United States District Court, M.D. Louisiana
TROY LILLIE ET AL.
STANFORD TRUST CO. ET AL. TROY LILLIE ET AL.
STANFORD TRUST CO. ET AL.
RULING AND ORDER
A. JACKSON JUDGE.
the Court are two motions: the Motion for Summary Judgment
(Doc. 127) by SEI and the Motion for Dismissal of Summary
Judgment or a Continuance (Doc. 130) by Plaintiffs. For the
reasons that follow, SEI's Motion (Doc. 127) is GRANTED
and Plaintiffs' Motion (Doc. 130) is DENIED.
issue in this long-running litigation is SEI's liability
under the control-person provision of the Louisiana
Securities Law. See La. Rev. STAT. § 51:714(B). That
liability turns on one question: Did SEI "control"
Stanford Trust Company's primary violations of the
Louisiana Securities Law? The undisputed facts show that it
securities dispute arises from R. Allen Stanford's
well-known Ponzi scheme. See Janvey v. Brown, 767
F.3d 430, 433-34 (5th Cir. 2014) (describing the scheme).
Stanford sold fraudulent certificates of deposit (CDs)
through his Antigua-based Stanford International Bank Ltd.
(SIBL). Id. at 433. He promised investors the
proceeds would be placed in low-risk, high-return
investments. Id. He instead used the proceeds to pay
earlier investors the promised returns. Id. All
told, his scheme bilked investors of $7 billion. Id.
are a Louisiana-based group of SIBL CD holders who lost their
investments. (Docs. 128 at p. 12, ¶ 13; 141-1 at p. 6,
¶ 13). SEI is a provider of "trust processing and
reporting services." (Doc. 250-2 at p. 72). In 1998, SEI
contracted to provide those services-including its Trust 3000
system-to Stanford Trust Company, an entity R Allen Stanford
used to sell SIBL CDs. (Doc. 28-5 at ¶¶ 4-6).
contract describes SEI as an "independent
contractor." (Doc. 250-2 at p. 72). It grants Stanford
Trust Company (but not SEI) the right to issue
"instructions." (Id. at pp. 77, 80). It
grants Stanford Trust Company (but not SEI) the right to
price non-marketable securities, like the SIBL CDs.
(Id. at p. 89). And it makes Stanford Trust Company
"solely responsible for the accuracy and completeness of
any data" provided to SEI under the contract.
(Id. at p. 74).
bought or renewed SIBL CDs from Stanford Trust Company.
(Docs. 128 at ¶ 13; 141-1 at p. 6, ¶ 13). They lost
their investments when the Ponzi scheme collapsed. (Doc. 28-5
at ¶¶ 4-21). In 2009, they sued SEI in Louisiana
state court, alleging that SEI violated the Louisiana
Securities Law. See La. Rev. Stat. §§
51:712(D), 51:714(A), 51:714(B). The state court certified a
class of all persons who bought or renewed SIBL CDs in
Louisiana between January 1, 2007 and February 13, 2009.
to Plaintiffs, SEI contracted with Stanford Trust Company to
"provide monthly and quarterly reports" on the
value of Stanford Trust Company's SIBL CDs. (Doc. 28-5 at
¶ 9). But the CDs were actually "highly speculative
debt instruments," part of a "a massive Ponzi
scheme." (Id. at ¶¶ 6-7). SEI
"played a vital and substantial role" in Stanford
Trust Company's sale of the SIBL CDs by "providing
the platform and expertise ... to implement the deceptive
scheme." (Id. at ¶ 10). Specifically, SEI
"fail[ed] to properly report the value" of the SIBL
CDs in "monthly and quarterly" reports to
Plaintiffs. (Id. at ¶¶ 21, 34).
2013, Plaintiffs amended their petition to assert
direct-action claims under LA. REV. Stat. § 22:1269
against SEI's insurers: Allied World Assurance Company
(U.S.) Inc., Continental Casualty Company, Arch Insurance
Company, Indian Harbor Insurance Company, Nutmeg Insurance
Company, and Certain Underwriters at Lloyd's of London
subscribing to policy nos. FD0805144, FD0805145, FD0805146,
FD0805149 (collectively, the "Insurer Defendants").
Insurer Defendants removed the case to this Court under the
Class Action Fairness Act. See 28 U.S.C.
§§ 1332(d)(2) & 1453(b). Five months later, the
United States Judicial Panel on Multidistrict Litigation
transferred Plaintiffs' claims against SEI and the
Insurer Defendants to MDL No. 2099, In re: Stanford
Entities Securities Litigation, before Judge David. C.
Godbey of the United States District Court for the Northern
District of Texas. (Doc. 94).
Northern District of Texas, SEI obtained on-the-pleadings
dismissals of Plaintiffs' claims under Sections 712(D)
and 714(A) of the Louisiana Securities Law. (Docs. 198 &
199 in N.D. Tex. No. 3:13-CV-3127-N). So the only remaining
claim against SEI is a control-person claim under Section
714(B) of the Louisiana Securities Law. See La. Rev. Stat.
case remained in the Northern District of Texas for five
years. (Docs. 94, 104). It returned to this Court in January
2019, when the JPML entered a conditional remand order. (Doc.
104). At the time of remand, two motions were pending:
SEI's motion for summary judgment and Plaintiffs'
motion for a continuance under Federal Rule of Civil
Procedure 56(d). (Docs. 127, 130). The Court considers each in
The Motion for Summary Judgment
moves for summary judgment on the ground that Plaintiffs
cannot prove the control element of their Section 714(B)
control-person claim. (Doc. 127). SEI contends that the
contract defined its relationship with Stanford Trust
Company, and the terms of that contract confirm that it did
not control the liability-creating conduct of Stanford Trust
Company. (Doc. 128). Plaintiffs disagree. (Docs. 129, 130,
Plaintiffs' view, summary judgment is premature. (Doc.
129). Plaintiffs assert that "no substantive document
production or substantive depositions have occurred . . .
other than the 30(b)(6) deposition of SEI[.]"
(Id.). And Plaintiffs assert that they "are
unable to fully present facts essential to [their]
opposition" because they "have not been permitted
to conduct substantive discovery." (Id.).
The Motion for a Rule ...