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Securities and Exchange Commission v. Alleca

United States District Court, N.D. Georgia, Atlanta Division

May 18, 2018

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
ANGELO A. ALLECA, SUMMIT WEALTH MANAGEMENT, INC., SUMMIT INVESTMENT FUND, LP, ASSET CLASS DIVERSIFICATION FUND, LP, and PRIVATE CREDIT OPPORTUNITIES FUND, LLC, Defendants.

          OPINION AND ORDER

          WILLIAM S. DUFFEY, JR. UNITED STATES DISTRICT JUDGE

         This matter is before the Court on The Meyers Group, Inc.'s (“TMG”) Motion for Reconsideration [149], and Receiver Robert D. Terry's (the “Receiver”) Motions for Settlement [145], [150].

         I. BACKGROUND

         On September 18, 2012, the SEC filed its Complaint [1], asserting securities fraud claims against Defendants Angelo A. Alleca (“Alleca”), Summit Wealth Management, Inc (“Summit”), Summit Investment Fund, LP (“SIF”), Asset Class Diversification Fund, LP (“ACDF”) and Private Credit Opportunities Fund, LLC (“PCOF” and together with SIF and ACDF, the “Summit Funds”). The next day, the Court froze Defendants' assets and enjoined Defendants from violating the securities laws. ([7]). On September 21, 2012, the Court appointed Robert D. Terry as receiver for the estate of Summit and the Summit Funds (the “Receivership Entities.”) ([9] at 2).

         On June 6, 2017, the Receiver filed his original plan of distribution ([120], as amended [125], the “Original Plan”), proposing to distribute the receivership assets pursuant to the “rising tide” methodology. Under this allocation method:

[T]he Receiver will deduct the amount of a Claimant's pre-receivership withdrawals after calculating the investor's pro rata share of any distribution. If the result is negative-meaning that the Claimant has already received pre-receivership withdrawals in excess of his or her calculated pro rata share of a distribution-that Claimant will not participate in that distribution, although he or she may participate in later distributions. This method preserves assets for those Claimants who have received nothing thus far and recognizes that some Claimants have already recovered a substantial percentage of their investment.

([120] at 18); see Commodity Futures Trading Comm'n v. Equity Fin. Grp., Inc., No. 04-cv-1512, 2005 WL 2143975, at *24 (D.N.J. Sept. 2, 2005) (discussing the rising tide methodology). “If approved, after taking into account any money received by investors prior to the Receivership, this distribution [plan] will represent a minimum recovery percentage among included Claimants of [14.5%].” ([120] at 14; [125] at 3; [125.1] at 1). On July 17, 2017, the Receiver filed minor amendments to his Original Plan. ([125]).

         On September 19, 2017, the Court held a hearing on the Receiver's Original Plan. ([130]). Only the Receiver and his counsel attended the hearing. The Receiver told the Court that his proposed Original Plan should be modified (the “Modified Plan”) to ensure that claimants are treated consistently. (Plan of Distribution Hearing Transcript (Sept. 19, 2017) (“Tr.”) at 3). Specifically, the Receiver sought to cancel his proposed distributions to TMG and the Bank of North Georgia (“BNG”).

         The Original Plan proposed distributing $123, 829.67 to TMG and $28, 722.08 to BNG. ([125.1] at 6). TMG asserted a claim based on a promissory note, dated April 21, 2010, in the original principal amount of $1, 221, 582.00. (See [120] at 25; [133] at 3). BNG asserted a claim based upon a promissory note dated August 25, 2011, in the amount of $289, 843.46. (See [120] at 25; [133] at 3). Before the Receiver was appointed, Defendants paid some, but not all, of the money owed to TMG and BNG under the promissory notes. They paid $407, 194.00, to TMG and $105, 160.20 to BNG (the “Payments”). ([133 at 4-5). The Original Plan reduced the value of TMG's and BNG's “allowed claims”-that is, the amount from which they are entitled to a 14.5% recovery-by the amount of the Payments. ([125.1] at 6). The Receiver represented at the hearing on the Original Plan that in order to conform to his treatment of other claimants, the Receiver concluded that the Payments should be deemed “pre-receivership withdrawals” rather than amounts by which the “allowed claims” are reduced. The Receiver stated that, if the Payments constitute pre-receivership withdrawals, TMG and BNG are not entitled to any distributions because they previously received more than 14.5% of the value of their promissory notes. (Tr. at 3-4, 7-8, 10). The Receiver asked the Court to approve the Original Plan except for the proposed distributions to TMG and BNG.

         On September 21, 2017, the Court issued an order [131] (the “September 21 Order”) granting the Receiver's Motion to Approve Plan of Distribution but ordering the Receiver to withhold distributions to TMG and BNG. The Court further ordered that the Receiver file a formal motion to modify the Original Plan to give TMG and BNG notice of the proposed revised treatment of their claims and to give them an opportunity to respond to the revision.

         On October 4, 2017, TMG filed its Motion for a Court Conference, seeking (1) a stay of the September 21 Order to allow TMG more time to object to the Modified Plan; (2) discovery prior to objecting to the Modified Plan; (3) leave of court to file an action against the Receiver for breach of fiduciary duty; and (4) a court-ordered settlement conference. ([132]).

         On October 5, 2017, the Receiver filed his Motion to Modify the Distribution Plan (the “Modified Plan”). ([133]). In seeking Court approval of the Modified Plan, the Receiver stated that a more equitable approach to TMG's and BNG's distributions would be to calculate their allowed claims as the amount of their original notes, as opposed to the amount of their original notes, minus payments received before the Receiver was appointed. Under this method BNG and TMG would not be entitled to a distribution because both claimants received an amount of pre-receivership payments in excess of the rising tide percentage (14.5%) of the allowed claim.

         On October 26, 2017, TMG filed its Opposition to the Receiver's Motion to Modify the Plan. ([137]).

         On November 16, 2017, the Court granted the Receiver's Motion to Modify the Distribution Plan (the “November 16, 2017, Order”). ([144]). The Court also denied TMG's motion seeking a court conference, a stay of distributions to other claimants, discovery from the receiver, and leave to initiate an action against the Receiver for breach of fiduciary duties. (Id.).

         On November 20, 2017, the Receiver filed a Motion for Settlement seeking (1) approval of a proposed settlement of a disputed claim for damages by the Receiver against Alexandria Capital, LLC, (2) entry of a bar order, and (3) approval of a form of notice related to the settlement and bar order. ([145]).

         On November 24, 2017, TMG filed its Motion for Reconsideration of the November 16, 2017, Order approving the Receiver's modification. ([149]).

         On November 30, 2017, the Receiver filed its Motion for Settlement seeking approval of a proposed settlement of a disputed claim made by BNG. ([150]).

         II. DISCUSSION

         A. Motion for Reconsideration

         Motions for reconsideration should not be used to present the Court with arguments already heard and dismissed, or to offer new legal theories or evidence that could have been presented in the previously-filed motion. See Arthur v. King, 500 F.3d 1335, 1343 (11th Cir. 2007); O'Neal v. Kennamer, 958 F.2d 1044, 1047 (11th Cir. 1992); Bryan v. Murphy, 246 F.Supp.2d 1256, 1259 (N.D.Ga. 2003); see also Jones v. S. Pan Servs., 450 Fed.Appx. 860, 863 (11th Cir. 2012) (“A motion to alter or amend a judgment cannot be used to relitigate old matters, raise arguments, or present evidence that could have been raised prior to the entry of judgment.”); Pres. Endangered Areas of Cobb's History, Inc. v. U.S. Army Corps of Eng'rs, 916 F.Supp. 1557, 1560 (N.D.Ga. 1995), aff'd, 87 F.3d 1242 (11th Cir. 1996) (“A motion for reconsideration is not an opportunity for the moving party and their counsel to instruct the court on how the court ‘could have done it better' the first time.”). Whether to grant a motion for reconsideration is within the sound discretion of the district court. See Region 8 Forest Serv. Timber Purchasers Council v. Alcock, 993 F.2d 800, 806 (11th Cir. 1993).

         TMG's Motion for Reconsideration reiterates the objections and arguments it made in response to the Receiver's modification of the Original Plan. The modification was made for the reasons stated in the Court's November, 16, 2017, Order. TMG opposes the Modified Plan's “pooling” of funds, and argues that the assets of the Summit Funds should be separated from those of Summit Wealth Management, and trade claimants (such as TMG) should be paid from the assets of Summit Wealth Management. TMG again argues that the prior payments it received on the amount owed to it should be subtracted from the total amount owed and should not be subtracted from the rising tide theory claim amount the Court calculated was payable to TMG. The Court considered these same arguments in the November 16, 2017, Order. (See November 16, 2017, Order [144] at 13-14). TMG does not present the Court with any new evidence, an intervening change in the law, or the need to correct clear error or prevent manifest injustice that warrants reconsideration. TMG was able to object to the Modified Plan in its submission on the Modified Plan submitted by the Receiver, and the Court considered TMG's arguments in approving the Modified Plan in the November 16, 2017, Order. That TMG disagrees with the Court's ruling in the November 16, 2017, Order is not a basis for reconsideration. TMG's Motion for Reconsideration is denied.

         B. Motions for Settlement of Disputed Claims

         “The district court has broad powers and wide discretion to determine relief in an equity receivership.” S.E.C. v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992); see also S.E.C. v. Kaleta, 530 Fed.Appx. 360, 362 (5th Cir. 2013). In determining whether to ...


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