United States District Court, D. Maryland
MEMORANDUM AND ORDER
JAMES
K. BREDAR CHIEF JUDGE.
Pending
before the Court is the Receiver's motion for approval of
the proposed distribution plan for assets of the Receivership
Estate, as modified and supplemented by the Receiver's
filing of September 20, 2018. (ECF Nos. 328, 329.) Also
before the Court is an objection by Donna Seuss Tarantino to
the proposed distribution. (ECF No. 330.) The Court finds no
merit in Ms. Tarantino's objection. However, the Court
has questions as to whether to accept the proposed
distribution otherwise as an appropriate, finely-tuned
exercise of the Court's equitable power. The Court finds
it necessary to hold an in-court hearing on these questions.
Plaintiff,
the Federal Trade Commission ("FTC"), sued a host
of entities and several individuals for fraud in relation to
a telemarketing scheme. A receivership was created for,
inter alia, collection of assets to provide
compensation to those who were victims of the scheme. (TRO,
ECF No. 9; Prelim. Inj., ECF No. 74.) In both of the early
injunctive orders, the Court directed the Receiver to
"[p]revent the inequitable distribution of assets and
determine, adjust, and protect the interests of consumers and
creditors who have transacted business with the Receivership
Defendants." (TRO 23; Prelim. Inj. 20.) The Court's
final order and judgment in favor of the FTC and against the
Entity Defendants continued the receivership and entered
judgment in the amount of $58, 137, 415 in favor of the FTC
as equitable monetary relief. (Final Order 6, ECF No. 229.)
Further, the Final Order specified, "All money paid to
the Commission pursuant to this Order may be deposited into a
fund administered by the Commission or its designee to be
used for equitable relief, including consumer redress and any
attendant expenses for the administration of any redress
fund." (Id. 7.)
After
disposing of various secured claims, the Receiver indicates
the only remaining claimants are unsecured, whether they be
consumers or creditors. (Supp. to Mot. Approval 1, ECF No.
329-4.) The Receiver indicates that its two guiding
principles in the formulation of the distribution plan were
the following:
• Those who participated in or in some way took money
out of the scheme ought not to be treated on par with the
consumer victims; and
• No. unsecured creditor's claim should be placed
ahead of compensation to consumer victims, pro rata.
(Id. 8.) The Receiver proposes a distribution plan
involving two classes of claimants:
First Priority Claimants:
Comptroller of the State of Maryland (to be determined)
Consumer victims ($58, 287, 849) Konica Minolta ($1, 000)
Second Priority Claimants:
Former employees of any Received Entity (approximately $232,
000)
Del Vel Chem Co. ($63, 829)
Fedder & Garten P.A. pre-receivership invoices (to be
determined)
(Id. 2.) Anticipating a total distribution of
approximately $11 million, the Receiver proposes a
distribution pro rata to the First Priority Claimants, with
nothing going to the ...