United States District Court, W.D. Missouri, Western Division
Whipple United States District Judge
the Court is the Receiver's Motion for Turnover of
Property of the Receivership Estate Transferred to Wyandotte
Nation / eData Solutions Inc. (Doc. 231) (the “turnover
motion”). The Receiver moves for an order directing
Wyandotte Nation to return $11, 825, 819.31 transferred by
FRH LLC; Incrementum Group LLC; Anasazi Group LLC; Namakan
Capital LLC; Sandpoint Capital LLC; and Basseterre Capital
LLC (collectively, the “Receivership Defendants”)
to Wyandotte Nation between July 2012 and August 2014. The
Receiver also seeks a judgment against Wyandotte Nation for
the same amount. Wyandotte Nation is not a party to the
underlying action, and has filed a Response (Doc. 256) and
Suggestions (Doc. 257) in opposition to the turnover motion.
Non-party eData Solutions, Inc. has also filed a Response
(Doc. 258) and Suggestions (Doc. 259) in opposition to the
turnover motion. The Receiver has in turn filed Reply
Suggestions (Doc. 292) in support of the turnover motion.
Upon consideration, the turnover motion will be denied.
Receiver alleges that the $11.8 million transferred by the
Receivership Defendants to Wyandotte Nation represents
“proceeds of an illegal consumer payday lending
scheme.” Thus, the Receiver asks the Court to exercise
its “broad equitable powers  to direct the return of
proceeds of the underlying fraud” under two alternative
first theory, the Receiver asserts the funds should be held
in a constructive trust for the benefit of the consumers
defrauded by the payday lending scheme. The Receiver states
that the Court has the authority to direct the return of such
funds “from a non-party regardless of whether that
non-party committed any wrong doing, simply by showing the
non-party has been unjustly enriched.” According to the
Receiver, the $11.8 million received by Wyandotte Nation
constitutes proceeds of the fraudulent consumer lending
activity of the named Defendants in this action, and as a
result, Wyandotte Nation has no legitimate right to said
second theory posits that where a non-party received proceeds
of an underlying fraud for less than reasonable equivalent
value, the Court may order the return of the funds under the
applicable fraudulent transfer statutes, such as the Missouri
Uniform Fraudulent Transfer Act, Mo. Rev. Stat. §§
428.024. See Fleming Cos., Inc. v. Rich, 978 F.Supp.
1281, 1296 (Mo. App. 1997). In this matter, according to the
Receiver, Wyandotte Nation failed to give reasonably
equivalent value to the Receivership Defendants in exchange
for the $11.8 million received.
parties agree that Wyandotte Nation is a federally-recognized
Indian Tribe. See 25 U.S.C. § 861. Thus, the
Receiver anticipates in the turnover motion that Wyandotte
Nation might assert the defense of sovereign immunity. The
Receiver states that the turnover motion “is brought by
the Receiver appointed by the Court in this action brought by
the Federal Trade Commission under the Federal Trade
Commission Act.” The Receiver then argues that the
Federal Trade Commission Act (“FTC Act”) is
“a general Act of Congress and a federal statute of
general applicability as to which tribal sovereignty does not
apply.” See e.g., FTC v AMC Servs.,
Inc., No. 2:12-CV-00536-GMN, 2014 WL 910302 (D. Nev.
Mar. 7, 2014).
anticipated, Wyandotte Nation does assert in its opposition
that the turnover motion is barred by sovereign immunity.
Specifically, Wyandotte Nation argues the FTC Act is not a
statute of general applicability, but even if it is, it does
not abrogate the Nation's sovereign immunity. In
addition, Wyandotte Nation argues that the Receiver is not
the Federal Trade Commission (“FTC”) and
therefore “did not succeed to, nor is he cloaked with,
any authority the FTC may have under the [FTC Act].”
the first theory, the Receiver asks the Court to establish a
constructive trust over the $11.8 million ultimately
transferred by the Receivership Defendants to Wyandotte
Nation. However, it matters not whether the FTC Act is a
statute of general applicability, or whether Wyandotte Nation
is entitled to sovereign immunity as to the FTC Act, because
the Court finds that the Receiver's own pleadings
demonstrate that such relief is inappropriate.
courts may order equitable relief as to a person against whom
no wrongdoing is alleged in an enforcement action “if
it is established that the relief defendant possesses
property or profits illegally obtained and the relief
defendant has no legitimate claim to them.”
FTC v. Think Achievement Corp., 144 F.Supp.2d 1013,
1020 (N.D. Ind. 2000) (citations omitted, emphasis added). A
relief defendant can establish a legitimate claim to property
by demonstrating that it provided some services as
consideration for the property. FTC v. Bronson Partners,
LLC, 674 F.Supp.2d 373, 392 (D. Conn. 2009); FTC v.
Direct Marketing Concepts, Inc., 569 F.Supp.2d 285, 312
(D. Mass. 2008); FTC v. Transnet Wireless Corp., 506
F.Supp.2d 1247, 1273 (S.D. Fla. 2007), U.S. Commodity
Futures Trading Comm'n v. Schiera, No. CV052660,
2006 WL 4586786 at *6 (S.D. Cal. Dec. 11, 2006).
the turnover motion itself asserts that Wyandotte Nation
provided a broad variety of legitimate services to the
Receivership Defendants in support of the lending activities,
including “providing customer/borrower leads,
qualifying the leads, providing a loan management software
system, and buying defaulted consumer loans to sell to third
party collectors.” (Doc. 231 at *3-4). Said services
were provided as consideration for the monies at issue, and
no wrongdoing by Wyandotte Nation is alleged. Although the
Receiver makes the conclusory assertion that “Wyandotte
Nation have no legitimate claim to these proceeds”, the
turnover motion's own assertions establish the contrary,
that Wyandotte Nation does indeed have a legitimate claim to
the monies. Accordingly, the Court cannot grant the relief
requested under the first theory.
Fraudulent Transfer Statutes
Receiver advances a second theory pursuant to the applicable
fraudulent transfer statutes. The Receiver argues that
“[u]nder fraudulent transfer statutes, a transfer is
set aside when it is made with actual intent to hinder,
delay, or defraud any creditor, or is made for less than
reasonable equivalent value in exchange for the
transfer.” See Mo. Rev. Stat. §§
428.024; Fleming Cos., Inc. v. Rich, 978 F.Supp.
1281, 1299 (Mo. App. 1997). As to this state law claim,
Wyandotte Nation is entitled to sovereign immunity.
well-established that “Indian tribes possess the
common-law immunity from suit traditionally enjoyed by
sovereign powers.” United States v. Red Lake Band
of Chippewa Indians, 827 F.2d 380, 383 (8th Cir. 1987).
As a matter of federal law, an Indian tribe is subject to
suit only “where Congress has authorized the suit or
the tribe has waived its immunity.” Kiowa Tribe of
Oklahoma v. Mfg. Techs., Inc., 523 U.S. 751, 754 (1998)
(involving state law suit on promissory note) (citations
omitted). Regarding Congressional authorization to bring
suit, the Supreme Court has stated that “general acts
of Congress apply to Indians as well as to all others in the
absence of a clear expression to the contrary.”
E.E.O.C. v. Fond du Lac Heavy Equip. and Constr.
Co., 986 F.2d 246, 248 (8th Cir. 1993) ...