Burton W. Wiand v. Roberta Schneiderman, 2015 U.S. App. LEXIS 2067

Background

Arthur Nadel operated six hedge funds in a Ponzi scheme; cumulative fund assets were vastly overstated and funds were undercapitalized when the SEC intervened in January 2009.
The SEC obtained appointment of Burton Wiand as receiver to collect assets and pursue "clawback" claims seeking to recover investor distributions that exceeded original investments.
Herbert Schneiderman invested $100,000 in Victory Fund, Ltd. (one of the six funds) and received $263,660.48 in distributions; the receiver sued Schneiderman's estate for $163,660.48 as "false profits."
Schneiderman's estate moved to compel arbitration under the Subscription Agreement and Limited Partnership Agreement; the district court granted the motion and the matter proceeded to AAA arbitration.
The arbitrator granted the estate summary judgment, holding Wiand's claims barred by Florida probate statutes and denying Wiand's request to void the arbitration agreements; the district court denied Wiand's motion to vacate the award.
The Eleventh Circuit affirmed both the district court's order compelling arbitration and its refusal to vacate the arbitration award.

Issues

Issue	Plaintiff's Argument (Wiand)	Defendant's Argument (Estate/Victory)	Held
Whether receivership/clawback actions are exempt from the FAA	Receivership statute (28 U.S.C. § 754) and receivership policy require centralized judicial resolution, creating an inherent conflict with arbitration	Section 754 vests control in the receiver, not the court; no congressional command to override FAA; precedent supports arbitration of receiver claims	Not exempt: FAA applies; no inherent conflict with receivership statutes, so arbitration is enforceable
Whether a contract containing arbitration clauses ever existed or is void ab initio	Contract never formed (Victory didn’t assent) or agents lacked authority because they acted for a Ponzi scheme; contract is ultra vires/public-policy invalid	Both parties performed under the contract (credits, statements, tax forms); formation is established and validity/performance issues go to arbitrator	Existence of contract established; questions about validity/performance are for arbitrator, so district court correctly compelled arbitration
Whether arbitration clause binds other funds (besides Victory) Wiand sued	Other funds lack direct agreements with Schneiderman; thus they cannot be compelled to arbitrate	Other funds have no independent relationship with Schneiderman; any rights are derivative of Victory’s rights	Court affirmed that other funds lack independent standing; sending claims derivative of Victory’s claim to arbitration was proper
Whether the arbitrator exceeded powers so award should be vacated	Arbitrator’s award was unsupported, unreasoned, and based on no evidence—warranting vacatur under 9 U.S.C. § 10(a)(4)	Arbitration awards are afforded strong deference; courts may not reweigh evidence or reexamine merits when a plausible ground for the award exists	Denial of vacatur affirmed: arbitrator did not exceed authority; FAA presumes confirmation and review is narrowly confined

Key Cases Cited

Shearson/American Express Inc. v. McMahon, 482 U.S. 220 (1987) (FAA governs securities-related arbitration absent clear congressional command)
Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (federal policy favors arbitration and doubts resolved for arbitration)
Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) (challenges to the contract as a whole go to arbitrator; only gateway issues for courts)
Oxford Health Plans LLC v. Sutter, 569 U.S. 564 (2013) (courts may vacate only when arbitrator acts beyond delegated authority and not merely for error)
United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29 (1987) (judicial review of arbitrator merits is limited even if decision seems improvident)
Frazier v. CitiFinancial Corp., LLC, 604 F.3d 1313 (11th Cir. 2010) (presumption in favor of confirming arbitration awards)