Opinion ID: 221659
Heading Depth: 2
Heading Rank: 2

Heading: Post-Adams Developments, the Employee Defendants, and the Instant Appeal

Text: The remaining frozen accounts represent accounts held at Pershing LLC and JP Morgan Clearing Corp. by the Employee Defendants. After Adams, the Receiver amended his complaint against the Employee Defendants, leaving claims only for fraudulent transfer or unjust enrichment. The Receiver subsequently reached a series of compromises with the Employee Defendants, allowing for partial releases of their frozen assets. The district court eventually entered an agreed order (the April 6th Order), releasing all but (1) commissions earned from the sale of SIB CDs; (2) SIB quarterly bonuses; and (3) branch managing-director quarterly compensation. With the account freeze due to expire, the Receiver moved for a preliminary injunction to continue the freeze as to the funds named in the April 6th Order. The Receiver claimed that the three named classes of funds represented payments by Stanford to the Employee Defendants from the proceeds of the Ponzi scheme and therefore constituted fraudulent transfers, entitling the Receiver to disgorgement of those assets. The Employee Defendants opposed the preliminary injunction and moved to compel arbitration. They based their motion to compel on the existence of Promissory Notes between the Employee Defendants and SGC. The Promissory Notes concerned upfront loan payments that SGC paid to the Employee Defendants when they joined Stanford. The Promissory Notes contained a broad arbitration clause, which provided that any dispute arising out of or relating to this Note ... would be submitted and settled by arbitration pursuant to the constitution, bylaws, rules, and regulations of the Financial Industry Regulation Authority (FINRA) or the National Association of Securities Dealers (NASD), FINRA's predecessor. The Employee Defendants argued that because the Receiver stood in the shoes of SGC, the Receiver was also bound by the arbitration clause between the Employee Defendants and SGC. The district court granted a temporary restraining order, and then granted the preliminary injunction. The district court did not decide the merits of the motion to compel arbitration, finding that it had the power to issue a preliminary injunction pending resolution of that matter. Additionally, the district court distinguished between a preliminary injunction under TUFTA and a writ of attachment, expressly granting the former. In granting the preliminary injunction, the district court continued the account freeze as to the amounts named in the April 6th Order. Various Employee Defendants appealed.