Case 3:18-cv-00866-CWR-FKB Document 70 Filed 05/05/21 Page 1 of 18

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, in her capacity as PLAINTIFF

receiver for Arthur Lamar Adams and
Madison Timber Properties, LLC

V. CAUSE NO. 3:18-CV-866-CWR-FKB

BAKER, DONELSON, BEARMAN, DEFENDANTS

CALDWELL & BERKOWITZ, PC;
ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; JON
SEAWRIGHT

ORDER

Before the Court are motions to dismiss filed by Baker, Donelson, Bearman, Caldwell &

Berkowitz, PC; Alexander Seawright, LLC; and Brent Alexander. Docket Nos. 59 & 63. On

review, Baker Donelson’s motion will be denied, while Alexander Seawright, LLC and

Alexander’s motion will be granted in part and denied in part.

I. Factual and Procedural History

From at least 2010 until April 2018, Lamar Adams operated timber investment companies

called Madison Timber Company LLC and Madison Timber Properties LLC. He told investors

they were purchasing shares of timber tracts that would be harvested and sold to lumber mills at

a significant profit. The demand for lumber was so great, he said, he could guarantee investors a

fixed rate of return in excess of 10%. Investors believed him. They collectively gave him

hundreds of millions of dollars.

Adams was lying. He had, with the help of others, faked everything about the scheme.

There were no timber deeds, tracts of land, or lumber mills. He was actually using new investors’
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money to pay old investors—a classic Ponzi scheme. It worked only as long as Adams and his

associates could continue to bring in new money.

The scheme collapsed in April 2018. Adams turned himself in to the United States

Attorney’s Office in Jackson, Mississippi and quickly pleaded guilty to wire fraud. He is now

serving a 19.5-year sentence in federal prison. The sentence reflects the significance of the fraud;

the criminal proceeding established that Adams’ victims lost approximately $85 million.

When the Ponzi scheme collapsed, the U.S. Securities and Exchange Commission asked

this Court to appoint a receiver to take charge of Adams’ companies and provide some measure

of financial relief to his victims. The Court appointed Alysson Mills to be that receiver. To date,

she has sold Adams’ assets, negotiated settlements with Adams’ enablers, and filed lawsuits

against persons and entities that contributed to the fraud. This is one of those lawsuits.

In this action, the receiver alleges that the Baker, Donelson, Bearman, Caldwell &

Berkowitz, PC law firm; Alexander Seawright, LLC; Brent Alexander; and Jon Seawright

facilitated Adams’ fraud.1 “Defendants lent their influence, their professional expertise, and even

their clients to Adams,” the receiver alleges. “They made a fraudulent enterprise a fraternity.”

The four defendants are deeply intertwined. Baker Donelson is a regional law firm that

employed Alexander and Seawright in its Jackson, Mississippi office. Alexander was (and is) a

“Senior Public Policy Advisor” at the firm. Seawright was (and is) a transactional attorney and

shareholder of the firm.2 Alexander and Seawright own Alexander Seawright LLC. The LLC was

an investment company that the pair ran out of their Baker Donelson offices.

The receiver’s amended complaint describes an approximately seven-year-long

relationship between the defendants and the Ponzi scheme. It started in 2011, when Alexander

1
Seawright filed for bankruptcy, so the case is presently stayed as to him.
2
At the time the Ponzi scheme collapsed, Seawright was on the firm’s Board of Directors.

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and Seawright were looking for investment deals. They met Adams and a partnership was

conceived.

Alexander and Seawright used Baker Donelson connections and assets to identify

wealthy persons looking for investment opportunities, like Baker Donelson clients. They formed

an LLC to pool investors’ funds and pitched the investment to potential marks. Alexander and

Seawright then funneled the money they raised into Adams’ Ponzi scheme. The scheme

generated a 10% “return” for the LLC and another 6% in profits for Alexander and Seawright.

The amended complaint claims that Alexander and Seawright kept from their victims the true

size of their profit.

The receiver says Alexander and Seawright repeatedly lied to their victims. They lied

when they claimed to have their own money invested in the fund. They lied when they promised

to personally inspect the timber tracts in question. (According to the amended complaint, email

correspondence reveals that “inspection” meant “[grab] a cooler of beer and make a loop.”) And

they lied when they promised to inspect Adams’ contracts with timber mills. No such contracts

existed.

The scheme looked more stable than it was because Baker Donelson was involved.

Alexander and Seawright ran the scheme out of their Baker Donelson offices. They described it

as a “friends and family” fund for preferred Baker Donelson partners and clients. Seawright, a

transactional attorney, drafted subscription agreements and other investment documents, and sent

them to Adams from his Baker Donelson email account. The pair also targeted Baker Donelson

clients who had recently closed transactions with the firm.

Baker Donelson, in turn, let the two move money through the firm’s escrow accounts,

lending an air of authenticity and safety to the scheme. It looked like a sanctioned team activity:

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other Baker Donelson attorneys referred new victims to Alexander and Seawright, generating

clients, while the firm’s runners were used to pick up investors’ checks, serving the clients. Baker

Donelson let Alexander and Seawright use the firm’s offices for presentations, meetings, and

“closings.” The receiver claims that “numerous” other Baker Donelson employees worked with

Adams “for the purpose of finalizing investments in Madison Timber.”

The receiver alleges that Alexander and Seawright made approximately $1.6 million from

the scheme, not including the cash bonuses that Adams occasionally gave them. As the money

flowed in, however, neither Alexander, Seawright, nor Baker Donelson ever called a landowner,

checked a title, called a lumber mill, or asked why the landowners’ signatures often looked the

same. They ignored the glaring red flag the guaranteed return represented, and instead marketed

it as a sign of stability. They even ignored feedback from prospective investors that the timber

market simply didn’t work like this, including feedback that this “nearly riskless opportunity”

where “lawyers did the tax work” and “the opportunity was unaudited” was, in truth, suspicious.

No one acted on these red flags, despite the likelihood that some modicum of due diligence

would have brought down the Ponzi scheme.

* * *

The Court appointed the receiver. She has a duty to “identif[y] and pursue[] persons and

entities as participants in the Ponzi scheme to recover funds for distribution to investor-

claimants.” Zacarias v. Stanford Int’l Bank, Ltd., 945 F.3d 883, 891 (5th Cir. 2019). The receiver

now alleges that Baker Donelson, Alexander Seawright LLC, Alexander, and Seawright

“contributed to Madison Timber’s success over time, and therefore to the Receivership Estate’s

liabilities today.” She brings claims of civil conspiracy; aiding and abetting breach of fiduciary

duty; and negligence, gross negligence, and recklessness against all defendants. Alexander and

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his LLC are allegedly responsible for fraudulent transfer, racketeering, and joint venture

liability.3 Baker Donelson, meanwhile, is claimed to also be liable for negligent retention and

supervision.

After receipt of the amended complaint, the defendants filed the present motions to

dismiss. Baker Donelson claims that Alexander and Seawright’s investment activities were

“unaffiliated” with the firm (emphasis in original), and suggests that it merely hosted their

professional biographies on its firm website. Alexander and his LLC contend that they are

victims themselves, that they were “duped by Adams,” and that they undertook “meaningful

evaluations” of the timber investments.

II. Legal Standard

When considering a motion to dismiss under Rule 12(b)(6), the Court accepts the

plaintiff’s factual allegations as true and makes reasonable inferences in the plaintiff’s favor.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To proceed, the complaint “must contain a short and

plain statement of the claim showing that the pleader is entitled to relief.” Id. at 677-78

(quotation marks and citation omitted). This requires “more than an unadorned, the defendant-

unlawfully-harmed-me accusation,” but the complaint need not have “detailed factual

allegations.” Id. at 678 (quotation marks and citation omitted). The plaintiff’s claims must also

be plausible on their face, which means there is “factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation

omitted).

A plaintiff that defeats a motion to dismiss does not automatically prevail. Defeating a

motion to dismiss simply means that the plaintiff is entitled to discovery—a period in which the

3
These defendants do not seek to dismiss the fraudulent transfer count.

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plaintiff and the defendants obtain evidence from each other and non-parties. After the close of

discovery, the defendants are then entitled to file motions for summary judgment, in which they

argue to the Court that, given all of the evidence, they are entitled to judgment as a matter of law.

A plaintiff who defeats a motion for summary judgment also does not automatically

prevail. Instead, the case is set for trial so that a jury may decide whether the plaintiff has proven

her case. Where this Court believes the jury has erred, it has the right to set aside the verdict. If

this Court errs, the court of appeals may have the final say.4

III. Discussion

A. Standing

The defendants first contend that the receiver lacks standing to bring these claims.

The Constitution limits the jurisdiction of federal courts to actual cases and controversies.

U.S. Const. art. III, § 2. Parties seeking to invoke federal-court jurisdiction must therefore

demonstrate standing, which is shown by three elements: (1) an injury in fact that is concrete and

particularized as well as imminent or actual; (2) a causal connection between the injury and the

defendant’s conduct; and (3) that a favorable decision is likely to redress the injury. Lujan v.

Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). In a standing analysis, the Court “must

accept as true all material allegations of the complaint, and must construe the complaint in favor

of the complaining party.” Warth v. Seldin, 422 U.S. 490, 501-02 (1975).

The defendants’ standing arguments are unpersuasive in light of the Fifth Circuit’s

decision in Zacarias v. Stanford International Bank. There, the appellate court upheld a federal

equity receiver’s standing to sue professionals who conspired with Allen Stanford to carry out a

4
The lawyers all know this procedure, but these paragraphs are for the benefit of any Ponzi scheme victims who
may read this Order.

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Ponzi scheme. The court found “no dispute” that the receiver had standing to bring such claims.

945 F.3d at 899. It reasoned as follows:

They bring only the claims of the Stanford entities—not of their investors—alleging
injury to the Stanford entities, including the unsustainable liabilities inflicted by the
Ponzi scheme. The receiver and Investors’ Committee “allege that Defendants’
participation in a fraudulent marketing scheme increased the sale of Stanford’s
CDs, ultimately resulting in greater liability for the Receivership Estate,” and that
defendants “harmed the Stanford Entities’ ability to repay their investors.” The
receiver and Investors’ Committee sought to recover for the Stanford entities’
Ponzi-scheme harms, monies the receiver will distribute to investor-claimants. The
district court had subject matter jurisdiction over these claims.

Id.

We are presented with the same essential structure here. The receiver has sued a law firm

and its employees that, she alleges, conspired with the Ponzi scheme principals to further the

Ponzi scheme and cause greater liabilities to the receivership estate. See id. at 901. She seeks to

recover for injuries to the Madison Timber entities’ “unsustainable liabilities inflicted by the

Ponzi scheme,” and distribute that money to investor-claimants. Id. at 899. As in Zacarias, there

can be “no dispute” that she has standing.5

B. Vicarious Liability

Baker Donelson argues that it has no responsibility for Alexander and Seawright because

they acted outside the scope of their employment. Its brief cites caselaw to imply that the pair

may have been involved in “independent criminal conduct.”

“Some actions are so clearly beyond an employee’s course and scope of employment that

they cannot form the basis for a claim of vicarious liability, as a matter of law.” Baker Donelson

Bearman Caldwell & Berkowitz, P.C. v. Seay, 42 So. 3d 474, 488 (Miss. 2010) (citation and

brackets omitted). This is not one of those actions.

5
The Court has not considered whether the receiver also has standing via assignments from investor-victims.

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The receiver has sufficiently alleged that this investment scheme, including the

subscription agreements Seawright drafted for it, was part and parcel of a bundle of services

Baker Donelson provided to its preferred transactional clients; that these services occurred

during Baker Donelson’s working hours and in its offices; and that they served Baker Donelson’s

interests. Far from being an unaffiliated frolic, the receiver’s allegations regarding consistent,

repeated use of Baker Donelson staff and resources—most glaringly, the firm’s escrow

account—suggest that there was knowledge of and some benefit to the firm from knowingly

facilitating Alexander and Seawright’s investment activities. The case is therefore unlike those

where sexual affairs were deemed unrelated to the course and scope of employment as a matter

of law. See id.6

C. Civil Conspiracy

The defendants then argue that the receiver has failed to state a claim for civil conspiracy.

In Mississippi, “the elements of a civil conspiracy are: (1) an agreement between two or

more persons, (2) to accomplish an unlawful purpose or a lawful purpose unlawfully, (3) an overt

act in furtherance of the conspiracy, (4) and damages to the plaintiff as a proximate result.” Rex

Distrib. Co., Inc. v. Anheuser-busch, LLC, 271 So. 3d 445, 455 (Miss. 2019) (quotation marks

and citation omitted). “[D]amages are the essence of a civil conspiracy.” Id. (quotation marks

and citation omitted).

A conspiratorial agreement to commit a wrong can be “tacit.” Gallagher Bassett Servs.,

Inc. v. Jeffcoat, 887 So. 2d 777, 786 (Miss. 2004). The Mississippi Supreme Court adds that a

defendant need not commit an overt act to be liable for civil conspiracy. While the plaintiff “has

to show an unlawful overt act and it has to show damages,” that court held recently, “the overt

6
The Court has not considered whether the receiver has sufficiently alleged that Alexander and Seawright had
apparent authority to act for Baker Donelson.

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act need not be by [the defendant].” Rex Distrib., 271 So. 3d at 455 (citation omitted). Civil

conspiracy “exists as a cause of action to hold nonacting parties responsible,” the court

explained. Id.

To this, the defendants argue that the claim fails because they lacked actual knowledge

that Adams was running a Ponzi scheme.7

The amended complaint plausibly alleges that the defendants had actual knowledge of

wrongdoing. It specifically recites that Alexander and Seawright enticed unwitting investors

through a pattern of lies and omissions: they lied about contracts that didn’t exist, they lied about

inspecting parcels of land, and they omitted from their victims their true compensation. Baker

Donelson knew that Alexander and Seawright were using firm resources, personnel, and its

escrow account to sell securities, and actively assisted them.8 All involved also ignored the

guaranteed rate of return. See Janvey v. Proskauer Rose LLP, No. 3:13-CV-477-N, 2015 WL

11121540, at *5 (N.D. Tex. June 23, 2015) (finding that allegation of defendant’s knowledge of

“unrealistic rates of return,” among other things, stated a plausible claim that defendant had

knowledge of a fraudulent enterprise). The pattern of activities meets Mississippi’s definition of

“actual knowledge,” see Collier v. Trustmark Nat’l Bank, 678 So. 2d 693, 697 (Miss. 1996), and

states a claim for a tacit agreement to accomplish an unlawful purpose.

7
The term “actual knowledge” is not used in these cases. While the Mississippi Court of Appeals has written that
“the alleged confederates must be aware of the fraud or wrongful conduct at the beginning of the agreement,”
Bradley v. Kelley Bros. Contractors, 117 So. 3d 331, 339 (Miss. Ct. App. 2013) (citing a treatise), and the Fifth
Circuit relied on that line in Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507, 519 (5th Cir. 2018), none of
the earlier or later Mississippi Supreme Court cases have adopted that verbiage, see Rex Distrib., 271 So. 3d at 455
and Gallagher Bassett Servs., Inc. v. Jeffcoat, 887 So. 2d 777, 786 (Miss. 2004) (collecting cases).
8
Baker Donelson says this is not enough to state a claim for civil conspiracy, because it is not a tort. But Mississippi
law holds that no tort is required for a civil conspiracy claim. See Rex Distrib., 271 So. 3d at 455.

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Whether the defendants will succeed at summary judgment, as the defendant did in their

preferred case, Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507, 519 (5th Cir. 2018), is

reserved for future proceedings.

D. Aiding and Abetting

Next, the defendants argue that the aiding and abetting breach of fiduciary duty claim

does not exist in Mississippi.

The receiver’s claim for aiding and abetting liability is based on § 876(b) of the

Restatement (Second) of Torts. The section provides, in relevant part, that “one is subject to

liability if he . . . knows that the other’s conduct constitutes a breach of duty and gives

substantial assistance or encouragement to the other so to conduct himself.” The theory here is

that the defendants knew that Lamar Adams’ conduct constituted a breach of his fiduciary duties

toward Madison Timber, but nevertheless provided him with substantial assistance.

The state courts of Mississippi have not expressed an opinion on whether § 876(b)

provides a viable cause of action in this state. It falls to this Court to make an Erie-guess into

how Mississippi courts would rule. As the Fifth Circuit put it, “in the absence of on-point

Mississippi law, our primary obligation is to make an Erie guess as to how the Mississippi

Supreme Court would decide the question before us.” Keen v. Miller Envtl. Grp., Inc., 702 F.3d

239, 243 (5th Cir. 2012).

The standard for making an Erie-guess is familiar.

We base our forecast on (1) decisions of the Mississippi Supreme Court in

analogous cases, (2) the rationales and analyses underlying Mississippi Supreme
Court decisions on related issues, (3) dicta by the Mississippi Supreme Court, (4)
lower state court decisions, (5) the general rule on the question, (6) the rulings of
courts of other states to which Mississippi courts look when formulating
substantive law and (7) other available sources, such as treatises and legal
commentaries. Absent evidence to the contrary, we presume that the Mississippi
courts would adopt the prevailing rule if called upon to do so.

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Centennial Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 382 (5th Cir. 1998) (quotation

marks, citations, and brackets omitted) (emphasis added).

Applying this standard, two colleagues on this Court have concluded that the Mississippi

Supreme Court would recognize a § 876(b) claim for aiding and abetting fraud. See Dale v. Ala

Acquisitions, Inc., 203 F. Supp. 2d 694 (S.D. Miss. 2002); Jones v. KPMG LLP, No. 1:17-CV-

319-LG-RHW, 2018 WL 5018469, at *2 (S.D. Miss. Oct. 16, 2018). The Dale court’s analysis

showed that “the majority of jurisdictions that have addressed the validity of a claim for aiding

and abetting under § 876(b) have held that such a claim exists.” 203 F. Supp. 2d at 700.

Alexander and his LLC argue that this was error. They point to this statement from the

Fifth Circuit: “When sitting in diversity, a federal court exceeds the bounds of its legitimacy in

fashioning novel causes of action not yet recognized by the state courts.” In re DePuy

Orthopaedics, Inc., Pinnacle Hip Implant Prod. Liab. Litig., 888 F.3d 753, 781 (5th Cir. 2018).

The DePuy court rejected a § 876(b) aiding and abetting claim under Texas law, at least in the

particular product liability circumstances that case presented.

Strictly as a textual matter, these defendants’ preferred sentence does not apply.

Jurisdiction in this case is predicated upon a federal question, rather than diversity. More to the

point, though, to the extent aiding and abetting breach of duty in the product liability context is

too “novel,” too close to “inventing a new framework” of state-law liability (and thus

prohibited), the claim in our case is not. Id. Aiding and abetting “has been recognized in the

breach of fiduciary context” in Texas, among other places. In re Houston Reg’l Sports Network,

L.P., 547 B.R. 717, 758 (Bankr. S.D. Tex. 2016).

That said, the undersigned also believes that controlling authority instructs that this Court

must make an Erie-guess, in accordance with the standard recited above, when squarely

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presented with a question of state law over which it cannot decline supplemental jurisdiction.

E.g., Keen, 702 F.3d at 243; Centennial Ins., 149 F.3d at 382; Midwest Feeders, 886 F.3d at 515-

16; Stacy v. Aetna Cas. & Sur. Co., 484 F.2d 289, 292 (5th Cir. 1973) (predicting that “the

Mississippi courts would now adopt the rule of 324A”); Howe ex rel. Howe v. Scottsdale Ins.

Co., 204 F.3d 624, 627 (5th Cir. 2000) (“If the Louisiana Supreme Court has not ruled on this

issue, then this Court must make an “Erie guess” and “determine as best it can” what the

Louisiana Supreme Court would decide.”) (emphasis added).

Here, because there is no evidence that Mississippi would not adopt the prevailing rule,

see Centennial Ins., 149 F.3d at 382, this Court concurs with its colleague that an aiding and

abetting breach of fiduciary duty claim under § 876(b) would likely be adopted by the

Mississippi Supreme Court. See Dale, 203 F. Supp. 2d at 701.

Baker Donelson presses that the amended complaint still fails to state a plausible aiding

and abetting cause of action. Respectfully, the undersigned disagrees. The lies and omissions set

forth above suggest that the defendants knew what they were doing was a breach of duty. The

motions to dismiss this claim are denied.

E. Negligence, Gross Negligence, and Recklessness

Next, the defendants contend that the receiver has failed to state a claim for negligence,

gross negligence, or recklessness.

“To succeed on a claim for negligence, the plaintiff must prove duty, breach, causation

and injury.” Rein v. Benchmark Const. Co., 865 So. 2d 1134, 1143 (Miss. 2004). Negligence is

the failure to use ordinary care. See George B. Gilmore Co. v. Garrett, 582 So. 2d 387, 391

(Miss. 1991).

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“[T]here is no precise definition of gross negligence, but one of the approximate

definitions may be thus expressed: gross negligence is that course of conduct which, under the

particular circumstances, disclosed a reckless indifference to consequences without the exertion

of any substantial effort to avoid them.” Turner v. City of Ruleville, 735 So. 2d 226, 229 (Miss.

1999) (citation omitted).

“Recklessness” has been defined as “that degree of fault which lies between intent to do

wrong, and the mere reasonable risk of harm involved in ordinary negligence.” Maldonado v.

Kelly, 768 So. 2d 906, 910 (Miss. 2000) (citation omitted). The Mississippi Supreme Court

added that recklessness is conduct “so far from a proper state of mind that it is treated in many

respects as if harm was intended.” Id. (citation and emphasis omitted).

The defendants claim that none of the elements of negligence, gross negligence, or

recklessness are sufficiently alleged. The Court disagrees. The defendants had a duty to use

ordinary care. The Mississippi Legislature has further defined “ordinary care” for entities dealing

with negotiable instruments to mean “observance of reasonable commercial standards, prevailing

in the area in which the person is located, with respect to the business in which the person is

engaged.” Miss. Code Ann. § 75-3-103(a)(9). A member of a joint venture has a duty to his

fellow venturers “to refrain[] from engaging in grossly negligent or reckless conduct, intentional

misconduct, or a knowing violation of law.” Id. § 79-13-404(c).

The amended complaint is rife with allegations of the defendants failing to use ordinary

care. The pattern of lies described above, actively allowed and facilitated by Baker Donelson,

states a claim for failure to abide ordinary commercial standards. The allegations set forth a

textbook example of defendants who display “a reckless indifference to consequences without

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the exertion of any substantial effort to avoid them.” Turner, 735 So. 2d at 229. The present

arguments are, therefore, denied.

F. Negligent Retention and Supervision

A “claim of negligent hiring, retention and supervision . . . is simply a negligence claim,

requiring a finding of duty, breach of duty, causation and damage.” Roman Catholic Diocese of

Jackson v. Morrison, 905 So. 2d 1213, 1229 (Miss. 2005). “In Mississippi, an employer will be

liable for negligent hiring or retention of his employee when an employee injures a third party if

the employer knew or should have known of the employee’s incompetence or unfitness.”

Parmenter v. J & B Enterprises, Inc., 99 So. 3d 207, 217 (Miss. Ct. App. 2012) (quotation marks

and citation omitted).

Baker Donelson argues that this claim fails because it didn’t know Alexander and

Seawright were part of a Ponzi scheme. In a similar case arising out of the Stanford litigation,

however, the district court found that “an ordinary degree of supervision” supports an inference

that the employing firm was “aware to some degree of [its employees] tortious conduct.” Janvey,

2015 WL 11121540, at *8. “Any further analysis of this issue requires factual development more

appropriately considered on a motion for summary judgment.” Id. This Court agrees.

Of particular salience, to this claim and others, are the questions about the use of Baker

Donelson’s escrow account. It is one thing to secretly operate a side business out of your office.

An employer cannot know everything you do on company time. Suppose the evidence generated

through discovery shows that Alexander and Seawright were truly out on their own, abusing their

positions without their employer’s knowledge. In that case, Baker Donelson will have strong

arguments at summary judgment. On the other hand, the allegations regarding the use of the

firm’s escrow account presently suggest Baker Donelson’s knowledge and ratification of the

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investment scheme. An escrow account is subject to greater oversight than, for example, one’s

work email account. Discovery is the right place to determine to what extent the evidence bears

out this allegation.

For these reasons, the motions to dismiss this claim are denied.

G. State Racketeering

Alexander and his LLC argue that the receiver has not sufficiently alleged a violation of

Mississippi’s Racketeer Influenced and Corrupt Organization Act (RICO). They are correct.

Under the relevant statute, “[a]ny aggrieved person may institute a civil proceeding under

subsection (1) of this section against any person or enterprise convicted of engaging in activity in

violation of this chapter.” Miss. Code Ann. § 97-43-9(5) (emphasis added).

At present, none of today’s defendants have been convicted of anything relating to this

Ponzi scheme. It follows that the receiver’s state RICO claim cannot proceed.

H. Joint Venture Liability

Alexander Seawright LLC and Alexander next contend that the amended complaint fails

to show that they and Adams entered into a joint venture or partnership.

In Mississippi,

no exact definition could be given of a joint venture, [as] the answer in each case
depended upon the terms of the agreement, the acts of the parties, the nature of the
undertaking and other facts. We broadly defined a joint venture as an association
of persons to carry out a single business enterprise for profit, for which purpose
they combine their property, money, efforts, skill and knowledge. We said it exists
when two or more persons combine in a joint business enterprise for their mutual
benefit with an understanding that they are to share in profits or losses and
each to have a voice in its management. We noted a condition precedent for its
existence was a joint proprietary interest in the enterprise and right of mutual
control. The joint purpose of the enterprise distinguishes it from a mere tenancy in
common. We further held an agreement, express or implied, for sharing in the
profits is essential, but there need be no specific agreement to share in the losses,
and if the nature of the undertaking was such that no losses other than those of time
and labor in carrying it out was likely to occur, an agreement to share in the profits

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might stamp it as a joint venture, although nothing was said about the losses. We
said a contract between the parties was necessary, but it need not be embodied in a
formal agreement, but might be inferred from the facts, circumstances and conduct
of the parties. Finally, we said it differed from a general partnership because it
related to a single transaction, while a partnership usually related to a general and
continuing business, and that a joint venture was of a shorter duration, and the
agreement was less formal.

Pittman v. Weber Energy Corp., 790 So. 2d 823, 826–27 (Miss. 2001) (citation omitted).

Here, the amended complaint thoroughly sets forth an association between Adams,

Alexander Seawright LLC, and Alexander to carry out a timber investment partnership or joint

venture. Adams supposedly contributed the timber expertise; the LLC and Alexander actually

contributed the working capital and “papering everything”; and all involved contributed their

time and sales expertise. The parties shared in the profits together, and as for losses, well, this

enterprise fits exactly into the Mississippi Supreme Court’s description, “if the nature of the

undertaking was such that no losses other than those of time and labor in carrying it out was

likely to occur, an agreement to share in the profits might stamp it as a joint venture.” Id.

Whether the evidence will actually bear out a joint venture or partnership, see Boyanton

v. Bros. Produce, Inc., 312 So. 3d 363, 374 (Miss. Ct. App. 2020) (granting summary judgment

given the record evidence), remains to be seen. For present purposes, though, the allegations in

the amended complaint are satisfactory.

I. In Pari Delicto

Lastly, the defendants contend that the doctrine of in pari delicto bars this suit.

“The phrase ‘in pari delicto’ is Latin for ‘in equal fault.’ The doctrine of in pari delicto

refers to the principle that a plaintiff who has participated in a wrongdoing may not recover

damages resulting from the wrongdoing.” Latham v. Johnson, 262 So. 3d 569, 581 (Miss. Ct.

App. 2018) (quotation marks, citation, and brackets omitted). “The doctrine . . . is undergirded

16
 Case 3:18-cv-00866-CWR-FKB Document 70 Filed 05/05/21 Page 17 of 18

by the concerns, first, that courts should not lend their good offices to mediating disputes among

wrongdoers; and second, that denying judicial relief to an admitted wrongdoer is an effective

means of deterring illegality.” Jones v. Wells Fargo Bank, N.A., 666 F.3d 955, 965 (5th Cir. 2012)

(citation omitted). “In pari delicto is an equitable, affirmative defense, which is controlled by

state common law.” Id. (citations omitted).

The defects with the defendants’ argument were well-explained by the Jones court. The

Fifth Circuit started by reciting that “[a] receiver is the representative and protector of the

interests of all persons, including creditors, shareholders and others, in the property of the

receivership.” Id. at 966. It then explained,

Although a receiver generally has no greater powers than the corporation had as of
the date of the receivership, it is well established that when the receiver acts to
protect innocent creditors he can maintain and defend actions done in fraud of
creditors even though the corporation would not be permitted to do so. The receiver
thus acts on behalf of the corporation as a whole, an entity separate from its
individual bad actors.

Id. (quotation marks, citations, and ellipses omitted). The Jones court declined to apply the in

pari delicto doctrine.

Under this precedent, the receiver and the receivership estate are legally distinct from

Adams and Madison Timber. Where, as here, the receiver is acting on behalf of innocent

investor-victims, she “does not stand in pari delicto to [her bank], even if” Adams would. Id.

And, as in Jones, “[a]pplication of in pari delicto would undermine one of the primary purposes

of the receivership established in this case, and would thus be inconsistent with the purposes of

the doctrine.” Id. (citation omitted).

Mississippi’s wrongful conduct rule is also unavailing. The rule provides that “no court

will lend its aid to a party who grounds his action upon an immoral or illegal act.” Price v.

Purdue Pharma Co., 920 So. 2d 479, 484 (Miss. 2006) (citation omitted). The Mississippi

17
 Case 3:18-cv-00866-CWR-FKB Document 70 Filed 05/05/21 Page 18 of 18

Supreme Court long ago explained that the judicial system, “from a consideration of its own

pecuniary interests, and of the interests of other litigants, may wisely refuse to assist in adjusting

equities between persons who have been engaged in an unlawful action.” W. Union Tel. Co. v.

McLaurin, 66 So. 739, 740 (Miss. 1914).

There are no inequities here in permitting the receiver to proceed. Just as with the

doctrine of in pari delicto, the receivership estate is not limited by the wrongful conduct of

Adams and Madison Timber. “The appointment of the receiver removed the wrongdoer from the

scene.” Scholes v. Lehmann, 56 F.3d 750, 754 (7th Cir. 1995). And the equities favor permitting

investor-victims to recover from a receiver’s suit against those culpable in the Ponzi scheme.

For these reasons, the defendants’ equitable arguments for dismissal are denied, without

prejudice to their re-urging at the summary judgment stage.

J. Piercing the Veil

Finally, Alexander and his LLC contend that the allegations are insufficient to pierce the

corporate veil of their LLC. For the reasons stated in Phillips v. MSM, Inc., No. 3:12-CV-175-

CWR-FKB, 2015 WL 420327, at *9 (S.D. Miss. Feb. 2, 2015), the argument is denied without

prejudice.

IV. Conclusion

The Court has considered all arguments raised by the parties; those not addressed in this

Order would not have changed the result. Baker Donelson’s motion is denied, while Alexander

Seawright, LLC and Alexander’s motion is granted in part and denied in part.

SO ORDERED, this the 5th day of May, 2021.

s/ Carlton W. Reeves
UNITED STATES DISTRICT JUDGE

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Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 1 of 16

   

 
____________________ 

No. 3:18‐CV‐866‐CWR‐FKB 

ALYSSON MILLS,  
Plaintiff, 

v. 

BUTLER SNOW LLP, ET AL., 
Defendants. 
____________________ 

ORDER 
____________________ 

Before CARLTON W. REEVES, District Judge. 
Defendants Butler Snow LLP, Butler Snow Advisory Services 
LLC, and Matt Thornton have moved to send this case to ar‐
bitration. For the reasons that follow, the motion is denied. 
I.   Factual and Procedural History 
From at least 2010 until April 2018, Lamar Adams operated 
timber  investment  companies  called  Madison  Timber  Com‐
pany LLC and Madison Timber Properties LLC. He told in‐
vestors  they  were  purchasing  shares  of  timber  tracts  that 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 2 of 16

would be harvested and sold to lumber mills at a significant 
profit. The demand for lumber was so great, he said, he could 
guarantee investors a fixed rate of return in excess of 10%. In‐
vestors believed him. They collectively gave him hundreds of 
millions of dollars. 
Adams was lying. He had, with the help of others, faked eve‐
rything about the scheme. There were no timber deeds, tracts 
of land, or lumber mills. He was actually using new investors’ 
money  to  pay  old  investors—a  classic  Ponzi  scheme.  It 
worked as long as Adams and his associates could continue 
to bring in new money. 
The scheme collapsed in April 2018. Adams turned himself in 
to the United States Attorney’s Office in Jackson, Mississippi 
and quickly pleaded guilty to wire fraud. He is now serving 
a  19.5‐year  sentence  in  federal  prison.  The  sentence  reflects 
the significance of the fraud; the criminal proceeding estab‐
lished that Adams’ victims lost approximately $85 million. 
When the Ponzi scheme collapsed, the U.S. Securities and Ex‐
change Commission asked this Court to appoint a receiver to 
take charge of Adams’ companies and provide some measure 
of financial relief to his victims. The Court appointed Alysson 
Mills to be that receiver. To date, she has sold Adams’ assets, 
negotiated settlements with Adams’ enablers, and filed law‐
suits  against  persons  and  entities  that  contributed  to  the 
fraud. 
This is one of those lawsuits. 
In  this  action,  the  receiver  alleges  that  the  Butler  Snow  and 
Baker  Donelson  law  firms  aided  and  abetted  Adams  in 

   
2 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 3 of 16

carrying out the Ponzi scheme.1 These firms “lent their influ‐
ence, their professional expertise, and even their clients to Ad‐
ams,” the complaint alleges. “They made a fraudulent enter‐
prise a fraternity. Defendants contributed to the success of the 
Madison Timber Ponzi scheme, and therefore to the debts of 
the Receivership Estate to investors. By this complaint the Re‐
ceiver seeks to hold Defendants accountable.” 
What follows will focus on the receiver’s allegations against 
Butler Snow and its affiliates. These allegations are disputed, 
but must be taken as true at this stage of the case. 
In  2009,  Adams  hired  Butler  Snow  to  draft  a  private  place‐
ment  memorandum  (PPM)  for  Madison  Timber  Fund  LLC. 
The  PPM  explained  to  potential  investors  that  Adams  used 
his “network of contacts cultivated over 20 years” to broker 
deals  between  landowners  and  “various  timber  mills.”  It 
claimed  that  Adams  had  a  “competitive  advantage”  and 
“highly competitive pricing strategy.” The PPM also warned 
investors that timber prices “experience significant variation 
and have been historically volatile,” and cautioned that suc‐
cess would be “substantially dependent” on Adams. 
It is not clear whether Butler Snow knew in 2009 that Adams 
was running a Ponzi scheme. The firm did know, however, 
that  people  who  helped  Adams  might  need  to  register  as  a 
broker. That year, according to a note in the firm’s Madison 
Timber file, senior partner Don Cannada researched Missis‐
sippi  law  to  learn  the  various  penalties  one  could  face  for 
                                                 
1  Butler  Snow  and  Baker  Donelson  are  law  firms  in  the  southeastern 

United States. Butler Snow is registered in Delaware but headquartered in 
Mississippi. Baker Donelson is incorporated in Tennessee and has a satel‐
lite office in Mississippi. 

   
3 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 4 of 16

profiting as an unlicensed real estate broker. See Miss. Code 
Ann. § 73‐35‐31.  He  observed that the law  set forth a  “very 
broad definition of what a broker is.” He somehow concluded 
that Mississippi law “[s]ays you can’t pay an unlicensed bro‐
ker, but doesn’t provide any penalty if you do so.” 
The PPM did not attract any formal investors. It succeeded in 
a different way. In lieu of buying into the fund, receptive in‐
vestors  simply  entered  into  “joint  ventures”  with  Madison 
Timber.  The  scheme  otherwise  worked  the  same—$100,000 
and $200,000 investments came in, while “consistent, uniform 
returns of 12% to 14%” went out. The fraudulent enterprise 
continued to grow. 
The next phase of Butler Snow’s work with Adams kicked off 
in 2012. That year, Adams hired Butler Snow’s new subsidi‐
ary, Butler Snow Advisory Services, to expand his “business” 
and  raise  $30–50  million.  The  complaint  says  that  Matt 
Thornton,  the  CEO  of  Butler  Snow  Advisory  Services, 
“alerted Don Cannada and Barry Cannada, a senior partner 
and the Vice Chair of Butler Snow, respectively, to the pro‐
spects  of  this  new  business.”  Meetings  were  held;  contracts 
were negotiated.  
The parties ultimately agreed that Butler Snow Advisory Ser‐
vices would pitch Adams’ timber investments to wealthy peo‐
ple  and  institutions.  In  exchange,  Adams  would  pay  Butler 
Snow Advisory Services a $3,500 monthly retainer, commis‐
sions for each completed transaction, a fund success fee (com‐
prised of half of the fund’s management fees and a quarter of 
the fund’s carried interest), expenses, and an administrative 
fee. 

   
4 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 5 of 16

The legal side of Butler Snow began to update the PPM while 
the  “strategic  advisors”  at  Butler  Snow  Advisory  Services 
went to work. The advisors made a list of more than 30 poten‐
tial  investors  and  refined  their  pitch.  Their  emails  reveal  a 
simple strategy: they knew that Adams had “a seemingly in‐
satiable appetite for cash,” and they would find investors to 
give him that cash—profiting from the ensuing commissions 
and fees—until Adams “says ‘uncle.’” 
The receiver has some of Butler Snow Advisory Services’ sales 
pitches. They are illuminating.  
Thornton told one potential mark that he could not share spe‐
cific information about the timber mills because Adams “has 
an extremely stringent NDA with his mill partners.” But that 
was a lie. There were no NDAs with mill partners; there were 
no mill partners at all. Thornton also engaged in obfuscation. 
He told another mark that Adams had “been vetted by several 
$1.5 billion family office(s) in Texas, encompassing a 75+ day 
due  diligence  period  [and]  as  you  would  imagine,  Lamar 
passed with flying colors!” That conveniently omitted that the 
billion‐dollar family offices had declined to invest with Ad‐
ams. 
Thornton kept the legal side of Butler Snow apprised of his 
progress.  The  complaint  says  he  “often”  copied  Barry  Can‐
nada on emails. Thornton also sent emails pressuring Butler 
Snow lawyers to work faster on Adams’ legal needs. The law‐
yers  did  so  and  finished  the  updated  PPM  in  2013.  As  de‐
scribed earlier, investors continued to sign up through joint 
ventures instead of the fund. Butler Snow Advisory Services 
still  received  its  commissions.  Neither  Thornton  nor  Butler 
Snow ever registered with the S.E.C. 

   
5 
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According to the complaint, Butler Snow’s lawyers and sales‐
men  “recklessly  ignored  numerous  red  flags.”  They  didn’t 
call a landowner or check a title. They didn’t call a mill. They 
told potential marks that in the event of a default, the investor 
could “simply file the [timber] deed,” but never questioned 
why investors were told not to record the deed at the outset 
of the investment. The professionals at Butler Snow also ig‐
nored  the  red  flag  of  the  return:  Adams  promised  “a  con‐
sistent, uniform return of 12% to 14%,” a rate of return una‐
vailable  in  the  broader  market  and  at  odds  with  the  PPM’s 
express warning that timber prices were volatile. 
No one acted on these glaring red flags. Adams got new in‐
vestors  to  pay  off  the  old  investors,  the  salesmen  at  Butler 
Snow Advisory Services got their commissions, and the law‐
yers at Butler Snow were paid for their legal work.  
Adams  and  Butler  Snow  Advisory  Services  parted  ways  in 
December 2013.  By  then, Adams had realized that he  could 
make more money if he hired one of Butler Snow Advisory 
Services’ key salesmen, Mike Billings, without the framework 
and  fees  of  the  Advisory  Services  itself.  So  Adams  directly 
hired  Billings  to  help  him  defraud  investors.2  Adams  also 
turned  to  the  lawyers  at  Butler  Snow  for  “regulatory”  and 
“compliance” help with a real estate development company 
he was setting up.3 

                                                 
2 The receiver’s claims against Billings were resolved in Cause No. 3:18‐

CV‐679. 
3 The receiver’s interest in that real estate development company is being 

adjudicated in Cause No. 3:18‐CV‐252. 

   
6 
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The  complaint says that by spring  2018, Butler Snow found 

itself  in  an  unusual  position.  The  firm  was  still  sending  in‐
voices  to  Adams—even  after  he  turned  himself  in  to  the 
United  States  Attorney’s  Office.  The  firm  simultaneously 
“purported to represent investors in their demands of Madi‐
son Timber,” the receiver alleges. And the firm “purported to 
represent  Billings—whose  interests  clearly  were  adverse  to 
investors,” according to the complaint. 
The  receiver  filed  this  action  in  December  2018.  She  claims 
that  Butler  Snow,  Butler  Snow  Advisory  Services,  and 
Thornton are liable to the receivership estate for civil conspir‐
acy,  aiding  and  abetting,  negligence,  gross  negligence,  and 
recklessness. She alleges that Butler Snow Advisory Services 
and  Thornton  violated  Mississippi’s  fraudulent  transfer  act 
and Mississippi’s prohibition on organized fraud enterprises 
(civil RICO). She adds that the Butler Snow law firm is liable 
to  the  estate  for  legal  malpractice,  negligent  retention,  and 
negligent supervision. The receiver seeks monetary, declara‐
tory, and equitable relief. 
Butler  Snow,  Butler  Snow  Advisory  Services,  and  Thornton 
subsequently moved to compel arbitration. 
II.   Legal Standards 
Today’s  motion  requires  an  application  of  both  federal  and 
state  law.  Federal  law  determines  the  procedure  by  which 
federal  courts  consider  motions  to  compel  arbitration.  State 
law,  which  in  this  case  is  Mississippi  law,  governs  whether 
the parties actually agreed to arbitrate their dispute. 
   

   
7 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 8 of 16

A.  Arbitration Law 
The Federal Arbitration Act “makes written arbitration agree‐
ments  valid,  irrevocable,  and  enforceable,  save  upon  such 
grounds  as  exist  at  law  or  in  equity  for  the  revocation  of  a 
contract.”  Crawford  Prof’l  Drugs,  Inc.  v.  CVS  Caremark  Corp., 
748 F.3d 249, 257 (5th Cir. 2014) (quotation marks and citation 
omitted).  In  other  words,  “courts  must  place  arbitration 
agreements on an equal footing with other contracts, and en‐
force  them  according  to  their  terms.”  AT&T  Mobility LLC  v. 
Concepcion,  563  U.S.  333,  339  (2011)  (citations  omitted).  Like 
any  other  contract,  agreements  to  arbitrate  may  “be  invali‐
dated  by  generally  applicable  contract  defenses,  such  as 
fraud, duress, or unconscionability.” Id. (quotation marks and 
citations omitted).4 
To  determine  whether  a  dispute  belongs  in  arbitration,  the 
Court considers “(1) whether there is a valid agreement to ar‐
bitrate  between  the  parties;  and  (2)  whether  the  dispute  in 
question falls within the scope of that arbitration agreement.” 
Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th Cir. 
2012) (quotation marks and citation omitted). If the answers 
to these questions are “yes,” the next question is “whether any 
federal  statute  or  policy  renders  the  claims  nonarbitrable.” 
Will‐Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 214 (5th 
Cir. 2003) (quotation marks and citation omitted). 
“The FAA . . . does not require parties to arbitrate when they 
have not agreed to do so.” E.E.O.C. v. Waffle House, Inc., 534 

                                                 
4 Mississippi courts approach arbitration agreements similarly. See Driver 

Pipeline Co. v. Williams Transport, LLC, 104 So. 3d 845, 849 (Miss. 2012). 

   
8 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 9 of 16

U.S. 279, 293 (2002) (quotation marks and citation omitted).5 
That is because arbitration “is a matter of consent, not coer‐
cion.” Id. at 294 (quotation marks and citation omitted). 
The FAA reflects a liberal federal policy favor‐
ing arbitration. However, the federal policy fa‐
voring arbitration does not apply to the deter‐
mination of whether there is a valid agreement 
to arbitrate between the parties. Given the fun‐
damental principle that arbitration is a matter of 
contract, to determine whether an agreement to 
arbitrate  is  valid,  courts  apply  ordinary  state‐
law principles that govern the formation of con‐
tracts. 
Carey, 669 F.3d at 205 (quotation marks and citations omitted). 
In this case, Mississippi contract law controls whether the par‐
ties agreed to arbitrate this dispute. See Crawford, 748 F.3d at 
258. 
B.  Mississippi Contract Law 
In  Mississippi,  as  elsewhere,  “[t]he  primary  purpose  of  all 
contract construction principles and methods is to determine 
and record the intent of the contracting parties.” Royer Homes 
of  Miss.,  Inc.  v.  Chandeleur  Homes,  Inc.,  857  So.  2d  748,  752 
(Miss. 2003) (citation omitted). “A cardinal rule of construc‐
tion of a contract is to ascertain the mutual intentions of the 

                                                 
5  Mississippi’s  highest  court  agrees  that  “a  party  cannot  be  required  to 

submit to arbitration any dispute which he has not agreed so to submit.” 
Driver Pipeline, 104 So. 3d at 850 (quotation marks and citations omitted). 

   
9 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 10 of 16

parties.” Union Planters Bank, Nat’l Ass’n v. Rogers, 912 So. 2d 
116, 120 (Miss. 2005) (citation omitted). 
The  analysis  begins  (and  usually  ends)  with  the  plain  lan‐
guage of the contract, since the words the parties selected “are 
by far the best resource for ascertaining the intent and assign‐
ing  meaning  with  fairness  and  accuracy.”  Royer  Homes,  857 
So.  2d  at  752  (citation  omitted).  The  contract  is  read  “as  a 
whole,  so  as  to  give  effect  to  all  of  its  clauses.”  Id.  (citation 
omitted). “[I]f the contract is unclear or ambiguous, the court 
should  attempt  to  harmonize  the  provisions  in  accord  with 
the parties’ apparent intent.” Id. (quotation marks and citation 
omitted). “An instrument that is clear, definite, explicit, har‐
monious in all its provisions, and is free from ambiguity will 
be enforced.” Epperson v. SOUTHBank, 93 So. 3d 10, 16 (Miss. 
2012) (quotation marks and citation omitted). 
The  Mississippi  Supreme  Court  defines  “ambiguity”  as  “a 
susceptibility  to  two  reasonable  interpretations.”  Dalton  v. 
Cellular  S.,  Inc.,  20  So.  3d  1227,  1232  (Miss.  2009)  (quotation 
marks and citations omitted). 
An “ambiguous” word or phrase is one capable 
of more than one meaning when viewed objec‐
tively  by  a  reasonably  intelligent  person  who 
has  examined  the  context  of  the  entire  inte‐
grated  agreement  and  who  is  cognizant  of  the 
customs,  practices,  usages  and  terminology  as 
generally understood in the particular trade or 
business. 
Id.  (citation  omitted).  “[I]nternal  conflict  or  uncertainty  can 
provide  the  necessary  condition  precedent  to  find 

   
10 
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ambiguity.”  Mississippi  Farm  Bureau  Mut. Ins.  Co.  v.  Walters, 

908 So. 2d 765, 769 (Miss. 2005) (citation omitted).  
In Dalton, the Mississippi Supreme Court looked at a business 
contract  with  contradictory  terms.  “Clause  3.5  allows  either 
party to terminate at will,” the Court found, while “Clause 3.4 
and  the  unnumbered  paragraph  following  clause  3.5  allow 
[the plaintiff] to terminate with cause under certain circum‐
stances.” 20 So. 3d at 1233. Because “reasonable minds could 
reach different conclusions after reading the whole contract, 
in discerning the intent of the parties, while giving effect to 
each separate clause,” the contract was ambiguous. Id. 
In these situations—i.e., where “the Court is unable to ascer‐
tain the meaning of the contract and the intent of the parties 
within the four corners of the contract”—it must “apply the 
canons  of  contract  construction.”  Epperson,  93  So.  3d  at  17 
(quotation marks and citation omitted). “Where the language 
of an otherwise enforceable contract is subject to more than 
one fair reading, the reading applied will be the one most fa‐
vorable to the non‐drafting party.” Id. (quotation marks and 
citation  omitted).  “The  reason  for  this  rule  is  to  protect  the 
party who did not choose the language from an unintended 
or unfair result.” Mastrobuono v. Shearson Lehman Hutton, Inc., 
514 U.S. 52, 63 (1995). 
III.   Discussion 
A.  The Contract 
Among  Adams’  various  relationships  with  Butler  Snow’s 
lawyers  and  advisors,  the  parties  have  identified  only  one 
contract. It is seven pages long. 

   
11 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 12 of 16

The first three pages are on Butler Snow Advisory Services’ 
letterhead.  These  pages  comprise  the  “Engagement  Letter.” 
Martin Willoughby signed the Engagement Letter on behalf 
of Butler Snow Advisory Services on August 8, 2012. Lamar 
Adams signed it four days later on behalf of Madison Timber 
Company, Inc. 
The  final  four  pages  are  the  “Standard  Terms  and  Condi‐
tions.”  They  are  referenced  in  and  incorporated  by  the  En‐
gagement Letter—so we know they belong with the Engage‐
ment Letter—but are not otherwise dated or signed. 
The dilemma can be stated simply. In the Engagement Letter, 
the parties agreed to the following: 
The state and federal courts in Mississippi shall 
have  exclusive  jurisdiction  in  relation  to  any 
claim, dispute or difference concerning this En‐
gagement Contract and any matter arising from 
it.  The  parties  hereto  irrevocably  waive  any 
right they may have to object to any action being 
brought  in  that  Court,  to  claim  that  the  action 
has been  brought to  an inconvenient forum  or 
to claim that that Court does not have jurisdic‐
tion. 
This is a typical forum selection clause. 
In the Standard Terms, however, the parties agreed “to sub‐
mit their dispute to binding arbitration under the authority of 
the  Federal  Arbitration  Act.  .  .  .  [T]he  parties  hereby  waive 
trial in a court of law or by jury.” 
The parties disagree as to which term applies to this case.  
 

   
12 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 13 of 16

B.  The Textual Analysis 
The main question is whether the above conflict renders the 
contract ambiguous.  
In  the  forum  selection  clause,  the  parties  agreed  to  resolve 
“any  claim,  dispute  or  difference”  they  might  have  in  “the 
state  and  federal  courts  in  Mississippi.”  The  parties  agreed 
that  those  courts  would  have  “exclusive  jurisdiction”  over 
“any” such claims. All objections to that forum or jurisdiction 
were  explicitly  waived.  The  arbitration  provision,  however, 
directly  contradicts  the  forum  selection  clause.  It  sends  dis‐
putes “to binding arbitration” instead of “a court of law.” 
It is not possible to reconcile the arbitration provision with the 
forum selection clause. Reasonable minds cannot, after read‐
ing the entire contract, determine which of these clauses the 
parties intended to control. “Both provisions are all‐inclusive, 
both are mandatory, and neither admits the possibility of the 
other.” Sharpe v. AmeriPlan Corp., 769 F.3d 909, 917 (5th Cir. 
2014) (quotation marks and citation omitted). The competing 
terms render this part of the contract ambiguous.6  
The Butler Snow parties endeavor mightily to harmonize the 
provisions. A close reading, they say, “leads to the inescapa‐
ble  result  that  the  forum  selection  clause  is  fully  consistent 
with the arbitration provision.” Their strongest argument is 
that the parties intended to arbitrate their dispute and, subse‐
quently,  have any  arbitration award  confirmed (or vacated) 
in court. 

                                                 
6 Where a conflict in the provisions exists, the Mississippi Supreme Court 

has declined to enforce the arbitration agreement. See Driver Pipeline, 104 
So. 3d at 849–50. 

   
13 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 14 of 16

The parties certainly could have written that in their contract.7 
Different contracts have been interpreted in that way. E.g., id. 
at  916  (harmonizing  dispute  resolution  provision  with  arbi‐
tration provision as to one of the plaintiffs). But these parties 
did not. The plain language of the contract contains no such 
two‐step process.8 
The  Butler  Snow  parties  then  assert  that  “this  very  case” 
proves that the contract needed both provisions, because “the 
arbitration  provision’s  validity  must  be  decided  by  some 
court.”  But  that  brings  us  back  to  the  central  problem.  This 
Court cannot adjudicate the validity of the arbitration provi‐
sion, because it cannot determine which provision the parties 
intended to be dispositive. 
The  Butler  Snow  parties  have  not  pointed  to  a  single  case 
where  an  identical  conflict  was  ordered  to  arbitration.  The 
closest case they identify—which they raised for the first time 
in their reply brief—is Personal Security & Safety Systems Inc. v. 
Motorola Inc., 297 F.3d 388 (5th Cir. 2002). In Motorola, though, 
the parties’ forum selection clause was much narrower than 
ours; it did not cover all “disputes” or all “claims.” Id. at 396. 
And the Fifth Circuit has been careful to distinguish Motorola 
when  interpreting  contracts  with  more  expansive  language. 
See Sharpe, 769 F.3d at 917–18 (finding that the “expansive dis‐
pute resolution provisions” in three of the plaintiffs’ contracts 
                                                 
7 Butler Snow is undoubtedly a sophisticated law firm with many talented 

attorneys. 
8 Although the location of the terms is not controlling, a reader of the en‐

tire contract will observe that rather than dovetailing with one another, 
the  forum  selection  clause and  the arbitration  provision  contradict  each 
other from distant and in fact distinct parts of the parties’ contract. 

   
14 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 15 of 16

“cannot be harmonized with the similarly expansive arbitra‐
tion  provision”).  After  all,  “different  contractual  language 
should be read differently.” Id. at 919. 
Because the forum selection clause and the arbitration provi‐
sion conflict, this part of the contract must be read favorably 
to  the  non‐drafting  party.  See  Miss.  Transp.  Com’n  v.  Ronald 
Adams Contractor, Inc., 753 So. 2d 1077, 1085 (Miss. 2000). But‐
ler Snow Advisory Services drafted this contract. In this case, 
therefore, the conflict in terms must be read favorably to the 
receiver. See Mastrobuono, 514 U.S. at 63. 
The receiver prefers to litigate in court rather than submit this 
dispute  to  arbitration.  Accordingly,  the  forum  selection 
clause, and not the arbitration provision, shall apply to the re‐
ceiver’s claims against the Butler Snow parties. 
C.  Other Arguments 
In the alternative, the receiver presents another textual argu‐
ment—that special terms control boilerplate provisions. See, 
e.g., Travelers Prop. Cas. Co. of Am. v. Federated Rural Elec. Ins. 
Exch.,  No.  3:08‐CV‐83‐DPJ‐JC,  2009  WL  2900027,  at  *3  (S.D. 
Miss. Sept. 3, 2009) (“As a matter of general construction, spe‐
cial  provisions  supersede  generic.  Furthermore,  Mississippi 
law is clear that ‘special provisions inserted in a contract gov‐
ern over boilerplate provisions.’”). 
The parties have also briefed whether the receiver has rejected 
the arbitration clause and “whether any federal statute or pol‐
icy renders the claims nonarbitrable.” Will‐Drill, 352 F.3d at 
214 (quotation marks and citation omitted). The receiver con‐
tends that if the contract is not ambiguous, either she or the 
Court may reject the arbitration provision as inconsistent with 
the  purpose  of  a  federal  equity  receivership.  See  Janvey  v. 

   
15 
Case 3:18-cv-00866-CWR-FKB Document 48 Filed 09/12/19 Page 16 of 16

Alguire,  No.  3:09‐CV‐0724‐N,  2014  WL  12654910,  at  *21–22 

(N.D. Tex. July 30, 2014). The Butler Snow parties disagree. 
Given the contract and the applicable law, the Court need not 
reach either of these arguments today. 
IV.   Conclusion 
The  motion  to  compel  arbitration  is  denied.  The  receiver’s 
claims  against  the  Butler  Snow  parties  shall  remain  stayed 
pending the movants’ interlocutory appeal. 
SO ORDERED, this the 12th day of September, 2019. 
s/ CARLTON W. REEVES  
United States District Judge 

   
16 
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 1 of 19

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY PLAINTIFF

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER
PROPERTIES, LLC

vs. CASE NO. 3:18-cv-866-CWR-FKB

BUTLER SNOW LLP; BUTLER SNOW DEFENDANTS

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT

REPLY BRIEF IN SUPPORT OF MOTION TO DISMISS FILED BY ALEXANDER

SEAWRIGHT, LLC, BRENT ALEXANDER, AND JON SEAWRIGHT

Setting aside the rhetoric in the Receiver’s Response, an analysis of the legal elements of

the Receiver’s claims against the Alexander Seawright Defendants1 in Counts I, II, III, V, and VI

and the Complaint’s allegations related to those claims demonstrates that the Complaint fails to

state a claim for which relief could be granted. Accordingly, the Alexander Seawright

Defendants respectfully submit that the Court should dismiss those claims in the Complaint.

First, the Receiver has not adequately pled the knowledge element required to state a

claim under Counts I (civil conspiracy), II (civil aiding and abetting), V (RICO), and VI (joint

venture). Instead, the Receiver clings solely to conclusory allegations that the Alexander

Seawright Defendants: (1) “knew or should have known that Madison Timber was a Ponzi

scheme” based on “numerous glaring red flags”; and (2) “falsely represented that they personally

1
Brent Alexander (“Alexander”), Jon Seawright (“Seawright”), and Alexander Seawright, LLC
(“Alexander Seawright”) will be collectively referred to as the “Alexander Seawright Defendants.”
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 2 of 19

inspected the timber and ‘mill contracts’ underlying each Madison Timber investment.” Resp. at

3 (citing Comp. at ¶¶ 129, 94-100, 86-88). Even if true—and they are not—those allegations are

insufficient as a matter of law. Second, the Complaint does not state any duty the Alexander

Seawright Defendants allegedly owed to Lamar Adams or Madison Timber, as required for

negligence, gross negligence, or recklessness claims under Count III. Third, because the

Receiver stands in the shoes of Adams and Madison Timber, the Court should dismiss Counts I,

II, III, V, and VI pursuant to the doctrine of in pari delicto. And finally, the Receiver’s claims

against Alexander and Seawright individually should be dismissed because the Receiver has not

sufficiently alleged facts to allow her to pierce Alexander Seawright’s LLC veil.2

ARGUMENT

I. Counts I, II, III, V, and VI of the Complaint Do Not State a Claim upon which
Relief may be Granted against the Alexander Seawright Defendants.

“‘Dismissal is proper if the complaint lacks an allegation regarding a required element

necessary to obtain relief.’” Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995)

(quoting 2A Moore’s Federal Practice ¶ 12.07 at 12–91) (internal brackets omitted). And the

Court should “‘accept all well-pleaded facts as true’” but should not “‘accept as true conclusory

allegations or unwarranted deductions of fact.’” Great Plains Trust Co. v. Morgan Stanley Dean

& Witter & Co., 313 F.3d 305, 312-13 (5th Cir. 2002) (emphasis added) (quoting Jones v.

Greninger, 188 F.3d 322, 324 (5th Cir. 1999); Collins v. Morgan Stanley Dean Witter, 224 F.3d

496, 498 (5th Cir. 2000)). “When considering a motion to dismiss for failure to state a claim . . .

conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice

to prevent a motion to dismiss.” Fernandez–Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284

2
The Alexander Seawright Defendants have produced to the Receiver in good faith all documents,
emails, correspondence, text messages, and other information in their possession that might be relevant to
her claims. See Compl. ¶¶ 70, 71, 75, 77. If facts existed that would allow the Receiver to cure the
Complaint’s defects, she would have alleged them. Accordingly, dismissal should be with prejudice.

2
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 3 of 19

(5th Cir. 1993)). A court should not accept “conclusory allegations, unwarranted factual

inferences, or legal conclusions.” Ferrer v. Chevron Corp., 484 F.3d 776, 780 (5th Cir. 2007).

A. The Court should dismiss Counts I, II, V, and VI because the Receiver has
not sufficiently pled the required element that the Alexander Seawright
Defendants knew Madison Timber was a Ponzi scheme.

Actual knowledge of Adams’s fraud is a required element of the Receiver’s claims in

Counts I, II, V, and VI. The Receiver states that what the Alexander Seawright Defendants

“mean by their argument is they do not believe the Receiver will ever obtain direct evidence of

their actual knowledge.” Resp. at 3. Not so. What the Alexander Seawright Defendants said and

mean is that the Receiver failed sufficiently to plead facts demonstrating that they knew Madison

Timber was a Ponzi scheme, which is a required element of her claims. To support the

knowledge element for each of her claims, the Receiver cites allegations from the Complaint that

the Alexander Seawright Defendants (1) “knew or should have known that Madison Timber was

a Ponzi scheme” based on purported “red flags”; and (2) “falsely represented that they personally

inspected the timber and ‘mill contracts’ underlying each Madison Timber investment.” See

Resp. at 6-10, 17-18. Neither allegation is sufficient.

First, the allegation that the Alexander Seawright Defendants “knew or should have

known” Madison Timber was a Ponzi scheme due to purported “red flags” is the epitome of a

“legal conclusion masquerading as factual conclusions” which should not “suffice to prevent a

motion to dismiss.” Fernandez–Montes, 987 F.2d at 284.3 In fact, the Complaint contains zero

facts establishing the Alexander Seawright Defendants actually were aware Adams was

operating a Ponzi scheme. As for the Receiver’s claim that they should have known of the Ponzi

3
As Baker Donelson pointed out, “[t]hat the Receiver felt obliged to hedge her claim (“or should have
known”) underscores that she cannot in good faith allege the required actual knowledge.” Doc. 36 at 10
(citing, among others, Litson-Gruenber v. JPMorgan Chase & Co., 2009 WL 4884426, at *2 (N.D. Tex.
Dec. 16, 2009) (dismissing claims in a Ponzi-scheme case because “pleading based on an allegation the
defendant ‘knew or should have known’ is insufficient” for actual knowledge)).

3
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 4 of 19

scheme, the Complaint’s “red flags” allegations are merely recitations of what the Receiver

thinks the Alexander Seawright Defendants should have done in dealing with Adams. See Comp.

at ¶ 95 (“Neither Alexander nor Seawright, nor anyone at Baker Donelson, ever called a

landowner or checked a tract’s title.”); ¶ 96 (“Neither Alexander nor Seawright, nor anyone at

Baker Donelson, ever called a mill.”); ¶ 97 (“[N]either Alexander nor Seawright, nor anyone at

Baker Donelson, questioned this requirement [to abstain from recording deeds].”); ¶ 98 (“The

profit that Adams promised . . . should have been a glaring warning sign”); ¶ 99 (“Neither

Alexander nor Seawright, nor anyone at Baker Donelson, ever evaluated the investment in light

of such [market] information.”); ¶ 100 (“Seawright blindly passed on to investors the dubious

explanation that mills shut down in December for OSHA inspections . . . .”). Those allegations

do not set forth facts demonstrating the required knowledge element, and the statement that the

Alexander Seawright Defendants “should have known” is nothing more than a legal conclusion.

Second, the Receiver’s reliance on allegations in Complaint paragraphs 86-88 that

Alexander and Seawright falsely “led investors to believe” that they would “personally inspect”

the timber and mill agreements as support for having pled the required knowledge element is

puzzling at best. Even if the allegations in those paragraphs are accepted as true—and they are

not because they are not well pled—they do not in any way demonstrate that Alexander and

Seawright were aware Adams was operating a Ponzi scheme.4 And assuming arguendo that the

4
Moreover, the allegations in Complaint paragraphs 86-88 are “unwarranted factual inferences.” Ferrer,
484 F.3d at 780. The Complaint cites a March 5, 2017 Equity Term Sheet to support the allegation that
“Alexander and Seawright” agreed to inspect the timber and mill agreements. See Resp. at 8-9. However,
the Equity Term Sheet defines “Company” as Alexander Seawright Timber Fund I, LLC, a separate legal
entity that is not a defendant in this action, not Alexander and Seawright individually. A copy of the
March 5, 2017 Equity Term Sheet is attached as Exhibit A. “Documents attached to a motion to dismiss
that are ‘referred to in the plaintiff’s complaint and . . . central to [plaintiff’s] claim,’ however, are
considered part of the pleadings for purposes of a motion under 12(b)(6).” Greene v. Indymac Bank, FSB,
2012 WL 5414097, at *2 (S.D. Miss. Nov. 6, 2012) (quoting Causey v. Sewell Cadillac-Chevrolet, Inc.,
394 F.3d 285, 288 (5th Cir. 2004)). The Receiver agrees. See Resp. at 14, n.34.

4
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 5 of 19

Alexander Seawright Defendants were obligated to inspect the timber and mill agreements, the

false allegation that they failed to do so does not equate to an allegation that they allegedly failed

to do so because they knew Adams was operating a Ponzi scheme. Thus, the Complaint fails to

sufficiently plead that the Alexander Seawright Defendants knew Madison Timber was a Ponzi

scheme, and the Court therefore should dismiss Counts I, II, V, and VI.

1. Failure to state a claim for “civil conspiracy” (Count I)

The Receiver cites Bradley v. Kelley Bros. Contractors, Inc., 117 So. 3d 331, 339 (Miss.

Ct. App. 2013), for the statement that an “agreement to conspire . . . ‘may be express, implied, or

based on evidence of a course of conduct.’” Resp. at 9. The Receiver conveniently ignores the

court’s clarification of that point: “For a civil conspiracy to arise, the alleged confederates must

be aware of the fraud or wrongful conduct at the beginning of the agreement.” Bradley, 117 So.

3d at 339 (citing 16 Am. Jur. 2d Conspiracy § 51); see also Midwest Feeders, Inc. v. Bank of

Franklin, 886 F.3d 507, 520 (5th Cir. 2018) (civil conspiracy requires proof that conspirator

“knew of [the] fraudulent scheme”). Thus, even if an agreement could be shown by a course of

conduct to sufficiently plead a claim for civil conspiracy, Mississippi law requires facts

establishing knowledge of the fraud or wrongful conduct at the beginning of the alleged

agreement.5 The Receiver has failed to plead a claim in that regard.6

5
The Receiver’s allegations show the Alexander Seawright Defendants attempted to evaluate whether
“Lamar is a fraud” before doing business with him, but there was “no evidence of that.” Compl. at ¶ 70.
6
The Receiver cites Rotstain v. Trustmark Nat’l Bank, 2015 WL 13034513, at *11 (N.D. Tex. Apr. 21,
2015), for the proposition that “[f]acts supporting the ‘substantial assistance’ prong of an aiding and
abetting claim also support a showing of ‘an overt act in furtherance of a [Ponzi scheme] conspiracy.’”
Resp. at 9-10. That is beside the point, however, because the Receiver has not alleged facts to support the
required element of knowledge. The Receiver cites Aetna Ins. Co. v. Robertson, 94 So. 7, 22 (Miss.
1922), for the proposition that a conspiracy may lie where there is a “tacit understanding between the
conspirators.” Id. But the Receiver again ignores binding Mississippi law that requires her to sufficiently
plead allegations of knowledge and awareness of the fraud at the beginning of the “tacit understanding.”

5
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 6 of 19

Moreover, the Receiver failed to plead that Adams and the Alexander Seawright

Defendants had a “meeting of the minds” as to “the object or course of action” to commit an

“underlying tort which could support a claim for conspiracy,” as is required by Mississippi law.

Fikes v. Wal-Mart Stores, Inc., 813 F. Supp. 2d 815, 822 (N.D. Miss. 2011). In addition to failing

to satisfy the knowledge element, the Receiver also failed to allege facts establishing an

“underlying tort” committed by the Alexander Seawright Defendants. Although the Alexander

Seawright Defendants pointed out this legal insufficiency in their initial brief, the Receiver

declined to address it in her Response. For these reasons, the Court should dismiss Count I.

2. Failure to state a claim for “aiding and abetting” (Count II)

The Receiver admits that Mississippi courts have never recognized a civil cause of action

for aiding and abetting. Resp. at 4. And the Receiver does not dispute the Fifth Circuit’s

instruction that “a federal court exceeds the bounds of its legitimacy in fashioning novel causes

of action not yet recognized by the state courts.” In re DePuy Orthopaedics, Inc., Pinnacle Hip

Implant Prods. Liability Lit., 888 F.3d 753, 781-782 (5th Cir. 2018). Instead, the Receiver

attempts to distinguish In re DePuy Orthopaedics on the basis that “the Texas Supreme Court

had explicitly stated that it ‘has not expressly decided whether Texas recognizes a cause of

action for aiding and abetting.’” Resp. at 5, n.14 (quoting DePuy, 888 F.3d at 781). Needless to

say, the Receiver clings to a distinction without a difference—the Receiver admits that the

Mississippi Supreme Court has never recognized the civil aiding and abetting cause of action,

and it would not make that fact truer if the Court merely stated as much in an opinion.

Further, even if Mississippi courts had recognized a claim for civil aiding and abetting,

the Receiver concedes that to state such a claim she must sufficiently plead “know[ledge] that

the other’s conduct constitutes a breach of duty . . . .” Resp. at 5 (quoting Restatement (Second)

6
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 7 of 19

of Torts § 876(b)). As demonstrated at length above, the allegations in the Receiver’s Complaint

are legally insufficient to satisfy the required element of knowledge.7

The Receiver cites only Janvey v. Proskauer Rose LLP in support of her position that

“red flags” support “knowledge for aiding and abetting purposes.” Resp. at 8 (citing 2015 WL

11121540, at *5 (N.D. Tex. June 23, 2015)). In Proskauer Rose, however, the court found the

plaintiff “sufficiently alleged that [defendant—an attorney hired to defend the Ponzi scheme

operator in an SEC enforcement action—]was aware that Stanford was engaged in a fraudulent

enterprise, and that the enterprise was very possibly a Ponzi scheme.” 2015 WL 11121540 at *5.

In making its finding, the court noted: (1) defendant became aware that Antiguan regulators

were not independent from Stanford; (2) defendant was aware Stanford was offering unrealistic

rates of return on his products; and (3) defendant was aware the unrealistic rates of return

supported the SEC’s belief that Stanford was operating a fraudulent scheme. Id. Here, the

Complaint sets forth no facts demonstrating that the Alexander and Seawright Defendants

actually became aware of facts to show Adams was conducting a fraudulent scheme. And unlike

in Proskauer Rose, the Complaint in this case contains no factual allegations that before Adams

turned himself into authorities, the Alexander Seawright Defendants were aware that the SEC

believed Adams was operating a fraudulent scheme.8 Thus, the Court should dismiss Count II.

7
Further, as Baker Donelson states in its Reply, that the Alexander Seawright Defendants might have
known “that Adams owed Madison Timber fiduciary duties” does not establish that they knew Adams
was breaching that duty by operating a Ponzi scheme. Doc. 36 at 12; Resp. at 5-6.
8
As asserted by Baker Donelson in its Reply brief, “red flags” do not support an allegation of actual
knowledge. Doc. 36 at 10-11 (citing Rosner v. Bank of China, 2008 WL 5416380, at *6 (S.D.N.Y. Dec.
18, 2008) (“courts overwhelmingly recognize” that “actual knowledge of a fraud” is not established
“based on allegations of . . . ignorance of obvious ‘red flags’”), aff’d, 349 F. App’x 637 (2d Cir. 2009);
Honig v. Kornfeld, 339 F. Supp. 3d 1323, 1344 (S.D. Fla. 2018) (“red flags fail to establish actual
knowledge”); Chemtex, LLC v. St. Anthony Enterprises, Inc., 490 F. Supp. 2d 536, 547 (S.D.N.Y. 2007)
(“even alleged ignorance of obvious warning signs of fraud will not suffice to adequately allege actual
knowledge”); In re Int’l Mgmt. Assocs., LLC, 563 B.R. 393, 420 (Bankr. N.D. Ga. 2017) (“allegations of
‘red flags’ were insufficient to establish the bank’s actual knowledge of existence of the Ponzi scheme”)).

7
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3. Failure to state a RICO claim (Count V)

As asserted in the Alexander Seawright Defendants’ initial brief, to state a claim that they

violated Mississippi’s Racketeer Influenced and Corrupt Organization (“RICO”) Act, the

Receiver must sufficiently plead that they “at least kn[e]w of the conspiracy and ‘adopt[ed] the

goal of furthering or facilitating the criminal endeavor.’” Chaney v. Dreyfus Serv. Corp., 595

F.3d 219, 239 (5th Cir. 2010) (quoting Salinas v. United States, 522 U.S. 52, 65 (1997)). The

Receiver states that the Alexander Seawright Defendants should have recognized the “red flags”

as evidence of the Ponzi scheme because of their respective professions. But that is, again, a

legal conclusion, and moreover, “[n]either awareness of some probability of illegal conduct nor a

showing the defendant should have known is enough” to establish the element of knowledge. Id.

at 239-40. The Complaint sets forth no facts whatsoever showing that the Alexander Seawright

Defendants, with actual knowledge of the Ponzi scheme, adopted “the goal of furthering or

facilitating the criminal behavior.” Id. Accordingly, the Court should dismiss Count V.

4. Failure to state a claim for “joint venture liability” (Count VI)

As the Alexander Seawright Defendants demonstrated in their initial brief, the Complaint

fails to plead a claim for “joint venture liability” because it sets forth no factual allegations

regarding the alleged “partnership” or “joint venture”9other than to state that Madison Timber

paid Alexander Seawright loan-origination fees. This is insufficient under Mississippi law to

state a claim for joint venture liability. 10

9
“A partnership and a joint venture are identical ‘except the latter has limited and circumscribed
boundaries.’” Carlson v. Brabham, 199 So. 3d 735, 742-43 (Miss. Ct. App. 2016) (quoting Hults v.
Tillman, 480 So. 2d 1134, 1141 (Miss. 1985)). “‘A joint venture is a form of contract, and [is] governed
by contract law.’” Id. Here, as in Carlson, the “parties did not have an agreement recognizing the
existence of a joint venture, written or otherwise.” Id. And such is not alleged.
10
The Mississippi Uniform Partnership Act defines “partnership” as “an association of two (2) or more
persons to carry on as co-owners a business for profit . . . .” Miss. Code Ann. § 79-13-101(8); see also

8
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The Receiver’s reliance on Smith v. Redd does not support her position. See Resp. at 13-

16 (citing 593 So. 2d 989 (Miss. 1991)). In that case, Smith sought to have the court declare a

partnership existed with Redd in a sawmill operation. Id. at 991. Smith and another gentleman,

Lea, were approached by Redd about “going into business together.” Id. Smith and Lea “joined

Redd at the sawmill” and “brought all of their logging equipment . . . to the mill site and began

working to get the mill operating.” Id. Evidence was presented regarding: ownership percentages

held by each of the men; that each had the ability to make decisions at the mill and hire and fire

employees; that they jointly discussed business decisions; that each had check-signing authority;

that money received by the mill was split among them; and that Redd offered Smith a lump-sum

amount to dissolve. Id. at 992. Clearly, the Receiver has not set forth similar allegations in the

Complaint to establish a “joint venture” or “partnership.” Finding that a partnership existed in

Smith, the Mississippi Supreme Court held: “Generally, a partnership exists when two or more

persons join together with their money, goods, labor, or skill for purposes of carrying on a trade,

profession or business with a community interest in the profits and losses.” Id. at 993-94

(citations omitted). By contrast, the Complaint does not sufficiently plead that the Alexander

Seawright Defendants joined with Adams to “carry on the business” of Madison Timber, and it

does not allege they had a “community interest” in Madison Timber’s “profits and losses.”

The Receiver agrees the applicable considerations in determining whether a partnership

exists are: “‘(1) the intent of the parties, (2) the control question, and (3) profit sharing.’” Walker

v. Williamson, 2016 WL 2771792, at *2 (S.D. Miss. May 12, 2016) (quoting Smith, 593 So. 2d at

994). With respect to the first consideration, “the parties must have . . . expressed an intention to

Miss. Code Ann. § 79-13-202(a). Again, Adams and the Alexander Seawright Defendants did not “carry
on as co-owners a business for profit.” Alexander Seawright and Madison Timber are separately formed
limited liability companies; not a single business for profit. The Alexander Seawright Defendants
coordinated loans to be made from Alexander Seawright Timber Fund I, LLC to Madison Timber.

9
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 10 of 19

form a partnership.” Smith, 593 So. 2d at 994. In Smith, the Court found “intent to form a

partnership” because Smith brought logging assets into the sawmill business, prepared the plant

site without remuneration, and ran the sawmill business. Id. at 994. The Complaint sets forth no

similar facts to show the Alexander Seawright Defendants intended to carry on a jointly-owned

business with Adams. The Complaint merely concludes “Defendants Alexander Seawright,

Alexander, and Seawright formed a joint venture with Adams and Madison timber, as evidenced

by their stated intent to form a fund to invest other people’s money in Madison Timber and to

split the ‘profits’ with Adams.” Comp. at ¶ 161. It is true the Alexander Seawright Defendants

coordinated loans from Alexander Seawright Timber Fund I, LLC to Madison Timber, but

coordinating loans from one legal entity to another is not “carry[ing] on as co-owners a business

for profit,” Miss. Code Ann. § 79-13-101(8), and it is not “join[ing] together with their money,

goods, labor, or skill for purposes of carrying on a trade, profession or business with a

community interest in the profits and losses,” Smith, 593 So. 2d at 993.11

Second, the Receiver states “the ‘control question’ asks whether one had any control over

the joint venture’s business.” Resp. at 14 (emphasis added). That is a misstatement of the law.

The Receiver again cites Smith v. Redd, but that case expressly states: “Participation in the

control of the business is indicative of whether a partnership exists.” 593 So. 2d at 994 (emphasis

added). In Smith, the business was the sawmill, where “Redd . . . handle[d] the financial matters .

. . Lea and Smith . . . direct[ed] the sawmill operations . . . [and a]ll parties made business

decisions.” Id. at 995. Here, “the business” is Madison Timber’s purported timber business, not

11
Under the Receiver’s approach, every lender in the country would be deemed a legal “partner” or
member of a “joint venture” with any person or entity to which it made a loan. That obviously is not the
law. The Receiver states that the factual circumstances from which the Court might infer intent are “too
numerous to summarize.” Resp. at 14. The Receiver cites only ¶¶ 161, 35, and 72-74. Paragraph 161
states a legal conclusion; paragraph 35 addresses Adams conduct related to “individual investors;” and
paragraphs 72-74 address the loan-origination fees paid by Madison Timber to Alexander Seawright,
which are not representative of “profits and losses” required to establish a joint venture.

10
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the Alexander Seawright Defendants’ separate lending business, which itself became a victim of

the Ponzi scheme. The Complaint fails to plead that the Alexander Seawright Defendants

exercised any control whatsoever over Madison Timber.12

Lastly, the Receiver argues that the “Mississippi Uniform Partnership Act provides that

the receipt of profits is prima facie evidence that a person is a partner in a business.” Resp. at 16

(purporting to cite “Miss. Code Ann. § 79-12-13(4)”). That is incorrect. The Receiver mistakenly

cites to a section of the Mississippi Code that has been repealed since 2005. Instead, the

Mississippi Uniform Partnership Act actually makes clear that Madison Timber’s payment of

loan-origination fees to the Alexander Seawright Defendants does not create a joint venture:

A person who receives a share of the profits of a business is presumed to be a

partner in the business, unless the profits were received in payment . . . [f]or
services as an independent contractor . . . [or] [o]f interest or other charge on a
loan, even if the amount of payment varies with the profits of the business . . . .

Miss. Code. Ann. § 79-13-202(c)(3). The Alexander Seawright Defendants cited this statutory

authority in their initial brief, but the Receiver did not address it. And in Smith v. Redd, the

Court’s discussion of “profit sharing” makes clear the pertinent consideration is whether partners

shared “profits and losses.” 593 So. 2d at 994. The Complaint does not even allege the

Alexander Seawright Defendants shared in Madison Timber’s “profits and losses.”13

Accordingly, the Court should dismiss Count VI.

12
The Receiver all but acknowledges the weak footing of her “control” argument, citing Century 21 Deep
S. Props., Ltd. v. Keys, 652 So. 2d 707, 715 (Miss. 1995), for the proposition that “lack of control is not
enough by itself to disprove partnership.”
13
In Walker, the court found the plaintiff failed to plead sufficient facts to show defendants intended to
establish a joint venture or controlled the relevant actions. 2016 WL 2771792, at *3-4. The court found
that payment of fees did not establish a larger agreement to split profits, but even if the shared-profits
element was established, it would not have been enough to overcome lack of intent and control. Id.

11
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B. The Complaint does not state a claim for “Recklessness,” “Gross

Negligence,” or “Negligence” (Count III).

Breach of a duty owed by the Alexander Seawright Defendants to Adams and Madison

Timber is a required element of the Receiver’s claims in Count III. See Rein v. Benchmark

Constr. Co., 865 So. 2d 1134, 1143 (Miss. 2004). Whether a duty exists is a question of law for

the Court to decide. Id. “In every instance, before negligence can be predicated of a given act,

back of the act must be sought and found a duty to the individual complaining, the observance of

which would have averted or avoided the injury.” Palsgraf v. Long Island R. Co., 162 N.E. 99,

99-100 (N.Y. 1928) (citations and internal quotation marks omitted). Here, the Complaint does

not sufficiently plead any duty owed by the Alexander Seawright Defendants to Adams and

Madison Timber, “the observance of which would have averted or avoided” the significant

damages and injury caused by Adams’s operation of a Ponzi scheme. Id.

In her Response, the Receiver attempts to argue for the first time that a “statutory duty”

allegedly arises from the “joint venture partnership” that she claims exists between Adams and

the Alexander Seawright Defendants. Resp. at 11. According to the Receiver, this satisfies the

“duty” element of her claims under Count III. As shown above, however, no such “joint venture

partnership” exists, and the Complaint therefore does not sufficiently plead a “statutory duty.”

The Receiver also argues “as a general proposition, ‘all individuals owe a duty to

exercise reasonable care to avoid foreseeable injury to others.’” Resp. at 11-12 (citing Fed. Sav.

& Loan Ins. Co. v. Tex. Real Estate Counselors, Inc., 955 F.2d 261, 265 (5th Cir. 1992)).14

Under Mississippi law, no duty is owed to unforeseeable plaintiffs. Rein, 865 So. 2d at 1143. The

foreseeability of injury to Adams and Madison Timber, in whose shoes the Receiver stands, is a

function of “duty” and is therefore a question of law for the Court. Id. (“‘[t]he important

14
The case the Receiver cites is a Fifth Circuit case analyzing a professional negligence claim under
Texas law. 955 F.2d at 265. Moreover, the language the Receiver selectively quotes is dicta. Id.

12
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component of the existence of the duty is that the injury is reasonably foreseeable, and thus it is

appropriate for the trial judge to decide’”) (emphasis omitted) (quoting Lyle v. Mladinich, 584

So. 2d 397, 399 (Miss. 1991)). “Under Mississippi law, for a person to be liable for another

person’s injury, the cause of an injury must be of such a character and done in such a situation

that the actor should have reasonably anticipated some injury as a probable result.” Id. at 1144

(citing Mauney v. Gulf Ref. Co., 9 So. 2d 780, 781 (Miss. 1942)). The Complaint fails to plead

facts to show that the Alexander Seawright Defendants “should have reasonably anticipated

some injury as a probable result” of the loans they facilitated from Alexander Seawright Timber

Fund I, LLC to Madison Timber. Id.

“Negligence is not actionable unless it involves the invasion of a legally protected

interest, the violation of a right. Proof of negligence in the air, so to speak, will not do.”

Palsgraf, 162 N.E. at 99 (citation and internal quotation marks omitted) (emphasis added).15 The

Receiver separately claims that the purported “red flags” show what amounts to “negligence in

the air,” but that is not enough. See Comp. at ¶ 138. And the Receiver cannot square her

statement that “a reasonable person in the same or similar circumstances would have discovered

Adams’s fraud” with her assertions that Adams “defrauded hundreds” of others in similar

circumstances. Because the Complaint does not sufficiently plead a duty owed by the Alexander

Seawright Defendants to Adams and Madison Timber, the Court should dismiss Count III.

15
As noted by Baker Donelson, the law does not impose duties on citizens to stop criminal conduct. See,
e.g., Cuyler v. United States, 362 F.3d 949, 954 (7th Cir. 2004) (“no common law duty to warn or
rescue”). And as the perpetrators of the criminal conduct, Adams and Madison Timber certainly cannot
claim a duty owed to them. See, e.g., Oden v. Pepsi Cola Bottling Co. of Decatur, Inc., 621 So. 2d 953,
954-55 (Ala. 1993) (thief cannot recover in tort for injury while stealing); Amato v. United States, 549 F.
Supp. 863, 867 (D.N.J. 1982) (criminal cannot recover for injury during robbery on theory that “the
government was negligent in not arresting [him] sooner”), aff’d, 729 F.2d 1445 (3d Cir. 1984).

13
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II. The Doctrine of In Pari Delicto Bars the Receiver’s Claims against the Alexander
Seawright Defendants in Counts I, II, III, V, and VI.

The Receiver acknowledges that the doctrine of in pari delicto is an “equitable,

affirmative defense” that prevents a tortfeasor from recovering against an alleged joint tortfeasor.

Resp. at 21 (citing Sneed v. Ford Motor Co., 735 So. 2d 306, 308 (Miss. 1999)). As stated in the

Alexander Seawright Defendants’ initial brief, the in pari delicto doctrine “applies where the

plaintiff is equally or more culpable than the defendant,” and the in pari delicto defense should

bar the Receiver’s tort claims because it is apparent from “the face of the complaint” that Adams

and Madison Timber, in whose shoes the Receiver stands, were far more culpable than the

Alexander Seawright Defendants. See Latham v. Johnson, 2018 WL 3121362, at *10 (Miss. Ct.

App. June 26, 2018) (citing 27A Am. Jur. 2d, Equity § 103, p. 641 (2008)), cert. denied 260 So.

3d 798 (Miss. 2019); Alexander v. Verizon Wireless Servs., 875 F.3d 243, 249 (5th Cir. 2017).

The Receiver’s objection to this Court’s application of the in pari delicto doctrine is

based on the Fifth Circuit’s interpretation of Texas law in Jones v. Wells Fargo Bank, N.A., 666

F.3d 955 (5th Cir. 2012). The Receiver claims the “exception” to the in pari delicto doctrine

recognized in Jones “allows a receiver to assert tort claims against professionals even though she

has stepped into the wrongdoer’s shoes.” Resp. at 21. The Receiver’s analysis is an

overstatement of Jones and its alleged application to the facts of this case. Id. at 21-24.

In Jones, the fraudster, Wahab, was just one of several owners of W Financial, the

business from which the fraudster stole funds.16 666 F.3d at 958. Jones, the receiver for W

Financial (but not Wahab), filed conversion and breach-of-contract claims against Wells Fargo to

16
Wahab withdrew $1,701,250 from W Financial’s account at a Wells Fargo branch in Houston, Texas.
Wahab used the funds to buy a cashier’s check payable to another group of people, but Wahab later
returned to a different Wells Fargo branch in Texas and deposited the cashier’s check into the Wells
Fargo account of a separate entity of which Wahab was the managing member and only authorized signer
on the account. Wells Fargo stamped the back of the check as follows: “CREDITED TO THE
ACCOUNT OF WITHIN NAMED PAYEE LACK OF ENDORSEMENT GUARANTEED WELLS
FARGO BANK, N.A.” See 666 F.3d at 958.

14
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recover amounts Wahab stole from W Financial. Wells Fargo asserted the in pari delicto defense

because Wahab was “primarily at fault for the conversion of the cashier’s check.” Id. at 965. The

Fifth Circuit affirmed that in pari delicto was inapplicable there because “Wahab’s actions could

not be rightfully imputed to W Financial because Wahab’s actions were taken against the interest

and authorization of the principal.” Id. (internal quotation marks omitted). The Court elaborated:

Wells Fargo’s in pari delicto argument fails to acknowledge the important

distinction between W Financial as a corporation and Wahab as an individual.
While it is undisputed that Wahab played a central role in the conversion of the
cashier’s check, W Financial is composed of more than Wahab or the other
individuals who operated the company. . . . To conclude that W Financial stands
in pari delicto simply because Wahab is a wrongdoer ignores the fundamental
distinction between a corporation and its officers.

Id. at 965-66.

But here, the Complaint alleges no distinction between Adams and Madison Timber, and

none exists; there is no allegation that Madison Timber is “composed of more than” Adams. See

Comp. at 2 (alleging Madison Timber was one of “his companies”); see also 3:18-cr-00088-

CWR-LRA at Doc. 1 (Bill of Information, stating: “In 2012, Adams formed and was the sole

owner of Madison Timber Properties, LLC”); 3:18-cv-00252-CWR-FKB at Doc. 3 (Complaint,

stating: “Arthur Lamar Adams . . . through his wholly-owned company, Madison Timber

Properties, LLC . . . committed securities fraud”). Thus, Adams’s actions should be “rightfully

imputed to” Madison Timber, and the Court should not follow the Jones decision for this case.17

Also in Jones, the receiver was appointed to pursue actions for the benefit of both W

Financial and all innocent investors who may have been victims of the fraud. See 666 F.3d at 966

17
See also Jones, 666 F.3d at 966-67 (citing Lewis v. Davis, 199 S.W.2d 146, 151 (Tex. 1947) for the
proposition that application of the in pari delicto doctrine “depends upon the peculiar facts and equities of
the case, and the answer usually given is that which it is thought will better serve public policy”). In
Jones, the court declined to apply in pari delicto because it would have the consequence of preventing
other owners of W Financial from recovering against Wells Fargo Bank. Id. at 958. Here, Adams is the
only owner of Madison Timber, and thus there are no “policy considerations” or “equitable
considerations” that should prevent the Court from applying in pari delicto.

15
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(noting receiver “brought this suit on behalf of W Financial . . . and other innocent victims”

which allowed receiver to bring claims that W Financial would not be permitted to bring). See

also Doc. 36 at Ex. C at 9 (receiver in Jones appointed as “representative of such investors”). In

this case, however, the Receiver has been appointed only to pursue claims for Adams and

Madison Timber. See 3:18-cv-252 at Doc. 33. Pursuant to the Court’s Order, the Receiver has no

standing to bring claims for any person or entity other than Adams and Madison Timber.18

Throughout her pleadings, the Receiver relies on principles of “equity” and “public

policy.” See, e.g., Resp. at 20, 23; Doc. 26 at 2, 13-14. Yet the Receiver ignores equity and

policy for her argument that she, while standing in the shoes of Adams and Madison Timber,

should be able to proceed with tort claims against the Alexander Seawright Defendants. The

Receiver claims there is “no public interest in” applying in pari delicto, but that is wrong. The

Mississippi public is well-served by applying established law that prevents joint tortfeasors from

suing one another for contribution. Standing in Adams’s shoes, the Receiver should not be able

to bring a negligence claim against those she alleges were somehow involved in Adams’s Ponzi

scheme. Accordingly, the Court should dismiss Counts I, II, III, V, and VI against the Alexander

Seawright Defendants pursuant to the doctrine of in pari delicto.

III. The Receiver Cannot Pierce the Limited Liability Company Veil of Alexander
Seawright to hold Brent Alexander and Jon Seawright Personally Liable.

For her argument that the Court should pierce the limited liability company veil of

Alexander Seawright, the Receiver relies on Jordan v. Maxfield & Oberton Holdings, LLC, in

which this Court employed an “alter ego” analysis for a “personal jurisdiction inquiry,” not to

determine whether to pierce the veil. 173 F. Supp. 3d 355, 360 n.5 (S.D. Miss. 2016). In fact, this

18
The Alexander Seawright Defendants hereby adopt, join, and incorporate the arguments set forth on
pages 13-15 of Baker Donelson’s Reply brief in support of its Motion to Dismiss, which further refute the
Receiver’s stated basis for opposing application of the in pari delicto defense.

16
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Court expressly acknowledged the “alter ego” analysis “is often discussed in conjunction with

piercing the corporate veil, which has a different application and analysis . . . .” Id. at 360

(emphasis added). This Court noted that, as opposed to the “alter ego” analysis, “[p]iercing the

corporate veil may initially look more rigid because it involves a three-part test . . . .’” Id. at 361

n.6 (emphasis added) (quoting Phillips v. MSM, Inc., 2015 WL 420327, at *9 (S.D. Miss. Feb. 2,

2015), where this Court cited the “three-part test for piercing the corporate veil” first announced

in Gray v. Edgewater Landing, Inc., 541 So. 2d 1044, 1047 (Miss. 1989)).19

As outlined in the Alexander Seawright Defendants’ initial brief, “the three-prong test for

piercing the veil of corporations, established in Gray v. Edgewater Landing, Inc. . . . is also the

appropriate test for piercing the veil of LLCs.” Rest. of Hattiesburg, LLC v. Hotel & Rest.

Supply, Inc., 84 So. 3d 32, 35 (Miss. Ct. App. 2012). Under the Gray test, a court may disregard

corporate formalities only if the plaintiff shows: “(a) some frustration of contractual expectations

regarding the party to whom he looked for performance; (b) the flagrant disregard of corporate

formalities by the defendant corporation and its principals; (c) a demonstration of fraud or other

equivalent misfeasance on the part of the corporate shareholder.” 541 So. 2d at 1047.

The Complaint asserts in conclusory fashion that “Defendants Alexander and Seawright

are liable for the acts of Alexander Seawright because they authorized or directed all acts of

Alexander Seawright” and “because the three are alter egos.” Comp. at ¶¶ 190, 191. In her

Response, the Receiver further concludes: “The complaint sufficiently alleges facts, described

herein, that if true would satisfy each prong of the test for piercing the corporate veil.” See Resp.

at 20. But the Receiver cites only paragraph 89 of the Complaint as purporting to contain such

19
Moreover, the Receiver cites Jordan to argue that failing to allow the Receiver to pursue her claims
against Alexander and Seawright individually “could sanction a fraud” because they “falsely represented
that they personally inspected the timber mill and ‘mill contracts’ underlying each Madison Timber
investment they sold.” Resp. at 20 (citing Comp. at ¶¶ 86-88). As made clear above, the Receiver is
mistaken in her assessment of the Equity Term Sheet on which she relies. See Ex. A.

17
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“facts,” and that paragraph states: “Between 2011 and April 2018, Alexander and Seawright

withdrew over $980,000 from the Alexander Seawright Timber Fund I, representing their

‘shares’ of investors’ returns. In addition, Adams separately paid them over $600,000

representing undisclosed ‘birddog fees.’” Comp. at ¶ 89. Even if those allegations were true—

and they are not—they do not amount to pleading that (a) Adams looked beyond the LLC for

performance; (b) Alexander and Seawright disregarded corporate formalities; or (c) the LLC was

created to further the fraud. Moreover, unlike in Jordan, the Complaint contains no allegations

that Alexander and Seawright commingled funds or otherwise improperly used the funds of

Alexander Seawright for personal objectives. Accordingly, the Complaint’s allegations are

insufficient to support the Receiver’s request to pierce Alexander Seawright’s limited liability

company veil, and the Court therefore should deny the Receiver’s request for “declaratory

judgment” against Alexander and Seawright individually.

CONCLUSION

For the reasons discussed above and in their initial brief, Jon Seawright, Brent Alexander,

and Alexander Seawright, LLC respectfully request that the Court dismiss Counts I, II, III, V,

and VI of the Complaint with prejudice and deny the Receiver’s request for declaratory judgment

against Alexander and Seawright individually.

Dated: March 22, 2019.

Respectfully submitted,

ALEXANDER SEAWRIGHT, LLC; BRENT

ALEXANDER; and JON SEAWRIGHT

By: /s/ R. David Kaufman

R. David Kaufman
One of Their Attorneys

18
 Case 3:18-cv-00866-CWR-FKB Document 40 Filed 03/22/19 Page 19 of 19

R. David Kaufman (MSB #3526)

Cody C. Bailey (MSB #103718)
BRUNINI, GRANTHAM, GROWER & HEWES, PLLC
The Pinnacle Building, Suite 100
190 East Capitol Street (39201)
Post Office Drawer 119
Jackson, Mississippi 39205
Telephone: (601) 948-3101
Facsimile: (601) 960-6902
dkaufman@brunini.com
cbailey@brunini.com

Counsel for Defendants Alexander Seawright, LLC,

Brent Alexander, and Jon Seawright

CERTIFICATE OF SERVICE
I, R. David Kaufman, hereby certify that on March 22, 2019, I caused the foregoing

pleading to be electronically filed with the Clerk of the Court using the CM/ECF system, which

will send notification of such filing to all counsel of record and registered participants.

/s/ R. David Kaufman

R. David Kaufman

19
 Case 3:18-cv-00866-CWR-FKB Document 40-1 Filed 03/22/19 Page 1 of 2
CONFIDENTIAL - NOT FOR DISTRIBUTION

EQUITY TERM SHEET

TIMBER RIGHTS
VARIOUS MISSISSIPPI COUNTIES
MARCH 5, 2017

Alexander Seawright, LLC is seeking co-investors (each an "Investor") to make an equity

investment (the "Investment") in connection with the financing of the acquisition of the Timber
Rights based on the terms and conditions outlined below:

Form of Investment: Class III Units of Alexander Seawright Timber Fund I,

LLC (the "Company")

Property: Cutting rights on tracts of land in various counties (the

"Timber Rights"), to be acquired for an aggregate purchase
price of approximately $1,200,000.

Closing: March 15, 2017

Total Invested Capital: Approximately $400,000(the "Invested Capital")

Minimum Investment: $25,000

Annual Return to Investor: 10.15%(the "Investment Return")

Business Plan: The Company will lend the Invested Capital to an

established timber manager and broker (the "Broker") to be
used to fund the acquisition of the Timber Rights. The
Invested Capital will constitute approximately 1/3 of the
Timber Rights purchase price, with the Broker contributing
the remaining approximate 2/3 of the purchase price. In
exchange for the loan, the Broker will issue a promissory
note (the "Note") with a thirteen month term, bearing
thirteen percent (13%) interest and payable in equal
monthly installments of principal and interest, provided,
however, that no payment will be made in December 2017.
The Note will be secured by timber deeds in favor of the
Company. Upon a default under the Note, the timber deed
will be recorded and the Company will take title to the
Timber Rights. Contemporaneously with the acquisition of
the Timber Rights, the Broker will enter into sales
agreements with lumber mills pursuant to which the lumber
mills agree to pay for the Timber Rights over thirteen (13)
months. Upon payment of all amounts under the sales
agreements, the Company will cancel the timber deeds
securing the Note and the Timber Rights will be transferred
to the mill purchaser(s). No timber cutting is permitted by
the mill until all payments are made. Payments by the mill
purchaser(s) fund the payments under the Note.

A ASTFI 001653
 Case 3:18-cv-00866-CWR-FKB Document 40-1 Filed 03/22/19 Page 2 of 2
CONFIDENTIAL - NOT FOR DISTRIBUTION

Cash Flow Priority: All proceeds of the Note will be credited first to Investors
until they receive a return of all Invested Capital and the
Investment Return. No distributions will be made to
Company from repayment of the Note until all Invested
Capital and the Investment Return have been credited to
Investors.

Governance: The Company's designees will be the managers of the

Company and responsible for all day-to-day activities and
administrative functions. The Company may not use the
Invested Capital for any purpose other than to lend for use
to acquire the Timber Rights without the unanimous
consent of the Investors.

Right to Sell Investment: Investor may, pursuant to terms consistent with the terms
and conditions of the Company operating agreement
regarding such matters, sell its interest in the Company.
Company agrees to cooperate in such sale process provided
such cooperation does not alter the economics of the
transaction and is at no cost to Company.

Expenses/Management Fee: Returns from the Note in excess of the Investment Return
will be allocated to the Company. Such allocation is
expected to be 2% of the Invested Capital, payable only
after the Invested Capital and Investment Return have been
paid to Investor. All Company expenses shall first reduce
the Company's allocable share of income. The Company
does not expect Company expenses to exceed the
Company's allocable share of income.

Additional Information: Company will inspect the property related to the Timber
Rights, must receive the original, executed Note and timber
deed and will inspect the executed agreement(s) with the
timber mill(s).

Investor Requirements: Investors must be "accredited investors" as contemplated

by the SEC's Regulation D and must execute a subscription
agreement certifying to such status.

ASTFI 001654
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 1 of 22

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER
PROPERTIES, LLC,
Case No. 3:18-cv-00866-CWR-FKB
Plaintiff,
v. Hon. Carlton W. Reeves

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON, ORAL ARGUMENT REQUESTED
BEARMAN, CALDWELL & BERKOWITZ
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT,
Defendants.

REPLY BRIEF IN SUPPORT OF BAKER, DONELSON, BEARMAN,

CALDWELL & BERKOWITZ, PC’S MOTION TO DISMISS THE COMPLAINT

Michael W. Ulmer (MSB #5760)

James J. Crongeyer, Jr. (MSB #10536)
WATKINS & EAGER PLLC
400 East Capitol Street, Suite 300 (39201)
Post Office Box 650
Jackson, MS 39205
Tel.: (601) 965-1900
Fax: (601) 965-1901
Email: mulmer@watkinseager.com

Craig D. Singer (pro hac vice)

Benjamin W. Graham (pro hac vice)
WILLIAMS & CONNOLLY LLP
725 Twelfth Street, N.W.
Washington, DC 20005
Tel.: (202) 434-5000
Fax: (202) 434-5029
Email: csinger@wc.com

Counsel for Defendant Baker, Donelson,

Bearman, Caldwell & Berkowitz, PC
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 2 of 22

TABLE OF CONTENTS

TABLE OF AUTHORITIES .......................................................................................................... ii

INTRODUCTION ...........................................................................................................................1

ARGUMENT ...................................................................................................................................2

I. Baker Donelson Is Not Responsible for the Actions of Alexander and Seawright. ............2

A. The Complaint Does Not State an “Actual Authority” Claim. ................................2

B. The Complaint Does Not State an “Apparent Authority” Claim. ............................3

1. There is no allegation that Adams was misled about the scope of

Alexander’s and Seawright’s authority. .......................................................3

2. Baker Donelson did not give Adams a misleading impression that

Alexander and Seawright had authority to manage timber
investments in the firm’s name. ...................................................................4

3. The Receiver’s cited authority supports dismissal.......................................7

C. The Complaint Does Not State a Claim for Negligent Supervision and
Retention (Count VIII). ............................................................................................8

II. The Complaint’s Causes of Action Do Not State a Claim for Relief. ...............................10

A. The Complaint Does Not State a Claim for Civil Conspiracy (Count I). ..............10

B. The Complaint Does Not State a Claim for Aiding and Abetting (Count II). .......12

C. The Complaint Does Not State a Claim for “Recklessness,” “Gross

Negligence,” or “Negligence” (Count III). ............................................................12

III. In Pari Delicto Bars the Receiver’s Claims. ......................................................................13

IV. The Complaint Should Be Dismissed with Prejudice. .......................................................15

 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 3 of 22

TABLE OF AUTHORITIES

Federal Cases: Page(s)

Amato v. United States,

549 F. Supp. 863 (D.N.J. 1982) ...............................................................................................13

Ashcroft v. Iqbal,
556 U.S. 662 (2009) .................................................................................................................10

Belmont v. MB Inv. Partners, Inc.,

708 F.3d 470 (3d Cir. 2013).......................................................................................................9

Chemtex, LLC v. St. Anthony Enterprises, Inc.,

490 F. Supp. 2d 536 (S.D.N.Y. 2007)......................................................................................10

CSX Transp., Inc. v. Recovery Express, Inc.,

415 F. Supp. 2d 6 (D. Mass. 2006) ............................................................................................6

Cuyler v. United States,

362 F.3d 949 (7th Cir. 2004) ...................................................................................................13

Hays v. Pearlman,
2010 WL 4510956 (D.S.C. Nov. 2, 2010) ...............................................................................15

Honig v. Kornfeld,
339 F. Supp. 3d 1323 (S.D. Fla. 2018) ....................................................................................10

I. Meyer Pincus & Assocs., P.C. v. Oppenheimer & Co.,

936 F.2d 759 (2d Cir. 1991).......................................................................................................5

In re Int’l Mgmt. Assocs., LLC,

563 B.R. 393 (Bankr. N.D. Ga. 2017) .....................................................................................10

Jacquez v. Compass Bank,

2016 WL 3017418 (W.D. Tex. May 24, 2016) .....................................................................6, 9

Janvey v. Adams & Reese, LLP,

2013 WL 12320921 (N.D. Tex. Sept. 11, 2013)......................................................................14

Janvey v. Democratic Senatorial Campaign Comm., Inc.,

712 F.3d 185 (5th Cir. 2013) ...................................................................................................15

Janvey v. Proskauer Rose LLP,

2015 WL 11121540 (N.D. Tex. June 23, 2015) ..................................................................9, 11

Jones v. Wells Fargo Bank, N.A.,

666 F.3d 955 (5th Cir. 2012) .......................................................................................13, 14, 15

ii
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 4 of 22

Letizia v. Facebook Inc.,

267 F. Supp. 3d 1235 (N.D. Cal. 2017) .....................................................................................4

Litson-Gruenber v. JPMorgan Chase & Co.,

2009 WL 4884426 (N.D. Tex. Dec. 16, 2009) ........................................................................10

Neilson v. Union Bank of California, N.A.,

2003 WL 27374137 (C.D. Cal. Feb. 20, 2003)........................................................................10

Rosner v. Bank of China,

2008 WL 5416380 (S.D.N.Y. Dec. 18, 2008) .........................................................................10

Tichenor v. Roman Catholic Church of Archdiocese of New Orleans,

32 F.3d 953 (5th Cir. 1994) .......................................................................................................9

State Cases:

Aetna Ins. Co. v. Robertson,

94 So. 7 (Miss. 1922) ...............................................................................................................11

Akin, Gump, Strauss, Hauer and Feld, L.L.P. v. E–Court, Inc.,

2003 WL 21025030 (Tex.App.—Austin 2003) .......................................................................13

Akins v. Golden Triangle Planning & Dev. Dist., Inc.,

34 So. 3d 575 (Miss. 2010) ........................................................................................................2

Andrew Jackson Life Ins. Co. v. Williams,

566 So. 2d 1172 (Miss. 1990) ....................................................................................................8

Baker Donelson Bearman Caldwell & Berkowitz, P.C. v. Seay,

42 So. 3d 474 (Miss. 2010) ................................................................................................2, 8, 9

Bell v. W. Harrison Cty. Dist.,

523 So. 2d 1031 (Miss. 1988) ..................................................................................................12

Bradley v. Kelley Bros. Contractors,

117 So. 3d 331 (Miss. Ct. App. 2013) .....................................................................................10

Cashin v. Murphy,
96 So. 747 (Miss. 1923) ...........................................................................................................14

Christian Methodist Episcopal Church v. S & S Construction Co., Inc.,

615 So.2d 568 (Miss. 1993) ...................................................................................................5, 8

Commercial Bank v. Hearn,

923 So.2d 202 (Miss. 2006) ...................................................................................................2, 3

iii
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 5 of 22

Eaton v. Porter,
645 So. 2d 1323 (Miss. 1994) ................................................................................................4, 7

Guardian Consumer Fin. Corp. v. Langdeau,

329 S.W.2d 926 (Tex.Civ.App.—Austin 1959, no writ) .........................................................14

Gulledge v. Shaw,
880 So. 2d 288 (Miss. 2004) ......................................................................................................2

Harris v. Town of Woodville,

196 So. 3d 1121 (Miss. Ct. App. 2016) ...................................................................................11

Holliday v. Pizza Inn, Inc.,

659 So. 2d 860 (Miss. 1995) ......................................................................................................2

Holmes v. Campbell Properties, Inc.,

47 So. 3d 721 (Miss. Ct. App. 2010) .........................................................................................9

Oden v. Pepsi Cola Bottling Co.,

621 So.2d 953 (Ala. 1993) .......................................................................................................13

Parmenter v. J & B Enterprises, Inc.,

99 So. 3d 207 (Miss. Ct. App. 2012) .........................................................................................9

Patriot Commercial Leasing Co. v. Jerry Enis Motors, Inc.,

928 So. 2d 856 (Miss. 2006) ......................................................................................................5

Raclaw v. Fay, Conmy and Co.,

668 N.E.2d 114 (Ill. App. 1996) ................................................................................................6

United Residential Properties, L.P. v. Theis,

378 S.W.3d 552 (Tex. App. 2012) .............................................................................................6

Other Authorities:

Miss. Code § 79-10-67.....................................................................................................................2

Restatement (2d) Torts § 876(b) ....................................................................................................12

iv
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INTRODUCTION

The Receiver’s Opposition makes two fundamental errors which, when corrected, doom

all of her claims against Baker Donelson. First, businesses are not automatically responsible for

everything their employees do when they are not working, and law firms are no exception. That

principle disposes of the Receiver’s claims because the Complaint’s allegations show that

Alexander and Seawright ran their personal LLC separately from the law firm. Baker Donelson

did not authorize, endorse, or in any way benefit from the LLC. Incidental use of firm facilities,

as happens in every business, does not transform an individual act into an act of the law firm. It

is telling that the Opposition, like the Complaint, depends on characterizing the Baker Donelson

website as though it advertised Alexander and Seawright as investment managers or brokers,

when anyone reading it can see that it does no such thing.

Second, the Receiver persistently writes as though her claims are brought on behalf of

investors, but that is contrary both to the law and to this Court’s appointment order. The

Receiver cannot bring investors’ claims. She stands in the shoes of Lamar Adams and the

fraudulent entity he controlled, Madison Timber. This means there can be no “apparent

authority” claim unless Adams reasonably relied on a misleading impression that Alexander and

Seawright were acting for Baker Donelson – which is neither alleged nor plausible. The

Receiver’s standing also makes her subject to the defense of in pari delicto – which, contrary to

the arguments in her Opposition, applies to receivers bringing tort claims.

These central issues are sufficient to warrant dismissal, but the Receiver also makes other

claim-specific errors. For example, a claim of conspiracy or aiding and abetting (if it exists in

Mississippi at all) requires an allegation of actual knowledge, not negligence in missing “red

flags.” And a professional firm has no duty in “negligence,” or “recklessness” (however

allegedly “gross” it may be), for failing to detect another’s wrongdoing in the absence of a client
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 7 of 22

relationship. Plaintiffs cannot create a duty of care to the entire world of non-clients by labeling

the claim “ordinary” negligence. The Complaint should be dismissed with prejudice.

ARGUMENT

I. Baker Donelson Is Not Responsible for the Actions of Alexander and Seawright.

A. The Complaint Does Not State an “Actual Authority” Claim.

An employer is not responsible for the conduct of an employee who “deviates or departs

from his work to accomplish some purpose of his own not connected with his employment[.]”

Baker Donelson Bearman Caldwell & Berkowitz, P.C. v. Seay, 42 So. 3d 474, 489 (Miss. 2010)

(quotation omitted). The Receiver suggests a crabbed reading of this rule that would cover only

“romantic affairs at their workplace,” Opp’n 10, but that is only an example of the general

principle that vicarious liability does not extend to employees’ acts outside “the scope of their

employment or of their apparent authority to act for the corporation.” Miss. Code § 79-10-67.

Of particular importance here, employees are routinely held to be acting outside the scope

of their employment where the employer received “no benefit” from the employees’ conduct.

E.g., Akins v. Golden Triangle Planning & Dev. Dist., Inc., 34 So. 3d 575, 580 (Miss. 2010)

(citing Commercial Bank v. Hearn, 923 So.2d 202 (Miss. 2006)). That is true even if the

employees were performing the precise type of activities for which they were hired. Gulledge v.

Shaw, 880 So. 2d 288, 296 (Miss. 2004) (no liability where notary public employed by the bank

“notariz[ed] a forged document” because it “was not in the furtherance of the Bank’s business—

rather, it was a personal act”). The rule extends to tortious conduct performed on the employer’s

premises. Holliday v. Pizza Inn, Inc., 659 So. 2d 860, 865 (Miss. 1995) (employee’s party at her

office “in no way furthered or was meant to further the business of [her] employers”). An act is

outside the scope of employment if it is not within the employee’s formal mandate, even where

the employer “encouraged [the employee’s] participation in [those new] activities and benefitted

2
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therefrom[.]” Hearn, 923 So. 2d at 208–09 (no liability where bank employee was soliciting

charitable donations for an entity other than the bank).

Here, it is undisputed that Baker Donelson received no benefit from Alexander’s and

Seawright’s investment activities. Certainly there is no allegation that the firm sent bills to

anyone, or received anything, for Alexander’s and Seawright’s work on the Timber Fund. Yet

the Receiver persists in arguing that managing the Timber Fund was within the scope of

Alexander’s and Seawright’s law-firm employment. This argument is based solely on a

continued misreading of their firm biographies. The Receiver states that Baker Donelson

“employ[s] Alexander as a ‘Senior Public Policy Advisor’ and a ‘Broker-Dealer/Investment

Advisor.’” Opp’n 7 (quoting Doc. 29-1 at 4). In fact, the website shows that Alexander is a

Senior Public Policy Advisor, Doc. 29-1 at 1, and at the bottom of the profile, it identifies him as

part of the firm’s “Broker-Dealer/Investment Advisor” practice area. Id. at 4. That is because

some of Baker Donelson’s clients are brokers – not because Alexander is one. The Receiver

similarly argues that Seawright is part of the firm’s “Securities” practice. Opp’n 7–8 (quoting

Doc. 29-2 at 5). Again, that means Seawright does legal work for clients in the securities

industry, not that he is employed as a securities dealer. Seawright is also affiliated with the

“Health Systems/Hospitals” practice, but that does not mean that Baker Donelson employs him

as a medical doctor.

B. The Complaint Does Not State an “Apparent Authority” Claim.

1. There is no allegation that Adams was misled about the scope of

Alexander’s and Seawright’s authority.

The Receiver concedes that “the key” to a claim of apparent authority “is how particular

third parties perceived the actions of the agents.” Opp’n 6 (quotation and modification omitted).

Those “particular third parties” are Adams and Madison Timber, in whose shoes the Receiver

3
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 9 of 22

stands. No one else’s “perception” of Alexander’s and Seawright’s authority is relevant for

purposes of this claim. See Eaton v. Porter, 645 So. 2d 1323, 1326 (Miss. 1994) (courts look to

“particular group of [plaintiffs] and how those third parties perceived that authority”). Yet the

Receiver continually repeats the investor-facing allegations in the Complaint, e.g., that

Alexander and Seawright conducted their timber business with firm clients, see Opp’n 7 (citing

Compl. ¶¶ 78, 84), which simply do not matter.

What matters is that the Complaint does not allege that Adams or his controlled

company, Madison Timber, perceived that Alexander or Seawright were acting on behalf of

Baker Donelson, much less that they relied to their detriment on any such misperception. That is

fatal to the Receiver’s claim of apparent authority.

It is not enough for the Receiver to suggest that Adams could have formed a mistaken

belief in Alexander’s and Seawright’s agency. See Opp’n 6–9. Even if this hypothesis were in

the Complaint (it is not), such speculation is a long way from alleging that Adams actually did

form such a belief. See Letizia v. Facebook Inc., 267 F. Supp. 3d 1235, 1243 (N.D. Cal. 2017)

(where reliance is an element, plaintiffs must plead they “actually relied”). The Receiver

evidently has no basis to make such an allegation, to say nothing of the even more outlandish

(but requisite) allegation that Adams did something in reliance on that misperception. Adams

ran a Ponzi scheme and stole the money Alexander Seawright Timber Fund I, LLC lent to him.

The Receiver cannot seriously allege that Adams accepted and stole that money because he

thought it came with the blessing of Baker Donelson.

2. Baker Donelson did not give Adams a misleading impression that

Alexander and Seawright had authority to manage timber
investments in the firm’s name.

Even if the Receiver somehow could allege a mistaken impression on Adams’s part, she

would have to show that Baker Donelson (as opposed to Alexander and Seawright) did

4
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 10 of 22

something to create that impression. Patriot Commercial Leasing Co. v. Jerry Enis Motors, Inc.,

928 So. 2d 856, 864 (Miss. 2006) (agent’s apparent authority extends only to that “authority that

the principal has by words or conduct held the alleged agent out as having”); Christian Methodist

Episcopal Church v. S & S Construction Co., Inc., 615 So.2d 568, 573 (Miss. 1993) (apparent

authority requires a “showing of . . . acts or conduct of the principal indicating the agent’s

authority”). The Receiver makes four unavailing arguments in support of her claim that Baker

Donelson fostered an impression that Alexander and Seawright were authorized to operate the

Timber Fund on behalf of the law firm.

First, the Receiver argues that the firm advertised that it “employed” Alexander as an

“Investment Advisor” and Seawright as a “Securities” practitioner. Opp’n 7. As discussed

above, that is not a fair reading of the firm website. Besides, there is no allegation that Adams

read it, or that he interpreted it in that unreasonable fashion.

Second, the Receiver argues that Alexander and Seawright used Baker Donelson’s office

space and facilities, for example by holding “closings” and other meetings there, Opp’n 7 (citing

Compl. ¶ 83); id. at 8 (citing Compl. ¶ 102), and sending emails from Seawright’s Baker

Donelson email address, Opp’n at 8 (citing Ex. A, Doc. 35-1). 1 But courts routinely reject

1
The Court may consider documents partially quoted in a complaint. See Mem at n.4. That rule
protects defendants by preventing the plaintiff (or receiver) from “evad[ing] a properly argued
motion to dismiss simply because [she] has chosen not to attach” the full document on which she
relies. I. Meyer Pincus & Assocs., P.C. v. Oppenheimer & Co., 936 F.2d 759, 762 (2d Cir.
1991); 5 Wright & Miller, Fed. Prac. & Pro. § 1327, at 489 & n.15 (when “plaintiff fails to
introduce a pertinent document as part of his pleading, defendant may introduce the exhibit as
part of his motion attacking the pleading”) (emphasis added). But it is something else altogether
for the Receiver selectively to exclude certain parts of a document from the Complaint only to
introduce them in opposition to a motion to dismiss.

In any event, the email makes clear that Alexander and Seawright were dealing at arm’s length
with what they believed was a legitimate timber business, and not a co-conspirator in a Ponzi
scheme. See Opp’n Ex. A, Doc. 35-1. Seawright even states he is “no timber expert,”
suggesting that he is relying on Adams, not the other way around. Id. at 1.

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 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 11 of 22

claims of apparent authority based on such superficial trappings. See, e.g., Jacquez v. Compass

Bank, 2016 WL 3017418, at *10 (W.D. Tex. May 24, 2016) (“authorizing someone to share

office space to conduct their independent business or authorizing someone to use an email

account” insufficient to create apparent authority); Raclaw v. Fay, Conmy and Co., 668 N.E.2d

114, 117 (Ill. App. 1996) (use of office space, telephones, mailing address, receptionist, and

stationery insufficient to create apparent authority); CSX Transp., Inc. v. Recovery Express, Inc.,

415 F. Supp. 2d 6, 12 (D. Mass. 2006) (“no reasonable person could conclude that apparent

authority was present” on the basis of an email address alone); United Residential Properties,

L.P. v. Theis, 378 S.W.3d 552, 564–65 (Tex. App. 2012) (collecting authority for the same).

Employees in businesses everywhere use their employers’ offices and facilities –

including their work email accounts – from time to time for personal endeavors. As the above

authorities show, that is not sufficient to create apparent authority. A different rule would

encourage employers to forbid these ordinary activities for fear of liability; and life in the

workplace could be profoundly different.

Third, the Receiver contends that Seawright “drafted subscription agreements” for

investments in Madison Timber. Opp’n 7. But this was obviously for the benefit of Alexander’s

and Seawright’s Timber Fund LLC and its investors, not Baker Donelson. In the email chain

attached to the Receiver’s Opposition, Adams refers to “your LLC” – showing that he knew

Seawright was acting for Alexander Seawright Timber Fund I, LLC. Opp’n Ex. A at 2

(emphasis added). Baker Donelson is not mentioned, and Adams cannot reasonably have formed

the impression from this exchange that the law firm was behind the Timber Fund.

Fourth, the Receiver alleges that members of Alexander’s and Seawright’s LLC included

Baker Donelson clients and that “[o]ther Baker Donelson shareholders . . . referred potential

investors to Alexander and Seawright.” Opp’n 7. But this allegation cuts against the Receiver’s

6
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 12 of 22

claim. The “referrals” were allegedly made to Alexander and Seawright for their Timber Fund,

not to Baker Donelson – and, again, there is no allegation that Baker Donelson performed any

legal work, billed the investors or anyone else for the Timber Fund’s work, or received any

benefit.

At bottom, the Receiver’s claim is that Alexander’s and Seawright’s professional

affiliation with Baker Donelson was beneficial to their investment business because of Baker

Donelson’s good reputation. But affiliation and reputation do not create liability. Any other rule

would effectively punish Baker Donelson for having a good reputation.

3. The Receiver’s cited authority supports dismissal.

The Opposition relies heavily on Eaton v. Porter, 645 So. 2d 1323 (Miss. 1994), which

demonstrates why the Receiver’s apparent authority claim lacks merit. The plaintiffs came to

Eaton Motors seeking repairs for their car. They met with Eaton, Sr. to negotiate the repair

services and saw Eaton Motors’ automotive repair equipment on site. Id. at 1327. Eaton, Sr.

signed the work authorization on behalf of Eaton Motors; the plaintiff addressed her payment to

Eaton Motors; and Eaton, Sr. cashed the check on behalf of Eaton Motors. Id. at 1324. Eaton

Motors later claimed that it was not in the business of repairing vehicles, and that Eaton, Sr. was

acting outside the scope of his authority in accepting the work. Id. at 1326. The court observed

that the plaintiffs were “not residents of the area and could not be expected to be familiar” with

limitations on the scope of “Eaton Motors’ . . . business operations.” Id. at 1327.

In this case, Adams and Madison Timber were not the victims of misleading conduct.

They were running a massive Ponzi scheme and concealing their fraud. They did business with

“Alexander Seawright Timber Fund I, LLC” not “Baker Donelson” (or “Baker, Sr.”). The

Complaint does not allege that Adams and Madison Timber sought to engage Baker Donelson’s

professional services. Adams and Madison Timber were seeking funding, which they received

7
 Case 3:18-cv-00866-CWR-FKB Document 36 Filed 03/14/19 Page 13 of 22

through loans from Alexander’s and Seawright’s independent LLC. They signed no agreement

with Baker Donelson, nor made any payment to the firm.

The Complaint also does not allege that Alexander and Seawright told Adams they were

acting on behalf of Baker Donelson. Cf. Andrew Jackson Life Ins. Co. v. Williams, 566 So. 2d

1172, 1182 (Miss. 1990) (agent for the defendant insurance company “believed he was

authorized to form [the] binding contract” at issue and that he “expected” the purchasers would

“one hundred percent rely” on his represented authority). A plaintiff claiming apparent authority

is presumed to have “knowledge of the nature and usages of the business involved” and must

then have “reasonabl[y] reli[ed]” on a belief that the agent was empowered to act for the

principal. Id. at 1181. Providing funding for timber investments is not among the services that

lawyers or policy advisors ordinarily perform on behalf of law firms, and there is no basis to

infer – much less a well-pleaded allegation – that Adams was misled to think otherwise. Cf.

Christian Methodist Episcopal Church, 615 So. 2d at 573 (defendant’s Secretary of Finance had

apparent authority to make representations about the business’s finances to plaintiff).

C. The Complaint Does Not State a Claim for Negligent Supervision and
Retention (Count VIII).

The Receiver’s arguments with respect to negligent supervision fail for many of the same

reasons. A negligent supervision claim does not apply to an employee’s acts outside the scope of

employment. Seay, 42 So.3d at 490. The above discussion disposes of the Receiver’s

contentions that Alexander and Seawright were acting within the scope of their employment, and

that only an employee’s “romantic affairs” can be outside the scope. Opp’n 20. The Receiver

does not address the cases dismissing claims for negligent supervision when employees allegedly

engaged in Ponzi schemes and criminal conduct outside the scope of employment. See Mem. at

8
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11 (citing Belmont v. MB Inv. Partners, Inc., 708 F.3d 470 (3d Cir. 2013); Tichenor v. Roman

Catholic Church of Archdiocese of New Orleans, 32 F.3d 953 (5th Cir. 1994)).

The Receiver cites no authority for her suggestion that an employer is generally liable for

an employee’s conduct while on the employer’s premises. Opp’n 21. The law is to the contrary:

“[E]mployers do not have a duty to supervise their employees when the employees are off-duty

or not working,” Seay, 42 So. 3d at 489, and an employee may engage in personal acts while on

the employer’s premises without exposing the employer to liability, see Jacquez, 2016 WL

3017418, at *10; other cases cited supra pp. 2–3.

Nor does the Receiver explain how the Complaint satisfies the requirement that Baker

Donelson “had either actual or constructive knowledge of an employee’s incompetence or

unfitness” to conduct the work for which they were employed. Parmenter v. J & B Enterprises,

Inc., 99 So. 3d 207, 217 (Miss. Ct. App. 2012). The Receiver suggests generally that it is “‘not

unreasonable to infer’ that employers ‘were aware to some degree’” of an employee’s material

assistance to a Ponzi scheme. Opp’n 21 (quoting Janvey v. Proskauer Rose LLP, 2015 WL

11121540, at *1 (N.D. Tex. June 23, 2015)). It is indeed “unreasonable to infer” a law firm’s

knowledge of a Ponzi scheme without some allegation of fact that would support such an

inference. See Holmes v. Campbell Properties, Inc., 47 So. 3d 721, 729 (Miss. Ct. App. 2010)

(misconduct itself is insufficient; plaintiff must show “specific evidence” to support employer’s

knowledge that misconduct was likely). The receiver in Proskauer brought a different claim,

alleging that the defendant law firm failed to supervise its attorneys’ provision of legal services

to the firm’s clients within the scope of their employment.

9
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II. The Complaint’s Causes of Action Do Not State a Claim for Relief.

A. The Complaint Does Not State a Claim for Civil Conspiracy (Count I).

Civil conspiracy requires that the alleged conspirators were “aware of the fraud or

wrongful conduct at the beginning of the agreement.” Bradley v. Kelley Bros. Contractors, 117

So. 3d 331, 339 (Miss. Ct. App. 2013). The Complaint alleges “red flags,” from which the

Receiver infers that Baker Donelson “knew or should have known” that Madison Timber was a

Ponzi scheme. Compl. ¶ 120 (emphasis added). That the Receiver felt obliged to hedge her

claim (“or should have known”) underscores that she cannot in good faith allege the required

actual knowledge. Litson-Gruenber v. JPMorgan Chase & Co., 2009 WL 4884426, at *2 (N.D.

Tex. Dec. 16, 2009) (dismissing claims in a Ponzi-scheme case because “pleading based on an

allegation the defendant ‘knew or should have known’ is insufficient” for actual knowledge);

Neilson v. Union Bank of California, N.A., 2003 WL 27374137, at *10 (C.D. Cal. Feb. 20, 2003)

(collecting authorities). Even if she had alleged it, a bare assertion of knowledge is a legal

conclusion, which does not suffice to state a claim. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

The Complaint’s allegations of fact are equally insufficient: “Red flags” do not support

an allegation of actual knowledge. See, e.g., Rosner v. Bank of China, 2008 WL 5416380, at *6

(S.D.N.Y. Dec. 18, 2008) (“courts overwhelmingly recognize” that “actual knowledge of a

fraud” is not established “based on allegations of . . . ignorance of obvious ‘red flags’”), aff’d,

349 F. App’x 637 (2d Cir. 2009); Honig v. Kornfeld, 339 F. Supp. 3d 1323, 1344 (S.D. Fla.

2018) (“red flags fail to establish actual knowledge”); Chemtex, LLC v. St. Anthony Enterprises,

Inc., 490 F. Supp. 2d 536, 547 (S.D.N.Y. 2007) (“even alleged ignorance of obvious warning

signs of fraud will not suffice to adequately allege actual knowledge”); In re Int’l Mgmt. Assocs.,

LLC, 563 B.R. 393, 420 (Bankr. N.D. Ga. 2017) (“allegations of ‘red flags’ were insufficient to

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establish the bank’s actual knowledge of existence of the Ponzi scheme”). And in any event, no

well-pleaded allegation connects any “red flag” to Baker Donelson.

Against the weight of that authority, the Receiver cites only Proskauer for the proposition

that a red flag “supports knowledge for aiding and abetting purposes.” Opp’n 15 (citing

Proskauer, 2015 WL 11121540, at *5). But in Proskauer, an attorney was hired to defend the

Ponzi scheme operator in an SEC enforcement action. Id. at *1. The attorney conducted

“substantial due diligence” while representing the client and gained “knowledge of [the] scheme”

which he used to “obstruct[] the investigation,” including by hiding from the SEC the fact that

the rates of return were too high and that the scheme’s investments in Antigua likely involved

corruption. Id. at *5; see also Compl., Doc. 1, Proskauer, 3:13-cv-477 (N.D. Tex.) at ¶ 112

(alleging that attorney “knew [his client] was actively misleading the SEC”).

Aside from “red flags,” the Receiver cites one other allegation in support of her “actual

knowledge” claim: that “Alexander and Seawright falsely represented that they personally

inspected the timber and mill contracts,” when “there were no timber and no ‘mill contracts’ to

inspect.” Opp’n 17–18. That inference is a non sequitur. Failing to read a document does not

mean one knows the document does not exist or that the transaction is a Ponzi scheme. And that

allegation, too, is only against Alexander and Seawright, not the law firm.

Finally, the Receiver insists that a conspiracy arises from a “‘mere tacit understanding

between the conspirators to work to a common purpose.’” Opp’n 18 (quoting Aetna Ins. Co. v.

Robertson, 94 So. 7, 22 (Miss. 1922)). But the common purpose must be unlawful. See id.;

Harris v. Town of Woodville, 196 So. 3d 1121, 1131 (Miss. Ct. App. 2016). “[P]ool[ing] other

people’s money to invest” in timber tracts, Opp’n 18, is not unlawful; and an agreement to do

that, tacit or otherwise, is not a conspiracy.

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B. The Complaint Does Not State a Claim for Aiding and Abetting (Count II).

The Receiver concedes that no Mississippi court has ever recognized a cause of action for

civil aiding and abetting. Opp’n 13. And even in jurisdictions that do, a plaintiff must prove the

defendant had “‘know[ledge] that the other’s conduct constitutes a breach of duty[.]’” Id.

(quoting Restatement (2d) Torts § 876(b)). The argument that Baker Donelson “knew that

Adams owed Madison Timber fiduciary duties[,]” Opp’n 13, does not establish actual knowledge

that Adams had breached such duties by operating a Ponzi scheme. That would be so even if the

conclusory argument about Baker Donelson’s knowledge were well-pleaded – which it is not.

C. The Complaint Does Not State a Claim for “Recklessness,” “Gross

Negligence,” or “Negligence” (Count III).

It is undisputed that Adams and Madison Timber were not clients of Baker Donelson.

Seeking to skirt the rule that only a client may sue a law firm for professional negligence, the

Receiver contends that she is suing for “ordinary” rather than “professional” negligence. See

Opp’n 19. That argument mischaracterizes the Complaint, and in any event is legally meritless.

First, the Complaint makes clear that Alexander and Seawright, allegedly acting for

Baker Donelson, were negligent in their professional capacities. Even the Opposition touts the

particular “education, experience, and judgment” of Baker Donelson’s professionals, id. at 11,

and argues that the firm engaged in misconduct through “the provision of routine professional

services[.]” Id. at 18 (quotation marks omitted). The Opposition cannot have it both ways,

arguing (1) that Baker Donelson is responsible because it authorized Alexander and Seawright to

act as professionals for the firm and (2) that Alexander and Seawright were acting in some non-

professional capacity so that a non-client can sue them. The Receiver cannot evade the

limitations on a claim for professional negligence, see Mem. 14–15, merely by labeling it

“ordinary negligence.” See, e.g., Bell v. W. Harrison Cty. Dist., 523 So. 2d 1031, 1033 (Miss.

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1988) (recasting claim involving the exercise of “professional skill” as “‘ordinary negligence’

. . . is without merit”).

Second, any claim of “ordinary” negligence would also fail because Baker Donelson

owed Adams and Madison Timber no duty of “ordinary” care to prevent their Ponzi scheme.

The law does not impose duties on citizens to stop tortious conduct. See, e.g., Cuyler v. United

States, 362 F.3d 949, 954 (7th Cir. 2004) (“no common law duty to warn or rescue”). And as the

perpetrators of the conduct, Adams and Madison Timber certainly cannot claim a duty owed to

them. See, e.g., Oden v. Pepsi Cola Bottling Co., 621 So.2d 953, 954–55 (Ala. 1993) (thief

cannot recover in tort for injury while stealing); Amato v. United States, 549 F. Supp. 863, 867

(D.N.J. 1982) (criminal cannot recover for injury during robbery on theory that “the government

was negligent in not arresting [him] sooner”), aff’d, 729 F.2d 1445 (3d Cir. 1984). In the

absence of an attorney-client duty of care, the Receiver’s claim is untenable.

III. In Pari Delicto Bars the Receiver’s Claims.

Because she stands in the shoes of Madison Timber and Adams, the Receiver may bring

their claims, but she does not have standing to bring investors’ claims. The Receiver does not

dispute that if Adams and Madison Timber were suing in their own right, their claims would be

barred by in pari delicto.

The Receiver argues, however, that it is “well established [in the Fifth Circuit] that when

the receiver acts to protect innocent creditors,” she may do so “even though the corporation

would not be permitted to do so.” Opp’n 22 (quoting Jones v. Wells Fargo Bank, N.A., 666 F.3d

955, 966 (5th Cir. 2012); modification in original). But Jones does not hold that the “innocent

successor” exception applies throughout the Fifth Circuit – that is the Receiver’s addition. The

Fifth Circuit was actually quoting the rule from a series of Texas state court cases. See Jones,

666 F.3d at 966 (quoting Akin, Gump, Strauss, Hauer and Feld, L.L.P. v. E–Court, Inc., 2003

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WL 21025030, at *5 (Tex.App.—Austin 2003); Guardian Consumer Fin. Corp. v. Langdeau,

329 S.W.2d 926, 934 (Tex.Civ.App.—Austin 1959, no writ)). The Fifth Circuit did so because

“[t]he rights of a receiver are determined by state law.” Jones, 666 F.3d at n.11.

In Texas, a receiver who is appointed “in a dual capacity, as a trustee for both the

stockholder and the creditors,” can act “as trustee for the creditors” without limitation of the

defenses to which the corporation would be subject. Langdeau, 329 S.W.2d at 934 (emphasis

added). 2 In Jones, “the district court specifically authorized the Receiver to pursue actions for

the benefit of “‘all investors who may be the victims of the fraudulent conduct[.]’” Id.; see also

Ex. C at 9, Order, Doc. 131, SEC v. W. Financial Group et al., Case No. 3:08-cv-00499-N (N.D.

Tex.) (appointing the receiver in Jones “as the representative of such investors”).

This Receiver was not appointed to stand in the shoes of investors in Madison Timber.

Rather, consistent with Mississippi law, the Court furnished the Receiver with “all powers,

authorities, rights, and privileges now possessed by the officers, managers, and interest holders

of and relating to the Receivership Defendants” and ordered her to “pursue . . . their claims.”

Doc. 33 at 5, SEC v. Adams, 3:18-cv-252 (S.D. Miss.) (emphasis added). When a receiver sues

on an estate’s, she “occup[ies] substantially the same relation which was occupied by the original

parties” and “[a]ny defense . . . which a defendant might have made to an action brought by the

original party is equally available” against the receiver. High on Receivers § 205 (2d Ed.); see

Cashin v. Murphy, 96 So. 747, 749 (Miss. 1923) (citing High). The Receiver is thus similarly

situated to the plaintiffs in the many recent cases that rejected innocent-successor claims brought

by trustees and receivers who claimed that their appointment cleansed the wrongdoer’s estate of

2
Thus, “[t]he Fifth Circuit, when applying Texas law, seems to hold the view that when a
receiver is protecting innocent creditors or recovering assets for investors and creditors, the
defense of in pari delicto should be rejected generally.” Janvey v. Adams & Reese, LLP, 2013
WL 12320921, at *3 (N.D. Tex. Sept. 11, 2013) (emphases added).

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in pari delicto. See Mem. at 17–20. The Receiver has identified no Mississippi case that

exempts a receiver from defenses against the corporation in whose shoes she stands.

Jones is also distinguishable because it concerned a different kind of claim. In its usual

articulation, the innocent-successor exception allows the Receiver in-pari-delicto immunity

“against third-party recipients of the entity’s assets that have been fraudulently transferred[.]”

Janvey v. Democratic Senatorial Campaign Comm., Inc., 712 F.3d 185, 191 (5th Cir. 2013). But

the exception typically does not apply to tort claims against those who allegedly conspired with

the entity in receivership to perpetrate a fraud. See, e.g., Hays v. Pearlman, 2010 WL 4510956,

at *5 (D.S.C. Nov. 2, 2010) (“in the absence of a fraudulent conveyance case, the receiver of a

corporation used to perpetuate a fraud may not seek recovery against an alleged third‐party co‐

conspirator in the fraud”). In Jones, the receiver brought a cause of action for conversion against

a bank that had issued and then deposited a fraudulent cashier’s check. 666 F.3d at 961. While

“conversion” is technically a tort, the claim in Jones was analogous to a fraudulent transfer, as it

sought to reclaim misappropriated monies belonging to the estate. The Receiver’s claims against

Baker Donelson do not pursue Madison Timber’s assets – Baker Donelson is not alleged to have

received anything from Adams’ scheme. Even under a permissive, Texas-like standard,

therefore, the torts the Receiver alleges are far afield from the fraudulent transfer or conversion

claims that the Fifth Circuit has addressed.

IV. The Complaint Should Be Dismissed with Prejudice.

The Receiver has not requested leave to amend and does not suggest that she possesses

additional facts that could cure the deficiencies in the Complaint. Wherefore, premises

considered, Baker Donelson respectfully requests that this honorable Court dismiss the

Complaint with prejudice and requests all further relief, both general and special, as mandated by

the premises and as justice requires.

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Dated this 14th day of March, 2019 Respectfully submitted,

BAKER, DONELSON, BEARMAN,

CALDWELL & BERKOWITZ PC

/s/ Craig D. Singer

Michael W. Ulmer (MSB #5760)
James J. Crongeyer, Jr. (MSB #10536)
WATKINS & EAGER PLLC
400 East Capitol Street, Suite 300 (39201)
Post Office Box 650
Jackson, MS 39205
Tel.: (601) 965-1900
Fax: (601) 965-1901
Email: mulmer@watkinseager.com

Craig D. Singer (pro hac vice)

Benjamin W. Graham (pro hac vice)
WILLIAMS & CONNOLLY LLP
725 Twelfth Street, N.W.
Washington, DC 20005
Tel.: (202) 434-5000
Fax: (202) 434-5029
Email: csinger@wc.com

Counsel for Defendant Baker, Donelson,

Bearman, Caldwell & Berkowitz, PC

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CERTIFICATE OF SERVICE

I hereby certify that on March 14, 2019, I caused the foregoing to be electronically filed

with the Clerk of the Court using CM/ECF, which will send notification of such filing to all

registered participants.

/s/ Benjamin W. Graham

Benjamin W. Graham

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 Case 3:18-cv-00866-CWR-FKB Document 35 Filed 03/07/19 Page 1 of 26

UNITED STATES DISTR ICT COURT

SOUTHERN DISTR ICT OF M ISS ISS IPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY Case No. 3:18-cv-00866

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER Arising out of Case No. 3:18-cv-252,
PROPERTIES, LLC, Securities and Exchange Commission v.
Arthur Lamar Adams and Madison Timber
Plaintiff, Properties, LLC

v. Hon. Carlton W. Reeves, District Judge

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ,
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT,

Defendants.

RECEIVER’S OPPOSITION TO BAKER DONELSON’S

MOTION TO DISMISS

Alysson Mills, in her capacity as the court-appointed receiver for Arthur Lamar Adams and

Madison Timber Properties, LLC (the “Receiver”), through undersigned counsel, opposes the

motion to dismiss filed by Defendant Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C.

(“Baker Donelson”).

INTRODUCTION

If this lawsuit is unprecedented, it is because there is no precedent for this set of facts. It is

not every day that a law firm such as Baker Donelson allows its agents, including a member of its

board of directors, to use their positions of trust and their firm’s name and resources to sell
 Case 3:18-cv-00866-CWR-FKB Document 35 Filed 03/07/19 Page 2 of 26

investments of any kind—much less investments in a Ponzi scheme—to unsuspecting individuals,

including firm clients.

Baker Donelson distances itself from its codefendant Butler Snow on the premises that,

unlike Butler Snow, Baker Donelson did not have an attorney-client relationship with Madison

Timber and did not form a separate LLC to provide Madison Timber “non-legal business advice.”

Unlike Butler Snow, Baker Donelson contends its agents’ work for Madison Timber was

“separate” from and “unaffiliated” with the firm’s business.

The complaint, however, tells another story. The complaint alleges that it was their

affiliation with Baker Donelson that enabled Brent Alexander and Jon Seawright, a Baker

Donelson lobbyist and lawyer, to recruit new investors to the Madison Timber Ponzi scheme.1

Alexander and Seawright relied heavily on their affiliation with Baker Donelson to recruit

investors. 2 Yes, they formed a separate LLC for their investment fund and named it after

themselves—but they pitched their fund as a “friends and family” fund for preferred Baker

Donelson partners and clients.3 They referred potential investors to Baker Donelson’s website,

which shows that Jon Seawright is not merely a shareholder in Baker Donelson’s Jackson office

but an elected member of the firm’s national governing board of directors. 4 They made a

pitchbook that emphasized their affiliation with Baker Donelson:

Brent Alexander is a senior public policy advisor at Baker, Donelson, Bearman,

Caldwell and Berkowitz (“Baker Donelson”) one of the nation’s largest law firms.
He provides strategic business consulting for the firm’s clients and serves as a
national recognized lobbyist both regionally and federally. . . .

Jon Seawright is a senior shareholder at Baker Donelson and a member of the

firm’s Board of Directors. Seawright has been deemed by peer-reviewed Super

1
Doc. 1 at ¶¶ 79–84, 193–94.
2
Doc. 1 at ¶ 80.
3
Doc. 1 at ¶¶ 75, 80.
4
Doc. 1 at ¶ 81.

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Lawyers as a Rising Star, as well as one of the nation’s top attorneys, and represents
a range of national and regional clients, specializing in complex business
transactions, mergers and acquisitions and taxation. . . . 5

In assessing an investment, potential investors reasonably counted Madison Timber’s and

Alexander and Seawright’s affiliations with Baker Donelson “to the good.”6

Baker Donelson knew that Alexander and Seawright used their affiliation with Baker

Donelson to recruit new investors to Madison Timber, and allowed it.7 Alexander and Seawright’s

investment business was not “separate” from or “unaffiliated” with the firm’s business—it was

inextricably intertwined. Alexander and Seawright used Baker Donelson’s Jackson address for

their investment business.8 They met with Lamar Adams, investors, and potential investors at

Baker Donelson’s offices for “closings” and used Baker Donelson’s runners to pick up investors’

checks. 9 They used Baker Donelson’s conference rooms to make presentations to potential

investors, accountants, and advisors.10 They enlisted their colleagues at Baker Donelson, including

from offices in other states, to introduce them to potential investors.11 They specifically targeted

clients of Baker Donelson for whom Baker Donelson had recently closed transactions, because

they knew those individuals had money available to invest.12 They told one such client, “[r]unning

funds through us or BD [Baker Donelson] escrow is not a problem” and all “legal and other admin

5
Doc. 1 at ¶ 103.
6
Doc. 1 at ¶ 105.
7
Doc. 1 at ¶ 82.
8
Doc. 1 at ¶ 83.
9
Doc. 1 at ¶ 83.
10
Doc. 1 at ¶ 102.
11
Doc. 1 at ¶ 84.
12
Doc. 1 at ¶ 78.

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expenses” would “come out of our share.” 13 Third parties, including Adams, investors, and

potential investors, reasonably believed that the investments were backed by Baker Donelson.14

That Alexander and Seawright did not share their Madison Timber commissions with

Baker Donelson does not absolve Baker Donelson of liability for the Madison Timber Ponzi

scheme fallout. This lawsuit does not “compound the harm of the Ponzi scheme” by seeking to

hold Baker Donelson liable for its allowance of unprecedented acts by its lawyer and lobbyist.

Baker Donelson is not “blameless.” But for Baker Donelson’s recklessness and willful blindness,

the Madison Timber Ponzi scheme would not have continuously grown.15

The complaint alleges claims against Baker Donelson for aiding and abetting; civil

conspiracy; recklessness, gross negligence, and at a minimum negligence; and for negligent

retention and supervision. The complaint also alleges Baker Donelson is vicariously liable for the

acts of its agents Alexander and Seawright. The Receiver need not prove Baker Donelson’s or

Alexander and Seawright’s actual knowledge that Madison Timber was a Ponzi scheme to survive

Baker Donelson’s motion to dismiss. It is sufficient that the complaint expressly alleges they knew

or should have known, and there are ample facts that if true establish that they did.

The Receiver does not lack standing to pursue her claims. The Receiver filed this lawsuit in

her capacity as Receiver and pursuant to the powers vested in her by the Court’s orders and

applicable law. The Receiver has standing to pursue, inter alia, claims against third parties whose

actions contributed to the success of the Madison Timber Ponzi scheme, and therefore to the debts

of the Receivership Estate. As the Fifth Circuit has held in comparable cases, the doctrine of in

pari delicto does not apply.

13
Doc. 1 at ¶ 71.
14
Doc. 1 at ¶ 79.
15
Doc. 1 at ¶ 183.

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The Receiver responds to Baker Donelson’s legal arguments below.

ARGUMENT

A complaint should state “factual content that allows the court to draw the reasonable

inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009). “When considering a motion to dismiss under Rule 12(b)(6), the Court accepts the

plaintiff’s factual allegations as true and makes reasonable inferences in the plaintiff’s favor.”

Handy v. U.S. Foods, Inc., No. 3:14-CV-854-CWR-LRA, 2015 WL 1637336, at *1 (S.D. Miss.

Apr. 13, 2015) (citing Iqbal, 556 U.S. at 678).

1. Baker Donelson is responsible for the acts of Alexander and Seawright, its agents.

“A domestic or foreign professional corporation whose employees perform professional

services within the scope of their employment or of their apparent authority to act for the

corporation is liable to the same extent as its employees.” MISS. CODE ANN. § 79-10-67(2)

(emphasis added).

Baker Donelson argues that it is not responsible for Alexander and Seawright’s acts, but it

concedes that it would be if Alexander and Seawright acted “either ‘within the scope [1] of their

employment or [2] of their apparent authority to act for [Baker Donelson].’”16 The complaint

alleges facts that would establish Baker Donelson’s liability under either scenario. The Receiver

addresses apparent authority first.

A. Alexander and Seawright acted with apparent authority.

“Whether an agent has the apparent authority to bind the principal is a question of fact”

that looks to “(1) acts or conduct of the principal indicating the agent’s authority, (2) reasonable

reliance upon those acts by a third person, and (3) a detrimental change in position by the third

16
Doc. 29 at p. 5 (quoting MISS. CODE ANN. § 79-10-67(2)) (emphasis added).

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person as a result of that reliance.” Eaton v. Porter, 645 So. 2d 1323, 1325 (Miss. 1994). The

complaint alleges facts sufficient to establish each of these three prongs.

“(1) acts or conduct of the principal indicating the agent’s authority”

The first prong is “fulfilled merely by acts of the principal which clothed the agent with

indicia of authority.” Id. at 1326. How the principal, here Baker Donelson, “held itself out to the

general public” is irrelevant; the Mississippi Supreme Court “care[s] not whether anyone from

[Baker Donelson] but its agent[s] . . . made any representations to [third parties].” Id. The “key is

how . . . particular third parties . . . perceived the actions of the agent[s].” Id.

Eaton v. Porter is instructive. In that case, J.W. Eaton, Sr., an employee of Eaton Motors,

represented to the Porters that their car would be repaired at the Eaton Motors shop. Id. at 1324.

Instead he arranged for a different auto body shop to perform the repairs, and that shop’s repairs

were defective. Id. After the Porters sued J.W. Eaton, Jr. d/b/a Eaton Motors for the defective

repairs, Eaton, Jr. argued Eaton, Sr. had no apparent authority to bind Eaton Motors because Eaton

Motors did not “h[o]ld itself out to the public as a repair business” and because Eaton, Jr. never

met the Porters nor made any representations to them. Id. at 1326. The Mississippi Supreme Court

explained that Eaton Motors’ argument “misconstrue[d] our case law.” Id.

Eaton Motors had “provided Eaton, Sr. with a desk on its premises” and Eaton, Sr. was

listed on Eaton Motors’ business cards. Id. Eaton, Sr. endorsed checks on behalf of Eaton Motors

and signed the repair estimate in question with his name and “Eaton Motors.” Id. These facts were

“sufficient evidence to show that Eaton, Jr. d/b/a/ as Eaton Motors, had clothed Eaton, Sr. with the

necessary indicia of authority.” Id. In another case, the Mississippi Supreme Court held it was

sufficient, for apparent authority purposes, that a business named its agent “Secretary of the

Department of Finance, charg[ed] him with the duty to write checks for the [business], and

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provid[ed] him with [the business’s] Department of Finance letterhead.” Christian Methodist

Episcopal Church v. S & S Constr. Co., 615 So. 2d 568, 573 (Miss. 1993).

Applying this precedent, the Receiver’s complaint alleges more than sufficient facts to

establish Baker Donelson “clothed [Alexander and Seawright] with the necessary indicia of

authority.” Eaton, 645 So. 2d at 1326. Among other things, Baker Donelson allowed Alexander

and Seawright to use Baker Donelson’s Jackson address for their investment business.17 Baker

Donelson allowed Lamar Adams, Alexander, and Seawright to hold “closings” in Baker

Donelson’s office and to use Baker Donelson’s runners to pick up investors’ checks.18 Other Baker

Donelson shareholders, including from offices in other states, referred potential investors to

Alexander and Seawright.19 Baker Donelson allowed Alexander and Seawright to target clients of

Baker Donelson for whom Baker Donelson had recently closed transactions.20 Echoing Eaton,

Seawright even “drafted subscription agreements and accompanying documents” for investments

in Madison Timber that he sent to Adams from his Baker Donelson e-mail address.21

While Mississippi law cares not how Baker Donelson “held itself out to the general

public,” id., it nevertheless bears mention that Baker Donelson employed, and continues to

employ, Alexander as a “Senior Public Policy Advisor” and a “Broker-Dealer/Investment

Adviser.” 22 Seawright was, and is, a Baker Donelson shareholder and “a member of Baker

Donelson’s Board of Directors,” with “Practices” including “Securities” and “Emerging

17
Doc. 1 at ¶ 83.
18
Doc. 1 at ¶ 83.
19
Doc. 1 at ¶ 84.
20
Doc. 1 at ¶ 78.
21
Doc. 1 at ¶ 74. See Exhibit A. As Baker Donelson acknowledges, “[w]hen a plaintiff quotes from a document used
as a foundation for allegations in the complaint, the Court may examine the entire document to review a motion to
dismiss.” Thornton v. Micrografix, Inc., 878 F. Supp. 931, 933 (N.D. Tex. 1995). Paragraph 72 of the complaint
quotes the email that is Exhibit A.
22
Doc. 29-1 at 4.

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Companies.” 23 Baker Donelson argues that additional language on its website qualifies the

practices of Alexander and Seawright to exclude the activities Alexander and Seawright

performed relating to Madison Timber investments,24 but that argument only raises a factual issue

that should not be resolved on a motion to dismiss.

In short, the complaint alleges more than sufficient “acts or conduct of [Baker Donelson]

indicating [Alexander and Seawright’s] authority.”

“(2) reasonable reliance upon those acts by a third person”

The second prong asks whether it was reasonable for a third party to rely on the indicia of

authority. What is reasonable is a question of fact, improperly decided on a motion to dismiss.

It is relevant, however, that in Eaton the Porters’ reliance was reasonable in part because

Eaton, Sr. met with them at Eaton Motors. Eaton, 645 So. 2d at 1327. Here, too, Alexander and

Seawright met with Lamar Adams, investors, and potential investors at Baker Donelson’s offices

for “closings”25 and investment-related presentations.26 In Christian Methodist Episcopal Church,

a third party’s reliance was reasonable because it had received a letter “written on [the principal’s]

Department of Finance letterhead.” 615 So. 2d at 573. Here, too, Alexander and Seawright

communicated with Adams, investors, and potential investors using their Baker Donelson email

accounts; indeed, Seawright sent Adams legal documents from his Baker Donelson e-mail

address.27

23
Doc. 29-1 at 2, 5.
24
Doc. 29 at 6-7.
25
Doc. 1 at ¶ 83.
26
Doc. 1 at ¶¶ 83, 102.
27
See e.g., Exhibit A.

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These facts, coupled with the facts, among others, that Alexander and Seawright

emphasized their affiliation with Baker Donelson in their pitchbook,28 and that Alexander and

Seawright represented that an investor’s funds could be “run” through “BD [Baker Donelson]

escrow,” 29 are sufficient to establish that any third party—Adams, investors, and potential

investors—reasonably relied on Alexander and Seawright’s indicia of authority.

Baker Donelson argues that even if investors reasonably relied on Alexander and

Seawright’s indicia of authority, the same reliance by Adams and Madison Timber could not be

reasonable and therefore the Receiver, who stands in the shoes of Adams and Madison Timber,

cannot invoke apparent authority. This argument ignores the complaint’s allegations that

Alexander and Seawright held themselves out as agents of Baker Donelson to Adams as well—by

sending legal documents to Adams from their Baker Donelson email accounts, inviting Adams to

“closings” at Baker Donelson’s offices, and pitching the Madison Timber investment to Baker

Donelson clients. Far from offering any proof that Adams had “actual knowledge of the limits of

the agents’ authority,” Baker Donelson suggests only that Adams “presumably did not care

whether Baker Donelson supported the investments.” 30 That suggestion does not undermine

reasonable reliance by Adams or Madison Timber as a matter of law.

“(3) a detrimental change in position by the third person as a result of that reliance”

Finally, it goes without saying that Baker Donelson’s apparent backing was to everyone’s

detriment. But for Baker Donelson’s backing, the Madison Timber Ponzi scheme would not have

continuously grown—it would have failed before ensnaring hundreds of new unwitting

28
Doc. 1 at ¶ 103.
29
Doc. 1 at ¶ 71; see also Exhibit B (an e-mail quoted in paragraph 71 of the complaint).
30
Doc. 29 at 8-9.

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investors.31 Each new investor that Alexander and Seawright, with Baker Donelson’s apparent

backing, recruited to the Madison Timber Ponzi scheme increased Madison Timber’s liabilities

and, today, the Receivership Estate’s debts. E.g., Official Stanford Inv’rs Comm. v. Greenberg

Traurig, LLP, No. 3:12-CV-4641-N, 2014 WL 12572881, at *6 (N.D. Tex. Dec. 17, 2014)

(finding defendants had caused damages to the Stanford receivership estate because “they

contributed to the size and scope of the underlying scheme, which ultimately resulted in Stanford’s

financial ruin”).

Because Alexander and Seawright acted with Baker Donelson’s apparent authority, Baker

Donelson is vicariously liable for their acts. See MISS. CODE ANN. § 79-10-67(2).

B. Alexander and Seawright acted within the scope of their employment.

Alternatively, Baker Donelson is liable for Alexander and Seawright’s acts because

Alexander and Seawright acted within the scope of their employment. Baker Donelson’s own

website represents that the scope of professional services Alexander and Seawright offer are

“Broker-Dealer/Investment Adviser” services (Alexander) 32 and “Securities” and “Emerging

Companies” services (Seawright).33

The two cases on which Baker Donelson relies to argue Alexander and Seawright did not

act within the scope of their employment are inapplicable here. Both involved employees who

conducted romantic affairs at their workplace. Baker Donelson Bearman Caldwell & Berkowitz,

P.C. v. Seay, 42 So. 3d 474, 487 (Miss. 2010) (concluding that an attorney’s affair with a client’s

wife was not related to representation of the client); Children’s Med. Grp., P.A. v. Phillips, 940 So.

2d 931, 936 (Miss. 2006) (following “[o]ther jurisdictions [that] have specifically found that an

31
Doc. 1 at ¶ 183.
32
Doc. 29-1 at 4.
33
Doc. 29-1 at 2, 5.

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employee’s affair with a coworker is beyond the course and scope of employment”). A romantic

affair is “the quintessential example of an activity that is for purely personal benefit and outside the

scope of employment.” Seay, 42 So. 3d at 488. This lawsuit does not allege a romantic affair.

Seay also involved a Baker Donelson shareholder. In holding that the shareholder’s affair

with a client’s wife was not within the scope of his employment, the Mississippi Supreme Court

observed that his conduct was “different in kind from that authorized” by Baker Donelson. Id.

(emphasis removed). Here, by contrast, Alexander and Seawright’s acts were “of the kind [they

were] employed to perform.” Id. (quoting Restatement (Second) of Agency § 228(1)(a)).

Alexander, who provides professional “Investment Adviser” services, 34 purported to provide

“smart advice” to potential investors to “put [their] money to work” by “invest[ing] in [] timber

round[s].”35 Seawright, a “Securities” lawyer presumably qualified to draft legal documents,36

drafted “subscription agreements and accompanying documents for the sales of units” in the

Alexander Seawright Timber Fund, which invested solely in Madison Timber.37

Baker Donelson argues that the court in Seay emphasized that its shareholder’s affair was

“not in any way related to [a legal] representation.”38 But the sales of investments by professionals

who hold themselves out as having the education, experience, and judgment to provide

professional advice on such matters is something else. The complaint alleges Alexander and

Seawright specifically targeted clients of Baker Donelson for whom Baker Donelson had recently

closed transactions39 and even told one such client, “[r]unning funds through us or BD [Baker

34
Doc. 29-1 at 4.
35
Doc. 1 at ¶ 77.
36
Doc. 29-1 at 2, 5.
37
Doc. 1 at ¶ 74.
38
Doc. 29 at 7 (quoting Seay, 42 So. 3d at 489).
39
Doc. 1 at ¶ 78.

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Donelson] escrow is not a problem” and all “legal and other admin expenses” would “come out of

our share.”40

These facts are sufficient to establish that Alexander and Seawright acted within the scope

of their employment, such that Baker Donelson is vicariously liable for their acts. See MISS. CODE

ANN. § 79-10-67(2).

2. The complaint states a claim for aiding and abetting.

A. This Court has recognized a claim for aiding and abetting.

Baker Donelson represents that “Mississippi law does not recognize a cause of action for

civil aiding and abetting.”41 Although no Mississippi state court has had the occasion to address

the issue, every Mississippi federal court to address the issue has agreed that Mississippi law

would recognize a claim for civil aiding and abetting as set forth in the Restatement (Second) of

Torts section 876(b). This includes the United States Bankruptcy Court for the Southern District

of Mississippi in In re Evans, 467 B.R. 399 (Bankr. S.D. Miss. 2011), which Baker Donelson

selectively quotes in its memorandum.

As the court In re Evans court explained, this Court in Dale v. Ala Acquisitions, Inc., 203 F.

Supp. 2d 694 (S.D. Miss. 2002), made an Erie guess that Mississippi would recognize a cause of

action under section 876(b) of the Restatement “(1) because a majority of other jurisdictions have

done so and (2) because Mississippi recognizes the analogous tort of civil conspiracy.” In re

Evans, 467 B.R. at 409. Since Dale, this Court has consistently recognized a cause of action for

aiding and abetting under Mississippi state law.42 The In re Evans court recognized the viability of

40
Doc. 1 at ¶ 71; see also Exhibit B.
41
Doc. 29 at 19.
42
See Natchez Reg’l Med. Ctr. v. Quorum Health Res., LLC, 879 F. Supp. 2d 556, 574 (S.D. Miss. 2012) (declining to
grant summary judgment to defendants on an aiding and abetting fraud claim); Dickens v. A-1 Auto Parts & Repair,
Inc., No. 1:18CV162-LG-RHW, 2019 WL 508074, at *2 (S.D. Miss. Feb. 8, 2019) (“Federal courts in this district
have concluded that Mississippi courts would recognize a claim of aiding and abetting fraud or civil conspiracy under

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a cause of action based on section 876(b) but declined to hold that Mississippi law would

recognize a cause of action cased on section 876(c). 457 B.R. at 409. As Baker Donelson

acknowledges, the Receiver’s cause of action arises under section 876(b), not section 876(c).43

B. The complaint alleges sufficient facts to state a claim for aiding and abetting.

“For harm resulting to a third person from the tortious conduct of another, one is subject to

liability if he knows that the other’s conduct constitutes a breach of duty and gives substantial

assistance or encouragement to the other so to conduct himself.” RESTATEMENT (SECOND) OF

TORTS § 876(b).

Baker Donelson, Alexander, and Seawright knew that Lamar Adams was the manager of

his company, Madison Timber. They therefore knew that Adams owed Madison Timber fiduciary

duties of care. Mississippi law requires a manager to discharge his duties in good faith and fair

dealing, with ordinary care, and in a manner that he reasonably believed was in the best interests of

the company. See MISS. CODE ANN. § 79-29-123(6)(a). Adams breached those duties by misusing

Madison Timber’s corporate form to sustain a Ponzi scheme. E.g., Greenberg Traurig, LLP, 2014

WL 12572881, at *8 (“the underlying fiduciary duties on which Plaintiffs’ claims are based are

those owed by directors and officers of the Stanford Financial Group to their respective Stanford

entities”).

The complaint alleges that Baker Donelson, Alexander, and Seawright, by recruiting new

investors to the Madison Timber Ponzi scheme, aided and abetted Adams in “committing breaches

of duties owed by Adams to Madison Timber and in other tortious conduct.”44 E.g., Official

the Restatement (Second) of Torts § 876(b).”); U-Save Auto Rental of Am., Inc. v. Moses, No. 1:02CV689GURO,
2006 WL 211955, at *1 (S.D. Miss. Jan. 27, 2006) (denying a motion to dismiss a claim for aiding and abetting breach
of contract); see also Wright v. Life Investors Ins. Co. of Am., No. CIV.A. 2:08CV3-P-A, 2008 WL 4450260, at *1
(N.D. Miss. Sept. 26, 2008) (denying a motion to dismiss a claim for aiding and abetting fraud).
43
Doc. 1 at ¶ 127.
44
Doc. 1 at ¶ 128.

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Stanford Inv’rs Comm. v. Breazeale Sachse & Wilson LLP, No. 3:11-CV-0329-N, 2015 WL

13740747, at *9, n.11 and accompanying text (N.D. Tex. Mar. 24, 2015) (allegations that law firm

referred clients to Ponzi scheme support “reasonable inference” of substantial assistance).

Baker Donelson argues it cannot be liable for aiding and abetting “because neither

Alexander, Seawright, nor anyone at Baker Donelson is alleged to have known that Madison

Timber was a Ponzi scheme.”45 But the complaint expressly alleges that they “knew or should

have known that Madison Timber was a Ponzi scheme” in view of the numerous red flags

described in the complaint.46 These red flags, summarized in paragraphs 94–100 of the complaint,

included the following:

95. The timber deeds and cutting agreements between landowners and
Madison Timber were fake. The landowners’ signatures, forged by Adams, often
looked the same. A call to any one of the hundreds of purported landowners, or a
simple check of the title for any one of the hundreds of purported tracts of land,
would have confirmed the truth. Neither Alexander nor Seawright, nor anyone at
Baker Donelson, ever called a landowner or checked a tract’s title.
96. Madison Timber also had no real contracts with any mills. A call to any
one of the mills for which Madison Timber purported to have contracts would have
confirmed the truth. Neither Alexander nor Seawright, nor anyone at Baker
Donelson, ever called a mill.
97. Adams required that an investor agree that he or she would not record
the deed by which Madison Timber purported to grant its own rights to the investor
unless and until Madison Timber failed to make a payment due under the
promissory note. Seawright quipped that “I have been clear that I am no timber
expert”—but he is unquestionably a lawyer to whom his clients and investors
looked to evaluate the investment’s risks. Incredibly, notwithstanding the
suspicious “agreement not to record,” neither Alexander nor Seawright, nor anyone
at Baker Donelson, questioned this requirement.
98. The “profit” that Adams promised was 300% to 400% better than that
payable by any other fully collateralized investment and was uniform and
consistent. This fact should have been a glaring warning sign but Alexander, who
Baker Donelson presents as a qualified and experienced advisor, turned this
warning sign into a selling point. Alexander bragged about his “six year perfect

45
Doc. 29 at 14.
46
Doc. 1 at ¶ 129.

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track record” of consistent uniform returns under his “beautiful, albeit simple,
financial model.”
99. Adams purported to have identified mills with an insatiable demand for
timber at uniform prices. The market price for timber is readily available from
multiple sources, and any one of those sources would have confirmed that the
market price for timber actually rises and falls, sometimes dramatically, over short
periods of time. Neither Alexander nor Seawright, nor anyone at Baker Donelson,
ever evaluated the investment in light of such information. To the contrary,
Seawright gloated that “[Adams] has stated that volume is not problem and
indicates there are enough opportunities for him to soak up as much capital as we
can raise.”
100. In 2014 Adams decided that he did not want to have to manage
Madison Timber during the month of December. He told his “bird dogs,” including
Alexander and Seawright, that Madison Timber would not issue checks in
December going forward; what had been a 12-month payoff would become a
13-month payoff, skipping the last month of the year. Seawright blindly passed on
to investors the dubious explanation that mills shut down in December for OSHA
inspections . . . .

Baker Donelson creates out of thin air a “universal rule in this country” that “banks,

lawyers, brokerage houses, [or] accountants” are not liable for aiding and abetting a fraudulent

scheme based on “red flags, smoke, and other irregularities.”47 Baker Donelson cites El Camino

Res., LTD v. Huntington Nat’l Bank, 722 F. Supp. 2d 875, 907–08 (W.D. Mich. 2010). The only

“universal rule” to which the El Camino court referred is the purported principle that “a bank’s

relationship is with its customer and that the bank owes third parties no duty of care to monitor a

customer’s activities.” 722 F. Supp. 2d at 907. That principle is inapplicable here, and in any

event, El Camino is not binding on this Court. Indeed, in Ponzi scheme cases decided in the Fifth

Circuit, awareness that an investment offered “unrealistic rates of return” supports knowledge for

aiding and abetting purposes. Janvey v. Proskauer Rose LLP, No. 3:13-CV-0477-N, 2015 WL

11121540, at *5 (N.D. Tex. June 23, 2015).

Moreover, the complaint does not depend on red flags alone. The complaint expressly

alleges at paragraphs 86–88 that Alexander and Seawright falsely represented that they personally
47
Doc. 29 at 14.

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inspected the timber and “mill contracts” underlying each investment. These representations were

knowingly false, because there were no timber and no “mill contracts” to inspect:

86. Investors were led to believe that Alexander and Seawright personally
inspected the timber underlying each investment. Of course they did not. Alexander
and Seawright gave investors “Equity Term Sheets” that described each upcoming
investment opportunity. An “Equity Term Sheet” dated March 5, 2017, for
instance, explained that for the “minimum investment” of $25,000, an investor
would share in the “cutting rights on tracts of land in various counties (the ‘Timber
Rights’).” Like all of Alexander and Seawright’s “Equity Term Sheets,” the
“Equity Term Sheet” dated March 5, 2017, expressly represented that Alexander
and Seawright would personally inspect the property in question:
Company [Alexander and Seawright] will inspect the property
related to the Timber Rights, must receive the original, executed
Note and timber deed and will inspect the executed agreement(s)
with the timber mill(s).
Alexander and Seawright could not and did not inspect the property in
question—nor “the executed agreement(s) with the timber mill(s)”—because such
did not exist. These representations were patently false.
87. Alexander and Seawright even devised a “Timber Rights Investment
Closing Checklist” that included among its list of things to do “Review Mill
Contract” and “Review Land re Timber.” Alexander and Seawright could not and
did not review any “Mill Contract” or “Land re Timber” because there was no “Mill
Contract” or “Land re Timber” to review.
88. On information and belief, Alexander and Seawright “inspected” a
purported timber tract only once or twice, at the very inception of their partnership
with Adams. The “inspection” was hardly professional. Email traffic indicates
“inspection” meant “[grab] a cooler of beer and make a loop.”

Because Alexander and Seawright were Baker Donelson’s agents, their knowledge is imputed to

Baker Donelson. See Lane v. Oustalet, 873 So. 2d 92, 95–96 (Miss. 2004) (“The law of agency

generally imputes knowledge and information received by an agent in conducting the business of a

principal to the principal, even where that knowledge or information is not communicated by the

agent to the principal.”); see also Proskauer, 2015 WL 11121540, at *5 (citing Texas agency law

to impute a lawyer’s knowledge of a Ponzi scheme to law firms where he was employed).

Reading the complaint’s allegations in a light most favorable to the Receiver, and

indulging reasonable inferences in her favor, the complaint states a claim for aiding and abetting.

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3. The complaint states a claim for civil conspiracy.

A conspiracy is “a combination of persons for the purpose of accomplishing an unlawful

purpose or a lawful purpose unlawfully.” Shaw v. Burchfield, 481 So. 2d 247, 255 (Miss. 1985).

An agreement to conspire “may be express, implied, or based on evidence of a course of

conduct.” Bradley v. Kelley Bros. Contractors, 117 So. 3d 331, 339 (Miss. Ct. App. 2013)

(emphasis added). The three elements of civil conspiracy claim are: “(1) the existence of a

conspiracy, (2) an overt act in furtherance of that conspiracy, and (3) damages arising therefrom.”

Wells v. Shelter Gen. Ins. Co., 217 F. Supp. 2d 744, 753 (S.D. Miss. 2002) (citing Delta Chem. &

Petroleum, Inc. v. Citizens Bank of Byhalia, 790 So. 2d 862, 877 (Miss. App. 2001)). Facts

supporting the “substantial assistance” prong of an aiding and abetting claim also support a

showing of “an overt act in furtherance of a [Ponzi scheme] conspiracy.” Rotstain v. Trustmark

Nat’l Bank, No. 3:09-CV-2384-N, 2015 WL 13034513, at *11 (N.D. Tex. Apr. 21, 2015).

Baker Donelson argues that under “settled Mississippi law,” the complaint does not state a

civil conspiracy claim because it “does not allege that anyone at Baker Donelson, including

Alexander and Seawright, knew that Madison Timber was a Ponzi scheme.”48 This argument fails

on two grounds. First, and again, the complaint expressly alleges that Baker Donelson, Alexander,

and Seawright “knew or should have known that Madison Timber was a Ponzi scheme”49 in view

of the red flags summarized in paragraphs 94–100 and reproduced above. Moreover, and again, the

complaint does not depend on red flags alone. The complaint expressly alleges at paragraphs

86–88 that Alexander and Seawright falsely represented that they personally inspected the timber

48
Doc. 29 at 18. Baker Donelson also argues that the Receiver cannot base her civil conspiracy claim on Alexander
and Seawright’s unlawful sale of unregistered securities. The Receiver does not purport to assert a private right of
action for Alexander and Seawright’s sale of unregistered securities. The Receiver would be remiss, however, to fail to
point to that unlawfulness, which is further “evidence of [Alexander and Seawright’s] course of conduct.” Bradley,
117 So. 3d at 339.
49
Doc. 1 at ¶ 120.

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and “mill contracts” underlying each investment. These representations were knowingly false,

because there were no timber and no “mill contracts” to inspect.

Second, “settled Mississippi law” holds that a conspiracy can be formed by a “mere tacit

understanding between the conspirators to work to a common purpose.” Aetna Ins. Co. v.

Robertson, 94 So. 7, 22 (1922), modified on suggestion of error for other reasons, 95 So. 137

(1923). Alexander and Seawright formed a common purpose with Lamar Adams to “pool other

people’s money to invest in Madison Timber,”50 and Baker Donelson furthered that purpose.

Baker Donelson knew that Alexander and Seawright used their affiliation with Baker Donelson to

recruit new investors to Madison Timber and allowed it.51 See, e.g., Rotstain, 2015 WL 13034513,

at *11 (even the provision of “routine [professional] services” is “sufficient to allege substantial

assistance and an overt act in furtherance of a conspiracy” if those services “inherently facilitated

the financial transactions and operations that formed the lifeblood of the [Ponzi] scheme”).

Baker Donelson cites Midwest Feeders, Inc. v. Bank of Franklin, 886 F.3d 507, 520 (5th

Cir. 2018), for the general proposition that civil conspiracy requires proof that the coconspirator

“knew of [the] fraudulent scheme.” In fact, in affirming summary judgment in that case, the Fifth

Circuit nevertheless observed that “civil conspiracy can be—and often is—established through

circumstantial evidence.” Id. at 520. Indeed, the district court in Midwest Feeders denied a motion

to dismiss because alleged “circumstantial evidence” created “a factual inquiry regarding a civil

conspiracy.” Midwest Feeders, Inc. v. Bank of Franklin, 114 F. Supp. 3d 419, 431 (S.D. Miss.

2015). Where one conspirator had “confessed to fraudulent activity,” it was sufficient, at the

motion to dismiss stage, that his coconspirators were alleged to have failed to investigate. Id.

50
Doc. 1 at ¶ 70.
51
Doc. 1 at ¶ 82.

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Applying this precedent, and reading the complaint’s allegations in a light most favorable

to the Receiver and indulging reasonable inferences in her favor, the complaint unquestionably

states facts supporting a civil conspiracy claim sufficient to survive a motion to dismiss.

4. The complaint states a claim for recklessness, gross negligence, and at a minimum
negligence; and for negligent retention and supervision.

“Negligence is a failure to do what the reasonable person would do under the same or

similar circumstances.” Estate of St. Martin v. Hixson, 145 So. 3d 1124, 1128 (Miss. 2014).

Recklessness “is a failure or refusal to exercise any care.” Maldonado v. Kelly, 768 So. 2d 906, 910

(Miss. 2000).52

Baker Donelson argues it cannot be liable for negligence or recklessness to the

Receivership Estate, because its duties of care are to its clients only. But Baker Donelson

misconstrues the Receiver’s claim as a claim for “professional negligence.”53 The complaint

currently alleges a claim for professional negligence, or attorney malpractice, only against Butler

Snow—not against Baker Donelson. Against Baker Donelson, the complaint currently alleges

ordinary negligence only. The complaint alleges Baker Donelson, Alexander, and Seawright

“were in advantageous positions to discover Adams’s fraud” and “[i]n view of the numerous red

flags described in this complaint, a reasonable person”—not a reasonable lawyer—“in the same or

similar circumstances would have discovered Adams’s fraud.”54 The complaint further alleges

they “not only failed to exercise due care, they failed or refused to exercise any care at all in their

dealings with Adams.”55

52
See also Dame v. Estes, 101 So. 2d 644, 645 (Miss. 1958) (“Gross negligence is that course of conduct which, under
the particular circumstances, discloses a reckless indifference to consequences without the exertion of any substantial
effort to avoid them.”).
53
Doc. 29 at ¶ 21 (emphasis added).
54
Doc. 1 at ¶ 138.
55
Doc. 1 at ¶ 139.

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The case law on which Baker Donelson relies holds only that lawyers generally are not

liable to non-clients for their negligent provision of legal services. See Great Am. E & S Ins. Co. v.

Quintairos, Prieto, Wood & Boyer, P.A., 100 So. 3d 420, 425 (Miss. 2012) (“But here, Great

American has alleged nothing more than professional negligence.”). Because the complaint does

not allege, and the Receiver’s claim does not depend, on Baker Donelson’s negligent provision of

legal services, that case law is inapplicable here. 56 Baker Donelson has stated no basis for

dismissing the Receiver’s claim for recklessness, gross negligence, and at a minimum negligence.

The complaint separately alleges a claim against Baker Donelson for negligent retention

and supervision. A claim for negligent retention and supervision is also “simply a negligence

claim.” Roman Catholic Diocese of Jackson v. Morrison, 905 So. 2d 1213, 1229 (Miss. 2005).

“[A]n employer will be liable for negligent hiring or retention of his employee when an employee

injures a third party if the employer knew or should have known of the employee’s incompetence

or unfitness.” Backstrom v. Briar Hill Baptist Church, Inc., 184 So. 3d 323, 327 (Miss. Ct. App.

2016) (quoting Parmenter v. J&B Enters. Inc., 99 So. 3d 207, 217 (Miss. Ct. App. 2007)).

Baker Donelson argues it cannot be liable for negligent retention and supervision because

“employers do not have a duty to supervise their employees when the employees are off-duty or

not working.”57 But the case on which Baker Donelson relies, Seay, is the same case on which it

relies to argue Alexander and Seawright did not act within the scope of their employment. That

case held only that a Baker Donelson shareholder’s romantic affair with a client’s wife was

56
Contrast the complaint, Doc. 1 at ¶¶ 135–41, with the facts in Great Am. E & S Ins. Co. v. Quintairos, Prieto, Wood
& Boyer, P.A., 100 So. 3d 420, 425 (Miss. 2012): “Great American’s claims for ordinary negligence, gross negligence,
and negligent supervision all allege that Quintairos breached its duty in providing legal services to Shady Lawn. As we
have said, ‘a legal malpractice action is a negligence action dressed in its Sunday best.’ A plaintiff, therefore, must
allege something other than professional negligence to establish an ordinary negligence claim. For instance, lawyers
who fail to maintain their offices in a reasonably safe manner are subject to their clients’ ordinary negligence claims.
But here, Great American has alleged nothing more than professional negligence.”
57
Doc. 29 at ¶ 17 (quoting Baker Donelson Bearman Caldwell & Berkowitz, P.C. v. Seay, 42 So. 3d 474, 489 (Miss.
2010)).

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“different in kind from that authorized” by Baker Donelson. Seay, 42 So. 3d at 487. As shown

above, Alexander and Seawright’s acts were “of the kind [they were] employed to perform.” Id.

(quoting Restatement (Second) of Agency § 228(1)(a)). Alexander, who provides professional

“Investment Adviser” services,58 purported to provide “smart advice” to potential investors to “put

[their] money to work” by “invest[ing] in [] timber round[s].”59 Seawright, a “Securities” lawyer

60
presumably qualified to draft legal documents, drafted “subscription agreements and

accompanying documents for the sales of units” in the Alexander Seawright Timber Fund, which

invested solely in Madison Timber.61 These facts are sufficient to establish that Alexander and

Seawright acted within the scope of their employment, see MISS. CODE ANN. § 79-10-67(2).

At a minimum, Baker Donelson had a duty to supervise acts that Alexander and Seawright

undertook within Baker Donelson’s offices and in reliance on Baker Donelson’s name and

resources. The complaint alleges sufficient facts, described above, which would establish that

Baker Donelson failed to do so. When a receiver adequately pleads that an employee “provided

material assistance” to a Ponzi scheme, a motion to dismiss a negligent retention or supervision

claim should be denied because it is “not unreasonable to infer” that employers “were aware to

some degree” of the material assistance, “[a]ssuming an ordinary degree of supervision.”

Proskauer Rose LLP, 2015 WL 11121540, at *8.62

58
Doc. 29-1 at 4.
59
Doc. 1 at ¶ 77.
60
Doc. 29-1 at 2, 5.
61
Doc. 1 at ¶ 74.
62
The court in Proskauer applied Texas law to explain that negligent supervision “requires a plaintiff to demonstrate
that the employee’s tortious conduct was foreseeable to the employer.” Texas’s standard for negligent supervision is
the same as Mississippi’s. CoTemp, Inc. v. Houston W. Corp., 222 S.W.3d 487, 492 (Tex. App. 2007) (“The basis of
responsibility under the doctrine of negligent retention is the master’s negligence in retaining in his employ an
incompetent servant whom the master knows, or by the exercise of reasonable care should have known, was
incompetent or unfit, thereby creating an unreasonable risk of harm to others.”).

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5. The doctrine of in pari delicto does not bar the Receiver’s claims.

The doctrine of in pari delicto is an equitable, affirmative defense, which provides that “a

wrongdoer is not entitled to compel contribution from a joint tortfeasor.” Sneed v. Ford Motor Co.,

735 So. 2d 306, 308 (Miss. 1999). Baker Donelson argues the Receiver’s claims are barred by the

doctrine of in pari delicto because the Receiver, having “stepped into the shoes” of Adams and

Madison Timber, can have no right of action against Baker Donelson. Baker Donelson is wrong.

In federal equity receiverships, the Fifth Circuit has adopted what Baker Donelson calls the

“innocent successor” exception to the doctrine of in pari delicto. This exception allows a receiver

to assert tort claims against professionals even though she has stepped into the wrongdoer’s shoes.

The rationale for applying the “innocent successor” exception in a federal equity receivership such

as this is straightforward: A receiver has a duty to maximize the value of a receivership estate for

the benefit of victims, and “[a]pplication of in pari delicto would undermine one of the primary

purposes of the receivership.” Jones v. Wells Fargo Bank, N.A., 666 F.3d 955, 966 (5th Cir. 2012).

Application of in pari delicto in a federal equity receivership would also “be inconsistent with the

purposes of the [in pari delicto] doctrine,” which is “not for the benefit of either party and not to

punish either of them, but for the benefit of the public.” Id. (quoting Lewis v. Davis, 145 Tex. 468,

199 S.W.2d 146, 151 (1947)). See also Janvey v. Adams & Reese, LLP, No. 3:12-CV-0495-N,

2013 WL 12320921, at *3 (N.D. Tex. Sept. 11, 2013) (“In other words, whether to apply in pari

delicto typically depends on what best serves public policy.”).

“It is [therefore] well established [in the Fifth Circuit] that when the receiver acts to protect

innocent creditors . . . [s]he can maintain and defend actions done in fraud of creditors even though

the corporation would not be permitted to do so.” Jones, 666 F.3d at 966 (internal quotation marks

and citation omitted). Indeed, the Stanford court has refused to apply the doctrine of in pari delicto

to that receiver’s claims against professionals. See, e.g., Greenberg Traurig, LLP, 2014 WL

22
 Case 3:18-cv-00866-CWR-FKB Document 35 Filed 03/07/19 Page 23 of 26

12572881, at *4 (“This Court has already held that the in pari delicto defense has little application

when a receiver seeks to reclaim assets for innocent investors.”); Janvey v. Willis of Colorado,

Inc., No. 3:13-CV-3980-N, 2014 WL 12670763, at *4 (N.D. Tex. Dec. 5, 2014) (same); Adams &

Reese, LLP, 2013 WL 12320921, at *3 (“The Fifth Circuit, when applying Texas law, seems to

hold the view that when a receiver is protecting innocent creditors or recovering assets for

investors and creditors, the defense of in pari delicto should be rejected generally.”).

Baker Donelson contends that “Mississippi courts have not yet spoken on the question”

and speculates that, if asked, they would find that the “innocent successor” exception does not

apply here.63 Baker Donelson premises its argument on case law from the Seventh Circuit and

from New York, which it characterizes as a “clear trend.”64 Baker Donelson does not explain why

it believes Mississippi courts would look to courts in the Seventh Circuit or New York for

guidance, when courts in the Fifth Circuit have addressed the issue repeatedly and convincingly.

Baker Donelson does not explain why it believes Mississippi courts would reject the Fifth

Circuit’s rationale in virtually identical cases.

Indeed, Mississippi courts have long recognized “important limitations” to the in pari

delicto doctrine. Morrissey v. Bologna, 123 So. 2d 537, 543 (Miss. 1960). “Even where the

contracting parties are in pari delicto, the courts may interfere from motives of public policy.

Whenever public policy is considered as advanced by allowing either party to sue for relief against

the transaction, then relief is given to him.” Id.; see also Rideout v. Mars, 54 So. 801, 802 (Miss.

1911) (“However, there is a well-defined exception to that rule, which is that, where the paramount

public interest demands it, the court will intervene in favor of one as against the other.”).

63
Doc. 29 at 17.
64
Doc. 29 at 19.

23
 Case 3:18-cv-00866-CWR-FKB Document 35 Filed 03/07/19 Page 24 of 26

Tellingly, Baker Donelson fails to address the important public policy reasons for not

applying in pari delicto in this case. Adams & Reese, 2013 WL 12320921, at * 3 (“The parties have

not briefed any public policy rationales, and thus the Court declines to dismiss the Receiver’s

claims on in pari delicto grounds.”). Plainly, there is a “paramount public interest” in the

Receiver’s recovery. There is no public interest in, and the purpose of the in pari delicto doctrine is

not served by, barring the Receiver from pursuing claims against defendants who are alleged to

have knowingly falsely represented that they personally inspected the timber and “mill contracts”

underlying each Madison Timber investment.65 Excepting the Receiver from the in pari delicto

doctrine is prudent and consistent with Fifth Circuit and Mississippi law.

Baker Donelson argues that, even if the “innocent successor” exception to the doctrine of

in pari delicto applies, it should except the Receiver’s fraudulent transfer claims only, not the tort

claims the Receiver alleges against Baker Donelson. Courts in the Fifth Circuit have flatly rejected

this argument. A federal equity receiver may pursue any claims against any third parties whose

actions contributed to the success of a Ponzi scheme, and therefore to the debts of a receivership

estate. See, e.g., Rotstain, 2015 WL 13034513, at *9 (“The Court has rejected [the argument that

the Receiver has no standing to bring tort claims] in the past and held that the Receiver has

standing to assert tort claims based on the harm to the Receivership Estate’s ability to repay its

creditors.”); Greenberg Traurig, LLP, 2014 WL 12572881, at *4 (“This Court has held that the

Receiver may assert tort claims against third parties based on allegations that the third parties’ torts

contributed to the liabilities of the Receivership Estate.”); Willis of Colorado, Inc., 2014 WL

12670763, at *3 (allowing the receiver to pursue “common law tort claims because they allege that

Defendants’ participation in a fraudulent marketing scheme increased the sale of Stanford’s CDs,

65
Doc. 1 at ¶¶ 86-88.

24
 Case 3:18-cv-00866-CWR-FKB Document 35 Filed 03/07/19 Page 25 of 26

ultimately resulting in greater liability for the Receivership Estate”); Adams & Reese, LLP, 2013

WL 12320921, at *1 (allowing the receiver to pursue civil conspiracy claim is for conspiracy to

commit fraud, breaches of fiduciary duty, fraudulent transfers, and conversion because the lawyer

defendants “were in advantageous positions to discover Stanford’s fraud and . . . they either failed

to discover it or discovered it and chose not to act because they benefitted from the enterprise

through their director fees or legal fees”). Like the courts before it, this Court too should find “in

pari delicto no impediment to the Receiver’s standing to assert [her] tort claims.” Greenberg

Traurig, LLP, 2014 WL 12572881, at *4.

CONCLUSION

Baker Donelson has not stated a basis for dismissing any of the Receiver’s claims against

Baker Donelson. The Receiver asks to be permitted to proceed with discovery, in anticipation of

presenting of her case to a jury.

25
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March 7, 2019
Respectfully submitted,

/s/ Lilli Evans Bass /s/ Rebekka C. Veith

BROWN BASS & JETER, PLLC FISHMAN HAYGOOD, LLP
Lilli Evans Bass, Miss. Bar No. 102896 Admitted pro hac vice
LaToya T. Jeter, Miss. Bar No. 102213 Brent B. Barriere, Primary Counsel
1755 Lelia Drive, Suite 400 Jason W. Burge
Jackson, Mississippi 39216 Kristen D. Amond
Tel: 601-487-8448 Rebekka C. Veith
Fax: 601-510-9934 201 St. Charles Avenue, Suite 4600
bass@bbjlawyers.com New Orleans, Louisiana 70170
Receiver’s counsel Tel: 504-586-5253
Fax: 504-586-5250
bbarriere@fishmanhaygood.com
jburge@fishmanhaygood.com
kamond@fishmanhaygood.com
rveith@fishmanhaygood.com
Receiver’s counsel

CERTIFICATE OF SERVICE

I certify that I electronically filed the foregoing with the Clerk of Court using the ECF

system which sent notification of filing to all counsel of record.

Date: March 7, 2019 /s/ Rebekka C. Veith

26
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 1 of 28

IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER
PROPERTIES, LLC,
Case No. 3:18-cv-00866-CWR-FKB
Plaintiff,
v. Hon. Carlton W. Reeves

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON, ORAL ARGUMENT REQUESTED
BEARMAN, CALDWELL & BERKOWITZ
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT,
Defendants.

MEMORANDUM OF LAW IN SUPPORT OF BAKER, DONELSON, BEARMAN,

CALDWELL & BERKOWITZ PC’S MOTION TO DISMISS THE COMPLAINT

Michael W. Ulmer (MSB #5760)

James J. Crongeyer, Jr. (MSB #10536)
WATKINS & EAGER PLLC
400 East Capitol Street, Suite 300 (39201)
Post Office Box 650
Jackson, MS 39205
Tel.: (601) 965-1900
Fax: (601) 965-1901
Email: mulmer@watkinseager.com

Craig D. Singer (pro hac vice)

Benjamin W. Graham (pro hac vice)
WILLIAMS & CONNOLLY LLP
725 Twelfth Street, N.W.
Washington, DC 20005
Tel.: (202) 434-5000
Fax: (202) 434-5029
Email: csinger@wc.com

Counsel for Defendant Baker, Donelson,

Bearman, Caldwell & Berkowitz PC
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 2 of 28

TABLE OF CONTENTS

INTRODUCTION ...........................................................................................................................1

FACTUAL ALLEGATIONS ..........................................................................................................3

STANDARD OF REVIEW .............................................................................................................5

ARGUMENT ...................................................................................................................................5

I. Baker Donelson Is Not Responsible for the Actions of Alexander and Seawright. ............5

A. Alexander’s and Seawright’s Investment Activities Were Outside the Scope

of Their Employment with Baker Donelson. ...........................................................5

B. The Complaint Does Not State an “Apparent Authority” Claim. ............................8

C. The Complaint Does Not State a Claim for Negligent Supervision and
Retention (Count VIII). ..........................................................................................10

II. The Complaint’s Causes of Action Do Not State a Claim for Relief Against Baker
Donelson. ...........................................................................................................................12

A. The Complaint Does Not State a Claim for Civil Conspiracy (Count I). ..............12

B. The Complaint Does Not State a Claim for Aiding and Abetting (Count II). .......13

C. The Complaint Does Not State a Claim for “Recklessness,” “Gross

Negligence,” or “Negligence” (Count III). ............................................................14

III. In Pari Delicto Bars the Receiver’s Claims. ......................................................................15

A. The Receiver Stands in the Shoes of the Most Culpable Parties, Madison
Timber and Adams. ................................................................................................16

B. The Receiver Cannot Claim an “Innocent Successor” Exception to In Pari

Delicto. ...................................................................................................................17

IV. The Complaint Should Be Dismissed with Prejudice. .......................................................20

CONCLUSION ..............................................................................................................................20
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 3 of 28

TABLE OF AUTHORITIES

Federal Cases: Page(s)

Alexander v. Verizon Wireless Servs., L.L.C.,

875 F.3d 243 (5th Cir. 2017) ...................................................................................................16

Bell Atl. Corp. v. Twombly,

550 U.S. 544 (2007) ...................................................................................................................5

Belmont v. MB Inv. Partners, Inc.,

708 F.3d 470 (3d Cir. 2013).....................................................................................................11

Dickens v. A-1 Auto Parts & Repair, Inc.,

No. 1:18-cv-162-LG-RHW, 2018 WL 5726206 (S.D. Miss. Nov. 1, 2018) ...........................14

El Camino Res., LTD. v. Huntington Nat. Bank,

722 F. Supp. 2d 875 (W.D. Mich. 2010), aff’d, 712 F.3d 917 (6th Cir. 2013)........................14

Hays v. Pearlman,
2010 WL 4510956 (D.S.C. Nov. 2, 2010) ...............................................................................18

Hymel v. FDIC,
925 F.2d 881 (5th Cir. 1991) ...................................................................................................16

In re Evans,
467 B.R. 399 (Bankr. S.D. Miss. 2011) ...................................................................................14

In re Orthopedic Bone Screw Prod. Liab. Litig.,

193 F.3d 781 (3d Cir. 1999).....................................................................................................13

In re S. Scrap Material Co., LLC,

541 F.3d 584 (5th Cir. 2008) .....................................................................................................5

Janvey v. Adams & Reese, LLP,

2013 WL 12320921 (N.D. Tex. Sept. 11, 2013)......................................................................19

Janvey v. Democratic Senatorial Campaign Comm., Inc.,

712 F.3d 185 (5th Cir. 2013) .......................................................................................16, 17, 18

Jones v. Greninger,
188 F.3d 322 (5th Cir. 1999) ...................................................................................................20

Jones v. Wells Fargo Bank, N.A.,

666 F.3d 955 (5th Cir. 2012) .............................................................................................19, 20

Knauer v. Jonathon Roberts Fin. Grp., Inc.,

348 F.3d 230 (7th Cir. 2003) .......................................................................................15, 19, 20

iii
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 4 of 28

Lerner v. Fleet Bank, N.A.,

459 F.3d 273 (2d Cir. 2006).....................................................................................................14

Midwest Feeders, Inc. v. Bank of Franklin,

886 F.3d 507 (5th Cir. 2018) ...................................................................................................12

Peterson v. McGladrey & Pullen, LLP,

676 F.3d 594 (7th Cir. 2012) .............................................................................................18, 19

Pinter v. Dahl,
486 U.S. 622 (1988) .................................................................................................................13

Scholes v. Lehmann,
56 F.3d 750 (7th Cir. 1995) ...............................................................................................17, 19

Thornton v. Micrografix, Inc.,

878 F. Supp. 931 (N.D. Tex. 1995) ...........................................................................................6

Tichenor v. Roman Catholic Church of Archdiocese of New Orleans,

32 F.3d 953 (5th Cir. 1994) .....................................................................................................11

Troelstrup v. Index Futures Grp., Inc.,

130 F.3d 1274 (7th Cir. 1997) .................................................................................................16

Trustcash Holdings, Inc. v. Moss,

668 F. Supp. 2d 650 (D.N.J. 2009) ..........................................................................................13

Wells v. Shelter Gen. Ins. Co.,

217 F. Supp. 2d 744 (S.D. Miss. 2002)....................................................................................13

State Cases:

Adams Cmty. Care Ctr., LLC v. Reed,

37 So. 3d 1155 (Miss. 2010) ....................................................................................................10

Baker Donelson Bearman Caldwell & Berkowitz, P.C. v. Seay,

42 So. 3d 474 (Miss. 2010) ..........................................................................................6, 7, 8, 11

Bradley v. Kelley Bros. Contractors,

117 So. 3d 331 (Miss. Ct. App. 2013) .....................................................................................12

Century 21 Deep S. Properties, Ltd. v. Corson,

612 So. 2d 359 (Miss. 1992) ....................................................................................................15

Children’s Med. Grp., P.A. v. Phillips,

940 So. 2d 931 (Miss. 2006) ......................................................................................................6

Christian Methodist Episcopal Church v. S & S Construction Co., Inc.,

615 So.2d 568 (Miss. 1993) .......................................................................................................8

iv
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 5 of 28

Forest Hill Nursing Ctr., Inc. v. McFarlan,

995 So. 2d 775 (Miss. Ct. App. 2008) .....................................................................................10

Glidewell v. Hite,
6 Miss. 110 (Miss. Err. & App. 1840) .....................................................................................18

Great Am. E & S Ins. Co. v. Quintairos, Prieto, Wood & Boyer, P.A.,
100 So. 3d 420 (Miss. 2012) ..............................................................................................14, 15

Harris v. Town of Woodville,

196 So. 3d 1121 (Miss. Ct. App. 2016) ...................................................................................12

Kirschner v. KPMG LLP,

938 N.E.2d 941 (N.Y. 2010) ....................................................................................................18

Latham v. Johnson,
--- So. 3d ---, 2018 WL 3121362 (Miss. Ct. App. June 26, 2018) ...........................................16

Long Term Care, Inc. v. Jesco, Inc.,

560 So. 2d 717 (Miss. 1990) ....................................................................................................17

McFarland v. Entergy Mississippi, Inc.,

919 So. 2d 894 (Miss. 2005) ................................................................................................9, 10

Mississippi Bar v. Thompson,

5 So. 3d 330 (Miss. 2008) ........................................................................................................10

Morgan v. MML Inv’rs Servs., Inc.,

226 So. 3d 590 (Miss. Ct. App. 2017) .......................................................................................9

Parmenter v. J & B Enterprises, Inc.,

99 So. 3d 207 (Miss. Ct. App. 2012) .......................................................................................11

Patriot Commercial Leasing Co. v. Jerry Enis Motors, Inc.,

928 So. 2d 856 (Miss. 2006) ..................................................................................................8, 9

Savage v. Prudential Life Ins. Co. of Am.,

154 Miss. 89, 121 So. 487 (1929) ............................................................................................14

Sneed v. Ford Motor Co.,

735 S.2d 306, 308 (Miss. 1999) ...............................................................................................15

Other Authorities:

27A Am. Jur. 2d, Equity § 103 (2008) ..........................................................................................16

Black’s Law Dictionary (10th ed. 2014)........................................................................................16

Federal Rule of Civil Procedure 12(b)(6) ........................................................................................5

v
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 6 of 28

Miss. Code § 79-10-67(2) ................................................................................................................5

Restatement (Second) of Agency § 261...........................................................................................9

Restatement (Second) of Torts § 876.......................................................................................13, 14

Securities Exchange Act § 12(a)(1) ...............................................................................................13

Securities Exchange Act § 3(4)......................................................................................................13

vi
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INTRODUCTION

In this unprecedented lawsuit, the Receiver seeks to hold the law firm of Baker,

Donelson, Bearman, Caldwell & Berkowitz P.C. (“Baker Donelson”) liable for the Ponzi scheme

perpetrated by Madison Timber Properties, LLC (“Madison Timber”) and Arthur Lamar Adams

(“Adams”). The law firm never represented Madison Timber or Adams, and it owed them no

attorney-client duties. The Receiver certainly does not allege that Baker Donelson perpetrated

the Ponzi scheme, or that anyone at the firm knew Adams was engaged in fraud. In contrast to

others whom the Receiver has sued, Baker Donelson never profited or stood to profit from the

scheme – not by a single penny.

The Receiver’s sole basis for suing Baker Donelson is that two individuals who work at

the law firm, Brent Alexander and Jon Seawright, also operated an unaffiliated personal LLC,

Alexander Seawright Timber Fund I, LLC, which lent its members’ funds to Madison Timber.

But the Receiver does not allege, because she cannot allege, that Baker Donelson owned or

controlled this LLC or profited from it in any way. Baker Donelson is not in the investment

business, much less the timber business. Alexander and Seawright operated their LLC separately

from the business of the law firm, and the Complaint alleges nothing to the contrary. Nor does it

allege a single fact about any other person at Baker Donelson. Whatever Alexander’s or

Seawright’s responsibility allegedly may be – and the Receiver does not allege that they knew

Madison Timber was fraudulent – there is no basis to hold Baker Donelson liable.

Baker Donelson fully supports the Receiver’s proper objective to compensate innocent

investors who lost money in Adams’s scheme. But such compensation must come from those

who profited from the scheme and are legally responsible for it. Mississippi law does not permit

imposing liability on a law firm that did not represent Adams or participate in his fraud. Such an

unprecedented action would only compound the harm of the Ponzi scheme by punishing other
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 8 of 28

innocent parties: the blameless employees and shareholders of Baker Donelson, who had nothing

to do with causing the investors’ losses.

The Court therefore should dismiss the Complaint against Baker Donelson because,

under settled Mississippi law, the firm is not responsible for its employees’ actions outside the

scope of their employment. The Complaint also should be dismissed for failure to state a claim

on the elements of the causes of action it asserts: First, it alleges no facts that could support a

finding that Baker Donelson had actual knowledge of Adams’s fraud, an essential element of the

Receiver’s claim for civil conspiracy. Second, the same defect would defeat the Receiver’s

claim for aiding and abetting – if such a cause of action existed in Mississippi, which it does not.

Third, the Receiver’s claim of “recklessness,” “gross negligence,” or “negligence” fails because

the Receiver stands in the shoes of Madison Timber and Adams, who were not clients of Baker

Donelson. Under settled Mississippi law, a law firm owes no duty of professional care to non-

clients absent rare circumstances not arguably present here. That rule ensures that lawyers can

exercise their duties to those who are their clients with uncompromised loyalty.

That the Receiver stands in the shoes of Madison Timber and Adams, and not the

investors, gives rise to another reason why the Complaint should be dismissed: The doctrine of

in pari delicto bars tort claims brought on behalf of a primary wrongdoer against other alleged

wrongdoers. Receivers and trustees have no greater powers than the entities in receivership,

which means this Receiver is subject to the same defenses that would have been available to

Baker Donelson if Madison Timber and Adams were the plaintiffs. To be sure, receivers may be

shielded from in pari delicto when they assert non-tort causes of action, like fraudulent transfer

claims (no such claims are alleged against Baker Donelson); but many courts hold otherwise

when, as here, a receiver asserts tort claims. The Mississippi courts have not spoken on this

2
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 9 of 28

issue, but they would likely apply the traditional rule that a receiver inherits tort claims as she

finds them, subject to all existing defenses. The Court need not consider in pari delicto,

however, if it finds the Complaint deficient because Baker Donelson is not liable for the acts of

Alexander and Seawright, or because the allegations do not establish the elements of a cause of

action. In all events, the Complaint does not state a claim and should be dismissed.

FACTUAL ALLEGATIONS1

Baker Donelson is a law firm based in Memphis, Tennessee, which employs more than

700 attorneys and public policy advisors around the country, including in its Jackson, Mississippi

office. Through its professionals, the firm provides legal and consulting services to a diverse set

of clients. The Complaint does not allege, however, that Madison Timber and Arthur Lamar

Adams were clients of Baker Donelson – because they were not clients. Cf. Compl. ¶¶ 165–176.

The Complaint also does not allege that anyone at Baker Donelson had any contact with

Adams or the Madison Timber investments, with the exception of two individuals, Brent

Alexander and Jon Seawright, who did business with Adams through an LLC that bears their

names, Alexander Seawright Timber Fund I, LLC. Compl. ¶ 74. Jon Seawright is an attorney

and shareholder in the firm, who works primarily on corporate law matters for healthcare clients.

Brent Alexander is a non-lawyer political consultant who works primarily in healthcare policy.

According to the Complaint, in 2011 Alexander and Seawright became acquainted with

Adams, who offered an opportunity to invest in Madison Timber. Id. ¶ 70. They asked Adams

about the potential risks to the timber stock and received assurances of an umbrella insurance

policy on all tracts. Id. ¶ 85. They viewed the investment as posing little risk because it was

secured by the land and timber deed. Id. ¶ 70. From time to time, Adams would present them

1
The Complaint’s allegations must be taken as true for purposes of this motion to dismiss.
Baker Donelson does not concede that any factual allegation in the Complaint is true.

3
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 10 of 28

with tranches of timber investments, for which they would locate investors. In exchange, they

received certain commissions. Id. ¶¶ 72–74. The Complaint does not allege that Baker

Donelson received any commissions. Nor does it allege that anyone at Baker Donelson other

than Alexander and Seawright did anything wrong. As to Alexander and Seawright, the

Complaint does not allege they knew Madison Timber was a Ponzi scheme. It alleges instead

that they missed “red flags” about Madison Timber – e.g., that the returns were too stable and too

high, and that the signatures on the timber deeds had been forged. See id. ¶¶ 94–100.2

On May 11, 2018, “Adams pleaded guilty to the federal crime of wire fraud and

‘admit[ted] to all of the conduct of the entire scheme and artifice to defraud.’” Compl. ¶ 21. In a

separate action, the SEC charged Adams with federal securities violations, and this Court

appointed Alysson Mills (the “Receiver”) as a federal equity receiver for Madison Timber and

the Adams estate. The Receiver has filed several lawsuits to claw back for the benefit of

investors funds that were fraudulently transferred from Madison Timber. This lawsuit is

different: The Receiver seeks to impose tort liability on parties who she alleges permitted the

scheme to grow, even if – as in Baker Donelson’s case – there is no allegation that they received

any payments from Madison Timber or were complicit in Adams’ scheme.

The Complaint names as defendants, in addition to Baker Donelson: Alexander,

Seawright, and Alexander Seawright, LLC3 (the “Alexander Seawright Defendants”); and Matt

Thornton, Butler Advisory Services LLC, and Butler Snow LLP (the “Butler Snow

2
The Complaint also alleges that Alexander and Seawright planned to expand their business with
Madison Timber through a second LLC, Alexander Seawright Timber Fund II, LLC, but this
fund never launched. See Compl. ¶¶ 101–112. The Complaint does not allege that this LLC had
any connection to the law firm either.
3
Alexander Seawright, LLC, a separate entity from Alexander Seawright Timber Fund I, LLC,
allegedly also participated in the Madison Timber investments. See Compl. ¶ 162. Again, there
is no allegation that this LLC had any connection to Baker Donelson.

4
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 11 of 28

Defendants”). The Receiver brings four counts against Baker Donelson: civil conspiracy (Count

I); aiding and abetting (Count II); “recklessness, gross negligence, and at a minimum

negligence” (Count III); and negligent supervision and retention (Count VIII), and alleges that

Baker Donelson is vicariously liable for the acts of Alexander and Seawright. The Complaint

brings other counts but not against Baker Donelson, including legal malpractice (Baker Donelson

did not represent Adams or Madison Timber), fraudulent transfer (Baker Donelson received no

payments as a result of the Ponzi scheme); and Mississippi’s civil RICO statute.

STANDARD OF REVIEW

To survive a motion to dismiss under Rule 12(b)(6), the Complaint must plead “enough

facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007). The plausibility requirement extends to every essential element of each claim.

In re S. Scrap Material Co., LLC, 541 F.3d 584, 587 (5th Cir. 2008).

ARGUMENT

I. Baker Donelson Is Not Responsible for the Actions of Alexander and Seawright.

The Receiver’s entire case depends on holding Baker Donelson responsible for the acts of

Alexander and Seawright. This theory fails as a matter of law. Baker Donelson is a professional

corporation doing business in Mississippi. Compl. ¶ 9. By statute, the liability of a professional

corporation is limited to the acts of its employees that are performed either “within the scope [1]

of their employment or [2] of their apparent authority to act for the corporation[.]” Miss. Code

§ 79-10-67(2). The allegations concerning Alexander and Seawright satisfy neither condition.

A. Alexander’s and Seawright’s Investment Activities Were Outside the Scope

of Their Employment with Baker Donelson.

“If an employee deviates or departs from his work to accomplish some purpose of his

own not connected with his employment – goes on a ‘frolic of his own’ – the relation of master

5
 Case 3:18-cv-00866-CWR-FKB Document 29 Filed 02/21/19 Page 12 of 28

and servant is temporarily suspended.” Baker Donelson Bearman Caldwell & Berkowitz, P.C. v.

Seay, 42 So. 3d 474, 489 (Miss. 2010) (internal quotation marks omitted). “Some actions are so

clearly beyond an employee’s course and scope of employment that they cannot form the basis

for a claim of vicarious liability, as a matter of law.” Children’s Med. Grp., P.A. v. Phillips, 940

So. 2d 931, 935 (Miss. 2006). The Mississippi Supreme Court in Seay applied these principles to

the conduct of (coincidentally) a shareholder of Baker Donelson, granting summary judgment to

the law firm where the shareholder’s actions – an alleged adulterous affair with an alleged

client’s spouse – were not in furtherance of the firm’s practice of law and were not approved by

Baker Donelson. 42 So. 3d at 489. While the plaintiff claimed that he relied on the lawyer’s

legal advice, the Court emphasized that Baker Donelson had obtained no benefit from the

shareholder’s wrongdoing, and that the affair did not relate to the attorney-client relationship. Id.

Seay’s reasoning compels dismissal here, because the Complaint’s allegations do not

plausibly demonstrate that Alexander and Seawright were acting within the scope of their

employment at Baker Donelson. Alexander and Seawright worked as, respectively, a lobbyist

and a lawyer at the Baker Donelson law firm. Compl. ¶ 69. The Complaint does not allege,

however, that Madison Timber or Adams sought or received legal advice from Seawright or

public-policy advice from Alexander, or that any of the wrongdoing attributed to Alexander or

Seawright occurred in the course of providing such client services to anyone. Rather, Alexander

and Seawright are alleged to have missed “red flags” in the course of managing investments

through their separate LLC.

Reading their full website biographies, as the Court is permitted to do on a motion to

dismiss,4 demonstrates that investment management is not part of Alexander’s or Seawright’s job

4
“When a plaintiff quotes from a document used as a foundation for allegations in the
complaint,” see Compl. ¶ 81, “the Court may examine the entire document to review a motion to
dismiss.” Thornton v. Micrografix, Inc., 878 F. Supp. 931, 933 (N.D. Tex. 1995).

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at Baker Donelson. Brent Alexander is employed as a lobbyist and public-policy consultant

working primarily “in health care, on behalf of health care providers and related service

industries.” Ex. A (Website) at 2. Jon Seawright is a lawyer who advises and represents firm

clients “with a particular focus on issues unique to community and non-profit hospitals” and an

emphasis on “new market tax credits . . . and historic tax credits[.]” Ex. B (Website) at 2.

The Complaint’s suggestions to the contrary are based entirely on misleading partial

quotations from the website. See Compl. ¶ 81. Alexander supposedly has “a ‘rapidly growing’

practice in ‘advising venture capital and related investors.’” Id. The quoted sentence does not

end with a period after “investors.” It actually says that Alexander advises “venture capital and

related investors on public policy issues” – not on their investments. Ex. A at 2. Seawright

supposedly has “‘extensive experience’ in business development and capital formation.” Compl.

¶ 81. That quotation omits the immediately preceding words, which explain that Seawright

provides legal advice on “structuring of tax incentives for business development and capital

formation[.]” Ex. B at 2. Interpreting the tax code and structuring tax incentives are legal

services, not the investment services the Complaint would suggest.

The Mississippi Supreme Court in Seay cited the Restatement (Second) of Agency,

emphasizing that “[c]onduct of a servant is not within the scope of employment if it is different

in kind from that authorized, far beyond the authorized time or space limits, or too little actuated

by a purpose to serve the master.” 42 So. 3d at 488 (emphases in original). The lawyer’s

conduct was outside the scope of his employment because it “was not in any way related to [a

legal] representation” and “not motivated by a desire to benefit” the firm. Id. at 489 (internal

quotation marks omitted). That equally describes the allegations in this case. Madison Timber

and Adams were not clients of Baker Donelson. Baker Donelson did not profit from Madison

Timber or Adams; the firm had no business relationship with them whatsoever. Alexander and

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Seawright conducted their investment business through a separate legal entity, Alexander

Seawright Timber Fund I, LLC. Baker Donelson has no ownership interest in the LLC and

exercised no control over it.

The separateness of the Alexander Seawright Defendants’ conduct from Baker Donelson

stands in contrast to the Complaint’s allegations about the Butler Snow Defendants. Unlike

Baker Donelson, Butler Snow allegedly had “attorney-client relationships with Adams and

Madison Timber[.]” Compl. ¶ 66. Where Alexander and Seawright acted through personal

LLCs, “Butler Snow launched Butler Snow Advisory Services, [as] ‘a wholly owned subsidiary

that provides non-legal business advice.’” Id. ¶ 38.

B. The Complaint Does Not State an “Apparent Authority” Claim.

In an effort to avoid the Seay case, the Receiver claims that even if Alexander and

Seawright did not have authority to act for Baker Donelson in their investment activities, they

had apparent authority. This theory does not rescue the Complaint from dismissal, both because

(1) if anyone could have been misled by an appearance of authority, it was not Adams or

Madison Timber, in whose shoes the Receiver stands; and (2) Alexander and Seawright had no

more “apparent” than “actual” authority to bind the firm in investment-management matters –

Baker Donelson is a law firm, not an investment management organization. See Compl. ¶ 81.

Apparent authority is “authority that the principal has by words or conduct held the

alleged agent out as having.” Patriot Commercial Leasing Co. v. Jerry Enis Motors, Inc., 928

So. 2d 856, 864 (Miss. 2006). It requires a “showing of (1) acts or conduct of the principal

indicating the agent’s authority, (2) reasonable reliance upon those acts by a third person, and

(3) a detrimental change in position by the third person as a result of that reliance.” Christian

Methodist Episcopal Church v. S & S Construction Co., Inc., 615 So.2d 568, 573 (Miss. 1993).

Apparent authority must be assessed “from the point of view of the third person” who is suing

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the principal. Restatement (Second) of Agency § 261, cmt. a. For example, “a third party cannot

rely on the apparent authority of an agent to bind a principal where he has actual knowledge of

the limits of the agent’s authority[.]” Patriot Commercial Leasing Co., 928 So. 2d at 864.

The Complaint alleges that “Investors reasonably believed that their investment in

Madison Timber, through Alexander Seawright Timber Fund I, LLC, was backed and promoted

by, and had been vetted by, Baker Donelson.” Compl. ¶ 79 (emphasis added).5 But the Receiver

does not stand in the shoes of investors; she asserts the claims of Madison Timber and Adams,

and apparent authority must be assessed from their perspective. The Complaint does not allege

that Madison Timber or Adams believed Alexander and Seawright were acting on behalf of

Baker Donelson, far less that they relied on any such mistaken belief or that such reliance would

be reasonable. See Morgan v. MML Inv’rs Servs., Inc., 226 So. 3d 590, 598 (Miss. Ct. App.

2017) (reliance was unreasonable where plaintiff “did not pay the funds to [the principal;] . . .

never received any receipt, contract, statement, or other documentation from them[; and]

acknowledges that [the agent] never even said that the investments would be with or through [the

principal]”). To the contrary, Madison Timber and Adams were engaged in fraud and

presumably did not care whether Baker Donelson supported the investments as long as they got

the money from Alexander Seawright Timber Fund I, LLC.

The Complaint also does not state a claim for vicarious liability because it does not allege

any act or conduct by Baker Donelson that indicated Alexander and Seawright’s authority to act

for the firm in recommending timber investments. “Apparent authority of an agent only binds

the principal when the plaintiff can show ‘acts or conduct of principal indicating agent’s

5
See also id. ¶ 71 (alleging Seawright told an investor his funds could be run through Baker
Donelson’s escrow account); ¶ 75 (alleging Alexander told investors that Baker Donelson
attorneys invested); ¶ 81 (alleging they “referred potential investors” to firm website); ¶ 85
(“Investors were led to believe . . . [investment] was backed by Baker Donelson’s reputation.”).

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authority[.]’” Forest Hill Nursing Ctr., Inc. v. McFarlan, 995 So. 2d 775, 781 (Miss. Ct. App.

2008) (emphasis in original) (quoting McFarland v. Entergy Mississippi, Inc., 919 So. 2d 894,

902 (Miss. 2005)). Absent some indication by Baker Donelson that Alexander and Seawright

were agents of Baker Donelson for the specific purpose on which Madison Timber allegedly

relied – i.e., for investment services – apparent authority is lacking. Adams Cmty. Care Ctr.,

LLC v. Reed, 37 So. 3d 1155, 1160 (Miss. 2010) (no apparent authority where “[t]he record is

devoid of any action on the part of [the principal] indicating that [the putative agent] was her

agent for the purpose of making health-care decisions”). An employer’s indication that an agent

is affiliated with the business – here, hosting Alexander’s and Seawright’s biographies on the

firm website – therefore does not confer authority outside the scope of the agent’s employment.

See McFarland, 919 So. 2d at 902 (“not reasonable . . . to assume” that use of a company utility

vehicle conferred apparent authority to repair power lines); Mississippi Bar v. Thompson, 5 So.

3d 330, 337 (Miss. 2008) (paralegal lacked apparent authority to create client relationship).

Because conduct by the principal is required, it is not enough for the Complaint to allege

that the putative agents, Alexander and Seawright, referred to their affiliation with Baker

Donelson. McFarlan, 995 So. 2d at 782 (insufficient that agent “held herself out” as authorized

because “the acts or conduct indicating the authority of the agent must be made by the

principal”). In any event, none of Alexander’s or Seawright’s alleged statements about Baker

Donelson are to the effect that the firm stood behind the investments. See supra n.5.

C. The Complaint Does Not State a Claim for Negligent Supervision and
Retention (Count VIII).

The Complaint also attempts to hold Baker Donelson liable for Alexander’s and

Seawright’s conduct through a claim that Baker Donelson negligently retained and supervised

them in their employment. Compl. ¶¶ 177–186. This claim fails for the same reasons as the

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vicarious liability theory: Under Mississippi law, “employers do not have a duty to supervise

their employees when the employees are off-duty or not working,” especially where the

employer gains no “corporate benefit therefrom.” Seay, 42 So. 3d at 489 (internal quotation

marks omitted). Because Alexander’s and Seawright’s investment activities were outside the

scope of their employment, the firm was under no duty to supervise them. See also Belmont v.

MB Inv. Partners, Inc., 708 F.3d 470, 491 (3d Cir. 2013) (dismissing negligent supervision claim

where employee operated a Ponzi scheme; employer has no duty “to discover, at its peril, the

fraudulent machinations in which [employee] was involved outside the scope of his

employment”); Tichenor v. Roman Catholic Church of Archdiocese of New Orleans, 32 F.3d

953, 960 (5th Cir. 1994) (applying Mississippi law, “[e]mployers also are not liable for failure to

supervise when the employee engages in independent criminal conduct”).

But even assuming Baker Donelson were under such an obligation, the Complaint does

not state a claim for breach. “A plaintiff must prove the defendant had either actual or

constructive knowledge of an employee’s incompetence or unfitness before the employer will

become liable for the negligent hiring or retention of an employee who injures a third party.”

Parmenter v. J & B Enterprises, Inc., 99 So. 3d 207, 217 (Miss. Ct. App. 2012) (internal

quotation marks omitted). The Receiver alleges that “[i]n view of the numerous red flags

described in this complaint, . . . Baker Donelson knew or should have known of [its] agents’

incompetence or unfitness.” Compl. ¶ 180. But the only “red flags” alleged in the Complaint are

about Madison Timber – e.g., uniform high-yield profits, forged documents, etc.; see Compl.

¶¶ 94–100 – and Baker Donelson is not alleged even to have known about them. There are no

alleged “red flags” that speak to Alexander’s or Seawright’s competence or fitness to practice

law or consulting. Baker Donelson does not supervise its employees’ personal business, and the

Alexander-Seawright LLCs were just that: Alexander’s and Seawright’s personal business.

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II. The Complaint’s Causes of Action Do Not State a Claim for Relief.

The Receiver brings three additional causes of action against Baker Donelson: civil

conspiracy (Count I); aiding and abetting (Count II); and recklessness, gross negligence, and

negligence (Count III). The Court should dismiss each of these counts because the Complaint

does not state a claim. First, each count apparently presumes that Alexander and Seawright were

acting for the firm in their investment matters, which is incorrect for the reasons discussed in

Part I above. Second, as discussed below, these counts should be dismissed against the law firm

no matter how the Court resolves the imputation question.

A. The Complaint Does Not State a Claim for Civil Conspiracy (Count I).

The essential elements of civil conspiracy are “(1) an agreement between two or more

persons, (2) to accomplish an unlawful purpose or a lawful purpose unlawfully, (3) an overt act

in furtherance of the conspiracy, and (4) damages to the plaintiff as a proximate result.” Harris

v. Town of Woodville, 196 So. 3d 1121, 1131 (Miss. Ct. App. 2016) (internal brackets omitted).

The Complaint does not state a conspiracy claim because it does not allege that anyone at

Baker Donelson, including Alexander or Seawright, knew that Madison Timber was a Ponzi

scheme. The Receiver contends only that Alexander and Seawright missed red flags. Compl.

¶¶ 94, 120. “For a civil conspiracy to arise, the alleged confederates must be aware of the fraud

or wrongful conduct at the beginning of the agreement.” Bradley v. Kelley Bros. Contractors,

117 So. 3d 331, 339 (Miss. Ct. App. 2013). Under settled law, therefore, the Receiver is wrong

to argue that “Defendants need not have known that Madison Timber was a Ponzi scheme to

unlawfully conspire with Adams,” Compl. ¶ 120. See also Midwest Feeders, Inc. v. Bank of

Franklin, 886 F.3d 507, 520 (5th Cir. 2018) (civil conspiracy requires proof that conspirator

“knew of [the] fraudulent scheme”). Absent such knowledge, it is also implausible to allege the

other central conspiracy element: that Baker Donelson intentionally agreed to the illegal scheme.

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The Receiver also has no viable conspiracy claim based on her allegations that Alexander

and Seawright (i) operated without a broker’s license and (ii) sold unregistered securities.

Compl. ¶ 118. Civil conspiracy requires that the plaintiff allege a viable underlying tort. Wells

v. Shelter Gen. Ins. Co., 217 F. Supp. 2d 744, 755 (S.D. Miss. 2002). The cause of action

“cannot rest solely upon the violation of a federal statute for which there is no corresponding

private right of action.” In re Orthopedic Bone Screw Prod. Liab. Litig., 193 F.3d 781, 790 (3d

Cir. 1999). Where the Receiver “could not sue an individual defendant for an alleged violation

of the [statute], it follows that [she] cannot invoke the mantle of conspiracy to pursue the same

cause of action against a group of defendants.” Id. at 789. With respect to licensure, the

Receiver alleges that a license is required under Section 3(4) of the Securities Exchange Act, see

Compl. ¶ 91, but cites no statutory provision that would confer a private right of action for such a

violation. With respect to registration, “only a purchaser of the unregistered security may sue”

for a registration violation under Section 12(a)(1) of the Securities Act. Trustcash Holdings, Inc.

v. Moss, 668 F. Supp. 2d 650, 654 (D.N.J. 2009) (citing Pinter v. Dahl, 486 U.S. 622, 644

(1988)). Madison Timber and Adams were not the purchasers of the alleged securities.

All of the above applies to Alexander and Seawright, but if their conduct is not imputed

to Baker Donelson, the conspiracy claim should be dismissed for the additional reason that the

Complaint alleges no facts showing that anyone at the firm entered into any agreement

concerning Madison Timber, or committed any overt acts in furtherance of Adams’ scheme.

B. The Complaint Does Not State a Claim for Aiding and Abetting (Count II).

The Court should dismiss Count II because Mississippi law does not recognize a cause of

action for civil aiding and abetting. The Receiver cites Section 876(b) of the Restatement

(Second) of Torts for the proposition that “a defendant is liable if he ‘knows that the other’s

conduct constitutes a breach of duty and gives substantial assistance or encouragement to the

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other so to conduct himself.’” Compl. ¶ 127. The Receiver cites no Mississippi statute or case

because “[n]o Mississippi court has ever recognized any of the subsections of the Restatement

(Second) of Torts § 876 as viable causes of action,” and “no Mississippi court has recognized a

claim for civil aiding and abetting.” In re Evans, 467 B.R. 399, 409 (Bankr. S.D. Miss. 2011).

Assuming arguendo that an aiding and abetting cause of action exists, the Complaint

does not state a claim because, again, neither Alexander, Seawright, nor anyone at Baker

Donelson is alleged to have known that Madison Timber was a Ponzi scheme. The Restatement

provides that a defendant is liable only if he “knows that the other’s conduct constitutes a

breach[.]” Restatement (Second) of Torts § 876(b); Compl. ¶ 127. Allegations that a defendant

“should have known about the dangers” of an alleged confederate’s conduct falls short of

establishing that the defendant “knew about conduct constituting a conspiracy[.]” Dickens v. A-1

Auto Parts & Repair, Inc., No. 1:18-cv-162-LG-RHW, 2018 WL 5726206, at *3 (S.D. Miss.

Nov. 1, 2018). Courts in those jurisdictions that recognize civil liability for aiding and abetting

routinely dismiss claims based on “red flags” like the Receiver alleges here. Consistent with the

“universal rule in this country,” “banks, lawyers, brokerage houses, [or] accountants” are not

liable for aiding and abetting based on “red flags, smoke, and other irregularities[.]” El Camino

Res., LTD. v. Huntington Nat. Bank, 722 F. Supp. 2d 875, 907–08 (W.D. Mich. 2010) (collecting

authority), aff’d, 712 F.3d 917 (6th Cir. 2013); Lerner v. Fleet Bank, N.A., 459 F.3d 273, 294 (2d

Cir. 2006) (“red flags” were “insufficient to establish a claim for aiding and abetting fraud”).

C. The Complaint Does Not State a Claim for “Recklessness,” “Gross

Negligence,” or “Negligence” (Count III).

“It is quite elementary that there cannot be a tort without a breach of a legal duty.”

Savage v. Prudential Life Ins. Co. of Am., 154 Miss. 89, 121 So. 487, 489 (1929). Lawyers owe

“absolute and uncompromised” duties to their clients. Great Am. E & S Ins. Co. v. Quintairos,

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Prieto, Wood & Boyer, P.A., 100 So. 3d 420, 425–26 (Miss. 2012). But the Mississippi Supreme

Court has strictly limited the scope of an attorney’s obligations to non-clients. Id. (declining to

adopt a regime that would hold attorneys “liable for all foreseeable harm . . . to nonclients”).

This ensures that a lawyer’s absolute obligations to her client is not compromised by duties to

non-clients. Id. Mississippi recognizes only narrow exceptions to this rule, in certain

circumstances where a non-client foreseeably relies on the attorney’s work. Century 21 Deep S.

Properties, Ltd. v. Corson, 612 So. 2d 359, 373–74 (Miss. 1992); see also, e.g., Great Am. E & S

Ins. Co., 100 So. 3d at 425 (permitting suit by non-client because title lawyers “are fully aware

that their work will be relied upon by subsequent purchasers”).

Baker Donelson is accused of professional negligence – that it breached a duty to

Madison Timber “to discover Adams’ fraud” by virtue of the “advantageous position” it

occupied as the law-firm employer of Alexander and Seawright. Compl. ¶ 138. Under the well-

established law cited above, there was no such duty. The Complaint does not allege that Adams

or Madison Timber were clients of the firm – they were not. Baker Donelson is not alleged to

have performed any professional work for Madison Timber, nor any work for another client on

which Madison Timber relied. There is no authority under Mississippi law, or any other law,

that would impose a duty on a law firm to monitor the conduct of non-client third parties, much

less a duty to discover a criminal fraud that the wrongdoer went to great lengths to disguise.

III. In Pari Delicto Bars the Receiver’s Claims.

Under Mississippi law,6 a plaintiff who is in pari delicto with the defendant may not

recover. Sneed v. Ford Motor Co., 735 S.2d 306, 308 (Miss. 1999) (“a wrongdoer is not entitled

to compel contribution from a joint tortfeasor . . . if [they] are in pari delicto”). The in pari

6
The Receiver’s claims are all brought under Mississippi law, which therefore also governs the
in pari delicto defense. Knauer v. Jonathon Roberts Fin. Grp., Inc., 348 F.3d 230, 235 (7th Cir.
2003) (court “must look to [the relevant state] law to determine the rights of the receiver”).

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delicto doctrine enforces the longstanding equitable “principle that a plaintiff who has

participated in wrongdoing may not recover damages resulting from the wrongdoing.” In Pari

Delicto Doctrine, Black’s Law Dictionary (10th ed. 2014). The doctrine “applies where [i] the

plaintiff is equally or more culpable than the defendant or [ii] acts with the same or greater

knowledge as to the illegality or wrongfulness of the transaction.” Latham v. Johnson, --- So. 3d

---, 2018 WL 3121362, at *10 (Miss. Ct. App. June 26, 2018) (citing 27A Am. Jur. 2d, Equity

§ 103, p. 641 (2008)), reh’g denied (Oct. 9, 2018). At the motion todismiss stage, an affirmative

defense like in pari delicto bars recovery where the defense is established “on the face of the

complaint.” Alexander v. Verizon Wireless Servs., L.L.C., 875 F.3d 243, 249 (5th Cir. 2017).

A. The Receiver Stands in the Shoes of the Most Culpable Parties, Madison
Timber and Adams.

The Receiver stands in the shoes of Madison Timber and the Adams estate. See Hymel v.

FDIC, 925 F.2d 881, 883 (5th Cir. 1991); Order Appointing Receiver, D.I. 33, SEC v. Adams,

No. 3:18-cv-00252 (S.D. Miss.). It is black-letter law that she “has standing to assert only the

claims of the entities in receivership and not the claims of the entities’ investor‐creditors.”

Janvey v. Democratic Senatorial Campaign Comm., Inc., 712 F.3d 185, 190 (5th Cir. 2013); see

also Troelstrup v. Index Futures Grp., Inc., 130 F.3d 1274, 1276 (7th Cir. 1997) (receiver

appointed for wrongdoer’s estate “has no possible claim against [a third‐party brokerage], or on

behalf of the investors, the victims of the fraud, because he was not their receiver”).

Madison Timber and Adams have no viable tort claims against defendants, like Baker

Donelson, who allegedly failed to discover their fraud. On the face of the Complaint, the

defense of in pari delicto bars such claims as a matter of law. “Madison Timber was a Ponzi

scheme[.]” Compl. ¶ 117. Adams operated Madison Timber for more than ten years, during

which time he purported to purchase timber from Mississippi landowners and resell it to lumber

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mills for a profit. Id. ¶ 13. But “[t]here was no timber and no proceeds from sales of timber.”

Id. at 1. Madison Timber conducted no legitimate business – it was created solely as a vehicle

for fraud. See id. ¶¶ 17, 117. Outside of the Ponzi scheme, “Madison Timber had no revenues

whatsoever[.]” Id. ¶ 17. Adams “pleaded guilty to the federal crime of wire fraud” and

“‘admit[ted] to all of the conduct of the entire scheme and artifice to defraud.’” Id. ¶ 21 (quoting

Plea Agreement, D.I. 11, United States v. Adams, No. 3:18-cr-00088 (S.D. Miss)).

Beyond question, Adams’s and Madison Timber’s wrongdoing (“delicto”) was at least

equal (“in pari”) to anything alleged against Baker Donelson. In contrast to Adams’ active and

criminal fraud, the Complaint alleges that Baker Donelson is responsible for the conduct of the

Alexander Seawright Defendants, who allegedly missed “red flags” in the course of introducing

potential investors to Adams. Where two parties allegedly are responsible for a tort, the “active

wrongdoer” is more at fault than the “passive wrongdoer.” Long Term Care, Inc. v. Jesco, Inc.,

560 So. 2d 717, 721 (Miss. 1990). In any event, there can be no dispute that Adams’s fault was

at least “equal” to anything alleged against Baker Donelson.7

B. The Receiver Cannot Claim an “Innocent Successor” Exception.

While Mississippi courts have not yet spoken on this question, some states recognize a

limited exception to the in pari delicto doctrine for so-called “innocent successors.” See, e.g.,

Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995) (applying Indiana law); Janvey, 712 F.3d at 191

(discussing Scholes and applying Texas law). Where the exception is available, it permits a

receiver “to assert the claims of a receivership entity against third‐party recipients of the entity’s

assets that have been fraudulently transferred by the principal of the Ponzi scheme[.]” Id.

7
There also can be no dispute that Adams’s fraud was within the scope of his relationship with
Madison Timber, as Adams allegedly operated Madison Timber as a pure Ponzi scheme with no
legitimate business activities. Compl. at 1.

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An innocent-successor exception does not apply to the Receiver’s tort claims for two

reasons: First, Mississippi has never recognized the exception and would not do so in these

circumstances. The Mississippi Supreme Court has recognized the doctrine of in pari delicto

since at least 1840, see Glidewell v. Hite, 6 Miss. 110, 134 (Miss. Err. & App. 1840), without

once excusing a corporation from its own fraud. Since the Seventh Circuit first recognized the

innocent successor rule (under Illinois law) in 1995, that court has criticized and progressively

narrowed it. See Peterson v. McGladrey & Pullen, LLP, 676 F.3d 594, 599 (7th Cir. 2012).

Other courts in recent years have flatly refused to adopt the exception, including the highest

court of New York in Kirschner v. KPMG LLP, 938 N.E.2d 941 (N.Y. 2010). Kirschner rejected

a litigation trustee’s attempt to sue professional firms and evade the in pari delicto defense,

reasoning that even after a fraudster has been removed, a corporation cannot foist liability for his

conduct onto third parties that allegedly failed to prevent his fraud. The court refused to permit

“the interests of innocent stakeholders of corporate fraudsters [to] trump those of innocent

stakeholders of the outside professionals who are the defendants in these cases.” Id. at 475.

Second, even where the exception is recognized, it typically applies to fraudulent transfer

claims, or similar claims designed to recoup monies expended from the estate – not tort claims

like the ones asserted against Baker Donelson in this case. Janvey, 712 F.3d at 191 (claims

against “recipients of the entity’s assets that have been fraudulently transferred”). Thus, in Hays

v. Pearlman, 2010 WL 4510956, at *5 (D.S.C. Nov. 2, 2010), the court dismissed an action like

this one, holding that “in the absence of a fraudulent conveyance case, the receiver of a

corporation used to perpetuate a fraud may not seek recovery against an alleged third‐party co‐

conspirator in the fraud.” The Receiver has not alleged a fraudulent transfer claim against Baker

Donelson, nor could she, as Baker Donelson received no payments as a result of the Ponzi

scheme. Cf. Compl. ¶¶ 145–149 (count for fraudulent transfer against other defendants).

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To be sure, the Fifth Circuit has applied an innocent successor rule under Texas law,

when considering a claim for conversion of a cashier’s check, Jones v. Wells Fargo Bank, N.A.,

666 F.3d 955 (5th Cir. 2012); and the district court in Janvey applied the exception to certain tort

claims, again under Texas law, while at the same time recognizing that “Scholes is not

universally accepted, especially outside the fraudulent transfer context.” Janvey v. Adams &

Reese, LLP, 2013 WL 12320921, at *3 (N.D. Tex. Sept. 11, 2013). The Seventh Circuit’s post-

Scholes opinion in Knauer v. Jonathon Roberts Fin. Grp., Inc. explains why the exception

should apply only to fraudulent-transfer claims and the like, not to tort claims:

The key difference, for purposes of equity, between fraudulent

conveyance cases such as Scholes and the instant case is the
identities of the defendants. The receiver here is not seeking to
recover the diverted funds from the beneficiaries of the diversions
(e.g., the recipients of [the fraudster’s] transfers in Scholes). Rather,
this is a claim for tort damages from entities that derived no benefit
from the embezzlements, but that were allegedly partly to blame for
their occurrence. In the equitable balancing before us, we find
Scholes less pertinent than the general Indiana rule that the receiver
stands precisely in the shoes of the corporations for which he has
been appointed.

348 F.3d 230, 236 (7th Cir. 2003). The Seventh Circuit has continued to limit Scholes,

describing some of its most-quoted language as “dictum” and explaining that “Scholes should

not be generalized beyond the law of fraudulent conveyances and preferential transfers.”

Peterson, 676 F.3d at 599 (applying in pari delicto to claims by bankruptcy trustee for Ponzi

scheme against third-party auditor).

If presented with this question, the Mississippi Supreme Court likely would follow this

clear trend in the caselaw and would hold that appointing a receiver does not automatically

nullify the well-established defense of in pari delicto in tort cases. At a minimum, Mississippi

would not apply an “innocent successor” rule in a case like this one, where Baker Donelson is

not alleged to have been directly involved in Adams’s fraud, nor to have derived any benefit

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from the scheme. Notably, the Jones court found the question of benefit important: it

distinguished Knauer based on the equities because in Knauer (as here) “the defendants were

neither directly involved in the embezzlements at issue nor benefitted from them.” 666 F.3d at

968 n.12.

IV. The Complaint Should Be Dismissed with Prejudice.

Amendment cannot cure any of the core defects in the Complaint: that Alexander and

Seawright acted for their own personal business without authority from Baker Donelson, that

Baker Donelson did not know that Madison Timber was a Ponzi scheme, and that in pari delicto

bars the claims. The Receiver has reviewed communications among Madison Timber, Adams,

Alexander, Seawright, and their members. See Compl. ¶¶ 70, 71, 75, 77. If there were facts to

remedy these flaws, she would have alleged them. Jones v. Greninger, 188 F.3d 322, 327 (5th

Cir. 1999) (dismissal with prejudice proper where “a complaint alleges the plaintiff’s best case”).

CONCLUSION

For the foregoing reasons, the Complaint should be dismissed with prejudice.

Dated this 21st day of February, 2019 Respectfully submitted,

BAKER, DONELSON, BEARMAN,

CALDWELL & BERKOWITZ PC

/s/ Michael W. Ulmer

Michael W. Ulmer (MSB #5760)
James J. Crongeyer, Jr. (MSB #10536)
WATKINS & EAGER PLLC
400 East Capitol Street, Suite 300 (39201)
Post Office Box 650
Jackson, MS 39205
Tel.: (601) 965-1900
Fax: (601) 965-1901
Email: mulmer@watkinseager.com

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Craig D. Singer (pro hac vice)

Benjamin W. Graham (pro hac vice)
WILLIAMS & CONNOLLY LLP
725 Twelfth Street, N.W.
Washington, DC 20005
Tel.: (202) 434-5000
Fax: (202) 434-5029
Email: csinger@wc.com

Counsel for Defendant Baker, Donelson,

Bearman, Caldwell & Berkowitz PC

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CERTIFICATE OF SERVICE

I hereby certify that on February 21, 2019, I caused the foregoing to be electronically

filed with the Clerk of the Court using CM/ECF, which will send notification of such filing to all

registered participants.

/s/ Michael W. Ulmer

Michael W. Ulmer

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY Case No. 3:18-cv-866-CWR-FKB

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER Arising out of Case No. 3:18-cv-252
PROPERTIES, LLC Securities and Exchange Commission v.
Arthur Lamar Adams and Madison Timber
Plaintiff Properties, LLC

v. Hon. Carlton W. Reeves, District Judge

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ,
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT

Defendants

MEMORANDUM IN SUPPORT OF
JOINT MOTION OF BUTLER SNOW PARTIES
TO DISMISS OR STAY PROCEEDINGS PENDING ARBITRATION

Defendants Butler Snow LLP (“Butler Snow”), Butler Snow Advisory Services, LLC

(“BSAS”), and Matt Thornton (“Thornton”) (collectively, the “Butler Snow Parties”) jointly

move the Court to dismiss or stay litigation of the claims asserted against them pending

arbitration as required by the Federal Arbitration Act (“FAA”). 1

The Complaint asserts that the Butler Snow Parties caused a multi-million dollar financial

fraud that continued until 2018. Each of the Butler Snow Parties denies liability with respect to

those matters. Many of the allegations in the Complaint relating to the Butler Snow Parties are

1
The Fifth Circuit has declined to decide whether arbitration motions fall under Rule 12(b)(1) or 12(b)(3).
Noble Drilling Servs., Inc. v. Certex USA, Inc., 620 F.3d 469, 472 (5th Cir. 2010). In either event, this motion is one
made within the scope of Rule 12.

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 Case 3:18-cv-00866-CWR-FKB Document 21 Filed 01/24/19 Page 2 of 14

incorrect, exaggerated, or misleading. But because this arbitration motion is predicated on a

written arbitration agreement, this is not the time to debate those allegations.

However, it is helpful to explain how the arbitration agreement was executed and the

roles of the Butler Snow Parties. Thus, the limited involvement and duration of any connections

of any Butler Snow Party with Adams are briefly summarized below.

Butler Snow LLP

The law firm of Butler Snow was engaged with respect to three matters that related to

Adams.

First, in 2009 Butler Snow was initially engaged in connection with Madison Timber

Fund, LLC on a referral from a longtime contact of Butler Snow. Butler Snow drafted a limited

liability company agreement and a private placement memorandum for this proposed timber fund

and made securities filings with the Securities and Exchange Commission (“SEC”) and the

Securities Division of the Mississippi Secretary of State. That fund was far different from what

became Adams’ Ponzi scheme referenced in this litigation. However, Adams elected not to

implement the proposed timber fund.

Second, in 2012 Butler Snow was engaged to prepare a revised version of the private

placement memorandum. Once again, Adams decided not to use the fund for his activities. By

the end of February 2013, the law firm had ceased any activity on the memorandum, and the law

firm formally concluded that engagement in July 2013. The fund, like other legitimate timber

funds common in this country, would have offered an investment interest in a fund intended to

invest in timber assets, not loans secured by timber deeds as in the plan described in the

Receiver’s Complaint. Moreover, as the Complaint concedes, the two private placement

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memoranda (in 2009 and in 2012) did not result in any investing activity. Complaint at ¶¶ 34,

54. Butler Snow received a total of $28,428.92 in fees for both engagements.

Third, and finally, Butler Snow represented Oxford Springs, LLC, a real estate

development entity in which Adams owned a minority interest. Butler Snow provided counsel

related to environmental permitting and other regulatory matters for Oxford Springs beginning in

September 2015. According to the Receiver’s December Report, Oxford Springs still owns

approximately 2300 acres of land purchased in 2015 and 2016 for more than $6,000,000. See

Doc. 70 in SEC v. Adams [Cause No. 3:18-cv-252]. Other than enhancing the value of a project

in which the Receiver now claims an interest, the work Butler Snow performed with respect to

Oxford Springs is totally unconnected with any alleged wrongdoing in this case.

Butler Snow Advisory Services, LLC

BSAS is a separate legal entity organized as an LLC with its own governance structure.

It is a subsidiary of the Butler Snow law firm. Neither BSAS nor its employees or contractors

engage in the practice of law but instead advise small and mid-sized entities with respect to

various business matters. Defendant Matt Thornton, a non-lawyer, has acted as its President

since 2011.

On a referral from a third party, not the law firm, on August 8, 2012, Madison Timber

Company and Adams engaged BSAS pursuant to a written agreement to provide business

advisory services. Ex. 1. That written agreement contained the arbitration agreement that is the

subject of this motion. The engagement of BSAS was terminated in December 2013. Thus,

BSAS was involved with Madison Timber Company and Adams for some 17 months, and that

association ended many years before Adams’ Ponzi scheme was discovered in 2018. BSAS did

introduce Adams to potential business partners for his various projects—all of which it believed

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were legitimate. In total, BSAS received $99,250 in fees for this engagement, of which $59,500

represented a monthly retainer fee of $3,500 (which was unrelated to any specific transactions)

for the 17 months BSAS was engaged.

THE AGREEMENT TO ARBITRATE

The August 2012 BSAS engagement is memorialized in an Engagement Contract that

consists of a signed engagement letter and attached “Standard Terms and Conditions.” The

Standard Terms and Conditions are repeatedly incorporated by reference into the letter. Ex. 1.

The parties expressly defined the “Engagement Contract” to include both documents:

This Engagement Letter and the Standard Terms and Conditions attached
hereto constitute the engagement contract (the “Engagement Contract”)
pursuant to which . . . Services . . . will be provided . . . . (Id. at BSAS 124.)

The last portion of the engagement letter—just above Adams’ signature—notes in bold

type that BSAS was retained upon the terms in the engagement letter itself and the attached

Standard Terms and Conditions document:

We agree to engage Butler Snow Advisory Services, LLC upon the

terms set forth herein and the attached Standard Terms and
Conditions. (Id. at BSAS 126.)

The Standard Terms and Conditions included a detailed arbitration provision. While the

entire provision is relevant to show the parties intention to arbitrate disputes, we focus on the

following pertinent portion:

In the event there is an unresolved legal dispute between the parties and/or
any of their respective officers, directors, partners, employees, agents,
affiliates or other representatives that involves legal rights or remedies
arising from this engagement or any other agreement between you [Adams
and Madison Timber Company] and [BSAS] and any of its affiliates, the
parties agree to submit their dispute to binding arbitration under the
authority of the Federal Arbitration Act. (Id. at BSAS 129, ¶ 6.3.)

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The Butler Snow Parties invoke this arbitration provision as a defense under Rule 12 and

move this Court to dismiss or stay the litigation against them pending arbitration.

ARGUMENT

I. The Federal Arbitration Act requires the Court to dismiss this matter so that it can
be arbitrated, or at least stay the litigation pending arbitration.

The FAA provides that a “written provision in any . . . contract evidencing a transaction

involving commerce to settle by arbitration a controversy thereafter arising out of such contract

or transaction . . . shall be valid, irrevocable, and enforceable.” 9 U.S.C. § 2. Under the FAA’s

plain language any arbitration agreement that is (1) written and (2) involves commerce should be

enforced. The August 8, 2012 Engagement Contract satisfies these criteria. The Engagement

Contract is comprised of two parts, both of which are written: an engagement letter and a

Standard Terms and Conditions document, attached to the letter and incorporated by reference in

the letter’s text and in the statement above the signature line. The Engagement Contract clearly

involves “commerce,” a term construed as broadly as Congress’ power to regulate interstate

commerce. See Allied-Bruce Terminix Companies, Inc. v. Dobson, 513 U.S. 265, 273-77 (1995).

The Complaint, on its face, alleges instances of interstate commercial activity, at Paragraphs 46-

47. Thus, the FAA requires enforcement of the arbitration provision in the Engagement

Contract. To enforce the arbitration provision the Court should dismiss or stay this case. 2

2
Enforcement can involve referring the matter to arbitration and staying this litigation against the Butler
Snow Parties: when a suit is filed that should be referred to arbitration, a federal court “shall on application of one of
the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the
agreement.” 9 U.S.C. § 3 (emphasis added). This “shall” stay provision in the FAA is mandatory. Waste Mgmt.,
Inc. v. Residuos Industriales Multiquim, S.A. de C.V., 372 F.3d 339, 345 (5th Cir. 2004).

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II. The arbitration provision in the Engagement Contract applies to all of the Butler
Snow Parties.

All of the Butler Snow Parties are entitled to enforce the arbitration provision in the

Engagement Contract. BSAS is a party to the agreement, and Thornton is an officer and agent

for BSAS who is alleged to have acted in that capacity in committing the acts of which the

Receiver complains. See Mississippi Fleet Card, L.L.C. v. Bilstat, Inc., 175 F. Supp. 2d 894, 900

(S.D. Miss. 2001) (“Courts in this circuit recognize that a non-signatory may enforce an

arbitration agreement [where] the non-signatory is alleged to be the agent of a signatory.”). The

arbitration agreement specifically applies to disputes “between the parties and/or any of their

respective officers [or] agents.” Ex. 1 at BSAS 129, ¶ 6.3.

Butler Snow—the law firm—can enforce the arbitration agreement for numerous reasons.

First, the Receiver alleges that the law firm is the alter ego and part of a “single business

enterprise” with BSAS. Second, Butler Snow is the corporate parent of BSAS. See Sam

Reisfeld & Son Imp. Co. v. S. A. Eteco, 530 F.2d 679, 681 (5th Cir. 1976) (“If the parent

corporation was forced to try the case, the arbitration proceedings would be rendered

meaningless and the federal policy in favor of arbitration effectively thwarted.”). Notably, the

arbitration provision in this case specifically applies to disputes “between the parties and/or any

of their respective . . . affiliates.” Ex.1, at BSAS 129, ¶ 6.3. Third, both Thornton and Butler

Snow can enforce the arbitration agreement because the claims asserted against BSAS are

intertwined with the claims asserted against them. The “intertwined claims” doctrine requires

arbitration and a stay—even for non-signatories—“when a non-signatory defendant has a close

relationship with one of the signatories and the claims are intimately founded in and intertwined

with the underlying contract obligations.” Hays v. HCA Holdings, Inc., 838 F.3d 605, 610 (5th

Cir. 2016); Mississippi Fleet Card, 175 F. Supp. 2d at 900; First Family Fin. Servs., Inc. v.

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Fairley, 173 F. Supp. 2d 565, 573 (S.D. Miss. 2001). Here, the Complaint itself (at Paragraphs

113-94) is replete with allegations that the parties acted in concert. Moreover, the Receiver

seeks to impute any liability of BSAS and Thornton to Butler Snow. Complaint at ¶¶ 187-94.

In sum, the starting point for arbitration is the Engagement Contract between BSAS, on

one hand, and Madison Timber and Adams, on the other hand. The agreement to arbitrate

extends to all of the Butler Snow Parties because of principles of agency, a parent/subsidiary

relationship, and the intertwined claims doctrine.

III. The arbitration agreement binds the Receiver.

A receiver is “bound to the arbitration agreements to the same extent that the receivership

entities would have been absent the appointment of the receiver.” Javitch v. First Union Sec.,

Inc., 315 F.3d 619, 627 (6th Cir. 2003); see also Wiand v. Schneiderman, 778 F.3d 917, 923

(11th Cir. 2015); Moran v. Svete, 366 F. App’x 624, 629-32 (6th Cir. 2010). Put simply, the

receiver “stands in the shoes” of the persons or entities subject to the receivership; their

agreements to arbitrate become the receiver’s agreements. 1 Thomas H. Oehmke & Joan

Brovins, Commercial Arbitration § 8:13 (Dec. 2018 Update). 3

The Receiver stands in the shoes of Arthur Lamar Adams, who signed the Engagement

Contract with BSAS. The Receiver is bound by that agreement because Adams is bound by it.

Adams was BSAS’s client under the Engagement Contract. The “Standard Terms and

Conditions” made clear in its first paragraph that “you” and “your” as used throughout the

3
At one time the Fifth Circuit reasoned that because receivers act “on behalf of creditors,” receivers are not
subject to arbitration agreements that creditors did not sign. Janvey v. Alguire (“Alguire I”), 628 F.3d 164, 182 (5th
Cir. 2010), opinion withdrawn and superseded, 647 F.3d 585 (5th Cir. 2011). However, the Fifth Circuit later held
“a federal equity receiver has standing to assert only the claims of the entities in receivership, and not the claims of
the entities’ investor-creditors.” Janvey v. Democratic Senatorial Campaign Comm., Inc., 712 F.3d 185, 190 (5th
Cir. 2013). Therefore, it is clear that the Fifth Circuit is now in accord with the general rule that receivers are bound
by the arbitration agreements of the persons or entities for whom they act. Cf. Janvey v. Alguire (“Alguire IV”), 847
F.3d 231, 238-39 (holding that entity within receivership umbrella that had no arbitration agreement was not
compelled to arbitrate).

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agreement referred to “Madison Timber Company, Inc. and/or A. Lamar Adams.” Ex. 1, at

BSAS 127 (emphasis added). The Receiver’s Complaint correctly alleges that “Adams formally

engaged Butler Snow Advisory.” Complaint at ¶ 44. The Complaint repeatedly alleges that

Adams individually benefited from the engagement with BSAS. See, e.g., id. at ¶ 58. Thus,

Adams—and therefore the Receiver—is bound for (a) having received the benefits of the

Engagement Contract and (b) asserting claims that must be determined in reference to that

contract. Noble Drilling, 620 F.3d at 473-74. All rights and obligations in the Engagement

Contract belonged to Adams, and now belong to the Receiver who stands in Adams’ shoes.

Moreover, the Receiver is required to arbitrate on behalf of all entities for which she is

Receiver. Throughout the Complaint, the Receiver expressly conflates Madison Timber

Company and Madison Timber Properties, treating them as a single entity. Complaint at p. 2.

Every allegation made regarding “Madison Timber” applies to both. Madison Timber Company

is a party to the Engagement Contract that contained the arbitration provision. Ex. 1 at BSAS

127. Hence, the Receiver has chosen to join Madison Timber Properties entirely with a party

bound to arbitrate. In addition, Madison Timber Properties was the fund manager for Madison

Timber Fund—another party to the Engagement Contract for the arbitration provision. Id. at

BSAS 124. As manager for the fund, Madison Timber Properties is bound by the principal/agent

doctrine, just as described above. Finally, Madison Timber Properties is bound to arbitrate

because it has received the benefits of the Engagement Contract and asserted claims that must be

determined in reference to that contract. Thus, the Receiver, standing in the shoes of Adams or

Madison Timber Properties, is bound to arbitrate.

IV. Argument in anticipation of Receiver’s position: Both the arbitration provision and
the forum selection clause must be given effect.

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Footnote 10 of the Complaint, at Paragraph 44, signals that the Receiver will argue that

the agreement to arbitrate is not valid. The Footnote suggests that the Receiver will argue that

some conflict between the arbitration provision and the forum selection clause somehow

invalidates the arbitration agreement. To understand the contention foreshadowed by the

Footnote to the Complaint, it is helpful to consider the most pertinent portions of these two

provisions side-by-side, both of which are found in Exhibit 1:

Arbitration Provision Forum Selection Clause

In the event there is an unresolved legal Governing Law and Jurisdiction. This
dispute between the parties and/or any of their Engagement Contract shall be governed by
respective officers, directors, partners, and interpreted in accordance with the laws of
employees, agents, affiliates or other Mississippi. The state and federal courts in
representatives that involves legal rights or Mississippi shall have exclusive jurisdiction
remedies arising from this engagement or any in relation to any claim, dispute or difference
other agreement between you [Adams and concerning this Engagement Contract and any
Madison Timber Company] and [BSAS] and matter arising from it. The parties hereto
any of its affiliates, the parties agree to submit irrevocably waive any right they may have to
their dispute to binding arbitration under the object to any action being brought in that
authority of the Federal Arbitration Act. Court, to claim that the action has been
brought to an inconvenient forum or to claim
that that Court does not have jurisdiction.

Although Footnote 10 does not elaborate on the particular inconsistency that the Receiver

will argue causes an invalidation of the arbitration provision, the process of elimination leads us

to conclude that she will argue that the “exclusive jurisdiction” language of the second sentence

should be read as if it said “all disputes will be determined by courts in Mississippi.” 4 Any such

argument will have no merit, as discussed in more detail below. There is no inconsistency in the

two provisions. The two provisions in the same contract should be harmonized.

A. Mississippi law requires the Court to harmonize the two provisions.

4
Though Footnote 10 quotes the second and third sentences of the forum selection provision, the third
sentence does not impact application of the arbitration provision. For example, in this case, there is no objection to
filing this action in this court, there is no claim that this is an inconvenient forum, and no claim that this court does
not have jurisdiction. Still the case must be arbitrated, and the third sentence does not affect that arbitration.

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As discussed below, there is no substantial basis for asserting any inconsistency between

the arbitration provision and the forum selection clause. However, if there were any question,

Mississippi law5 requires that the arbitration provision and the forum selection clause be

harmonized to give effect to both. The Court must “read the contract as a whole, so as to give

effect to all of its clauses.’” Gaiennie v. McMillin, 138 So. 3d 131, 135 (Miss. 2014) (quoting

Facilities, Inc. v. Rogers–Usry Chevrolet, Inc., 908 So.2d 107, 111 (Miss.2005). If the “contract

is unclear or ambiguous, the court should attempt to ‘harmonize the provisions in accord with the

parties’ apparent intent.” Id.; West v. West, 891 So. 2d 203, 212 (Miss. 2004); Royer Homes of

Mississippi, Inc. v. Chandeleur Homes, Inc., 857 So. 2d 748, 753 (Miss. 2003). Moreover,

Mississippi law provides that any ambiguity or uncertainty regarding whether the parties formed

a valid agreement to arbitrate must be resolved in favor of arbitration. Harrison Cnty.

Commercial Lot, LLC v. H. Gordon Myrick, Inc., 107 So. 3d 943, 950 (Miss. 2013).

Those principles clearly apply here. “[I]nstruments executed at the same time, by the

same contracting parties, for the same purpose, and in the course of the same transaction will be

considered and construed together, since they are, in the eyes of the law, one contract.” Gilchrist

Tractor Co. v. Stribling, 192 So. 2d 409, 417 (Miss. 1966) (quoting 17 Am.Jur.2d Contracts §

264 (1964)). There is no merit to the implication of Footnote 10 of the Complaint that the

arbitration provision contained in the Standard Terms and Conditions is not of equal stature to

the forum selection clause contained in the August 8 engagement letter. Both provisions are part

of the same Engagement Contract executed at the same time. The parties’ intent to be equally

bound by both is made clear by the signature line on the August 8 engagement letter, placed just

5
Whether there is a valid agreement to arbitrate is an issue that must be decided under Mississippi law. “In
answering the first question of contract validity” federal courts apply “‘ordinary state-law principles that govern the
formation of contracts.’” Graves v. BP Am., Inc., 568 F.3d 221, 222 (5th Cir. 2009) (quoting First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).

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below a statement in bold print, which makes it clear that both the letter and the Standard Terms

and Conditions constitute the “Terms of Engagement.” Thus, there is no basis for any claim that

the forum selection clause somehow “trumps” the arbitration provision.

B. These provisions are readily harmonized.

If, in fact, the Receiver’s contention is that the “exclusive jurisdiction” language of the

second sentence should be read as if it said “all disputes will be determined by courts in

Mississippi,” that contention has no merit. The word “jurisdiction” has a very precise and well-

established legal meaning. In the context of adjudicating disputes, “jurisdiction” refers to a

“court’s power to decide a case or issue a decree.” Black’s Law Dictionary (10th ed. 2014)

(emphasis added). In recognition that the word “jurisdiction” is sometimes misused, the

Supreme Court of the United States has explicitly cautioned federal courts to only apply the

jurisdictional label to “a court’s adjudicatory capacity.” Henderson ex rel. Henderson v.

Shinseki, 562 U.S. 428, 435 (2011).

Thus, the statement that Mississippi courts have “exclusive jurisdiction” is accurately

read to mean that it is only in the Mississippi courts that a party can invoke a “court’s power” to

decide a case or issue a decree.” The second sentence provides that the exclusive right to

exercise the “adjudicatory capacity of a court” with respect to any dispute, claim or difference

lies in the Mississippi courts.

This provision by its own terms does not provide that all disputes, claims, or differences

will be resolved by courts. Instead, the plain meaning of the words is that if there is any exercise

of the adjudicatory power of courts—using “jurisdiction” in its clear and precise legal sense as

defined by Black’s—that judicial power can only be exercised by courts in Mississippi. Had the

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provision been intended to provide that “all disputes will be resolved by courts” it could have

been written that way if that was the intent of the parties.

Accordingly, reading the word “jurisdiction” in light of its actual and technically accurate

meaning leads to the inescapable result that the forum selection clause is fully consistent with the

arbitration provision. Importantly, this reading—based on the meaning of the literal words—is

supported by common sense experience as to the intent of parties who purposefully include both

an arbitration provision and a forum selection clause in the same agreement. Their intent is that

(a) both provisions will be enforced and (b) the forum selection clause will establish which

courts would be involved if a judicial decision becomes necessary. The reason why parties

included both provisions in the same agreement—with the intention that both will be enforced—

is illustrated by what is happening in this very case. Here, the arbitration provision’s validity

must be decided by some court. The forum selection clause means, in this case, that the

exclusive decision to exercise judicial power as to that issue must be exercised by a court in

Mississippi—and not by a court in some far-off state. Moreover, if issues arise from the

arbitration of this dispute, such as enforcement or validity of the arbitration award, then

Mississippi courts will have exclusive jurisdiction over those disputes. Indeed, the arbitration

provision here specifically provides that certain disputes as to the award of the arbitrators would

be resolved by “a court of law.” The forum selection clause vests exclusive judicial power to

consider those issues in the Mississippi courts.

Here, the intent of the parties that both provisions be enforced is clear from the fact that

both are contained in the same agreement. 6 The two provisions can be readily harmonized.

6
An intent that both provisions be enforced is clear here. The lengthy arbitration provision in the Standard
Terms and Conditions document (which is part of the Engagement Contract) manifests a clear intent to arbitrate, and
the engagement letter repeatedly incorporates that document by reference and conditions the parties’ agreement on
it. Had the parties intended the forum selection clause to void the agreement to arbitrate, surely they would have

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There is a clear and logical reading of the forum selection clause based on the plain meaning of

the words that is not inconsistent with the arbitration provision. That meaning is consistent with

the apparent intent of parties that include arbitration provisions and forum selection clauses in

the same agreement that both should be enforced. Thus, under Mississippi law, both provisions

of this agreement must be given effect.

V. Questions regarding the scope of arbitration should be resolved by the arbitrators.

The parties to the Engagement Contract reached some agreement to arbitrate. Any issues

as to the scope of arbitration must be decided by the arbitrators. Parties to an arbitration may

refer such questions to the arbitrator either by including express referral language in the

arbitration agreement itself or by incorporating the AAA Rules of arbitration into their

agreement. 7 Here, as in Henry Schein, Inc. v. Archer & White Sales, Inc., No. 17-1272, 2019

WL 122164, at *3 (U.S. Jan. 8, 2019), the arbitration provision referenced the rules of the

American Arbitration Association (AAA). Those rules plainly delegate to the arbitrators the

power to rule on objections as to the scope of the arbitration agreement. 8

CONCLUSION

The Court should dismiss the case so that it can be arbitrated, or at least stay litigation of

the claims asserted against the Butler Snow Parties pending arbitration.

done so expressly by omitting the arbitration clause or included some language that negated the arbitration provision
by name. See, e.g., Reading Health Sys. v. Bear Stearns & Co., 900 F.3d 87, 103 (3d Cir. 2018).
7
Houston Ref., L.P. v. United Steel, Paper & Forestry, Rubber, Mfg., 765 F.3d 396, 408 (5th Cir. 2014);
Petrofac, Inc. v. DynMcDermott Petroleum Operations Co., 687 F.3d 671, 675 (5th Cir. 2012).
8
The AAA rules are publicly available at https://www.adr.org/sites/default/files/Employment%20Rules.pdf.

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Respectfully submitted this 24th day of January, 2019.

/s/ Edward Blackmon /s/ Alan Perry

Edward Blackmon, Jr. (MB No. 3354) Alan W. Perry (MB No. 4127)
Bradford J. Blackmon (MB No. 104848) Simon Bailey (MB No. 103925)
Michael Casey Williams (MB No. 104537)

Blackmon & Blackmon, PLLC Bradley Arant Boult Cummings LLP

907 W. Peace Street Suite 450, One Jackson Place
Canton, MS 39046 188 East Capitol Street
Phone: (601) 859-1567 Post Office Box 1789
Facsimile: (601) 859-2311 Jackson, MS 39215-1789
edblackmon@blackmonlawfirm.com Phone: (601) 948-8000
bjblackmon@blackmonlawfirm.com Facsimile: (601) 948-3000
aperry@bradley.com
sbailey@bradley.com
mcwilliams@bradley.com

Attorneys for Butler Snow Advisory LLC Attorneys for Butler Snow LLP
and Matt Thornton

CERTIFICATE OF SERVICE

I, Alan W. Perry, certify that on January 24, 2019, I electronically filed the foregoing
with the Clerk of the Court using the CM/ECF system, which will send notification of such filing
to all counsel of record.

/s/ Alan Perry

14
 Case 3:18-cv-00866-CWR-FKB Document 20 Filed 01/24/19 Page 1 of 2

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY Case No. 3:18-cv-866-CWR-FKB

AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER Arising out of Case No. 3:18-cv-252
PROPERTIES, LLC Securities and Exchange Commission v.
Arthur Lamar Adams and Madison Timber
Plaintiff Properties, LLC

v. Hon. Carlton W. Reeves, District Judge

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ,
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT

Defendants

JOINT MOTION OF BUTLER SNOW PARTIES

TO DISMISS OR STAY PROCEEDINGS PENDING ARBITRATION

Defendants Butler Snow LLP (“Butler Snow”), Butler Snow Advisory Services, LLC

(“BSAS”), and Matt Thornton (“Thornton”) (collectively, the “Butler Snow Parties”) jointly

move the Court under Federal Rule of Civil Procedure 12 to dismiss or stay litigation of the

claims asserted against them pending arbitration as required by the Federal Arbitration Act. The

bases for this Motion are more fully set forth in the Memorandum in Support being filed

contemporaneously with the Motion, which is hereby incorporated by reference. The Butler

Snow Parties also rely on Exhibit 1—the August 8, 2012 Engagement Contract—attached to this

Motion. In light of this Exhibit and the arguments in the Memorandum in Support, the Butler

Snow Parties are entitled to either a dismissal of this action, or to a stay while the matter is

arbitrated.

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 Case 3:18-cv-00866-CWR-FKB Document 20 Filed 01/24/19 Page 2 of 2

Respectfully submitted this 24th day of January, 2019.

/s/ Edward Blackmon /s/ Alan Perry

Edward Blackmon, Jr. (MB No. 3354) Alan W. Perry (MB No. 4127)
Bradford J. Blackmon (MB No. 104848) Simon Bailey (MB No. 103925)
Michael Casey Williams (MB No. 104537)

Blackmon & Blackmon, PLLC Bradley Arant Boult Cummings LLP

907 W. Peace Street Suite 400, One Jackson Place
Canton, MS 39046 188 East Capitol Street
Phone: (601) 859-1567 Post Office Box 1789
Facsimile: (601) 859-2311 Jackson, MS 39215-1789
edblackmon@blackmonlawfirm.com Phone: (601) 948-8000
bjblackmon@blackmonlawfirm.com Facsimile: (601) 948-3000
aperry@bradley.com
sbailey@bradley.com
mcwilliams@bradley.com

Attorneys for Butler Snow Advisory LLC Attorneys for Butler Snow LLP
and Matt Thornton

CERTIFICATE OF SERVICE

I, Alan W. Perry, certify that on January 24, 2019, I electronically filed the foregoing with
the Clerk of the Court using the CM/ECF system, which will send notification of such filing to all
counsel of record.

/s/ Alan Perry

2
 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 1 of 45

UNITED STATES DISTR ICT COURT

SOUTHERN DISTR ICT OF M ISS ISS IPPI
NORTHERN DIVISION

ALYSSON MILLS, IN HER CAPACITY 866CWR-FKB

Case No. 3:18-cv-00____
AS RECEIVER FOR ARTHUR LAMAR
ADAMS AND MADISON TIMBER Arising out of Case No. 3:18-cv-252,
PROPERTIES, LLC, Securities and Exchange Commission v.
Arthur Lamar Adams and Madison Timber
Plaintiff, Properties, LLC

v. Hon. Carlton W. Reeves, District Judge

BUTLER SNOW LLP; BUTLER SNOW

ADVISORY SERVICES, LLC; MATT
THORNTON; BAKER, DONELSON,
BEARMAN, CALDWELL & BERKOWITZ,
PC; ALEXANDER SEAWRIGHT, LLC;
BRENT ALEXANDER; and JON
SEAWRIGHT,

Defendants.

COMPLAINT

Alysson Mills, in her capacity as the court-appointed receiver for Arthur Lamar Adams and

Madison Timber Properties, LLC (the “Receiver”), through undersigned counsel, files this

Complaint against Butler Snow LLP; Butler Snow Advisory Services, LLC; Matt Thornton;

Baker, Donelson, Bearman, Caldwell & Berkowitz, PC; Alexander Seawright, LLC; Brent

Alexander; and Jon Seawright (collectively “Defendants”), stating as follows:

 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 2 of 45

INTRODUCTION

For more than ten years, Arthur Lamar Adams (“Adams”), through his companies Madison

Timber Company, LLC and Madison Timber Properties, LLC (“Madison Timber”), operated a

Ponzi scheme that defrauded hundreds of investors. Investors believed that Madison Timber used

investors’ money to purchase timber from Mississippi landowners; that Madison Timber sold the

timber to Mississippi lumber mills at a higher price; and that Madison Timber repaid investors

their principal plus interest with the proceeds of those sales. Investors received timber deeds that

purported to secure their investments—but the deeds were fake. There was no timber and no

proceeds from sales of timber. The money used to repay existing investors came solely from new

investors.

Madison Timber had to continuously grow to repay existing and new investors, and

continuously grow it did. In 2011, Madison Timber took in approximately $10 million from

investors. By 2018 that number had grown by a factor of 16. In the one-year period prior to April

19, 2018, the date Adams surrendered to federal authorities and confessed to the Ponzi scheme,

Madison Timber took in approximately $164.5 million. As of April 19, 2018, Madison Timber

had 501 outstanding promissory notes, reflecting debts to investors of more than $85 million.1

Madison Timber would not have grown without Defendants’ encouragement and

assistance. Defendants lent their influence, their professional expertise, and even their clients to

Adams. They made a fraudulent enterprise a fraternity. Defendants contributed to the success of

the Madison Timber Ponzi scheme, and therefore to the debts of the Receivership Estate to

investors. By this complaint the Receiver seeks to hold Defendants accountable.

1
The evidence at Adams’s sentencing established that of the $164.5 million that Madison Timber received in its last
year of operation, it paid back approximately $79.5 million, leaving an $85 million difference. The outstanding
principal and interest owed to investors is necessarily higher.

2
 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 3 of 45

JURISDICTION AND VENUE

1. The Court has jurisdiction over this action and its parties, and venue is proper in

this Court, pursuant to the Securities Act of 1933, 15 U.S.C. § 77v(a); the Securities & Exchange

Act of 1934, 15 U.S.C. § 78aa; 28 U.S.C. § 1692; and 28 U.S.C. § 754.

2. This action arises in connection with and is ancillary to the civil action already

pending in this Court styled Securities & Exchange Commission v. Arthur Lamar Adams and

Madison Timber Properties, LLC, No. 3:18-cv-252-CWR-FKB. In that civil action, the Securities

& Exchange Commission (“S.E.C.”) alleges that “[b]eginning in approximately 2004,” Adams,

through Madison Timber, “committed securities fraud by operating a Ponzi scheme” in violation

of the Securities Act of 1933 and the Securities & Exchange Act of 1934.2

3. The S.E.C. requested that the Court appoint a receiver for the estates of Adams and

Madison Timber.3 As the Court that appointed the Receiver, this Court has jurisdiction over any

claim brought by the Receiver in the execution of her duties. “[I]t is well-settled that when an

initial suit results in the appointment of the receiver, any suit that the receiver thereafter brings in

the appointment court in order to execute h[er] duties is ancillary to the main suit.” U.S. Small Bus.

Admin. v. Integrated Envtl. Sols., Inc., No. 05-cv-3041, 2006 WL 2336446, at *2 (S.D. Tex. Aug.

10, 2006) (citing Haile v. Henderson Nat’l Bank, 657 F.2d 816, 822 (6th Cir. 1981)). See also 28

U.S.C. § 1692 (“In proceedings in a district court where a receiver is appointed for property, real,

personal, or mixed, situated in different districts, process may issue and be executed in any such

district as if the property lay wholly within one district . . . ”).

4. Consistent with that precedent, Chief U.S. District Judge Daniel P. Jordan III has

ordered that all “cases filed by the duly appointed Receiver . . . which . . . arise out of or relate to
2
Doc. 3, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
3
Docs. 11, 21, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 4 of 45

[Securities & Exchange Commission v. Arthur Lamar Adams and Madison Timber Properties,

LLC, No. 3:18-cv-252-CWR-FKB] shall be directly assigned by the Clerk of Court to U.S. District

Judge Carlton W. Reeves and U.S. Magistrate Judge F. Keith Ball.”4 In compliance with Chief

Judge Jordan’s order, the Receiver shall separately file, contemporaneously with this complaint, a

notice of relatedness.

PARTIES

5. Plaintiff Alysson Mills is the Court-appointed Receiver for the estates of Adams and

Madison Timber. The Court’s order of appointment vests in her the power to, among other things:

investigate and . . . bring such legal actions based on law or equity in

any state, federal, or foreign court as the Receiver deems necessary
or appropriate in discharging her duties as Receiver.5

The Receiver brings this civil action in her capacity as Receiver and pursuant to the powers vested

in her by the Court’s orders and applicable law. The Receiver has standing to pursue, inter alia,

claims against third parties whose actions contributed to the success of the Madison Timber Ponzi

scheme, and therefore to the debts of the Receivership Estate.

6. Defendant Butler Snow LLP (with Butler Snow Advisory Services, LLC, “Butler

Snow”) is a Delaware limited liability partnership doing business in Mississippi.

7. Defendant Butler Snow Advisory Services, LLC (with Butler Snow LLP, “Butler

Snow”) is a Mississippi limited liability company doing business Mississippi.

8. Defendant Matt Thornton is an adult resident of Jackson, Mississippi. He is

founder, President, and CEO of Butler Snow Advisory Services, LLC.

4
Doc. 45, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).
5
Doc. 33, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss). By order dated
August 22, 2018, the Court eliminated the requirement that the Receiver obtain “prior approval of this Court upon ex
parte request” before bringing any legal action. Doc. 38, Securities & Exchange Commission vs. Adams, et al., No.
3:18-cv-00252 (S.D. Miss).

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 5 of 45

9. Defendant Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (“Baker

Donelson”) is a Tennessee professional corporation doing business in Mississippi.

10. Defendant Alexander Seawright, LLC is a Mississippi limited liability company

doing business in Mississippi.

11. Defendant Brent Alexander is an adult resident of Jackson, Mississippi. He is a

“Senior Public Policy Advisor” for Baker Donelson. With Jon Seawright, he owns Alexander

Seawright, LLC.

12. Defendant Jon Seawright is an adult resident of Jackson, Mississippi. He is a

shareholder of Baker Donelson and a member of its national governing Board of Directors. With

Brent Alexander, he owns Alexander Seawright, LLC.

ADAMS AND MADISON TIMBER

13. For more than ten years, Adams, through Madison Timber, operated a Ponzi

scheme that purported to purchase timber from Mississippi landowners and resell it to Mississippi

lumber mills at higher prices.

14. Investors in Madison Timber delivered to Madison Timber large sums of money,

typically in excess of $100,000 dollars, in reliance on the promise that Madison Timber would

repay them their principal plus interest of not less than 12% per annum, and sometimes as much as

20% per annum. The promised interest invariably far exceeded the interest any investor might

receive on any other collateralized investment.

15. Investors believed that Madison Timber would use their money to acquire timber

deeds and cutting agreements from Mississippi landowners; that Madison Timber would then sell

the timber to Mississippi lumber mills at a higher price; and that with the proceeds of those sales

Madison Timber would repay investors their principal and promised interest.

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 6 of 45

16. In exchange for their investments, investors in the Madison Timber Ponzi scheme

received a promissory note in the amount of their investment, payable in twelve monthly

installments together with the promised interest; twelve pre-dated checks, each in the amount of

the installment due under the promissory note; a timber deed and cutting agreement by which a

named landowner purported to grant to Madison Timber the rights to harvest timber on the land

described in the deed; and a timber deed and cutting agreement by which Madison Timber

purported to grant its own rights to the investor.

17. In fact, the timber deeds and cutting agreements were fake. Madison Timber had

no rights to harvest timber and no timber to cut and sell. Because Madison Timber had no

revenues whatsoever, investors were being repaid with new investors’ money.

18. Each month, Madison Timber required more and more new investors to repay

existing investors. Like any Ponzi scheme, Madison Timber had to continuously grow. To grow

Madison Timber, Adams relied on recruiters, including Defendants, to attract new investors.

19. In 2011, Madison Timber took in approximately $10 million from investors. By

2018 that number had grown by a factor of 16.

20. In April 19, 2018, on the heels of investigations of him by the F.B.I. and the U.S.

Attorney’s Office for the Southern District of Mississippi, Adams turned himself in. In the

one-year period prior to April 19, 2018, Madison Timber took in approximately $164.5 million.

As of April 19, 2018, Madison Timber had 501 outstanding promissory notes, reflecting debts to

investors of more than $85 million.6

6
The evidence at Adams’s sentencing established that of the $164.5 million that Madison Timber received in its last
year of operation, it paid back approximately $79.5 million, leaving an $85 million difference. The outstanding
principal and interest owed to investors is necessarily higher.

6
 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 7 of 45

21. Adams pleaded guilty to the federal crime of wire fraud and “admit[ted] to all of the

conduct of the entire scheme and artifice to defraud.”7 On October 30, 2018, he was sentenced to

a term of imprisonment of 235 months.8

22. The S.E.C. separately charged Adams with violations of the Securities Act of 1933

and Securities & Exchange Act of 1934, alleging in its complaint that “[b]eginning in

approximately 2004,” Adams, through Madison Timber, “committed securities fraud by operating

a Ponzi scheme.”9

23. The promissory notes sold by Madison Timber to investors were “securities,” as

that term is defined under 15 U.S.C.A. §78(c)(A)(10) and Miss. Code Ann. § 75-71-102(28).

24. As alleged in the complaint in the underlying action SEC v. Arthur Lamar Adams et

al., No. 3:18-cv-252 (S.D. Miss.), and in the bill of information filed against Adams in U.S. v.

Arthur Lamar Adams, No. 3:18-c-188 (S.D. Miss.), Adams, Madison Timber, and their affiliates,

including Defendants, facilitated sales of promissory notes to investors through material

misstatements and omissions; employed a device, scheme, or artifice to defraud; and engaged in

acts, practices, or courses of business that operated or would operate as a fraud or deceit, all in

violation of Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q(A); Section 10(b) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5,

thereunder; as well as the Mississippi Securities Act, Miss. Code Ann. § 75-71-501.

25. The sales furthermore violated the Securities Act of 1933 and the Mississippi

Securities Act because there were no registration statements for the promissory notes, see Section

5 of the Securities Act of 1933, 15 U.S.C § 77e, and Miss. Code Ann. § 75-71-301; and the

7
Doc. 11, United States v. Adams, No. 3:18-cr-00088 (S.D. Miss).
8
Doc. 21, United States v. Adams, No. 3:18-cr-00088 (S.D. Miss).
9
Doc. 3, Securities & Exchange Commission vs. Adams, et al., No. 3:18-cv-00252 (S.D. Miss).

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 8 of 45

promissory notes were not exempt from registration, see Section 5 of the Securities Act of 1933,

15 U.S.C § 77e, and Miss. Code Ann. §§ 75-71-201 through 75-71-203.

BUTLER SNOW

26. Adams and Madison Timber’s relationship with Butler Snow began in 2009 and

continued until Adams turned himself in on April 19, 2018.

The first engagement

27. Adams had made a name for himself as someone who understood the timber

industry and made money brokering timber sales. For many years Adams brokered legitimate

timber sales—but by 2009 he had figured out that he could fake things, and he saw an opportunity

to go big.

28. Adams previously had done business with Pinnacle Trust, a financial services

company in Madison, Mississippi. He and Pinnacle Trust discussed ways to maximize Adams’s

business. They decided to form an investment fund and engaged Butler Snow law firm to draft the

private placement memorandum, or PPM.

29. The investment fund was named Madison Timber Fund, LLC. Its aim would be to

raise $10,000,000 by selling 100 units at $100,000 each. Lawyers at Butler Snow spent months

working with Adams on the PPM and its accompanying documents.

30. The resulting PPM, drafted by Butler Snow, described the fund as follows:

MADISON TIMBER FUND, LLC, a Mississippi limited liability company (the

“Fund”), has been formed for the objective of achieving income and capital
preservation through investment in timber-producing real estate and other interests
in timber.

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 9 of 45

31. The PPM identified Adams and Madison Timber Company, Inc. as the fund’s

“Manager” and advised that the fund’s “Business Strategy” depended on the Manager’s “network

of contacts”:

[T]he Fund purchases the standing timber directly from the landowner and
then sells or arranges for the sale of the tree harvest. The purchase is made by the
execution of a “Timber Deed,” which is consequently filed in the real estate records
of the county where the land is located. The Timber Deed commonly allows for a
24 to 36 month period to actually harvest the timber. . . .
***
Using its network of contacts cultivated over 20 years, the Manager
regularly receives opportunities to purchase land tracts with timber. Typically, the
Manager has the opportunity to purchase before these tracts go on the “market.”
This gives the Manager a first-look pricing advantage. . . .
***
The Manager also has a number of established relationships with various
lumber mills, which includes knowledge of the mills’ preferred specialty type of
lumber needs from hardwoods to pine. These mills also offer the Manager referrals
for timber purchases. The Manager’s Timber Deeds are designed to protect the
Fund from liability for cleanup, property damage, road repair and other harvesting
challenges.
***
[T]he Manager has developed a timber purchase format that allows the
Manager to control the cyclical aspects of the business. By securing various
term-length contracts, the Manager is able to even out its supplies of timber for its
mill purchasers. The Manager intentionally purchases short-term contracts (3 to 6
month harvest), mixed with mid-term (6 to 12 months) and longer-term tracts (24 to
36 months) to enable the Manager to have a steady three-year supply of harvestable
inventory.
In addition, the Manager tracks the needs of its regular mill customers to
better supply the type of product they need.
***
The Manager believes that its competitive advantage is its flexibility in
choosing both wood sources and wood processing mills. By not having an in-house
mill, the Manager is able to obtain raw timber from various locations and match it
to buyers and mills that are geographically compatible with the mill location. . . .
The Manager’s pricing philosophy is to offer its mills a highly competitive
product. The Manager can offer lower pricing in exchange for a contributing
stream of referrals from its mill customers. The Manager is able to maintain a
highly competitive pricing strategy because it operates with low overhead costs,

9
 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 10 of 45

outsources its harvesting operations with a network of loggers and owns very little
equipment.

32. The PPM identified several “Timber Investment Risks,” including “Timber Price

Volatility.” The PPM explained:

The Fund’s revenues will be affected by the cyclical nature of the forest
products industry. Prices for timber can experience significant variation and have
been historically volatile. The Fund will have little control over the timing and
extent of price changes for timber products. The demand for timber and wood
products is affected primarily by the level of new/residential construction activity,
the supply of manufactured timber products, including imported timber products,
and other uses of timber products. These activities are subject to variation because
of changes in economic conditions, interest and currency rates, population growth
and changing demographics and seasonal weather cycles and storm activity.

33. The PPM also identified several “General Investment Risks,” one of which was

“Reliance on the Manager.” The PPM explained that the fund’s success is “substantially

dependent on the Manager”—therefore the fund might fail if Adams quits or dies. The PPM

disclosed the fund “does not currently own key-person insurance on the life of Lamar Adams” but

will “purchase such a policy within twelve months.”

34. Ultimately the fund itself did not attract any investors, and the PPM was shelved for

the time being.

35. Adams, however, continued to broker purported timber sales and make money

entering “joint ventures” with individual investors to purchase purported stand-alone timber tracts

that he called “standing tracts.” In 2011, Madison Timber took in approximately $10 million from

investors.

36. By this time the Madison Timber Ponzi scheme had been perfected. The consistent,

uniform returns of 12% to 14% attracted dozens of investors with between $100,000 and $200,000

to invest—but like any Ponzi scheme, each month Madison Timber required more and more new

10
 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 11 of 45

investors to repay the old ones. Adams would have to continuously grow Madison Timber to keep

up.

The second and third engagements

37. To continuously grow Madison Timber, Adams turned again to Butler Snow.

38. Butler Snow markets itself to clients as “the only resource you need.” To provide

business services to its law firm’s clients, in 2011 Butler Snow launched Butler Snow Advisory

Services, “a wholly owned subsidiary that provides non-legal business advice.” Butler Snow’s

website boasts that Butler Snow Advisory provides “executive-level strategic guidance” to closely

held businesses:

Closely held businesses face many of the same challenges as large, public
companies without the advantage of strategic advisors. This can make it more
difficult to those business owners to make informed decisions regarding their
business strategy.
Butler Snow Advisory specializes in providing executive-level strategic guidance
to private, family owned and closely held companies. We’ve built a diverse,
experienced team of professionals that are uniquely positioned to leverage industry
knowledge and real-world experience to work for our clients from day one.
Members of the BSA team are dedicated to understanding the goals of your
company and crafting actionable strategies for success, all while identifying
opportunities and mitigating risks.

39. Butler Snow’s website boasts that Butler Snow Advisory “utilize[s] resources from

across the Butler Snow network to match your business needs”:

In addition to our team’s expertise, as a part of the larger Butler Snow family, BSA
has the advantage of access to resources and networks that put our company ahead
of the competition. Our team approach allows us to utilize resources from across
the Butler Snow network to match your business needs with the expertise required.
As a result, our clients benefit from strategic counsel, innovative solutions and
efficient execution – all from an extensive, reputable network of professionals.
A few of the Butler Snow advantages include access to a legal network that boasts:
x 325+ attorneys
x 24 offices across the United States and in Asia and the United Kingdom

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 12 of 45

x client representation in all 50 states and the District of Columbia, as well as

internationally in more than 25 countries around the globe
x extensive business knowledge in a wealth of industries, including
telecommunications, technology, banking and finance, healthcare, oil and
gas and manufacturing

40. Under the leadership of Matt Thornton, its President and CEO, Butler Snow

Advisory sought to “fast-track” its own business by acquiring “top-level talent.” In April 2012,

Thornton announced that Mike Billings would join the team as a “strategic advisor”:

Michael Billings is a strategic advisor for Butler Snow Advisory Services,

specializing in strategic business development – helping clients identify optimal
business opportunities, then designing and implementing business development
strategies to gain a competitive advantage within the sector. He has years of
experience serving in a business development, consulting and advisory capacity to
a number of large companies in the Dallas, Texas area.

41. Butler Snow Advisory was young, and Billings was brand new, when in May 2012

the opportunity to “strategically advise” Madison Timber arose. Adams wanted assistance with a

“$30-50 million capital raise.” Thornton alerted Don Cannada and Barry Cannada, a senior

partner and the Vice Chair of Butler Snow, respectively, to the prospects of this new business.

42. A series of meetings followed at Butler Snow’s Ridgeland office. After, Thornton

told Adams “I have thoroughly enjoyed getting to know you and believe we could be a piece of the

puzzle in terms of strategic business growth and the associated financing/capital strategies to

accompany growth.” Thornton proposed that Adams engage Butler Snow Advisory to provide

“strategic business development, strategic financing/capital strategies and overall management

advisory services” and, separately, engage Butler Snow law firm to update the preexisting PPM.

43. Internally Thornton and Billings discussed how Butler Snow Advisory would be

compensated. They proposed a monthly fee of $3,500 “to assist in strategic business

development” plus a “success fee” for “individual projects.” If Thornton and Billings succeeded

12
 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 13 of 45

in establishing a fund, they proposed to receive half of Madison Timber’s management fee plus

33% (later reduced to 25%) of Madison Timber’s carried interest. At the time, Billings wrote

Thornton of Adams’s “insatiable appetite for cash”:

As Lamar [Adams] has a seemingly insatiable appetite for cash, all the way up to a
couple hundred $ Million, in theory we would be engage[d] and be paid the $3,500
retainer until he says “uncle” and does not have the capacity to do any more
volume.

Thornton agreed that they should “lock that down for at least a year.”

44. In August 2012, at Thornton’s urging, Adams formally engaged Butler Snow

Advisory to “focus on strategic business development” and, separately, formally engaged Butler

Snow law firm to update the preexisting PPM.10

The pitch

45. While lawyers at Butler Snow updated the preexisting PPM, Thornton and Billings

began pitching Madison Timber to high net-worth clients. During this time they often copied

Barry Cannada on their emails to keep him apprised of their progress.

46. They had early success with a high net-worth client in New Orleans. The investor

was not interested in investing in a fund, but he was willing to entertain a “joint venture” in a

“standing tract.” Billings and Adams made a presentation to the investor that falsely represented

that Madison Timber had “timber sales” of $9,576,252 in 2009; $8,087,072 in 2010; and

$10,034,024 in 2011. The impressed investor wired Madison Timber $450,000, and Madison

Timber delivered to Butler Snow an $8,000 “commission check.” One month later, after the same

10
The “BSA – Standard Terms and Conditions” that accompanied the August 8, 2012 engagement letter for the
“Engagement of Butler Snow Advisory” includes an arbitration clause, but the letter itself, signed by Lamar Adams
for Madison Timber and Martin Willoughby for Butler Snow Advisory, expressly states that “The state and federal
courts in Mississippi shall have exclusive jurisdiction in relation to any claim, dispute or difference concerning this
Engagement Contract and any matter arising from it. The parties hereto irrevocably waive any right they may have to
object to any action being brought in that Court, to claim that the action has been brought to an inconvenient forum or
to claim that that Court does not have jurisdiction.”

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 Case 3:18-cv-00866-CWR-FKB Document 1 Filed 12/19/18 Page 14 of 45

investor wired Madison Timber another $1,050,000, Madison Timber delivered to Butler Snow a

$15,750 “commission check.”

47. Buoyed by this early success, Billings introduced Adams to two “billion-dollar”

“family offices” in Texas. Thornton gushed at this “tremendous ‘start.’” On the same day, eager

to please Adams, and worried his counterparts at Butler Snow law firm were not meeting Adams’s

needs, Thornton complained to Barry Cannada that an associate in Butler Snow’s Memphis office

had failed to return Adams’s call and caused Adams to submit a bid for a tract of land “without

legal review.” Thornton lamented that “we continue to have the same scenario occur

over-and-over again with respect to Advisory asking the law firm to assist in a timely, efficient &

within scope manner.”

48. While lawyers at Butler Snow continued to work on the updated PPM, Thornton

and Billings looked for other investors who, like the high net-worth client in New Orleans, might

prefer to invest in a “standing tract” only. They were aware that Madison Timber offered a

consistent, uniform return of 12% to 14%. They made a list of thirty-plus mostly local individuals

and families to target as “Small Investor Madison Timber Prospects.” Many of the individuals on

their list became investors in Madison Timber.

49. In February 2013 lawyers at Butler Snow finalized the updated PPM. The fund

would now aim to raise up to $100,000,000 by selling 1,000 units at $100,000 each. Notably, the

fund’s “Business Strategy” and “Timber Investment Risks”—reproduced above, both of which

were false or misleading—were unchanged. Nevertheless, Thornton represented that he personally

“reread from a non-legal language standpoint and all business, market and organizational aspects

remain in-tact.”

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50. With the PPM in hand, Thornton made pitches to bigger, institutional clients. He

told them that “Madison Timber (Lamar Adams, President) is a very good client of ours” that “has

been vetted by several $1.5 billion family office(s) in Texas, encompassing a 75+ day due

diligence period [and] as you would imagine, Lamar passed with flying colors!” In fact, the two

“family offices” in Texas had chosen not to invest in Madison Timber.

51. One institutional client to whom Thornton pitched Madison Timber candidly

remarked that “First blush says there has been some inventory build over the last four years.” But

instead of addressing the question raised by the remark, Thornton continued his pitch: “‘Inventory

Build-Up’ . . . great question and one major topic we would like to discuss ‘face-to-face’ . . . we

believe Madison Timber’s business model, strategic partnerships and forward-thinking

supply/demand philosophy is a real differentiator.”

52. Thornton often emphasized non-disclosure agreements both to reinforce the

exclusivity of Madison Timber’s purported “strategic partnerships” and to justify Madison

Timber’s inability to provide requested information. He told one potential investor “we have had

entities sign NDA(s) prior to providing financial information . . . we certainly did this with the two

multi-billion $ family office entities in Dallas.” He told another potential investor, “As we

discussed extremely confidential information relative to Madison Timber’s relationships with

mills, financing structure and the like, we certainly appreciate very much your team’s treating

today’s discussion and information provided in the STRICTLY CONFIDENTIAL category under

the NDA umbrella.” These comments had the effect of impressing upon the potential investor that

Madison Timber represented a uniquely lucrative investment opportunity.

53. Thornton told yet another potential investor who asked about mill contracts:

“Lamar [Adams] has an extremely stringent NDA with his mill partners [and] due to this

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extremely stringent NDA, we have not shared any mill names/profiles with any potential investors

to date.” Of course, this representation was false because Adams did not have any “mill partners”

therefore there was no “extremely stringent NDA” and no “mill names/profiles” to share. But

Thornton went on:

Additionally, as the investor has a contract with Madison Timber (and NOT with
the mill directly) via promissory note issued from Madison Timber that has
assigned timber deed worth twice as much as their invested dollars. So, investors
would be looking to Madison Timber for payment (not the mill), and in the event of
a default by Lamar, the investors simply file the deed / resell the timber.

Thornton thus assured the potential investor that he should not worry about the mills, because his

contract would be with Madison Timber—a company backed by Butler Snow’s reputation.

54. Ultimately, no investor chose to invest in the fund for which the PPM had been

updated and through which Butler Snow and Adams had hoped to raise $100,000,000. But many

individuals and institutional clients to whom Thornton and Billings made a pitch did invest in

purported “standing tracts” only, and for each of these investments, Madison Timber delivered to

Butler Snow a “commission check.”

55. For all of these transactions, Thornton, Billings, and Butler Snow acted as

unlicensed brokers, in violation of federal and state law. A broker is “any person engaged in the

business of effecting transactions in securities for the account of others.” See Section 3(4) of the

Securities Exchange Act of 1934, 15 U.S.C. § 78c. The S.E.C.’s public website states that the

receipt of transaction-related commissions is a key indicator that a broker must be registered.11 A

recent search using the Financial Industry Regulatory Authority’s public online BrokerCheck

confirms that neither Thornton, Billings, nor Butler Snow have ever registered with the S.E.C.

11
Guide to Broker-Dealer Registration, U.S. SECURITIES & EXCHANGE COMMISSION, https://www.sec.gov/reports
pubs/investor-publications/divisionsmarketregbdguidehtm.html.

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56. Butler Snow knew or should have known what it was doing was unlawful. Among

the notes in Butler Snow’s Madison Timber files is this comment from Don Cannada in 2009:

“Very broad definition of what a broker is . . . Includes one who for a commission procures a

purchaser or prospect etc. See 73-35-31 for penalties. Says you can’t pay an unlicensed broker,

but doesn’t provide any penalty if you do so.”

57. Investors might fairly question what Butler Snow did for them to earn their

commissions. The answer is not much. While they extolled Madison Timber’s “strategic

partnerships and forward-thinking supply/demand philosophy,” neither Thornton nor Billings, nor

anyone at Butler Snow, conducted an even cursory inspection of Madison Timber’s operations. If

they had, they would have been forced to face the reality that Madison Timber was nothing more

than a Ponzi scheme.

58. Instead, Butler Snow aided and abetted Madison Timber’s growth, lending Adams

and Madison Timber their influence, professional expertise, and clients. Butler Snow’s

imprimatur was powerful, and they knew it. They even agreed to serve as a “referral” for other

firms’ clients. In July 2013 “Baker Donelson” sought “a few referrals” to validate Madison

Timber. Thornton responded within minutes: “No problem by me – thanks!” Billings exclaimed:

“You are more than welcome to include me as a reference for anything at any time . . . highest

marks possible!!”

Red flags

59. Not only did Thornton, Billings, and Butler Snow broker Madison Timber

investments without a license and fail to independently confirm that the timber and rights in

question were real, they also recklessly ignored numerous red flags.

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60. Indeed, the timber deeds and cutting agreements between landowners and Madison

Timber were fake. The landowners’ signatures, forged by Adams, often looked the same. A call to

any one of the purported landowners, or a simple check of the title for any one of the purported

tracts of land, would have confirmed the truth. Neither Thornton nor Billings, nor anyone at Butler

Snow, ever called a landowner or checked a tract’s title.

61. Madison Timber also had no real contracts with any mills. A call to any one of the

mills for which Madison Timber purported to have contracts would have confirmed the truth.

Neither Thornton nor Billings, nor anyone at Butler Snow, ever called a mill. Worse, having

conducted no due diligence themselves, they falsely represented to potential investors that they

could not disclose Madison Timber’s “mill partners” due to an “extremely stringent NDA.”

62. Adams required that an investor agree that he or she would not record the deed by

which Madison Timber purported to grant its own rights to the investor unless and until Madison

Timber failed to make a payment due under the promissory note. Incredibly, notwithstanding the

suspicious “agreement not to record,” neither Thornton nor Billings, nor anyone at Butler Snow,

questioned this requirement.

63. The “profit” that Adams promised was 300% to 400% better than that payable by

any other fully collateralized investment and was uniform and consistent. This fact should have

been a glaring warning sign standing alone, particularly for individuals such as Thornton and

Billings who touted decades of business experience. It is all the more incredible that neither

Thornton nor Billings, nor anyone at Butler Snow, ever questioned it, given that the PPM drafted

by Butler Snow, which Thornton professed to have read, expressly disclosed the risk of “Timber

Price Volatility.”

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Another engagement

64. By December 2013 Adams had grown tired of paying Butler Snow Advisory the

monthly fee of $3,500 plus travel expenses. Separately Billings saw potential to make more money

recruiting new investors to Madison Timber fulltime. Adams and Billings informed Thornton that

they would “proceed on a direct basis,” meaning Billings would leave Butler Snow Advisory to

work for Adams fulltime, effective January 1, 2014. Thornton told Adams he had “thoroughly

enjoyed” Madison Timber” and to “please let me know if I or BSAS can ever be of service again.”

65. Butler Snow, however, did not cease servicing Adams. In 2015 Adams engaged

Butler Snow to assist Oxford Springs, LLC, of which he effectively was the managing member,

with “regulatory permitting and compliance matters.” Butler Snow thus continued to lend its

influence to Adams, this time with government bodies. Indeed, Butler Snow was still sending

invoices to Adams after Adams turned himself in.

66. Notwithstanding its attorney-client relationships with Adams and Madison Timber,

not to mention its own role in perpetuating the Ponzi scheme, after Adams turned himself in Butler

Snow purported to represent investors in their demands of Madison Timber. These investors were

led to believe that Butler Snow could and would represent their best interests. At the same time,

however, Butler Snow also purported to represent Billings—whose interests clearly were adverse

to investors.

67. On May 11, 2018, Butler Snow sent Adams a letter titled “Disengagement”

advising that “recent events” made it “appropriate for us to withdraw from the representation.”

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BAKER DONELSON

68. Adams and Madison Timber’s relationship with Baker Donelson began in 2011 and

continued until Adams turned himself in on April 19, 2018.

A joint venture

69. In 2011, Brent Alexander and Jon Seawright, a lawyer and lobbyist at the Baker

Donelson law firm in Jackson, were looking to start a new investment fund.

70. Alexander and Seawright made acquaintances with Adams and a partnership

quickly formed. Alexander and Seawright would create an LLC that would pool other people’s

money to invest in Madison Timber, and Adams would share the returns with Alexander and

Seawright. From Seawright’s perspective, it was “a virtually risk free deal”:

I feel pretty good about this . . . Please explain to me why this is not a virtually risk
free deal. There is no pricing risk – everything is tied down on the front end. The
only risk I see is (i) mill defaults, but you still own the land, (ii) Lamar is a fraud,
but no evidence of that, or (iii) such a fundamental collapse of the timber industry
that mill defaults and uncut timber is less than purchase price, but investor is
oversecured almost 2:1, so there would have to be catastrophic collapse. Jds

71. Alexander and Seawright saw a big opportunity in Madison Timber, but to raise

“significant capital” for Adams, they needed to do some “smaller investments to prove out the

income earning potential.” They pitched the first investment to a client of Baker Donelson.

Seawright told the client that Alexander and Seawright would be responsible for everything:

We would be responsible for papering everything, liaison with Lamar, monitoring

process of sale of timber, acquisition of timber rights, proper recording of
documents, etc., distribution of loan repayments and otherwise managing the
investment.

Seawright told the client that “[r]unning funds through us or BD [Baker Donelson] escrow is not a

problem,” and all “legal and other admin expenses” would “come out of our share.”

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72. Alexander and Seawright’s “share” would include a portion of each investment’s

return, what Adams called a “birddog fee.” Adams told Alexander and Seawright that he could

ensure a 14% “profit” with a 2% “birddog fee” built-in, but Alexander and Seawright could decide

“how you guys want the split done.”

73. Seawright proposed instead that each investment’s promissory note bear 13%

interest, of which investors would receive 10% and Alexander and Seawright would keep 3%.

Separately Alexander and Seawright negotiated an additional 3% commission for themselves. As

a result, Alexander and Seawright’s “share” of each investment’s return included the 3% they

disclosed to investors, plus an extra undisclosed 3% that Adams paid them directly.

74. Seawright drafted subscription agreements and accompanying documents for the

sales of units in what was then called Alewright Investments, LLC, later renamed Alexander

Seawright Timber Fund I, LLC. From 2011 until April 2018, Alexander and Seawright used their

fund to invest other people’s money in Madison Timber and split the “profits” with Adams.

The pitch

75. Throughout this time period Alexander and Seawright pitched their fund to

potential investors, including Baker Donelson clients, as an exclusive “friends and family” fund.

Alexander often used the phrase “simple, elegant and profitable” to describe the fund. He told

investors that “we are in it”— a lie; neither Alexander nor Seawright invested their own money in

the fund—“our neighbors, lots of physicians, many of the attorneys at Baker Donelson and other

firms, a United States Senator etc.”

76. Alexander was a persistent salesman. His pitch varied slightly depending on his

audience—for some investors the minimum was $25,000; for others, $50,000—but he always

promised a “rock stable” and “oversecured” 10% return, in a fund “safe enough for friends and

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family.” If an investor said he could invest “either 25k or 30,” Alexander responded “$50k would

be better for you . . . The more you get in circulation, the more you can compound each quarter.”

77. If a potential investor was noncommittal Alexander applied pressure. He told

investors the fund “sells out quick” and “is moving fast.” To one such person he texted: “[You]

need to invest in the timber fund. We have figured the math and can get you 14 percent fully

secured if you reinvest your principle [sic] and interest every quarter. It compounds like you

would not believe,” followed by, “Are you going to invest in this timber round? You need to put

your money to work. No pressure at all, just smart advice in this climate.”

78. Alexander and Seawright specifically targeted individuals who had recently sold

assets because they knew those individuals had money to invest. Such individuals included clients

for whom Baker Donelson had recently closed transactions.

Backed by Baker Donelson

79. Investors reasonably believed that their investment in Madison Timber, through

Alexander Seawright Timber Fund I, LLC, was backed and promoted by, and had been vetted by,

Baker Donelson.

80. Alexander and Seawright relied heavily on their affiliation with Baker Donelson in

securing investments. Alexander and Seawright described the fund to potential investors who were

clients of Baker Donelson as a fund for preferred Baker Donelson clients and partners.

81. Alexander and Seawright referred potential investors to Baker Donelson’s website,

which shows that Jon Seawright is not merely a shareholder in Baker Donelson’s Jackson office

but an elected member of the firm’s national governing Board of Directors. Baker Donelson is a

law firm, not an investment advisory firm, but its website touts Jon Seawright’s advanced degree

in taxation and “extensive experience” in business development and capital formation. Its website

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presents Brent Alexander as a “Senior Public Policy Advisor” who is qualified by regulators to

serve as a principal in, or advisor to, hedge funds and who has a “rapidly growing” practice in

“advising venture capital and related investors.”

82. Baker Donelson knew Alexander and Seawright relied on their affiliation with

Baker Donelson in securing investments and allowed it.

83. Alexander and Seawright used Baker Donelson’s Jackson office’s address for

official business. They and Adams held “closings” at Baker Donelson’s Jackson office. They used

Baker Donelson’s runners to pick up investors’ checks.

84. Alexander and Seawright enlisted their colleagues at Baker Donelson, including in

offices in other states, to introduce them to potential investors. They asked their colleagues to

“[h]elp us get a meeting if you’re able,” adding “[i]f you can get us in the door, it would mean a

great deal.” Their colleagues obliged.

Easy money

85. Investors were led to believe that they could rely on Alexander and Seawright to

evaluate each investment using their professional expertise and judgment, which was backed by

Baker Donelson’s reputation. In fact Alexander and Seawright undertook no meaningful

evaluation of the investments they pushed on unwitting persons, including Baker Donelson’s

clients. At the beginning of their partnership with Adams, Seawright asked questions such as

“Who bears the loss with respect to the destruction of timber? For example, if there is fire, beetles,

hurricane, whatever, who is on the hook? Is it an insured risk?” But he accepted Adams’s answers

to his questions without follow-up. Adams told Seawright that Madison Timber had “umbrella

[insurance] on all tracts” (he added, “Expensive, don’t need it but have it”). Seawright never asked

to inspect the insurance, which did not exist.

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86. Investors were led to believe that Alexander and Seawright personally inspected

the timber underlying each investment. Of course they did not. Alexander and Seawright gave

investors “Equity Term Sheets” that described each upcoming investment opportunity. An

“Equity Term Sheet” dated March 5, 2017, for instance, explained that for the “minimum

investment” of $25,000, an investor would share in the “cutting rights on tracts of land in various

counties (the ‘Timber Rights’).” Like all of Alexander and Seawright’s “Equity Term Sheets,” the

“Equity Term Sheet” dated March 5, 2017, expressly represented that Alexander and Seawright

would personally inspect the property in question:

Company [Alexander and Seawright] will inspect the property related to the
Timber Rights, must receive the original, executed Note and timber deed and will
inspect the executed agreement(s) with the timber mill(s).

Alexander and Seawright could not and did not inspect the property in question—nor “the

executed agreement(s) with the timber mill(s)”—because such did not exist. These representations

were patently false.

87. Alexander and Seawright even devised a “Timber Rights Investment Closing

Checklist” that included among its list of things to do “Review Mill Contract” and “Review Land

re Timber.” Alexander and Seawright could not and did not review any “Mill Contract” or “Land

re Timber” because there was no “Mill Contract” or “Land re Timber” to review.

88. On information and belief, Alexander and Seawright “inspected” a purported

timber tract only once or twice, at the very inception of their partnership with Adams. The

“inspection” was hardly professional. Email traffic indicates “inspection” meant “[grab] a cooler

of beer and make a loop.”

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89. Between 2011 and April 2018, Alexander and Seawright withdrew over $980,000

from the Alexander Seawright Timber Fund I, representing their “shares” of investors’ returns. In

addition Adams separately paid them over $600,000 representing undisclosed “birddog fees.”

90. On information and belief, Adams also sometimes paid Alexander and Seawright

bonuses, including Christmas bonuses in cash that he had delivered to Alexander and Seawright at

their Baker Donelson office.

91. For all this time, Alexander and Seawright acted as unlicensed brokers, in violation

of federal and state law. A broker is “any person engaged in the business of effecting transactions

in securities for the account of others.” See Section 3(4) of the Securities Exchange Act of 1934, 15

U.S.C. § 78c. The S.E.C.’s public website states that the receipt of transaction-related

commissions is a key indicator that a broker must be registered.12 A recent search using the

Financial Industry Regulatory Authority’s public online BrokerCheck confirms that neither

Alexander nor Seawright have ever registered with the S.E.C.

92. Investors might fairly question what Alexander and Seawright did to investigate the

investment. The reality is not much. In October 2017, Alexander bragged to a potential investor

that “to our surprise, we have now financed the purchase of about $60 million in timber . . . It has

worked so well that we simply send out an email on the 15th of each month and some hours later

have collected the investment we need for the next round.”

93. Neither Alexander nor Seawright, nor anyone at Baker Donelson, conducted an

even cursory inspection of Madison Timber’s operations. If they had, they would have realized

what should have been obvious—that the money was too good to be true because Madison Timber

12
Guide to Broker-Dealer Registration, U.S. SECURITIES & EXCHANGE COMMISSION https://www.sec.gov/reports
pubs/investor-publications/divisionsmarketregbdguidehtm.html

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was nothing more than a Ponzi scheme. Instead, they aided and abetted Madison Timber’s growth,

providing Adams and Madison Timber their influence and their clients.

Red flags

94. Not only did Alexander and Seawright and Baker Donelson fail to independently

confirm that the timber and rights in question were real, they recklessly ignored numerous red

flags.

95. The timber deeds and cutting agreements between landowners and Madison

Timber were fake. The landowners’ signatures, forged by Adams, often looked the same. A call to

any one of the hundreds of purported landowners, or a simple check of the title for any one of the

hundreds of purported tracts of land, would have confirmed the truth. Neither Alexander nor

Seawright, nor anyone at Baker Donelson, ever called a landowner or checked a tract’s title.

96. Madison Timber also had no real contracts with any mills. A call to any one of the

mills for which Madison Timber purported to have contracts would have confirmed the truth.

Neither Alexander nor Seawright, nor anyone at Baker Donelson, ever called a mill.

97. Adams required that an investor agree that he or she would not record the deed by

which Madison Timber purported to grant its own rights to the investor unless and until Madison

Timber failed to make a payment due under the promissory note. Seawright quipped that “I have

been clear that I am no timber expert”—but he is unquestionably a lawyer to whom his clients and

investors looked to evaluate the investment’s risks. Incredibly, notwithstanding the suspicious

“agreement not to record,” neither Alexander nor Seawright, nor anyone at Baker Donelson,

questioned this requirement.

98. The “profit” that Adams promised was 300% to 400% better than that payable by

any other fully collateralized investment and was uniform and consistent. This fact should have

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been a glaring warning sign but Alexander, who Baker Donelson presents as a qualified and

experienced advisor, turned this warning sign into a selling point. Alexander bragged about his

“six year perfect track record” of consistent uniform returns under his “beautiful, albeit simple,

financial model.”

99. Adams purported to have identified mills with an insatiable demand for timber at

uniform prices. The market price for timber is readily available from multiple sources, and any one

of those sources would have confirmed that the market price for timber actually rises and falls,

sometimes dramatically, over short periods of time. Neither Alexander nor Seawright, nor anyone

at Baker Donelson, ever evaluated the investment in light of such information. To the contrary,

Seawright gloated that “[Adams] has stated that volume is not problem and indicates there are

enough opportunities for him to soak up as much capital as we can raise.”

100. In 2014 Adams decided that he did not want to have to manage Madison Timber

during the month of December. He told his “bird dogs,” including Alexander and Seawright, that

Madison Timber would not issue checks in December going forward; what had been a 12-month

payoff would become a 13-month payoff, skipping the last month of the year. Seawright blindly

passed on to investors the dubious explanation that mills shut down in December for OSHA

inspections:

In December 2014, we were notified that the mills intended to shut down
operations in December to allow a break for the holidays and complete OSHA
required inspections. With their operations down, they requested that no payment
be made in December. The broker we worked with agreed to this, but on the
condition that the interest rate is increased by 1%, which they agreed to. This
increase is passed on to investors, so now all rounds pay out in 12 payments over 13
months, with a total interest of 13%. The result is the annual effective interest rate
increased to 10.15%, so while the payments are stretched out by a month, the
interest rate is better.

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Neither Alexander nor Seawright, nor anyone at Baker Donelson, did anything to verify this false

information.

Alexander Seawright Timber Fund II

101. In 2015 Alexander and Seawright had an idea. They had been making monthly

investments with Adams of between $100,000 and $500,000 using other people’s money.

Alexander proposed that “[we] systemize this a little and take it to the next level.” Over the next

two years Alexander and Seawright would brainstorm a new model that could make Alexander

and Seawright rich. Alexander estimated that if a fund put $1 million in Madison Timber and then

reinvested the principal and interest each month for ten years it would make $17 to $18 million.

What if the fund put $10 million in?

102. The idea consumed Alexander. He texted Seawright, “Woke at [sic] at 2 thinking

about the structure of the timber pool. We pull this off, we get rich.” Using Baker Donelson’s

conference rooms and resources, he hosted meetings with and made presentations to accountants,

investors, and advisors to push his idea and debate the merits of a five-year versus ten-year model.

He reported the models gave people “much more level headed” than he “an orgasm as to its

potential.” Fearing that “now that they have seen up our skirts” people will “try to cut us out,” he

had prospective partners execute a non-disclosure agreement that Seawright drafted.

103. Alexander and Seawright gave their new model a new company and named it

Alexander Seawright Timber Fund II, LLC. They made a pitchbook for prospective investors. As

always, in it they emphasized their affiliation with Baker Donelson:

Brent Alexander is a senior public policy advisor at Baker, Donelson, Bearman,

Caldwell and Berkowitz (“Baker Donelson”) one of the nation’s largest law firms.
He provides strategic business consulting for the firm’s clients and serves as a
national recognized lobbyist both regionally and federally. . . .

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Jon Seawright is a senior shareholder at Baker Donelson and a member of the

firm’s Board of Directors. Seawright has been deemed by peer-reviewed Super
Lawyers as a Rising Star, as well as one of the nation’s top attorneys, and represents
a range of national and regional clients, specializing in complex business
transactions, mergers and acquisitions and taxation. . . .

104. The 15-page pitchbook extolled the “elegant, simple and highly profitable” model

by which Alexander and Seawright had already “invest[ed] more than $20 million to facilitate the

purchase of over $50 million in timber.” The pitchbook falsely represented that an investment

would be “over-secured” and the timber would be “insured.” The pitchbook called the opportunity

to compound both principal and interest in the new fund “a nice trick indeed”:

Similar in almost all respects in operation to Alexander Seawright Timber Fund I,

Alexander Seawright Timber Fund II will use a pool of dedicated funds to allow
Alexander Seawright, not individual investors, the authority to systematically
control the reinvestment of all of the returned principal and interest in each
subsequent round of the fund. This will dramatically increase returns without
increasing risk.
On a fully secured investment.
This is a nice trick indeed.

105. The feedback was not all good. One prospective investor observed that Alexander

and Seawright could count “the respect we have for Baker” “to the good”—but the investment

presented at least ten concrete concerns, the first of which he called the “John Grisham novel

problem”:

To the concerning . . .
1. The structure seems very difficult – bordering on uninvestable in its current form
– for institutional managers, which is to say those managing money for others. Were
this to go bad in any way, there’s a beginning to a John Grisham novel problem here:
two lawyers drove up from Jackson, MS, to Memphis, TN, to pitch yield hungry
investors on a double digit, nearly riskless opportunity. The opportunity was
unaudited, and the lawyers did the tax work. . . .

But Alexander brushed off the criticism. (“I’m not sure he is a particularly artful or cogent writer,”

he told Seawright.)

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106. The same prospective investor questioned why Alexander and Seawright

themselves were not invested in their own fund. “Your interest in the incentive is noteworthy, but,

it is derived from sweat, not money you stand to lose,” he wrote. Alexander replied, “We do have

skin in the game, at least in the way we characterize it”:

We do have skin in the game, at least in the way we characterize it, in that we have
fronted the expenses for the design, implementation, operation and management of
Alexander Timber Fund I, with little direct compensation because we knew that if
we were successful in building a track record, the opportunity to create a larger fund
would follow. . . . [O]ur incentives under this model are perfectly aligned with our
investors. If they don’t make money, we really don’t make money. That’s about the
best we can do.

What Alexander’s reply did not acknowledge was the obvious: Investors stood to lose their own

money, but Alexander and Seawright did not.

107. The same prospective investor pressed Alexander and Seawright on the question of

“margin”—that is, how did their broker (Adams) guarantee such uniform and consistent profits?

He asked “what are we missing to understand here that a broker exists which [sic] such large

spreads/ margins?”:

Gents – in doing some research on this strategy, I spoke to a friend who is more
familiar with timber. I described the model this opportunity works under, which
was foreign to him. What he is used to seeing is the forester working as an agent of
the landowner, where the forester is incented by receiving (if they are really good)
5-10% of the sales price. In this model, the forester markets the timber directly to
the mills and, in some cases, literally opens the bids up in front of everyone. Both
the concept of a broker and the 30ish % margins discussed seemed unfamiliar (and
this is a very experienced guy).

Notwithstanding this meaningful input, neither Alexander nor Seawright, nor anyone at Baker

Donelson, did anything to slow things down, nor even made a cursory analysis of their and

Adams’s business.

108. Instead Alexander and Seawright speeded things up with more forceful

presentations. They now argued Alexander Seawright Timber Fund II, LLC was for investors

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“with brains and balls.” Meanwhile they continued to invest other people’s money in Alexander

Seawright Timber Fund I, LLC.

109. In late 2017, Alexander and Seawright finally secured a “key investor” to “seed”

Alexander Seawright Timber Fund II, LLC with $6 million. Alexander wanted $12 million to start

but figured he would raise the remaining $6 million by “bootstrapping.” Eventually he hoped “to

raise an additional $36 [million] over the life of the fund and let it roll for ten years.”

110. The “key investor” was a Baker Donelson client who would fund his investment

with the proceeds from the sale of a major asset. Seawright represented him in the sale. Alexander

told him, “I think you know us well enough to trust us, and if anything were ever go wrong, the

fund would simply unwind, at a profit.” He continued:

As you know, we are extremely confident in the model which is why we are
investing and reinvesting our earnings along with you under the same conditions.
Every deal has risk, but the only way that the numbers would be affected would be
if we for some reason could not close the rounds on a monthly basis (and I am very
confident we will). . . .

The purchase from the timber owner and the sale to the mill are executed
simultaneously Remember on the sale, we are over-secured by 50 percent. We put
up half the money, but have rights to the entire tract of timber. So, that gives us a
lot of margin to sell to someone else should there be a default. We have never
experienced a default, but we have a lot of wiggle room should one occur.

111. Anticipating their launch, Alexander and Seawright opened a new bank account for

Alexander Seawright Timber Fund II, LLC. Alexander wrote Adams to advise that starting May 1,

2018, they would “start deploying at $1 million a month beginning May 1”:

[W]e have a signed commitment for $6 million that we plan to start deploying at $1
million a month beginning May 1. . . . [I]t is safe to assume that we will invest $1
million an month increasing to $1.5 million a month. . . . Also, this investment,
which will be made under Alexander Seawright Timber Fund II, will be in addition
to the on-going investment in Alexander Seawright Timber Fund I, so plan on an
average of about $350,000 -$500,000 per month in Alexander Seawright Timber
Fund I. We are excited about the opportunity to provide a regular, consistent and

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predictable volume of capital to your company and look forward to growing in

cooperation with you over the next 5 years.

112. Just days before Alexander and Seawright would have deployed their “key

investor” and client’s money, Adams turned himself in. As news spread, the investor sought

information from Alexander. Alexander told the investor that Alexander and Seawright were

victims:

Investor: How did you get hooked with him?

Alexander: My clients are hanging with me. They know I am a victim.
Investor: To think I was almost out of my entire life earnings makes me shiver
Alexander: Everyone knew him. Country club fixture.
Alexander: Would not let you lose your savings.
Investor: Man it was close . . . a day or two . . .
***
Alexander: To be clear, Jon and I were the victims of fraud.

CAUSES OF ACTION
COUNT I
FOR CIVIL CONSPIRACY
AGAINST ALL DEFENDANTS

113. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

114. Mississippi law defines a civil conspiracy as a “combination of persons for the

purpose of accomplishing an unlawful purpose or a lawful purpose unlawfully.” Shaw v.

Burchfield, 481 So. 2d 247, 255 (Miss. 1985).

115. Defendants conspired with Adams to commit the tortious acts alleged in this

complaint.

116. Defendants agreed to assist Adams by recruiting new investors to Madison Timber.

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117. Madison Timber was a Ponzi scheme; therefore Defendants and Adams’s purpose

was unlawful.

118. In addition, Defendants acted unlawfully. Defendants were unlicensed brokers of

securities, in violation of federal and state law. The securities that Defendants sold were not

exempt from registration but were unregistered, in violation of federal and state law.

119. In furtherance of their unlawful purpose, among other overt acts, Defendants

pitched Madison Timber to potential investors, including their clients; consummated sales of

Madison Timber to investors; and received commissions from Adams for their assistance in

growing Madison Timber’s business.

120. Defendants need not have known that Madison Timber was a Ponzi scheme to

unlawfully conspire with Adams. Nevertheless, in view of the numerous red flags described in this

complaint, Defendants knew or should have known that Madison Timber was a Ponzi scheme.

121. Numerous red flags notwithstanding, Defendants lent their influence, their

professional expertise, and even their clients to Adams. They made a fraudulent enterprise a

fraternity. Madison Timber grew from an approximately $10 million-a-year Ponzi scheme in 2011

to an approximately $164.5 million-a-year Ponzi scheme as of April 19, 2018.

122. Defendants were essential to the growth of the Madison Timber Ponzi scheme. But

for Defendants’ encouragement and assistance, Madison Timber would not have continuously

grown—it would have failed before ensnaring hundreds of new unwitting investors.

123. Defendants contributed to Madison Timber’s success over time, and therefore to

the Receivership Estate’s liabilities today. Defendants and Adams’s civil conspiracy is a

proximate cause of the debts of the Receivership Estate.

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124. Defendants are jointly and severally liable for the debts of the Receivership Estate,

which their and Adams’s civil conspiracy proximately caused.

125. Because Defendants acted with reckless disregard of the wellbeing of others, and in

specific instances described in this complaint committed actual fraud, punitive damages are

appropriate.

COUNT II
FOR AIDING AND ABETTING
AGAINST ALL DEFENDANTS

126. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

127. The Restatement (Second) of Torts § 876(b) (1979) provides that a defendant is

liable if he “knows that the other’s conduct constitutes a breach of duty and gives substantial

assistance or encouragement to the other so to conduct himself.” Stated differently, a defendant is

liable for aiding and abetting the wrongful conduct of another.

128. Defendants aided and abetted Adams in committing breaches of duties owed by

Adams to Madison Timber and in other tortious conduct alleged in this complaint.

129. In view of the numerous red flags described in this complaint, Defendants knew or

should have known that Madison Timber was a Ponzi scheme.

130. Numerous red flags notwithstanding, Defendants gave substantial assistance and

encouragement to Adams. Defendants lent their influence, their professional expertise, and even

their clients to Adams. They made a fraudulent enterprise a fraternity. Madison Timber grew from

an approximately $10 million-a-year Ponzi scheme in 2011 to an approximately $164.5

million-a-year Ponzi scheme as of April 19, 2018.

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131. Defendants were essential to the growth of the Madison Timber Ponzi scheme. But

for Defendants’ substantial assistance and encouragement, Madison Timber would not have

continuously grown—it would have failed before ensnaring hundreds of new unwitting investors.

132. Defendants contributed to Madison Timber’s success over time, and therefore to

the Receivership Estate’s liabilities today. Defendants’ substantial assistance and encouragement

is a proximate cause of the debts of the Receivership Estate.

133. Defendants are jointly and severally liable for the debts of the Receivership Estate,

which their substantial assistance and encouragement proximately caused.

134. Because Defendants acted with reckless disregard of the wellbeing of others, and in

specific instances described in this complaint committed actual fraud, punitive damages are

appropriate.

COUNT III
FOR RECKLESSNESS, GROSS NEGLIGENCE, AND AT A MINIMUM NEGLIGENCE
AGAINST ALL DEFENDANTS

135. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

136. “Negligence is a failure to do what the reasonable person would do under the same

or similar circumstances.” Estate of St. Martin v. Hixson, 145 So. 3d 1124, 1128 (Miss. 2014).

137. While negligence is the failure to exercise due care, recklessness “is a failure or

refusal to exercise any care.” Maldonado v. Kelly, 768 So. 2d 906, 910 (Miss. 2000).

138. Defendants were in advantageous positions to discover Adams’s fraud. In view of

the numerous red flags described in this complaint, a reasonable person in the same or similar

circumstances would have discovered Adams’s fraud.

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139. Defendants not only failed to exercise due care, they failed or refused to exercise

any care at all in their dealings with Adams.

140. Defendants’ recklessness, or at a minimum negligence, allowed Madison Timber to

continuously grow. Madison Timber grew from an approximately $10 million-a-year Ponzi

scheme in 2011 to an approximately $164.5 million-a-year Ponzi scheme as of April 19, 2018.

141. But for Defendants’ recklessness, or at a minimum negligence, Madison Timber

would not have continuously grown—it would have failed before ensnaring hundreds of new

unwitting investors.

142. Defendants by their recklessness, or at a minimum negligence, contributed to

Madison Timber’s success over time, and therefore to the Receivership Estate’s liabilities today.

Defendants’ recklessness, or at a minimum negligence, is a proximate cause of the debts of the

Receivership Estate.

143. Defendants are liable for the debts of the Receivership Estate, which their

recklessness, or at a minimum negligence, proximately caused.

144. Because Defendants acted with gross negligence evincing a reckless disregard of

the wellbeing of others, punitive damages are appropriate.

COUNT IV
FOR VIOLATIONS OF MISSISSIPPI’S FRAUDULENT TRANSFER ACT
AGAINST BUTLER SNOW ADVISORY, THORNTON,
ALEXANDER SEAWRIGHT, ALEXANDER, AND SEAWRIGHT

145. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

146. The Receiver may avoid any transfer made in violation of the Mississippi Uniform

Fraudulent Transfer Act (the “Act”), MISS. CODE ANN. §15-3-101, et seq.

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147. Pursuant to § 107 of the Act, the Receiver may recover from any party any funds

that Madison Timber transferred with the actual intent to hinder, delay, or defraud any of its

creditors. Because Madison Timber was a Ponzi scheme, by definition all transfers by Madison

Timber were made with the actual intent to hinder, delay, or defraud its creditors.

148. The Receiver is entitled to avoid all “commissions,” fees, and other such payments

paid by Adams or Madison Timber to Defendants Butler Snow Advisory, Thornton, Alexander

Seawright, Alexander, and Seawright, and to the entry of a judgment against Defendants Butler

Snow Advisory, Thornton, Alexander Seawright, Alexander, and Seawright for the amount of all

such monies received by them.

149. Alternatively, the Receiver is entitled to recover all monies paid to Defendants

Butler Snow Advisory, Thornton, Alexander Seawright, Alexander, and Seawright because

(i) Madison Timber was insolvent when it paid those commissions because its net liabilities far

exceeded the value of its (nonexistent) assets and (ii) Madison Timber received no value for the

commissions paid to Defendants Butler Snow Advisory, Thornton, Alexander Seawright,

Alexander, and Seawright.

COUNT V
FOR VIOLATIONS OF MISSISSIPPI’S RACKETEER INFLUENCED
AND CORRUPT ORGANIZATION ACT
AGAINST BUTLER SNOW ADVISORY, THORNTON,
ALEXANDER SEAWRIGHT, ALEXANDER, AND SEAWRIGHT

150. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

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151. Mississippi’s RICO statute provides: “It shall be unlawful for any person to

conduct, organize, supervise or manage, directly or indirectly, an organized theft or fraud

enterprise.” MISS. CODE ANN. § 97-43-3.1.

152. Madison Timber was a “fraud enterprise” within the meaning of Mississippi’s

RICO statute because “fraud enterprise” includes one conducted by “mail or other means of

communication,” MISS. CODE ANN. § 97-43-3.1, and Adams was convicted of wire fraud.

153. Mississippi’s RICO statute further provides: “It is unlawful for any person

employed by, or associated with, any enterprise to conduct or participate, directly or indirectly, in

such enterprise through a pattern of racketeering activity. . . .” MISS. CODE ANN. § 97-43-5

(emphasis added). “‘Racketeering activity’ means to commit, to attempt to commit, to conspire to

commit . . . any crime which is chargeable under [Mississippi’s RICO statute],” MISS. CODE ANN.

§ 97-43-3, including wire fraud.

154. Defendants Butler Snow Advisory, Thornton, Alexander Seawright, Alexander,

and Seawright participated, directly or indirectly, in the Madison Timber “fraud enterprise.”

155. Their participation allowed the Madison Timber “fraud enterprise” to continuously

grow. Madison Timber grew from an approximately $10 million-a-year Ponzi scheme in 2011 to

an approximately $164.5 million-a-year Ponzi scheme as of April 19, 2018.

156. But for their participation, the Madison Timber “fraud enterprise” would not have

continuously grown—it would have failed before ensnaring hundreds of new unwitting investors.

157. By their participation, they contributed to Madison Timber’s success over time, and

therefore to the Receivership Estate’s liabilities today. Their participation is a proximate cause of

the debts of the Receivership Estate.

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158. Defendants Butler Snow Advisory, Thornton, Alexander Seawright, Alexander,

and Seawright therefore are liable for “threefold the actual damages sustained” by the

Receivership Estate, punitive damages, and attorneys’ fees.

COUNT VI
FOR JOINT VENTURE LIABILITY
AGAINST ALEXANDER SEAWRIGHT, ALEXANDER, AND SEAWRIGHT

159. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

160. “[A] joint venture can be defined as a single purpose partnership.” Duggins v.

Guardianship of Washington ex rel. Huntley, 632 So. 2d 420, 427 (Miss. 1993). “Profit sharing is

the most important factor in determining whether a joint venture exists.” Walker v. Williamson,

131 F. Supp. 3d 580, 591 (S.D. Miss. 2015). “Where a joint venture exists, its members are bound

by the acts of the other members acting in the course and scope of the joint venture.” Braddock

Law Firm, PLLC v. Becnel, 949 So. 2d 38, 50 (Miss. Ct. App. 2006).

161. Defendants Alexander Seawright, Alexander, and Seawright formed a joint venture

with Adams and Madison Timber, as evidenced by their stated intent to form a fund to invest other

people’s money in Madison Timber and to split the “profits” with Adams.

162. Defendants Alexander Seawright, Alexander, and Seawright did invest other

people’s money in Madison Timber and did split the “profits” with Adams.

163. As Adams and Madison Timber’s joint venturers, Defendants Alexander

Seawright, Alexander, and Seawright are liable for debts incurred within the scope of their joint

venture, which was still ongoing on April 19, 2018, the date Adams turned himself in.

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164. Defendants Alexander Seawright, Alexander, and Seawright therefore are jointly

and severally liable for the debts of the Receivership Estate.

COUNT VII
FOR ATTORNEY MALPRACTICE
AGAINST BUTLER SNOW

165. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

166. “Lawyers owe their clients a duty to protect them from liability in every possible

way.” Official Stanford Inv’rs Comm. v. Greenberg Traurig, LLP, No. 3:12-cv-4641, 2014 WL

12572881, *3 (N.D. Tex. Dec. 17, 2014).

167. Adams and Madison Timber had a lawyer-client relationship with Defendant

Butler Snow. Adams twice engaged Defendant Butler Snow to draft a private placement

memorandum, or PPM, for Madison Timber.

168. The PPMs drafted by Defendant Butler Snow contained numerous false and

misleading statements, including but not limited to those described in this complaint, regarding

Madison Timber’s “Business Strategy” and “Timber Investment Risks.”

169. In view of the numerous red flags described in this complaint, a reasonable lawyer

in the same or similar circumstances would have discovered Adams’s fraud.

170. Defendant Butler Snow not only failed to exercise due care, it failed or refused to

exercise any care at all in its dealings with Adams. Defendant Butler Snow was not merely

negligent, but reckless, in its handling of legal affairs to which it was entrusted.

171. Although no investor chose to invest in the funds for which the PPMs were drafted,

many relied on the PPMs in choosing to invest in purported “standing tracts” only.

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172. Defendant Butler Snow’s recklessness, or at a minimum negligence, allowed

Madison Timber to continuously grow. Madison Timber grew from an approximately $10

million-a-year Ponzi scheme in 2011 to an approximately $164.5 million-a-year Ponzi scheme as

of April 19, 2018.

173. But for Defendant Butler Snow’s recklessness, or at a minimum negligence,

Madison Timber would not have continuously grown—it would have failed before ensnaring

hundreds of new unwitting investors.

174. Defendant Butler Snow by its recklessness, or at a minimum negligence,

contributed to Madison Timber’s success over time, and therefore to the Receivership Estate’s

liabilities today. Defendant Butler Snow’s recklessness, or at a minimum negligence, is a

proximate cause of the debts of the Receivership Estate.

175. Defendant Butler Snow is liable for the debts of the Receivership Estate, which its

recklessness, or at a minimum negligence, proximately caused.

176. Because Defendant Butler Snow acted with gross negligence evincing a reckless

disregard of the wellbeing of others, punitive damages are appropriate.

COUNT VIII
FOR NEGLIGENT RETENTION AND SUPERVISION
AGAINST BUTLER SNOW AND BAKER DONELSON

177. The Receiver re-alleges each of the foregoing paragraphs as though stated fully

herein.

178. “[A]n employer will be liable for negligent hiring or retention of his employee

when an employee injures a third party if the employer knew or should have known of the

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employee’s incompetence or unfitness.” Backstrom v. Briar Hill Baptist Church, Inc., 184 So. 3d

323, 327 (Miss. Ct. App. 2016).

179. Agents of Defendants Butler Snow and Baker Donelson agreed to assist Adams by

recruiting new investors to Madison Timber, thereby acting as unlicensed brokers of securities, in

violation of federal and state law.

180. In view of the numerous red flags described in this complaint, Defendants Butler

Snow and Baker Donelson knew or should have known of their agents’ incompetence or unfitness.

181. Defendants Butler Snow and Baker Donelson were reckless, or at a minimum

negligent, in retaining their agents and failing to supervise their agents’ dealings.

182. Defendants Butler Snow and Baker Donelson’s recklessness, or at a minimum

negligence, allowed Madison Timber to continuously grow. Madison Timber grew from an

approximately $10 million Ponzi scheme in 2011 to an approximately $164.5 million Ponzi

scheme on April 19, 2018.

183. But for Defendants Butler Snow and Baker Donelson’s recklessness, or at a

minimum negligence, Madison Timber would not have continuously grown—it would have failed

before ensnaring hundreds of new unwitting investors.

184. Defendants Butler Snow and Baker Donelson, by their recklessness, or at a

minimum negligence, contributed to Madison Timber’s success over time, and therefore to the

Receivership Estate’s liabilities today. Defendants Butler Snow and Baker Donelson’s

recklessness, or at a minimum negligence, is a proximate cause of the debts of the Receivership

Estate.

185. Defendants Butler Snow and Baker Donelson are liable for the debts of the

Receivership Estate, which their recklessness, or at a minimum negligence, proximately caused.

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186. Because Defendants Butler Snow and Baker Donelson acted with gross negligence

evincing a reckless disregard of the wellbeing of others, punitive damages are appropriate.

LIABILITY OF BUTLER SNOW

FOR BUTLER SNOW ADVISORY

187. Defendant Butler Snow is liable for the acts of Butler Snow Advisory, and

therefore the acts of Thornton and Billings, because Defendant Butler Snow authorized or directed

those acts; had knowledge of, or gave consent to, those acts; or acquiesced in those acts when it

knew or should have known that it should have taken steps to prevent them.

188. Defendant Butler Snow is liable for the acts of Butler Snow Advisory because the

two effectively operate as a single business enterprise, and Butler Snow and Butler Snow Advisory

are alter egos.

189. The Receiver is entitled to a declaratory judgment holding, inter alia, that

Defendant Butler Snow is liable for payment of all damages or other relief awarded in favor of the

Receiver and against Defendant Butler Snow Advisory.

LIABILITY OF ALEXANDER AND SEAWRIGHT

FOR ALEXANDER SEAWRIGHT

190. Defendants Alexander and Seawright are liable for the acts of Alexander Seawright

because they authorized or directed all acts of Alexander Seawright.

191. Defendants Alexander and Seawright are liable for the acts of Alexander Seawright

because the three are alter egos.

192. The Receiver is entitled to a declaratory judgment holding, inter alia, that

Defendants Alexander and Seawright are personally liable for payment of all damages or other

relief awarded in favor of the Receiver and against Defendant Alexander Seawright.

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BUTLER SNOW’S AND BAKER DONELSON’S VICARIOUS LIABILITY

193. The apparent backing of Defendants Butler Snow and Baker Donelson enabled

Thornton and Billings, and separately Alexander and Seawright, respectively, to recruit new

investors to Madison Timber. Defendants Butler Snow and Baker Donelson are liable for the

negligent and reckless acts of their agents, including but not limited to Thornton and Billings, and

Alexander and Seawright, respectively.

194. The Receiver is entitled to a declaratory judgment holding, inter alia, that

Defendant Butler Snow is liable for payment of all damages or other relief awarded in favor of the

Receiver and against Defendants Butler Snow Advisory and Thornton, and that Defendant Baker

Donelson is liable for payment of all damages or other relief awarded in favor of the Receiver and

against Defendants Alexander and Seawright.

___________________

WHEREFORE, the Receiver respectfully requests that, after due proceedings, the Court

enter judgments:

1. awarding damages in her favor and against Butler Snow LLP;

Butler Snow Advisory Services, LLC; Matt Thornton; Baker,
Donelson, Bearman, Caldwell & Berkowitz, PC; Alexander
Seawright, LLC; Brent Alexander; and Jon Seawright, jointly
and severally;

2. awarding any and all attorney’s fees, costs, and interest

allowed by contract or law; and

3. awarding any and all other relief as may be just and equitable.

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December 19, 2018

Respectfully submitted,

/s/ Lilli Evans Bass /s/ Brent B. Barriere

BROWN BASS & JETER, PLLC FISHMAN HAYGOOD, LLP
Lilli Evans Bass, Miss. Bar No. 102896 Admission pro hac vice pending
LaToya T. Jeter, Miss. Bar No. 102213 Brent B. Barriere, Primary Counsel
1755 Lelia Drive, Suite 400 Jason W. Burge
Jackson, Mississippi 39216 Kristen D. Amond
Tel: 601-487-8448 Rebekka C. Veith
Fax: 601-510-9934 201 St. Charles Avenue, Suite 4600
bass@bbjlawyers.com New Orleans, Louisiana 70170
Receiver’s counsel Tel: 504-586-5253
Fax: 504-586-5250
bbarriere@fishmanhaygood.com
jburge@fishmanhaygood.com
kamond@fishmanhaygood.com
rveith@fishmanhaygood.com
Receiver’s counsel

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