United States District Court, D. Connecticut
RULING GRANTING RELIEF DEFENDANTS' EMERGENCY
MOTION FOR APPELLATE ATTORNEY FEES
JANET
BOND ARTERTON, U.S.D.J.
Relief
Defendants move for the release of $350, 000 from the assets
of the Receivership Estate “to pay for Relief
Defendants' appellate counsel, Jenner & Block
LLP” (“JB”). (Rel. Defs.' Mot. for
Appellate Fees [Doc # 1273]; see also Rel.
Defs.' Mot. for Funds for Appellate Counsel [Doc. #
1080].)
Appeals
which are now before the Second Circuit Court of Appeals were
stayed pending this Court's ruling on Defendant's
Rule 59(e) motion, which was denied on September 4, 2019.
(Ruling Denying Def.'s Mot. to Alter J. [Doc. # 1263].)
“As the Court has now ruled on the [Rule 59(e)] Motion,
the stay is lifted and Relief Defendants[] have 14 days from
the date of the ruling . .. in which to file a briefing
schedule and take other procedural steps - which means that
the Relief Defendants must retain counsel and act by
September 18, 2019." (Rel. Defs.' Mot for Appellate
Fees at 2.) Relief Defendants seek the release of $350, 000
from the Receivership Estate "to retain Attorneys Jenner
& Block to represent them on appeal." (Id.)
"While a Notice of Appeal was filed, no appearance has
yet been filed by appellate counsel in the Court of Appeals,
pending payment." (Id.) Relief Defendants
represent that they sought consent from the SEC to a stay of
proceedings in the Second Circuit "pending the
resolution of all issues pending in the District Court, so as
to avoid piecemeal appeals," but the SEC did not consent
to that request. (Id.)
Defendant
consents to the Relief Defendants' request. (Def.'s
Resp. [Doc. # 1283].) Although the SEC "is not
necessarily opposed to the release of funds to Relief
Defendants for prospective appellate counsel fees," it
"opposes the Motion because Relief Defendants have
(again) failed to demonstrate that their ability to hire
appellate counsel hinges on the release of $350, 000 in
frozen funds, and there is good reason to believe Relief
Defendants can hire appellate counsel without the release of
frozen funds." (SEC Resp. [Doc. # 1286] at 1-2.) The SEC
also opposes the Relief Defendants' request that funds
for appellate counsel be released from Fidelity account x7540
because "the Court has already found these are monies
Defendant obtained through fraud, to which Ms. Ahmed has no
claim" and because "the Receiver has already
earmarked these funds to be used to satisfy the SEC's
judgment." (Id. at 5.) Instead, the SEC argues,
any funds to pay Relief Defendants' appellate counsel
should be released from TD Ameritrade accounts of the
Receivership Estate "which combined hold more than $9
million and have not been earmarked to satisfy the judgment
in this case." (Id. at 6.)
The
Receiver "tak[es] no position with respect to the
requested release of funds." (Receiver's Resp. [Doc.
# 1282] at 2.) Mr. Horwitt explains that "the ultimate
extent of Residual Assets" which will not be necessary
to secure the judgment, "if any, presently remains
unknown in large part because the exact dollar amount of the
Judgment... cannot be fixed until assets securing it have
been actually liquidated and deposited into the CRIS account,
and because the amount to be realized from such assets will
also not be determined until they are actually
liquidated." (Id.) Thus until that time
"there are no Receivership Assets that, in the
Receiver's view, are truly excess." [Id.)
However, "in light of the current cumulative value of
Receivership Assets, the Receiver does not believe that a
disbursement of $350, 000 to JB will adversely impact the
Receiver's ability to fulfill his primary obligation in
this receivership-to fully secure the Required Amount through
the liquidation of Receivership Assets-or to execute in any
other regard his duties pursuant to the Appointment
Order." (Id. at 3.)
As the
Receiver notes, the Relief Defendants' Emergency Motion
for Appellate Fees differs from other currently pending
motions for attorneys' fees by Defendant and Relief
Defendants in several key ways. "JB, as appellate
counsel, would represent the Relief Defendants in connection
with ongoing litigation, which may impact the Receivership
Estate" and the ultimate outcome in this case.
(Id.) In contrast, other motions for attorneys'
fees by the Relief Defendants "seek[] only to have a
past due liability owed by the Relief Defendants ... paid by
the Receivership Estate." (Id.)
"Additionally, there is an appreciable difference in the
amounts sought" in each motion. (Id. (comparing
$350, 000 sought to retain JB with $1.8 million sought by
Relief Defendants to pay Harris, St. Laurent & Chaudhry
LLP for past work).)
Moreover,
the Relief Defendants include "three minor
children" and "a variety of entities" which
"must have qualified attorney representation" to
proceed in any action. (Rel. Defs.' Mot. for Appellate
Fees at 3.) If those parties do not "have attorney
representation for their appeal," then that "appeal
will be dismissed on procedural grounds without the merits
having been considered." (Id.)
In
light of the need for immediate action by the Relief
Defendants in the Second Circuit, the Receiver's
expectation that the requested release of funds will not
impair his ability to secure the judgment or execute his
other duties, the inability of most of the Relief Defendants
to proceed pro se, and the prospective nature of the request,
Relief Defendants' motions for appellate attorneys'
fees [Docs. # 1080, 1273] are GRANTED with modification.
The
Court authorizes the release of up to $350, 000 from the
Receivership Estate for reasonable attorneys' fees, to be
paid to Jenner & Block for representation of the Relief
Defendants before the Second Circuit. Invoices for such
representation shall be submitted to this Court for approval,
and no funds shall be released by the Receiver absent such
approval. Any invoice submitted for the Court's approval
shall be accompanied by documentation of Relief
Defendants' inability to pay counsel absent release of
funds from the Receivership Estate, including a sworn
affidavit from Ms. Ahmed demonstrating her inability to pay
the fees. Upon approval by the Court of any such invoice, the
Receiver shall determine which assets of the Receivership
Estate should be used to pay that invoice and shall inform
the Court and the parties of his determination.
This
authorization shall terminate once the judgment is secured in
the CRIS account, and residual assets, if any, have ...