Jay Noland fails to block new SBH Receiver appointment
Due to new employment that will leave her unable to continue, Kimberly Friday informed the court she’d be resigning as Receiver of Success by Health on August 12th.
As part of that resignation process, Friday recommended Peter Davis be appointed her successor.
Davis has worked as a forensic accountant for the Success by Health Receivership. He is somewhat familiar with the case and also has past Receivership experience.
The FTC consented to the transfer but on August 9th Jay Noland and his fellow defendants filed an objection.
In an order filed on August 13th, Judge Lanza dismantled each of Noland’s objections.
To keep things simple I’m going to refer to Noland and the other defendants as the “Noland defendants”.
The order opens by acknowledging the unique circumstances the court finds itself in:
- the Receiver’s resignation was unexpected;
- the court is ‘open to the idea of modifying or dissolving the receivership and asset freeze in light of’ the AMG decision, but is unable to proceed due to a previously filed appeal by the Noland defendants;
- the Noland defendants’ appeal won’t be resolved until September 18th; and
- due to the Receiver providing notice of her August 12th resignation, the court can’t wait until September 18th to issue a ruling on the Receiver transfer motion.
Whilst acknowledging that the Receiver transfer motion is flawed, namely with respect to increased expenditure as ‘Mr. Davis gets up to speed regarding his new responsibilities’, Judge Lanza puts forth ‘the alternatives proposed by the Individual Defendants are even more flawed.’
The Noland defendants argue that in light of the AMG decision, the assumption is that the court will have to dissolve the Receivership.
Thus the appointment of an interim Receiver for a few weeks runs contrary to the interests of justice.
To which Judge Lanza responded;
There are several problems with this argument.
First, the Court is not convinced that AMG Capital automatically requires the dissolution of the receivership in this action.
The narrow holding of AMG Capital was that the FTC may not seek equitable monetary relief in a § 13(b) case … but the purpose of the receivership in this action was not solely to safeguard assets in anticipation of a future monetary award under § 13(b) (instead, it was also to prevent ongoing harm) and the FTC’s claims for monetary relief in this action are not limited to § 13(b).
The issue is more complicated than the Individual Defendants portray it to be.
Next the Noland defendants put forth that the court
can issue an indicative ruling under Rule 62(d)(1) regarding their pending (but still not fully briefed) post-AMG Capital motion to dissolve the receivership and preliminary injunction.
To which Judge Lanza replied;
This proposal comes far too late. The Receiver’s resignation is imminent.
There is no time to wait for the motion to become fully briefed, and then consider it and issue an indicative ruling, and then wait to see how the Ninth Circuit responds to the indicative ruling.
Something needs to be done now.
A laughable suggestion put forth by the Noland defendants was that they be entrusted to run Success by Health until the appeal issue was dealt with.
Judge Lanza was having none of it;
The Individual Defendants argue that the Court can “order the individual defendants to carry on the business of Success By Media as it has been carried on by the receiver.”
But this is just a backdoor attempt to dissolve the receivership—something the Court currently lacks jurisdiction to do.
Further, the Receiver’s most recent report, issued earlier today, accuses the Individual Defendants of violating the terms of the preliminary injunction (by failing to provide a detailed description of the intended activities of their new business venture, “SBH Products, Inc.”), of operating this new business venture in an illegal manner (by, among other things, using SBM’s proprietary formulas and goodwill without permission), and of defrauding affiliates in an effort to raise legal defense funds for this case (by making false statements about the supposed existence of a bank account filled with withheld commissions, when in fact “there is no such account”).
The Court recognizes that these accusations, as serious as they may be, are just accusations … nevertheless, the presence of such accusations calls into question the Individual Defendants’ assurance that they could be trusted to operate the business lawfully if the receivership were dissolved.
BehindMLM will have an article up covering the Receiver’s recent August 12th report later today.
Update 17th August 2021 – The Success by Health Receiver’s report article is now live. /end update
The last argument the Noland defendants put up was
Mr. Davis … because he (unlike the Receiver) is not a licensed attorney, he cannot serve as counsel for the Corporate Defendants.
Judge Lanza acknowledged this was “a fair point”,
but the solution isn’t to preclude Mr. Davis from serving as the Receiver’s successor.
Judge Lanza presented the option of Davis hiring the Noland defendants attorneys to represent Success by Health as a corporate entity.
Ultimately how Davis proceeds however is up to him. And that’s assuming the Receivership stands.
In the meantime, Judge Lanza approved Davis’ appointment as Success by Health Receiver.