             Case: 13-10448   Date Filed: 06/02/2014    Page: 1 of 21


                                                                        [PUBLISH]



               IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT
                         ________________________

                               No. 13-10448
                         ________________________

                  D.C. Docket No. 8:10-cv-00201-EAK-MAP


BURTON W. WIAND,
as Receiver for Valhalla Investment Partners, L.P.; Viking Fund, LLC; Viking IRA
Fund, LLC; Victory Fund, Ltd.; Victory IRA Fund, Ltd.; Scoop Real Estate, L.P.;
and Traders Investment Club,

                                                Plaintiff-Appellee/Cross-Appellant,

                                     versus

VERNON M. LEE,
individually and as Trustee of the VERNON M. LEE TRUST,
                                              Defendant-Appellant/Cross-Appellee.

                         ________________________

                  Appeals from the United States District Court
                       for the Middle District of Florida
                         ________________________

                                 (June 2, 2014)
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Before MARTIN and ANDERSON, Circuit Judges, and FULLER, * District Judge.

FULLER, District Judge:

       Vernon M. Lee (“Lee”) individually and as Trustee of the Vernon M. Lee

Trust (“the Lee Trust”) (collectively, “the Lee Defendants”) appeals the grant of

summary judgment in favor of Burton M. Wiand (“the Receiver”) on the

Receiver’s complaint brought pursuant to the Florida Uniform Fraudulent Transfer

Act (“FUFTA”), Fla. Stat. § 726.101 et seq. The Receiver sought to void

distributions of profits to the Lee Defendants from the receivership entities, which

were used in perpetration of a Ponzi scheme. 1 The Receiver appeals the denial of

prejudgment interest on the profits Lee was ordered to return to the receivership

entities.

       After careful review and with the benefit of oral argument, we affirm the

district court’s grant of summary judgment in favor of the Receiver and reverse

and remand the denial of prejudgment interest.

                                          I. FACTS

       This case is one of many “clawback” actions initiated by the Receiver to

recover profits from investors in a Ponzi scheme run by Arthur Nadel (“Nadel”) in

order to compensate those investors who were not lucky enough to have profited
*
  Honorable Mark E. Fuller, United States District Judge for the Middle District of Alabama,
sitting by designation.
1
  A Ponzi scheme operates by using new investors’ funds to pay old investors to create the
impression that the scheme is generating profits. See United States v. Orton, 73 F.3d 331, 332 n.
2 (11th Cir. 1996).
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on their investments. The Receiver brings this action on behalf of Valhalla

Investment Partners, L.P. (“Valhalla Investment”), Viking Fund, LLC (“Viking

Fund”), Viking IRA Fund, LLC (“Viking IRA Fund”), Victory Fund, LTD

(“Victory Fund”), Victory IRA Fund, LTD (“Victory IRA Fund”), and Scoop Real

Estate, L.P. (“Scoop Real Estate”) (collectively, “the Hedge Funds”), as well as

Traders Investment Club (“Traders”).

      Nadel was a hedge fund manager who induced investors to open trading

accounts with the Hedge Funds based on false representations as to the funds’

assets and the returns the investors would receive. Although Nadel conducted

some trading activity, Nadel primarily used the principal funds of new and existing

investors to benefit himself and to pay distributions to older investors in order to

maintain the appearance that the Hedge Funds were generating profits through

legitimate investment activities, thus enabling him to attract new investors. The

scheme eventually collapsed in January 2009, and Nadel subsequently plead guilty

to a fifteen-count indictment charging him with securities fraud, mail fraud, and

wire fraud. On December 3, 2010, Nadel was sentenced to a 168-month sentence

and ordered to pay $174,930,311.07 in restitution. Nadel died in custody on April

16, 2012.

      The details of the manner in which Nadel perpetrated the Ponzi scheme are

not in dispute. Nadel ultimately controlled the Hedge Funds’ investments through


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two entities that he created and controlled, Scoop Capital and Scoop Management.

Nadel created and controlled Traders, an investment club separate from the Hedge

Funds. From at least December 1999 through January 2009, Nadel managed the

Hedge Funds and misrepresented their performance. During this time period,

Nadel maintained more than 700 investor accounts and raised at least $336 million

from investors. Nadel misrepresented the net asset value and net profits of the

Hedge Funds and Traders through monthly statements issued to investors. The

monthly statements showed appreciation and increase in the investor accounts that

did not exist. Nadel used his control of the Hedge Funds’ trading activity to

transfer investor funds to brokerage accounts for the Hedge Funds as well as to

Nadel’s personal accounts. Investors’ funds from the Hedge Funds and Traders

were commingled among Nadel’s personal accounts and then combined into a

single master trading account that was used to purchase securities. Nadel then

allocated completed trades to the Hedge Fund brokerage accounts and his personal

accounts, typically allocating profitable trades to non-Hedge Fund accounts and

unprofitable trades to the Hedge Fund accounts. Investors’ funds were used to pay

management fees and performance-incentive fees to Nadel based on the inflated

performance and net asset value of the funds reported to the investors.

      Although Nadel represented to investors that their individual accounts and

the Hedge Funds as a whole were generating profits, the Hedge Funds were


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insolvent as early as 2000 and remained so until January 2009, when the scheme

collapsed. The Hedge Funds were funded almost entirely from investors and

required continuous infusions from investors to pay redemptions to earlier

investors. Nadel managed the Traders investment club in a similar manner. Nadel

misrepresented the gains generated by Traders and used principal investor funds,

as well as cash transferred from Hedge Fund accounts, to pay Traders’ investors’

redemptions. The Hedge Funds collapsed in January 2009 as a result of the funds’

losses and the payment of larger management fees to Nadel based on the fabricated

increasing gains of the funds.

       Lee and the Lee Trust held accounts with all of the Hedge Funds and with

Traders. The Lee Defendants received distributions from the Hedge Funds and

Traders from late 2000 through 2008. The distributions received by the Lee

Defendants during this period were $935,631.51 more than their investments.2

       The Receiver filed a complaint on January 19, 2010, seeking the return of

these “false profits” on behalf of the receivership entities in order to partially

compensate those investors who suffered a net loss on their investments. The

Receiver sought to void the distributions from the receivership entities to the Lee

Defendants as fraudulent transfers under FUFTA. On March 23, 2012, the

Receiver moved for partial summary judgment on the issue of whether Nadel

2
 This amount of profits includes a reduction of $133,371.09 obtained by the Receiver in a
settlement with Lee’s children.
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operated the Hedge Funds as a Ponzi scheme from 1999 to January 2009 and

whether, consequently, every transfer of an asset from a Hedge Fund during that

time was made with actual intent to hinder, delay, or defraud creditors of Nadel

under FUFTA’s actual fraud provision. See Fla. Stat. § 726.105(1)(a). The

Receiver filed another motion for summary judgment on liability against Lee under

FUFTA and on its unjust enrichment claim and also sought judgment as to

damages in the amount of $935,631.51, plus prejudgment interest.

      The magistrate judge issued a thorough report and recommendation that

recommended granting summary judgment in favor of the Receiver and against the

Lee Defendants but also recommended denial of an award of prejudgment interest

to the Receiver. The magistrate judge found that Nadel operated the Hedge Funds

and Traders as a Ponzi scheme during the time these entities made their

distributions to the Lee Defendants, and that these distributions were therefore

avoidable under FUFTA because they were made with the actual intent to defraud

creditors. The magistrate judge recommended against an award of prejudgment

interest on the grounds that the Lee Defendants assumed the legitimacy of the

investment funds and that it would be inequitable to require them to pay more than

the amount of their false profits to the receivership entities. The district court

adopted the magistrate judge’s report and recommendation and entered final




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judgment in favor of the Receiver and against the Lee Defendants in the amount of

$935,631.51.

                                   II. ANALYSIS

A.    FUFTA

      This case requires us to state whether the elements of FUFTA’s actual fraud

provision are satisfied in a receivership proceeding where the creditors are the

receivership entities and the debtor is a person who controlled and transferred the

entities’ funds in furtherance of a Ponzi scheme. The Receiver’s amended

complaint asserts violations of FUFTA under both its actual fraud provision, see

Fla. Stat. § 726.105(1)(a), and its constructive fraud provision, see Fla. Stat. §

726.105(1)(b). Since the magistrate judge concluded that Nadel’s transfer of funds

from the receivership entities to the Lee Defendants violated FUFTA’s actual fraud

provision, he did not reach the issue of whether the transfers also violated the

constructive fraud provision. The issue presented by this appeal is whether

Nadel’s transfer of receivership funds to the Lee Defendants was a transfer of

“property of a debtor” as required by FUFTA and otherwise satisfies the elements

of actual fraudulent intent. See Fla. Stat. § 726.101(2) (defining “asset” to mean

“property of a debtor”).

      Under FUFTA’s actual fraud provision, a “transfer made or obligation

incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim


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arose before or after the transfer was made or the obligation was incurred, if the

debtor made the transfer or incurred the obligation: (a) [w]ith actual intent to

hinder, delay, or defraud any creditor of the debtor . . . .” Fla. Stat. §

726.105(1)(a). The statute requires “[1] a creditor to be defrauded, [2] a debtor

intending fraud, [3] and a conveyance of property which is applicable by law to the

payment of the debt due.” Johnson v. Dowell, 592 So. 2d 1194, 1196 (Fla. 2d

DCA 1992). A “creditor” is “a person who has a claim,” and “claim” is broadly

defined as “a right to payment, whether or not the right is reduced to judgment,

liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,

undisputed, legal, equitable, secured, or unsecured.” Fla. Stat. § 726.102(4), (3).

A fraudulent transfer must be of an “asset,” which is defined as any “property of a

debtor,” excluding certain narrow exceptions. Fla. Stat. § 726.102(2).

      In determining whether a transfer was made with actual intent to defraud a

creditor, courts look to the statutory “badges of fraud,” such as whether, for

example, the transfer was to an insider, the debtor retained control of the property

after the transfer, the transfer was of substantially all the debtor’s assets, or the

debtor was insolvent or became insolvent shortly after the transfer was made. Fla.

Stat. § 726.105(2)(a)–(k). See also In re Levine, 134 F.3d 1046, 1053–54 (11th

Cir. 1998) (applying FUFTA’s statutory badges of fraud). “The existence of

badges of fraud creates a prima facie case and raises a rebuttable presumption that


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the transaction is void.” Gen. Elec. Co. v. Chuly Int’l, LLC, 118 So. 3d 325, 327

(Fla. 3d DCA 2013) (citation and internal quotation omitted). While “[a] single

badge of fraud may only create a suspicious circumstance and may not constitute

the requisite fraud to set aside a conveyance [] several of them when considered

together may afford a basis to infer fraud.” Johnson, 592 So. 2d at 1197 (citation

omitted). Although FUFTA lists a number of badges of fraud, “[i]t is clear from

the language of the statute that in determining intent, consideration may be given

to factors other than those listed.” Gen. Trading Inc. v. Yale Materials Handling

Corp., 119 F.3d 1485, 1498 (11th Cir. 1997) (citation and internal quotation

omitted). “Courts may take into account the circumstances surrounding the

conveyance.” Gen. Elec. Co., 118 So. 3d at 327 (citing Kirk v. Edinger, 380 So.

2d 1336, 1337 (Fla. 5th DCA 1980)).

      In S.E.C. v. Elliott, we stated that a receiver could void the transfer of assets

from the receivership entities by the person who was using them to perpetrate a

Ponzi scheme under FUFTA’s actual fraud provision because two of the statutory

badges of fraud were present–namely, the transfer occurred two weeks before the

appointment of a receiver and the debtor was insolvent. 953 F.2d 1560, 1567–68

(11th Cir. 1992). However, we stopped short of holding the transfer in question

was voidable under FUFTA and remanded the case to the district court to correct

procedural defects in the original order by holding an evidentiary hearing on the


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transferee’s objections. Id. at 1568. The magistrate judge cited Elliott as an

example of this court’s “willingness to allow a receiver to pursue FUFTA claims

under substantially similar facts . . . .” We endorse Elliott’s application of FUFTA

to a receiver’s action to avoid a transfer of funds from the receivership entities

used in a Ponzi scheme and undertake to develop Elliott by explaining how such a

transfer satisfies the elements of FUFTA.

      Elliott suggested that the transfers made by the perpetrator of the Ponzi

scheme were made with actual intent to defraud because two of FUFTA’s badges

of fraud were present in the transaction in question. 953 F.2d at 1568. Other

circuits have held that in a receiver’s suit under a state uniform fraudulent transfer

law, proof that a transfer was made from an entity used to perpetrate a Ponzi

scheme is sufficient to establish the transfer was made with actual fraudulent intent

without a consideration of the badges of fraud. See Donell v. Kowell, 533 F.3d

762, 770 (9th Cir. 2008) (applying California’s UFTA); S.E.C. v. Res. Dev. Int’l,

LLC, 487 F.3d 295, 301 (5th Cir. 2007) (applying Texas’s UFTA); Warfield v.

Byron, 436 F.3d 551, 558–59 (5th Cir. 2006) (applying Washington’s UFTA); see

also Wing v. Dockstader, 482 F. App’x 361, 363 (10th Cir. 2012) (applying Utah’s

UFTA). This court has embraced the so-called “Ponzi scheme presumption” in

applying the Bankruptcy Code’s fraudulent transfer provisions. Perkins v. Haines,

661 F.3d 623, 626 (11th Cir. 2011) (“With respect to Ponzi schemes, transfers


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made in furtherance of the scheme are presumed to have been made with the intent

to defraud for purposes of recovering the payments under [11 U.S.C.] §§ 548(a)

and 544(b).”) (citations omitted). We now clarify that, under FUFTA’s actual

fraud provision, proof that a transfer was made in furtherance of a Ponzi scheme

establishes actual intent to defraud under § 726.105(1)(a) without the need to

consider the badges of fraud. 3 The magistrate judge was thus correct to frame the

inquiry in terms of whether Nadel operated the receivership entities as a Ponzi

scheme at the time he made the transfers to Lee.

       The magistrate judge concluded, and the parties do not challenge, that Nadel

operated the receivership entities as a Ponzi scheme. A Ponzi scheme uses the

principal investments of newer investors, who are promised large returns, to pay

older investors what appear to be high returns, but which are in reality a return of

their own principal or that of other investors. In re Fin. Federated Title & Trust,

Inc., 309 F.3d 1325, 1327 n. 1 (11th Cir. 2002). The entities used to perpetrate the

scheme usually conduct little to no legitimate business operations. Id. Since Ponzi

schemes do not generate profits sufficient to provide their promised returns, but

rather use investor money to pay returns, they are insolvent and become more

3
  This holding is not inconsistent with Elliott, since one of the badges of fraud noted in that
case–the Ponzi scheme operator’s insolvency–is necessarily present in every Ponzi scheme. See
Warfield v. Byron, 436 F.3d 551, 558 (5th Cir. 2006) (noting that “a Ponzi scheme . . . is, as a
matter of law, insolvent from its inception”) (citing Cunningham v. Brown, 265 U.S. 1, 8 (1924)
(“[Charles Ponzi] was always insolvent, and became daily more so, the more his business
succeeded. He made no investments of any kind, so that all the money he had at any time was
solely the result of loans by his dupes.”)).
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insolvent with each investor payment. See id. at 1332 (“By definition, a Ponzi

scheme is driven further into insolvency with each transaction.”) (quoting In re

Universal Clearing House, 60 B.R. 985, 999 (D. Utah 1986)); see also

Cunningham, 265 U.S. at 7–8.

      Nadel’s scheme exhibited all of the marks of a Ponzi scheme. Nadel

attracted investors with promises of high returns by misrepresenting the

performance of the Hedge Funds and Traders as well as their net assets. Although

Nadel conducted trading activity, he did not make legitimate investments. Nadel

commingled investor funds from the different Hedge Funds and Traders into a

master trading account, then allocated the profitable trades to his personal accounts

and the unprofitable trades to the Hedge Fund accounts. Nadel used the

commingled funds to pay management fees to himself and to make distributions to

older investors. The investors who profited, such as the Lee Defendants, did not

receive income from their investments, but received principal funds from other

investors. The scheme required continuous infusions of new investments, which

were solicited through misrepresentations of the funds’ performance and falsified

monthly statements to individual investors that led them to believe they were

making profits on their investments. The receivership entities were insolvent in

2000 almost immediately after they began operating in this manner in December

1999, and they remained insolvent until their collapse in 2009. The magistrate


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judge correctly concluded that the receivership entities’ transfers of distributions to

Lee as an investor were made in furtherance of a Ponzi scheme.

      The Lee Defendants argue that the Ponzi scheme presumption should not

apply to find that the distributions to them were made with actual intent to defraud

as a matter of law because the transfers in question cannot satisfy the plain

language of FUFTA. The Receiver proceeds under the theory that the receivership

entities are creditors of Nadel and that Nadel is a debtor to the entities. Thus, as

FUFTA requires, Nadel’s transfers to investors must have been transfers of

“property of a debtor.” Fla. Stat. § 726.102(2), (10), (12). But, the Lee Defendants

argue, the transfers were of the receivership entities’ funds, not Nadel’s funds. In

other words, applying FUFTA to Nadel’s transfers appears to treat the receivership

entities and Nadel as simultaneously both separate and distinct entities–the

receivership entities are considered distinct from Nadel in order to establish a

creditor and a debtor, but they are treated as one entity in order to establish that

Nadel’s transfers of the entities’ funds were transfers of his property. The court is

not persuaded by these arguments.

      First, an explanation of how the Receiver has standing to sue also explains

how the receivership entities are creditors of Nadel for the transfers he made in

perpetrating the Ponzi scheme. Judge Posner, in the leading case on the issue,

addressed a receiver’s standing to sue in a clawback action related to a Ponzi


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scheme in Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995). A receiver of entities

used to perpetrate a Ponzi scheme does not have standing to sue on behalf of the

defrauded investors but does have standing to sue on behalf of the corporations that

were injured by the Ponzi scheme operator. 56 F.3d at 753–55. Although the

corporations constitute the “robotic tools” used by the Ponzi operator, they are

“nevertheless in the eyes of the law separate legal entities with rights and duties.”

Id. at 754. The money they receive from investors should be used for their stated

purpose of investing in securities, and thus the corporations are harmed when

assets are transferred for an unauthorized purpose to the detriment of the defrauded

investors, who are tort creditors of the corporations. Id. Although the corporations

participate in the fraudulent transfers, once the Ponzi schemer is removed and the

receiver is appointed, the receivership entities are no more the “evil zombies” of

the Ponzi operator but are “[f]reed from his spell” and become entitled to the return

of the money diverted for unauthorized purposes. Id.

      Under Lehmann, the Receiver has standing to sue on behalf of the

receivership entities because they were harmed by Nadel when he transferred

profits to investors, such as the Lee Defendants, from the principal investments of

others for the unauthorized purpose of continuing the Ponzi scheme. Although the

receivership entities were the instruments of Nadel’s fraud, they were distinct legal

entities whose purpose was to use client funds to invest in securities, and they were


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harmed when Nadel diverted the funds for unauthorized uses. Applying Lehmann

to FUFTA, the receivership entities became “creditors” of Nadel at the time he

made the transfers of profits to Lee and others because, as FUFTA requires, they

had a “claim” against Nadel.4 They had a “claim” against Nadel because he

harmed the corporations by transferring assets rightfully belonging to the

corporations and their investors in breach of his fiduciary duties, and a “claim”

under FUFTA includes “any right to payment” including a contingent, legal, or

equitable right to payment. Fla. Stat. § 726.102(3). See also Cook v. Pompano

Shopper, Inc., 582 So. 2d 37, 40 (Fla. 4th DCA 1991) (“A tort claimant or

contingent claimant is as fully protected under the Uniform Fraudulent Transfer

Act as a holder of an absolute claim.”). The receivership entities were thus

creditors because they had a right to a return of the funds Nadel transferred for

unauthorized purposes for the benefit of their innocent investors. See Lehmann, 56

F.3d at 754. The Receiver’s claim thus fits within the statutory language of

FUFTA, which requires the existence of a creditor and a debtor.

          Second, the Lee Defendants object that Nadel’s transfers of funds from the

receivership entities could not have been transfers of “assets” because assets under

FUFTA must be “property of a debtor,” and the funds Nadel transferred were

property of the corporations. Fla. Stat. §726.102(2), (12). This argument fails


4
    Under FUFTA, a “creditor” is simply “a person who has a claim.” Fla. Stat. § 726.101(4).
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because the Receiver has demonstrated every element Florida courts require under

FUFTA, including the nature of the property constituting the asset. The creditor

must demonstrate that “(1) there was a creditor to be defrauded; (2) a debtor

intending fraud; and (3) a conveyance of property which could have been

applicable to the payment of the debt due.” Nationsbank, N.A. v. Coastal Utils.,

Inc., 814 So. 2d 1227, 1229 (Fla. 4th DCA 2002) (citation omitted) (emphasis

added). 5 The third element constitutes Florida courts’ criterion for when

something is the property of a debtor under FUFTA. This element is established

because the funds that Nadel controlled and transferred to investors could have

been applied by him to pay the debt he owed to the receivership entities as a result

of his use of funds to perpetrate a Ponzi scheme. With each transfer that Nadel

made, Nadel became a debtor of the receivership entities because he diverted the

funds from their lawful purpose in violation of his fiduciary duties and was thus

obligated to return those same funds to the entities to be used for the benefit of the

investors. Therefore, with each transfer, Nadel diverted property that he controlled

and that could have been applicable to the debt due, namely, the very funds being

transferred. As the Receiver states, “[T]he money transferred to the Defendants is

not only ‘applicable to the payment of the debt due,’ but it is the actual money that

5
  The first element is established by the Lehmann case, which explains how the receivership
entities are creditors of Nadel even though they were the instruments by which he defrauded
investors. The second element is established by the Ponzi presumption since Nadel indisputably
made the transfers to Lee in furtherance of the Ponzi scheme.
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generated and deepened (in part, along with money transferred to other investors)

the debt owed by Nadel to the Investment Funds. In other words, it is the exact

same money that generated the debt and gave rise to the claims in this case.”

      Since the undisputed facts show that Nadel’s transfers to the Lee Defendants

satisfy all the elements of FUFTA, the district court’s grant of summary judgment

in favor of the Receiver is due to be affirmed as is the judgment for the Receiver

and against the Lee Defendants in the amount of $935,631.51.

B.    Prejudgment Interest

      The Receiver appeals from the denial of prejudgment interest by the district

court. The Receiver sought $437,734 in prejudgment interest. This amount was

derived by applying Florida’s statutory interest rate from the point at which the Lee

Defendants received transfers from the receivership entities that were more than

they invested and carried forward. The magistrate judge recommended that the

Receiver be denied an award of prejudgment interest on the amounts the Lee

Defendants received in excess of their principal on equitable grounds.

      Since the district court exercised supplemental jurisdiction over the

Receiver’s FUFTA claim, Florida law on prejudgment interest applies. See Flava

Works, Inc. v. City of Miami, 609 F.3d 1233, 1237 (11th Cir. 2010). A trial

court’s decision to refuse or reduce prejudgment interest in weighing the equities is

reviewed for abuse of discretion. Blasland, Bouck & Lee, Inc. v. City of N.


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Miami, 283 F.3d 1286, 1298 (11th Cir. 2002). Florida endorses the “loss theory”

of prejudgment interest according to which prejudgment interest is “merely another

element of pecuniary damages.” Argonaut Ins. Co. v. May Plumbing Co., 474 So.

2d 212, 214 (Fla. 1985). “[W]hen a verdict liquidates damages on a plaintiff’s out-

of-pocket, pecuniary losses, plaintiff is entitled, as a matter of law, to prejudgment

interest at the statutory rate from the date of that loss.” Id. at 215; see also Bosem

v. Musa Holdings, Inc., 46 So. 3d 42, 44–46 (Fla. 2010) (reaffirming Argonaut’s

loss theory). However, “[t]his general rule is not absolute.” Broward Cnty. v.

Finlayson, 555 So. 2d 1211, 1213 (Fla. 1990). “[I]nterest is not recovered

according to a rigid theory of compensation for money withheld, but is given in

response to considerations of fairness. It is denied when its exaction would be

inequitable.” Flack v. Graham, 461 So. 2d 82, 84 (Fla. 1984) (quoting Bd. of

Comm’rs of Jackson Cnty. v. United States, 308 U.S. 343, 352 (1939)).

      In the case of Blasland, this court applied Florida law to a district court’s

decision to award prejudgment interest on a breach of contract claim. 283 F.3d at

1297–99. Citing State v. Hallandale, 623 So. 2d 474, 479–80 (Fla. 1993), this

court considered three factors that should guide a court’s discretion in deciding

whether to award prejudgment interest on equitable grounds. Those factors are (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)


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whether it is equitable to allow an award of prejudgment interest when the delay

between injury and judgment is the fault of the prevailing party; (3) whether it is

equitable to award prejudgment interest to a party who could have, but failed to,

mitigate its damages. Blasland, 283 F.3d at 1297. Upon a consideration of these

factors, a district court may decide not to award prejudgment interest or to reduce

the amount of interest. Id. at 1298 (citing Finlayson, 555 So. 2d at 1213–14

(restricting on equitable grounds accrual of prejudgment interest to the date of

demand of a back pay award rather than the date the back pay accrued)).

      Here, the magistrate judge stated that Florida law considers prejudgment

interest an element of pecuniary damages and stated the equitable factors in

Blasland that would warrant a court in departing from the general rule that

prejudgment interest is to be awarded. However, the magistrate judge then stated

“[t]he list is obviously illustrative as each case is different” and concluded that

allowing recovery of prejudgment interest against the Lee Defendants would be

inequitable because they invested in the Hedge Funds assuming their legitimacy,

paying prejudgment interest would result in an award greater than the amount of

their profits, and because “the Lee Defendants have suffered enough.”

      The court finds the magistrate judge’s rationale to be an abuse of discretion

because it fails to identify and apply the equitable factors considered in Blasland to

the decision to deny prejudgment interest. The general observation that the Lee


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Defendants “have suffered enough” does not explain why the Receiver is not

entitled to be made whole under Florida law, which holds prejudgment interest is

an element of pecuniary damages. Further, that the Lee Defendants will be forced

to pay more than the profits they received with the addition of a prejudgment

interest award is not an equitable factor weighing against an award, but is a

necessary consequence of the loss theory of prejudgment interest. See Argonaut,

474 So. 2d at 214–15 (rejecting the theory according to which an award of

prejudgment interest is regarded as a penalty).

       The general rule is that prejudgment interest is an element of pecuniary

damages, and Florida courts have awarded prejudgment interest on FUFTA claims

and on unjust enrichment claims as a matter of course.6 See Willis v. Red Reef,

Inc., 921 So. 2d 681, 684–85 (Fla. 4th DCA 2006) (remanding with instructions to

trial court to calculate prejudgment interest due on damages awarded for FUFTA

claim); Montage Grp., Ltd.v. Athle-Tech Computer Sys., Inc., 889 So. 2d 180, 199

(Fla. 2d DCA 2004) (reversing trial court for failure to award prejudgment interest

on unjust enrichment award); Mansolillo v. Parties by Lynn, Inc., 753 So. 2d 637,

6
  The Receiver moved for summary judgment on its FUFTA claim, or, in the alternative, on an
unjust enrichment claim. The magistrate judge’s report and recommendation did not reach the
unjust enrichment claim, and the district court accordingly granted summary judgment in favor
of the Receiver only as to the claim for fraudulent transfer with actual intent to defraud in Count
I of the Receiver’s complaint. The court includes Florida cases awarding prejudgment interest
for unjust enrichment because it is an analogous claim to a FUFTA violation. See In re Agric.
Research & Tech. Grp., Inc., 916 F.2d 528, 541–42 (9th Cir. 1990) (applying Hawaii law on
prejudgment interest for conversion claims as a basis for determining when interest began to
accrue on fraudulent transfers under Bankruptcy Code).
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             Case: 13-10448     Date Filed: 06/02/2014    Page: 21 of 21


640 (Fla. 3d DCA 2000) (stating that, on a FUFTA claim, “Once the loss is fixed

as of [a] specific date, prejudgment interest is to be added to that amount.”); Burr

v. Norris, 667 So. 2d 424, 426 (Fla. 2d DCA 1996) (reversing and remanding with

instructions to trial court to award prejudgment interest on unjust enrichment

award). See also Donell, 533 F.3d at 772 (“Once the district court has identified

the avoidable transfers [under California’s UFTA], it has the discretion to permit

the receiver to recover pre-judgment interest on the fraudulent transfers from the

date each transfer was made . . . [P]rejudgment interest should not be thought of as

a windfall in any event; it is simply an ingredient of full compensation that corrects

judgments for the time value of money.”) (internal quotation and citations

omitted). Upon remand, the magistrate judge must cite specific equitable

considerations recognized under Florida law that would result in a different

outcome than the cases cited above.

                                III. CONCLUSION

      For the reasons above, we AFFIRM the district court’s order granting

summary judgment in favor of the Receiver and REVERSE and REMAND with

instructions for the court to apply the factors in Blasland to determine whether

equitable considerations justify denying or reducing a prejudgment interest award

in light of Florida’s general rule that prejudgment interest is an element of

pecuniary damages.


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