Curtis G. Swarts, CPA
The ability to appoint a receiver is a powerful tool which a litigant may use to preserve and protect his or her interest in property. However, the appointment of a receiver is an extreme measure. As such, careful consideration of the relevant statutes and case law should be utilized to determine the appropriateness of a receiver.
Once the decision to petition for a receiver has been made, it is imperative to identify a receiver who is best qualified for these broad duties.
Valuable definitions of the role of a receiver are offered in the Nevada Supreme Court case, Jones v. Free, 83 Nev. 31, 422 p.2d 551 (1967). The court, citing Clark on Receivers states that a receiver appointed by the court is a person who by such appointment becomes an officer of the court to receive, collect, care for, administer and dispose of the property of another. A receiver appointed by the court is an arm of the court and thus a representative of the court. As such, the receiver is subject to the court’s directions and orders and in the discharge of his official duties is entitled to apply to the court for instructions. Id.
It is clear that the duties and powers of a receiver are vast and must be executed judiciously. The appointment of the “right” receiver is critical to the success of the receivership estate. Here are five criteria that should be evaluated when selecting a receiver:
1. Does your receiver have the appropriate experience and professional credentials? Is your receiver knowledgeable about the duties and powers that are available to receivers under the law and which may be appropriate for your case?
2. Does your receiver have the necessary technical competence and training? Does your receiver have sufficient knowledge of federal and district court rules regarding reporting requirements and other requisites of the position?
3. Is your receiver qualified with respect to financial responsibility, integrity, and objectivity?
4. How well can your receiver communicate with the parties as well as the court? Is your receiver experienced in managing and negotiating emotionally charged situations that occur frequently during the course of receiverships?
5. Does your receiver have sufficient staff and resources at their disposal to fulfill their duties and manage the needs of the receivership estate in a timely and efficient manner?
The answers to these questions can be ascertained by gathering information about your potential receiver. Upon request, a potential receiver should provide his/her resume along with an up to date list of cases worked. Additional information can be gathered by talking with attorneys that have worked with the receiver.
In answering the first questions the parties should seek individuals who have sufficient expertise and experience in handling such matters. It is imperative that the receiver be well equipped to satisfy all of the obligations necessary in discharging his or her duties. In addition, the receiver must have actual knowledge and experience in the operations of a business.
The only language used by our Supreme Court in affirming the appointment of a receiver was the acknowledgement that the receiver was qualified both in respect to financial responsibility as well as integrity. Bowler v. Leonard, 70 Nev. 370, 269 P. 2d833.
The next question relates to the receivers technical competence and training. The receiver must have the knowledge and familiarity with the statutes and rules that govern his or her actions. Also, the receiver must be educated and competent in many business concepts including accounting, finance, and business operations.
The third criteria relates to the receiver’s financial responsibility, integrity, and objectivity. The receiver is considered to be an arm of the court, therefore the activities of the receiver are generally considered to be under the courts exclusive jurisdiction. Due to the receiver’s unique position, he or she essentially has fiduciary duties which run to the court, the owners/shareholders of the receivership estate, and its creditors. These duties must be discharged responsibly and with integrity. The receiver must act in an unbiased and impartial manner.
Next, the ability of the receiver to communicate with the parties as well as the court is vital to the success of the estate. The interaction a receiver has with litigants and counsel cannot be compared with any other area of the law. Generally in a receivership the receiver is not constrained by the prohibition of ex parte communication and has a good deal of open communication with the parties. Additionally, communication with the court is essential and required under statute. The court must be kept informed of the activities of the receivership. The receiver must know how and when to report to the court as well as recognize when to petition the court for direction. Without these essential communication skills, the effectiveness of the receiver is substantially diminished.
Finally, your receiver must have the necessary staff and resources to effectively manage the receivership estate. Each situation is different and requires careful consideration of all these factors. Time spent evaluating and identifying a receiver who meets each of these requirements will set your case on course for successful management and conservation of the estate. This practice area is complex and requires careful consideration as you identify your qualified receiver.
