Securities and Exchange Commission v. Schooler et al
Filing
1548
ORDER Granting Receiver's Twentieth Interim Fee Application #1521 ; Granting Allen Matkins' Twentieth Interim Fee Application #1522 ; Granting #1523 Duffy Kruspodin & Company's Application. The Receiver's Twentieth Interim report, ECF No. [1505[] is approved. Signed by Judge Gonzalo P. Curiel on 11/7/17. (dlg)
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
9
10
11
12
13
14
15
16
SECURITIES AND EXCHANGE
COMMISSION,
Case No.: 3:12-cv-2164-GPC-JMA
(1) GRANTING RECEIVER’S
TWENTIETH INTERIM FEE
APPLICATION;
Plaintiff,
v.
LOUIS V. SCHOOLER and FIRST
FINANCIAL PLANNING
CORPORATION, dba Western Financial
Planning Corporation,
[ECF No. 1521]
(2) GRANTING ALLEN MATKINS’
TWENTIETH INTERIM FEE
APPLICATION;
Defendants.
17
[ECF No. 1522]
18
19
(3) GRANTING DUFFY,
KRUSPODIN & COMPANY’S
SEVENTH INTERIM FEE
APPLICATION;
20
21
22
[ECF No. 1523]
23
24
Before the Court are three fee applications by the court-appointed receiver Thomas
25
C. Hebrank (the “Receiver”) (ECF No. 1521); counsel to receiver Allen Matkins Leck
26
Gamble Mallory & Natsis LLP (“Allen Matkins”) (ECF No. 1522); and tax accountants
27
for receiver Duffy, Kruspodin & Company, LLP (“Duffy Kruspodin”) (ECF No. 1523).
28
1
3:12-cv-2164-GPC-JMA
1
Plaintiff Securities and Exchange Commission (the “SEC”) filed a non-opposition
2
to all three motions on October 13, 2017. ECF No. 1533. The Court finds these motions
3
suitable for disposition without oral argument pursuant to Civil Local Rule 7.1 (d)(1).
4
5
BACKGROUND
A. Receiver
6
In the Twentieth Interim Fee Application, the Receiver asserts that he incurred
7
$96,363.00 in fees and $1,288.85 in costs for the application period covering April 1,
8
2017, through June 30, 2017 (“Twentieth Application Period”). ECF No. 1521 at 1. The
9
breakdown of the fees amassed is as follows:
10
Category
Total
General Receivership
$4,331.25
Asset Investigation & Recovery
$0.00
14
Reporting
$1,777.50
15
Operations & Asset Sales
$67,878.00
16
Claims & Distributions
$22,376.25
Legal Matters & Pending Litigation
$0.00
Total
$96,363.00
11
12
13
17
18
19
20
21
Id. at 2–4. Receiver now seeks payment of 80% of fees incurred, amounting to
22
$77,090.40, and 100% of the costs, which account for postage, website maintenance, and
23
copies. Id. at 1 & Exhibit C.
24
25
B. Allen Matkins
In the Twentieth Interim Fee Application, Allen Matkins, counsel for receiver,
26
asserts that it incurred $82,392.30 in fees and $570.56 in costs for the application period
27
covering April 1, 2017, through June 30, 2017. ECF No. 1522 at 1. The breakdown of
28
the fees amassed is as follows:
2
3:12-cv-2164-GPC-JMA
1
Category
Total
General Receivership
$11,811.60
Reporting
$1,759.50
5
Operations & Asset Sales
$60,437.70
6
Claims & Distributions
$6,572.25
7
Third Party Recoveries
$258.75
Employment/Fees
$1,552.50
Total
$82,392.30
2
3
4
8
9
10
11
12
Id. at 1–8. Allen Matkins now seeks payment of 80% of the fees incurred, amounting to
13
$65,913.84, and 100% of the costs, accounting for document searches, filing fees, and
14
service of process. Id. at 1 & Exhibit A.
15
C. Duffy Kruspodin
16
In the Sixth Interim Fee Application, Duffy Kruspodin, tax accountants for
17
Receiver, asserts that it incurred $180,528.75 in fees and $13,597.08 in costs for work in
18
preparing the 2016 federal and state tax returns for the General Partnerships (“GPs”).
19
ECF No. 1523 at 1. The breakdown of the fees amassed is as follows:
20
Category
Total
21
General Engagement Services
$41,364.00
IT Consulting
$4,348.80
Preparation of 2016 Informational Returns and
$126,394.20
22
23
24
2016 Income Tax Returns for GPs
25
26
Preparation of 2015 Income Tax Returns for First
$8,421.75
Financial, Real Asset Locators, and related entities
27
28
3
3:12-cv-2164-GPC-JMA
1
$180,528.75
Total
2
3
Id. at 1–7. Duffy Kruspodin now seeks payment for all fees and costs incurred in
4
carrying out these tasks. Id. at 2. The costs are itemized in Exhibit D of the application
5
and account for tax software, electronic filing, envelopes, and postage. Id. at 8 & Ex. D.
6
LEGAL STANDARD
7
“[I]f a receiver reasonably and diligently discharges his duties, he is entitled to fair
8
compensation for his efforts.” Sec. & Exch. Comm’n v. Elliott, 953 F.2d 1560, 1577
9
(11th Cir. 1992). “The court appointing [a] receiver has full power to fix the
10
compensation of such receiver and the compensation of the receiver’s attorney or
11
attorneys.” Drilling & Exploration Corp. v. Webster, 69 F.2d 416, 418 (9th Cir. 1934).
12
A receiver’s fees must be reasonable. See In re San Vicente Med. Partners Ltd., 962 F.2d
13
1402, 1409 (9th Cir. 1992).
14
As set forth in the Court’s prior fee orders, see, e.g., ECF No. 1167, the Court will
15
assess the reasonableness of the requested fees using the factors enumerated in Sec. &
16
Exch. Comm’n v. Fifth Avenue Coach Lines, 364 F. Supp. 1220, 1222 (S.D.N.Y. 1973)
17
and In re Alpha Telcom, Inc., 2006 WL 3085616, at *2–3 (D. Or. Oct. 27, 2006). Those
18
factors include: (1) the complexity of the receiver’s tasks; (2) the fair value of the
19
receiver’s time, labor, and skill measured by conservative business standards; (3) the
20
quality of the work performed, including the results obtained and the benefit to the
21
receivership estate; (4) the burden the receivership estate may safely be able to bear; and
22
(5) the Commission’s opposition or acquiescence. See 364 F. Supp. at 1222; 2006 WL
23
3085616, at *2–3.
24
DISCUSSION
25
26
27
28
Interim Fee Applications
A. Complexity of Tasks
1. Receiver
4
3:12-cv-2164-GPC-JMA
1
The Court finds that the tasks performed by the Receiver during the Twentieth
2
Application Period was moderately complex. The Receiver undertook the following
3
tasks during the relevant period:
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
- handling general administrative issues, including reviewing mail, email, and
other correspondence directed at the Receivership Entities;
- administering the bank accounts of the Receivership Entities;
- reviewing and approving expenditures;
- maintaining and updating the Receiver’s website with case information and
documents;
- responding to investor inquiries and misinformation put out by certain
investors;
- preparing Receiver’s Nineteenth interim report;
- preparing the filings regarding the sale of the Reno Partners, Valley Vista,
Bratton View, and Santa Fe properties;
- managing and overseeing the GPs’ operations and real properties;
- managing and overseeing Western’s operations;
- performing accounting functions of the Receivership Entities;
- managing and overseeing tax reporting for Receivership Entities;
- managing and overseeing GP operational bills, loan payments, and cash
management;
- obtaining listing agreements and marketing properties for sale with brokers;
- analyzing, negotiating, and accepting purchase offers;
- conducting investor votes;
- closing property sales;
- sending monthly case update reports to investors, listing major legal filings,
property sales activity, court rulings, tax, and other information; and
- preparing “cash in vs. cash out” analysis to determine each investor’s proposed
allowed claim amount, which included reviewing historical files and
employment records.
ECF No. 1521 at 2–4.
23
2. Allen Matkins
24
The Court finds that the tasks performed by Allen Matkins, counsel for Receiver,
25
during the Twentieth Application Period were somewhat complex. Counsel undertook
26
the following tasks during this period:
27
28
- advising the Receiver regarding the formation of a Qualified Settlement Fund
under the Internal Revenue Code;
5
3:12-cv-2164-GPC-JMA
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
- assisting and advising the Receiver in responding to a request by Louis
Schooler’s former counsel relating to a sale of real property;
- assisting and advising the Receiver in the remand of this case from the Ninth
Circuit to determine whether Mr. Schooler is deceased and if a representative of
his estate should be permitted to prosecute the appeal;
- assisting and advising the Receiver regarding a request for documents from an
investor in WFP Securities;
- preparing the Receiver’s Nineteenth Interim Report;
- assisting the Receiver with respect to operations of Western and the General
Partnerships, including easement and condemnation issues, issues relating to
property taxes and assessments, and the sales of the Reno Partners, Valley
Vista, Bratton View, LV Kade, RenoVista/Reno View, and Santa Fe properties;
- assisting and advising the Receiver on issues relating to investor claims and
procedures for the administration of such claims, which included reviewing and
responding to communications from investors, creditors, and counsel;
- assisting the Receiver in preparing notices to investors and updates to the
receivership website;
- collecting the outstanding judgment against LinMar III, which included
reviewing the post-judgment receiver’s reports and advising on issues relating
to the post-judgment receivership; and
- assisting the Receiver in preparing his Eighteenth and Nineteenth Interim Fee
Applications, and Duffy Kurspodin & Co. in preparing its Seventh Interim Fee
Application.
ECF No. 1522 at 2–8.
18
3. Duffy Kruspodin
19
The Court finds that the tasks performed by Duffy Kruspodin, tax accountants for
20
Receiver, during the Seventh Application Period were moderately complex. Tax
21
Accountants to Receiver undertook the following tasks during this period:
22
23
24
25
26
27
28
- engaging in communication and meetings with the Receiver with respect to the
receivership;
- updating the accounting documents necessary to prepare the tax returns;
- working with the Receiver to evaluate all balance sheet accounts and retaining
those that remain to be paid out as of the close of the entities;
- preparing short year tax returns for the 2016 tax return;
- providing services related to information technology to assist with the tax
preparation process; and
6
3:12-cv-2164-GPC-JMA
1
2
- preparing the 2016 informational returns for the GPs, 2016 income tax returns
for the GPs, and 2015 income tax returns for Western and its subsidiaries,
including First Financial and Real Asset Locators.
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
ECF No. 1523 at 2–7.
B. Fair Value of Time, Labor, and Skill
The Receiver billed his time at $247.50 per hour and the time of those working for
him at $180.00 per hour during both application periods. ECF No. 1521 at 2–4. Allen
Matkins billed its time at $283.50 – $715.50 per hour, with the majority of work being
billed at $517.50 per hour. ECF No. 1522, Exhibit A. Duffy Kruspodin billed its time
from $70 – $400 per hour, with a blended billing rate of $169.65. ECF No. 1523 at 9–10.
These rates reflect a ten percent discount from the Receiver’s, Allen Matkins’, and Duffy
Kruspodin’s ordinary rates. ECF No. 1521 at 1; ECF No. 1522 at 1; ECF No. 1523 at 1.
The Court continues to find, as it has in previous fee orders, that the rates charged
by the Receiver, Allen Matkins, and Duffy Kruspodin are comparable to rates charged in
this geographic area and therefore represent a fair value of the time, labor, and skill
provided.
C. Quality of Work Performed
The Court finds that the quality of work performed by the Receiver, Allen Matkins,
and Duffy Kruspodin to be above average. The Receiver has, and continues to,
competently operate the Receivership as evidenced by Receiver’s Nineteenth Status
Report (ECF No. 1478), while at the same time marshalling assets—through capital calls,
post-judgment collection, and sales—to support its continued financial integrity. These
actions benefit all investors. The Receiver and his counsel have, moreover, complied
with the Court’s orders and have made every effort to protect investors’ interests in the
GP properties during the pendency of this litigation. The Court likewise finds the quality
of Duffy Kruspodin’s work to be satisfactory. Duffy Kruspodin prepared all 98 of the GP
tax returns for 2016 in a timely manner, fulfilling the Receivership’s responsibility to the
federal and state governments and to investors. ECF No. 1523 at 10.
7
3:12-cv-2164-GPC-JMA
1
2
D. Receivership Estate’s Ability to Bear Burden of Fees
On August 30, 2016, the Court approved the Receiver’s Modified Orderly Sale
3
Process, ECF No. 1359, and the use of the One Pot approach to distribute receivership
4
assets, ECF No. 1304 at 31. These actions were taken for the dual purpose of increasing
5
the value of the receivership estate by selling GP properties and lowering administrative
6
costs. ECF No. 1304 at 30.
7
Since the Court approved the Receiver’s last interim fee application, the Court has
8
approved the sales of the LV Kade, Silver Springs North, Park Vegas, Washoe V, and
9
Production Partners Properties. ECF Nos. 1511, 1520, 1536, 1537, 1538. A pending
10
motion for approval of sale of the Silver State Properties is pending and awaiting
11
confirmation that not qualified overbids have been submitted. ECF No. 1527.
12
The sales and future sale of these properties have maximized, and will continue to
13
maximize, the value of the GP properties for the benefit of all investors. Such sales will
14
also increase the Receivership’s cash balance. Accordingly, the Court finds that the
15
Receivership estate has sufficient ability to bear the instant fee requests.
16
17
E. Commission’s Opposition or Acquiescence
On October 13, 2017, the Securities and Exchange Commission filed a notice that
18
it supported approval of these interim fee applications because they “appear reasonable in
19
light of the work performed during this interim period.” ECF No. 1533.
20
Interim Reports
21
On August 9, 2017, the Receiver filed the Twentieth Interim Report. ECF No.
22
1505. The Report provides updates concerning: (1) the Receiver’s activities; (2)
23
Western’s assets; (3) issues concerning the GP properties; (4) closed and pending sales of
24
GP properties; and (5) pending offers and negotiations. The Court is satisfied with the
25
level of detail contained in the Twentieth Interim Report and with the reasonableness of
26
the actions taken by the Receiver during the relevant time periods.
27
28
8
3:12-cv-2164-GPC-JMA
1
CONCLUSION
Considering the above five factors taken together, and considering that “[i]nterim
2
3
fees are generally allowed at less than the full amount,” Alpha Telcom, 2006 WL
4
3085616, at *2–3, the Court awards fees and costs as set forth in the following table:
5
Applicant
Fees Allowed % of Fees
Costs Allowed % of Costs
Incurred1
Requested
6
7
Receiver
$77,090.40
80
$1,288.85
100
8
Allen Matkins
$65,913.84
80
$570.56
100
Duffy Kruspodin
$180,528.75
100
$13,597.08
100
9
10
11
ORDER
12
13
14
After a review of the parties’ submissions, the record in this matter, and the
applicable law, and for the foregoing reasons, IT IS HEREBY ORDERED that:
1. The Receiver’s Twentieth Interim Fee Application, ECF No. 1521, is GRANTED;
15
2. Allen Matkins’ Twentieth Interim Fee Application, ECF No. 1522, is GRANTED;
16
3. Duffy Kruspodin’s Seventh Interim Fee Application, ECF No. 1523, is
17
GRANTED;
18
4. The Receiver’s Twentieth Interim Report, ECF No. 1505, is APPROVED.
19
20
21
IT IS SO ORDERED.
Dated: November 7, 2017
22
23
24
25
26
27
28
1
The Court includes the percentage of fees incurred rather than a percentage of the fees requested, given that the
Receiver and Allen Matkins request only a percentage of their actual fees. In addition, Duffy Kruspodin’s billing
rate already incorporated a discount of 10%. ECF No. 1523 at 1.
9
3:12-cv-2164-GPC-JMA
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?