Discretion and Mr. Stanford

Two oft-addressed topics in 2019–the wreckage of Allen Stanford’s Ponzi scheme, and the appropriate deference to district court discretion in complex litigation– intersected in Zacarias v. Stanford Int’l Bank, No. 17-11703-CV (July 22, 2019).

The panel majority affirmed the “bar orders” entered by the district court in connection with a complicated settlement, observing: “The receiver initiated suit, negotiated, and settled with the Willis Defendants and BMB while empowered to offer global peace, that is, to deal with potential investor holdouts like the Plaintiffs-Objectors. These holdouts have been content for the receiver to pursue litigation for their benefit, then to participate as receivership claimants, collecting pro rata. Now, however, they ask to jump the queue, come what may to their fellow claimants who remain within the receivership distribution process.”

The dissent countered: “I share the majority’s appreciation for this settlement’s practical value. But in my view, the district court lacked jurisdiction to grant the bar orders. The Receiver only had standing to assert the Stanford entities’ claims. It could not release other  parties’ claims, or have the court do so, in exchange for a payment to the Stanford estate. For better or worse, the objecting plaintiffs’ claims were beyond the district court’s power.”