No. 23-2551 ___________________________

Douglas A. Kelley, in his capacity as the Trustee of the BMO Litigation Trust,

lllllllllllllllllllllAppellee,

v. BMO Harris Bank National Association, as successor to M&I Marshall and Ilsley Bank,

lllllllllllllllllllllAppellant.

------------------------------ The Bank Policy Institute; Securities Industry and Financial Markets Association; Chamber of Commerce of the United States of America,

lllllllllllllllllllllAmici on Behalf of Appellant(s),

National Association of Federal Equity Receivers,

lllllllllllllllllllllAmicus on Behalf of Appellee(s). ___________________________

No. 23-2632 ___________________________

Douglas A. Kelley, in his capacity as the Trustee of the BMO Litigation Trust,

lllllllllllllllllllllAppellant,

v. BMO Harris Bank National Association, as successor to M&I Marshall and Ilsley Bank,

lllllllllllllllllllllAppellee. ____________

Appeals from United States District Court for the District of Minnesota ____________

Submitted: May 9, 2024 Filed: September 12, 2024 ____________ Before COLLOTON, Chief Judge, BENTON and SHEPHERD, Circuit Judges. ____________ COLLOTON, Chief Judge.

This appeal is the latest in a series of disputes arising from Thomas Petters’s multibillion-dollar Ponzi scheme. When the scheme collapsed, a federal district court placed one of his companies, Petters Company, Inc. (PCI), in a receivership and appointed Douglas Kelley as a receiver. PCI then filed for bankruptcy, and Kelley was appointed trustee of the bankruptcy estate.

As trustee, Kelley filed an adversary proceeding in the bankruptcy court against BMO Harris as successor-in-interest to M&I Bank, alleging that M&I aided and abetted the Ponzi scheme. BMO raised the equitable defense of in pari delicto on the ground that the debtor, PCI, bore equal or greater responsibility for its injury. The bankruptcy court and the district court concluded that the defense was unavailable in light of the receivership. The case proceeded to trial, and a jury found that M&I aided and abetted PCI officers’ breach of fiduciary duty and awarded Kelley more than $500 million in damages.

-2- BMO appeals and raises numerous contentions regarding available defenses, sufficiency of the evidence, jury instructions, and damages. Because we conclude that the doctrine of in pari delicto barred Kelley’s action against BMO, we reverse.

I.

Petters created PCI to facilitate his Ponzi scheme. He represented to investors that PCI purchased consumer electronics from wholesalers and resold the products to retailers. In reality, Petters rerouted much of the money to himself and his fellow fraudsters using PCI’s accounts at M&I Bank.

The scheme collapsed in 2008 when Petters was arrested. A jury found him guilty of various fraud offenses, and the district court sentenced him to 50 years’ imprisonment. See United States v. Petters, 663 F.3d 375 (8th Cir. 2011). PCI pleaded guilty to wire fraud, conspiracy to commit mail and wire fraud, and conspiracy to commit money laundering.

At the federal government’s request, a federal district court placed PCI into a receivership and appointed Douglas Kelley as the receiver under 18 U.S.C. § 1345(a)(2)(