United States District Court, D. Minnesota
Douglas A. Kelley, in His Capacity as the Court-Appointed Receiver of Thomas Joseph Petters; Petters Company Inc., aka PCI; Petters Group Worldwide LLC; ., Plaintiff,
JPMorgan Chase & Co., JPMorgan Chase Bank, N.A., One Equity Partners LLC, Jacques A. Nasser, Lee M. Gardner, Charles F. Auster, James W. Koven, Rick A. Lazio, J. Michael Pocock, William L. Flaherty, Ira H. Parker, Defendants. and Ritchie Special Credit Investments, Ltd., Rhone Holdings II, Ltd., Yorkville Investment I, L.L.C., Ritchie Capital Structure Arbitrage Trading, Ltd., Ritchie Capital Management, Ltd., Ritchie Capital Management, L.L.C., Movants.
Douglas L. Elsass and Lori A. Johnson, Nilan Johnson Lewis
PA, K. Jon Breyer, Lindquist & Vennum LLP, Kevin M.
Magnuson and Steven E. Wolter, Kelley, Wolter & Scott,
P.A., for Plaintiff.
R. McDonald, Benjamin E. Gurstelle, and Kevin M Decker,
Briggs & Morgan, PA, Alan Craig Turner, David J. Woll,
Isaac Martin Rethy, Joshua C. Polster, and Thomas Charles
Rice, Simpson Thacher & Bartlett LLP, for Defendants.
Patrick H. O'Neill, Jr, Larson King, LLP, for Movants.
MEMORANDUM OPINION AND ORDER
RICHARD NELSON, UNITED STATES DISTRICT JUDGE
matter is before the Court on the Appeal/Objection
(“Objection”) [Doc. No. 56] of Movants Ritchie
Special Credit Investments, Ltd., Rhone Holdings II, Ltd.,
Yorkville Investment I, L.L.C., Ritchie Capital Structure
Arbitrage Trading, Ltd., Ritchie Capital Management, Ltd.,
Ritchie Capital Management, L.L.C. (all collectively,
“Ritchie”) to United States Magistrate Judge
Hildy Bowbeer's Order dated January 2, 2018 (“Jan.
2 Order”) [Doc. No. 54] denying Ritchie's Motion to
Intervene in the present suit. For the reasons stated herein,
Ritchie's Objection is overruled.
facts underlying this lawsuit stem from the well-known Ponzi
scheme orchestrated by Minnesota businessman Thomas Petters.
See, e.g., United States v. Petters, 663
F.3d 375, 380-86 (8th Cir. 2011) (affirming Petters's
conviction and 50-year sentence). As the magistrate
judge's January 2 Order thoroughly sets forth the facts
underlying Ritchie's Motion to Intervene, this Court
recites here only the facts necessary to contextualize, and
rule on, Ritchie's Objection.
Collapse of Petters's Ponzi Scheme
nearly twenty years, Petters operated a massive,
multi-billion dollar Ponzi scheme through which he defrauded
a myriad of investors. See Id. at 379. This Ponzi
scheme collapsed in 2008 after one of Petters's employees
contacted law enforcement. Id. On September 24,
2008, federal agents raided Petters's offices and
subsequently arrested him on October 3, 2008. See Kelley
v. JPMorgan Chase & Co., 464 B.R. 854, 856 (D. Minn.
2011). The collapse of Petters's Ponzi scheme has led to
a host of litigation, as described below.
Legal Actions Generally
The Receivership and Bankruptcy Cases
before Petters's arrest, the Government commenced a civil
action pursuant to the Fraud Injunction Statue, 18 U.S.C.
§ 1345, to freeze Petters's assets and those of the
entities he controlled in order to preserve them for victim
restitution and forfeiture were Petters and the entities
ultimately convicted in the criminal proceedings.
(See Compl. Permanent Inj. & Other Equitable
Relief, United States v. Petters, No. 08-cv-5348
(ADM/TNL) (hereinafter Receivership Proceedings) (D.
Minn. Oct. 2, 2008), ECF No. 1.) These proceedings are often
termed the “Receivership Proceedings” in
Petters-related litigation. After first granting an ex
parte temporary restraining order, on October 6, 2008,
the Honorable Ann Montgomery entered a preliminary injunction
and later appointed Douglas A. Kelley (“Kelley”),
the Plaintiff here, as an equity receiver
(“Receiver”) for Petters, two of his
companies-Petters Company, Inc. (“PCI”) and
Petters Group Worldwide (“PGW”)-as well as
several entities owned and controlled by those corporations.
(See Order Entry Prelim. Inj., Order Appointing
Receiver, & Other Equitable Relief, Receivership
Proceedings (D. Minn. Oct. 6, 2008), ECF No. 12.) After
several amendments, Judge Montgomery's order
(“Receivership Order”) also stayed all litigation
against Petters, his corporations, and the Receivership
assets, except for claims asserted in the criminal suit or
later filed in bankruptcy proceedings. (See Second
Am. Order Entry Prelim. Inj., Appointment of Receiver, &
Other Equitable Relief, Receivership Proceedings (D.
Minn. Dec. 8, 2008), ECF No. 127.)
after entry of the Receivership Order-Kelley, in his capacity
as Receiver, filed for Chapter 11 bankruptcy for PCI and PGW
and their affiliates. See Kelley, 464 B.R. at 857.
Kelley was then appointed as Chapter 11 Bankruptcy Trustee
for the PCI and PGW bankruptcy estates. Id. In his
capacity as Bankruptcy Trustee, Kelley has filed hundreds of
adversary proceedings to try to recover fraudulent transfers
and stolen funds. Id.
The Petters Criminal Case
December of 2009, a jury convicted Petters of 20 counts of
fraud, conspiracy, and money laundering, and a court within
this district sentenced him to 50 years of incarceration.
See Petters, 663 F.3d at 380. Petters's sentence
also included a personal money judgment in the amount of $3,
522, 880, 614.10. (See Sentencing J., United
States v. Petters, No. 08-cr-364 (RHK/AJB) (D. Minn.
Apr. 8, 2010), ECF No. 400 at 6.) The district court declined
to order restitution to Petters's victims, however,
citing, in part, the extreme difficulty associated with the
restitution process in the case and the complexity of the
fact-finding that it would require. See United States v.
Petters, No. 08-cr-364 (RHK/AJB), 2010 WL 2291486, at *5
(D. Minn. June 3, 2010). The court noted that the Government
could proceed through the remission process instead in order
to attempt to recompense Petters's fraud victims.
Coordination Agreement Between the Government, Bankruptcy
Trustee, and Receiver
August of 2010, in light of their competing claims to the
property associated with Petters's fraud, the Government
and Kelley-in his capacities as both Receiver and Bankruptcy
Trustee-entered into an agreement to coordinate their efforts
(the “Coordination Agreement”). Recognizing that
there was a “significant overlap of identity between
victims of the fraud and creditors of the PCI Estates and the
PGW Estates, ” the parties sought “to maximize
recovery to victims and creditors and minimize receivership
and bankruptcy expenses through the coordination of their
respective efforts for the victims and creditors.”
(Coordination Agreement, Receivership Proceedings
(D. Minn. Aug. 18, 2010), ECF No. 1351-1 at 4.) The parties
acknowledged that “competing litigation would result in
the overall diminishment of the recovery for victims and
creditors alike and undue delay in the distribution of