Federal Trade Commission v. Innovative Wealth Builders, Inc. et al

Filing 96

ORDER: The Receiver's Amended Second Interim Application for Payment for Services Rendered and Costs Incurred 95 is GRANTED to the extent that the Receiver is awarded $27,228.50 in fees and $279.11 in costs. See Order for details. Signed by Judge Virginia M. Hernandez Covington on 8/22/2013. (KAK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
FEDERAL TRADE COMMISSION,
Plaintiff,
v.

Case No.

8:13-cv-123-T-33EAJ

INNOVATIVE WEALTH BUILDERS,
INC., ET AL.,
Defendants.
________________________________/
ORDER
This

matter

is

before

the

Court

pursuant

to

the

Receiver’s Amended Second Interim Application for Payment for
Services Rendered and Costs Incurred (Doc. # 95), filed on
August 21, 2013.

In the Fee Application, the Receiver

requests fees in the amount of $54,457.00 and costs in the
amount of $279.11, for services rendered from March 1, 2013,
through July 20, 2013. For the reasons that follow, the Court
grants the Fee Application in part after reducing the amount
of fees sought by 50%.1
I.

Background
On

January

14,

2013,

the

Federal

Trade

Commission

initiated this action against Innovative Wealth Builders and
its officers for violating the FTC Act and the Telemarketing

1

The Court does not find the requested costs to be
objectionable.

Sales Rules by engaging in “deceptive telemarketing campaigns
throughout the United States designed to take money from
already indebted consumers.” (Doc. # 1).

On that same day,

the Court entered an Order appointing Mark J. Bernet, Esq. as
the Receiver for Innovative Wealth Builders, Inc. and its
affiliates, subsidiaries, divisions, or business or sales
operations, wherever located (the "Receivership Defendant").
(Doc. # 11 at 14).
On January 25, 2013, the FTC and the Defendants entered
into

an

agreed

Preliminary

Injunction

barring

deceptive

telemarketing activities. (Doc. # 31). The agreed Preliminary
Injunction contains a detailed list of the Receiver's official
duties, including but not limited to, assuming full control of
the Receivership Defendant; taking custody, control, and
possession of the Receivership Defendant's assets; securing
the

business

premises

of

the

Receivership

Defendant;

conserving, holding, and managing all of the Receivership
Defendant's assets; entering into contracts and purchasing
insurance

as

distribution

of

necessary;
assets;

preventing

managing

and

the

inequitable

administering

the

business of the Receivership Defendant;

making necessary

payments,

determining

such

as

rental

payments;

and

implementing the manner in which the Receivership Defendant

2

will comply with the Orders of the Court and preventing
violations

of

instituting,

the

law

by

compromising,

the

Receivership

adjusting,

Defendant;

appearing

in,

and

intervening in any lawsuits to protect the assets of the
Receivership
accounts;

Defendant;

maintaining

issuing

subpoenas;

records;

opening

cooperating

with

bank
law

enforcement; and filing reports with the Court. (Doc. # 31 at
14-18).
On March 1, 2013, the Court conducted an evidentiary
hearing on a Motion to Modify Preliminary Injunction filed by
Independent

Resources

Network

Corp.

(d/b/a

Systems) and other Motions. (Doc. # 60).

IRN

Payment

The Receiver

testified at the hearing and the matter of his fees was
discussed. The Receiver indicated that he agreed to an hourly
rate of $275.00 and that “Anybody who has standing can come
and say that’s too much if they – if they legitimately think
that’s the case.” (Id. at 115).
In the current Fee Application, the Receiver requests an
award of $54,457.00 in fees based on 184.6 hours at the hourly
rate of $295.00.

The Court takes this opportunity to express

its legitimate concern regarding the fees thus far accumulated
by the Receiver and his counsel in this action.
II.

Discussion

3

As

the

Court

expressed

during

the

March

1,

2013,

evidentiary hearing, the purpose of this action and of the
receivership, is to conserve the resources available for
payment to the victims of fraud in the instance that the FTC
prevails.
Rather than conserving the funds so far identified and
isolated for potential victim restitution, the Receiver and
his team of professionals have expended significant sums that
would otherwise be available to remediate alleged consumer
fraud.

Thus far, the Court has awarded the Receiver fees in

the amount of $46,365.00 and costs in the amount of $880.24.
(Doc. # 79).

Those fees represented 168.6 hours expended by

the Receiver at the hourly rate of $275.00.
also

paid

the

Receiver’s

counsel,

The Court has

Akerman

Senterfitt,

$36,463.00 in attorneys’ fees and $334.11 in costs. (Doc. #
90).
The Court’s prior awards were entered based on the
Court’s

understanding

that

the

FTC

would

scrutinize

the

Receiver’s and his counsel’s fee petitions and would play a
part in safeguarding the funds for the victims of the alleged
fraudulent scheme. It appears to the Court, however, that the
FTC’s current plan for the management of the asserts in this
case is not working.

The FTC is directed to find a less

4

expensive way of protecting the assets now in the Receiver’s
control.
This case, initiated on January 14, 2013, is in its
infancy.

Pursuant to the Case Management and Scheduling

Order, the discovery deadline expires on October 11, 2013, the
dispositive motions deadline is set for January 3, 2014, the
pretrial conference is scheduled to take place on May 15,
2014, and the case is set for a non-jury trial during the
Court’s trial term commencing June 2, 2014. (Doc. # 78).

If

the Court were to continue to authorize the fees and costs
requested at the current rate, the Court anticipates that the
funds available at the conclusion of the case, if any, would
be paltry.

The Court must exercise its discretion to prevent

the dissipation of assets that should be available for victim
restitution should the FTC prevail on its claims against
Defendants.
Thus, the Court determines that it is appropriate to
reduce the fees requested by 50%.
support

the

Court’s

fee

Myriad reasons exist to

reduction,

inter

alia:

(1)

the

Receiver testified that he has agreed to an hourly rate of
$275.00,

however,

in

his

Fee

Application

he

requests

compensation at the hourly rate of $295.00; (2) the Receiver
is charging the same hourly rate as an attorney, but is

5

performing administrative services, such as supervising the
packing

of

boxes;

and

(3)

the

Receiver

has

billed

for

unnecessary legal work.
Even when the Receiver represented to the Court that his
hourly rate was $275.00, the Court felt that the fees so far
incurred were excessive.

The Court expressed its concern

regarding the Receiver’s fees during the March 1, 2013,
evidentiary hearing. (Doc. # 60 at 101-103, 117, 140). Rather
than alleviate the Court’s pressing concern that “these fees
[will] eat up the estate,” the Receiver has augmented his
hourly

rate

flabbergasted

from
by

$275.00
the

to

$295.00.

Receiver’s

implied

The

Court

request

for

is
an

enhancement of his hourly rate in light of the Court’s
repeated warnings, enunciated at the evidentiary hearing,
regarding excessive fees in this case.
The Court’s examination of the Receiver’s fee ledger also
reveals the unsettling fact that the Receiver is charging an
excessive rate for tasks that could be performed without
incurring

significant

expense.

Although

the

Court

acknowledges that the Receiver is a keen attorney with an AV
rating, it certainly does not require a person of such skill
and distinction to supervise the packing of boxes and the

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movement of those boxes from one facility to another.2
In addition, the fee ledger reflects that the Receiver
has conducted many hours of legal research regarding claims
against Defendants Innovative Wealth Builders (“IWB”) and
Independent Resources Networks (“IRN”) and has prepared a yetto-be-filed Complaint:
•
•

•
•

•

•
•

•

7/10/2013 “Analysis of potential claims
against IRN and discussion with atty for FTC
re various litigation matters” 1.8 hours;
7/11/2013 “Analysis of potential ‘aiding and
abetting’ claim against IRN (including legal
research on Tew v. Chase Manhattan and Scholes
v. Lehman)” 2.7 hours;
7/12/2013 “Analysis of potential fiduciary
duty claim against IRN and begin preparation
of Complaint” 4.5 hours;
7/13/2013 “Continued drafting of complaint
against
IRN,
including
legal
research
concerning negligence, breach of fiduciary
duty and RICO” 6.0 hours;
7/15/2013 “Preparation of RICO complaint,
including legal research on RICO elements” 5.0
hours;
7/17/2013 “Prepare complaint against IWB” 2.0
hours;
7/18/2013 “Continued preparation of Complaint
against IWB, including legal research on Rule
9(b) application to RICO allegations, legal
research on aiding and abetting liability” 8.0
hours;
7/19/2013 “Continued preparation of RICO
complaint;
legal
research
regarding

2

Entries on the Receiver’s fee ledger dated March 26,
2013, and March 28, 2013, reflect that the Receiver billed
12.5 hours for supervising “packing and moving of electronic
and paper records from Clearwater Facilities” and “Moving Day
- supervise moving of materials to new Largo Facilities” at
the hourly rate of $295.00. (Doc. # 95-1 at 2).
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allegations to support ‘enterprise’ element;
discussions with firm’s in-house counsel
concerning RICO complaint; legal research re
predicate acts, including possible theft and
credit-card claims under state law” 7.0 hours.
See (Doc. # 95-1 at 5).3
This single example, that the Receiver expended 37 hours
at the suggested hourly rate of $295.00 to draft a proposed
complaint that has not been filed and will likely never be
filed,

is

emblematic

of

the

problem

here.

In

the

Fee

Application, the Receiver explains that he “prepared a draft
complaint

against

equitable theories.

IRN

grounded

upon

several

legal

and

The Receiver anticipates filing the

Complaint after the depositions are concluded, provided that
the depositions support the claims that the Receiver believes
are viable.” (Doc. # 95 at 9). The docket reflects, however,

3

The Receiver’s use of block billing also justifies a
reduction of his requested fee. “One basis for reducing the
requested number of hours is the use of block billing, which
refers to the practice of including multiple distinct tasks
within the same time entry.” Bujanowski v. Kocontes, No. 8:08cv-390-T-33EAJ, 2009 WL 1564263, at *2 (M.D. Fla. Feb. 2,
2009). “Block billing occurs when an attorney lists all the
day’s tasks on a case in a single entry, without separately
identifying the time spent on each task.” Ceres Envtl. Servs.
v. Colonel McCrary Trucking, LLC, No. 11-12787, 2012 U.S. App.
LEXIS 8271, at *11 (11th Cir. Apr. 25, 2012). The Ceres court
noted that block billing results in “imprecision in an
attorney’s records . . . a problem for which the opponent
should not be penalized” and approved the use of across-theboard reductions to offset the ill effects of block billing.
Id. (internal citations omitted).
8

that the deadline to amend pleadings passed on June 14, 2013.
(Doc. # 78 at 1).

It is shocking to this Court’s conscience

that the Receiver would bill for over $10,900.00 to prepare a
proposed amended complaint in this action well after the
expiration of the deadline for amending pleadings.
Enough

is

enough.

As

explained

above,

the

Court

determines that it is appropriate to reduce the Receiver’s
requested fee by 50%.

Furthermore, the Court directs the FTC

and the Receiver to coordinate their efforts to dramatically
reduce excessive expenditures that have thus far characterized
the

administration

of

the

assets

available

for

victim

recompense in the instance that the FTC prevails in this case.
Accordingly, it is hereby
ORDERED, ADJUDGED, and DECREED:
The Receiver’s Amended Second Interim Application for
Payment for Services Rendered and Costs Incurred (Doc. # 95)
is

GRANTED

to

the

extent

that

the

Receiver

is

awarded

$27,228.50 in fees and $279.11 in costs.
DONE and ORDERED in Chambers, in Tampa, Florida, this
22nd day of August, 2013.

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Copies: All Counsel of Record

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