Securites and Exchange Commission v.Morriss et al

Filing 321

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that the receivers motion for leave to sell preferred and common shares of Pollen, Inc., [Doc. #293 ] is granted. IT IS FURTHER ORDERED that the receiver is authorized to sell the receiverships Preferred Stock and Common Stock in Pollen, Inc. to Pollen, Inc. on the terms and conditions set forth in the motion and in Exhibit A to the motion. Signed by District Judge Carol E. Jackson on 4/2/14. (KJS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
vs.
BURTON DOUGLAS MORRISS, et al.,
Defendants.

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Case No. 4:12-CV-80 (CEJ)

MEMORANDUM AND ORDER
This matter is before the Court on the receiver’s motion for sale of preferred and
common shares of Pollen, Inc.
On January 17, 2012, the Court appointed a receiver to oversee four investment
entities established by defendant Burton Douglas Morriss. The appointment order
empowered the receiver to “administer and manage” the business affairs and property
of the investment entities and to “marshal and safeguard all of the assets of the
Investment Entities and take whatever actions are necessary for the protection of
investors.” Order at 1 [Doc. #16]. The receivership owns shares of preferred and
common stock in Pollen, Inc., a private financial software company founded in 2008.
The receiver seeks authorization to sell those shares back to Pollen, which has offered
to purchase 1,656,299 preferred shares for $2.25 per share and 31,764 common
shares for $1.00 per share.1 The proposed sale will increase the liquid assets of the

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After the receiver filed the motion, nonparty Mike McDaniel filed a motion to
intervene, pursuant to Fed.R.Civ.P. 24(a). McDaniel identified himself as a shareholder
in the receivership entities with standing to object to a proposed sale if it was not in
the best interest of the receivership estate. However, McDaniel failed to submit a claim
in compliance with the procedure established by court order, and thus forfeited his
rights to either claim or object to a distribution from the receivership. No other
objections to the proposed sale have been received.

estate, maximize the possibility of a distribution to investors, help fund the receiver’s
pursuit of recoveries against third parties, and reduce the costs of managing and
monitoring the investment.
The proposed sale is governed by 28 U.S.C. §§ 2001 and 2004. Section 2004
states that “any personalty sold under any order or decree of any court in the United
States shall be sold in accordance with section 2001, unless the court orders
otherwise.” Under § 2001, property may be sold in a public sale or, as is necessary
here, in a private sale, provided that three separate appraisals have been conducted,
the terms are published, and the sale price is no less than two-thirds of the valued
price. SEC v. Goldfarb, No. C 11-00938 WHA, 2013 WL 4504271, at *2 (Aug. 21,
2013). Section 2001 “does express a preferential course to be followed in connection
with a court authorized sale of property and . . . the district court should not order
otherwise except under extraordinary circumstances.” Tanzer v. Huffines, 412 F.2d
221, 222 (3d Cir. 1969).
The pool of potential buyers of the Pollen shares is very limited. As a private
company, Pollen is under no obligation to provide the information and diligence a
serious potential buyer would require.

Thus, only current shareholders and the

company itself are in a position to make a genuine offer.

The accounting firm

CliftonLarsonAllen LLP evaluated Pollen’s offer and concluded that the share prices
offered by Pollen would give the receivership “a rate of return commensurate with the
expected returns of venture capitalists in start-up and early development companies.
Further, the purchase provides liquidity for what would otherwise be an illiquid longterm investment.” Cover letter [Doc. #294-2].

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The Court finds that sufficient grounds exist to authorize the receiver’s sale
outside the statutory scheme set forth in 28 U.S.C. §§ 2001 and 2004. The Court
further finds that the offer by Pollen represents the best price for the preferred and
common stock under the circumstances.
Accordingly,
IT IS HEREBY ORDERED that the receiver’s motion for leave to sell preferred
and common shares of Pollen, Inc., [Doc. #293] is granted.
IT IS FURTHER ORDERED that the receiver is authorized to sell the
receivership’s Preferred Stock and Common Stock in Pollen, Inc. to Pollen, Inc. on the
terms and conditions set forth in the motion and in Exhibit A to the motion.

___________________________
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 2nd day of April, 2014.

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