The 10th Circuit Court of Appeals on March 9 issued an opinion that solidifies the legal rights of a court-appointed receiver.
When a court appoints a receiver to manage the assets and handle litigation for a group of defrauded investors, the receiver is often in the best position to get a favorable outcome for those investors. But a recent case challenged the common practice because a small group of investors wanted to pursue individual claims without the receiver. The outcome affirmed a district court rule that said a court-appointed receiver could represent a group of individuals victimized in fraud cases and that a district court may impose a claims bar order, which acts as an injunction against further claims brought by individuals involved in the case.
Attorneys from Ballard Spahr in Utah represented the receiver in a case that challenged her standing to represent defrauded individuals. The precedent-setting case clarifies established practices that haven’t been challenged in the 10th Circuit before, according to an attorney on the case.
The case, Securities and Exchange Commission v. Curtis DeYoung, involved claims from three defrauded investors out of a group of 5,500 who said they were denied their day in court. The SEC had brought a case against American Pension Services, a third-party administrator of IRA accounts, and DeYoung, its president and CEO. The SEC alleged DeYoung had misappropriated $24 million in customer funds that APS commingled in a master trust account at First Utah Bank. The district court appointed a receiver who entered into a settlement with First Utah, which included a claims bar order, which barred other claims against First Utah related to the IRA accounts.