Kelley v. Boosalis, No. 19-1079 (8th Cir. 2020)
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This case arose from a Ponzi scheme perpetrated by Thomas Petters from 1994 to 2008 through his company, PCI. These appeals involve the Trustee’s separate claw back claims against defendants. The Trustee asserted claims under 11 U.S.C. 544(b)(1), which permits a trustee to "avoid any transfer of an interest of the debtor . . . that is voidable under applicable law by a creditor holding an unsecured claim." In this case, the applicable law is the Minnesota Uniform Fraudulent Transfers Act (MUFTA).
The Eighth Circuit held that the district court erred in applying the Supreme Court of Minnesota's controlling MUFTA decision in Finn v. Alliance Bank, 860 N.W.2d 638 (Minn. 2015), and the Minnesota law of void contracts. Therefore, the court reversed summary judgment against Papadimos and Kanios. The court also reversed and remanded in the Boosalis case because the district erred in instructing the jury on the MUFTA elements of "good faith" and "reasonably equivalent value." In both cases, the court held that the district court erred in concluding that Minnesota rather than federal law governed the award of prejudgment interest. The court rejected defendants' other arguments.
Court Description: [Loken, Author, with Benton and Kelly, Circuit Judges] Civil case - Bankruptcy. In this action, the Chapter 11 Trustee for the Petters bankruptcy sought to claw back interest paid to early lenders in the Petters Ponzi scheme; a jury found the interest payments to defendant Boosalis were fraudulent transfers under the Minnesota Uniform Fraudulent Transfers Act; following the jury verdict, the court granted the Trustee's motion for summary judgment against defendants Papadimos and Kanios; Held: the district court erred in instructing the jury on the statute's elements of "good faith" and "reasonably equivalent value" and the judgment for the Trustee is reversed and the case remanded; further, the court erred in granting summary judgment for the Trustee against Papadimos and Kanios because it erred in applying the Minnesota Supreme Court's controlling decision on the statute and the Minnesota law of void contracts; in both cases, the district court erred in concluding that Minnesota rather than federal law governed the award of prejudgment interest. Reversed and remanded for further proceedings. Judge Kelly, concurring in part and dissenting in part.
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