Janvey v. Democratic Senatorial Campaign Committee, Inc.

Summarized by Brendan Gage , Goulston & Storrs PC
13 years 4 months ago

Citation:

No. 11-10704 (5th Cir. Mar. 18, 2013)

Tag(s):

Ruling:

Withdrawing its prior opinion in Janvey v. Democratic Senatorial Campaign Comm., Inc., 699 F.3d 848 (5th Cir. 2012), the Fifth Circuit held that it had erroneously asserted that a Receiver had standing to assert claims under the Texas Uniform Fraudulent Transfer Act (“TUFTA”) on behalf of creditors against several national political committees (“the Committees”) for receiving contributions. The basis for the Receiver’s standing was not through the claims of the investors, but rather through the various captive corporations in the receivership that were previously under the coercion of their principal. Upon the appointment of the Receiver, the captive corporations were freed and the Receiver could then bring the TUFTA claims on their behalf. The district court (“DC”) had also misidentified the basis for the Receiver’s standing, but this was harmless because the DC order did not authorize the Receiver to represent the creditors of the captive corporations. Second, the TUFTA claims were timely. Knowledge of the fraudulent transfers could not be attributed to the coerced corporations because they were merely their principal’s “robotic tools” before the Receiver was appointed. Although the avoidable donations were registered with a federal agency and reported in the media, the Committees did not establish that the Receiver knew or could have reasonably known of the fraudulent nature of the transfers more than one year before he filed his suit. While the Conkling exception would permit the disclosure of privileged information tending to show that Receiver knew or should have known about the fraudulent nature of the contributions, the issue of whether the DC properly applied the exception was not preserved on appeal. Finally, federal campaign finance law did not preempt the Receiver’s TUFTA claims. The Federal Campaign Act of 1971 (“FECA”) preempts “any provision of State law with respect to election to federal office,” but it did not expressly preempt TUFTA. TUFTA is a general state law that happened to apply to federal political committees and was not passed to specifically regulate federal campaign finance. Field preemption did not apply because FECA regulates impermissible sources of campaign contributions to the Committees and does not address sources of funding by the contributor. Furthermore, political committees remain subject to state contract law, suggesting that Congress did not intend to “occupy the field” of campaign finance to the extent that state fraudulent transfer laws would be preempted. Similarly, conflict preemption was inapplicable because the soft money provisions of the Bipartisan Campaign Reform Act of 2002 deal with refunds of political contributions. The Receiver’s claims could not be characterized as claims for refunds because TUFTA only entitles the Receiver to recover the value of the assets transferred or the amount necessary to satisfy the creditor’s claim, whichever is less.

Procedural context:

The Committees each filed a motion to dismiss the Receiver’s TUFTA claims in the DC for the Northern District of Texas. Additionally, the Republican Committee and the Receiver moved for summary judgment. The DC granted the Receiver’s motion for summary judgment, denied the Republican Committee motion for summary judgment, and denied the motions to dismiss. The DC ruled that: (1) the Receiver stands in the shoes of creditors and may bring the TUFTA claims; (2) the claims were timely; (3) federal campaign finance law did not preempt the Receiver’s claims; and (4) the Receiver was entitled to summary judgment on the merits of the claims.

Facts:

The DC appointed Ralph Janvey as Receiver over convicted Ponzi schemer Allen Standford, his corporations, and their assets. The Receiver then brought TUFTA claims against the Committees to recover approximately $1.8 million in political contributions made by the Defendants. The Receiver asserted that the contributions were transfers made “with actual intent to hinder, delay, or defraud” creditors under TUFTA.

Judge(s):

Jolly, Benavides, and Dennis.

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