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James S. Sallah, As Receiver For Mrt LLC and Mrt Holdings LLC v. Worldwide Clearing LLC

November 28, 2011


The opinion of the court was delivered by: Robert N. Scola, Jr.united States District Judge


THIS MATTER is before the Court on the following motions: Defendant GeeGee Morgan's Motion to Dismiss (ECF No. 55), Defendant Larry French's Motion to Dismiss (ECF No. 72), Defendant Joseph Charles's Motion to Dismiss (ECF 79), Defendant Melba Pompey's Motion to Dismiss (ECF 81), Defendants Alberto Pardo and Matusha Pardo's Motion to Dismiss (ECF No. 235), Defendant James Bou, Jr.'s Motion to Dismiss (ECF No. 251), and Defendant Francis McLean's Motion to Dismiss (ECF No. 259). I have reviewed the parties' arguments, the record, and the relevant legal authorities. For the reasons more fully set forth in this Order, the Motions to Dismiss are denied.


James Clements and Zeina Smidi operated a Ponzi scheme which defrauded several hundred investors out of approximately $50 million. Clements and Smidi orchestrated the Ponzi scheme through MRT LLC, a corporate entity. In 2007, several of the defrauded investors brought a class action lawsuit against Clements, Smidi, and MRT LLC. A settlement was reached in the class action, and a final judgment in the amount of $50 million was entered against Clements, Smidi, and MRT LLC. A Receiver was appointed to take control of MRT LLC, as part of the class action settlement. The Receiver was authorized to take possession of MRT LLC's property and assets, and to take legal action against persons or entities which the Receiver claimed had misappropriated or transferred money from MRT LLC. The order appointing the Receiver specifically authorized the Receiver to pursue actions under Florida's Uniform Fraudulent Transfer Act (Florida Statute Sections 726.101 -- 726.201).

The Receiver conducted an investigation and determined that the class action allegations regarding the operation of a Ponzi scheme were accurate. The Receiver confirmed that although MRT LLC was purportedly in the business of trading foreign currency futures offshore with Swiss banks, that Clements and Smidi operated MRT LLC such that the company did not engage in legitimate business operations. Instead, as is typical of Ponzi schemes, MRT LLC used later-investors' money to pay off earlier-investors' interest payments and capital refunds.

The Receiver has alleged that the Defendants received payments in excess of their individual investments and that the money paid to the Defendants was not interest earned on their investments, or a return of their principal, but was actually money which had been fraudulently procured from later-investors. The Receiver is attempting to recover these excess payments for MRT LLC. The Amended Complaint contains four counts: (I) Fraudulent Transfer under Florida Statute Section 726.105(1)(a); (II) Fraudulent Transfer under Florida Statute Section 726.105(1)(b); (III) Fraudulent Transfer under Florida Statute Section 726.106(1); and (IV) Unjust Enrichment.


A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In order to survive a motion to dismiss, a plaintiff must articulate "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009).

While detailed factual allegations are not required, a pleading that merely offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" will not survive a motion to dismiss. Id. When considering a motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must accept all of the plaintiff's allegations as true, construing them in the light most favorable to the plaintiff. Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir. 2008).


Through the several motions to dismiss, the Defendants challenge the Receiver's standing to bring this action. The Defendants also challenge the sufficiency of the Receiver's pleadings. Finally, the Defendants argue that the Receiver's allegations establish the existence of a meritorious affirmative defense regarding the unjust enrichment.

A.The Receiver's Standing/Authority Pursuant to the Order Appointing Receiver

The Defendants first argue that the Receiver does not have authority under the order appointing the receiver to pursue claims against the investor-Defendants. (See, e.g., Def.'s Mot. To Dismiss 4, ECF No. 55.) The order appointing the Receiver authorizes the Receiver to "institute such actions and legal proceedings . . . as the Receiver deems necessary against those individuals . . . which the Receiver may claim have . . . wrongfully, illegally, or otherwise misappropriated or transferred money [from MRT LLC]." (Am. Compl. ¶ 2(b).) The order specifically authorizes actions under Florida's Uniform Fraudulent Transfer Act. (Id.)

The Defendants argue that the order appointing the Receiver should be narrowly construed to only permit the Receiver the authority to pursue claims against persons who are culpable of some wrongdoing. The Defendants point out that there are no allegations that they were aware of the illicit nature of the Ponzi scheme. They argue that as ...

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