Spring 2010 • Issue 36, page 17

How and Why to Avoid Jury Trial of Claims Against a Receiver or a Receivership Estate

By Weissman, Richard*

It is a general rule in state and federal courts that permission to bring suit against a receiver or receivership estate for some action taken or contract entered into by the receiver must first be obtained by motion from the appointing judge. Such claims are typically tried (unless quickly dismissed for frivolousness or otherwise resolved) in the appointing court for purposes of judicial economy and because the appointing judge is most familiar with the facts and circumstances of the case. But what happens if a jury trial is requested in a court, unequipped for jury trials – a Family Law or Probate court, for example?

In such cases, a jury trial would likely be transferred to a general civil trial judge who administers jury trials but knows nothing about you, the receiver, little about receivership law, and what you as receiver did in the course of your case. Perhaps more important is the fact that the jury does not know you, what your function was (what a receiver is), and why you should not be held liable either in your representative capacity or personally. There will also be exacerbated costs of defense because of such lack of familiarity with applicable law and facts.

Receiverships are equitable remedies. Consideration of claims against the estate and the receiver in his representative capacity (CCP §568) should be by the appointing court sitting in equity, without a jury. But there is some case law that suggests that a claimant may be entitled to a jury trial of her/his claims. How best to reduce this possibility?

Following are two clauses that a receiver may wish to incorporate in her/his various agreements with vendors, buyers of personal and real property, and as otherwise prudent to enhance the probability that the appointing court will consider and adjudicate such claims without a jury:

Jurisdiction
Any controversy and/or dispute arising under or by virtue of the Agreement shall be submitted to the Court then supervising the receivership (“Receivership Court”) in the Receivership Action titled, *** v. ***, et al., bearing Los Angeles County Superior Court Case No. ****** (“Receivership Action”), which is deemed by the Parties to be the Court of competent jurisdiction for all proceedings of every nature relating to this Agreement and for determining all of the rights and duties of the Parties hereto.

“All petitions, complaints, actions for intervention and/or motions and proceedings of every nature relating to this Agreement and/or among and between the Parties hereto shall be filed in the Receivership Action. The Receivership Court, sitting without a jury, shall hear all such matters. The parties hereby expressly waive and release all and any right(s) to a trial by jury on all issues arising from this agreement. No Party shall have the right to file an independent action in any other county or in any other judicial district in Los Angeles County in an effort to have another Court obtain personal or in rem jurisdiction over any such controversy or dispute, in any manner whatsoever.

“The terms ‘Party’ or ‘Parties’, as used herein, refers to Buyer herein and all other bidders and purchasers of the subject real property, and the receivership in the Receivership Action. The receiver, individually, is not a party to said Receivership Action, and is not personally liable to Buyer or any third party arising from the sale of the Property. In the event a dispute arises over the interpretation, construction and/or enforcement of any provision of this Agreement, and/or there is any dispute or conflict regarding the performance of any term(s), covenant or act thereunder, the Receivership Court, in its discretion, shall determine whether an award of reasonable attorney’s fees and/or costs to any Party should be made and in what amount(s), if any.”

Receiver’s Agency
“The receiver is acknowledged by Buyer to be only an agent of the Court and not acting as a principal in the sale herein. Therefore, the receiver, in his personal and/or official capacity herein, shall not bear any personal liability under the Agreement, in any manner, and shall not be individually named as a party in any action, petition or proceeding of any nature, notwithstanding the intent or substance of Section 568, California Code of Civil Procedure. Buyer expressly waives each and all of the provisions of Section 568.

“Any action by a Party or Buyer in contravention to this paragraph shall entitle the receiver, upon motion in such proceeding(s), to a complete and full dismissal from said action or proceeding and to indemnification and award against such Party and Buyer of professional fees and costs actually incurred by the receiver to obtain his dismissal. The Parties further acknowledge and agree that the receiver also shall be entitled to an award of professional fees and costs, at his then professional hourly rate charged for his services, in the event he brings said motion(s) on his own behalf, rather than through counsel. Buyer acknowledges that the receiver is an attorney, licensed under the laws of the state of California, and that he is not representing the Buyer in any manner.”

*Richard Weissman, Esq. is a receiver and acts as counsel to receivers in addition to his financial law practice. He is a partner in the Los Angeles firm Saltzburg, Ray & Weissman, LLP.