Securities and Exchange Commission v. Nadel et al

Filing 930

Unopposed MOTION for miscellaneous relief, specifically for leave to pay arbitrators' hourly fees directly from Receivership Estate by Burton W. Wiand. (Morello, Gianluca)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.

Case No. 8:09-cv-87-T-26TBM

ARTHUR NADEL;
SCOOP CAPITAL, LLC;
SCOOP MANAGEMENT, INC.
Defendants,
SCOOP REAL ESTATE, L.P.;
VALHALLA INVESTMENT PARTNERS, L.P.;
VALHALLA MANAGEMENT, INC.;
VICTORY IRA FUND, LTD;
VICTORY FUND, LTD;
VIKING IRA FUND, LLC;
VIKING FUND, LLC; AND
VIKING MANAGEMENT, LLC
Relief Defendants.
____________________________________/
RECEIVER’S UNOPPOSED MOTION FOR LEAVE TO PAY
ARBITRATORS’ HOURLY FEES DIRECTLY FROM RECEIVERSHIP ESTATE
Pursuant to Rule 66 of the Federal Rules of Civil Procedure and Rule 3.01 of the
Local Rules of the Middle District of Florida, Burton W. Wiand, as Receiver (the
“Receiver”), moves for leave to pay the arbitrator’s hourly fees in connection with the
pending arbitrations, as well as any subsequent arbitrations that may be filed, from the
Receivership Estate. Those arbitration proceedings are part of the Receiver’s continued
efforts to recover money and other assets for the Receivership Estate so that they may be re-

distributed in an equitable manner to investors who were injured by the fraudulent scheme
underlying this case and to other creditors. The Court previously authorized the Receiver to
pay the arbitration filing fees (Doc. 878), but not specifically the fees charged by each
arbitrator.
Pursuant to the Order Reappointing Receiver (Doc. 140), the Receiver has the duty
and authority to:
Investigate the manner in which the affairs of the Receivership Entities
were conducted and institutes such actions and legal proceedings, for the
benefit of and on behalf of the Receivership Entities and their investors and
other creditors as the Receiver deems necessary against those individuals,
corporations, partnerships, associations and/or unincorporated organizations,
which the Receiver may claim have wrongfully, illegally, or otherwise
improperly misappropriated or transferred monies or other proceeds directly
or indirectly traceable from investors in the Receivership Entities, including
against their officers, directors, employees, affiliates, subsidiaries, or any
persons acting in concert or participation with them, or against any transfer of
money or other proceeds directly or indirectly traceable from investors in the
Receivership Entities; 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.
Order Reappointing Receiver, ¶ 2.
In fulfillment of his responsibilities, the Receiver commenced numerous Clawback
Cases. As the Receiver previously informed the Court (see Docs. 668 & 671), the defendants
in 24 of the Clawback Cases (the “Defendants”) successfully moved to compel arbitration
under arbitration language in the offering documents used to attract investors into the scheme
underlying this case.1

Based on a number of considerations, the Receiver plans to

1

      With the Court’s permission, the Receiver attempted to pursue appeals of the orders
compelling arbitration. (See Docs. 668, 669, 671, 672.) As the Receiver had foreseen as a

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consolidate his claims against the Defendants into 9 separate arbitrations.

To date, the

Receiver has initiated 4 arbitrations (“Filed Arbitrations”).2 With respect to the other cases,
the Receiver is currently engaged in settlement discussions with certain Defendants, but he
stands ready to file the remaining arbitration proceedings should settlement appear unlikely.
In the aggregate, the Receiver’s claims against the Defendants seek or will seek to
recover approximately $36 million, not including pre-judgment interest and costs. Of that
sum, approximately $10 million represent the “false profits” received by Defendants (i.e., the
amount they each received from the scheme in excess of their total investment).

The

resulting balance, or approximately $26 million, represents distributions to Defendants who
are professionals or otherwise sophisticated investors whom, for various reasons, were or
should have been aware of “red flags” surrounding the scheme underlying this case. If these
arbitration proceedings are ultimately successful, the Receiver stands to recover a significant
amount of assets for the Receivership Estate that would, in turn, be distributed to investors
defrauded by the scheme.
By this Motion, the Receiver seeks leave to pay directly from the Receivership Estate
hourly fees due and owing to the arbitrator(s) presiding over the Filed Arbitrations, as well as

possibility, the U.S. Circuit Court of Appeals for the Eleventh Circuit concluded the orders
compelling arbitration and staying the court cases were not final appealable orders and thus
dismissed the appeals. To hedge against that possibility, the Receiver had also moved in this
Court for a certification to pursue an interlocutory appeal under 28 U.S.C. § 1292(b) (see
Doc. 668 at 9), but those motions were denied (see, e.g., Wiand, as Receiver v. Munson
Family Partners, Ltd., Case No. 8:10-cv-221-T-17MAP, Doc. 56). As such, the Receiver has
no choice but to proceed to arbitration.
2

      The Receiver amicably resolved the claims against one of the two Defendants in an

arbitration proceeding. (See Doc. 896.)

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the arbitrator fees the Receiver will incur in the Filed Arbitration and other arbitrations he
will have to file if the disputes are not amicably resolved. These hourly fees range from $250
to $900 per hour, and are dependent on the specific arbitrator’s credentials and experience,
the tribunal in which the arbitration was brought, and the arbitration’s location.3 Although
the Receiver is mindful about minimizing fees and costs, the Receiver’s ability to do so is
limited.4 Unfortunately, it is difficult (if not impossible) to predict the amount of fees that
will be incurred by each party in each arbitration because it is unknown how much time the
arbitrator(s) will spend on a particular case. While the amount is potentially significant, as
set forth in the Receiver’s motion to pay the arbitration filing fees (Doc. 877), the Receiver
believes it is in the best interests of the Receivership Estate to proceed with arbitration
proceedings against the Defendants in light of the merits of the claims asserted and the
potential recovery.5

Accordingly, pursuant to paragraph 4 of the Order Reappointing

Receiver, the Receiver seeks leave to pay those fees directly out of accounts held by the

3

      Per the “contracts”, the arbitrations are to occur in Sarasota, Florida (AAA), Chicago,

Illinois (AAA), or New York, New York (JAMS). The arbitrators in New York, which are
required to be individuals knowledgeable in securities matters, charge a significantly higher
rate than arbitrators located in Florida.
4

    For example, again per the “contracts,” some disputes require a panel of three arbitrators
when they involve a particularly significant amount of money sought by the Receiver, and
the Receiver has no ability to reduce that to a single arbitrator without the opposition’s
consent.

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For example, in an arbitration pending in Chicago, Illinois against World Opportunity
Fund, L.P., the three arbitrators charge $395, $495, and $630 per hour. The Receiver,
however, seeks over $4 million transferred to the Defendant, including over $2.3 million in
“false profits.” Thus, while the arbitrator fees could be significant, the arbitration could
generate a significantly larger amount of money for the Receivership Estate. As such, not
pursuing the Defendant would significantly decrease the potential money available to
distribute to losing investors through the claims process.

4

Receivership Estate.6 See S.E.C. v. Elliott, 953 F.2d 1560, 1566 (11th Cir. 1992) (“The
district court has broad powers and wide discretion to determine relief in an equity
receivership.).
WHEREFORE, the Receiver respectfully requests that the Court grant him leave to
pay hourly fees incurred in arbitration proceedings directly from funds in the Receivership
Estate.
LOCAL RULE 3.01(g) CERTIFICATION
Counsel for the Receiver has conferred with counsel for the SEC and is authorized to
represent to the Court that the SEC does not object to the relief requested in this motion.
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.L.
3000 Bayport Drive, Suite 600
Tampa, FL 33607
Tel.: [phone]
Fax: [phone]
Attorneys for the Receiver, Burton W. Wiand

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In relevant part, that paragraph authorizes the Receiver to pay all reasonable expenses
associated with “exercising the power granted by” the Order Reappointing Receiver subject
to the Court’s approval. Without approval from the Court, the arbitrator fees would have to
be paid by the Receiver’s and his counsel’s law firm (which would then seek
reimbursement). Consistent with the law firm’s policy requiring clients to directly pay
significant costs, the Receiver seeks leave to pay the hourly fees directly out of the
Receivership Estate.
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on October 25, 2012, I electronically filed the foregoing
with the Clerk of Court by using the CM/ECF system.

s/Gianluca Morello
Gianluca Morello, FBN 034997
[e-mail]
Michael S. Lamont, FBN 0527122
[e-mail]
Jared J. Perez, FBN 0085192
[e-mail]
WIAND GUERRA KING P.L.
3000 Bayport Drive, Suite 600
Tampa, FL 33607
Tel.: [phone]
Fax: [phone]
Attorneys for the Receiver, Burton W. Wiand

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