Opinion
1:19-CV-00661 EAW
2020-12-03
SECURITIES AND EXCHANGE COMMISSION, Plaintiff, v. Robert C. MORGAN, Morgan Mezzanine Fund Manager LLC, and Morgan Acquisitions LLC, Defendants.
Lee Attix Greenwood, Neal Ralph Jacobson, Daniel Michael, U.S. Securities and Exchange Commission, New York, NY, for Plaintiff. Joel M. Cohen, Caitlin S. Walgamuth, Lee Gordon Dunst, Gibson, Dunn & Crutcher, LLP, New York, NY, for Defendants.
Lee Attix Greenwood, Neal Ralph Jacobson, Daniel Michael, U.S. Securities and Exchange Commission, New York, NY, for Plaintiff.
Joel M. Cohen, Caitlin S. Walgamuth, Lee Gordon Dunst, Gibson, Dunn & Crutcher, LLP, New York, NY, for Defendants.
DECISION AND ORDER
ELIZABETH A. WOLFORD, United States District Judge On November 30, 2020, Court-appointed receiver Robert Knuts (the "Receiver") filed a "second fee application" seeking approval to "pay the interim fees and expenses of the Receiver and the professional services firms that have rendered services on the Receiver's behalf from April 1, 2020 to September 30, 2020 (the ‘Second Application Period’)." (Dkt. 148) (the "Second Fee Application"). In particular, the Receiver asks the Court to approve the payment of: (1) $33,723.62 in fees and $99.23 in expenses to the Receiver and his law firm, Sher Tremonte LLP ("Sher Tremonte"); and (2) $31,560 in fees and $532 in expenses to Greendyke Jencik & Associates, CPAs, PLLC ("Greendyke"). (Id. at 2). The Receiver also asks the Court to approve the payment of invoices issued by DeJoy, Knauf & Blood, LLP ("DeJoy"), dated between January 22, 2019, and May 15, 2019, in the total amount of $20,000, for tax accounting services provided to certain of the Receivership Entities by that firm prior to appointment of the Receiver and prior to commencement of this litigation. (Id. ; see Dkt. 148-4). The Receiver represents that neither plaintiff the Securities and Exchange Commission ("SEC") nor counsel for defendants object to the Second Fee Application. (Id. at 2).
On June 18, 2020, the Court entered a Text Order authorizing the Receiver to employ Greendyke to provide tax accounting services for the Receivership entities. (Dkt. 99).
As a matter of discretion, the Court previously required distribution of the Receiver's first fee application to the investors. However, this was not required under the law. See generally SEC v. Byers , 590 F. Supp. 2d 637, 643, 646 n.3 (S.D.N.Y. 2008) (rejecting argument that fee application should be denied due to a "lack of a set procedure for notifying investors and creditors and giving them an opportunity to be heard"). The Court did not receive any substantive objections from the investors to the reasonableness of the first fee application—which sought fees that were much more significant than the present application. Under the circumstances, the Court concludes that it is unnecessary to direct distribution of the Second Fee Application to all investors.
"A receiver appointed by a court who reasonably and diligently discharges his duties is entitled to be fairly compensated for services rendered and expenses incurred. The amount of the compensation is to be determined by the court in the exercise of its reasonable discretion." SEC v. Byers , 590 F. Supp. 2d 637, 644 (S.D.N.Y. 2008) (citations omitted). "This presumption of reasonable compensation extends to a receiver's counsel and professionals." SEC v. Platinum Mgmt. (NY) LLC , No. 16-CV-6848 (BMC), 2018 WL 4623012, at *4 (E.D.N.Y. Sept. 26, 2018).
The Court considers several factors in determining a reasonable fee, including "(1) the complexity of problems faced, (2) the benefits to the receivership estate, (3) the quality of the work performed, and (4) the time records presented." Id. (quotations omitted). The Court may also consider "the reasonableness of the hourly rate charged and the reasonableness of the number of hours billed." SEC v. Amerindo Inv. Advisors Inc. , No. 05 Civ. 5231 (RJS), 2015 WL 13678841, at *1 (S.D.N.Y. Sept. 14, 2015) (citations omitted). "In addition, in a securities receivership, opposition or acquiescence by the SEC to the fee application will be given great weight." Byers , 590 F. Supp. 2d at 644 (quotation and alteration omitted).
Here, the Court finds the fees and expenses requested by the Receiver with respect to his services, the services of Sher Tremonte, and the services of Greendyke, to be reasonable. The issues presented in this litigation have been complex; the Receiver's efforts have resulted in significant benefits to the Receivership Estate; the services performed have been satisfactory; the Receiver has submitted detailed, contemporaneous time records reflecting his work and that of other professionals at Sher Tremonte; and the rates are reasonable and consistent with those previously approved by the Court. (See Dkt. 148-2). The Court similarly finds that with respect to the fees charged by Greendyke, the services provided were necessary; the rates charged are in accordance with those approved by the Court; and the Receiver has submitted detailed, contemporaneous time records reflecting that firm's work. (See Dkt. 148-3). Therefore, the Second Fee Application is approved as to fees requested by the Receiver, Sher Tremonte, and Greendyke.
As to the request to pay the Receivership Entities’ outstanding debts to DeJoy, the Receiver is empowered to "[p]ay from the Receivership Estate necessary expenses to preserve the Receivership Assets," but must seek the Court's approval before making (1) payments that exceed $10,000.00 or (2) payments "on account of any debt or obligation incurred prior the commencement of the receivership." (Dkt. 39 at 4). It is an appropriate use of Receivership Assets to satisfy valid debts owed by the Receivership Entities. See SEC v. Credit Bancorp, Ltd. , 124 F. Supp. 2d 824, 827 (S.D.N.Y. 2000) (noting that valid debts would be satisfied as part of the distribution of the receivership estate). Particularly in light of the SEC's lack of objection, the Court finds it appropriate to grant the Receiver's request to pay $20,000 to DeJoy, in satisfaction of the Receivership Entities’ outstanding debt.
For these reasons, and affording the appropriate weight to the SEC's approval of the requested fees and expenses, the Court grants the Second Fee Application in its entirety and approves an interim payment of $33,723.62 in fees and $99.23 in expenses to the Receiver and Sher Tremonte, and $31,560 in fees and $532 in expenses to Greendyke, as well as the payment of $20,000 in invoices to DeJoy.
SO ORDERED.