Two days after assuming control of VPL Medical, the Redwood Receiver shut it down.
Jason Cardiff was furious, prompting a twenty-eight page rage filing demanding removal of the Receiver.
Spoiler alert: Cardiff was denied.
We’ve previously covered Cardiff’s VPL Medical scheme, so I won’t go to deep into it again here.
At issue was a July 14th deadline, requiring VPL Medical to supply the U.S. Department of Health & Human Services with two million COVID-19 masks.
Following a “surprise visit” to VPL Medical’s manufacturing facilities, the Redwood Receiver concluded the company wouldn’t be able to meet its contractual obligations.
VPL has no more than 1 functioning manufacturing machine, which is old and is not functioning well.
That machine is not capable of manufacturing more than 8,000 to 10,000 masks during any given 8- hour shift.
Three of the other machines are used machinery, lacking key parts, and are non-functional.
The Receiver also relied on a statement from Matthew Peters, VPL’s primary investor, confirming
VPL would not be ready to produce 2 million FDA-compliant masks by the HHS contract deadline.
Jason Cardiff argues the Receiver’s decision was based on the “false claim” that there ‘were not enough production lines available to manufacture masks.’
Simply stated, the Receiver has created a double bind for VPL; that is, you need to meet the HHS deadlines, but don’t provide the funds to pay VPL’s Engineer and fund workers to operate the production lines.
In an attempt to circumvent the court order, Cardiff threw money at the FTC.
VPL and Jason Cardiff made offers to the FTC to settle the case.
The offers are far more than the FTC would get if they destroy VPL.
The FTC however suspected Cardiff wasn’t good for the money, and demanded settlement upfront.
Cardiff took this request personally, claiming
the FTC’s inability to see that some risk might be necessary to fund a settlement illustrates the inflexible attitude of agency officials who are not concerned about the constituency they purportedly serve.
He even went so far as to frame the FTC as standing in the way of ‘HHS’s ability to protect the public from the hazards of the Coronavirus.’
The court rejected Cardiff’s arguments, falling back on the reasoning the VPL Medical preliminary injunction was granted.
Reminiscent of their arguments against the Court’s July 7 Preliminary Injunction, Cardiff and VPL have not provided a legal basis on which to remove the Receiver.
The Receiver has been ordered to “[c]onserve, hold, manage, and prevent the loss of all VPL Assets, and perform all acts necessary or advisable to preserve the value of those Assets.”
Based on the information before the Receiver, the Receiver did not clearly violate its fiduciary duty or its Court-ordered obligation to prevent loss of VPL Assets by spending money to fulfill a contract that appeared to be doomed to fail.
Moreover, removing the Receiver at this stage would cause the estate irreparable harm, as the Court has already amply explained its concerns of asset dissipation (and Cardiff and VPL’s proposed order seeks to pay $20,000 per month to both Bedi and Cardiff, without temporal limitation or explanation).
The Court thus does not find that the equities require terminating the Receiver’s responsibilities over VPL.
Nor have Cardiff and VPL stated with sufficient particularity based on credible facts what the Court should order the Receiver to do in the alternative.
Criticising communication between the parties, concern was expressed over the filing of
legally baseless ad hominem attacks and last-minute applications to the Court.
The Receiver has been ordered to file a report detailing the current status of VPL Medical’s HHS contract.
The court’s order was made on July 16th. As at the time of publication a report hasn’t been filed.
In related news, the FTC has signaled it intends to file for summary judgment with respect to the Redwood case.
This is through a motion requesting permission to file a longer than allowed memorandum in support of summary judgment. The Cardiffs have opposed the motion.
A decision on the FTC’s request remains pending.