Securities and Exchange Commission v. Nadel et al
MOTION for miscellaneous relief, specifically Determination that Wells Fargo Bank, N.A.'s Failure to Comply with this Court's Claims Administration Process Extinguished Its Purported Interests in Receivership Properties by Burton W. Wiand. (Keefe, Sean)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
SECURITIES AND EXCHANGE
SCOOP CAPITAL, LLC,
SCOOP MANAGEMENT, INC.,
CASE NO.: 8:09-cv-0087-T-26TBM
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.
RECEIVER’S MOTION (I) FOR DETERMINATION THAT WELLS FARGO
BANK, N.A.’S FAILURE TO COMPLY WITH THIS COURT’S CLAIMS
ADMINISTRATION PROCESS EXTINGUISHED ITS PURPORTED
INTERESTS IN RECEIVERSHIP PROPERTIES, AND (II) FOR RELEASE OF
PROCEEDS OF SALE OF SARASOTA PROPERTY.
Burton W. Wiand, as Receiver (the “Receiver”), for Valhalla Investment Partners,
L.P. (“Valhalla Investment”); Viking Fund, LLC (“Viking Fund”); Viking IRA Fund,
LLC, (“Viking IRA Fund”); Victory Fund, Ltd. (“Victory Fund”); Victory IRA Fund,
Ltd. (“Victory IRA Fund”); and Scoop Real Estate, LP (“Scoop Real Estate”)
(collectively, the “Hedge Funds”) respectfully files this Motion (I) For Determination that
Wells Fargo Bank, N.A.’s Failure to Comply with this Court’s Claims Administration
Process Extinguished Its Purported Interests in Receivership Properties, and (II) For
Release of Proceeds of Sale of Sarasota Property (“Motion”).1
In relevant part, Wells Fargo Bank, N.A.2 (“Wells Fargo” or “the Bank”)
identifies itself as follows: (1) a second priority secured lender with respect to the
approximately 420 acres held by the Receiver in Buncombe and McDowell counties,
North Carolina (“Laurel Mountain Property”) and (2) a loan servicer on a first priority
secured loan held by Bank of America (“BoA”) and a second priority secured lender on
former Receivership property located at 464 Golden Gate Point, Unit 703, Sarasota,
Florida (the “Sarasota Property”) (collectively, “the Properties”). The Receiver sold the
Sarasota Property (See Docs. 1175 and 1177) and any interests Wells Fargo had in it were
transferred to the proceeds of the sale until resolution by the Court. The Laurel Mountain
Property currently remains an asset of the Receivership. This Motion relates to these
Properties and loans.
Wells Fargo never submitted a claim related to either of the Properties. As
demonstrated below, in April 2011—months after this Court’s Claims Bar Date—the
Receiver provided the Bank an opportunity to submit a belated Proof of Claim, and that if
it believed there were circumstances justifying its failure to submit a timely claim, the
The parties previously briefed this matter (see Docs. 740, 755, 762) but the Court deferred ruling pending
resolution of Wiand v. Wells Fargo Bank, N.A., et al Case No. 8:12-cv-557 (M.D. Fla.) (See Doc. 955).
That matter is pending before the Eleventh Circuit Court of Appeals on the Receiver’s appeal of summary
judgment in favor of Wells Fargo. (See Burton Wiand v. Wells Fargo Bank N.A., Case No. 15-10968-CC
(11th Cir.)). However, the Receiver respectfully believes that in light of opinions recently issued by this
Court barring purported secured and unsecured creditors who failed to timely file proofs of claim from
recovering from the Receivership Estate, the result of the Receiver’s appeal will not impact the narrow
range of procedural arguments relevant to this Motion. Consequently, the Receiver submits that these
limited issues are now ripe for adjudication.
Wells Fargo Bank, N.A. is successor-in-interest to Wachovia Bank, N.A.
Receiver would consider them.
Wells Fargo refused to respond to the Receiver’s
instructions. Instead, the Bank moved for a determination by this Court that the filing of
proofs of claim is not necessary to preserve secured creditors’ state law security interests
in, and claims against, collateral in the Receiver’s possession, or in the alternative, leave
to file late claims pursuant to Federal Rule of Civil Procedure 60(b) (“Motion for
Determination”) (Doc. 740).
Wells Fargo’s obstinacy on this matter has frustrated the Receiver’s attempts to
dispose of the Properties. Although the Court previously deferred ruling on the Motion
for Determination, the pending appeal of the Receiver’s case against Wells Fargo will not
impact the arguments for denial made in this motion. Accordingly, the Receiver brings
this Motion to resolve some outstanding issues so that he can proceed with selling and
distributing Receivership assets to move closer towards winding down the Receivership.
Of specific relevance, this Court has already held that secured creditors like Wells
Fargo must file timely proof of claim forms in compliance with the claims administration
process to preserve their claims, just as unsecured creditors must. As such, Wells Fargo’s
status as a secured creditor does not excuse its failure to file timely proof of claims forms.
Additionally, the Bank is not entitled to any relief under Rule 60(b) because its request
was untimely and it did not meet its burden of establishing “excusable neglect.”
Accordingly, the Receiver respectfully requests entry of an order granting this Motion3.
CHRONOLOGY OF RELEVANT DATES
Wells Fargo has yet to file claims related to the Properties. As such, the Receiver’s arguments articulated
herein pertain exclusively to the procedural relief sought by the Bank (see Doc. 740). Should this Court
allow Wells Fargo to file belated claims, or determine that, as a secured creditor, it did not need to file
claims, the Receiver reserves his right to approve or reject such claims on their merits. So as to preserve
Receivership assets, the Receiver is not addressing the merits of any of Wells Fargo’s claims at this stage.
Wells Fargo alleges it was not on notice of the claims administration process and
that its failure to timely file proof of claims was the result of “excusable neglect.” (See,
e.g., Docs. 690, 740, 762). Below is a chronology of dates relevant to these assertions.
Feb. 11, 2009
Feb. 13, 2009
Mar. 9, 2009
Mar. 17, 2009
Mar. 25, 2009
Apr. 8, 2009
June 9, 2009
June 10, 2009
June 26, 2009
July 22, 2009
Jan. 28, 2010
Jan. 29, 2010
Feb. 1, 2010
Feb. 4, 2010
Feb. 25, 2010
Order expanding Receivership to include Laurel Preserve, LLC,
entity holding title to Laurel Mountain Property. (Doc. 44)
Orders appointing Receiver and expanding Receivership to include
Laurel Preserve, LLC filed in Buncombe County, N.C., where part
of Laurel Mountain Property is located. (Doc. 713, ¶8).
Receiver sends letter to Wells Fargo Legal Group identifying
Laurel Preserve, LLC as Receivership Entity and enclosing copy of
Order expanding the Receivership to include Laurel Preserve, LLC.
Wachovia’s counsel sends letter to Receiver advising that
Wachovia issued mortgage to Laurel Preserve and that loan is in
default. (Doc. 713-6).
Order of Preliminary Injunction and Order expanding Receivership
to include Laurel Preserve, LLC filed in McDowell County, N.C.,
where part of Laurel Mountain Property is located. (Doc. 713,
Order of Preliminary Injunction filed in Buncombe County, N.C.
(Doc. 713, ¶9).
Wells Fargo’s counsel emails Receiver regarding his marketing of
Laurel Mountain and advising that Wells Fargo issued mortgage
related to the property. (Doc. 713-7, p.5).
Receiver files Order Reappointing Receiver in W. D. of North
Carolina, where Buncombe County is located. (Doc. 713-1).
Wells Fargo’s counsel emails Receiver advising the Bank wants to
have appraisal performed of Laurel Mountain. (Doc. 713-7, p.9).
Receiver emails Wells Fargo’s counsel to provide update regarding
marketing Laurel Mountain (Doc. 713-7, p.11).
Order granting Receiver possession of and title to Sarasota
Property. (Doc. 327).
Receiver mails copy of Notice of Filing to counsel for both BoA
and Wells Fargo. This notice includes: (a) Order appointing
Receiver; (b) Order of Preliminary Injunction; and (c) Order
granting Receiver title to Sarasota Property. (Doc. 756-3).
Receiver files Notice of Filing in foreclosure action styled Bank of
America, National Association v. Neil Moody, et al. Case No. 2009
CA 017517 NC (12th Cir. Fla.). (Doc. 756-2).
Receiver emails Wells Fargo’s counsel to set conference call to
discuss Laurel Mountain. (Doc. 713-7, p.16).
Order granting Receiver title to Sarasota Property is recorded in
Apr. 21, 2010
June 4, 2010
Sept. 2, 2010
Sept. 2, 2010
Oct. 28, 2010
Nov. 2, 2010
Nov. 22, 2010
Dec. 30, 2010
Jan. 26, 2011
Feb. 17, 2011
Apr. 5, 2011
July 21, 2011
Official Records of Sarasota County, Florida. (Doc. 756-1).
Order granting Receiver’s motion to approve procedure to
administer claims and proof of claim forms and to establish
deadline for filing proof of claims. (Doc. 391)
Receiver mails claim packets to BoA and Wells Fargo. (Docs. 71310; 756-5).
Claims Bar Deadline.
Wells Fargo timely files its Claim Form for Rite-Aid Property, but
does not file claim form for either of the Properties. (Doc. 713-11).
Receiver emails counsel for BoA and Wells Fargo reiterating that
Receiver has possession of Sarasota Property and requesting both
provide itemized payoff figures. Only Wells Fargo responds.
Receiver again emails BoA and Wells Fargo’s counsel requesting
BoA’s itemized payoff figure. BoA responds that it will provide
the requested information. (Doc. 756-8).
Wells Fargo sends a letter to Receiver informing that it possesses
loan payoff information but needed borrower’s authorization.
Wells Fargo confirms to Receiver’s counsel that it is servicer on
first mortgage loan, currently assigned to BoA, and that it
originated second mortgage in amount of $880,000 on May 23,
2006. Letter additionally states that Wells Fargo will not negotiate
fees or costs with Receiver. (Doc. 756-10).
Receiver again informs Wells Fargo that Sarasota Property is part
of Receivership Estate and that Wells Fargo is prohibited from
interfering with Receiver’s possession of the Property. (Doc. 75611).
Wells Fargo sends Receiver a Beneficiary’s Demand Statement
related to Sarasota Property which provided details of all fees and
costs. (Doc. 756-12).
Receiver sends Wells Fargo letter advising that claims bar date
expired, but that it is free to submit a claim with an explanation for
its failure to timely file. (Doc. 713-8).
Findings of Fact and Conclusion of Law and Order Vacating
Easement entered in Wiand v. Carolina Mtn. Land Conservancy,
Case No. 8:09-cv-2443-T-27BM (M.D. Fla. May 24, 2011) filed in
Buncombe County. (Doc. 713-2).
On April 21, 2010, the Court granted the Receiver’s motion to, in relevant part,
approve a procedure to administer claims and proof of claim forms (“POCs”) and to
establish a deadline for filing POCs. (Doc. 391.) The Order directed that each “entity
that asserts a claim against the Receivership arising out of or related in any way to the
acts, conduct, or activities of Receivership Entities must submit an original, written Proof
of Claim ... to be received on or before the later of 120 days from the entry of this
Order or 90 days from the mailing of the Proof of Claim Form to known possible
Claimants ...” (“Claim Bar Date”).
Order ¶ 2 (emphasis in original).
explained that any “entity that fails to submit a Proof of Claim ... on or before the Claim
Bar Date ... shall be forever barred and precluded from asserting any claim against the
Receivership or Receivership Entities ....” Id.
In accordance with the procedures adopted by the Court, the Receiver provided
notice to every potential claimant by mailing a claim packet consisting of a cover letter, a
Notice of Deadline Requiring Filing Of Proofs Of Claims On Or Before September 2,
2010 (“Claim Bar Date Notice”), and a Proof of Claim form. (Doc. 713-10.) The cover
letter explained that, “[m]ost importantly, to have your claim considered, you MUST
submit a completed and signed Proof of Claim form ... that provides responses to all of
the questions in the Proof of Claim form, so that it is received on or before September
2, 2010 at the address provided in the Proof of Claim Form and Notice.” Id. Similarly,
the Claim Bar Date Notice explained that “the Court entered an order (the “Claim Bar
Date Order”) establishing September 2, 2010 (the “Claim Bar Date”) as the last date
for each person or entity ... to file a Proof of Claim against the Receivership Entities.”
Claim Bar Date Notice at 2-3. It also explained that “[i]f you think that you may have a
claim, you MUST file a Proof of Claim to share in distributions from the Receivership
Estate.” Id. at 3. It added that,
If you were not an investor, but believe you are or may be a creditor of
one o[r] of the Receivership Entities, you must provide to the Receiver by
the Claim Bar Date (1) the amount you contend you are owed from any
Receivership Entity; (2) any amounts received from any Receivership
Entity; and (3) legible copies of all documents on which you base your
claim (i.e., all invoices for services or goods provided, loan documents,
etc.) or, if any such documents are not available, a detailed explanation as
to why any such documents are not available.
Id. at 4. Finally, the Claim Bar Date Notice warned as follows:
CONSEQUENCES OF FAILURE TO FILE A PROOF OF
CLAIM BY THE BAR DATE
ANY HOLDER OF A CLAIM OR POTENTIAL CLAIM THAT
FAILS TO FILE A PROOF OF CLAIM ... BY THE CLAIM BAR DATE
WILL BE FOREVER BARRED, ESTOPPED, AND ENJOINED FROM
ASSERTING SUCH CLAIM AGAINST THE RECEIVERSHIP
ENTITIES ... THEIR RESPECTIVE PROPERTY, THE RECEIVER, OR
THE RECEIVERSHIP ESTATE, AND FROM PARTICIPATING IN
ANY DISTRIBUTION FROM THIS RECEIVERSHIP.
Id. at 5 (emphasis in original). The Proof of Claim form itself explained that “to be
eligible to receive a distribution from the Receivership Entities’ assets, you must
complete and return this Proof of Claim form and, if applicable, provide the requested
documentation, so that it is received on or before September 2, 2010 ....” Id. at 10. It
adds that, “IF THIS COMPLETED FORM, SIGNED UNDER PENALTY OF
PERJURY, IS NOT RECEIVED BY THE RECEIVER ... BY SEPTEMBER 2, 2010,
YOU WILL BE FOREVER BARRED FROM ASSERTING ANY CLAIM AGAINST
THE RECEIVERSHIP ENTITIES’ ASSETS AND YOU WILL NOT BE ELIGIBLE TO
RECEIVE ANY DISTRIBUTIONS FROM THE RECEIVER.” Id.(emphasis in original).
Wells Fargo Had Proper Notice Of Its Need To File A Claim Relating To Its
Purported Interest In Laurel Mountain. Wells Fargo has been on notice of this
Receivership, of the Laurel Mountain Property’s association with the Receivership, of the
requirement of filing a claim and of the Claim Bar Date for years. Wells Fargo received
the claim packet and understood its contents as demonstrated by its timely filing of a preprinted Proof of Claim form mailed by the Receiver. (Doc. 712 at 9; Doc. 713 ¶ 24).
That claim, however, related only to its loan purportedly secured by real property
generally referred to in this Receivership as the “Rite Aid Property”, and not to either of
the Properties. (See, e.g., Docs. 713-11, 713-12). The Receiver informed Wells Fargo of
this Receivership shortly after it started (Doc. 690-2) and of Laurel Preserve, LLC’s (the
record owner of the Laurel Mountain Property) inclusion in the Receivership on March 9,
2009—less than a month after it was included in the Receivership (Doc. 713-5). On
March 17, 2009, counsel for Wells Fargo informed the Receiver of its security interest in
the Laurel Mountain Property (Doc. 713-6), and communications between Wells Fargo
and the Receivership relating to that property continued (Doc. 713-7). Further, on June 4,
2010, the Receiver mailed a claim packet to Wells Fargo that specifically identified
Laurel Preserve as a Receivership entity and, as detailed above, clearly explained the
claims process and consequences of not filing a timely claim. (Doc. 713-10).
Notably, on April 5, 2011, the Receiver’s counsel informed Wells Fargo’s counsel
in writing that the Claim Bar Date had expired in September 2010, and added that if
“[Wells Fargo] believes there are circumstances that justify its failure to file a Proof of
Claim, it remains free to submit one and an explanation for the delay and any other
materials or information which it deems appropriate.” (Doc. 713-8). That letter also
explained that if Wells Fargo did not file a claim, “then its interest will not be considered
by the Receiver, and the Court….” Id. Despite the Receiver’s invitation, Wells Fargo
did not respond or file a claim.
Wells Fargo Had Proper Notice Of Its Need To File A Claim Relating To The
Sarasota Property. Similarly, both Wells Fargo (the servicer on one relevant loan and
holder of a second relevant loan) and BoA (the holder of the relevant loan serviced by
Wells Fargo) received timely notice relating to the Sarasota Property and both had notice
of this property’s inclusion in this Receivership before the Claim Bar Date. The Court
approved this property’s inclusion in the Receivership on January 28, 2010 (the “Sarasota
Property Order””) (Doc. 327). BoA had initiated a foreclosure proceeding and the case
was pending at that time. (See Doc. 324 at 2, 10.). On February 1, 2010, the Receiver
filed in the foreclosure proceeding a notice of filing accompanied by the Sarasota
Property Order, the Order Appointing Receiver, the Order of Preliminary Injunction and
Other Relief as to Defendants Scoop Capital, LLC and Scoop Management, Inc. and All
Relief Defendants, and an Order Reappointing Receiver. (Doc. 756-2). He also served a
copy of this notice and orders on BoA’s and Wells Fargo’s attorneys in the foreclosure
case on January 29, 2010. (Doc. 756-3, 4). On February 25, 2010, a copy of the Sarasota
Property Order was recorded in the Sarasota County public records. (Doc. 756-1).
As previously noted, the Receiver then mailed to Wells Fargo a claims packet on
June 4, 2010, which Wells Fargo received and understood. A claim packet was also
mailed to BoA on June 4, 2010. (Doc. 756-5). After the Claim Bar Date, the Receiver’s
representatives continued to communicate with BoA’s and Wells Fargo’s respective
outside counsel that were handling the Sarasota Property and internal employees about
the Receivership and its control over that property. In those communications, it is evident
the banks and their representatives were aware the Sarasota Property was part of the
Receivership. (Doc. 756-6,7,8). Nevertheless, neither bank filed a claim relating to either
of the loans purportedly secured by the Sarasota Property.
Though it was on notice of its obligation to file POCs, Wells Fargo chose not to
file POCs relating in any way to the Properties. Instead, months after the Claims Bar
Date, it filed its Motion for Determination. Notably, Wells Fargo has the burden of proof
on its Motion and its purported claims regarding the Properties. (See Doc. 675 at 82
(“The Claimant shall have the burden of proof.”)); (Doc. 776 (approving procedures set
forth in Doc. 675)).
As argued below, the Motion for Determination should be denied because this
Court has already held that secured creditors were required to comply with this Court’s
order governing the claims administration process, just like unsecured creditors. Wells
Fargo failed to do this and its status as a purported secured creditor did not relieve it of its
obligation to comply with this Court’s process. Additionally, the Bank is not entitled to
relief under Federal Rule of Civil Procedure 60(b) as a matter of law for two independent
reasons: first, because it did not seek relief within the one-year period set forth in the rule,
and second, because even if it had complied with that deadline, it did not satisfy the
substantive requirements for relief under Rule 60(b).
THE COURT HAS ALREADY HELD IN THIS RECEIVERSHIP THAT
SECURED CREDITORS MUST TIMELY FILE PROOFS OF CLAIMS TO
BE ENTITLED TO PROCEEDS FROM THE RECEIVERSHIP ESTATE.
It is axiomatic that any person or entity with a claim against a receivership estate
must assert that claim in the court overseeing the receivership, or it will be precluded
from later pursuing its claims. See Callahan v. Moneta Capital Corp., 415 F.3d 114, 11718 (1st Cir. 2005) (potential claimants that did not submit their claims by bar date lacked
“standing to object to the adjudication of a pending claim in the Claims Disposition
Order”); SEC v. Princeton Econ. Int’l Ltd., 2008 WL 7826694, *4 (S.D.N.Y. 2008) (“All
persons or entities with a claim that failed to file a proof of claim prior to the Bar Date
and were not excused from filing a proof of claim under the Plan are forever barred,
estopped, and permanently enjoined.”).
Nevertheless, Wells Fargo did not file any claims relating to the Properties and
argued it did not have to because it is a secured creditor. However, the Court established
an unambiguous claims process here with specific filing requirements and deadlines. (See
Docs. 390, 391). Critically, Wells Fargo complied with those deadlines with respect to
the Rite Aid Property, but did not comply with them with respect to the Properties in
spite of receiving notice of its responsibilities. Thus, the Bank’s own actions are
inconsistent with its position that no POC was necessary to preserve its purported secured
This Court has already held in this Receivership that the requirement of filing
timely claims applies to everyone, including secured creditors. Most recently, Branch
Banking and Trust Company (“BB&T”) filed a motion substantively identical to Wells
Fargo’s Motion for Determination.
Specifically, BB&T moved for turnover of the
proceeds from the sale of real property in which it had a secured interest. Like Wells
Fargo here, BB&T failed to submit a timely claim despite having received notice, and
argued that its status as a secured creditor exempted it from having to file a claim.
This Court rejected BB&T’s argument. Significantly, this Court explained that
the order outlining the claims process in this Receivership was “unambiguous” and
clearly required “that claimants follow a particular procedure or suffer their claims
forever barred.” (Doc. 1174 at p.7). Noting the inapplicability of the Bankruptcy Code
and its rules to federal equity receiverships, the Court found that the burden rests on the
secured creditor “to protect its rights pursuant to the framework clearly set forth in the
conduct of this receivership. The claims process procedure did not contain any language
exempting secured creditors from filing a proof of claim.” Id. As such, BB&T’s failure
to timely file a POC barred it from enforcing any interest it may have had in the sale
The Court also has refused to recognize other purported creditors’ late claims
because they, like Wells Fargo, failed to comply with the claims procedures and
deadlines promulgated in this case. For example, on March 1, 2013, investor Elendow
LLC (“Ellendow”) filed a Motion To Modify Order Disallowing Claim, asking “the
Court [to] reconsider that portion of its March 2, 2012 Order disallowing Elendow’s latefiled claim (Docket No. 776) and enter a new order allowing Elendow to participate in
distributions to victims of Nadel’s schemes.” (Doc. 980 at 2). In opposing the motion,
the Receiver explained Elendow’s many failures to comply with pertinent deadlines: (1)
Elendow missed the September 2, 2010, deadline to file a Proof of Claim form by almost
a month; (2) the Receiver then allowed Elendow the opportunity to explain the reasons
for missing the deadline, but it did not timely respond to the Receiver’s letter; (3) after
the Court denied Elendow’s claim, Elendow never submitted an objection although the
objection deadline was March 28, 2012; and (4) instead, Elendow waited almost one year
and filed its Motion seeking relief under Rule 60(b), which relief is only granted in
extraordinary circumstances. (Doc. 990 at 1). Even after “[g]iving Elendow the benefit
of the doubt” regarding contested facts, the Court denied its motion. (Doc. 1002 at 10; see
also Doc. 1204 (Order granting Receiver’s Motion to Overrule Objection to
Determination of Claim of MMG Bank & Trust, Ltd., because it “failed to comply with
the claims procedures and deadlines promulgated by this Court, and the information
belatedly supplied in its objection did not cure the deficiency.”)).
Based on this precedent and other applicable cases, the Court should reach the
same result here. Every creditor claiming an interest in Receivership property, whether
the interest is secured or unsecured, unequivocally was required to file a timely claim
with the Receiver to preserve its interests for adjudication by this Court. Riehle v.
Margolies, 279 U.S. 218, 224 (1929) (“Of course, no one can obtain any part of the
assets, or enforce a right to specific property in the possession of a receiver, except upon
application to the court which appointed him.”); see Ralph E. Clark, Clark on Receivers
§ 646 at 1132 (3d ed. 1992) (“Every person who has any claim or demand against the
estate or property in the custody of the court through the receiver, ... must assert such
claim or demand in the court in which such receiver was appointed.”). For efficiency and
finality, courts overseeing receiverships typically establish a claims process, require
submission of claim forms, and set pertinent deadlines. See Riehle, 279 U.S. at 224 (“[I]n
the receivership proof of the claim [must] be made in an orderly way, so that it may be
established who the creditors are and the amounts due them.”). To achieve finality, courts
also set a claim bar date and disallow late-filed claims. See S.E.C. v. Princeton Econ. Int’l
Ltd., 2008 WL 7826694, *4 (S.D.N.Y. 2008) (entering bar date); Callahan v. Moneta
Capital Corp., 415 F.3d 114, 117-18 (1st Cir. 2005) (potential claimants that did not
submit claims by bar date lacked “standing to object to the adjudication of a pending
claim in the Claims Disposition Order”).
Not a single receivership case supports Wells Fargo’s position that secured
creditors do not have to comply with the Court’s claims process. Instead, the Bank relies
exclusively on the Bankruptcy Code and its corresponding cases to support its argument.
The Court has previously dispatched these cases in finding that the bankruptcy opinions
do not control this federal equity receivership. (See Doc 822 at pp. 12-13 “[A]lthough
federal district courts presiding over federal equity receiverships, such as this SEC case,
may look for guidance from bankruptcy law, [footnote omitted] they are not restricted by
the dictates of bankruptcy law.”)); (see also Doc 1061 at pp. 7-8 (“Any attempted
analogy between the significance of a proof of claim under bankruptcy law with respect
to any presumption of its validity and one submitted in the course of this equity
receivership is unavailing.”)). The Court’s reasoning is correct and there is copious
authority supporting the Court’s analytical distinction. See, e.g., S.E.C. v. TLC Inv. &
Trade Co., 147 F. Supp. 2d 1031, 1039 (C.D. Ca. 2001) (“Therefore, balancing the
Applicants’ position against the need to protect and marshal the assets of the
Receivership estate, protect defrauded and innocent investors, and judicial economy, the
Court DENIES the Applicants’ request to require the Receiver to follow all aspects of the
bankruptcy code.”); S.E.C. v. Sunwest Mgmt., Inc., 2009 WL 3245879, *8 (D. Or. 2009)
(“Federal equity receivership courts are not required to exercise bankruptcy powers nor to
strictly apply bankruptcy law.”); S.E.C. v. Heartland Group, Inc., 2003 WL 1089366, *1
n.1 (N.D. Ill. 2003) (rejecting argument that “receivership actions are different from other
forms of litigation and are more akin to bankruptcy court proceedings”); S.E.C. v. Capital
Consultants LLC, 453 F.3d 1166, 1170 n.4 (9th Cir. 2006)(“Although similarities
between receivership and bankruptcy proceedings certainly exist, differences exist as
well.”); Marion v. TDI, Inc., 2006 WL 3742747, *2 (E.D. Pa. 2006)(“a bankruptcy
proceeding differs significantly from an equity receivership imposed at the request of a
government agency such as the SEC.”).
Here, the Court’s claims process procedures did not exempt secured creditors
from timely filing claims to preserve their interests in Receivership property. As
demonstrated above, the Bank was given proper notice of its need to file POCs for the
Laurel Preserve and Sarasota Properties. Moreover, Wells Fargo indisputably knew about
the claims process (and its applicability to both secured and unsecured creditors) because
it filed a POC with respect to the Rite Aid Property, and it received correspondence from
the Receiver regarding that claim. This Court has now held that secured creditors were
required to timely file POCs. Wells Fargo failed to do this and is precluded from
asserting its claims with respect to the Properties. See S.E.C. v. Morriss, 2014 WL
585395, *3 (E.D. Mo. 2014) (nonparty who failed to filed a claim by the claim bar date
“ha[d] forfeited his rights to either claim or object to a distribution ....”); S.E.C. v.
Aquacell Batteries, Inc., 2009 WL 1854671, *1 (M.D. Fla. 2009) (disallowing claim filed
after the claim bar date).
Accordingly, the Court should find that Wells Fargo’s
purported interests are extinguished.
WELLS FARGO’S REQUEST FOR RELIEF TO FILE UNTIMELY
CLAIMS UNDER FEDERAL RULE OF CIVIL PROCEDURE 60(b)
SHOULD BE DENIED
Wells Fargo also argues that its failure to timely file POCs regarding the
Properties should be excused under the exceptions in Federal Rule of Civil Procedure
60(b)(1), which allows a court to relieve a party from a final judgment or order for
“excusable neglect.” Relief under Rule 60(b)(6) is available only “upon a showing of
exceptional circumstances.” Cavaliere v. Allstate Ins. Co., 996 F.2d 1111, 1115 (11th
Cir.1993). Courts must consider “the danger of prejudice to the [non-moving party], the
length of the delay and its potential impact upon judicial proceedings, the reason for the
delay, including whether it was in the reasonable control of the movant, and whether the
movant acted in good faith.” Pioneer Inv. Servs. Co. v. Brunswick Associated Ltd. P’ship,
507 U.S. 380, 395 (1993); see also Canfield v. Van Atta Buick/GMC Truck, Inc., 127
F.3d 248, 249-50 (2d Cir.1997) (finding that while Pioneer involved the Bankruptcy
Code, the analysis was equally applicable to Rule 60(b)).
Wells Fargo effectively asks the Court to modify its Order barring untimely
claims and its request should be denied for two separate reasons. First, it fails as a matter
of law because Wells Fargo has not complied with the strict one-year deadline for
seeking relief under Rule 60(b)(1). Second, it fails because Wells Fargo has wholly
failed to satisfy its burden of demonstrating “excusable neglect.”
A. Wells Fargo’s Request for Relief is Untimely Under Federal Rule 60(b).
Wells Fargo’s request for relief under Rule 60(b)(1) fails as a matter of law
because any such motion must be made within one year of the entry of the order in
question. See Fed. R. Civ. P. 60(c)(1) (emphasis added); see also Pioneer Inv. Servs. Co.,
507 U.S. at 393 (“The same is true of Rule 60(b)(1), which permits courts to reopen
judgments for reasons of ‘mistake, inadvertence, surprise, or excusable neglect,’ but only
on motion made within one year of the judgment”).
The Court’s Order establishing a Deadline for Filing Proofs of Claims (Doc. 391)
was entered on April 21, 2010, and set a Claim Bar Date of September 2, 2010. This
Order was “clear and unambiguous” and all parties, including Wells Fargo, were advised
that failure to comply with the Claims Bar Date would “forever bar and preclude
[them] asserting any claim against the Receivership or Receivership Entities ….” (See
Docs. 1174, p. 6, n. 10; 713-10). In other words, by operation of this court’s April 21,
2010 Order, Wells Fargo was barred from pursuing the purported interests underlying its
Motion for Determination on September 2, 2010.
Under Rule 60(b)(1), at best for Wells Fargo, it had until September 2, 2011,
which was one year after the Claims Bar Date (if not only until April 21, 2011), to seek
relief under the “excusable neglect” standard since it became barred from pursuing any
interest it may have had in the Properties on September 2, 2010.4 Wells Fargo, however,
waited until February 8, 2012 to seek relief. (Doc. 740).
The Court has previously denied as untimely motions seeking to file late claims
under Rule 60(b). (See Doc. 1174). Because like BB&T, Wells Fargo did not file its
Motion for Determination within one year after it was barred from pursuing the interests
it pursues in that Motion, as a matter of law Wells Fargo’s requested relief must be
B. Wells Fargo Submitted No Relevant Proof And Otherwise Failed To Satisfy
Its Burden Under Rule 60(b).
Even assuming arguendo that the Motion for Determination was timely filed, it
should still be denied because Wells Fargo has not satisfied its burden for establishing
excusable neglect. See Pelican Production Corp. v. Marino, 893 F.2d 1143 (10th Cir.
The Court’s March 2, 2012, Order granting the Receiver’s Motion to (1) Approve Determination and
Priority of Claims, (2) Pool Receivership Assets and Liabilities, (3) Approve Plan of Distribution, and (4)
Establish Objection Procedure (Doc. 776) re-confirmed that any person or entity that failed to comply with
the Claims Bar Date was barred from pursuing any claim. And while that Order also stated that the dispute
between the Receiver and Wells Fargo over the Bank’s purported interests in the Properties would be
resolved by a later order after the Court resolved Wells Fargo’s motion to disqualify the Receiver, that
Order did not in any way change that the April 21, 2010 Order, unequivocally barred Wells Fargo from
pursuing those interests on September 2, 2010.
1990) (“The burden is upon the party moving to have the judgment set aside to plead and
prove excusable neglect.”). Wells Fargo does not “prove” excusable neglect because
Wells Fargo offers almost no evidence to support a finding of excusable neglect, such as
affidavits or declarations. Rather, Wells Fargo primarily relies on argument, which does
nothing to prove excusable neglect.
Wells Fargo does attach a Declaration of Elizabeth A. Ryan (the “Ryan
Declaration”) in support of its Motion (Doc. 740-E). However, the Ryan Declaration falls
short of providing the requisite supporting evidence of excusable neglect. Ms. Ryan
identifies herself as a “Mortgage Quality Assurance Analyst at Wells Fargo Home Equity
Group” (Doc. 740-E, ¶ 1) and offers her unfounded opinion that “in [her] experience a
secured lender is not required to file a Proof of Claim and can simply stand upon its state
law property interest as evidenced by its mortgage and security interest.” (Doc. 740-E, ¶
5). As discussed above, there is no support for this proposition in receivership law, and
Ms. Ryan does not even specify that she is referring to her “opinion” in a receivership
setting. Finally, Ms. Ryan declares that she did not receive notice of the above-captioned
proceeding until April 2011, one year and five months after the bar date for filing Proofs
of Claim in this case (September 2, 2010).
This is not evidence of excusable neglect. That a “mortgage analyst” incorrectly
“presumed” (Doc. 740-E, ¶ 5) that secured creditors do not need to file claims in “a
bankruptcy proceeding” is not tantamount to relevant evidence; it is simply an incorrect
“opinion” of a Wells Fargo employee which has no relevancy in a federal equity
receivership like this one and is insufficient as a matter of law to establish “excusable
neglect.” See McDowell-Bonner v. District of Columbia, 668 F. Supp.2d 124 (D.C. Cir.
2009) (“inadvertence, ignorance of the rules, or mistakes construing the rules do not
usually constitute ‘excusable’ neglect”) (internal citation omitted).
Moreover, although Ms. Ryan states that she did not receive notice of this
proceeding until April 2011, she fails to identify what, if any, involvement or
responsibility she had for the Properties or for deciding whether to file a claim. Further,
Ms. Ryan makes no mention of whether other Wells Fargo employees or officers
received timely notice of the instant proceedings well in advance of the Claim Bar Date.
As shown by Wells Fargo’s filing of a claim relating to a different property (the Rite Aid
Property) the clear answer is that Wells Fargo received timely notice and clearly
understood the Court’s Order establishing the claims process, the Bank’s requirements
under that Order, and the consequences of failing to abide by the Order.
The Receiver was not obligated to provide notice to every Bank employee or
specifically to Ms. Ryan or any other “mortgage analyst.” He was simply required to
provide notice reasonably calculated, under the circumstances, to apprise Wells Fargo of
this Receivership and its right to file timely claims to preserve its interests. See Mullane
v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950) (“An elementary and
fundamental requirement of due process in any proceeding which is to be accorded
finality is notice reasonably calculated, under all the circumstances, to apprise interested
parties of the pendency of the action and afford them an opportunity to present their
objections.”). The Receiver complied with this obligation, and the Bank received timely
notice of the Claims Bar Date and of its obligation to file claims. If Wells Fargo did not
have in place adequate internal procedures to protect its interests, that is the fault of Wells
Fargo, and not of the Receiver, and it does not rise to the level of “excusable neglect.”
1. Wells Fargo, Not The Receiver, Has Been Responsible For The Long Delay.
As noted above, the Court’s Rule 60(b) analysis must consider the length of Wells
Fargo’s delay in filing claims and the reason for the delay. Pioneer Inv. Servs., 507 U.S.
at 395. Without justification, Wells Fargo blames the Receiver for its failure to file its
claims. (Doc. 740, p. 14). But rather than pointing to any facts demonstrating that the
Receiver caused Wells Fargo’s “delay,” Wells Fargo superficially mentions that vague
and unidentified complexities of its merger with a failed financial institution combined
with its purported misunderstanding of this Court’s Claim Bar Date caused its delay and
also states that it did “not understand that its failure to file claims before the bar date
could result in a loss of its valid state law property rights….” (Id., p. 15). However, with
respect to the “merger,” Wells Fargo submits no supporting proof to show how any of
that impacted its filing of claims. In fact, it did file a claim on the Rite Aid Property but
does not explain how it knew to file that claim while not knowing to file claims with
respect to the Properties. With respect to its lack of understanding that its rights could be
terminated, this is not a valid ground for finding excusable neglect. See Noah v. Bond
Cold Storage, 408 F.3d 1043 (8th Cir. 2005) (“Neither a mistake of law nor the failure to
follow the clear dictates of a court rule constitutes excusable neglect”).
It also is
inconsistent with Wells Fargo’s filing of a claim relating to the Rite Aid Property. That
the Bank did file a claim to protect its purported security interest related to another
property belies its dubious claim that its 2008 merger—nearly two full years before the
claims bar deadline—precluded it from understanding the Court’s Order.
As the record demonstrates, Wells Fargo was on notice of the scope of the
Receivership and aware of the procedure for filing claims relating to its interests, was
aware of the deadline for filing claims, and had many communications with the
Receiver’s representatives. Its failure to timely file claims was, at best, a complete lack
of diligence and thus not excusable neglect. See Robinson v. Wix Filtration Corp, LLC.,
599 F.3d 403 (4th Cir. 2010) (“A party that fails to act with diligence will be unable to
establish that his conduct constituted excusable neglect”).
2. Wells Fargo Has Not Shown That It Acted In Good Faith.
Under Rule 60(b), the Court must consider whether Wells Fargo acted in good
faith. Pioneer Inv. Servs. Co., 507 U.S. 395. Wells Fargo does not establish that it acted
in good faith5 in this proceeding. For example, as outlined above, Wells Fargo was on
notice of this Court’s and the Receiver’s jurisdiction and control over the Laurel
Mountain Property as far back as no later than March 2009. Communications between
Wells Fargo and the Receivership continued through February of 2010. Wells Fargo’s
counsel sent a pair of letters to the Receiver in March 2011 which again identified Wells
Fargo’s interest in that property and demanded payment on the underlying loan. On
April 5, 2011, the Receiver responded by letter to Wells Fargo advising the deadline for
filing a claim had passed in September 2010, but that if “the Bank believes there are
circumstances that justify its failure to file a Proof of Claim, it remains free to submit one
and an explanation for the delay and any other materials or information which it deems
appropriate.” (Doc. 713-8). Well Fargo ignored the Receiver.
Instead, without ever notifying the Court or the Receiver, in June (and again in
July) 2011, Wells Fargo filed a petition in the criminal case against Nadel pending in the
Under Rule 60(b)’s “good faith” analysis, only Wells Fargo’s conduct during the Receivership
proceedings is relevant. As such, while its pre-receivership conduct during Nadel’s scheme is relevant to
the good faith inquiry under the Florida Uniform Fraudulent Transfer Act, the Bank’s pre-Receivership
conduct is irrelevant to the arguments in this Motion.
U.S. District Court for the Southern District of New York seeking adjudication of its
alleged rights to the Laurel Mountain Property. Not only did Wells Fargo’s inexplicable
failure to serve or otherwise notify the Receiver or this Court of its petition demonstrate a
lack of good faith, but it violated this Court’s injunction. It violated the injunctive
language of the Order Appointing Receiver (Doc. 8) enjoining all parties with notice of
that Order – such as Wells Fargo – “from in any way disturbing the assets or proceeds of
the receivership or from prosecuting any actions or proceedings which involve the
Receiver or which affect the property of the Defendants or Relief Defendants….” See
also Order Granting Second Unopposed Motion to Expand Scope of Receivership (Doc.
44) (including Laurel Mountain Preserve within the ambit of the Court’s Order
Appointing Receiver). Rather than filing a late claim, Wells Fargo sought to circumvent
this Court and the Receiver in violation of an injunction by seeking relief in New York
without giving notice to either this Court or the Receiver. As the Court may recall, it was
displeased with Wells Fargo’s conduct and found the Bank’s jurisdictional arguments to
be meritless. (See Doc. 786-1). Without question, Wells Fargo’s has not acted in “good
faith” during these proceedings.
3. Allowing Wells Fargo To File A Claim Nearly Five Years After The Deadline
Will Prejudice The Receiver And Impact The Proceedings.
The consequences for the Receivership and the injured investors will be
significant should Wells Fargo be allowed to file late claims. Wells Fargo is seeking
preferential treatment by not having to comply with the same claims procedures that all
other purported creditors were required to follow. Such preferential treatment is
inconsistent with the equitable principles that govern this proceeding. Allowing the Bank
to file claims nearly five years after the Claims Bar Date would undermine the finality
and absolute nature of the Claims Bar Date, and would encourage other claimants to
attempt to either file late claims or seek to modify and supplement their previous
submissions. The purpose of the Claims Bar Date is precisely to avoid these issues and
create finality to the process.
Wells Fargo became aware of this Receivership no later than in a matter of weeks
after the inception of this Receivership and, as a sophisticated party with sophisticated
counsel, has known about its need to file claims to preserve its interests in Receivership
property for equally as long. But in any event, it received the claims packet that was
mailed on June 4, 2010, and thus cannot dispute that it received all the notice it was
entitled to about what it had to do to preserve its interests and have them adjudicated.
Yet, for reasons that still remain a mystery and for which there is no legal support, Wells
Fargo chose not to file claims on the Laurel Mountain Property or the Sarasota Property.
As the Court has already found, allowing any late claims at this juncture will
prejudice “both the victims of the fraud and the judicial administration of this
receivership.” (Doc. 1164, at p.6) (citing In re Intelligent Med. Imaging, Inc., 262 B.R.
142, 146 (Bankr. S.D. Fla. 2001). The rule against filing late claims is even more
controlling in cases like this, where the Order establishing the claims process is “clear
and unambiguous.” Id. (citing In re Bautista, 235 B.R. 678, 683 (Bankr. M.D. Fla. 1999)
(finding no excusable neglect based on the unambiguous court orders).
The Bank’s conduct has already prejudiced the Receiver. For example, beginning
in 2010, the Receiver attempted to sell the Sarasota Property, but was unable to do so
because the title insurance company would not issue a policy as a result of Wells Fargo’s
purported security interest. (See Decl. of Burton W. Wiand, at ¶15). The Receiver
attempted to negotiate with the Bank a fair and equitable resolution of its outstanding fees
and costs associated with the Sarasota Property loans, but it refused to enter into any
negotiations. (Id. at ¶14) Consequently, the title insurance company would not issue a
policy showing the property was being transferred free and clear of all liens and
encumbrances. (Id.at ¶15). The Receiver was not able to finally sell the Sarasota Property
until April 2015. (Id). Additionally, the Receiver has been unable to sell the Laurel
Mountain Property because public records reflect that it is encumbered by Wells Fargo’s
purported lien for a loan that exceeds the current value of the Property. (Id. at ¶13)
While the Bank’s intransigence has already prejudiced the Receiver, allowing late
claims to now be filed—or to have allowed them to be have been filed when the Bank
filed its Motion for Determination—will cause additional prejudice because he will be
forced to expend Receivership resources in addressing this dispute to the detriment of the
Receivership Estate. The main purpose of the claims process is to adjudicate all claims to
receivership property in an efficient and timely manner, and to bring finality to those
claims so that receivership assets can be distributed to victims. The Bank has already
delayed that process, and allowing it to file claims now will prejudice the Receiver.
Further, allowing Wells Fargo to file late claims will also cause additional delay
to these proceedings. Wells Fargo has made numerous filings related to the Properties
and another Receivership property in this Court and even one in the Southern District of
New York in violation of an injunction, causing delays in this proceeding that would
have been avoided had Wells Fargo followed its obligation to timely participate in the
claims process. To allow Wells Fargo to now submit additional claims will delay the
proceedings even further because of the time and resources needed to address the validity
of those claims and, ultimately, delay distributions to defrauded investors.
importantly, it would also “open the door” for other would-be claimants who previously
ignored the Claim Bar Date from seeking similar relief. The entire purpose of the Claim
Bar Date is precisely to avoid situations like this which require receivers to waste scarce
receivership resources to address Wells Fargo’s failure to comply with these procedures.
And for that reason, the hurdle to overcome for receiving permission to file a late claim is
very high. Wells Fargo’s showing falls far short of satisfying that hurdle, especially in
light of its lack of good faith.
Scenarios like this one – in which a non-party forces a receiver to waste resources
litigating its entitlement to receivership assets despite not having filed claims – are
precisely those the claim bar date is meant to prevent. As this Court has already held,
“[t]he orders in this equitable receivership are clear that the claim bar date and
subsequent bar and injunction serve to impose finality, regardless of whether the
Receiver had notice that a lien existed.” (Doc. 1174, p. 8). Accordingly, the Receiver’s
Motion should be granted.
CERTIFICATE UNDER LOCAL RULE 3.01(g)
Undersigned counsel for the Receiver has conferred with counsel for the SEC and
is authorized to represent that the SEC does not oppose the relief requested in this
motion. Undersigned counsel has conferred with counsel for Wells Fargo (and Bank of
America through Wells Fargo, as servicer) and is authorized to represent that they do
oppose the requested relief.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on December 7, 2015, I electronically filed the
foregoing with the Clerk of the Court by using the CM/ECF system.
JAMES HOYER, P.A.
/s/ Sean P. Keefe
Sean P. Keefe (FBN 413828)
One Urban Centre, Suite 550
4830 W. Kennedy Blvd.
Tampa, FL 33609
Telephone: (813) 397-2300
Facsimile: (813) 397-2310
Attorney for the Receiver, Burton W. Wiand
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