United States District Court, E.D. California
MEMORANDUM DECISION AND ORDER RE STATEMENT OF CAPITAL
ONE BANK (USA), N.A. REGARDING STATUS OF FROZEN FUNDS IN
RESPONSE TO COURT ORDER GRANTING PLAINTIFF'S MOTION FOR
MONETARY RELIEF (ECF NO. 327)
LAWRENCE J. O'NEILL UNITED STATES CHIEF DISTRICT JUDGE
Court has reviewed and considered the Statement of Capital
One Bank (USA), N.A. Regarding Status of Frozen Funds in
Response to Court Order Granting Plaintiff's Motion for
Monetary Relief (ECF No. 327), Statement of Capital One Bank
(USA), N.A. Regarding Availability for Status Conference re.
Disbursement of Frozen Capital One Account Proceeds in
Further Response to Court Order Granting Plaintiff's
Motion for Monetary Relief; and/or Offer of Capital One to
Provide any Further Requested Information to the Court (No.
418), Response and Objection of Margarita Nase to Capital One
Bank (USA), N.A.'s Request for Money Loaned to Margarita
Nase (No. 424), and the Statement of Position of Receiver,
David P. Stapleton, Regarding Funds Withdrawn From Capital
One By Defendants (No. 425). The Court
ORDERS as described below.
parties are familiar with the facts of this case. This Order
concerns the disposition of frozen lines of credit advance
obtained from Capital One credit cards. On March 10, 2016,
prior to the SEC's initiation of this action, Defendant
Daniel Nase and now-dismissed Defendant Margarita Nase
obtained personal lines of credit advance from their Capital
One credit card accounts in the amounts of $43, 962.29 and
$50, 000, respectively. See ECF No. 48 at 2. On
April 22, 2016, the Court granted Defendants' request
that the aggregate amount of the Capital One credit line-$93,
962.29-be deposited into the Vick Law Group (Defendants'
counsel) client trust account and frozen. See Id. at
4. Claims against Margarita Nase were dismissed on March 22,
2017, with the stipulation of dismissal noting “the
Receiver has informed the SEC that it has recovered from
Margarita Nase all funds and/or property in her possession,
custody, or control which were traceable to the alleged
fraud.” ECF No. 179. On April 13, 2017, Defendant
Daniel Nase suggested that the funds be held pending his
request for attorneys' fees. See ECF No. 203 at
6-7. On April 20, 2017 the SEC took the position that the
funds should be paid to the Receiver or, in the alternative,
returned to Capital One. See ECF No. 208 at 10.
Defendants once again contended that Ms. Nase's Capital
One funds are properly returned to her and Mr. Nase's
Capital One funds should be used to pay his attorneys'
fees. See ECF No. 224 at 5-6.
May 4, 2017 order, the Court deferred decision as to whether
the frozen Capital One funds could be used in satisfaction of
Defendants' disgorgement obligations until it had all of
the relevant information and had heard from the interested
parties, including but not limited to Capital One.
See ECF No. 224 at 6. The SEC alerted non-party
Capital One to the fact of the frozen funds. ECF No. 327 at
2. Capital One stated that Defendants have been in default on
three Capital One credit card accounts since April 2016 and,
as of September 2017, owed a total of $124, 429.56 on the
accounts. See ECF No. 327 at 3. It is Capital
One's position that the frozen Capital One funds should
be released to Capital One. See Id. On March 27,
2019, Capital One filed a second request for return for the
frozen funds. See ECF No. 418. On May 17, 2019, the
Court ordered that the Receiver “provide its position
as to the proper distribution of the frozen Capital One
funds, ” that “[a]ny other party believing it is
entitled to the Capital One funds, including but not limited
to Margarita Nase, may also submit an objection or response
to Capital One's request, ” and that the Capital
One funds remain frozen. ECF No. 423 at 12-13.
6, 2019, Margarita Nase filed a response and objection to
Capital One's Request. ECF No. 424. Ms. Nase stated that
it is undisputed that she has been dismissed from this
action, all funds traceable to the fraud in her possession
have been returned to the Receiver, and the $50, 000 in
Capital One funds was not traceable to any fraud.
Id. at 2-3. Ms. Nase argued that this Court does not
have jurisdiction over any dispute regarding the borrowing
relationship between non-party Capital One and the
now-dismissed Ms. Nase because such dispute does not relate
to the SEC's claims nor the Receiver's directives.
Id. at 3. Ms. Nase requested that the $50, 000 be
returned to her and that at least a portion of the $43,
926.29 be paid to Defendants' attorneys subject to a
subsequent fee application to the Court. Id.
Receiver filed its response on June 6, 2019 as well.
See ECF No. 425. The Receiver stated it has no
objection to the Capital One funds being returned to Capital
One. Id. at 2. The Receiver further stated that its
“accounting of the assets of the Receivership Entities
does not include, and has never included, the Capital One
Funds. As such, the Receiver's claims and distribution
recommendations and calculations, as previously submitted to
the Court, did not contemplate his use or application of such
funds.” The Receiver did not provide its position as to
the propriety of releasing the frozen funds to any party
aside from Capital One. The SEC did not provide any updated
position as to the proper distribution of the funds.
Court agrees with Ms. Nase that it would be improper for the
Court to order the funds returned to Capital One. No party
has provided any authority for the Court to make such an
order, nor has the Court been provided any legal basis for
the Capital One funds to remain frozen as a general matter.
Any dispute between Capital One and Mr. Nase or Ms. Nase
regarding the defaulted credit cards is not properly before
this Court. Moreover, the Receiver stated these funds are not
considered part of the receivership and not contemplated as
part of any distribution to claimants. The Court has not been
provided any legal basis for the funds remain frozen.
the Court has not been provided any basis upon which it could
order that Defendants' attorneys' fees be drawn from
the frozen funds. Defendants refer to an application for
attorney's fees that may, at some time in the future, be
directed to the Court. Unless and until the parties identify
a legal basis for such an application to be made in the
context of this case, the Court does not believe it has any
authority to intervene in what otherwise would be a private
matter of contract between Defendants and counsel.
out of an abundance of caution, the Court will not order the
funds be unfrozen until fourteen days from electronic service
of this Order. If a party believes, despite this order, that
there is a legal basis for the Capital One funds to remain
frozen or distributed in a different manner, that party may
make a properly noticed motion, supported by citations to
cases, statutes, and/or judgments from other courts, prior to
the expiration of the fourteen-day interim period. If no
party moves for the funds to remain frozen during the interim
period, the Capital One funds shall be released to Mr. Nase
and Ms. Nase.
reasons stated above, the Court orders as follows:
(1) The Court DENIES Capital One's
Request for the frozen Capital One credit line funds to be
released to Capital One.
(2) The Court ORDERS the frozen Capital One
funds be unfrozen and released fourteen (14) days from
electronic service of this Order, with $43, 926.29 returned
to Daniel Nase and $50, 000 returned Margarita Nase,
respectively, UNLESSS a party makes a