No; injunction not broad enough to bar this suit |
| Did the receivership court have power to prevent suit by non-debtors? | Ritchie | Jeffries/Chee-Awai | Unusual-circumstance stay not applicable; no stay against non-debtors |
| Is Ritchie’s common law fraud count sufficiently pled under Rule 9(b) and Rule 12(b)(6)? | Ritchie | Jeffries/Chee-Awai | Plaintiff adequately pled misrepresentations and intent; relief supported |
Key Cases Cited
- Wealth Mgmt. LLC, 628 F.3d 323 (7th Cir. 2010) (bankruptcy-like stay analogies in receivership contexts)
- McCartney v. Integra Nat'l Bank N., 106 F.3d 506 (3d Cir. 1997) (automatic stay concepts and non-debtor stays)
- A.H. Robins Co. v. Piccinin, 788 F.2d 994 (4th Cir. 1986) (non-debtor stay principles and ancillary relief)
- Liberte Capital Grp. v. Capwill, 462 F.3d 543 (6th Cir. 2006) (breadth of receivership powers and stays)
- SEC v. Wencke, 622 F.2d 1363 (9th Cir. 1980) (ancillary relief in equity receiverships)
- Sav-A-Trip, Inc. v. Belfort, 164 F.3d 1137 (8th Cir. 1999) (limitations on broad stays against non-debtors)
- Croyden Assocs. v. Alleco, Inc., 969 F.2d 675 (8th Cir. 1992) (economic consequence test for stays against non-debtors)
- Sav-A-Trip, Inc. v. Belfort, 164 F.3d 1137 (8th Cir. 1999) (abstention and stay considerations in overlapping actions)