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Ritchie Capital Mgmt., L.L.C. v. Opportunity Fin., L.L.C.

United States District Court, D. Minnesota

June 5, 2014

Ritchie Capital Management, L.L.C.; Ritchie Special Credit Investments, Ltd.; Rhone Holdings II, Ltd.; Yorkville Investments I, L.L.C.; Ritchie Capital Structure Arbitrage Trading, Ltd.; and Ritchie Capital Management, Ltd., Plaintiffs,
v.
Opportunity Finance, L.L.C.; Sabes Family Foundation; Sabes Minnesota Limited Partnership; Robert W. Sabes; and Jon R. Sabes, Defendants

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[Copyrighted Material Omitted]

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Brian A. McAleenan, Esq., Michael J. La Mare, Esq., and Thomas K. Cauley, Esq., Sidley Austin LLP; and James M. Jorissen, Esq., Leonard, O'Brien, Spencer, Gale & Sayre, Ltd., counsel for Plaintiffs.

Christopher J. Mandernach, Esq., Jonathan Landy, Esq., Joseph G. Petrosinelli, Esq., and Jefferey D. Bailey, Esq., Williams & Connolly LLP; and John R. McDonald, Esq., Kari S. Merman, Esq., Kevin M. Decker, Esq., and Scott M. Flaherty, Esq., Briggs & Morgan, PA, counsel for Defendants.

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MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, United States District Judge.

INTRODUCTION

This matter is before the Court on a Motion to Abstain and Remand brought by Plaintiffs Ritchie Capital Management, L.L.C., Ritchie Special Credit Investments, Ltd., Rhone Holdings II, Ltd., Yorkville Investments I, L.L.C., Ritchie Capital Structure Arbitrage Trading, Ltd., and Ritchie Capital Management, Ltd. (collectively, " Plaintiffs" ) (Doc. No. 24); and a Motion to Remand to Bankruptcy Court brought by Defendants Opportunity Finance, L.L.C., Sabes Family Foundation, Sabes Minnesota Limited Partnership, Robert W. Sabes, and Jon R. Sabes (collectively, " Defendants" ) (Doc. No. 29).

BACKGROUND

This case relates to losses associated with dealings with Tom Petters (" Petters" ). (Doc. No. 1, Ex. A (" Compl." ) ¶ 1.) Petters was a Minnesota businessman who was convicted in 2009 for running a number of Ponzi schemes between approximately 1993 and 2008. ( Id. ¶ ¶ 1, 19-25.) During that time, Petters induced a number of individuals and entities to lend money to his businesses. ( Id. )

Defendants loaned substantial funds to two special-purpose entities, PC Funding, L.L.C., and SPF Funding, L.L.C., which in turn loaned that money to Petters. ( Id. ¶ 26.) Plaintiffs invested money in one of Petters's schemes. ( Id. ¶ ¶ 37-40.)

Plaintiffs allege that Petters sought money from them in order to meet Defendants' demands for immediate loan repayments. ( Id. ¶ ¶ 47-50.) Specifically, Plaintiffs allege that Defendants learned that Petters was engaged in fraud and then demanded repayment of their loans to Petters on an accelerated basis from Petters. ( Id. ¶ ¶ 47-51.) Plaintiffs allege that Defendants knew that the only way they would receive repayment was if Petters continued his fraud and sought new investors. ( Id. ) Plaintiffs claim they were such new investors and, therefore, Defendants were complicit in Petters's procurement of $189 million in loans from Plaintiffs. ( Id. ¶ ¶ 47-51.)

With the conviction of Petters and the collapse of his enterprise, proceedings relating to Petters are pending before the Bankruptcy Court for the District of Minnesota. (Doc. No. 1 (" Removal Notice" ) ¶ 1.) On October 3, 2009, a number of Petters's companies went into receivership. See In re Petters Co. , Civ. No. 08-45257 (Bankr. D. Minn. Oct. 22, 2008). The Bankruptcy Court appointed Douglas A. Kelley (" Kelley" ) as receiver for those companies. Id. Kelley filed a number of

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petitions for those companies, and they were consolidated before Bankruptcy Chief Judge Gregory F. Kishel. Id. On February 26, 2009, Kelley was also appointed Trustee for all debtors to the Petters bankruptcy case. (Doc. No. 39 at 3.)

The Trustee has commenced a number of proceedings seeking distributions to creditors of various Petters-related estates, including against Opportunity Finance. (Doc. No. 39, Ex. A (Amended Compl., Kelley v. Opportunity Fin. , No 10-04301 (Bankr. D. Minn. Feb. 25, 2011)).) In that proceeding, the Trustee asserts claims of constructive fraud and unjust ...


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