Filed: May 05, 2011
Latest Update: Feb. 22, 2020
Summary: Case: 10-10336 Document: 00511468394 Page: 1 Date Filed: 05/05/2011 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED May 5, 2011 No. 10-10336 Lyle W. Cayce Clerk SECURITIES AND EXCHANGE COMMISSION, Plaintiff - Appellee RALPH S. JANVEY, Appellee v. STANFORD INTERNATIONAL BANK LIMITED, et al., Defendants JANE ANN SASSER; LINDA K. OGE; MARK D. OGE, Movants - Appellants Appeal from the United States District Court for the Northern Distric
Summary: Case: 10-10336 Document: 00511468394 Page: 1 Date Filed: 05/05/2011 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED May 5, 2011 No. 10-10336 Lyle W. Cayce Clerk SECURITIES AND EXCHANGE COMMISSION, Plaintiff - Appellee RALPH S. JANVEY, Appellee v. STANFORD INTERNATIONAL BANK LIMITED, et al., Defendants JANE ANN SASSER; LINDA K. OGE; MARK D. OGE, Movants - Appellants Appeal from the United States District Court for the Northern District..
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Case: 10-10336 Document: 00511468394 Page: 1 Date Filed: 05/05/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 5, 2011
No. 10-10336 Lyle W. Cayce
Clerk
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff - Appellee
RALPH S. JANVEY,
Appellee
v.
STANFORD INTERNATIONAL BANK LIMITED, et al.,
Defendants
JANE ANN SASSER; LINDA K. OGE; MARK D. OGE,
Movants - Appellants
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:09-CV-298
Before REAVLEY, GARZA, and SOUTHWICK, Circuit Judges.
PER CURIAM:*
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
Case: 10-10336 Document: 00511468394 Page: 2 Date Filed: 05/05/2011
No. 10-10336
This is an appeal from the District Court’s denial of the Appellants’ motion
for a modification of an injunction 1 to allow Appellants to proceed with their
respective arbitrations. We affirm.
As part of an enormous alleged Ponzi scheme perpetrated by the Stanford
companies, financial advisors sold innocent investors essentially worthless
certificates of deposit (“CD’s”) issued by Stanford Bank in Antigua. In February
2009, the SEC filed suit against Allen Stanford and all related Stanford entities.
The District Court appointed a Receiver, Ralph S. Janvey, to marshal, conserve,
hold, manage and preserve the value of the receivership estate. Additionally,
the District Court issued an injunction against all judicial, administrative, or
other proceedings in other fora against any Stanford entities.
Appellant Jane Ann Sasser (“Sasser”), a retired, widowed school teacher,
invested her entire retirement, approximately $550,000, in Stanford CD’s. Those
CD’s are now virtually worthless. Pursuant to her contract with her financial
advisor, Sasser filed a claim for arbitration with the Financial Industry
Regulatory Authority (“FINRA”) against her Stanford financial advisor, Robert
Lenoir (“Lenoir”), and his supervisor, Douglas McDaniel (“McDaniel”). Both
Lenoir and McDaniel have accounts that are the subject of the receivership suit.
Similarly, Appellants Linda and Mark Oge (the “Oges”) invested a substantial
amount of their retirement savings, approximately $250,000, in now-worthless
Stanford CD’s. The Oges also filed a claim with FINRA against their financial
advisors, James Keith Cox (“Cox”) and Arlen R. Blackwell (“Blackwell”). The
Receiver has brought suit against Cox for over $1 million.
FINRA refunded Appellants’ filing fees and stated that the arbitrations
could not proceed absent leave of court in the receivership suit. The Appellants
moved the District Court to modify the stay to allow them to pursue their
1
The motions were entitled motions to compel arbitration. However, they are, in
essence, motions to modify the injunction, so we denominate them thusly.
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No. 10-10336
arbitrations against their financial advisors. The District Court denied the
motions. The Appellants timely appealed, and we have jurisdiction to review a
district court’s refusal to modify an injunction pursuant to 28 U.S.C.
§ 1292(a)(1).
“We review the district court’s actions pursuant to the injunction it issued
for an abuse of discretion.” Newby v. Enron Corp., 542 F.3d 463, 468 (5th Cir.
2008). “In performing that review, findings of fact that support the district
court’s decision are examined for clear error, whereas conclusions of law are
reviewed de novo.” Affiliated Prof. Home Health Care Agency v. Shalala,
164
F.3d 282, 284–84 (5th Cir. 1999).
Appellants first argue that the District Court’s injunction violates their
procedural due process right to arbitration. It is axiomatic that a district court
has broad authority to issue blanket stays of litigation to preserve the property
placed in receivership pursuant to SEC actions. Schauss v. Metals Depository
Corp., 757 F.2d 649, 654 (5th Cir. 1985); SEC v. Wencke,
622 F.2d 1363, 1372
(9th Cir. 1980) (“Wencke I”) (“It is especially appropriate in an action like this
one that the federal courts have the power, if necessary, to take control over an
entity and impose a receivership free from interference in other court
proceedings.”). Since a district court has the power to enjoin other courts, it
follows that it has the power to enjoin arbitration, which is after all a private
contract right between two parties rather than a constitutionally guaranteed
right like access to the courts. The District Court’s stay was properly justified
by the enormity of the Receiver’s task given the number of entities, countries,
and dollars involved in the alleged Stanford Ponzi scheme.
Appellants next contend that the District Court abused its discretion when
it denied their motion for modification of the stay to allow them to pursue their
arbitrations against their financial advisors. To determine whether an exception
should be made to a stay of proceedings in a case such as this, the court should
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consider “(1) whether refusing to lift the stay genuinely preserves the status quo
or whether the moving party will suffer substantial injury if not permitted to
proceed; (2) the time in the course of the receivership at which the motion for
relief from the stay is made; and (3) the merit of the moving party’s underlying
claim.” SEC v. Wencke, 742 F.2d 1230, 1231 (9th Cir. 1984) (Wencke II).
The first factor essentially balances the interests in preserving the
receivership estate with the interests of the Appellants. See United States v.
Acorn Tech. Fund, L.P., 429 F.3d 438, 443 (3d Cir. 2005). The District Court
found that the Appellants’ desire for immediate arbitration—although
understandable—was outweighed by the importance of maintaining control over
the receivership estate for several reasons. First, the District Court found that
the financial advisors at issue were, in many cases, parties to ancillary litigation
already initiated by the Receiver. Recovery against one of them could deplete
possible assets coming into the estate. Second, the District Court noted that it
had not yet ruled on whether the insurance proceeds of any insurance policies,
which could pay for awards against the advisors, were property of the estate. So,
again recovery against the advisors could deplete the estate. Third, the District
Court found it highly likely that the financial advisors would argue as a defense
that the Stanford companies were at least partially responsible for the investors’
losses. And last, the District Court found that the Receiver’s ongoing duty to
monitor and possibly intervene in ancillary actions would cost the estate in
money and efficiency. The District Court held that the first factor weighed in
favor of maintaining the stay.
We are not insensitive to the Appellants’ arguments that given their
financial situations, their need to recover funds immediately is paramount.
However, the Receiver’s task to marshal, preserve and conserve the receivership
estate is as much for their benefit as for the benefit of all of the other
investors—investors who also lost amounts of money that changed their lives.
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Therefore, at this stage of the litigation, we agree with the District Court that
the needs of the Receiver outweigh the substantial injury being suffered by the
Appellants.
The District Court also weighed the second factor—the time in the course
of the receivership—in favor of maintaining the stay. Timing in a receivership
process is fact specific, based on the number of entities, the complexity of the
scheme, and any number of other factors. See Wencke II, 742 F.2d at 1231–32;
SEC v. Universal Fin.,
760 F.2d 1034, 1039 (9th Cir. 1985). At the time of the
District Court’s order, the receivership had been in place for one year. The
District Court found that the alleged Ponzi scheme was complex and intricate,
involving many entities and billions of dollars. Additionally, satellite litigation
instigated by the Receiver on behalf of the estate was just beginning. Therefore,
the District Court held that the receivership was in its early stages and that the
interest of the Receiver in continuing to marshal and conserve the estate
outweighed the Appellants’ claims at this time.
For the last factor, the District Court was unable to make findings
regarding the merits of the Appellants’ claims. However, the court indicated a
willingness to reweigh the factor once the evidence in the ancillary litigation
revealed more facts regarding the financial advisors’ knowledge and
participation in the scheme. The Wencke factors acknowledge that, with time,
the balancing between the parties may change, such that modifying the stay
would be possible. And, the District Court’s findings reflect that understanding.
Based on the findings of the District Court, we cannot say that it abused its
discretion in denying the Appellants’ motion to modify.
AFFIRMED.
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