► In This Issue:

• In Pari Delicto: State Law Controls Application of Equitable Defense
• Time Out: Resetting the Clock for Avoidance Actions
• Fifth Circuit on Tolling a Texas Uniform Fraudulent Transfer Act Statute of Repose:
  “I’ve Got a Lot on My Plate” May Be Sufficient

In Pari Delicto: State Law Controls Application of Equitable Defense

Stephen C. Stapleton Cowles & Thompson PC Dallas

The in pari delicto defense is a state law-based equitable defense designed to prevent a plaintiff from pursuing damages resulting from wrongful conduct in which the plaintiff itself is complicit. Its goal is to “deter[] wrongful conduct by refusing wrongdoers any legal or equitable relief and protecting the judicial system from having to use its own resources to provide an accounting among wrongdoers.”

While its application varies among jurisdictions, the defense has been evolving in recent years and was most recently utilized in both the Madoff and the MF Global cases. The defense has been instrumental for professionals sued by bankruptcy trustees or receivers, who have been held generally to stand in the shoes of the debtor entity, and, in certain cases, has barred those trustees or receivers from pursuing damages resulting from wrongful conduct in which the debtor’s officers, directors or employees participated.  Read More

Time Out: Resetting the Clock for Avoidance Actions

Rob Loh Stout Risius Ross, Inc. New York

On Sept. 22, 2011, Charlene Milbury filed for chapter 7 bankruptcy protection in the Central District of California, starting the clock on a two-year period for the commencement of avoidance actions by the trustee. The debtor was the sole owner of a materials-hauling business known as Charlene’s Transportation Inc. (CTI).

During the pendency of the chapter 7 case, two creditors, Patricia and G. Cresswell Templeton III, conducted their own investigation into the activities of Milbury and certain related parties. In the days leading up to the Sept. 22, 2013, statutory deadline, the Templetons notified the trustee about a number of potentially avoidable transactions that they had uncovered. Specifically, the Templetons provided a binder to the trustee that documented “descriptions of assets and transfers that the Templetons believed might be recoverable for the benefit of the estate, as well as some supporting documentation…”   Read More

Fifth Circuit on Tolling a Texas Uniform Fraudulent Transfer Act Statute of Repose: “I’ve Got a Lot on My Plate” May Be Sufficient

Christopher J. Weema Pugh, Accardo, Haas, Radecker & Carey, LLC New Orleans

In a March 16, 2016, opinion, the U.S. Court of Appeals for the Fifth Circuit held that a claimant’s delay in initiating his investigation of potentially fraudulent transfers while triaging numerous other responsibilities could toll the applicable statute of repose under the Texas Uniform Fraudulent Transfer Act (TUFTA) until the claimant was able to begin investigating the particular transfers at issue, even if that investigation began more than one year after it otherwise could have.

In Janvey v. Romero (Romero), one of the most recent rounds of the ongoing Stanford Ponzi saga, the Fifth Circuit held that Ralph Janvey, the court-appointed receiver for R. Allen Stanford and numerous Stanford entities (the “receiver”), was not barred from bringing fraudulent transfer claims against a former Stanford entity employee simply because he began investigating the transfers more than one year after his appointment.    Read More