Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-01899/USCOURTS-casd-3_14-cv-01899-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:0077 Securities Fraud

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

BRUCE J. STANIFORTH,

Plaintiff,

CASE NO. 14cv1899-GPC-JLB

ORDER FOLLOWING ORDER TO

v. SHOW CAUSE 

TOTAL WEALTH MANAGEMENT

INC., a California corporation;

ALTUS CAPITAL MANAGEMENT,

LLC, a Delaware limited liability

company; ALTUS CAPITAL

OPPORTUNITY FUND LP, a

Delaware limited partnership; JACOB

K. COOPER, an individual; NATHAN

MCNAMEE, an individual; DAVID

SHOEMAKER, an individual;

CAPITA ADVISORS, INC., a

California corporation; FINANCIAL

COUNCIL, INC., a California

corporation; PINNACLE WEALTH

GROUP, INC., a California

corporation;; and DOES 1 through

100, inclusive,

Defendants.

On February 6, 2015,Receiver Kristen A. Janulewicz (“Receiver”) filed a Notice

of Pending Receivership regarding her appointment as a temporary Receiver for Total

Wealth Management Inc., and its subsidiaries and affiliates, including, but not limited

to Atlus Capital Management, LLC, in Securities and Exchange Commission v. Total

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Wealth Management, Case No. 15-cv-226-BAS (DHB) (the “Receivership Action”). 

(ECF No. 34.)

On February 12, 2015, District Judge Cynthia Bashant (hereinafter “the

Receivership Court”) issued a preliminary injunction order, wherein she appointed the

Receiver as a permanent receiver. (Case No. 15-cv-226-BAS (DHB), ECF No. 8.) The

order appointing a permanent receiver provides that: 

[E]xcept by leave of this Court, during the pendency of this receivership,

all clients, investors, trust beneficiaries, note holders, creditors, claimants,

lessors and all other persons or entities seeking relief of any kind, in law

or in equity, from Defendant Total Wealth Management, Inc., or its

subsidiaries or affiliates . . . are hereby restrained and enjoined from,

directly or indirectly, with respect to these persons and entities . . .

commencing, prosecuting, continuing or enforcing any suit or proceeding

(other than the present action by the SEC or any other action by the

government) against any of them . . . .

(Id. at 11.) 

On February 17, 2015, this Court issued an Order to Show Cause (“OSC”) why

this action should not be stayed during the pendency of the receivership in Securities

and Exchange Commission v. Total Wealth Management, Case No. 15-cv-226-BAS

(DHB). (ECF No. 35.) Plaintiff and the Receiver both filed responses to the OSC

(ECF Nos. 37 & 38.) None of the other Defendants filed responses. 

BACKGROUND

On April 15, 2014, the Securities and Exchange Commission (“SEC”) issued an

Order Instituting Administrative and Cease-and-Desist Proceedingsin itsinvestigation

of Total Wealth Management, Inc. (“TWM”), Jacob Keith Cooper (“Cooper”), Nathan

McNamee (“McNamee”), and Douglas David Shoemaker (“Shoemaker”). ( Case No.

15-cv-226-BAS (DHB), ECF No. 3-3, Ex. 1.) According to the SEC’s order, 1

The Court takes judicial notice of the SEC’s order, a copy of which was filed in the 1

Receivership Action. Under Federal Rule of Evidence 201, a court may take notice of facts not subject

to reasonable dispute that are capable of accurate and ready determination by resort to sources whose

accuracy cannot reasonably be questioned. Fed. R. Evid. 201(b). Public records are a proper subject

of judicial notice. See Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866

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McNamee isthe current president and chief compliance officer of TWM, an investment

adviser representative for TWM, and the sole founder and operator of Capita Advisors,

Inc. (“Capita”). (Id., Ex. 1 ¶¶ 1, 3, 11.) Shoemaker is a co-founder and former chief

compliance officer of TWM, an investment adviser representative for TWM, and the

sole founder and operator of Financial Council, Inc. (“Financial Council”). (Id., Ex.

1 ¶¶ 1, 3, 12.) The SEC alleges that TWM entered into revenue sharing arrangements

with several investment funds (including Altus funds), such that when TWM placed

its clients’ investments in those funds, TWM received sharing fees. (Id., Ex. 1 ¶¶ 25,

53.) TWM, in turn, paid Cooper, McNamee, and Shoemaker a portion of the revenue

sharing fees it received. (Id., Ex. 1 ¶ 26.)

The SEC further alleges that “[a]bout the same time that the Altus Capital Fund

was established [by Cooper], Cooper formed Pinnacle, and he advised Shoemaker and

McNamee to form Financial Council and Capita, respectively.” (Id., Ex. 1 ¶ 27.) After

forming their respective “consulting” companies, McNamee and Shoemaker would

routinely invoice TWM for “consulting fees,” even though McNamee and Shoemaker

did not do any consulting work. (Id., Ex. 1 ¶ 28.) The money TWM paid in response

to these invoicesinstead represented McNamee and Shoemaker’s shares ofthe revenue

sharing fees. (Id.)

DISCUSSION

The issue presented by the Court’s OSC is whether the injunction issued by the

Receivership Court should be extended to stay this action. TheReceiver acknowledges

that the preliminary injunction does not bar prosecution of litigation against the

n.1 (9th Cir. 2004); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Courts may also

take judicial notice of relevant court records under Federal Rule of Evidence 201. See United States

ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) (“[W]e

‘may take notice of proceedings in other courts, both within and without the federal judicial system,

if those proceedings have a direct relation to matters at issue.’” (citation omitted)). The Court finds

that the SEC’s order is properly noticeable. 

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individual defendants in this case or entities not deemed to be Receivership Entities . 

2

(ECF No. 38 at 1.) However, for practical reasons, the Receiver recognizes that the

injunction “has significant implications” in connection with discovery, summary

judgment, and potential judgment enforcement actions that may be undertaken against

the individual and non-receivership defendants. (Id. at 4.) Additionally, the Receiver

believes “that those defendants in this matter to whom the litigation stay does not apply

will almost certainly become subjects of the Receiver’s investigation effort, and may

themselves become defendants or relief defendants in the Receivership Case or in

Receivership Asset recovery litigation brought by the Receiver.” (Id. at 5.) For this

reason, failing to impose a blanket stay in this case could result in a “race to the

courthouse,” wherein some claimants may obtain relief first, to the detriment of other

claimants. (Id.) The Receiver also argues that judicial economy militates against

evaluating claims in a piecemeal fashion. (Id.) Accordingly, the Receiver does not

object to the Court staying the action in its entirety pending resolution of the

Receivership Case. (Id.)

Plaintiff does not object to the Court staying the entire case in the interest of

judicial efficiency, provided that the stay can be lifted in the future as to those

individuals not expressly covered by the Receivership Court’s injunction. (ECF No.

1.) It is Plaintiff’s understanding that only “Defendant TotalWealth Management, Inc.,

or its subsidiaries or affiliates” are covered by the injunction—the individual

defendants are not. (Id.) Plaintiff further understands that the parties will not be able

to conduct discovery with respect to the covered entities. (Id.) It is for this reason that

Plaintiff does not object to staying the entire case, even if the individual defendants are

not expressly covered by the Receivership Court’s litigation stay. (Id.)

“The power of a district court to impose a receivership or grant other forms of

The Receiver defines the “Receivership Entities” as “Total Wealth Management, Inc. and 2

its subsidiaries and affiliates, including but not limited to Altus Capital Management, LLC.” (ECF

No. 38 at 1.)

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ancillary relief . . . derives from the inherent power of a court of equity to fashion

effective relief.” SEC v. Wencke, 622 F.2d 1363, 1369 (9th Cir. 1980). The “primary

purpose of equity receivershipsisto promote orderly and efficient administration ofthe

estate by the district court for the benefit of creditors.” SEC v. Hardy, 803. F.2d 1034,

1038 (9th Cir. 1986). In order to effectuate this goal, the receivership court has

authority to enjoin individuals from proceeding in another court in order to prevent

interference with a receivership action. Wencke, 622 F.2d at 1371-72 (upholding

district court’s order staying state action by nonparties against receivership entities

because “[t]here is a strong federal interest in insuring effective relief in SEC actions

brought to enforce the securities laws”). 

Plaintiff is correct that he will not be allowed to proceed with discovery against

TWM, Altus Capital Opportunity Fund LP, Altus Capital Management, LLC, and

Cooper. The Court finds that discovery falls squarely within the Receivership Court’s

order prohibiting investors from “prosecuting [or] continuing . . . any suit or

proceeding” against the defendants in the Receivership Action. (See Case No. 15-cv226-BAS (DHB), ECF No. 8 at 11.) Moreover, if this Court were to allow Plaintiffs

to propound discovery against TWM, Altus Fund, Altus Capital, and Cooper, the

Receiver would be required to expend time and funds fromthe receivership resin order

to respond. The purpose of the receivership and the litigation stay issued by the

Receivership Court is to protect receivership assets and to allow the Receiver time to

focus on identifying and recovery receivership assets. (Id. at 2, 9-10) (finding that

“[g]ood cause exists to believe that, unless restrained and enjoined by order of this

Court, Defendants will dissipate, conceal, or transfer assets” and that a permanent

receiver was necessary “to conduct such investigation and discovery as may be

necessary to locate and account for all of the assets” and “take such action as is

necessary and appropriate to preserve and take control of and to prevent the dissipation,

concealment, or disposition of any assets”). Thus, to allow discovery against TWM,

Altus Fund, Altus Capital, and Cooper would be contrary to the spirit and intent, in

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addition to the express language, of the Receivership Court’s injunction order.

The Court further finds it appropriate to stay this entire action at this time. The

Receiver indicated that the defendants not expressly covered by the injunction “will

almost certainly become subjects of the Receiver’s investigation effort, and may

themselves become defendants or relief defendants in the Receivership Case or in

Receivership Asset recovery litigation brought by the Receiver.” (ECF No. 38 at 5.) 

This suggests that assets of the McNamee/Shoemaker Defendants may at some future

date become part of the receivership res. Thus, allowing Plaintiff to proceed forward

against these defendants could put him ahead of other claimants in recovering

receivership assets. Absent a showing of a substantial injury if he is not allowed to

proceed, which Plaintiff does not allege, the Court finds no reason to try this case in

a piecemeal fashion. For this reason, and because Plaintiff does not object to staying

the entire case, the Court hereby STAYS this case in its entirety.

In so ruling, the Court is cognizant of the fact that the Receivership Court is

more knowledgeable about the status of the SEC’s administrative action and the

Receivership Action. Absent an intervening ruling from the Receivership Court that

affects this case, the Court orders the Receiver to provide this Court with an update

regarding the status of Securities and Exchange Commission v. Total Wealth

Management, Case No. 15-cv-226-BAS (DHB) on or before August 14, 2015. 

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CONCLUSION

For the foregoing reasons, the Court:

1. STAYS this case in its entirety and,

2. ORDERS the Receiver to provide thisCourt with an update regarding the

status of Securities and Exchange Commission v. Total Wealth Management, Case No.

15-cv-226-BAS (DHB) on or before August 14, 2015. 

IT IS SO ORDERED. 

DATED: May 12, 2015

HON. GONZALO P. CURIEL

United States District Judge

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