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R. Wayne Klein, the Court-Appointed Receiver of Trigon Group, Inc., and For the Assets of Daren L. v. Capital One Financial Corporation

July 29, 2011

R. WAYNE KLEIN, THE COURT-APPOINTED RECEIVER OF TRIGON GROUP, INC., AND FOR THE ASSETS OF DAREN L. PALMER,
PLAINTIFF,
v.
CAPITAL ONE FINANCIAL CORPORATION, A DELAWARE CORPORATION, CAPITAL ONE, NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION, AND CAPITAL ONE BANK (USA), NATIONAL ASSOCIATION, A NATIONAL BANKING ASSOCIATION, DEFENDANTS.



The opinion of the court was delivered by: U. S. District Judge Honorable Edward J. Lodge

MEMORANDUM ORDER

INTRODUCTION

Pending before the Court in the above-entitled matter is Defendants Motion to Dismiss. The Motion is made under Federal Rules of Civil Procedure 12(b)(1) and (6). The matter is ripe for the Court's consideration. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately represented in the briefs and record. Accordingly, and in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this Motion shall be decided on the record before this Court without oral argument.

FACTUAL AND PROCEDURAL BACKGROUND

On February 26, 2009, Plaintiff, R. Wayne Klein, was appointed Receiver of Trigon Group, Inc. and for the assets of Daren L. Palmer in two related enforcement actions filed by the Securities and Exchange Commission (the "SEC") and the Commodity Futures Trading Commission (the "CFTC"). See Case 4:09-cv-00075-EJL and Case 4:09-cv-00076-EJL. In those cases, Trigon and Mr. Palmer were alleged to have engaged in a large-scale Ponzi scheme.

The Complaint here details the Ponzi scheme undertaken by Trigon and Mr. Palmer. (Dkt. 1.) The Receiver has brought this action against Defendants Capital One Financial Corporation, Capital One, National Association, and Capital One Bank (USA), National Association to recover funds invested in Trigon that were diverted to Defendants during the Ponzi scheme. (Dkt. 1.) The Receiver alleges the Defendants, between November 15, 2006 and August 29, 2008, received payments from Trigon in the sum of $44,259.75; specifically listing several of these payments. (Dkt. 1, pp. 7-9.) The Complaint raises claims for 1) Avoidance and Recovery of Fraudulent Transfers and 2) Constructive Trust and Other Provisional Remedies. (Dkt. 1.) The fraudulent transfer claim is brought under the Idaho Uniform Fraudulent Conveyance Act (UFTA), Idaho Code §§ 55-913, 55-914, and 55-916. The Constructive Trust claim seeks remedies provided for under Idaho Code § 55-916(b) and (c) (Dkt. 1.) The Defendants have filed the instant Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 6) which the Court now takes up. (Dkt. 8.) STANDARD OF LAW 1. Rule 12(b)(1)

A Defendant may move to dismiss a complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) in one of two ways. See Thornhill Publ'g Co., Inc. v. General Tel. & Elec. Corp., 594 F.2d 730, 733 (9th Cir. 1979). The attack may be a "facial" one where the defendant attacks the sufficiency of the allegations supporting subject matter jurisdiction. Id. On the other hand, the defendant may launch a "factual" attack, "attacking the existence of subject matter jurisdiction in fact." Id. When considering a "facial" attack made pursuant to Rule 12(b)(1), a court must consider the allegations of the complaint to be true and construe them in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1988). A "factual" attack made pursuant to Rule 12(b)(1) may be accompanied by extrinsic evidence. St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989); Trentacosta v. Frontier Pac. Aircraft Indus., 813 F.2d 1553, 1558 (9th Cir. 1987). When considering a factual attack on subject matter jurisdiction, "the district court is ordinarily free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983) (citing Thornhill, 594 F.2d at 733). "[N]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims ." Thornhill, 594 F.2d at 733 (quoting Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)).

However, "[t]he relatively expansive standards of a 12(b)(1) motion are not appropriate for determining jurisdiction ... where issues of jurisdiction and substance are intertwined. A court may not resolve genuinely disputed facts where 'the question of jurisdiction is dependent on the resolution of factual issues going to the merits.'" Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987) (quoting Augustine, 704 F.2d at 1077). In such a case, "the jurisdictional determination should await a determination of the relevant facts on either a motion going to the merits or at trial." Augustine, 704 F.2d at 1077 (citing Thornhill, 594 F.2d at 733-35). This case does not require the Court to resolve substantive issues in determining whether jurisdiction is proper.

2. Rule 12(b)(6)

A motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a party's claim for relief. When considering such a motion, the Court's inquiry is whether the allegations in a pleading are sufficient under applicable pleading standards. Federal Rule of Civil Procedure 8(a) sets forth minimum pleading rules, requiring only a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2).

A motion to dismiss will only be granted if the complaint fails to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citations omitted).Although "we must take all of the factual allegations in the complaint as true, we are not bound to accept as true a legal conclusion couched as a factual allegation." Id. at 1949-50; see also Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Therefore, "conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Caviness v. Horizon Comm. Learning Cent., Inc., 590 F.3d 806, 811-12 (9th Cir. 2010) (citation omitted).

DISCUSSION

Defendants' Motion raises several arguments as grounds for dismissal of the Complaint here including standing, failure to plead fraud with particularity, failure to state a claim, and statute of limitations. (Dkt. 8.)*fn1 The Court will address each in turn.

1. Rule 12(b)(1): Receiver's Standing

Defendants argue the Court lacks jurisdiction in this case because the Receiver lacks standing to pursue claims under Idaho's UFTA because he is not a "creditor." (Dkt. 8, p. 5.) Instead, Defendants contend, this matter should be resolved under the United States Bankruptcy Code. In response, the Receiver argues as a federal equity receiver he has standing to assert claims under the UFTA on behalf of the debtor entity, in this case Trigon. (Dkt. 11, p. 5-6.) Defendants counter that nothing in the receivership orders give the Receiver here standing to pursue UFTA causes of action owned by third-party creditors. (Dkt. 15, p. 4.)

The claims here seek to recover funds allegedly unlawfully diverted from Trigon to the Defendants during the time the Ponzi scheme was operating to pay Mr. Palmer's creditors. (Dkt. 1.) Like the receiver in Scholey v. Lehman, 56 F.3d 750, 754-55 (7th Cir. 1995), a case cited by Defendants, here too the Receiver has standing to raise such claims. The Receiver's role in this case is to recover assets of Trigon unlawfully ...


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