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FEDERAL TRADE COMM. v. CAPITAL ACQUISITIONS & MGMT. CORP.

August 26, 2005.

FEDERAL TRADE COMMISSION, Plaintiff,
v.
CAPITAL ACQUISITIONS & MANAGEMENT CORP., a corporation, RM FINANCIAL SERVICES, INC., a corporation, CAPITAL PROPERTIES HOLDINGS, INC., a corporation, and REESE WAUGH, JEROME KUEBLER, ERIC WOLDOFF, GEORGE OTHON, and JEFFREY GARRINGTON, individually Defendants, ROY WELLAND and SHERIDAN OPPORTUNITY FUND, L.P., Defendants-Intervenors.



The opinion of the court was delivered by: NAN NOLAN, Magistrate Judge

MEMORANDUM OPINION & ORDER

On December 2, 2004, plaintiff Federal Trade Commission ("FTC") sued defendants under the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), and the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 16921, to secure temporary, preliminary, and permanent injunctive relief, rescission of contracts, restitution, disgorgement, appointment of a receiver, and other equitable relief for defendants' alleged violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a) and the FDCPA, 15 U.S.C. § 1692 et seq. The following day, the district court entered a temporary restraining order which appointed LePetomane XII, Inc. ("LePetomane") as Temporary Equity Receiver of the assets and operations of the corporate defendants Capital Acquisitions & Management Corp. ("CAMCO"), RM Financial Services, Inc., and Capital Properties Holdings, Inc. (collectively, the "Receivership Defendants"). On January 19, 2005, the district court entered the parties' Stipulated Preliminary Injunction, which continued the receivership and appointed LePetomane as Receiver, ("the Receiver"). Under both the TRO and the Stipulated Preliminary Injunction, the Receiver is empowered to "[c]hoose, engage, and employ attorneys, accountants, appraisers, and other agents or technical specialists as the Receiver deems necessary or advisable in the performance of the duties and responsibilities authorized by [the TRO and Stipulated Preliminary Injunction]." The Receiver engaged the law firm Foley & Lardner LLP ("Foley") as its counsel.

The district court has referred this matter to this court for rulings on several motions relating to attorney's fees and expenses. This matter is presently before the court for ruling on (1) the Receiver's Second Motion for Approval and Allowance of Fees and Expenses of Foley & Lardner LLP as Counsel to the Receiver ("Receiver's Second Fee Motion") and (2) the Receiver's Third Motion for Approval and Allowance of Fees and Expenses of Foley & Lardner LLP as Counsel to the Receiver ("Receiver's Third Fee Motion"). For the reasons explained below, the court grants the Receiver's Second and Third Fee Motions over the objections of defendant-intervenor Roy Welland ("Welland").

  I. BACKGROUND

  A brief summary of the motions and certain background facts is warranted. The Receivership Defendants, including CAMCO, were engaged in the business of purchasing and collecting consumer debts that had been charged off by the original creditors (e.g., credit card, revolving charge card and installment debts). According to the FTC, the Receivership Defendants have been collecting time-barred debts since CAMCO was first incorporated in 1997, and have engaged in illegal practices in attempting to collect those debts.*fn1 The Receiver took possession of the Receivership Defendants' assets and operations on December 6, 2004. Welland, one of CAMCO's secured creditors, filed a motion to intervene in the litigation on January 13, 2005, claiming an interest in CAMCO's assets that the Receiver would be disposing of. Welland's motion to intervene was granted on January 18, 2005.

  The following day, the Stipulated Preliminary Injunction was entered. The Stipulated Preliminary Injunction specifically provides that the Receiver and its attorneys and agents shall be compensated for their reasonable and necessary fees and expenses, upon application to the court and after notice to the parties.

  On February 1, 2005, the Receiver filed its first fee motion, requesting approval to pay Foley $169,180.50 in fees and $7,708.16 in expenses incurred during the period from August 24, 2004 through and including December 31, 2004. Welland filed objections to the first fee motion, but on February 25, 2005, by agreed order, the court authorized payment for all of the expenses and $152,262.45 (ninety percent) of the fees requested. The agreed order further stated that the Receiver could resubmit the remaining $16,918.05 (ten percent) of the fees for further determination. (Agreed Order of 2.25.05.)*fn2

  On March 25, 2005, the Receiver filed its Second Fee Motion, requesting approval to pay Foley: (a) "$114,467.50 for actual and necessary professional services performed on behalf of the Receiver from January 1, 2005 through and including January 31, 2005 (the `Second Relevant Period')"; (b) expenses in the amount of $14,731.16 for the Second Relevant Period; and (c) the $16,918.05 in fees from the first fee motion that the district court deferred ruling on. (Second Fee Motion at 1-2.)

  On April 4, 2005, four of CAMCO's creditors filed an involuntary petition in bankruptcy (Chapter 11) against CAMCO in the Bankruptcy Court of the Northern District of Illinois.*fn3 On April 14, 2004, the bankruptcy court issued an Agreed Order Authorizing Receiver to Continue its Duties under 11 U.S.C. § 543(d) as Enumerated Prepetition by the United States District Court. ("Agreed Bankruptcy Order"). Under the Agreed Bankruptcy Order, the Receiver is authorized to continue to exercise the duties and powers enumerated in the Stipulated Preliminary Injunction.

  On April 5, 2005, the district court granted the Second Fee Motion in part and continued it in part. Specifically, the district court approved payment of the $16,918.05 in fees that remained at issue from the first fee motion. To the extent the Receiver sought approval to pay fees and expenses incurred during the Second Relevant Period, the district court deferred ruling on the motion until April 7, 2005. (See Minute Order of 4.5.05. docket 122.) The following day, April 6, 2005, Welland filed objections to the Second Fee Motion. At the status hearing on April 7, 2005, after the district court was informed of the pending involuntary bankruptcy petition, the district court deferred ruling on the Second Fee Motion until May 11, 2005. On May 11, 2005, ruling on the Second Fee Motion was again deferred. On June 7, 2005, the Receiver filed its Third Fee Motion, requesting approval to pay Foley: (a) "$143,722.00 for actual and necessary professional services performed on behalf of the Receiver from February 1, 2005 through and including February 28, 2005 (the `Third Relevant Period')"; (b) expenses in the amount of $5,441.12 for the Third Relevant Period; (c) "$157,299.00 for actual and necessary professional services performed on behalf of the Receiver from March 1, 2005, through April 4, 2005 (the `Fourth Relevant Period')"; and (d) expenses in the amount of $7,652.05 for the Fourth Relevant Period. (Third Fee Motion at 1-2.) Weller again filed objections.

  On June 14, 2005, the district court instructed counsel for Welland to comply with the requirements of Local Rule 54.3 if Welland intended to pursue his objections. Although Welland has pursued his objections, he has not complied with Local Rule 54.3.

  On June 17, 2005, the district court referred the Second and Third Fee Motions to this court for ruling. The Receiver responded to Weller's objections to the Second and Third Fee Motions on July 12, 2005. Pursuant to this court's order, Weller filed a memorandum in support of his objections on July 25, 2005, and the Receiver filed its reply on August 1, 2005. The motions are fully briefed and ready for ruling.

  II. DISCUSSION

  The court has reviewed the Receiver's Second and Third Fee Motions, Welland's objections, and all of the supporting briefs. The Receiver's Second and Third Fee Motions are supported by Foley's detailed invoices, with time entries recorded and reported in 45 different task categories and a summary of the extensive work the Receiver and its counsel have performed during the course of the Receivership. Welland, however, asserts that the attorney's fees are excessive and are disproportionate to the benefit bestowed on the receivership.*fn4 Additionally, in his final brief, Welland asserts that there is an apparent conflict of interest and that the fees are ...


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