IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

CHARLOTTE DIVISION



SECURITIES AND EXCHANGE
COMMISSION,

Plaintiff,

vs.

REX VENTURE GROUP, LLC
d/b/a ZEEKREWARDS.COM, and
PAUL BURKS,

Defendants.






Civil Action No. 3:12 cv 519

RECEIVERS OBJECTION TO COUNSELS NOTICE OF ATTORNEYS CHARGING
LIEN AND REQUEST FOR ORDER IN AID OF DISTRIBUTION

Kenneth D. Bell, Court-appointed Receiver (Receiver) of Rex Venture Group, LLC
d/b/a ZeekRewards.com (RVG or Receivership Defendant), by and through counsel,
respectfully submits this Objection to Marc R. Michauds Notice of Attorneys Charging Liens
(the Notice).
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(Doc. No. 258). The Receiver respectfully requests that the Court strike the
Notice and the liens asserted therein from the docket or, in the alternative, decline to rule on the
validity of these liens and confirm that the Receiver may distribute the proceeds free and clear of
any third-party claim.
The Notice appears to be an attempt by Mr. Michaud to circumvent the Courts prior
orders regarding this issue and insert himself as the recipient of money that belongs to victims.
In directly rejecting Mr. Michauds prior attempts to obtain this money before his clients, the

1
Mr. Michaud represents the Belsome Plaintiffs in Belsome v. Rex Venture Group LLC, No.
3:12-cv-800 (W.D.N.C. 2012). That action was transferred from Eastern District of Louisiana
and then stayed by order of this Court.
Case 3:12-cv-00519-GCM Document 260 Filed 10/10/14 Page 1 of 8
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Court determined that the Receiver should distribute this money directly to victims without
regard to any interest asserted by a third-party. Order Approving Claims Process (Doc No. 199
at 9); Order Granting Motion for Reconsideration and/or Clarification (Doc No. 221 at 12).
As set forth more fully below, this case is simply not the appropriate forum for the resolution of
third-party claims to distribution proceeds.
Additionally, the Receiver respectfully requests that the Court enter an order directing
Mr. Michaud to immediately and without any further delay provide the Receiver with the
addresses of those victims whom he purports to represent. The Court has already addressed this
issue when, in addressing Mr. Michauds most recent motion regarding the distributions, the
Court specifically directed claimants to amend the address on the Claim Portal to provide the
claimants actual address. (Doc No. 221 at 1). Three months have passed since the Court
entered this Order and only eight claims have been amended to provide the claimants actual
address. Hundreds of other claims continue to list Patrick Miller LLC (Mr. Michauds law
office) as their mailing address. Although Mr. Michaud has repeatedly maintained that his
representation of these victims includes helping them navigate the claims portal, he apparently
does not consider complying with this Order and changing these addresses within the scope of
such representation. Unfortunately for these victims, because these addresses were not changed,
they did not receive their portion of the first distribution.
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2
Mr. Michauds refusal to comply with the Courts Order and provide these claimants addresses
through the Claims Portal may constitute a violation of both the Louisiana and North Carolina
Rules of Professional Conduct. It appears that Mr. Michaud refused to provide these addresses
in the hopes of securing a lien on the proceeds before it was distributed to claimants. However,
both the Louisiana and North Carolina Rules of Professional Conduct prohibit attorneys from
placing their own financial interests before those of their clients. See N.C. R. Profl Conduct R.
1.7 Comment 1 (Loyalty and independent judgment are essential elements in the lawyers
relationship to a client.); R. 1.7 Comment 10 (The lawyers own interests should not be
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ANALYSIS

I. Receivers Objections to the Notice

Mr. Michaud claims a 25% interest in the distribution proceeds owed to his clients,
claiming a charging lien under North Carolina state law and a privilege under Louisiana state
law. See La. Rev. Stat. Ann. 9:5001; La. Rev. Stat. Ann. 37:218. It appears that Mr.
Michaud may be attempting to bind the Receiver and require that 25% of these proceeds be sent
to him and not the victims. As stated above, the Court has already considered and rejected Mr.
Michauds prior attempts to insert himself in the distribution process, ordering the Receiver to
distribute the money solely to the holders of allowed claims without regard to any third partys
interest. (Doc. No. 199 at 9; Doc No. 221 at 1-2). The Receiver respectfully requests that the
Court exercise its equitable authority over this matter and strike the Notice from the docket or, in
the alternative, decline to rule on the validity of the asserted liens and find that the Receiver may
distribute any proceeds free of any third party claim.
The Court has broad powers and wide discretion to determine relief in an equity
receivership action such as this. CFTC v. Barki, LLC, 2009 U.S. Dist. LEXIS 112998, *34
(W.D.N.C. Nov. 12, 2009) (Mullen, J .); SEC v. Wealth Mgmt. LLC, 628 F.3d 323, 33233 (7th
Cir. 2010). Further, a charging lien under North Carolina law is an equitable lien subject to the
Courts equitable discretion. See, e.g., Wilson v. Wilson, 644 S.E.2d 379, 381 (N.C. Ct. App.

permitted to have an adverse effect on representation of a client.); La. Rules. Profl Conduct R.
1.7 Comments 1, 10 (same).
In addition, both the North Carolina and Louisiana Rules of Professional Conduct prevent
attorneys from collecting fees which are clearly excessive, N.C. Rules of Profl Conduct R.
1.5(a), or unreasonable. La. Rules of Profl Conduct R. 1.5 (a). Mr. Michauds attempt to
collect $130,000 in legal fees for navigating the Claims Portal, something thousands of other
victims have successfully done without the aid of an attorney, may constitute a violation of these
Rules of Professional Conduct. In sum, the Receiver believes Mr. Michauds conduct in this
matter may warrant alerting the Louisiana Attorney Disciplinary Board.
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2007). With thousands of allowed claims in this matter, it is impractical to allow third parties to
interfere with the distribution process. The Receiver is simply not equipped to assess the validity
of every interest asserted by a third party in the distribution proceeds of every victim. To allow
otherwise would inundate this matter with third-party claims. Further, the Receiver is ill-
equipped to address the validity of such claims given that each claim, in effect, becomes another
case in and of itself.
Here, Mr. Michaud contends that he is entitled to 25% of these proceeds by virtue of a
contingent fee agreement with these victims apparently entered into with regard to the stayed
class action suit Belsome et al. v. Rex Venture Group LLC et al., No. 3:12-cv-00800 (W.D.N.C.
2012).
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Whether and to what extent this agreement entitles Mr. Michaud to a percentage of these
proceeds for his aid in the claims process is not for the Receiver to say at this time. Louisiana
law expressly governs these agreements, which include a mandatory agreement to submit any
disputes to binding arbitration. And whether a 25% contingent fee is patently unreasonable
under Louisiana Rules of Professional Conduct Rule 1.5 is uncertain. In any event, neither the
Receiver nor this Court has or should now undertake the obligation to enforce ambiguous third-
party agreements to which there may or may not be a dispute governed by Louisiana law,
particularly where the agreements enforceability and unconscionability plainly may be at issue.
In addition, the charging lien asserted in this case cannot comport with North Carolina
law because this matter involves a non-legal administrative process as opposed to a typical cause
of action. North Carolina courts are clear that a charging lien can only attach to a judgment.
Wilson v. Wilson, 644 S.E.2d 379, 383 (N.C. Ct. App. 2007) (citation omitted). And while a

3
A copy of the fee agreement is attached as Exhibit 1 to Receivers Reply in Opposition to
Belsome, et al.s Objection to the Receivers Motion for Order Approving Distribution
Procedures and Certain Other Related Relief (Doc No. 183).
Case 3:12-cv-00519-GCM Document 260 Filed 10/10/14 Page 4 of 8
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charging lien can attach to a settlement as well as a judgment, see Wilson, 644 S.E.2d at 383
(quoting Mack v. Moore, 418 S.E.2d 685, 688 (1992)), no judgment or settlement has been
obtained because this matter involves a non-legal administrative claim determination in which
Mr. Michauds clients are involved solely as non-party victims. They have asserted no cause of
action in this matter from which a judgment or settlement can be obtained.
Further, North Carolina courts have consistently displayed a strong antipathy towards
charging liens. See Wilson v. Wilson, 644 S.E.2d 379 (N.C. C.t App. 2007) (Affirming Rule 11
sanctions where attorney wrongfully asserted charging lien against former client); Howell v.
Howell, 365 S.E.2d 181 (N.C. Ct. App. 1988) (Affirming lower courts striking of charging lien
by attorney against former client); Carmen K. Hoyme, The Problem With Charging Liens,
Ethics Opinion Articles NC State Bar J ournal, available at http://www.ncbar.gov/
ethics/eth_articles_12,4.asp (In North Carolina, the availability of attorney charging liens is
strictly limited.). Here, a charging lien is inappropriate given that Mr. Michaud continues to
represent these victims in a matter which has not yet been resolved; there is no evidence of either
an avoidance of payment or a dispute as to the amount of fees; and there is no indication that
these victims have received notice that Mr. Michaud seeks to claim 25% of this first distribution.
II. Receivers Request for Order in Aid of Distribution
In addition to the above requested relief, the Receiver respectfully asks this Court to enter
an order directing Mr. Michaud to immediately provide the Receiver with the addresses of the
victims he represents. This is an issue the Court has already addressed when, in response to Mr.
Michauds previous motion regarding the distribution process (Doc No. 201), the Court
specifically ordered that all claims in the Claims Portal be amended to provide the claimants
actual address. Order Granting Motion for Clarification and/or Reconsideration (Doc No. 201
Case 3:12-cv-00519-GCM Document 260 Filed 10/10/14 Page 5 of 8
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at 1-2). The Court further directed that [t]he Receiver will not issue a distribution check to a
law firms address. Id. In spite of this clear directive, hundreds of claims continue to list
Patrick Miller LLCs address (Mr. Michauds law firm) as their address. Unfortunately for these
individuals, until Mr. Michaud complies with the Courts Order and provides the Receiver with
their actual addresses, they cannot receive their portion of the distribution proceeds.
It is unclear (other than perhaps his personal pecuniary interests) why Mr. Michaud has
not complied with the Courts Order and made the appropriate amendments in the Claims Portal.
In any event, by not providing the Receiver with these addresses, Mr. Michaud has prevented
these individuals from receiving their distribution. The Receiver respectfully requests that the
Court enter an order directing Mr. Michaud to immediately provide these addresses so that the
claims process can continue for these victims.
CONCLUSION
The liens asserted in the Notice appear to be an attempt to circumvent the Courts prior
orders regarding the distribution process and somehow assert a direct claim to these proceeds.
The Court has already ordered twice that the Receiver should distribute proceeds solely to the
holders of allowed claims without regard to any Claim or interest asserted by any third party in
such distributions. (Doc No. 199 at 9; Doc No. 221 at 1). This case is not the appropriate forum
to determine the validity of a contingent fee agreement between certain victims and a third-party
attorney under Louisiana law. This is a contractual issue that is more appropriately addressed
elsewhere. For these and the other above stated reasons, the Receiver requests that the Court
strike the Notice and the liens asserted therein from the docket or, in the alternative, find that that
the Receiver can distribute proceeds directly to victims free of any third-party interest.
Case 3:12-cv-00519-GCM Document 260 Filed 10/10/14 Page 6 of 8
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In addition, the Receiver respectfully requests that the Court order Mr. Michaud to
immediately provide the relevant addresses to the Receiver or amend each claim in the Claims
Portal which continues to list the address of Patrick Miller LLC to the actual address of the
claimant. The Receiver believes the Court has already addressed this issue before (Doc. No. 221
at 1-2), yet hundreds of claims continue to list the address of Mr. Michauds law firm as their
address. Until Mr. Michaud provides these claimants actual addresses, they will not be able to
receive their portion of the proceeds.

Respectfully submitted this 10th day of October, 2014.

By: /s/ Irving M. Brenner
Kenneth D. Bell, Receiver, Esq.
N.C. State Bar No. 10800
Irving M. Brenner, Esq.
N.C. State Bar No. 15483
McGuireWoods LLP
201 North Tryon Street, Suite 3000
Charlotte, North Carolina 28202
Telephone: 704-373-4620
Facsimile: 704-373-8836
kbell@mcguirewoods.com
ibrenner@mcguirewoods.com

Case 3:12-cv-00519-GCM Document 260 Filed 10/10/14 Page 7 of 8
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CERTIFICATE OF SERVICE

I hereby certify that I electronically filed the foregoing using the CM/ECF system, which
will send electronic copies to counsel of record registered to receive electronic service.




This the 10th day of October, 2014.

/s/ Irving M. Brenner




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