November 11, 2015 Articles

Clawback Suits Are Not Categorically Exempt from Arbitration under FAA

By Quinton M. Herbert

On February 10, 2015, the U.S. Court of Appeals for the Eleventh Circuit held that clawback claims brought by court-appointed receivers are not categorically exempt from arbitration as said claims are subject to arbitration under the Federal Arbitration Act (FAA). In Wiand v. Schneiderman, 778 F.3d 917 (11th Cir. 2015), the Eleventh Circuit upheld the lower court's decision compelling arbitration and denying a receiver's motion to vacate an arbitration award in a clawback suit stemming from Arthur Nadel's $168 million Ponzi scheme. The court essentially held that the proceedings were rightfully ordered to arbitration and deferred to the discretion of the arbitrator on the merits.

In clawback suits, the court appoints a receiver who is required to post a bond. Pursuant to 28 U.S.C. ยง 754 (login required), once the bond is posted, a receiver is vested with complete jurisdiction over any real and personal property located within the jurisdiction in which he or she is appointed. If the receivership estate has real or personal property in other jurisdictions, the receiver can also obtain jurisdiction over that property by filing a copy of the complaint and the order of appointment within 10 days of appointment in the district court in which property subject to the suit is located. See Guy v. Citizens Fid. Bank & Trust Co., 429 F.2d 828, 833 (6th Cir. 1970).

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