960 F.3d 1037
8th Cir.2020Background
- Between Feb–May 2008 five Ritchie entities loaned Tom Petters and his companies ≈ $189 million; after Petters’s Ponzi scheme unraveled the Ritchies recovered only a small portion and sued various banks (notably JP Morgan and JP Morgan Europe), Richter Consulting, and Syndicate Lenders, alleging they enabled/concealed the fraud and laundered loan proceeds.
- Ritchie filed in New York state court (Jan 2014); some defendants removed to federal court (SDNY), which denied remand under the Edge Act and § 1334(b) and transferred the case to Minnesota; the bankruptcy court and Trustees became involved.
- The Ritchies’ Second Amended Complaint asserted 22 claims (aiding/abetting fraud, conversion, negligence, unjust enrichment, fraudulent conveyance, etc.).
- The district court dismissed the claims as time‑barred under Illinois’s 5‑year limitations period (applying New York’s borrowing statute) and found no personal jurisdiction over JP Morgan Europe.
- On appeal the Eighth Circuit: (a) affirmed dismissal as to Ritchie Capital Management, LLC and Yorkville Investment I, LLC; (b) reversed dismissal as to three Cayman entities (Ritchie Special Credit Invs., Ltd.; Rhone Holdings II, Ltd.; Ritchie Capital Management SEZC, Ltd.) because accrual location was not established; and (c) remanded to permit jurisdictional discovery as to JP Morgan Europe if the district court deems it necessary.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject‑matter jurisdiction (Edge Act) | Federal jurisdiction lacking; remand required | Edge Act and bankruptcy‑related jurisdiction support removal | Edge Act jurisdiction exists (district court correct to hear case) |
| Choice‑of‑law & borrowing statute (plaintiff residency / place of accrual) | Apply federal choice‑of‑law or Minnesota law; some Ritchies were NY residents so borrowing statute inapplicable | Apply New York choice‑of‑law and N.Y. C.P.L.R. §202; Ritchie Capital was Illinois resident | New York choice‑of‑law governs; Ritchie Capital is Illinois resident; but accrual location for Cayman entities not established—their dismissals reversed |
| Statute of limitations / tolling (discovery rule, equitable estoppel, equitable tolling) | Discovery rule, equitable estoppel or tolling saved claims; plaintiffs were prevented from discovering defendants’ roles | Claims accrued with the loans (Feb–May 2008) and are time‑barred; equitable doctrines inapplicable | For Illinois plaintiffs claims accrued and are time‑barred; discovery rule/estoppel/tolling do not apply here; Cayman entities unresolved on accrual so reinstated |
| Personal jurisdiction over JP Morgan Europe | District court should have exercised jurisdiction or permitted jurisdictional discovery | JP Morgan Europe lacks constitutionally sufficient contacts with forum | Court found no error in district court’s jurisdictional analysis but remanded so district court may allow jurisdictional discovery in light of Cayman entities’ revival |
Key Cases Cited
- United States v. Petters, 663 F.3d 375 (8th Cir. 2011) (describing Petters’s Ponzi scheme)
- Ferens v. John Deere Co., 494 U.S. 516 (U.S. 1990) (transferee court applies transferor forum's choice‑of‑law)
- Sollitt v. KeyCorp, [citation="463 F. App'x 471"] (6th Cir. 2012) (discussing Edge Act jurisdiction scope)
- Am. Int’l Grp., Inc. v. Bank of Am. Corp., 712 F.3d 775 (2d Cir. 2013) (Edge Act requires nexus to offshore banking of federally chartered bank)
- A.I. Trade Fin., Inc. v. Petra Int’l Banking Corp., 62 F.3d 1454 (D.C. Cir. 1995) (rejecting federal common‑law choice‑of‑law for Edge Act suits)
- Khan v. Deutsche Bank AG, 978 N.E.2d 1020 (Ill. 2012) (Illinois accrual and discovery‑rule principles)
- Glickert v. Loop Trolley Transp. Dev. Dist., 792 F.3d 876 (8th Cir. 2015) (plaintiff must proffer proposed amendment to preserve right to amend)