Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 1 of 8 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

Transcription

1 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 1 of 8 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA Case No.: CIV-MARRA/HOPKINS SECURITIES AND EXCHANGE COMMISSION, v. Plaintiff, MICHAEL LAUER, LANCER MANAGEMENT GROUP, LLC, and LANCER MANAGEMENT GROUP II, LLC, and Defendants, LANCER OFFSHORE, INC., LANCER PARTNERS, LP, OMNIFUND, LTD., LSPV, INC., and LSPV, LLC, Relief Defendants. / RECEIVER S RESPONSE IN OPPOSITION TO LAUER PARTIES MOTION FOR LEAVE TO SEEK DISCOVERY RELATING TO FEE REQUESTS OF RECEIVER AND HIS PROFESSIONALS [DE 3043] 1 Marty Steinberg, Esq., Court-appointed receiver (the Receiver ) of Lancer Management Group, LLC, Lancer Management Group II, LLC, Lancer Offshore, Inc., Omnifund, Ltd., LSPV, Inc., LSPV, LLC, Alpha Omega Group, Inc., CLR Associates, LLC, and G.H. Associates, LLC (collectively, the Receivership Entities ), and formerly the responsible person for Lancer Partners, L.P., through undersigned counsel, hereby files this Response in Opposition to the Motion for Leave to Seek Discovery Relating to Fee Requests of Receiver and his Professionals (the Discovery Motion ) filed by Michael Lauer ( Lauer ), Martin Garvey ( Garvey ), John W. 1 The Lauer Parties originally filed the Discovery Motion as DE 3042, without complying with this Court s conference requirement. To the extent necessary, this Response applies to DE 3042 as well as DE 3043, which are substantially identical.

2 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 2 of 8 2 Bendall, Jr. ( Bendall ), Richard Geist ( Geist ), and Richard Lombardi ( Lombardi ) (collectively, the Lauer Parties ) on February 1, 2016 [DE 3043], and states the following: By the Discovery Motion, the Lauer Parties seek this Court s permission to serve discovery requests on the Receiver relating to the final fee applications recently filed by the Receiver and each of his professionals (collectively, the Fee Applications ). In support of this request, the Lauer Parties assert, without citation to any authority, that they are entitled to discovery because [t]he rules and practice contemplate that there will be a hearing that will resolve all fee questions. See Discovery Motion at 2. The Lauer Parties further assert that they have made a strong case that a substantial portion of the fees received and sought by the Receiver and his professionals should be denied. See id. In order to support this supposed strong case, the Lauer Parties note that they intend to seek specific totals of fees received and sought by the Receiver and each of his professionals; specific information on the services performed for each fee request, including, but not limited to, unredacted bills and other communications to the Court; and memoranda and other documents prepared by the Receiver or his professionals and sent to the SEC, DOJ, IRS, and other Executive Branch departments and agencies. See id. at 3, n. 3. The Court should deny the Discovery Motion and bar the Lauer Parties from serving any document requests on the Receiver and the SEC for two reasons. First, there is no reason to allow the Lauer Parties to take discovery in support of objections to the Fee Applications that they lack standing to maintain. Second, the Lauer Parties have failed to establish the existence of any genuine issue of material fact requiring further discovery or an evidentiary hearing on the Fee Applications. I. THE LAUER PARTIES ARE NOT ENTITLED TO DISCOVERY RELATING TO THE FEE APPLICATIONS BECAUSE THEY LACK STANDING TO OBJECT TO THE FEE APPLICATIONS As a threshold matter, the Lauer Parties are not entitled to any discovery relating to the Fee Applications because they lack standing to maintain any objection to the Fee Applications. A party lacks standing to object to payment of compensation to professionals from a courtsupervised fund if the party has no claim against such fund and thus will not be responsible for payment of such compensation. See Wolff v. Cash 4 Titles, 351 F.3d 1348, 1355 (11 th Cir. 2003). In Wolff, the United States Court of Appeals for the Eleventh Circuit (the Court of Appeals ) concluded that non-parties lacking any claims against a class action settlement fund necessarily lack standing to appeal a district court s rejection of their objections to the payment of fees from

3 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 3 of 8 such fund. See id. On the facts of this case, none of the appellants is responsible for paying the plaintiffs attorneys fees; none would suffer any imaginable concrete injury if those fees were increased, nor would they enjoy any concrete benefit if those fees were eliminated altogether. Instead, these hypothetical injuries or benefits would accrue to the class members themselves. Id. A similar standing rule applies in bankruptcy cases. The Court of Appeals has held that only aggrieved persons who are directly, adversely, and pecuniarily affected by a bankruptcy court order can allege sufficient injury to maintain standing to appeal such order. See In re Ernie Hare Ford, Inc., 764 F.3d 1321, 1325 (11 th Cir. 2014). A creditor without any further right to distribution from a bankruptcy estate cannot be directly, adversely and pecuniarily affected by the subsequent payment of compensation to professionals from such estate. See Search Market Direct, Inc. v. Jubber (In re Paige), 438 B.R. 355, *10 (10 th Cir. BAP 2010) (concluding that creditor holding fully satisfied claim lacked standing to object to compensation of professionals, despite remote and speculative contingencies that might arise from reversal of confirmation on appeal). In the instant Case, none of the Lauer Parties will be directly, adversely, and pecuniarily affected by an order of this Court approving the Fee Applications because none of them holds an allowed claim against the Receivership Entities estates. The Court of Appeals has specifically held that both Bendall and Garvey are forever barred from recovering anything from the Receivership Estates due to their failure to timely file claims against the Receivership Entities. See Bendall v. Lancer Management Group, LLC, 523 Fed. Appx. 554, (11 th Cir. 2013). Further, Lauer and Geist, like Bendall and Garvey, failed to timely file claims against the Receivership Entities and, pursuant to the law of the case established in Bendall, are also forever barred from recovering anything from the Receivership Estates. See id.; S.E.C. v. Lauer, 610 Fed. Appx. 813, 817 (11 th Cir. 2015) (ruling that findings of fact and conclusions of law by an appellate court are generally binding in all subsequent proceedings in the same case under the law of the case doctrine). 2 2 This Court has repeatedly rejected the efforts of Lauer, Garvey, Bendall and Geist to recover their purported share of the Receivership Entities assets. See e.g. DE 3013 at 5-7 (denying Lauer and Garvey s Motion for Their Shares of the Estate ). These efforts are nothing more than an impermissible collateral attack on the Court-approved claims process that supported the Court of Appeals ruling in Bendall. 3

4 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 4 of 8 4 Finally, Lombardi specifically waived any claims against the Receivership Estates in a settlement with the Receiver that was approved by this Court on April 7, See DE 1970 at 3-5 and Exh. A at 8; DE Lombardi released any claims against the estate as part of a settlement of the Receiver s claim against him to recover more than $1 million in placement fees received for referring investors to Lauer. See DE In fact, Lombardi and one of his affiliated entities together received more than $2.4 million in such payments. Nevertheless, after Lombardi represented that he and his related entities lacked sufficient assets to satisfy any judgment, the Receiver agreed to settle these claims in exchange for, among other consideration, Lombardi s agreement to release any claims against the Receivership Entities. See DE 1970, Exh. A at 8. Accordingly, Lombardi has not received any distributions or other payments from the Receivership Entities. Since the Lauer Parties, as non-claimants, will not benefit from any distribution of the Receivership Entities assets, they cannot be harmed by any diminution of such assets due to payment of the compensation sought in the Fee Applications. Accordingly, the Lauer Parties lack standing to object to the Fee Applications. See Wolff, 351 F.3d at 1355; Ernie Hare Ford, 764 F.3d at 1327; Blodgett v. Stoebner (In re T.G. Morgan, Inc.), 394 B.R. 478, 483 (8 th Cir. BAP 2008), aff d 343 Fed. Appx. 171 (8 th Cir. 2009). Because the Lauer Parties lack standing to object to the Fee Applications, they should not be allowed to diminish the remaining assets of the Receivership Entities available for distribution to investors the real parties-in-interest by forcing the Receiver to respond to pointless discovery requests. II. THE LAUER PARTIES HAVE FAILED TO ESTABLISH THE EXISTENCE OF ANY GENUINE ISSUE OF MATERIAL FACT REQUIRING DISCOVERY OR AN EVIDENTIARY HEARING ON THE FEE APPLICATIONS Even assuming the Court must consider an objection to the Fee Applications submitted by the Lauer Parties despite the Lauer Parties clear lack of standing, the comprehensive Fee Applications provided by the Receiver and his professionals, along with the thousands of filings on the record of this Case, sufficiently detail the facts underlying the compensation sought by the Receiver and his professionals to allow the Court to evaluate the Fee Applications on a summary basis without further discovery or evidentiary hearing. Contrary to the Lauer Parties assertion, the rules and practice of this Court and the Court of Appeals do not mandate that an evidentiary hearing be held or discovery conducted with respect to the Fee Applications. See S.E.C. v. Elliott, 953 F.2d 1560, 1566 (11 th Cir. 1992). The district court has broad powers and wide discretion to determine relief in an equity receivership. Id. In granting relief, it is

5 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 5 of 8 appropriate for the district court to use summary proceedings. Id. Accordingly, a district court may use summary proceedings to determine the allowance of claims against a receivership estate. See id. A district court should allow the presentation of evidence on claims allowance in such summary proceedings only if genuine issues of material fact exist. See id. at In this Case, the Receiver submits that no such issues exist. The Receiver and his professionals have satisfied their burden to support the Fee Applications by presenting ample evidence, including summaries, redacted time entries, narratives, and affidavits, and by pointing to matters on the record in this Case and ancillary Cases supporting their actions. Thus, the burden is on the Lauer Parties to bring forward evidence demonstrating the existence of a genuine issue of material fact requiring discovery and an evidentiary hearing on the Fee Applications. But the Lauer Parties have presented nothing more than their usual litany of personal attacks, conclusory contentions, and straw man questions and concerns regarding the conduct of the Receiver and the SEC. These self-serving allegations do not establish that the Lauer Parties are entitled to conduct the requested fishing expedition into the behavior of the Receiver and his professionals, such as a proposed review of obviously privileged memoranda and other documents prepared by the Receiver or his professionals in assisting the SEC s case against Lauer. Lauer has had years to substantiate his claims against the Receiver and his professionals to support the endless cavalcade of accusations that have populated his briefs in this Court and others since 2003, both before and after he retained counsel. But Lauer and his allies have repeatedly failed to even attempt to do so. The Court of Appeals has already approved this Court s exercise of its discretion to dispose of Lauer s typical groundless arguments as a matter of law without further evidentiary hearing or discovery. See S.E.C. v. Lauer, 610 Fed.Appx. 813, 821 (11 th Cir. 2015). On February 20, 2013, Lauer filed a motion for discovery in this Court seeking materials supposedly relevant to his motion to vacate the summary judgment against him and his motion to dismiss the SEC s complaint. See DE Lauer filed a separate pleading demanding an evidentiary hearing. See DE As with the instant Discovery Motion, Lauer asserted that his unsupported ad hominem attacks on this Court, the Receiver and the SEC provided grounds sufficient to allow discovery and an evidentiary hearing on his motions. See DE 2679 at 3 ( [i]n view of the fact that substantial admissible evidence has been cited in support of the motion [to vacate and dismiss], Lauer seeks at this time necessary discovery of documents and 5

6 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 6 of 8 depositions ). This Court disagreed, and denied the motion to vacate as a matter of law without discovery or evidentiary hearing. See DE The Court of Appeals affirmed this Court s actions. See Lauer, 610 Fed.Appx. at 821. The Court of Appeals specifically rejected Lauer s argument that he was entitled to discovery and an evidentiary hearing: Lauer argues that he should have been granted discovery on the questions whether the Commission approved the action against him and whether Chief Judge Zloch influenced the reassignment of the case to Judge Marra, but we disagree. A district court does not abuse its discretion both [where] it had a detailed record of the evidence before it and [where a party] did not adequately indicate how further discovery or a hearing would have aided the court's determination. Lauer s argument that the complaint was not properly approved runs counter to the presumption that an agency follows the law and he has presented no reason to believe that additional discovery would prove otherwise. Lauer also fails to explain what further discovery would accomplish regarding his claim of judicial bias. Notwithstanding Lauer s self-serving declaration, written a decade after the fact, the record evidence confirms that the process was handled correctly. Id. (citations omitted). This Court should similarly exercise its discretion to deny the Lauer Parties request for discovery and an evidentiary hearing with respect to the Fee Applications. The self-serving statements of the Lauer Parties in the Discovery Motion and other pleadings do not sufficiently establish the existence of genuine issues of material fact requiring discovery or an evidentiary hearing on the Fee Applications. 3 Absent such genuine issues, the detailed record of the evidence already before this Court in the form of the Fee Applications and the entire record of this Case and ancillary cases over the past twelve years obviates the need for further factual development. The Court may consider the Fee Applications as a matter of law, and need not waste its resources or the Receivership Entities assets on discovery, discovery disputes, and an evidentiary hearing. CONCLUSION The Receiver finds the Lauer Parties assertion that they are entitled to discovery because they have made a strong case for reduction of the compensation sought in the Fee Applications supremely ironic. The strong case of the Lauer Parties against the Receiver and the SEC has 3 This is especially true in light of the Lauer Parties clear lack of standing, as discussed above. 6

7 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 7 of 8 been summarily rejected by this Court and the Court of Appeals on numerous occasions. Meanwhile, this Court and the Court of Appeals have repeatedly found in favor of the Receiver and the SEC on their fraud claims against Lauer. See e.g. S.E.C. v. Lauer, 478 Fed.Appx. 550 (11 th Cir. 2012) (affirming this Court s entry of summary judgment on the SEC s fraud claims and disgorgement remedy). In its 2012 decision, the Court of Appeals stated: The district court had before it overwhelming evidence of Lauer s knowing false statements, coming in a number of forms (PPMs, newsletters, fake portfolios, and conference calls), pertaining to a variety of issues (portfolio positions, the status of audits, concerns of auditors, and staff backgrounds), and made to several investors, auditors, and potential investors. Further, the record includes specific, uncontroverted evidence that these knowing misrepresentations were material, with individual investors in fact basing their decisions on the false information Lauer provided them. Lauer has not countered these showings with evidence of his own. Id. at 556. The Court of Appeals found that, in the face of this evidence, Lauer was required to present more than mere allegations The district court concluded that he failed to do so, explicitly stating that it chose not to give weight to what it regarded as Lauer s conclusory claims. See id. at 556. It is the Receiver and the SEC, not Lauer, that has made a strong case that Lauer defrauded his investors. Despite this, the Lauer Parties contend that their mere allegations require this Court to recognize their standing to seek discovery and object to the Fee Applications on the defrauded investors behalf. Even more amazing, the Lauer Parties assert their right to discovery from the Receiver and the SEC twelve years into this Case notwithstanding this Court s finding that Lauer unjustifiably failed to provide material discovery requested by the Receiver and the SEC from the beginning. See DE 1075 ( [t]he Court has reviewed the ample evidence of Lauer s failures to provide discovery and the various procedural and substantive rules violations by Lauer in the course of the litigation of this case and concludes that the relief sought by the SEC is appropriate ). Now, with supreme chutzpah, it is Lauer the adjudged fraudster who failed to present any evidence supporting his allegations against the Receiver and the SEC and who this Court found guilty of failure to participate in discovery and litigation-by-ambush tactics who claims to have proven his case and to be entitled to discovery. The Court should not countenance this brazen and transparent effort to delay the closure of this Case and prevent a final distribution of the Receivership Entities assets to the defrauded investors. 7

8 Case 9:03-cv KAM Document 3045 Entered on FLSD Docket 02/12/2016 Page 8 of 8 WHEREFORE, the Receiver respectfully requests that the Court deny the Discovery Motion in its entirety and grant such other and further relief as the Court deems just and proper. Respectfully submitted, HUNTON & WILLIAMS LLP Counsel for the Receiver 1111 Brickell Avenue - Suite 2500 Miami, FL Tel: (305) Fax: (305) jenjamio@hunton.com keckhardt@hunton.com /s/ Juan C. Enjamio Juan C. Enjamio (FBN ) Kevin M. Eckhardt (FBN ) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing was filed with the Court through CM/ECF this 12th day of February, I also certify that the foregoing is being served this day on all counsel of record via transmission of Notices of Electronic Filing generated by CM/ECF. /s/ Juan C. Enjamio Juan C. Enjamio EMF_US v2 8