Janvey v. Alguire

Citation:
No. 10-10617
Tag(s):
Ruling:
1. The District Court acted within its power when it issued a preliminary injunction prior to deciding an outstanding motion to compel arbitration. 2. The District Court did not abuse its discretion in issuing a preliminary injunction. 3. The preliminary injunction was not a pre-judgment attachment, nor was it overly broad. 4. The Reciever's fraudulent transfer claims are not subject to arbitration because he is suing the defendants on behalf of the estate's creditors, not on behalf of the company/contract counter-party to the defendants.
Procedural context:
This decision arises from an interlocutory appeal of a preliminary injunction.
Facts:
This appeal arises out of the alleged multi-billion dollar Ponzi scheme perpetrated by the Stanford Companies. According to the SEC, the companies' core objective was to sell certificates of deposit ("CDs") issued by SIB. Stanford achieved and maintained a high volume of CD sales by promising above-market returns and falsely assuring investors that the CDs were backed by safe, liquid investments. The SEC filed suit against Stanford, SIB and related companies in 2009. At the request of the SEC, the district court issued a temporary restraining order restraining the payment or expenditure of funds belonging to the Stanford parties. The district court also appointed the Reciever. Post-appointment, the Receiver froze millions of dollars in assets. The frozen accounts allegedly contained funds disbursed by Stanford as purported interest on CDs, reimbursement of CD principle, or compansation to former Stanford employees. The receiver subsequently filed a series of claims against hundreds of CD investors and Employee Defendants seeking to recover funds from frozen accounts as fraudulent transfers under the Texas version of Uniform Fraudulent Transfer Act. Prior to the expiration of the "freeze" on the accounts, the receiver sought a preliminary injunction to prevent the dissipation of the funds in the accounts. In response to the motion, the Employee Defendants opposed the motion for preliminary injunction and moved to compel arbitration. The Employee Defendants based their motion to compel arbitration on the existence of an arbitration clause contained in certain Promissory Notes between the Employee Defendants and Stanford. The Employee Defendants argued that because the Receiver stood in the shoes of Stanford, the Receiver was also bound by the arbitration clause between the Employee Defendants and Stanford. The District Court granted the temporary injunction prior to ruling on the motion to compel arbitration. The United States Court of Appeals for the Fifth Circuit affirmed.
Judge(s):
Stewart, Prado and Elrod

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