Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_05-cv-02142/USCOURTS-cand-4_05-cv-02142-15/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 7:6(b) Federal Commodity Exchange Regulation

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United States District Court

For the Northern District of California

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1 The court finds this motion appropriate for decision without oral argument as

permitted by Civil L.R. 7-1(b) and Fed. R. Civ. P. 78. See also Lake at Las Vegas Investors

Group, Inc. v. Pacific Malibu Dev. Corp., 933 F.2d 724, 729 (9th Cir. 1991) (holding that the

court's consideration of the moving and opposition papers is deemed an adequate substitute

for a formal hearing), cert. denied, 503 U.S. 920 (1992). Accordingly, the March 1, 2006

hearing date is hereby VACATED.

United States District Court

For the Northern District of California

NOT FOR CITATION

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

COMMODITY FUTURES TRADING 

COMMISSION

Plaintiff, No. C 05-2142 PJH

v. ORDER GRANTING RECEIVER’S

PETITION AND MOTION AND

ROBERT JOSEPH BEASLEY, et al., VACATING HEARING DATE

Defendants.

_______________________________/

Before this court is the temporary receiver’s petition for instructions and motion for

an order seeking transfer of receivership property. Having carefully read the parties’

papers and considered the relevant legal authority, the court hereby GRANTS the motions

for the reasons that follow.1

BACKGROUND

This case involves the Commodity Exchange Act, which establishes a system for

regulating the purchase and sale of commodity futures contracts, and options on

commodity futures. See 7 U.S.C. §6o(1)(A) and (B). On May 25, 2005, plaintiff, the

Commodity Futures Trading Commission (the “Commission”), sued defendants Joseph

Beasley (“Beasley”) and Longboat Global Funds Management (“Longboat”) for violation of

the Act. On August 19, 2005, the court entered a consent order, granting preliminary

injunctive and other equitable relief. As part of that relief, the court appointed Robb Evans

Case 4:05-cv-02142-PJH Document 74 Filed 02/24/06 Page 1 of 4
United States District Court

For the Northern District of California

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& Associates LLC (“REA”) as temporary receiver. 

Prior to the filing of the instant lawsuit, however – on October 15, 2004 – a group of

four investor plaintiffs (“Illinois plaintiffs”) sued Longboat, Beasley, and Piranha Capital (not

a defendant in this action) in Illinois state court, alleging fraud and breach of contracts as a

result of defendants’ failure to honor certain requests for redemption totaling approximately

$1.4 million. The Illinois plaintiffs sought and obtained an attachment order from the court –

in the amount of a $1,000,000.00 asset held by Piranha – on October 27, 2004. 

Thereafter, defendants removed the case to the federal district court for the northern district

of Illinois. Once in federal court, defendants moved to vacate the state court attachment

order, but the federal court denied defendants’ request. 

REA now petitions this court for an order allowing petitioner to seek transfer of the

$1,000,000 Piranha asset from the Illinois district court. 

DISCUSSION

As the Ninth Circuit has recognized, “case law involving district court administration

of an equity receivership ... is sparse and is usually limited to the facts of the particular

case.” See Securities & Exchange Comm’n v. Hardy, 803 F.2d 1034, 1037 (9th Cir. 1986). 

Nonetheless, the Ninth Circuit has enunciated two basic principles in dealing with equitable

receiverships. First, that the district court “has broad powers and wide discretion to

determine the appropriate relief in an equity receivership.” See Securities & Exchange

Comm’n v. Lincoln Thrift Ass’n, 577 F.2d 600, 606 (9th Cir. 1978). Second, that “a primary

purpose of equity receiverships is to promote orderly and efficient administration of the

estate by the district court for the benefit of creditors.” Hardy, 803 F.2d at 1038. 

For the reasons below, the court finds that REA has made a sufficient showing to

warrant an order granting it leave to seek the transfer of the Piranha asset at issue from the

Illinois district court. 

To begin with, the August 19 consent order entered by the court directed and

authorized REA to do the following: take control and possession of all assets of Longboat

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United States District Court

For the Northern District of California

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related to Piranha that are under Longboat’s control, wherever situated; perform all acts

necessary to preserve those assets; and intervene in or become a party to any federal

action necessary to preserve the Longboat assets. See Consent Order of Preliminary

Injunction and Other Equitable Relief, section D, ¶¶ B, C, G. As the $1,000,000 Piranha LC

asset is held in an account which is purportedly under Longboat’s control, REA would

appear to have the authority to assert control over this asset. And since REA has been

entrusted with control over all Longboat’s assets and accounts, and must properly take

account of, and report on, all such assets and accounts which may then form the basis for

any recovery issued to aggrieved investors in the instant case, REA’s request to seek a

transfer of the asset is a good faith request. 

Furthermore, although the Illinois plaintiffs argue that REA is improperly trying to

liquidate Piranha Capital’s assets, this does not appear to be the case. As REA points out,

the asset in question is already restrained under the Illinois court’s order. Accordingly,

REA’s actions in seeking to take control of the asset cannot constitute any independent

liquidation of Piranha’s assets. 

Moreover, the interests of the Illinois plaintiffs as creditors can effectively be taken

into account by REA’s proposal to hold the asset in trust, pending resolution of the Illinois

district court action. In that event, if the plaintiffs there are successful, they can proceed to

recover against the receiver the funds in trust. 

Most significantly, however, the court notes that REA merely seeks an order from

the court granting it leave to request a transfer of the property in question from the Illinois

district. Thus, while all the reasons above may be persuasive in arguing for transfer, it is

the district court in Illinois, and not this court, that will ultimately decide the question of

transfer. This eliminates any concerns raised by the Illinois plaintiffs about recognizing the

jurisdiction of a sister court. The court here need only decide whether REA has sufficiently

shown that it should not be precluded from requesting the transfer in the first place. 

Since the court finds that REA has successfully done so, REA’s request is

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United States District Court

For the Northern District of California

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GRANTED.

IT IS SO ORDERED.

Dated: February 24, 2006 ______________________________

PHYLLIS J. HAMILTON

United States District Judge

Case 4:05-cv-02142-PJH Document 74 Filed 02/24/06 Page 4 of 4