Q: I am a receiver. I filed a fraudulent
transfer action against the mother of the defendant in the main case in
which I was appointed. I only discovered six weeks ago that the defendant
had transferred hundreds of thousands of dollars to his mother,
approximately 4½ years ago, in order to, I believe, hide assets from
creditors pursuing him. Counsel for the mother claims that the causes of
action I am asserting against the mother are barred by the statute of
limitations. How can that be when I only just obtained the documents
showing the transfers to the mother?
A: For actual fraudulent
transfers, that is transfers made with the “actual intent to hinder, delay
or defraud any creditor of the debtor,” the statute of limitations in
California provides that the action must be brought “within four years
after the transfer was made or the obligation was incurred, or, if later,
within one year after the transfer or obligation was or could reasonably
have been discovered by the claimant.” California Civil Code §
3439.09(a). A number of cases have dealt with when the one year from
discovery statute of limitations starts to run with regard to a receiver.
Defendants have asserted that the one year discovery period begins as soon
as the receiver is appointed. Where receivers have been appointed in
Ponzi scheme cases or other fraud cases, the courts have generally not
agreed with this contention. The most recent case to discuss this issue
is Donell v.
Mojtahedian, __ F.
Supp. 2d __, 2013 WL 5143035 (C.D. Cal 2013). There the Court found that
the limitations period did not start to run as to the receiver until the
receiver determined he had a valid claim against the defendant. In the
case, while the receiver knew within one year of his appointment that the
defendant had received money back from her investment in the Ponzi scheme,
the receiver did not know whether the defendant was a “winner” in the
scheme (whether she received back more than her investment) until the
receiver subpoenaed records from 74 bank and investment accounts, which
first had to be identified by the receiver’s professionals, and then the
receiver’s accountants analyzed the 44,000 financial transactions
involved. It was only after that analysis was completed that the receiver
determined that the defendant indeed had received back more than her
investment and, hence, that the receiver had a fraudulent transfer claim
to assert. The court acknowledged that in order to meet the requirements
of Rule 11 of the Federal Rules of Civil Procedure, the receiver needed to
know the facts underlying any possible claim before he could sue the
defendant. The court relied on a number of cases which support the
proposition that a receiver is not vested with the knowledge of the
wrongdoer simply upon his appointment.
See Janvey v. Democratic
Senatorial Campaign Committee, Inc.,
791 F. Supp. 2nd 825 (N.D. Tex. 2011),
aff’d,
712 F.3d 185 (5th Cir. 2013), where the court rejected the defendants’
contention that the statute starts to run as soon as the receiver is
appointed, stating that the fraudulent transfer statute “requires only the
exercise of reasonable diligence, not omniscience.”
Id.
at 837.
See also, In
re Bernard L. Madoff Investment Securities LLC,
445 Bankr. 206 (S.D.N.Y.) (“It simply cannot be expected that a newly
appointed trustee, with no prior knowledge of the debtor, could assert
causes of action within an applicable statute of limitation periods that
occur in the very early stages of a case”);
Janvey v. Alguire,
2013 WL 2451738, at *11 (N.D. Tex. January 22, 2013) (holding that in the
Stanford Ponzi scheme “discovering the fraudulent nature of the Net
Winning transfers certainly takes time. Further, the burden is on the Net
Winners to (1) conclusively prove when the cause of action occurred, and
(2) negate the discovery rule, if it applies and has been pled or
otherwise raised… (citations omitted).”).
Therefore, as long as you can show that you acted reasonably in
discovering the underlying facts, which gave rise to the fraudulent
transfer claim, you should be ok. The statute of limitations does not
necessarily immediately start on your appointment date in what the Janvey
court termed a “singularity-like moment.”
Janvey,
supra. at
831.
*Peter A. Davidson is a Partner of Ervin
Cohen & Jessup LLP, a Beverly Hills Law Firm. His practice includes
representing Receivers and acting as a Receiver in State and Federal
Court. |