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)

EXHIBIT C

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IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_________________________
Case No. 15-13410-F
_________________________
BURTON W. WIAND, as Receiver for Valhalla Investment Partners, L.P.; Viking
Fund, LLC; Viking IRA Fund, LLC; Victory Fund, Ltd.; Victory IRA Fund, Ltd.;
Scoop Real Estate, L.P.; and Traders Investment Club,
Appellant,
v.
DANCING $, LLC,
Appellee.
___________________________________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
___________________________________________
INITIAL BRIEF OF APPELLANT
BURTON W. WIAND, AS RECEIVER
___________________________________________
Gianluca Morello, FBN 034997
[e-mail]
WIAND GUERRA KING P.A.
5505 West Gray Street
Tampa, FL 33609
Tel.: [phone]
Fax: [phone]
Attorney for Appellant Receiver, Burton W.
Wiand

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CERTIFICATE OF INTERESTED PERSONS AND
CORPORATE DISCLOSURE STATEMENT
Appellant Burton W. Wiand as 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. (the “Hedge Funds”), by and through his
undersigned counsel and pursuant to Fed. R. App. P. 26.1 and 11th Cir. R. 26.1-1,
certifies that no publicly held corporation owns 10% or more of the Hedge Funds.
Further, the Receiver submits this Certificate of Interested Persons:
1.

Bleil, Joshua

2.

Dancing $, LLC

3.

Kovachevich, Elizabeth A. (District Judge, Middle District of Florida)

4.

Lamont, Michael S.

5.

Lazzara, Richard A. (District Judge, Middle District of Florida)

6.

Levenson, Robert

7.

Masel, Scott A.

8.

McCoun, III, Thomas B. (Magistrate Judge, Middle District of
Florida)

9.

Morello, Gianluca

10.

Nadel, Arthur (Deceased)

11.

Perez, Jared J.

12.

Pizzo, Mark A. (Magistrate Judge, Middle District of Florida)
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13.

Scoop Capital, LLC

14.

Scoop Management, Inc.

15.

Scoop Real Estate, L.P.

16.

Securities and Exchange Commission

17.

Stillman, Philip H.

18.

Stillman & Associates

19.

The Ticktin Law Group, P.A.

20.

Valhalla Investment Partners, L.P.

21.

Valhalla Management, Inc.

22.

Victory Fund, Ltd.

23.

Victory IRA Fund, Ltd.

24.

Viking Fund, LLC

25.

Viking IRA Fund, LLC

26.

Viking Management, LLC

27.

Wiand, Burton

28.

Wiand Guerra King P.A.

29.

Yip, Maria M.

30.

YIPCPA, LLC d/b/a Yip Associates

31.

Zamorano, Andre

ii

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STATEMENT REGARDING ORAL ARGUMENT
Appellant Burton W. Wiand, as Receiver, requests oral argument, as the
appeal concerns precedential matters regarding prejudgment interest that will impact
this and future equity receiverships in this Circuit.

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TABLE OF CONTENTS

TABLE OF CITATIONS……………………………...…………………………...v
SUBJECT MATTER AND APPELLATE JURISDICTION ……………….vi-vii
ISSUE PRESENTED…………………………………………………………..viii
STATEMENT OF THE CASE …………………………………………………..1
SUMMARY OF THE ARGUMENT …………………………………………….9
ARGUMENT ………………………………………………………………………9
I.

THIS COURT DIRECTED THE DISTRICT COURT TO “IDENTIFY AND
APPLY THE BLASLAND FACTORS” ON REMAND ....................................9

II.

THE SECOND R&R’S INTERPRETATION OF BLASLAND IS
INCORRECT ...................................................................................................12
A.

The Second R&R Incorrectly Found The Blasland Factors Are Merely
“Illustrative” .......................................................................................................... 13

B.

The Second R&R Incorrectly Found That If The Blasland Factors Were Not
Merely “Illustrative,” Then This Court Would Have “Simply Instructed The
[District] Court To Compute The Sum” Of Pre-Judgment Interest To Award To
The Receiver ......................................................................................................... 14

C.

This Court Has Already Rejected The Evaluation Of The Equities Underlying The
Second R&R’s Recommendation, Which The District Court Adopted ............... 15

III. IF THE BLASLAND FACTORS DO NOT APPLY, THE RECEIVER IS
ENTITLED TO PREJUDGMENT INTEREST FROM THE DATE OF LOSS
UNDER THE GENERAL RULE ....................................................................17
CONCLUSION ........................................................................................................19

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TABLE OF CITATIONS
Cases
Allstate Ins. Co. v. Palterovich,
653 F. Supp. 2d 1306 (S.D. Fla. 2009) .................................................................................... 18
Alvarado v. Rice,
614 So. 2d 498 (Fla. 1993)......................................................................................................... 3
Argonaut Ins. Co. v. May Plumbing Co.,
474 So. 2d 212 (Fla. 1985)................................................................................................... 3, 10
Blasland, Bouck & Lee, Inc. v. City of N. Miami,
283 F.3d 1286 (11th Cir. 2002) ........................................................................................ passim
Donell v. Kowell,
533 F.3d 762 (9th Cir. 2008) ................................................................................................... 18
Florida Farm Bureau Cas. Ins. Co. v. Patterson,
611 So. 2d 558 (Fla. 1st DCA 1992) ....................................................................................... 18
Greenberg v. Grossman,
683 So. 2d 156 (Fla. 3d DCA 1996) ........................................................................................ 18
In re International Administrative Services, Inc.,
408 F.3d 689 (11th Cir. 2005) ................................................................................................. 18
KH Outdoor, LLC v. City of Trussville,
458 F.3d 1261 (11th Cir. 2006) ................................................................................................. 8
Miller v. Reinhart,
548 So. 2d 1174 (Fla. 4th DCA 1989) ..................................................................................... 18
Montage Group, Ltd. v. Athle-Tech Computer Sys., Inc.,
889 So. 2d 180 (Fla. 2d DCA 2004) ........................................................................................ 18
Sargent v. Midlantic Nat. Bank,
358 So. 2d 855 (Fla. 2d DCA 1978) ........................................................................................ 18
Vining v. Martyn,
660 So. 2d 1081 (Fla. 4th DCA 1995) ..................................................................................... 18
Wiand v. Dancing $, LLC,
578 Fed. App’x 938 (11th Cir. 2014) ............................................................................... passim
Wiand v. Lee,
753 F.3d 1194 (11th Cir. 2014) ........................................................................................ passim
Wiand v. Meeker,
572 Fed. App’x 689 (11th Cir. 2014) ...................................................................................... 11

Statutes
Fla. Stat[s]. § 726.105(1)(a) ............................................................................................................ 2

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SUBJECT MATTER AND APPELLATE JURISDICTION
This is a direct appeal from a civil case. On January 23, 2013, the United
States District Court for the Middle District of Florida (the “District Court”)
adopted (Doc.1 128) a Report and Recommendation (Doc. 121), recommending that
Burton W. Wiand as Receiver’s (the “Receiver”) motions for summary judgment be
granted. A final judgment was entered against Appellee Dancing $, LLC (“Dancing
$”), on January 24, 2013 (Doc. 129). The District Court had subject matter
jurisdiction pursuant to 15 U.S.C. § 78aa, 28 U.S.C. §§ 754 and 1692, and principles
of ancillary or supplemental jurisdiction under 28 U.S.C. § 1367.
On February 22, 2013, Dancing $ filed a notice of appeal (Doc. 131), and the
Receiver filed a notice of cross-appeal (Doc. 132). Pursuant to pertinent law, the
Receiver then moved for permission from the District Court in S.E.C. v. Nadel et al.,
Case No. 8:09-cv-87-T-26TBM (M.D. Fla.) (the “SEC Action”) – the action in
which the Receiver was appointed – to prosecute the cross-appeal, and the District
Court granted the Receiver’s motion (SEC Action Docs.2 981, 982).
On August 27, 2014, this Court affirmed the portion of the District Court’s
order which ruled in favor of the Receiver on his fraudulent transfer claims, but it

1

“Doc.” refers to the docket number of filings in the District Court in this case.

2

“SEC Action Doc.” refers to the docket number of filings in the District Court in
the SEC Action.
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reversed and remanded the District Court regarding its refusal to award the Receiver
prejudgment interest. On remand, the District Court adopted a second Report and
Recommendation (Docs. 147, 150) which only awarded the Receiver prejudgment
interest from the date he filed his complaint in this action (as opposed to the earlier
dates of the pertinent fraudulent transfers). A final judgment was entered against
Dancing $ on July 14, 2015 (Doc. 151) in the amount of $17,724.12, and the
Receiver filed a timely notice of appeal on July 28, 2015 (Doc. 152).

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ISSUE PRESENTED
1.

On remand, did the District Court comply with Florida law and this Court’s

instructions in Wiand v. Dancing $, LLC, 578 Fed. App’x 938, 947 (11th Cir. 2014),
to “identify and apply the [Blasland, Bouck & Lee, Inc. v. City of N. Miami, 283 F.3d
1286, 1297 (11th Cir. 2002)] factors in order to determine whether equitable
considerations justify a denial or reduction of prejudgment interest to the Receiver
in light of Florida’s general rule that prejudgment interest is an element of pecuniary
damages” ?

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STATEMENT OF THE CASE
Relevant Procedural History
This is one of numerous “clawback” cases brought by the Receiver against
recipients of fraudulent transfers in the aftermath of a massive Ponzi scheme
perpetrated by Arthur Nadel (“Nadel”). See generally S.E.C. v. A. Nadel et al., Case
No. 8:09-cv-87-T-26TBM (M.D. Fla.); United States v. A. Nadel., Case No. 1:09cr-00433-JGK (S.D.N.Y.). The majority of clawback defendants, like Dancing $,
were investors who received from the scheme more money than they “invested” (i.e.,
they enjoyed “false profits”).
The Receiver brought this case in his capacity as court-appointed Receiver for
the Hedge Funds. The Receiver filed a partial summary judgment motion (Doc. 30)
in the District Court on March 23, 2012, seeking to establish that Nadel perpetrated
a Ponzi scheme through the Hedge Funds. Because of the case’s procedural posture,
on September 28, 2012, the Receiver filed a second summary judgment motion
(Doc. 97) seeking to avoid the fraudulent transfers Dancing $ received from the
scheme under the Florida Uniform Fraudulent Transfer Act (“FUFTA”) or claims
for unjust enrichment and also seeking prejudgment interest (id. at 20-21).
On December 13, 2012, Magistrate Judge Mark A. Pizzo issued a Report and
Recommendation (Doc. 121) (the “First R&R”) recommending the District Court
grant the Receiver’s summary judgment motions with respect to (1) the existence of
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“a massive Ponzi scheme” perpetrated through the Hedge Funds, and (2) the
Receiver’s FUFTA claim under Section 726.105(1)(a). 3 (The R&R explains the
procedural history of the Receiver’s motions at pages 4 through 9.) Of relevance to
this appeal, the First R&R also recommended that the District Court deny in full the
Receiver’s request for prejudgment interest on his successful FUFTA claim. Id. at
30-31. Specifically, it “balance[ed] the equities at hand” and concluded they
weighed in favor of Dancing $ and against an award of prejudgment interest because,
although Dancing $ was a “net winner” compared to hundreds of investors who lost
approximately $168 million in Nadel’s Ponzi scheme, it had “suffered enough.” Id.
at 30-31.
The parties filed objections to the R&R and responses to those objections (see
Docs. 123, 124, 126, 127), but the District Court adopted the R&R on January 23,
2013, and incorporated the R&R’s reasoning into its order (Doc. 128). A final
judgment (Doc. 129) was entered against Dancing $ on January 23, 2013, in the
amount of $107,172.11, which did not include any prejudgment interest. Dancing $
appealed the summary judgment (Doc. 131), and the Receiver cross-appealed the
prejudgment interest determination (Doc. 132).

3

The District Court had referred the Receiver’s summary judgment motions to the
Magistrate Judge for report and recommendation (see Docs. 121, 128).
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On appeal, the Receiver explained that prejudgment interest is “merely
another element of pecuniary damages” in Florida. Argonaut Ins. Co. v. May
Plumbing Co., 474 So. 2d 212, 214 (Fla. 1985). Under this “loss theory,” “the loss
itself is a wrongful deprivation by the defendant of the plaintiff’s property.” Id. at
215. Accordingly, “it is well settled that a plaintiff is entitled to prejudgment interest
when it is determined that the plaintiff has suffered an actual, out-of-pocket loss at
some date prior to the entry of judgment.” Alvarado v. Rice, 614 So. 2d 498, 499
(Fla. 1993). Because Florida does not follow the “penalty theory” of prejudgment
interest, Dancing $’s purported suffering was irrelevant to the Receiver’s entitlement
to prejudgment interest. The Receiver further explained that the equitable factors
set forth in Blasland are the sole equitable factors that justify departure from
Florida’s general rule in favor of prejudgment interest, and they either did not apply
here or they favored the Receiver.
The Eleventh Circuit agreed and, citing another clawback case in which the
Receiver prevailed on appeal, determined the Magistrate Judge abused his
discretion:
In [Wiand v. Lee, 753 F.3d 1194 (11th Cir. 2014)], the Magistrate Judge
in the report and recommendation adopted by the District Court “stated
that Florida law considers prejudgment interest an element of pecuniary
damages and stated the equitable factors in Blasland that would warrant
a court in departing from the general rule that prejudgment interest is
to be awarded.” Id. at 1204. But the rationale the Magistrate Judge set
out “fail[ed] to identify and apply the equitable factors considered in
Blasland to the decision to deny prejudgment interest” and thus
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committed an abuse of discretion. Id. at 1205. We noted several cases
indicating that Florida courts award prejudgment interest “as a matter
of course.” Id. (citations omitted). Accordingly, we reversed the
District Court’s judgment denying prejudgment interest and instructed
that, “[u]pon remand, the magistrate judge must cite specific equitable
considerations recognized under Florida law that would result in a
different outcome than the cases” that routinely award prejudgment
interest on FUFTA and unjust enrichment claims. Id.
Here, the Magistrate Judge’s R & R, which the District Court adopted,
‘recommends denying prejudgment interest in virtually identical
language to that the Magistrate Judge used in recommending a denial
of prejudgment interest in Lee—only the defendants’ names differ.
Thus, following Lee, we must reverse the District Court’s judgment
denying prejudgment interest and remand. Upon remand, the District
Court must identify and apply the equitable factors set forth in Blasland
in order to explain why a denial of prejudgment interest is warranted in
light of cases which indicate that Florida courts award it routinely.
Dancing $, 578 Fed. App’x at 947 (emphasis added). In short, the Eleventh Circuit
expressly directed the District Court to “identify and apply the equitable factors set
forth in Blasland in order to explain why a denial of prejudgment interest is
warranted” (id. (emphasis added)), but as explained below, the Magistrate Judge’s
Report and Recommendation on remand (Doc. 147) (the “Second R&R”)
admittedly identified and applied equitable factors outside those set forth in Blasland
to improperly reduce the Receiver’s prejudgment interest award.
Specifically, after remand and additional briefing, the Magistrate Judge issued
the Second R&R, recommending the Court award the Receiver prejudgment interest
from the date of the complaint as opposed to the dates of the fraudulent transfers to
Dancing $. Doc. 147 at 12. In making that recommendation, the Second R&R
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described this Court’s instruction to “identify and apply the equitable factors set
forth in Blasland in order to explain why a denial of prejudgment interest is
warranted” (578 Fed. App’x at 947 (emphasis added)) as “enigmatic,”
“uninformative,” and “an impossible exercise” (id. at 9, 8, 3 (respectively)). The
Second R&R recognized the facts of this case do not fall within the Blasland factors
for departing from Florida’s general rule of awarding prejudgment interest from the
date of loss, yet it nevertheless did not apply the general rule. Instead, in direct
conflict with this Court’s remand instructions and Florida law, the Second R&R
concluded that “Blasland clearly did not limit the equitable factors a court can
consider to just those Blasland identified” (Id. at 3), and that “[a]t most, Blasland’s
list presents illustrative examples where courts have considered particular
circumstances for deciding if the equities outweigh the proposition that money over
time creates value and that value should be a compensable feature of the winning
party’s pecuniary damages.” Id. at 4. Based on factors admittedly not contemplated
in Blasland, the Second R&R recommended limiting the Receiver to prejudgment
interest from the date of the complaint instead of from the date of the fraudulent
transfers.
The Receiver filed an objection to the Second R&R, but the District Court
adopted its recommendation in full. As a result, a final judgment was entered against
Dancing $ on July 14, 2015 (Doc. 151) in the amount of $17,724.12, representing
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prejudgment interest only from the date of the complaint, and the Receiver filed a
timely notice of appeal on July 28, 2015 (Doc. 152).
Factual Background
As the District Court correctly determined based on the Receiver’s
“overwhelming” record evidence, Nadel operated a “massive Ponzi scheme”
through the Hedge Funds. Doc. 121 at 1; see Doc. 128; Dancing $, 578 Fed. App’x
at 945-46. As part of that scheme, Nadel caused the Hedge Funds to transfer money
to investors “with the actual intent to hinder, delay, or defraud [any creditor] as
required by Fla. Stat[s]. § 726.105(1)(a).” Doc. 121 at 31. On January 21, 2009, the
District Court appointed the Receiver in the SEC Action and charged him with,
among other things, recovering those fraudulent transfers for the benefit of the
Hedge Funds and their creditors, including defrauded investors who collectively lost
approximately $168 million in the scheme. See SEC Action Doc. 8 (initial order
appointing Receiver). Pursuant to this mandate, the Receiver identified “winning”
investors like Dancing $ who enjoyed false profits, or “profiteers” – i.e., those that
received more money from the scheme than they “invested” in it – and demanded
they return their false profits. Numerous profiteers settled with the Receiver pre-suit
and returned the vast majority of their false profits.4 The Receiver then sued in the

4

See generally orders approving settlements at SEC Action Docs. 106, 110, 114,
126, 134, 136, 138, 143, 150, 159, 187, 197, 203, 210, 212, 219, 220, 221, 222, 226,
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District Court profiteers who refused to settle, like Dancing $ (which totaled
approximately 150 cases), and the vast majority of those actions were settled.5 The
money the Receiver recovered through the settlements (and from other sources) is
being distributed pro rata to the hundreds of investors who lost money in the scheme
(the “losing investors”) through a claims process established in the SEC Action.
SEC Action Docs. 675, 776. To date, as a result of the Receiver’s efforts, those
losing investors have recovered approximately 44.37% of their losses through the
claims process, but they almost certainly will never be made whole. See SEC Action
Docs. 945, 946.
As previously noted, Dancing $ was among the profiteers the Receiver sued.
Specifically, Dancing $ “invested” a total of $675,000 in the scheme in 2006 and
2007 by “investing” in Hedge Funds Valhalla Investment Partners, L.P.
(“Valhalla”), and Scoop Real Estate, L.P. (“Scoop Real Estate”). Doc. 97 at 9-11;
see Doc. 121 at 3. It received purported “distributions” from those Hedge Funds in

228, 243, 261, 270, 283, 285, 290, 295, 306, 307, 308, 310, 318, 319, 334, 336, 349,
364, 373, 385, 394, 397, 415, 452, 634, 656, and 885.
5

See generally orders approving settlements at SEC Action Docs. 339, 340, 347,
348, 359, 361, 366, 368, 375, 377, 379, 381, 383, 389, 399, 401, 404, 405, 407, 409,
412, 413, 428, 429, 442, 444, 447, 469, 488, 489, 504, 508, 514, 515, 517, 525, 526,
527, 528, 529, 530, 531, 533, 550, 551, 552, 559, 560, 561, 573, 574, 579, 584, 586,
590, 592, 594, 596, 598, 602, 604, 606, 611, 613, 624, 628, 636, 638, 642, 644, 649,
654, 661, 808, 830, 865, 881, 889, 896, 918, 923, 957, 962, 963, 1014, 1015, and
1032.
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2008 totaling $782,172.11. Id. As such, Dancing $ received from the scheme
$107,172.11 more than it “invested,” which represents its false profits. Id. Because
Dancing $ received those transfers in 2008, it enjoyed the use of money that did not
rightfully belong to it for more than 7 years (and counting). The Receiver obtained
a judgment in the amount of Dancing $’s false profits, but so far the District Court
has only awarded him $17,724.12 of the $37,967.48 in prejudgment interest to which
he is entitled. Regardless of the amount of prejudgment interest due, Dancing $ has
made no attempt to satisfy the judgment against it.
Standard of Review
De novo review for legal error applies to the legal issue of whether the District
Court complied with this Court’s instructions in Wiand v. Dancing $, LLC, 578 Fed.
App’x 938, 947 (11th Cir. 2014), to “identify and apply the Blasland, factors in order
to determine whether equitable considerations justify a denial or reduction of
prejudgment interest to the Receiver in light of Florida’s general rule that
prejudgment interest is an element of pecuniary damages.” See KH Outdoor, LLC
v. City of Trussville, 458 F.3d 1261, 1266 (11th Cir. 2006). Abuse of discretion
review applies to whether the District Court erred in weighing the equities and
concluding the Receiver was only entitled to prejudgment interest on his successful
fraudulent transfer claim from the date of the complaint. Blasland, Bouck & Lee,
Inc. v. City of N. Miami, 283 F.3d 1286, 1298 (11th Cir. 2002).
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SUMMARY OF THE ARGUMENT
The Second R&R failed to follow Florida law and this Court’s instructions on
remand. Instead of considering only the factors set forth in Blasland, it admittedly
considered other factors and evaluated the purported equitable underpinnings of
clawback cases arising from Ponzi scheme enforcement actions, and concluded the
Receiver is only entitled to prejudgment interest from the date of the complaint. As
explained below, because, as the Second R&R acknowledges, the Blasland factors
do not apply here, Florida law requires the District Court apply Florida’s general
rule awarding the Receiver prejudgment interest from the date of loss – i.e., the dates
of the fraudulent transfers to Dancing $.
ARGUMENT
I.

THIS COURT DIRECTED THE DISTRICT COURT TO “IDENTIFY
AND APPLY THE BLASLAND FACTORS” ON REMAND
In both Lee and Dancing $, this Court was clear that “Florida endorses the

‘loss theory’ of prejudgment interest according to which prejudgment interest is
‘merely another element of pecuniary damages.’” Lee, 753 F.3d at 1204 (quoting
Argonaut Ins. Co., 474 So. 2d at 214). “‘[W]hen a verdict liquidates damages on a
plaintiff’s out-of-pocket, pecuniary losses, plaintiff is entitled, as a matter of law, to
prejudgment interest at the statutory rate from the date of that loss.’” Id. (quoting
Argonaut, 474 So. 2d at 215); see Dancing $, 578 Fed. App’x at 946.

9

“In

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determining whether to award prejudgment interest or to reduce the amount of
prejudgment interest awarded, a court must consider three factors:
(1) in matters concerning government entities, whether it would be
equitable to put the burden of paying interest on the public in choosing
between innocent victims; (2) whether it is equitable to allow an award
of prejudgment interest when the delay between injury and judgment is
the fault of the prevailing party; (3) whether it is equitable to award
prejudgment interest to a party who could have, but failed to, mitigate
its damages.
Dancing $, 578 Fed. App’x at 946 (citing Blasland, 283 F.3d at 1297).
This Court was clear in both Lee and Dancing $ that, in deciding whether to
depart from Florida’s general rule, the Court’s equitable inquiry is limited to the
three exceptions set forth in Blasland:
•

In Blasland, “this court considered three factors that should guide a
court’s discretion in deciding whether to award prejudgment interest on
equitable grounds.… Upon a consideration of these factors, a district
court may decide not to award prejudgment interest or to reduce the
amount of interest.” Lee, 753 F.3d at 1204 (emphasis added).

•

“The court finds the magistrate judge’s rationale to be an abuse of
discretion because it fails to identify and apply the equitable factors
considered in Blasland to the decision to deny prejudgment interest.”
Id. at 1205 (emphasis added).

•

We “REVERSE and REMAND with instructions for the court to apply
the factors in Blasland to determine whether equitable considerations
justify denying or reducing a prejudgment interest award in light of
Florida’s general rule that prejudgment interest is an element of
pecuniary damages.” Id. at 1205 (underlined emphasis added; bold in
original).

•

“But the rationale the Magistrate Judge set out ‘failed to identify and
apply the equitable factors considered in Blasland to the decision to
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deny prejudgment interest’ and thus committed an abuse of discretion.”
Dancing $, 578 Fed. App’x at 947 (quotation omitted; emphasis added).
•

“Upon remand, the District Court must identify and apply the equitable
factors set forth in Blasland in order to explain why a denial of
prejudgment interest is warranted in light of cases which indicate that
Florida courts award it routinely.” Id. (emphasis added).

•

We “REVERSE and REMAND the denial of prejudgment interest with
instructions that the District Court identify and apply the Blasland
factors in order to determine whether equitable considerations justify a
denial or reduction of prejudgment interest to the Receiver in light of
Florida’s general rule that prejudgment interest is an element of
pecuniary damages.” Id. at 947-48 (emphasis added).

In direct conflict with this Court’s unequivocal and repeated 6 statements
limiting pertinent considerations to the three equitable factors identified in Blasland,
the Second R&R more broadly concluded that “Blasland clearly implied that its list
was not exhaustive as it considered a fourth factor that its Florida survey of cases
had not uncovered (i.e., the [defendant] … had a well-founded malpractice claim
against Blasland which precipitated the [defendant’s] … breach).” Doc. 147 at 4.
But the Second R&R failed to appreciate that Blasland only considered the
malpractice claim because it overlapped two recognized factors: failure to mitigate
damages and unwarranted procedural delay. 283 F.3d at 1299. This Court explained

6

See also Wiand v. Meeker, 572 Fed. App’x 689 (11th Cir. 2014) (“For the reasons
set forth in Section II.B of this Court’s Lee opinion, we find that the district court
abused its discretion in denying Wiand’s request for prejudgment interest in the
instant case and, therefore, reverse and remand for the lower court to apply the
factors in Blasland to determine whether equitable considerations justify denying or
reducing a prejudgment interest award in this case.”).
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that like the malpractice that caused the Blasland defendant to breach its contract,
“those two factors focus on the fault of the victim in either creating the damages or
causing delay in recovering them.” Id. In other words, the Court’s consideration of
the malpractice claim in Blasland was encompassed by the three factors recognized
by Florida law as possible bases for departing from the general rule awarding
prejudgment interest from the date of loss. In contrast, the Second R&R not only
failed to explain how the factors it relied upon overlapped any of the Blasland
factors, but it effectively acknowledged there was no overlap. Doc. 147 at 3 (finding
Blasland factors “uninformative” because “our circumstances are unlike those
Florida courts see when deciding awards of prejudgment interest”). Blasland and
this Court’s repeated statements in Lee and Dancing $ are clear that in the absence
of any of the three factors excerpted above, “[t]he general rule is that prejudgment
interest is an element of pecuniary damages, and Florida courts have awarded
prejudgment interest on FUFTA claims and on unjust enrichment claims as a matter
of course.” Lee, 753 F.3d at 1205.
II.

THE SECOND R&R’S INTERPRETATION OF BLASLAND IS
INCORRECT
In concluding that Blasland’s equitable factors were not exhaustive, for

several reasons the Second R&R found this Court could not have meant what it
(repeatedly and unequivocally) held. None of those reasons, however, support the
Second R&R’s conclusion.
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A.

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The Second R&R Incorrectly Found The Blasland Factors Are
Merely “Illustrative”

The Second R&R concluded this Court could not have meant what it held
because the Blasland exceptions to Florida’s general rule are merely an “illustrative
list” of “examples.” Doc. 147 at 3, 4. But that theory was the lynchpin of the First
R&R’s conclusion that the District Court could deviate from the general rule
entitling the Receiver to prejudgment interest from the date of each pertinent
fraudulent transfer (see generally Doc. 121 at 30-31), and this Court reversed that
conclusion. In fact, the Second R&R reused the exact language this Court quoted in
holding the District Court abused its discretion by denying prejudgment interest:
Here, the magistrate judge stated that Florida law considers
prejudgment interest an element of pecuniary damages and stated the
equitable factors in Blasland that would warrant a court in departing
from the general rule that prejudgment interest is to be awarded.
However, the magistrate judge then stated “[t]he list is obviously
illustrative as each case is different” ….
The court finds the magistrate judge’s rationale to be an abuse of
discretion because it fails to identify and apply the equitable factors
considered in Blasland to the decision to deny prejudgment interest.
Lee, 753 F.3d at 1204-05 (emphasis added). This Court’s instructions were clear:
the District Court was required to apply only the Blasland factors, and any departure
from those factors is an abuse of discretion. As discussed below in Section III, if
none of the Blasland factors applies, there is no discretion to depart from Florida’s
general rule requiring an award of prejudgment interest from the date of loss.

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B.

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The Second R&R Incorrectly Found That If The Blasland Factors
Were Not Merely “Illustrative,” Then This Court Would Have
“Simply Instructed The [District] Court To Compute The Sum”
Of Pre-Judgment Interest To Award To The Receiver

According to the Second R&R, “[t]he Eleventh Circuit’s remand cannot be
read to say that the general rule is anything other than general, or to say that this
Court must rigidly adhere to the general rule thereby entitling the Receiver to the
interest calculated from the date of the clawed-back transfers. If so, the remand
would have simply instructed the Court to compute the sum.” Doc. 147 at 8; see id.
at 9 (“But, if the Eleventh Circuit had determined as much, it would have so stated
in its opinion and remanded the matter solely for the Court’s computation.”). That
conclusion, however, is not supported by this Court’s decision, which remanded so
the District Court could specifically consider and explain whether any of the
Blasland factors applied since the First R&R did not do so.
The First R&R contained only two paragraphs on prejudgment interest. See
Doc. 121 at 30-31. Those two paragraphs recognized the Blasland factors – “the
extent the plaintiff’s conduct contributed to the delay between the injury and
judgment; whether the prevailing party failed to mitigate damages; in matters
involving public bodies, and in choosing between innocent victims, it is inequitable
to put the burden of paying interest on the public” – but contained no analysis or
findings of whether any of those factors applied. Id. Instead, the First R&R more
generally stated that “[i]n view of these principles, I conclude that to exact
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prejudgment interest from Dancing $ would be inequitable.” Doc. 121 at 31.
Because the First R&R did not “identify and apply the Blasland factors,” this Court
reversed and remanded so the District Court could do so. Dancing $, 578 Fed. App’x
at 947-48. That this Court remanded for the District Court to apply those factors
rather than to simply “compute the sum” of prejudgment interest, does not justify
the Second R&R’s conclusion that the District Court could consider factors beyond
those identified in Blasland.
C.

This Court Has Already Rejected The Evaluation Of The Equities
Underlying The Second R&R’s Recommendation, Which The
District Court Adopted

After concluding the Blasland factors are “illustrative,” and this Court could
not have meant otherwise, the Second R&R examined “[t]he judicial evolution for
dealing with massive Ponzi schemes halted by enforcement actions” and concluded
that “to apply Florida’s prejudgment presumption across the board to all transferees
would distort the equitable goal of the enforcement action, particularly when the
character of the transferee, which FUFTA takes into account, is as innocent as his
losing companion investor.” Doc. 147 at 5-9. Relying on that conclusion, the
Second R&R recommended the District Court only award prejudgment interest from
the date of the complaint. Id. at 10. As an initial matter, as discussed in Section III
below, if none of the Blasland factors applies, then Florida law does not allow the
District Court to deviate from the general rule of awarding prejudgment interest from
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the date of loss. But putting that aside, the Second R&R’s conclusion is not
substantively different than the one in the First R&R, which this Court held was an
abuse of discretion:
Despite its position as a “net winner,” compared to the greater number
of “net losers” Nadel swindled, Dancing $ is certainly not a winning
investor in the normal sense. Like the net losers, Dancing $ invested in
the hedge funds assuming their legitimacy. That it received a return in
excess of its investments was likely serendipitous. With the avoidance
of those positive transfers (the amounts above principal invested),
requiring Dancing $ to pay more out of its pocket in the form of
prejudgment interest would not satisfy the goals for making the
award…. Simply put, Dancing $ members (despite the LLC’s legal
fiction), have suffered enough.
Doc. 121 at 31. This Court already rejected the notion that an investor is not required
to pay prejudgment interest because of the investor’s purported innocence in the
fraud: “that the Lee Defendants will be forced to pay more than the profits they
received with the addition of a prejudgment interest award is not an equitable factor
weighing against an award, but is a necessary consequence of the loss theory of
prejudgment interest.” Lee, 753 F.3d at 1205. Had Dancing $ (or Lee or any other
clawback defendant) wished to avoid paying prejudgment interest, it could have
accepted the Receiver’s pre-suit offer to settle for 90% of its false profits instead of
litigating for five years before losing. Put simply, just as it was an abuse of discretion
to conclude the Receiver was entitled to no prejudgment interest without identifying
a specific applicable Blasland factor, it is also an abuse of discretion to limit the

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amount of prejudgment interest without identifying a specific applicable Blasland
factor.
III.

IF THE BLASLAND FACTORS DO NOT APPLY, THE RECEIVER IS
ENTITLED TO PREJUDGMENT INTEREST FROM THE DATE OF
LOSS UNDER THE GENERAL RULE
The Second R&R found applying the Blasland factors is “an impossible

exercise” because “neither side cites a Florida case with similar facts and [the
Magistrate Judge] can find none.” Doc. 147 at 8. The Second R&R asked, “[i]f no
Florida case speaks to similar facts, how is this Court to appropriately consider
Florida’s general rule in the manner Florida courts would?” Id. The answer is
straightforward: “When a verdict liquidates damages on a plaintiff’s out-of-pocket,
pecuniary losses, plaintiff is entitled, as a matter of law, to prejudgment interest at
the statutory rate from the date of that loss.” Lee, 753 F.3d at 1204. 7 Thus, if there

7

See also See Allstate Ins. Co. v. Palterovich, 653 F. Supp. 2d 1306, 1329 (S.D.
Fla. 2009) (applying Florida law in calculating prejudgment interest from the date
of each wrongful taking); Montage Group, Ltd. v. Athle-Tech Computer Sys., Inc.,
889 So. 2d 180, 199 (Fla. 2d DCA 2004) (calculating prejudgment interest in an
unjust enrichment action from the date on which the defendant became unjustly
enriched); Greenberg v. Grossman, 683 So. 2d 156, 157 (Fla. 3d DCA 1996)
(calculating the date of loss as the date of takings in a civil theft case); Vining v.
Martyn, 660 So. 2d 1081, 1082 (Fla. 4th DCA 1995) (awarding prejudgment interest
from the date theft occurred); Florida Farm Bureau Cas. Ins. Co. v. Patterson, 611
So. 2d 558, 560 (Fla. 1st DCA 1992) (awarding prejudgment interest from the date
conversion occurred); Miller v. Reinhart, 548 So. 2d 1174, 1175 (Fla. 4th DCA
1989) (awarding prejudgment interest from the date of each unauthorized taking);
Sargent v. Midlantic Nat. Bank, 358 So. 2d 855, 856 (Fla. 2d DCA 1978) (remanding
for the purpose of amending final judgment to add prejudgment interest from the
date of conversion); see also In re International Administrative Services, Inc., 408
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is no Florida case8 authorizing departure from the general rule under similar facts,
then the Court should apply the general rule awarding prejudgment interest from the
date of loss. The Second R&R briefly considers this straightforward answer (see
Doc. 147 at 9), but rejects it because “if the Eleventh Circuit had determined as
much, it would have so stated in its opinion and remanded the matter solely for the
Court’s computation” (id.). As explained above in Section II.B., however, that
conclusion does not follow its premise. The First R&R’s two paragraphs on
prejudgment interest did not apply the specific Blasland factors to the facts of the
case, and this Court reversed and remanded “the denial of prejudgment interest with
instructions that the District Court identify and apply the Blasland factors in order
to determine whether equitable considerations justify a denial or reduction of
prejudgment interest to the Receiver in light of Florida’s general rule that
prejudgment interest is an element of pecuniary damages.” Dancing $, 578 Fed.
App’x at 947-48. Having concluded in the Second R&R that none of the Blasland

F.3d 689, 710 (11th Cir. 2005) (confirming award of pre-judgment interest “for the
use of funds for the entire period of time in which they were wrongfully withheld”).
8

Outside of Florida, courts routinely award receivers prejudgment interest in Ponzi
scheme clawback actions. See, e.g., Lee, 753 F.3d at 1205 (citing Donell v. Kowell,
533 F.3d 762, 772 (9th Cir. 2008) (Court can “permit the receiver to recover prejudgment interest on the fraudulent transfers from the date each transfer was made”
because “prejudgment interest should not be thought of as a windfall…; it is simply
an ingredient of full compensation that corrects judgments for the time value of
money.”)).
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factors applies, the Magistrate Judge had no basis to deviate from the general rule
awarding the Receiver prejudgment interest from the dates of the fraudulent transfers
to Dancing $. Because the District Court, however, has now had the opportunity to
evaluate the Blasland factors and concluded none of them apply here, there is no
more factual analysis to be done, and this Court should simply direct it to calculate
and award the Receiver prejudgment interest from the dates of the pertinent
fraudulent transfers.
CONCLUSION
For the reasons set forth above, the Court should direct the District Court to
calculate and award the Receiver prejudgment interest from the dates of the pertinent
fraudulent transfers as opposed to the date of the complaint.

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CERTIFICATE OF COMPLIANCE
I CERTIFY that this brief complies with the type-volume limitation set forth
in FRAP 32(a)(7)(B)(i). This brief contains 4,964 words. Times New Roman 14 is
the type style and size used in this brief.

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 Appellant Receiver, Burton W.
Wiand

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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on September 15, 2015, I filed the foregoing
through the Court’s ECF system.
Phillp H. Stillman
Stillman & Associates
2540 Manchester Ave.
Cardiff, California 92007
[e-mail]

Joshua Bleil
The Ticktin Law Group P.A.
600 W. Hillsboro Blvd.
Suite 220
Deerfield Beach, FL 33441
[e-mail]

s/Gianluca Morello
Gianluca Morello, FBN 034997