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Pavlik et al v. Fdic et al

November 1, 2011

PAVLIK ET AL
v.
FDIC ET AL



Name of Assigned Judge Sitting Judge if Other or Magistrate Judge Amy J. St. Eve than Assigned Judge

CASE TITLE

DOCKET ENTRY TEXT

The Court grants in part and denies in part Plaintiffs' Petition for an Award of Attorney Fees [57]. The Court awards attorneys' fees to Krislov & Associates in the amount of $203,711.55, and denies Plaintiffs' counsel's request for costs and incentive awards. Status hearing set for 11/16/11 is stricken.

O[ For further details see text below.] Notices mailed by Judicial staff.

STATEMENT

Before the Court is Plaintiffs' Petition for an Award of Attorney Fees and request for costs and incentive awards. For the following reasons, the Court grants Plaintiffs' Petition in part and denies it in part.

BACKGROUND

Plaintiffs Joseph Pavlik and Donna Smithey (the "Named Plaintiffs"), on behalf of themselves, Universal Federal, and a putative class of Federal Deposit Insurance Corporation ("FDIC")-certified Universal Federal claimants, filed a Complaint against Adam Resnick and the Federal Deposit Insurance Corporation, in its corporate receivership capacity, on February 5, 2010. (R. 1, Complaint.) In their complaint, Plaintiffs, represented by the law firm of Krislov & Associates, asked the Court to require the FDIC to 1) pay former depositors the remaining unpaid portions of their Universal Federal Bank deposits in excess of $100,000.00 from Defendant Resnick's qui tam settlement; 2) pay creditors pursuant to 12 U.S.C. § 1821's priority scheme; and 3) return all profits gained from Defendant Resnick's restitution to the bank's depositors, as mutual owners of the bank. (Id. ¶ 1.) According to the Complaint, all of the Plaintiffs were FDIC-certified claimants, meaning that the FDIC had already admitted their statutory rights to the money by the time they filed the complaint. (Id.)

Courtroom Deputy KF

Initials:

Former Defendant Adam Resnick perpetrated a check-kiting scheme that led to the FDIC's takeover of Universal Bank, a mutually-owned savings bank located in Chicago, in 2002.*fn1 The FDIC insured Universal's deposits, and the FDIC served as the FDIC's receiver. On November 15, 2007, the FDIC terminated the Universal Federal receivership.

Mr. Resnick pled guilty to the check-kiting fraud, and Judge Wayne Anderson sentenced him to forty-two months in prison and imposed a restitution obligation of approximately $10 million. Before Mr. Resnick was indicted, he was employed as a consultant for a company called U.S. Pharmacy. During his employment there, he became aware of healthcare fraud and thereafter initiated a False Claims Act whistleblower case. While Mr. Resnick was in prison, the whistleblower case settled, resulting in a recovery to him individually in the amount of $5,402,687.95. After attorneys' fees and taxes, there was over $2,000,000 remaining. Pursuant to his restitution order, that amount was distributed to FDIC corporate (the "Restitution Proceeds"), since the FDIC had, by that time, closed its Universal Bank receivership.

The FDIC was unaware of Mr. Resnick's qui tam lawsuit, which was under seal until 2009, or his recovery under the settlement until it received a copy of the Complaint in this lawsuit. At the time Plaintiffs filed their Complaint, the FDIC had not yet received any of the Restitution Proceeds. The case was generally inactive during the first several months after Plaintiffs filed it. In early May 2010, the FDIC moved to dismiss the complaint for lack of ripeness because the FDIC had not yet received any of the Restitution Proceeds. Plaintiffs did not file a response to the FDIC's motion because the Court stayed the case for 60 days in late May and denied the FDIC's motion as moot. On September 1, the FDIC filed an answer and affirmative defenses, which Plaintiffs moved to strike. After the Court denied Plaintiffs' motion to strike the FDIC's answer and granted the motion to strike the affirmative defenses with leave to amend, the FDIC filed an amended answer on October 26, 2010. In early October, Plaintiffs served interrogatories (9) and requests for production of documents (10), to which the FDIC responded in November 2010.

As soon as the FDIC received the Restitution proceeds, the case moved into court-sponsored mediation. The Court held a settlement conference on January 20, 2011, which lasted approximately four hours. One week before the settlement conference, the FDIC sent Plaintiffs's counsel a letter containing a written offer and expressing ...


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