Securities And Exchange Commission v. San Francisco Regional Center LLC

Background

The Securities and Exchange Commission filed this civil enforcement action in January 2017. The dispute had connections to a 2015 state-court action brought by Allan Young. Pritzker Levine LLP represented Young in that litigation, obtained appointment of a state-court receiver, and later pursued derivative claims on behalf of some entities that became defendants in the federal case. Pritzker also asserted claims against some other entities named as defendants or relief defendants.

After the Commission filed this action, it sought appointment of a federal receiver and a stay of other litigation. Pritzker opposed that request and proposed maintaining two receiverships. The court rejected that proposal, appointed Susan L. Uecker as the federal receiver, and stayed the state-court litigation. Approximately $25.2 million was transferred from the state receivership to the federal receivership, which later also received approximately $1.55 million from the sale of commercial property initiated during the state-court proceedings.

The Ninth Circuit had ruled that Pritzker was entitled to a reasonable attorney-fee award under the common-fund doctrine because its work contributed to the recovery for investors. The Ninth Circuit returned the matter for a determination of a reasonable award, to be treated as an administrative claim.

Requested Fee

Pritzker requested $2,669,449, representing 10% of the amount it claimed was the common fund. Alternatively, it proposed multiplying its lodestar—the fees calculated from reasonable hours multiplied by reasonable hourly rates—by 1.98, which would produce the same award.

The court determined that the lodestar method was the better way to calculate a reasonable fee in these unusual circumstances. Pritzker’s work was one part of a complex, multiyear effort involving the Commission, its counsel, the receiver, and the receiver’s counsel. The court concluded that awarding an arbitrary 10% of the transferred funds and later sale proceeds would not produce a reasonable result. It also rejected using a multiplier to reach the same amount.

Hours and Rates

Pritzker submitted 109 pages of time records. It excluded time spent solely on Young’s individual claims, monitoring the federal action after the state-court stay, preparing and negotiating its fee claim, litigating the fee motions, and appealing the first fee order. The Commission did not challenge the overall reasonableness of the hours, but argued that several categories should be excluded, including work during the first year of the state-court matter, later work connected to that period, efforts concerning removal to federal court, and opposition to appointment of a federal receiver.

The court held that the Ninth Circuit’s prior ruling foreclosed those exclusions. It found that Pritzker’s initial work was a compensable part of the efforts that ultimately led to the common fund. The court determined that Pritzker reasonably incurred 2,056.8 hours of attorney and paralegal time.

Pritzker’s timekeepers billed hourly rates ranging from $250 to $695. The court found that Pritzker showed its rates were customary, consistent with rates for similar work in the community, and consistent with rates approved in other cases. The Commission did not otherwise challenge those rates.

Multiplier and Expenses

The court calculated Pritzker’s lodestar at $1,346,204.75. Although Pritzker had been successful in obtaining a receiver who appears to have marshaled as much of the remaining property as reasonably possible for eventual distribution to investors, its contribution was only one part of the overall recovery effort. The court found that the circumstances did not justify increasing the lodestar, while also finding no reason to reduce it.

The court further found that Pritzker adequately established $30,800.54 in litigation expenses. The Commission did not challenge that amount.

Disposition

The court awarded Pritzker $1,346,204.75 in fees and $30,800.54 in litigation expenses. The sums were allowed as an administrative claim.