Securities and Exchange Commission v. Nadel et al

Filing 139

MOTION for miscellaneous relief, specifically to Reappoint Receiver by Burton W. Wiand. (Attachments: #1 Exhibit A - Proposed Order Reappointing Receiver)(Nelson, Carl)

Securities and Exchange Commission v. Nadel et al

Doc. 139

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION
SECURITIES AND EXCHANGE COMMISSION,

Plaintiff,
v.

ARTHUR NADEL, SCOOP CAPITAL, LLC, SCOOP MANAGEMENT, INC.,

Defendants,

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.
Relief Defendants.
/

RECEIVER'S MOTION FOR REAPPOINTMENT

Burton W. Wiand, as Receiver (the "Receiver"), by and through his undersigned
counsel moves the Court for an Order Reappointing Receiver in the form attached as Exhibit
"A" and would show as follows:
1. The Securities and Exchange Commission (the "Commission") instituted this

action to "halt (an J ongoing fraud, maintain the status quo, and preserve investor assets. . . ."

(CompI., ir 7 (Dkt. 1,)). To further these goals, the Receiver, on motion of the Commission,

was appointed Receiver over Defendants Scoop Capital, LLC and Scoop Management, Inc.

Dockets.Justia.com

and over all Relief Defendants by Order Appointing Receiver entered January 21, 2009 (the

"Appointment Order") (Dkt. 8). The Receivership was expanded to include Venice Jet
Center, LLC; Tradewind, LLC; Laurel Mountain Preserve, LLC; Laurel Preserve, LLC; the
Marguerite J. Nadel Revocable Trust UAD 8/2/07 and the Laurel Mountain Preserve

Homeowners Association, Inc.; The Guy-Nadel Foundation; Lime Avenue Enterprises, LLC;
and A

Victorian Garden Florist, LLC by orders entered January 27,2009 (Dkt. 17), February

11,2009 (Dkt. 44), March 9, 2009 (Dkt. 68), and March 17, 2009 (Dkt. 79), respectively (the
entities in receivership are collectively referred to as the "Receivership Entities").
2. Under the Appointment Order, the Receiver was authorized, empowered, and

directed to, among other things:

(iJnvestigate the manner in which the affairs of the Defendants and Relief Defendants were conducted and institute such actions and legal proceedings, for the benefit and on behalf of the Defendants and Relief Defendants and

their investors and other creditors as the Receiver deems necessary . . . ;
provided such actions may include, but not be limited to, seeking imposition

of constructive trusts, disgorgement of profits, recovery and/or avoidance of
fraudulent transfers under Florida Statute § 726.101, et. seq. or otherwise,

rescission and restitution, the collection of debts, and such orders from this Court as may be necessary to enforce this Order. . . .
(Appointment Order, ir 2 (Dkt. 8)).

The Receiver's investigation has revealed it is appropriate to, and the Receiver
intends to institute actions, including but not limited to actions against investors in the
Receivership Entities who profited at the expense of other investors, against persons and

entities that received funds from the Receivership Entities that were not related to the
recipient's investments (for example, person and entities that received purported

commissions), and against persons and entities to whom and to which assets other than funds

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were transferred, such as property interests. The purpose of the actions wil be to "marshal
and safeguard all of the assets of the Defendants and Relief Defendants" in order to distribute

those assets equitably among investors and other creditors who suffered losses as a result of
the investment scheme orchestrated through Receivership Entities.
3. The Receiver makes this motion so that

he may satisfy the 1 O-day requirement of 28

U.S.C. § 754 to invoke the jurisdiction ofthe United States District Court for the Middle of
Florida over the actions he intends to commence as wil be explained more fully below.

MEMORANDUM IN SUPPORT

Jurisdiction and Venue
While the actions the Receiver intends to commence wil be based on state law, this

Court has subject matter jurisdiction over the actions based on ancilary or supplemental
jurisdiction as set forth in 28 U.S.C. § 1367. See Scholes v. Lehmann, 56 F.3d 750, 753 (7th
Cir. 1995) (receiver's state law fraudulent conveyance action against Ponzi scheme investors

for recovery of profits is ancilary to federal court SEC enforcement action which appointed

receiver, and subject matter jurisdiction is provided by 28 U.S.c. § 1367). When, as here, a
receiver's action is brought to accomplish the objectives of the receivership order, it is

ancilary to the court's exclusive jurisdiction over the receivership estate. See SEC v.
Bilzerian, 378 F.3d 1100, 1107 (D.C. Cir. 2004).

Venue for all of these actions is also appropriate in this district under 28 U.S.C.
§ 754, which states:
A receiver appointed in any civil action or proceeding involving property,

real, personal, or mixed, situated in different districts shall, upon giving bond as required by the court, be vested with complete jurisdiction and control of all such property with the right to take possession thereof.

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He shall have capacity to sue in any district without ancilary appointment,

and may be sued with respect thereto as provided in section 959 of this title.
Such receiver shall, within ten days after the entry of his order of

appointment, file copies of the complaint and such order of appointment in the district court for each district in which property is located. The failure to file

such copies in any district shall divest the receiver of jurisdiction and control
over all such property in that district.

See Scholes, 56 F.3d at 753 (Section 754 provides venue in receivership district). This
section "allows a receiver to sue in the district in which he was appointed to enforce claims

anywhere in the country." ˇd. Section 754 extends "the territorial jurisdiction of the
appointing court. . . to any district of the United States where property believed to be that of

the receivership estate is found, provided that the proper documents have been filed in each

such district as required by § 754." Bilzerian, 378 F.3d at 1104 (citing Haile v. Henderson
Nat'l Bank, 657 F.2d 816, 823 (6th Cir. 1981)).
In addition, the Court wil have personal jurisdiction over the defendants under the

nationwide service of

process statute for receiverships, 28 U.S.C. § 1692, which states:

In proceedings in a district court where a receiver is appointed for property,

real, personal, or mixed, situated in different districts, process may issue and be executed in any such district as if the property lay wholly within one district, but orders affecting the property shall be entered of record in each of such districts.
See Bilzerian, 378 F.3d at 1104 (personal jurisdiction is established by the nationwide service

of process authorized in receivership proceedings by 28 U.S.C. § 1692, under which "(tJhe

appointment court's process extends to any judicial district where receivership property is
found." (quoting Haile, 657 F.2d at 826)).

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Need for Reappointment
As shown above, in order to invoke personal jurisdiction over defendants residing

outside of this district, the Receiver must file a copy of the complaint and the order
appointing the Receiver in the districts in which the receivership property is located within
10 days from the date of

the order appointing a receiver. SEC v. Bilzerian, 378 F.3d 1100,

1103 (D.C. Cir. 2004).

In the instant case, the Receiver, upon appointment, did not know (could not know)

the districts of domicile and identity of parties against whom. actions could be brought, a
thorough investigation being necessary to assure that actions would be brought in good faith
under the Receivership Order. Through investigation, the Receiver has learned the identity

of parties against whom actions may be brought and their districts of domicile. Thus, the
Receiver requests an order reappointing him as Receiver so that he may timely fie the

requisite papers in the appropriate jurisdictions as required by Section 754 to obtain
jurisdiction over assets and defendants against whom actions wil be commenced.
Reappointment of a receiver for the purpose of re-starting the 10-day time limit under
§ 754 has been expressly approved by the courts.

See Bilzerian, 378 F.3d at 1105 (citing

SEC v. Vision Communications, Inc., 74 F.3d 287, 291 (D.C. Cir. 1996)) ("On remand, the
court may reappoint the receiver and start the ten-day clock ticking once again."); SEC v.

Aquacell Batteries, Inc., 2008 WL 2915064, at *3 (M.D. Fla. July 24,2008) (citing Warfield
v. Arpe, 2007 WL 549467, at *12 (N.D. Tex. Feb. 22, 2007))

("A district court may reappoint

a federal equity receiver in a securities fraud case in order to 'reset' the 10-day clock under §

754"); Terry v. June, 2003 WL 21738299, at *3 (W.D. Va. July 21, 2003) ("Courts having

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addressed this issue unanimously suggest that an order of reappointment wil renew the ten-

day filing deadline mandated by section 754."); SEC v. Heartland Group, Inc., 2003 WL
21000363, at *5 (N.D. IlL. May 2, 2003) ("(TJhe court can easily correct (the Receiver'sJ
failure to file such a claim by merely reappointing the Receiver and thereby starting the 10-

day time period under § 754 ticking once more."). "Permitting a receiver to reassume.
jurisdiction in this manner is consistent with the role and purpose of a federal receivership.
Were this not the rule, a receiver would be forced to fie the required documentation in all
ninety-four federal districts to protect jurisdiction

over any potential, but presently unkown,

receivership assets-a result that would produce a needless waste of time and lead to

dissipation of assets otherwise returnable to defrauded investors." Terry v. June, 2003 WL
21738299, at *3 (citing Heartland Group, 2003 WL 21000363, at *5; SEC v. Infinity Group

Corp., 27 F. Supp. 2d 559, 563 (E.D. Pa. 1998)). This proceduré has been utilized in this

District. See, e.g., SEC v. HKW Trading, LLC, et aI., Case No. 8:05-cv-l076-T-24TBM

(M.D. Fla. Feb. 22, 2006) (Order Reappointing Receiver (Dkt. 75)) (order reappointing
Burton W. Wiand as Receiver).

WHEREFORE, the Receiver moves the Court to reappoint him as Receiver over all
of the Receivership Entities by Order in the form attached as Exhibit "A" and for such other
relief as the Court deems appropriate.

LOCAL RULE 3.0l(g) CERTIFICATE OF COUNSEL
The undersigned counsel for the Receiver is authorized to represent to the Court that

the SEC has no objection to the Court's granting this motion. The undersigned counsel is

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unable to contact Arthur Nadel, who is incarcerated in New York and is not represented by
counsel in this action.

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on June 2, 2009, I electronically filed the foregoing with
the Clerk of the Court by using the CM/ECF system. I further certify that I mailed the

foregoing document and the notice of electronic filing by first-class mail to the following
non-CM/ECF participants:
Arthur G. Nadel Register No. 50690-018 York MCC New Metropolitan Correctional Center Row 150 Park New York, NY 10007
s/ Carl R. Nelson

Carl R. Nelson, FBN 0280186 cnelson(ifowlerwhi teo com Gianluca Morello, FBN 034997
gianluca.morello(ifow lerwhi teo com

Ashley B. Trehan, FBN 0043411 ashley. trehan(ifowlerwhite. com
Maya M. Lockwood, FBN 0175481

mlockwood(ifow lerwhite. com FOWLER WHITE BOGGS P.A. 501 E. Kennedy Blvd., Suite 1700 Tampa, FL 33602 Tel: [phone] Fax: [phone] Attorneys for the Receiver, Burton W. Wiand
40691746vl

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