Securities and Exchange Commission v. Schooler et al
Filing
1727
ORDER Granting #1714 Motion for Authority to Make Second Interim Distribution to Holders of Allowed Claims. Signed by Judge Gonzalo P. Curiel on 6/14/19. (dlg)
1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT
9
SOUTHERN DISTRICT OF CALIFORNIA
10
11
12
SECURITIES AND EXCHANGE
COMMISSION,
15
16
17
ORDER GRANTING MOTION FOR
AUTHORITY TO MAKE SECOND
INTERIM DISTRIBUTION TO
HOLDERS OF ALLOWED CLAIMS
Plaintiff,
13
14
Case No.: 3:12-cv-2164-GPC-JMA
v.
LOUIS V. SCHOOLER and FIRST
FINANCIAL PLANNING
CORPORATION d/b/a WESTERN
FINANCIAL PLANNING
CORPORATION,
18
[ECF No. 1714]
Defendants.
19
20
21
22
23
24
25
26
27
28
In March 2018, the Receiver previously sought and was granted authority to
distribute a total of $13 million to the holders of allowed claims. ECF Nos. 1594, 1610.
Since then, the Receiver has been able to sell further properties pursuant to the Modified
Orderly Sale Process and has accumulated approximately $8.1 million in cash in the
receivership estate.
The Receiver now seeks authority to make a second interim distribution totaling $6
million to holders of allowed claims. ECF No. 1714. The motion has not been opposed.
1
3:12-cv-2164-GPC-JMA
1
On April 22, 2019, the SEC filed a non-opposition to the motion, stating it supported the
2
Receiver’s motion because the “payment of an interim distribution to injured investors of
3
$6 million with a holdback of $2.1 million to cover operating expenses, administrative
4
expenses, and a reasonable contingency reserve appears to be both reasonable in light of
5
the current posture of this matter and in the best interest of investors.” ECF No. 1716.
6
For the reasons set forth below, the Court GRANTS the motion for authority to make a
7
second interim distribution to holders of allowed claims.
8
9
This Court entered an initial final judgment against Defendant Louis Schooler on
February 23, 2016 and a revised final judgment against Defendant Louis Schooler on
10
June 4, 2019. ECF Nos. 1190 and 1724. Three months after the initial final judgment,
11
the Court approved the Distribution Plan proposed by the Receiver. ECF No. 1304. That
12
plan involves a “one-pot approach,” which includes determining investor claims “by the
13
total payment made by each investor to the Receivership Entities, less all payments
14
received by each investor from the Receivership Entities.” Id. at 31 (approving plan as
15
discussed at Ex. E of ECF No. 1181-1). As that proposed plan stated, “[a]fter all
16
Administrative Claims have been paid in full, all Claimants shall receive Cash in an
17
amount equal to such Claimant’s Pro Rata Share of total Cash to be distributed to all
18
Allowed Claims.” ECF No. 1181-1, Ex. E at 3. Three months after that, the Court
19
approved the Modified Orderly Sale Process by which the Receiver would sell properties
20
owned by the receivership estate. ECF No. 1359. Since then, the Receiver has calculated
21
the claim amounts of each investor and has sold several properties. The Receiver has
22
been able to sell 24 properties so far, raising $22,418,073 in net sale proceeds. ECF
23
1714-1 at 3. In June 2018, pursuant to authorization from the Court, the Receiver issued
24
distribution checks totaling $13 million to the holders of allowed claims. Id. The vast
25
majority of those distribution checks (a total of $12,692,351) have been cashed by
26
investors. ECF 1714-2 at 2.
27
Now, the Receiver proposes to distribute a total of $6 million at this time, “which
28
is the vast majority of cash in the receivership estate.” ECF No. 1714-1 at 3. According
2
3:12-cv-2164-GPC-JMA
1
to the Receiver, the remaining approximately $2.1 million will be held in reserve to cover
2
operating expenses, administrative expenses, and “a reasonable contingency reserve.” Id.
3
Moreover, the Receiver is continuing to generate sale proceeds from property sales and
4
“is hopeful that the full reserve amount will not be necessary to cover” expenses. Id. at 4.
5
Nonetheless, the Receiver believes that maintaining a reasonable contingency reserve at
6
this time is prudent in order to respond to “unanticipated expenses.” Id. According to the
7
Receiver, it will use an outside vendor to print and mail the approximately 3,307 checks
8
to investors with allowed claims, which will be done 45 days after the entry of this order.
9
Id. As discussed in the Distribution Plan, ECF No. 1181-1, Ex. E, the Receiver will
10
conduct a reasonable investigation into checks that have not been cashed 90 days after
11
they were issued; if contact cannot be made with the claimant after further inquiry, the
12
claimant’s amount will be “automatically and permanently extinguished and the uncashed
13
distribution amount will go back into the reserve for future distribution.” Id. As a result
14
of this procedure, the Receiver states that he has “reminded investors throughout the case
15
of the importance of informing the Receiver of any change to their contact information.”
16
Id. The Receiver argues that the other investors should not have to bear the expense of an
17
extensive search to find a non-responsive investor claimant. Id.
18
The “primary purpose of equity receiverships is to promote orderly and efficient
19
administration of the estate by the district court for the benefit of creditors.” Secs. &
20
Exch. Comm’n v. Hardy, 803 F.2d 1034, 1038 (9th Cir. 1986). The Court possesses
21
broad “power to supervise an equity receivership and to determine the appropriate action
22
to be taken in the administration of the receivership.” Secs. & Exch. Comm’n v. Capital
23
Consultants, LLC, 397 F.3d 733, 750 (9th Cir. 2005). In light of these broad powers, and
24
pursuant to the procedures approved by the Court in the previous orders mentioned
25
above, it appears that the Receiver’s request for authority to make a second interim
26
distribution to the investors is appropriate. As a result, the Court AUTHORIZES the
27
Receiver to distribute a total of $6 million to investors with allowed claims on a pro rata
28
3
3:12-cv-2164-GPC-JMA
1
basis pursuant to the Distribution Plan approved by the Court, with the remaining cash in
2
the Receivership to be held in reserve pending further orders of this Court.
3
4
IT IS SO ORDERED.
Dated: June 14, 2019
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
4
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?