GREGORY F. KISHEL, CHIEF UNITED STATES BANKRUPTCY JUDGE.
This adversary proceeding came before the court for oral argument on three specific aspects of the Defendant's motion for dismissal. The Defendant ("Associated Bank") appeared by its attorney, Bryan E. Minier, Pedersen & Houpt, P.C., Chicago. The Plaintiff ("the Trustee") appeared by his attorneys, Terrence J. Fleming and James A. Lodoen, Lindquist & Vennum, P.L.L.P., Minneapolis. The following order addresses Associated Bank's motion in its entirety.
In 2010, a large docket of avoidance litigation was commenced in the Chapter 11 cases of Debtors Petters Company, Inc. ("PCI") and its related entities, to address the failure of the massive Ponzi scheme perpetrated by Thomas J. Petters through those companies. See, e.g., In re Petters Company, Inc., 494 B.R. 413, 495 B.R. 887, and 499 B.R. 342 (all Bankr.D.Minn.2013). This adversary proceeding was commenced during the first wave in that litigation.
However, in its pleaded factual basis this matter differs significantly from the bulk of the docket. In most of the adversary proceedings, the Trustee has sued parties that had lent to PCI, documented for the funding of commercial transactions that actually had been postured as a central part of the Ponzi scheme. As to those defendants, he seeks to recover all or a portion of PCI's payback on that lending. Those proceedings were sued on the general theory that the payments to the defendants enabled the fraud on contemporaneous or later investor-lenders into the scheme.
As the Trustee pleads this matter, however, Associated Bank was not a transaction-specific lender roped into the scheme. The Trustee's amended complaint [Dkt. No. 8] names Associated Bank as a depository bank through which PCI channeled a large number of monetary transfers from and to lender-investors and others over a five-year period, 2000-2005.
The vocabulary for the fact-pleading on these events is somewhat opaque. This is particularly striking given the very specific structure of the banking relationship in which the transfers are alleged to have occurred. The Trustee uses the term "payments or other transfers," made by PCI to the Bank, to describe these events. He lists them in an exhibit to the amended complaint. They are identified to separate dates between March 14, 2000 and October 3, 2002. He does not identify the transactional form in which the "payments" were made. It is clear, however, that the transfers were effected through PCI's business checking account with the Bank, or at least in relation to the account in some way. Amended Complaint, ¶ 40. The total of the "payments or other transfers" that would be avoided is stated as approximately $2.5 million.
The Trustee alleges that these "transfers" rectified prior "overdrafts" on the account — each one thus constituting "payment" on "a short-term open credit transaction." He asserts that these "payments" were "in furtherance of" the Ponzi scheme because they kept the account standard-compliant and open, thereby enabling PCI to maintain a functional tool for monetary transfers that was essential to the scheme's operation. On that theory the Trustee brands the "transfers" as fraudulent and hence avoidable under law, as actually- or constructively-fraudulent.
The fact-pleading for the Trustee's theory of suit against Associated Bank is as follows.
Amended Complaint, pp. 8-10.
As its initial response to the Trustee's complaint, Associated Bank filed a motion for dismissal. It raised several contentions with the Trustee's pleading and his theory of suit. Dozens of other defendants on this docket did the same thing. Some of Associated Bank's issues fell into the mainstream of the broader defense effort. They were addressed in the three "consolidated issues" memoranda [Dkt. Nos.1951, 2018, and 2044, formally cited supra at p. 553].
Early in the litigation, some individual defendants came forward to assert that they had issues unique to them, potentially dispositive as matters of law, due to past transactional relationships with the Debtors that were different from the straight lending transactions common to most defendants. While the massed motions for dismissal were being administered on a common opening track, such individual defendants were allowed to request rulings on their unique issues.
Associated Bank raised several such issues for itself. Thus this adversary proceeding was excepted from the provision for further pleading and resumption of the litigation [BKY 08-45257, Dkt. No. 2158]. Supplementary briefing on Associated Bank's issues was directed. That was filed and oral argument was received.
Associated Bank's unique issues go to the pleading of the Trustee's fraudulent-transfer counts under both statutory variants (actually- and constructively-fraudulent). The argument is that the Trustee has not pled a plausible set of facts to support either theory of avoidance as to the six banking events at issue with Associated Bank.
When the parties' arguments were structured and presented, counsel relied on the analysis of case law then extant — the three common-issues memoranda issued in the PCI cases, persuasive appellate precedent from other circuits on the application of fraudulent-transfer remedies to transactions documented as ordinary-course commercial arrangements, and the like. After this motion was submitted, the Minnesota Supreme Court issued Finn v. Alliance Bank, 860 N.W.2d 638 (Minn. 2015). Finn treated the application of avoidance remedies under MUFTA to transfers of money made by the perpetrator of a later-failed Ponzi scheme, on financing given for genuine commercial transactions. Though the transactions and transfers treated in Finn, are different from the ones at bar, Finn's analysis and rulings offer some principles for the treatment of this motion.
Some of Associated Bank's initial arguments seemed to challenge rulings previously made in the PCI common-issues memoranda. Finn's take on the subject matter was different enough that both those arguments and this court's previous rulings required reexamination. The strength of a couple of Finn's component holdings moots most of the many tangents that Associated Bank argued. In the end, Finn supports a particular outcome here — dismissal for the want of a plausibly-pled case, and no possibility of pleading one via amendment. First, though, it is appropriate to indulge the parties in one of the
For the six account-events at issue, the Trustee's pleading firmly stamps a specific transactional relationship onto the active parties — PCI as account-holder and Associated Bank as depository bank. But then he abruptly classifies Associated Bank as a lender to PCI. This is signified by his choice of vocabulary: "loan" and "obligation" on a "short-term open end credit transaction." As the Trustee envisioned these "loans," they were made in response to shortfalls in PCI's account that had occurred when "Petters and his Associates overdrew" the account. Amended Complaint, ¶ 37.
For its defense, Associated Bank fell into the Trustee's initial, unilateral impress of a consensual debtor-creditor relationship. In consequence, the parties argued over the adequacy of the Trustee's fact-pleading to support this characterization. The dispute became lengthy and snarled, over whether Associated Bank had become a creditor of PCI — in legal consequence of the account-events in question, on some kind of contractually-contemplated extension of credit, or otherwise.
Associated Bank insisted that the Trustee had to, but did not, plead in detail the circumstances that initially gave rise to an insufficient-funds status for PCI's account, for each of the six sequences that involved a debt created on an overdraft and a transfer made when the consequences of the overdraft were rectified. As Associated Bank would have it, this required pleading multiple factual aspects of each sequence: the account balance before the presentation of every check that caused an NSF status and any that resulted in a separate overdraft; the detail on the checks and their treatment at the Bank's instance; and the account balances thereafter. And, Associated Bank insisted, the Trustee never specified a factual or legal basis for the arising of a debt on the occurrence of an overdraft: a contractual program for overdraft protection under a commercial account-holder agreement? The bare consequence of governing general law? The Bank's simple act of honoring a check otherwise-to-bounce upon its initial presentment, with the account status held in the stasis of further NSF until money was received from PCI? Or the intentional deferral of honoring, until the "midnight deadline" under Article 4 of the Uniform Commercial Code had passed?
The Trustee did not plead any of this. For that matter, he did not even plead as to one obvious question: how was the rectifying transfer made, when the hypothesized debt was satisfied? Was it just a later, regular-course deposit of funds into the account from a different source, that "made up" to a balance sufficient to rectify the NSF posture and enable the honoring of draws then-presented? Or was it a
The Trustee pleaded barely more than a page of facts specific to this adversary proceeding, in the middle of several dozen pages of boilerplate for his clawback-avoidance theory. In doing this he was too coy by half. One suspects he was casting any debt cognizable here as the result of a "loan" in order to make the amended complaint's vocabulary fit more into the general theory of suit for his avoidance litigation.
In the way it first confronted the Trustee, Associated Bank is vulnerable to the same charge. It was too cute by half in trying to shoehorn multiple factual assertions and more factual assumptions into the record as if they were pleaded fact. Worse, Associated Bank did this without having filed an answer and without using a platform of extrinsic documents argued as "necessarily embraced by the pleadings" and presented for facial content that would go to material facts.
But there is much to support Associated Bank's first vocabulary-driven point, that the Trustee's amended complaint does not plausibly plead the specific status he alleges for the Bank — "lender" based on a "credit extension."
The question thus remains: has the Trustee plausibly pleaded the presence of preexisting debts, as to which payment was made by transfers that the Trustee characterizes as fraudulent? This issue is relevant to Associated Bank's motion in three ways. Associated Bank's attorney argued one way that had no merit at all in
The law that specifically governs the relationships on bank accounts furnishes a better frame of reference for analyzing the pleading on this point, than the Trustee's misleading notion of "loans" on a "short-term open end credit transaction."
Swift County Bank v. United Farmers Elevators, 366 N.W.2d 606, 609 (Minn.Ct. App.1985) (citations and interior quotes omitted).
The debtor-creditor relationship described by that legal authority — the one that arises on an account-holder's deposit of funds — obviously runs one way, from the bank to the account-holder. Where a checking account is involved, a debtor-creditor relationship running the other way may arise — when the account-holder draws checks and the checks are presented for payment when the account does not hold sufficient funds to honor them all. This comes about under provisions of Article 4 of the Uniform Commercial Code that govern such "NSF" activity, as well as the legal governance imposed by the Federal Reserve Banks for the clearing of interbank transactions on checks. A legal analysis for these functions is set out for the context of trustees' avoidance litigation in bankruptcy, in In re AppOnline.com, Inc., 296 B.R. 602, 608-611 (Bankr.E.D.N.Y. 2003).
Up to the midnight deadline, the presentment of the check gives rise to a "provisional NSF" status for the account, and for the depository bank's reserve account at the Federal Reserve Bank. In re AppOnline.com, Inc., 296 B.R. at 609-610. As soon as the midnight deadline passes, the depository bank has the obligation to honor (pay on) the check. In re Agriprocessors, Inc., 490 B.R. at 865-866; In re AppOnline.com, Inc., 296 B.R. at 610. See also Corsica Livestock Sales, Inc. v. Sumitomo Bank of Calif, 726 F.2d 374, 377 (8th Cir.1983). If at that point the balance in the drawer's account is less than the amount of the check, a "true overdraft" by the drawer-account holder occurs; and a debt from the account-holder to the depository bank arises — "amount[ing] to an extension of credit to [the] customer [-account holder]," In re AppOnline.com, Inc., 296 B.R. at 610 and 611. This is what can give rise to a debtor-creditor relationship on a checking account, that runs from account-holder to bank.
The Trustee's summary assertion in legal terminology, that PCI "overdrew the PCI.... Bank accounts," thus saves the Trustee's foundational point — the existence of a debt — as a point of pleading. The creation of a debt from drawer-accountholder to a depository bank is inherent in the legal notion of an overdraft, when presentment is made for a draft in an amount exceeding the current balance and the draft is nonetheless honored or at least is subject to obligatory honoring after the midnight deadline.
In a connotative way, at least, this allegation of overdraft was sufficient to put Associated Bank on general notice that the Trustee was relying on the larger narrative-theory of his clawback effort, that avoidable fraudulent transfers had been made by the use of monies from later-defrauded investors to pay debts incurred in furtherance of the Petters Ponzi scheme — here, obligations to make the Bank whole on a half-dozen checks that had taken NSF status on presentment and that the Bank honored at some point, which debts were "paid" after the midnight deadline by deposits or other transfers into PCI's account.
The Trustee's main substantive theory for avoidance was the Ponzi scheme
MUFTA's actual-fraud variant, Minn. Stat. § 513.44(a)(1), is sued out under Count II of the amended complaint. Under the statute there is only one specific factual element, that the transfer in question was made "with actual intent to hinder, delay, or defraud any creditor of the debtor."
Like any element going to a past subjective state of mind, this one has its difficulties of proof. Those difficulties were addressed in part in the statute, which permits actual fraudulent intent to be inferred on proof of surrounding circumstances consistent with the harboring of such intent — the so-called "badges of fraud." Minn.Stat. § 513.44(b) (2014); Citizens State Bank Norwood Young America v. Brown, 849 N.W.2d 55, 60 (Minn.2014). However, in the specialized context at bar, the judicially-recognized Ponzi scheme presumption made the question of subjective intent easy, with proof of the right platform. As long as it was established that the transfer had been made "in furtherance" of a Ponzi scheme, the statutory intent was to be presumed. See discussion in In re Polaroid Corp., 472 B.R. 22, 35-36, 43 (Bankr.D.Minn.2012), aff'd on other grounds, Ritchie Capital Mgmt., LLC v. Stoebner, 779 F.3d 857 (8th Cir.2015); In re Petters Co., Inc., 495 B.R. at 907-908. (Ritchie Capital Mgmt, LLC v. Stoebner enumerates the other circuit courts that had adopted the presumption as of mid-2015. 779 F.3d at 862 n. 6.)
To make out a basis for this specialized presumption, the Trustee proposed that the Bank's accommodations to PCI to avoid bouncing checks and draws preserved the accounts as part of the necessary equipment for Tom Petters's scheme; also, that the avoidance of the normal consequences to a bank customer preserved Tom Petters's public image and that of "his Associates" as responsible and successful intermediaries in consumer goods inventory. The subsequent central thrust of the argument was that keeping PCI's accounts operating without interruption from the overdrafts prolonged the scheme.
But Finn took away the possibility of all that. The receiver in Finn had made a very broad argument to extend the federally-developed presumption to the facts of his case: the presumption deemed a pervasive intent to defraud creditors, to any and every payment of money made out of the general business structure through which a Ponzi scheme is perpetrated. The
The result is inescapable: on the Trustee's pleading, his main articulated vehicle for an actual-fraud theory under MUFTA fails as a matter of law as to this avenue for avoidance. His trump card is not legally available to him.
He had another alternative, of course: pleading that PCI made the transfers with the statutory intent and setting out specific pleading of surrounding acts, events, and circumstances that logically went to the intent that accompanied those very transfers. This, of course, was the "badges of fraud" option under Minn.Stat. § 513.44(b).
The Trustee's pleading fails on this alternative. It identifies very specific acts as the subject transfers — those "payments" having apparently consisted of depositing funds or directing wire transfers into the account. But the Trustee does not lay out a single one of the statutory badges or any other surrounding circumstance on which it could be inferred that PCI did those things with a specific accompanying intent to hinder, delay, or defraud any of its creditors by doing them. There is much boilerplate pleading on the general operation of the Petters scheme, in the rote text common to virtually all of the Trustee's litigation docket. But there is no description of surrounding circumstances, that would go to an intent harbored by Tom Petters or any of his "Associates," directed toward any third-party creditors of PCI, at the half-dozen times when a rectifying transfer would have been made to deal with an actual overdraft on PCI's account at the Bank.
This is crucial. Originally, the Trustee portrayed PCI as running its account at the Bank on the razor's edge of a zero-balance for four and a half years — routinely going into NSF status and, allegedly at the Bank's sufferance, avoiding overdrafts and their consequences only by making "payments."
Finn dictates that avoidability under MUFTA be determined on a transfer-by-transfer basis. 860 N.W.2d at 647. It is not to turn on the "form or structure" of the transferor, even if the transferor is engaged in a broader fraudulent scheme that is effected through other transactions and transfers. Id. For want of badge-specific fact pleading, the amended complaint fails plausibility through the badges-based alternative on actual fraud, for the specific transfers on which it is based.
In a fillip toward its end, Finn acknowledges another haven for an actual-fraud theory in a Ponzi scheme clawback lawsuit, at least at the pleading stage. The bulk of Finn is devoted to substantive rulings on a claim against a single bank, one of multiple defendants in the receiver's litigation, that the trial court had disposed of on summary judgment. But after that Finn addresses the pleading as to a group of other defendant-banks that had aggressively acted to defend earlier in the litigation against them, by moving to dismiss the receiver's complaint in lieu of answering. For those defendants, it was held that "the Receiver's complaint sufficiently alleged fraudulent intent," and "stated a claim for actual fraud against [sic] [those] Banks," so as to meet muster under the Minnesota state analog to Rule 12. 860 N.W.2d at 654. This conclusion was justified on only three features of the complaint's content, summarized by the Finn court as follows:
Id. (emphasis in original).
At first, this holding seems incongruous. Much of the substantive treatment in Finn seems to evidence skepticism, over the basic applicability of MUFTA's remedies to redress a failed Ponzi scheme for the benefit of defrauded investors left unsatisfied at the failure. Yet, there the ruling is, 860 N.W.2d at 654: a complaint adequately states a claim under MUFTA for avoidance of an actually-fraudulent transfer where a plaintiff alleges in detail a pattern of fraudulent investment-related conduct by a party that has been operating a Ponzi scheme; alleges that the subject transfers had been made with actual intent to hinder, delay, or defraud creditors of the perpetrator; and alleges that the Ponzi scheme had been conducted generally to defraud investors like the defendant-recipient(s) of the subject transfers. Under this component-ruling of Finn, suit under MUFTA may be initiated under an actual-fraud theory on the right facts featuring a Ponzi scheme, and maintained beyond the pleading stage. The scope or impact of Finn's rulings on the substantive merits of claims for avoidance and affirmative defenses can be debated. But on the sufficiency of pleading, that much is clear from this terse sequence in the opinion.
This is a break in the fog of doubt that Finn spewed up earlier, 860 N.W.2d at 652-53, as to whether MUFTA's remedies apply to Ponzi-clawback litigation at all. The reach of this pleading-oriented holding is open to debate. However, it can fairly be read for the proposition, that a plaintiff may sue on an allegation that a defendant received an actually-fraudulent transfer from the perpetrator of a Ponzi scheme, where the circumstances indicate that the defendant-recipient had been situated in a transactional relationship with the debtor similarly to the class of intended victims of the scheme, and thus the transfer may have been made within the central structure and operation of the scheme.
The question then is whether that option saves the Trustee's pleading here. The analysis goes back to the matter of plausibility — a requirement of the pleaded factual theory for any claim sued out in the wake of Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Under this alternate Finn-based theory, any sense of plausibility vanishes, as to the Trustee's pleaded facts.
The Trustee has pled the nature and operation of Tom Petters's scheme in a consistent fashion in nearly two hundred complaints. He has never alleged that the scheme was perpetrated over its term of years to defraud and victimize the depository banks through which he funneled all the money. He does not do so in his case against Associated Bank.
In summary: the Trustee does not plead any facts that go to specific intent, directly or by badge-based inference. Bounded as the Trustee's suit is by the legal and commercial relationship between PCI and the Bank, there is no fact-pleading of an intent to defraud other depository banks through a comprehensive scheme involving transfers of the sort pleaded. Nor does the Trustee plead other facts from which to infer an intent to hinder, delay, or defraud PCI's general creditors, motivating the six subject acts of transfer. The Trustee has not pled a sustainable case for an actually-fraudulent transfer.
As a result, Count II of the amended complaint is to be dismissed. There is no way to contort a plausible theory for an actual, directed fraudulent intent in connection with the pleaded transfers, out of the basic posture of PCI and the Bank at the times of the transfers. As a result, a grant of leave to amend would be futile. Count II must be dismissed with prejudice.
The Trustee's alternate theory under MUFTA, pled under Counts III-V of the amended complaint, was that the "payments" had been a constructively-fraudulent transfer. Minn.Stat. §§ 513.44(a)(2) and 513.45(a)-(b)(2014) permit avoidance on more "objective" facts surrounding a transfer by a debtor:
Finn v. Alliance Bank, 860 N.W.2d at 645.
On the issue of reasonably equivalent value for this theory, the Trustee's pleading is cryptic. There is no detail as to how the rectification of overdrafts gave PCI less than reasonably equivalent value for monies transferred to the Bank that would have been applied to the amount of the overdrafts to raise the account balance
Amended Complaint, ¶ 39.
Amended Complaint, ¶¶ 64 and 70.
Even before Finn, this imprecision posed a real problem for the Trustee on this theory of recovery.
For the ruling on the issue presented there, the policy- and equity-based analysis of Scholes v. Lehmann, 56 F.3d 750, 756-758 (7th Cir.1995) was adopted: when the remedy for a constructively-fraudulent transfer is brought to bear on payments made by the purveyor of a Ponzi scheme to a past investor, using monies infused by a current defrauded investor, receipt of value is deemed to the debtor-transferor to the extent of principal repaid to the earlier investor, in satisfaction of a debt for restitution. 499 B.R. at 356. The interest component of any such payment, however, is not cognate to the debt service (interest) paid by a company that has applied the proceeds of legitimate borrowing honestly taken from the later investor to make capital expenditure, to finance operations, or to meet the other costs of a real operating business. By fostering the scheme's pretense at a time when the purveying entity is insolvent, and by increasing that insolvency, the payment of ostensible interest only prolongs the scheme. 499 B.R. at 356-357.
Where this is done as part of a pervasive, multi-victim scheme that later fails, and a receivership or bankruptcy case is commenced to give a global remedy for unsatisfied end-victims, all participants may be subject to a judicial recasting of their relationships with the purveyor. The theory of restitution in equity would furnish the guidance for structuring remedies. 499 B.R. at 356. In equity and under statute, all investors are deemed to have been entitled to the recovery of their principal, as value they originally parted with and value they are entitled to have received in return. When that matched dollar-for-dollar in a purveyor's payment to a fraudulent-transfer defendant, there was reasonable equivalence. 499 B.R. at 356. But true value on the retirement of a
Associated Bank seized on this analysis for the motion at bar, and skewered the amended complaint for its lack of any allegation that anything had been "paid" to the Bank, above an ostensible "principal" debt owing on the "short-term open credit transaction" the Trustee described. At oral argument, the Trustee's counsel came close to conceding that. But, he never forsook his constructive-fraud theory.
Finn v. Alliance Bank speaks to the issue of reasonably equivalent value in the application of MUFTA to the remediation of a failed Ponzi scheme. When the Minnesota Court of Appeals issued its opinion in Finn v. Alliance Bank, it characterized the prior federal case law's denial of reasonably-equivalent value to the payment of interest as another component of a more comprehensive Ponzi scheme presumption. 838 N.W.2d 585, 598 (Minn. Ct.App.2013). The Minnesota Supreme Court endorsed that categorization. 860 N.W.2d at 645-646. But then it rejected this component presumption as well, as an adjudicative shortcut for fact-finding under MUFTA. 860 N.W.2d at 645-646, 649-653. This ruling dovetailed with the Finn court's broader observation, that "the focus of [MUFTA] is on individual transfers," requiring a plaintiff initiating the "asset-by-asset and transfer-by-transfer... inquiry under MUFTA ... to prove the elements of a fraudulent transfer with respect to each transfer, rather than relying on a presumption...." 860 N.W.2d at 647.
After that, Finn addressed the broader issue on its substance, of whether reasonable equivalence of value lay in a debtor's repayment of debt owing to a defendant. The Finn court concluded that "any legally enforceable right to payment against the debtor is sufficient to qualify as an antecedent debt under MUFTA" for the purposes of the definition of "value" under Minn.Stat. § 513.43(a). 860 N.W.2d at 651. In the context of repayment of debt, "a transfer qualifies as constructively fraudulent only if it depletes the assets of the debtor without a reasonably equivalent reduction in the debtor's liabilities." 860 N.W.2d at 652-653.
The defendant-transferees in Finn had all been lenders on debt incurred by the debtor-transferor to facilitate and finance genuine, existing transactions involving real estate. Separately from those bona fide transactions, the debtor-transferor had induced other lenders to advance money under the pretensed auspices of the same sort of transaction, which did not exist in reality — that having occurred within the operation of a true Ponzi scheme. 860 N.W.2d at 642. Emphasizing the genuineness of the underlying transactions in suit before it, the Finn court rejected out of hand the notion that repayment of any part of the debt in question had lacked reasonably equivalent value to the debtor. 860 N.W.2d at 655. It also pointed to the
The Finn court made its pronouncements on reasonably equivalent value on a distinctive set of facts. The pronouncements are cast in several different directions — observations on the policy underlying MUFTA; the propriety of judicially construing presumptions of broad application from statutory text; the soundness of the specific presumptions argued before it; and the evaluation of the content of the record before it as a basis for fact-finding on a direct application of its interpretation of the substantive law, without the interference of a presumption's operation. The applicability of Finn's substantive rulings beyond the facts presented there is open to debate. Yes, in the wake of Finn, the viability of the analysis adopted for the Trustee's avoidance litigation docket is unsettled. It is still an open question as to which rule of decision should apply for the application of MUFTA's constructive-fraud provisions to transfers in repayment of a debt incurred for a business transaction that was not genuine and existing, and that fell within the rolling churn of a Ponzi scheme as generally understood.
But regardless of which rule and application harmonize with Finn, the pleading here fails on the element concerning reasonably equivalent value. The amended complaint has none of the elaborate text about "false profits" that features prominently in the Trustee's complaints against defendant-recipients that lent to PCI to finance transactions that were falsely-pretensed — the allegations of contractual interest actually paid at anomalously-high rates, with the proceeds of borrowing from later-duped lenders. If indeed the transfers here only brought a checking account balance above a negative level, nothing more happened than the repayment of an analog to principal indebtedness.
The Trustee's counsel came very close to conceding this during oral argument. He did not offer to withdraw Counts III-V, however. Thus a ruling is necessary. It is the only one possible on the facts as pled: the Trustee has no claim against
These rulings address all but three counts of the Trustee's amended complaint. To enable a final disposition, the others should be treated.
Through Count VI, the Trustee sought to compel Associated Bank to "disgorge" "all funds received" through the six transfers in question. The theory here is purely one of equity, on the thought that the Bank "knowingly received monies from the Ponzi scheme, [and] was unjustly enriched through its receipt of the fraudulently obtained monies to the detriment of other investors in PCI...." Amended Complaint, ¶ 76.
The reference to "other investors" makes it pretty clear that this whole count was swept into the amended complaint as part of the Trustee's rote, boilerplate pleading. The Bank is not characterized as an "investor" in PCI anywhere else. There is no separate, specific fact-pleading for the Trustee's insinuation, of an inequitable and iniquitous "knowing" receipt by the Bank. There is only the perfunctory, shallow, and lonely throw-off, that the
Amended Complaint, ¶ 42. With that little, it is impossible to see anything concrete and plausible enough to trigger an equitable remedy.
In any event, this count is barred by the Trustee's simultaneous assertion of multiple theories for recovery under law, i.e. MUFTA. In re Petters Co., Inc., 499 B.R. at 370-375 (relying on analysis in United States v. Bame, 721 F.3d 1025, 1029-1031 (8th Cir.2013)). Count VI is thus to be dismissed.
In his original and amended complaints, the Trustee pleaded requests for relief in two other forms. He framed Count I under 11 U.S.C. § 542, seeking a recovery of funds equating to the "Negative Balance Transfers" under the notion that somewhere at that time there was associated "property of the estate" that must be turned over to him, or accounted for.
On the rulings in this memorandum, IT IS HEREBY ORDERED that Counts II-VI of the Plaintiff's amended complaint are dismissed with prejudice, for failure to plausibly plead a claim on which relief may be granted.
Peterson v. Somers Dublin, Ltd., 729 F.3d 741, 748 (7th Cir.2013).
3/14/2000 $1,312,936.80 9/26/2000 $ 450,874.64 12/21/2000 $ 665,664.63 1/11/2001 $ 106,025.48 10/3/2002 $ 3,807.82 10/3/2002 $ 28.00
Minn.Stat. § 513.44(a); and
Minn.Stat. § 513.45.
