VPL Receivership to disband, Cardiffs & FTC share costs
As part of the fallout of the AMG decision wreaking havoc on FTC regulatory cases, the VPL Receivership is schedule to be discharged.
The VPL Receivership was established as part of the FTC’s ongoing Redwood Scientific Technologies fraud case.
As per a May 24th order, the Receiver’s request seeking an ‘order approving its administration of the Receivership Estate regarding VPL, discharging it from its duties regarding VPL, and releasing it from liability regarding VPL’, was denied.
The reason for the denial was the FTC
assert(ing) that it may still seek monetary relief on Count 13 of the Complaint, for the Cardiffs’ violations of the Restore Online Shoppers’ Confidence Act (“ROSCA”), on which the Court granted summary judgment for the FTC.
As they say though, the devil is in the details.
Prior to being discharged, the Receiver must
complete VPL’s 2020 tax returns, after which the Receiver is relieved from the Receiver’s official duties only with respect to VPL, but is not yet discharged from its obligation to provide a full and final accounting at the termination of the Receivership as a whole.
With respect for requested VPL Receivership fees, the outstanding amount of which totals $477,317, the Cardiff defendants had argued the FTC should bear the burden of cost.
The court disagreed.
This argument fails for several reasons.
First, the VPL Receivership was authorized under existing Ninth Circuit precedent and the 2018 Preliminary Injunction.
The Court therefore exceeded no authority in granting the FTC’s motion to put VPL under Receivership.
Other reasons cited for the denial include the Cardiff’s incorrect interpretation of previous case orders.
In light of the case law and as a matter of equity, the Court declines to lay the Receiver’s entire bill at the FTC’s feet.
The Cardiffs and VPL fail to show that the FTC acted in bad faith in requesting that the Court impose the Receivership over VPL.
The FTC’s aggressive actions with respect to VPL are defensible, given that the Cardiffs’ prior businesses resulted in summary judgment against them for violations of the FTC Act, ROSCA, Electronic Funds Transfer Act, and Telemarketing Sales Rule, and both Cardiffs remain in contempt of court.
The court also noted the Cardiffs repeatedly shot themselves in the foot by running up Receivership costs.
The Cardiffs’ and VPL’s litigiousness has also resulted in more work and fees for the Receiver’s attorney.
These factors tilt the equities toward paying the Receiver fees from the Receivership Estate.
All of that said, the court wasn’t without some sympathy towards the Cardiffs.
The Court agrees with the Cardiffs and VPL, however, that the equities do not require Jason Cardiff and VPL’s co-owner Bobby Bedi, an innocent third party, to watch VPL’s remaining funds drain entirely into the Receiver’s fees and costs.
The court found some off the Receiver’s “excessive” reimbursement costs were due to “inefficient and unnecessary practices.
One example cited includes consultants travelling hundreds of miles a day to oversee VPL’s operations on behalf of the Receiver.
This Court recognizes the Receiver and FRBC’s hard work in this difficult matter, and that a better outcome for VPL may not have been possible under any circumstance.
But, as a matter of equity, VPL cannot alone bear the costs of this ill-fated Receivership, particularly where there is some evidence of inefficient billing.
The solution put forth by the court was a 40% cut in the Receiver’s requested fees.
This reduced the amount owed to the VPL Receivership to $258,820. This is a 40% cut on outstanding fees owed prior to the AMG decision.
For fees generates after the AMG decision, the FTC is to bear the costs.
Any of the Receiver’s or FRBC’s fees and costs with respect to VPL that were incurred on or after the date of the Supreme Court’s AMG decision, shall be paid by the FTC without any percentage reduction, unless the FTC files its own objections to the amount of the fees/costs.
When I checked the docket yesterday, no objection had been filed.
Looking forward, winding up the VPL Receivership continues to generate costs. The court has stated who pays those fees will be decided at a later date, after the Receiver’s final accounting report has been filed.
The Court ORDERS the Receiver to account for payment of its fees from the funds belonging to VPL.
In order to prevent any dissipation of VPL assets that belong to Jason Cardiff, the Receiver shall continue to maintain control over Cardiff’s VPL salary going forward, and anything of value provided by VPL, Bedi, and/or any other person or entity to Jason or Eunjung Cardiff shall continue to be remitted to the Receiver.
The Court assumes that Jason Cardiff and Bedi share VPL’s control and financial benefits equally and prohibits the dilution of any of Cardiff’s interest in VPL in any manner, by any means, until the remedies issue is resolved and the scope of the 2018 Preliminary Injunction and Receivership is clarified.
Accordingly, half of the remainder of any VPL funds held in bank accounts or as cash, after paying the Receivers’ fees and costs as set forth above, shall remain in the Receiver’s control as Receivership Property until the Court orders otherwise. The other half, which belongs to Bedi, shall be immediately turned over to VPL’s control.
Pending prior resolution, a hearing on the granted Redwood preliminary injunction is scheduled for June 18th.
Update 2nd June 2021 – Following requests from both parties, the court has pushed back the Redwood preliminary injunction hearing to June 28th.
Note this is a “if required” hearing. Filings for the hearing are due by June 18th. If the court feels there’s no need to hold a hearing an order will be made prior to the 28th.