Securities And Exchange Commission v. Torchia et al

Filing 451

OPINION AND ORDER directing that the Receiver shall, on or before June 2, 2017, file its reply to the Sutherlands' Response brief 404 . The Court will then determine whether further proceedings are required with respect to the Receivers Motion for Order for Assignment by Katherine and Richard Sutherland to the Receivership Estate 342 . Signed by Judge William S. Duffey, Jr on 5/16/17. (ddm)

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 Receiver Al Hill’s (“Receiver”) Motion
for Order for Assignment by Katherine and Richard Sutherland to the Receivership
Estate [342].
The Receiver seeks an order requiring two Direct Investors, Katherine and
Richard Sutherland, to assign their policies to the Receivership. The Sutherlands
argue they have not been afforded due process. In SEC v. Elliott, 953 F.2d 1560
(11th Cir. 1992), the Eleventh Circuit explained:

Due process requires notice and an opportunity to be heard. Due
process essentially requires that the procedures be fair. The process
that is due varies according to the nature of the right and to the type of
proceedings. In [Matthews v.] Eldridge, [424 U.S. 319, 335 (1976),]
the Supreme Court applied a balancing test to determine what type of
procedure was required. The Court looked at the strength of the
private interest, the risk of erroneous deprivation, the probable value
of additional or substitute safeguards, and the government interest,
“including the function involved and the fiscal and administrative
burdens that the additional or substitute procedural requisites would
entail.” Generally, if government action will deprive an individual of
a significant property interest, that individual is entitled to an
opportunity to be heard. However, a hearing is not required if there is
no factual dispute.
With these factors in mind, we must decide whether the summary
procedure the district court used violated the appellants’ due process
rights. Rule 56 of the Federal Rules of Civil Procedure gives the
district court summary jurisdiction over all the receivership
proceedings and allows the district court to disregard the Federal
Rules. The district court has broad powers and wide discretion to
determine relief in an equity receivership. This discretion derives
from the inherent powers of an equity court to fashion relief. In
granting relief, it is appropriate for the district court to use summary
proceedings.
The government’s and parties’ interests in judicial efficiency underlie
the use of a single receivership proceeding. A summary proceeding
reduces the time necessary to settle disputes, decreases litigation
costs, and prevents further dissipation of receivership assets.
While the term “summary” connotes that the procedure was
abbreviated, it does not mean that the parties received no procedure at
all. We must look at the actual substance, not the name or form, of
the procedure to see if the claimants’ interests were adequately
safeguarded. Summary proceedings are inappropriate when parties
would be deprived of a full and fair opportunity to present their claims
and defenses. The appellants must show how they were prejudiced by

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the summary proceedings and how they would have been better able
to defend their interests in a plenary proceeding.
Elliott, 953 F.2d at 1566-67 (citations omitted).
In Elliott, the receiver asserted fraudulent conveyance claims against several
claimants, and the district court conducted summary proceedings to adjudicate
those claims. The claimants appealed, arguing that the summary proceedings were
inadequate. On appeal, the Eleventh Circuit found two claimants presented
specific defenses to the fraudulent conveyance claims, and were denied an
opportunity to present evidence to rebut the receiver’s claim and to present their
affirmative defenses. The Eleventh Circuit held that an evidentiary hearing was
necessary to allow them the opportunity to present their defenses. Elliott, 953 F.2d
at 1568.
The Court requires additional information to determine whether the
Sutherlands have been afforded due process. Accordingly, the Receiver shall, on
or before June 2, 2017, file its reply to the Sutherlands’ Response brief [404]. The
Court will then determine whether further proceedings are required.
For the foregoing reasons,
IT IS HEREBY ORDERED that the Receiver shall, on or before June 2,
2017, file its reply to the Sutherlands’ Response brief [404]. The Court will then
determine whether further proceedings are required with respect to the Receiver’s
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Motion for Order for Assignment by Katherine and Richard Sutherland to the
Receivership Estate [342].
SO ORDERED this 16th day of May, 2017.

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