As of mid-2009, investment firm Wealth Management LLC of Appleton, Wisconsin managed over $130 million in almost 450 client accounts. Until 2003, most of that money was held in low risk investments appropriate for Wealth Management's clients. Wealth Management's approach changed drastically that year. It began investing its client's funds in illiquid and risky ventures through six unregistered investment pools it established. By 2009, over 75% of its managed money was in these risky investments. Investors in one of the investment pools were informed in early 2008 that redemptions would be limited to 2% per quarter. Later in 2008, two of Wealth Management's offers officers admitted receiving kickbacks, the SEC began an investigation, and the company suspended redemptions and begin to liquidate. The SEC brought an enforcement action in 2009. The court froze the firm's assets and appointed a receiver. The receiver conducted an accounting of the company's funds and proposed a distribution plan. The accounting concluded that only $6.3 million was available for distribution. The receiver proposed a pro rata distribution with any redemptions after May 2008 (i.e., after the SEC investigation became public) offset against an investor's total distribution. Judge Griesbach (E.D. Wis.) approved the proposal over objection. Two of the objectors, Dr. Edwin Wilson and the James and Sandra Verhoeven Revocable Trust, appeal.

In their opinion, Seventh Circuit Judges Ripple, Kanne, and Sykes affirmed. The Court first addressed its jurisdiction. The order below is not appealable as a final order. If it is appealable, it is under the collateral order doctrine -- a question of first impression in the Circuit, although the Fifth and Six Circuits have allowed an appeal from a receiver's distribution plan. The Court concurred with its sister circuits, concluding that the appeal satisfied the collateral order doctrine's requirements: the order conclusively determined a disputed question, it resolved an important issue separate from the merits, and it was effectively unreviewable after final judgment. Addressing another minor procedural issue, the Court held that the appellants satisfied Federal Rule of Appellate Procedure 3(c), even though the Verhoevens objected below as individuals and appealed as the Verhoeven Trust. On the merits of the appellant's' challenge to the distribution plan, the Court noted that the district court has broad discretion in ensuring that the plan is fair and reasonable. Here, the plan treated all investors equally, an approach routinely endorsed by courts as fair and reasonable. The Court considered the claims of investors who tried to redeem their equity that their interest was different but ultimately concluded that the claims were the same as those who did not try to redeem. The Court rejected the appellants' claim that they were entitled to be treated differently under either federal or state law. With respect to the offset date challenge, the Court noted that the district court had several options: offset all redemptions, offset no redemptions, offset some redemptions based on a cutoff date, or offset some redemptions based upon an individual analysis of each redemption request. The individual analysis approach may have resulted in a more accurate distribution, but it would have been expensive and time-consuming. Each of the other approaches would penalize a different subset of investors. The district court did not abuse its discretion in selecting the cutoff date approach or in selecting the cutoff date.