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Securities and Exchange Commission v. Byers

United States District Court, S.D. New York

December 23, 2014

STEVEN BYERS et al., Defendants.

Neil Jacobson, Esq., Alistaire Bambach, Esq., Securities and Exchange Commission, New York, NY, For the SEC.

Jonathan W. Ware, Esq., Freshfields Bruckhaus Deringer U.S. LLP, Washington, DC, For the Receiver, Freshfields.

Joseph C. Corneau, Esq., Tracy L. Klestadt, Esq., Klestadt & Winters LLP, New York, NY, For FTI Consulting, Inc., as Trustee for Dewey.

P. Gregory Schwed, Esq., Daniel B. Besikof, Esq., Loeb & Loeb LLP, New York, NY, For Deloitte.

Steven E. Fox, Esq., Riemer Braunstein LLP, New York, NY, For Badger Real Estate Advisors, LLC.

George P. Angelich, Esq., Arent Fox LLP, New York, NY, For Arent Fox.

Barry S. Pollack, Esq., Joshua L. Solomon, Esq., Pollack Solomon Duffy LLP, New York, NY, For G&H Partners A.G.


DENNY CHIN, District Judge.

In this securities fraud case brought by the Securities and Exchange Commission (the "SEC") against Steven Byers, Joseph Shereshevsky, and affiliated entities, before the Court are the following applications:

1. Application of FTI Consulting, Inc. ("FTI"), in its capacity as Secured Lender Trustee of the Dewey & LeBoeuf, LLP ("Dewey") Secured Lender Trust, for fees and expenses of $1, 256, 886.68 as requested in Dewey's Tenth Fee Application and for payment of holdbacks of $3, 446, 019.10 (Dkt. No. 1048);

2. Application of Arent Fox LLP ("Arent Fox") for payment of holdbacks of $33, 216.50 (Dkt. No. 1049);

3. Application of Badger Real Estate Advisors ("Badger") for the period July 1, 2012 through February 28, 2013 for $160, 000 in fees (Dkt. No. 1055);

4. Application of Deloitte Financial Advisory Services ("Deloitte") for the period January 1, 2013 through September 30, 2014 for fees and expenses of $55, 720 (Dkt. No. 1047) and for payment of holdbacks of $735, 245 (Dkt. No. 1051);

5. Fifth Interim Joint Application of the Receiver Timothy J. Coleman and his counsel Freshfields Bruckhaus Deringer U.S. LLP ("Freshfields") for the period October 1, 2013 through August 31, 2014 for $844, 591.75 in fees and $26, 042.52 in expenses (Dkt. No. 1045) and for the payment of holdbacks of $882, 781.72 (Dkt. No. 1052).

The applications are GRANTED in part and DENIED in part as set forth below.


The facts and procedural history of this case are set forth in the Court's prior decisions and orders as well as in decisions of the Second Circuit. See, e.g., SEC v. Orgel, F.Appx. 504 (2d Cir. 2010) (holding district court did not abuse its discretion in approving plan to distribute receivership assets on pro rata basis); SEC v. Malek , 397 F.Appx. 711 (2d Cir. 2010) (affirming district court's order approving distribution plan); SEC v. Byers , 609 F.3d 87 (2d Cir. 2010) (affirming district court's injunction barring non-parties from filing involuntary bankruptcy proceedings against defendants and upholding anti-litigation injunction); SEC v. Byers , 637 F.Supp.2d 166 (S.D.N.Y. 2009) (approving distribution plan); SEC v. Byers, No. 08 Civ. 7104 (DC), Order filed Aug. 18, 2009 (Dkt. No. 439) (expressing concern over fees incurred by Receiver and Dewey, in light of uncertainty in recovering substantial assets); SEC v. Byers, No. 08 Civ. 7104 (DC) , 2009 WL 1505674 (S.D.N.Y. May 29, 2009) (granting third application by Receiver and Dewey for fees and expenses); SEC v. Byers , 590 F.Supp.2d 637 (S.D.N.Y. 2008) (approving fee applications, but substantially reducing Dewey's fees and imposing 20% holdback). I summarize certain facts relevant to the pending applications.

A. The Applications

1. Dewey

From the filing of this case on August 11, 2008 through September 30, 2011, Dewey provided legal services to the Receiver. (Dkt. No. 1048, ¶¶ 1, 7, 43). Based on the first nine fee applications, Dewey was awarded $9, 423, 211.76 in fees, for the period from August 11, 2008 through October 31, 2009. (See id., ¶¶ 14, 34 & Ex. A (sum of fees awarded for first nine applications)). Substantial amounts were held back from the first nine applications, totaling $3, 446, 019.10, including a 50% holdback on the Eighth and Ninth applications. (See id. ¶¶ 38, 39 & Ex. A (sum of holdbacks for first nine applications)). Dewey made a Tenth Application for fees of $1, 238, 362.42, which I denied without prejudice. (Id. ¶¶ 40-42 & Ex. A). From July 1, 2010 through September 30, 2011, Dewey spent an additional $603, 009 in time on the case and incurred an additional $35, 412.91 in expenses which have not been billed. On Dewey's behalf, FTI is waiving these unbilled amounts "[a]s a gesture of goodwill, given the nature of this case and the losses of the victims of the Ponzi scheme, and in further recognition of the public service nature of [Dewey]'s representation of the Receiver." (Id. ¶ 43).

On May 28, 2012, Dewey filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. (Id. ¶ 44). FTI, as secured lender trustee, now seeks the holdbacks of $3, 446, 019.10 and, with respect to the Tenth Application, fees of $1, 238, 362.42 and costs of $24, 524.26, for a total request at this time of $4, 708, 905.78. Any award, of course, would inure to the benefit of the Dewey bankruptcy estate and, in particular, creditors. (12/18/14 Tr. 16).

2. Arent Fox

Arent Fox made one fee application during the case, for $66, 216.50 in fees and expenses of $1, 916.83, covering the period from June 1, 2010 through May 31, 2011. (Dkt. No. 1049, ¶¶ 3, 4, 6). This engagement resulted when Mark Radke, Esq., withdrew from Dewey and joined Arent Fox. (Id. ¶¶ 2, 7). After Radke withdrew from Arent Fox on February 28, 2013, Arent Fox ceased its representation of the Receiver. (Id. ¶ 7). Apparently, Arent Fox provided additional services for the Receiver between June 1, 2011 and May 30, 2012, totaling some $6, 413.50 in time, which it has waived. (Id. ¶ 10). It also previously wrote-off $767 in fees. (Id.). Arent Fox's fee application noted certain discounts, such as billing for non-working travel time at 50% of the standard rate and billing for "non-legal" services at $200 per hour, but no "public service" discount was provided. (Id. ¶¶ 19, 27).

3. Deloitte

Deloitte had previously made ten applications for fees and costs. The first six applications were granted, and certain amounts were held back from the Seventh through Tenth applications as follows:

Amount Amount Application Awarded Held Back First 80, 242.49 0 Second 626, 016.43 0 Third 965, 481.40 0 Fourth 865, 013.15 0 Fifth 877, 561.38 0 Sixth 728, 211.45 0 Seventh 242, 932.26 238, 437.50 Eighth 132, 831.94 389, 445.00 Ninth 82, 547, 50 82, 547.50 Tenth 74, 445.00 24, 815.00

The total amount awarded to Deloitte for the first ten applications, covering the period from August 18, 2008 through December 31, 2012, was $4, 674, 283.00; some $735, 245.00 was held back. (Dkt. 1047-1, ¶¶ 14-23). These amounts reflect a cap on Deloitte's blended hourly rate through the case as well as holdbacks ...

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