Simon PLC Attorneys & Counselors – October 2025 Memorandum
Federal Court Receiverships
Troy, Michigan – As is apparent from our recent memorandum, receiverships are the cornerstone of our practice at Simon PLC Attorneys & Counselors. Most often, receiverships are viewed as a creature of state law, such as Michigan’s Receivership Act and its 2018 incorporation of the Uniform Commercial Receivership Act (MCL 554.1011, et. seq.) as well as Michigan Court Rule MCR 2.622. Less well known, however, is the federal counterpart to state law receiverships.
Perhaps most commonly utilized by various “3-letter” federal agencies such as the FTC and SEC, the remedy of a federal court receivership is also available to private litigants under Fed. R. Civ. P. Rule 66 and 28 U.S.C. § 3103, et seq., however it is not commonly used by creditors to enforce their rights. Federal receiverships offer essentially all of the benefits that state court receiverships typically provide, but also some key advantages that may be advantageous in certain cases.
Like his or her state court counterpart, a federal court receiver may sell real property via public or private sale. The sale of real property by public sale is governed by 28 U.S.C. § 2001(a) and § 2002 which require only that the sale be conducted at the courthouse, where the greater part of the property is located; that the sale be upon such terms and conditions as the court directs; and that notice of the sale be published once a week for at least four weeks prior to the sale in at least one newspaper of general circulation in that area.
The sale of real property by private sale is governed by 28 U.S.C. § 2001(a) which requires that the court must appoint three disinterested persons to appraise the property. The selling price must be at least two-thirds of the appraised value and on terms that are published in a newspaper of general circulation at least 10 days before confirmation of the sale.
The primary benefit of proceeding in federal court is the broad reach of federal receivers. This is so because federal courts can empower receivers to act across state lines, wherever assets are located. See 28 U.S.C. § 3103(b); 28 U.S.C. § 754. As a result, if the debtor owns properties, including real estate, in multiple jurisdictions, the federal court is empowered to appoint a single receiver with the power to manage and/or preside over the disposition of secured property located in different states that may have inconsistent or even conflicting statutory provisions regarding the appointment and powers of a receiver.
Typically, state law remedies, including state court receiverships and assignments, are applicable only to assets located in that particular state. Creditors relying on such remedies and needing to take control of assets spread throughout several states are often forced to commence multiple actions, one in each state, and are tasked with coordinating those actions and out-of-state attorneys. Appointment of a receiver in federal court, by contrast, offers a much more streamlined process: A single district court judge, applying one set of receivership rules and law, can exercise jurisdiction over all of the receivership property located in multiple states.
Of course, unlike most state courts which are courts of general jurisdiction, federal courts are courts of limited jurisdiction. In order for a creditor to avail itself of the federal receivership remedy, it must first establish federal court jurisdiction over the matter. Most commonly, this would be via diversity – showing it and the borrowers are domiciled in different states. Being courts of specific, rather than general, jurisdiction, federal courts may also reward the petitioning creditor with much shorter dockets and overall fewer delays. Thus, obtaining jurisdiction may be a potential downside of the multistate jurisdiction from which the power of a federal receiver to extend his or her reach beyond the state in which the appointing court is located.
A federal court receiver may not be the first remedy that springs to mind when seeking to liquidate collateral and it requires the creditor to jump through jurisdictional hoops. When, however, receivership property is spread across multiple states, a receiver appointed by a federal district court can provide a more centralized and efficient means of effectuating liquidation. As always, the most effective remedy depends on the facts and circumstances of your specific need. Simon PLC Attorneys & Counselors is uniquely positioned to provide accurate advice and implement a strategy to maximize recovery whether involving the state or federal court systems.
N.B. Not Legal Advice: Please contact us if you would like to discuss the facts and circumstances of your specific matter. Simon PLC Attorneys & Counselors expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this memorandum. The information contained herein may not reflect current legal developments and is provided without any knowledge as to the recipient’s location, industry, identity or specific circumstances. No recipients of this content, clients or otherwise, should act, or refrain from acting, on the basis of any content included in this memorandum without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the jurisdiction for which the recipient’s legal issue(s) involve. The application and impact of relevant laws varies from jurisdiction to jurisdiction, and our attorneys do not seek to practice law in states, territories and foreign countries where they are not properly authorized to do so.
