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Securities and Exchange Commission v. Path America, LLC

United States District Court, W.D. Washington

May 16, 2017

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
PATH AMERICA, LLC, et al., Defendants, and POTALA SHORELINE, LLC, et al., Relief Defendants.

          ORDER GRANTING MOTION FOR FINAL APPROVAL OF THE DISPOSTION OF THE MARKETPLACE PROJECT

          JAMES L. ROBART United States District Judge.

         Before the court is Receiver Michael A. Grassmueck's (“the Receiver”) motion for final approval of the disposition of the Marketplace Project. (Mot. (Dkt. # 526).) Although the SEC and certain interested entities filed responses to the Receiver's motion (see SEC Resp. (Dkt. # 532); 46 Investors Resp. (Dkt. # 531); Eluri Resp. (Dkt. # 528)), no party or interested entity has filed an opposition to the motion. (See generally Dkt.) The court has considered the Receiver's motion, the relevant portions of the record, and the applicable law. Being fully advised, the court GRANTS the Receiver's motion for final approval of the disposition of the Marketplace Project.

         Plaintiff Securities and Exchange Commission (“SEC”) filed a “statement of non-opposition” in response to the Receiver's motion but ultimately stated that it “supports the Receiver's [m]otion.” (SEC Resp. at 2.) Forty-six Chinese nationals who invested $500, 000.00 each in the Marketplace Project through the EB-5 immigrant-investor program (“46 Investors”) also filed a memorandum in support of the Receiver's motion. (46 Investors Resp. (Dkt. # 531).)

         Mr. Eswar Eluri, a creditor who holds a 20% membership interest in Path America, LLC, which is one of the Receivership entities, filed a response in which he states that he “does not object to entry of the Receiver's proposed [o]rder approving the Marketplace Project sale.” (Eluri Resp. (Dkt. # 528) at 2.) However, “he expects that the proceeds of this and other sales of Path America's assets will be fully accounted for and properly reflected in the amount ultimately paid to Mr. Eluri with respect to his 20% ownership in Path America.” (Id.) As the Receiver noted, issues relating to the appropriate distribution of Receivership funds will be addressed in the claims process previously approved by the court. (See 8/30/16 Order (Dkt. # 415).) The Receiver states that Mr. Eluri submitted a timely claim which will be reviewed and determined by the Receiver in due course. (Reply (Dkt. # 530) at 1-2.) If a dispute arises concerning Mr. Eluri's claim that the Receiver cannot resolve, then the dispute will be submitted to the court by motion. (Id.) The Receiver also represents that any transaction related to the final disposition of the Marketplace Project “will be reflected in the Receiver's books and records in the normal course, and the funds will be maintained by the Receiver for the benefit of the Receivership Estate, in the same manner as all other funds and assets of the [R]eceivership.” (Id. at 2.)

         Although no party or entity has filed an opposition to the Receiver's motion, the court has nevertheless independently reviewed the Receiver's motion, and finds that there is good cause to grant the Receiver's motion. Accordingly, the court ORDERS, ADJUDGES, and DECREES as follows:

         1. The court finds that the Receiver gave proper, timely, adequate, and sufficient notice of the Receiver's motion, and of the proposed relief described therein, and such notice was reasonable and appropriate under the circumstances and comports in all regards with the requirements of due process and no further notice is appropriate or necessary;

         2. The court GRANTS the Receiver's motion (Dkt. # 526);

         3. The court APPROVES the final terms of the Restructuring Transaction as memorialized in the Master Agreement (“Master Agreement”) and all related additional agreements necessary for completion of the transaction, copies of which are appended as Exhibit A to the Receiver's declaration (Grassmeuck Decl. (Dkt. # 526-1)) and as Exhibit A to the Notice of Errata Re: Motion for Final Approval of Disposition of the Marketplace Project (Errata (Dkt. # 527)) (the Master Agreement and all additional agreements are referred to herein as the “Final Agreements”);

         4. The court APPROVES the Final Agreements;

         5. Upon the closing of the Restructuring Transaction as contemplated by the Final Agreements (“Closing”):

a. Path America shall absolutely and unconditionally assign all of its right, title, and interest in and to the limited liability company membership interest in Path America SnoCo, LLC (“SnoCo”) to EB5 Group, LLC (“EB5G”), and EB5G shall accept the same;
b. Except as otherwise provided in the Master Agreement, each of SnoCo, Path America Farmer's Market, LP (“PAFM”), and Path Farmer's Market, LLC (“PFM”), including their assets and equity interests, shall be free and clear of all security interests, liens, claims, pledges, encumbrances or other rights or claims of any other Person (as defined in the Master Agreement), including without limitation any Limited Partners (as defined in the Master Agreement), or any preemptive or similar rights, other than those encumbrances identified in Schedule 1 to the Master Agreement;
c. Path America, LLC (“Path America”) shall not have any further ownership, management, economic, voting, or other interest in SnoCo whatsoever;
d. Liabilities not retained by SnoCo, PAFM, and PFM pursuant to Schedule 1 to the Master Agreement shall be deemed claims against the estate of the Receivership ...

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