Securities and Exchange Commission v. Bivona et al

Filing 208

STIPULATION AND ORDER re 206 Modifying Briefing Schedule for the Joint Motion of the SEC and the Receiver for Approval of Proposed Joint Distribution Plan filed by SRA Funds Investor Group. Hearing on (196) MOTION for Approval o f Joint Distribution Plan, Retention of Professionals, Dissolution of Certain Defendants and Relief Defendants and Consent by the Receiver to Permanent Injunction remains set for 8/31/17 at 1:30 p.m. Final hearing on the same motion set for 9/28/2017 01:30 PM in Courtroom 5, 17th Floor, San Francisco before Edward M. Chen. Signed by Judge Edward M. Chen on 7/25/17. (bpfS, COURT STAFF) (Filed on 7/25/2017)

1 JONATHAN K. LEVINE (SBN: 220289)
ELIZABETH C. PRITZKER (SBN: 146267)
2 BETHANY L. CARACUZZO (SBN: 190687)
PRITZKER LEVINE LLP
3 180 Grand Avenue, Suite 1390
Telephone: [phone]
4 Facsimile: [phone]
Email: [e-mail]
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[e-mail]
[e-mail]
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Attorneys for the SRA Funds Investor Group
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[Additional counsel appear on signature pages]
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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

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Case No: 3:16-cv-01386-EMC

vs.
JOHN V. BIVONA; SADDLE RIVER
ADVISORS, LLC; SRA MANAGEMENT
LLC; FRANK GREGORY MAZZOLA,
Defendants, and
SRA I LLC; SRA II LLC; SRA III LLC;
FELIX INVESTMENTS, LLC; MICHELE J.
MAZZOLA; ANNE BIVONA; CLEAR
SAILING GROUP IV LLC; CLEAR
SAILING GROUP V LLC,

STIPULATION AND [PROPOSED]
ORDER MODIFYING BRIEFING AND
HEARING SCHEDULE FOR THE JOINT
MOTION OF THE SEC AND THE
RECEIVER FOR APPROVAL OF
PROPOSED JOINT DISTRIBUTION
PLAN
Date: August 31, 2017
Time: 1:30 p.m.
Courtroom: 5
Judge: Hon. Edward M. Chen

Relief Defendants.

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STIPULATION AND [PROPOSED] ORDER MODIFYING BRIEFING AND HEARING
SCHEDULE RE APPROVAL OF PROPOSED JOINT DISTRIBUTION PLAN
Case No. 3:16-cv-01386-EMC

Counsel for (i) plaintiff Securities and Exchange Commission (“Commission”), (ii)

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2 defendants John V. Bivona and Saddle River Advisors, LLC, (iii) the Receiver for the receivership
3 entities, relief defendants and third-party affiliated entities, and (iv) the SRA Funds Investor Group1,
4 along with pro per defendant Frank G. Mazzola and pro per relief defendant Michele J. Mazzola,
5 hereby submit this Stipulation and [Proposed] Order to modify in part the briefing and hearing
6 schedule on the Commission’s and the Receiver’s pending joint motion for approval of a proposed
7 joint distribution plan in this action.
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STIPULATION

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On May 31, 2017, the Commission and the Receiver, with the agreement of the defendants

10 and relief defendants, proposed a schedule to the Court for the briefing and hearing on the
11 Commission’s and the Receiver’s anticipated motion for approval of a proposed distribution plan
12 for the assets of the receivership estate. The proposed schedule called for the motion to be filed by
13 June 29, 2017, with any opposition papers, objections or proposed amendments filed by July 27,
14 2017, and reply papers filed by August 17, 2017. The hearing on the motion was proposed for
15 August 31, 2017. See Dkt. No. 186. The proposed schedule was adopted by the Court on June 6,
16 2017. See Dkt. No. 191.
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On June 2, 2017, Pritzker Levine LLP filed a Notice of Appearance and Intent to be Heard

18 on behalf of 92 individuals and entities (collectively the “SRA Funds Investor Group”) that have
19 purchased and continue to own membership interests in one or more of the SRA Funds that are at
20 issue in this litigation. See Dkt. No. 189. On June 22, 2017, a Supplemental Notice of Appearance
21 was filed on behalf of 27 additional individuals and entities that joined the SRA Funds Investor
22 Group subsequent to the June 2, 2017 Notice of Appearance being filed.2 See Dkt. No. 193.
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For the purposes of this Stipulation only, the term “parties” refers to the Commission, Mr. Bivona
25 and Saddle River Associates, the Receiver, and the SRA Funds Investor Group.
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The SRA Funds Investor Group currently includes 124 individuals and entities with about $38.25
million still invested in the SRA Funds.

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STIPULATION AND [PROPOSED] ORDER MODIFYING BRIEFING AND HEARING
SCHEDULE RE APPROVAL OF PROPOSED JOINT DISTRIBUTION PLAN
Case No. 3:16-cv-01386-EMC

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On June 29, 2017, the Commission and the Receiver filed their Joint Motion for Approval

2 of the Proposed Joint Distribution Plan. See Dkt. Nos. 196 – 201.
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Since the filing of the Joint Motion, counsel for the SRA Funds Investor Group has

4 conferred with the Commission, the Receiver, and counsel for certain other parties to exchange and
5 discuss information concerning the management and operation of the SRA Funds and the proposed
6 joint distribution plan.3 The Commission and the Receiver have been fully cooperative with counsel
7 for the SRA Funds Investor Group in the exchange of requested information. Counsel for the SRA
8 Funds Investor Group has also been working with the individual members of the Group to analyze
9 the Joint Motion and formulate a response on behalf of the Group.
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In light of the volume of materials filed by the Commission and the Receiver in connection

11 with the Joint Motion, the number of pre-IPO companies and investment funds involved for which
12 information must be gathered and analyzed, the additional information still being analyzed and
13 gathered by counsel to prepare a response to the Joint Motion, the number of investors in the SRA
14 Funds Investor Group who must be consulted with respect to the response to the Joint Motion, and
15 the complex nature of the distribution plan that the SRA Funds Investor Group is likely to propose
16 to the Court as an alternative to the joint distribution plan proposed by the Commission and the
17 Receiver4, additional time is needed by the SRA Funds Investor Group to prepare its response to
18 the Joint Motion and to confer with the Commission and the Receiver about its alternative plan in
19 advance of it being filed with the Court.
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The parties have conferred and agree that in light of the foregoing facts, the SRA Funds

21 Investor Group should have more time to submit its response to the joint distribution plan proposed
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In addition, on July 20, 2017, the Receiver hosted a conference call for interested SRA investors
to provide information about the Commission’s and Receiver’s proposed joint distribution plan.

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The SRA Funds Investor Group is working on an alternative distribution plan that will allow
investors to continue to maintain their investments in the pre-IPO companies on a going-forward
25 basis, provide for the appointment of a new, independent manager for the funds (with an oversight
26 board), and provide funds to pay accrued or future administrative fees of the receivership estate,
along with other creditors.
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SCHEDULE RE APPROVAL OF PROPOSED JOINT DISTRIBUTION PLAN
Case No. 3:16-cv-01386-EMC

1 in the pending Motion. The parties have conferred about how best to modify the schedule to provide
2 the SRA Funds Investor Group with the time it needs to prepare and submit its response to the Joint
3 Motion, while at the same time allowing some portions of the Joint Motion to move forward under
4 the existing schedule.
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The parties are in agreement, subject to Court approval, that the schedule and hearing on the

6 Joint Motion should be bifurcated to allow the Court to make preliminary findings under the existing
7 schedule while deferring to a later date any consideration of any proposed distribution plan or final
8 action with respect to the status of the receivership entities and the management agreements in place
9 to operate the SRA Funds. The parties believe that the Court’s early consideration of the facts
10 underlying the Joint Motion will assist all parties in their ongoing discussions about potential
11 distribution plans that the Court may ultimately consider. The proposed bifurcated schedule would
12 be as follows, subject to Court approval:
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1.

Any opposition or challenge to the Commission’s and the Receiver’s findings that

14 (a) defendants commingled investor funds, (b) defendants diverted investor cash to themselves or
15 otherwise violated provisions of the federal securities laws, and (c) defendants’ conduct would
16 justify the termination of the management agreements and the exclusion of defendants and certain
17 specified insiders from recovery through the proposed distribution plan, must still be filed on or
18 before July 27, 2017.5
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2.

If an opposition or challenge is filed, the Commission and the Receiver will still file

20 their replies on or before August 17, 2017, and the Court will conduct a hearing on August 31, 2017,
21 but only with respect to the three issues set forth in paragraph 1 above.
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The SRA Funds Investor Group requests that the Court not take any action with respect to the
24 management agreements until after all proposed distribution plans have been put before the Court,
since the SRA Funds Investor Group’s anticipated distribution plan will require that there be a
25 management agreement in place on a going-forward basis. The Commission and the Receiver are
26 agreeable to deferring final action on the management agreements until the proposed September 28,
2017 hearing.
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SCHEDULE RE APPROVAL OF PROPOSED JOINT DISTRIBUTION PLAN
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3.

If no opposition or challenge is filed on these three issues, the August 31, 2017

2 hearing date will be taken off calendar.
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4.

Any opposition papers, objections, alternative distribution plans or proposed

4 amendments to the joint distribution plan proposed by the Commission and the Receiver shall be
5 filed on or before August 24, 2017, with replies by the Commission and the Receiver to be filed on
6 or before September 13, 2017.
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5.

Subject to the Court’s availability, a hearing will be held at 1:30 p.m. on September

8 28, 2017 to consider (a) the Commission’s and Receiver’s proposed joint distribution plan, (b) any
9 alternative distribution plans proposed by the SRA Funds Investor Group or any other SRA Funds
10 investors, (c) whether the management agreements with certain defendants should be terminated
11 and/or replaced, and (d) whether some or all of the receivership entities should be dissolved or
12 replaced.
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14 DATED: July 21, 2017

Jonathan K. Levine________________
Jonathan K. Levine
PRITZKER LEVINE LLP
Attorneys for the SRA Funds Investor Group

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John S. Yun (by email authorization)
John S. Yun
Attorneys for Plaintiff Securities and
Exchange Commission

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Jahan P. Raissi_(by email authorization)
Jahan P. Raissi
SHARTSIS FRIESE LLP
Attorneys for Defendants John V. Bivona and
Saddle River Advisors, LLC and Relief
Defendant Anne Bivona

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John W. Cotton_(by email authorization)
John W. Cotton
GARTENBERG, GELFAND & HAYTON
LLP
Attorneys for the Receiver Sherwood

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STIPULATION AND [PROPOSED] ORDER MODIFYING BRIEFING AND HEARING
SCHEDULE RE APPROVAL OF PROPOSED JOINT DISTRIBUTION PLAN
Case No. 3:16-cv-01386-EMC

Partners, Inc.

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Frank G. Mazzola (by email authorization)
Defendant Frank G. Mazzola, in pro per

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Michelle J. Mazzola (by email authorization)
Relief Defendants Michelle J. Mazzola,
in pro per

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[PROPOSED] ORDER

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The Court hereby accepts the modified briefing and hearing schedule set forth in the

9 Stipulation above and orders as follows:
1.
Any opposition or challenge to the Commission’s and the Receiver’s findings that
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11 (a) defendants commingled investor funds, (b) defendants diverted investor cash to themselves, and
12 (c) defendants’ conduct would justify the termination of the management agreements, must be filed
13 on or before July 27, 2017.
2.
If an opposition or challenge is filed, the Commission and the Receiver will file their
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15 replies on or before August 17, 2017. The Court will conduct a hearing on August 31, 2017 with
16 respect to the three issues set forth in paragraph 1 above. The Court will not take any action with
17 respect to the management agreements or the receivership entities at the August 31, 2017 hearing.
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3.

If no opposition or challenge is filed on the three issues set forth in paragraph 1

19 above, the August 31, 2017 hearing date will be taken off calendar.
4.
Any opposition papers, objections, alternative distribution plans or proposed
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21 amendments to the joint distribution plan proposed by the Commission and the Receiver shall be
22 filed on or before August 24, 2017, with replies by the Commission and the Receiver to be filed on
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or before September 13, 2017.
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A hearing will be held at 1:30pm September 28, 2017 to consider (a) the
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25 Commission’s and Receiver’s proposed joint distribution plan, (b) any alternative distribution plans
26 proposed by investors, (c) whether the management agreements with certain defendants should be
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STIPULATION AND [PROPOSED] ORDER MODIFYING BRIEFING AND HEARING
SCHEDULE RE APPROVAL OF PROPOSED JOINT DISTRIBUTION PLAN
Case No. 3:16-cv-01386-EMC

1 terminated and/or replaced, and (d) whether some or all of the receivership entities should be
2 dissolved or replaced.

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Judge Edward M. Chen
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7/25
4 Dated: _______________, 2017

UNIT
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SO ORDERED

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STIPULATION AND [PROPOSED] ORDER MODIFYING BRIEFING AND HEARING
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Case No. 3:16-cv-01386-EMC

ATTESTATION

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I, Jonathan K. Levine, am the ECF user whose ID and password are being used to file this

3 document. In compliance with Local Rule 5-1(i)(3), I hereby attest that all other signatories listed
4 have concurred in this filing.
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/s/ Jonathan K. Levine_______
Jonathan K. Levine

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STIPULATION AND [PROPOSED] ORDER MODIFYING BRIEFING AND HEARING
SCHEDULE RE APPROVAL OF PROPOSED JOINT DISTRIBUTION PLAN
Case No. 3:16-cv-01386-EMC