Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_12-cv-03237/USCOURTS-cand-5_12-cv-03237-42/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 15:77 Securities Fraud

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Case No.: 5:12-cv-03237 EJD

ORDER GRANTING SEVENTH MOTIONS FOR INTERIM FEES AND COSTS

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

v.

SMALL BUSINESS CAPITAL CORP., et 

al.,

Defendants.

Case No. 5:12-cv-03237 EJD 

ORDER GRANTING SEVENTH 

MOTIONS FOR INTERIM FEES AND 

COSTS

Re: Dkt. Nos. 966, 967

I. INTRODUCTION

In this civil enforcement action, Plaintiff Securities and Exchange Commission (“SEC”) 

alleges that individual defendant Mark Feathers (“Feathers”) and institutional defendants Small 

Business Capital Corp., Investors Prime Fund, LLC, and SBC Portfolio Fund, LLC violated 

federal law in the offer and sale of investment fund securities. On June 10, 2012, this court issued 

a stipulated preliminary injunction appointing Thomas A. Seaman (“Seaman”) as the permanent 

receiver of the institutional defendants. See Docket Item No. 34. The court also granted, that 

same day, Seaman’s motion to engage Allen Matkins Leck Gamble Mallory & Natsis, LLP

(“Allen Matkins”) as his general counsel. See Docket Item No. 36. 

Pursuant to the preliminary injunction order, Feathers and the institutional defendants 

“shall pay the costs, fees and expenses of the permanent receiver incurred in connection with the 

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Case No.: 5:12-cv-03237 EJD

ORDER GRANTING SEVENTH MOTIONS FOR INTERIM FEES AND COSTS

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performance of his duties,” including the costs of his counsel. See § XII of Docket Item No. 34. 

Presently before the court is Seaman’s seventh motion for interim fees pursuant to the preliminary 

injunction order. See Docket Item No. 966. Also before the court is Allen Matkins’ similar 

request for fees and costs. See Docket item No. 967. Feathers has filed an opposition to these 

motions. See Docket Item No. 970. The SEC supports the requests. See Docket Item No. 976. 

Having carefully reviewed these matters, the court finds them suitable for decision without 

oral argument pursuant to Civil Local Rule 7-1(b). Accordingly, the hearing scheduled for 

February 5, 2015, will be vacated. The seventh interim fee applications will be granted for the 

reasons explained below. 

II. LEGAL STANDARD 

A court appointing a receiver “has full power to fix the compensation of such receiver and 

the compensation of the receiver’s attorney or attorneys.” In re Alpha Telcom, Inc. [Alpha 

Telcom II], No. 03:01-CV-1283-PA, 2013 U.S. Dist. LEXIS 32391, at *51, 2013 WL 840065 (D. 

Or. Mar. 6, 2013) (citing Drilling & Exploration Corp. v. Webster, 69 F.2d 416, 418 (9th Cir. 

1934)). “[C]onsiderable discretion” is afforded to the court in that regard, which may fashion a 

“fee award that is appropriate under the circumstances.” Id. at *52.

In exercising its discretion over fees, the court must be mindful that a receiver and any 

assisting professionals should be “reasonably, but not excessively” compensated for efforts to 

benefit the receivership estate. Id. “[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). Thus, it is often appropriate to award a reduced rate in order to reflect the public interest 

involved in preserving funds held in the receivership estate. See id. at 646-47. Emphasis on 

sufficient, but not excessive, compensation for the receiver aids in securing confidence in the 

process because the injured investors usually recover “only a fraction of their losses.” Id. at 645.

Several additional factors should also be considered. Alpha Telcom II, 2013 U.S. Dist. 

LEXIS 32391, at *51-52. In particular, an award of interim fees may be necessary “where both 

the magnitude and the protracted nature of a case impose economic hardships on professionals 

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Case No.: 5:12-cv-03237 EJD

ORDER GRANTING SEVENTH MOTIONS FOR INTERIM FEES AND COSTS

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rendering services to the estate.” In re Alpha Telcom, Inc. [Alpha Telcom I], No. 01-CV-1283-

PA, 2006 U.S. Dist. LEXIS 79997, at *7, 2006 WL 3085616 (D. Or. Oct. 27, 2006). Also relevant 

is 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). These factors 

along with other unique considerations 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.

When interim fees are at issue, courts will routinely withhold a portion of the requested 

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 U.S. Dist. LEXIS 79997, at *7-8. Lastly, “courts have recognized that it is 

unrealistic to expect a trial judge to evaluate and rule on every entry in an application” and courts 

“endorse percentage cuts as a practical means of trimming fat from a fee application.” Id. (internal 

quotations omitted).

III. DISCUSSION 

A. The Fee Requests

Seaman and Allen Matkins currently request the following fees for services performed:

Applicant and 

Role

Fees Incurred Interim Payment 

Requested

Costs 

Incurred

Total Interim 

Payment 

Requested

Seaman

(Receiver)

$198,712.00 $178,840.80 $0 $178,840.00

Allen Matkins

(Receiver’s 

General 

Counsel)

$138,784.05 $110,047.00 $3,332.47 $113,379.47

As the above chart demonstrates, Seaman requests approval of his fees in full and the 

authority to pay 90% of the $198,712.00 in fees incurred from May 1, 2014, through July 31, 

2014, amounting to $178,840.00. Seaman requests compensation for 1,220.3 hours of work 

during this period at a blended hourly rate of $163. Compensation for expenses is not requested. 

Allen Matkins requests $110,047.00 of the $138,784.05 in total fees incurred during this 

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period, which amounts to 278.6 hours of work at a blended hourly rate of $395.00. Allen Matkins 

also requests compensation for all expenses, or $3,332.47. The total payment requested is

$113,379.47.

B. Analysis of Applications

i. Seaman

During the seventh interim period, Seaman and his staff undertook a variety of activities to 

administer the receivership estate. Seaman continued to manage and service the loan portfolio, 

which included collecting loan payments, monitoring loan status, resolving problem loans, and 

attending required site visits. Seaman’s management resulted in benefit to the estate in that 

regard, since the receivership entities were paid $251,591.78 in loan servicing fees during this 

period, while Seaman charged $87,256.80 to manage the loans. A net profit of $160,335.00 was 

therefore realized by the estate. Seaman also prepared the loan portfolio and SBLC license for

sale, which required coordination with the SBC as well as the review of over 100,000 pages of 

loan materials. In addition, Seaman commenced and continued to participate in litigation against 

California Business Bank on behalf of the receivership estate. 

In light of the extensive work Seaman and his staff undertook on behalf of the estate, and 

in recognition of the benefit this work has conferred, the court will approve Seaman’s interim 

request for fees in the amount of $198,712.00, of which he will be authorized to pay $178,840.80, 

or 90% of that amount, from the receivership estate as this time. 

ii. Allen Matkins

As it has throughout this litigation, Allen Matkins supported Seaman in his management 

efforts during the seventh interim period. Allen Matkins responded to Feathers’ communications 

and court filings, including those in the Ninth Circuit Court of Appeals, and prepared reports for 

the court. The firm also assisted in servicing the loan portfolio by addressing legal issues raised 

by problem loans and obtaining court authorization to sell the loans and the SBLC license. 

Furthermore, Allen Matkins managed the estate’s legal action against California Business Bank, 

which has become seriously contested. 

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For this period, the court will grant Allen Matkins’ request for fees in the amount of 

$110,047.00. The remaining amount, $28,737.05, will be withheld until the conclusion of the 

receivership. The court will also authorize Allen Matkins’ expenses of $3,332.47.

However, while Allen Matkins’ fees are granted as requested for this particular application, 

the court is nonetheless compelled to address its argument that it is “unfair” to reduce this and 

future fee requests to an amount that reflects an hourly rate of less than $395.00. Simply put, 

doing so is not unfair. As has been stated previously, this court’s primary duty is to preserve the 

receivership estate for the benefit of the investors. The court takes that duty seriously, as should 

the other involved parties. Indeed, all participants must be mindful that the estate is a limited 

resource with a number of interested claimants, including investors and professionals assisting in

its management. Out of necessity, claims of all types must be reduced where appropriate in order 

to provide at least partial compensation to the broadest number of parties. Like investors, 

professional claimants are not immune from such reductions. 

Moreover, it must be emphasized that the court did not order any particular hourly rate 

when it authorized Seaman to engage Allen Matkins as his counsel; it approved Allen Matkins’

appointment considering its agreement not to charge the estate more than $395.00 per hour. The

actual rate of compensation is instead subject to a number of discretionary factors, and it is not 

unfair to Allen Matkins when such factors compel a reduced fee award. Those factors did not 

require a reduction this time, but they may again in the future. 

IV. CONCLUSION AND ORDER

The motions for fees and expenses incurred by Seaman and Allen Matkins (Docket Item 

Nos. 966, 967) are GRANTED. The requested amounts are disbursed as follows:

Applicant Fees & Expenses 

Authorized for 

Distribution

% of Requested Fees 

Authorized for 

Distribution

% of Request

Seaman

(Receiver)

$178,840.80 90% 100%

Allen Matkins 

(Receiver’s General 

Counsel)

$110,047.00 (fees)

$3,332.47 (expenses)

79% (fees)

100% (expenses)

100%

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Case No.: 5:12-cv-03237 EJD

ORDER GRANTING SEVENTH MOTIONS FOR INTERIM FEES AND COSTS

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The hearing scheduled for February 5, 2015, is VACATED. 

IT IS SO ORDERED.

Dated: February 2, 2015

______________________________________

EDWARD J. DAVILA

United States District Judge

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