UNITED STATES CO URT OF APPEALS FOR THE TENTH CIRCUIT

R. WAYNE KLEIN, the Court-Appointed Receiver of U.S. Ventures LC, Winsome Investment Trust, and the assets of Robert J. Andres and Robert L. Holloway, Plaintiff - Appellee,

v. KING & KING & JONES, Defendant - Appellant. No. 13-4131 (D.C. No. 2:12-CV-00051-DBP) (D. Utah)

ORDER AND JUDGMENT *

Before MATHESON , PORFILIO , and PHILLIPS , Circuit Judges.
R. Wayne Klein (“Mr. Klein” or “Rece iver”), the court-a ppointed receiver for Winsome Investment Trust (“ Winsome”), filed this action to recover funds paid from Winsome to King & King & Jo nes, P.C. (“KKJ”). The district court granted summary judgment in favor of the Rece iver. KKJ appeals, and we affirm.

* After examining the briefs and appella te record, this pa nel has determined unanimously to grant the parties’ request for a decision on the briefs without oral argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore ordered submitted without oral argument. This order and judgment is not binding precedent, except under the doctr ines of law of the case, res judicata, and collateral estoppel. It may be cite d, however, for its persuasi ve value consistent with Fed. R. App. P. 32.1 a nd 10th Cir. R. 32.1. FILED United States Court of Appeals Tenth Circuit 

### July 14, 2014
Elisabeth A. Shumaker Clerk of Court- 2 - BACKGROUND KKJ is an Atlanta, Georgia, law firm . In 2006, an individual named Enrique Baca retained KKJ to defend him against pe nding criminal charges in Georgia state court, for a fee of $25,000. The payment to KKJ came in the form of two wire transfers of $12,500 each to KKJ from Wins ome’s bank account. KKJ’s state-court efforts on Mr. Baca’s behalf were succes sful: in 2007, the charges were dropped. The nature of Mr. Baca’s relationship to Winsome, and Winsome’s reasons for paying KKJ to represent him, do not appear in the record. The record does reflect that beginning as early as 2005, Winsome was operated as an illegal Ponzi scheme. 1 Between 2005 and 2011, it collected millions of dollars from i nvestors, much of which it lost in a series of ill-fated ventures. It is undis puted that the funds paid to KKJ to represent Mr. Baca were derived from this Ponzi scheme. In January 2011, as th e result of an action file d by the Commodity Futures Trading Commission, Mr. Klein was appoi nted receiver for Winsome and for a number of other related indi viduals and entities. Among his duties as receiver, he was charged with recapturing and returning i nvestor funds that were diverted as part of the Ponzi scheme. Mr. Klein then file d this action seeking to recover the $25,000 KKJ received from Winsome. He theorize d that the wire transfers from Winsome

1 A “Ponzi” scheme is “an investment scheme in whic h returns to investors are not financed through the su ccess of the underlying busine ss venture, but are taken from principal sums of newly attracted investments,” and usually attracting investors by promising them “large retu rns for their investments.” In re Hedged-Investments Assocs., Inc. , 48 F.3d 470, 471 n.2 (10th Cir. 1995).- 3 - amounted to fraudulent transfers under Utah law, or, alternatively, that KKJ had been unjustly enriched by them. The parties filed cross-motions for su mmary judgment. The district court granted the Receiver’s motion for summary judgment and denied KKJ’s motion. The district court reasoned that although KKJ received the wire transfers in good faith as payment for legal services provided to Mr . Baca, KKJ provided no value to Winsome for the funds it received. The beneficiary of the paym ents from Winsome to KKJ was Mr. Baca, not Winsome. The district court concluded that the payments, which amounted to both actual and constructive fra udulent transfers, should therefore be recouped in favor of Wi nsome’s investors. ANALYSIS We review the district court’s summ ary-judgment determination de novo. S.E.C. v. Thompson , 732 F.3d 1151, 1156 (10th Ci r. 2013). Summary judgment should be granted when “the re is no genuine dispute as to any material fact and . . . the movant is entitled to judgment as a matter of law. ” Fed. R. Civ. P. 56(a). “In making that determination, a court views the evidence and draws reasonable inferences therefrom in the light most favorable to the nonmoving party.” Thompson , 732 F.3d at 1156–57 (int ernal quotation marks a nd brackets omitted). A federally appointed receiver may sue under state uniform-fraudulent-transfer law to recover assets fraudul ently transferred to third parties pursuant to a Ponzi scheme. Janvey v. Democratic Senat orial Campaign Comm., Inc. , 712 F.3d 185, 190- 4 - (5th Cir. 2013). Here, the Receiver re lies on Utah’s Unifor m Fraudulent Transfer Act, Utah Code Ann. §§ 25-6-1 to 25-6-14 (“UFTA”). “Becau se the [UFTA] is remedial in nature, it should be liberally construed.” Nat’l Loan Investors, L.P. v. Givens , 952 P.2d 1067, 1069 (Utah 1998). Under the UFTA, a transfer is actually fraudulent if it was made “with actual intent to hinder, delay, or defraud any credito r of the debtor.” § 25-6-5(1)(a). In the district court, KKJ conceded that Winsome made the transfers with actual intent to defraud its creditors. See KKJ’s Memorandum in Oppos ition to Plaintiff’s Motion for Summary Judgment, Aplee. Supp. App. at 172, 174. The UFTA, however, provides a good-faith defense in actions seeking to avoid su ch fraudulent transfers. “A transfer or obligation is not voidabl e under Subsection 25-6-5(1)(a) against a person who took in good faith and for a re asonably equivalent va lue or against any subsequent transferee or oblig ee.” § 25-6-9(1). KKJ conte nds that it is entitled to the defense because it is both a “person who took in good faith and for reasonably equivalent value” and a “subs equent transferee.” In evaluating these defenses, we cons ider first whether KKJ “took in good faith and for reasonably equiva lent value.” The Receiver concedes that KKJ acted in good faith. The question is whether KKJ provided “reasonably e quivalent value” for the $25,000 it received. The district court concluded that to sa tisfy this requirement, KKJ must have provided “reasonably equivalent value” to Winsome . Because the re cord fails to- 5 - show that the legal services KKJ provi ded benefitted anyone but Mr. Baca, the district court further concluded that the “reasonably equivalent value” requirement was not met. We agree. See, e.g. , S.E.C. v. Res. Dev. Int’l, LLC , 487 F.3d 295, 301–02 (5th Cir. 2007) (“A payment made solely for the benefit of a third party, such as a payment to satisfy a third party’s de bt, does not furnish reasonably-equivalent value to the debtor” (internal quotation marks omitted) (applying Texas UFTA)); Dietz v. St. Edward’s Catho lic Church (In re Bargfrede) , 117 F.3d 1078, 1080 (8th Cir. 1997) (per curiam) (applyi ng similar provision in Federal Bankruptcy code); 2 see also Dahnken, Inc. v. Wilmarth , 726 P.2d 420, 422 (U tah 1986) (holding, under Utah’s predecessor Uniform Fraudulent Conveyance Act, that “[s]atisfaction of an obligation owed the transferee by a third party does not qualify as fair consideration” for payment by the debtor). 3
Nor is KKJ entitled to the UFTA’s exceptions for subs equent transferees, Utah Code Ann. § 25-6-9(1), or subs equent good-faith transferees, id. § 25-6-9(2)(b). As a

2 Bargfrede interpreted the phrase “reasonably equivalent value” used in the fraudulent transfer provision of the Federal Bankruptcy Code, 11 U.S.C. § 548. The phrase “reasonably equivalent value” in the UFTA was derived from § 548, and we therefore find this inte rpretation persuasive. See Frank Sawyer Trust of May 1992 v. Comm’r , 712 F.3d 597, 608 n.2 (1st Cir. 2013) (stating cases construing § 548 offer guidance in interpreting meaning of “reasona bly equivalent value” used in UFTA).
3 “Fair consideration” is a predecessor term to “reasonably equivalent value,” and serves a similar function to the latter term in the fraudulent tran sfer context. See Texas Truck Ins. Ag ency, Inc. v. Cure (In re Dunham) , 110 F.3d 286, 289 (5th Cir. 1997) (equating “fair consid eration” with “reasonably e quivalent value” for purposes of § 548).- 6 - direct transferee and recipient of th e funds wired from Winsome’s account, who obtained dominion and control over the funds once they were transferred, KKJ was not a “subsequent” transferee. Rather , KKJ was the “initial” transferee. See, e.g. , Bailey v. Big Sky Motors, Ltd. (In re Ogden) , 314 F.3d 1190, 1202–05 (10th Cir. 2002) (applying similar “initi al transferee” concept in Bankruptcy Code, 11 U.S.C. § 550(a)). Also, Mr. Baca was not the in itial transferee, as KKJ argues. There has been no showing that the wire tran sfer gave him actual domini on or control over the funds, which were wired directly fro m Winsome’s account to KKJ. See Rupp v. Markgraf , 95 F.3d 936, 938–40 ( 10th Cir. 1996) (con cluding, based on similar Bankruptcy Code provision in 11 U.S.C. § 550, that individua l who caused a corporate debtor to make a fraudulent transfer to his creditors through his role as corporate principal, but who never personally had domini on and control of funds, was the “entity for whose benefit the transaction wa s made,” and that the recipients of funds were the initial transferees). Finally, we agree with the district c ourt that in addition to being actually fraudulent, the transfers were constructiv ely fraudulent under § 25-6-5(1)(b). Under the UFTA, a transfer is cons tructively fraudulent if it wa s made without the debtor receiving “a reasonably equivalent value in exchange” and if ei ther the debtor’s remaining assets were unreasona bly small in relation to the transaction, or the debtor “intended to incur, or be lieved or reasonably should have believe d that he would- 7 - incur, debts beyond his ability to pay as th ey became due.” § 25-6-5(1)(b). For reasons we have already stat ed, the transfers we re not made for r easonably equivalent value. Furthermore, as th e district court recognized, “W insome’s operation as Ponzi scheme also shows that Winsome intended to incur, or believed or reasonably should have believed that it woul d incur, debts beyond its ab ility to pay as they became due.” Aplee. Supp. App. at 209 (interna l quotation marks and brackets omitted). In sum, the district court correctly determined that the transfers to KKJ were actually and constructively fraudulent under th e Utah UFTA. KKJ is not entitled to either the good-faith “reasonably equivale nt value” or the “subsequent transferee” defenses under the UFTA. We therefore affi rm the grant of summary judgment to the Receiver, the denial of summary judgment to KKJ, and the judgment of the district

court. Entered for the Court
Gregory A. Phillips Circuit Judge