funds. The SEC's claim for return of the salary payments to defendants is not extinguished by today's order denying the motion for their immediate return, however. Especially in the case of Palmarez and Parker, who have agreed to pay disgorgement in an amount yet to be negotiated, the monies they received from the Cablemaxx proceeds will presumably become a subject for the anticipated negotiation.
c. The remaining monies disbursed from the payroll account could be subject to a recovery order only if I were to recognize and impose the constructive trust argument adopted in SEC v. Antar, 831 F. Supp. 380, 402-03 (D.N.J. 1993). The Antar decision imposed a constructive trust as a matter of New Jersey law. Neither party has suggested what the applicable state law would be in the instant case. In any event, it is open to question whether an order requiring non-parties to return portions of the Cablemaxx proceeds they received as payroll payments from Omnivision could be effectively enforced -- at least without an additional expenditure of litigation resources that might well return only pyrrhic victories.
I reach a different result with regard to the funds transferred to defendant Interactive that have not been approved for expenditure. The June 27 payment from Omnivision to Interactive was not an intra-company transfer, from an operating account to a payroll account, but rather a cash payment to a defendant, for which the March 3 order required notice. Because Omnivision's payment or transfer to Interactive was in violation of that March 3 order, defendant Interactive will be ordered to hold subject to the June 29 freeze order or to return to Omnivision the sum of $ 28,500.
D. Use of Cablemaxx proceeds to pay attorneys' fees and other expenses
United defendants move for leave to make payments from the Cablemaxx proceeds to pay $ 96,328 in legal fees to the firm of Hill, Held, Metzger, Lofgren & Peele.
It is doubtful that the United defendants have the right to spend investor money for services rendered by an attorney. See, e.g., SEC v. Cherif, supra, 933 F.2d at 417. But it is unnecessary to reach that question on this record: United defendants have made no showing that they cannot make the requested payments from exempt assets.
An appropriate order will issue with this memorandum.
Dated: September 12, 1995
United States District Judge
For the reasons stated in a memorandum issued today it is this 12th day of September 1995 ORDERED
1. The motion of defendants to vacate the freeze order issued June 29, 1995 or in the alternative to permit certain payments [#73] is denied.
2. Defendant Interactive Communications Network, Inc., is ordered to hold pursuant to the freeze order issued June 29, 1995, or to return to defendant Omnivision, Inc., for holding pursuant to the freeze order, the sum of $ 28,500.
3. Except for the provisions of paragraph 2, the motion of the SEC to supplement the freeze order by requiring the return of certain sale proceeds [#69] is denied.
United States District Judge