State Court Receivership 101: Representing a Receiver

There are effectively two categories of discussion when looking at representing a receiver:

• Pre-Receivership Representation
• During the Receivership Representation

Pre-Receivership

One of the most important aspects here is to review an advanced copy/draft of the receivership order. Make sure that certain provisions are in to protect your client.

• The order should not contain erosion of the common law doctrine of immunity.
• It should provide the right to seek instructions from the court.
• It’s important to make sure there is adequate provision for the receiver to be compensated and there is an exit strategy if funding is not available.

During the Receivership

The receiver is an arm of the court. At that point, the attorney representing the receiver is also essentially an arm of the court. There is some case law showing counsel for the receiver enjoys the same quasi-judicial immunity as the receiver.

One vital aspect to focus on in advising the receiver is to make sure that they are consistently advised towards disclosure. Understand that the receiver’s conversations are not confidential when talking to defendant or plaintiff. In addition, if there is ambiguity upon court order or applicable law, ask the judge for instructions. Getting court instruction protects the receiver. Court instruction also prevents perception of favoritism by receiver.

Compensation

Upon appointment the lawyer representing the receiver should file a notice of appearance and notice of retention explaining that they have been engaged, who will be working on the case, and how the receivership will be billed. Try to include language that can provide some flexibility.

As a cautionary warning: Many times, a receiver has previously served in a consulting role for the company prior to the receivership. A receiver should not come in with this experience. A receiver should be independent, and this prior effort no longer makes them independent. If they have served as a consultant previously the receiver may have had access to information that the debtor would deem confidential. If this is going to be undertaken the debtor should sign off ahead of time because the consultant may be appointed as the receiver in the future.

Finally, the receiver is not a party litigant in the matter. Often this is not understood by the parties and anger and frustration can be taken out upon the receiver. There is no advantage to this for the party litigants. It’s important to help the litigants understand the receiver is there to serve on behalf of the court and should be treated as such.

This article and it’s accompanying video are part of the Receivership 101 series, created in partnership with the Commercial Receivership Association.