The opinion of the court was delivered by: Bua, District Judge.
This case first was heard in this Court pursuant to an action
by the Secretary of Labor (the Secretary) filed December 29, 1982
styled Donovan v. Dorfman. With the filing of the case the
Secretary filed a motion for a finding that case 82 C 7951 was
related to case 78 C 4075*fn1 pursuant to Local Rule 2.31. On that
same day the Secretary also made an application for an ex parte
temporary restraining order in cases 78 C 4075 and 82 C 7951. As
the designated emergency judge, this court heard the ex parte
application and granted the injunctive relief requested by the
Secretary.*fn2 The terms of the order imposed a receivership on the
property and assets of Allen M. Dorfman, Amalgamated Insurance
Agency Systems, Inc., Federal Computer Systems, Inc., Health Plan
Consultants Service, Inc., and Prescription Plan, Inc. This
emergency relief was sought by the Secretary to prevent the
cessation of claims processing by Amalgamated for the Fund
because of a fear that Dorfman would liquidate or flee the
country with his assets as a result of a recent criminal
conviction.*fn3 The law firm of Scariano, Kula & Associates, Ltd.
was appointed as receiver.
On the following day, December 30, 1982, the defendants in 82
C 7951 were granted a hearing before this Court at which they
moved to dissolve the receivership and deny the other injunctive
relief granted in the temporary restraining order. After argument
of counsel, this court denied the defendants' motion. At the
hearing Kevin M. Forde was appointed as the receiver's attorney.
A status hearing was set for January 3, 1983 before Judge Flaum.
At the January 3 status hearing the defendants again moved for
dissolution of the restraining order. Judge Flaum determined that
the matter should proceed on the Secretary's motion for
preliminary injunction which had been filed on December 29, 1982.
The hearing on the Secretary's motion for preliminary
injunction began on the morning of January 4, 1983, and continued
for four full days. During the hearing over one hundred exhibits
were submitted and seven witnesses testified. Judge Flaum then
extended the temporary restraining order until January 18, 1983.
On January 18, Judge Flaum denied the Secretary's motion for a
preliminary injunction and determined that the restraining order
was no longer required, 558 F. Supp. 319. To effect a smooth
transition the receivership was continued until January 21, 1983.
As a general rule, the expenses and costs of a receivership are
charged to the property or fund administered. Atlantic Trust Co.
v. Chapman, 208 U.S. 360 at 375-6, 28 S.Ct. 406 at 411, 52 L.Ed.
528 (1908). It is up to the discretion of the court appointing
the receiver as to who shall be charged with the costs of the
receivership. Bowersock Mills & Power Co. v. Joyce, 101 F.2d 1000
at 1003 (8th Cir. 1939). Under Illinois law, the fees and
expenses of a receiver incurred in administering a property are
properly chargeable against the owner of the property. In re
Spicewood Assoc., 445 F. Supp. 564 at 570 (N.D.Ill. 1977). If the
plaintiff's claim is unjust or unlawful, however, it is
inequitable to charge the defendant with the expenses of a
receivership wrongfully imposed on it. Feldman v. Illinois
Pawners Assoc., 279 Ill. App. 476 (1925).
Defendants Amalgamated and Dorfman claim that the Secretary of
Labor misled this Court as to the necessity of the restraining
order and the receivership as part of a general pattern of
harassment of Mr. Dorfman, et al., and that the ex parte hearing
unjustly imposed the costs of the receivership on Amalgamated.
Although the defendants were not present at the December 29, 1982
hearing which resulted in the restraining order, the defendants
were heard on December 30, 1982. After due deliberation on
defendants' motion to dissolve the temporary restraining order,
this Court allowed the order to stand. Judge Marshall, presiding
in Allen M. Dorfman's criminal case, thought the risk of flight
by Mr. Dorfman to be so great that he required the posting of a
substantial bond. This Court agreed that there was a real risk
that Mr. Dorfman would flee rather than face incarceration. The
concern of the Secretary of Labor was that prior to fleeing Mr.
Dorfman would loot the assets of Amalgamated, leaving that
company unable to process the claims submitted by the
beneficiaries of the Fund. The second concern was that if the
Fund stopped monthly payments to Amalgamated, Amalgamated would
cease processing claims. Each of those possibilities was
determined by this Court to represent potential irreparable harm
to the Fund and beneficiaries of the Fund. In order to avoid the
possibility of that irreparable harm, the Court granted the
Secretary of Labor's motion for a temporary restraining order,
leaving the question of whether or not a preliminary injunction
should be issued for a determination by Judge Flaum. The granting
of this relief is clearly within the sound discretion of this
Court. Atlantic Trust Co. v. Chapman, 208 U.S. 360 at 370, 28
S.Ct. 406 at 408, 52 L.Ed. 528 (1908). The fact that Judge Flaum,
at a later date, declined to extend the temporary restraining
order and to grant a preliminary injunction does not mean that
the action taken by this Court was not warranted at the time.*fn4
Judge Flaum, in reaching his decision, had the benefit of over
100 exhibits and extensive testimony during four days of
hearings. He was also able to rely on the reports of the receiver
in his decision. In ruling that the appointment of the temporary
receiver was no longer necessary, Judge Flaum found that, based
on the extensive evidence presented, irreparable harm to the Fund
participants and beneficiaries was not imminent. He decided that,
having posted a substantial bond, and given the ownership
interests of many of Mr. Dorfman's relatives in Amalgamated and
related companies, it was unlikely Mr. Dorfman would take any
drastic actions. Relying on the assurances of Amalgamated's
counsel, Judge Flaum also concluded that Amalgamated would not
stop processing claims if it did not receive a monthly payment
from the Fund.
The changed conditions from December 29, 1982 to January 18,
1983, extensive testimony and numerous exhibits, and the interim
reports of the receiver, all allowed Judge Flaum to determine
that the continuation of the receivership was no longer
necessary, and that a preliminary injunction was not required.
Nothing presented in the four-day hearing before Judge Flaum, or
in the subsequent appeals of his order, showed that the Secretary
of Labor or the Central States Fund acted maliciously, in bad
faith, or without a reasonable belief in their application for a
temporary restraining order or for a preliminary injunction. On
the contrary, the Secretary presented evidence of well-grounded
fears that Amalgamated would cease processing benefit payments
for members of the Fund. It was the assurances of Amalgamated
that it would not do so, which were substantiated in an extensive
hearing, that led to cessation of the need for a receiver.*fn5 The
receiver having been appointed on a good faith application upon
a showing of a probability of irreparable harm, this Court will