WGK Successfully Argues Pivotal Fraudulent Transfer Issues In The Eleventh Circuit


The Eleventh Circuit recently issued a pivotal decision for fiduciaries such as equity receivers and bankruptcy trustees in an appeal successfully argued by WGK. In Wiand, as Receiver v. Lee et al., No. 13-10448, the Court affirmed the District Court’s grant of summary judgment obtained by WGK in favor of the Receiver appointed in the wake of an over $350-million Ponzi scheme. In relevant part, the appeal focused on fiduciaries’ fraudulent transfer “clawback” claims, and the Court unequivocally confirmed a fiduciary’s ability to assert fraudulent transfer claims on behalf of entities that were used as part of a fraudulent investment scheme. Specifically, for purposes of a claim under Florida’s adaptation of the Uniform Fraudulent Transfer Act, the Court held the Receiver, acting on behalf of entities used as part of the fraudulent scheme, was a “creditor;” the scheme operator was a “debtor;” and the transfers of assets from entities used as part of the scheme were transfers of “property of the debtor”. This is a pivotal decision for two primary reasons: First, the Florida Uniform Fraudulent Transfer Act is substantively identical to the Uniform Fraudulent Transfer Act as adopted my numerous other jurisdictions, and thus the Lee decision can be applied in numerous other jurisdictions. Second, District Courts throughout the country have grappled with these issues for years, and although Circuit Courts have tended to side with fiduciaries, the Lee decision may very well be among the first to squarely address and explain why fiduciaries can satisfy all elements of fraudulent transfer claims.

Also of note, the Eleventh Circuit sided with WGK’s client in reversing the District Court’s denial of the Receiver’s request for prejudgment interest for abuse of discretion. In a decision that broadly applies to all prejudgment interest litigation under Florida law, the Court observed that Florida law operates under the loss theory of prejudgment interest and that such interest is merely an element of pecuniary damages. The Court explained that a trial court’s discretion to reject an award of prejudgment interest on equitable grounds is guided by three factors: (1) in matters concerning government entities, whether it would be equitable to put the burden of paying interest on the public in choosing between innocent victims; (2) whether it is equitable to allow an award of prejudgment when the delay between injury and judgment is the fault of the prevailing party; and (3) whether it is equitable to award prejudgment interest to a party who could have, but failed to, mitigate its damages. The Court observed that Florida courts have awarded prejudgment interest as a matter of course on fraudulent transfer and unjust enrichment claims.

I was lead counsel for the Receiver in this matter and argued before the Eleventh Circuit. A copy of the Eleventh Circuit’s opinion is available here.

For more information, please contact Gianluca at 813-347-5105 or gmorello@wiandlaw.com