Securities And Exchange Commission v. Torchia et al

Filing 410

OPINION AND ORDER. Defendant James A. Torchia's Emergency Motion for Preliminary and Permanent Injunction 345 is DENIED. Signed by Judge William S. Duffey, Jr on 3/1/2017. (bgt)

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

1:15-cv-3904-WSD

JAMES A. TORCHIA, CREDIT
NATION CAPITAL, LLC, CREDIT
NATION ACCEPTANCE, LLC,
CREDIT NATION AUTO SALES,
LLC, AMERICAN MOTOR
CREDIT, LLC, and SPAGHETTI
JUNCTION, LLC,
Defendants.

OPINION AND ORDER
This matter is before the Court on Defendant James A. Torchia’s Emergency
Motion for Preliminary and Permanent Injunction [345] (“Emergency Motion”).

I.

BACKGROUND1
A.

Facts

On May 10, 2016, Receiver Al Hill (“Receiver”) filed a motion requesting
“an Order permitting him to sell certain assets of CNC and AMC at his discretion
and at the best available price.” ([90] at 2). He sought the Court’s approval to
retain the firm Wm. Page & Associates, Inc. (“Wm. Page”) to manage, market, and
sell the life insurance policies for a fee for less than the operating costs of Credit
Nation Capital. (Id. at 3). The Receiver represented that Wm. Page’s management
responsibilities included marketing and selling life insurance policies to interested
third-parties with the cooperation and approval of the Receiver. (Id.). On
May 11, 2016, the Court granted the Receiver’s motion and granted the Receiver’s
request to retain Wm. Page to manage, market, and sell the life insurance policies.
([95] at 6).
The Receiver retained Wm. Page, and he also retained TrackLife, LLC
(“TrackLife”), a company affiliated with Wm. Page, to monitor insurance premium
due dates and policy maturities and to determine market values of specific policies
when requested. Beginning in early May, 2016, the Receiver’s staff began
1

The Court here sets forth the facts pertinent to Mr. Torchia’s Emergency
Motion. A more complete description of the background of this action is set forth
in the Court’s Orders of April 25, 2016, [81] and May 25, 2016, [120].

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marketing the Sneider policy (policy no. ending in -2626) (the “Policy”) for
potential sale by sending out information about the Policy and the insured. The
Receiver represents that TrackLife and Wm. Page were not asked to market the
Policy and have never marketed any of the Receivership’s policies. On
June 1, 2016, the Receiver also sent the Policy to TrackLife and asked for a
valuation. On June 9, 2016, TrackLife determined that the Policy was worth
between $500,000 and $900,000. The Receiver represents that the valuation was
for the Receiver’s internal use and was not part of the package sent to potential
bidders.
Sometime in early June, an employee of TrackLife disclosed that an Irish
company called Redbird was affiliated with TrackLife, and asked whether Redbird
could be allowed to bid. The Receiver determined that allowing Redbird to bid, if
it wished to do so, would be appropriate because the Receiver sought as many bids
as possible to get the maximum amount for the sale of the policy. The Receiver’s
staff sent the same information to Redbird that was provided to all other potential
bidders, and it was the same information previously given to TrackLife for its
valuation of the Policy. No bidder received any information regarding the identity
or the bid of any other potential buyer. TrackLife and Page were not privy to the

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identity of any potential buyers other than Redbird and did not have access to their
bids.
Three potential buyers submitted bids for the Policy, with Redbird
submitting the highest bid at $1,000,000. After all initial bids were received, the
Receiver dealt directly with the principal of Redbird to negotiate the final terms of
the offer and sale of the Policy. Redbird paid $1,000,000 for the Policy. An entity
called Lifeline signed the purchase agreement as representative of Redbird, and
Redbird authorized Lifeline to “act on behalf of Purchaser with respect to written
directions to Seller from Purchaser under this Agreement.”
The Receiver dealt with Redbird on one other occasion, when Redbird
submitted a bid to purchase another policy. On that occasion, Redbird did not
submit the highest bid and did not purchase the policy.
B.

Procedural History

On February 14, 2017, Mr. Torchia filed his Emergency Motion,2 seeking an
injunction preventing the Receiver from using Wm. Page, TrackLife, and William
Scott Page—Wm. Page’s principal—to provide any services to the Receiver
including, but not limited to, managing, marketing, and selling the life insurance
2

On February 16, 2017, Mr. Torchia filed his corrected brief in support of his
Emergency Motion [379].

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policies of the Receivership Estate. ([379.1] at 13-14). Mr. Torchia contends that
Mr. Page, individually and through his corporate Lifeline entities, had a significant
financial incentive to sell the Policy to Redbird for less than fair market value. He
claims that Mr. Page had an undisclosed financial interest in Lifeline, and that two
men, Mr. Lauck and Mr. Covington, serve as directors of both Redbird and
Lifeline. Mr. Torchia claims that, prior to the sale of the Policy, the Receiver
failed to conduct adequate due diligence about the financial relationships between
Page, Lifeline, and Redbird.
The Receiver argues that Mr. Torchia’s motion is based on speculation, and
that Redbird acquired the policy only because it offered more money than two
other unrelated bidders. He argues Mr. Torchia fails to show a substantial
likelihood of success on the merits. The Receiver also represents that he does not
intend to employ TrackLife in the future to market any policies, and thus
Mr. Torchia cannot show irreparable harm. He argues the balance of the equities
disfavors an injunction, because the cost of obtaining a new service to monitor the
policies on behalf of the Receivership would be prohibitively expensive and
potentially impossible at this late stage. The Receiver also argues that
Mr. Torchia’s Emergency Motion is frivolous, and requests an opportunity to

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submit evidence of the fees incurred by the Receivership in responding to the
Motion.
II.

DISCUSSION
A.

Legal Standard

A party seeking a preliminary injunction must establish: (1) that it is likely
to succeed on the merits, (2) that it is likely to suffer irreparable harm in the
absence of preliminary relief, (3) that the balance of equities tips in its favor, and
(4) that an injunction is in the public interest. Winter v. Nat. Res. Def. Council,
Inc., 555 U.S. 7, 20 (2008). “The preliminary injunction is an extraordinary and
drastic remedy not to be granted unless the movant clearly carries the burden of
persuasion as to the four prerequisites. The burden of persuasion in all of the four
requirements is at all times upon the [moving party].” Ne. Fla. Chapter of Ass’n of
Gen. Contractors of Am. v. City of Jacksonville, 896 F.2d 1283, 1285 (11th Cir.
1990) (internal quotation marks omitted) (quoting United States v. Jefferson Cty.,
720 F.2d 1511, 1519 (11th Cir. 1983)); see Seiko Kabushiki Kaisha v. Swiss
Watch Int’l, Inc., 188 F. Supp. 2d 1350, 1357 (S.D. Fla. 2002) (“Courts in this
Circuit will not issue a preliminary injunction where the moving party fails to meet
its burden of proof on each of the four factors.”).

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B.

Analysis

The Court finds that Mr. Torchia has not met his burden to show that he will
suffer irreparable harm. “[P]reventing irreparable harm in the future is the sine
qua non of injunctive relief.” Alabama v. U.S. Army Corps of Eng’rs, 424 F.3d
1117, 1133 (11th Cir. 2005) (internal quotation omitted). The “asserted irreparable
injury must be neither remote nor speculative, but actual and imminent.”
Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000) (internal quotation marks
omitted).
Mr. Torchia claims that he will be irreparably harmed because the SEC
seeks disgorgement of at least the difference between what investors deposited
with Defendants and the value of the Receivership Estate after all assets are
eventually sold. He argues every asset that is sold for less than the fair retail value
irreparably harms Mr. Torchia, and argues that TrackLife’s undisclosed conflicts
of interest will cause it to undervalue policies in the future. The Receiver
represents that he does not intend to employ TrackLife to market any policies.
TrackLife’s role in the Receivership will continue to be to monitor insurance
premium due dates and policy maturities.3 Mr. Torchia argues that “the Receiver
3

The Court understands these are the limited activities in which TrackLife
will be involved.

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(either unwittingly or in concert) already allowed TrackLife to market the [] Policy
to the Redbird Entities, apparently without authorization to do so.” ([385] at 9).
He notes that TrackLife represented to the Receiver that Redbird wanted to bid on
the Policy, which “is clear evidence that [TrackLife] marketed the [] Policy to
[Redbird] before discussing it with the Receiver.” ([385] at 6-7). He also argues
the Receiver’s representation regarding TrackLife is not true, because TrackLife
continues to provide valuations for the Receiver on the life policies, which is a
central aspect of marketing the policies. He claims that continuing to allow
TrackLife to provide valuations despite having undisclosed conflicts of interest
will cause irreparable harm.
The Court finds Mr. Torchia’s asserted irreparable injury is purely
speculative. See Siegel, 234 F.3d at 1176. The only alleged conflict Mr. Torchia
presents is the purported conflict between Wm. Page and Redbird. Mr. Torchia
does not present any evidence to show what, if any, “undisclosed conflicts”
remain, offering only this question: “[w]hat meaningful protections are in place to
prevent any undisclosed conflicts of interest from impacting TrackLife’s valuations
in the future?” ([385] at 9). The possibility that TrackLife may have undisclosed
conflicts that may, in the future, incentivize it to lower its valuations which may, in
turn, result in below-market sales of policies is the height of speculation. The

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Court is confident that the Receiver has and will use his best judgment to provide
the highest return on the policies in the Receivership.4 Mr. Torchia does not
present any evidence that he will suffer actual and imminent harm in the absence
of injunctive relief, and his Emergency Motion is denied.5, 6
III.

CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that Defendant James A. Torchia’s

Emergency Motion for Preliminary and Permanent Injunction [345] is DENIED.

4

While injunctive relief is not appropriate here, but to avoid any claimed
appearance of impropriety, the Receiver is instructed to decline to approve bidding
on policies by Wm. Page, TrackLife, or any of their affiliates.
5
The Court also notes that the irreparable harm Mr. Torchia alleges is
monetary in nature. Normally, monetary injuries do not rise to the level of
irreparable harm. Watts v. Wells Fargo Dealer Servs., Inc., No. 4:15-CV-02250KOB, 2016 WL 6248018, at *1 (N.D. Ala. Oct. 26, 2016) (citing
Sampson v. Murray, 415 U.S. 61, 90 (19874)). “An injury is ‘irreparable’ only if it
cannot be undone through monetary remedies.” Charles H. Wesley Educ. Found.,
Inc., 324 F. Supp. 2d 1358, 1368 (N.D. Ga. 2004) (quoting Cunningham v. Adams,
808 F.2d 815, 821 (11th Cir. 1987)). Mr. Torchia does not show that his alleged
irreparable injury could not be undone through monetary remedies.
6
Regarding the Receiver’s request for attorneys’ fees, the Court finds
Mr. Torchia’s Emergency Motion, while ultimately without merit, was grounded in
reasonable concerns.

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SO ORDERED this 1st day of March, 2017.

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