Securities and Exchange Commission v. Nadel et al

Filing 1334

MOTION for Attorney Fees and Costs as Administrative Expenses by Wells Fargo Bank, N.A., as successor by merger to Wachovia Bank, N.A.. (Attachments: # 1 Exhibit 1 - Affidavit as to Attorneys' Fees and Costs, # 2 Exhibit 2 - Affidavit as to Reasonableness of Attorneys' Fees and Costs, # 3 Exhibit 3 - Proposed Order, # 4 Exhibit 4 - Excerpts of Applicable Attorneys' Fee Provision)(Wirth, Steven)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SECURITIES AND EXCHANGE
COMMISSION
Plaintiff,
v.

ORAL ARGUMENT
REQUESTED

ARTHUR NADEL,
SCOOP CAPITAL, LLC,
SCOOP MANAGEMENT, INC.,
Defendants,

CASE NO.: 8:09-0087-T-26TBM

SCOOP REAL ESTATE, L.P.,
VALHALLA INVESTMENT PARTNERS, L.P.,
VALHALLA MANAGEMENT, INC.,
VICTORY IRA FUND, LTD.,
VICTORY FUND, LTD.,
VIKING IRA FUND, LLC.,
VIKING FUND, LLC., and
VIKING MANAGEMENT, LLC.
Relief Defendants.
_______________________________________________/
WELLS FARGO’S MOTION FOR PAYMENT OF CERTAIN
FEES AND COSTS AS ADMINISTRATIVE EXPENSES
Wells Fargo Bank, N.A. (“Wells Fargo” or “Bank”)1 moves this Court for an Order
compelling the Receiver to reimburse the Bank for specific fees and costs incurred in defense
of the Bank’s property rights and security interests, against the claims made and positions taken
by the Receiver, as an administrative expense, and states:

1

Wells Fargo is successor by merger to Wachovia Bank, N.A. (“Wachovia”).

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SUMMARY OF THE ARGUMENT
A party subjected to loss and expense as a result of the administration of a receivership
estate is entitled to be made whole as a matter of fundamental fairness; and allowing the injured
party to be paid through an administrative expense claim is an accepted method of
implementing this policy. This policy and method have been endorsed by the United States
Supreme Court in Reading Co. v. Brown, 391 U.S. 471, 478 (1968) and several courts in the
Middle District of Florida. Here, Wells Fargo has been unfairly subjected to loss and expense
as a result of the Receiver’s unsuccessful litigation against it. Separate from and in addition to
the unsecured deficiencies on its secured claims, Wells Fargo has suffered losses as the
Receiver forced it to spend multiple millions of dollars in attorneys’ fees and costs to defend
against unfounded attacks. After two trips to the Eleventh Circuit, the Receiver’s attacks have
been conclusively defeated.2 Despite their losing efforts, the Receiver and his counsel have
been fully compensated from estate assets for their time opposing Wells Fargo's interests in
this case and asserting meritless claims and positions (even after the Eleventh Circuit
conclusively established their clear lack of any legal foundation). Now, the Receivership
Estate should reimburse Wells Fargo for some3 of the damage the Receiver has done to the
Bank.

2

By separate motion, the Bank recently sought turnover of Rents improperly retained by the
Receiver. This issue remains pending, even though the Eleventh Circuit precedent makes it
clear that the Receiver must return this property to the Bank.
3

In this motion, the Bank only seeks to recover a portion of the fees and costs it incurred in
this Receivership. Specifically, Wells Fargo seeks to recover the legal fees and costs it incurred
in defending its security interests before this Court, plus the appellate costs awarded by the
Eleventh Circuit, as discussed below. The Bank is not seeking to recover the legal fees
associated with the appeals to the Eleventh Circuit, legal fees or costs associated with the

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FACTUAL BACKGROUND
A.

THIS RECEIVERSHIP PROCEEDING

The SEC initiated this action against Arthur Nadel and his entities on January 21, 2009.
(Dkts. 1-2). The SEC also moved to appoint the Receiver on the same date. (Dkt. 6). The
Court immediately entered the Order Appointing Receiver. (Dkt. 8). As a result of the Order
Appointing Receiver, and the orders expanding the Receivership, the Receiver took possession
of several properties, including four properties subject to Wells Fargo security agreements.
B.

WELLS FARGO SECURED CLAIMS

As of January 21, 2009, Wells Fargo held valid secured claims against the following
properties: (1) 841 South Main Street, Graham, North Carolina (the “Rite Aid Property”); (2)
approximately 420 acres near Asheville, North Carolina in Buncombe and McDowell counties
(the “Laurel Mountain Property”); (3) 30393 Upper Bear Creek Road, Evergreen, Colorado
(the “Evergreen Property”); and (4) 464 Golden Gate Point, Unit 703, Sarasota, Florida (the
“Sarasota Property”).4 In addition, Wells Fargo held valid property rights to, and secured
claims against, rents generated from, inter alia, the Rite Aid Property.

motion to disqualify the Receiver, or the legal fees or costs associated with monitoring the
Receivership matters that were not directly related to the defense of the Bank’s security
interests. In this motion, the Bank does not seek recovery of the attorney’s fees and costs
incurred in defense of the separate litigation the Receiver filed and lost, against Wells Fargo.
In that case, the Bank incurred approximately $4 million in attorneys' fees between March
2012 and February 2015. See Case No. 8:12-cv-00557, Doc. No. 327.
4

After losing twice in the Eleventh Circuit to Wells Fargo, the Receiver turned over the net
proceeds of the sales of the Rite Aid Property and Sarasota Property to the Bank, and lifted the
Court’s injunction to allow Wells Fargo to foreclose on the Laurel Mountain Property (Dkt.
1296). The Receiver did not dispute the Bank’s lien on the Evergreen Property and the Receiver
paid off that loan after a Court-approved sale (Dkt. 1043).

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C.

THE RECEIVER CHALLENGED WELLS FARGO’S SECURITY INTERESTS
AND SOUGHT TO EXTINGUISH VESTED PROPERTY RIGHTS THROUGHOUT

The Receiver’s aggressive litigation tactics have needlessly damaged Wells Fargo by
forcing the Bank to incur fees and costs associated with protecting its property rights against
several attacks. In particular, the Receiver:
•

Sought the imposition of an untenable "claims administration" process, which the
Eleventh Circuit ultimately determined to be wholly improper as a means to eradicate
valid state law property interests. See Dkts. 675, 689.

•

Objected to the Rite Aid Claim on a number of different theories, including the Bank's
alleged complicity in Arthur Nadel's Ponzi scheme. The Receiver lost on every theory,
but the Bank incurred significant attorneys' fees and costs;

•

Initiated separate litigation against the Bank that lasted over 5 years, which the
Receiver lost in District Court and at the Eleventh Circuit. See Wiand v. Wells Fargo
Bank, N.A., 86 F. Supp. 3d 1316 (M.D. Fla. 2015) (granting summary judgment for
Wells Fargo, on all counts), aff’d Wiand v. Wells Fargo Bank, N.A., No. 15-10968, 677
F. App. 573 (11th Cir. Jan. 26, 2017).

•

Moved to sell the Rite Aid Property (Dkts. 706 & 823), despite Wells Fargo’s secured
claim against the property. See Dkts. 719, 840, 842.

•

Opposed Wells Fargo's motion to compel abandonment of the Rite Aid Property,
despite his agreement that there was no equity in the Property. See Dkts. 719, 840, 842.

•

Maintained his motion to sell the Rite Aid Property even in the face of a higher and
better offer. See Dkt. 853.

•

Filed an inadequate motion to sell the Rite Aid Property, failing to comply with 28
U.S.C. § 2001 (Dkt. 706). After Wells Fargo was forced to object to the sale, the Court
denied the sale and compelled the Receiver to comply with the statute. (Dkt. 726).

•

Sought to eradicate Wells Fargo’s security interests in the La Bellasara and the Laurel
Mountain Properties, based on the failure to file proofs of claim. See Dkts. 740, 1222.
The Eleventh Circuit restored Wells Fargo’s security interests on appeal, determining
that the receivership court does not have the authority to extinguish a creditor’s state
law property rights (e.g., security interests) that vested prior to the commencement of
the receivership. See SEC v. Wells Fargo Bank, N.A., 848 F.3d 1339 (11th Cir. 2017).

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•

Sought to distribute Receivership funds without maintaining sufficient reserves to pay
the Rite Aid Rents to Wells Fargo, necessitating the Bank's objections. See Dkts. 825,
831, 1253, 1254.

•

Is seeking to eradicate Wells Fargo's interests in the Rents generated by the Rite Aid
Property, despite Wells Fargo's valid Assignment of Rents, which cannot be reasonably
challenged in light of the Eleventh Circuit's decision in SEC v. Wells Fargo Bank, N.A.,
848 F.3d 1339 (11th Cir. 2017). Due to this challenge, Wells Fargo was forced to
prepare and file its motion to compel the Receiver to turn over the rents. (Dkt. 1332).
Throughout the Receivership Proceedings, the Receiver has vigorously challenged

Wells Fargo's claims, often without a legitimate legal basis. He objected to the Bank's claims
on a number of different theories, including the Bank's alleged (but ultimately discredited)
complicity in Arthur Nadel's Ponzi scheme. See, e.g., Dkt. 675. He sought to eradicate the
Bank's valid state law property rights through an untenable "claims administration" process.
See, e.g., Dkt. 1209. Even after the Eleventh Circuit determined the "claims administration"
process to be wholly improper as to state law security agreements, the Receiver has continued
to assert that certain security instruments were eradicated – in fact, he is still arguing that Wells
Fargo's North Carolina assignment of rents was somehow extinguished by one of this Court's
orders, despite the Court's lack of authority to do so. See Dkts. 840, 842. In 2012, he moved
to sell the Bank's collateral despite the Bank's valid liens, the Bank's opposition to the sale, his
own noncompliance with applicable statutes, and a better offer for the same property. See Dkt.
706, 718, 719, 823, 840, 842, 853. At several points during these proceedings, the Receiver
sought to distribute Receivership funds without maintaining sufficient reserves to turn over the
Bank's property, necessitating the Bank's objections. See Dkts. 825, 831, 1253, 1254. These
are just some of the examples of how the Receiver's litigation tactics have needlessly damaged

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Wells Fargo by forcing the Bank to incur attorneys' fees and costs associated with protecting
its property rights against myriad attacks.
The Receivership Proceedings could have been inexpensive for the Receivership Estate
and Wells Fargo, if the Receiver had been reasonable. In fact, he could have merely abandoned
Wells Fargo's collateral pursuant to the unassailable security instruments, but he refused to do
that. See Dkts. 719, 840, 842. Instead, the Receiver and his attorneys have incurred hundreds
of thousands of dollars in fees litigating against Wells Fargo, with nothing to show; and Wells
Fargo has incurred hundreds of thousands of dollars defending against the Receiver's baseless
challenges. The Receivership Estate has paid all of the Receivers' attorneys' fees and costs. It
is now time for Wells Fargo's attorneys' fees and costs to be paid too.
D.

THE FEES AND COSTS SOUGHT BY THE BANK FALL WITHIN THE
COURT-APPROVED DEFINITION OF ADMINISTRATIVE EXPENSES

On April 20, 2010, the Receiver filed a motion for an order establishing a claims
administration process by which potential claimants could file their claims against the
Receivership Estate (the "Claims Procedures Motion") (Dkt. 390). The order approving the
Claims Procedures Motion set September 2, 2010 as the general claims bar date for filing
claims against the Receivership Entities (the "Claims Procedures Order") (Dkt. 391). The
Claims Procedures Order did not set a bar date for filing administrative claims, but it did
approve the Claims Procedures Motion "in all respects", including the definition of
administrative expenses:
All administrative expenses, including attorneys’ fees and costs,
litigation expenses, experts, and other administrative costs, will be
paid from the Receivership Estate. These administrative expenses
will be paid or reserved before any Distribution is made.
Administrative expenses may also include, but are not limited to (1)

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expenses for publishing notice and (2) the retention of one or more
consultants to assist in analyzing the validity of filed claims. No
previous request for the relief sought herein has been made to this
or any other Court.
(emphasis supplied) (Dkt. 390 at 11).
The Receiver has previously moved this Court to pay himself and his attorneys for the
prosecution of these unsuccessful actions against Wells Fargo, with funds from the
Receivership Proceeding.

See, e.g., Receiver’s Twenty-First Interim Motion for Order

Awarding Fees, Costs, and Reimbursement of Costs to Receiver and His Professionals, Dkt.
1245 at 19-21; Twentieth Motion, Dkt. 1211 at 20-22, etc.
As of July 31, 2016, the Receiver personally received $815,543.89 from estate assets,
and the Receiver's attorneys received at least $11,420,873.19. See Dkts 130, 165, 201, 266,
395, 497, 582, 646, 657, 717, 860, 914, 951, 1047, 1091, 1127, 1143, 1156, 1201, 1218. More
specifically, the James Hoyer law firm – which was hired for the sole purpose of pursuing
claims against Wells Fargo (see Dkt. 730) – received $323,316.78 for its services between
February 2, 2012 and July 31, 2016.5 And these figures do not even include fees and costs
incurred by conflicts counsel during the past 16 months or the significant fees and costs
incurred by the Receiver's own law firm from January 2009 through February 2, 2012, in
opposing Well Fargo's interests.

5

The James Hoyer firm received this substantial sum from the Receivership Estate despite
being hired on a contingency basis to sue Wells Fargo for the Bank's alleged complicity in
Arthur Nadel's Ponzi scheme. After over four years of litigation, including an appeal to the
Eleventh Circuit, the Receiver lost on all counts and the James Hoyer firm recovered nothing
for the Receivership Estate. Although the Bank prevailed, it was nonetheless forced to incur
approximately $4 million in attorneys' fees defending this specious lawsuit just at the trial
level. See Case No. 8:12-cv-00557, Doc. No. 327.

7
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As a matter of fundamental fairness, Wells Fargo seeks payment of $527,548.10 as an
administrative expense for enforcing its status as a secured creditor, which includes
$491,036.17 in attorneys' fees (after application of the Courtesy Discount and agreed-upon
client adjustments); $16,511.93 in costs incurred from the beginning of the Receivership
through October 31, 2017 (after application of agreed-upon client adjustments); and $20,000
in estimated future attorneys' fees, since November 1, 2017.
In addition, having prevailed in the Eleventh Circuit appeal of SEC v. Wells Fargo
Bank, N.A., 848 F.3d 1339 (11th Cir. 2017), $761.70 (the "Appellate Costs") is payable to
Wells Fargo pursuant to Federal Rule of Appellate Procedure 39, and should be paid as an
administrative expense. A copy of Wells Fargo's Bill of Costs was filed in this case at Docket
No. 1282, p. 3. All of the fees and costs sought by the Bank fall within the definition set out
in the Court's Claims Procedures Motion. See Dkt. 390.6
Finally, having prevailed in the related litigation in the United States District Court for
the Middle District of Florida and recevied a cost award from Judge Whittemore, $40,312.94
(the "Related Litigation Cost Award") is payable to Wells Fargo and should be taxed as an
administrative expense. See Case No. 8:12-cv-557, Dkt. 340. In total, Wells Fargo seeks
allowance and payment of $568,622.74 as an administrative expense claim.

6

The specific attorneys’ fees and costs sought in this administrative claim are detailed in the
Affidavit of Steven R. Wirth, Esq., attached as Exhibit 1.

8
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MEMORANDUM OF LAW
A.

WELLS FARGO'S ATTORNEYS' FEES AND COSTS SHOULD
BE ALLOWED AND PAID AS AN ADMINISTRATIVE EXPENSE.
1.

Attorneys' Fees and Costs Should be Paid to the Prevailing Party.

The Receiver has vigorously challenged Wells Fargo's status as a secured creditor.
Many of his challenges were meritless; and in the end, all were unsuccessful. Despite his
losing every challenge against the Bank, the Receiver and his attorneys have been paid
handsomely from the Receivership Estate, receiving 100% of their requested fees. On the
other hand, despite its prevailing in every challenge, Wells Fargo has been left to bear a
substantial expense burden on its own – a burden which was unjustly imposed by the Receiver.
In an SEC receivership, a Court's decision to award attorneys' fees should be guided by
a number of factors including the results obtained and "the complexity of problems faced, the
benefit to the receivership estate, the quality of work performed, and the time records
presented." SEC v. Fifth Ave. Coach Lines, Inc., 364 F. Supp. 1220 (S.D.N.Y. 1973).
Importantly, “whether a receiver merits a fee is based on the circumstances surrounding the
receivership, and ‘results are always relevant.’” FTC v. Worldwide Info. Serv. Inc., 2015 WL
144389, *4 (M.D. Fla. Jan. 12, 2015) (citing SEC v. Elliott, 953 F. 2d 1560, 1577 (11th Cir.
1992) (emphasis added)). Unlike in a bankruptcy proceeding, the preservation of assets for
creditors is not a prime concern. See Fifth Ave. Coach Lines, Inc., 364 F. Supp. at 1222.
Rather, the emphasis is on the results obtained.
Applying these factors to the discrete matters presented in this motion, it is abundantly
clear that if any party has earned a fee award under this analysis, it is the Bank, not the
Receiver. Yet, the Receiver's fees have been paid from receivership property (see Dkts 130,

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165, 201, 266, 395, 497, 582, 646, 657, 717, 860, 914, 951, 1047, 1091, 1127, 1143, 1156,
1201, 1218), while the Bank's have not. Making matters worse, much of the Bank's substantial
attorneys' fee burden was caused by the Receiver, who relentlessly fought the Bank to no avail.
Fairness requires allowance of an administrative claim for the Bank; and so does the law of
this Court.
When a receiver pursues an action to benefit the estate, but is unsuccessful, fees
incurred in defending the claims asserted by the receiver are “properly classified as an
administrative claim against the estate.” SEC v. HWK Trading LLC, 2009 WL 2499146 (M.D.
Fla. Aug. 14, 2009) (allowing administrative expense claim and denying receiver’s request to
subordinate claim filed by wife of Ponzi scheme perpetrator, to claims of the defrauded
investors).

A similar rule applies in the bankruptcy context, with courts allowing

administrative expense claims for attorneys' fees incurred by creditors' defending their valid
claims.7 In fact, the Supreme Court has expanded Section 503(b)(1)(A) of the Bankruptcy
Code8 to require that courts consider the “statutory objective: fairness to all persons having

7

It is well established that courts in this Circuit can and should look to bankruptcy law when
there is minimal authority in the specific context of a receivership. See SEC v. Wells Fargo
Bank, N.A., 848 F.3d 1339 (11th Cir. 2017) (stating that “bankruptcy law is both analogous
and instructive here” when evaluating the effect of a receivership on a secured creditor’s
preexisting state law security interests); see also Bendall v.Lancer Management Group, LLC,
523 Fed. Appx. 554 (11th Cir. 2013) (the Eleventh Circuit “will apply cases from the analogous
context of bankruptcy law, where instructive, due to limited case law in the receivership
context”).
8

Section 503(b)(1)(A) of the Bankruptcy Code provides that “there shall be allowed
administrative expenses… including –” for the “actual, necessary costs and expenses of
preserving the estate.” By using the term “including” in the introductory provision of section
503(b), “Congress built a mechanism into § 503(b) for bankruptcy courts to reimburse
expenses not specifically mentioned in § 503(b)’s subsections” such that “Congress anticipated
that bankruptcy courts would encounter a variety of ... circumstances warranting

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claims against an insolvent.” See Reading Co. v. Brown, 391 U.S. at 478 (“We hold that
damages resulting from the negligence of a receiver acting within the scope of his authority as
receiver give rise to ‘actual and necessary costs’ of a Chapter XI arrangement.”).
In Reading Co., the Court allowed a creditor's administrative expense claim, reasoning
that "parties subjected to loss and expense as a result of the administration of a bankruptcy
estate are entitled to be made whole as a matter of fundamental fairness and should be allowed
an administrative claim to implement that result.” See In re G.I.C. Gov't. Sec., Inc., 121 B.R.
647, 649 (Bankr. M.D. Fla. 1990) (discussing Reading Co.). Interpreting Reading Co., the
Bankruptcy Court for the Middle District of Florida has allowed administrative expense claims
to pay the attorneys' fees of creditors successfully defending their claims against courtappointed officials, compensating those who are forced to expend new resources successfully
defending against attempts to rehabilitate/improve the estate. See id. (allowing administrative
claim to pay costs incurred in successful defense of claim filed by trustee, which the trustee
pursued in an attempt to benefit the estate); In re Prop. Mgmt. and Invests., Inc., 91 B.R. 170
(Bankr. M.D. Fla. 1988) (allowing administrative claim to pay for law firm’s legal fees
incurred in defense of malpractice claim pursued by debtor, because if it had been successful,
claim would have benefited estate). Here, the Receiver's actions in administering the
receivership estate have subjected Wells Fargo to loss and expense, needlessly forcing Wells
Fargo to defend its unassailable security interests, so Wells Fargo's attorneys' fee expenses
should be paid as an administrative expense.

reimbursement, which it could then evaluate on a case-by-case basis.” In re Connolly N. Am.
LLC, 802 F.3d 810, 816 (6th Cir. 2015).

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2.

Fairness Requires Allowance and Payment of
The Bank's Fees as an Administrative Expense.

Granting the Bank an administrative expense claim comports with the fundamental
fairness principles that permeate bankruptcy and receivership proceedings. See, e.g., In re
Carpet Ctr. Leasing Co., Inc., 991 F.2d at 685-86 (recognizing that § 507(b) converts a secured
creditor’s claim into an allowable administrative expense claim, where there has been a
diminution of value in the collateral by reason of the automatic stay). Indeed, the law is clear
that a creditor should not be damaged by actions taken to benefit the estate. See, e..g, In re CM
Sys., Inc., 86 B.R. 286, 287 (Bankr. M.D. Fla. 1988) (allowing administrative expense for cost
of leasing equipment, which equipment was leased to generate funds for operating the debtor’s
business); Tribune Media Co., 2015 WL 7307305, at *4 (Bankr. D. Del. Nov. 19, 2015)
(“Creditors may seek payment of postpetition fees and expenses under § 503(b)(3)(D) and §
503(b)(4), which allow an administrative claim for actual, necessary expenses that confer a
'substantial contribution' on the bankruptcy estate.”), motion to certify appeal granted sub nom.
In re Tribune Media Co., 2016 WL 1451161 (D. Del. Apr. 12, 2016).
Had the Receiver been successful in objecting to one or more of the Bank’s secured
claims, it might have freed up additional funds to the benefit of the receivership estate, but the
Receiver's motives are irrelevant. See HWK Trading LLC, 2009 WL 2499146, at *4 (allowing
administrative claim even though the “Court is not unmindful that the actions taken by the
Receiver that led to the award of attorneys’ fees against the Receivership were done with the
proper motive and intentions”). Because the Court should be focused on results, the only
relevant factor is that the Receiver’s actions damaged Wells Fargo by forcing the Bank to
needlessly expend resources in the form of attorneys’ fees and costs. Consequently, Wells

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Fargo is entitled to an administrative claim to compensate it for those damages. See HWK
Trading LLC, 2009 WL 2499146, at *4 (“As such, since the litigation that led to the attorneys’
fee award was pursued by the Receiver in an attempt to benefit the state, such fees are properly
classified as an administrative claim against the estate.”).
Without an administrative expense award to Wells Fargo, the burden of the
Receivership's fruitless fighting would be unfairly borne by Wells Fargo, particularly since
Receiver has already been paid for losing fights that should never have been brought in the
first place. The most bewildering example of this unfair result is demonstrated by contrasting
the parties' attorneys' time records for January 2012, when the Receiver pursued a sale of the
Rite Aid property, over the Bank's objection and despite the Bank's valid state law security
instruments.
In his initial motion to sell the property, the Receiver failed to comply with the statutory
requirements of 28 U.S.C. § 2001. See Dkt. 706. After Wells Fargo pointed out the flaws, the
Receiver fought the Bank rather than fixing the problem. See Dkt. 718. On January 24, 2012,
the Court denied the sale motion and ordered the Receiver to comply with the statute. See Dkt.
726 ("Because there is nothing in the record before the Court even remotely suggesting
compliance with the statute, the Court has no jurisdiction to approve the contemplated sale.").
Ultimately, the Receiver complied with the statute and the property was sold over the Bank's
objection. See Dkts. 840, 842.
Incredibly, the Receivership Estate has paid all of the Receiver's attorneys' fees for
services performed during this period, including the fees incurred to pursue the unlawful sales
process in the first place and the fees incurred to vigorously defend that unlawful process rather

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than ameliorate after Wells Fargo pointed out the flaws. See, e.g., Dkt. 897-9, p. 4. On the
other hand, Wells Fargo had to pay its attorneys to protect its position from unwarranted attack.
This is the kind of injustice that the case law is able to remedy. Moreover, Wells Fargo actually
conferred a benefit on the Receivership Estate by insisting with statutory compliance, because
benefits to a receivership may take "more subtle forms than a bare increase in monetary value."
Gaskill v. Gordon, 27 F.3d 248, 253 (7th Cir. 1994) (quoting SEC v. Elliott, 953 F.2d 1560,
1577 (11th Cir. 1992)). Therefore, Wells Fargo is entitled to reimbursement for its fees and
costs from estate assets.
3.

The Appellate Costs and the Related Litigation Cost
Award Are Unquestionably Administrative Expenses.

Having prevailed in the Eleventh Circuit appeal of SEC v. Wells Fargo Bank, N.A., 848
F.3d 1339 (11th Cir. 2017), the Appellate Costs detailed and allowed in the amount of $761.70
(see Dkt. 1282, p. 3) should be paid as an administrative expense. See FRAP 39; see also HKW
Trading LLC, 2009 WL 2499146, at *3-4; see also In re G.I.C. Gov't. Secur., Inc., 121 B.R. at
648 (defendant’s taxable costs were an administrative expense of estate because trustee sued
defendant in an attempt to benefit estate); Resolution Trust Corp. v. Heinhold Commodities,
Inc., 803 F. Supp. 1342, 1344, 1349 (N.D. Ill. 1992) (concluding an award of attorney’s fees
and costs constituted a first priority administrative expense of receivership). Similarly, having
prevailed in related litigation before Judge Whittemore – in case no. 8:12-cv-557 – the Related
Litigation Cost Award of $40,312.94 is payable to Wells Fargo and should be taxed as an
administrative expense. See id.

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4.

The Loan Documents Require the Borrowers
to Pay the Bank's Attorneys' Fees and Costs

Although not a prerequisite to recover attorneys’ fees and costs as an administrative
expense claim, it should be noted that each of the loan documents at issue here contain
provisions requiring the borrowers to pay the Bank’s attorneys’ fees and costs. Because the
Receiver stands in the shoes of the borrowers, he is bound by the fee provisions in each of the
loan documents.

Wiand v. Schneiderman, 778 F.3d 917, 925 (11th Cir. 2015) (affirming

enforcement against Receiver of contractual arbitration provision between fund and investor);
Resolution Trust Corp. v. United Trust Fund, Inc., 57 F.3d 1025 (11th Cir. 1995) (recognizing that
receiver stands in the shoes of the insolvent entity).

In this case, the applicable loan documents state, in relevant part:9
•

"In the event that Lender is called upon to pay any sums of money to protect this Deed
of Trust and the Note… All such monies so advanced by Lender shall be deemed to be
secured by this Deed of Trust." Rite Aid Property Deed of Trust and Security
Agreement, ¶ 1.11. And, "in the event this Deed of Trust is placed in the hands of an
attorney… Grantor agrees to pay all costs of collection, including reasonable attorneys'
fees (including those in all appellate and bankruptcy proceedings) incurred by
Lender..." Rite Aid Property Deed of Trust and Security Agreement, ¶ 1.12.

•

"Grantor shall protect, indemnify and save harmless Bank from and against all
losses… costs and expenses (including, without limitation, reasonable attorneys'
fees and expenses)… incurred by or asserted or assessed against Bank on account
of or in connection with (i) the Loan Documents or any failure or alleged failure
of Grantor to comply with any of the terms of… the Loan Documents." Laurel
Mountain Property Deed of Trust and Assignment of Rents, pp. 9-10.

9

All of the applicable provisions appear in the Record, in their entirety. See, e.g., Doc. No.
719-1, pp. 21-22 (the Rite Aid Property Deed of Trust and Security Agreement, ¶¶ 1.11 and
1.12); Doc. No. 740-1, p. 16 (the Evergreen Property Deed of Trust, ¶ 9); Doc. No. 740-2, pp.
14-15 (the Sarasota Property First Mortgage, ¶ 9); Doc. No. 740-3, p. 26 (the Sarasota Property
Second Mortgage, ¶ 16); and Doc. No. 740-4, pp. 20-21 (the Laurel Mountain Property Deed
of Trust and Assignment of Rents, pp. 9-10). They are also attached to this motion as Exhibit
4, and incorporated herein by reference. Copies are also in the Receiver's possession and are
available upon request. Due to their length, only key portions are set forth in this motion.

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•

"If (a) Borrower fails to perform the covenants and agreements contained in this
Security Instrument, (b) there is a legal proceeding that might significantly affect
Lenders Interest in the Property and/or rights under this Security Instrument… then
Lender may do and pay for whatever is reasonable or appropriate to protect Lender's
interest in the Property and rights under this Security Instrument, including… paying
reasonable attorneys' fees to protect its interest in the property and/or rights under this
Security instrument… Any amounts disbursed by Lender under this Section 9 shall
become additional debt of Borrower secured by this Security instrument." Evergreen
Property Deed of Trust, ¶ 9.

•

"If (a) Borrower fails to perform the covenants and agreements contained in this
Security Instrument, (b) there is a legal proceeding that might significantly affect
Lenders Interest in the Property and/or rights under this Security Instrument… then
Lender may do and pay for whatever is reasonable or appropriate to protect Lender's
interest in the Property and rights under this Security Instrument, including… paying
reasonable attorneys' fees to protect its interest in the property and/or rights under this
Security instrument… Any amounts disbursed by Lender under this Section 9 shall
become additional debt of Borrower secured by this Security instrument." Sarasota
Property First Mortgage, ¶ 9.

•

"Mortgagor agrees to pay all of Lender's expenses if Mortgagor breaches any covenant
in this Security Instrument. Mortgagor will also pay on demand any amount incurred by
Lender for insuring, inspecting, preserving or otherwise protecting the Property and
Lender's security interest." Sarasota Property Second Mortgage, ¶ 16.
In this case, the Requested Fees and Requested Costs clearly fall within the purview of

these provisions because the Bank was necessarily protecting its security instruments against
the Receiver's challenges and enforcing the Bank's secured claims. Because these contractual
fee provisions unambiguously state that the Bank’s attorneys’ fees are recoverable and clearly
identify the matters which are recoverable, the fee provisions are enforceable pursuant to the
standard set forth in Succar Succar v. Safra Nat’l Bank of New York, 237 Fed. Appx. 526, 528
(11th Cir. 2007) (per curiam) (unpublished).
The Receiver’s prior citation to Bendall v. Lancer Management Group, LLC, 523 Fed.
Appx. 554 (11th Cir. 2013) for the proposition that a creditor must file a proof of claim in order
to recover attorneys’ fees pursuant to contract is inapposite for a number of reasons. First,

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unlike the creditors in Bendall, the fees sought to be recovered by the Bank here did not begin
to accrue until after the bar date was entered. Second, the Bank timely filed a proof of claim
with respect to the Rite Aid Property and the vast majority of the fees sought to be recovered
herein relate to that loan. Third, unlike the creditors in Bendall, the Bank did not receive proper
notice of the bar date for the loans which it did not file a proof of claim. See Doc. Nos. 689,
690.10 Fourth, and most importantly, the Bank is seeking payment of its fees and costs as an
administrative expense claim based on the principles of fundamental fairness and benefit to the
estate, not as an unsecured deficiency claim, and there is no bar date for the filing of
administrative claims in this case. Thus, Bendall has no bearing on the outcome of this motion.
B.

THE FEES AND COSTS SOUGHT ARE REASONABLE.

The Bank recognizes that any request for attorney’s fees must be reviewed for
reasonableness. The standard for reviewing the reasonableness of fees is set forth in Johnson
v. Georgia Highway Express, 488 F.2d 714, 488 at 717-19 (5th Cir. 1974).11 The twelve
Johnson factors are (1) the time and labor required; (2) the novelty and difficulty of the issues;
(3) the skill requisite to perform the legal service properly; (4) the preclusion of other
employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether
the fee is fixed or contingent; (7) time limitations imposed by the client or other circumstances;

10

Indeed, as confirmed by the Eleventh Circuit, the Receiver only mailed a single claims
packet to Wells Fargo at its Atlanta, Georgia address. After receiving this packet, Wells Fargo
submitted a Proof of Claim as to its loan that secured the Rite Aid Property within the set claim
bar date, but did not submit a Proof of Claim detailing its secured interest in the other
receivership properties. See SEC v. Wells Fargo Bank, N.A., 848 F.3d at 1342
11

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh
Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed down
prior to October 1, 1981.

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(8) the amount involved and the results obtained; (9) the experience, reputation, and ability of
the attorneys, (10) the “undesirability” of the case; (11) the nature and length of the
professional relationship with the client (12) awards in similar case.12
The specific attorneys’ fees and costs sought in this administrative claim are detailed
in the Affidavit of Steven R. Wirth, Esq., attached as Exhibit 1. This affidavit attached
redacted billing invoices reflecting each cost item and the substance of each time entry for
which a fee sought in this motion.

The affidavit includes the Appellate Costs.

The

reasonableness of these amounts is established the Affidavit of Jeffrey Warren, Esq., attached
as Exhibit 2.
WHEREFORE, Wells Fargo respectfully requests that the Court enter an order in the
form attached as Exhibit 3 (i) granting this motion; (ii) directing the Receiver to disburse
$568,622.74 as an Administrative Expense Claim to Wells Fargo, within three days of the
Court’s Order; and (iii) granting such other and further relief as this Court deems just and
proper.

12

Even if the Court were to apply a Florida standard of reasonableness, the criteria is virtually
identical. See Bell v. U.S.B. Acquisition Co., Inc., 734 So. 2d 403 (Fla. 1999).

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LOCAL RULE 3.01(g) CERTIFICATION
Counsel for Well Fargo has conferred with counsel for the Receiver and counsel for
the Securities and Exchange Commission. The Receiver has indicated that he objected to and
would oppose the relief requested in this motion. The SEC has indicated that it takes no
position regarding the relief requested in the motion.
LOCAL RULE 3.1(j) REQUEST FOR ORAL ARGUMENT
Pursuant to Local Rule 3.1(j), Wells Fargo requests oral argument on this motion and
estimates the time required for both sides to make their presentation to be one hour.
Respectfully submitted,
/s/ Steven R. Wirth
AKERMAN LLP
L. Joseph Shaheen, Jr.
Florida Bar No.: 212385
Email: [e-mail]
Steven R. Wirth
Florida Bar No.: 170380
Email: [e-mail]
401 East Jackson Street, Suite 1700
Tampa, Florida 33602
Telephone: [phone]
Facsimile: [phone]
Counsel for Wells Fargo, N.A.
CERTIFICATE OF SERVICE
I hereby certify that on December 1, 2017, I electronically filed the foregoing with the
Clerk of the Court by using the CM/ECF system.
/s/ Steven R. Wirth
Attorney

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