A divided Eleventh Circuit panel held in Perlman v. PNC Bank, N.A., 38 F.4th 899 (11th Cir. June 27, 2022), that a court-appointed receiver lacked standing to bring claims against the bank which, he alleged, aided and abetted the fraudulent scheme committed by the companies for which he was appointed receiver. The receiver’s action was thus properly dismissed for lack of subject matter jurisdiction.
The underlying litigation became complicated when the Supreme Court decided, in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021), that the Federal Trade Commission Act did not authorize the FTC to seek equitable monetary relief. The Eleventh Circuit applied that decision in a subsequent case, FTC v. On Point Capital Partners LLC, 17 F.4th 1066, 1078 (11th Cir. 2021), holding that a court-appointed receiver was no longer an appropriate remedy under section 13(b) of the FTC Act. These two developments during the Perlman litigation left the enforcement agencies involved, the FTC and the Florida Attorney General, scrambling to recalibrate their enforcement actions accordingly. The result isn’t pretty and may not be over.
The impetus for the litigation was a debt relief scam perpetrated by Jeremy Marcus and numerous entities controlled by him. The FTC and the Florida Attorney General caught on to the scheme and filed an action seeking, among other relief, appointment of a receiver to take control of the entities’ assets. Perlman was appointed as receiver. Ultimately, an $85 million stipulated judgment was entered against Marcus and the entities. Perlman then filed a separate action—the one leading to this appeal—on behalf of the receivership entities, alleging that PNC Bank aided and abetted the scheme by providing bank accounts that were used by the perpetrators.
Another intervening decision by the Eleventh Circuit, however, altered the course of litigation. In Isaiah v. JPMorgan Chase Bank, N.A., 960 F.3d 1296, 1308 (11th Cir. 2020), the court held that a receivership entity must have at least one innocent officer or director in order to have standing to assert claims for wrongdoing against third parties. That prompted PNC to move to dismiss for lack of subject matter jurisdiction, arguing that the receiver failed to allege the presence of an innocent officer or director. The receiver responded by contending that he was appointed under section 501.207(3) of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) which, he argued, authorizes a receiver to bring actions on behalf of an enterprise in receivership regardless of whether it had committed unlawful acts. But the district court agreed with PNC that Perlman had been appointed under section 13(b) of the FTC Act and granted the motion to dismiss for lack of subject matter jurisdiction.
On appeal, Judge Chuck Wilson’s majority opinion applied Isaiah and rejected the receiver’s argument that the FDUTPA receivership provision made a difference. According to the majority, the receiver suffered no injury and thus had no standing to sue.
Judge Rosenbaum dissented, contending that the majority misinterpreted a 2006 amendment to FDUTPA, which added the language that a receiver may be sought regardless of wrongdoing by the subject entity. Isaiah, she pointed out, wasn’t brought under FDUTPA but under the Florida fraudulent transfer statute, which lacked the key language added to FDUTPA.
Motions for rehearing and for certification of the FDUTPA question to the Florida Supreme Court are now pending. The majority opinion appears to confuse Article III jurisdictional standing with a more generalized notion of having a right to sue. As Judge Rosenbaum pointed out, the receiver appears to allege Article III standing under the standard criteria. The receiver’s problem appears to be that the plurality did not believe that he stated a claim, grounds for a Rule 12(b)(6) dismissal, not a Rule 12(b)(1) dismissal. Either way, the receiver ends up out of court, but the analysis seems a bit untidy. Another curiosity concerns the subject matter jurisdiction for the receiver’s claim. To try to avoid the newly-recognized limitations on the FTC’s remedial authority, the receiver disclaimed that he was appointed under the FTC Act, instead invoking FDUTPA. But that would appear to leave his separate action against PNC without a basis for subject matter jurisdiction. A case for supplemental jurisdiction under 28 U.S.C. § 1367(a) might be made if the receiver at least contended that he originally brought the case under the FTC Act but changed his mind (and amended his pleadings accordingly). A court may exercise supplemental jurisdiction on a discretionary basis after a federal claim is dismissed. But given the absence of a federal claim, according to the receiver, and the state law question, which the division among the court suggests is not an easy one, the case would seem a poor candidate for the exercise of supplemental jurisdiction.