Opposition Brief — H&D Entertainment, Inc. v. Fleet National Bank

A

Supreme Court, U.S.

= a. & D

Cy) FEB 26 1997

No. 96-1195 | ae

In The

Supreme Court of the United States

October Term, 1996

SJ

H & D ENTERTAINMENT, INC., ET AL.,

Petitioners,

FLEET NATIONAL BANK, ET AL.,

Respondents.

*

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The First Circuit

np

RESPONDENTS’ BRIEF IN OPPOSITION

JoHN D. Haniry

Haroitp B. Murpuy

MatTHew P. McCue

Haniry & KING

*

Professional Corporation

One Federal Street

Boston, MA 02110

(617) 423-0400

Counsel for Respondent

Charles E. Giddens, as Receiver

CuHarwes L. Gierum

Counsel of Record

SarA A. WALKER

CuHoate, Hatt & STEWART

Exchange Place

53 State Street

Boston, MA 02109

(617) 248-5000

Counsel for Respondents

Fleet National Bank and

PNC Bank, Ohio, N.A.

COCKLE LAW BRIEF

PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTIONS PRESENTED

Should this Court reverse the First Circuit and adopt

a per se disqualification rule which would preclude a

receiver from selling receivership assets to a non-

fiduciary whose affiliate (also a non-fiduciary) tempo-

rarily performed accounting services for the receiver-

ship prior to the sale, where there is no evidence of

bad faith, fraud, collusion or the use of inside infor-

mation?

Should this Court reverse the First Circuit and void a

sale of receivership assets simply because the receiver

engaged his firm as a broker for the sale where (i) the

receiver obtained prior court approval to retain his

firm, (ii) the Petitioners did not properly raise the

issue below, (iii) there is no conflict between the

circuit courts with respect to this issue, and (iv) the

district court found the sale was commercially rea-

sonable and in the best interests of the receivership

estate?

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6 of the Supreme Court Rules,

Respondents hereby make the following Corporate Dis-

closure Statement, identifying parent companies and non-

wholly owned subsidiaries:

1. Fleet Financial Group, Inc. is the parent company

of Respondent Fleet National Bank (“Fleet”) and its

shares are publicly traded. Fleet owns an interest in the

following nonwholly owned subsidiaries: Allied Interna-

tional Bancorp, Inc., GTT Realty Limited Partnership and

Onyx Properties Limited Partnership. Through wholly

owned subsidiaries, Fleet also owns an interest in the

following partnerships: SL Mortgage Company, Limited

Partnership, Wamsutta Partners, and Broadmoor Prop-

erty Associates.

2. PNC Bank Corp. is the ultimate parent of Respon-

dent PNC Bank, Ohio, N.A. (“PNC”), and its shares are

publicly traded. PNC does not own any shares of a non-

wholly owned subsidiary.

iii

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .........................

CORPORATE DISCLOSURE STATEMENT .......... i

TAMEM OW COBPPENITS....2.0.2....<.5.00008055050 iii

TABLE OF AUTHORITIES......................:.. iv

STATEMENT OF THE CASE.................00000. 1

REASONS FOR DENYING PETITION FOR WRIT OF

iro ey th agbens <cdbeu dee dsieess 6

I. THE DECISION OF THE FIRST CIRCUIT

COURT OF APPEALS IS NOT IN CONFLICT -

WITH THIS COURT’S RULING IN MOSSER

iE Soe 8 cara ptinw tN 646s ocda eek spe 6

Il. THE DECISION OF THE FIRST CIRCUIT

COURT OF APPEALS IS NOT IN CONFLICT

‘WITH DECISIONS IN OTHER CIRCUITS... 9

Ill. MANTANZA SHORES DOES NOT WARRANT

GRANTING CERTIORARI .................. 13

A. Petitioners Waived And Abandoned Any

Right to Challenge The Sale Based On

MVP’s Engagement As Broker.......... 13

B. In Any Event, the Second Circuit’s Deci-

sion in Mantanza Shores is Not in Conflict

With the First Circuit’s Decision Below.. 15

Oe eee re een er ae 17

iv

TABLE OF AUTHORITIES

Page(s)

CASES

Brown v. Trustees of Boston Univ., 891 F.2d 337 (1st

Cir. 1989), cert. denied, 496 U.S. 937 (1990) ........ 14

Citibank, N.A. v. Data Lease Fin. Corp., 645 F.2d 333

hE > RAs em PM he Pp cnnee a rie 16

Donovan & Schuenke v. Sampsell, 226 F.2d 804 (9th

Cir.), cert. denied sub nom., Freedman v. Donovan

& Schuenke, 350 U.S. 895 (1955)............ MO, ik, 12

Duignan v. United States, 274 U.S. 195 (1927) ........ 15

Greenhow v. Secretary of Health & Human Servs., 863

eg ee ere. eras ee ere 14

In re Beck Indus., Inc., 605 F.2d 624 (2d Cir. 1979) .... 12

In re Exennium, Inc., 23 B.R. 782 (Bankr. 9th Cir.

1982), rev'd, 715 F.2d 1401 (9th Cir. 1983) ......... 11

In re Exennium, Inc., 715 F.2d 1401 (9th Cir. 1983).... 11

In re Frazin & Oppenheim, 181 F. 307 (2d Cir. 1910) .... 11

In re General Insecticide Co., 403 F.2d 629 (2d Cir.

NS 45-5 Gb Ko OT ee ea 12

In re Palm Coast, Mantanza Shores Ltd. Partnership,

308 BSG Bos Gee Ce BORD ck sexcesavuiecs 13, 15, 16

In re Rex Body Corp., 138 F.2d 912 (2d Cir. 1943) .... 12

In_re Transcontinental Energy Corp., 683 F.2d 326

Re ae: See Pere Te 0 See 10, 11

Keller v. Petsock, 849 F.2d 839 (3rd Cir. 1988) ........ 14

Lawn v. United States, 355 U.S. 339 (1958) ........... 15

7

TABLE OF AUTHORITIES - Continued

Page(s)

Layne & Bowler Corp. v. Western Well Works, 261

Sea > RR ere ners es are epee 9

Lytle v. Household Mfg., Inc., 494 U.S. 545 (1990)..14, 15

Mosser v. Darrow, 341 U.S. 267 (1951)............ 6, 8, 9

Nagle v. Alspach, 8 F.3d 141 (3rd Cir. 1993), cert.

mate, SUD SIT. LARS CAPO GN es ok vc conc inksccsavave 14

NLRB v. Pittsburgh S.S. Co., 340 U.S. 498 (1951) ...... 9

Pagano v. Frank, 983 F.2d 343 (1st Cir. 1993)......... 13

Pollard v. United States, 352 U.S. 354 (1957).......... 15

Thomas v. Arn, 474 U.S. 140 (1985) .................. 13

United States v. Ecker, 923 F.2d 7 (1st Cir. 1991)...... 13

United States v. Tracy, 989 F.2d 1279 (1st Cir.), cert.

oo eG. Rt. 14

Wilson v. Schnettler, 365 U.S. 381 (1961)............... 9

Youakim v. Miller, 425 U.S. 231 (1975)................ 15

STATUTES

Re See EE cing co. cGUGnedune heath viccae ces cael 16

RULEs

Ds Se WU canoe 9056045 kha oo0ekkeccs caseeere 1, 12

ee Se ea cher ares ares \ si OS ee 13

RESPONDENTS’ BRIEF IN OPPOSITION

The Respondents, Fleet National Bank (the “Bank”),

PNC Bank, Ohio, N.A., and Charles E. Giddens, the

court-appointed receiver (the “Receiver”), respectfully

request that this Court deny the petition for a writ of

certiorari seeking review of the First Circuit’s opinion in

the case below. The Petitioners argue that the First Cir-

cuit’s decision approving the sale of receivership assets

should be reversed for two reasons: (1) the assets were

sold to a company whose affiliate had performed minis-

terial accounting services for the Receiver; and (2) the

Receiver, with prior court approval, retained his own

brokerage firm as the broker for the sale. Neither argu-

~- ment presents an “important federal question” justifying

commitment of additional judicial resources to review

this case on certiorari. Sup. Ct. R. 10. None of the issues

that were raised before the First Circuit in this case were

addressed in the cases relied upon by the Petitioners to

suggest a conflict with decisions of this Court or deci-

sions of other circuit courts. Moreover, none of the cases

cited by the Petitioners support a decision contrary to the

decision rendered by the First Circuit. There being no

important federal question or conflict with either a deci-

sion of this Court or decisions of other circuit courts, the

petition for writ of certiorari should be denied.

a

STATEMENT OF THE CASE

On December 2, 1994, the Bank commenced the under-

lying action against H & D Entertainment, Inc; H & D

Wireless Limited Partnership; H & D Media Limited Partner-

ship; H & D Broadcasting Limited Partnership; and H & D

Radio Limited Partnership (collectively, the “H & D Group”)

seeking to collect over $12.9 million owed under certain

notes and guarantees. Petitioners’ Appendix (“App.”) 22. On

December 5, 1994, the district court entered an order

appointing Charles E. Giddens as Receiver of the H & D

Group and directing him to take possession of, manage,

operate, and, subject to court approval, sell the assets of the

H & D Group, which then consisted primarily of four am/fm

combination radio stations (the “Radio Stations”). App.

22-23.

On February 3, 1995, the Receiver moved for

approval to employ his firm, Media Venture Partners

(“MVP”), as broker for the sale of the Radio Stations.

App. 26. On March 9, 1995, after notice and a hearing, the

magistrate judge approved MVP’s employment - a fact

omitted from the Petitioner’s brief. App. 26. The Peti-

tioners never requested that the district court reconsider

the magistrate’s order. App. 26, n.17.

MVP then solicited and received twenty-four first

round bids for the Radio Stations on or before April 13,

1995. App. 26-29. Thereafter, the Receiver negotiated and,

on July 31, 1995, entered into a Purchase and Sale Agree-

ment with the high bidder, Spring Broadcasting, L.L.C.

(“Spring”). App. 31-33. After five days of hearings and

several modifications, the magistrate judge approved a

sale procedure which involved a second round of com-

petitive bidding, whereby MVP solicted counteroffers to

Spring’s Purchase and Sale Agreement.! App. 34. No

1 In their Statement of the Case, Petitioners allege that

“after April 17, 1995, the Receiver never contacted the two

bidders whose bids, in combination, totaled $14,300,000.” See

Petition, p. 6. That allegation is contrary to the district court’s

second round counteroffers were submitted. App. 35. On

October 27 and November 3, 1995, the district court held

evidentiary hearings on the Receiver’s motion to approve

the sale to Spring. App. 35.

The Receiver then filed a motion requesting approval

of three changes to the agreement between the Receiver

and Spring. App. 37. The amended terms were put out to

the public for a third round of competitive bidding. App.

37-39. Again, no counteroffers were submitted. App. 38.

On January 19, 1996, the district court conducted a

third evidentiary hearing on the motion to approve the

sale of the Radio Stations to Spring. App. 39. While the

Petitioners made a number of attacks on the sale, they

primarily maintained that Spring should be disqualified

from purchasing the Radio Stations because a principal of

Spring, P. Richard Zitelman (“Zitelman”), was also a prin-

cipal of The Zitelman Group (“TZG”), an entity that had

performed ministerial accounting functions for the

Receiver at the inception of the receivership. The Peti-

tioners argued that the district court should adopt a per se

rule which would disqualify virtually anyone ever

employed by the Receiver from purchasing the assets of

the estate.

The district court rejected the Petitioners’ arguments

that a per se rule disqualified Spring. Instead, the district

court followed a case-by-case approach which would dis-

qualify a purchaser only where the sale is tarnished by

findings of fact that after August 22, 1995, “MVP, again acting as

broker for the Receiver, distributed notice of the second round

bidding procedures to all the unsuccessful first round bidders,

as well as to others who expressed an interest in the Radio

Stations.” App. 34.

bad faith, fraud or collusion. App. 49. Applying that

analysis, the district court found no evidence of bad faith,

fraud or collusion and found the sale to Spring to be

commercially reasonable and in the best interests of the

estate. App. 51-52.

The district court’s decision was based in large part

upon its finding that even during TZG’s limited tenure as

accountant for the Receiver, neither TZG nor Zitelman

had a fiduciary relationship with the estate. App. 47. TZG

had performed only very limited services for the estate

on a temporary basis. Specifically, the district court found

that “[a]lthough TZG offered a wide range of services, the

Receiver only engaged TZG in a limited capacity, hiring

the firm to perform certain ministerial accounting func-

tions.” App. 25. “TZG did not advise the receivership,

provide financial audits, or direct investment of assets,

with respect to the Radio Stations; nor did it participate

in management decisions with respect to the operation of

the Radio Stations or get involved in the MVP’s sale

efforts.” Id.

TZG did not “have access to confidential information

or even raw financial data” and was never given any

information that was not available to other bidders. App.

29 and 47. Nor could Spring “responsibly have relied, in

preparing its bid, on information to which Zitelman had

access because of TZG’s services.” App. 28, n.23. More-

over, the relationship between the Receiver and TZG

terminated on June 19, 1995, before negotiation of the

Purchase and Sale Agreement and before the second an

third rounds of competitive bidding.? App. 31.

Finding that no per se rule disqualified Spring from

purchasing the Radio Stations and rejecting the Peti-

tioners’ other arguments, on April 12, 1996, the district

court entered an order approving the sale to Spring. The

Petitioners appealed to the First Circuit raising, among

other issues, the same argument concerning the propriety

of Spring purchasing the assets. The Petitioners did not

then argue — as they attempt to do here - that the sale

should not have been approved because of the fact that

the Receiver’s firm was engaged as a broker for the sale.

The First Circuit Court of Appeals affirmed, noting

that “the district court and the magistrate judge have

done a very able job in handling this complex and conten-

tious case.” App. 16. Agreeing with the district court’s

case-by-case approach, the First Circuit Court stated that

“the greater weight of authority is that any judgments as

to disqualification of a non-fiduciary purchaser should be

made on a case-by-case basis, taking account of all of the

surrounding circumstances.” App. 14. The First Circuit

2 The Petitioner’s Statement of the Case on this issue again

includes allegations directly contrary to the district court’s

findings of fact. Petitioners contend TZG resigned “more than

half-way through negotiations of the Spring P&S.” See Petition,

p- 6. The district court expressly found that “prior to the

negotiation of a purchase and sale agreement, TZG resigned as

the Receiver’s accountant.” App. 31. The district court further

found that “[a]ccording to credible testimony before this

[c]ourt, Giddens requested that Zitelman resign before the two

engaged in earnest negotiations.” App. 31, n.29.

also noted that even in the few jurisdictions which argua-

bly have adopted a per se rule, the courts do not uni-

formly follow the rule. Id.

The Petitioners now seek review on certiorari claim-

ing that the First Circuit’s decision decided an important

federal question in a way that conflicts with a decision of

this Court and decisions of two circuit courts. As dis-

cussed below, they are wrong. There is nothing remark-

able about the First Circuit decision which warrants

further review by this Court.

¢

REASONS FOR DENYING PETITION

FOR WRIT OF CERTIORARI

I. THE DECISION OF THE FIRST CIRCUIT COURT

OF APPEALS IS NOT IN CONFLICT WITH THIS

COURT’S RULING IN MOSSER v. DARROW.

The Petitioners first argue that Mosser v. Darrow, 341

U.S. 267 (1951), prohibits Spring from purchasing assets

of the receivership estate. The facts in Mosser, however,

bear no similarity to the facts in the case now before the

Court and its rulings of law are inapplicable.

In Mosser, this Court held that the district court prop-

erly surcharged the reorganization trustee for profits

which his employees had derived from personally trad-

ing in the debtors’ securities. Jd. at 270. The case did not

involve the issue presented below concerning whether a

sale should be approved. The debtors in Mosser were two

common law trusts functioning “as holding companies

and their principal assets were the securities of twenty-

seven underlying companies, each of which owned

. —_ «4

improved real estate and had its own debt and capital

structure.” Id. at 268. The reorganization trustee

employed two individuals who previously had promoted

the trusts. Id. at 269. Those individuals then managed the

properties for the trustee and had “complete charge of all

records of income, expenditures and properties of both

debtors and all underlying companies.” Id. Relying upon

the “judgment and advice” of those individuals, the

trustee then purchased and retired bonds of the debtors’

subsidiaries at a discount rate. Id.

Without ever seeking approval from the district

court, the trustee also authorized those two “key”

employees, who were “indispensable” to the estate, to

trade personally in the debtors’ securities while employed

by the trustee. Id. at 268-69 and 274. “On many occasions

they acquired bonds for themselves and on the same day,

or within a few days, transferred them to [the trustee] at

a profit.” Id. at 269. Those improprieties were discovered

only after the Securities and Exchange Commission

demanded an investigation, causing the trustee to resign

and file accounts not previously filed during the eight

years of trusteeship. id. at 270. Not surprisingly, the

Court held that the trustee should not have authorized

the employees to self-deal and should have disclosed the

conduct earlier. While recognizing the harshness of

imposing a surcharge, this Court noted that the trustee

could have limited, if not avoided, personal liability by

disclosing the proposed relationship to the court in

advance:

The practice is well established by which

trustees seek instructions from the court, given

upon notice to creditors and interested parties,

as to matters which involve difficult questions

of judgment.

Id. at 274.

Completely contrary to the facts in Mosser, in the

present case there was no undisclosed relationship which

had not been subject to judicial scrutiny. Instead, the

“sale has been repeatedly scrutinized by the market, by

interested parties and by the court.” App. 20. “It [was]

the subject of three competitive bidding processes and a

magistrate judge’s careful monitoring, during which the

relevant parties were given an opportunity to object to

sale procedures and substance, and through which,

where appropriate, the procedures adopted came to

reflect the concerns of the parties.” App. 20.

Moreover, the relationship between the receivership

esta.2 and Spring in this case is completely different from

the relationship between the debtors’ estate and the

trustee’s employees in Mosser. Unlike the employees in

Mosser, Spring was never employed by the Receiver.

Spring’s affiliates TZG and Zitelman neither performed

any key services for the Receiver nor were employed by

the Receiver at the time of the sale. The district court

specifically found that neither TZG nor Zitelman owed a

fiduciary duty to the estate. App. 47. Unlike the

employees in Mosser who provided advice to the trustee,

“TZG did not advise the receivership, provide financial

audits, or direct investment of assets, with respect to the

Radio Stations; nor did it participate in management deci-

sions with respect to the operation of the Radio Stations

or get involved in MVP’s sales efforts.” App. 25. Further,

unlike the employees in Mosser who purchased assets of

the debtor and resold those assets to the trustee while

employed by the trustee, TZG was not performing any

services for the estate at the time the Purchase and Sale

Agreement was negotiated or during the second or third

rounds of competitive bidding. App. 31. Mosser is simply

not on point and the decision below is not so “repugnant

to controlling rules and decisions of this Court” as to

warrant the grant of certiorari. Wilson v. Schnettler, 365

U.S. 381, 383 (1961).

II. THE DECISION OF THE FIRST CIRCUIT COURT

OF APPEALS IS NOT IN CONFLICT WITH DECI-

SIONS IN OTHER CIRCUITS.

While the First Circuit may not have been persuaded

by the reasoning in the narrow line of cases relied upon

by the Petitioners, the decision below did not create a

conflict between the circuit courts as the Petitioners sug-

gest. First, neither the Ninth nor the Second Circuit

Courts of Appeals ever has adopted a per se rule which

would disqualify a non-fiduciary from purchasing assets

of the estate in the absence of fraud, collusion or bad

faith. Second, even if the cases cited by the Petitioners

did support recognition of such a per se rule, in subse-

quent decisions each of the Ninth and Second Circuit

Courts of Appeals has rejected that rule and adopted a

case-by-case approach. It can hardly be said that the First

Circuit’s decision below creates a “real and embarrassing

conflict of opinion and authority between the circuit

courts of appeal” justifying review on certiorari. NLRB v.

Pittsburgh S.S. Co., 340 U.S. 498, 502 (1951) (quoting Layne

& Bowler Corp. v. Western Well Works, 261 U.S. 387, 393

(1923)).

10

The Ninth Circuit cases cited by Petitioners do not

recognize a per se rule which would disqualify Spring, a

non-fiduciary, from purchasing the Radio Stations. In

Donovan & Schuenke v. Sampsell, the Ninth Circuit

reversed an order authorizing the sale of property of a

bankrupt estate to a former president of the bankrupt

who owed a fiduciary duty to the estate and who also

was employed by the trustee to maintain and sell the

property. Donovan & Schuenke v. Sampsell, 226 F.2d 804

(9th Cir.), cert. denied sub nom., Freedman v. Donovan &

Schuenke, 350 U.S. 895 (1955). The court in Donovan stated

that “[a] fiduciary cannot purchase property which he is

empowered to sell.” Id. at 811.

Unlike the purchaser in Donovan, Spring was not a

fiduciary. Further, Spring’s affiliate TZG was not a fiduci-

ary of the estate, and was not employed by the receiver-

ship at the time of the sale. In further contrast to the

purchaser in Donovan, neither Spring nor TZG was ever

employed at any time to sell the Radio Stations or to

advise the Receiver in any way with respect to the sale.

Whatever precedential force Donovan may have had,

it has been narrowed substantially by In re Transcontinen-

tal Energy Corp., 683 F.2d 326 (9th Cir. 1982), a case much

more analogous to the one now before the Court. Like the

Petitioners here, the appellants in Transcontinental relied

on language in Donovan that would “make any person a

trustee or fiduciary who has had a connection with any

other person or entity or who has been employed or

concerned with the affairs of others and thereby acquired

a knowledge of the property and concerns of the others.”

Transcontinental, 683 F.2d at 328 (quoting Donovan, 226

F.2d at 811). The Ninth Circuit found their argument to

11

74

“rely too heavily on the ‘broad dicta’” in Donovan and

accordingly confirmed a judicial sale where an individual

related to the purchaser previously had operated a por-

tion of the assets, but where, as here, the purchaser did

not owe the bankrupt a fiduciary duty and there was no

evidence of bad faith, fraud, collusion, or use of inside

information. Transcontinental at 328-29.

Similarly misplaced is the Petitioners’ reliance on In

re Exennium, Inc., 23 B.R. 782 (Bankr. 9th Cir. 1982), rev'd,

715 F.2d 1401 (9th Cir. 1983). In that case, the purchaser

had been the attorney for the debtor and therefore owed

the estate a fiduciary duty. 23 B.R. at 786. The Ninth

Circuit reversed Exennium on other grounds and crit-

icized the underlying court’s reading of Donovan “as

holding that sales to fiduciairies can be overturned at any

time because they are void.” In re Exennium, Inc., 715 F.2d

1401 (9th Cir. 1983).

The Second Circuit case relied upon by the Peti-

tioners, In re Frazin & Oppenheim, 181 F. 307 (2d Cir. 1910),

also does not support a per se rule which would have

disqualified Spring from purchasing the Radio Stations.

There the Second Circuit considered “whether an official

appraiser of a bankrupt estate may, prior to the filing of

the appraisal, purchase property of the estate.” Id. at

308-309. Significantly, the court observed that the

appraiser was “an officer of the court,” and that he “nec-

essarily obtain[ed] confidential information concerning

the cost of the property to be appraised and concerning

many other matters affecting its value and the price to be

obtained for it.” See id. at 311. Simply stated, the court

was faced with a purchaser who possessed confidential

information and could exploit it to his advantage and to

12

the detriment of the estate. See id. at 310. Expressly left

open was the question of whether the appraiser could

purchase from the estate after filing his appraisal. Id. at

311.

Frazin is inapposite here. First, unlike the appraiser,

“neither TZG nor Zitelman individually had a fiduciary

relationship with the estate.” App. 47. Second, unlike the

appraiser, “the tasks performed by TZG were ministerial

in nature.” App. 47. Moreover, “TZG [did not] have

access to confidential information or even raw financial

dara.” App. 47. As a result, neither TZG nor Spring

possessed confidential information that they could

exploit for their benefit and to the detriment of the

receivership estate and its creditors.

Moreover, the Second Circuit implicitly has over-

ruled Frazin and adopted the case-by-case approach

adopted by the First Circuit below. See In re Rex Body

Corp., 138 F.2d 912, 913 (2d Cir. 1943) (approving sale of

estate to fiduciary of the bankrupt). See also In re Beck

Indus., Inc., 605 F.2d 624, 635-37 (2d Cir. 1979) (refusing to

follow Donovan); In re General Insecticide Co., 403 F.2d 629,

631 (2d Cir. 1968) (finding Donovan inapposite “because

the purchaser . . . was not a fiduciary with respect to the

property sold”).

The First Circuit’s decision below is not “in conflict

with the decision of another United States court of

appeals on the same matter.” Sup. Ct. R. 10. The First

Circuit decided the issue of whether a non-fiduciary may

purchase assets of the estate in the absence of bad faith,

fraud or collusion. Because the Ninth and Second Circuit

decisions cited by Petitioners do not address the issues

13

raised below —- and are not even uniformly followed

within those circuits — there is no conflict between the

circuit courts.

Ill. MANTANZA SHORES DOES NOT WARRANT

GRANTING CERTIORARI

A. Petitioners Waived And Abandoned Any Right

to Challenge The Sale Based On MVP’s Engage-

ment As Broker.

The Petitioners now attempt to argue that the sale

should be reversed because the Receiver’s firm was

engaged as the broker for the sale. That argument, how-

ever, was no! made to, or addressed by, the First Circuit.

There is, therefore, no conflict between the circuit courts

warranting further review by this Court.

On March 9, 1995, upon notice and after hearing, the

magistrate judge approved the retention of MVP as the

Receiver’s broker for the sale of the Radio Stations. App.

26. The Petitioners failed to move for reconsideration or

to file an objection to the magistrate’s order in the district

court. Id. Such failure operated as a waiver of the Peti-

tioners’ right to seek further appellate review of the

magistrate’s decision. Thomas v. Arn, 474 U.S. 140, 155

(1985) (determination that failure to object to magistrate’s

order within mandated time frame waives right to later

appeal of order did not violate petitioner’s due process

rights); Pagano v. Frank, 983 F.2d 343, 346 (1st Cir. 1993)

(party who fails to file objections to magistrate’s non-

dispositive order within ten days “may not thereafter

assign as error a defect in the magistrate’s order”) (citing

Fed. R. Civ. P. 72); U.S. v. Ecker, 923 F.2d 7 (1st Cir. 1991)

14

(magistrate’s order is generally not a final order which is

subject to direct appellate review; the argument must be

made first to the district court); see also Keller v. Petsock,

849 F.2d 839, 842 (3rd Cir. 1988) (court of appeals is

without jurisdiction to hear appeal of magistrate’s order

that is not first raised in district court); but see Greenhow v.

Secretary of Health & Human Servs., 863 F.2d 633, 636 (9th

Cir. 1988) (failure to file objections to magistrate’s order

waives only factual issues on appeal).

Furthermore, in their brief to the First Circuit, the

Petitioners did not challenge the propriety of the

Receiver’s retention of MVP as broker.® The First Circuit

quite appropriately did not address this issue because the

Petitioners had abandoned and waived this argument. See

Nagle v. Alspach, 8 F.3d 141, 143 (3rd Cir. 1993), cert.

denied, 510 U.S. 1215 (1994) (when issue not set forth in

statement of issues or pursued in appellate brief, the

issue is deemed abandoned and waived); United States v.

Tracy, 989 F.2d 1279, 1286 (1st Cir.), cert. denied, 508 U.S.

929 (1993) (issues advanced with virtually no argument

and no citation to authorities are deemed waived); Brown

v. Trustees of Boston Univ., 891 F.2d 337, 352 (1st Cir. 1989),

cert. denied, 496 U.S. 937 (1990) (university abandoned

argument when it failed to address argument in appellate

brief).

3 While the Petitioner’s preliminary statement of issues

filed with their designation of the appendix included reference

to MVP’s engagement as broker, the issue was not included in

either of the Statement of the Issues or Argument sections of

their brief.

15

It is axiomatic that absent “exceptional circum-

stances” the Supreme Court will not consider issues that

were neither raised nor considered by the court of

appeals. Duignan v. United States, 274 U.S. 195, 200 (1927);

Lytle v. Household Mfg., Inc., 494 U.S. 545, 546 (1990); Lawn

v. United States, 355 U.S. 339, 362-63, n.16 (1958). The

“exceptional circumstances” required are not present

here. See, e.g., Youakim v. Miller, 425 U.S. 231, 234 (1975)

(important conflict between state and federal statutes);

Pollard v. United States, 352 U.S. 354, 359 (1957) (criminal

pro se defendant allowed to raise issues of constitutional

significance which were not considered below).

This Court has recognized that the rule against con-

sidering issues not raised in the courts below is required

to preserve judicial economies. See Thomas v. Arn, 474 U.S.

at 147. Absent such a rule, this Court would be forced to

review issues not reviewed by the circuit court, and the

circuit court would be forced to review every issue raised

in the district court even though not presented for review

by the parties. The petition for writ of certiorari should

be denied simply because the Petitioners did not properly

raise this argument below and have presented no “excep-

tional circumstances” which would warrant review of

this issue in this Court.

B. In Any Event, the Second Circuit’s Decision in

Mantanza Shores is Not in Conflict With the

First Circuit’s Decision Below.

Even if the First Circuit had addressed the propriety

of retaining MVP and its effect on the sale, the First

Circuit’s decision approving the sale would not be in

16

conflict with the law of the Second Circuit. The Peti-

tioners contend that the First Circuit’s decision below is

in conflict with the decision in In re Palm Coast, Mantanza

Shores Ltd. Partnership, in which the Second Circuit

reversed an order permitting a Chapter 11 bankruptcy

trustee to retain his own brokerage firm. Mantanza Shores,

101 F.3d 253, 258 (2d Cir. 1996). Like the other cases cited

by the Petitioners, Mantanza Shores is not on point. In

Mantanza Snores, the Second Circuit addressed “the ques-

tion of whether the Bankruptcy Code permits-a bank-

ruptcy trustee to employ his real estate firm as real estate

consultant to the bankruptcy estate.” Id. at 256. The Code

specifically provides that the trustee may employ only

professional persons “that do not hold or represent an

interest adverse to the estate, and that are disinterested

persons.” 11 U.S.C. 327(a). This case, however, concerns a

receivership not governed by the Bankruptcy Code.

Unlike a bankruptcy case, a federal receivership is gov-

erned by equitable principles which allow a court to

approve a sale under terms and conditions in the best

interest of the receivership estate. See, e.g., Citibank, N.A.

v. Data Lease Fin. Corp., 645 F.2d 333, 339 (5th Cir. 1981).

The recent decision in Mantanza Shores does not cre-

ate a conflict between the circuit courts because the

Second Circuit did not address the issues addressed by

the First Circuit. There is, therefore, no compelling reason

to warrant further review of this case on certiorari.

v

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17

CONCLUSION

For all of the foregoing reasons, the Respondents

respectfully request that this Court DENY the petition for

a writ of certiorari.

Respectfully submitted,

JoHN D. HAaniry CHARLES L. GLERUM

Haro_p B. MurpHy Counsel of Record

MattHew P. McCue SarA A. WALKER

Haniry & KING CuHoate, HALL & STEWART

Professional Corporation Exchange Place

One Federal Street 53 State Street

Boston, MA 02110 Boston, MA 02109

(617) 423-0400 (617) 248-5000

Counsel for Respondeiit Counsel for Respondents

Charles E. Giddens, as Receiver Fleet National Bank and

PNC Bank, Ohio, N.A.