United States Securities and Exchange Commission v. Holzhueter, Loren et al

Filing 245

ORDER denying 239 Motion for Attorney Fees. Signed by District Judge James D. Peterson on 3/9/17. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

UNITED STATES SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
ISC, INC., d/b/a INSURANCE SERVICE CENTER, and
THE ESTATE OF LOREN W. HOLZHUETER,
Defendants,

ORDER
15-cv-45-jdp

and
HONEFI, LLC, ARLENE HOLZHUETER, and
AARON HOLZHUETER,
Relief Defendants.
On October 20, 2016, the court determined that it would allow KHK to “stand with”
the defrauded investor class and recover a percentage of its attorney fees during phase I.
Specifically, “[c]ommensurate with the investor class’s projected phase I recovery, KHK will
recover only a pro rata share of its unpaid fees and expenses [during phase I].” Dkt. 192, at 6.
The court went on to explain that the investor class would recover approximately 66 percent
of their net principal losses, so KHK would likewise recover 66 percent of the total value of
its representation. Importantly, the court explicitly stated that any fees KHK had already
recovered would count against its pro rata recovery, and, by the court’s “rough calculation, this
means that KHK will be paid approximately $188,000 in phase I.” Id. at 6-7. On November
30, 2016, the court authorized the receiver to pay KHK $188,000 from the phase I funds.
Dkt. 223.

Now KHK has moved for an additional phase I payout—it seeks a pro rata share of
$242,209.79, which appears to be the balance of its unpaid fees. Dkt. 239. KHK is correct
that the court allowed it to participate in phase I. But the court’s October 20 order did not
allow KHK to collect a pro rata share of its unpaid fees; it allowed KHK to collect a pro rata
share of its total representation to date, less any payments received, which the court calculated
to be roughly $188,000.
The SEC objects to KHK’s motion and does not believe that KHK is entitled to any
additional phase I payouts. Dkt. 241. The SEC’s assessment is dead on. Again, the court
allowed KHK to collect a pro rata share of its total representation to date. For example, assuming
that the investor class will recover roughly 66 percent of their net principal losses, then KHK
may recover 66 percent of the total fees charged for its work for defendants. That value
would be off-set by the fees that KHK has recovered to date. The court’s rough calculation
back in October indicated that KHK would recover roughly $188,000 from phase I total.
Now, according to the SEC, that number actually appears to have been high, as KHK has
been paid approximately 70 percent of its total fees, and the investor class will likely recover
approximately 64 percent of their net principal balances.
KHK’s motion is denied. KHK may seek additional payment of its fees during phase
II.
Entered March 9, 2017.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge

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