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Judge: Law Firm Granted Attorney Fees Despite Receivership

August 31, 2018 | Posted in : Fee Agreement, Fee Award, Fee Entitlement / Recoverability, Fee Request

A recent Law 360 story by Lauraann Wood, “Firm Can Get Fees Despite Receivership, Judge Says, reports that an Illinois federal judge granted a law firm's bid to collect $20,000 in retainer fees for work performed leading up to and during a hearing in which he ordered a receivership over a real estate investment company accused of running a Ponzi scheme, saying the firm’s request is fair and reasonable.

U.S. District Judge John Lee granted Celiza Braganca’s motion to collect the money, which was transferred to Braganca Law LLC  in two $10,000 wire payments surrounding the hearing in which the judge temporarily restrained and ordered a receivership over Jerome and Shaun Cohen’s allegedly unlawful business conduct, over the U.S. Securities and Exchange Commission’s objection that the money she’d receive belongs to the investors the father-son duo allegedly defrauded. 

“Allowing reimbursement sought by Braganca Law for the work they performed is reasonable and appropriate here,” Judge Lee said.  “After all, the defendant should be entitled to legal representation for the defense in this case at least through the entry of a consent judgment.”  The commission asked for a temporary restraining order and receivership the day it filed suit against the Cohens and their company Equitybuild LLC, saying they wrongfully misled about 900 investors with promises of double-digit returns.

The two owners lied to their investors about essentially everything, from their failure to disclose that both had previously filed for bankruptcy to their falsehoods about the experience and technology they’d tap to identify undervalued but high-performing property, according to the SEC’s lawsuit.  The Cohens would represent to investors that those properties were generating returns between 12 and 20 percent, but in reality they were losing huge amounts of money and returns were being paid with other investors’ money, according to the suit.

However, the day after the suit was filed, Equitybuild sent a $10,000 wire to Braganca’s firm, the SEC said.  A day after that, while the court was conducting TRO proceedings, the firm received another $10,000 from Equitybuild’s investment vehicle, Equitybuild Finance LLC, according to the commission.  But during the hearing, Braganca noted to Judge Lee that she’d raised the issue of attorneys’ fees during the earlier TRO proceedings, and the motion he saw regarding her requested $20,000 is how he told her to approach the issue.

The case is U.S. Securities and Exchange Commission v. Equitybuild Inc. et al., case number 1:18-cv-05587, in the U.S. District Court for the Northern District of Illinois.