In countless westerns and action movies, there comes a scene where guns are drawn and the characters and audience are all puzzling over who is “on the good guys’ side” and who is on the other side. In almost every case involving white-collar wrong-doing, there is a similar drama of “who knew what when” on the margins — whether particular individuals or entities are perpetrators, bystanders, victims, part of the problem, or part of the solution (with the search for the deep pocket often skewing incentives and perspectives as accounting firms, legal advisors, and other bit part actors will strenuously argue)…
The drama has been playing out in the Petters litigation (in the slow-motion of U.S. civil litigation as opposed to the frenzied 100 minutes or so in a movie, of course). A bankruptcy trustee has alleged that Ritchie Capital Management and related entities (“Ritchie Capital”), investors in the Petters scampire (scam empire), “literally days before the ponzi scheme collapsed [along with Petters] orchestrated a series of transactions…in a final-hour attempt to shore up, conceal and cover millions of dollars of losses.” Ritchie Capital, on the other hand, has brought a separate action against Polariod executives, alleging racketeering (“civil RICO”).
In response, the Polariod executives have brought a motion to dismiss Ritchie’s RICO suit now pending before U.S. District Court Judge James R. Rosenbaum (D. Minn.). Their primary arguments are that the claims are so enmeshed and intertwined with the various Petters cases and, in particular, the bankruptcy and receivership matters, that the case should be stayed. (Other discussion of judicial immunity may also be of interest to Minnesota litigators (in both supporting and opposing briefs.))
Defendants admit as they must that there is no stay expressly naming them individually. They argue, however, that the stay applies to “documents identified as part of the Receivership Action,” which, they point out are expressly identified and attached as exhibits to the Ritchie RICO complaint. The Ritchie RICO plaintiffs, of course, lay great emphasis on the fact that the RICO defendants are not identified in the stay order. They reject that the mere mention of documents violates the stay or precludes their suit.
The motion is currently scheduled to be argued on June 11 at 11 a.m.