Recent headlines regarding conservatorships, highlighting their negative consequences which can include overbearing administrators flexing too much power over long periods of time at high expense, can unjustifiably cloud the public perception of a similar process – receiverships. But such a rush to judgment would be a misstep when a receivership is tactfully deployed, in circumstances such as insolvency or other mismanagement. Here are six reasons why establishing a Rule 66 receivership can be a creative tool to achieve a best-case goal. 1. Attain More Claims This requires an example, which we will call the “Three Party Case.” In a recent case in Colorado, the problem confronting a real estate developer was that while its insolvent and near defunct client was cooperative and suffered damages due to the acts of a breaching third party, the developer did not have privity of contract directly with the breaching third party, that privity being necessary to support contract-based claims such as breach of contract. With the client’s poor state of affairs, the client did not have the will or means to pursue the breaching third party either. In essence, the third party unlawfully breached a critical contract with the client, causing the client to fold and terminate the real estate development, leaving the real estate developer to sort out a plan to pursue relief. For the real estate developer to increase its chances of recovery against the breaching third party, the real estate developer needed a breach of contract claim directly against the breaching third party, which meant the real estate developer had to strategically find a way to “stand in the shoes” of the client, who no longer had officers or employees, had no other known creditors, and was effectively dissolved. Since the client was friendly and accepting of its insolvent circumstances, pursuing a default judgment against the client with an order installing a receivership over the client, for the receiver to then pursue the client’s claims against the breaching third party became the answer. The endgame was to have the 66 . . . 6 Reasons Rule 66 Receiverships Are the Mark of Ingenuity By Lucas L. Schneider Partner, Stinson, LLP www.coloradobankers.org 26
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