Gustin v. Hoffman (Standing)

2008 WL 2949443 (M.D.FL 2008)

In Gustin v. Hoffman, 2008 WL 2949443 (M.D.FL 2008), several Plaintiffs who were also creditors of the Receivership Estate sought to bring an independant cause of action against the defendants in the underlying SEC enforcement action (as well as those who received fraudulent transfers from those individuals) despite the fact that the Receiver had filed a claim against those same defendants on behalf of the Receivership Estate. Defendant Hoffman sought to dismiss the Plaintiffs’ action on the basis that it was duplicative of the Receiver’s action against him. Gustin, 2008 WL 2949443 *2. The Court noted that “the general rule is that a suit is duplicative of another suit if the parties, issues and available relief do not significanlty differ between the two actions.” Id. quoting I.A. Durbin, Inc. v. Jefferson Nat’l Bank, 793 F.2d 1541, 1551. The Plaintiffs responded by arguing that, although they would be unable to recover in their action if the Receiver was successful in his case against Hoffman, they ought to be permitted to pursue their action on the basis that the Receiver will not likely recover more than a fraction of the losses they incurred. Id. The Plaintiffs went on to argue that Hoffman had asserted in the Receiver’s action, the Receiver’s lack of standing to bring a claim under Florida’s Uniform Fraudulent Transfer Act. Id. While the District Court had already ruled against Hoffman on his motion to dismiss, the Plaintiff’s asserted that Hoffman could appeal that decision and, therefore, there had been no definitive resolution of whether the Receiver could pursue the fraudulent transfer claims. Id. The District Court flatly rejected the Plaintiffs’ arguments and dismissed their case stating that “Plaintiffs admit that they have filed this action as a placeholder, in the event that Hoffman successfully appeals this Court’s Order in the Silver v. Hoffman case. This is simply not permissible.” Id. at *3.

– Phillip S. Stenger