Securities and Exchange Commission v. Nadel et al

Filing 990

RESPONSE in Opposition re 980 MOTION to modify Order Disallowing Claim by Elendow LLC filed by Burton W. Wiand. (Morello, Gianluca)

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.
/
THE RECEIVER’S OPPOSITION TO THE MOTION OF CLAIMANT
ELENDOW LLC TO MODIFY ORDER DISALLOWING CLAIM (DOC. 980)

Burton W. Wiand, as Receiver (the “Receiver”), opposes the Motion Of Claimant
Elendow LLC (“Elendow”) To Modify Order Disallowing Claim (Doc. 980) (the “Motion”).
Although the Motion contains pages of purported factual background with alleged
misunderstandings, miscommunications, and failures by the Receiver, the pertinent facts are
straightforward and uncontested:


The Court set September 2, 2010, as the deadline to file a Proof of Claim form, but
Elendow missed that deadline by almost a month.



The Receiver then allowed Elendow the opportunity to explain in writing the reasons
for missing the deadline, but it did not respond to the Receiver’s letter – if at all (see
infra Section II.A.) – for six months.



After the Court denied Elendow’s claim, Elendow never submitted an objection, and
the deadline for objections expired on March 28, 2012.



Instead, Elendow waited almost one year and filed its Motion seeking relief under
Rule 60(b), which relief is only granted in extraordinary circumstances.
As explained below, Elendow’s failure to comply with the procedures governing the

claims process is attributable solely to its own inaction and lack of diligence, and its Motion
falls far short of satisfying the threshold prerequisites for relief under Rule 60(b). Indeed, its
Motion relies on correspondence it received from the Receiver and the Department of Justice
as purportedly confusing and misleading, but virtually every claimant received substantively
identical correspondence and none has requested similar relief. Granting the Motion would
reward Elendow’s lack of diligence at the expense of hundreds of other investors who
complied with Orders and encourage other untimely claims.
BACKGROUND
The Court Barred Claims Filed After September 2, 2010
On April 20, 2010, the Receiver filed his Unopposed Motion To (1) Approve

1

Procedure To Administer Claims And Proof Of Claim Form, (2) Establish Deadline For
Filing Proofs Of Claim, And (3) Permit Notice By Mail And Publication (the “Claims
Motion”). See Doc. 390. The Claims Motion proposed inter alia parameters for the claims
process, a proof of claim form (the “Proof of Claim”), and a notice letter to creditors (the
“Notice to Creditors”). It also proposed a claim bar date (the “Claim Bar Date”) and
requested that “any claim received by the Receiver after the Claim Bar Date should be
disallowed.” Id. at 5. As the Claims Motion explained, “a Claim Bar Date will allow the
Receiver to obtain certainty in a reasonably prompt fashion as to the total amount of potential
claims against the Receivership Estate.

Such certainty will facilitate a timely claims

resolution and Distribution process.” Id. In relevant part, the Notice to Creditors made two
important, indisputably clear disclosures: (1) all claims, whether mature or not, had to be
submitted by the Claim Bar Date, and (2) anyone who did not comply with that deadline
would be forever barred and enjoined from asserting a claim. See Doc. 390-2 at 3, 5. On
April 21, 2010, the Court granted the Claims Motion, approved the Notice to Creditors, and
established a Claim Bar Date of September 2, 2010. See Doc. 391. Specifically, the Court
confirmed that untimely claims “shall be forever barred and precluded.” Id. ¶ 2.
Elendow’s Proof Of Claim Was 27 Days Late
On June 4, 2010, the Receiver mailed the Notice to Creditors and Proof of Claim
form to Elendow. See Declaration of Gianluca Morello (the “Morello Decl.”), Ex. A, which
is being filed along with this opposition. He also included a cover letter that made clear that
“[f]ailure to timely return a completed and signed Proof of Claim for an account will forever
bar any claim related to that account.” Id. at 2. Nevertheless, Elendow did not submit its

2

Proof of Claim until September 29, 2012 – 27 days after the Claim Bar Date and 115 days
after the Receiver mailed the claims package.
The Receiver Received No Response To His Follow Up Letter; Elendow Claims
It Responded 6 Months Later
On February 10, 2011, the Receiver sent Elendow a letter requesting an explanation
for its untimely Proof of Claim (see Morello Decl., Ex. B), but as discussed below in Section
II.A., the Receiver’s records reflect neither Elendow nor anyone else ever responded to that
letter (see id. ¶ 8). Elendow claims that it did respond, but even if that is true, its response
was purportedly sent on August 11, 2011 – six months after the Receiver’s letter requesting
an explanation of Elendow’s failure to comply with the Claims Bar Date. See Stillman Decl.,
Ex. 4 (Doc. 980-2). Although other investors filed untimely claims, they either included an
explanation for the delay with their Proof of Claim or promptly responded to the Receiver’s
letter with extenuating circumstances. As such, the Receiver ultimately recommended those
claims be allowed. See Doc. 675 at 21-22.
Elendow Never Objected To The Determination Of Its Claim
On December 7, 2011, the Receiver filed his Unopposed 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

(the

“Determination Motion”). See Doc. 675. The Receiver noted he received 504 total claims
(id. at 10), which he divided into five proposed categories: (1) allowed; (2) allowed in part;
(3) allowed in part but limited to specific collateral; (4) allowed but subrogated; and
(5) denied.
denied.

The Determination Motion and its exhibits are clear Elendow’s claim was

Specifically, its claim (i.e., Claim No. 458) was listed in Exhibit G to the

3

Determination Motion, which was entitled “Investor Claims – Denied.” See Doc. 675-7.
The Receiver also addressed the denial of Claim No. 458 in the body of the Determination
Motion:
Fourteen Proof of Claim Forms were received after the Claim Bar Date. The
Receiver sent a letter to each Investor Claimant who filed a late claim without
providing an explanation for the late filing. The letter requested that any
extenuating circumstances for the late filing be provided to the Receiver in
writing and that failure to do so could result in denial of the claim. The
Receiver received responses for each such claim except for one. (See Claim
No. 458.)
Doc. 675 at 21-22 (emphasis added). That section was entitled “Investor Claim Which
Should Be Denied Because It Was Filed After The Claim Bar Date And Investor Claimant
Failed To Explain Reason For Late Submission.” Id. As such, the Determination Motion
was clear the Receiver recommended denial of Elendow’s claim because it was untimely, and
Elendow had not responded to the Receiver’s request for an explanation.
In the interests of simplicity and conservation of Receivership resources, the Receiver
assigned each claim an “Allowed Amount.” See id. at 13 (“As detailed in Exhibits B
through J, the Receiver has proposed an Allowed Amount for each claim.” (footnote omitted;
emphasis added)). A claim received an Allowed Amount of “None” if it was waived,
consolidated with another claim, or denied. Indeed, Exhibits B through J each contain a
column entitled “Allowed Amount,” and at least 95 claims – all of which were denied,
waived, or consolidated with another claim – were clearly assigned an Allowed Amount of
“None.” Among those claims with an Allowed Amount of “None,” Elendow’s claim was
itemized in Exhibit G and denied in part for being untimely. See Doc. 675-7 at 7. The
Receiver adopted this procedure to avoid the significant cost associated with creating

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customized notice letters for each claim.
On December 9, 2011, the Receiver sent Elendow and all other claimants an identical
letter (the “Determination Letter”) informing them he had filed the Determination Motion
and that they should consult it and its exhibits (available on the Receiver’s website or in
hardcopy from the Receiver) to learn the determination of claims:
My recommended determination of your claim is set forth in the Exhibits
attached to the Motion and is addressed in the body of the Motion. My
recommended determination of your claim will include an Allowed Amount.
The Allowed Amount is the amount to which I have determined the relevant
claim is entitled. The Allowed Amount, however, is not indicative of the
amount you may ultimately receive. Rather, I have proposed that each
investor claimant holding an allowed claim with a positive Allowed Amount
ultimately receive a percentage of their Allowed Amount on a pro rata basis.
Stillman Decl., Ex. 5 at 1 (bold emphasis added); see Doc. 678 (notice of mailing letters to
claimants, “informing them: (i) that the Motion was filed; (ii) that a copy of the Motion is
available on the Receiver’s website at www.nadelreceivership.com and, upon request, from
the Receiver’s office; and (iii) of their respective Claim Numbers”). Had Elendow or its
counsel referenced the Determination Motion and its exhibits, as directed, they would have
learned its claim was expressly denied.
The Determination Motion also set forth a procedure for objecting to the Receiver’s
claim determinations. Specifically, any claimant that did not agree with the Receiver’s
determination had to “serve the Receiver in accordance with the service requirements of
Rule 5 of the Federal Rules of Civil Procedure with a written objection no later than twenty
(20) days after the date of mailing of the Receiver’s letter advising the [c]laimant of the
Order on this [Determination] Motion.” Id. at 81.
The Court granted the Determination Motion on March 3, 2012. See Doc. 776. In

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doing so, it found “[t]he Receiver’s determination of claims and claim priorities as set forth
in the motion and in Exhibits B - J attached to the motion is fair and equitable and is
approved.” See Doc. 776 ¶ 3. The Court reiterated that “any and all further claims against
… the Receivership estate are hereby barred and enjoined.” Id. ¶ 8.
On March 8, 2012, the Receiver sent a letter to Elendow (and all other claimants)
informing it the Court granted the Determination Motion and again directing it to that motion
and its exhibits to view the determination of its claim (the letter also directed Elendow to the
Receiver’s website for a copy).
The Court has approved my recommended determination of the above claim.
This determination is set forth in the Exhibits attached to the Motion and is
addressed in the body of the Motion. If you wish to dispute this claim’s
determination, its priority, or the plan of distribution, you MUST serve me
with a written objection no later than March 28, 2012.
Morello Decl., Ex. D (underline added). Consequently, Elendow was required to object to
the Receiver’s determination by March 28, 2012. Elendow, however, never filed an
objection. It thus waived its right to challenge the denial of its claim:
Failure to properly and timely serve an objection to the determination of
your claim, its priority, or plan of distribution shall permanently waive
your right to object to or contest the determination of your claim, its
priority, and plan of distribution and your final claim amount shall be set
as the Allowed Amount determined by me and approved by the Court as
set forth in the Exhibits attached to the Motion. (Id.)
In accordance with the procedures in the Determination Motion, claimants submitted
23 objections to the Receiver’s determinations. The Receiver set aside reserves for those
disputed claims as necessary and, on May 7, 2012, made a first distribution of $25 million to
claimants with approved claims (see Docs. 825, 838).

The Receiver made a second

distribution of $22 million on November 20, 2012. See Docs. 945, 946. Because Elendow

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did not object to the denial of its claim, the Receiver did not reserve for its $700,000 claim
amount. As such, any award to Elendow now would necessarily reduce the funds available
to make a third or final distribution to all of the other claimants who complied with the
procedures governing the claims process.
ARGUMENT
I.

BARRING LATE-FILED CLAIMS IS NECESSARY
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. 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). For
efficiency, 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”); cf. In re Best Products Co., Inc., 140 B.R. 353, 60 (Bankr. S.D.N.Y.
1992) (“Although persons with legitimate claims may be precluded from sharing in estate
assets, strict enforcement of the bankruptcy bar date is no more unfair than application of a

7

statute of limitations to foreclose a tort claim.”). Here, the Court established a claims process
with specific deadlines; Elendow and all other potential creditors were appropriately notified
of the process and deadlines; and Elendow failed to comply with the applicable procedures
and deadlines. As such, its claim was properly denied.
II.

ELENDOW HAS NOT DEMONSTRATED THAT IT IS ENTITLED TO
RELIEF UNDER RULE 60(b)(1)
Because Elendow’s claim was properly denied, and it failed to object to the denial of

its claim, it has no choice but to try seeking relief under Rule 60(b). Elendow first contends
that it is entitled to relief under Rule 60(b)(1) because of “excusable neglect.” As shown
below, however, the facts governing this issue fall far short of constituting “excusable
neglect.”

Relief under Rule 60(b) “is an extraordinary remedy and is granted only in

exceptional circumstances.”

Harrington v. City of Chicago, 433 F.3d 542, 546 (7th

Cir.2006). In Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd. P’ship, 507 U.S. 380, 395
(1993), the Supreme Court articulated a four-pronged test for examining excusable neglect.
See Canfield v. Van Atta Buick/GMC Truck, Inc., 127 F.3d 248, 249-50 (2d Cir.1997)
(finding that while Pioneer involved Bankruptcy Code, the analysis was equally applicable to
Fed. R. Civ. P. 60(b)). 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, 507 U.S. at 395. “The burden is upon the party
moving to have the judgment set aside to plead and prove excusable neglect.” Pelican
Production Corp. v. Marino, 893 F.2d 1143 (10th Cir. 1990)). Here, Elendow has not
satisfied its burden of establishing under the relevant factors it acted with excusable neglect.

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A.

Allowing Elendow’s Untimely Claim Would Prejudice The Receivership
And Other Investors Who Followed Mandated Procedures

Elendow argues allowing its untimely claim would not prejudice the Receivership
because “the Receiver has acknowledged that allowing claims filed within 30 days of the
Claims Bar Date caused no prejudice at all.” See Mot. 13. That argument refers to the
Receiver’s recommendation in the Determination Motion that certain untimely claims be
allowed because those claimants “provided extenuating circumstances for the delay which
the Receiver believe[d], under the totality of the circumstances, reasonably justif[ied]
allowing those late-filed claims.” See Doc. 675 at 22. Elendow is wrong, however, for two
reasons:

(1) unlike the other relevant claimants, it failed to provide extenuating

circumstances for its delay in filing a Proof of Claim – and even if it did so, as it contends, it
only did so six months after requested by the Receiver; and (2) while there may have been no
prejudice to allowing late-filed claims in December 2011 when the Receiver filed the
Determination Motion, that is not true now (i.e., 15 months later), as two significant
distributions of Receivership assets have already been made.
First, Elendow relies on other late-filed claims to argue that claims filed within 30
days of the Claim Bar Date caused no prejudice. But Elendow ignores those claimants
explained extenuating circumstances for the tardiness of the claims in prompt fashion. In
contrast, the Receiver has no record that Elendow provided or attempted to provide
extenuating circumstances for its delay in filing a Proof of Claim. Specifically, on February
10, 2011, the Receiver wrote all claimants who filed untimely claims “to allow [them] to
submit an explanation in writing explaining the extenuating circumstances for [their] late
filing.”

Morello Decl., Ex. B.

The letter warned:

9

“In the absence of a reasonable

explanation, it may be necessary to deny your claim.”

Id. All of the claimants who

submitted late-filed claims provided extenuating circumstances in writing, except Elendow.
See Doc. 675 at 21 (“The Receiver received responses for each such claim except for one.
(See Claim No. 458.)”).
Now, more than two years after the Receiver’s February 2011 letter and for the first
time, Elendow claims to have actually responded – through counsel – on August 11, 2011, to
the Receiver’s request for an explanation of extenuating circumstances. See Stillman Decl.,
Ex. 4. As an initial matter, the Receiver has no record of actually receiving that letter. The
Receiver’s February 2011 letter was sent under his name, and it explicitly directed inquiries
to Jordan Maglich (one of the Receiver’s attorneys). Id. Further, Elendow’s counsel claims
to have had communications with Gianluca Morello, Michael Lamont, and Maya Lockwood
(other attorneys representing the Receiver). Yet, he purportedly and inexplicably sent
Elendow’s explanation letter to “Claims Dept.”

See id. ¶¶ 10-13.

But even assuming

arguendo the Receiver had received that letter, it still was not sent until six months after the
Receiver requested additional information. As such, Elendow’s August 11, 2011, letter did
not excuse Elendow’s delay for filing its claim; the letter merely compounded it and reflected
additional lack of diligence. See Robinson v. Wix Filtration Corp, LLC., 599 F.3d 403, 412
(4th Cir. 2010) (“A party that fails to act with diligence will be unable to establish that his
conduct constituted excusable neglect.”).
Second, there was no prejudice to allowing limited, late-filed claims in December
2011 when the Receiver filed the Determination Motion, but since then he has made two
interim distributions, totaling $47 million. Because Elendow’s claim was denied and it never

10

submitted an objection, the Receiver did not reserve for its $700,000 claim amount.
Recognizing the prejudicial impact of its Motion, Elendow suggests this problem could be
remedied by only allowing it “to receive future pro rata distributions rather than receiving all
of the distributions to which it would otherwise have been entitled had its claim been allowed
or this Motion filed before any distribution had been made.” See Mot. at 14. But even that
limited remedy is highly prejudicial because it would reduce the amount of money available
in future distributions to those claimants and, more broadly, undermine the finality imposed
by the Claim Bar Date and encourage other late-filed (or unfiled) claims. See, e.g., In re New
Cent. TRS Holdings, Inc., 465 B.R. 38, 51 (Bankr. D. Del. 2012) (finding prejudice and
barring late-filed claim because “the Trust has already made two interim distributions” and
“allowance of late-filed claims in this case unquestionably will open a floodgate to similar
claims by other borrowers”); In re US Airways, Inc., 2005 WL 3676186, *9 (E.D. Va. 2005)
(“[A] a large and complicated reorganization case such as this would be subject to constant
disruption—to the considerable prejudice of creditors who filed timely proofs of claim—if
the court were to allow claims to be filed after the bar date except for the most compelling
circumstances.”); In re Best Products, 140 B.R. at 359-60 (finding prejudice where delay
would “impact the assets available to … other creditors” and noting “it is generally
improvident to grant permission to file late proofs of claim”). As such, Elendow has failed to
demonstrate the relief it seeks would not prejudice this Receivership and consequently its
Motion should be denied for this reason alone.
B.

Elendow Failed To Comply With Multiple Deadlines, And Its Delays
Were Significant And Within Its Control

In addition to prejudice, when granting extraordinary relief under Rule 60(b), courts

11

must consider “the length of the delay and its potential impact upon judicial proceedings,
[and] the reason for the delay, including whether it was in the reasonable control of the
movant.” Pioneer, 507 U.S. at 395. Here, Elendow missed multiple deadlines by lengthy
periods of time, and the delays were the result of its own conduct or inaction and
consequently do not qualify as excusable neglect. See In re Best Products, 140 B.R. at 359
(“I can not overlook the fact that [claimants] themselves were the source of the delay in
asserting their rights. Even ignorance of one’s own claim does not constitute excusable
neglect.”); In re S. Atlantic Fin. Corp, 767 F.2d 814, 817-818 (11th Cir. 1985) (reviewing
cases finding no excusable neglect where late filing resulted from (1) sending
correspondence to wrong address, (2) relying on “misinformation from bankruptcy court
clerk,” (3) failing to obtain necessary records, and (4) a “misunderstanding” between a
creditor and its lawyers).
First, Elendow failed to file its Proof of Claim by the Claim Bar Date. It was late by
almost a month, and in total, 115 days elapsed between the date the Receiver mailed the
claims package and the date Elendow’s managing member, Eric Waldman (“Mr.
Waldman”) finally reviewed it. Mr. Waldman writes that “[a]t some time during summer of
2010, I apparently was mailed” the claims package, but he claims he did not review it until
September 27, 2010, because he was trying to start a new business and traveling. See
Waldman Decl. ¶ 10 (Doc. 980-1).

Despite Mr. Waldman’s vagueness about when he

received the claims package, there is no evidence in the record that he did not receive it
within a few days after it was mailed to him on June 4, 2010. As such, there is no record
evidence contradicting the fact that Mr. Waldman had the claims package for over three

12

months before he saw it on September 27, 2010. See id. His reasons for not seeing it for
over three months – attempting to start a business and traveling “most” but not all of each
month – on their face are not excusable neglect. Second, in February 2011, the Receiver
wrote Elendow asking it to explain its delay in writing and to provide any extenuating
circumstances, but even according to its own account (which, as explained above in Section
II.A., the Receiver cannot substantiate), Elendow did not respond to the Receiver’s letter
until August 2011 – i.e., six months later. Third, Elendow never objected to the denial of its
claim, and it did not file this Motion until almost a year after the deadline to object.
Elendow argues these delays are excusable because (1) it did not initially realize its
claim had been denied because the Determination Letter was purportedly misleading; (2) it
received a purportedly confusing letter from the Department of Justice; and (3) it was waiting
to file this Motion until the Court resolved its entitlement to setoff through the Receiver’s
case against Dancing $, LLC (“Dancing $”).1

As explained below in Section III, the

Determination Letter was not misleading, and it expressly directed all claimants to consult
the Determination Motion and its exhibits, which clearly indicated Elendow’s claim was
denied and that it would not be entitled to receive any distributions. Elendow inexcusably
failed to read the Determination Motion or its exhibits.2

Further, the letter from the

1

Mr. Waldman was the managing member of both Elendow and Dancing $. Dancing $ received false profits
of $107,172.11 from the scheme and the Receiver successfully sued it to recover those funds. See Wiand, as
Receiver v. Dancing $, Case No. 8:10-cv-92-T-17MAP (M.D. Fla.). Dancing $ argued its false profits should
be setoff against Elendow’s losses because the entities had overlapping members. As explained later in this
response, that argument clearly lacked merit.
2

To justify its late filings, Elendow relies on purported confusion as to whether it or its counsel received and
was responsible for acting on the Receiver’s correspondence (see, e.g., Stillman Decl. ¶¶ 7, 8 & Ex. 3), but a
“misunderstanding” between a claimant and “its own attorney” “does not constitute excusable neglect.” In re
Horn Constr. & Maint., Inc., 32 B.R. 87, 89 (Bankr. S.D. Ala. 1983). Further, as also discussed below in
Section II.C., Elendow claims the Receiver should have directed correspondence to its counsel or otherwise

13

Department of Justice is a classic red herring, because as a matter of law Elendow’s
purported confusion cannot constitute excusable neglect. See In re Oakton Beach & Tennis
Club Real Estate Ltd. P’ship, 9 B.R. 201, 205 (Bankr. E.D. Wisc. 1981) (holding counsel’s
reliance on misinformation from a bankruptcy court clerk regarding his duty to file a proof of
claim did not amount to excusable neglect); McDowell-Bonner v. District of Columbia, 668
F. Supp.2d 124 (D.C. Cir. 2009) (noting “inadvertence, ignorance of the rules, or mistakes
construing the rules do not usually constitute ‘excusable’ neglect”) (internal citation
omitted); 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.”).
In any event, identical letters were sent by the Department of Justice to most if not all living
investors who lost money in Arthur Nadel’s Ponzi scheme, yet Elendow is the only instance
in which an investor claimed “confusion.”
Finally, Elendow’s argument that it was waiting to file this Motion until the Court
decided its right to setoff in the Dancing $ litigation simply makes no sense. The Receiver
sued Dancing $ to recover $107,172.11 in “false profits” (see supra fn. 1), but Elendow
submitted a late claim for $700,000. Thus, even if the Court permitted setoff in Dancing $,
Elendow would still have had a claim for $592,827.89.3 Unless it was willing to waive that
amount, it would have had to file this Motion regardless of the outcome in Dancing $. And

contacted its counsel when it failed to meet the Court’s deadlines, but the Proof of Claim form directed
claimants to “[p]rovide one mailing address where you … authorize receipt of all future communications
relating to this claim,” and Elendow listed Mr. Waldman’s address in Bozeman, Montana. See Morello Decl.
¶ 9. As such, the Receiver properly sent all correspondence to that address. See id., Exs. B, C & D.
3

There was never a basis to setoff Dancing $’s false profits with Elendow’s losses because they are separate
entities and setoff requires mutuality of debts. See, e.g., Scholes v. Ames, 850 F. Supp. 707, 713 (N.D. Ill.
1994); In re McKay, 420 B.R. 871, 877 (Bankr. M.D. Fla. 2009).

14

in any event, this Court issued a Report and Recommendation (“R&R”) on November 29,
2012, denying setoff (see Dancing $ Doc. 121), and it was clear from the cases cited in the
R&R and in footnote 3 here that denial of setoff would not be overturned by the District
Judge. Despite this, Elendow nevertheless waited to the second-to-last day possible to seek
relief under Rule 60(b) from the Court’s Order granting the Determination Motion.
C.

Elendow’s Claim Should Be Denied On The Merits

Elendow also argues the merits of its claim support reconsideration, but the merits are
not a relevant factor under the Supreme Court’s Pioneer decision. See 507 U.S. at 395.4 As
such, they have no impact on the Motion as a matter of law. In any event, Elendow’s
arguments merely rehash procedural objections made elsewhere in the Motion. For example,
Elendow contends only its claim was denied as untimely (see Mot. at 16), but it ignores that,
unlike other claimants with late-filed claims, it either (1) never responded to the Receiver’s
letter regarding extenuating circumstances or (2) at best for Elendow, responded six months
after the Receiver requested an explanation (see supra II.A.). Elendow argues this is no
reason to have denied its claim because the Receiver “obviously knew how to reach Elendow
– [the Receiver’s counsel] need only have picked up the telephone and called Mr. Stillman or
sent an email” (see Mot. at 17). Of course, this ignores the burden of perfecting Elendow’s
claim does not fall on the Receiver or his counsel. Indeed, the Receiver processed more than
500 claims while simultaneously litigating dozens of “clawback” and other lawsuits,
including a successful one against Mr. Waldman’s other entity, Dancing $, and working on
numerous other efforts on behalf of the Receivership estate. This complexity and scope of

15

responsibilities held by a receiver are precisely why claims processes are established with
specific procedures and deadlines to which claimants are required to strictly adhere. It is not
the Receiver’s responsibility to babysit claimants – especially those represented by counsel –
to preemptively ensure they act in accordance with all applicable procedures and deadlines
and read and follow all pertinent correspondence. In re New Cent. TRS Holdings, 465 B.R.
at 52 (“Permitting this late filing would create a dangerous precedent for other creditors who
have sat on their rights without any other reasonable justification.”) (quotation omitted).
Elendow’s only argument regarding the actual merits of its untimely claim is that the
Receiver must treat Elendow and Dancing $ as separate entities, and he cannot rely on
Dancing $’s receipt of false profits (or its frivolous litigation strategy) to deny Elendow’s
claim. As an initial matter, the claims process is governed by equity and this Court may
consider Mr. Waldman’s conduct through Dancing $ on the one hand and Elendow on the
other. See S.E.C. v. Elliot, 953 F. 2d 1560, 1566 (11th Cir. 1992) (court has “broad powers
and wide discretion” to assure equitable distributions); S.E.C. v. Byers, 637 F. Supp. 2d 166,
176 (S.D.N.Y. 2009) (noting “when funds are limited, hard choices must be made”). But in
any event, Elendow never objected to the Receiver’s determination of its claim; as such, any
argument regarding the merits of that determination is expressly waived. Morello Decl., Ex.
D (“Failure to properly and timely serve an objection to the determination of your claim …
shall permanently waive your right to object to or contest the determination of your
claim…”). As previously noted, the merits are not a factor for consideration under Rule

4

Instead, the only other pertinent factor is good faith. See id. One of Elendow’s arguments in its Motion – that
the Receiver engaged in misconduct by adopting a strategy to “lull” claimants into abandoning their claims (see
infra Section III) – is so baseless it calls Elendow’s good faith into question.

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60(b) and consequently cannot help Elendow.
III.

ELENDOW IS NOT ENTITLED TO RELIEF UNDER RULE 60(b)(3)
In a transparent attempt to excuse its inattention and inaction, Elendow next argues

the Receiver committed misconduct by employing a “strategy” “intended to lull those
claimants holding a denied claim not to oppose the treatment of their claim.” Mot. at 18.
Specifically, Elendow argues the Determination Letter was “misleading and fail[ed] to give
proper notice” that its claim was denied because it purportedly informed Elendow it had an
“Allowed Claim.”

Id.

This argument fails for four independent reasons.

First, the

Determination Letter did not inform Elendow that it had an “Allowed Claim.” See Stillman
Decl., Ex. 5. Instead, it explicitly referred Elendow to the Determination Motion and its
exhibits to learn the Receiver’s determination of the claim:
My recommended determination of your claim is set forth in the Exhibits
attached to the Motion and is addressed in the body of the Motion. My
recommended determination of your claim will include an Allowed Amount.
The Allowed Amount is the amount to which I have determined the relevant
claim is entitled. The Allowed Amount, however, is not indicative of the
amount you may ultimately receive. Rather, I have proposed that each
investor claimant holding an allowed claim with a positive Allowed Amount
ultimately receive a percentage of their Allowed Amount on a pro rata basis.
Id. at 1. Elendow’s claim was addressed in an exhibit entitled “Investor Claims – Denied,”
and it was also discussed in a section of the Determination Motion devoted to its denial. See
Doc. 675 at 21-22. Elendow’s misquotation of the Determination Letter is either particularly
careless or deliberately misleading. Aside from directing Elendow to the Determination
Motion and its exhibits to learn the determination of its claim, the Determination Letter
informed Elendow that (1) the Receiver assigned claims an Allowed Amount, (2) Elendow
should refer to “the Exhibits attached to the Motion” to determine that amount, and (3) only

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claimants with a “positive” Allowed Amount would ultimately be entitled to recovery. Id.;
see also id. at 2 (noting only claimants holding “an allowed claim with a positive Allowed
Amount” will recover). As noted above at page 4, all claims, including those that were
denied, waived, or consolidated with other claims were assigned an Allowed Amount. For
the denied, waived, or consolidated claims, that amount was “none,” and it was clearly
indicated in the Determination Motion and pertinent exhibits. That Elendow purportedly did
not realize its claim had been denied and “none” of its claim amount had been allowed
because it and its counsel ignored the Receiver’s express direction to consult the
Determination Motion and its exhibits does not render the Determination Letter misleading.
Second, the Receiver sent a substantively identical Determination Letter to all
claimants because it would have been unnecessarily expensive and time-consuming to create
more than 500 individualized letters. As explained in the Background Section above, claims
were divided into five general categories, and the reasons for an individual claim’s
assignment to a particular category were varied. For example, the Receiver assigned at least
95 claims an Allowed Amount of “None.” A claim received an Allowed Amount of “None”
if it was waived, consolidated with another claim, or denied.

Exhibit G contained all

“Denied” claims, including Elendow’s, and large sections of the Determination Motion were
devoted to explaining the legal basis for the denials. As such, referring investors to the
Determination Motion and its exhibits was designed to conserve Receivership resources and
eliminate the need for unnecessary and complex paperwork. The Receiver even offered to
provide a copy of the Determination Motion if a claimant was unable to access it on the
Receiver’s website. See id. at 1.

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Third, the Determination Letter did not, in fact, “lull” claimants into abandoning their
claims.

For example, claimants timely submitted 23 objections to the Receiver’s

determinations in accordance with the procedures set forth in the Determination Motion.
This is prima facie evidence the Determination Letter was sufficient to provide reasonable
notice and was not misleading. See Mullane v. Central Hanover Bank & Trust Co., 339 U.S.
306, 314 (1950) (requiring “notice reasonably calculated, under all the circumstances, to …
afford [parties] an opportunity to present their objections.”). Indeed, only Elendow has
complained that the Determination Letter was misleading.

Because Elendow was

represented by counsel and even unrepresented claimants managed to file timely objections,
Elendow’s failure to submit an objection is attributable solely to its and its counsel’s
inattention and lack of diligence. Cf. In re Oakton Beach & Tennis Club, 9 B.R. at 205
(holding claimant “was represented by an attorney who should have independently
determined whether or not his client needed to file a proof of claim” or here, an objection).
Fourth, the Court approved the Receiver’s proposed procedures. For example, in the
body of the Determination Motion, the Receiver clearly stated each claim was assigned an
Allowed Amount. See id. at 13 (“As detailed in Exhibits B through J, the Receiver has
proposed an Allowed Amount for each claim.” (footnote omitted; emphasis added)). Indeed,
Exhibits B through J (including Exhibit G “Investor Claims – Denied”) each contained a
column entitled “Allowed Amount,” and at least 95 claims were transparently assigned an
Allowed Amount of “None.” In granting the Determination Motion, the Court found “[t]he
Receiver’s determination of claims and claim priorities as set forth in the motion and in
Exhibits B - J attached to the motion is fair and equitable and is approved.” See Doc. 776

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¶ 3; see also Doc. 678 (notice of mailing letters to claimants). In short, the Receiver did not
engage in any misconduct (much less misconduct sufficient to warrant Rule 60(b)(3) relief),
as his actions were approved by this Court and they purportedly mislead no one but Elendow.
Because this argument is nothing more than a fabrication designed to excuse Elendow’s
complete lack of diligence, this ground for the Motion also should be denied.
IV.

ELENDOW IS NOT ENTITLED TO RELIEF UNDER RULE 60(b)(6)
Finally, Elendow argues it is entitled to relief under Rule 60(b)(6). But even it

recognizes “a district court may grant a Rule 60(b)(6) motion only in extraordinary
circumstances not covered by subsections (1)-(5) and only when necessary to accomplish
justice.” See Mot. at 19. For the reasons discussed above, the Motion does not present
extraordinary circumstances:

it merely seeks relief for Elendow’s inexcusable lack of

diligence and attention. More broadly, the Motion merely seeks reconsideration of the
unchallenged denial of Elendow’s untimely claim.

Such motions are ordinary, and as

explained above, to achieve finality, discourage the filing of additional late claims, and
promote orderly administration, courts routinely deny them. Princeton Econ., 2008 WL
7826694 at *4 (establishing bar date); Callahan, 415 F.3d at 117-18 (dismissing objection for
lack of standing asserted by parties that failed to file timely claim); In re S. Atlantic Fin.
Corp, 767 F.2d at 819 (affirming bankruptcy court’s denial of claim field 18 days after bar
date); In re New Cent. TRS Holdings, 465 B.R. at 52 (disallowing and expunging late-filed
claim); In re US Airways, 2005 WL 3676186 at *9 (denying motion to file late claim); In re
Oakton Beach & Tennis Club, 9 B.R. at 205 (same).

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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on March 18, 2013, I electronically filed the foregoing
with the Clerk of the 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.
5505 West Gray Street
Tampa, FL 33609
Tel.: [phone]
Fax: [phone]
Attorneys for the Receiver, Burton W. Wiand

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