LAS VEGAS—As anticipated, lawyers for Private Media Group filed a petition for an emergency writ of mandamus Monday with the Nevada Supreme Court in Consipio v. Private. If granted, the writ would direct the Clark County lower court currently adjudicating the case to vacate the Order issued Aug. 25 by the judge in that case, District Court Judge Elizabeth Gonzalez, that appointed a receiver, Sureflix CEO and Private Board member Eric Johnson, to take control of all of Private’s assets.
The petition outlined several legal precedents for approving the writ, including:
1. The District Court abused its discretion in appointing a receiver
* The appointment of a receiver is not authorized under NRS 78.650 for a corporation which is a going concern and is not contemplated to be the subject of winding up and dissolution.
* The appointment of a receiver under an involuntary dissolution statute does not appear to have ever been applied to publicly traded companies, either in Nevada, or its sister states.
* The District Court abused its discretion in setting forth a “remedy” that is unduly harsh, in light of the negative repercussions that company, and its shareholders, will likely experience.
* The unduly harsh “remedy” of appointing a receiver would create further disruption; likely resulting in an additional reduction of the stock price and the appointment could jeopardize and disrupt relations with vendors and customer, and lead to delisting from Nasdaq and the calling of loans.
* The appointment of a receiver and the expansive powers extended to him lack any legal justification, and constitutes an abuse of discretion by the District Court.
2. A “plain, speedy and adequate remedy in the ordinary course of law” does not exist for Petitioners, and writ relief is appropriate.
* The appointment of a receiver is a remedy of last resort, to be used only when all else fails. The imposition of a receivership is not proper when an adequate remedy at law exists, as is the case here.
The petition also claims bias on the part of Judge Gonzalez, alleging, “Amazingly, due to a comment from the Court the afternoon before the hearing, which was captured on a daily transcript of an unrelated jury trial, it is clear that the District Court recognized, and appeared to almost relish, the very real possibility that the appointment of a receiver could result in such damage including delisting. Following day three of a trial in an unrelated matter known as CMICM Diamonds, Inc. V. Urban Casavant, et. al, (the day before the hearing on the appointment of a receiver), the court stated: ‘Hopefully my delisting of the publicly traded corporation will happen tomorrow morning, too, won't have to have a long hearing.’ Not only does this demonstrate that the judge knew of and accepted such an adverse effect on this company; it illustrates that she already knew and openly discussed the action she was going to take before the day of the hearing.”
The petition concludes, “The appointment of a receiver under this statute and these circumstances is improper and requires review. Therefore, Private, at the request ofthe independent members of its board of directors, which have executed the accompanying verification, requests that this Court issue a writ directing that the appealed from Order be vacated as the District Court has abused it's discretion, acting in an arbitrary and capricious manner, and in a manner inconsistent with the clear intent of NRS 78.650, and additionally has issued an Order in excess of its jurisdiction.”
In a recent 8-K filing with the Securities and Exchange Commission, Private reported that it has a hearing scheduled before all seven judges of the Supreme Court of Nevada on a matter related to the Consipio lawsuit, and that it intends to request that the Sept. 8 hearing also consider the emergency writ of stay request, assuming the stay is not granted prior to that hearing.
The plaintiffs were contacted but declined to comment for this story.
