SERENA BADGLEY’S LIMITED OBJECTION—PAGE 1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

SECURITIES AND EXCHANGE §

COMMISSION, § 

§

Plaintiff §

§

v. § C.A. No.: 3:22-cv-2118-X

§

TIMOTHY BARTON, CARNEGIE §

DEVELOPMENT, LLC, WALL007, LLC, §

WALL009, LLC, WALL010, LLC, § Jury Trial Demanded

WALL011, LLC, WALL012, LLC, §

WALL016, LLC, WALL017, LLC, §

WALL018, LLC, WALL019, LLC, §

HAOQIANG FU (aka MICHAEL FU), §

STEPHEN T. WALL, §

§

Defendants §

§

DJD LAND PARTNERS, LLC and §

LDG001, LLC, §

§

Relief Defendants §

SERENA BADGLEY’S LIMITED OBJECTION TO 

PLAINTIFF SECURITIES AND EXCHANGE COMMISSION’S 

MOTION FOR APPOINTMENT OF A RECEIVER, 

FOR A PRELIMINARY INJUNCTION AND ANCILLARY RELIEF, 

AND TO LIFT STAY FOR LIMITED PURPOSE

TO THE HONORABLE BRANTLEY STARR, UNITED STATES JUDGE:

Serena Badgley (Badgley), as a representative of minor B.B., files this limited 

objection (Objection) to the Securities and Exchange Commission’s Motion for 

Appointment of a Receiver, for a Preliminary Injunction and Ancillary Relief, and to Lift 

Stay for Limited Purpose [Dkt. 309] (Motion) and states as follows:

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I. INTRODUCTION

1. Badgley is a personal injury claimant with claims against Goldmark 

Hospitality, LLC (Goldmark), which the SEC seeks to designate as a Receivership Entity.

Badgley’s claims have been referenced in this proceeding, primarily in relation to the sale 

of an apartment complex owned by Goldmark, the Amerigold Suites. The condition of 

the Amerigold Suites, which has been documented in this proceeding, is at the basis of 

Badgley’s claims. Badgley and her son resided at the Amerigold Suites on or about June 

24, 2021, having recently moved. At that time, a deteriorated window gave way on three 

sides. Badgley’s five-year-old son fell from the second story of the apartment complex. 

He suffered severe injuries to his pelvis, head, legs, and other parts of his body, 

necessitating extensive medical treatment. 

2. Badgley brought claims against Goldmark less than a month after the 

injuries were sustained in Badgley v. Goldmark Hospitality, LLC, No. CC-21-02991-B, 

County Court at Law No. 2, Dallas County, Texas (State Court Case). Prior to the initial 

Receivership Order, these claims were actively litigated in the State Court Case with

mediation scheduled for November 18, 2022, and trial set for February 14, 2023. Badgley 

has reason to believe Goldmark maintained, or caused to be maintained, insurance 

coverage potentially applicable to the type of claims Badgley asserts in the State Court 

Case.

3. Badgley files this limited Objection to the extent the Motion seeks to extend 

the Receiver’s jurisdiction to non-receivership property and stay the adjudication of her 

claims against Goldmark in the State Court Case for purposes of collection against 

applicable insurers and insurance policies. 

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III. FACTUAL BACKGROUND

4. Badgley is a personal injury claimant with claims pending against 

Goldmark. On or about June 24, 2021, Badgley’s five-year-old son fell from the second 

story of an apartment complex, the Amerigold Suites, owned by Goldmark when a rotted 

window that should have been secured gave way. Badgley’s son sustained serious injuries 

to his pelvis, head, legs, and other parts of his body. Goldmark’s negligence and gross 

negligence were a proximate cause of these injuries and the resulting damages.

5. On July 23, 2021, Badgley filed claims against Goldmark in the State Court 

Case. See Exhibit A, Original Petition. On October 18, 2021, Badgley filed her Amended 

Petition. See Exhibit B, Amended Petition. These claims were actively litigated in the 

State Court Case with mediation scheduled for November 18, 2022, and trial set for 

February 14, 2023. See Exhibit C, Mediation Order; Exhibit D, Trial Order.

6. Upon information and belief, Goldmark has maintained, or caused to be 

maintained, insurance coverage applicable to the type of claims asserted by Badgley in 

the State Court Case, including defense costs. See Exhibit E.

7. The SEC filed its Complaint in this action on September 23, 2022. [Dkt. 1]. 

8. On September 26, 2022, the SEC moved the Court for the appointment of a 

receiver [Dkt. 6], which the Court granted on October 18, 2022 [Dkt. 29] (Receivership 

Order). The Receivership Order designated Goldmark as a Receivership Entity and

enjoined the adjudication of Badgley’s claims in the State Court Case. See Receivership 

Order, at 3, 16-17. The Court supplemented the Receivership Order on November 16, 

2022 [Dkt. 62], and December 13, 2022 [Dkt. 88], to include additional entities to the 

receivership.

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9. On November 2, 2022, the United States Attorney’s Office for the Northern 

District of Texas filed a motion to stay this action but not the receivership [Dkt. 44], which 

the Court granted on November 16, 2022 [Dkt. 64].

10. On March 2, 2023, the Receiver sought approval to sell the Amerigold

Suites, an apartment complex owned by Goldmark [Dkt. 167], which the Court approved 

on March 29, 2023 [Dkt. 202]. This sale has not yet closed.

11. On June 28, 2023, the Fifth Circuit vacated the Receivership Order, 

effective 90 days after the issuance of its mandate, and granted a stay of the receivership’s

powers to sell or dispose of property in the interim. SEC v. Barton, 72 F.4th 640

(5th Cir. 2023). On August 31, 2023, the Fifth Circuit withdrew its prior opinion and 

entered a new opinion (Opinion). SEC v. Barton, No. 22-11132, 2023 WL 5618997 

(5th Cir., Aug. 31, 2023). The Opinion substantially aligned with its initial opinion but

clarified the scope of its stay on the sale and disposition of property under the

receivership. See id. at *5-6.

12. On August 31, 2023, the Fifth Circuit issued its mandate.

13. On September 5, 2023, the Receiver filed a Declaration and Interim Report, 

detailing the status of the receivership [Dkt. 308] (Interim Report). The Interim Report

alleges that Goldmark received funds subject to the underlying controversy via HR 

Sterling, LLC and JMJ Development, LLC that were used for improvements and 

operations for the Amerigold Suites. See Interim Report at ¶¶ 103-116, Ex. 9. Specifically, 

the Interim Report identified two payments in September and December 2018 to 

Goldmark totaling $250,000 that was then directed to Universal Solar System. See id. at 

Ex. 9.

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14. On September 7, 2023, the SEC filed their Motion for appointment of a 

receiver and preliminary injunction [Dkt. 309]. The Motion relies on the Interim Report 

as well as the declarations of Carol Hahn, which similarly allege that Goldmark received 

funds subject to the underlying controversy, identifying the September and December 

2018 amounts totaling $250,000. See App. at 10 [Dkt. 7-1]; Supp. App. at 7 [Dkt. 310-2].

IV. ARGUMENT AND AUTHORITIES

15. Badgley asserts this limited Objection to the SEC’s Motion to the extent it 

seeks to enjoin the adjudication of her claims against Goldmark for purposes of collection 

against applicable insurance proceeds. Currently, the Motion seeks a blanket injunction 

that would enjoin all litigation against designated Receivership Entities regardless of the 

nature of the claim or property at issue. See Mot. at 20-21. The Court has broad authority 

to issue stays of litigation to preserve receivership property. See SEC v. Stanford Int’l 

Bank, Ltd., 424 Fed. App’x 338, 340 (5th Cir. 2011). However, that authority is limited to 

property subject to the underlying litigation. Barton, 2023 WL 5618997, at *5 (citing 

Netsphere, Inc. v. Baron, 703 F.3d 296, 310 (5th Cir. 2012)). A receivership’s jurisdiction 

extends only over property subject to those underlying claims. Id. 

16. Insurance proceeds under third-party liability policies providing coverage 

for claims like Badgley’s are not property of the receivership. When analyzing 

receivership assets, courts have turned to bankruptcy caselaw, as the purpose of the two 

processes is essentially the same—the fair distribution of liquidated assets. SEC v. 

Stanford Int’l Bank, Ltd., 927 F.3d 830, 840-41 (5th Cir. 2019) (identifying the “shared 

legal heritage, since ‘federal equity receiverships were the predecessor to Chapter 7 

liquidations and Chapter 11 reorganizations’”). Under bankruptcy caselaw, it is 

well-settled that “while insurance policies are generally property of the estate, the 

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proceeds of liability insurance policies, unlike first party policies, generally are not.” 

See Sosebee v. Steadfast Ins., Co., 701 F.3d 1012, 1023 (5th Cir. 2012); see also In re 

Edgeworth, 993 F.2d 51, 55-56 (5th Cir. 1993). This determination turns on entitlement 

to proceeds (i.e., whether proceeds of the policy would belong to the debtor once the 

insurer pays a claim). See, e.g., Sosebee, 701 F.3d at 1023; In re Edgeworth, 993 F.2d at 

55-56. Courts in this circuit have applied this bankruptcy law to receiverships. See Exec. 

Risk Indem., Inc. v. Integral Equity, L.P., No. 3:03-cv-0269, 2004 WL 438936, at *13 

(N.D. Tex. Mar. 10, 2004); SEC v. Narayan, No. 3:16-cv-1417-M, 2017 WL 447205, at *4 

(N.D. Tex. Feb 2, 2017); Pellegrini v. Toffoli, 640 F.Supp.3d 553, 564, n.44 (E.D. La. 

2022). Like debtors, receivers have no cognizable claim to the proceeds of liability 

insurance policies or control over how those proceeds are distributed. See Exec. Risk 

Indemnity, Inc., 2004 WL 438936, at *13 (citing In re Edgeworth, 993 F.2d at 55-56 and

Landry v. Exxon Pipeline Co., 260 B.R. 769, 786 (Bankr. M.D. La. 2001)). Those proceeds 

are only payable to claimants falling within the terms of the applicable policies. 

See Narayan, 2017 WL 447205, at *5 (“The general rule is that a receiver acquires no 

greater rights in property than the debtor had”); SEC v. Faulkner, No. 3:16-cv-1735-D, 

2018 WL 2761850, *5 (N.D. Tex. Jun. 06, 2018) (same). The insurance proceeds under 

Goldmark’s CGL policy are not subject to the receivership and should be excluded from 

any issued litigation stay. See Exhibit E. 

17. Moreover, the potential harm to Badgley in staying the State Court Case far 

outweighs any harm to the receivership. Badgley asserts personal injury claims for 

injuries her child sustained. Those injuries cannot be compensated until they are 

adjudicated. And that adjudication is poised for resolution. Badgley’s claims have been 

pending for over two years. See Exhibits A-B. Mediation was set for November 18, 

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2022, shortly after when the initial Receivership Order was entered, with trial then set for 

February 14, 2023. See Exhibits C-D. In in the context of liability insurance, Badgley

must first establish Goldmark’s liability before an insurer becomes contractually 

obligated to make payments. See In re Edgeworth, 993 F.2d at 53-56. Bankruptcy again 

provides guidance here as bankruptcy courts often grant relief from the automatic stay,

so claimants can adjudicate their unliquidated claims against a debtor outside of 

bankruptcy court, particularly when the claims are already the subject of pending 

litigation. See Kipp Flores Architects, L.L.C. v. Mid-Continent Cas. Co., 852 F.3d 405, 

414 (5th Cir. 2017); see also In re Fuchs, No. 05-3595-BJH-7, 2006 WL 6543977, at *2-3 

(Bankr. N.D. Tex. 2006) (unpublished) (finding adjudication of personal injury claims 

sufficient to establish cause for granting relief from the automatic stay); In re Bock 

Laundry Machine Co., 37 B.R. 564, 567 (Bankr. N.D. Ohio 1984) ("The automatic stay 

was never intended to preclude a determination of tort liability and the attendant 

damages"). Additional delay will unnecessarily harm Badgley and her son.

18. In contrast, the adjudication of Badgley’s claims will not harm the 

receivership. First, the applicable insurance policy at issue provides defense costs. 

See Exhibit E. Regardless, courts in this circuit have permitted defense costs to be issued

even when receivership assets were implicated. See Narayan, 2017 WL 447205, at *5-10; 

SEC v. Stanford Int’l Bank, Ltd., No. 309-cv-298-N, 2009 WL 8707814, *2-4 (N.D. Tex. 

Oct. 9, 2009). Second, there is no indication that subject funds were used to pay 

insurance premiums on the applicable policy. See Interim Report at ¶¶ 103-116, Ex. 9; 

see also App. at 10; Supp. App. at 7. In fact, the Receiver has identified $2,500,000 in 

assets for Goldmark subject to the pending sale, but only $250,000 in subject funds being 

directed to Goldmark. See Interim Report at ¶¶ 103-116, Ex. 9. Regardless, use of such 

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funds to pay insurance premiums does not create a contractual right to insurance 

proceeds. See Stanford Int’l Bank, Ltd., 2009 WL 8707814, *3 n.2. Third, the claims at 

issue are isolated and not a mass tort. See Sosebee, 701 F.3d at 1023-24; In re Sfuzzi, 

191 B.R. 664, 668 (Bankr. N.D. Tex. 1996). The Receiver has only identified Badgley’s 

pending personal injury claims during the applicable policy period.1 See Interim Report 

at ¶ 107. Finally, Badgley would limit collection against Goldmark outside of any

receivership entered to third-party insurers and insurance proceeds, while reserving any 

direct collection of judgment or settlement against Goldmark to a claim within the 

administration of any receivership entered. All of these considerations warrant the 

adjudication of Badgley’s claims in the State Court Case.

V. PRAYER

WHEREFORE, Badgley respectfully requests that the Court limit the proposed 

receivership order to receivership property and allow the adjudication of Badgley’s claims 

in the State Court Case to final judgment or settlement and collection of any judgment or 

settlement from third-party insurers and insurance policies outside the receivership, 

while reserving any direct collection of judgment or settlement against Goldmark to a 

claim within the administration of any entered receivership. Badgley also requests any 

and all other general relief to which she may be entitled.

1 The only other personal injury claim identified against Goldmark appears to have been raised in 2023 in 

relation to a storm. See Interim Report at ¶ 107.

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Respectfully submitted this 28th day of September 2023.

/s/ Ryan E. Chapple

Ryan E. Chapple (pro hac vice)

Texas State Bar No. 24036354

Email:rchapple@cstrial.com

CAIN & SKARNULIS PLLC

303 Colorado Street, Suite 2850

Austin, Texas 78701

512-477-5000

512-477-5011—Facsimile

ATTORNEY FOR BADGLEY

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing limited Objection has 

been served on counsel for the parties and all parties receiving or entitled to notice 

through CM/ECF on this 28th day of September 2023.

/s/ Ryan E. Chapple

Ryan E. Chapple

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