Federal Trade Commission et al v. Vantage Point Services, LLC et al
Filing
119
DECISION AND ORDER re 71 MOTION for release of funds from receivership estate filed by Payment Management Solutions, Inc., Angela Burdorf, Vantage Point Services, LLC, Megan Vandeviver, Gregory Mackinnon. Signed by Hon. H. Kenneth Schroeder, Jr on 5/3/2016. (KER)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
FEDERAL TRADE COMMISSION, et al.,
Plaintiffs,
v.
15-CV-6S(Sr)
VANTAGE POINT SERVICES, LLC., et al.,
Defendants.
DECISION AND ORDER
This case was referred to the undersigned by the Hon. William M.
Skretny, in accordance with 28 U.S.C. § 636(b)(1)(A), for all pretrial matters, and for
hearing and disposition of all non-dispositive motions or applications. Dkt. #64.
Plaintiffs commenced this action pursuant to Section 13(b) of the Federal
Trade Commission Act, 15 U.S.C. § 53(b) (“FTCA”); Section 814 of the Fair Debt
Collection Practices Act, 15 U.S.C. § 1692l (“FDCPA”); New York Executive Law
§ 63(12); and New York General Business Law §§ 349 and 602, alleging abusive and
deceptive debt collection practices by defendants. Dkt. #1.
Currently before the Court is a motion (Dkt. #71), by defendants Vantage
Point Services, LLC; Payment Management Solutions, Inc; Greg MacKinnon; Angela
Burdorf; and Megan VanDeViver seeking release of $50,000 for defendants’ legal
defense from the receivership estate created by an Ex Parte Temporary Restraining
Order With Asset Freeze (“TRO”), issued by the Court on January 5, 2015 (Dkt. #11),
and continued by entry of a Preliminary Injunction With Asset Freeze on May 15, 2015.
Dkt. #62. In support of the motion, defendants’ attorney declares that “defendants
require resources to conduct the discovery process and prepare for trial.” Dkt. #71-1,
¶ 11. More specifically, defendants’ attorney declares that
The living allowances carved out of the TRO since January
($5,000 for defendant MacKinnon and $8,000 for defendant
Burdorf) is not nearly sufficient to support their families, let
alone to compensate counsel.
Dkt. #71-1, ¶ 33.
In opposition to the motion, plaintiffs argue that defendants have not
provided the Court with an accounting of their finances or any evidence to suggest that
they are unable to provide for their legal defense absent release of funds from the
receivership estate. Dkt. #75. Plaintiffs note that prior to the establishment of the
receivership estate, millions of dollars were transferred to associates, including
defendants’ relatives, suggesting that defendants have access to funds that are being
held by non-parties to this action. Dkt. #75.
In reply, counsel for defendants’ declares that the individual defendants
provided a sworn and verified inventory of their financial holdings pursuant to the terms
of the TRO and that defendants’ responses to plaintiffs’ discovery demands
substantiate the defendants’ explanation of the transfers as primarily relating to the
purchase of debt portfolios. Dkt. #76, ¶ ¶ 23 & 29.
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In sur reply, plaintiffs’ counsel declares that their investigation has
revealed payment to defendant Joseph Ciffa of $340,000 in cashier’s checks from debt
collection activities undertaken after this action was filed, thereby substantiating
plaintiffs’ belief that defendants have access to sufficient funds for their legal defense.
Dkt. #92.
“[J]ust as this Court has the authority to freeze assets in this civil
enforcement action, it also has the discretion to unfreeze those assets when equity
requires.” FTC v. 4 Star Resolution, LLC, No. 15-CV-112, 2015 U.S. Dist. LEXIS
91069, *4 (W.D.N.Y. July 14, 2015). However, any determination to release funds
must account for the fact that the asset freeze was imposed to ensure the Court’s ability
to fashion an appropriate remedy, such as restitution to the victims, should the plaintiffs
prevail in the prosecution of this action. Id. The Court must also be mindful that
wrongdoing has not been determined and that defendants should not be prevented
from defending against the accusations set forth in the complaint. Id.
In balancing the defendants’ right to fund their defense against the
preservation of assets to compensate potential victims, the Court considers “whether
the defendants have other available funds by which to pay their attorneys, which
requires full financial disclosure by the defendants” as well as “the claims of the
consumers who were the victims of the defendants’ [alleged] wrongdoing.” Id. at 5,
quoting FTC v. QT, Inc., 467 F. Supp.2d 863, 866 (N.D. Ill. 2006). As determined by
the Court of Appeals for the Fifth Circuit, while “some kind of allowance must be made
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to permit each defendant to pay reasonable attorneys’ fees if [the defendant] is able to
show that he cannot pay them from new or exempt assets; the burden . . . will be on the
defendant to satisfy the court that he can secure the services of an attorney only if
assets subject to the freeze order are released.” Federal Savings & Loan Ins. Corp. v.
Dixon, 835 F.2d 554, 565 (5th Cir. 1987). “A district court may, within its discretion,
forbid or limit payment of attorney fees out of frozen assets.” CFTC v. Noble Metals
Int’l, 67 F.3d 766, 775 (9th Cir. 1995).
Defendants have not met their burden in the instant case.
Notwithstanding counsel’s reference to the financial disclosures required by the TRO,
such disclosures would only be accurate as of the date of filing, to wit, January, 2015,
and would not account for any salary received from current employment or financial
resources received or otherwise available from other sources. Moreover, defendants
have presented no accounting of assets within the receivership estate so as to permit
the Court to consider the proportion of assets that defendants are seeking to remove
from the reach of potential victims. Absent a declaration setting forth such information,
the Court cannot properly consider defendants’ request for release of funds.
Accordingly, defendants’ motion is denied.
SO ORDERED.
DATED:
Buffalo, New York
May 3, 2016
s/ H. Kenneth Schroeder, Jr.
H. KENNETH SCHROEDER, JR.
United States Magistrate Judge
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