CCUR Aviation Fin., LLC v. S. Aviation, Inc.

• Decision Date: 02 March 2021
• Docket Number: Case No. 21-cv-60462-BLOOM/Valle
• Parties: CCUR AVIATION FINANCE, LLC and CCUR HOLDINGS, INC., Plaintiffs, v. SOUTH AVIATION, INC. and FEDERICO A. MACHADO, Defendants.
• Court: U.S. District Court — Southern District of Florida

CCUR AVIATION FINANCE, LLCand CCUR HOLDINGS, INC., Plaintiffs, v. SOUTH AVIATION, INC. and FEDERICO A. MACHADO, Defendants.

Case No. 21-cv-60462-BLOOM/Valle

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

March 2, 2021

ORDER

THIS CAUSE is before the Court upon Plaintiffs CCUR Aviation Finance, LLC and CCUR Holdings, Inc. (collectively, "Plaintiffs") ex parte Verified Motion for Immediate Appointment of Receiver, ECF No. [4] ("Motion"), filed on March 1, 2021. The Court has reviewed the Motion, all supporting submissions, the record in this case, the applicable law, and is otherwise fully advised. For the reasons set forth below, the Motion is denied.

Plaintiffs initiated this action on March 1, 2021. ECF No. [1]. The same day, Plaintiffs filed the instant Motion seeking the appointment of a receiver to:

(i) confirm what assets the Defendants previously had and currently have; (ii) confirm what the Defendants' creditors are currently owed; (iii) freeze assets to ensure that Defendants' creditors are repaid; (iv) marshal, safeguard, and liquidate assets; (v) ensure that preferential payments to creditors and insiders do not occur at the expense of other creditors; (vi) ensure that the Defendants' creditors are repaid in a fair and equitable manner; and (vii) file any necessary or appropriate ancillary actions to recover monies or assets for the benefit of the Defendants' creditors.

ECF No. [4] at 4. In particular, Plaintiffs request emergency relief because, on February 26, 2021, a criminal indictment in the Eastern District of Texas, which included one of the Defendants in this case, Federico A. Machado, was unsealed. As such, Plaintiffs are concerned that this unsealed indictment will motivate Defendants to divert or conceal funds and assets from Plaintiffs to avoid satisfying Plaintiffs outstanding claims.

"The Court has broad equitable powers to stop misconduct and to preserve the status quo when there is good cause to do so." Commodity Futures Trading Comm'n v. Fingerhut, No. 1:20-cv-21887, 2020 WL 2747448, at *1 (S.D. Fla. May 26, 2020). These broad equitable powers include granting ex parte temporary restraining orders before a defendant has been served and given an opportunity to respond. See Fed. R. Civ. P. 65(b) (permitting the issuance of "a temporary restraining order without written or oral notice to the adverse party").

It follows then that courts may also exercise their equitable powers to appoint a temporary receiver in the absence of service. See, e.g., Arkansas Louisiana Gas Co. v. Kroeger, 303 F.2d 129, 132 (5th Cir. 1962) ("[A] court of equity does have the power and authority to make an ex parte appointment of a receiver.") (citations omitted); Porter v. Cooke, 7 F. Supp. 724 (W.D. La. 1933) (holding that written notice of application for appointment of receiver was sufficient without formal service). This makes sense. The basis for appointing a temporary receiver is the same as that underpinning an ex parte temporary restraining order: to preserve the status quo for a limited duration until the parties may be heard. See Bookout v. Atlas Fin. Corp., 395 F. Supp. 1338, 1342 (N.D. Ga. 1974), aff'd sub nom. Bookout v. First Nat. Mortg. & Disc. Co., 514 F.2d 757 (5th Cir. 1975) ("The appointment of a receiver certainly is not made for the purpose of destroying the rights of persons, but rather, that their rights may be made more secure.") (citation omitted).

Fingerhut, 2020 WL 2747448, at *2.

However, "[a] district court's appointment of a receiver . . . is an extraordinary equitable remedy." United States v. Bradley, 644 F.3d 1213, 1310 (11th Cir. 2011) (citation and internal quotation marks omitted).

"[T]he appointment of a receiver in equity is not a substantive right; rather, it is an ancillary remedy which does not affect the ultimate outcome of the action." National Partnership Inv. Corp. v. National Housing Development Corp., 153 F.3d 1289, 1291 (11th Cir. 1998); see also Hutchinson v. Fidelity Inv. Ass'n, 106 F.2d 431, 436 (4th Cir. 1939) ("It should not be forgotten that the appointment of a receiver is not a matter of right, but one resting in the sound discretion of thecourt.") (citation omitted); Sterling Sav. Bank v. Citadel Development Co., 656 F. Supp. 2d 1248, 1258 (D. Or. 2009) (noting that "a party does not have a substantive right to a receiver"). Simply put, "[r]eceivership is an extraordinary remedy that should be employed with the utmost caution and is justified only where there is a clear necessity to protect a party's interest in property, legal and less drastic equitable remedies are inadequate, and the benefits of receivership outweigh the burdens on the affected parties." Netsphere, Inc. v. Baron, 703 F.3d 296, 305 (5th Cir. 2012).

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