Foreclosure Litigation and Receivership 101: A Conversation With Douglas Wilson Companies and Sheppard Mullin

As we work through the current economic downturn, many project stakeholders will confront the question of whether a receivership is key to the best possible path to resolution.

In a recent webinar discussion with four attorneys from Global 100 firm Sheppard Mullin, DWC Chairman and CEO Douglas Wilson shared perspective as a receiver over the last 30 years, while the panel discussed considerations for working with a receiver in today’s economic cycle.

“When the ‘music’ stopped, the strategy was largely forbearance,” said Wilson of the 2020 COVID-19-fueled downturn. “…The reality is much of this forbearance is going to bleed off toward the end of the year. Many of these assets particularly hotels and retail are running out of reserves… What we are expecting is the world of distress really has not been here [yet] but is going to continue and is going to start with greater velocity toward the end of this year and will go on for the ensuing year or two, at least.” Lenders are going to be looking at alternate strategies..

A receiver is a neutral person appointed by the court to take over a piece of property or business,” explained Sheppard Mullin Partner Alejandro Moreno in defining the basics. “The receiver owes a fiduciary duty to the court, and to preserve the property for any parties with an interest in it.

In considering whether to work with a receiver, there are several questions an entity must consider with respect to the powers granted to the receiver, the panel noted, such as:

• Can the receiver hire its own separate counsel?
• Can the receiver take out loans?
• Is the receiver entitled to dispose of property to pay for debts of the receivership estate?

Any granted powers need to be decided upon upfront.

Receivers & Attorneys

Transactional attorneys often work with receivers to achieve the best outcome for the property. Pamela Westhoff, Partner with Sheppard Mullin, also spoke on the panel about her experience in working with DWC on many receivership matters. “Pick the right receiver,” she said. “You need a receiver that understands all aspects of operating the project.”From the onset, the transactional attorney and receiver will want to ensure they are aligned on several items:

• What they are trying to achieve
• Who’s doing what at the property
• What other professionals may need to be involved (such as consultants, environmental experts, etc.)
• What the challenges are to overcome

“Never deviate from the goal,” Wilson said. “Assemble the right experts to support you in achieving that goal… One of the most important things we do well is recognizing what we don’t do well. One size does not fit all in our world; to be able to identify market specific talent to manage the process in a thoughtful and efficient way is how we’ve been able to successfully do work [across the] country.”

Click here to view the full webinar from Sheppard Mullin

If you have any questions regarding information in this article or think we can be of service to you, please don’t hesitate to contact Douglas Wilson at 619-906-4312.