Fall 2012 • Issue 45, page 10

Avoiding a Nightmare

By Hays, S. Gregory*

A properly structured receivership can provide a cost-effective, efficient, and flexible vehicle to protect and maximize the assets of a financially distressed or otherwise troubled entity and to allow stakeholders to minimize losses and maximize recovery. As receiverships have become more popular in recent years due to the potential benefits, property managers, accountants, and other parties have increasingly sought to obtain receivership skills in order to acquire new business opportunities.³ Inexperienced receivers, however, often encounter difficulty in navigating the vague rules and regulations governing receiverships, which can cause various adverse consequences for lenders, creditors, and even the receiver. Such consequences may be magnified in instances where property in receivership is subject to a subsequent bankruptcy case and the receiver is caught between the two proceedings.

This article will discuss selected practices to attempt to avoid adverse consequences in a receivership and the associated liability and loss of value. First, this article will examine an example of a nightmare receivership superseded by a bankruptcy case in which creditors incurred additional fees and expenses, and the receiver was subject to a finding of contempt and conflicting instructions in the different proceedings. Next, best practices will be recommended for: 1) the preliminary stage of a receivership; 2) the operation of the receivership; and 3) a receivership encountering a subsequently filed bankruptcy case.

1. The Unfortunate Experience of a Receiver
   In In re Golden Grove Pecan Farm, et al., a CPA with little prior receivership experience was appointed as the receiver (the “GG Receiver”) of five separate business entities located in different counties in Georgia (collectively, the “GG Receiverships”).⁴ While an experienced receiver may have quickly recognized that the businesses were not viable operations, the GG Receiver attempted to operate the businesses and struggled to effectively manage the GG Receiverships.⁵ At the request of a creditor inquiring as to the status of the GG Receiverships, the supervising court in two of the counties (the “Superior Court”) held a status hearing.⁶ Parties present at the status hearing disagreed as to whether the Superior Court dissolved the GG Receiverships at that hearing, but no recording, transcript, or other written record of the hearing exists to clarify the oral ruling of the Superior Court.⁷ The confusion that ensued created additional costs for the receivership and, ultimately, the receiver in unpaid fees and defense costs.
   
   Without previously seeking instruction or guidance from the Superior Court, the GG Receiver relied on authority contained in the order appointing the GG Receiver and filed Chapter 11 petitions for each of the entities in the GG Receiverships (the “GG Bankruptcy Cases”).⁸ Without a request for relief from the automatic stay, the Superior Court entered written orders several months after the filing of the GG Bankruptcy Cases to: 1) terminate the GG Receiverships; 2) order the GG Receiver to return certain property in the GG Receiverships to the defendants in the litigation underlying the GG Receiverships; 3) find the GG Receiver to be in civil and criminal contempt for filing the GG Bankruptcy Cases; and 4) order that the GG Receiver be incarcerated for five (5) days and pay two $500.00 fines.⁹ Although the orders of the Superior Court conflicted with the duties of the GG Receiver pursuant to the Bankruptcy Code, the GG Receiver filed in the GG Bankruptcy Cases a notice of intent to comply with the orders of the Superior Court in order to avoid further sanctions.¹⁰
   
   In response to the notice by the GG Receiver, the bankruptcy court responsible for the GG Bankruptcy Cases (the “Bankruptcy Court”) asserted exclusive jurisdiction over the property of the estates in the GG Bankruptcy Cases and found that the orders of the Superior Court were entered in violation of the automatic stay and therefore of no effect.¹¹ The GG Receiver subsequently delivered the property subject to the conflicting orders to an experienced trustee (the “Trustee”) appointed in the GG Bankruptcy Cases who: 1) generated substantial benefit for the estates by quickly liquidating certain property; and 2) evaluated potential claims against the GG Receiver.
   
   Although the GG Receiver avoided incarceration and successfully appealed the finding of contempt,¹² the GG Receiver will likely incur a loss in excess of $100,000 in lost reimbursement for certain fees and expenses. The creditors will ultimately suffer a substantial loss as well from the double layer of administrative expenses of both the Trustee and the GG Receiver.

2. Procedures During the Preliminary Stages of Receivership
   The court appointing a receiver as an equitable form of ancillary relief has wide discretion in selecting, empowering, controlling, and replacing a receiver.¹³ Few limitations generally restrict a court in selecting a receiver,¹⁴ and the selection of a particular party as a receiver is generally not a basis for appeal where the appointing court had an opportunity to review the purported qualifications of the receiver.¹⁵ Because the selection and installation of an appropriate receiver are critical elements to the ultimate success of a receivership, parties-in-interest are encouraged to nominate a receiver and assist in structuring the receivership to be created by the court.¹⁶ During the preliminary stage of a receivership, lenders and other stakeholders are best served by performing due diligence and focusing on obtaining: 1) a receiver who is and will remain a neutral third-party; 2) the appointment of the most cost-effective receiver with a sufficient amount of relevant knowledge and experience; and 3) appropriate content and liability protections for the receiver, creditors, and lenders in the order appointing the receiver.

   1. Selecting a Neutral Third Party Receiver
      The appointment of a receiver who is and will remain a neutral third party is critical to maintain the integrity of the process and to avoid liability for all involved. A receiver is an officer of the court with the fiduciary responsibility to act in the best interests of all parties involved in the receivership rather than any particular party-in-interest.¹⁷ “A receiver may not subordinate the interest of one creditor in favor of those of another creditor.”¹⁸ Accordingly, a party seeking the appointment of a receiver is generally prohibited from directly or indirectly requiring any understanding or agreement with the potential receiver. To the extent that a receiver acts contrary to the duty of the receiver to act in the best interests of all parties, such receiver may be subject to a surcharge by the court.²⁰ Similarly, interference by lenders, creditors, and other parties-in-interest with the functions of a receiver is punishable by contempt.²¹
      
      In addition to being held in contempt for interfering with the functions of a receiver, a lender attempting to conspire secretly with or inappropriately control or partner with the receiver may be exposed to additional liability. Lenders seeking to avoid taking title to financially distressed property are increasingly seeking the appointment of a receiver to reduce exposure and preserve collateral. With the growing use of receiverships, lenders new to the process do not fully understand or appreciate the role of a lender in the receivership process. Some inexperienced lenders incorrectly view the receiver as working for the lender rather than functioning as a fiduciary responsible to the court and not to any particular party. Such lenders may seek to control the conduct of the receiver, and an inexperienced receiver may not object as a result of not comprehending the gravity of the situation. If the lender inappropriately controls the receiver, the lender may be exposed to potential lender liability claims seeking to hold the lender liable for losses resulting from the enterprise controlled by the lender.²² Accordingly, in order to actually reduce and limit exposure in a receivership, a lender and all parties in interest in a receivership should seek to obtain a neutral receiver and act throughout the receivership in a manner consistent with the receiver functioning as an independent fiduciary.

   2. Selection of Cost-Effective Receiver
      A receiver takes possession of and manages property in receivership as a fiduciary at the direction of the court that appointed the receiver.²³ As an officer of the court, the receiver answers to the court as an agent of the appointing court.²⁴ A receiver acting within the scope of the authority of the receiver may be protected by judicial immunity for breaches of fiduciary duty arising from omissions or actions during the course of the receivership.²⁵ Although a receiver may be replaced, the court that appointed the receiver will be the same court that reviews any concerns regarding the ability or conduct of the appointed receiver.²⁶ Given that a receiver may receive limited liability and a potentially favorable disposition by the appointing court, the interests of stakeholders are best served by initially seeking the appointment of a knowledgeable and experienced receiver who will cost the receivership as little as possible within a framework in which certain conduct may be absolved without recourse. So long as the lender does not assert inappropriate control over the receiver or take other actions that may lead to liability, parties may not generally seek recourse for the selection of the receiver or from a lender for damages caused by the receiver.²⁷
      
      An ideal receiver will have experience managing properties similar to the entity in receivership, understand the nuances of receivership law, and have the proper skill set to function as a court-appointed fiduciary administering the receivership for the benefit of all parties of the receivership estate. While an inexperienced receiver may offer a “free receivership” in exchange for future commissions²⁸ or a lower hourly rate than an experienced receiver, a novice receiver may: 1) not have the ability to personally perform all functions required of some receivers such as liquidating assets, preserving assets, or pursuing assets and litigation matters, 2) not adequately understand court procedures, legal implications, or tax consequences of particular acts; or 3) have a learning curve at the expense of the parties. Since the conduct of an inefficient receiver with a lower hourly rate may ultimately lead to higher cost to the receivership than would be incurred by a more qualified and efficient receiver with possibly a higher hourly rate, the actual total cost of a receiver is comprised of: 1) the cumulative fees charged by a receiver; 2) the impact of inefficient conduct and lost opportunities to preserve and recover assets; and 3) any losses caused by mistakes generated by the receiver.

      1. Avoid Inefficient Conduct and Lost Opportunities
         Inefficient conduct and lost opportunities to preserve or recover property can significantly increase the total cost of a receivership, particularly when time is of the essence. The failure of a receiver to timely and efficiently perform tasks not only harms the receivership estate, but may also subject the receiver to potential liability for mismanagement and other claims.²⁹ An experienced receiver will have a better understanding of how to prioritize tasks and focus on the issues that require immediate attention. For example, a receiver with relevant experience will know to, among other tasks, immediately: 1) secure the assets and records of the receivership to prevent the loss or destruction of vital documents and assets; 2) obtain control of the mail to manage deliveries, communications, and mailed payments; 3) identify estate property; 4) recover funds such as security deposits or funds wired out of the company in the days prior to the receivership; 5) coordinate and exchange information with the party seeking the appointment of a receiver; 6) ensure that all assets of the estate are insured; and 7) obtain an understanding of the big picture and resolve tasks specific to the property in receivership. Without a prompt response to such tasks, the value of the property in receivership can be harmed, and potentially eliminated.

      2. Avoid Unnecessary Mistakes
         An inexperienced receiver can also generate costly mistakes such as improperly failing to preserve and protect property of the estate, recover all potential assets for the benefit of the estate, and maintain necessary licenses.³⁰ Some mistakes may stem from a failure to understand the business or assets in receivership, but other mistakes may be more procedural based such as taking actions without prior court approval, commingling funds from different entities in receivership, and paying personal or inappropriate expenses out of the receivership estate. Such mistakes could expose the receiver to liability for improper use of funds,³¹ ignore the separate and distinctive nature of different entities that have not been consolidated, or subject certain stakeholders to a potentially reduced distribution.³² Furthermore, an unprepared receiver may pay certain claims at the expense of claims of higher priority and, after incurring litigation costs and delaying the administration of the estate, have to recover the windfall paid to creditors of lower priority and properly distribute the proceeds of the estate.³³
         
         In addition to such mistakes, an inexperienced receiver may negatively impact the value of property in receivership by failing to: 1) properly market and sell property in receivership;³⁴ 2) adhere to fiduciary duties;³⁵ 3) properly deal with taxing authorities and tax liabilities; 4) conform conduct to applicable standard of care;³⁶ or 5) properly identify insurable property interests.³⁷ An experienced professional is better able to avoid such mistakes among other minefields and, as a result, prevent the receivership from incurring the losses that may result from such mistakes.

   3. Carefully Crafted Order Appointing Receiver
      After selecting the most cost-effective neutral receiver with a sufficient amount of relevant knowledge and experience, the content of the order appointing the receiver may be the most critical component of a successful receivership. The powers, duties, and scope of the authority of the receiver are defined in the order appointing the receiver.³⁸ Prudent parties will participate in the drafting of the order appointing the receiver to ensure that the order addresses the concerns of the parties and reduce the need to return to the court to obtain a clarifying order.
      
      Other than empowering a receiver to perform tasks necessary to accomplish the objectives of a receivership, an order appointing a receiver can also incorporate protections for both the receiver and the receivership estate by clearly defining the duties and responsibilities of a receiver, requiring the receiver to file with the court periodic status reports and other updates regarding activity in the receivership, and including provisions that explicitly limit the liability of a receiver.³⁹ The order appointing the receiver can also set forth the basis for calculating the compensation of the receiver and require monthly fee applications and estimates of fees so that all parties are aware of the costs associated with pursing actions at the time that the work is being done rather than only at the end of the case. The order may also require a receiver to post a bond in an amount as determined by the court,⁴⁰ which is particularly helpful in instances where a receiver may not otherwise have sufficient funds to satisfy a judgment resulting from the misconduct of the receiver. Other protections to limit potential loss of value during the course of a receivership may be available based on the specific circumstances of a particular receivership, such as addressing environmental or regulatory concerns.

3. Procedures During Receivership
   Certain procedures, some of which may be established in the order appointing the receiver, during the course of a receivership can assist in limiting liability and loss of value in a receivership. Two helpful procedures are: 1) maintaining and building a record of the activity in the receivership; and 2) requiring the receiver to provide adequate updates to keep the supervising court fully informed until the conclusion of the receivership. A clear record of the conduct during the receivership will be useful in the future should any conduct later be questioned. In the GG Receiverships, the absence of a clear record caused confusion regarding the termination of the receiverships and led to additional expenses as the GG Receiver attempted to avoid liability related to the finding of contempt. To establish a clear record for a reviewing court, a receivership can maintain procedures pursuant to which conferences and hearings are recorded or transcribed and written orders are issued to document significant events, such as the disposition of property in receivership, a bankruptcy filing for any entities in receivership, or the termination of the receivership.
   
   Just as any employee is wise to update their manager, it is in the best interests of the receiver, and the receivership estate, for the court to have sufficient and current knowledge regarding the status of the receivership. A receiver can further supplement the record and avoid surprises by filing regular reports, including all required reports,⁴¹ and having such reports approved by the court. Since receiverships do not generally have routine hearings, regular reports are an important medium to provide adequate disclosure of: 1) the progress of the receivership without having to incur the expense of updating each interested party individually; and 2) proposed future conduct. Effective communication between creditors and the receiver is critical in any successful receivership. To enable ongoing access to receivership activities and to avoid surprises at the end of the case, in addition to filing reports, a receiver can also post reports, fee applications, and other docket activity on the website of the receiver. Websites maintained by a receiver are especially helpful in the many state court systems that do not have electronic access to dockets like the Pacer system in federal courts.
   
   While prior court approval is not required for every detail in a receivership, a receiver is ultimately responsible to the court and has a duty to keep the court informed and seek the guidance in instances where the appointment order is unclear.⁴² A receiver has a strong interest in remaining within the scope of the authority granted by the court since a receiver assumes the risk of liability for any act taken without court authority.⁴³ Accordingly, an experienced receiver will keep the court fully informed and obtain explicit court approval in instances where authority is unclear or where proposed future conduct may be questioned.⁴⁴
   
   For example, a receiver filing a bankruptcy petition for an entity in receivership without express authority could cause disputes regarding the authority of the receiver and, therefore, additional expenses for the receivership estate.⁴⁵ If the appointment order empowers the receiver to initiate a bankruptcy case for the entity in receivership, then the receiver may rely on such authority without obtaining additional approval.⁴⁶ Even with such authority, however, the receiver may incur liability, as happened with the GG Receiver. A receiver can avoid potential liability and loss of value to the estate by keeping the court fully informed and obtaining written authorization to proceed with a bankruptcy filing. Under such circumstances, the receiver should also advise the court of the impact of the automatic stay on the receivership assets and document a clear plan of action regarding the termination of the receivership.

4. Procedures Upon Intersection of Receivership and Bankruptcy Case
   The filing of a bankruptcy case for an entity in receivership converts the receiver of such entity into a custodian in possession of property of the estate in the bankruptcy case that may only be administered at the direction of the bankruptcy court.⁴⁷ Once a receiver has knowledge of a bankruptcy case involving property in the receivership, the receiver is required to comply with the rules and procedures set forth in Section 543 of the Bankruptcy Code. In pertinent part, Section 543 provides that, upon learning of a bankruptcy case, a receiver: 1) may not make disbursements or administer the property of the debtor other than to the extent necessary to preserve such property; and 2) shall file an accounting and deliver property of the estate in the possession of the receiver to the trustee or debtor-in-possession. In the event that that debtor is not insolvent or the equity security holders would be better served by permitting the receiver to remain in possession of certain property, the bankruptcy court may excuse the turnover requirements.⁴⁸
   
   To attempt to avoid conflicting instructions in the receivership and the bankruptcy case, the receiver should confirm that the bankruptcy proceeding was properly initiated and keep all supervising courts up to date and as informed as possible under the circumstances. Many receivers add specific language in their appointment order to detail procedures to follow in the event of the filing of a subsequent bankruptcy case. A receiver encountering a bankruptcy case should consider the following options: seeking abstention, requesting that the bankruptcy court voluntarily refrain from considering the bankruptcy case, leaving the entity in receivership, or assisting in the bankruptcy case if employment in the bankruptcy is approved. After such consideration, the receiver should, if appropriate, officially resign as receiver and obtain the entry of an order closing the receivership.

5. Conclusion
   Although not an exhaustive overview of receiverships, several recommendations have been advanced to attempt to avoid a potential nightmare receivership for creditors, receivers, or lenders. The importance of obtaining an experienced fiduciary cannot be understated since an experienced receiver will be cognizant of potential minefields throughout the course of the receivership and will more readily and cost-effectively be able to navigate around and avoid potential nightmares in the receivership.

¹ The information contained in this article: 1) is provided solely for informational and discussion purposes; 2) is not jurisdiction specific; and 3) should not be construed, or relied upon, as legal or business advice.
² S. Gregory Hays is the Managing Principal of Hays Financial Consulting, LLC, based in Atlanta, Georgia and has served as a federal and state court receiver in numerous jurisdictions across the country. Greg has been appointed as receiver in numerous enforcement actions brought by Federal agencies and also serves as a bankruptcy trustee, assignee, and bankruptcy plan fiduciary. This article was written with the assistance of Eric J. Silva, an attorney at James C. Frenzel, P.C. in Atlanta, Georgia with experience representing receivers in receiverships and creditors and court-appointed trustees in corporate reorganization, insolvency, and commercial bankruptcy matters.
³ According to social media web site Linked-In, receiverships skills have a year-to-year growth rate of approximately 60% and are the 15th fastest growing skill set on the Linked-In network with over 5,000 members listing receivership as a skill. See Linkedin, Skills & Expertise, Receiverships (January 15, 2012), http://www.linkedin.com/skills/skill/Receiverships?trk=skills-hp-search.
⁴ See In re Golden Grove Pecan Farm, et al., 2010 Bankr. LEXIS 2776 at *2 (Bankr. M.D. Ga. Sept. 2, 2010).
⁵ See id. at 3.
⁶ See Newton v. Golden Grove Pecan Farm, et al., 711 S.E.2d 351, 352 (Ga.App. 2011).
⁷ Id. at 353; In re Golden Grove Pecan Farm, et al., 2010 Bankr. LEXIS 2776, at *3 (Bankr. M.D. Ga. Sept. 2, 2010).
⁸ See Newton, 711 S.E.2d at 353-54.
⁹ See Golden Grove, 2010 Bankr. LEXIS 2776, at *3.
¹⁰ Id. at *4-5.
¹¹ Id. at *10-14.
¹² See Newton, 711 S.E.2d 351.
¹³ See United States v. Bradley, 2009 U.S. Dist. LEXIS 36465, at *5-6 (S.D. Ga. Apr. 29, 2009) (removing receiver due to misfeasance, appointing new party as receiver, and ordering that old receiver to retain fiduciary responsibility until the property in receivership is delivered to the new receiver); Cavanagh v. Cavanagh, 118 R.I. 608, 375 A.2d 911 (R.I. 1977) (indicating that the selection and removal of a receiver is a matter for the discretion of the court appointing the receiver).
¹⁴ See Dinsmore v. Barker, 212 P. 1109, 1111 (Utah 1923) (“The court may appoint any proper person not prohibited by law.”).
¹⁵ See Herzfeld v. Herzfeld, 285 S.W.3d 122, 131 (Tex.App.–Dallas 2009) (finding that the failure to hear appeal regarding appointment of receiver did not result in improper judgment even though receiver had no prior receivership experience, “did not understand the transaction she was to undertake, prepared erroneous documents, improperly joined motions filed by appellee in the trial court, and caused or contributed to delay in resolving the parties' dispute”).
¹⁶ See First American Development Group/Carib, LLC v. WestLB AG, 2010 WL 1552320, at *13 (V.I.Super. 2010) (indicating an intent to “order the parties to brief the question of who ought to serve as a receiver and what powers that receiver should have.”).
¹⁷ See City of Chula Vista v. Gutierrez, 207 Cal. App. 4th 681, 685 (Cal. App. 4th Dist. 2012) (citations omitted); Waag v. Hamm, 10 F. Supp. 2d 1191, 1193 (D. Colo. 1998); Sec. Pac. Nat'l Bank v. Geernaert, 199 Cal. App. 3d 1425, 1431-1432 (Cal. App. 5th Dist. 1988).
¹⁸ KeyBank Nat'l Ass'n v. Michael, 737 N.E.2d 834, 850 (Ind. Ct. App. 2000).
¹⁹ See Cal Rules of Court, Rule 3.1179.
²⁰ See Shannon v. Superior Court, 217 Cal. App. 3d 986, 998 (Cal. App. 5th Dist. 1990).
²¹ See Clear Creek Power & Development Co. v. Cutler, 79 Colo. 355 (Colo. 1926).
²² See William Hoffman, Troubled Assets: Commercial Real Estate in Receivership, Commercial Lending Review (Nov-Dec. 2010).
²³ See Hendricks v. Emerson, 199 Ga. App. 208, 209 (1991).
²⁴ See Georgia Rehabilitation Center, Inc. v. Newnan Hosp., 284 Ga. 68 (Ga. 2008) (“A ‘receiver’ is an officer of the court which appoints him, and his duty upon his appointment is to take possession of the assets of the insolvent debtor for the court and to preserve those assets so that upon distribution of the assets to the creditors they will be fully available to pay the claims of the creditors.”); Clark v. Clark, 58 U.S. 315 (1885).
²⁵ See In re Yellow Cab Co-op. Ass'n, 185 B.R. 844, 852-53 (Bankr. D.Colo. 1995).
²⁶ See O.C.G.A. § 9-8-8 (“The receiver is an officer and servant of the court appointing him, is responsible to no other tribunal than the court, and must in all things obey its direction.”).
²⁷ See Wolfe v. Illinois Fed. Sav. & Loan Ass'n, 158 Ill. App. 3d 321, 323 (Ill. App. Ct. 5th Dist. 1987) (finding that a mortgage holder who commenced a foreclosure action and then obtained the appointment of a receiver was not liable for damage to the property when the receiver subsequently allowed insurance coverage to lapse and the property was damaged).
²⁸ Bill Hoffman, ‘Low or No Charge’ Receiverships: A Very Costly Mistake? California Real Estate Journal (March 29, 2010).
²⁹ See Complaint, Michael Alonso et al. v. Leslie J. Weiss et al., case number 1:12-cv-07373 (N.D. Ill. 2012) (alleging that the receiver and the attorneys for the receiver intentionally breached their fiduciary duties, committed malpractice, were reckless and grossly negligent and intentionally, recklessly or with gross negligence, disregarded their fiduciary duties of care and the best interests of parties in interest).
³⁰ See William Hoffman, Troubled Assets: Commercial Real Estate in Receivership, Commercial Lending Review (Nov-Dec. 2010).
³¹ See United States v. Bradley, 2009 U.S. Dist. LEXIS 36465 at *6 (S.D. Ga. Apr. 29, 2009) (indicating the substitute receiver shall recover all fees accrued due to the misfeasance of the prior receiver).
³² See In re Charter First Mortg., Inc., 56 B.R. 838, 849 (Bankr. D. Or. 1985) (“If the creditor has allowed his proceeds to be commingled in the debtor's deposit accounts, the creditor may receive only that amount determined under the formula”).
³³ See In re Receivership Estate of Indian Motorcycle Mfg., Inc., 2006 U.S. Dist. LEXIS 52182, at *28-29 (D. Colo. 2006) (finding that, to ensure that compromised priority claims against the receivership estate are paid, both law and equity weigh in favor of recovering windfall paid to claimants who received 100% payment ahead of claims of greater priority).
³⁴ See Ohio Director of Transp. v. Eastlake Land Dev. Co., 177 Ohio App. 3d 379 (Ohio Ct. App., Cuyahoga County 2008) (reversing approval of sale by receiver of real property free and clear of liens where receiver did not: 1) present evidence of marketing or sale efforts; 2) provide notice or obtain approval of lien holder; or 3) indicate whether the property would be sold free and clear of the liens of the senior lienholder).
³⁵ See FTC v. Certified Merch. Servs., 126 Fed. Appx. 651 (5th Cir. Tex. 2005) (requiring the receiver to disgorge portion of compensation due to breaches of fiduciary duty by the receiver involving misrepresentation, self-dealing, and causing the company to pay certain fees and expenses incurred by the receiver without first reporting such fees to the court).
³⁶ See F.T.C. v. Think Achievement Corp., 2007 WL 3286802, at *7 (N.D. Ind. 2007) (finding that an inexperienced receiver who failed to procure insurance on an asset that was damaged was entitled to have jury determine whether the receiver was liable for damages for failing to confirm his conduct to the applicable standard of care and recognize that the receivership had an insurable interest in the property that was damaged).
³⁷ Id.
³⁸ See O.C.G.A. § 14-2-1432; see also Federal Home Loan Mortg. Corp. v. Tsinos, 854 F. Supp. 113, 115 (E.D.N.Y. 1994) (“The court that appoints the receiver determines the scope of that receiver's authority”).
³⁹ See Liberte Capital Group, LLC v. Capwill, 462 F.3d 543, 551 (6th Cir. Ohio 2006) (“[R]eceivership court may issue a blanket injunction, staying litigation against the named receiver and the entities under his control unless leave of that court is first obtained.”).
⁴⁰ See O.C.G.A. § 14-2-1432(b); Minn. R. Gen. Pract. 137.03 (2011) (requiring a receiver to post a bond); see also Belk's Dep't Store, Miami, Inc. v. Scherman, 117 So.2d 845 (Fla. 3d DCA 1960) (indicating that a receiver should be required to post a bond).
⁴¹ See Mass. R. Civ. P. 66(b).
⁴² See Haw. Ventures, LLC v. Otaka, Inc., 114 Haw. 438, 468 (Haw. 2007) (citations omitted).
⁴³ See Interlake Co. v. Von Hake, 697 P.2d 238, 240 (Utah 1985) (stating that a receiver “has only very limited powers and should apply to the court for advice and directions [since a receiver assumes the risk of liability for]…acts without court authority”).
⁴⁴ See Fauci v. Mulready, 337 Mass. 532, 538, 150 N.E.2d 286, 290 (1958) (“Where his judgment is likely to be questioned by creditors, prudence will dictate recourse to the court for a decree authorizing the particular action which will afford protection against later claim that the action was disadvantageous to the estate or beyond his authority.”).
⁴⁵ In re American Marine Holdings, LLC, et al. Case No. 12-11354-EPK, Doc 72 (Mot. to Dismiss) (S.D. Fla. Feb. 2, 2012); but see In re Statepark Building Group, Ltd., et. al, Case No. 04-33916-hdh-11 (finding that a state court appointed receiver had authority to initiate a bankruptcy proceeding without an express grant of such authority in the order appointing the receiver).
⁴⁶ See Honorable H. DeWayne Hale, et al., Dueling Proceedings Between Bankruptcy and Receiverships, The University of Texas' 29th Annual Jay L. Westbrook Bankruptcy Conference (Nov. 19, 2010) (citations omitted); see also In re Statepark Building Group, Ltd., et. al, Case No. 04-33916-hdh-11 (holding that a receiver had authority to commence a bankruptcy proceeding even without an express grant of such authority); Central Mortgage & Trust Inc. v. State of Texas (In re Central Mortgage & Trust Inc.), 50 B.R. 1010, 1020 (S.D. Tex. 1985) (finding that “a corporation may not be precluded by state law from availing itself of federal bankruptcy law.”).
⁴⁷ See Pimper v. State ex rel. Simpson, 274 Ga. 624, 626 (Ga. 2001).
⁴⁸ See 11 U.S.C. § 543(d).

*S. Gregory Hays is the Managing Principal of Hays Financial Consulting, LLC, based in Atlanta, Georgia and has served as a federal and state court receiver in numerous jurisdictions across the country.