Federal Trade Commission v. American Financial Benefits Center

Background

The district court previously granted the Federal Trade Commission’s request for a preliminary injunction against American Financial Benefits Center, Financial Education Benefits Center, and Brandon Frere. That order appointed Thomas McNamara as receiver for the two corporate defendants and gave him broad authority to manage the receivership. The district court referred matters arising from the receiver’s duties to Judge Jacqueline Scott Corley.

The preliminary-injunction order allowed the receiver to hire attorneys, accountants, appraisers, contractors, and technical specialists as needed. It also provided that the receiver and authorized personnel could receive reasonable compensation and reimbursement for actual out-of-pocket expenses from assets held or controlled by the corporate defendants. The receiver had to submit periodic requests for payment to the court.

The court had already approved the receiver’s first interim application, covering November 29, 2018, through January 15, 2019, for $335,213.88. The second application covered January 16 through November 30, 2019, and was unopposed.

Legal standard

The court explained that receivership expenses and fees generally are paid from the property being administered. Courts may compensate a receiver and the professionals assisting the receiver, but the fees should be moderate and should reflect the public interest in preserving the receivership estate. In evaluating the request, the court considered the burden on the estate, the time required, administrative efficiency, and the overall value of the services.

Analysis

The receiver requested $43,690.00 in fees and $6,718.47 in expenses for the receiver and staff employed by TWM Receiverships Inc., doing business as Regulatory Resolutions; $54,197.00 in fees and $3,493.58 in expenses for McNamara Smith LLP, the receiver’s counsel; $14,110.00 in fees and $13.90 in expenses for Franklin Soto LLP, insurance coverage counsel; and $1,050.00 in fees and $160.00 in expenses for The Computer Admin, the receiver’s information-technology consultant. The total requested was $123,432.95.

The receiver submitted a declaration and invoices describing the work and expenses. The court found the invoices sufficiently detailed and the services necessary to administer the receivership. It noted that the receiver’s fees reflected a discounted rate and that the listed hourly rates for attorneys and a paralegal at McNamara Smith LLP had not increased from the first interim application. The court also considered a status report showing a receivership bank-account balance of $384,236.66 as of January 9, 2020; the requested amount was roughly one-third of that balance.

Disposition

Judge Jacqueline Scott Corley granted the receiver’s second interim application for fees and expenses in the amount of $123,432.95. The court vacated the February 13, 2020 hearing because it concluded that oral argument was unnecessary.