U.S. Securities and Exchange Commission v. Wilson et al

Filing 62

ORDER granting in part and denying in part 60 Motion for Appointment of Real Estate Brooker and for Waiver of Statutory Requirements for Private Sale of Real Property. Signed by District Judge Thomas L. Ludington. (SGam)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
U.S. SECURITIES AND
EXCHANGE COMMISSION,
Plaintiff,
v.

Case Number 12-cv-15062
Honorable Thomas L. Ludington

JOEL WILSON et al.,
Defendants.
________________________________________/
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART RECEIVER’S
MOTION FOR APPOINTMENT OF REAL ESTATE BROKER AND WAIVER OF
STATUTORY REQUIREMENTS FOR PRIVATE SALE OF REAL PROPERTY
Does shall mean may or must? The United States Code provides that before confirming a
receiver’s private sale of real property “the court shall appoint three disinterested persons to
appraise such property.” 28 U.S.C. § 2001(b) (emphasis added).
Does this mean that the court must appoint three appraisers? Or simply that it may? Can
it appoint just one?

The receiver in this case, Mr. Randall Frank, asserts that the latter

interpretation is permissible. The U.S. Securities and Exchange Commission, which initiated
this case against several defendants and obtained the appointment of Mr. Frank as receiver over
Defendants’ estate, does not object to this interpretation. And yet.
Shall mean may?

How can this be “when every lawyer knows that it denotes a

mandatory action?” Bryan Garner, Dictionary of Modern Legal Usage 952 (3d ed. 2011). Or at
least it is supposed to. See generally Antonin Scalia & Bryan Garner, Reading Law: The
Interpretation of Legal Texts 114 (2012) (observing that “when the word shall can be reasonably
read as mandatory, it ought to be so read”).

The short answer is that yes, shall may indeed mean may, but not in § 2001(b). To
elaborate, notwithstanding popular legal wisdom, shall isn’t always a mandatory must.
Sometimes it’s a permissive may. E.g., Fed. R. Civ. P. 16(e) (amended 2007); see generally
Gutierrez de Martinez v. Lamagno, 515 U.S. 417, 434 n.9 (1995) (“Though ‘shall’ generally
means ‘must,’ legal writers sometimes use, or misuse, ‘shall’ to mean ‘should,’ ‘will,’ or even
‘may.’”). But not in § 2001(b).
Illustrating the use (or misuse) of the permissive shall is the former Federal Rule of Civil
Procedure 16. Before restyling in 2007, the rule provided: “The order following a final pretrial
conference shall be modified only to prevent manifest injustice.”

Fed. R. Civ. P. 16(e)

(emphasis added) (amended 2007). What the rule means, of course, is that a court may modify
the order, not that the court must do so. And this is precisely what the current rule provides:
“The court may modify the order issued after a final pretrial conference only to prevent manifest
injustice.” Fed. R. Civ. P. 16(e) (emphasis added).
The shall of § 2001(b), in contrast, is unambiguously mandatory. “Before confirmation
of any private sale, the court shall appoint three disinterested persons to appraise such property.”
28 U.S.C. § 2001(b) (emphasis added). The subject, the court, is required to take a specific
action. Before confirming a sale, appoint three disinterested persons as appraisers. Not none.
Not one. Not two. Three.
Context reinforces the conclusion. Section § 2001, as noted, governs the sale of real
property; section 2004, the sale of personal property. “Any personalty sold under any order or
decree of any court of the United States,” that section provides, “shall be sold in accordance with
section 2001 of this title, unless the court orders otherwise.” 28 U.S.C. § 2004 (emphasis

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added). Thus, for the sale of personal property a court may require that the sale comply with the
strictures of § 2001, but a court may also make an exception.1 It may order otherwise.
In enacting § 2001(b), however, Congress did not confer similar discretion on the court.
The court shall appoint three appraisers — no ordering otherwise.

No discretion, period.

Consequently, before authorizing the private sale of real property held by Mr. Frank, three
disinterested persons must be appointed as appraisers. One will not suffice.
In reaching this decision, the Court is fully conscious of the costs that this will impose on
the estate and, more importantly, those who will ultimately bear those costs. Increasing the costs
of administering the estate harms the estate’s creditors, the very people that § 2001(b) was
presumably drafted to protect. Congress, however, has elected to draw a bright line in § 2001(b).
Three appraisers for real property, no exceptions, regardless of the size of the estate. Thus, while
even a single obscure Winslow Homer painting may be more valuable than the priciest parcel in
this estate’s real property portfolio, Congress has decreed that three appraisals are required for
each parcel regardless of its value. And while as a matter of policy this Court may wish to create
exceptions for situations such as this, the Court is not free to disregard the plain meaning of the
statute.
The word shall in § 2001(b) unambiguously means must, and so this Court interprets the
word just so. Before confirmation of any private sale, a court must appoint three disinterested
persons to appraise the property. One will not do. Mr. Frank’s request to have the Court order
otherwise than in accordance with § 2001(b) will be denied.
In Mr. Frank’s motion, he also requests authorization to employ Century 21-Signature
Realty as his real estate broker. That request will be granted.

1

Another permissive shall is contained within § 2004, but it is permissive only because of the dependent
clause “unless the court orders otherwise.”
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Accordingly, it is ORDERED that the Receiver’s motion (ECF No. 60) is GRANTED
IN PART AND DENIED IN PART.
The Receiver’s request that the requirements of § 2001 be waived is DENIED. The
Receiver’s request that Century 21-Signature Realty be appointed as real estate broker is
GRANTED.
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
Dated: March 28, 2013

PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was served
upon each attorney or party of record herein by electronic means or first
class U.S. mail on March 28, 2013.
s/Tracy A. Jacobs
TRACY A. JACOBS

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