Court Opinion

ID: 4118926
Source: CourtListenerOpinion
Date Created: 2017-01-26 20:01:24.336243+00
Date Added: 2024-06-11T14:15:23.914873
License: Public Domain

Case: 15-10968        Date Filed: 01/26/2017       Page: 1 of 5

                                                                        [DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                     No. 15-10968
                               ________________________

                       D. C. Docket No. 8:12-cv-00557-JDW-EAJ

BURTON W. WIAND, as Court-
Appointed Receiver for Scoop Real
Estate, L.P., et al.,

                                                                           Plaintiff-Appellant,

                                             versus

WELLS FARGO BANK, N.A., INC.,
as Successor-in-interest to Wachovia
Bank, N.A.,

                                                                          Defendant-Appellee.
                                _______________________

                      Appeal from the United States District Court
                          for the Middle District of Florida
                             _______________________

                                      (January 26, 2017)

Before TJOFLAT and MARCUS, Circuit Judges, and STEELE *, District Judge.

       *
          Honorable John E. Steele, Senior United States District Judge for the Middle District of
Florida, sitting by designation.
                Case: 15-10968       Date Filed: 01/26/2017      Page: 2 of 5

PER CURIAM:

                                              I.

       Arthur Nadel (Nadel) perpetrated a Ponzi scheme between 1999 and 2009

using six hedge funds: Scoop Real Estate, L.P. (SRE), Valhalla Investment

Partners, L.P., Victory Fund, Ltd., Victory IRA Fund, Ltd., Viking Fund, LLC, and

Viking IRA Fund, LLC. During the course of the Ponzi scheme, Nadel raised, and

stole, millions of dollars from investors by virtue of the hedge funds. Nadel’s

scheme was eventually discovered in 2009. He was indicted and plead guilty to six

counts of securities fraud, one count of mail fraud, and seven counts of wire fraud.

In a related case, Burton Wiand, Esq. (Receiver) was appointed as receiver for the

six hedge funds. SEC v. Nadel, No. 8:09-cv-87-RAL-TBM (M.D. Fla. Jan. 21,

2009) (order appointing receiver).

       Nadel was the investment advisor to all six of the hedge funds, and also the

general partner of Victory Fund, LLC, Victory IRA Fund, Ltd., and Scoop Real

Estate, L.P. 1 Two of the hedge funds, Scoop Real Estate, L.P. and Victory Fund,

LLC, were customers of SouthTrust Bank, which merged with Wachovia Bank,

and eventually with Wells Fargo Bank, N.A. (Wells Fargo). Nadel opened a

number of accounts at Wells Fargo, including two personal accounts designated as

       1
        Scoop Capital, LLC is listed as the general partner in the private placement memoranda.
The private placement memoranda state that Arthur Nadel, as President of Scoop Capital, LLC,
was responsible for the day to day investment decisions of the hedge funds.
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                Case: 15-10968      Date Filed: 01/26/2017      Page: 3 of 5

d/b/a accounts for Valhalla Investment Partners, L.P. and Viking Fund, LLC. The

d/b/a accounts were opened without authorization on behalf of Valhalla Investment

Partners, L.P. and Viking Fund, LLC and played an integral role in Nadel’s Ponzi

scheme.

       Wells Fargo invested in two of the hedge funds pursuant to a separate and

unrelated option contract. Pursuant to these investments, which were redeemed

due to the hedge funds’ inability to produce audited financials, Wells Fargo came

into the possession of private placement memoranda and executive summaries that

indicated high rates of return. Between 2001 and 2008, Wells Fargo issued loans

to Nadel and his entities. As part as the loan qualification process, Wells Fargo

obtained information regarding Nadel’s relationship to the hedge funds and the

business structure of the hedge funds.

       The Receiver filed this action on behalf of the six hedge funds2 in the Circuit

Court for the Twelfth Judicial Circuit in and for Sarasota County, Florida against

Wells Fargo, N.A. and Timothy Ryan Best (Best) 3 alleging that Wells Fargo was

on notice of Nadel’s diversion of the hedge funds’ monies and, as such, is liable to

them. Wells Fargo and Best removed the matter to the United States District Court

for the Middle District of Florida, Tampa Division, on the basis of diversity

       2
         During the course of the proceedings, the claims on behalf of Viking IRA Fund, LLC,
Valhalla Investment Partners, L.P., and Victory IRA Fund, Ltd. were dismissed.
       3
         Best is a former employee of Wells Fargo.
                                              3
              Case: 15-10968     Date Filed: 01/26/2017    Page: 4 of 5

jurisdiction under 28 U.S.C. § 1332 and federal question jurisdiction under 28

U.S.C. § 1348. The Notice of Removal alleged that Best had been fraudulently

joined in the action in an effort to destroy diversity jurisdiction. After removal,

Receiver moved to remand the action to state court. The District Court denied the

motion to remand, finding subject-matter jurisdiction under 28 U.S.C. § 1348.

      Prior to the District Court’s ruling on Wells Fargo’s summary judgment

motion, Receiver stipulated to the dismissal of Best. On February 9, 2015, the

District Court granted Wells Fargo’s motion for summary judgment as to the

Receiver’s remaining claims of negligence, under the Florida Uniform Fraudulent

Transfers Act (FUFTA), and unjust enrichment. Receiver timely appealed the

District Court’s Order under 29 U.S.C. § 1291. Receiver asserts that the District

Court did not have subject-matter jurisdiction, erred in finding no duty owed to

customers and non-customers, and erred in finding that Wells Fargo was not an

initial transferee or, alternatively, that Wells Fargo was entitled to the mere conduit

defense to the FUFTA claim.

      A.

      The District Court found no need to conduct an analysis of diversity

jurisdiction due to its finding of federal question jurisdiction under 28 U.S.C. §

1348. On appeal, the parties dispute whether there is jurisdiction over this matter

under 28 U.S.C. § 1348. While at the time of removal there was not complete

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              Case: 15-10968     Date Filed: 01/26/2017    Page: 5 of 5

diversity among the parties due to defendant Best’s presence in the litigation, it is

undisputed that Best was dismissed as a defendant prior to the entry of summary

judgment. Accordingly, there was complete diversity, and therefore subject-matter

jurisdiction, at the time summary judgment was entered. Caterpillar, Inc. v. Lewis,

519 U.S. 61 (1996) (declining to vacate judgment where jurisdictional defect was

cured prior to entry of judgment).

      B.

      Receiver also challenges on appeal the District Court’s grant of summary

judgment in favor of Wells Fargo as to Receiver’s claims of negligence and under

FUFTA. This Court has extensively reviewed the District Court’s decision, the

underlying record, the parties’ briefs, and the supplemental authority filed by

appellant, and had the benefit of oral argument, and agrees with the District

Court’s decision.

      For the reasons stated, the judgment of the District Court is Affirmed.

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