Securities and Exchange Commission v. Schooler et al
Filing
1610
ORDER Granting #1594 Motion for Authority to Make Interim Distributions to Holders of Allowed Claims. Signed by Judge Gonzalo P. Curiel on 4/30/18. (dlg)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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SECURITIES AND EXCHANGE
COMMISSION,
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ORDER GRANTING MOTION FOR
AUTHORITY TO MAKE INTERIM
DISTRIBUTIONS TO HOLDERS OF
ALLOWED CLAIMS
Plaintiff,
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Case No.: 3:12-cv-02164-GPC-JMA
v.
LOUIS V. SCHOOLER and FIRST
FINANCIAL PLANNING
CORPORATION, d/b/a WESTERN
FINANCIAL PLANNING
CORPORATION,
[ECF No. 1594]
Defendants.
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Before the Court is the Receiver’s motion for authority to make interim
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distributions to holders of allowed claims. (ECF No. 1594.) The motion has not been
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opposed. On April 5, 2018, the SEC filed a non-opposition to the motion, stating,
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because the “Court has previously approved a distribution plan and approved the allowed
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amounts of investor claims,” “[i]nvestors have been waiting over five years for some
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recovery on their losses, and the Receiver has cash on hand from property sales available
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to make distributions,” the SEC “supports the Receiver’s motion for authority to make an
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interim distribution and believes it is in the best interest of the investors.” (ECF No.
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1604.) For the reasons set forth below, the Court GRANTS the motion for authority to
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make interim distributions to holders of allowed claims.
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This Court entered final judgment against Defendant Louis Schooler on February
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23, 2016. (ECF No. 1190.) Three months later, the Court approved the Distribution Plan
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proposed by the Receiver. (ECF No. 1304.) That plan involves a “one-pot approach,”
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which includes determining investor claims “by the total payment made by each investor
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to the Receivership Entities, less all payments received by each investor from the
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Receivership Entities.” (Id. at 31 (approving plan as discussed at Ex. E of ECF No.
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1181-1).) As that proposed plan stated, “[a]fter all Administrative Claims have been paid
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in full, all Claimants shall receive Cash in an amount equal to such Claimant’s Pro Rata
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Share of total Cash to be distributed to all Allowed Claims.” (ECF No. 1181-1, Ex. E at
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3.) Three months after that, the Court approved the Modified Orderly Sale Process by
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which the Receiver would sell properties owned by the receivership estate. (ECF No.
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1359.) Since then, the Receiver has calculated the claim amounts of each investor, and
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has sold several properties. The Receiver has been able to sell 13 properties so far,
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raising $17,492,013 in net sale proceeds. (ECF No. 1594-1 at 3.) As of March 7, 2018,
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the Receiver held $16,408,357 in cash receivership accounts. (Id.) Meanwhile, on
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February 20, 2018, after adjudicating the remaining disputed claim amounts, the Court
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approved the Receiver’s proposed claim amounts with a single exception noted in that
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order. (See ECF No. 1591.)
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Having obtained significant cash amounts as a result of the property sales, the
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Receiver now proposes to distribute a total of $13 million, “which is the vast majority of
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cash in the receivership estate.” (ECF No. 1594-1 at 3.) The remaining amount,
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according to the Receiver, will be held in reserve to cover operating expenses,
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administrative expenses, and “a reasonable contingency reserve.” (Id.) Moreover, the
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Receiver is continuing to generate sale proceeds from property sales and “is hopeful that
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the full reserve amount will not be necessary to cover” expenses, in which case a
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subsequent distribution would be made. (Id. at 4.) Nonetheless, the Receiver believes
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that maintaining a reasonable contingency reserve at this time is prudent in order to
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respond to “unanticipated expenses.” (Id.) According to the Receiver, it will use an
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outside vendor to print and mail the distribution checks, which will done 45 days after the
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entry of this order. (Id.) As discussed in the distribution plan, the Receiver will conduct
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a reasonable investigation into checks that have not been cashed 90 days after they were
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issued; if contact cannot be made with the claimant after further inquiry, that claimant’s
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amount will be “automatically and permanently extinguished and the uncashed
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distribution amount will go back into the reserve for future distribution.” (Id.) As a
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result of this procedure, the Receiver states that he has “reminded investors throughout
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the case of the importance of informing the Receiver of any change to their contact
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information.” (Id.) The Receiver argues that the other investors should not have to bear
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the expense of an extensive search to find a non-responsive investor claimant. (Id.)
The “primary purpose of equity receiverships is to promote orderly and efficient
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administration of the estate by the district court for the benefit of creditors.” Secs. &
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Exch. Comm’n v. Hardy, 803 F.2d 1034, 1038 (9th Cir. 1986). The Court possesses
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broad “power to supervise an equity receivership and to determine the appropriate action
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to be taken in the administration of the receivership.” Secs. & Exch. Comm’n v. Capital
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Consultants, LLC, 397 F.3d 733, 750 (9th Cir. 2005). In light of these broad powers, and
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pursuant to the procedures approved by the Court in the previous orders mentioned
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above, it appears that the Receiver’s request for authority to make an interim distribution
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to the investors is appropriate. In light of the fact that sufficient cash is now available,
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and that the investors in this case have waited over five years for some recovery on their
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losses related to this case, the Court approves of the Receiver’s request for such authority.
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As a result, the Court AUTHORIZES the Receiver to distribute a total of $13 million to
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investors with allowed claims on a pro rata basis pursuant to the Distribution Plan
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approved by the Court, with the remaining cash in the Receivership to be held in reserve
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pending further orders of this Court.
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//
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IT IS SO ORDERED.
Dated: April 30, 2018
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