Note from the Education Co-Chairs
MIA BLACKLER AND CHRISTOPHER HAWKINS

We were tasked with putting together educational topics that were of interest to our highly sophisticated membership. We were also tasked with making the program interactive in nature to encourage our experts to share ideas, concerns, and successes with one another, whether on stage or off. Our goals included updating the format of the seminar and striving for diversity in the presentations. The new format permitted and encouraged all experts to share their opinions and knowledge.

After watching EVERYONE engage dynamically throughout the symposium, we concluded (in our biased opinions) that we hit a home run with the interactive break-out sessions and hypotheticals, bolstered by the timely panels on municipal insolvencies, judicial perspectives on receivership sales, and the state of the CMBS world.

We are pleased to have received so much positive feedback on the program, but we’d be kidding ourselves if we didn’t acknowledge that we would have assuredly failed in our task had we not received your comments and support. We also could not have succeeded without the fantastic session producers and lively speakers who toiled countless hours to put together the interesting and interactive seminars. And a special thanks to to Gordy, Nancy, Jeanne and Toni who fearlessly lead us over the finish line. But if you have any complaints, call Chris.

Medical Marijuana Businesses/Facilities
BY MIKE BRUMBAUGH, SESSION PRODUCER

Absent the brownies, attendees consumed much knowledge concerning the contradictions between state and federal laws, and the challenges, red flags and cautions receivers should be aware of when dealing in or with medical marijuana (cases). The "high" points included the following:

• California laws covering the cultivation, distribution, and compliance are subjective at best. Regulation and enforcement varies county to county; therefore, knowledge is critical.

• Federal laws are explicit. Cultivation, distribution, and use are illegal. Enforcement by the U.S. Attorney's Office and DEA continues, but resources and manpower vary by region. To knowingly facilitate continued activities is a violation of the Controlled Substance Act. Prosecution and forfeiture is possible.

• Unique Health Safety, Fire Prevention and Building Codes are often ignored by operators. Inspections, with local officials, if necessary, are critical. Confirm permits. Check electrical and HVAC/Air Quality systems.

• Security and public safety issue pose liability and risk. Sites are magnets for criminal activity.

• Sensitivity by neighboring tenants is heightened due to impacts on business in the commercial settings, and comfort and safety of living in the residential settings.

• Protect your interests to regulate and enforce, and reduce risk, with appropriate lease provisions.

Receiverships involving medical marijuana operations present unique situations and risks. Familiarize yourself with the panel materials and Marijuana Resource Guide, and communicate with local, state. and federal officials.

Mike Brumbaugh thanks panelists attorney, Amanda Allen, receivers, Nancy Martin and Robert Griswold and Jeff Schunk, Orange County Deputy District Attorney.

Affordable Housing & Redevelopment Issues
BY DAVID PASTERNAK, SESSION PRODUCER

The panel on Affordable Housing presented a summary about the complex, arcane world of low income housing tax credits, which always involves both federal and state tax agencies as well as local government, private lenders, developers and builders. The primary lesson is that any receiver involved with such issues must retain an expert who is knowledgeable about these tax credits in order to assist and guide the receiver so that the tax credits are maintained and not jeopardized (which can occur if a subject property is not operated in compliance with the tax credit requirements).

The panel also noted that receiverships involving tax credits can arise in a variety of circumstances, including regulatory, health and safety code receiverships, family law matters, and rents-and-profits receiverships. The program experts were David Pasternak, Ted Lanes, David Levin, Michael Williamson, and Charles Slyngstad.

Receivership Sales
BY ROBERT P. MOSIER, SESSION PRODUCER

A statewide panel of Superior Court judges assembled for a General Session at Loyola V to discuss whether a rents, issues and profits receiver can sell real estate that is progressing through the judicial foreclosure process. The panel included the Honorable Shelleyanne Chang from Sacramento, the Honorable Derek Hunt from Orange County, and the Honorable Jeffrey Barton from San Diego, where Judge Barton also serves as the Presiding Judge. Each of these judges had participated in prior CRF panels. In keeping with the goal of Loyola V, there was significant participation from the audience on the subject.
In the end, the Judges concluded that only if all parties are in agreement and there are no parties disagreeing, a sale can proceed. Helpful suggestions were made from experienced receivers and counsel for receivers in the audience, including buying off mechanics lien holders, taking care in some fashion any subordinate liens, and possibly trading back a personal guarantee in exchange for the cooperation of the defendant or owner of the building. To proceed in the face of opposition can be risky and was not recommended by this learned Judges’ panel.

Regulatory Receiverships
BY KENTON JOHNSON, SESSION PRODUCER

Panelists David M. Agler, Gary O. Caris, Diane Romaniuk, Thomas Hebrank, Hon. Dean D. Pregerson, and moderator, Kenton Johnson led an advanced-level discussion on receivership operations, covering advanced procedures, techniques and approaches to successfully complete a regulatory receivership. The panelists covered issues relating to the control and management of records, determinations whether the operations could be profitable and lawful, the receiver’s initial report, the tracing and locating of assets, claims procedures and problems, and the final report and account.

The panelists also offered a number of suggestions for legal tools and issues to help guide a regulatory receiver through a successful appointment, such as: contempt as a tool for asset recovery; priority issues as between defrauded investors or consumers and trade creditors; lawsuits against receivers; and the interplay between federal regulatory receiverships and federal civil in rem asset forfeiture proceedings.

Additional issues and situations were covered from both the perspective of the nominating regulatory agency and the district court appointing the receiver. Finally, receivership tax issues were discussed, including the special requirements and procedures a receiver should follow to avoid personal tax liability.

Ask the Experts
BY ALAN MIRMAN, SESSION PRODUCER

The Ask the Experts panel featured a lively combination of responses to questions from the audience, and “rants” from the experienced panel consisting of Marilyn Bessey, Marc Brooks, Ron Oliner, David Wald, and Alan Mirman, moderator. Among the many points covered were the following:

Q: When and how do operating funds become property of the receivership estate?

A: Typically, upon the court’s issuance of the order. Even though the receiver can’t take possession of the funds until the oath and bond are filed with the court, the receivership order usually provides that operating funds are property of the receivership and contains a temporary restraining order barring the defendant(s) from using, disbursing or withdrawing those funds. If a defendant withdraws or disburses funds after the issuance of the order, the receiver can usually compel the defendant to return the funds to the estate.

Q: Is a state court receiver for a contaminated property protected from federal lawsuits?

A: No, but current federal policy makes it unlikely that a receiver will be subject to a federal claim.

Q: Is a receiver obligated to provide due diligence information or disclosures to a prospective note (loan) buyer?

A: No. Notes are sold by the lender not the receiver, unless the note itself is part of the receivership estate.

Q: Will the receivership business get busier or slower?

A: It depends upon how well the Fed manages interest rates and inflation, but the prevailing thought is that there will be at least a steady stream of defaulted and matured paper secured by real property, and a continuing need for receiverships.

Video of Ask the Experts is now available here.

Municipal Insolvencies
BY HANNAH L. BLUMENSTIEL, SESSION PRODUCER*

The Municipal Insolvencies panel featured Hon. Meredith A. Jury, Steven J. Katzman, and Kevin J. Whelan. The panel was uniquely qualified to discuss their subject, as Judge Jury has authored some significant appellate decisions concerning Chapter 9 bankruptcy issues as a member of the 9th Circuit Bankruptcy Appellate Panel and presides over the San Bernardino Chapter 9 case; Steve Katzman spent several years as the United States Trustee in the Central and Southern Districts of California; and Kevin Whelan currently serves as a receiver in the City of Stockton Chapter 9 case.
The panel discussed the ways in which cases under Chapter 9 differ from cases under other chapters of the Bankruptcy Code, such as: the ability of parties in interest to challenge the debtor's eligibility for relief and the impact of state law on eligibility for relief; the designation of the presiding bankruptcy judge by the Chief Judge of the 9th Circuit; the limited oversight the bankruptcy judge may exercise over the debtor's day-to-day operations; the limited roles of the United States Trustee and any creditors' committee; and the treatment of collateral securing special revenue bonds. The panel also discussed the role of a receiver in a Chapter 9 case, noting the rarity of receivers in Chapter 9 cases. Kevin offered several tips for receivers, including: the need to foster good relations with special revenue bondholders and whether and how to use revenues generated by property under the receiver's care. The panel suggested that receivers could play a beneficial role in Chapter 9 cases, but observed that receivers will operate in uncharted territory and might be well-served by a conservative approach. In other words, ask for permission -- not forgiveness!

*Ms. Blumenstiel was sworn in and began her service as Honorable Hannah L. Blumenstiel, U.S. Bankruptcy Court, Northern District of California, San Francisco Division in February 2013.

Ponzi Schemes
BY KATHY B. PHELPS, SESSION PRODUCER

Many thanks to my panelists, Hon. Steven Rhodes, Steven J. Donell, Thomas Foley, and David Zaro, whom I asked to fully and unconditionally delve into their respective roles in Ponzi scheme cases so that we could highlight a few of the controversial issues that arise in these types of cases. David and Steve shared their practical experience in how they deal with a receiver’s task of filing fraudulent transfer actions. To sue – or not to sue – the net loser? That was the question. Tom gave us the not-often-shared-at-a-receiver’s-conference point of view of the investor. Judge Rhodes suggested his equitable views of how to even out the slices of pie among net winners and net losers. The issues of whether to sue net winners, or net losers, or both, led naturally to a discussion of the range of options and discretion in allowing investor claims and in the type of distribution plan that should be proposed. One of the main question in claims and allowance distribution analysis is: How to decide among net investment, last statement, rising tide, modified net investment, or some other hybrid methodologies? Much discussion took place at the breakout sessions on the equities of how to deal with net losers in Ponzi scheme cases.

A lively discussion also took place on the in pari delicto doctrine. While most people in the room seemed to agree that the doctrine should not bar a receiver’s claims against third parties, the discussion turned to whether there should be special application in Ponzi scheme cases if the law would otherwise bar a receiver. The panelists also led an interesting discussion on the concept and practicalities of a receiver joining forces with a class of investors to sue third parties in an effort to maximize recoveries, streamline the distribution process, and prevent a third party from arguing its way out of separate court proceedings on standing or in pari delicto grounds.

Hosted Table Lunch Discussion
BY MIKE ESSARY, SESSION PRODUCER

The Friday lunch program featured 20 tables – each with a specific topic and a host discussion leader. The format of the lunch program provided the benefit of great networking opportunities. The topics included a wide variety of subjects related to bankruptcy and receiverships, including retirement plans in receivership, bonds, property management, ethics and many others.

The tables rotated so that there were two discussions with different table groups. The rotation allowed participants to elect to choose another table/topic or to remain for more information. The hosts reported that their groups were extremely interactive with questions flowing. The discussions were based on experience of others at the table, information provided by the discussion leaders in their written handouts, and participant questions about specific situations in a receivership.

Regulated Senior Care Facilities
BY KRISTA FREITAG, SESSION PRODUCER

The Regulated Senior Care Facility session focused on the complexities of the wide-range of senior care facilities, and the common mistakes to avoid with a subject receivership, including disposition. The panelists shared their unparalleled expertise on the types of facilities – Residential Care Facility for the Elderly (RCFE), Skilled Nursing Facility (SNF), Continuing Care Retirement Community (CCRC) – and the mixed licensing statutes, and licensing and notice requirements associated with each. From the California Department of Social Services (RCFE) to the California Department of Public Health (SNF) to the Attorney General (SNF), the panelists also focused on the governing regulatory agencies associated with each type of facility.

Given the complex nature of the varying circumstances, the panelists discussed the common and detrimental mistakes a receiver must avoid, including: (1) not understanding the importance of the licensing regimes, requirements and timelines; (2) failing to disclose plans to regulatory agencies; (3) failing to keep regulatory agencies apprised of progress; (4) assuming a regulatory agency will allow receiver to supplant the agency’s regulatory process for troubled facilities; (5) providing incomplete information to agencies; (6) failing to notify residents and their responsible persons of plans; (7) assuming the Attorney General will approve a buyer; (8) assuming regulatory agency has same objectives as the lender; and (10) confusing notices with approvals.

Special thanks to my esteemed expert panelists: Joel S. Goldman, Esq., Hanson Bridgett, LLP, Diedre Schönfeldt, Esq., Hanson Bridgett, LLP, Sue Farrow, Integral Senior Living, LLC, Thomas Seaman, The Thomas Seaman Company and Todd Wohl, Braun Corporation. Thanks also to Pamela Kauffman, Esq., Hanson Bridgett, LLP for her contributions to the session materials.

Substandard Housing: Health and Safety Code Receiverships
BY RICHARDSON "RED" GRISWOLD, SESSION PRODUCER

This session explored the use of health and safety code receiverships (pursuant to Health & Safety Code section 17980, et seq.) in cities and counties across the State of California. The panel of speakers, Mark Adams, Richard Ormond and Kevin Collins, led an engaging discussion of how municipalities can utilize this receivership remedy to clean up their neighborhoods and ensure the safety of their citizens.

During break-out table sessions, the panel of speakers mixed with the audience members to discuss in greater detail the procedural aspects of these receiverships, the granting of super-priority receivership certificates to fund these receiverships, and the ongoing debate of selling properties within a receivership. Participants were intrigued by some of the key differences between rents and profits receiverships versus health and safety code receiverships–the most significant difference being that the moving party within a health and safety code receivership is a public municipality instead of a lender.

Receiverships with Environmental Issues
BY MARK CAMERON, SESSION PRODUCER

Panelists Kevin Singer, receiver, Linda Taverner of SCS Engineers, environmental expert, and Terry Plowden of Douglas Wilson Companies, receiver, along with intrepid attendees, investigated, analyzed, and strategized over contamination hypotheticals. As a result, the following Top 10 List of issues to consider was generated: (10) Potential liability risk may be extreme for owners, operators, and those participating in management over contaminated property; (9) Fiduciary liability immunities are conditional under H&S Code sections 25548 et seq.; (8) Multiply normal receivership "red flags" by three; (7) Avoid sites with ongoing contaminant sources; (6) Keep lender hands off prior to foreclosure; (5) Thou shalt not make changes which impair contamination containment; (4) Choose a good environmental consultant familiar with local regulators; (3) Preserve and maintain only–lease or sell with extreme caution; (2) Customize appointment order, termination order, and all prudent interim court approvals; (1) Per Dietrich Bonhoeffer: "Not to speak is to speak. Not to act is to act."

In environmentally-impacted property receiverships, be compulsive about sending notices and sharing information and action plans, especially with the court, parties, and where required, regulators and tenants. For bonus material, see the links in the panel materials, especially "Geotracker".

Title Issues
BY TERRI RIKER, SESSION PRODUCER

The panelists – Anthony A. Arostegui, James Lowe, Laura Lowe and Alan Wasserman – delved into a hypothetical case involving a receivership over an office building/hospital. With discussions centered around the company’s leasehold interest under a ground lease, pending construction on a new facility, potential sale, and concurrent workout negotiations, the panel and participants quickly identified salient points of the case and a path to navigate through potential title obstacles of a sale.

Various title issues were raised during this case review, and the panelists discussed the importance of timely review of all underlying documents and identification of all parties who may have an interest or claim to the property so that they can be given appropriate notice.

It is highly recommended to review with the underwriter both the order giving the receiver authority to sell and the sale order, prior to the court entering such orders, to ensure title conditions are met for the receivership sale. In many cases, the underwriter may provide the receiver with acceptable language to use in their orders. In addition, contacting the title underwriter as soon as title issues are identified is paramount to a successful sale.

The panelists also warned receivers about reliance on title documents and not relying on Preliminary Title Reports or proformas as they are not binding and may not contain all title exceptions. Instead, a receiver should request a binding title commitment.

Receivership vs. ABC vs. Bankruptcy
BY JOEL B. WEINBERG, SESSION PRODUCER

When faced with a financially challenged business, many professionals reflexively choose bankruptcy as the only avenue. An in-depth discussion of other options, namely receiverships and general assignments, was explored and debated from the perspectives of different stakeholders in an insolvency matter: the business, insiders of the business, the fiduciary, secured creditors, and unsecured creditors. In choosing a liquidation device, the following issues were considered: equity consent (or lack thereof), the interests and consent of secured creditors, venue (and an ability to choose California law for a general assignment, despite the fact that neither the debtor or creditors have any real connection with the state), employee claims, scope and location of assets, and ability to assign executory contracts and unexpired leases. Going concern sale transactions, including sales to insiders, were explored along with issues relating to the maintenance of operations pending the closing of the sale. Stays of enforcement of claims, avoidance power actions (and the continued viability of state court preference claims in the case of an ABC), and successor liability rounded out the discussion.

Joel B. Weinberg, Esq., Insolvency Services Group and adjunct professor at Loyola Law School, thanks panel members Lei Lei Wang Ekvall, Esq., Weiland, Golden, Smiley, Wang Ekvall & Strok, LLP, Ori Katz, Esq., Sheppard Mullin and Rene Lastreto II, Esq., Lang Reichert & Patch APC.

Loyola V Leadership and Speakers

Special thanks to the Loyola V leadership for their commitment to excellence, diversity and discussion provoking presentations all while executing a re-design of the program format. The Session Producers/Moderators, Table Discussion Leaders and Panelists shared an amazing wealth of information.
 

CHAIRS Gordon Dunfee – Chair Nancy Hotchkiss – Honorary Chair Mia Blackler – Education Co-Chair Christopher Hawkins – Education Co-Chair Robert Mosier – Judicial Liaison Kevin Singer – Sponsorship Co-Chair Christopher Seymour – Sponsorship Co-Chair Ted Phelps – Materials Chair SYMPOSIUM MANAGEMENT Jeanne Sleeper Toni Spangler Staff of JBS & Associates SESSION PRODUCERS/MODERATORS Hannah Blumenstiel – Municipal Insolvencies Michael Brumbaugh – Medical Marijuana Businesses/Facilities Mark Cameron – Environmental Issues Michael Essary – Hosted Table Discussions Luncheon Krista Freitag – Senior Care Facilities Richardson “Red” Griswold – Substandard Housing Kenton Johnson – Regulatory Receiverships Alan Mirman – Ask the Experts Doug Morehead - CMBS Robert Mosier –Judges Panel on Receivership Sales David Pasternak – Affordable Housing/ Redevelopment Kathy Bazoian Phelps – Ponzi Schemes Terri Riker – Title Issues Joel Weinberg – Receivership vs. ABC vs. Bankruptcy LUNCHEON TABLE DISCUSSION LEADERS Edythe Bronston - Provisional Director Risks Mark Cameron - Environmental Issues Peter Davidson - Personal Liabilities of Receivers Curtis DeYoung - Retirement Funds in Receivership Michael Essary - Receiver, Property Manager or Both? Anthony Fitzgerald - Brokerage vs auction - Pros and Cons Mark Forsythe - Bankruptcy Meets Receivership Gordon Gerson - Selling Property Out of Receivership Candi Grant - Judicial Foreclosure Sales Kavita Gupta - Intersection of Receiverships & Bankruptcy Will Mingram - Bonding Receivers Nancy Martin - Hard Core Receiverships Beverly McFarland - Operating A Business in Receivership Stan Mullin - Nominating: Conflict of Interest Issues Ted Phelps - Found Fraud - What Next? Stacy Rubin - Overcoming Courtroom Obstacles Gabriel Torre - Tax Issues in Receiverships Robert Warren - Rents & Profits Receiverships Todd Wohl - Appraisal Reality vs Sales Price

PANELISTS AFFORDABLE HOUSING Ted Lanes David Levin Charles Slyngstad Michael Williamson MEDICAL MARIJUANA BUSINESS/FACILITIES Amanda Allen Robert Griswold Nancy L. Martin Jeffrey Schunk REGULATORY RECEIVERSHIPS Hon. Dean D. Pregerson David M. Agler Gary Caris Thomas Hebrank Diane Romaniuk RECEIVERSHIP SALES Hon. Jeffrey B. Barton, San Diego County Superior Court Hon. Shellyanne W.L. Chang, Sacramento County Superior Court Hon. Derek W. Hunt, Orange County Superior Court MUNICIPAL INSOLVENCIES Hon. Meredith A. Jury U.S. Bankruptcy Court Central District of CA, Riverside Steven Katzman Kevin Whelan ASK THE EXPERTS Marilyn Bessey Marc Brooks Ron Oliner David Wald PONZI SCHEMES Hon. Steven Rhodes – U.S. Bankruptcy Court Eastern District of MI, Detroit Stephen Donell Thomas Foley, Jr David Zaro REGULATED SENIOR CARE FACILITIES Sue Farrow Joel Goldman Deidre Schonfeldt Thomas Seaman Todd Wohl SUBSTANDARD HOUSING - HEALTH & SAFETY CODE Mark Adams Kevin Collins Richard Ormond CMBS Mark Osgood ENVIRONMENTAL ISSUES Linda Mackey-Taverner Terry Plowden Kevin Singer TITLE ISSUES Anthony Arostegui James Lowe Laura Lowe Allan Wasserman RECEIVERSHIP VS. ABC VS. BANKRUPTCY Ori Katz Rene Lastreto II Lei Lei Wang Ekvall