Securities and Exchange Commission v. Nadel et al

Filing 975

RESPONSE in Opposition re 966 MOTION for miscellaneous relief, specifically to clarify certain settlement orders and JOINDER re 973 World Opportunity Fund's Objection to Receiver's Motion "To Clarify Certain Settlement Orders" filed by Peter Roby, Katherine Roby, Charles A. Hailey, Gregg Weinberg, Louis Wang, John D. Whitlock, Rodney Nigel Turner, W.W. Whitlock Foundation, Paul Swenson, Harvey A. Gilbert, Deanne E. Gilbert, Thomas Luck, Mark Munson, Melinda Munson, Munson Family Partners, Ltd.. (Warren, Jeffrey)

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

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

ARTHUR NADEL, SCOOP CAPITAL,
LLC, SCOOP MANAGEMENT, INC.,
Defendants.
________________________________________/
CERTAIN ARBITRATION RESPONDENTS’1
JOINDER IN WORLD OPPORTUNITY FUND’S OBJECTION TO
RECEIVER’S MOTION “TO CLARIFY CERTAIN SETTLEMENT ORDERS”
The Arbitration Respondents, by and through the undersigned counsel and without
waiver of their right to have the claims asserted against them by Burton W. Wiand
(“Wiand”), as receiver, and any defenses thereto, determined in arbitration proceedings,
hereby file this joinder (the “Joinder”) and respectfully join and adopt the arguments made
in World Opportunity Fund’s Objection to Receiver’s Motion “To Clarify Certain Settlement
Orders” filed in the above-referenced case (Doc. No. 973) and attached hereto as Exhibit
“B.”
Wiand has been compelled by this Court to arbitrate his claims against the Arbitration
Respondents under the Viking Fund, LLC, Viking IRA Fund, LLC, or the Victory Fund, Ltd.
operating agreements and subscription documents (“Wiand’s Claims”). See, e.g., Wiand v.
1

A complete list of the Arbitration Respondents, the case numbers in which they were named as defendants,
and the funds they invested in is attached hereto as Exhibit “A.” Wiand filed claims against each of the
Arbitration Respondents in separate actions in this Court, which were subsequently compelled to arbitration.

Roby, 8:10-cv-71, Doc. Nos. 49 (Order adopting R&R and ordering arbitration), 60 (Court of
Appeals order dismissing appeal), 61 (Order adopting R&R and denying interlocutory
appeal) (M.D. Fla.).2
Wiand has initiated arbitration proceedings against only two of the Arbitration
Respondents, John D. Whitlock (“Mr. Whitlock”), individually, and Mr. Whitlock and
Thomas Luck, as co-trustees of the Edward J. Whitlock, Jr. Marital Trust Two, who invested
in Victory Fund, Ltd (“Victory”). Wiand has not initiated arbitration proceedings against the
remaining Arbitration Respondents who invested in Viking Fund, LLC (“Viking”) or Viking
IRA Fund, LLC (“Viking IRA”).
With respect to the motion filed by Wiand currently pending before this Court, the
significant distinction between the Arbitration Respondents and World Opportunity Fund, LP
is that Wiand’s claims against World Opportunity Fund, LP are based on its investment in
Valhalla Investment Partners LP, whereas Wiand’s Claims against the Arbitration
Respondents are based on their investments in Viking, Viking IRA, and Victory.
Although the Arbitration Respondents have not formally appeared, are not parties to,
are not named in the complaint, and have not been served with process under Federal Rule of
Civil Procedure 4 in this action by the SEC, the Receiver’s Motion to Clarify Certain
Settlement Orders (Doc. No. 966) affects the Arbitration Respondents’ right to have Wiand’s
Claims decided in arbitration and violates Judge Kovachevich’s stay order by asking this
Court to issue an order determining the merits of the Arbitration Respondents’ potential
defense in the arbitration proceedings or by seeking this Court to impermissibly alter a final
2

Each of these orders was entered in each of the actions filed by Wiand in this Court against the Arbitration
Respondents as listed in Exhibit A.

2

and non-appealable settlement orders. By filing this Joinder, the Arbitration Respondents do
not waive their rights to have Wiand’s Claims and any of the Arbitration Respondents’
defenses thereto to be decided outside of arbitration.
Wiand seeks to recover funds from the Arbitration Respondents based on their
investment in Viking, Viking IRA, or Victory in 2003 and the redemption of their
investments pursuant to the terms of the applicable fund operating agreements in full
beginning in 2004 and ending in the Spring of 2006.3 According to company documents,
Viking, Viking IRA, and Victory invested in securities throughout their existence—including
making investment gains and losses as described in Wiand’s various reports to this Court.
For example, by Wiand’s own calculations of the funds’ actual returns from 2003-2005
(when the Arbitration Respondents were invested in Viking), Viking showed returns of
29.52% in 2003, -5.97% in 2004 and 3.20% in 2005; Viking IRA showed returns of 55.07%
in 2003, 5.84% in 2004, and 2.89% in 2005; and Victory showed 63.59% in 2003, 3.96% in
2004, and 1.45% in 2005.

(Doc. No. 540 at 19.)

Wiand’s Claims involve questions

regarding Wiand’s ability to compel the return of funds distributed to the Arbitration
Respondents by Viking, Viking IRA, or Victory.

Wiand’s Claims and any defenses,

including whether the Arbitration Respondents are entitled to judgment credit based on final
settlement and bar orders, are subject to arbitration.
The Arbitration Respondents fully adopt and incorporate into this Joinder the
Argument and Citation of Authorities in World Opportunity Fund’s Objection to Receiver’s

3

The majority of the Arbitration Respondents withdrew their investments in 2004 and the Spring of 2005. Only
two distributions were made in 2006 and they were to Rodney Turner after he redeemed the majority of his
investment in 2005.

3

Motion “To Clarify Certain Settlement Orders.” In sum, if Wiand is asking this Court to
substantively change the final judgment entered as part of the Court’s prior approval of the
bar orders, such a request is: (1) untimely, (2) alters the rights of the settling defendants
without their consent to the relief, and (3) operates to deprive the Arbitration Respondents of
their right to either a judgment credit or a claim against the settling defendants. If Wiand is
asking the Court to determine the legal consequences of those judgments, then that motion is
also improper because: (1) the determination of the consequences of a bar order is for an
arbitrator with jurisdiction over the parties and their claims and defenses; (2) this Court lacks
jurisdiction over the dispute between Wiand and the Arbitration Respondents and any such
opinion would be advisory; and (3) the motion violates the stay order of this Court related to
the litigation of the merits qua non of Wiand’s Claims. Under either construction of the
Receiver’s Motion to Clarify Certain Settlement Orders, however, this Court cannot grant
Wiand the relief he seeks.
For the reasons stated herein and in World Opportunity Fund’s Objection to
Receiver’s Motion “To Clarify Certain Settlement Orders,” the Arbitration Respondents
respectfully request that this Court abstain or deny the Receiver’s Motion to Clarify Certain
Settlement Orders so that the issue presented can be addressed in the appropriate arbitration
proceedings when applicable.

4

Dated: Tampa, Florida
February 19, 2013

Respectfully submitted,
By:

/s/ Jeffrey W. Warren
Jeffrey W. Warren
Florida Bar No. 0150024
Lauren R. Pilkington
Florida Bar No. 0070282
BUSH ROSS, P.A.
P.O. Box 3913
Tampa, FL 33601-3913
[phone] (telephone)
[phone] (telecopy)
[e-mail]
[e-mail]

CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on February 19, 2013, I electronically filed a true and
correct copy of the foregoing Certain Arbitration Respondents’ Joinder in World Opportunity
Fund’s Objection to Receiver’s Motion “To Clarify Certain Settlement Orders” with the
Clerk of the United States District Court for the Middle District of Florida by using the
CM/ECF system which will automatically send email notification of such filing sufficient to
constitute service to all attorneys of record in this case.

/s/ Jeffrey W. Warren
ATTORNEY

5

EXHIBIT A

DEFENDANT/ARBITRATION
RESPONDENT
Peter Roby and Katherine Roby
Charles A. Hailey
Gregg Weinberg, as Trustee of the
Commonwealth Radiology, PC ProfitSharing Plan
Louis Wang
John D. Whitlock
Rodney Nigel Turner
W. W. Whitlock Foundation
Paul Swenson
Harvey A. Gilbert and Deanne E. Gilbert,
as Co-Trustees of the Gilbert Family Trust
John D. Whitlock, as Trustee of the W.W.
Whitlock PC Pension Trust
John Whitlock and Thomas Luck, as CoTrustees of the Edward J. Whitlock, Jr.
Marital Trust Two
Melinda Munson and Mark Munson
Munson Family Partners, Ltd.

CASE NUMBER
8:10-cv-00071
8:10-cv-00096

Viking Fund, LLC
Viking Fund, LLC

8:10-cv-00097

Viking Fund, LLC

8:10-cv-00112
8:10-cv-00119
8:10-cv-00123
8:10-cv-00125
8:10-cv-00134

Viking IRA Fund, LLC
Victory Fund, Ltd.
Viking Fund, LLC
Viking Fund, LLC
Viking IRA Fund, LLC

8:10-cv-00171

Viking Fund, LLC

8:10-cv-00180

Viking Fund, LLC

8:10-cv-00184

Victory Fund, Ltd.

8:10-cv-00206
8:10-cv-00221

6

INVESTMENT FUND

Viking IRA Fund, LLC
Viking Fund, LLC

Case 8:09-cv-00087-RAL-TBM Document 973 Filed 02/19/13 Page 1 of 17 PageID 16789

EXHIBIT B
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.

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CASE NO.
8:09-CV-87-T-26TBM

WORLD OPPORTUNITY FUND’S OBJECTION TO RECEIVER’S MOTION
“TO CLARIFY CERTAIN SETTLEMENT ORDERS”
Pursuant to the Court’s order dated February 15, 2013 [Dkt. 968] and without
waiver of its right to have the Receiver’s claims determined by a panel of three AAA
arbitrators, World Opportunity Fund LP (“WOF”) respectfully files this objection to the
relief sought by the Receiver in his motion to “clarify” certain settlement orders.
As an initial matter, WOF objects to these proceedings to the extent that they
supplant WOF’s right to have the Receiver’s claims decided in arbitration. The Receiver
is collaterally estopped from thrice litigating this issue, having lost his plea to avoid
arbitration in the case pending before Judge Kovachevich (Wiand v. World Opportunity
Fund, LP, Case No. 8:10-cv-203-EAK-MAP) and again before a panel of three
arbitrators convened by the American Arbitration Association. In fact, the Receiver is
presently in violation of Judge Kovachevich’s stay order by asking this Court to issue an
order determining the merits of a defense asserted by WOF in the arbitration proceeding
commenced by the Receiver. By responding in this case, WOF does not waive its rights

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to have the matters that have been fully briefed, with the Receiver’s consent, to an
arbitration panel decided by anyone other than that panel.
FACTUAL BACKGROUND
The Receiver seeks to recover funds from WOF based on its investment in
Valhalla Investment Partners LP (“Valhalla”), which was founded in 1999 by Neil
Moody as a Delaware limited liability partnership. Valhalla Management, Inc. was
founded in the same year by Neil Moody as a Florida corporation for the purpose of
being Valhalla’s general partner. The Receiver admits that Neil Moody (and his son
Chris) were the only principals at Valhalla and Valhalla Management.
At some point, but not earlier than 2001, Valhalla began to obtain investment
advisory services from Scoop Management, a Florida corporation, whose principal was
Arthur Nadel. Mr. Nadel was never an officer, director, principal, or partner in either
Valhalla or Valhalla Management. Mr. Nadel pled guilty to securities fraud and wire
fraud in connection with the services he rendered to Valhalla, among other hedge funds,
which were formerly relief defendants in this action.
But Valhalla was different than other hedge funds in the alleged scheme, because
of the continuing control exerted over the fund by the Moodys during the period of the
alleged fraud and because of Valhalla’s actual performance. According to company
documents, Valhalla invested in securities throughout its existence—including making
investment gains and losses as described in the Receiver’s various reports to this Court.
For example, by the Receiver’s own calculations of Valhalla’s actual returns from 2003
through 2007 (when WOF exited Valhalla), the fund showed returns of 110.84%, 9.39%,

2

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3.85%, -0.64%, and 7.3%, or approximately 130% over those five years. Receiver’s
Seventh Interim Report [Dkt. 540] at 19. The claims asserted by the Receiver involve
questions regarding the Receiver’s ability to compel the return of funds distributed to
WOF by Valhalla. Those claims are subject to arbitration as further discussed herein.
The Receiver initially sought to litigate his claims against WOF. Twice adopting
reports and recommendations made by Magistrate Judge Pizzo, this Court—through
Judge Kovachevich—granted WOF’s motion to compel arbitration and, importantly for
this motion, stayed continued litigation regarding the Receiver’s claims and WOF’s
defenses. The parties were ordered to resolve their dispute in arbitration. See Wiand v.
WOF, Case No. 8:10-cv-203-EAK-MAP, Dkt. 49 (M.D. Fla.).
Once in arbitration, the parties conferred through counsel regarding the most
efficient means to proceed through the arbitration.1 The Receiver suggested that he
wished to test the arbitration panel’s jurisdiction. WOF disagreed with the Receiver’s
position but agreed that it would be more efficient to resolve jurisdictional issues early in
the case. WOF also proposed that the arbitration panel hear WOF’s argument that a
judgment credit was due under the bar orders signed by this Court and that such credits
would preclude a need for a hearing on the merits. The Receiver agreed that having the
judgment-credit issue decided early made sense and consented to the briefing and

1

The panel assigned by the American Arbitration Association is composed of three,
experienced litigators in the Chicago area: William Deitrick (chairman of arbitration
panel and former partner at Mayer Brown), Robert Byman (partner at Jenner & Block
and lead counsel for the Examiner in the Lehman Bankruptcy ), and Gordon Nash
(partner at Drinker Biddle and former chief of special prosecutions for the U.S.
Attorney’s Office for the Northern District of Illinois). The qualifications and abilities of
this arbitration panel are beyond criticism or reproach.

3

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resolution of this issue by the arbitration panel before moving to the merits of the claims.
In January 2013, the arbitration panel denied the Receiver’s jurisdictional motion and set
WOF’s motion for a judgment credit for a hearing on February 22, 2013. See Ex. A,
AAA Order regarding Jurisdiction. Thus, the judgment-credit issue, which is asserted as
a defense by WOF to the Receiver’s claims, is fully briefed and awaiting ruling by a
panel of three senior litigators in Chicago, Illinois.2
In tacit acknowledgment of the merits of WOF’s arguments regarding its
entitlement to a judgment credit, the Receiver now asks the Court to “clarify” settled,
final judgments of this Court. Those judgments are not ambiguous, were proposed by the
Receiver himself (together, as negotiated documents, by the Settling Defendants), and
were vetted and challenged by certain clawback defendants at the time that the judgments
were entered.3 The final judgments entered by this Court in connection with the
settlements by Goldman Sachs and Holland & Knight were not pro forma documents—
they were documents negotiated by parties with competent counsel, challenged in an
adversarial process, and reviewed and signed by this Court. In fact, the Receiver both
drafted these final judgments and defended them from challenge before this Court. He
should not now be heard to argue that he does not like their contents.
2

The judgment-credit defense is more fully described herein. The Receiver settled
claims by the relief defendants (and individual investors) against Goldman Sachs,
Holland & Knight, and Shoreline Trading (collectively, the “Settling Defendants”). In
those settlements, claims against the Settling Defendants by non-parties were barred in
exchange for judgment credits.
3

The Receiver argued—and this Court agreed—that the clawback defendants lacked
standing to challenge the bar orders because they lacked a justiciable injury. Dkts. 731,
742. The only way that the clawback defendants are uninjured by the bar order is if they
received credit for the claims barred by this Court’s final judgments.

4

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The Receiver is not seeking a “clarification.” Rather, he is asking the Court to
opine on the application of the language unambiguously contained in the bar orders as to
WOF. WOF, however, is not a party to the SEC action, is not named in the complaint
pending in the case, and has not been served with process under Federal Rule of Civil
Procedure 4. The consequences for the Receiver’s claims against WOF based on the
language of the bar orders are not capable of review by this Court.
The Receiver’s motion fails because (1) to the extent it seeks a ruling on the
applicability of judgment credits to the Receiver’s claims against WOF, the issue is
required to be decided by an arbitrator and any ruling would be an advisory opinion that
would violate Article III of the U.S. Constitution; and (2) to the extent that the Receiver
asks the Court to alter or amend its final judgments issued in 2012, the time has passed
under Federal Rule of Civil Procedure 59 and the alterations requested would violate
WOF’s due-process rights and may constitute a judicial taking. The Eleventh Circuit’s
precedent is crystalline that bar orders may strip claims from litigants only if such
litigants are provided something of value to compensate them for their loss. To the extent
that the Court would hold that WOF lacked both a claim against the Settling Defendants
and a judgment credit against the Receiver’s claims, such an interpretation of the bar
order would violate binding, Eleventh Circuit precedent. These issues are the subject of
this objection to the Receiver’s requested relief in his motion to “clarify.”
ARGUMENT AND CITATION TO AUTHORITIES
The Federal Arbitration Act limits the circumstances of judicial intervention when
a decision as to arbitrability has been made, and the U.S. Constitution limits the power of

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federal courts to decide only “cases and controversies.” The junction of these two ideas
forecloses the relief the Receiver seeks in his motion to “clarify.”
As an initial matter, the Court must determine the nature of the Receiver’s
motion; a task which is made more difficult because the Receiver failed to cite any rule of
federal civil procedure as the basis for his motion. Based on the relief that the Receiver
desires, his motion is stuck in the horns of a dilemma. If, on the one hand, he is asking
this Court to substantively change the final judgments entered as part of the Court’s prior
approval of the bar orders, such a request is (1) untimely, (2) alters the rights of the
Settling Defendants without their consent to the relief,4 and (3) operates to deprive WOF
of its right to either a judgment credit or a claim against the Settling Defendants. If, on
the other hand, the Receiver is not asking the Court to modify the prior judgments and
only asking the Court to determine the legal consequences of those judgments, then that
motion is also improper because (1) the determination of the consequences of the bar
orders is for a tribunal with jurisdiction over the parties and their claims and defenses
(here, the arbitration panel), (2) this Court lacks jurisdiction over the dispute between the
Receiver and WOF and any such opinion would be advisory, and (3) the motion violates
the stay order of this Court related to the litigation of the merits qua non of the Receiver’s
claims against WOF. Under either construction of the Receiver’s motion, however, this
Court cannot grant the Receiver the relief he seeks.

4

Goldman Sachs and Holland & Knight have made their position on the Receiver’s
motion clear: they take no position on whether WOF is entitled to a judgment credit
under the bar orders. Those settling defendants would have a strong position were the
Court to revisit the substance of the bar order to permit WOF (and other clawback
defendants) to bring claims in lieu of a judgment credit.

6

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This objection to the Receiver’s motion proceeds in four parts. First, WOF will
show that this is the wrong forum for the Receiver’s claims and, second, that the relief
requested requires the Court to issue an advisory opinion barred by Article III of the U.S.
Constitution. Third, WOF will show that even if the request were in any way proper, the
motion to clarify is an improper attempt by the Receiver to alter or amend a final
judgments and that, fourth, even if the Court wished to alter its prior judgments regarding
the bar orders, it cannot take WOF’s claim without providing just compensation.
A. Decisions as to the merits of WOF’s defenses to the Receiver’s claims must be
decided in arbitration.
Having argued and been defeated many multiple times on whether his claims
must be arbitrated, the Receiver’s current motion is “another arbitration dispute in which
the parties are litigating whether or not they should be litigating.” Terminix Int’l Co. v.
Palmer Ranch, LP, 432 F.3d 1327, 1329 (11th Cir. 2005). In fact, this issue has been
litigated, appealed, and arbitrated. See Wiand v. WOF, Civ. No. 8:10-cv-203, Dkts. 39
(R&R ordering arbitration), 49 (Order adopting R&R and ordering arbitration), 57 (R&R
denying interlocutory appeal), 58 (Court of Appeals order dismissing appeal), and 61
(Order adopting R&R and denying interlocutory appeal); Wiand v. WOF, AAA Arb. No.
51-512-892-12, Ex. A hereto (denying Receiver’s motion to dismiss for lack of arbitral
jurisdiction). Furthermore, the Receiver again tries to litigate whether the defense of the
judgment credit can be arbitrated. See Mot. at 8. As the Receiver noted, however, he

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submitted this issue to the arbitration panel. See Brief in Opp. to Mot. for Judgment
Credit at 6–7, attached hereto as Exhibit B.5
This Court should not permit the Receiver to collaterally attack Judge
Kovachevich’s order compelling arbitration and staying litigation as well as the order of
the arbitration panel denying the Receiver’s motion to dismiss for lack of jurisdiction.
The merits of the Receiver’s claims and the defenses thereto were properly sent to
arbitration and the Receiver provides no basis for the Court to rule on the question
presented by the Receiver. WOF respectfully moves that this Court decline the
Receiver’s invitation to intrude on the arbitration and compel arbitration of these matters
under 9 U.S.C. § 3.
B. Expressing any opinion regarding the judgment credit as regards WOF’s
defenses is an impermissible advisory opinion.
In 2012, this Court entered three unconditional bar orders, which prevent suits
against Settling Defendants related to their conduct in connection with the activities of
Mr. Nadel. As was required by the clear law of the Eleventh Circuit, the Court properly
provided judgment credits to anyone who was (1) sued by the Receiver and (2) deprived
of their claims against the Settling Defendants. In fact, the clawback defendants were the
principal class of people affected by the bar order as investors in funds who were also
being sued by the Receiver.
As an initial matter, the Receiver’s attempts to collaterally challenge the content
of the bar orders fails under the “invited error” doctrine. Doe v. Princess Cruise Lines,

5

For the sake of completeness, WOF attaches its reply from the arbitration proceedings
to this objection as Exhibit C.

8

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Ltd., 657 F.3d 1204, 1213 (11th Cir. 2011) (“The invited error doctrine stands for the
common sense proposition that someone who invites a court down the primrose path to
error should not be heard to complain that the court accepted its invitation and went down
that path.”). This Court signed the bar orders as presented by the Receiver. The legal
consequences that flow from the contents of those orders are the Receiver’s consequences
to bear. This is particularly true because the Receiver failed to object on the grounds now
before the Court at the time the Court first considered the matter. Fed. R. Civ. P. 45
(“When a ruling or order is requested or made, a party need only state the action that it
wants the court to take or objects to, along with the grounds for the request or
objection.”). Having failed to raise the issues when the Court first considered the matter,
the Receiver should not now be heard to have the Court revisit its earlier order.
As discussed above, the bar orders became final judgments of this Court. See
Dkts. 744 (final judgment regarding the settlement with Goldman Sachs), 924 (final
judgment regarding the settlement with Holland & Knight).6 Those bar orders provide
for mandatory judgment credits “as permitted by law.” See, e.g., H&K Bar Order, Dkt.
922, at 4. Whether a party might be entitled to a judgment credit as a matter of law is a
matter for a tribunal with authority over the claims sought to be barred.
What the Receiver presents as a “motion to clarify” is for all practical purposes a
motion seeking an opinion regarding whether the judgment credits described in the bar

6

It does not appear that the order granting the Receiver’s motion to approve Shoreline’s
settlement agreement resulted in a Rule 58 judgment on the Court’s docket. The
judgment credits available under the Goldman Sachs and Holland & Knight judgments
total approximately $35 million and provide sufficient credits to protect WOF and any
other clawback defendant asserting this defense.

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orders are available as a defense to the Receiver’s claims in the clawback litigations and
arbitrations. The Receiver is seeking to alter who gets to decide this question based on
his filings in this Court. Because the Receiver filed WOF’s motion and a document that
is substantively identical to his opposition to that motion before the arbitration panel, see
Ex. B hereto, the Receiver’s efforts to have this Court decide a matter fully briefed in the
arbitration lacks even a fig-leaf of propriety.
As a motion requesting relief against non-parties to litigation, the Receiver is
seeking an advisory opinion that violates Article III of the U.S. Constitution. Vornado
Realty Trust v. Stop & Shop Supermarkets (In re Bradlees, Inc.), 2005 U.S. Dist. LEXIS
725, at *13–14 (S.D.N.Y. Jan. 19, 2005) (“Vornado seeks to have this and/or the
Bankruptcy Court declare the meaning of the February 6 Order as applied to another
dispute—to state its preclusive effects. This, as Stop & Shop has argued, is firmly
prohibited [as an advisory opinion].”); Pronti v. Barnhart, 441 F. Supp. 2d 466, 477
(W.D.N.Y. 2006) (“Nor can the Court make a declaration as to the rights of other
claimants not parties to these cases. . . . Federal courts are, of course, courts of limited
jurisdiction and are not charged with rendering advisory opinions concerning nonparties.”); Day v. Chevron U.S.A. Inc., 2011 U.S. Dist. LEXIS 112178, at *30 (S.D. Ind.
Sept. 29, 2011) (“There is no ‘right’ to have this Court interpret an order entered by the
Bankruptcy Court. Day’s proposed amendment is, rather, a request for an advisory
opinion as to the proper interpretation of the Bankruptcy Court’s order. Furthermore, Day
appears to be asking for a declaration of his rights relative to the Bankruptcy Court.
However, as the Bankruptcy Court is not a party to the litigation, a determination of

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Day’s rights with respect to the Bankruptcy Court would be an improper use of a
declaratory judgment under the Declaratory Judgments Act.”). Cf. United States v.
Zipkin, 729 F.2d 384, 389 (6th Cir. 1984) (“It was error for the trial judge to permit
Bankruptcy Judge Ray to testify as to his understanding of what his order meant.”). This
Court lacks jurisdiction to decide whether WOF’s motion for a judgment credit has merit
because WOF is not a party to this action.
C. To the extent the Receiver seeks modification of the bar orders, the motion is
untimely.
The Receiver misleadingly cites a string of generic cases stating that a court
appointing a receiver can enter orders relative to the receivership, as justification the
motion made by the Receiver in this case. The present motion, however, seeks to modify
not the receivership but rather final judgments of this Court related to settlement
agreements and bar orders entered in February and October 2012. Because the relief
sought by the Receiver relates to final judgments rather than interlocutory orders, his
motion is untimely and due to be denied. Birdsong v. Wrotenbery, 901 F.2d 1270, 1272
(5th Cir. 1990) (holding that seeking to “clarify” a permanent injunction prohibiting the
bringing of certain claims goes to the merits of the injunction and must be challenged
under Rule 59).
As argued extensively above, the Receiver seeks either (1) an order stating that
WOF is not entitled to a judgment credit—that is, the application of an order of this Court
to a party not before the Court or (2) a substantive modification of the previously entered
judgments stating that clawback defendants may not receive a judgment credit. The latter
of these options is improper because it is untimely. See, e.g., Bernstein v. Lefrak (In re

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Frigitemp Corp.), 781 F.2d 324, 326 (2d Cir. 1986) (noting that motions to “clarify” must
proceed under either Rule 59 or Rule 60 and that the passage of time will bar
consideration of such motions); see also Fed. R. Civ. P. 59(e) (“A motion to alter or
amend a judgment must be filed no later than 28 days after the entry of the judgment.”).7
The judgments that the Receiver seeks to amend with his motion were entered many
multiples of 28 days before his motion.
D. The bar orders cannot be construed to have deprived WOF of valuable rights
without compensation.
Bar orders provide peace to settling defendants in order to induce settlements in
amounts greater than might be available absent a bar order. In this case, the Receiver
convinced three organizations to settle claims for consideration in excess of $37 million.
This Court allowed the Receiver to sell finality—total peace of mind to the settling
defendants that they would never need worry about claims related to Mr. Nadel ever
again. Selling that finality, however, came at the cost of providing judgment credits to
7

As noted above, no provision of Rule 60 affords the Receiver the relief he seeks. The
Receiver has alleged no typographical error, new evidence, fraud, voidness, or discharge
that would justify relief under Rule 60. The Receiver’s motion comes closest to arguing
that this Court made a mistake in the entry of the judgments, but that theory cannot hold
water because too many skilled eyes reviewed, argued over, and approved the language
of the bar orders. The Receiver negotiated the language of the bar orders with counsel
for Goldman Sachs and Holland & Knight; he submitted the bar orders for this Court to
review; he opposed motions that were filed by counsel for other clawback defendants
challenging the bar orders; and he argued to this Court that the orders should be entered
as drafted. The bar orders are likely the most fully vetted and intentional documents on
the docket of this case. The final judgments are not mistakes within the meaning of Rule
60. Finally, even if the Court wished to consider its prior judgments to be mistakes, relief
is unavailable under Rule 60(b) as to the Goldman Sachs $9,850,000 judgment entered on
February 13, 2012, because the Receiver’s motion is untimely by one day. Fed. R. Civ.
P. 60(c)(1) (requiring such motions to be made “no more than a year after entry of the
judgment”).

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people with claims against the Settling Defendants. The motion that WOF made to its
arbitration panel involved those judgment credits.
In the arbitration, the Receiver did not dispute several key facts:
•

WOF is in the class of persons contemplated as having rights under the bar orders;

•

WOF’s claims against H&K or GSEC are precluded by the bar orders;

•

WOF otherwise received no benefit for the claims it lost under the bar orders;

•

The Receiver chose to settle his claims for less than the amounts he believes
H&K, GSEC, and others owe for their participation in the “scheme;” and

•

Had the Receiver obtained full relief from H&K and GSEC for investor losses, he
would not have claims against WOF for fraudulent transfer.
By focusing on Mr. Nadel, the Receiver seeks to divert attention away from the

deal he struck with H&K and GSEC when he received $35 million in settlement of
claims for those entities participation in Mr. Nadel’s investments. In those deals, he sold
the potential for a full recovery for the certainty of a lesser recovery. He also sold
WOF’s claims against H&K and GSEC for no value to WOF, except for the judgment
credit he now attempts to avoid. The Receiver seeks to make up the shortfall generated
by his voluntary reduction in the assets available (i.e., settlement of claims against H&K
and GSEC) by continuing to press claims against innocent investors, like WOF, who
happened to redeem from Valhalla before it crashed.
As argued to the arbitration panel, it is now clear that the Receiver only wished to
offer bar orders to the Settling Defendants so long as no one was eligible to claim relief
under their judgment credit provisions. The Receiver simply believes that WOF lost its

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right to sue without compensation. Federal courts, however, are prohibited from
awarding bar orders that fail to compensate affected parties. AAL High Yield Bond Fund
v. Deloitte & Touche LLP, 361 F.3d 1305, 1312 (11th Cir. 2004) (vacating an
“exceedingly broad” bar order because the trial court provided “no rationale or authority
for barring claims without a settlement credit or ‘set off’”).
The Receiver suggests—in contravention of every case describing bar orders—
that WOF’s claims may be cancelled without compensation because entitlement to a
judgment credit is limited to “such set-offs or judgment credits as permitted by law, if
any.”8 Mot. at 7. Federal cases are uniform in requiring bar orders that deprive someone
of a right to provide compensation to that person. In re Healthsouth Corp. Sec. Litig.,
572 F.3d 854, 861 (11th Cir. 2009) (acknowledging that “a bar order deprives a nonsettling defendant of potentially valuable rights, and therefore, the non-settling defendant
should be compensated. . . . [T]he instant Bar Order includes, as part of its compensation
to [defendant], a judgment credit, which would credit [defendant] against any future
8

WOF does not understand why the Receiver decided to advertise its theory of defense
to the entire world of potential claimants. While there was no guaranty of secrecy in the
arbitration proceedings, by filing this motion, the Receiver has invited every clawback
defendant to assert the judgment credits as a defense to his claims and opened a
substantial appellate issue regarding his claims still pending in federal courts. Having
chosen to advertise this substantial complication into his own claims, one must question
the continuing marginal utility of the Receiver’s claims against clawback defendants
generally—that is, how much more of the investor recoveries that he has obtained to date
will the Receiver now have to pay his firm to litigate and arbitrate the few remaining
clawback claims? Furthermore, the Receiver places into jeopardy the very settlements he
worked so hard to obtain by arguing that the bar orders took claims from the clawback
defendants without compensation. Appellate review of these bar orders could result in
unwinding the settlements—a consequence that no party desires but that the clawback
defendants may need to promote to see that their claims against the Settling Defendants
are not taken from them without just compensation.

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judgment that the underling plaintiffs might obtain against him.”). Furthermore, because
these cases arose in the context of Mr. Nadel’s alleged securities fraud and are supervised
by this Court under claims based on the Securities Exchange Act of 1934, the bar orders
are governed by federal common law, which provides sufficient grounds to award a
judgment credit under the cases cited herein. See, e.g., In re Sunrise Sec. Litig., 698 F.
Supp. 1256, 1257 (E.D. Penn. 1988) (discussing rationale for “a uniform national
settlement bar rule”).9 That federal common law fully supports the judgment credit that
WOF seeks to enforce in the arbitration proceeding.
CONCLUSION
The outcome of the Receiver’s motion in this case is patent. The issue presented
is for arbitrators to decide; this Court lacks a case or controversy to rule upon; and the
Receiver lacks a procedural basis to obtain the relief he seeks. The Receiver makes no
effort to conform to the rules that govern all litigants: citing a rule of civil procedure
authorizing relief, abiding by orders of a federal court compelling arbitration, and
performing under his settlement agreements, made final judgments in which he received
over $37 million in settlement proceeds, despite arguing that equity is equality. For these
reasons, among the others stated herein, WOF respectfully asks the Court to deny the
9

The Receiver continues to argue that there is something about the special nature of his
claims for fraudulent transfer that interferes with WOF’s claims against H&K and GSEC.
While WOF does not agree with the tort-vs-fraudulent-transfer distinction drawn by the
Receiver, the Receiver continues to ignore the fact that he asserted tort claims in his
arbitration demand, since a claim for unjust enrichment is a classic, common-law tort.
Duncan v. Kasim, 810 So. 2d 968, 971 (Fla. 5th DCA 2002) (“We think the unjust
enrichment claim is similar to the conversion claim.”) The Receiver functionally
concedes that the bar order operates to deny claims for torts in exchange for a judgment
credit.

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Receiver’s motion and refer this issue and the others remaining in the case to the panel of
AAA arbitrators for their decision.
Dated: February 19, 2013.
/s/ Mark A. Rogers
James E. Connelly
Georgia Bar No. 181808
[e-mail]
Mark A. Rogers
Georgia Bar No. 142487
[e-mail]
Womble Carlyle Sandridge & Rice, LLP
271 17th Street, Suite 2400
Atlanta, Georgia 30363
Telephone: [phone]
Facsimile: 404-888-7490
Frederick S. Schrils
Florida Bar No. 0604003
[e-mail]
GrayRobinson, P.A.
201 N. Franklin St., Suite 2200
Tampa, Florida 33602
Telephone: [phone]
Facsimile: 813-273-5145
Attorneys for World Opportunity Fund, L.P.
CERTIFICATE OF SERVICE
The undersigned certifies that a true and correct copy of WORLD
OPPORTUNITY FUND’S OBJECTION TO RECEIVER’S MOTION “TO CLARIFY
CERTAIN SETTLEMENT ORDERS” has been filed electronically with the Clerk of the
Court using the CM/ECF system which will automatically send email notification of such
filing sufficient to constitute service to all attorneys of record.

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This 19th day of February, 2013.
/s/ Mark A. Rogers
Mark A. Rogers
WCSR 7659570v2

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