MEMORANDUM OPINION AND ORDER
“Pоnzi schemes leave no true winners once the scheme collapses.” Donell v. Rowell,
BACKGROUND
Petters and others orchestrated and participated in a Ponzi scheme lasting over a decade. They laundered more than $40 billion through two companies Petters controlled, Petters Company, Inc. (“PCI”) and Petters Group Worldwide, LLC (“PGW”), and other affiliated entities.
In late 2008, the FBI learned of the fraud and the Ponzi scheme imploded; Petters was arrested and later convicted of 20 counts of mail fraud, wire fraud, money laundering, and conspiracy. He is currently serving a 50-year prison sentence. Following his conviction, the Court entered a criminal forfeiture money judgment against him for more than $3.5 billion in fraud proceeds. (See Doc. No. 395 in Crim. No. 08-364.) That judgment remains outstanding.
Shortly after Petters wаs arrested, the United States filed an application under the fraud injunction statute, 18 U.S.C. § 1345, asking this Court to place Petters, PCI, PGW, and others into civil receivership. On October 6, 2008, the Court (Montgomery, J.) granted that application and appointed Kelley as the equity receiver for these individuals and companies, as well as the Foundation. He was granted the authority to “sue for, collect, receive, take in possession, hold, liquidate, or sеll and manage all assets of these” individuals and entities. Kelley then placed PCI and PGW into bankruptcy and was appointed the trustee of their bankruptcy estates.
Meanwhile, the United States sought to forfeit certain assets previously held by Petters and others as part of the criminal proceedings against them. This resulted in substantial overlap in the property subject to the bankruptcy proceedings, the receivership action, аnd the government’s forfeiture efforts. To avoid stepping on each other’s toes, so to speak, Kelley and the government entered into a “Coordination Agreement” approved by both the Bankruptcy Court and Judge Montgomery. Under that agreement, the government would use its forfeiture powers to recover assets fraudulently transferred by the individuals to certain third parties. In return, Kelley would seek to recover from “religious, charitаble, educational and/or political institutions” any “donations and gifts” made “on behalf of [Petters], [the] Foundation or other Receiver entities.” (Def. Mem. Ex. B, § 1(B)(3)(b).)
The specter of such “clawback” litigation did not go unnoticed. Indeed, Kelley once publicly estimated that more than $400 million in charitable contributions by Petters and his associates were potentially subject to clawback. See http://www. startribune.com/politics/statelocal/ 146014325.html (last visitеd October 22, 2012). Apparently concerned that nonprofits, charities, religious organizations and the like would be unable to repay donations long after they had been received and spent, Minnesota’s Governor signed legislation on April 3, 2012, redefining the term “transfer” under the MFTA. While claims under the statute were previ
Acting “in his capacity as the court-appointed Receiver of Thomas Joseph Petters [and the] Thomas J. Petters Family Foundation” (Compl. at 1), Kelley commenced the instant action on April 2, 2012, two days before the MFTA amendment took effect. In his Complaint, Kelley asserted four fraudulent-transfer claims against the College, as well as a claim for unjust enrichment, and sought to set aside the pledge in its entirety and recover the $2 million the College had already received. The College moved to dismiss, arguing that the MFTA claims were untimely, based upon the statutory amendment abоve.
In response, Kelley filed an Amended Complaint that is the subject of the instant Motion. The Amended Complaint asserts four claims under the FDCPA (Counts VI-IX), alleging that the pledge and the funds given to the College were fraudulent transfers. He also continues to assert four claims under the MFTA (Counts I-IV) and a claim for unjust enrichment (Count V). The College now moves to dismiss all of these claims. The Motion has been fully briefed, and the Court heard oral argument on October 4, 2012. The Mоtion is now ripe for disposition.
STANDARD OF REVIEW
The Supreme Court set forth the standard for evaluating a motion to dismiss in Bell Atlantic Corp. v. Twombly,
When reviewing a motion to dismiss, the Court “must accept a plaintiffs specific factual allegations as true but [need] not ... accept ... legal conclusions.” Brown v. Medtronic, Inc.,
ANALYSIS
I. The FDCPA claims (Counts VI-IX)
The Court begins its analysis with the FDCPA claims, the crux of the instant
The College’s standing argument actually comprises two separate but related contentions. First, it asserts that a federal equity receiver enjoys standing only to bring claims on behalf of entities in receivership. Second, it asserts that only the United States may bring claims under the FDCPA. Because the FDCPA is rеserved for the government’s exclusive use, and because the government is not in receivership, the College argues that Kelley lacks standing to bring the FDCPA claims. The Court agrees.
A. A receiver may sue only on behalf of receivership entities
The College is correct that an equity receiver may sue only on behalf of the entity (or person) in receivership, not third parties. This is because a receiver “stands in the shoes” of the receivership entity. Lank v. N.Y. Stock Exch.,
Kelley suggests that he enjoys standing because Judge Montgomery’s Order appointing him receiver authorized him to sue on the government’s (and other creditors’) behalf. (Mem. in Opp’n at 3, 19 n. 10.) He notes that the Order empowered him to commence actiоns not only for the receivership individuals and entities, but also for “other persons or entities whose
As the Court pointed out at the hearing, however, it is unclear whether Judge Montgomery intended her order to sweep this broadly. (See id. at 33-34.) More importantly, courts have rejected attempts by receivers to use appointment orders to create standing to sue on behalf of non-receivership entities. This is because “the appointment of a receiver is inherently limited by the jurisdictional constraints of Article III and all other curbs on federal court jurisdiction.” Scholes v. Schroeder,
Relying upon SEC v. Cook, No. CA 3:00-CV-272,
Cook and Butcher v. Howard,
A close reading of Cook reveals that this is what the court meant when stating that receivers may “assert rights and defenses not available to” the recеivership entity. A receiver is not precluded from asserting claims that would be barred by a corporation’s own fraud had the corporation brought the claims on its own behalf.
The College also correctly argues that the provisions of the FDCPA are available only to the United States. The statute “was enacted, in part, to provide a uniform, nationwide mechanism” for the collection of government debts. United States v. Lawrence,
The FDCPA contаins a bevy of other provisions intimating that only the United States may bring claims thereunder. For example, the subsection regarding service of process provides that “[a]t such time as counsel for the United States considers appropriate, ... counsel for the United States shall exercise reasonable diligence to serve [ ] the debtor.” 28 U.S.C. § 3004(c) (emphases added). Similarly, § 3012 authorizes the United States to join non-debtor defendants as parties. See also id. § 3104(b)(2) (listing matters “the United States shall include in its application for a writ of garnishment”) (emphasis added); id. § 3205(b)(1) (same). Nothing in the statute contemplates that a non-governmеnt entity may invoke it. And notably, Kelley acknowledges that the “fraudulent transfer provisions within the FDCPA allow[] the United States, as a creditor, also to avoid navigating and complying with various fraudulent transfer laws adopted by the states.” (Mem. in Opp’n at 13 n. 9 (emphasis added).)
Kelley contends that courts have held “that a receiver may recover fraudulent transfers under the FDCPA on behalf of the United States.” (Mem. in Opp’n at 15.) The Court’s research, however, has failed to uncover any case so holding. The sole case Kelley cites ostensibly supporting this proposition, Lightfoot v. Miss Lou Properties, Inc., Civ. No. 05-3776-PB-SS,
Kelley also argues that the government has “effectively assigned” its FDCPA claims to him under the Coordination Agreement. (Mem. in Opp’n at 21-22.) The word “assignment,” however, is noticeably absent from the relevant portions of the agreement, and nothing therein suggests that the United States intended to assign its rights to him. The agreement simply provides that Kelley would bring claims “on behalf of the Individual Defendants, Thomas J. Petters Family Foundation or other Receiver entities,” not on behalf of third-parties such as the federal government. While Kelley might be correct that “[njothing prevents the United States from assigning or transferring its ability to pursue the remedies available to it under the FDCPA” (id. at 21 (emphasis added)), there is no indication that such an аssignment occurred here. Notably, Kelley acknowledged at oral argument that there was no “direct assignment” in the Coordination Agreement, but he contended that an assignment was implicit in its terms. (10/4/12 Hear. Tr. at 18.) But the Court perceives no reason to read into the agreement something that simply isn’t there — had the government intended to assign to Kelley its rights under the FDCPA, it could have (and should have) done so clearly and explicitly. The fact that it did not do so is telling.
C. The end result
Putting two and two together, the Court reaches the same conclusion as the College. Only the United States can bring FDCPA claims, and Kelley cannot sue on the United States’ behalf because the government is not in receivership and has not assigned its rights to him. Accordingly, Kelley lacks standing to sue under the FDCPA, and Counts VI through IX must be dismissed.
II. The MFTA claims
' There does not appear to be any dispute that the MFTA claims (Counts I-IV) are moot. Kelley acknowledges that these сlaims are not designed to recover the $2 million already paid to the College (as in the FDCPA claims). Rather, they seek to set aside the remaining $1 million of the pledge insofar as it can be construed “as an ‘obligation’ ” — that is, were the College to attempt to recover the remaining funds. (Mem. in Opp’n at 7-8.) Yet, the College has indicated that it will not “attempt[ ] to enforce the Pledge in order to recover the remaining amounts that Petters promised to pay.” (Reply at 14.)
In any event, the parties agree that the MFTA claims are relevant only to the College’s defenses to the FDCPA claims. (See Mem. in Opp’n at 7 n. 6.) As all of the FDCPA claims have been dismissed for the reasons noted above, the MFTA claims will also be dismissed.
Kelley’s final claim asserts that the College was unjustly enriched by the $2 million it received through the pledge. The College argues that an equitable claim, such as unjust enrichment, cаnnot stand where “there is an adequate legal remedy or where statutory standards for recovery are set by the legislature.” (Reply at 15 (quoting Southtown Plumbing, Inc. v. Har-Ned Lumber Co.,
In Soutktown, the Minnesota Court of Appeals held that “[r]elief under the theory of unjust enrichment is not available where there is an adequate legal remedy.”
The MFTA provided Kelley with an adequate legal remedy here. “In order for a legal remedy to be adequate it must be practical and efficient.” Munshi,
Kelley points out that several eases have permitted fraudulent-transfer claims and unjust-enrichment claims to coexist. (See 10/4/12 Hear. Tr. аt 22-24.) This is perhaps not surprising, given that the Federal Rules of Civil Procedure allow for pleading claims in the alternative. See Fed. R.Civ.P. 8(d)(2)-(3). But in any event, the Court has carefully reviewed the cases Kelley has cited,
CONCLUSION
Based on the foregoing, and all the files, records, and proceedings herein, IT IS ORDERED that the College’s Motion to Dismiss (Doc. No. 18) is GRANTED and Kelley’s Amended Complaint (Doc. No. 13) is DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Notes
. The Court may consider the Coordination Agreement when ruling on the instant Motion because it was referenced throughout the Amended Complaint. See Fed.R.Civ.P. 10(c); Moses.com Sec., Inc. v. Comprehensive Software Sys., Inc.,
. The United States is a creditor due to both the criminal forfeiture money judgment аnd unpaid tax liabilities by Petters and the other receivership individuals and entities.
. Kelley also cites Bartholomew v. Avalon Capital Group, Inc.,
. This argument was not fully raised until the College filed its Reply brief, and hence the Court afforded Kelley the opportunity to submit a supplemental brief on this issue. He declined, opting instead to rely upon the cases discussed at the hearing. (See 10/4/12 Hear. Tr. at 16-17, 20-24, 27-28.) Accordingly, the Court will address this argument.
. United States v. Bame, Civ. No. 11-62,