Securities and Exchange Commission v. Nadel et al

Filing 1069

RESPONSE to Motion re 1065 MOTION to intervene and to Allow First National Bank of Albany/Breckenridge to go Free of the Stay to Enforce its Security Interest in Assets of Quest Energy Management Group, Inc., and Motion for Immediate Accounting and Memorandum of Law in Suppo - filed by Securities and Exchange Commission. (Levenson, Robert)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
CASE NO. 8:09-cv-87-T-26TBM
ARTHUR NADEL,
SCOOP CAPITAL, LLC,
SCOOP MANAGEMENT, INC.
Defendants,
SCOOP REAL ESTATE, L.P.,
VALHALLA INVESTMENT PARTNERS, L.P.,
VALHALLA MANAGEMENT, INC.,
VICTORY IRA FUND, LTD,
VICTORY FUND, LTD,
VIKING IRA FUND, LLC,
VIKING FUND, LLC, AND
VIKING MANAGEMENT
Relief Defendants.
/
PLAINTIFF’S RESPONSE TO NON-PARTY FIRST NATIONAL BANK
OF ALBANY’S MOTION TO INTERVENE
I. Introduction
Largely for reasons this Court has set forth in prior orders concerning the motions of other
non-parties in this action, Plaintiff Securities and Exchange Commission opposes the Motion of
First National Bank of Albany to Intervene (DE 1065). First, as the Court held previously, it
lacks jurisdiction over a motion to intervene in the Quest Energy Management portion of the
Receivership because of the appeal of the former principals of Quest of the Court’s order
expanding the Receivership over Quest (DE 1040). Second, as this Court previously held under
very similar circumstances, Section 21(g) of the Securities Exchange Act of 1934 (“Exchange

Act”) is a bar to the Bank’s intervention here (DE 207). Finally, as the Receiver’s response to
the instant motion explains in more detail, the motion does not establish the necessary grounds
for intervention under Federal Rule of Civil Procedure 24.
II. Lack Of Jurisdiction
In the Eleventh Circuit, “the filing of a notice of appeal divests the district court of
jurisdiction over the aspects of the case involved in the appeal.” United States v. Tovar-Rico, 61
F.3d 1529, 1532 (11th Cir. 1995) (holding District Court was divested of jurisdiction to try
defendant while government’s appeal of District Court’s motion to suppress evidence was
pending). Put another way, “it is the general rule of this Circuit that the filing of a timely and
sufficient notice of appeal acts to divest the trial court of jurisdiction over the matters at issue in
the appeal, except to the extent that the trial court must act in aid of the appeal.” Shewchun v.
United States, 797 F.2d 941, 942 (11th Cir. 1986) (per curiam) (affirming trial court ruling it
could not rule on a defendant’s motion to correct his criminal sentence while the defendant was
appealing his sentence).

See also Showtime/The Movie Channel, Inc. v. Covered Bridge

Condominium Ass’n, Inc., 895 F.2d 711, 713 (11th Cir. 1990) (while a case is on appeal “the
district court retains only the authority to act in aid of the appeal, to correct clerical mistakes or
to aid in the execution of a judgment that has not been superseded”).
Here, the Bank’s motion directly impacts “matters at issue in the appeal.” The Bank
seeks to intervene to take action against an asset of the Quest Energy Management portion of the
Receivership. The relief the Bank seeks would necessarily affect the rights and holdings of
Quest, as well as other creditors of that company. It is the ownership, holdings and assets of
Quest that are at issue in the pending appeal of the former principals of Quest of the Court’s

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order expanding the Receivership over the company. Thus, the Bank’s motion directly impacts
“matters at issue in the appeal.” 1
In fact, Quest’s former principals filed a very similar motion to intervene and for an
immediate accounting after they had appealed the order expanding the Receivership over the
company (DE 1039). The Court denied that motion, holding it did not have jurisdiction to
entertain it because of the pending appeal (DE 1040). The result should be the same here, and
the Court should deny the Bank’s motion because it does not have jurisdiction over it at this
time.
III. Exchange Act Section 21(g)
Exchange Act Section 21(g) provides in pertinent part that:
. . . no action for equitable relief instituted by the Commission pursuant to the securities
laws shall be consolidated or coordinated with other actions not brought by the
Commission, even though such other actions may involve common questions of fact,
unless such consolidation is consented to by the Commission.
As discussed in earlier responses to attempts by other creditors to intervene in this action,
although the language of the statute does not mention intervention, some federal courts have held
that, nonetheless, the statute operates as an “impenetrable wall” to a third party intervening in a
Commission enforcement action absent the Commission’s consent. See, e.g., SEC v. Wozniak,
No. 92 C 4691, 1993 WL 34702 at *1 (N.D. Ill. Feb. 8, 1993) (denying motion to intervene by
investor who asserted he was a victim of the fraud alleged in the Commission’s complaint
because the Commission would not consent).
This Court eventually agreed in ruling on a motion filed by one of many creditors of the
Receivership estate to intervene to prosecute a foreclosure action (DE 207). There, the Court
1

In response to the Receiver’s motion to dismiss the appeal for lack of jurisdiction, the Eleventh Circuit
recently determined it would carry the jurisdictional question with the rest of the appeal and declined to
dismiss it (DE 1068).

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agreed with the majority of cases holding Section 21(g) bars intervention without Commission
consent, and held the statute acted as an “impenetrable barrier” to that creditor’s intervention in
this case (DE 207 at 2-3).
The circumstances are similar here. As with the creditor in the prior instance, the Bank is
attempting to intervene to take action against an asset of the Receivership. The Bank did not
even address Section 21(g) in its motion, and the Commission does not consent to the Bank’s
intervention. The result should be the same as in the prior instance. If the Court decides it has
jurisdiction over the motion and considers its merits, it should deny the Bank’s motion based on
Exchange Act Section 21(g).
IV. Intervention Under Federal Rule 24
The Commission believes intervention is also not appropriate under Rule 24 of the
Federal Rules of Civil Procedure for a variety of reasons the Receiver intends to address in his
response to this motion. The Commission will defer to the Receiver’s response on this issue.
For all these reasons, the Commission asks the Court to deny the Banks’ motion to
intervene in this matter.

Date: September 19, 2013

Respectfully submitted,
By:

s/Robert K. Levenson____
Robert K. Levenson
Regional Trial Counsel
Florida Bar No. 0089771
Direct Dial: [phone]
E-mail: [e-mail]
Attorney for Plaintiff
Securities and Exchange Commission
801 Brickell Avenue, Suite 1800
Miami, Florida 33131
Telephone: [phone]
Facsimile: [phone]

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CERTIFICATE OF SERVICE
I hereby certify that on September 19, 2013, I electronically filed the foregoing with the
Clerk of the Court by using the CM/ECF system which will send a notice of electronic filing to
the following:
Burton W. Wiand, Esq.
Wiand Guerra King P.L.
3000 Bayport Drive, Suite 600
Tampa, FL 33607
Telephone: [phone]
Facsimile: [phone]
Court-appointed Receiver for Corporate Defendants
and Relief Defendants
Gianluca Morello, Esq.
Wiand Guerra King P.L.
3000 Bayport Drive, Suite 600
Tampa, FL 33607
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Counsel for Receiver Burton W. Wiand
Sean P. Keefe, Esq.
James, Hoyer, Newcomer, Smiljanich & Yanchunis, PA
Suite 550
4830 W Kennedy Blvd
Tampa, FL 33609
813/286-4100
Fax: [phone]
Email: [e-mail]
Counsel for Receiver Burton W. Wiand
Terry Alan Smiljanich, Esq.
James, Hoyer, Newcomer, Smiljanich & Yanchunis, PA
Suite 550
4830 W Kennedy Blvd
Tampa, FL 33609
813/286-4100
Fax: [phone]
Email: [e-mail]
Counsel for Receiver Burton W. Wiand

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Maya M. Lockwood, Esq.
Wiand Guerra King P.L.
3000 Bayport Drive, Suite 600
Tampa, FL 33607
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Co-counsel for Receiver Burton W. Wiand

s/ Robert K. Levenson
Robert K. Levenson, Esq.

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