Federal Trade Commission v. Noland, Jr. ( 2020 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Federal Trade Commission, No. CV-20-00047-PHX-DWL 10 Plaintiff, AMENDED ORDER 11 v. 12 James D Noland, Jr., et al., 13 Defendants. 14 15 On April 2, 2020, the Court granted Defendants’ former counsel’s motion to 16 withdraw. (Doc. 124.) The next day, Daryl M. Williams and Daniel B. Mestaz of the law 17 firm Williams|Mestaz, LLP (“New Counsel”) entered a notice of appearance on behalf of 18 certain individual defendants plus the two corporate defendants, Success by Media 19 Holdings, Inc., and Success by Media, LLC. (Doc. 126.) 20 It is unclear to the Court whether New Counsel’s appearance was proper as to the 21 two corporate defendants. Both entities comprise the Receivership Entities that are 22 currently under the control of the Court-appointed receiver. (Doc. 109 at 3, 12.) Per an 23 earlier order, the receiver has “[a]ssume[d] full control of [the] Receivership Entities” and 24 has the authority to remove “any director, officer, independent contractor, employee, 25 attorney, or agent” of the Receivership Entities. (Id. at 12-13.) 26 “As an officer of the court, the receiver’s powers are coextensive with [her] order 27 of appointment.” Liberte Capital Grp., LLC v. Capwill, 462 F.3d 543, 551 (6th Cir. 2006). 28 See also Fed. Home Loan Mortg. Corp. v. Tsino, 854 F. Supp. 113 (E.D.N.Y. 1994) (“The 1 court that appoints the receiver determines the scope of that receiver’s authority.”). Here, 2 the order appointing the receiver gave her broad control over the Receivership Entities, 3 including the ability to remove the Receivership Entities’ attorneys. The notice of 4 appearance does not address whether the receiver was involved in selecting and retaining 5 New Counsel and the Court suspects she was not involved—in a notice filed one day 6 earlier, the receiver stated that she “is not aware of a good faith basis to oppose most aspects 7 of the FTC’s complaint against the corporate defendants” and thus does “not anticipate 8 spending the Receivership Estate’s limited resources [following the withdrawal of former 9 counsel] to fight a losing battle.” (Doc. 123 at 2-3.) If the retention and appearance of 10 New Counsel occurred without the receiver’s approval—if, for example, New Counsel 11 were chosen unilaterally by the individual defendants—there may be a problem. Finally, 12 separate from the issue of appointment authority, the receiver likely possesses the power 13 to waive the attorney-client privilege on behalf of the Receivership Entities,1 so New 14 Counsel’s simultaneous representation of the individual and corporate defendants may 15 raise ethical concerns. See Ariz. S. Ct. R. 42, ER. 1.7(a) (“[A] lawyer shall not represent a 16 client if the representation involves a concurrent conflict of interest. A concurrent conflict 17 of interest exists if . . . there is a significant risk that the representation of one or more 18 clients will be materially limited by the lawyer’s responsibilities to another client.”). 19 Accordingly, IT IS ORDERED that New Counsel confer with the receiver 20 concerning the propriety of New Counsel’s recent appearance on behalf of the 21 Receivership Entities. 22 … 23 … 24 … 25 … 26 … 27 1 See, e.g., United States v. Plache, 913 F.2d 1375, 1381 (9th Cir. 1990) (“Because 28 the privilege was held by the corporation, any right to assert the attorney-client privilege on behalf of the corporation passed when the receiver . . . was appointed by the court.”). 1 IT IS FURTHER ORDERED that if New Counsel and the receiver cannot reach agreement over the propriety of New Counsel’s appearance on behalf of the Receivership Entities, they must submit separate briefs on the issue (not to exceed seven pages each) no 4|| later than April 17, 2020 setting forth their respective positions. 5 Dated this 6th day of April, 2020. 6 8 fi 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3-