Finn v. Alliance Bank

This case stemmed from the largely fraudulent lending operations of First United Funding, LLC (First United). After First United collapsed, a court-appointed Receiver commenced this action under Minnesota’s Uniform Fraudulent Transfer Act (MUFTA) against several financial institutions, including Alliance Bank and certain Respondent Banks, that had participated in First United’s loan-participation scheme. The district court (1) dismissed the claims against the Respondent Banks for failure to bring the action in a timely fashion, and (2) allowed the claim against Alliance Bank, concluding that that the Receiver had pleaded legally sufficient claims based on a “Ponzi-scheme presumption.” The district court then entered judgment against Alliance Bank. The Receiver and Alliance Bank appealed. The court of appeals (1) divided the Ponzi-scheme presumption into three separate components and concluded that the third component was unfounded in the case of Alliance Bank; and (2) concluded that the district court erred when it dismissed the Receiver’s actual-fraud claims against the Respondent Banks. The Supreme Court affirmed as modified, holding (1) all three components of the Ponzi-scheme presumption lack support in MUFTA; and (2) the Receiver failed to adequately plead constructive fraud, but the district court erred when it dismissed the Receiver’s actual fraud claims. Remanded. View "Finn v. Alliance Bank" on Justia Law