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Davis v. Lifetime Capital

June 2, 2006

H. THAYNE DAVIS, PLAINTIFF,
v.
LIFETIME CAPITAL, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Magistrate Judge Sharon L. Ovington (By Consent of the Parties)

DECISION AND ORDER

I. BACKGROUND

On March 10, 2006, the Court granted the Receiver's Motion to Approve Bidding and Portfolio Sale Procedures (Doc. #397; see Doc. #393, Exhibit A), and implemented various bidding procedures and requirements. The Order further required the Receiver, his counsel, and the Court-appointed Examiner to review all bids compliant with the bidding requirements and submit the bids to the Court along with recommendations regarding the highest and best bid. (Doc. #397; see Doc. #393, Exhibit A). The Court scheduled a hearing on March 29, 2006 to evaluate the bids and directed the Receiver to notify LifeTime investors about the date and time of the hearing. (Doc. #397). The Court further ordered, "all interested parties shall have an opportunity to be heard regarding the proposed sale of the LifeTime Portfolio during the March 29, 2006 hearing." (Doc. #397 at 3).

During the hearing, the evidence surprisingly established that the Receiver had communicated with one bidder -- Lorenzo Tonti Fund, Ltd. ("Tonti") -- after the close of the bidding process. The Receiver allowed Tonti to submit an enhanced bid after the deadline set forth in the bidding procedures. The Receiver failed to accord any other bidder with the same opportunity. Consequently, the other bidders objected asserting that Tonti had impermissible contact with the Receiver to the detriment of the other bidders, and that Tonti had access to the Receiver and to information that was not accorded to the other bidders.

On March 30, 2006, the Court held a hearing concerning whether to reopen the bidding on the LifeTime Portfolio. On the day of the hearing Tonti filed a Motion to Intervene. (Doc. #408). During the hearing, the Court permitted Tonti to appear through counsel for the purposes of the hearing. Tonti's counsel argued that its bid must be accepted as the highest and best bid.

The Court concluded that there were irregularities in the bidding process due to actions by the Receiver and refused to accept any bids presented. Instead, the Court issued an Order and Supplemental Order reopening the bidding process and setting forth the procedures to be followed.

Tonti objected to the Court's Orders as it perceived itself to have the highest and best bid. Tonti then participated in the further bidding process under protest. Through counsel, Tonti sent a letter to the Court (Doc. #424, Exhibit 11), asking the Court to suspend the bidding and to accept its enhanced bid. Tonti stated that it intended not only to seek injunctive relief but also to notify the issuing life insurance companies that there is a cloud on the title to the policies in the LifeTime Portfolio and that the policies should not be transferred or paid upon maturity pending outcome of the litigation. (Doc. #424, Exhibit 12).

After the renewed bidding closed, the Court held a hearing to consider the highest and best bid for the sale of the LifeTime Portfolio. During the hearing, the Receiver testified and an actuarial accountant testified in support of Tonti's bid. Two bidders -- SPCP Group, LLC ("SilverPoint") and Tonti -- each argued that it had the highest and best bid.

On April 21, 2006, the Court held, for various reasons, that SilverPoint, not Tonti, presented the highest and best bid, and consequently accepted the SilverPoint Bid and rejected the Tonti Bid. Thereafter, the Court set a final hearing on May 9, 2006 to conclude the sale of the LifeTime Portfolio. (Doc. #436).

This case is presently before the Court upon Tonti's Motion To Intervene (Doc. #408), Tonti's Motion to Submit a Restructured Bid (Doc. # 444), and Tonti's Motion to Submit a New Bid in the amount of $20,000,000. (Doc. # 450).

II. ANALYSIS

A. Tonti's Motions to Submit a Restructured Bid and Submit a New Bid are Denied

On May 1, 2006, Tonti filed a Motion to Submit a Restructured Bid. (Doc. # 444). On May 11, 2006, Tonti filed a Motion to Submit a New Bid in the amount of $20,000,000. (Doc. # 450). ( "The Bid Motions"). SilverPoint argues that Tonti's motions should be denied. (Doc. # 451)

Tonti has presented no evidence and has made no compelling argument as to why this Court should consider the Bid Motions and defeat the real expectation of finality resulting from the Court's order accepting SilverPoint's bid as the highest and best. SilverPoint cogently argues that the Bid Motions are nothing more than a collateral attack on this Court's previous order finding SilverPoint's bid to be the highest and best. (Doc. # 451 at 2). This Court agrees and rejects Tonti's attempts to continue and/or reopen the bidding process by submitting additional bids which are subject to a reservation of rights and offer no real additional value to the investors.

In reviewing the Bid Motions this Court must balance the interests of the finality of the sale process versus the maximization of the sale price. As noted in Corporate Assets, ...


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