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Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

JEFFER MANGELS BUTLER & MITCHELL LLP

BENNETT G. YOUNG (Bar No. 106504)

byoung@jmbm.com

JOSEPH N. DEMKO (Bar No. 113104)

jdemko@jmbm.com

Two Embarcadero Center, 5th Floor

San Francisco, California 94111-3813

Telephone: (415) 398-8080

Facsimile: (415) 398-5584

Special Counsel for Receiver Susan L. Uecker

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA -SAN FRANCISCO DIVISION

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

vs.

SAN FRANCISCO REGIONAL CENTER, LLC; 

THOMAS M. HENDERSON; CALIFORNIA 

GOLD MEDAL, L.P.; CALLSOCKET, L.P.; 

CALLSOCKET II, L.P.; CALLSOCKET III, 

L.P.; COMPREHENSIVE CARE OF 

OAKLAND, L.P.; NA3PL, L.P.; WEST 

OAKLAND PLAZA, L.P.; CALLSOCKET, 

LLC; CALLSOCKET II, LLC; CALLSOCKET 

III, LLC; COMPREHENSIVE CARE OF 

CALIFORNIA, LLC; IMMEDIA, LLC; and 

NORTH AMERICA 3PL, LLC,

Defendants,

-andCALLSOCKET HOLDING COMPANY, LLC; 

CALLSOCKET III HOLDING COMPANY, 

LLC; BERKELEY HEALTHCARE 

DYNAMICS, LLC; CENTRAL CALIFORNIA

FARMS, LLC; and JL GATEWAY, LLC,

Relief Defendants.

Case No. 3:17-CV-00223-RS

REPLY MEMORANDUM IN SUPPORT 

OF RECEIVER'S RENEWED MOTION 

FOR ORDER AUTHORIZING

RECEIVER TO RETAIN REAL ESTATE 

BROKER TO LIST AND SELL REAL 

PROPERTY OF BERKELEY 

HEALTHCARE DYNAMICS, LLC

Date: August 16, 2018

Time: 1:30 p.m.

Place: 450 Golden Gate Ave.

17th Floor, Ctrm. 3

San Francisco, CA 94102

Judge: The Hon. Richard Seeborg

Case 3:17-cv-00223-RS Document 431 Filed 07/09/18 Page 1 of 18
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28 i Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

TABLE OF CONTENTS

Page

I. INTRODUCTION .................................................................................................................1

II. ADDITIONAL FACTS .........................................................................................................2

A. The NA3PL Notes......................................................................................................2

B. Intervenors' Claim to Sweat Equity ...........................................................................5

C. NA3PL, LLC Guarantees the East West Bank Loan.................................................6

D. Intervenors' Proposed Sale.........................................................................................6

E. Intervenors' Have Not Shown that the Buyer Has the Financial Ability to 

Perform the Proposed Transaction.............................................................................8

F. Intervenors' Proposed Transaction Establishes the Benefits of a Public Sale ...........9

III. ARGUMENT.......................................................................................................................10

A. Cause Exists to Renew the Motion to List the 20th Street Warehouse on the 

Open Market ............................................................................................................10

1. The Parties Are At An Impasse ...................................................................11

2. Intervenors' Proposed Sale is Unacceptable. ...............................................12

3. The Sale Proceeds Can be Used to Repay Unrelated EB-5 Investors .........12

B. The 20th Street Warehouse Should Be Sold in an Open Market Transaction.........12

C. The Statutory Requirements Applicable to a Private Sale Make a Public 

Sale Superior............................................................................................................13

IV. CONCLUSION....................................................................................................................15

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28 ii Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

TABLE OF AUTHORITIES

Page

CASES

Acadia Land Co. v. Horuff,

110 F.2d 354 (5th Cir. 1940) .....................................................................................................14

SEC v. T-Bar Resources LLC,

2008 WL 4790987 (N.D. Tex. 2008).........................................................................................14

SEC v. Wilson,

2013 WL 1283437 (E.D. Mich. 2013).......................................................................................14

United States v. Prime,

431 F.3d 1147 (9th Cir. 2005) .....................................................................................................4

Western Surety Co. v. La Cumbre Office Partners, LLC,

8 Cal.App.5th 125, 132 (2018) ....................................................................................................5

Young v. Henderson.

Case No. RG15778891 ................................................................................................................8

STATUTES

28 U.S.C.

§ 2001.........................................................................................................................................13

§ 2001(a)....................................................................................................................................14

§ 2001(b)......................................................................................................................2, 8, 13, 14

California Civil Code

§ 2792...........................................................................................................................................4

California Corporations Code

§ 17157(d)....................................................................................................................................5

§ 17703.01(b)(2) ..........................................................................................................................5

OTHER AUTHORITIES

Federal Rule of Evidence 702............................................................................................................3

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1 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

Susan L. Uecker, the duly appointed receiver (the “Receiver”) for Defendants NA3PL, 

L.P. ("NA3PL, LP"); North America 3PL, LLC (NA3PL LLC"); and Relief Defendant Berkeley

Healthcare Dynamics, LLC ("BHD"), as well as the remaining named entity Defendants and 

Relief Defendants (collectively the “Receivership Entities”), submits her reply memorandum in 

support of the Receiver’s Renewed Motion for Order Authorizing Receiver to Retain Real Estate 

Broker to List and Sell Real Property of Berkeley Healthcare Dynamics, LLC (the “Renewed 

Motion”) as follows:

I. INTRODUCTION

The Receiver has amply demonstrated that cause exists to file the Renewed Motion. 

Intervenors still have not provided to the Receiver evidence that Intervenors' proposed buyer has 

the financial ability to close. As a result, Intervenors' proposed transaction is unacceptable. The 

buyer's financial ability to perform is obviously a critical element. Despite months to do so, 

Intervenors have yet to deliver a commitment letter establishing that their buyer has the ability to 

fund the transaction. The importance of a commitment letter is magnified by the terms of 

Intervenors' proposed transaction. Intervenors did not require the buyer make an earnest money

deposit. Normally, one would expect a deposit of at least $500,000 to $1 million in a transaction 

of this magnitude. Instead, the buyer has no "skin in the game" and can walk away without a 

financial penalty.

The parties are at an impasse regarding the amount of EB-5 funds to which the Receiver is 

entitled from the sale proceeds. The parties agree that the net amount of $5,465,356.88 of EB-5 

investor monies was transferred to BHD and BHD, LP from SFRC and NA3PL, LP. The impasse 

is over the validity of BHD's guaranties of two of the NA3PL Notes. NA3PL, LP raised over $18 

million from EB-5 investors in reliance on a business plan under which NA3PL, LP would lend 

the funds to NA3PL, LLC. These investors were given the NA3PL Notes by Henderson and SFRC 

to use in connection with their I-526 petitions. Intervenors' vigorous objection to BHD's guaranty 

of the NA3PL Notes establishes that the parties are at an impasse. 

Additionally, the SEC has demonstrated that the sales proceeds can and should be used to 

repay EB-5 investors their losses on unrelated projects. (Dkt. no. 422.) This alone supplies cause 

Case 3:17-cv-00223-RS Document 431 Filed 07/09/18 Page 4 of 18
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2 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

for the Renewed Motion.

The 20th Street Warehouse should be sold in an open market transaction. Just the 

possibility of an open market transaction already has caused Intervenors to increase their price by 

$18.5 million. The property should be sold on the open market for cash and the net proceeds held 

pending the adoption of a plan of distribution by the Receiver. Intervenors' real goal is to obtain a 

distribution of the value of their interests in BHD prior to adoption of a plan of distribution and 

before any other creditor or investor receives a distribution. 

Finally, the private sale proposed by Intervenors is subject to the cumbersome 

requirements imposed on private sales by federal receivers. See 28 U.S.C. § 2001(b). Intervenors 

completely ignore these mandatory requirements. Compliance with these requirements largely

eliminates the benefits claimed by Intervenors for their proposed transaction..

II. ADDITIONAL FACTS

A. The NA3PL Notes

Intervenors claim to have never seen the two NA3PL Notes that were guaranteed by BHD 

(Exs. 15 and 16 to the Uecker Decl., dkt no. 414) and further claim that BHD's guaranties of those 

Notes are forged. According to the attorney for certain EB-5 investors, all three NA3PL Notes 

were provided to EB-5 investors by SFRC and Henderson to support the investors' I-526 visa 

petitions. See Declaration of Patrick P. Gunn in Support of Expansion of Receivership to Include 

NA3PL LLC and Berkeley Healthcare Dynamics, LLC, ¶ 12 and Exs. E, F. and G. (Dkt. no. 130.)1

The notes provided to investors by Henderson and SFRC include the two notes that were 

guaranteed by BHD. Id., Exs. E and F. Thus, EB-5 investors invested $18 million in NA3PL, LP

at least in part based upon the NA3PL Notes and BHD guaranty of the Notes.

Intervenors first argue that the Receiver has not provided a reasonable commercial 

explanation for why BHD, the owner of the 20th Street Warehouse, would guaranty its tenant's 

debt. To the extent a commercial explanation is required, Intervenors, who were on the inside, are 

in a better position to supply one. Indeed, Intervenors speculated that the notes and guaranties 

 

1 Mr. Gunn's testimony is sufficient to authenticate the NA3PL Notes. Furthermore, the notes were 

attached as Exhibits 14 and 15 to the Monitor's Report. (Dkt. no. 129.)

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3 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

were used to raise funds from investors in China. Intervenors' Opposition, p. 19, fn. 14. 

That EB-5 investors would require a guaranty from BHD makes perfect sense. EB-5 

investors invested in NA3PL, LP, which was supposed to lend the investor funds to NA3PL, LLC 

to be used in part to develop the 20th Street Warehouse. However, the warehouse was not owned 

by NA3PL LLC, but instead was owned by BHD. A sophisticated investor would realize that that 

unless BHD guaranteed the loan, NA3PL, LP would not have recourse to the warehouse in the 

event NA3PL, LLC failed to pay, greatly increasing NA3PL, LP's, and therefore EB-5 investors', 

risk. 

Intervenors make a series of hyper technical arguments disputing the validity of the 

NA3PL Notes and the guaranties. This is mere grasping at straws. Intervenors claim that the 

address for SFRC on two of the Notes is wrong. True, SFRC's headquarters was in the Tribune 

Tower, but that does not mean that is what SFRC told EB-5 investors. The address on the Notes is 

1750 Broadway, Oakland, California. The 1750 Broadway Building was owned by Callsocket II, 

L.P., another defendant, which acquired the property in October 2012. While owned by Callsocket 

II, the building had a huge sign on the front that read ”San Francisco Regional Center”. Supp. 

Dolby Decl., ¶¶ 3, 5 and Ex. B.

Intervenors next argue that the Notes incorrectly identify Henderson as the CEO of 

NA3PL, LLC and as managing member of BHD. The two NA3PL business plans in the section 

headed "Management Team," both describe Henderson as the CEO of NA3PL, LLC. See Uecker 

Decl. Ex. 13, p. 26; Ex. 14, p. 26. Bronson testified that she the author of the business plan. 

Deposition of Jennifer Bronson, p. 21, l1. 14 – 21, Young Decl. ¶ 2 and Ex. 1. Similarly, one of 

the two BHD operating agreements lists Henderson as a managing member, and he signed the East 

West loan documents and account signature cards as a managing member. See Uecker Decl. Exs. 

3, 4, 5, 7 and 8. Chin and Shimamoto also signed each of these documents, establishing that they 

knew that Henderson was holding himself out as a managing member of BHD. 

Intervenors contend that one of the notes has a photocopied signature. There is no 

evidentiary basis for this opinion. Handwriting analysis is a matter for expert opinion under 

Federal Rule of Evidence 702 and Intervenors did not offer any expert opinion testimony. See

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4 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

United States v. Prime, 431 F.3d 1147 (9th Cir. 2005).

Intervenors claim that BHD is not a party and never identified in the two notes. This is not 

accurate. Both notes state that "If NA3PL, LLC cannot repay the [$10,000,000 or $15,000,000] 

back to NA3PL, LP, Berkeley Healthcare Dynamics is obligated to repay the [$10,000,000 or 

$15,000,000]." That the reference is to BHD is made clear by the signature line. Henderson signed 

as the managing member of Berkeley Healthcare Dynamics. Limited liability companies have 

managing members; limited partnerships do not. Thus, the reference is to BHD. 

Intervenors next assert that the notes do not use the word "guaranty" and do not contain a 

promise to pay. The first does not matter (and Intervenors cite no authority that a guaranty must 

use the word "guaranty") and the second is incorrect. As quoted above, both notes state that if 

NA3PL LLC fails to pay, BHD is obligated to repay the amount borrowed. The language "is 

obligated to repay" is sufficient language to constitute a promise to pay and create a guaranty. 

Both notes have a signature line for both NA3PL, LLC and Berkeley Healthcare Dynamics. There 

is no reason for BHD to sign the notes unless it has obligations under them.

Intervenors further argue that the notes do not set forth objective criteria under which the 

guaranties mature and became due. Intervenors neglect to provide any authority for their position

that such objective criteria is a requirement. In any event, the quoted language adequately 

describes when BHD must pay, namely if NA3PL, LLC cannot. This language meets the 

requirement, to the extent it exists.

Intervenors argue that the guaranties lack consideration. Intervenors overlook California 

Civil Code section 2792 which provides "Where a suretyship obligation is entered into at the same 

time with the original obligation, or with the acceptance of the latter by the creditor, and forms 

with that obligation a part of the consideration to him, no other consideration need exist." Cal. Civ. 

Code § 2792. Thus, there is adequate consideration.

Finally, Intervenors argue that the guaranties of the NA3PL Notes by BHD, LLC were 

unauthorized under BHD's operating agreement and therefore are invalid. Intervenors rely solely 

on the provisions of the operating agreement and do not cite any legal authority to support their 

position. Intervenors overlook Henderson's apparent authority to sign the guaranties and therefore 

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5 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

overlook the controlling statute, California Corporations Code section 17703.01(b)(2).

Whether or not Henderson had actual authority to bind BHD, he had apparent authority to 

execute the guaranties. BHD is a California limited liability company governed by the California 

Corporations Code. Section 17703.01(b)(2) of the Corporations Code provides:

Every manager is an agent of the limited liability company for the purpose of its 

business or affairs, and the act of any manager, including, but not limited to, the 

execution in the name of the limited liability company of any instrument for 

apparently carrying on in the usual way the business or affairs of the limited liability

company of which the person is a manager, binds the limited liability company, 

unless the manager so acting has, in fact, no authority to act for the limited liability 

company in the particular matter and the person with whom the manager is dealing 

has actual knowledge of the fact that the manager has no such authority.

Cal. Corp. Code § 17703.01(b)(2). Under the statute, a contract signed by a manager of an LLC is 

valid, even if the manager lacked authority, unless the third party had actual knowledge that the 

manager lacked authority: "The words of former § 17157(d)2are plain and clear: a written contract 

signed by an LLC’s manager is valid even if the manager—without the knowledge of the third 

party—was without authority." Western Surety Co. v. La Cumbre Office Partners, LLC, 8 

Cal.App.5th 125, 132 (2018). 

Here, Henderson was a manager of BHD. See Uecker Decl., Ex. 3. p. 26. The guaranties 

are consistent with BHD's business and with the NA3PL business plans and were provided by

Henderson and SFRC to EB-5 investors in connection with their investments. Furthermore, 

Intervenors knew that Henderson held himself out as a managing member of BHD. Henderson 

thus had apparent authority to execute the guaranties unless Intervenors can establish that the EB-5 

investors had actual knowledge that he lacked authority. Intervenors have offered no such 

evidence.

B. Intervenors' Claim to Sweat Equity

Intervenors do not dispute that they did not invest any capital in BHD and that all of the 

capital to acquire the 20th Street Warehouse and to improve the property was EB-5 investor 

 

2 Western Surety Co. addressed the now repealed California Corporations Code section 17157(d). 

The language of section 17157(d) is identical to the language of section 17703.01(b). 

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6 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

monies. Instead, Intervenors contend that they contributed 'sweat equity' in developing the 

businesses of BHD and NA3PL, LLC which justifies their claim to ownership of 60% of the 

equity in BHD.

3

At most, the evidence supports Intervenors' contention only as to Shimamoto and Chin, not 

as to Bronson. Both Shimamoto and Chin testified to their efforts to build the businesses of BHD 

and NA3PL, LLC. (Dkt. Nos. 294-2 and 294-18.) However, as BHD did not operate a business 

and was only a passive owner of the real estate, the bulk of their efforts benefitted NA3PL, LLC's 

logistics business. Furthermore, an allocation that gives 60% of the profits to the parties that 

contributed labor only and just 40% of the profits to the party that contributed the required 

millions of dollars in capital is inequitable. 

There is no corresponding evidence of Bronson's "sweat equity" on behalf of BHD and 

NA3PL, LLC. Bronson testified that she prepared business plans for submission to the United 

States Citizenship and Immigration Services. (Dkt. 423-1.) There is no evidence of her 

involvement in the acquisition of the 20th Street Warehouse or its development. 

C. NA3PL, LLC Guarantees the East West Bank Loan

BHD is indebted to East West Bank pursuant to a noted dated September 17, 2014 in the 

original principal amount of $6,200,000. This note is secured by a deed of trust encumbering the 

20th Street Warehouse and is guaranteed by, among others, Henderson, Chin, Shimamoto, and 

SFRC. The note is also guaranteed by NA3PL, LLC the tenant of the 20th Street Warehouse. 

Supp. Uecker Decl. ¶ 2 and Ex. 23. Thus, tenant NA3PL, LP guarantied landlord BHD's debt to 

East West Bank. This guaranty, and BHD's guaranties of the NA3PL Notes indicate that creditors 

viewed NA3PL, LP and BHD as one and the same. 

D. Intervenors' Proposed Sale

Intervenors propose a sale of the 20th Street Warehouse to a joint venture between Lift 

Real Estate Partners and PCCP for $18.5 million. This is not an all cash transaction. Instead, the 

buyer will pay a portion of the purchase price in cash and the balance will be paid by Intervenors 

 

3 Because this motion relates to BHD, Intervenors' claimed efforts on behalf of NA3PL, LLC are 

not relevant.

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7 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

converting their equity interests in BHD into equity interests in the buyer. The cash portion of the 

purchase price will be used to retire the East West Bank loan, to repay EB-5 investor monies of 

$5,465,356.88 plus interest and to satisfy the receivership estate's 40% equity interest in BHD. 

Murray Decl., ¶ 14. If confirmed, the proposed sale will result in the distribution to Intervenors of 

the value of their equity interests in BHD in advance of the adoption of a plan of distribution by

the Receiver.

There are several notable omissions from Intervenors' proposed transaction that create 

doubt as to whether the transaction will close on the timeline asserted by Intervenors or at all. The 

letter of intent attached as Exhibit C to the Murray Declaration (dkt. no. 423-4) references a 

Schedule 1 which is supposed to set forth the dilution of Intervenors' ownership interests that will 

occur when Lift or PCCP fund additional money. No Schedule 1 is attached. The dilution to which 

Intervenors' are subject is an important issue to both Intervenors and to the capital partners, Lift 

and PCCP. If the potential dilution has not been agreed, the deal could be delayed or fall apart if 

parties do not agree prior to close. Furthermore, there is no LLC Agreement for the new buying 

entity attached. The terms of the LLC Agreement are likewise a material deal point and if this has 

not been agreed, the transaction could be delayed or collapse if the parties are unable to agree.

The form Purchase and Sale Agreement attached as Exhibit A to the Murray Declaration 

also is problematic. Section 3(b) provides that the buyer can request an ALTA survey of the 

property. An ALTA survey take six weeks to prepare. Supp. Dolby Decl. ¶ 8. The transaction thus 

will not close in thirty days, contrary to Intervenors' claim.

Most importantly, Intervenors' form Purchase and Sale Agreement does not provide for an 

earnest money deposit by the buyer. Thus, the buyer can walk away without any financial penalty, 

for example if PCCP is unable or unwilling to fund the purchase. The absence of a deposit is 

particularly important because the property will be off the market. The market could decline while 

the property is tied up. Furthermore, potential buyers often perceive that cancellation of an escrow 

indicates a problem with the property. This can impact getting another offer and can affect what 

price is offered. Supp. Dolby Decl. ¶ 10. 

In general, in a transaction such as this, one would expect an earnest money deposit of 

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8 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

between $500,000 to $1,000,000. Supp. Dolby Decl. ¶ 10. Such an amount insures that the buyer 

is committed to the transaction and compensates the seller for any delay and adverse consequences 

if the buyer cancels. The deposit usually is refundable for a short period of time, after which the 

buyer is required to increase the deposit and the entire amount becomes non-refundable. Id. For 

example, the Receiver, in her capacity as the receiver appointed in the action pending in the 

California Superior Court for the County of Alameda, entitled Young v. Henderson. Case No. 

RG15778891, sold the real property owned by the Receivership Entities known as the Tribune 

Tower for $20,400,000 with a $1,000,000 earnest money deposit. Supp. Uecker Decl. ¶ 3. Here 

there is no earnest money deposit whatsoever, giving the buyer a free option to decide whether to 

close the purchase.

Intervenors' claim that a competing purchase would have to exceed $19.5 million to 

generate the same net proceeds to the Receivership estate is incorrect.4Intervenors claim that they

will save the Receivership estate the cost of a broker's commission. That is not correct. As 

discussed in more detail below, Intervenors' proposed sale must be advertised publicly. See 28 

U.S.C. § 2001(b). The requirement that the sale be publicly advertised means that the Receiver 

must make a good faith effort to market the property, implying that the Receiver will need a 

broker to handle this effort.

Furthermore, the Receiver's legal and other costs likely will be higher in Intervenors' 

proposed transaction. The form Purchase and Sale Agreement permits the buyer to inspect the 

property and conduct other due diligence. Normally the due diligence process is handled by the 

seller's broker and the broker's compensation for doing so is included in the broker's commission. 

Supp. Dolby Decl. ¶ 11. If there is no broker, then the process would be handled by the Receiver 

and her counsel, resulting in increased costs. Furthermore, as discussed below Intervenors' 

proposed transaction will require the Court to appoint three appraisers, at significant cost.

E. Intervenors' Have Not Shown that the Buyer Has the Financial Ability to 

Perform the Proposed Transaction

 

4 There is no evidence to support this calculation. The brokerage commission on a sale at $18.5 

million would be $555,000. There is no evidence to support the additional $445,000. The figure 

appears to have simply been invented by Intervenors.

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9 Case No. 3:17-CV-00223-RS

REPLY MEMO ISO RECEIVER'S RENEWED MTN FOR ORDER AUTHORIZING RECEIVER TO RETAIN 

ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

The Receiver has not been provided with adequate evidence that the proposed buyer has 

the financial ability to perform. According to the Declaration of Michael Murray (dkt. no. 423-4) 

submitted by Intervenors, the buyer will be a joint venture between Lift Real Estate Partners and 

PCCP. Murray Decl. ¶ 11. PCCP will provide the majority of the cash needed to fund the cash 

portion of the purchase price. Id. Intervenors offer Exhibit B to the Murray Declaration as 

evidence of PCCP's ability to fund the transaction.

Exhibit B, however, is inadequate. The document (which is not properly authenticated and 

is hearsay) does not state that PCCP has the cash to fund the transaction nor does it state the 

amount of liquid assets PCCP has. Instead, the document states that PCCP has "capital 

commitments from investors" and that PCCP's net worth includes "unfunded capital 

commitments." No detail is furnished. The implication is that PCCP does not have the cash and 

instead must get it from its investors. What conditions PCCP's "unfunded capital commitments" 

are subject to, the mechanics and timing of the process to raise funds from investors, and whether 

the investors have the ability and willingness to fund are all unknown.

More importantly, Exhibit B does not contain any commitment by PCCP. Exhibit B merely 

states PCCP's claimed net worth. It does not state that PCCP has agreed to the transaction, does 

not state that PCCP is committed to fund the transaction and does not state that PCCP has obtained 

all necessary internal approvals, such as investment committee approval, to fund the purchase. The 

document is not a commitment letter. There is no evidence that there is a committed source of 

funds to finance the proposed transaction.5

F. Intervenors' Proposed Transaction Establishes the Benefits of a Public Sale

The history of the transaction proposed by Intervenors establishes the benefit to the 

Receivership Estate of a competitive public sale process. Intervenors' offer to purchase the 20th 

 

5 At approximately 4:40 p.m. on Friday July 6, Intervenors' counsel, Mr. Dunne, provided to the 

Receiver's counsel a second letter from PCCP. Mr. Dunne stated that the new PCCP letter 

contained PCCP's proprietary information and he requested that the Receiver maintain the 

confidentiality of PCCP's information. The new letter contains additional information regarding 

PCCP. However, the new letter still does not state that PCCP has agreed to the transaction, still 

does not state that PCCP is committed to fund the transaction and still does not state that PCCP 

has obtained all necessary internal approvals. Intervenors still have not provided a commitment 

letter. 

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Street Warehouse has increased by $1,500,000 since the Receiver first proposed to list the 

property. The Receiver's original motion to list the 20th Street Warehouse (dkt. no. 281) was 

supported by a Broker's Opinion of Value of $16,970,000. In response, Intervenors proposed a 

sale to Lift Real Estate Partners for $17 million. Intervenors' Opposition to Uecker's Motion for 

Order Authorizing (1) Closing North America 3PK, LLC; and (2) Retaining Broker For Listing 

and Sale of Berkeley Healthcare Dynamics, LLC Property, p. 24. (Dkt. no. 294). In her Renewed 

Motion, the Receiver states that she has received unsolicited offers at $18.5 million. Intervenors 

again propose a sale to Lift, this time coincidentally at $18.5 million.6 Without any marketing, 

without any sales effort whatsoever, and without a competitive process, the Lift offer has 

improved by $1.5 million. In the Receiver's business judgment, a marketing effort and a 

competitive process is likely further to increase the purchase price.

III. ARGUMENT

A. Cause Exists to Renew the Motion to List the 20th Street Warehouse on the 

Open Market

Intervenors spill much ink arguing that there are no grounds for the Receiver to bring the 

Renewed Motion. In its Order, the Court stated the circumstances under which the Receiver could 

renew her motion:

In the event no consensus can be reached on the figures, and/or the Receiver offer 

other legitimate reasons the intervenors' proposal is unacceptable, she my renew 

her motion for authority to list and sell the warehouse on the open market. The 

Receiver may also renew her motion if she and/or the SEC can demonstrate that it 

would be legal and appropriate to apply funds from the sale of the Warehouse to 

unrelated losses suffered in connection with other EB-5 projects, despite full 

repayment of all funds paid into BHD and the Warehouse from these projects or 

other defendants. 

Order Granting Motion For Authorization to Close North America 3PL, LLC and Denying 

without Prejudice Motion to Retaining [sic] Broker for Listing and Sale of Warehouse. (Dkt. No. 

336.) Here, the parties did not reach consensus on the figures, Intervenors' proposal lacks a 

financing commitment and is unacceptable, and, as the SEC demonstrated in its response to the 

 

6 The implication is that Intervenors attempted to buy the 20th Street Warehouse for less that it 

was worth, to the detriment of the Receivership Estate.

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Renewed Motion (dkt. no. 422), it is "legal and appropriate to apply funds from the sale of the 

warehouse to unrelated losses suffered in connection with other EB-5 projects...."

1. The Parties Are At An Impasse

Contrary to Intervenors' assertions, the parties have not reached consensus on the figures. 

Intervenors apparently have withdrawn their objection to the recovery of EB-5 investor funds that 

were transferred to BHD, LP.7 Thus, the parties agree that the net amount of $5,465,356.88 of EB5 investor monies was transferred to BHD and BHD, LP from SFRC and NA3PL, LP. 

The impasse is over BHD's guaranty of the NA3PL Notes. Intervenors categorically deny 

the validity of the guaranties. The Notes with the guaranty language were given to EB-5 investors 

by SFRC and Henderson, apparently to induce them to invest. Gunn Decl., ¶ 12. (Dkt. no. 130.) 

The Receiver therefore believes that the Notes and guaranties may be valid. Certainly the Receiver 

cannot just walk away from the guaranties simply because Intervenors, who have a huge financial 

interest in declaring the guaranties invalid, dispute them. This is an impasse.

The validity of the Notes and guaranties is not before the Court on this motion.8 Neither is 

the validity of Bronson's claimed 10% interest in BHD. Further proceedings may be necessary to 

determine the validity of the guaranties and Bronson's interest. The Receiver recognizes that the 

fact that there are three NA3PL Notes raises an obvious question. Nonetheless, if one of the 

guaranties is valid, it will absorb all of the remaining proceeds of a sale. This is the Receiver's 

point: whatever sale is ultimately approved must allow for the possibility that the NA3PL Notes 

and the guaranties could be determined to be valid in a subsequent proceeding. The sale proposed 

by Intervenors, however, locks the Court in to a particular plan of distribution with respect to the 

proceeds of the sale of the 20th Street Warehouse and therefore forecloses the possibility of 

collecting the guaranties.

 

7

Intervenors disputed the Receiver's right to recover the EB-5 funds that were transferred to BHD, 

LP, conditioned their agreement to the recovery of such funds on the Receiver's acceptance of 

Intervenor's proposed sale and reserved their rights.

8 At this time the Receiver seek only authority to retain a broker. Once a buyer is located, the 

Receiver contemplates a further motion to confirm the sale and further contemplates that the net 

sale proceeds would be escrowed pending a determination of the rights thereto and the adoption of 

a plan of distribution. 

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2. Intervenors' Proposed Sale is Unacceptable.

The Receiver had legitimate reasons to reject the transaction proposed by Intervenors. 

Even now, Intervenors have not provided proof that the buyer has the financial ability to close. 

Intervenors admit that they did not provide this evidence to the Receiver earlier, despite the 

obvious need for it. Intervenors blame the Receiver for their failure to do so, claiming that they

would do so after the parties agreed upon a sale, but the Receiver never agreed upon the price or 

terms of a sale.

Intervenors put the cart before the horse. Whether a potential buyer has the ability to 

perform is a critical factor. Indeed, a seller will often accept a lower price from a more qualified 

buyer in order to have greater certainty of closing. Qualification is key. One doesn't negotiate the 

price and terms of a sale and then investigate whether the buyer is able to perform. Instead, one 

qualifies the buyer and then negotiates. To do otherwise risks wasting time and effort on 

unqualified buyers. Supp. Dolby Declaration, ¶ ¶ 6, 7. 

More importantly, Intervenors still have not provided evidence of the buyer's ability to 

perform. There is no earnest money deposit. There is no evidence that the buyer has the funds to 

close and there is no financing commitment. Exhibit B to the Murray Declaration is not a 

commitment letter and the document does not establish that PCCP has the liquidity to close. Nor is 

the new letter from PCCP, provided by Intervenors at the 11th hour, a commitment letter. 

3. The Sale Proceeds Can be Used to Repay Unrelated EB-5 Investors

The Receiver submits that the SEC has demonstrated that the sales proceeds can and 

should be used to repay EB-5 investors their losses on unrelated projects. (Dkt. no. 422.) This 

factor alone is cause for the Receiver to renew her motion to list and sell the 20th Street 

Warehouse.

B. The 20th Street Warehouse Should Be Sold in an Open Market Transaction

The Receiver and Intervenors agree that the 20th Street Warehouse should be sold. The 

dispute is not whether to sell, but whether to sell in an open market transaction or in a private sale 

transaction in which Intervenors will receive a distribution of the value of their equity interest in 

BHD before a plan of distribution is adopted and in advance of distributions to any other creditor 

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ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

or investor. 

Selling the warehouse in an open market transaction is the superior process. Intervenors 

seek a no bid process, with no competition. The benefit of an open market transaction can be seen 

from the history of Intervenors' proposed transaction. Just the possibility of a competitive, open 

process has caused the offered price to jump by $1,500,000, an almost 10% increase. The 

Receivership Estate would receive at a minimum 40% of that increase. That Intervenors continue 

to push for a no bid transaction suggests that Intervenors know that they are getting a below 

market price. 

There is no possible prejudice to Intervenors in an open market transaction. The Receiver 

is indifferent as to whom she sells the property. The Receiver's criteria is that she sell to the party 

making the highest and best offer, whomever that might be. Intervenors' money is green just like 

everyone else's. If Intervenors' offer is the highest and best offer, the Receiver likely will accept it.

Intervenors criticize the three month length of the Receiver's proposed listing agreement. 

Three months is the maximum length, not the minimum. If an offer is received sooner, which the 

Receiver believes is likely, the process will proceed more quickly.

C. The Statutory Requirements Applicable to a Private Sale Make a Public Sale 

Superior

Intervenors' proposed transaction is a private sale. Indeed, Intervenors' goal is to avoid a 

public, competitive sales process. A private sale of real property by a federal receiver is subject to 

strict statutory requirements. See 28 U.S.C. § 2001(b). Intervenors did not propose to comply with 

these requirements. Indeed, Intervenors wholly ignore these requirements and did not cite the 

controlling statute in their brief, perhaps because compliance with the statute is cumbersome and 

expensive and undercuts any claimed benefit from the private sale process urged by Intervenors.

The sale of real property by a federal receiver is governed by 28 U.S.C. § 2001. That 

section provides:

(a) Any realty or interest therein sold under any order or decree of any court of the 

United States shall be sold as a whole or in separate parcels at public sale at the 

courthouse of the county, parish, or city in which the greater part of the property is 

located, or upon the premises or some parcel thereof located therein, as the court 

directs. Such sale shall be upon such terms and conditions as the court directs.

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ESTATE BROKER TO LIST AND SELL REAL PROPERTY OF BHD, LLC

Property in the possession of a receiver or receivers appointed by one or more 

district courts shall be sold at public sale in the district wherein any such receiver 

was first appointed, at the courthouse of the county, parish, or city situated therein 

in which the greater part of the property in such district is located, or on the 

premises or some parcel thereof located in such county, parish, or city, as such court 

directs, unless the court orders the sale of the property or one or more parcels 

thereof in one or more ancillary districts.

(b) After a hearing, of which notice to all interested parties shall be given by

publication or otherwise as the court directs, the court may order the sale of such 

realty or interest or any part thereof at private sale for cash or other consideration 

and upon such terms and conditions as the court approves, if it finds that the best 

interests of the estate will be conserved thereby. Before confirmation of any private 

sale, the court shall appoint three disinterested persons to appraise such property or 

different groups of three appraisers each to appraise properties of different classes 

or situated in different localities. No private sale shall be confirmed at a price less 

than two-thirds of the appraised value. Before confirmation of any private sale, the 

terms thereof shall be published in such newspaper or newspapers of general 

circulation as the court directs at least ten days before confirmation. The private 

sale shall not be confirmed if a bona fide offer is made, under conditions prescribed 

by the court, which guarantees at least a 10 per centum increase over the price 

offered in the private sale.

28 U.S.C. § 2001(a) & (b). Because section 2001(b) uses the word "shall", the provisions relating 

to private sales are mandatory. Acadia Land Co. v. Horuff, 110 F.2d 354, 355 (5th Cir. 1940) 

("[A]ll of the requirements are, by the express terms of the statute, made conditions precedent to a 

valid sale.") The court has no discretion to deviate from these requirements. SEC v. Wilson, 2013 

WL 1283437, *1 (E.D. Mich. 2013); SEC v. T-Bar Resources LLC, 2008 WL 4790987, *3 (N.D. 

Tex. 2008). 

Thus, as directed by section 2001(b), before the Court can confirm Intervenors' proposed 

transaction, the Court must appoint three disinterested appraisers to appraise the 20th Street 

Warehouse and the Court must find that the proposed sales price is at least two-thirds of the 

appraised value. Furthermore, the terms of the sale must be advertised in such newspapers as the 

Court directs and the sale cannot be confirmed if a bona fide overbid is made that is at least ten 

percent higher. Because the Court must find that the proposed sale is in the best interests of the 

estate, the Court appears to have the discretion to decline to confirm the sale if an overbid is 

received that is less than ten percent greater than the offered price. 

These mandatory requirements are cumbersome and likely expensive. The appraisal 

process will undoubtedly consume several weeks and, since the court must appoint three 

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appraisers, will be costly. Intervenors' claim that their proposed transaction can close in thirty days 

is a mirage.

Furthermore, the requirements that the sale be publicly advertised and overbids accepted 

severely undercut the potential benefit, if there is any, from a private sale. The Receiver likely will 

require a broker to handle marketing the property. It makes no sense to incur the cost and delay of 

the appraisal process and then to receive overbids. Far better to run a public sales process, as 

proposed by the Receiver, and avoid these cumbersome requirements.

IV. CONCLUSION

WHEREFORE, the Receiver prays for an order of this Court that:

1. Authorizing the Receiver pursuant to Paragraph 36 of the Appointment Order to 

enter into the Listing Agreement with Colliers International for the 20th Street Warehouse as set 

forth in the Motion; and 

2. For such other and further relief as the court deems proper.

DATED: July 9, 2018 JEFFER MANGELS BUTLER & MITCHELL LLP

BENNETT G. YOUNG

JOSEPH N. DEMKO

By: /s/ Bennett G. Young

BENNETT G. YOUNG

Special Counsel for Susan L. Uecker, Receiver

Case 3:17-cv-00223-RS Document 431 Filed 07/09/18 Page 18 of 18