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CASE NO. 8:12-CV-1837-T-17MAP
03-22-2013
REGIONS BANK, etc., Plaintiff, v. MARVIN I. KAPLAN, etc., et al., Defendants. MARVIN I. KAPLAN, etc., et al., Counterclaim/Crossclaim Plaintiffs, v. REGIONS BANK, etc., et al., Counterclaim/Crossclaim Defendants.
ORDER
This cause is before the Court on:
+-------------------------------------------+ ¦Dkt. 19¦Motion to Dismiss (Bridgeview) ¦ +-------+-----------------------------------¦ ¦Dkt. 36¦Motion to Dismiss (Starr) ¦ +-------+-----------------------------------¦ ¦Dkt. 37¦Amended Motion to Dismiss (Regions)¦ +-------+-----------------------------------¦ ¦Dkt. 38¦Motion to Dismiss (Shaw) ¦ +-------+-----------------------------------¦ ¦Dkt. 41¦Motion to Dismiss (Wells Fargo) ¦ +-------+-----------------------------------¦ ¦Dkt. 42¦Motion to Dismiss (FBA) ¦ +-------+-----------------------------------¦ ¦Dkt. 52¦Response ¦ +-------+-----------------------------------¦ ¦Dkt. 53¦Response ¦ +-------+-----------------------------------¦ ¦Dkt. 54¦Response ¦ +-------------------------------------------+
+-----------------+ ¦Dkt. 55¦Response ¦ +-------+---------¦ ¦Dkt. 56¦Response ¦ +-------+---------¦ ¦Dkt. 62¦Reply ¦ +-------+---------¦ ¦Dkt. 63¦Reply ¦ +-------+---------¦ ¦Dkt. 76¦Notice ¦ +-----------------+
The Complaint was filed in Sarasota County Circuit Court on February 23, 2012, and was removed on August 31, 2012. The Counterclaim/Crossclaim was filed on May 30, 2012. Counterclaim/Crossclaim Plaintiffs are Marvin Kaplan ("Kaplan"), R1A Palms, LLC, Triple Net Exchange, LLC, MK Investing LLC and BNK Smith LLC (the "Investment Companies").
The Counterclaim/Crossclaim Defendants are Regions Bank ("Regions"), Robert Nicholas Shaw ("Shaw"), The Florida Bankers Association, Inc. ("FBA"), Bridgeview Bancorp, Inc. ("BBI"), Charles L. Starr, III a/k/ Larry Starr ("Starr"); Wells Fargo Bank, N.A.("Wells Fargo"), Smith Advertising & Associates, Inc. ("SAA"); G. Todd Smith a/k/a Todd Smith ("G. Smith"); Gary T. Smith ("T. Smith")("the Smiths") and Lucy B. Smith ("L. Smith").
The Counterclaim/Crossclaims (Dkt. 3) of Counterclaim/Crossclaim Plaintiffs include:
+-----------------------------------------------------------------------------+ ¦Count I ¦Fraud ¦Starr, T. Smith, SAA ¦ +--------+-------------------------+------------------------------------------¦ ¦Count II¦Conspiracy to Defraud ¦Starr, T. Smith, G. Smith, L. Smith, BBI, ¦ ¦ ¦ ¦SAA ¦ +--------+-------------------------+------------------------------------------¦ ¦Count ¦Negligent ¦Starr, T. Smith, SAA ¦ ¦III ¦Misrepresentation ¦ ¦ +--------+-------------------------+------------------------------------------¦ ¦Count IV¦18 U.S.C. 1962, 1964 ¦Starr, T. Smith, G. Smith, L. Smith, BBI. ¦ ¦ ¦ ¦SAA ¦ +--------+-------------------------+------------------------------------------¦ ¦Count V ¦F.S. 772.103, 772.104 ¦Starr, T. Smith, G. Smith, L. Smith, BBI, ¦ ¦ ¦ ¦SAA ¦ +-----------------------------------------------------------------------------+
+-----------------------------------------------------------------------------+ ¦Count VI ¦F.S. 772.11 ¦T. Smith, G. Smith, L Smith, SAA ¦ +---------+---------------------------------+---------------------------------¦ ¦Count VII¦Conversion ¦T. Smith, G. Smith, L. Smith, ¦ ¦ ¦ ¦BBI, SAA ¦ +---------+---------------------------------+---------------------------------¦ ¦Count ¦F.S. 501.201, FDUTPA ¦T. Smith, B. Smith, L. Smith, ¦ ¦VIII ¦ ¦BBI, SAA ¦ +---------+---------------------------------+---------------------------------¦ ¦Count IX ¦F.S. 68.05 ¦SAA ¦ +---------+---------------------------------+---------------------------------¦ ¦Count X ¦Breach of Contract ¦SAA, T. Smith, G. Smith ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XI ¦Breach U.C.C. 4-302(A) ¦BBI ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XII¦Breach U.C.C. 4-302(A) ¦Wells Fargo ¦ +---------+---------------------------------+---------------------------------¦ ¦Count ¦Breach 12 C.F.R. Pt. 229 ¦BBI ¦ ¦XIII ¦ ¦ ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XIV¦Breach 12 C.F.R. Pt. 229 ¦Wells Fargo ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XV ¦Negligence ¦BBI ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XVI¦Negligence ¦Wells Fargo ¦ +---------+---------------------------------+---------------------------------¦ ¦Count ¦Fraud ¦BBI ¦ ¦XVII ¦ ¦ ¦ +---------+---------------------------------+---------------------------------¦ ¦Count ¦Negligent Misrepresentation ¦BBI ¦ ¦XVIII ¦ ¦ ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XIX¦Defamation per se ¦Regions, FBA, Shaw ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XX ¦Invasion of Privacy ¦Regions, FBA, Shaw ¦ +---------+---------------------------------+---------------------------------¦ ¦Count XXI¦Negligence/Negligent ¦Regions ¦ ¦ ¦Misrepresentation ¦ ¦ +-----------------------------------------------------------------------------+ I. Background
The claims in this case are based on an alleged investment scheme in which Marvin Kaplan and the Investment Companies Sent money on a short term basis to SAA, in exchange for payment of interest and incentives. The alleged purpose of the short term loans was to enable SAA to take advantage of discounts on private printing contracts. According to the Counterclaim/Crossclaims, Starr explained to Kaplan:
30 ......the Smiths and SAA were requesting that investors advance half of the required early payment for any given print contract and that the Smiths and/or SAA would advance the other half.In August, 2009, Marvin Kaplan met with the Smiths and SAA, and discussed investing with them; in those discussions the Smiths/SAA repeated Starr's representations. At that time, Kaplan made an initial investment of $50,000, which was successful. After that, Kaplan caused the Investment Companies (owned by Kaplan) to being investing with Smiths/SAA. All went as expected for a time. The Smiths/SAA continued to offer more investments and to "renew" the old ones, urging Kaplan through the Investment Companies, to take new contracts upon the expiration of each prior contract, leaving the principal sum to "ride" from contract to contract. Instead of depositing the checks when they were due, the Investment Companies would hold them, if the checks had not expired, or discard the checks if they had expired, and Smiths/SAA would issue new checks. Over time, the Smiths/SAA would consistently urge Kaplan to reinvest both the returns that the Investment Companies had made as well as "new money" in to the deals. By November, 2011, the Investment Companies had over $7,000,000 invested with the Smiths/SAA.
31. According to Starr, this money would be immediately paid to the vendor to obtain the 10% discount.
32. Under the plan, the investor would immediately receive his share of the 10% discount by a check from SAA. The investor would also receive a promissory note or notes guaranteed by G. Smith and T, Smith and one or more checks representing the return of principal, which were to be cashed after the thirty (30) day period had expired and SAA had received payment from the customer.
33. The investor would then wait the thirty (30) days until SAA received the payment back from the customer and then would deposit the checks.
In November, 2011, T. Smith proposed a different and "better" method to earn larger returns to Kaplan and the Investment Companies, which required larger investments. Kaplan and the Investment Companies agreed to the "new arrangement" and infused additional capital into the investment scheme. The new scheme required the Investment Companies to wire funds from their bank accounts to SAA's account at BBI. The Smiths and SAA would fedex contracts and checks for the new transactions, to be received by the Investment Companies on the day they sent the wire(s) to the Bridgeview account. The contract would provide for the deposit of the checks thereafter, after SAA had gotten the customer payment. Because of the large wire transfers, the Investment Companies opened an account at Regions Bank in November, 2011. For each successive deal, the Investment Companies wired funds to BBI as Regions Bank would advise them that the checks from the prior deal cleared and the money was in the bank to wire. From November, 2011 through January 20, 2012, the Investment Companies continued to invest and, through the infusion of new capital and the "returns," their total investment grew to approximately $22,000,000. Counterclaim/Crossclaim Plaintiffs have attached sixty-seven promissory notes between the respective Investment Companies and Smith Advertising and Associates as to loans made by the Investment Companies to be paid in full during January, 2012; the promissory notes are signed by G. Todd Smith, COO/Owner, Smith Advertising & Associates, and are signed by Gary T. Smith, Personal Guarantee, and G. Todd Smith, Personal Guarantee.
On January 20, 2012, the Investment Companies wired $9,700,000 from their accounts at Regions Bank to SAA's account at BBI. They received checks for repayment and for payment of interest and incentives, which were deposited on January 20, 2012 at Regions Bank. (pars. 86, 87). On January 23, 2012, Kaplan, on behalf of the Investment Companies, reviewed the accounts and found that Regions had cleared all of the previously deposited checks and that the funds were in the bank. On January 23, 2012, the Investment Companies wired $10,450,000 to SAA's accounts at BBI. The Investment Companies received checks for repayment, and for payment of interest and certain incentives. (par. 93). The Investment Companies deposited the checks on January 23, 2012, but Regions Bank placed a hold on the checks and declined to credit them that day. On January 24, 2012, the Investment Companies agreed to invest in another deal, using the funds that remained at BBI, $9,950,000 since the deposited checks were on hold. The Investment Companies received checks for repayment, and for interest and incentives. Kaplan did not deposit the checks on January 24, 2012. On January 24, 2012, R1A, LLC, one of the Investment Companies, wired $2,000,000 to SAA's account at BBI. (par. 103).
On January 24, 2012, T. Smith and SAA called Kaplan and advised that BBI had frozen all of SAA's accounts. On January 25, 2012, Linda Carlson, a manager with Regions Bank, advised Kaplan and the Investment Companies that the checks deposited on January 20, 2012 had not cleared, and the checks were being return "Refer to Maker." (pars. 112, 114). Kaplan called T. Smith and SAA, who advised Kaplan that BBI wrongfully placed a hold on the SAA accounts, and asked Kaplan and the Investment Companies to be patient. (par. 115). Robert Nicholas Shaw, with Regions Bank' security, called Kaplan, who arranged a telephone conference with Smith/SAA that day. Thereafter, T. Smith/SAA advised Kaplan and the Investment Companies that a new set of checks for the first and second deals drawn on an account at Wells Fargo would be sent by a special air flight that day. The checks arrived on January 25, 2012, and included only replacement for the second deal checks. Kaplan and the Investment Companies deposited the checks in Regions Bank on January 25, 2012.
On January 26, 2012, the Investment Companies received written notice from Regions Bank of the return of twenty-eight checks that had been returned from BBI with the designation "Refer to Maker." (pars. 136, 137). On January 27, 2012, the Investment Companies received written notice from Regions Bank of the return of thirty- two checks that had been returned from BBI with the designation "Refer to Maker." (par. 138, 139). On January 30, 2012, Shaw called Kaplan and the Investment Companies to advise that the checks drawn on Wells Fargo Bank had not cleared.
On January 30, 2012, Regions Bank obtained an ex parte temporary injunction to enjoin the transfer of up to $2,775,000 from an account at Wells Fargo Bank, N.A. in the name of Lighthouse Pointe, LLC, to which Kaplan had transferred $2,775,000 resulting from the scheme. (Dkt. 1-7, pp. 24-30).
On January 31, 2012, the Investment Companies received written notice from Regions Bank of the return of twenty-one checks that had been returned from Wells Fargo with the designation "Refer to Maker." (par. 147, 148). One check was returned with the designation "NSF" for insufficient funds.
Counterclaim/Crossclaim Plaintiffs allege that Regions, through Shaw and other representatives began to tell other parties, including Wells Fargo, the Florida Bankers Association and the general public that Kaplan and his wife engaged in criminal conduct, illegal activities and were "check kiters." (par. 153). Counterclaim/Crossclaim Plaintiffs allege that Shaw published an alert bulletin to the Florida Banker's Association with Kaplan and his wife's social security number in it, accusing them of fraud, check kiting and criminal conduct, (par. 155). Counterclaim/Crossclaim Plaintiffs further allege that Shaw and Regions sued Kaplan individually without actually bringing a claim against him and therein repeated the false accusations of check kiting and fraud (par. 156) and reported Kaplan to the Secret Service and law enforcement for a crime that did not occur. (par. 159).
Regions' Amended Complaint (Dkt. 2) includes:
+-----------------------------------------------------------------------------+ ¦Count I ¦Imposition of Constructive Trust ¦ +---------+-------------------------------------------------------------------¦ ¦Count II ¦Imposition of Equitable Lien ¦ +---------+-------------------------------------------------------------------¦ ¦Count III¦Breach of Deposit Agreement (R1A) ¦ +---------+-------------------------------------------------------------------¦ ¦Count IV ¦Breach of Deposit Agreement (Triple Net) ¦ +---------+-------------------------------------------------------------------¦ ¦Count V ¦Breach of Deposit Agreement (BNK Smith) ¦ +---------+-------------------------------------------------------------------¦ ¦Count VI ¦Breach of Deposit Agreement (MK Investing) ¦ +---------+-------------------------------------------------------------------¦ ¦Count VII¦Claim for Damages for Value of Dishonored Checks (Smith ¦ ¦ ¦Advertising) ¦ +-----------------------------------------------------------------------------+ Kaplan, an individual, is named as a Defendant. Kaplan is further identified as: 1) a manager of R1A and an authorized signer on accounts titled in R1A at Regions; 2) a manager of Lighthouse and, on information and belief, an authorized signer on an account titled in Lighthouse at Wells Fargo; 3) an authorized signer on accounts titled in Triple Net at Regions; 4) a manager of MK Investing and an individual signer on accounts titled in MK Investing at Regions: 5) a manager of BNK Smith and an authorized signer on accounts titled in BNK Smith at Regions.
Kaplan, R1A Palms, LLC and Lighthouse Point, LLC stipulated to the transfer of $2,775,000 from Wells Fargo to Regions Bank on February 22, 2012. Upon receipt, Regions Bank released an administrative hold on six accounts at Regions Bank on which Kaplan was an authorized signer. (Dkt. 1-9, pp. 34-36). A final judgment in favor of Regions Bank and against SAA was entered on May 18, 2012. (Dkt. 1-4, pp. 22-34).
In the Amended Complaint filed on February 23, 2012, Regions Bank alleges:
13. Upon information and belief, the Kaplan Defendants and Smith Advertising are involved in what appears to be a scheme of check kiting, as set forth more fully below.II. Standard of Review A. Personal Jurisdiction - Federal Question
In analyzing a motion to dismiss for lack of personal jurisdiction, the Court determines whether the applicable statute potentially confers jurisdiction over the defendant, and then determines whether the exercise of jurisdiction comports with due process. Go-Video, Inc. v. Akai Electric Co., Ltd., 885 F.2d 1406, 1413 (9th Cir. 1989)(federal question case).
When a jurisdictional motion to dismiss depends on the assertion of a right created by a federal statute, a court should dismiss for lack of jurisdiction "only if the right claimed is 'so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise devoid of merit so as not to involve a federal controversy.'" Garcia v. Copenhaver, Bell & Assocs., 104 F.3d 1256 (11th Cir. 1997). B. Fed. R. Civ. P. 12(b)(6)
Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." "[D]etailed factual allegations" are not required, Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007), but the Rule does call for sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face," Id., at 570. A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556. Two working principles underlie Twombly. First, the tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements. Id. at 555. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim is context-specific, requiring the reviewing court to draw on its experience and common sense. Id., at 556. A court considering a motion to dismiss may begin by identifying allegations that, because they are mere conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the complaint's framework, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1955-1956 (2009)(quoting Bell Atlantic v. Twombly, 550 U.S. 544 (2007). C. Fed. R. Civ. P. 9(b)
Rule 9(b) provides that "[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." To satisfy the Rule 9(b) standard, RICO complaints must allege: (1) the precise statements, documents, or misrepresentations made; (2) the time and place of and person responsible for the statement; (3) the content and manner in which the statements misled the Plaintiffs; and (4) what the Defendants gained by the alleged fraud. Brooks v. Blue Cross and Blue Shield of Florida, Inc., 116 F.3d 1364, 1380-81 (11th Cir. 1997). In Brooks, the Eleventh Circuit Court of Appeals concluded that the complaint alleging a RICO claim did not meet the Rule 9(b) particularity standard because it was devoid of specific allegations with respect to each defendant; the plaintiffs lumped together all of the defendants in their allegations of fraud. Id. at 1381. "[I]n a case involving multiple defendants ... the complaint should inform each defendant of the nature of his alleged participation in the fraud." Id. D. Fed. R. Civ. P. 12(b)(1)
A motion to dismiss for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1), Federal Rules of Civil Procedure, can be a facial attack or a factual attack. A facial attack on the complaint "requires the court merely to look and see if [the] plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the factual allegations of the Complaint are taken as true. Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir. 1990). In a factual attack, the Court may consider matters outside the Complaint, and is free to weigh evidence and satisfy itself as to the existence of its power to hear the case. In a factual attack, the allegations of the Complaint are not presumptively true. Where the attack on jurisdiction implicates the merits of the plaintiff's federal cause of action, the Court should find that jurisdiction exists and deal with the objection as a direct attack on the merits of plaintiff's case, proceeding under Rule 12(b)(6) or Rule 56. The exceptions to this rule are narrowly drawn, and are intended to allow jurisdictional dismissals only in those cases where the federal claim is clearly immaterial or insubstantial. See Williamson v. Tucker, 645 F.2d 404 (5th Cir), cert. denied, 454 U.S. 897 (1981). E, Consideration of Documents Attached to the Complaint or Incorporated
The Court limits its consideration to well-pleaded factual allegations, documents central to or referenced in the complaint, and matters judicially noticed. La Grasta v. First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004). The Court may consider documents which are central to plaintiff's claim whose authenticity is not challenged, whether the document is physically attached to the complaint or not, without converting the motion into one for summary judgment. Speaker v. U.S. Dept of Health and Human Services Centers for Disease Control and Prevention, 623 F.3d 1371, 1379 (11th Cir. 2010); SFM Holdings, Ltd. v. Banc of America Securities, LLC, 600 F.3d 1334, 1337 (11th Cir. 2010); Day v. Taylor, 400 F.3d 1272, 1276 (11th Cir. 2005); Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337, 1340 n. 3 (11th Cir. 2005). III. Discussion A. Preliminary Issues 1. Shotgun Complaint
Each count of the Counterclaim/Crossclaim incorporates the 169 general factual allegations. In some counts, Counterclaim/Crossclaim Plaintiffs include additional factual allegations. In Anderson v. District Board of Trustees of Central Florida Community College, 77 F.3d 364, 368 (11th Cir. 1996), the Eleventh Circuit Court of Appeals states:
"Anderson's complaint is a perfect example of "shotgun" pleading, see Pelletier v. Zweifel, 921 F.2d 1465, 1518 (11th Cir.), cert. denied, 502 U.S. 855, 112 S.Ct. 167, 116 L.Ed.2d 131 (1991), in that it is virtually impossible to know which allegations of fact are intended to support which claim(s) for relief. Under the Federal Rules of Civil Procedure, a defendant faced with a complaint such as Anderson's is not expected to frame a responsive pleading. Rather, the defendant is expected to move the court, pursuant to Rule 12(e), to require the plaintiff to file a more definite statement.... Where, as here, the plaintiff asserts multiple claims for relief, a more definite statement, if properly drawn, will present each claim for relief in a separate count, as required by Rule 10(b), ... and with such clarity and precision that the defendant will be able to discern what the plaintiff is claiming and to frame a responsive pleading. Moreover, with the shotgun pleading out of the way, the trial judge will be relieved of "the cumbersome task of sifting through myriad claims, many of which [may be] foreclosed by [various] defenses." Fullman v. Graddick, 739 F.2d 553, 557 (11th Cir. 1984). Experience teaches that, unless cases are pled clearly and precisely, issues are not joined, discovery is not controlled, the trial court's docket becomes unmanageable, the litigants suffer, and society loses confidence in the court's ability to administer justice." (Footnotes omitted).See also Davis v. Coca Cola Bottling Co. Consol., 516 F.3d 955, 979-985 (11th Cir. 2008).
As long as a complaint is minimally sufficient to put a defendant on notice of the claims against him, the complaint will not fail for mere surplusage. Bailey v. Janssen Pharmaceutica, Inc., 288 Fed. Appx 597 (11th Cir. 2008). The Court discourages pleading in which it is not clear which facts support which cause of action. However, the Court will overlook the extraneous factual allegations where possible, treating extraneous allegations as background, in adjudicating the pending motions. 2) Wrong Party
In the Crossclaim, Crossclaim Plaintiffs allege:
11. Bridgeview is, upon information and belief a Delaware corporation doing business nationally and in Sarasota County, Florida. The tortious acts alleged in this complaint were performed by the Bridgeview in Sarasota County, Florida.
Defendant BBI argues that Crossclaim Plaintiffs have named the wrong party. If Crossclaim Plaintiffs have named the parent holding company instead of a related entity which conducts banking activities and in which SAA maintained checking accounts and decide to amend the Counterclaim/Crossclaims, Crossclaim Plaintiffs are granted leave to file an amended complaint within fourteen days to name the correct party. B. Subject Matter Jurisdiction
Starr argues that Triple Net Exchange, LLC, MK Investing, LLC and BNK Smith, LLC were not incorporated at the time of the Starr/Kaplan conversation in August 2009, and therefore they do not have standing to bring a claim against Starr for fraud or negligent misrepresentation.
To have standing, each Crossclaim Plaintiff must show: 1) it suffered an injury in fact that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; 2) the injury is fairly traceable to Starr's conduct; and 3) it is likely, not merely speculative, that the injury will be redressed by a favorable decision. Kelly v. Harris, 331 F.3d 817, 819-20 (11th Cir. 2003).
The factual allegations in paragraphs 21 through 35 encompass the alleged representations and conduct of Starr in August, 2009, made to Kaplan. In Count II, Crossclaim Plaintiffs allege a conspiracy to defraud that commenced at some time prior to August 2009 and ended in January, 2012. Each act done in pursuance of the conspiracy by one of several co-conspirators is an act for which each is jointly and severally liable. Nicholas v. Kellin, 481 So.2d 931, 935 (Fla. 5th DCA 1985).
The Court may take judicial notice of public records. The above entities were incorporated during the time that the alleged conspiracy to defraud was being carried out.
Starr could not have made any representations to the designated Investment Companies. After consideration, Starr's Motion to Dismiss (Dkt. 36) for lack of standing as to Triple Net Exchange, LLC, MK Investing, LLC and BNK Smith, LLC on Count I, fraud, and Count III, negligent misrepresentation is granted. C. Personal Jurisdiction
BBI moves to dismiss for lack of personal jurisdiction. This case was removed on the basis of federal question jurisdiction. (Dkt. 1). 1. RICO
Section 1965(d) of the RICO statute provides for service in any judicial district in which the defendant is found. When a federal statute provides for nationwide service of process, it becomes the statutory basis for personal jurisdiction. In re Chase and Sanborn Corp., 835 F.2d 1341, 1344 (11th Cir. 1988), rev'd on other grounds sub nom. Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989). 2. Due Process
The due process clause of the Fifth Amendment constrains a federal court's power to acquire personal jurisdiction via nationwide service of process. a. Purposeful Availment
The relevant forum under the Fifth Amendment is the United States. Where a defendant is incorporated in the United States, that defendant has purposefully directed its activities at the United States. b. Minimum Contacts
Once it is established that a defendant has purposefully directed its activities at a particular forum, the Court determines whether the assertion of personal jurisdiction would comport with "fair play and substantial justice." Madara v. Hall, 926 F.2d 1510, 1517 (11th Cir. 1990).
Minimum contacts with the forum state are not constitutionally required. Where the relevant forum is the United States, the aggregate contacts with the United States are of significance. 1. Fairness
In this context, "fairness" involves the consideration of whether litigating in this forum will impose an unreasonable burden on the defendant. The Court balances the burdens on the individual defendant against the federal interest involved in the litigation. The Court considers a defendant's contacts with the nation as a whole rather than contacts with the individual forum state. United States Securities and Exchange Commission v. Carrillo, 115 F.3d 1540 1543-44 (11lh Cir. 1997).
When a defendant makes a showing of constitutionally significant inconvenience, the exercise of jurisdiction comports with due process only if the federal interest in litigating the dispute in the chosen forum outweighs the burdens imposed on the defendant. Republic of Panama v. BCCI Holdings (Luxembourg), S.A., 119 F.3d 935, 948 (11th Cir. 1997).
Litigation in a forum in which a corporate defendant does not do business or have an office imposes burdens. However, "[m]odern means of communication and transportation have lessened the burden of defending a lawsuit in a distant forum." Chase and Sanborn, 835 F.2d at 1346. The burden is on the defendant to establish that the assertion of jurisdiction in this forum will make litigation so gravely difficult that the defendant will be at a severe disadvantage in comparison to his opponent. Burger King v. Rudzewicz, 471 U.S. 462, 478 (1985).
In this case, BBI has not established that litigation in this forum will put BBI at a severe disadvantage in comparison to Counterclaimants. Because BBI has not shown inconvenience of constitutional significance, it is not necessary for the Court to balance the burden on BBI with the federal interest involved in this case.
After consideration, the Court denies the Motion to Dismiss (Dkt. 19) for lack of personal jurisdiction. D. Count I Fraud
Starr moves to dismiss under Fed. R. Civ. P. 9(b), which requires that the circumstances constituting the fraud or mistake shall be stated with particularity.
Rule 9(b) is satisfied if the complaint sets forth '(1) precisely what statements were made in what documents or oral representations or what omissions were made, and (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, and (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud.'" Ziemba v. Cascade International, 256 F.3d at 1202 (citing Brooks v. Blue Cross and Blue Shield of Florida, Inc., 116 F.3d 1364, 1371(11th Cir. 1997)). A list containing allegations of fraud describing the nature and subject of statements has been found to be sufficient, even where precise words used were not alleged. Brooks, 116 F.3d at 1371 (citing Seville Indus. Machine Corp. v. Southmost Machinery Corp., 742 F.2d 786, 791 (3rd Cir. 1984)).
The factual allegations in paragraphs 21 through 35 encompass the alleged representations and conduct of Starr in August, 2009, made to Kaplan. In paragraph 38, Counterclaim/Crossclaim Plaintiffs allege that "the Conspirators would then take some or all of the money or compensation for themselves, constantly cycling and floating what remained among the many victims to maintain the illusion that the fictional investments were paying off and to induce still more investment into the scheme."
Based on the allegations within the Counterclaim/Crossclaims, it is undisputed that Kaplan and the Investment Companies discussed the proposed investments with the Smiths/SAA, after which Kaplan and the Investment Companies decided to make their investments. There are no allegations as to Starr's direct participation in the alleged scheme other than the representations identified above. Based on the promissory notes attached to the Counterclaim/Crossclaims, the transactions were between the Investment Companies and Smiths/SAA. Starr was not a party to the transactions.
After consideration, the Court grants Starr's Motion to Dismiss as to Count I. E. Count II Conspiracy to Defraud
BBI and Starr move to dismiss Count II for failure to state a claim.
A civil conspiracy requires: (a) an agreement between two or more parties; (b) to do an unlawful act or to do a lawful act by unlawful means; (c) the doing of some overt act in pursuance of the conspiracy; and (d) damage to the plaintiff as a result of the acts done under the conspiracy. Raimi v. Furlong, 702 So.2d 1273, 1284 (Fla. 3d DCA 1997). An actionable conspiracy claim requires an actionable underlying tort or wrong. Wright v. Yurko, 446 So.2d 1162, 1164 (Fla. 5th DCA 1984).
In a criminal case, the purpose of a charge of conspiracy is to punish the act of agreement itself; there is no need to prove that the conspiracy led to an injury-causing criminal activity. In a civil case, the purpose of a civil conspiracy claim is to impute joint liability to all the members of the conspiracy. Beck v. Prupis, 162 F.3d 1090, 1099 (11th Cir. 1998). In a civil conspiracy, a plaintiff must prove that someone in the conspiracy committed a tortious act that proximately caused plaintiff's injury; the plaintiff can then hold other members of the conspiracy liable for the injury. Every member of an alleged conspiracy may carry out a different part of the conspiracy, but all share in the liability for the tortious acts done in furtherance of the conspiracy. The presence of a conspiracy is often established by circumstantial evidence rather than direct evidence. Under Florida law, a civil conspiracy may be established by circumstantial evidence only when the inference sought to be created by such circumstantial evidence outweighs all reasonable evidence to the contrary. See Diamond v. Rosenfield, 511 So.2d 1031, 1034 (Fla. 4th DCA 1987). A person who joins a conspiracy with knowledge of its actual purpose and scope may be held liable for activity in furtherance of the conspiracy which took place before they joined it. See James v. Nationsbank Trust Co. (Florida) National Association, 639 So.2d 1031, 1033 (Fla. 5th DCA 1994).
From the allegations of the Counterclaim/Crossclaims, the Court understands that the alleged conspiracy to defraud commenced at some point prior to August, 2009 and continued until January 24, 2012, when SAA's account(s) at BB! were frozen. Agreement to participate in the Ponzi scheme in exchange for money is the essence of the civil conspiracy claim. 1. Starr
Starr's alleged role was to act as the "pitch man" to lure Kaplan and the Investment Companies into the fraudulent scheme and then to hand them off to the Smiths/SAA. Counterclaim/Crossclaim Plaintiffs allege generally that Starr, as a conspirator, received money for his acts in furtherance of the conspiracy. Counterclaim/Crossclaim Plaintiffs have included no factual allegations as to when and how Starr obtained Starr's alleged knowledge of the purpose and scope of the alleged conspiracy, when and how Starr joined the alleged conspiracy, and how Starr received anything for his alleged participation. 2. BBI
Crossclaim Plaintiffs allege that BBI allowed the other conspirators to utilize BBI as a repository and accounting system in exchange for compensation. BBI is a banking company; this allegation could mean that BBI entered into an account agreement with SSA for a general deposit account or accounts, and BBI charged typical monthly service fees associated with the accounts. The Court "may infer from the factual allegations in the complaint 'obvious alternative explanations],' which suggest lawful conduct rather than the unlawful conduct the plaintiff would ask the Court to infer." American Dental Association v. Cigna Corp., 605 F.3d 1283, 1290 (11th Cir. 2010). The above allegation could also mean that BBI maintained SAA's checking accounts, and was paid extra compensation to perform unidentified services specifically related to the Ponzi scheme. The allegation that BBI provided "conscious and knowing support" to other Conspirators and allowed the Conspirators to maintain accounts is an allegation of aiding and abetting rather than direct participation.
Counterclaim/Crossclaim Plaintiffs allege that SAA maintained accounts at BBI, that BBI transferred funds between accounts, and that BBI "floated" checks. It is unclear whether Plaintiffs are alleging that an employee at BBI arranged and carried out transfers, or BBI permitted SAA to maintain checking accounts for which access to online services was provided, and the account holders electronically carried out transfers, which is the obvious alternative explanation.
The Court understands the allegation that "BBI 'floated' checks" to mean that BBI extended provisional credit on a routine basis to SAA. The alleged fraudulent scheme in Count I was the inducement of Kaplan and Investment Companies to invest in an alleged business opportunity which was fictional. After Counterclaim/Crossclaim Plaintiffs accepted each offer to invest, promissory notes were signed and sent by SAA, money was transferred to SAA's accounts by a wire transfer, and checks were sent to Counterclaim/Crossclaim Plaintiffs the same day, which Counterclaim/Crossclaim Plaintiffs then deposited in their accounts. To outward appearances, the repetition of the cycle of transfers and checks is a routine activity. The authorized extension of provisional credit does not necessarily involve fraud or check kiting, but the systematic and recurrent use of provisional credit could indicate the presence of a fraudulent scheme. At this point it is unclear what the account activity of SAA's accounts or other records would reveal, if anything.
Counterclaim/Crossclaim Plaintiffs further allege that BBI "induced investors to wire funds by manipulating and false statements." It is unclear whether Counterclaim/Crossclaim Plaintiffs are alleging that BBI's employees made representations to Counterclaim/Crossclaim Plaintiffs or whether Counterclaim/Crossclaim Plaintiffs are relying on transactions in accounts to which Counterclaim/Crossclaim Plaintiffs had electronic access. While it is not necessary for the specific person at BBI to be identified at this stage, the Court expects some identification of time, place and content. If Counterclaim/Crossclaim Plaintiffs are referring to the fact that BBI returned checks to Regions Bank which were marked "Refer to Maker" the Court needs to know that is the factual basis on which Counterclaim/Crossclaim Plaintiffs are relying. The Counterclaim alleges the Investment Companies made wire transfers to BBI on January 20, 2012, January 23, 2012, and January 24, 2012. The Crossclaim further alleges that Regions Bank notified the Investment Companies on January 25, 2012 that checks were returned marked "Refer to Maker." Therefore, the returned checks marked "Refer to Maker" did not induce the Investment Companies to make wire transfers to BBI.
After consideration, the Court grants Starr's and BBI's Motions to Dismiss as to Count II, with leave to file an amended Counterclaim/Crossclaims within fourteen days. F. Count III Negligent Misrepresentation
Starr moves to dismiss Count III for failure to state a claim.
To state a cause of action for negligent misrepresentation, a plaintiff must show:
1) the defendant made a misrepresentation of material fact that he believed to be true but which was in fact false;See Specialty Marine & Industrial Supplies. Inc. v. Venus. 66 So.3d 306, 309 (Fla. 1st DCA 2011).
(2) the defendant was negligent in making the statement because he should have known the representation was false;
(3) the defendant intended to induce the plaintiff to rely and [sic] on the misrepresentation; and
(4) injury resulted to the plaintiff acting in justifiable reliance upon the misrepresentation.
Based on the allegations of the Counterclaim/Crossclaims, and the attachments, it is undisputed that Kaplan and the Investment Companies discussed the proposed investments with Smiths/SAA, and entered into transactions only with Smiths/SAA. Starr was not a party to the transactions.
After consideration, the Court grants Starr's Motion to Dismiss as to Count HI. G. Count IV 18 U.S.C. Sec. 1962, 1964
Starr moves to dismiss Count IV for failure to state a claim.
18 U.S.C. Sec. 1962(c) provides:
(c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.In Count IV, Counterclaim/Crossclaim Plaintiffs allege:
185. Starr, T. Smith, G. Smith, L. Smith, Bridgeview and SAA were employed by or associated with an enterprise, namely the Ponzi scheme related above, and engaged in the activities referenced above with full knowledge of their purpose to defraud.
186. The Ponzi scheme affected interstate commerce insofar as it made use of interstate mails and wires to commit fraud.
187. Starr, T. Smith, G. Smith, L, Smith, Bridgeview and SAA conducted or participated directly or indirectly, in the conduct of the Ponzi scheme's affairs through a pattern of racketeering activity in which all were knowingly engaged.
188. The racketeering activities engaged in by Starr, T. Smith, G. Smith, L. Smith, Bridgeview and SAA are indictable under 18 U.S.C. Sec. 1341 and 18 U.S.C. Sec. 1343.
189. There are two or more acts of such racketeering activity.
190. As a proximate and factual result of the racketeering activity, the Investment Companies have suffered damages and/or injuries to their business interest and/or property.
The allegations of Count IV track the provisions of 18 U.S.C. Sec. 1962(c). The Court understands Count IV to be a claim only under 18 U.S.C. Sec. 1962(c), and not under 18 U.S.C. Sec. 1962(d), which provides:
(d) It shall be unlawful for any person to conspire to violate (a), (b) or (c) of this section.In a civil RICO claim, the plaintiff must allege and prove injury from a predicate racketeering act. In this case, the predicate acts are mail fraud and wire fraud.
The factual allegations of the Counterclaim/Crossclaims indicate that Starr's alleged role in the Ponzi scheme was to explain the investment to Kaplan in August, 2009. There is no allegation that Starr participated in the predicate acts of mail fraud and wire fraud. Counterclaim/Crossclaim Plaintiffs have not alleged a RICO conspiracy claim. If Counterclaim/Crossclaim Plaintiffs intend to assert a RICO conspiracy claim, it should be stated in a separate count.
After consideration, the Court grants Starr's Motion to Dismiss as to Count IV, with leave to amend within fourteen days. H. Count V F.S. 772.103, 772.104
Starr moves to dismiss Count V for failure to state a claim.
Florida Statute 772.103(3) provides that it is unlawful for any person :
(3) employed by or associated with any enterprise to conduct or participate, directly or indirectly, in such enterprise, through a pattern of criminal activity or the collection of an unlawful debt.
The analysis applied to federal RICO claims applies equally to Florida RICO claims. Jackson v. Bellsouth Telecommunications, 372 F.3d 1250 (11th Cir. 2004).
For the same reason stated in Count IV, the Court grants Starr's Motion to Dismiss as to Count V, with leave to amend within fourteen days. I. Count VIII FDUTPA
This claim is addressed to T. Smith, G. Smith, L. Smith, SAA and BBI. BBI moves to dismiss for failure to state a claim.
BBI argues that Counterclaim/Crossclaim Plaintiffs have not pled the necessary facts to establish a breach of FDUTPA by BBI. BBI contends that the only deceptive act alleged is the withholding, converting or misappropriating of Counterclaim/Crossclaim Plaintiffs' funds. BBI argues that the deceptive acts alleged are those of the Smith Defendants, and their inducements to the Investment Companies.
BBI argues that the only representations made by BBI were the dishonorment of fraudulent checks, and those representations were made to Regions Bank when it returned the checks marked "Return to Maker". BBI argues that the representations are not deceptive, and are truthful, appropriate and expressly contemplated by 12 C.F.R. Pt. 229.30(d). BBI further argues that Crossclaim Plaintiffs do not show how BBI's actions caused the damage complained of.
Counterclaim/Crossclaim Plaintiffs respond that they pled that the Ponzi scheme is a consumer transaction within the meaning of FDUTPA, and that BBI and the conspirators withheld, converted and misappropriated the funds invested by the Investment Companies, which directly and proximately caused actual damages.
The representation "Refer to Maker" is expressly contemplated by 12 C.F.R. Pt. 229.30(d); this is an "obvious alternative explanation" which suggests lawful activity. If the fraudulent scheme is the inducement of Counterclaim/Crossclaim Plaintiffs to enter into a fictional investment which caused Counterclaim/Crossclaim Plaintiffs' losses, it is not clear how BBI's conduct caused Counterclaim/Crossclaim Plaintiffs' losses.
After consideration, the Court grants BBI's Motion to Dismiss as to Count VIII, with leave to amend within fourteen days. J. Count XI Breach UCC 4-302(A)
BBI moves to dismiss Count XI for failure to state a claim.
Florida has adopted the U.C.C. Regulation CC, governing Availability of Funds and Collection of Checks, 29 C.F.R. Pt. 229, supersedes any inconsistent provisions of the U.C.C. as adopted by any state, but only to the extent of the inconsistency. See 29 C.F.R. Pt, 229.41. At this stage, the Court is unable to determine whether there are specific issues involved which require application of federal statutes and regulations to the exclusion of state statutes and regulations.
Florida Statute 674.402 provides:
1) If an item is presented to and received by a payor bank, the bank is accountable for the amount of:
(a) A demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond midnight of the banking day of receipt without settling for it or, whether or not it is also the depositary bank, does not pay or return the item or send notice of dishonor until after its midnight deadline; or
(b) Any other properly payable item unless, within the time allowed for acceptance or payment of that item, the bank either accepts or pays the item or returns it and accompanying documents.
(2) The liability of a payor bank to pay an item pursuant to subsection (1) is subject to defenses based on breach of a presentment warranty (s. 674.2081) or proof that the person seeking enforcement of the liability presented or transferred the item for the purpose of defrauding the payor bank.
In Count XI, Counterclaim/Crossclaim Plaintiffs allege that checks were presented for payment to BBI by Regions Bank on or before January 24, 2012 and BBI did not return any of the items by their midnight deadline. Counterclaim/Crossclaim Plaintiffs also allege that checks were presented for payment to BBI by Regions Bank on or before January 25, 2012, and BBI did not return any of the items by their midnight deadline.
Counterclaim/Crossclaim Plaintiffs further allege that BBI did not return the checks as required under 29 C.F.R. Pt. 229.30(d): "A paying bank returning a check shall clearly indicate on the front of a check that it is a returned check and the reason for the return."
The representation "Refer to Maker" is expressly contemplated by 29 C.F.R. Pt. 229.30(d); this is an "obvious alternative explanation" that suggests lawful activity.
After consideration, the Court grants BBI's Motion to Dismiss Count XI in part as to representations required under 29 C.F. R. Pt. 229.30(d), with leave to amend within fourteen days, and denies BBI's Motion to Dismiss in part. K. Count XII Breach U.C.C. 4-302(A)
Wells Fargo moves to dismiss Count XII for failure to state a claim.
In Count XII, Counterclaim/Crossclaim Plaintiffs allege that checks were presented to Wells Fargo by Regions for payment on or before January 29, 2012, and Wells Fargo did not return any of the items by their midnight deadline.
Counterclaim/Crossclaim Plaintiffs allege that Wells Fargo did not return the checks as required under 29 C.F.R. Pt. 229.30(d): "A paying bank returning a check shall clearly indicate on the front of a check that it is a returned check and the reason for the return."
The representation "Refer to Maker" is expressly contemplated by 29 C.F.R. Pt. 229.30(d); this is an "obvious alternative explanation" that suggests lawful activity.
After consideration, the Court grants the Wells Fargo's Motion to Dismiss Count XII in part as to the representation required under 29 C.F.R. Pt. 229.30(d), with leave to amend within fourteen days, and otherwise denies the Motion. L. Count XIII Breach 12 C.F.R. Pt. 229
BBI moves to dismiss Count XIII for failure to state a claim.
In Count XIII, Counterclaim/Crossclaim Plaintiffs allege that BBI did not return checks presented for payment on January 24, 2012 and January 25, 2012 by the midnight deadline, and did not include a reason for the return of the items. Counterclaim/Crossclaim Plaintiffs seek the award of statutory damages under 12 C.F.R. Pt. 229.21 and 229.38 for BBI's alleged failure to comply with 12 C.F.R. Pt. 229.30(d), the face amount of the checks, $22,814,135.00, and other damages.
12 C.F.R. Pt. 229.38 provides:
(a) Standard of care; liability; measure of damages. A bank shall exercise ordinary care and act in good faith in complying with the requirements of this subpart. A bank that fails to exercise ordinary care or act in good faith under this subpart may be liable to the depositary bank, the depositary bank's customer, the owner of a check, or another party to the check. The measure of damages for failure to exercise ordinary care is the amount of the loss incurred, up to the amount of the check, reduced by the amount of the loss that party would have incurred even if the bank had exercised ordinary care. A bank that fails to act in good faith under this subpart may be liable for other damages, if any, suffered by the party as a proximate consequence. Subject to a bank's duty to exercise ordinary care or act in good faith in choosing the means of return or notice of nonpayment, the bank is not liable for the insolvency, neglect, misconduct, mistake, or default of another bank or person, or for loss or destruction of a check or notice of nonpayment in transit or in the possession of others. This section does not affect a paying bank's liability to its customer under the U.C.C. or other law.
(b) Paying bank's failure to make timely return. If a paying bank fails both to comply with § 229.30(a) and to comply with the deadline for return under the U.C.C, Regulation J (12 CFR Part 210), or § 229.30(c) in connection with a single nonpayment of a check, the paying bank shall be liable under either § 229.30(a) or such other provision, but not both.
After consideration, the Court grants BBI's Motion to Dismiss Count XIII in part as to the alleged noncompliance with 29 C.F.R. Pt. 229.30(d), with leave to amend within fourteen days, and otherwise denies the Motion. M. Count XIV Breach 12 C.F. R. Pt. 229
Wells Fargo moves to dismiss Count XIV for failure to state a claim.
Counterclaim/Crossclaim Plaintiffs allege that Wells Fargo did not return the checks presented for payment on January 29, 2012 by their midnight deadline, and did not include a reason for the return as required by 12 C.F.R. Pt. 229.30(d). Counterclaim/Crossclaim Plaintiffs seek the award of statutory damages under 12 C.F.R. Pt. 229.21 and 229.38, the face amount of the checks, $10,550,000, and other damages.
After consideration, the Court grants Wells Fargo's Motion to Dismiss Count XIV in part as to the alleged noncompliance with 29 C.F.R. Pt. 229.30(d), with leave to amend within fourteen days, and otherwise denies the Motion. N. Count XV Negligence
BBI moves to dismiss Count XV for failure to state a claim.
Count XV alleges that BBI was negligent or negligent per se in failing to return the items with proper designation in a timely manner, that BBI had a duty to provide a proper return designation on the items, that BBI breached that duty, and the breach proximately caused damage to the Investment Companies. Count XV is an alternative count to Count XI, and Count XIII. It is premised on the alleged breach of the statutory duty to exercise ordinary care and good faith in the collection of checks. See 12 C.F.R. 229.38 (bank that fails to exercise ordinary care or act in good faith under this subpart may be liable to depositary bank's customer).
After consideration, the Court grants BBI's Motion to Dismiss Count XV in part as to the alleged failure to return items with a proper designation, with leave to amend within fourteen days, and otherwise denies the Motion. O. Count XVI Negligence
Wells Fargo moves to dismiss Count XVI.
Count XVI alleges that Wells Fargo was negligent or negligent per se in failing to return the items with proper designation in a timely manner, that Wells Fargo had a duty to provide a proper return designation on the items, that Wells Fargo breached that duty, and the breach proximately caused damage to the Investment Companies. It is premised on the alleged breach of the statutory duty to exercise ordinary care and good faith in the collection of checks. See 12 C.F.R. 229.38 (bank that fails to exercise ordinary care or act in good faith under this subpart may be liable to depositary bank's customer).
After consideration, the Court grants Wells Fargo's Motion to Dismiss Count XVI in part as to the alleged failure to return items with a proper designation, with leave to amend within fourteen days, and otherwise denies the Motion. P. Count XVII Fraud
BBI moves to dismiss Count XVII for failure to state a claim.
To establish a claim for fraudulent misrepresentation, a plaintiff must show:
1) a false statement concerning a material fact;See Butler v. Yusem, 44 So.3d 102, 105 (Fla. 2010).
(2) the representor's knowledge that the representation is false;
(3) an intention that the representation induce another to act on it; and
(4) consequent injury by the party acting in reliance on the representation.
To plead fraudulent inducement, a plaintiff must allege that the defendants:
(1) made a statement concerning a material fact;See Gutter v. Wenker, 631 So.2d 1117, 1118 (Fla. 4th DCA 1994).
(2) knowing that the statement was false;
(3) with intent that the plaintiffs act on the false statement; and
(4) the plaintiffs were damaged as a result of their reasonable reliance on the false statement.
A cause of action for fraudulent misrepresentation is subject to the requirements of Fed. R. Civ. P. 9. Rule 9(b).
The factual basis for this claim is not clear. Counterclaim/Crossclaim Plaintiffs shall specify the representations made, who made them, when, where and in what context the representations were made, and how the representations caused injuries to Counterclaim/Crossclaim Plaintiffs. The Court incorporates the discussion as to Count II.
After consideration, the Court grants the BBI's Motion to Dismiss as to Count XVII, with leave to amend within fourteen days. Q. Count XVIII Negligent Misrepresentation
BBI moves to dismiss Count XVIII for failure to state a claim.
The same factual allegations discussed above as to fraudulent misrepresentation underlie this claim for negligent misrepresentation, and the same analysis applies. Claims for negligent misrepresentation are subject to Fed. R. Civ. P. 9(b). The Court incorporates the discussion as to Count II.
After consideration, the Court grants the Motion to Dismiss as to Count XVIII, with leave to amend within fourteen days. R. Count XIX Defamation Per Se 1. Absolute Immunity
The factual allegations relating to conduct and statements of Regions and Shaw are stated in paragraphs 152-159 of the Counterclaim/Crossclaim. The Court notes that only Marvin Kaplan and the Investment Companies are named as Defendants in the Complaint and Amended Complaint. a. Regions/Shaw
In the Counterclaim/Crossclaims, Kaplan and the Investment Companies allege that Regions defamed them by naming Kaplan as a defendant and calling the Investment Companies check-kiters in the Complaint. On January 30, 2012, Regions moved for an ex parte restraining order as to the funds transferred to the Lighthouse account at Wells Fargo. The Complaint was filed later.
Regions moves to dismiss because absolute immunity is afforded to any act occurring during the course of a judicial proceeding, so long as the act has some relation to the proceeding. Echevarria, McCalla, Raymer, Barrett & Frappier v. Cole, 950 So.2d 280 (Fla. 2007). Regions explains that Kaplan was named as a defendant because Kaplan controlled the Investment Companies's accounts at Regions and the Lighthouse Pointe account at Wells Fargo.
The Court has considered the allegations of the Amended Complaint. The Court notes that Marvin Kaplan is a manager of R1A, Lighthouse, MK Investing, and BNK Smith, and is the authorized representative of the Investment Companies as to their Regions' accounts. The Amended Complaint includes four counts directed to breach of the "Insufficient Funds and Overdrafts" provision (par. 19) of the Investment Companies' accounts at Regions. The Court concludes that naming Kaplan as a defendant and alleging that "Kaplan Defendants and Smith Advertising are involved in what appears to be a scheme of check kiting" are allegations which relate to the proceedings.
After consideration, the Court grants the Regions'/Shaw's Motions to Dismiss as to Count XIX as the Motions relate to allegations in the pleadings on the basis of the litigation privilege. b. FBA
FBA moves to dismiss under the Communications Decency Act of 1996 ("CDA"), 47 U.S.C. Sec. 230(c): "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." FBA argues that the Sec. 230(c) creates federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service. See Zeran v. America Online, Inc., 123 F.3d 327, 330 (4th Cir. 1997). A "provider" of an interactive computer service includes websites that host third-party generated content, such as the FBA's Fraud-Net website. Doe v. Friendfinder Network, Inc., 546 F.Supp.2d 288, 293 (D.N.H. 2008). Section 230(c) of the CDA preempts state law causes of action that are contrary to its terms. See Doe v. America Online, Inc., 783 So.2d 1010 (Fla. 2001)(negligence claim preempted); Giordano v. Romeo, 76 So.3d 1100, 1101-02 (Fla. 3d DCA 2011)(absolute immunity for defamation).
In the Counterclaim/Crossclaims, Counterclaim/Crossclaim Plaintiffs alleged that the FBA is a Florida corporation doing business in Sarasota County, Florida (par. 10), and Shaw published an alert bulletin to the FBA which contained false and defamatory statements. (par. 155.) Counterclaim/Crossclaim Plaintiffs further alleged that the FBA published and republished the defamatory statements. (par. 266).
The Court may take judicial notice of facts which are not subject to reasonable dispute because they can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned. In this case, the Court takes judicial notice of the fact that Crossclaim Defendant FBA maintains a website, and on the website there is a link to "Fraud-Net." The Court also takes judicial notice of the fact that the "Fraud-Net" website states that it "is a dynamic, secured, online database created to help financial institutions and law enforcement in the fight against financial crime." (Exhibit A).
In the Motion to Dismiss, Crossclaim Defendant FBA argues that, through "Fraud-Net," FBA distributes information regarding actual and potential fraud to authorized users, which is produced and posted to the website by those authorized Fraud-Net users.
Since Counterclaim/Crossclaim Plaintiffs allege that Shaw published an alert which contained defamatory information to the FBA, and that FBA published and republished the defamatory statements, the Court finds it appropriate to take judicial notice of the means of the alleged publication. Since Shaw sent the alert to the FBA, the only reasonable inference is that Shaw selected the content of the alert.
In response to FBA's Motion, Counterclaim/Crossclaim Plaintiffs state they believe FBA's contention as to FBA's status as provider of an interactive computer service to be untrue, and the unsworn contentions are outside of the Complaint, which the Court cannot consider on a motion to dismiss. The Court could not take judicial notice of a disputed fact. The presence of the FBA website and the Fraud-Net link are facts which can readily be verified, and are not beyond the scope of investigation to be undertaken prior to filing pleadings.
After consideration, the Court grants FBA's Motion to Dismiss as to Count XIX on the basis of absolute immunity under the CDA. 2. Qualified Immunity
Kaplan and the Investment Companies allege that Regions defamed them by informing the FBA, Wells Fargo and the Secret Service that Kaplan and the Investment Companies were kiting checks. 1. Statements to FBA, Wells Fargo
Regions moves to dismiss because Florida law provides a qualified privilege negating a claim for defamation where the speaker acts in good faith, with an interest to be upheld, through a statement limited in scope to a specific purpose and published on a proper occasion and manner. Gunder's Auto Center v. State Farm Mut. Auto Ins. Co., 422 Fed. Appx. 819, 821-22 (11th Cir. 2011). To overcome qualified immunity, the pleading must allege facts showing "express malice." The question of whether qualified immunity attaches is a question of law. Shaw v. R.J. Reynolds, 818 F.Supp. 1539, 1542 (M.D. Fla. 1993).
In Nodar v. Galbreath, 462 So.2d 803, 809 (Fla.1984), the Florida Supreme Court held:
A communication made in good faith on any subject matter by one having an interest therein, or in reference to which he has a duty, is privileged if made to a person having a corresponding interest or duty, even though it contains matter which would otherwise be actionable.The Court takes judicial notice that the Florida Bankers Association is a trade association comprised of banks which operate in Florida. The website of the Florida Bankers Association, www.fioridabankers.com provides a link to "Fraud-Net," a "dynamic, secured online database created to help financial institutions and law enforcement in the fight against financial crime." SAA issued checks to the Investment Companies which were drawn on account at Wells Fargo. Kaplan transferred funds from Regions Bank to the Lighthouse Pointe, LLC account at Wells Fargo.
Counterclaim/Crossclaim Plaintiffs allege that:
266. Beginning on or about January 30, 2012, and continuing to the present day Regions, FBA and Shaw have conspired, contrived and engaged in a series of knowing, willful, purposeful and malicious acts designed to discredit, defame and destroy the reputation and business relationships of Kaplan and the Investment Companies, including but not limited to publishing or republishing the above-alleged defamatory statements accusing Kaplan of check kiting and fraudulent activity.Counterclaim/Crossclaim Plaintiffs allege that Shaw made defamatory statements while acting in the course and scope of his employment with Regions. Shaw is employed in Regions' security department; within the scope of employment Shaw has a duty to act to avoid fraud losses. It is not disputed that Regions sustained a multi-million dollar loss as a result the simultaneous wire transfers and check deposits in the Investment Companies' accounts.
.......
271. The Regions (sic), FBA and Shaw knew or reasonably should have known that the defamatory statements were false and made said defamatory statements either knowingly or with reckless disregard for their truth or falsity.
Express malice is "ill will, hostility and an evil intention to defame and injure." Lewis v. Evans, 406 So.2d 489, 492 (Fla. 2d DCA 1981). Express malice cannot be inferred from the fact that some statements are untrue. Demby v. English, 667 So.2d 350, 353 (Fla. 1st DCA 1995). A conclusory allegation unsupported by factual allegations that statements were made maliciously is not an allegation of express malice.
Counterclaim/Crossclaim Plaintiffs argue that their allegation that the "statements were made for the improper purpose of distracting attention from the fact that [Regions] had not followed their own procedures" coupled with the above allegations is sufficient to negate the qualified privilege. Express malice is present where the speaker uses his privileged position to "gratify his malevolence." Demby, 667 So.2d at 354.
Shaw's notification to a bank involved in the movement of funds and holder of SAA's account and a trade association of banks is within the parties' collective business interests in preventing losses from fraudulent banking activity. The Gramm-Leach-Billey Act, 15 U.S.C. permits banks to disclose private information for the purpose of detecting and deterring bank fraud. Counterclaim/Crossclaim Plaintiffs do not allege facts sufficient to show express malice.
After consideration, the Court grants the Regions'/Shaw's Motions to Dismiss XIX as to the qualified privilege. 2. Statements to Secret Service
Regions moves to dismiss because Shaw's reporting to law enforcement raises the presumption of a qualified privilege. See Fridovich v. Fridovich, 598 So.2d 65 (Fla. 1995).
The Secret Service investigates financial fraud. Shaw's notification to the Secret Service is within collective interest of Regions and the Secret Service in preventing losses from fraudulent banking activity. Counterclaim/Crossclaim Plaintiffs do not allege facts sufficient to show express malice.
After consideration, the Court grants the Regions'/Shaw's Motions to Dismiss as to Count XIX as the Motions relate to the qualified privilege. S. Count XX Invasion of Privacy 1. Regions, Shaw
Regions moves to dismiss because Florida does not recognize false light invasion of privacy. Jews For Jesus, Inc. v. Rapp, 997 So.2d 1098 (Fla. 2008).
Counterclaim/Crossclaim Plaintiffs allege that the defamatory statements published by Regions, FBA and Shaw violate Kaplan's and the Investment Companies' right to privacy by revealing private facts about Kaplan and the Investment Companies and their affairs.
A claim for invasion of privacy based on the public disclosure of private facts requires: 1) the publication 2) of private facts 3) that are offensive and 4) are not of public concern. Doe v. Univision Television Group, Inc., 717 So.2d 63, 64 (Fla. 3d DCA 1998).
To the extent that Counterclaim/Crossclaim Plaintiffs are asserting a claim for invasion of privacy based on allegations that they were "check-kiters" and "conducting illegal activities," the claim fails in that Counterclaim/Crossclaim Plaintiffs assert those allegations are false. A claim for public disclosure of private facts requires disclosure of private facts that are true, not false. Tyme v. Time Warner Entertainment Co., L.P., 204 F.Supp.2d 1338 (M.D. Fla. 2002).
To the extent that Counterclaim/Crossclaim Plaintiffs assert a claim for invasion of privacy based on disclosure of Kaplan's social security number in an alert, the Court notes that, aside from a physical invasion, invasion of privacy requires publication to the public in general or to a large number of persons. Steele v. Offshore Shipbuilding, Inc., 867 F.2d 1311, 1315 (11th Cir. 1989). "Fraud-Net" is a secured, online database created to help financial institutions and law enforcement combat financial crime. Only banks, credit unions and law enforcement agencies may register for "Fraud-Net." Counterclaim/Crossclaim Plaintiffs do not allege that the social security number was published to the general public, or to so many persons that the information was substantially certain to become public knowledge.
After consideration, the Court grants the Regions'/Shaw's Motions to Dismiss Count XX as to this issue. 2. FBA
FBA moves to dismiss on the basis that FBA is not a "publisher" pursuant to the CDA, and the alleged private information was disclosed in order to detect and deter fraud, which is a matter of public concern.
After consideration, the Court concludes that FBA is immune from suit for invasion of privacy pursuant to Section 230(c) of the CDA, as explained above. The FBA is deemed not to be a publisher of content posted by third parties on "Fraud-Net".
After consideration, the Court grants FBA's Motion to Dismiss Count XX as to this issue. T. Count XXI Negligence/Negligent Misrepresentation
Counterclaim/Crossclaim Plaintiffs allege that the Investment Companies were customers of Regions, that Regions owed a fiduciary duty to them, that Regions breached its duty to the Investment Companies by affirmatively advising that they had sufficient funds to wire to SAA, that Regions breached its duty to the Investment Companies by extending credit to the Investment Companies without their request, knowledge or consent, that the Investment Companies relied on the material misrepresentations of Regions, which proximately damaged the Investment Companies.
Counterclaim/Crossclaim Plaintiffs allege that Kaplan is a prominent businessman, developer and investor throughout Southwest Florida, particularly in Sarasota, Florida. (par. 17). Kaplan was an owner and managing member of the Investment Companies at the relevant time. (par. 2).
The Court takes judicial notice of the deposit account agreement which is attached to the Amended Complaint. (Dkt. 2-1).
The Deposit Account provides:
43. Applicable Law. This Agreement and your deposit relationship with us will be governed by the substantive laws (excluding laws of conflict) and regulations of the United States and of the state in which your account is established, except that Alabama law will govern the maximum interest rate that may be payable to us. We reserve all of our rights with respect toThe signature card indicates the MK Investing, LLC account is a business account. Par. 27 (Dkt. 2-1, pp. 23-24) and par. 54 (Dkt. 2-1, p. 34) apply to business accounts. Section IV (Dkt. 2-1, pp. 39-41) outlines the Funds Availability Policy. 1. U.C.C. Displacement
the preemptive effect of any applicable federal laws and/or regulations. Our rights under this Agreement and applicable law are cumulative and not exclusive.
44. Conflicts with Applicable Law and Disclosures. To the extent this Agreement conflicts with any applicable provision of the Uniform Commercial Code, this Agreement shall control; otherwise, this Agreement supplements but does not displace the Uniform Commercial Code. If any provision of this Agreement conflicts with any applicable disclosure statement we have given you pursuant to the requirements of any law, such as the federal Electronic Fund Transfer Act, the federal Truth-in-Savings Act, the federal Expedited Funds Availability Act, or the Check 21 Act, the provisions of such disclosure statement shall control.
45. Entire Agreement; Other Programs and Services. You agree to be bound by any and all operating rules, circulars, and regulations imposed by any networks, funds transfer systems (including, without limitation, the Federal Reserve), and/or clearinghouses which process transactions that affect your account. You further agree to be bound by any agreements we have with other financial institutions with respect to the processing or handling of transactions that affect your account. This Agreement constitutes the current and entire general deposit agreement between you and us with respect to the account(s) for which this Agreement has been delivered; and any and all prior general deposit agreements with respect to such account(s) are superseded by this Agreement. Additional and/or specific rules, regulations, disclosures, and/or agreements may be applicable to certain or particular accounts or specialized account programs and/or to bank services linked to an account, such as electronic or online banking. You agree that the terms and conditions set forth in such rules, regulations, disclosures and other agreements continue in effect and are intended to be in addition to and not in substitution of the terms and conditions set forth in this Agreement. To the extent there is a conflict, the terms and conditions set forth in such rules, regulations, disclosures, and other agreements shall govern unless otherwise required by applicable law.
The basis for Counterclaim/Crossclaim Plaintiffs' claim for negligence and/or negligent misrepresentation is Regions' alleged breach of a duty to the Investment Companies by affirmatively advising them they had sufficient funds to wire to SAA, and by extending credit to them without their request, knowledge or consent. Counterclaim/Crossclaim Plaintiffs allege that they relied on the material misrepresentations of Regions, which proximately damaged them.
The duties of a depositary bank to its customer are controlled by the U.CC. See Florida Statute 674.201 (bank is agent for customer and credit given is provisional); 674.2141(1) and (4}(a)(bank's right of chargeback and right of recovery against customer when payor bank dishonors check; right of chargeback not affected by use of credit); 674.207(2)(transfer warranties); 673.4151(1)(endorser obligation). "Ordinary care" in the context of bank deposits and collections is defined in Florida Statute 674.103; other terms are defined in Florida Statute 674.104 and 671.201 et seq.
Florida law provides that common law principles are intended to supplement the U.C.C., unless the common law principles are displaced by a particular provision or provisions of the U.CC See Florida Statute 671.103. The Florida Supreme Court has held that the U.CC displaces inconsistent common law claims. Weiner v. American Petrofina Mktg., Inc., 482 So.2d 1362, 1364 (Fla. 1986); see also Impact Computers and Electronics, Inc. v. Bank of America, N.A., 852 So.2d 946, 948 (Fla. 3d DCA 2003).
After consideration, the Court finds that the common law negligence/negligent misrepresentation claims in Count XXI are displaced by the U.C.C. The Court grants Regions' Motion to Dismiss as to Count XXI, with leave to file an amended complaint within fourteen days. 2. Fiduciary Duty
The Court has found that the common law claims Counterclaim/Crossclaim Plaintiffs allege are displaced, and includes this section only in the alternative.
The Deposit Account Agreement is for a general deposit account, A general deposit is credited to the depositor to be drawn upon by him in the usual course of banking business. The general deposit is a chose in action, or right to the money deposited, creating a debtor/creditor relationship between the bank and its customer. Coyle v. Pan American Bank of Miami, 377 So.2d 213, 216 (Fla. 3d DCA 1979).
Regions' debtor/creditor relationship with the Investment Companies does not establish a fiduciary relationship. A fiduciary duty to disclose material facts to customers arises where a bank establishes a confidential or fiduciary relationship with a customer, and the transaction is one from which the bank is likely to benefit. Barnett Bank of West Florida v. Hooper, 498 So.2d 923, 925 (Fla. 1986). To establish a fiduciary relationship, a party must allege some degree of dependency on one side, and some degree of undertaking on the other side to advise, counsel and protect the weaker party. Watkins v. NCNB Nat. Bank of Fla., N.A., 622 So.2d 1063, 1065 (Fla. 3d DCA 1993). In the usual creditor/debtor relationship, a fiduciary duty does not arise. Hooper, 498 So.2d at 925.
In an arm's length transaction, there is no duty imposed on either party to act for the benefit or protection of the other party, or to disclose facts that the other party by its own diligence could have discovered. Watkins, 622 So.2d at 1065. In this case, the Investment Companies, business entities owned and managed by a sophisticated businessman, opened general deposit accounts with Regions.
To the extent that Count XXI is premised on the breach of a fiduciary duty owed by Regions to the Investment Companies, the Court finds that there is no fiduciary duty. After consideration, the Court grants Regions' Motion to Dismiss Count XXI as to this issue. 3. Fed. R. Civ. P. 9(b)
The Court has concluded that common law claims that Counterclaim/Crossclaim Plaintiffs allege are displaced by the U.C.C., and includes this discussion only in the alternative.
A claim for negligent misrepresentation sounds in tort, and is subject to the particularity requirements of Fed. R. Civ. P. 9(b). As pleaded, Count XXI does not meet those particularity requirements. The factual basis for this claim is not clear. Counterclaim/Crossclaim Plaintiffs shall identify the alleged misrepresentations, who made them, when and in what context they were made, and how they caused Counterclaim/Crossclaim Plaintiffs' losses.
After consideration, the Court grants Regions' Motion to Dismiss Count XXI as to this issue, with leave to amend within fourteen days. Accordingly, it is
ORDERED that the pending Motions are resolved as follows:
BBI's Motion to Dismiss (Dkt. 19):
+----------------------------------------------------------+ ¦personal jurisdiction¦denied ¦ +---------------------+------------------------------------¦ ¦Count II ¦granted, with leave to amend ¦ +---------------------+------------------------------------¦ ¦Count VIII ¦granted, with leave to amend ¦ +---------------------+------------------------------------¦ ¦Count XI ¦granted in part, with leave to amend¦ +---------------------+------------------------------------¦ ¦Count XIII ¦granted in part, with leave to amend¦ +---------------------+------------------------------------¦ ¦Count XV ¦granted in part, with leave to amend¦ +---------------------+------------------------------------¦ ¦Count XVII ¦granted, with leave to amend ¦ +---------------------+------------------------------------¦ ¦Count XVIII ¦granted, with leave to amend ¦ +----------------------------------------------------------+
Starr's Motion to Dismiss (Dkt. 36)
+--------------------------------------------------------+ ¦subject matter jurisdiction¦granted ¦ +---------------------------+----------------------------¦ ¦Count I ¦granted ¦ +---------------------------+----------------------------¦ ¦Count II ¦granted, with leave to amend¦ +---------------------------+----------------------------¦ ¦Count III ¦granted ¦ +---------------------------+----------------------------¦ ¦Count IV ¦granted, with leave to amend¦ +---------------------------+----------------------------¦ ¦Count V ¦granted, with leave to amend¦ +--------------------------------------------------------+
Regions' Amended Motion to Dismiss (Dkt. 37)
+--------------------------------------+ ¦Count XIX¦granted ¦ +---------+----------------------------¦ ¦Count XX ¦granted ¦ +---------+----------------------------¦ ¦Count XXI¦granted, with leave to amend¦ +--------------------------------------+
Shaw's Motion to Dismiss (Dkt. 38)
+------------------+ ¦Count XIX ¦granted¦ +----------+-------¦ ¦Count XX ¦granted¦ +------------------+
Wells Fargo's Motion to Dismiss (Dkt. 41)
+----------------------------------------------+ ¦Count XII¦granted in part, with leave to amend¦ +---------+------------------------------------¦ ¦Count XIV¦granted in part, with leave to amend¦ +---------+------------------------------------¦ ¦Count XVI¦granted in part, with leave to amend¦ +----------------------------------------------+
FBA's Motion to Dismiss (Dkt. 42)
+------------------+ ¦Count XIX ¦granted¦ +----------+-------¦ ¦Count XX ¦granted¦ +------------------+ The amended Counterclaim/Crossclaims shall be filed within fourteen days.
DONE and ORDERED in Chambers, in Tampa, Florida on this 22nd day of March, 2013.
_________________
ELIZABETH A. KOVACHEVICH
UNITED STATES DISTRICT JUDGE
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