Burton Wiand v. Wells Fargo Bank N.A. Inc.

Filing

Opinion issued by court as to Appellant Burton W. Wiand. Decision: Affirmed. Opinion type: Non-Published. Opinion method: Per Curiam. The opinion is also available through the Court's Opinions page at this link http://www.ca11.uscourts.gov/opinions.

Case: 15-10968

Date Filed: 01/26/2017

Page: 1 of 5

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-10968
________________________
D. C. Docket No. 8:12-cv-00557-JDW-EAJ
BURTON W. WIAND, as CourtAppointed Receiver for Scoop Real
Estate, L.P., et al.,

Plaintiff-Appellant,
versus
WELLS FARGO BANK, N.A., INC.,
as Successor-in-interest to Wachovia
Bank, N.A.,
Defendant-Appellee.
_______________________
Appeal from the United States District Court
for the Middle District of Florida
_______________________
(January 26, 2017)
Before TJOFLAT and MARCUS, Circuit Judges, and STEELE *, District Judge.
*

Honorable John E. Steele, Senior United States District Judge for the Middle District of
Florida, sitting by designation.

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PER CURIAM:
I.
Arthur Nadel (Nadel) perpetrated a Ponzi scheme between 1999 and 2009
using six hedge funds: Scoop Real Estate, L.P. (SRE), Valhalla Investment
Partners, L.P., Victory Fund, Ltd., Victory IRA Fund, Ltd., Viking Fund, LLC, and
Viking IRA Fund, LLC. During the course of the Ponzi scheme, Nadel raised, and
stole, millions of dollars from investors by virtue of the hedge funds. Nadel’s
scheme was eventually discovered in 2009. He was indicted and plead guilty to six
counts of securities fraud, one count of mail fraud, and seven counts of wire fraud.
In a related case, Burton Wiand, Esq. (Receiver) was appointed as receiver for the
six hedge funds. SEC v. Nadel, No. 8:09-cv-87-RAL-TBM (M.D. Fla. Jan. 21,
2009) (order appointing receiver).
Nadel was the investment advisor to all six of the hedge funds, and also the
general partner of Victory Fund, LLC, Victory IRA Fund, Ltd., and Scoop Real
Estate, L.P. 1 Two of the hedge funds, Scoop Real Estate, L.P. and Victory Fund,
LLC, were customers of SouthTrust Bank, which merged with Wachovia Bank,
and eventually with Wells Fargo Bank, N.A. (Wells Fargo). Nadel opened a
number of accounts at Wells Fargo, including two personal accounts designated as

1

Scoop Capital, LLC is listed as the general partner in the private placement memoranda.
The private placement memoranda state that Arthur Nadel, as President of Scoop Capital, LLC,
was responsible for the day to day investment decisions of the hedge funds.
2

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d/b/a accounts for Valhalla Investment Partners, L.P. and Viking Fund, LLC. The
d/b/a accounts were opened without authorization on behalf of Valhalla Investment
Partners, L.P. and Viking Fund, LLC and played an integral role in Nadel’s Ponzi
scheme.
Wells Fargo invested in two of the hedge funds pursuant to a separate and
unrelated option contract. Pursuant to these investments, which were redeemed
due to the hedge funds’ inability to produce audited financials, Wells Fargo came
into the possession of private placement memoranda and executive summaries that
indicated high rates of return. Between 2001 and 2008, Wells Fargo issued loans
to Nadel and his entities. As part as the loan qualification process, Wells Fargo
obtained information regarding Nadel’s relationship to the hedge funds and the
business structure of the hedge funds.
The Receiver filed this action on behalf of the six hedge funds2 in the Circuit
Court for the Twelfth Judicial Circuit in and for Sarasota County, Florida against
Wells Fargo, N.A. and Timothy Ryan Best (Best) 3 alleging that Wells Fargo was
on notice of Nadel’s diversion of the hedge funds’ monies and, as such, is liable to
them. Wells Fargo and Best removed the matter to the United States District Court
for the Middle District of Florida, Tampa Division, on the basis of diversity

2

During the course of the proceedings, the claims on behalf of Viking IRA Fund, LLC,
Valhalla Investment Partners, L.P., and Victory IRA Fund, Ltd. were dismissed.
3
Best is a former employee of Wells Fargo.
3

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jurisdiction under 28 U.S.C. § 1332 and federal question jurisdiction under 28
U.S.C. § 1348. The Notice of Removal alleged that Best had been fraudulently
joined in the action in an effort to destroy diversity jurisdiction. After removal,
Receiver moved to remand the action to state court. The District Court denied the
motion to remand, finding subject-matter jurisdiction under 28 U.S.C. § 1348.
Prior to the District Court’s ruling on Wells Fargo’s summary judgment
motion, Receiver stipulated to the dismissal of Best. On February 9, 2015, the
District Court granted Wells Fargo’s motion for summary judgment as to the
Receiver’s remaining claims of negligence, under the Florida Uniform Fraudulent
Transfers Act (FUFTA), and unjust enrichment. Receiver timely appealed the
District Court’s Order under 29 U.S.C. § 1291. Receiver asserts that the District
Court did not have subject-matter jurisdiction, erred in finding no duty owed to
customers and non-customers, and erred in finding that Wells Fargo was not an
initial transferee or, alternatively, that Wells Fargo was entitled to the mere conduit
defense to the FUFTA claim.
A.
The District Court found no need to conduct an analysis of diversity
jurisdiction due to its finding of federal question jurisdiction under 28 U.S.C. §
1348. On appeal, the parties dispute whether there is jurisdiction over this matter
under 28 U.S.C. § 1348. While at the time of removal there was not complete
4

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diversity among the parties due to defendant Best’s presence in the litigation, it is
undisputed that Best was dismissed as a defendant prior to the entry of summary
judgment. Accordingly, there was complete diversity, and therefore subject-matter
jurisdiction, at the time summary judgment was entered. Caterpillar, Inc. v. Lewis,
519 U.S. 61 (1996) (declining to vacate judgment where jurisdictional defect was
cured prior to entry of judgment).
B.
Receiver also challenges on appeal the District Court’s grant of summary
judgment in favor of Wells Fargo as to Receiver’s claims of negligence and under
FUFTA. This Court has extensively reviewed the District Court’s decision, the
underlying record, the parties’ briefs, and the supplemental authority filed by
appellant, and had the benefit of oral argument, and agrees with the District
Court’s decision.
For the reasons stated, the judgment of the District Court is Affirmed.

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