Ralph S. Janvey, a partner in Dallas’ Krage & Janvey
Weary of waiting years for a court-appointed receiver to finish his job securing millions in assets connected to R. Allen Stanford’s $7 billion dollar Ponzi scheme through federal court litigation, some of the imprisoned financier’s victims would like to pursue their claims in Texas state courts.
But for the second time, the U.S. Court of Appeals for the Fifth Circuit has refused to grant a plaintiff’s request to lift a litigation stay imposed over them five years ago by U.S. District Judge David Godbey of Dallas.
Godbey’s stay halts state law claims against Stanford from proceeding, thereby protecting the assets a receiver he appointed is seeking to collect as part of federal civil litigation filed against Stanford by the U.S. Securities and Exchange Commission in 2009.
The Sept. 16 decision in Rishmague v. Winter, prevents two separate cases from proceeding in state court in which plaintiffs allege they were harmed by Stanford who allegedly purported the CDs they bought at his bank were backed up by insurance when they weren’t. Stanford is currently serving 110 years in prison after a Houston federal jury convicted him of numerous fraud allegations. More than 100 civil actions involving Stanford assets are pending before Godbey.
The plaintiffs in Rishmague asked Godbey to lift the stay, were refused, and they appealed his decision to the Fifth Circuit because “the receivership stay has been in place for five years with no end in sight,” according to their appellate brief in the case.
In his decision, Judge Stephen Higginson noted that the court had previously denied other plaintiffs’ attempts to lift Godbey’s stay, noting that the trial court has broad authority to issue stays to preserve property placed into receivership pursuant to SEC actions. And he also noted that Godbey has more than a dozen Stanford receiver cases set for trial in the next year and half. [See “R. Allen Stanford Civil Litigation Hits the Stage,” Texas Lawyer, Feb. 16, 2015.”]
“We are mindful that four years have passed since that decision” first upholding Godbey’s litigation stay, Higginson wrote. “At this time, however, as the district court continues to receive itself as well as coordinate and oversee extensive litigation, relating to asset recovery, we cannot say that the district court abused its discretion in declining to lift the litigation stay.”
Kevin Sadler, a partner in the Palo Alto office of Baker Botts who represents receiver Ralph Janvey in the case, is pleased with the Fifth Circuit’s decision upholding the litigation stay.
“The receiver continues to pursue numerous lawsuits to recover funds for the benefit of the more than 18,000 victims of the Stanford Ponzi scheme. Asset-recovery litigation is a very difficult and lengthy process,” Sadler said. “The litigation stay affirmed by the Fifth Circuit’s decision allows the receiver to continue to focus his efforts on these lawsuits against parties who aided or profited from the Stanford Ponzi scheme.”
Leslie Hyman, a partner in San Antonio’s Pulman, Cappuccio, Pullen, Benson & Jones who represents the investor plaintiffs in the case, is disappointed in the Fifth Circuit’s decision— given that Godbey has lifted the stay for investors seeking similarly situated claims against Stanford in federal court “and we’re not being allowed to proceed in state court.”
“Now he’s lifted the stay as to investors suing in federal court as to investors suing in state court. And the Fifth Circuit said, apparently, that was fine,” Hyman said of Godbey. “What we were hoping for was at the very least some guidance as to when it might be appropriate to lift the stay but they chose not to offer that guidance.”
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For a full and open debate on the Stanford receivership visit the Stanford International Victims Group – SIVG official Forum http://sivg.org.ag/