RALPH S. JANVEY, Plaintiff-Appellee,
JAMES R. ALGUIRE; VICTORIA ANCTIL; TIFFANY ANGELLE; SYLVIA AQUINO; JONATHAN BARRACK; MARK TIDWELL; CHARLES RAWL; SUSANA ANGUIANO; TERAL BENNETT; LORI BENSING; SUSANA CISNEROS; RON CLAYTON, JOHN D. ORCUTT, et al., Defendants-Appellants. RALPH S. JANVEY, in his capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, et al., Plaintiff-Appellee,
ORESTE TONARELLI, Defendant-Appellant. RALPH S. JANVEY, in his capacity as Court-Appointed Receiver for the Stanford International Bank, Limited, et al., Plaintiff - Appellee,
JUAN ALBERTO RINCON, Defendant-Appellant. RALPH S. JANVEY, in his capacity as Court Appointed Receiver for the Stanford International Bank Limited, et al.; OFFICIAL STANFORD INVESTORS COMMITTEE, Plaintiffs - Appellees,
LUIS GIUSTI, Defendant-Appellant.
from the United States District Court for the Northern
District of Texas
HIGGINBOTHAM, OWEN, and ELROD, Circuit Judges.
case is the latest in a number of appeals arising from the
collapse of Allen Stanford's massive Ponzi scheme. Ralph
Janvey, the Receiver for the Stanford entities, seeks to use
the Texas Uniform Fraudulent Transfer Act to take back money
paid to employees of various Stanford entities. The district
court denied these employees' motions to compel
arbitration based on arbitration agreements included in the
terms of contracts with the Stanford Group Company. We
Allen Stanford created a large network of interconnected
companies that sold certificates of deposit to investors
through the Stanford International Bank, Ltd. (the
"Bank"). These certificates of deposit promised
favorable returns and drew over $7 billion in investments in
the nearly ten years that the scheme operated. Stanford
generated the promised returns not by wisely managing the
investors' money but by using payments from new investors
to cover the gains paid to older investors-a classic Ponzi
scheme. Stanford and his Chief Financial Officer, James
Davis, pleaded guilty to a number of federal offenses and are
effort to unwind the scheme, the Securities and Exchange
Commission sued Stanford, the Stanford Group Company (the
"Company"), and numerous other Stanford entities.
At the SEC's request, the district court appointed Janvey
as Receiver and "charged him with preserving corporate
resources and recovering corporate assets that had been
transferred in fraudulent conveyances." Janvey v.
Brown, 767 F.3d 430, 433 (5th Cir. 2014).
Receiver sued a large group of individuals who profited from
the Stanford scheme and froze assets in Stanford entity
accounts tied to those individuals. The district court
severed the Receiver's claims against investor-defendants
from the Receiver's claims against employee-defendants.
This court has dealt separately with various claims against
the investor-defendants and they are not at issue
defendants in the present action all previously worked in
various capacities for the Stanford enterprises and received
salary, commissions, bonuses, or later-forgiven loans from
the Stanford entities.
after the Receiver initiated his claims against these former
employees, they moved to compel arbitration. The motions to
compel arbitration relied on arbitration agreements between
the Company or Stanford Group Holdings, Inc. (another
Stanford entity) and the former employees.The agreements were contained in: (1)
promissory notes between the defendants and the Company that
governed the upfront loan payments that the Company awarded
to the defendants when they joined Stanford; (2) the
broker-dealer forms that the Company submitted to the
Financial Industry Regulation Authority (FINRA) when
registering the employee-defendants as brokers; (3)
FINRA's internal rules governing disputes between brokers
and their employers; and (4) Stanford Group Holdings,
Inc.'s Performance Appreciation Rights plan. The
arbitration clauses in the promissory notes provide that:
"any controversy arising out of or relating to this
Note, or default on this Note, shall be submitted to and
settled by arbitration pursuant to the constitution, by-laws,
rules and regulations of the National Association of
Securities Dealers (NASD) . . . ." The other arbitration clauses are
materially indistinguishable for purposes of this case.
the motions to compel arbitration were pending, the district
court issued a preliminary injunction preventing the
employees from accessing the frozen assets. The defendants
challenged the injunction in an interlocutory appeal. We held
that: (1) the district court had power to consider the
preliminary injunction before deciding the motion to compel
arbitration; (2) the district court did not abuse its
discretion by issuing the preliminary injunction; (3) the
preliminary injunction was neither an attachment nor overly
broad; and (4) although the district court had not yet ruled
on the motion to compel arbitration, the Receiver's
claims were not subject to the arbitration agreement because
the Receiver was suing not on behalf of the Stanford
entities, but rather on behalf of creditors who were not
parties to the arbitration agreements. Janvey v.
Alguire (Alguire I), 628 F.3d 164, 185 (5th
Cir. 2010). We then withdrew that opinion and replaced it
with another opinion that repeated the first three holdings
but concluded that we lacked jurisdiction over the
still-pending motion to compel arbitration and remanded to
the district court for consideration of the motion in the
first instance. Janvey v. Alguire (Alguire
II), 647 F.3d 585, 605 (5th Cir. 2011).
district court, although not bound by our decision in
Alguire I, agreed with its reasoning and denied the
motions to compel arbitration. As we had in Alguire
I, the district court reasoned that the Receiver's
claims, brought on behalf of third-party creditors, were not
affected by the promissory notes between the defendants and
the Company. Janvey v. Alguire, No. 3:09-cv-724,
2011 WL 10893950, at *4 (N.D. Tex. Aug. 26, 2011).
the appeal from that decision was pending, we held in another
Stanford scheme appeal that the Receiver represented the
creditors, not the Stanford entities. Janvey v.
Democratic Senatorial Campaign Committee, Inc. (DSCC
I), 699 F.3d 848 (5th Cir. 2012). We withdrew that
opinion and issued another, concluding instead that:
[A] federal equity receiver has standing to assert only the
claims of the entities in receivership, and not the claims of
the entities' investor-creditors, but the knowledge and
effects of the fraud of the principal of a Ponzi scheme in
making fraudulent conveyances of the funds of the
corporations under his evil coercion are not imputed to his
captive corporations. Thus, once freed of his coercion by the
court's appointment of a receiver, the corporations in
receivership, through the receiver, may recover assets or
funds that the principal fraudulently diverted to third
parties without receiving reasonably equivalent value.
Janvey v. Democratic Senatorial Campaign Committee,
Inc. (DSCC II), 712 F.3d 185, 190 (5th Cir.
2013). This holding invalidated the basis for the district
court's denial of the motions to compel arbitration. As a
result, we vacated the denial of the motion to compel and
remanded once again for the district court to reconsider the
motions in light of DSCC II. Janvey v.
Alguire (Alguire III), 539 F.App'x 478,
480-81 (5th Cir. 2013).
district court once again denied the motions to compel,
resting its result on three major conclusions. First, the
district court rejected the Receiver's argument that he
can choose the Stanford entity on whose behalf he sues,
instead requiring the Receiver to sue on behalf of the
Company, which was party to the arbitration agreements.
Janvey v. Alguire (Denial Order), No. 3:09-cv-724,
ECF No. 1093, at 9-10 (N.D. Tex. July 30, 2014) (order
denying motions to compel arbitration).
the district court concluded that the Receiver had rejected
the arbitration agreements and that such rejection was
permissible. Id. at 16-25. The district court,
drawing from well-established bankruptcy law, determined that
an equity receiver, like a bankruptcy trustee, has the power
to assume or reject any executory contract. The district
court concluded that executory arbitration agreements are
analyzed as separable from the contracts in which they are
contained. Turning to the arbitration agreements in this
case, the district court rejected the defendants'
argument that the Receiver had not rejected the agreements,
noting that federal equity receivers have no obligation to
affirmatively reject an executory contract. The district
court determined that the Receiver's rejection of the
arbitration agreements was permissible, explaining that it
would be "unjust and inequitable" to burden and
deplete the receivership estate by requiring the Receiver to
adopt the arbitration agreements.
the district court concluded in the alternative that
arbitration of the Receiver's claims would conflict with
the central purposes and objectives of the federal equity
receivership statutory scheme, and therefore exercised its
discretion to deny the motions to compel arbitration.
Id. at 26-49. The district court noted that in the
receivership statutes Congress had "clearly emphasized
the importance of consolidating in one court all matters
involving the receivership estate and assets, " that
courts have consistently held that Congress intended for
federal equity receivers to be utilized in situations
involving federal securities laws, and that the federal
multidistrict litigation scheme implicated in this
receivership also emphasizes consolidation before one court.
Id. at 33-36. Drawing from case law involving
conflicts between the purposes of the Bankruptcy Code and the
Federal Arbitration Act (FAA), the district court concluded
a specific conflict arises between arbitrating the
Receiver's fraudulent transfer claims under the Employee
Defendants' arbitration agreements and certain central
purposes of the federal equity receivership statutory
framework, especially in the added context of the Stanford
receivership being a multidistrict litigation SEC
receivership over a Ponzi scheme.
Id. at 41. Considering that "[a]rbitration
decentralizes, deconsolidates, strips the court and the
receiver of exclusive jurisdiction over the receivership
assets, interferes with the broad powers of both the court
and the receiver to adjudicate all issues affecting
receivership assets, " id. at 46, and
interferes with equal distribution of assets, the district
court exercised its discretion to deny the motions to compel
arbitration. Id. at 47-49.
separate orders, the district court denied motions to compel
arbitration filed by Juan Rincon (the former Executive Vice
President and Chief Financial Officer of the Company),
 Luis Giusti (a former member of the
Bank's advisory board),  and Oreste Tonarelli (a former managing
director of the Company's Private Clients
Group). The defendants appeal and
their appeals were consolidated.
jurisdiction to consider this appeal even though the district
court's denials of the motions to compel arbitration are
interlocutory orders. In re Mirant Corp., 613 F.3d
584, 588 (5th Cir. 2010). We review the denial of a motion to
compel arbitration de novo, but we review the
district court's factual findings for clear error.
is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed so
to submit." United Steelworks of Am. v. Warrior
& Gulf Nav. Co., 363 U.S. 574, 582 (1960). As a
result, we analyze whether a party can be compelled to
arbitrate using a two-step process. "First, we ask if
the party has agreed to arbitrate the dispute."
Sherer v. Green Tree Serv. L.L.C., 548 F.3d 379, 381
(5th Cir. 2008). "While there is a strong federal policy
favoring arbitration, the policy does not apply to the
initial determination whether there is a valid agreement to
arbitrate." Banc One Acceptance Corp. v. Hill,
367 F.3d 426, 429 (5th Cir. 2004). If the party opposing
arbitration has agreed to arbitrate, "we then ask if
'any federal statute or policy renders the claims
nonarbitrable.'" Sherer, 548 F.3d
at 381 (quoting JP Morgan Chase & Co. v.
Conegie, 492 F.3d 596, 598 (5th Cir. 2007)).
Receiver argues that he is bringing his claims on behalf of
the Bank, which has not agreed to arbitrate with the
defendants, except in the case of Giusti. In the alternative,
the Receiver argues that the arbitration agreements on which
the defendants' motions are based should be rejected as
part of the fraudulent scheme, and that his equitable
authority as Receiver empowers him to reject executory
contracts, including the arbitration clauses. Finally, the
Receiver argues there is "an inherent conflict between
arbitration and the [federal receiver] statute's
underlying purpose" such that federal law does not
permit the court to compel arbitration. Shearson/Am.
Express, Inc. v. McMahon, 482 U.S. 220, 227 (1987). The
various defendants disagree and also argue that the district
court exceeded the scope of our mandate in Alguire
III by allowing the Receiver to avoid
Receiver first argues that he is free to bring his TUFTA
claims on behalf of any of the Stanford entities and that, by
bringing the claims on behalf of the Bank, which was not a
signatory to the arbitration agreements (except for the
agreement with Giusti), he is not bound by the arbitration
agreements. The district court disagreed, reasoning that
allowing the Receiver to pick the entity on whose behalf he
brought the claims "would be inconsistent with [the
district court's] previous rulings and inconsistent with
equity." Denial Order at 10.
previously considered at great length the Receiver's
representative role. In DSCC II we concluded that
the Receiver "has standing to assert the claims of [the
Bank], and any other Stanford entity in receivership."
712 F.3d at 192. We clarified, however, that "the
knowledge and effects of the fraud of the principal of a
Ponzi scheme in making fraudulent conveyances of the funds of
the corporations under his evil coercion are not imputed to
his captive corporations." Id. at 190.
Therefore, "once freed of his coercion by the
court's appointment of a receiver, the corporations in
receivership, through the receiver, may recover assets or
funds that the principal fraudulently diverted to third
parties . . . ." Id. We based our decision in
that case on the Seventh Circuit's holding in
Scholes that corporations involved in a fraudulent
scheme, although "[the defrauder's] robotic tools,
were nevertheless in the eyes of the law separate legal
entities with rights and duties." Scholes v.
Lehmann, 56 F.3d 750, 754 (7th Cir. 1995).
like DSCC II, determined that a receiver has
standing to sue on behalf of formerly captive corporations
and that the corporations, once freed from the control of the
scheme's perpetrator, are not barred from recovery by the
defense of in pari delicto. Id. at 754-55;
DSCC II, 712 F.3d at 191-92. Although these cases do
not directly answer our question, their reasoning compels a
single outcome. If the corporations retain identities
distinct from Stanford himself, as "separate legal
entities with rights and duties, " it logically follows
that they are distinct from one another. Scholes, 56
F.3d at 754. Now that Stanford no longer controls the Bank
and the Company for the benefit of an integrated criminal
scheme, the Bank and the Company are separate actors. The
Receiver, appointed by the court to represent all of the
Stanford entities, may bring his claim on behalf of whichever
of the entities he chooses, provided that the entity has a
claim against the defendant in question.
Receiver has exercised his authority to bring claims on
behalf of the Stanford entities individually and argues that
he brings his claims against the employee-defendants on
behalf of the Bank. The Bank collected deposits from
investors. The Receiver alleges that Stanford diverted those
deposits from the Bank into the Company and then arranged for
the Company to pay the employee-defendants in furtherance of
his illegal scheme. These allegations satisfy the
requirements of TUFTA, which allows any creditor to reclaim
fraudulently transferred assets from the initial transferee
(here the Company) or "any subsequent transferee other
than a good faith transferee who took for value." Tex.
Bus. & Comm. Code § 24.009. The Bank, which has a
"right to payment or property, " is a creditor
under TUFTA. Id. § 24.002(3), (4). TUFTA thus
allows the Receiver to bring a claim on behalf of the Bank
against the defendants as "subsequent
transferee[s]" of the fraudulent transfers.
Bank is not a signatory to any of the promissory notes apart
from Giusti's, nor is it a member or associated person
bound to arbitrate under FINRA's rules. Moreover, the
references to "affiliates" in the arbitration
agreements are insufficient to bind the Bank. See In re
Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 191 (Tex.
2007) ("'A corporate relationship is generally not
enough to bind a nonsignatory to an arbitration
agreement.' Unlike a corporation and its employees,
corporate affiliates are generally created to separate the
businesses, liabilities, and contracts of each. Thus, a
contract with one corporation-including a contract to
arbitrate disputes-is generally not a contract with any other
corporate affiliates.") (citations omitted) (declining
to allow affiliates referenced in arbitration agreement to
compel arbitration in the absence of an "alter-ego
exception"). Because the Receiver brings his claims on
behalf of the Bank and the Bank has not consented to
arbitration, the motions to compel arbitration fail.
defendants' arguments to the contrary are unavailing.
They argue that three different equitable doctrines bind the
Bank as a third party to the arbitration agreements between
the Company and the defendants: alter ego, estoppel, and
third-party beneficiary. These doctrines permit a court to
impose a contract on a third party who is not a signatory to
the contract. See Bridas S.A.P.I.C. v. Gov't of
Turkmenistan, 345 F.3d 347, 356, 358-63 (5th Cir. 2003).
These three doctrines sound in equity. We do not apply
equitable principles rigidly, but rather circumspectly,
because they are "grounded in fairness . . . . 'In
all cases, the lynchpin . . . is equity, and the point of
applying it to compel application of a contractual provision
is to prevent a situation that would fly in the face of
fairness.'" Bahamas Sales Assoc., L.L.C. v.
Byers, 701 F.3d 1335, 1342 (11th Cir. 2012) (alterations
and citation omitted). None of the three doctrines bind the
doctrine of alter ego allows a court to pierce the corporate
veil and impose on an owner the obligations of its subsidiary
"when their conduct demonstrates a virtual abandonment
of separateness." Bridas, 345 F.3d at 359
(quoting Thomson-CSF, S.A. v. Am. Arbitration
Ass'n, 64 F.3d 773, 777 (2d. Cir. 1995)).
"Courts do not lightly pierce the corporate veil even in
deference to the strong policy favoring arbitration."
Id. (quoting ARW Exploration Corp. v.
Aguirre, 45 F.3d 1455, 1461 (10th Cir. 1995)). In prior
litigation, we have made clear that the blurring of corporate
boundaries and the wrongful acts taken by Stanford no longer
equitably affect the hostage corporations now that they are
under the control of the Receiver. See DSCC II, 712
F.3d at 192. Just as Stanford's removal from the scene
vitiated the defendants' defense of in pari
delicto, so it vitiates their defense of alter ego.
defendants advance two theories of equitable estoppel, both
of which are inapplicable. The "intertwined claims"
theory governs motions to compel arbitration when a
signatory-plaintiff brings an action against a
nonsignatory-defendant asserting claims dependent on a
contract that includes an arbitration agreement that the
defendant did not sign. Grigson v. Creative Artists
Agency, L.L.C., 210 F.3d 524, 527-28 (5th Cir. 2000). It
does not govern the present case, where a signatory-defendant
seeks to compel arbitration with a nonsignatory-plaintiff.
Bridas, 345 F.3d at 361. The "direct
benefits" theory of equitable estoppel "prevents a
nonsignatory from knowingly exploiting an agreement
containing the arbitration clause." Graves v. BP
Am., Inc., 568 F.3d 221, 223 (5th Cir. 2009). That is,
"a nonsignatory cannot sue under an agreement while at
the same time avoiding its arbitration clause."
Id. This theory is inapplicable here because the
Receiver does not seek to enforce the various contracts
containing the arbitration agreements; rather, he seeks to
unwind them and reclaim the benefits fraudulently distributed
to the defendants under the contracts.
the third-party beneficiary doctrine prevents the intended
beneficiary of a contract from avoiding the terms of the
contract. It does not apply when a person merely is directly
affected by the parties' conduct or has a substantial
interest in a contract's enforcement. Bridas,
345 F.3d at 362. Rather, "[p]arties are presumed to be
contracting for themselves only, " and a third party is
bound only "if the intent to make someone a third-party
beneficiary is 'clearly written or evidenced in the
contract.'" Id. (citing Fleetwood Ent.,
Inc. v. Gaskamp, 280 F.3d 1069, 1075-76 (5th Cir.
2002)). There is no indication in the contracts or promissory
notes that the Company and the defendants intended the Bank
to be the beneficiary of their agreements. The defendants
argue that the inflated commissions paid to them under the
contracts benefited the Bank because they induced more
creditors to invest in the Bank, but this argument conflates
Stanford with his victim corporations. Expanding the number
of defrauded investors in the Bank merely expanded the
Bank's ultimate liabilities and increased the injury to
the Bank; it did not benefit the Bank as a corporate entity
distinct from the fraudster, Stanford. See Warfield v.
Byron, 436 F.3d 551, 560 (5th Cir. 2006) ("It takes
cheek to contend that in exchange for the payments [an
investor and promoter] received, the RDI Ponzi scheme
benefitted from his efforts to extend the fraud by securing
the Receiver may sue on behalf of any of the Stanford
entities that has a claim against the defendants, because he
has chosen to sue on behalf of the Bank, which has not
consented to arbitrate claims against any of the defendants,
except Giusti, and because none of the equitable doctrines
urged by the ...