USSEC, ET AL V. CHICAGO TITLE COMPANY, ET
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 22-56206, 22-56208 (9th Circuit, Feb 20,2025) Published
- Tag(s):
-
- Ruling:
- In a decision that reduced Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024), to one footnote, the court ruled that district courts could enter third-party injunctions in SEC Ponzi-scheme receivership cases in United States District Courts. The court found no statutory authority for such injunction. Instead, the court relied only on the inherent equitable powers of United States District Courts as the rationale for affirming the district court's approval of the injunction.
- Procedural context:
- The Securities and Exchange Commission initiated litigation to stop an ongoing Ponzi scheme. The district court appointed a receiver to wind up the Ponzi scheme. The receiver negotiated a settlement with a title insurance company whose personnel were involved in the Ponzi scheme. The settlement barred all federal and state litigation against the title insurance company. Numerous Ponzi victims appealed to the United States Court of Appeals for the Fifth Circuit.
- Facts:
- Gina Champion-Cain, through her company ANI Development, LLC, ran a Ponzi scheme. The Ponzi scheme convinced victims to make loans to persons who were applying for liquor licenses in California. In California, liquor license applicants had to post a bond that remained in place during the application period. Under the Ponzi scheme, the funds received from investors would be held in trust at Chicago Title Company until the end of the application period, and then returned to the investors. In addition, the investors would receive interest of up to 25% from the liquor license applicants.
However, the money was never held in trust. Rather, Cain bribed several Chicago Title officers and agents to prepare fraudulent paperwork and paid an attorney to prepare an "opinion letter" stating that the investment was safe. Cain used the money from the investors to support her lifestyle, fund other business ventures, and repay some of the early investors.
Once the Ponzi scheme unravelled, some investors sued Chicago Title and others, including an early investor and shill for the Ponzi scheme (Kim H. Peterson). Chicago Title counter and cross claimed against Peterson, and Peterson filed cross-claims against Chicago Title.
The receiver ultimately sued Chicago Title after Chicago Title had paid $163 million to more than 300 of the investors to settle their claims. The receiver and Chicago settled by Chicago Title paying an additional $24 million to the receivership estate and obtaining a release and a stay of all other litigation by investors against Chicago Title.
- Judge(s):
- EBEL (sitting by designation), BADE, and FORREST, Circuit Court judges
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