United States District Court, N.D. Texas, Dallas Division
MEMORANDUM OPINION AND ORDER
SIDNEY
A. FITZWATER SENIOR JUDGE.
The
court-appointed temporary receiver (“Receiver”)
moves for authority to sell a number of oil and gas
interests, to use an online public auction to sell those
interests, and to retain a sales and marketing firm. For the
reasons that follow, the court grants the Receiver's
motion and enters a separate order effecting this
decision.[1]
I
The
Receiver proposes to sell the portfolio of oil and gas
interests included in the receivership estate, as well as any
oil and gas interests that the estate recovers in the future
(“the Breitling Portfolio”).[2] He seeks
permission to employ EnergyNet.com, LLC
(“EnergyNet”) to help market and sell these
assets. According to the Receiver, “EnergyNet is an
upstream oil & gas property transaction advisory firm
specializing in the preparation, evaluation, analysis,
marketing, negotiation, and closing of oil and gas property
transactions.” Mot. 4. The firm hosts an online auction
marketplace where potential buyers can submit bids “24
hours a day, 7 days a week, 365 days a year.”
Id. It has sold over 60, 000 oil and gas properties
since its founding in 1999, for a total of over $6.75
billion, and among its sellers are the Federal Deposit
Insurance Corporation and several U.S. states. EnergyNet has
assisted a number of court-appointed receivers in disposing
of estate assets, including the present Receiver in an
unrelated case.
Under
the sales and marketing agreement negotiated by the Receiver,
EnergyNet will perform a number of services related to the
Breitling Portfolio. EnergyNet will recommend which assets
should be packaged together and which should be sold
separately; will suggest transaction structures and establish
a timeline for presentation of the properties; will assist in
the valuation process; will create comprehensive asset
summaries and a “virtual data room” for potential
buyers; will publish the properties and solicit bids on its
auction website; will assist with negotiations and due
diligence requests; and will support the Receiver in closing
proposed sales. For these services, EnergyNet will be
entitled to a flat-rate 3 percent commission on any final
sales that are approved by the court. EnergyNet will also
enjoy the liability protection that is extended to all of the
Receiver's agents by ¶ 49 of the court's second
amended order appointing receiver.
The
Receiver maintains that working with EnergyNet is the best
way to market the working interests and royalty interests in
the Breitling Portfolio, so that he can maximize the value
received by defrauded investors. As an additional precaution,
the Receiver will seek the court's approval of every sale
agreement. No objection has been filed to the sale procedure
proposed by the Receiver.[3]
II
“The
court has authority to authorize the sale of real estate
within the receivership estate.” SEC v. AmeriFirst
Funding, Inc., 2008 WL 706846, at *1 (N.D. Tex. Mar. 11,
2008) (Fitzwater, C.J.) (citing SEC v. Am. Capital Invs.,
Inc., 98 F.3d 1133, 1144-45 (9th Cir. 1996),
abrogated in part by Steel Co. v. Citizens for a Better
Env't, 523 U.S. 83 (1998)). This authority is
limited by 28 U.S.C. § 2001. See Id. Moreover,
public sales of real estate must comply with the notice
requirements set out in 28 U.S.C. § 2002. The
Receiver's proposed sale process complies with both
statutes.
Section
2001(a) provides, in relevant part, that “[p]roperty in
the possession of a receiver or receivers appointed by one or
more district courts shall be sold at public sale in the
district wherein any such receiver was first
appointed.” The Receiver was appointed in the Northern
District of Texas. EnergyNet has its principal place of
business in Amarillo, which is within the Northern District
of Texas. Thus the text of the statute, interpreted
literally, allows for the sale of receivership assets via
EnergyNet's website. No one contends otherwise-nor has
anyone argued that an online auction would be a less
effective means of selling the oil and gas interests than an
in-person, physical auction in this District. See
Pennant Mgmt., Inc. v. First Farmers Fin., LLC, 2015
WL 5180678, at *7 (N.D. Ill. Sept. 4, 2015) (approving online
auction as public sale under § 2001(a) in the absence of
any objections).
Section
2002 imposes certain notice requirements that must be met
before a public sale of receivership property. The statute
provides, in relevant part:
[a] public sale of realty or interest therein under any
order, judgment or decree of any court of the United States
shall not be made without notice published once a week for at
least four weeks prior to the sale in at least one newspaper
regularly issued and of general circulation in the county,
state, or judicial district of the United States wherein the
realty is situated.
If such realty is situated in more than one county, state,
district or circuit, such notice shall be published in one or
more of the counties, states, or districts wherein it is
situated, as the court directs.
28 U.S.C. § 2002. Courts have approved, in the absence
of any objections, notice procedures that deviated from the
text of § 2002 in non-substantial ways, see, e.g.,
United States v. Rodenberg, 2006 WL 3743842, at *1 (N.D.
Iowa Dec. 18, 2006), or that relied on modern advertising
methods that were more effective, under the circumstances,
than strict adherence to the statutory procedure, see,
e.g., Pennant, 2015 WL 5180678, at *7.
The
Receiver does not propose to publish notice in any newspaper
of general circulation. Instead, for at least four weeks
prior to the first auction, he will publish notice of the
sale of the Breitling Portfolio in an electronic newsletter
that is popular in the oil and gas industry. He will also
post notice of each individual ...