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SEC v. Founding Ptnrs. Capital Mgmt.

United States District Court for the Middle District of Florida, Fort Myers Division

June 8, 2009, Decided; June 8, 2009, Filed

Case No. 2:09-cv-229-FtM-29SPC

Opinion

 [*1292]  OPINION AND ORDER

This matter comes before the Court on the Motion of the Sun Capital "Relief Defendants" to Dismiss the Complaint (Doc. # 65) filed on May 11, 2009. Plaintiff filed its Response (Doc. # 77) in opposition to the motion on May 26, 2009. For the reasons set forth below, the Court will grant the motion.

Sun Capital, Inc. and Sun Capital Healthcare, Inc. (collectively, "Sun Capital") are named as "relief defendants" by plaintiff the Securities and Exchange Commission (SEC) in the Complaint (Doc. # 1) against defendants Founding Partners Capital Management, Co. and  [**2] William L. Gunlicks. The Court previously summarized the allegations of the Complaint in its Opinion and Order (Doc. # 56) entered on May 7, 2009, which summary will be adopted without being repeated here. It is undisputed that Founding Partners Stable-Value Fund, LP ("Stable-Value") made loans to Sun Capital pursuant to written loan agreements, which allowed Sun Capital to use the loan proceeds to purchase healthcare and commercial receivables. The permitted uses of the loan proceeds were expanded by Stable-Value beginning in 2004, and the SEC alleges that the newly-allowed permitted uses increased the risks to Stable-Value's investors. While the SEC has brought a variety of fraud-related counts against the actual defendants, no substantive claim has been made against Sun Capital. Rather, the SEC has named Sun Capital as relief defendants and will seek disgorgement of $ 550 million from Sun Capital if the SEC proves the case against the actual defendants.

The essence of the motion to dismiss is that Sun Capital is not a proper relief defendant. As a result, Sun Capital argues, the district court lacks subject matter jurisdiction over Sun Capital and the Complaint fails to state  [**3] a claim against Sun Capital.

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639 F. Supp. 2d 1291 *; 2009 U.S. Dist. LEXIS 48121 **

SECURITIES AND EXCHANGE COMMISSION, Plaintiff, vs. FOUNDING PARTNERS CAPITAL MANAGEMENT and WILLIAM L. GUNLICKS, Defendants, SUN CAPITAL, INC., SUN CAPITAL HEALTHCARE, INC., FOUNDING PARTNERS STABLE-VALUE FUND, LP, FOUNDING PARTNERS STABLE-VALUE FUND II, LP, FOUNDING PARTNERS GLOBAL FUND, LTD., and FOUNDING PARTNERS HYBRID-VALUE FUND, LP, Relief Defendants.

Subsequent History: Motion granted by, in part, Motion denied by, in part SEC v. Founding Partners Capital Mgmt., 2009 U.S. Dist. LEXIS 136824 (M.D. Fla., July 13, 2009)

Request denied by SEC v. Founding Partners Capital Mgmt., 2009 U.S. Dist. LEXIS 136828 (M.D. Fla., July 13, 2009)

Motion granted by, in part, Motion granted by SEC v. Founding Ptnrs. Capital Mgmt., 2009 U.S. Dist. LEXIS 69422 (M.D. Fla., July 24, 2009)

Prior History: SEC v. Founding Ptnrs. Capital Mgmt., 2009 U.S. Dist. LEXIS 40221 (M.D. Fla., May 13, 2009)

CORE TERMS

funds, nominal defendant, allegations, subject matter jurisdiction, loan proceeds, ownership interest, ownership, argues