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Commission v. Small Business Capital Corp.

United States District Court, N.D. California, San Jose Division

May 9, 2014

SECURITIES AND EXCHANGE COMMISSION, Plaintiffs,
v.
SMALL BUSINESS CAPITAL CORP.; MARK FEATHERS; INVESTORS PRIME FUND, LLC; and SBC PORTFOLIO FUND, LLC, Defendants.

ORDER PARTIALLY GRANTING FOURTH INTERIM FEE APPLICATIONS

EDWARD J. DAVILA, District Judge.

This lawsuit involves allegations made by the Securities and Exchange Commission ("SEC") that the Defendants violated antifraud and other provisions of the federal securities laws. See Compl. 1, Docket Item No. 1. Receiver Thomas Seaman ("Receiver") and the law firm of Allen Matkins, Leck, Gamble, Mallory & Natsis, LLP ("Allen Matkins") seek interim payment of fees and expenses for services performed during the period from August 1, 2013 through October 31, 2013 ("fourth interim fee period") in connection with the receivership of Defendant companies Small Business Capital Corporation, Investors Prime Fund, LLC, SBC Portfolio Fund, LLC, and related companies. The Receiver and Allen Matkins filed their fourth interim fee applications on December 4, 2013. See Receiver's Fourth Interim Fee Appl., Docket Item No. 646; See Allen Matkins' Fourth Interim Fee Appl., Docket Item No. 647.

I. Fee Applications

The Receiver and Allen Matkins request the following fees for services performed:

A. The Receiver

The Receiver requests approval of his fees in full and the authority to pay 90% of the $167, 264.50 in fees incurred from August 1, 2013, through October 31, 2013. Dkt. No. 646 at 1. The Receiver is requesting compensation for 861 hours of work during this period at a blended hourly rate of $194.00. Id. at 8. The Receiver is not requesting compensation for any expenses incurred during this period.

B. Allen Matkins

Allen Matkins requests $89, 981.00 of the $99, 292.05 in incurred fees for 227.8 hours of work, amounting to approximately 90.6% of the total fees incurred. Dkt. No. 647 at 1. This requested amount reflects a blended hourly rate of $395.00. Dkt. No. 647 at 1. Allen Matkins also requests approval of 100% of its expenses totaling $905.68. Id. at 6. The total payment requested amounts to $90, 886.68.

II. Discussion

A. Applicable Law

The court appointing the Receiver is responsible for compensating the Receiver and his attorneys. See In re Alpha Telcom, Inc. [Alpha Telcom II], No. 03:01-CV-1283-PA , 2013 WL 840065, at *16 (D. Or. Mar. 6, 2013). The court may use its discretion to fashion a "fee award that is appropriate under the circumstances." Id. at *17. "The court appointing the receiver has full power to fix the compensation of such receiver and the compensation of the receiver's attorney or attorneys." Drilling & Exploration Corp. v. Webster , 69 F.2d 416, 418 (9th Cir. 1934). The Receiver and the attorneys assisting the Receiver will be "reasonably, but not excessively" compensated for their efforts to benefit the receivership estate. Alpha Telcom II , 2013 WL 840065, at *17. "[I]n receivership situations, lawyers should be awarded moderate fees and not extravagant ones." SEC v. Byers , 590 F.Supp.2d 637, 648 (S.D.N.Y. 2008). The Receiver and any professionals assisting the Receiver should charge a reduced rate to reflect the public interest involved in preserving funds held in the receivership estate. See id. at 646-47. The Receiver and his counsel should be moderately compensated for their services because investors who were promised large returns on investments by the defendant may stand to recover "only a fraction of their losses." See id. at 645.

A court considering awarding interim fees should consider several factors. Alpha Telcom II , 2013 WL 840065, at *16. An award of interim fees is appropriate "where both the magnitude and the protracted nature of a case impose economic hardships on professionals rendering services to the estate." In re Alpha Telcom, Inc. [Alpha Telcom I], No. 01-CV-1283-PA , 2006 WL 3085616, at *3 (D. Or. Oct. 27, 2006). The court should also consider the "economy of administration, the burden that the estate may be able to bear, the amount of time required, although not necessarily expended, and the overall value of the services provided to the estate." In re Imperial "400'" Nat., Inc. , 432 F.2d 232, 238 (3rd Cir. 1970). Frequently courts will withhold a portion of the requested interim fees because "until the case is concluded the court may not be able to accurately determine the reasonable' value of the services for which the allowance of interim compensation is sought." Alpha Telcom I , 2006 WL 3085616, at *3. The factors listed above, and others, may persuade the court to award the entirety of the requested interim fees or some amount less than requested. See Byers , 590 F.Supp.2d at 648. Lastly, "courts have recognized ...


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