Pritzker Levine's 2,000 hours saved $29M, 9th circuit says

A divided federal appeals court panel vacated a lower court's denial of attorney fees for Pritzker Levine's 2,000 hours of work recovering assets wrongly put into receivership.

"The attorneys used their own resources to recover $30 million that otherwise would have dissipated," co-founding partner Elizabeth C. Pritzker said in a phone interview Tuesday. "Attorneys are entitled to be paid for their work."

The 9th U.S. Circuit Court of Appeals majority rejected a finding by U.S. District Judge Richard Seeborg in San Francisco that the diverted money in the case would have been recovered without Pritzker Levine's involvement. U.S. Securities & Exchange Commission v. Pritzker Levine LLP, 20-17419 (9th Cir. Mar. 7, 2022) (unpublished).

A memorandum opinion overturning Seeborg was issued Monday by 9th Circuit Judges Paul J. Watford and Andrew D. Hurwitz. Judge M. Miller Baker of the U.S. Court of International Trade, sitting by designation, wrote in a dissent that Seeborg was not clearly in error.

Pritzker Levine represented Allan Young in a superior court lawsuit against San Francisco Regional Center LLC, a company run by his former business partner, Thomas Henderson. Young sought damages for illegally rerouted funds and concealed records.

"Pritzker obtained the appointment of a receiver and assisted the receiver in identifying nearly $29 million in assets that were taken into the receivership estate," according to the unpublished 9th Circuit memorandum. "The firm spent approximately 2,000 hours litigating the state court proceedings."

Two years later, the Securities and Exchange Commission sued Henderson and the regional center in federal court. The state court litigation was stayed, a receiver was appointed in the federal case, and roughly $25 million from the state receivership was turned over to the federal receiver, according to the 9th Circuit memorandum. After the district court approved the receiver's proposed plan of distribution, Pritzker unsuccessfully sought an award of attorney fees for its role in securing a "common fund" for investors.

"Under the 'common fund' doctrine, the panel majority found, 'a private plaintiff, or his attorney, whose efforts create, discover, increase or preserve a fund to which others also have a claim is entitled to recover from the fund the costs of his litigation including ... including attorney fees.' Vincent v. Hughes Air W., Inc., 557 F. 2d 759, 769 (9th Cir. 1977)."

"Pritzker's efforts in the state court litigation -- which included filing the case, obtaining the appointment of a receiver, working closely with the receiver in amassing the receivership fund, and defending the fund against various claims -- undeniably caused the creation, discovery, increase, or preservation of a common fund that benefited investors at the conclusion of the federal action," the memorandum stated.

Baker wrote in his dissent, however, "Pritzker's argument -- that, but for its involvement, the assets would have been dissipated -- is just as speculative as the district court's factual finding to the contrary. The relevant question, therefore, is whether the district court's necessarily speculative counterfactual finding was still 'plausible in light of the record viewed in its entirety.'"