Federal Trade Commission v. Ivy Capital, Inc. et al

Filing 435

ORDER Denying 427 Motion for release of funds. Signed by Judge James C. Mahan on 6/17/2014. (Copies have been distributed pursuant to the NEF - SLR)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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FEDERAL TRADE COMMISSION,

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2:11-CV-283 JCM (GWF)

Plaintiff,

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v.

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IVY CAPITAL, INC., et al.,

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Defendants.

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ORDER

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Presently before the court is the individual defendants Benjamin and Leanne Hoskins’

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(hereinafter “defendants”) motion for release of funds. (Doc. # 427). The plaintiff, the Federal Trade

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Commission (“FTC”), responded with its opposition to the motion, (doc. # 430), and the defendants

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replied (doc. # 434).

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I.

Background

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The FTC filed a complaint alleging that the defendants were deceptively telemarketing

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products and services that would purportedly assist consumers in developing their own lucrative

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internet business. (Doc. # 430). The FTC simultaneously moved the court for an ex parte temporary

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restraining order (“TRO”) that froze the defendants’ personal and corporate assets and appointed a

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receiver.

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At a preliminary injunction hearing on March 23, 2011, the court outlined a procedure by

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which the defendants could request the release of limited funds for attorney’s fees. On March 25,

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2011, the court ordered the substantive provisions of the preliminary injunction to continue and the

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receivership to become permanent.

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James C. Mahan
U.S. District Judge

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In August 2011, the court ordered that the parties submit proposed budgets for litigation fees

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and costs. (Doc. # 229). The proposal (doc. # 236) was submitted and approved in November 2011.

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Since that time, the defendants have submitted and received payments for $181,592.11 of actual

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legal fees out of the assets currently subject to the freeze. The budget included expenses for:

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“pleadings and pre-discovery matters; discovery; dispositive motions; case management/planning;

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pre-trial and trial.” (Doc. # 430). The budget did not include any expenses for an appeal. Id.

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The court thereafter granted the plaintiff’s motion for summary judgment on March 26, 2013.

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The case is currently pending appeal. On January 22, 2014, defendants’ counsel contacted the

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receiver to submit the most recent invoice for legal fees totaling approximately $42,000. The receiver

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rejected the request, which resulted in the filing of the current motion.

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II.

Legal Standard

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“It is fundamental that the mere pendency of an appeal does not, in itself, disturb the finality

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of a judgment.” Wedbush, Noble, Cooke, Inc. v. S.E.C., 714 F.2d 923, 924 (9th Cir. 1983) (citing

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Hovey v. McDonald, 109 U.S. 150, 161 (1883)).

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Furthermore, “[a] defendant has no Sixth Amendment right to spend another person's money

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for services rendered by an attorney, even if those funds are the only way that [the] defendant will

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be able to retain the attorney of his choice.” Caplin & Drysdale, Chartered v. United States, 491 U.S.

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617, 626 (1989).

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Therefore, once a case has been fully adjudicated on the merits, “[the defendant] has no right

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to use any of the frozen money for his own purposes,” and all frozen assets, whether a “product of

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fraud or necessary to compensate the victims of the fraud for their losses,” must be used to

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compensate victims before satisfying attorney’s fees. F.T.C. v. Think Achievement Corp., 312 F.3d

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259, 262 (7th Cir. 2002); see also CFTC v. Noble Metals Int’l, 67 F.3d 766, 775 (9th Cir. 1995)

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(holding that a court may completely forbid payment of attorney’s fees out of frozen assets, and

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when frozen assets fall short of amount needed to compensate victims there is “reason enough” to

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deny attorney’s fees). This is especially true when counsel is aware of the frozen assets and therefore

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assumes the risk that those funds will not be released. See FTC v. Sharp, 1991 U.S. Dist. LEXIS

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James C. Mahan
U.S. District Judge

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19295, at *4 (D. Nev. July 23, 1991).

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III.

Discussion

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In the instant case, because the court has awarded summary judgment on the merits in favor

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of the FTC, it is entitled to the frozen assets in order to enforce the court’s judgment. Allowing the

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defendants to further deplete the funds would be unfair to the victims of the defendants’ fraud. Such

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payment would be inequitable especially in light of the fact that the defendants’ counsel was aware

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of the frozen assets and failed to get appellate fees included in the approved budget.

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Accordingly,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the defendants’ motion

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for release of funds (doc. # 427) be, and the same hereby is, DENIED.
DATED June 17, 2014.

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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge

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