48 F.4th 896
8th Cir.2022Background
- Ritchie loaned about $189 million to Petters-related companies, secured by Polaroid stock; Tom Petters was operating a large Ponzi scheme and was later arrested.
- The Petters companies filed bankruptcy; trustees succeeded to causes of action belonging to the debtors and settled claims with JP Morgan.
- Bankruptcy courts entered bar orders prohibiting creditors from pursuing claims that belonged to the trustees.
- Ritchie sued JP Morgan (a fellow creditor) and Richter Consulting, alleging aiding-and-abetting and fraudulent-transfer claims to recover its losses.
- The district court dismissed Ritchie’s complaint; the Eighth Circuit affirmed, holding most claims belong to the bankruptcy trustees and the remaining aiding-and-abetting claim against Richter failed for insufficient factual allegations of actual knowledge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ritchie may pursue an aiding-and-abetting claim against JP Morgan or whether that claim belongs to the bankruptcy estate | Ritchie: claim is personal to its loss and may be litigated by the creditor | JP Morgan/Trustees: claim is general to the estate; only the trustee may bring it; bar orders preclude creditor suits | The claim belonged to the trustees; Ritchie lacks bankruptcy standing and is barred from suing JP Morgan |
| Whether Ritchie may bring fraudulent-transfer claims against JP Morgan | Ritchie: transfers to JP Morgan were fraudulent and Ritchie can sue to recover | JP Morgan/Trustees: fraudulent-transfer claims are estate property and only the trustee has standing | Only the trustee may bring fraudulent-transfer claims; Ritchie lacks standing |
| Whether Ritchie plausibly pleaded that Richter Consulting aided-and-abetted Petters’s fraud under New York law (actual knowledge element) | Ritchie: Richter’s due-diligence reports and its discovery of suspicious Polaroid accounting show it knew of the fraud | Richter: allegations show at most constructive knowledge or are conclusory; no plausible allegation of actual knowledge | Complaint fails to plausibly allege Richter had actual knowledge of Petters’s fraud; aiding-and-abetting claim dismissed |
Key Cases Cited
- In re Senior Cottages of Am., LLC, 482 F.3d 997 (8th Cir. 2007) (trustee owns debtor’s causes of action on behalf of the estate)
- In re Wilton Armetale, Inc., 968 F.3d 273 (3d Cir. 2020) (distinguishing general estate claims from creditor-specific claims for bankruptcy standing)
- In re Lauer, 98 F.3d 378 (8th Cir. 1996) (only trustee may bring fraudulent-transfer claims)
- Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) (NY law requires actual knowledge for aiding-and-abetting fraud)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (complaint must plead facts plausibly showing entitlement to relief)
- SPV Osus Ltd. v. UBS AG, 882 F.3d 333 (2d Cir. 2018) (requiring plausible factual allegations to show defendant’s actual knowledge in aiding-and-abetting claims)
- Finn v. All. Bank, 860 N.W.2d 638 (Minn. 2015) (describing elements of fraudulent-transfer claims under Minnesota law)