Free Response in Opposition to Motion - District Court of Arizona - Arizona

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PAUL K. CHARLTON United States Attorney District of Arizona Reid C. Pixler Assistant U.S. Attorney Arizona State Bar No. 12850 Two Renaissance Square 40 North Central, Suite 1200 Phoenix, Arizona 85004-4408 Telephone: (602) 514-7500 [email protected]

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA UNITED STATES OF AMERICA,

9 Plaintiff, 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendants. FACTUAL BACKGROUND Plaintiff originally filed a motion seeking approval for an interlocutory sale more than one year ago. The pleadings filed in relation to that motion resulted in an Order issued by the Court on August 23, 2005. As the Court noted, the parties could not agree on the issue of a private sale vs. a public auction and the default position should be a public sale. Since that date steady progress has been made as the aircraft has been repaired and prepared for sale, resulting in the publication of advertisements for the public sale on June 23, 2006. All parties agree that the aircraft should be sold for the greatest price possible. However, there is substantial and continuing disagreement regarding what the best process may be to achieve that greatest price. However, the focus should be not on the greatest price, but the greatest net sales proceeds after deductions of the costs of sale. While the evaluation of such an approach is dependent upon the determination of how the aircraft should be sold, there are two very different approaches set out. Bombardier has a sales force experienced in reselling prior owned aircraft and will obviously have expertise in that activity. EG&G has demonstrated experience in the disposition of property as the result of v. Lear Jet, Model 31A, Serial Number 31A224, U.S. Registration # N224LJ; CIV-04-363-PHX-JWS RESPONSE TO CLAIMANT'S MOTION RE: PUBLIC SALE OF AIRCRAFT

Case 2:04-cv-00363-JWS

Document 169

Filed 05/19/2006

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forfeiture orders related to cases handled by the Department of the Treasury and the Department of Homeland Security. Based upon this experience they prefer the public auction approach as noted in the three Exhibits attached to this pleading and hereby incorporated by this reference, as Exhibit A, B, and C. These three exhibits were requested by the undersigned to attempt to address the issues which will be critical to the consideration of this matter by this Court prior to the proposed Sale Date of June 23, 2006. It is imperative to have an opinion issued by the Court well prior to the sale date, or the uncertainty regarding whether the sale will be conducted will certainly negatively impact the potential offers to be generated from the sale. Therefore, plaintiff gives the Court and the parties this notice that unless the Court enters and order staying the sale, the proposed sale will be held on June 23, 2006, as scheduled. Exhibit A addresses specific short questions including the proposed costs of the sale; the impact or additional costs of cancelling the sale of the aircraft as presently scheduled; the experience of EG&G conducted sales of aircraft; a short analysis of the BPOA's commission proposal; the availability of extended warranties regardless of the party conducting the sale; and the "myth" that government auctions generate "fire sale prices." Exhibit B is a breakdown of the expenses proposed or incurred regarding the auction sale. Exhibit C is a letter dated March 17, 2006, which addresses specific reasons, based upon experience, for the approach taken by EG&G regarding the public sale. These exhibits are presented to provide balance for the Court and other parties to consider at this late date and are intended to explain the benefits experienced from the public sale or auction.

ARGUMENT I. IS CLAIMANTS' "JOINT" MOTION TIMELY MADE? As claimants noted, the Court entered its Order on August 23, 2006, after extensive discussion about how best to proceed. Generally, motions to reconsider should be filed within 10 business days of the entry of the Order. The present motion is filed nearly 8 months after entry of the Order and is justified on the basis that two of the claimants now

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believe an alternative to the Order might be justified. Claimants present a proposal for consideration by the Court. If the Court elects to consider the motion, then the three Exhibits referenced above provide a different point of view for the Court to consider. However, plaintiff asserts that little substantively has changed which should cause this Court to reconsider the Order previously entered. Further, not all parties are in agreement. Plaintiff is and has always been concerned about the consequences of seeking any form of sale other than an auction without agreement of all parties for fear that such an approach needlessly creates greater expenses, as outlined below.

II.

WHAT ARE THE CONSEQUENCES OF PROCEEDING WITH A PRIVATE SALE ABSENT TOTAL AGREEMENT?

If all interested parties consent to the sale, the parties may simply enter into a stipulation agreeing to sell the property, setting forth the terms of the proposed interlocutory sale, the process by which the sale will be conducted, and the agreed disposition of the proceeds pending conclusion of the case. See United States v. BCCI Holdings (Luxembourg), S.A, 69 F. Supp. 2d 36, 44-45 (D.D.C. 1999). However, when a Court orders an interlocutory sale over the objection of any interested party, the sale must comply with the provisions of 28 U.S.C. §§ 2001, 2002, and/or 2004. These statutes provide procedural safeguards to ensure that court-ordered sales are made on terms that best preserve the parties' interests. Section 2001(a) authorizes public sales of real property and sales by court-appointed receivers. Section 2001(b) permits private sales of real property after a hearing with notice to all interested parties and after the court finds that the best interests of the estate will be conserved thereby. Before confirming a private sale, the court must obtain three appraisals, which adds to the costs of the sale. No private sale can be confirmed for less than two-thirds of the appraised value. The proposed sale terms must be published before confirmation. The sale cannot be confirmed if a bona fide offer is made to buy the property for at least ten percent more than the proposed sale price. The additional publication contributes to an

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increase in costs, and the delay occasioned by the publication has a negative impact upon bidding because the property cannot be made available in a reasonably short period of time. Contested interlocutory sales of personal property must be conducted in the same manner as real property sales, "unless the court orders otherwise." 28 U.S.C. §2004. Section 2004 does expressly allow courts to alter the procedures for sales of personal property, but sections 2001 and 2002 do not contain such language. However, the apparent purpose of these provisions is to protect the rights of the parties in situations where the court orders an interlocutory sale over a party's objection. Once proper notice of the intended interlocutory sale has been given to all interested parties and all interested parties have agreed on the terms of sale, the concerns that might otherwise have justified costly protective measures such as publishing the terms and obtaining three appraisals prior to a private sale are no longer present. The parties' consent indicates that the terms of the sale are acceptable to them. Accordingly, courts routinely approve stipulated interlocutory sales without reference to 28 U.S.C. § 2001 et seq. Id.

III. SUMMARY It appears that there still remains disagreement about how the sale should be conducted. If the Court were to agree to consider amending the previous Order of August 23, 2006, the requirements of conducting a contested private sale would not only substantially increase the expenses associated with the sales effort and delay the ability to quickly close the sales transaction, it would also incur the additional expenses of advertising and then subsequently cancelling the lawfully noticed public sale approved and ordered by this Court. Those expenses must be paid from the gross sales proceeds from the aircraft when it is finally sold. Further, it is an open question whether the effort to auction the aircraft would adversely affect the sales price of the aircraft if the minimum bid required at auction is not obtained. In other words, if the auction is held and the minimum bid not obtained, the Court and parties would still be in a position of agreeing to an alternative sales procedures while minimizing the sales expenses. Wherefore, the plaintiff respectfully urges the Court to deny the motion

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and confirm the previous order seeking the sale of the aircraft by public sale. Absent an Order staying the sale, the Order of August 23, 2005, will be executed on June 23, 2006. Respectfully submitted this 19 th day of May, 2006. PAUL K. CHARLTON United States Attorney District of Arizona S/ Reid C. Pixler REID C. PIXLER Assistant U.S. Attorney

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CERTIFICATE OF SERVICE

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Leonard J M cDonald, Jr Tiffany & Bosco PA Camelback Esplanade II 2525 E Camelback Rd 3rd Floor Phoenix, AZ 85016 9I hereby certify that on May 19, 2006, I served the attached document by U.S. mail, who are not registered participants of the CM/ECF System: Marc S. Nurik Ruden McClosky Smith Schuster & Russell, PA PO Box 1900 Ft Lauderdale, FL 33302 Cynthia Eva Hujar Orr Goldstein Goldstein & Hilley 2900 Tower Life Bldg 310 S St Mary's St, Ste 2900 San Antonio, TX 78205 [email protected] K Lawson Pedigo Miller Keffer & Pedigo 8401 N Central Expressway , Ste 630 Dallas, TX 75225 [email protected] I.I hereby certify that on M ay 19, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Allen B Bickart Law Office of Allen B Bickart PO Box 44005 Phoenix, AZ 85064 [email protected] Douglas F Behm Jennings Strouss & Salmon PLC Collier Ctr 201 E W ashington St, Ste 1100 Phoenix, AZ 85004-2385 [email protected]

S/

Reid C. Pixler

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