On September 13, 2022, the U.S. Court of Appeals for the Eighth Circuit affirmed dismissal of claims for fraudulent transfer and aiding and abetting a Ponzi scheme brought by one lender to a series of companies owned by Tom Petters against another lender. Defendant JPMorgan Chase had obtained repayment of its loans to the Petters companies while Plaintiff Ritchie Special Credit Investments (with affiliates) was a “later lender” that was not repaid its $189 million loan. During the Petters companies’ bankruptcy cases, the bankruptcy trustees settled the estates’ claims against JPMorgan and obtained an order barring any creditor whose claim “in any way arises from or is related to the [debtors]” from asserting or prosecuting any claim belonging to the trustees. Seeking a way around the bankruptcy court’s bar order, Ritchie alleged the JPMorgan aided and abetted Petters’s fraud and received fraudulent transfers.

The district court dismissed the case, finding that the claims belonged to the respective bankruptcy trustees, and the plaintiff lender lacked standing to assert them. The Eighth Circuit affirmed. “The basic rule of thumb is that, if the debtor could have asserted the claim the moment before it entered bankruptcy, the trustee gets to bring it now,” the court observed. Because Petters stole funds loaned to his own companies, the debtor companies had the same right to sue JPMorgan as did Ritchie. In fact, the debtors did pursue JPMorgan, and JPMorgan paid over $30 million to settle a group of claims filed by the bankruptcy trustees. The bar order and standing doctrine thus prevented Ritchie from pursuing JPMorgan separately.

The case is Ritchie Special Credit Invs., Ltd. v. JPMorgan Chase & Co., No. 21-2707 (8th Cir. 2022). Ritchie is represented by Larson King, LLP. JPMorgan is represented by Simpson Thacher & Bartlett LLP and Taft Stettinius & Hollister LLP. The opinion is available here.