United States District Court, E.D. Pennsylvania
BERLE SCHILLER, District Judge.
Kamian Schwartzman, in his capacity as Receiver for the Receivership Estate established by the Court in SEC v. Stinson, Civ. A. No. 10-3130, brought this action to recover stolen funds received by Defendants Roger Paul, Inc. ("RPI"), Rogue International Talent Group, Inc. ("Rogue"), Roger Paul ("Paul"), High Idea Corp., LLC ("High Idea"), and Dustin Diamond ("Diamond"). Currently before the Court is the Receiver's motion for summary judgment on his claims for fraudulent transfer, unjust enrichment, and equitable accounting against Defendants Paul, RPI, and Rogue, and Paul's cross-motion for summary judgment. Because the Court has granted default judgment for the Receiver against Rogue and RPI, the Court will deny as moot the Receiver's motion for summary judgment against Rogue and RPI. For the following reasons, the Court grants summary judgment to the Receiver on his claim of fraudulent transfer against Paul for $61, 411.55. The Court denies summary judgment on the Receiver's claim that the Court should pierce the veils of Rogue and RPI to hold Paul liable for the debts of those companies.
The Receiver filed this action on September 12, 2012, alleging that Rogue, RPI, Paul, High Idea, and Diamond received stolen funds that originated from a Ponzi scheme perpetrated by Robert Stinson, Jr. Through the Ponzi scheme, Stinson and the entities that he controlled obtained over $17 million from at least 262 investors. SEC v. Stinson, Civ. A. No. 10-3130, 2011 WL 2462038, at *1 (E.D. Pa. June 20, 2011). Following an SEC investigation and civil enforcement action, the Court appointed the Receiver to recover funds that investors lost in Stinson's scheme. See id. at *2.
The Receiver alleges that $143, 273.44 in the form of services, property, and cash was transferred from Stinson's entities to Paul, Rogue, RPI, High Idea, and Diamond. On July 3, 2013, the Court granted the Receiver's motion for default judgment against High Idea and Diamond for $40, 000. Schwartzman v. Rogue Int'l Talent Group, Inc., Civ. A. No. 12-5255, 2013 WL 3367262, at *1 (E.D. Pa. July 3, 2013). On November 7, 2013, the Court granted the Receiver's motion for default judgment against Rogue and RPI for $81, 861.89. Schwartzman v. Rogue Int'l Talent Group, Inc., Civ. A. No. 12-5255, 2013 WL 5948028, at *1 (E.D. Pa. Nov. 7, 2013). The Receiver now seeks judgment against Paul, Rogue, and RPI in the amount of $143, 273.44, plus pre- and post-judgment interest and court costs. The Receiver requests that a constructive trust be imposed on the assets of Paul, Rogue, and RPI in the amount of $143, 273.44, and that these Defendants be enjoined from transferring or disposing of any assets.
II. STANDARD OF REVIEW
Summary judgment is appropriate when the admissible evidence fails to demonstrate a genuine dispute of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When the moving party bears the burden of persuasion at trial, it must identify evidence in the record establishing the absence of a genuine factual issue. Nat'l State Bank v. Fed. Reserve Bank, 979 F.2d 1579, 1582 (3d Cir. 1992). When the moving party does not bear the burden of persuasion at trial, it may meet its burden on summary judgment by showing that the nonmoving party's evidence is insufficient to carry its burden of persuasion. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Thereafter, the nonmoving party demonstrates a genuine issue of material fact if sufficient evidence is provided to allow a reasonable finder of fact to find for the nonmoving party at trial. Anderson, 477 U.S. at 248.
In reviewing the record, "a court must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor." Shuman ex rel. Shertzer v. Penn Manor Sch. Dist., 422 F.3d 141, 146 (3d Cir. 2005). The court may not, however, make credibility determinations or weigh the evidence in considering motions for summary judgment. See Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); see also Goodman v. Pa. Tpk. Comm'n, 293 F.3d 655, 655 (3d Cir. 2002). A court must apply the same standards to cross-motions for summary judgment. Lawrence v. City of Phila., 527 F.3d 299, 310 (3d Cir. 2008).
A. Fraudulent Transfer
The Receiver brings his fraudulent transfer claim under the Pennsylvania Uniform Fraudulent Transfer Act ("PUFTA"). PUFTA allows a creditor to obtain avoidance of a "transfer" made to another party with "actual intent to... defraud." 12 Pa. Cons. Stat. §§ 5104(a), 5107(a). A transfer is "[e]very mode... of disposing of or parting with an asset or an interest in an asset, " including the payment of money. Id. § 5101(b). Actual fraudulent intent is established through the mere existence of a Ponzi scheme. Hecht v. Malvern Preparatory Sch., 716 F.Supp.2d 395, 400 (E.D. Pa. 2010); see also SEC v. Forte, Civ. A. Nos. 09-63, 09-64, 2010 WL 939042, at *5 (E.D. Pa. Mar. 17, 2010). Therefore, a creditor establishes a prima facie claim under PUFTA by showing that money was transferred from a fund that operated as a Ponzi scheme.
As an affirmative defense under PUFTA, the transferee may claim that he took the money "in good faith and for a reasonably equivalent value." 12 Pa. Cons. Stat. § 5108(a); see also id. Committee Cmt. 1 (stating that the transferee bears the burden of establishing both his good faith and the reasonable equivalence of the consideration exchanged).
If the creditor prevails under PUFTA, his remedies include, inter alia, avoidance of the transfer, attachment of the transferred asset or other property of the transferee, an injunction against future transfers, or any other relief that the circumstances may require. Id. § 5107(a). Judgment may be entered against "the first transferee of the asset or the person for whose benefit the transfer was made, " among other parties. Id. § 5108(b).
The Court finds that the Receiver has established a fraudulent transfer claim against Paul in the amount of $61, 411.55. The Receiver has established that Stinson's entities transferred $40, 000 by check to Paul, who transferred that money to Diamond and High Idea. (Pl.'s Mot. for Summ. J. [Pl.'s Mot.] Statement of Undisputed Material Facts [SOF] ¶ 20, Exs. J [Check], K [Promissory Note].) The Receiver has also established that Stinson's entities paid $21, 411.55 directly to Paul in the form of checks. (SOF ¶ 18, Ex. H [Checks] at 2-20.) Paul concedes that he received transfers from Stinson's entities. (Def. Paul's Opp. at 8.) Because this Court has already ...