Securities and Exchange Commission v. Fujinaga et al

Filing 180

IT IS HEREBY ORDERED that the parties meet and confer, and submit a revised, proposed stipulated order pursuant to the Courts discussion in this order. The parties shall submit the proposed order to this Court no later than December 16, 2014. Signed by Magistrate Judge Carl W. Hoffman on 12/2/2014. (Copies have been distributed pursuant to the NEF - DKJ)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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SECURITIES AND EXCHANGE COMMISSION, )
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Plaintiff,
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vs.
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EDWIN YOSHIHIRO FUJINAGA, et al.,
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Defendants.
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__________________________________________)

Case No. 2:13-cv-01658-JCM-CWH
ORDER

INTRODUCTION

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Before the Court is Plaintiff’s Proposed Order Appointing an Equitable Receiver (doc. # 174),

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filed November 7, 2014, Defendants’ response (doc. # 175), filed November 10, 2014, and Plaintiff’s

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reply (doc. # 176), filed November 10, 2014. Also before this Court are the receiver bid proposals.

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BACKGROUND

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At a hearing conducted on October 30, 2014, this Court ruled on Plaintiff’s motion to appoint

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a receiver and determined that it would recommend appointing a limited receivership to the district

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judge for the purpose of managing and maintaining real property in the instant case. See Doc. # 145;

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Doc. # 170. At the hearing, moreover, this Court directed the parties to meet and confer, and submit

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a proposed stipulated order addressing the issues raised by Plaintiff’s motion, along with Defendants’

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and this Court’s comments, and to file a joint status report no later than November 13, 2014. On

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November 12, 2014, the parties filed their joint status report. See Doc. # 177. Thereafter, Plaintiff

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filed the proposed order at issue. Plaintiff also forwarded the receiver bid proposals to this Court.
DISCUSSION

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1.

Proposed Order Appointing a Receiver
Plaintiff has submitted an unstipulated proposed order appointing an equitable receiver in the

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instant case. See Doc. # 174. Defendants, in opposition, contend they did not stipulate to Plaintiff’s

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proposed order because it is “far more expansive” than this Court’s ruling. Doc. # 175 at 2. For

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example, Defendants point out that the proposed order erroneously includes “all personal property”

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of Defendants. Id. at 3. Defendants explain that Plaintiff is not entitled to computers, servers, and

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technical equipment, which are protected because they contain confidential information and have

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nothing to do with the management or sale of real property. Defendants then point out that one of the

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properties listed, the Harmon Medical Center, is neither vacant nor unused, and not entirely owned by

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Defendants and, thus, should not fall within the scope of the Court’s limited receivership order.

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Defendants also contend that Defendant MRI International, Inc., should not be required at this point

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to indemnify, defend, and hold harmless any receiver because Plaintiff has not yet established damages

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in the instant case and Defendants prefer to retain any and all rights to hold a wayward receiver

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accountable.

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In reply, Plaintiff argues that personal property should be included in the proposed order

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because it would be “disruptive” to allow Defendants continued access to personal property, and such

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property cannot remain, especially once the real property is sold. See Doc. # 176 at 2. To address

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Defendants’ concerns, per Plaintiff, the Court could add a provision in the order directing the receiver

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to maintain the confidentiality of information contained in any personal property, and to dispose of

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such information in an appropriate manner and in consultation with Defendants. Plaintiff also argues

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that the Harmon Medical Center should be included in the receivership roster because the property

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“closed” several weeks ago due to nonpayment of its medical malpractice insurance. Id. To the extent

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a tenant occupies a portion of the property, per Plaintiff, the order includes language that allows the

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receiver to serve as a landlord and collect all rents. According to Plaintiff, moreover, the owner of the

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Harmon Medical Center is no longer a viable legal entity, which confirms the need to appoint a

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receiver for that property. Plaintiff further argues that the indemnification clause should remain to

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protect the receiver from “intimidating strike suits” by Defendants or their creditors “seeking an unfair

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advantage.” Id. at 3.

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As a preliminary matter, this Court notes that the proposed order is rife with issues, including

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failing to adequately describe the properties, and failing to state why the properties should be included
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in the receiver’s roster (i.e., due to vandalism, waste, etc.). The proposed order also includes

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provisions this Court did not grant, such as: (1) a provision allowing the receiver to employ other

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persons to assist it in its duties, and (2) a provision allowing the receiver to list and market “all”

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properties (i.e., real and personal property) for sale or lease, which Defendants rightly point out. This

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Court addresses each of the issues raised by Plaintiff’s proposed order:

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a.

Property List

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This Court finds that the property list submitted by Plaintiff is inadequate. As such, Plaintiff

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shall submit a list to this Court, attached as an exhibit to the proposed order, containing all the

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properties Plaintiff believes the receiver should assume control over and conserve, and provide a fuller

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description of each of these properties and reasons why (e.g., waste, vandalism, no viable owner) these

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properties should be included on the list.

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b.

Harmon Medical Center Property

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This Court finds that the property should be included on the list because, as Plaintiff rightly

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points out, the property is closed and no viable legal owner exists. Moreover, to the extent a tenant

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occupies a portion of that property, the receiver can serve as a landlord to manage the property and

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collect rent.

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c.

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This Court agrees with Plaintiff that it would be disruptive to allow Defendants continued

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access to personal property. This Court also agrees with Plaintiff that the proposed order should

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include a provision allowing the receiver to: (1) assume control over personal property, (2) maintain

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the confidentiality of information contained in such property, and (3) dispose of such information in

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an appropriate manner and in consultation with Defendants.

Personal Property

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d.

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This Court finds that the indemnification provision should remain in the proposed order to

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Indemnification of Receiver

allow the receiver to effectively carry out his or her duties.

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e.

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The Court finds the provision allowing the receiver to employ other persons is unwarranted.

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Employing Other Persons

If the issue ever arises, the receiver shall bring by motion his or her request.
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f.

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The Court also finds value in adding a new provision in the proposed order requiring the

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receiver to submit a report to this Court as required by Civil Local Rule 66-4, and a status report every

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90 days for the purpose of apprising the Court of the receiver’s activities.

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Status Report

Accordingly, this Court directs the parties to meet and confer, and submit a revised proposed

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order pursuant to the Court’s discussion above.

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2.

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Receiver Bid Proposals
The Court has received the bid proposals. The Court will review the proposals and make a

recommendation to the district judge in due course.
CONCLUSION AND ORDER

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Based on the foregoing and good cause appearing therefore, IT IS HEREBY ORDERED that

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the parties meet and confer, and submit a revised, proposed stipulated order pursuant to the Court’s

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discussion in this order. The parties shall submit the proposed order to this Court no later than

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December 16, 2014.

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DATED: December 2, 2014

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______________________________________
C.W. Hoffman, Jr.
United States Magistrate Judge

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