Kelley v. Boosalis

Background

Douglas A. Kelley, acting as the PCI Liquidating Trustee for the PCI Liquidating Trust, asserted fraudulent-transfer claims against Gus Boosalis under provisions of the U.S. Bankruptcy Code and the Minnesota Uniform Fraudulent Transfer Act. The case was tried to an eight-person jury. The jury found that Petters Company, Inc. made interest payments to Boosalis through actual fraudulent transfers and that Boosalis did not prove his defense that he received the payments in good faith and for reasonably equivalent value. The jury also found constructive fraudulent transfers because Petters Company, Inc. did not receive reasonably equivalent value and met specified financial-distress conditions. For both theories, the jury found damages of $3,502,455.

Boosalis’s Post-Trial Motion

Boosalis renewed his request for judgment as a matter of law under Federal Rule of Civil Procedure 50(b) and alternatively requested a new trial under Rule 59. The court explained that judgment as a matter of law is proper only when the evidence cannot reasonably support the verdict, viewed in the light most favorable to the prevailing party. For a new trial, the court may weigh the evidence and consider witness credibility, but retrial must be necessary to avoid a miscarriage of justice.

The court found that witness testimony and exhibits sufficiently supported the jury’s findings on both actual and constructive fraudulent transfers and the amount of damages. It also found that a new trial was not warranted because the verdict was well-supported by the evidence. The court therefore denied Boosalis’s Motion to Set Aside the Verdict as a Matter of Law and Request for a New Trial.

Prejudgment Interest

Kelley requested prejudgment interest at 10% per year under Minnesota Statutes section 549.09, calculated from September 23, 2010, when the adversary proceeding was commenced in Bankruptcy Court. The court determined that Minnesota law supplied the substantive basis for the fraudulent-transfer claims, while the Bankruptcy Code provisions supplied the means for asserting those claims. It therefore applied Minnesota’s prejudgment-interest rule.

The court held that section 549.09 provided a 10% annual rate for the damages award and determined that September 23, 2010, was the date the action commenced. It also found that awarding interest was appropriate because Boosalis had use of the money while the victims of the Ponzi scheme had lost use of their principal investments.

Order

Judge Susan Richard Nelson granted Kelley’s Motion for Prejudgment Interest. Kelley was awarded prejudgment interest from Boosalis on $3,502,455 at 10% per year from September 23, 2010, until final judgment. Kelley was ordered to promptly file a calculation of the interest so the court could enter final judgment.