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Bell v. Disner

United States District Court, W.D. North Carolina, Charlotte Division

January 4, 2018

KENNETH D. BELL, in his capacity as court-appointed Receiver for Rex Venture Group, LLC d/b/a ZeekRewards.com, Plaintiff,
v.
TODD DISNER, in his individual capacity and in his capacity as trustee for Kestrel Spendthrift Trust; TRUDY GILMOND; TRUDY GILMOND, LLC; JERRY NAPIER; DARREN MILLER; RHONDA GATES; DAVID SORRELLS; INNOVATION MARKETING, LLC; AARON ANDREWS; SHARA ANDREWS; GLOBAL INTERNET FORMULA, INC.; T. LEMONT SILVER; KAREN SILVER; MICHAEL VAN LEEUWEN; DURANT BROCKETT; DAVID KETTNER; MARY KETTNER; P.A.W.S. CAPITAL MANAGEMENT LLC; LORI JEAN WEBER; and a Defendant Class of Net Winners in ZEEKREWARDS.COM; Defendants.

          ORDER

          Graham C. Mullen United States District Judge

         This matter is before the Court upon motion of Net Winner Class members Darlene Armel, Ronald Cox, Frank Scheuneman, Edward Rourke, Theresa Bridie, Marc Kantor, Paola Kantor, Tim Rice, Wayland Woods and two movants listed only as D.W. and T.H. (collectively “Movants”) to intervene in this action and decertify the class or alter the Final Judgments issued. (Doc. No. 196). This matter has been fully briefed and is ripe for disposition.

         FACTUAL BACKGROUND

         This Court certified the Net Winner Class (over the opposition of a number of net winners who were represented by counsel) on February 10, 2015, more than two and a half years ago. See Doc. No. 101. In the certification Order, the Court explained the basis for the certification of the Class and responded to the same concerns over commonality and alleged conflicts expressed in the Movants' motions. While acknowledging the challenges of a defendant class action and the due process concerns of those opposed to the Class, the Court concluded that “the Court is firmly convinced a class action is the only means to reasonably and efficiently resolve the Receiver's claims against 9, 400 Net Winners.” Id. at p.12.

         Class Counsel Kevin Edmundson was appointed on September 14, 2015. The Court provided a 30 day period of time for objections to his appointment. None of the Movants (or any other net winner) expressed an objection to Mr. Edmundson based on his representation of other net winners, which was a matter of record and specifically stated in the Order appointing him Class Counsel. See Consent Order Appointing Class Counsel, Doc. No. 125 at pp. 2, 4. Subsequently, the Court authorized the defendant class to engage an expert witness, Berkeley Research Group (“BRG”), at the primary expense of the Receivership.

         BRG was given an expansive opportunity to review the RVG records and ask questions of FTI, the Receiver's expert, but was unable to raise any material objections or evidence that challenges FTI's conclusions. In its initial report dated January 18, 2016, BRG agreed that it was able to “replicate the exhibits in the Turner Report [the Receiver's financial expert's report], within a reasonable margin of difference.” Then, in its “Phase II” report, BRG reached two conclusions (bolded in the report):

         a) [B]ased upon a preliminary analysis, it does not appear that the magnitude of profit from the auction business would materially impact the assessment of whether or not the business, taken as a whole, operated as a Ponzi scheme.

         b) As a result of our testing in Phase II, we have not found evidence that definitively disproves that the business as a whole operated as a Ponzi scheme.

         These findings on the existence of a Ponzi scheme were consistent with the findings of the Receiver's expert. In addition, the finding of the existence of a Ponzi scheme by all concerned was consistent with the guilty pleas and/or criminal convictions of those who ran the scheme.

         On June 30, 2016, the Receiver moved for summary judgment against the named net winners on liability and damages and the Class on liability. While Class Counsel had no choice but to concede the existence of a Ponzi scheme based on the Defendants' expert report and the other facts in the record, Class Counsel vigorously opposed the Receiver's motion on other grounds. On November 29, 2016, the Court granted the Receiver's Motion for Summary Judgment.

         Following entry of Summary Judgment on liability, the Court approved a process reached after consultation between the Receiver and Class Counsel that provided a fair and thorough process for determining the amount of each class member's net winnings. See Doc. No. 153. This process, to which none of the Movants or any Class member objected, included both an opportunity for Class members to dispute the amount of their net winnings to the Receiver and to present any unresolved dispute over the amount to a Special Master or, ultimately, to the Court. A number of the Movants participated in this process but stopped short of referring their disputes to the Special Master.

         The Receiver's Motion seeking Final Judgments against the remaining Movants who chose not to disagree with the amount of their net winnings or for whom the Receiver accepted their alternate amount was filed on June 27, 2017 (Doc. No. 166). In the Notice by the Court related to the Receiver's June 27 motion (Doc. No. 167), the Court stated that “[t]he Court expects to rule on the Receiver's Motion and enter Final Judgments as appropriate on or after July 31, 2017.” Final Judgments were accordingly entered on August 14, 2017. Movants filed the present motion on September 11, 2017. Therefore, despite being on notice that any filing challenging the Receiver's motion seeking Final Judgments should have been made before July 31, 2017, Movants failed to do so.

         DISCUSSION

         As members of the Net Winner Class, the Movants may seek to alter or amend the certification of the Class “before final judgment.” See Fed. R. Civ. Proc. 23(c)(1)(C). While Final Judgment has already been entered against a number of the Movants, Judgment has not been entered against at least two of the Movants. Therefore, those Movants, as Class members, may seek decertification of the Class. Because one or more Movants can seek decertification ...


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