Warfield v. Alaniz (Standing/Status of Repose)

The following case touches on several important issues concerning receiverships.

– Phil Stenger

Warfield v. Alaniz 2006 2190563 (D.Ariz. August 1, 2006) an August, 2006 decision of the federal district court for the district of Arizona held:

    1. In an action for fraudulent transfer, the Receiver has standing to sue for injuries to the underlying receivership entities, which are liable to the defrauded investors as as the wrongdoer’s “tort creditors,” following Scholes v. Lehmann, 56 F.3d 750, 753 (7th Cir. 1995). **5-6
    1. Where the Receivership Court has extraterritorial jurisdiction under a federal nationwide service of process statute (e.g., securities fraud actions under 15 U.S.C. §78aa), that personal jurisdiction also extends to pendent state-law claims.**6-7
    1. In dicta, the Court indicated that summary proceedings might be utilized against third parties who are not named parties to the agency enforcement action, including “show cause” proceedings before the Receivership Court against persons in possession of receivership assets, so long as the third parties received procedural due processin the form of notice and an opportunity for a hearing.**12-13
    1. Insofar as timeliness of actions is concerned, the Court drew a dividing line between “statutes of limitation,” which operate as a defense against a cause of action and bar enforcement of the right, and “statutes of repose,” which extinguish the claim.Against a statute of repose, such as that contained in the Uniform Fraudulent Transfer Act, principles of equitable tolling are not available.Similarly, while statutes of limitation are not binding on the government (including a court-appointed receiver in an SEC-initiated action), statutes of repose are binding on the government.However, equitable defenses such as laches and estoppel are not available as a defense in an action brought by the government or its subdivisions, including a court-appointed receiver. The Court thus recognized that a court-appointed receiver is “an officer of the court.” **8-11
  1. Finally, the Court recognized that proof of a Ponzi scheme establishes the transferor’s actual intent to defraud [see our Receivership Alertconcerning Quilling v. Cristell, 2006 WL 316981 (W.D.N.C., February 9, 2006), *6, reaching a similar result], and that the existence of the Ponzi scheme can be established by proof of the transferor’s related guilty plea.However, the court further held that proof of the Ponzi scheme did not automatically establish the transferee’s knowledge of or participation in the fraud.**15-17