Securities and Exchange Commission v. Nadel et al

Filing 1202

Unopposed MOTION for miscellaneous relief, specifically Permission to Prosecute Appeal by Burton W. Wiand. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D)(Morello, Gianluca)

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, LLC,
Relief Defendants.
____________________________________/
THE RECEIVER’S UNOPPOSED MOTION FOR
PERMISSION TO PROSECUTE APPEAL
Burton W. Wiand, as Receiver (the “Receiver”) for Valhalla Investment Partners,
L.P.; Viking Fund, LLC; Viking IRA Fund, LLC; Victory Fund, Ltd.; Victory IRA Fund,
Ltd.; and Scoop Real Estate, L.P. (collectively, the “Hedge Funds”), moves this Court for
permission to proceed with an appeal pro bono of an order (Doc. 150) (the “Order”) entered
by the Honorable Elizabeth A. Kovachevich on June 23, 2015, incorporating and adopting a
report and recommendation (Doc. 147) (the “Second R&R”) issued by Magistrate Judge

Mark A. Pizzo in Wiand, as Receiver v. Dancing $, Case No. 8:10-cv-92-T-17MAP (M.D.
Fla.). The Order awarded the Receiver prejudgment interest from the date of his Complaint
against Dancing $ instead of from the dates of the pertinent fraudulent transfers to Dancing $
as the Receiver had requested in accordance with Florida law. The Second R&R and Order
are attached as Exhibits A and B.
“It is a well-established rule that as an officer of the court, ‘a receiver may not
ordinarily appeal without first obtaining authority from his creator, the court appointing
him.” Holland v. Sterling Enters., Inc., 777 F.2d 1288, 1291-92 (7th Cir. 1985) (quoting
Hatten v. Vose, 156 F.2d 464, 468 (10th Cir. 1946)). The Receiver requests the Court
authorize him to proceed with this appeal because his arguments are meritorious. Instead of
restating them at length here, however, the Receiver has attached his initial appellate brief to
this motion as Exhibit C. As set forth in that Exhibit, this Court previously authorized the
Receiver’s earlier cross-appeal of the Court’s earlier denial of any prejudgment interest to the
Receiver.

The Receiver prevailed on that appeal (both on his cross-appeal relating to

prejudgment interest and on Dancing $’s appeal). See Wiand v. Dancing $, LLC, 578 Fed.
App’x 938, 947 (11th Cir. 2014), a copy of which is attached as Exhibit D. The Eleventh
Circuit found the District Court abused its discretion by denying the Receiver any
prejudgment interest.
On remand, the District Court awarded prejudgment interest to the Receiver but only
from the date of the Receiver’s complaint rather than from the date of the fraudulent
transfers. As Exhibit C explains, the Receiver believes the Second R&R and Order commit
the same reversible error as the initial R&R and order because the default rule under Florida

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law awards prejudgment interest from the date of loss (here, the date of the fraudulent
transfers) and a court may vary from the default rule only if it finds the circumstances of the
case fall within one of the enumerated exceptions identified in Blasland, Bouck & Lee, Inc. v.
City of N. Miami, 283 F.3d 1286, 1297 (11th Cir. 2002).

Here, the Second R&R

acknowledges that none of the Blasland exceptions apply, yet it nevertheless strayed from the
default Florida rule of awarding prejudgment interest from the date of loss. The Receiver
believes this was reversible error.
If the Court grants this motion, the Receiver will proceed with the appeal. If the
Court denies this motion, the Receiver will dismiss the appeal. The Receiver and his counsel
will prosecute this appeal pro bono because the dollar amount at issue is relatively small, but
they believe the partially unfavorable precedent set by the Order is significant and warrants
appellate review. A receiver’s ability to recover prejudgment interest in “clawback” cases
from the date of the pertinent fraudulent transfer is important because not only is it consistent
with Florida law, but also because it incentivizes settlement and conserves receivership
resources, ultimately resulting in a more favorable recovery for defrauded, losing investors.
For example, before the Receiver filed any lawsuits here, he afforded potential clawback
defendants the opportunity to settle by returning 90% of their false profits – i.e., a 10%
discount on their false profits – and by not having to pay prejudgment interest. Depending
on the timing of the pertinent fraudulent transfers, not requiring a potential clawback
defendant to pay prejudgment interest is a significant concession and a strong incentive for
settlement. Many potential defendants accepted the Receiver’s offer. Many others did not,
resulting in extensive litigation and the depletion of Receivership resources. By limiting the

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amount of prejudgment interest the Receiver can collect to the amount that accrues only after
the filing of a complaint, the Order sets a precedent that in many instances will greatly reduce
potential defendants’ incentive to settle in future equity receiverships and result in smaller
recoveries for defrauded, losing investors.
CONCLUSION
For the foregoing reasons, the Receiver respectfully asks the Court to grant him
permission to prosecute pro bono an appeal of the Order.
LOCAL RULE 3.01(g) CERTIFICATE OF COUNSEL
Counsel for the Receiver has conferred with counsel for the Securities and Exchange
Commission, and the Commission has no objection to the requested relief.

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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on September 28, 2015, I electronically filed the
foregoing with the Clerk of the Court by using the CM/ECF system.
s/Gianluca Morello
Gianluca Morello, FBN 034997
[e-mail]
Michael S. Lamont, FBN 0527122
[e-mail]
Jared J. Perez, FBN 0085192
[e-mail]
WIAND GUERRA KING P.A.
5505 West Gray Street
Tampa, FL 33609
Tel.: [phone]
Fax: [phone]
Attorneys for the Receiver, Burton W. Wiand

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