United States District Court, N.D. Ohio, Eastern Division
SOLOMON OLIVER, JR. UNITED STATES DISTRICT JUDGE.
pending before the court is Defendant Thomas Abdallah's
(“Defendant” or “Mr. Abdallah”)
Motion to Approve Settlement Agreement and Allocate and
Release Proceeds to Defendant, His Spouse, and His Counsel
(“Motion”). (ECF No. 304.) The Motion asks the
court to approve a settlement agreement, in the amount of
$25, 000.00, obtained by Defendant relating to a personal
injury claim resulting from a motor vehicle accident. The
Motion further requests that the court order the disbursement
of the settlement to Defendant, his spouse, and his counsel.
Plaintiff United States Securities and Exchange Commission
(“Plaintiff” or “SEC”) filed a
Limited Objection to Defendant Abdallah's Motion to
Approve Settlement Agreement and Allocate and Release
Proceeds to Defendant, His Spouse, and His Counsel
(“Objection”), objecting to the release of the
settlement award to Defendant. (ECF No. 308.) For the
following reasons, the court grants in part, denies in part,
and reserves ruling in part on Defendant's Motion.
29, 2014, the SEC commenced this action against several
individuals and entities, including Mr. Abdallah, alleging
that they were the originators of a Ponzi scheme that
defrauded investors of millions of dollars. (Compl.
¶¶ 1-17, ECF No. 1.) The court appointed the
Receiver to administer and conserve the Defendants'
assets pending resolution of the case on December 3, 2014.
(Order Appointing Receiver, ECF No 119.) Mr. Abdallah
consented to an entry of judgment against him, and a Judgment
as to Defendant Thomas Abdallah was entered by this court on
November 2, 2017. (ECF No. 330.) Pursuant to this Judgment,
Mr. Abdallah is liable for disgorgement in the amount of $5,
209, 349.00, plus prejudgment interest in the amount of $868,
835.00, deemed satisfied by the criminal restitution order of
$17, 077, 571.44 entered against Mr. Abdallah on October 19,
2016 in United States v. Thomas Abdallah, et
al., No. 1:15-CR-231 (N.D. Ohio). (Id.)
an agreement between the Receiver, Mr. Abdallah, and
Plaintiff, this court granted Mr. Abdallah limited relief
from the Order Appointing Receiver in order to prosecute a
personal injury claim resulting from a motor vehicle accident
occurring on November 6, 2013. (Order, Oct. 29, 2015, ECF.
225.) The Order granting limited relief held that any
recovery or settlement obtained by Mr. Abdallah as a result
of the prosecution of his personal injury claim shall be
subject to the approval of this court, as well as to the
terms of the Order Appointing Receiver. (Id. at1-2.)
Pursuant to this limited relief, Mr. Abdallah and his spouse,
Yasmin Abdallah (“Mrs. Abdallah”), through their
counsel Paul R. Hoffer, initiated a personal injury lawsuit
against Osama Fahmy and Merveat Henein in the Cuyahoga
County, Ohio Court of Common Pleas on October 30, 2015. (Mot.
2.) The claim sought compensation for physical injury to Mr.
Abdallah and for loss of consortium to Mr. and Mrs. Abdallah.
(Id.) Mr. and Mrs. Abdallah obtained a settlement
agreement with Osama Fahmy's insurer, Allstate Insurance,
in the amount of $25, 000.00, and the action in the Cuyahoga
County, Ohio Court of Common Pleas was dismissed.
(Id. at 2-3.)
Abdallah brought the present Motion on July 24, 2017, seeking
approval of the settlement agreement. (Mot. 3.) Mr. Abdallah
also requests that the court order the disbursement of funds,
received and held by the Receiver from the settlement, in the
amount of $6, 250.00 to Attorney Paul R. Hoffer for legal
services provided in prosecuting the personal injury claim.
(Mot. 4.) The Motion includes an Affidavit of Mr. Hoffer
averring that counsel for Receiver authorized Mr. Hoffer to
charge a contingency fee of twenty-five percent of any award
recovered by judgment or settlement for his services.
(Affidavit, ECF No. 304-2, 13.) Mr. Abdallah further asks
this court to order the disbursement of the remaining balance
of the settlement, in the amount of $18, 750.00, to Mr. and
Mrs. Abdallah. (Mot. 4.)
August 2, 2017, Plaintiff filed a limited Objection to Mr.
Abdallah's Motion. Plaintiff indicated that, while it
does not object to the approval of the settlement, it objects
to “Defendant Abdallah keeping the personal injury
settlement when he owes so much in criminal restitution to
victims from two separate criminal restitution
judgments.” (Obj. 3.) Plaintiff argues that Mr.
Abdallah is currently incarcerated and required by 18 U.S.C.
§ 3664(n) to apply the proceeds of his personal injury
settlement to his restitution debt. (Id. at 3.)
LEGAL STANDARD AND ANALYSIS
Approval of Settlement
Abdallah requests this court's approval of the settlement
entered into between Mr. and Mrs. Abdallah and Allstate
regarding Mr. Abdallah's personal injury claim. Plaintiff
does not object. The court hereby approves the settlement.
Disbursement of Funds to Mr. Abdallah
district court's power to supervise an equity
receivership and to determine the appropriate action to be
taken in the administration of the receivership is extremely
broad.'”See 51382 Gratiot Ave. Holdings, LLC v.
Chesterfield Dev. Co., LLC, No. 2:11-CV-12047, 2011 WL
4695820, at *2 (E.D. Mich. Oct. 5, 2011) (citing SEC v.
Capital Consultants, LLC, 397 F.3d 733, 738 (9th
Cir.2005)); see also Quilling v. Trade Partners,
Inc., 572 F.3d 293, 298 (6th Cir.2009). Furthermore,
“[i]t is settled law that a receiver's right to
possession dates from the time of his appointment.”
See 51382 Gratiot Ave. Holdings, LLC, 2011
WL 4695820 at *2 (citing Davis v. Cox, 356 F.3d 76,
93 (1st Cir.2004) (construing Maine law); Wells v. Cermak
(In re Ackermann), 82 F.2d 971, 972 (6th Cir.1936);
Saginaw Cnty. Sav. Bank v. Duffield, 122 N.W. 186,
court denies Mr. Abdallah's request to release any amount
of the settlement award to him. Mr. Abdallah was granted
limited relief from this court's Order Appointing
Receiver for the purpose of prosecuting his personal injury
claim. (Order, Oct. 29, 2015.) The Order granting relief to
prosecute the claim held that “any recovery that may be
paid to Defendant Abdallah by judgment or settlement shall be
subject to the terms of the Order Appointing Receiver”.
(Id. at 1.) The Order Appointing Receiver grants the
Receiver the power and duty to “[t]ake custody,
control, and possession of all Receivership
Property”. (Order Appointing Receiver, 4.) Thus, the
Receiver maintains the power to possess and control Mr.
Abdallah's settlement award. Contrary to Mr.
Abdallah's arguments, whether the settlement proceeds are
related to the Ponzi scheme is irrelevant to the
Receiver's authority to possess and control the property
pursuant to the terms of the Receivership. (See
Order Appointing Receiver, 4 (defining Receivership Property
in a manner not limited to property related to the crime)).
as noted by Plaintiff, Mr. Abdallah owes a staggering $17,
077, 571.41 on the criminal judgment entered against him by
this court in 1:15-CR-231. (Obj., 2) He also owes $620,
658.75 on the criminal judgment entered against him by this
court in 1:06-CR-401. (Id. at ...