Case :0-cv-00-BEN-NLS Document - Filed 0//00 Page of 0 DAVID L. OSIAS (BAR NO. 0) ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS LLP 0 West Broadway, th Floor San Diego, California 0- Phone: () - Fax: () - E-Mail: dosias@allenmatkins.com JOSHUA A. DEL CASTILLO (BAR NO. 0) ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS LLP South Figueroa Street, th Floor Los Angeles, California 00-0 Phone: () - Fax: () 0- E-Mail: jdelcastillo@allenmatkins.com Attorneys for Receiver Stephen J. Donell UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA 0 SECURITIES AND EXCHANGE COMMISSION, v. Plaintiff, PLUS MONEY, INC. and MATTHEW LA MADRID, Defendants, THE PREMIUM RETURN FUND LIMITED- LIABILITY LIMITED PARTNERSHIP, ET AL., Relief Defendants. Case No. :0-cv-0 BEN (NLS) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF FIRST INTERIM FEE APPLICATIONS OF RECEIVER, STEPHEN J. DONELL, AND HIS PROFESSIONALS, FOR PAYMENT OF FEES AND REIMBURSEMENT OF EXPENSES Date: November, 00 Time: 0:0 a.m. Ctrm: Judge: Hon. Roger T. Benitez Stephen J. Donell (the "Receiver") court-appointed permanent receiver for Defendant Plus Money, Inc. and Relief Defendants The Premium Return Fund Limited-Liability Limited Partnership, The Premium Return Fund II Limited-Liability Limited Partnership, The Premium Return Fund III Limited-Liability Limited Partnership, Return Fund, LLC, Return Fund II, LLC, 0.0/SD --
Case :0-cv-00-BEN-NLS Document - Filed 0//00 Page of 0 0 Return Fund III, LLC, Return Fund IV, LLC, Return Fund V, LLC, Return Fund VI, LLC, and their subsidiaries and affiliates (collectively with Plus Money, Inc., the "Receivership Entities") in the above-captioned matter hereby submits this Memorandum of Points and Authorities in Support of the Interim Applications for Payment of Fees and Reimbursement of Expenses (the "Applications") filed by the Receiver and his professionals, Mallory & Natsis, LLP ("Allen Matkins"); Schaefer & Company ("Schaefer"), and LECG, LLC ("LECG") (collectively, the "Professionals"). Pursuant to the concurrently-filed Applications, the Receiver and his Professionals request that the Court allow the requested fees and expenses, and authorize the Receiver to pay the fees and expenses out of net assets of the Receivership Entities (sometimes referred to herein as "Receivership Assets"). I. PRELIMINARY STATEMENT. The Applications submitted by the Receiver and his Professionals represent the first fee and expense applications submitted to the Court in this matter. The Receiver and his Professionals have worked diligently since the inception of this matter without compensation or reimbursement of expenses. Interim fee awards are a recognized and necessary mechanism for ensuring that competent professionals remain willing to serve as receivers, attorneys, and accountants for receivers. The fees and expenses requested in the Applications are reasonable, and the services rendered were necessary and benefited the receivership estate. Pursuant to the Order in Aid of Receivership, the Receiver and his professionals are allowed to file interim fee applications approximately every 0 days. Once the fee application time period has been determined, the billing statements are forwarded for review by the United States Securities and Exchange Commission (the "Commission"). The Commission provides its comments within a 0-day window. Thereafter, the applications are prepared and filed. The period for these interim applications covers from the commencement of the receivership to the filing of the Receiver's first status report. The Receiver requests the authority to pay allowed fees and costs incurred by the Receiver and his Professionals from the inception of this case through July, 00, on an interim basis from net Receivership Assets. As of September 0, 00, - the most recent date for which a full 0.0/SD --
Case :0-cv-00-BEN-NLS Document - Filed 0//00 Page of accounting is available the Receiver held over $ million available in net receipts from which to pay the requested fees and costs in the aggregate amount of $,. to the Receiver and his Professionals,. (See concurrently filed Declaration of Stephen J. Donell [hereinafter "Donell Decl."], Ex. A.) As discussed above, the Receiver provided his billing statements and those of his Professionals to the Commission prior to filing. No objections were received from the Commission to the payment of the requested fees and costs. 0 II. THE COURT HAS THE AUTHORITY AND DISCRETION TO APPROVE THE REQUESTED INTERIM FEES AND EXPENSES. "As a general rule, the expenses and fees of a receivership are a charge upon the property 0 administered." Gaskill v. Gordon, F.d, (th Cir. ). These expenses include the fees and expenses of the Receiver and his Professionals. Decisions regarding the timing and amount of an award of fees and costs to the Receiver and his Professionals are committed to the sound discretion of the Court. See SEC v. Elliot, F.d 0, (th Cir. ) (rev'd in part on other grounds, F.d (th Cit. )). Here, the Order in Aid of Receivership and Order Approving Receiver's Employment of Counsel and Accountants specifically authorize the submission of interim fee applications to the Court approximately every 0 days. A. The Fees Requested By The Receiver And His Professionals Are Reasonable. In determining the reasonableness of fees and expenses requested in this context, a District Court should consider the time records presented, the quality of the work performed, the complexity of the problems faced, and the benefit of the services rendered to the receivership estate. SEC v. Fifth Avenue Coach Lines, Inc., F.Supp. 0, (S.D.N.Y. ). In a practical sense, the Court should begin by multiplying the number of hours expended by the identified hourly rates charged for comparable services in other matters. Southwestern Media, Inc. v. Rau, 0 F.d, (th Cir. ). Here, the Applications describe the nature of the services rendered, and where appropriate, the identify and billing rate of the individuals performing each task. The Receiver and his Professionals have endeavored to staff matters as efficiently as possible in light of the level of 0.0/SD --
Case :0-cv-00-BEN-NLS Document - Filed 0//00 Page of experience required and the complexity of the issues presented. In general, the Applications utilize the Receiver's and his Professionals' customary billing rates and reflect the rates charged for comparable services in other matters, less any discounts or reductions specifically identified in the Applications. The average billing rates are as noted in the Applications. 0 0 The Receiver has reviewed each Application, and believes the fee and expense requests to be fair and reasonable, and an accurate representation of the work performed. (Donell Dec..). The Receiver likewise believes that the receivership estate has benefited from the services identified. Id. B. The Fees And Expenses Requested By The Receiver And His Professionals Have Been Submitted To The Commission, Without Objection. Courts often consider the judgment and experience of the Commission relating to receiver compensation. "[I]t is proper to [keep] in mind that the [Commission] is about the only wholly disinterested party in [this] proceeding and that its experience has made it thoroughly familiar with the general attitude of the Courts and the amounts of allowances made in scores of comparable proceedings." In re Philadelphia & Reading Coal & Iron Co., F. Supp. 0, (D.C. Pa. ). Indeed, the Commission's perspectives are not "mere casual conjectures, but are recommendations based on closer study than a district judge could ordinarily give to such matters." Finn v. Childs Co., F. d, (d Cir. 0) (internal quotation marks omitted). In fact, "recommendations as to fees of the SEC may be the only solution to the 'very undesirable subjectivity with variations according to the particular judge under particular circumstances' which has made the fixing of fees seem often to be 'upon nothing more than an ipse dixit basis.'" Id. Thus, the Commission's perspective on the matter should indeed by given "great weight," as observed by the court in Fifth Avenue Coach Lines, Inc., F. Supp. at. In order to ensure that the fees and costs requested in the Applications are appropriate, the Receiver and his Professionals have submitted their respective invoices to the Commission for review. There is no present objection. The Commission's apparent satisfaction with the subject As an example, although Allen Matkins attorneys were required to travel within California to attend hearings, etc., Allen Matkins will write off all such travel time. 0.0/SD --
Case :0-cv-00-BEN-NLS Document - Filed 0//00 Page of 0 invoices deserves deference. As the Philadelphia & Reading Coal & Iron Co. court observed, the Commission is "thoroughly familiar with the amounts of allowances made in scores of comparable proceedings." F.Supp. at. Indeed, the Commission is likely in the best position to measure the fees requested here against those incurred in other, similar proceedings, and cases of similar complexity. The Receiver and his Professions thus respectfully request that the Court approve all requested fees and costs. C. Interim Fees And Costs Are Appropriate Under The Circumstances. Interim fee and costs allowances are appropriate where both the magnitude and the protracted nature of a case impose economic hardships upon the professionals rendering services for the benefit of an estate. Matter of Interstate Stores, Inc., F.Supp., (S.D.N.Y. ). Interim allowances are necessary "to relieve counsel and others from the burden of 'financing' lengthy and complex efforts." In re Mansfield Tire and Rubber Co., B.R., (Bankr. N.D. Ohio ). Here, the Receiver and his Professionals have been rendering service, uncompensated, for approximately three months. Given the complexity of the matter, as described above, the Receiver and his Professionals have made a substantial commitment of time, dedicated significant resources, and advanced significant costs. It is both necessary and equitable that the Receiver and his Professionals be compensated at this time on an interim basis. 0 III. THE RECEIVER SHOULD BE AUTHORIZED TO PAY ALLOWED FEES AND COSTS FROM CASH ON HAND. As of September 0, 00, the Receiver held approximately $,,0. in net receipts, comprised of cash recovered from financial institutions holding Receivership Assets and funds recovered from the accounts of Relief Defendants Donald Lopez ("Lopez") and Palladium Holding Company ("Palladium"). (Donell Decl., Ex. A.) Pursuant to a previously filed Stipulation and Request for Order to Amend Preliminary Injunction (the "Palladium Stipulation"), the Receiver was to segregate the funds recovered from the accounts of Lopez and Palladium, 0.0/SD --
Case :0-cv-00-BEN-NLS Document - Filed 0//00 Page of 0 pending further order of the Court. (Id.) By the terms of the Palladium Stipulation, Palladium did not waive any defenses or claims it might be entitled to raise with respect to the funds recovered from its account. For this reason, the payment of the fees and costs requested in the Applications from the funds recovered from the accounts of Lopez and Palladium may be subject to objection. In the aggregate, the Receiver holds funds far in excess of those requested in the Applications, and the Receiver respectfully requests the Court's permission to pay requested fees and costs from this cash on hand. By their concurrently filed Applications, and in conformity with the terms of the Palladium Stipulation, the Receiver respectfully requests that the Court exercise its broad discretion and enter an order permitting the him to pay the fees and costs requested in the Applications from the net receipts currently on hand, including from the funds recovered from the Lopez and Palladium accounts. IV. CONCLUSION. The Receiver requests that this Court approve the Applications and authorize interim payment in the amount of the sums requested. Dated: October, 00 0 By: /s/ David L. Osias DAVID L. OSIAS ALLEN MATKINS LECK GAMBLE MALLORY & NATSIS LLP Attorneys for Receiver Stephen J. Donell The Receiver has complied with the terms of the Palladium Stipulation. 0.0/SD --
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