text:
    In re HEDGED-INVESTMENTS ASSOCIATES, INC., Debtor. Harvey SENDER, Trustee, Plaintiff-Appellee, v. Eugene D. JOHNSON, Defendant-Appellant.
    No. 94-1485.
    United States Court of Appeals, Tenth Circuit.
    May 23, 1996.
    See also, 84 F.3d 1281 and 84 F.3d 1286.

      Melody Dawson (John B. Wasserman with her on the brief) of Kateh, Sender & Wasser-man, P.C., Denver, Colorado, for Plaintiff-Appellee.
    Bruce E. Rohde of Davis & Ceriani, P.C., Denver, Colorado, for Defendanl>-Appellant.
    Before BRORBY and MeWILLIAMS, Circuit Judges, and KERN, District Judge.

       The Honorable Terry C. Kern, United States District Judge for the Northern District of Oklahoma, sitting by designation.

   BRORBY, Circuit Judge.

This ease arises out of a fraudulent investment scheme with which this court is all too familiar. See, e.g., Sender v. Nancy Elizabeth R. Heggland Family Trust (In re Hedged-Investments Assocs., Inc.), 48 F.3d 470 (10th Cir.1995). Eugene Johnson was one of the innocent investors in the scheme. He finds himself among the small group of investors who received more money from the scheme than he invested. Harvey Sender, as trustee in bankruptcy for the entities used in the operation of the scheme, sued Mr. Johnson in bankruptcy court to recover certain pre-petition transfers. Though Mr. Sender sued Mr. Johnson under various theories of recovery, this appeal only involves his preferential transfer claim under 11 U.S.C. § 547(b). After a trial, the bankruptcy court found against Mr. Sender on his claim. On appeal, the district court reversed, finding Mr. Sender had “demonstrated the requisite elements of a preferential transfer.” Mr. Johnson appeals the district court’s decision. We exercise jurisdiction over his appeal under 28 U.S.C. § 158(d). We reverse the district court’s decision.

I. Standard of Review

In reviewing the decision of a bankruptcy court pursuant to 28 U.S.C. § 158(a) and (d), the district court and the court of appeals apply the same standards of review that govern appellate review in other cases. We therefore review the bankruptcy court’s legal determinations de novo and its factual findings for clear error. Phillips v. White (In re White), 25 F.3d 931, 933 (10th Cir.1994); see also Sender, 48 F.3d at 472. “[WJhen a lower court’s factual findings are premised on improper legal standards or on proper ones improperly applied, they are not entitled to the protection of the clearly erroneous standard, but are subject to de novo review.” Osborn v. Durant Bank & Trust Co. (In re Osborn), 24 F.3d 1199, 1203 (10th Cir.1994).

II. Facts & Procedural Background

Most of the relevant facts are undisputed. In the late 1970s, James Donahue started an investment fund known as Hedged-Investments. He formed a corporation named Hedged-Investments Associates, Inc. (“HIA Inc.”), of which he was the sole stockholder, to operate the investment fund. He enticed investors into the fund by claiming he had developed a sophisticated strategy for investing in hedged stock options that yielded high returns with low risks. Mr. Donahue established three limited partnerships as vehicles to allow investors into the Hedged-Investments fund. These limited partnerships were named Hedged-Investments Associates, L.P. (“HIA L.P.”), Hedged-Seeurity Associates, L.P. (“HSA L.P.”), and Hedged-Investments Associates II, L.P. (“HIA II L.P”) (collectively the “Debtor Partnerships”). HIA Inc. served as the managing general partner of the three Debtor Partnerships. When an interested investor sought to invest in the Hedged Investments fund, Mr. Donahue purportedly sold the investor an interest in one of the Debtor Partnerships. None of the Debtor Partnerships maintained a bank account; all the invested funds were commingled in a single account held in the name of HIA Inc. Mr. Donahue consistently reported high earnings to the investors. In truth, however, the Hedged-Investments fund generated enormous losses. Mr. Donahue kept these losses from being discovered by running a Ponzi scheme — he paid investors who requested cash withdrawals from their accounts with the contributions of other investors.

Mr. Donahue’s scheme collapsed in August 1990. On August 30, 1990, HIA Inc. filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code. On September 7,1990, the ease was converted to one under Chapter 7, and the bankruptcy court appointed Mr. Sender as trustee of HIA Inc.’s estate. Mr. Sender then commenced involuntary bankruptcy actions against the Debtor Partnerships. He filed an involuntary petition under Chapter 7 against HSA L.P. on September 28, 1990, and against HIA L.P. and HIA II L.P. on October 3,1990.

Mr. Johnson’s relationship with the Hedged-Investments fund began in 1987, when he met a man named Larry Comstock. Mr. Comstock was the general partner of a limited partnership named CCM Financial Group, L.P. (“CCM”). Apparently, CCM was a sub-limited partnership in HSA L.P.; ie., it was a limited partner in HSA L.P. At Mr. Comstock’s urging, Mr. Johnson agreed to invest $60,000 in the Hedged-Investments fund via CCM. Mr. Johnson understood that CCM would use the entire $60,000 to purchase a limited partnership interest in HSA L.P. on his behalf. In January 1988, Mr. Johnson remitted a check to CCM for $60,-000. CCM deposited the cheek into its bank account and then transferred the entire amount to HSA L.P. In March 1990, Mr. Johnson decided to liquidate his investment in the Hedged-Investments fund. Up to this point, he apparently had made no cash withdrawals. On March 12, 1990, Mr. Johnson wrote Mr. Comstock and requested that his account balance be liquidated. On April 2, 1990, Mr. Comstock wrote Mr. Donahue requesting liquidation of Mr. Johnson’s interest in the Hedged-Investments fund. In response to this letter, Mr. Comstock received a check written on HIA Inc’s account for $90,707.09. The check was dated June 9, 1990, and was payable to “CCM Financial— FBO Eugene Johnson.” A notation on the check read, “termination of capital account.” Mr. Comstock deposited the check in the account of AWF Hedged, Ltd., the new name of CCM. Once the check cleared, Mr. Comr stock wrote a check on AWF’s account for $90,707.09 payable to Mr. Johnson. Thus, Mr. Johnson received $30,707.09 more than he invested in the Hedged-Investments fund. Many others were not so fortunate. According to Mr. Sender, approximately 1,400 hundred investors lost aggregately about $200 million.

For the period of January 1,1990, through June'30,1990, HSA L.P. guaranteed its limited partners a minimum annual return on their investment of fifteen percent. This guarantee apparently was limited, however, “by an escrow account that Mr. Donahue had maintained at Central Bank of Denver.” Our analysis below reveals the significance of this guarantee and its limitation.

Mr. Sender, as trustee for the four entities used in Mr. Donahue’s investment scheme, sued Mr. Johnson in the bankruptcy court for the district of Colorado. His complaint alleged three claims for relief. First, he alleged the entire $90,707.09 was avoidable as a preferential transfer under 11 U.S.C. § 547(b). Second, he alleged $30,707.09 of the transfer was avoidable as a constructive fraudulent conveyance under 11 U.S.C. § 548(a)(2). Third, Mr. Sender claimed $30,-707.09 was recoverable under sections 607 and 608(2) of the Colorado Uniform Limited Partnership Act of 1981, Colo.Rev.Stat. § 7-62-101 et seq. See Colo.Rev.Stat. §§ 7-62-607 & 608(2). Mr. Sender later added a claim under 11 U.S.C. § 548(a)(1).

After a trial, the bankruptcy court denied all of Mr. Sender’s claims. The court rejected the claims under 11 U.S.C. §§ 547(b) and 548(a)(2) and the claim under Colo.Rev.Stat. § 7-62-607 on the ground Mr. Sender had not proven the Hedged Investment entities were insolvent at the time of the transfer to Mr. Johnson. The court reached this finding after determining the limited partnership interests were “equity securities and not debts.” The court denied the claim under Colo.Rev.Stat. § 7-62-608(2) because Mr. Sender did not prove “the distribution was in violation of the partnership agreement.” Finally, the bankruptcy court denied Mr. Sender’s claim under 11 U.S.C. § 548(a)(1) because Mr. Sender failed to present any evidence at trial “indicating any fraudulent intent or any intent to hinder or delay any creditor.” Mr. Sender appealed to the district court, which properly exercised jurisdiction over the appeal under 28 U.S.C. § 158(a).

The district court reversed. First, the district court concluded the bankruptcy court made a legal error in finding the debtor entities were solvent. According to the district court, the limited partner investors in the Hedged-Investments fund were more than equity security holders — they had claims against the debtor estates and were therefore creditors, as well as equity security holders. After determining Mr. Johnson was a creditor of an insolvent debtor, the district court went on to find Mr. Sender had satisfied the remaining requirements of 11 U.S.C. § 547(b). Accordingly, the district court held Mr. Sender could avoid the $90,707.09 transfer to Mr. Johnson. Because the district court found the entire transfer avoidable as a preference under § 547(b), it declined to address the validity of Mr. Sender’s other claims. Mr. Johnson appeals the § 547(b) decision.

III. Analysis

According to 11 U.S.C. § 547(b),

[T]he trustee may avoid any transfer of an interest of the debtor in property—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A)on or within 90 days before the date of the filing of the petition;
... and
(5) that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.

The burden of proving each of these elements rests on the trustee. 11 U.S.C. § 547(g) (“the trustee has the burden of proving the avoidability of a transfer under subsection (b) of this section”); Danning v. Bozek (In re Bullion Reserve of N. Am.), 836 F.2d 1214, 1217 (9th Cir.), cert. denied, 486 U.S. 1056, 108 S.Ct. 2824, 100 L.Ed.2d 925 (1988).

As our first order of business, we would like to address the issue of who the debtor is in this case. In his capacity as bankruptcy trustee for the legal vestiges of the Hedged-Investments fund, Mr. Sender represents the estates of four entities: HIA Inc., HIA L.P., HIA II L.P., and HSA L.P. Both the bankruptcy court and the district court failed to address squarely the issue of which of these four entities Mr. Sender represents in this case, ie., which entity is the debtor. Section 547(b) allows the trustee to avoid certain transfers of an interest in the debtor in property so long as the transfers were made “on or within 90 days before the date of the filing of the [bankruptcy] petition.” 11 U.S.C. § 547(b)(4)(A). As neither Mr. Sender nor Mr. Johnson disputes, HIA Inc. was the only debtor entity of the four Mr. Sender represents to file its petition within ninety days after the transfer to Mr. Johnson. Accordingly, HIA Inc. is the only entity eligible for consideration as the debtor pursuant to Mr. Sender’s claim under § 547(b). In other words, Mr. Sender can prevail on his claim under § 547(b) only if he can meet his burden of proof as to each element of that claim qua HIA Inc.

Pursuant to § 547(b)’s first enumerated requirement, Mr. Sender had the burden of proving the pre-petition transfer to Mr. Johnson was “to or for the benefit of a creditor” of HIA Inc. 11 U.S.C. § 547(b)(1). The bankruptcy court found Mr. Johnson was not a creditor of HIA Inc. Noting that an equity security holding does not make the equity holder a creditor, the bankruptcy court asserted: “The facts presented indicate that it was the intent of [Mr.] Comstock and [Mr.] Donahue, at the time CCM invested [Mr.] Johnson’s $60,000.00, that CCM become an equity security holder in HSA [L.P.]_ Therefore, the Court concludes that neither CCM nor [Mr.] Johnson was a creditor of the debtors.” The bankruptcy court rejected Mr. Sender’s contention that HSA L.P.’s guaranteed return of fifteen percent made Mr. Johnson a creditor. The court reasoned:

An investor, based on one transaction, with the specific intent to become an equity security holder, cannot be considered both an equity security holder and a creditor. Either CCM became an equity security holder in HSA [L.P.] as a result of its investment of $60,000 on behalf of [Mr.] Johnson, or it merely made a loan to HSA [L.P.], thereby being entitled to a guaranteed rate of return.

The district court disagreed with the bankruptcy court’s analysis. According to the district court:

[Mr. Johnson] and the other investor limited partners had a legal right to payment of the guaranteed return. While limited partners are not claim holders by virtue of their partnership interests alone, the added factor of guaranteed returns makes them both claim holders and equity security holders for purposes of the Bankruptcy Code. The limited partners are creditors because they are entities with “a claim against the debtor that arose ... before the order for relief concerning the debtor.” 11 U.S.C. § 101(10). Therefore, the distribution to [Mr. Johnson] was “to or for the benefit of a creditor.”

In this appeal, Mr. Sender predictably advocates the position taken by the district court. He argues Mr. Johnson was a creditor of HIA Inc. because of his “legal entitlement to the guaranteed payments of money.” Mr. Johnson argues he was not a creditor, contending the fifteen percent guarantee did not convert his equity security holding in HSA L.P. into a claim against HIA Inc. Focusing on the fact that HIA Inc. is the debtor in this case, Mr. Johnson also argues that Mr. Sender presented no evidence at trial to establish that the guarantee from HSA L.P. to its limited partners rendered HIA Inc. liable on that guarantee.

We begin our analysis by noting Mr. Johnson cannot be considered a creditor of HIA Inc. merely on the basis of his equity investment in HSA L.P. This is true for two reasons. First, “limited partners’ interests do not constitute ‘claims’ as defined under [11 U.S.C. § 101(5) ]. They are equity security holders- Simply put, an equity interest is not a claim against the debtor....” In re Pine Lake Village Apartment Co., 21 B.R. 478, 480 (Bankr.S.D.N.Y.1982); see also In re Riverside-Linden Inv. Co., 85 B.R. 107, 112 (Bankr.S.D.Cal.1988) (“‘partners in the [debtor] partnership are not claim holders by virtue of their partnership interest -’”) (quoting H.R.Rep. No. 595, 95th Cong., 1st Sess. 197 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 6158), aff'd, 99 B.R. 439 (9th Cir. BAP 1989); 11 U.S.C. § 101(16) (establishing that an “interest of a limited partner in a limited partnership” is an “equity security”). As established by 11 U.S.C. § 101(10), “creditor” means an “entity that has a claim against the debtor.” Since limited partners do not satisfy this definition on the basis of their partnership interests, they are not creditors on the basis of those interests. See Estes & Hoyt v. Crake (In re Riverside-Linden Inv. Co.), 925 F.2d 320, 323 (9th Cir.1991) (“A partnership interest is not a claim_ Partners own the partnership subject to the profits or losses. Creditors, however, hold claims regardless of the performance of the partnership business. Thus, an ownership interest is not a claim against the partnership.”).

The second, more fundamental, reason why Mr. Johnson did not become a creditor of HIA Inc. merely by virtue of his equity interest in HSA L.P. is because HIA Inc. and HSA L.P. are separate entities. Though HIA Inc. was the' managing general partner of HSA L.P., Mr. Sender has given us no factual or legal reason to believe that Mr. Johnson’s equity interest in the partnership would make him a creditor of the general partner.

Since Mr. Johnson cannot be considered a creditor of HIA Inc. merely because he owned an equity security interest in HSA L.P., Mr. Sender is left to argue that the fifteen percent guaranteed return for the first half of 1990 created a creditor-debtor relationship between Mr. Johnson and HIA Inc. As we have already discussed, this guarantee is evidenced by an exhibit J proffered by Mr. Sender at trial. • The exhibit is a letter, and the letterhead indicates it was sent by HSA L.P. The letter is signed by Mr. Donahue on behalf of HIA Inc. as “General Partner.” Mr. Sender argues that this guarantee from HSA L.P. to its limited partners made Mr. Johnson a creditor of HIA Inc. Mr. Sender focuses his argument on the reasoning and holding in In re St. Charles Preservation Investors, Ltd., 112 B.R. 469 (D.D.C.1990), in which the court was asked to decide whether a partnership agreement that guaranteed limited partners a stated return on their capital investments made the limited partners creditors of the partnership. See id. at 470. The court in St. Charles found the guarantee made the limited partners creditors of the partnership. Id. at 474-75.

In reversing the bankruptcy court in this case, the district court relied' on the St. Charles decision. Mr. Sender urges us to do the same. There is an important distinction between St. Charles and the instant case that the district court did not address. In St. Charles, the court was faced with whether a guaranteed rate of return from a partnership to its limited partners made the limited partners creditors of the partnership. In this case, the partnership, HSA L.P., is not the debtor. The debtor is HIA Inc., the managing general partner of HSA L.P. Thus, we need not consider whether the 1990 guarantee created a claim by Mr. Johnson against HSA L.P. until we first determine whether Mr. Sender has proven HIA Inc. would be liable on that claim. Mr. Sender’s brief devotes one sentence to this issue. He contends HIA Inc. “was the general partner of HSA, L.P. and was responsible for the guaranteed minimum returns.” Though HIA Inc. might have been the general partner of HSA L.P., that does not a fortiori mean it was equally responsible, along with HSA L.P., for satisfying the guaranteed returns. Whether HIA Inc. as general partner of HSA L.P. was independently responsible for the debts of the partnership is a factual issue Mr. Sender had the burden of proving at trial. The bankruptcy court did not find HIA Inc. was liable for the debts of HSA L.P., and Mr. Sender does not support his statement with cites to uncontroverted evidence in the record that would justify such a finding.

To be sure, our own review of the scant record provided on appeal suggests HIA Inc. did make some type of assurance that the minimum return would be paid. Exhibit J references “the minimum rate-of-retum ... against which [HIA Inc.] has pledged corporate assets.” The exhibit does not explain which corporate assets HIA Inc. purportedly pledged or how it pledged them. Mr. Com-stock shed some light on the so-called pledge in his testimony. When asked whether exhibit J “was in fact a guarantee of the minimum rate of return,” Mr. Comstock responded, “It was always understood by me that it was a limited guarantee backed by an escrow account that Mr. Donahue had maintained at Central Bank of Denver.” We have seen nothing in the record to indicate what, if any, funds resided in this escrow account. For all we know, it had no funds. The entire guarantee, in that it seems to have been limited to the escrow account, could have been illusory. Certainly, we cannot affirm a reversal of the bankruptcy court on the speculation that it was not illusory.

Given that Mr. Sender has not shown us he met his burden of proving HIA Inc. was independently liable for the debts of HSA L.P., we conclude the bankruptcy court did not clearly err in finding Mr. Johnson was not a creditor of HIA Inc. Since Mr. Johnson was not a creditor of HIA Inc., Mr. Sender cannot satisfy the requirements of 11 U.S.C. § 547(b).

For the reasons given above, we REVERSE the decision of the district court to the extent it is inconsistent with this decision.

      . Though Mr. Johnson disagrees, the bankruptcy court clearly found that HSA L.P. guaranteed its limited partners a minimum rate of return of fifteen percent for 1990. We disagree with the bankruptcy court’s finding only to the extent it found HSA L.P. guaranteed a fifteen percent return for all of 1990. The only evidence of the fifteen percent guarantee we have been provided is Mr. Sender’s trial exhibit J. The bankruptcy court cited exhibit J as its evidentiary support for its finding of a guarantee for all of 1990. By its own terms, however, exhibit J relates only to “to the period January 1 through June 30, 1990.” Therefore, to the extent the bankruptcy court found a guaranteed minimum return of fifteen percent for all of 1990, it clearly erred.

      . The section also permits a trustee to avoid transfers made up to one year before the debtor’s bankruptcy filing if the transferee-creditor "was an insider.” 11 U.S.C. § 547(b)(4)(B). Mr. Sender did not bring an insider preference claim; therefore, we are only concerned with the 90 day period provided by § 547(b)(4)(A).

      . Mr. Sender alternatively argues Mr. Johnson was a creditor of HIA Inc. because of HIA Inc.'s fraud. According to this argument, HIA Inc. became indebted to Mr. Johnson from the moment it accepted his fraudulently induced investment. From what we can tell, Mr. Sender raises this argument for the first time in this appeal. He has given us no reason to believe he raised it before the bankruptcy court or the district court. Accordingly, we will not address the merits of Mr. Sender's fraud argument. See Lyons v. Jefferson Bank & Trust, 994 F.2d 716, 720-21 (10th Cir.1993) (noting this court generally will refuse to consider an argument raised for the first time on appeal unless the issue concerns sovereign immunity or jurisdiction). Though not relevant to our decision not to hear his fraud argument, we note Mr. Sender represents in his brief that the district court partially supported its finding of a creditor-debtor relationship by relying on this fraud theory. Our reading of the district court's decision leads us to conclude Mr. Sender has misrepresented that decision to us. Put simply, the district court’s analysis of whether Mr. Johnson was a creditor of HIA Inc. relies exclusively on the notion that the fifteen percent guarantee created a claim against HIA Inc. Not once does the district court mention fraud as a basis for its conclusion that Mr. Johnson was a creditor of HIA Inc. We counsel Mr. Sender to be more careful in the future.

      . Since the issue of whether Mr. Johnson was a creditor of HSA L.P. is not relevant to this case as decided, nothing we say should be taken as holding he was a creditor of HSA L.P. Neither should our discussion of the St. Charles decision be seen as an adoption or rejection of that decision as it might apply to the facts of this case.

      . The only support Mr. Sender offers for his statement is the orally delivered decision of the bankruptcy court in Sender v. Greenlee (In re Hedged-Investment Associates, Inc.), (91-1930CEM) (June 11, 1992) (oral ruling). In Greenlee, the court found “the general partner [HIA Inc.] had an obligation to ... make that payment out of partnership funds if they were available and out of the general partner’s own pocket if funds were not available.” Mr. Johnson was not a defendant in Greenlee; therefore, the finding in Greenlee is not binding on him. If Mr. Sender wanted a similar finding against Mr. Johnson, then he needed to prove it against Mr. Johnson.


source: Caselaw Access Project

author: TACHA, Circuit Judge.

license: Public Domain

text:
    CHURCH ON THE ROCK; Don Kimbro, Pastor, Plaintiffs-Appellants, v. CITY OF ALBUQUERQUE; Toni Martorelli, in her official capacity as Director of Family and Community Services for the City of Albuquerque; Mark Sanchez, in his official capacity as Deputy Director of Family and Community Services for the City of Albuquerque; Kathleen Stark, in her official capacity as Supervisor, Bear Canyon Senior Center, City of Albuquerque, Defendants—Appellees.
    No. 95-2009.
    United States Court of Appeals, Tenth Circuit.
    May 23, 1996.

      Benjamin W. Bull, The American Center for Law and Justice, Phoenix, Arizona (Jay Alan Sekulow, The American Center for Law and Justice, Washington, DC, Nikolas T. Ni-kas, The American Center for Law and Justice, Phoenix, Arizona, and Paul F. Becht, Becht Law Firm, Albuquerque, NM, with him on the briefs), for Appellants.
    William D. Winter, Assistant City Attorney (Robert M. White, City Attorney, with him on the brief), Albuquerque, NM, for Appellees.
    Before TACHA, LOGAN, and REAVLEY, Circuit Judges.

       The Honorable Thomas M. Reavley, Senior Circuit Judge, United States Court of Appeals for the Fifth Circuit, sitting by designation.

   TACHA, Circuit Judge.

Plaintiffs Church on the Rock and Pastor Don Kimbro (“Church on the Rock”) brought suit under 42 U.S.C. § 1983 alleging that defendants the City of Albuquerque and its agents (“the City”) denied Church on the Rock’s First Amendment right to free expression at City Senior Centers. The district court granted summary judgment in favor of the City on all claims. Church on the Rock now appeals, arguing that the City’s policy prohibiting “sectarian instruction and religious worship” at City Senior Centers violates the First Amendment. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and reverse.

I. Background

The City owns and operates six Senior Centers. The centers are multipurpose facilities that provide forums for lectures, classes, movies, crafts, bingo, dancing, physical exercise, and other activities. To become a member of a Senior Center, one need only fill out an application. The sole requirement for membership is that a person be at least fifty-five years old or be married to a member who is at least fifty-five years old. People who use the Senior Centers do not reside there, and all of the programs are voluntary.

Many of the programs at the Senior Centers are organized and sponsored by private individuals or organizations. Senior center policies permit non-member groups to use the centers for classes and other activities if the subject matter is “of interest to senior citizens.” Alternatively, groups may use the Senior Centers without regard to this subject matter requirement if they are composed of seventy-five percent or more senior citizens. Nonmembers or persons under fifty-five years of age may conduct classes, and people who deliver lectures or teach classes are also permitted to distribute literature.

The range of subjects that qualify as being “of interest to senior citizens” is quite broad. The Senior Centers’ activities catalogs list many of the programs that meet this requirement, such as Amateur Radio, Ceramics, Chinese, Choral Group, Economies, El Abuelo— The Clown of Spanish Culture, Fishing, Medieare/Health Insurance Counseling, Myth of the Hanging Tree, and Plants and People of New Mexico. The catalogs also include a number of classes and presentations in which religion or religious matters are the primary focus: Bible as Literature, Myths and Stories About the Millennium, Theosophy, and A Passover Commemoration (an oratorio). The catalogs encourage “ideas for new classes and programs” as well.

On March 24, 1994, Pastor Kimbro, a citizen over the age of fifty-five, requested permission from Kathleen Stark, the supervisor of the Bear Canyon Senior Center, to show a two-hour film entitled Jesus. The film recounts the life of Jesus Christ as described in the Gospel of Luke. At the conclusion of the story, a voice-over narrator makes affirming statements such as, “Jesus is exactly who he claimed to be — the Son of the Lord, the Savior of all mankind.” The narrator then invites viewers to adopt the Christian religion and to join him in a short prayer. Kim-bro also requested permission to give away giant-print New Testaments to persons attending the film.

On May 18, 1994, after reviewing the film, Mark Sanchez, the City’s Deputy Director of Family and Community Services, denied Kimbro’s requests. Sanchez stated that City policy prohibited the use of Senior Centers “for sectarian instruction or as a place for religious worship.” The City adopted this policy to conform with the terms of the Older Americans Act. The Older Americans Act provides federal funding to the states for multipurpose senior centers, but requires, as a condition for receiving such funding, that the “facility will not be used and is not intended to be used for sectarian instruction or as a place for religious worship.” 42 U.S.C.A. § 3027(a)(14)(A)(iv).

In keeping with this directive, Senior Center personnel screen programs for sectarian instruction or religious worship before allowing them at the Senior Centers. Senior Center employees also monitor presentations for religious content by sitting in on classes and entertaining objections from Senior Center members who call attention to expression falling into one of these forbidden categories. When Senior Center employees determine that presentations are too religious in nature, they intervene to stop the presentations. There are no official criteria or written standards to assist them in deciding whether or not expression constitutes “sectarian instruction” or “religious worship.”

Church on the Rock filed this suit seeking declaratory and injunctive relief. The district court granted summary judgment in favor of the City. In its decision, the court assumed without deciding that the Senior Center is a designated limited public forum. The court stated that the purpose of the Senior Center does not include sectarian instruction, and that the primary purpose of the film Jesus is to proselytize. The court concluded that the film constitutes sectarian instruction and that the City may therefore exclude the film on the ground that its subject matter is not within the purpose of the Senior Centers. The court also held that the City’s restriction is not viewpoint-based because the City does not permit sectarian instruction from any religious perspective. This appeal followed.

II. The Degree of First Amendment Protection Afforded to the Expression

We review the district court’s grant of summary judgment de novo. Cannon v. City and County of Denver, 998 F.2d 867, 870 (10th Cir.1993). We begin our analysis by noting that the speech in question is entitled to First Amendment protection. It is well established that religious worship and discussion are forms of speech and association protected by the First Amendment. Widmar v. Vincent, 454 U.S. 263, 269, 102 S.Ct. 269, 274, 70 L.Ed.2d 440 (1981); Heffron v. International Soc. for Krishna Consciousness, 452 U.S. 640, 647, 101 S.Ct. 2559, 2563-64, 69 L.Ed.2d 298 (1981). The City argues that the proselytizing religious speech in the film Jesus enjoys a lesser degree of First Amendment protection than does religious speech that is not intended to recruit new believers. The Supreme Court, however, has rejected the notion that speech about religion, religious speech designed to win converts, and religious worship by persons already converted should be treated differently under the First Amendment. Widmar, 454 U.S. at 269 n. 6, 102 S.Ct. at 274 n. 6; see also Lamb’s Chapel v. Center Moriches Union Free School District, 508 U.S. 384, 394-96, 113 S.Ct. 2141, 2148, 124 L.Ed.2d 352 (1993) (describing the fear that proselytizing by a “radical” church might cause unrest as “difficult to defend as a reason to deny the presentation of a religious point of view about a subject the District otherwise makes open to discussion on District property”). The City's policy, then, restricts speech that is entitled full protection under the First Amendment.

III. The Nature of the Forum

The government’s ability to restrict protected speech by private persons on government property depends, in part, on the nature of the forum. Cornelius v. NAACP Legal Defense & Educ. Fund, 473 U.S. 788, 797, 105 S.Ct. 3439, 3446, 87 L.Ed.2d 567 (1985). The three types of forums that may exist on government property are traditional public forums, designated public forums, and nonpublic forums. Id. at 802, 105 S.Ct. at 3449. Traditional public forums are places such as streets and parks that “by long tradition ... have been devoted to assembly and debate.” Perry Educ. Assn. v. Perry Local Educators’ Assn., 460 U.S. 37, 45, 103 S.Ct. 948, 954, 74 L.Ed.2d 794 (1983). Designated public forums are those “created by government designation of a place or channel of communication for use by the public at large for assembly and speech, for use by certain speakers, or for the discussion of certain subjects.” Cornelius, 473 U.S. at 802, 105 S.Ct. at 3449. Thus, designated public forums may be limited in terms of participants and in terms of subject matter. University facilities opened for meetings of registered student organizations qualify as a designated public forum, Widmar, 454 U.S. at 267-68, 102 S.Ct. at 273-74, as do public school classrooms that are available to the general public outside of school hours for limited purposes, Lamb’s Chapel, 508 U.S. 384, 390-94, 113 S.Ct. 2141, 2146-47. In Rosenberger v. Rector & Visitors of Univ. of Va., — U.S. -, 115 S.Ct. 2510, 132 L.Ed.2d 700 (1995), the Supreme Court treated a university’s student activities fund as a designated public forum, albeit “more in a metaphysical than in a spatial or geographic sense.” Id. at — , 115 S.Ct. at 2517. A nonpublic forum is government property that is not by tradition or designation a forum for public communication. Perry, 460 U.S. at 46, 103 S.Ct. at 955-56.

The Bear Canyon Senior Center is a designated public forum. It may not be classified as a traditional public forum because it is not a traditional location of public debate or assembly. It is, however, a place that has been opened to the public for diseussive purposes. The City has permitted lectures and classes on a broad range of subjects by both members and non-members at its Senior Centers. The City limits this designated public forum in two ways. First, the City imposes an age requirement for participation, although this limitation is rather flexible where groups or spouses are involved. Second, the City limits the subject matter of presentations to topics “of interest to senior citizens.” The subject matter limitation has also been extremely flexible in practice, as evidenced by the long list of diverse topics that have been presented in the past.

IV. The Nature of the City’s Restriction

Having classified the type of forum involved, we now turn to the type of restriction that the City has imposed. The Senior Center Policies and Procedures Manual from the City’s Office of Senior Affairs includes the following directive: “It is prohibited to use any OSA facility for sectarian instruction or as a place for religious worship.” The City contends that this policy is a restriction based upon content, not viewpoint, because it disallows all sectarian instruction and religious worship in its Senior Centers, regardless of the particular religion involved. The Supreme Court, however, has rejected similar arguments. In Lamb’s Chapel, for example, the Court noted that the mere fact that a regulation categorically treats all religions alike does not answer the critical question of whether viewpoint discrimination exists between religious and nonreligious expression. 508 U.S. at 392-94, 113 S.Ct. at 2147. Here, the City had already opened the doors of its Senior Centers to presentations about religion, such as The Bible as Literature and Myths and Stories About the Millennium. The City allowed speakers at Senior Centers to discuss the Bible from a “strictly historical” perspective and to address religion as long as such presentations could be characterized as “a literature discussion or a philosophical discussion.” The film Jesus dealt with subject matter similar to that which would be included in a class on the Bible as literature. The film ran afoul of City policy, however, by advocating the adoption of the Christian faith. In contrast, a film about Jesus’s life that ended on a skeptical note and urged agnosticism or atheism would not have contravened the City’s policy. Because “[t]he prohibited perspective, not the general subject matter” triggered the decision to bar the private expression, Rosenberger, — U.S. at-, 115 S.Ct. at 2517, the City’s policy is properly analyzed as a viewpoint-based restriction on speech.

Moreover, even if the City had not previously opened the Senior Centers to presentations on religious subjects, its policy would still amount to viewpoint discrimination. Any prohibition of sectarian instruction where other instruction is permitted is inherently non-neutral with respect to viewpoint. Instruction becomes “sectarian” when it manifests a preference for a set of religious beliefs. Because there is no nonreligious sectarian instruction (and indeed the concept is a contradiction in terms), a restriction prohibiting sectarian instruction intrinsically favors secularism at the expense of religion. Therefore, we conclude that the City’s policy constitutes viewpoint discrimination.

V. The Appropriate Level of Judicial Scrutiny

The government bears a particularly heavy burden in justifying viewpoint-based restrictions in designated public forums. Viewpoint discrimination is “an egregious form of content discrimination.” Rosenberger, — U.S. at — , 115 S.Ct. at 2516. Content-based restrictions are subject to strict scrutiny. See United States v. Kokinda, 497 U.S. 720, 726-27, 110 S.Ct. 3115, 3119-20, 111 L.Ed.2d 571 (1990); Perry, 460 U.S. at 46, 103 S.Ct. at 955-56. Viewpoint-based restrictions receive even more critical judicial treatment. As the Supreme Court noted in Rosenberger:

The necessities of confining a forum to the limited and legitimate purposes for which it was created may justify the State in reserving it for certain groups or for the discussion of certain topics.... [I]n determining whether the State is acting to preserve the limits of the forum it has created so that the exclusion of a class of speech is legitimate, we have observed a distinction between, on the one hand, content discrimination, which may be permissible if it preserves the purposes of that limited forum, and, on the other hand, viewpoint discrimination, which is presumed impermissible when directed against speech otherwise within the forum’s limitations.

— U.S. at-, 115 S.Ct. at 2516-2517 (citations omitted). While the Court did not explain what, precisely, the government must show in order to overcome this heavy presumption, it did indicate that the necessity of complying with another clause of the Constitution — the Establishment Clause— would excuse a viewpoint-based restriction on speech. Id. at -, 115 S.Ct. at 2520. We understand Rosenberger to mean that courts must examine viewpoint-based restrictions with an especially critical review of the government’s asserted justifications for those restrictions. At a minimum, to survive strict scrutiny the City’s policy must be “narrowly drawn to effectuate a compelling state interest.” Perry, 460 U.S. at 46, 103 S.Ct. at 955.

VI. The City’s Justifications for its Policy

The City offers three justifications for its policy prohibiting religious expression. First, the City asserts that the policy ensures conformity with the First Amendment’s prohibition against state establishment of religion. While adherence to the Establishment Clause is a compelling government interest that may justify restrictions on speech in designated public forums, Rosenberger, — U.S. at — , 115 S.Ct. at 2520; Widmar, 454 U.S. at 270-71, 102 S.Ct. at 274-75, the City’s restriction is not necessary to serve this interest. The Supreme Court has made it abundantly clear that providing equal access to a designated public forum for citizens engaging in religious expression and citizens engaging in secular expression does not violate the Establishment Clause. Rosenberger, — U.S. at — , 115 S.Ct. at 2520-25; Lamb’s Chapel, 508 U.S. at 394-96, 113 S.Ct. at 2148; Widmar, 454 U.S. at 270-75, 102 S.Ct. at 274-77. The government need only remain neutral, preferring neither religious nor secular expression over the other. See Rosenberger, — U.S. at — , 115 S.Ct. at 2521-2522. Where the state does not sponsor the religious expression, the expression is made on government property that has been opened to the public for speech purposes, and permission is obtained through the same application process and on the same terms as secular groups, there is no violation of the Establishment Clause. Capitol Square Review and Advisory Bd. v. Pinette, — U.S. — , — , 115 S.Ct. 2440, 2447, 132 L.Ed.2d 650 (1995). “[I]t is no violation for government to enact neutral policies that happen to benefit religion.” Id. Clearly, the Establishment Clause does not compel the City to bar sectarian instruction and religious worship from its Senior Centers.

Second, the City asserts that its policy is necessary to remain in compliance with the Older Americans Act. To that end, the policy mirrors the language of the Older Americans Act, which requires as a condition for receiving federal funding assurances that a “facility will not be used and is not intended to be used for sectarian instruction or as a place for religious worship,” 42 U.S.C. § 3027(a)(14)(A)(iv). The fact that the City’s •policy is designed to conform with federal statutory requirements, however, does not shelter it from constitutional scrutiny. A city or state’s desire for federal funds is not a compelling government interest. Thus, compliance with the Older Americans Act does not justify this viewpoint-based restriction on expression. In the context presented here, no government entity may permissibly control the viewpoint being expressed. See Rosenberger, — U.S. at — , 115 S.Ct. at 2518-19 (where the government expends public funds to convey its own message, it may say what it wishes; where private speech is concerned, the government may not restrict expression on the basis of viewpoint).

Third, the City asserts that its policy is necessary to protect the senior citizens who use its centers. The City argues that the senior citizens who use the Senior Centers are members of a “captive audience” who are “vulnerable” to “religious proselytizing and coercion.” Br. Appellees 27. This claim is at best tenuous, and at worst insulting to senior citizens. People in this age group are not in need of special insulation from invitations to adopt a religious faith; nor are they, as a class, more likely than other citizens to be intimidated by such invitations. Moreover, the showing of the Jesus film and the distribution of giant-print New Testaments can hardly be construed as intimidating or coercive. People who choose to attend presentations at the Senior Centers do not become part of a captive audience: attendance at such programs is purely voluntary, and people are free to come and go as they please. Nor is there any implicit coercion to attend. This is not a situation akin to the school graduation ceremony at issue in Lee v. Weisman, where those who chose to absent themselves paid the price of missing “one of life’s most significant occasions.” 505 U.S. 577, 595, 112 S.Ct. 2649, 2659, 120 L.Ed.2d 467 (1992). Shielding senior citizens from religious speech, then, is also an inadequate justification for the City’s policy.

VII. Tilton v. Richardson

Finally, we address the City’s contention that Tilton v. Richardson, 403 U.S. 672, 91 S.Ct. 2091, 29 L.Ed.2d 790 (1971), which primarily concerned an Establishment Clause challenge to statutory language similar to that in the Older Americans Act, should be read to uphold the City’s policy against a free speech challenge. We reject this reading of Tilton. In that case, the Court considered a federal grant and loan program for the construction of academic facilities at institutions of higher learning. The terms of the act excluded facilities used for sectarian instruction or religious worship. The Court held, however, that a provision in the act that effectively allowed facilities to be converted entirely to religious purposes after twenty years violated the Establishment Clause. Id. at 682-684, 91 S.Ct. at 2097-99. At no point did the Court address any free-speech challenge to the act, and nothing in the opinion implied that its decision upholding the remainder of the act against an Establishment Clause challenge could be extended to protect similar statutory language against a free-speech challenge. Furthermore, the Court revisited the Tilton case in Widmar and warned against such an expansive reading: “[N]othing in Tilton suggested a limitation on the State’s capacity to maintain forums equally open to religious and other discussions. Cases before and after Tilton have acknowledged the right of religious speakers to use public forums on equal terms with others.” 464 U.S. at 272 n. 12, 102 S.Ct. at 276 n. 12.

VIII. Conclusion

The City of Albuquerque has failed to show a compelling interest that justifies its policy prohibiting sectarian instruction and religious worship at its Senior Centers. For that reason, we hold that the policy is an unconstitutional restriction on expression. We therefore REVERSE the judgment of the district court and enjoin the City from barring the showing of the film Jesus and the distribution of New Testaments at its Senior Centers. We also award reasonable attorney’s fees to the appellants in the district court and on appeal, as provided under 42 U.S.C. § 1988, and remand this matter to the district court for the determination of appropriate fee amounts.


author: BRORBY, Circuit Judge.

text:
    In re: HEDGED-INVESTMENTS ASSOCIATES, INC., Debtor. Harvey SENDER, Trustee, Plaintiff-Appellant, v. Estill H. BUCHANAN, a/k/a Mary Estill Buchanan, individually, and as Trustee of the Estill H. Buchanan Trust and as Custodian for Catharine Buchanan and Helen Buchanan under the Uniform Gifts to Minors Act, Defendant-Appellee.
    No. 95-1162.
    United States Court of Appeals, Tenth Circuit.
    May 23, 1996.
    See also 84 F.3d 1267 and 84 F.3d 1286.

      John B. Wasserman (Melody Dawson, with him on the briefs) of Kateh, Sender & Was-serman, P.C., Denver, Colorado, for Plaintiff-Appellant.
    Bruce E. Rohde of Davis & Ceriani, P.C., Denver, Colorado, for Defendant-Appellee.
    Before BRORBY and McWILLIAMS, Circuit Judges, and KERN, District Judge.

       The Honorable Terry C. Kern, United States District Judge for the Northern District of Oklahoma, sitting by designation.

   BRORBY, Circuit Judge.

This case arises out of an elaborate and long-running Ponzi scheme. As with all Ponzi schemes, this one collapsed and left many innocent investors with significant losses. The scheme was masterminded and operated by James Donahue, whom a federal district court sentenced to federal prison for his role in the debacle. In his operation of the scheme, Mr. Donahue utilized a solely-owned corporation and three limited partnerships. The innocent investors in the scheme purportedly purchased limited partnership interests in the partnerships. Now that the scheme has collapsed, the corporation and the three limited partnerships are in bankruptcy under Chapter 7 of Title 11 of the United States Code.

Harvey Sender is the trustee in bankruptcy for the four bankrupt entities’ estates. Ms. Buchanan finds herself among the small group of investors who managed to withdraw more money from Mr. Donahue’s scheme than they put into it. Mr. Sender sued Ms. Buchanan under, inter alia, Colorado partnership law to recover the money she was overpaid.

The district court entered judgment for Ms. Buchanan after concluding her limited partnership agreement was not enforceable. We exercise jurisdiction over this appeal under 28 U.S.C. § 1291. Teton Exploration Drilling, Inc. v. Bokum Resources Corp., 818 F.2d 1521, 1524 (10th Cir.1987). We affirm.

I. Background

We detailed the basic operation of Mr. Donahue’s fraudulent investment scheme in Sender v. Simon (In re Hedged-Investments Assocs. Inc.), 84 F.3d 1299 (10th Cir.1996), and see no reason to repeat that discussion here.

Ms. Buchanan’s involvement with the Hedged Investments fund began in 1978 and 1979, when she executed several limited partnership agreements for HIA L.P. on behalf of herself individually, as trustee for the Es-till H. Buchanan Trust, and for her four children under the Uniform Gifts to Minors Act. Acting in these separate capacities, Ms. Buchanan opened a total of six capital accounts in the Hedged Investments fund. Ms. Buchanan contributed about $750,000 to the fund. She withdrew about $2,000,000 before the scheme’s collapse in 1990.

Mr. Sender initiated this case in the Bankruptcy Court for the District of Colorado. Claiming “a partner is not entitled to profits never realized,” he sued Ms. Buchanan under § 608(2) of the Colorado Uniform Limited Partnership Act of 1981 (“CULPA”), Colo. Rev.Stat. § 7-62-608(2). Section 608(2) provides:

If a partner has received the return of any part of his contribution in violation of the partnership agreement or this article, he is hable to the limited partnership for a period of six years thereafter for the amount of the contribution wrongfully returned.

Specifically, Mr. Sender claims Ms. Buchanan received returns of her contribution in violation of her partnership agreement. The bankruptcy court heard Mr. Sender’s partnership claim pursuant to 28 U.S.C. § 157(c)(1) and, after a trial, issued proposed findings and conclusions recommending Mr. Sender’s claim be dismissed. Mr. Sender moved for reconsideration. The bankruptcy court granted the motion, amended its proposed findings and conclusions, and recommended judgment enter in favor of Mr. Sender. Ms. Buchanan filed an appropriate objection in district court pursuant to Fed. R. Bankr.P. 9033. The district court rejected the bankruptcy court’s proposed findings of fact and conclusions of law and entered judgment for Ms. Buchanan on Mr. Sender’s claim under Colorado partnership law. According to the district court:

[Ms. Buchanan] was induced to become a partner by way of a fraudulent scheme. Enforcement of the partnership contract only would serve to further the illegitimate Ponzi scheme. Thus, the plaintiff’s [partnership law] claim for relief must fail.

Mr. Sender appeals, claiming Ms. Buchanan’s partnership agreement is enforceable and that she is liable for payments in violation of the agreement under Colo.Rev.Stat. § 7-62-608(2). Ms. Buchanan presents four reasons why Mr. Sender should not prevail. First, she invokes the district court’s reasoning and argues Mr. Sender cannot enforce the partnership agreement because she was induced to enter the agreement by fraud and enforcement of the agreement would violate public policy. Second, she contends she never became a limited partner in a partnership governed by CULPA. Third, even if CUL-PA does apply, she claims she did not receive any distributions in violation of § 608(2) of that Act. Fourth, Ms. Buchanan contends Mr. Sender is estopped from claiming she received distributions in violation of her partnership agreement.

II. Standard of Review

This case comes to us via a relatively unusual route. The bankruptcy court heard Mr. Sender’s state law partnership claim as a non-core proceeding under 28 U.S.C. § 157(c). Ms. Buchanan did not consent, under § 157(e)(2), to having the bankruptcy court enter a final judgment with respect to the partnership claim; therefore, the bankruptcy court heard the claim pursuant to § 157(c)(1), which provides:

A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge’s proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected.

Thus, the district court entered final judgment in this case pursuant to § 157(c)(1). It did not hear the ease in its appellate capacity under 28 U.S.C. § 158(a). Therefore, our jurisdiction over Mr. Sender’s appeal is based on 28 U.S.C. § 1291, not 28 U.S.C. § 158(d). Teton Exploration Drilling, Inc. v. Bokum Resources Corp., 818 F.2d 1521, 1524 (10th Cir.1987). Since we are reviewing a final judgment of the district court under § 1291, we are limited in our review to the normally applicable standards. We review the district court’s findings of fact for clear error, Church Mut. Ins. Co. v. Mount Calvary Baptist Church (In re Mount Calvary Baptist Church), 70 F.3d 51, 53 (7th Cir.1995); see Exxon Corp. v. Gann, 21 F.3d 1002, 1005 (10th Cir.1994), and its conclusions of law, including determinations of state law, de novo. Salve Regina College v. Russell, 499 U.S. 225, 238, 111 S.Ct. 1217, 1224-25, 113 L.Ed.2d 190 (1991); Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458, 1464 (10th Cir.1988).

III. Analysis

Mr. Sender’s claim against Ms. Buchanan is based solely on a provision of CULPA. Therefore, before we can consider the merits of his claim, we must find Ms. Buchanan entered into a valid and enforceable partnership agreement that is subject to CULPA. Furthermore, as we explained in Sender v. Simon, Mr. Sender’s standing to bring a claim under partnership law against Ms. Buchanan is found in 11 U.S.C. § 541. See Simon, 84 F.3d at 1304-05. Thus, he stands in the shoes of the debtor partnership and takes no greater rights than the partnership had as of the bankruptcy filing. Id. at 1305.

For the same reasons detailed in Simon, Mr. Sender may not use this court as a vehicle for the enforcement of Ms. Buchanan’s limited partnership agreement against her. See Simon, 84 F.3d at 1306-07. We base our decision on “ ‘the elementary principle that one who has himself participated in a violation of law cannot be permitted to assert in a court of justice any right founded upon or growing out of the illegal transaction.’” Simon, 84 F.3d at 1306 (quoting Merrill v. Abbott (In re Indep. Clearing House Co.), 77 B.R. 843, 857 (D.Utah 1987)). Because we fully explain our position in Simon, we need not rearticulate it here.

Mr. Sender does, however, raise an argument in the instant case that he did not present in Simon. Mr. Sender contends that by virtue of his status as a bankruptcy trustee he, and therefore the partnership he represents, are immune to any defenses based on Mr. Donahue and HIA Inc.’s wrongdoing. Mr. Sender contends that because he, as trustee, is “trying to rectify the fraud” perpetrated by Mr. Donahue, the misrepresentations attributable to Mr. Donahue and the various entities he once controlled are no longer legally relevant. Mr. Sender points us to the Seventh Circuit’s recent decision in Scholes v. Lehmann, 56 F.3d 750 (7th Cir.), cert. denied, — U.S.-, 116 S.Ct. 673, 133 L.Ed.2d 522 (1995). In Scholes, a receiver for corporations used in a Ponzi scheme brought a state law fraudulent conveyance action against an innocent investor who, like Ms. Buchanan, was lucky enough to come away from the scheme with more than he invested. The investor-defendant argued the receiver could not bring a fraudulent conveyance action on behalf of the corporations because the corporations were in complicity with the fraud worked on innocent investors like himself and were therefore subject to the defense of in pari delicto. The Seventh Circuit was not persuaded. The court began by recognizing that normally “the maker of the fraudulent conveyance and all those in privity with him — which certainly includes the corporations — are bound by it.” Scholes, 56 F.3d at 754. The court then explained why receivership rendered the normal rule no longer applicable:

But the reason, of course, [for the in pari delicto defense], is that the wrongdoer must not be allowed to profit from his wrong by recovering property that he had parted with in order to thwart his creditors. That reason falls out now that [the scheme operator] has been ousted from control of and beneficial interest in the corporations. The appointment of the receiver removed the wrongdoer from the scene. The corporations were no more [the scheme operator’s] evil zombies. Freed from his spell they became entitled to the return of the moneys — for the benefit not of [the scheme operator] but of innocent investors — that [the scheme operator] had made the corporations divert to unauthorized purposes.

Id. Mr. Sender asks us to apply the “evil zombie” rule announced in Scholes to this case. Now that the partnership represented by Mr. Sender is free of Mr. Donahue and HIA Inc.’s evil spell, misrepresentations made to Ms. Buchanan are no longer relevant.

Though the Seventh Circuit’s reasoning in Scholes enjoys a certain appeal, both from doctrinal and public policy perspectives, we cannot adopt it in this ease. Put most simply, Mr. Sender is a bankruptcy trustee acting under 11 U.S.C. § 541, and bankruptcy law, apparently unlike the law of receivership, expressly prohibits the result Mr. Sender urges.

For the same reasons discussed in Simon, Mr. Sender’s standing in this ease is based on 11 U.S.C. § 541. Simon, 84 F.3d at 1304-05. Under § 541, the estate over which the appointed trustee is given control “is comprised of ... all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Causes of action belonging to the debtor fall within this definition. Simon, 84 F.3d at 1304-05; Mixon v. Anderson (In re Ozark Restaurant Equip. Co.), 816 F.2d 1222, 1225 (8th Cir.), cert. denied, 484 U.S. 848, 108 S.Ct. 147, 98 L.Ed.2d 102 (1987). We emphasize § 541(a)(1) limits estate property to the debtor’s interests “as of the commencement of the case.”- This phrase places both temporal and qualitative limitations on the reach of the bankruptcy estate. In a temporal sense, it establishes a clear-cut date after which property acquired by the debtor will normally not become property of the bankruptcy estate. See generally 4 Collier on Bankruptcy ¶ 541.05. In a qualitative sense, the phrase establishes the estate’s rights as no stronger than they were when actually held by the debtor. Hays & Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149, 1154 n. 7 (3d Cir.1989). Congress intended the trustee to stand in the shoes of the debtor and “take no greater rights than the debtor himself had.” H.R.Rep. No. 595, 95th Cong, 1st Sess. 368, reprinted in 1978 U.S.C.C.A.N. 5963, 6323. Therefore, to the extent Mr. Sender must rely on 11 U.S.C. § 541 for his standing in this ease, he may not use his status as trustee to insulate the partnership from the wrongdoing of Mr. Donahue and HIA Inc.

To be sure, Mr. Sender articulates sound reasons why it might be wise to allow an exception to this rule in cases, such as this one, where the trustee’s efforts stand to benefit hundreds of innocent investors. However, to paraphrase the Supreme Court, the issue is not whether such an exception would make good policy but whether the exception can be found in the Bankruptcy Code. See Central Bank v. First Interstate Bank, — U.S. — , — , 114 S.Ct. 1439, 1448, 128 L.Ed.2d 119 (1994). Neither the text of the Code nor its legislative history suggests any exceptions to the principle that the strength of an estate’s cause of action is measured by how it stood “as of commencement of the case.” 11 U.S.C. § 541(a)(1). It falls beyond the province of this court to let policy considerations override our interpretation of the text and clear intent of an act of Congress, unless we are faced with the “rare and exceptional cireumstanee[ ]” that such a reading would require a result “so bizarre that Congress ‘could not have intended’ it.” Demarest v. Manspeaker, 498 U.S. 184, 190-91, 111 S.Ct. 599, 604, 112 L.Ed.2d 608 (1991) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 575, 102 S.Ct. 3245, 3252, 73 L.Ed.2d 973 (1982)). This is not such a circumstance.

The decision of the district court is AFFIRMED.

      . A Ponzi scheme is a fraudulent investment scheme in which “profits” to investors are not created by the success of the underlying business venture but instead are derived fraudulently from the capital contributions of other investors. Sender v. Nancy Elizabeth R. Heggland Family Trust (In re Hedged-Investments Assocs., Inc.), 48 F.3d 470, 471 n. 2 (10th Cir.1995).

      . Mr. Sender also brought avoidance claims under 11 U.S.C. §§ 547 & 548. See Sender v. Buchanan (In re Hedged-Investments Assocs., Inc.), 84 F.3d 1286 (10th Cir.1996). The instant case does not implicate these claims.

      . Though Mr. Sender has never indicated which bankruptcy estate he represents in this matter, we think the statute he invokes makes it clear that he represents the partnership in which Ms. Buchanan was a limited partner — section 608(2) makes a limited partner liable "to the limited partnership.” There is some dispute among the parties as to which limited partnership Ms. Buchanan belonged, if any, when she received the transfers Mr. Sender seeks to recover. Our decision does not require us to resolve this dispute. In the interest of avoiding confusion, we refer genetically to “the limited partnership” or "her limited partnership.”

      . 28 U.S.C. § 157(c)(2)
      Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all the parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments, subject to review under section 158 of this title.

      . The case sub judice does not implicate the law of receivership, and nothing we say herein should be construed as applicable to that area of law or as a comment on the validity of the rule announced in Scholes, 56 F.3d 750.

      . It is important to note that not all state law claims brought by a trustee are properly brought under 11 U.S.C. § 541. A trustee is empowered under 11 U.S.C. § 544(b) to "avoid any transfer of an interest of the debtor in property ... that is voidable under applicable law by a creditor holding an unsecured claim.” This provision is typically invoked by trustees to pursue state law fraudulent transfer or conveyance claims. See, e.g., Hayes v. Palm Seedlings Partners-A (In re Agricultural Research & Technologyl Group, Inc.), 916 F.2d 528, 534-40 (9th Cir.1990) (Ponzi scheme context). As we explained in Simon, Mr. Sender’s partnership law claims do not meet the requirements of § 544(b); they are brought pursuant to § 541. Simon, 84 F.3d at 1303-05. Accordingly, nothing we say in the instant case applies to the breadth of a trustee’s avoidance powers under § 544(b).


text:
    In re HEDGED-INVESTMENTS ASSOCIATES, INC., Debtor. Harvey SENDER, Trustee, Plaintiff-Appellee, v. Estill H. BUCHANAN, a/k/a Mary Estill Buchanan, individually, and as Trustee of the Estill H. Buchanan Trust and as Custodian for Catharine Buchanan and Helen Buchanan under the Uniform Gifts to Minors Act, Defendant-Appellant.
    No. 95-1059.
    United States Court of Appeals, Tenth Circuit.
    May 23, 1996.
    See also 84 F.3d 1267 and 84 F.3d 1281.

      Melody Dawson of Katch, Sender & Was-serman, P.C., Denver, Colorado, for Plaintiff-Appellee.
    Bruce E. Rohde of Davis & Ceriani, P.C., Denver, Colorado, for Defendant-Appellant.
    Before BRORBY and McWILLIAMS, Circuit Judges, and KERN, District Judge.

      . The Honorable Terry C. Kern, United States District Judge for the Northern District of Oklahoma, sitting by designation.

   BRORBY, Circuit Judge.

Harvey Sender, as trustee in bankruptcy, brought claims in the bankruptcy court against Estill Buchanan under, inter alia,,11 U.S.C. § 547(b) & (b)(4)(B) (insider preferences) and 11 U.S.C. § 548(a)(2) (constructive fraudulent transfers). The bankruptcy court found in favor of Mr. Sender on both claims. The district court affirmed the bankruptcy court, and Ms. Buchanan now appeals. We exercise jurisdiction pursuant to 28 U.S.C. § 158(d) and affirm the district court’s decision affirming the bankruptcy court.

This case arises out of a fraudulent investment scheme perpetrated by James Donahue and his solely-owned corporation, Hedged Investments Associates, Inc. (“HIA Inc.”). The parties do not dispute the basic operation of the scheme. In the late 1970s, Mr. Donahue and HIA Inc. began an investment fund known as Hedged Investments. Mr. Donahue attracted investors to the fund by claiming he had developed a sophisticated method of trading in stock options that resulted in substantial returns. Upon enticing someone to invest in the Hedged Investments fund, Mr. Donahue sold the investor limited partnership units in one of three limited partnerships he established as investment vehicles for the fund. Mr. Donahue named these partnerships Hedged-Investments Associates, L.P., (“HIA L.P.”), Hedged-Investments Associates II, L.P., (“HIA II L.P.”), and Hedged-Securities Associates, L.P. (“HSA L.P.”) (collectively the “Debtor Partnerships”). HIA Inc. served as managing general partner for each of the Debtor Partnerships. Acting through HIA Inc., Mr. Donahue told investors he would invest partnership capital in the Hedged Investments fund and that the fund’s assets would in turn be invested according to his trading strategy. Though Mr. Donahue actually used investors’ contributions to trade in stock options, the Hedged Investments fund amassed enormous trading losses. To hide these losses, Mr. Donahue reported false earnings and allocated false profits to investors’ accounts. He then allowed investors to withdraw cash from their accounts on the basis of these falsely attributed profits. In effect, Mr. Donahue ran a Ponzi scheme— he paid these so-called profits to investors who chose to make cash withdrawals with the contributions of other investors.

In 1978, Ms. Buchanan, acting for herself and as trustee for her own trust and custodian for her children, began investing in the Hedged Investments fund. Over the course of her participation in the Hedged Invest-merits scheme, Ms. Buchanan invested about $750,000 in the fund and received transfers from HIA Inc. totaling a little over $2 million. Apparently, Ms. Buchanan was among the few investors who received more money from the Hedged Investments fund than they invested. According to Mr. Sender, “hundreds of people together lost hundreds of millions of dollars in [the Hedged Investments] scheme.”

Mr. Donahue’s Hedged Investments scheme collapsed in August 1990. On August 30, 1990, HIA Inc. filed for bankruptcy protection under Chapter 11 of Title 11 of the United States Code. In September 1990, the bankruptcy court converted the proceeding to Chapter 7 and appointed Mr. Sender as trustee.

During the one-year period extending backward from the original bankruptcy filing, Ms. Buchanan received transfers from HIA Inc. totaling $248,896.88. Mr. Sender, as bankruptcy trustee for the estate of HIA Inc., sued Ms. Buchanan to recover these transfers pursuant to two alternative avoidance theories. First, he claimed under 11 U.S.C. § 547(b) that Ms. Buchanan received the $248,896.88 as preferences to or for the benefit of an inside creditor. Second, Mr. Sender claimed the transfers were avoidable under 11 U.S.C. § 548(a) as transfers made while HIA Inc. was insolvent and for which it did not receive reasonably equivalent value. The bankruptcy court found for Mr. Sender on both theories and entered alternative judgments against Ms. Buchanan under § 547(b) and § 548(a) in the amount of $248,-896.88, plus costs. The district court affirmed the bankruptcy court’s decision. In this appeal, Ms. Buchanan contends the transfers from HIA Inc. to her are avoidable under neither § 547(b) nor § 548(a). Because we find the bankruptcy court properly concluded Mr. Sender can avoid the transfers pursuant to 11 U.S.C. § 548(a), we do not address the issues raised by Mr. Sender’s claim under § 547(b).

In reviewing the decision of a bankruptcy court pursuant to 28 U.S.C. § 158, the district court and the court of appeals apply the same standards of review that govern appellate review in other eases. Therefore, we review the bankruptcy court’s legal conclusions de novo and its factual findings for clear error. Phillips v. White (In re White), 25 F.3d 931, 933 (10th Cir.1994).

According to 11 U.S.C. § 548:

(a) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition, if the debtor voluntarily or involuntarily—
(2)(A) received less than a reasonably equivalent value in exchange for such transfer or obligation; and (B)(i) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;

The bankruptcy court found the payments made to Ms. Buchanan within one year of the bankruptcy filing for HIA Inc. satisfied these requirements. Accordingly, the bankruptcy court ruled Mr. Sender could avoid the payments. Ms. Buchanan challenges this ruling on the basis of a single issue. She claims HIA Inc. received “reasonably equivalent value in exchange” for the money it transferred to her, which, if true, would mean the transfers are not avoidable. The bankruptcy court disagreed, declaring:

Here, the evidence established that during the relevant one year preceding the Debtor’s bankruptcy, the Defendant received $248,896.88, and she invested not one red cent during that time period. Up to the beginning of the one-year period, she had invested a total of $750,911.00 in cash and had already received $1,761,143 in cash — over $1 million more than she invested. It is ludicrous for her to now argue that she gave the reasonably equivalent value for the sums received during the one-year period.

Ms. Buchanan does not dispute the bankruptcy court’s observation that “she invested not one red cent” during the time she received the transfers at issue. Instead, she contends HIA Inc. received reasonably equivalent value for its transfers to her because the transfers partially satisfied her legitimate fraud claim against HIA Inc. According to Ms. Buchanan:

everyone agrees that HIA, Inc. fraudulently induced Mrs. Buchanan to invest and then misappropriated her investment.... Obviously, then, Mrs. Buchanan had a ‘claim’ against HIA, Inc. and HIA, Inc. had a ‘debt’ to her (a liability on that claim)_ Mrs. Buchanan’s claims were satisfied, in part, by the payments she received. Therefore, HIA, Inc. received value for its transfers to her.

The bankruptcy court did not address this theory. The district court addressed it only cursorily, asserting:

[Ms. Buchanan’s] reasoning is specious. Although the Hedged scheme was a fraud, because the amounts Buchanan received were well in excess of her investment, rather than a victim of the Ponzi scheme, she was a beneficiary who suffered no damages. Given these excess payments, the Court finds that there was no reasonably equivalent value.

Though the district court reached the correct conclusion, the issue is not as elementary as the court’s treatment suggests. For Ms. Buchanan to succeed on her argument, HIA Inc. must have (1) received value and (2) that value must have been reasonably equivalent to the $248,896.88 in transfers to Ms. Buchanan. See Gray v. Snyder, 704 F.2d 709, 711-12 (4th Cir.1983).

According to 11 U.S.C. § 548, “ Value’ means property, or satisfaction or securing of a present or antecedent debt of the debtor.” 11 U.S.C. § 548(d)(2)(A). Ms. Buchanan contends the transfers at issue satisfied an “antecedent debt” created by her fraud claim against HIA Inc. The Bankruptcy Code defines “debt” as “liability on a claim.” 11 U.S.C. § 101(12). According to the legislative history from both Houses of Congress, the terms “are coextensive: a creditor has a ‘claim’ against the debtor; the debtor owes a ‘debt’ to the creditor.” H.R.Rep. No. 595, 95th Cong., 1st Sess. 310, reprinted in 1978 U.S.C.C.AN. 5963, 6267 and App. 2 Collier on Bankruptcy; S.Rep. No. 989, 95th Cong., 2d Sess. 23, reprinted in 1978 U.S.C.C.AN. 5787, 5809 and App. 3 Collier on Bankruptcy; see also Pennsylvania Dept. of Public Welfare v. Davenport, 495 U.S. 552, 558, 110 S.Ct. 2126, 2130-31, 109 L.Ed.2d 588 (1990) (recognizing Congress’ intent to make the terms “debt” and “claim” coextensive). Thus, a debtor receives ‘Value” for a transfer if the transfer satisfies a “claim” the transferee-creditor has against the debtor.

The bankruptcy code defines “claim” as: “right to payment, whether or not such right is reduced to judgment, liquidated, unliqui-dated, fixed, contingent, matured, unma-tured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5). Congress intended that this be the “broadest possible definition.” H.R.Rep. No. 595, at 309; S.Rep. No. 989, at 21; see also Ohio v. Kovacs, 469 U.S. 274, 279, 105 S.Ct. 705, 707-08, 83 L.Ed.2d 649 (1985) (recognizing “that Congress desired a broad definition of a ‘claim’ ”). Ms. Buchanan contends she had a claim against HIA Inc. on a theory of fraud because she was fraudulently induced to participate and continue participating in the Hedged Investments scheme.

There is no dispute that Ms. Buchanan was fraudulently induced to participate in a Ponzi scheme. The question is whether she had a viable claim against HIA Inc. based on this fraud. Ms. Buchanan received the transfers at issue after already receiving approximately $1 million more than her original $750,000 investment. The district court found that since Ms. Buchanan received more than she invested she did not have a viable claim for fraud. In effect, the district court determined Ms. Buchanan had already received restitution and therefore was entitled to no remedy. The district court’s observations are correct insofar as restitution is the remedy to which Ms. Buchanan would be entitled; however, restitution is not the only remedy available to a defrauded party under Colorado law.

Under Colorado law, a fraud plaintiff must elect either to rescind the entire contract to restore the conditions existing before the agreement was made or to affirm the entire contract and recover the difference between the actual value of the benefits received and the value of those benefits if they had been as represented, plus any other damages naturally and proximately caused.

Colorado Interstate Gas Co. v. Chemco, Inc., 833 P.2d 786, 793 (Colo.Ct.App.1991) (citing Trimble v. City & County of Denver, 697 P.2d 716, 724 (Colo.1985)) (emphasis added), aff'd, 864 P.2d 1232 (Colo.1993); see also 37 Am.Jur.2d Fraud & Deceit § 327. The election of remedies belongs to the defrauded party. Trimble, 697 P.2d at 723 (citing Altergott v. Yeager, 37 Colo.App. 23, 543 P.2d 1293 (1975)).

Ms. Buchanan contends the district court overlooked the second alternative remedy for fraud. She claims she could have affirmed the investment contract and recovered the difference between the value of what she received and the value of Mr. Donahue’s representations to her, plus consequential damages. In support of this argument, Ms. Buchanan points to evidence in the record indicating that even though she received about $1.25 million more than she invested, she still did not receive the full value of Mr. Donahue’s representations. She also highlights certain consequential damages she suffered, including unrecoverable tax payments on undistributed earnings and interest payments on money she borrowed to pay the taxes.

We are not persuaded. Ms. Buchanan correctly observes Colorado law ordinarily permits a fraud plaintiff to affirm the contract and receive expectation and consequential damages. This case, however, is not ordinary; it arises out of a Ponzi scheme in which Ms. Buchanan was only one of many innocent investors. As the district court in Merrill v. Abbott (In re Independent Clearing House Co.), 77 B.R. 843 (D.Utah 1987) (en banc), observed:

To allow an [investor] to enforce his contract to recover promised returns in excess if his [investment] would be to further the debtors’ fraudulent scheme at the expense of other [investors].
... Any recovery would not come from the debtors’ own assets because they had no assets they could legitimately call their own. Rather, any award of damages would have to be paid out of money rightfully belonging to other victims of the Pon-zi scheme.

Id. at 858.

We find the district court’s reasoning in Merrill persuasive and reach the same conclusion. “[A]s a matter of public policy, the contract!] involved in this case w[as] unenforceable to the extent [it] purported to give [Ms. Buchanan] a right to payments in excess of [her] undertaking.” Id. In other words, Ms. Buchanan did not have the enforceable option of affirming her contract with HIA Inc. and recovering expectation and consequential damages. Because she had no claim against HIA Inc. for damages in excess of her original investment, HIA Inc. had no debt to her for those amounts. Therefore, the transfers could not have satisfied an antecedent debt of HIA Inc., which means HIA Inc. received no value in exchange for the transfers. Since HIA Inc. received no value for the transfers, a fortiori, it did not receive reasonably equivalent value, which brings the transfers within the requirements of 11 U.S.C. § 548(a)(2). Merrill, 77 B.R. at 858-59; see also In re Taubman, 160 B.R. 964, 985-86 (Bankr.S.D.Ohio 1993) (adopting the rule announced in Merrill ); Jobin v. Lalan (In re M & L Business Mach. Co.), 160 B.R. 851, 858 (Bankr.D.Colo.1993) (same), aff'd, 167 B.R. 219 (D.Colo.1994).

Ms. Buchanan has not challenged the bankruptcy court’s application of § 548(a) on any other grounds. For the reasons given herein, we AFFIRM the district court’s decision affirming the decision of the bankruptcy court.

      . Pursuant to his powers under 11 U.S.C. § 541, Mr. Sender also brought claims against Ms. Buchanan under the Colorado Uniform Limited Partnership Act, Colo.Rev.Stat. § 7-62-101 et seq. The appeal sub judice does not implicate these claims.


author: LOGAN, Circuit Judge.

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Hitman C. MOFFETT, also known as Jamil Moffett, Defendant-Appellant.
    No. 95-2050.
    United States Court of Appeals, Tenth Circuit.
    May 23, 1996.

      Richard A. Winterbottom of Stout & Win-terbottom, Albuquerque, New Mexico, for Defendant-Appellant.
    Robert D. Kimball, Assistant U.S. Attorney (John J. Kelly, United States Attorney, with him on the brief), Albuquerque, New Mexico, for Plaintiff-Appellee.
    Before MOORE and LOGAN, Circuit Judges, and O’CONNOR, District Judge.

       The Honorable Earl E. O'Connor, Senior United States District Judge, United States District Court for the District of Kansas, sitting by designation.

   LOGAN, Circuit Judge.

Defendant Hilman C. Moffett appeals his conviction on one count of possessing with intent to distribute more than fifty kilograms of marijuana, in violation of 21 U.S.C. §§ 841(a)(1) and 841(b)(1)(C), and 18 U.S.C. § 2. Defendant asserts that the district court erred (1) in denying his motion to suppress evidence seized as a result of an administrative subpoena issued under 21 U.S.C. § 876; and (2) in allowing the government to take inconsistent positions by first arguing that defendant had abandoned three suitcases containing marijuana (thus allowing the government to seize them) and then linking defendant to the suitcases.

I

This case essentially began when Drug Enforcement Agency (DEA) Agent Samuel Candelaria obtained an administrative subpoena commanding Amtrak to produce passenger lists and reservations for certain trains stopping in Albuquerque, New Mexico during December 1993. Candelaria reviewed the reservation information looking for passengers who paid cash, booked sleeping cars, and purchased tickets on the day of departure, all of which in his experience suggested possible drug trafficking. One of the reservations indicated that defendant (under the name “J. Moffett”) had booked a sleeper compartment for two on December 16 for a trip leaving that day from Los Angeles to New York and had paid in cash. When Candelaria tried the callback number given for the reservation he got an answering machine which did not identify the person being called.

Based on this information DEA task force officer Jeanette Tate approached defendant’s compartment when the train arrived at Albuquerque early in the afternoon of December 17. Defendant came out of the compartment to speak with Tate. Defendant and his stepdaughter, Angela Dean, voluntarily allowed Tate to check for drugs in the baggage they had in their compartment. Finding no contraband in the bags in the roomette, Tate rejoined Candelaria.

Meanwhile Candelaria had spoken with the car attendant, who told him that defendant brought three heavy suitcases on the train and placed them together on the top rack of the common luggage area. Because defendant had told Tate he had not checked any bags, Tate returned to talk again with defendant. Defendant agreed to look at the common luggage rack. Before being asked any questions he looked directly at the three bags. Defendant denied ownership or interest in the bags; he said that he had helped an elderly woman carry them onto the train. The officers then took the bags — which apparently had no identification tags — off the train as abandoned property; the train carrying defendant continued on its way.

The officers took the bags to the Albuquerque DEA office and found that they contained 162 pounds of baled marijuana. The officers then called ahead and asked the New Mexico state police to send officers to meet the train at its next stop in Lamy, New Mexico. Two state police officers detained defendant and Dean so that the DEA officers could arrest them. The officers took the roomette’s trash bag with them. The trash bag contained a soda can with a key inside that fit two of the three bags the DEA officers had taken off the train in Albuquerque.

Defendant was charged with possession of marijuana with intent to distribute. Denying defendant’s suppression motion, the district court found defendant had no standing to challenge the administrative subpoena issued under 21 U.S.C. § 876. After defendant’s first trial ended in a mistrial, he was tried again and convicted.

II

Defendant first argues that the district court erred in denying his motion to suppress. We review the court’s findings of fact on a motion to suppress for clear error but its application of law de novo. See United States v. Garcia, 42 F.3d 604, 605 (10th Cir.1994), cert. denied, - U.S. -, 115 S.Ct. 1713, 131 L.Ed.2d 573 (1995). Defendant asserts that the district court erred in denying him standing to challenge the Attorney General’s authority to issue a prospective “John Doe” subpoena under 21 U.S.C. § 876, and argues that the remedy for the allegedly invalid subpoena is suppression of all evidence gained through its use.

The statute at issue, 21 U.S.C. § 876(a), provides in relevant part:

§ 876. Subpoenas
(a) Authorization of use by Attorney General
In any investigation relating to his functions under this subchapter with respect to controlled substances, listed chemicals, tableting machines, or encapsulating machines, the Attorney General may subpoena witnesses, compel the attendance and testimony of witnesses, and require the production of any records (including books, papers, documents, and other tangible things which constitute or contain evidence) which the Attorney General finds relevant or material to the investigation.

The right (or standing) to contest the constitutionality of a search and to argue for exclusion at a criminal trial of evidence obtained as a result of the search is subsumed under substantive Fourth Amendment doctrine. Rakas v. Illinois, 439 U.S. 128, 139-40, 99 S.Ct. 421, 428-29, 58 L.Ed.2d 387 (1978). “[I]t is proper to permit only defendants whose Fourth Amendment rights have been violated to benefit from the [exclusionary] rule’s protection.” Id. at 134, 99 S.Ct. at 425. The capacity to claim the Fourth Amendment’s protection depends on whether the person claiming it has a “legitimate expectation of privacy in the invaded place.” Id. at 143, 99 S.Ct. at 430.

In the instant case defendant admits he has no reasonable expectation of privacy in the information on the train manifest — a business record of Amtrak. Thus, he does not purport to make any Fourth Amendment or other constitutional argument. Rather he argues more broadly that he has Article III case or controversy standing to challenge the statutory authority of the Attorney General to issue subpoenas under 21 U.S.C. § 876(a). The cases he relies on for this proposition are clearly distinguishable. In Peters v. United States, 853 F.2d 692 (9th Cir.1988), an administrative subpoena issued by the Immigration and Naturalization Service (INS) under 8 U.S.C. § 1225(a) was challenged by the person against whom it was directed, the manager of the camp which the INS thought might house undocumented aliens. In United States v. Bisceglia, 420 U.S. 141, 95 S.Ct. 915, 43 L.Ed.2d 88 (1975), the John Doe summons that the Internal Revenue Service (IRS) issued under 26 U.S.C. § 7602 was challenged by the bank vice-president to whom it was directed. In the case before us Amtrak, to which the summons was issued, would have had standing to make the statutory construction arguments defendant asserts; but it chose to comply with the subpoena.

Defendant must show not only that he suffered actual personal injury traceable to the challenged action but that he is in the zone of interest the statute is meant to protect. See Mount Evans Co. v. Madigan, 14 F.3d 1444, 1450-51. (10th Cir.1994). The statute at issue before us is written to give the DEA broad powers to investigate violations of federal drug laws. The statute provides no express right to challenge the Attorney General’s subpoenas issued under it. Cf. 26 U.S.C. § 7609 (requiring notice and giving a right to intervene to person whose business records are subpoenaed by the IRS). In analogous circumstances the courts have denied attempted challenges without adjudicating the merits of the claimed statutory violation. See, e.g., United States v. Zermeno, 66 F.3d 1058, 1062 (9th Cir.1995) (Absent presence or proprietary interest in house searched defendant had no standing to challenge knock-and-announce statute because he was not a “member of the class of persons sought to be protected by the statute.”); United States v. Thompson, 936 F.2d 1249, 1251-52 (11th Cir.1991) (evidence obtained allegedly in violation of pen register statute admissible because the statute does not provide the remedy of exclusion), cert. denied, 502 U.S. 1075, 112 S.Ct. 975, 117 L.Ed.2d 139 (1992). We agree with those cases.

Our supervisory power does not authorize us to order suppression of “otherwise admissible evidence on the ground that it was seized unlawfully from a third party not before the court.” United States v. Payner, 447 U.S. 727, 735, 100 S.Ct. 2439, 2446, 65 L.Ed.2d 468 (1980). Thus, we do not reach the statutory construction issue defendant presses: whether the DEA had authority to issue a prospective subpoena as Bisceglia permitted with respect to a subpoena issued under an internal revenue statute, or whether it had to request existent records for an identified suspect as Peters held necessary with respect to a subpoena issued under an immigration act.

Ill

Defendant also complains that the government took inconsistent positions in both seizing and searching the suitcases as abandoned and then charging him with possession of the marijuana found in those suit-eases. There is no merit to this argument. The government introduced evidence that defendant placed the suitcases on the train and then conveniently abandoned them when they became the object of the agents’ investigation. See United States v. Salvucci, 448 U.S. 83, 90, 100 S.Ct. 2547, 2552, 65 L.Ed.2d 619 (1980) (“[A] prosecutor may simultaneously maintain that a defendant criminally possessed the seized good, but was not subject to a Fourth Amendment deprivation, without legal contradiction.”); Zermeno, 66 F.3d at 1061 (not inconsistent for government to argue defendant frequented house where drugs were stored but also to assert he lacks standing to challenge search of premises). Defendant’s reliance upon United States v. Morales, 737 F.2d 761, 763-64 (8th Cir.1984), is misplaced. There the Eighth Circuit rejected the government’s attack on defendant’s standing to challenge the search of a hotel room in part because the government changed its position from the trial to the appeal.

AFFIRMED.