751 F.Supp.3d 733
E.D. Ky.2024Background
- Bernard Tew, a Kentucky resident and trustee of Bluegrass Retirement Group Trust, sued UK-based MCML LTD (formerly ED&F) alleging a $70 million fraud connected to a European dividend arbitrage trading scheme.
- Alleged fraudulent activity occurred between 2012 and 2015, using Bluegrass as a conduit in “cum-ex” trades that generated false tax refund claims to foreign authorities.
- Tew claims he was unaware of the fraud until 2021 due to alleged concealment by ED&F, and that this led to significant legal issues, including a $39 million lawsuit by the Danish tax authority and personal bankruptcy.
- The present action tested subject matter jurisdiction, personal jurisdiction over ED&F, and whether the claims were timely under various limitations and repose doctrines.
- The defendant moved to dismiss on multiple grounds, including lack of jurisdiction, failure to state a claim, and statutes of limitation/repose. The court conducted a detailed analysis of federal and Kentucky procedural and substantive law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III Standing | Tew personally suffered loss and reputational harm due to the fraud. | Only Bluegrass (not Tew) lost funds; SKAT settlement unpaid; damages speculative. | Standing established; court can hear the case. |
| Personal Jurisdiction | ED&F transacted business in Kentucky (contracts, withdrawals, emails). | Mere contract with Kentuckian insufficient contact for jurisdiction. | Kentucky long-arm jurisdiction and Due Process satisfied. |
| RICO Statute of Limitations | Claim tolled by concealment/discovery in 2021. | RICO claim accrues on discovery of injury (at latest 2018); suit untimely. | RICO claims dismissed as time-barred. |
| State Law Tolling (Confidential Fiduciary) | ED&F’s fiduciary role tolled claims until actual discovery of fraud (2021). | No fiduciary relationship; statutes of limitation run from when Tew learned or should’ve of injury. | Tolling applied due to confidential relationship; most state claims timely. |
| Statute of Repose on Fraud/Misrepresentation | Tolling or concealment should override statute of repose. | Statute of repose provides absolute 10-year bar, not subject to tolling. | Claims re: conduct before Dec. 2013 dismissed under statute of repose. |
| Breach of Contract (Borrowing Statute) | Kentucky 15-year statute should apply. | UK’s 6-year statute applies because breach occurred in UK. | UK limitations period applied; contract claim dismissed as untimely. |
| Rule 9(b) Pleading Particularity | Fraud pled with sufficient specificity for time, place, content, and scheme. | Allegations too general, fail to specify reliance and misrepresentation. | Fraud/negligent misrepresentation claims post-Dec. 2013 survive. |
| Conversion/Unjust Enrichment/Indemnity | Sufficient facts for conversion; unjust enrichment based on defendants’ profits; indemnity due to SKAT liability. | Legal title passed to ED&F; unjust enrichment inapplicable; no indemnity liability for Bluegrass. | Conversion, Tew’s indemnity survive; unjust enrichment/Bluegrass indemnity dismissed. |
Key Cases Cited
- DaimlerChrysler Corp. v. Cuno, 547 U.S. 332 (constitutional limits on federal court jurisdiction)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (due process for personal jurisdiction)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard for 12(b)(6) motions)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (complaint must state a plausible claim for relief)
- Rotella v. Wood, 528 U.S. 549 (RICO accrual on discovery of injury)
- Klehr v. A.O. Smith Corp., 521 U.S. 179 (RICO statute of limitations is four years)
- Caesars Riverboat Casino, LLC v. Beach, 336 S.W.3d 51 (Kentucky’s long-arm statute)
- Munday v. Mayfair Diagnostic Lab’y, 831 S.W.2d 912 (concealment and confidential relationships in Kentucky law)
- McCollum v. Sisters of Charity of Nazareth Health Corp., 799 S.W.2d 15 (statutes of repose not subject to equitable tolling)