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Wiand v. Schneiderman

United States Court of Appeals, Eleventh Circuit

February 10, 2015

BURTON W. WIAND, Plaintiff - Appellant,
v.
ROBERTA SCHNEIDERMAN, ROBERT ZIMELIS, Defendants - Appellees

Page 918

[Copyrighted Material Omitted]

Page 919

Appeal from the United States District Court for the Middle District of Florida. D.C. Docket No. 8:10-cv-00181-EAK-MAP.

For Burton W. Wiand, Plaintiff - Appellant: Gianluca Morello, Michael Schaenen Lamont, Jared J. Perez, Wiand Guerra King, PL, Tampa, FL.

For Roberta Schneiderman, Robert D. Zimelis, Defendants - Appellees: Mahlon Herbert Barlow II, Robert L. Chapman, Sivyer Barlow & Watson, PA, Tampa, FL; Christian Read Sawczyn, FineMark National Bank & Trust, Fort Myers, FL.

Before ED CARNES, Chief Judge, DUBINA and GILMAN,[*] Circuit Judges.

OPINION

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GILMAN, Circuit Judge:

In January 2009, Burton Wiand was appointed the receiver of six hedge funds that were part of a Ponzi scheme orchestrated by Arthur Nadel. Since that time, Wiand has been aggressively pursuing investors who made money in connection with Nadel's fraudulent scheme. His purpose is to recover these alleged " false profits" so that the excess proceeds can be redistributed to the investors who lost money. Herbert Schneiderman (now deceased) was among the investors who made money, and thus became subject to one of Wiand's " clawback" lawsuits.

The executors of Schneiderman's estate moved to compel arbitration based on arbitration clauses in the Limited Partnership Agreement and the Subscription Agreement that governed Schneiderman's investment in one of the six hedge funds in question. After the district court granted the motion and Wiand's attempt to pursue an interlocutory appeal failed, the parties proceeded to arbitration.

The arbitrator granted summary judgment to the estate and denied Wiand's motion for reconsideration. Wiand then filed a motion in federal district court to vacate the arbitrator's decision, which was denied. He now appeals both the district court's decision compelling arbitration and its denial of his motion to vacate the arbitration award. For the reasons set forth below, we AFFIRM the judgment of the district court.

I. BACKGROUND

Nadel, through his control of two investment-management companies, managed six hedge funds for approximately ten years, beginning around 1999. As determined by the district court, all of the hedge funds were undercapitalized because, " [l]ike every Ponzi schemer, Nadel robbed Peter to pay Paul." In re Wiand, No. 8:10-cv-71-T-17MAP, 2011 WL 4530203, at *3 (M.D. Fla. Sept. 29, 2011). The funds' cumulative net worth in 2009 was closer to $500,000 than to their reported value of hundreds of millions. Instead of earning profits as the investor account statements in 2008 and 2009 repeatedly stated, the hedge funds lost money.

The Securities and Exchange Commission (SEC) brought an emergency enforcement action in January 2009 against Nadel, his investment-management companies, and the six hedge funds connected with his scheme, contending that the defendants had violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and

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SEC Rule 10b-5. In addition to seeking declaratory and injunctive relief, an asset freeze, disgorgement, and civil money penalties, the SEC moved for the appointment of a receiver to manage and preserve all assets. The district court appointed Wiand as the receiver for the hedge funds.

Wiand has been charged with rounding up recoverable assets and redistributing them to those who came up short. Since his appointment, he has filed more than 150 " clawback" lawsuits to recover false profits from hedge-fund investors. All of these cases lay out a similar scenario: The investor received payouts from his or her investment that exceeded the amount of the intial investment (hence the claim of a " false profit" ). These investors, Wiand contends, are to be distinguished from the larger group of investors who suffered net losses. ...


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