Securities and Exchange Commission v. Alleca et al

Filing 156

OPINION AND ORDER denying The Meyers Group, Inc.'s Motion for Reconsideration 149 , granting the Receiver's Motion for Settlement of BNG's claim 150 and approving the Settlement Agreement [150.1] between the Receiver and BNG. It is further ordered that the Receiver's Motion for Approval of Settlement of Disputed Claim and Settlement Agreement and for Entry of Bar Order and Approval of Form of Notice 145 is granted in part and deferred in part. On or before June 1, 2018, the Receiver shall send the Notice to each person who will or could be impacted by the approval of the settlement with Alexandria and the bar order. On or before June 1, 2018, the Receiver shall file with the Court a list of each person to whom the Notice is sent. The Court defers ruling on the proposed settlement and bar order pending the opportunity for objections as provided in the Notice. Signed by Judge William S. Duffey, Jr. on 5/18/18. (ddm)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

1:12-cv-3261-WSD

ANGELO A. ALLECA, SUMMIT
WEALTH MANAGEMENT, INC.,
SUMMIT INVESTMENT FUND,
LP, ASSET CLASS
DIVERSIFICATION FUND, LP,
and PRIVATE CREDIT
OPPORTUNITIES FUND, LLC,
Defendants.

OPINION AND ORDER
This matter is before the Court on The Meyers Group, Inc.’s (“TMG”)
Motion for Reconsideration [149], and Receiver Robert D. Terry’s (the
“Receiver”) Motions for Settlement [145], [150].
I.

BACKGROUND
On September 18, 2012, the SEC filed its Complaint [1], asserting securities

fraud claims against Defendants Angelo A. Alleca (“Alleca”), Summit Wealth
Management, Inc (“Summit”), Summit Investment Fund, LP (“SIF”), Asset Class
Diversification Fund, LP (“ACDF”) and Private Credit Opportunities Fund, LLC

(“PCOF” and together with SIF and ACDF, the “Summit Funds”). The next day,
the Court froze Defendants’ assets and enjoined Defendants from violating the
securities laws. ([7]). On September 21, 2012, the Court appointed Robert D.
Terry as receiver for the estate of Summit and the Summit Funds (the
“Receivership Entities.”) ([9] at 2).
On June 6, 2017, the Receiver filed his original plan of distribution ([120],
as amended [125], the “Original Plan”), proposing to distribute the receivership
assets pursuant to the “rising tide” methodology. Under this allocation method:
[T]he Receiver will deduct the amount of a Claimant’s
pre-receivership withdrawals after calculating the investor’s pro rata
share of any distribution. If the result is negative—meaning that the
Claimant has already received pre-receivership withdrawals in excess
of his or her calculated pro rata share of a distribution—that Claimant
will not participate in that distribution, although he or she may
participate in later distributions. This method preserves assets for
those Claimants who have received nothing thus far and recognizes
that some Claimants have already recovered a substantial percentage
of their investment.
([120] at 18); see Commodity Futures Trading Comm’n v. Equity Fin. Grp., Inc.,
No. 04-cv-1512, 2005 WL 2143975, at *24 (D.N.J. Sept. 2, 2005) (discussing the
rising tide methodology). “If approved, after taking into account any money
received by investors prior to the Receivership, this distribution [plan] will
represent a minimum recovery percentage among included Claimants of [14.5%].”
([120] at 14; [125] at 3; [125.1] at 1). On July 17, 2017, the Receiver filed minor
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amendments to his Original Plan. ([125]).
On September 19, 2017, the Court held a hearing on the Receiver’s Original
Plan. ([130]). Only the Receiver and his counsel attended the hearing. The
Receiver told the Court that his proposed Original Plan should be modified (the
“Modified Plan”) to ensure that claimants are treated consistently. (Plan of
Distribution Hearing Transcript (Sept. 19, 2017) (“Tr.”) at 3). Specifically, the
Receiver sought to cancel his proposed distributions to TMG and the Bank of
North Georgia (“BNG”).
The Original Plan proposed distributing $123,829.67 to TMG and
$28,722.08 to BNG. ([125.1] at 6). TMG asserted a claim based on a promissory
note, dated April 21, 2010, in the original principal amount of $1,221,582.00. (See
[120] at 25; [133] at 3). BNG asserted a claim based upon a promissory note dated
August 25, 2011, in the amount of $289,843.46. (See [120] at 25; [133] at 3).
Before the Receiver was appointed, Defendants paid some, but not all, of the
money owed to TMG and BNG under the promissory notes. They paid
$407,194.00, to TMG and $105,160.20 to BNG (the “Payments”). ([133 at 4-5).
The Original Plan reduced the value of TMG’s and BNG’s “allowed claims”—that
is, the amount from which they are entitled to a 14.5% recovery—by the amount of
the Payments. ([125.1] at 6). The Receiver represented at the hearing on the
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Original Plan that in order to conform to his treatment of other claimants, the
Receiver concluded that the Payments should be deemed “pre-receivership
withdrawals” rather than amounts by which the “allowed claims” are reduced. The
Receiver stated that, if the Payments constitute pre-receivership withdrawals, TMG
and BNG are not entitled to any distributions because they previously received
more than 14.5% of the value of their promissory notes. (Tr. at 3-4, 7-8, 10). The
Receiver asked the Court to approve the Original Plan except for the proposed
distributions to TMG and BNG.
On September 21, 2017, the Court issued an order [131] (the “September 21
Order”) granting the Receiver’s Motion to Approve Plan of Distribution but
ordering the Receiver to withhold distributions to TMG and BNG. The Court
further ordered that the Receiver file a formal motion to modify the Original Plan
to give TMG and BNG notice of the proposed revised treatment of their claims and
to give them an opportunity to respond to the revision.
On October 4, 2017, TMG filed its Motion for a Court Conference, seeking
(1) a stay of the September 21 Order to allow TMG more time to object to the
Modified Plan; (2) discovery prior to objecting to the Modified Plan; (3) leave of
court to file an action against the Receiver for breach of fiduciary duty; and (4) a
court-ordered settlement conference. ([132]).
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On October 5, 2017, the Receiver filed his Motion to Modify the
Distribution Plan (the “Modified Plan”). ([133]). In seeking Court approval of the
Modified Plan, the Receiver stated that a more equitable approach to TMG’s and
BNG’s distributions would be to calculate their allowed claims as the amount of
their original notes, as opposed to the amount of their original notes, minus
payments received before the Receiver was appointed. Under this method BNG
and TMG would not be entitled to a distribution because both claimants received
an amount of pre-receivership payments in excess of the rising tide percentage
(14.5%) of the allowed claim.
On October 26, 2017, TMG filed its Opposition to the Receiver’s Motion to
Modify the Plan. ([137]).
On November 16, 2017, the Court granted the Receiver’s Motion to Modify
the Distribution Plan (the “November 16, 2017, Order”). ([144]). The Court also
denied TMG’s motion seeking a court conference, a stay of distributions to other
claimants, discovery from the receiver, and leave to initiate an action against the
Receiver for breach of fiduciary duties. (Id.).
On November 20, 2017, the Receiver filed a Motion for Settlement seeking
(1) approval of a proposed settlement of a disputed claim for damages by the
Receiver against Alexandria Capital, LLC, (2) entry of a bar order, and (3)
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approval of a form of notice related to the settlement and bar order. ([145]).
On November 24, 2017, TMG filed its Motion for Reconsideration of the
November 16, 2017, Order approving the Receiver’s modification. ([149]).
On November 30, 2017, the Receiver filed its Motion for Settlement seeking
approval of a proposed settlement of a disputed claim made by BNG. ([150]).
II.

DISCUSSION
A.

Motion for Reconsideration

Motions for reconsideration should not be used to present the Court with
arguments already heard and dismissed, or to offer new legal theories or evidence
that could have been presented in the previously-filed motion. See Arthur v. King,
500 F.3d 1335, 1343 (11th Cir. 2007); O’Neal v. Kennamer, 958 F.2d 1044, 1047
(11th Cir. 1992); Bryan v. Murphy, 246 F. Supp. 2d 1256, 1259 (N.D. Ga. 2003);
see also Jones v. S. Pan Servs., 450 F. App’x 860, 863 (11th Cir. 2012) (“A motion
to alter or amend a judgment cannot be used to relitigate old matters, raise
arguments, or present evidence that could have been raised prior to the entry of
judgment.”); Pres. Endangered Areas of Cobb’s History, Inc. v. U.S. Army Corps
of Eng’rs, 916 F. Supp. 1557, 1560 (N.D. Ga. 1995), aff’d, 87 F.3d 1242 (11th Cir.
1996) (“A motion for reconsideration is not an opportunity for the moving party
and their counsel to instruct the court on how the court ‘could have done it better’
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the first time.”). Whether to grant a motion for reconsideration is within the sound
discretion of the district court. See Region 8 Forest Serv. Timber Purchasers
Council v. Alcock, 993 F.2d 800, 806 (11th Cir. 1993).
TMG’s Motion for Reconsideration reiterates the objections and arguments
it made in response to the Receiver’s modification of the Original Plan. The
modification was made for the reasons stated in the Court’s November, 16, 2017,
Order. TMG opposes the Modified Plan’s “pooling” of funds, and argues that the
assets of the Summit Funds should be separated from those of Summit Wealth
Management, and trade claimants (such as TMG) should be paid from the assets of
Summit Wealth Management. TMG again argues that the prior payments it
received on the amount owed to it should be subtracted from the total amount
owed and should not be subtracted from the rising tide theory claim amount the
Court calculated was payable to TMG. The Court considered these same
arguments in the November 16, 2017, Order. (See November 16, 2017, Order
[144] at 13-14). TMG does not present the Court with any new evidence, an
intervening change in the law, or the need to correct clear error or prevent manifest
injustice that warrants reconsideration. TMG was able to object to the Modified
Plan in its submission on the Modified Plan submitted by the Receiver, and the
Court considered TMG’s arguments in approving the Modified Plan in the
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November 16, 2017, Order. That TMG disagrees with the Court’s ruling in the
November 16, 2017, Order is not a basis for reconsideration. TMG’s Motion for
Reconsideration is denied.
B.

Motions for Settlement of Disputed Claims

“The district court has broad powers and wide discretion to determine relief
in an equity receivership.” S.E.C. v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992);
see also S.E.C. v. Kaleta, 530 F. App’x 360, 362 (5th Cir. 2013). In determining
whether to approve a proposed settlement in a receivership, a district court must
consider:
(a) The probability of success in the litigation; (b) the difficulties, if
any, to be encountered in the matter of collection; (c) the complexity
of the litigation involved, and the expense, inconvenience and delay
necessarily attending it; (d) the paramount interest of the creditors and
a proper deference to their reasonable views in the premises.
In re Justice Oaks II, Ltd., 898 F.2d 1544, 1549 (11th Cir. 1990).1 The district
court’s powers to fashion relief in an equity receivership include “the court’s
inherent equitable authority to issue a variety of ‘ancillary relief’ measures in

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In re Justice Oaks II addressed the approval of a settlement in a bankruptcy
matter. The Receiver has not provided, and the Court has not found, any specific
guidance from the Eleventh Circuit on approving settlements in a receivership.
Because a receivership estate is comparable to the estate administered in a
bankruptcy case, the Court will consider the factors used by the bankruptcy courts,
as approved by the Eleventh Circuit, to determine if the Settlement Agreement
should be approved.
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actions brought by the SEC to enforce the federal securities laws.” Kaleta,
530 F. App’x at 362 (quoting S.E.C. v. Wencke, 622 F.2d 1363, 1369 (9th Cir.
1980)). “Such ‘ancillary relief’ includes injunctions to stay proceedings by nonparties to the receivership.” Id.
1.

The Bank of North Georgia Settlement

The Receiver seeks approval of a proposed settlement of BNG’s claim of
lien against funds that BNG turned over to the Receivership in 2012. At that time,
BNG requested, and the Receiver agreed, that the Receiver would hold the funds
pending a determination by the Court of BNG’s claim of lien against the funds.
For that reason, the Receiver had not determined whether the funds were property
of the Receivership, and postponed the ownership determination. The Receiver
notified the Court that ownership of the funds was “at issue” and that the matter
“would be presented to the Court at a later date.” (Mot. to Approve Plan of
Distribution and Mem. of Law in Supp. [120] at 14, n.2).
BNG claims it holds a valid first priority security interest in funds held in a
bank account in the name of Summit (the “Account”).2 BNG claims that it held its

2

The Agreement governing the Account provides, in relevant part:
SET-OFF - [Summit] agree[s] that [BNG] may (without prior notice
and when permitted by law) set-off the funds in this account against
any due and payable debt owed to [BNG] now or in the future, by any
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security interest before BNG received notice of the September 21, 2012, Order
appointing the Receiver. The security interest arose from the Universal Note and
Security Interest (the “Loan Agreement”) between Summit and BNG that provided
a security interest in favor of BNG’s inventory, equipment, accounts, instruments,
and general intangibles. ([150.3]).3 BNG made the claim of lien by letter to the
Receiver dated September 28, 2012, and reiterated the claim in a filing with the
Court on October 2, 2012. ([13]).
The Settlement with BNG provides for payment by the Receiver of
$18,692.52 to BNG, and the release by BNG of any and all other claims against the
Receivership related to the Account or the loans governed by the Loan Agreement.
The Receiver considered the validity of BNG’s claim, the value of the
[account holder] having the right of withdrawal, to the extent of such
person’s or legal entity’s right to withdraw. If the debt arises from a
note, “any due and payable debt” includes the total amount of which
[BNG is] entitled to demand payment under the terms of the note at
the time [BNG] set[s] off, including any balance the due date for
which we properly accelerate under the note.
([150.4] at 3).
3
The Loan Agreement provides for a right of set-off as follows:
SET-OFF – [Summit] agrees that [BNG] may set off any amount due
and payable under this note against any right [Summit has] to receive
money from [BNG]. “Right to receive money from [BNG]” means . . .
any deposit account balance [Summit has] with [BNG].
([150.3]).
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consideration received for the Receivership, the expenses of litigation, and the
likelihood of BNG’s success in seeking approval of its claim. Having considered
the Receiver’s submission, the Court finds that the settlement is fair, reasonable,
and adequate. The Court approves the proposed settlement with BNG.
2.

Alexandria Capital, LLC Settlement

The Receiver seeks Court approval of the settlement of a disputed claim for
damages by the Receiver against Alexandria Capital LLC (“Alexandria”), entry of
a bar order, and Court approval of the Receiver’s proposed form of notice related
to the proposed settlement and bar order. ([145]). If approved, the settlement will
result in the payment of $77,000 to the Receivership Estate.
Because a bar order is requested, the Court will provide potential claimants
with notice and an opportunity to object to the proposed settlement and bar order.
(See [109]). The Court has reviewed the Proposed Notice of Receiver’s Motion
for Approval of Settlement of Disputed Claim and Settlement Agreement, and for
Entry of a Bar Order ([145.2] the “Notice”), attached as modified as Exhibit A to
this Order. The Court determines the Notice adequately summarizes the
settlement, its terms, and the potential impact of the bar order. The Notice and
procedures detailed therein give sufficient opportunity to object to the proposed
settlement and bar order. The Notice is approved. On or before June 1, 2018, the
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Receiver shall send the Notice to each person who will or could be impacted by the
approval of the settlement with Alexandria and the bar order. On or before June 1,
2018, the Receiver shall file with the Court a list of each person to whom the
Notice is sent.
III.

CONCLUSION
For the foregoing reasons,
IT IS FURTHER ORDERED that The Meyers Group, Inc.’s Motion for

Reconsideration [149] is DENIED.
IT IS FURTHER ORDERED that the Receiver’s Motion for Settlement of
BNG’s claim [150] is GRANTED and the Settlement Agreement [150.1] between
the Receiver and BNG is APPROVED.
IT IS FURTHER ORDERED that the Receiver’s Motion for Approval of
Settlement of Disputed Claim and Settlement Agreement and for Entry of Bar
Order and Approval of Form of Notice [145] is GRANTED IN PART and
DEFERRED IN PART. It is GRANTED insofar as the Proposed Notice of
Receiver’s Motion for Approval of Settlement of Disputed Claim and Settlement
Agreement, and for Entry of a Bar Order ([145.2]), as modified and attached as
Exhibit A to this Order, is APPROVED. On or before June 1, 2018, the Receiver
shall send the Notice to each person who will or could be impacted by the approval
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of the settlement with Alexandria and the bar order. On or before June 1, 2018, the
Receiver shall file with the Court a list of each person to whom the Notice is sent.
The Court DEFERS ruling on the proposed settlement and bar order pending the
opportunity for objections as provided in the Notice.

SO ORDERED this 18th day of May, 2018.

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

1:12-cv-3261-WSD

ANGELO A. ALLECA, SUMMIT
WEALTH MANAGEMENT, INC.,
SUMMIT INVESTMENT FUND,
LP, ASSET CLASS
DIVERSIFICATION FUND, LP,
and PRIVATE CREDIT
OPPORTUNITIES FUND, LLC,
Defendants.
NOTICE OF RECEIVER’S MOTION FOR APPROVAL OF
SETTLEMENT OF DISPUTED CLAIM AND SETTLEMENT
AGREEMENT, AND FOR ENTRY OF A BAR ORDER
This Notice contains important information regarding the Receiver’s
Motion for Approval of Settlement of Disputed Claim and Settlement
Agreement, and for Entry of Bar Order, including important dates and
deadlines.
On November 20, 2017, Robert D. Terry, the Receiver for Summit Wealth
Management, Inc. (“Summit”) and for three investment entities created by
Summit’s president (collectively, the “Summit Entities”) filed a Motion for
Approval of Settlement of Disputed Claims and Settlement Agreement, and for
Entry of Bar Order (the “Motion”), seeking Court approval of a proposed

1

settlement of a disputed matter (the “Settlement Agreement”) with Alexandria
Capital, LLC (“Alexandria”).
If the Court grants the Motion, Alexandria would make two (2) cash
payments to the Receivership Estate totaling $77,000 in exchange for a release of
all claims the Receiver, the Receivership Entities and third parties may have
against Alexandria related to the claims described in the Settlement Agreement.
The entry of a Bar Order is a condition precedent that must occur
before the Settlement Agreement becomes effective. If the Bar Order is
entered, any claims you have or believe you have against Alexandria, other
than a claim filed in the Receivership, will be released, and you will no longer
be able to pursue those claims.
The documents relevant to the Motion, together with exhibits, are available
in electronic format at no cost on the Receivership Estate’s website at
http://www.swmreceivership.com. In addition, you may contact counsel for the
Receiver at the address or telephone number shown below and request a copy of all
relevant documents. They will be provided to you by your choice of email or
regular mail at no cost.
The principal features of the Settlement Agreement are: (1) payment by
Alexandria of the total sum of $77,000 (“Settlement Consideration”) to the

2

Receivership Estate, and (2) the entry of a Bar Order preventing future claims by
any party, in any forum, against Alexandria based upon claims that are released in
the Settlement Agreement. The Bar Order is necessary to make the Settlement
Agreement effective, since the Settlement Agreement is expressly conditioned on a
bar order to prevent future claims being made against Alexandria.
If the Bar Order is entered by the Court, all third parties, including investors
in the Summit Entities, will be enjoined from taking any adverse action against
Alexandria, including the commencement or continuation of any legal proceeding
against Alexandria arising out of, in connection with, or relating to any claims set
forth in the lawsuits Robert D. Terry v. Alexandria Capital, LLC, United States
District Court for the Northern District of Georgia, Atlanta Division, Civil Case
No. 1:17-CV-03678 (“Alexandria Lawsuit”) and Mistina v. Alexandria Capital,
LLC, United States District Court for the Eastern District of Virginia, Civil Case
No. 1:13- CV-00692/CMM/TRJ.1
Nothing in the Bar Order will impair the rights of any Receivership Estate
claimant from instituting or continuing any claims against any person, or against
any third parties, except as to Alexandria as provided in the Bar Order. Likewise,
nothing in the Bar Order will impair the rights of any Receivership Estate claimant

1

Nothing herein should be construed or intended to modify the terms of the
proposed Bar Order. You are encouraged to review the Bar Order carefully.

3

from participating in the claims process associated with the ultimate distribution of
Estate assets at the conclusion of the Receivership.
As stated in the Motion and Memorandum, the Receiver believes that the
Settlement Agreement, including the entry of a Bar Order is fair, equitable and
reasonable, and in the best interest of the Receivership Estate and its claimants.
The Settlement Consideration is an amount representing approximately 55.6% of
the alleged damages in the Alexandria Lawsuit. The Receiver believes this amount
fairly resolves the Estate’s claims in light of the following factors:
(1)

the available defenses to Alexandria in the Alexandria Lawsuit

including but not limited to Alexandria’s contention that the original contract on
which the Receiver bases his breach of contract claim may be deemed void or
voidable;
(2)

the likelihood that, absent a settlement, the funds available to

Alexandria to fund the settlement will be exhausted by litigation costs;
(3)

the claimed right of payment by Summit may be defeated in whole or

in part by the unclean hands or other misconduct of Summit or its agents, including
Angelo Alleca;
(4)

the claimed right of payment may be defeated by the total or partial

failure of consideration;

4

(5)

the claimed right of payment may be defeated, in whole or in part, by

post-transaction conduct by Alleca that may negatively affect the amount of
damages;
(6)

the inability of Alexandria to pay any judgment that may be entered;

(7)

the delay in obtaining any judgment and pursuing collection; and

(8)

the projected costs to the Receiver in continuing to pursue a

judgment and collection, which costs could eventually exceed any amounts
collected.
Important Deadlines and Information Regarding Filing Objections
Please review the following information carefully:
I.

Deadline for Objections:
A.

Any objection to the Settlement Agreement and entry of a Bar Order

must be filed on or before July 13, 2018, with the Clerk’s Office of the United
States District Court for the Northern District of Georgia, Richard B. Russell
Federal Building 2211 United States Courthouse, 75 Ted Turner Drive SW,
Atlanta, Georgia 30303.
B.

Any objection must contain the following information:
(1) The name of person or entity making an objection, including
their contact information (addresses, telephone number(s) and email
address(es)), if applicable;

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(2) If a claim has already been filed by the objector in court or in an
arbitration proceeding, the caption of the case, setting forth the name
of the court, the names of the plaintiff, and defendants, and the case
number as noted above;
(3) A concise statement setting forth the reasons why the proposed
settlement should not be approved and the Bar Order entered; and
(4) All documentation or other evidence of upon which the person
or entity making the objection will rely in opposing the Settlement
Agreement and entry of a Bar Order.
II.

Opportunity to be Heard:
A hearing to approve the Settlement Agreement and entry of a Bar Order

will be held on a date to be later determined by the Court.
III.

Inquiries
A copy of all documents relevant to the Settlement Agreement and entry of

Bar Order, including the Motion filed by the Receiver and all exhibits to the
Motion, and the Memorandum of Law in support of the Motion, are available for
download at no cost on the Receiver’s website at
http://www.swmreceivership.com.
You may also contact counsel for the Receiver at the address or telephone
number shown below and request a copy of all relevant documents. They will be
provided to you by your choice of email or regular mail at no cost.
Please direct all questions to the undersigned.

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/s/ Robert D. Terry
Robert. D. Terry
Georgia Bar No. 702606
Receiver
Parker MacIntyre
2987 Clairmont Road
Suite 200
Atlanta, GA 30329
Tel: [phone]
Fax: [phone]
[e-mail]

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