Document Type
Research Memorandum
Publication Date
2021
Abstract
(Excerpt)
A court-appointed receiver is charged with collecting the assets of an entity for the benefit of creditors. A receiver, however, only has standing to bring claims that the party in the receivership possessed. In determining whether a receiver has standing to bring a claim, it is necessary to differentiate between the types of claims that can be asserted on behalf of a corporation. First, there are actions that a receiver may bring directly against the principals of a corporation or the recipients of fraudulent transfers. Second, are common law tort claims that can be brought against a third party, in the name of the corporation, to recover damages perpetrated by the corporation’s own insiders. For example, the Uniform Fraudulent Transfer Act (“UFTA”), as enacted in Florida, authorizes a receiver standing in the shoes of the corporation, to commence certain fraudulent conveyance actions against third parties.
A receiver, however, lacks standing to bring claims on behalf of a corporation, where a receiver is unable to treat the corporation as a separate legal entity from the insiders who perpetrated the fraud. Thus, in the case of a Ponzi scheme, where the enterprise that existed was fraudulent, an issue arises as to whether a receiver, acting on behalf of the company that managed the Ponzi scheme, has standing to bring such claims. In such cases, a majority of courts have found that a receiver lacks standing to commence a fraudulent conveyance action because the corporation and insiders were functionally equivalent. The only entities entitled to bring such claims are the individual customers who lost their assets.
For example, in Isaiah v. JPMorgan Chase Bank, the United States Court of Appeals for the Eleventh Circuit held that a receiver lacked standing to commence an action against a financial institution for aiding and abetting a Ponzi scheme, because he represents the receivership and not the individuals who were the actual victims of the fraud. Thus, since the receiver stands in the shoes of the corporation, the bad acts of the corporation remain inherently within the receivership. Additionally, the court held that the court-appointed receiver could not recover a deposit made by its principals into various bank accounts within the same financial institution, because under UFTA, such a transaction was not a “transfer” within the meaning of the statutory language, regardless of whether such amounts were the subject of a Ponzi scheme.
Part I of this memorandum addresses what qualifies as a “transfer” under the specific language of Florida’s enactment of the Uniform Fraudulent Transfer Act and why an intercompany transfer between two bank accounts cannot be deemed a transfer. Then, part II analyzes the claims that a receiver can bring and when a receiver lacks standing to bring such claims. Finally, Part III concludes with addressing who, if anyone, may actually have standing to recover the fraudulent transfers in those scenarios.