Erik P. Kimball, Judge, United States Bankruptcy Court.
Robert C. Furr, as trustee (the "Trustee" or "Plaintiff") in the substantively consolidated chapter 7 cases of Rollaguard Security, LLC ("Rollaguard"), Shamrock Jewelers, Inc. ("Shamrock Jewelers"), and Shamrock Jewelers Loan & Guarantee, LLC, commenced these three adversary proceedings by complaints filed on December 29, 2016. The Trustee brought substantially identical claims against TD Bank, N.A. ("TD Bank") (Adv. Proc. No. 16-01755-EPK), PNC Bank, N.A. ("PNC Bank") (Adv. Proc. No. 16-01756-EPK), and JPMorgan Chase Bank, N.A. d/b/a Chase Bank ("JPMC Bank") (Adv. Proc. No. 16-01757-EPK) (collectively, the "Defendants"). The Defendants moved to dismiss and, after full briefing, the Court granted those motions and entered judgments in favor of the Defendants. Thereafter,
Each of the original complaints in these adversary proceedings alleged substantially the same facts and presented the same five requests for relief. In counts I and II of the original complaints, the Trustee sued the Defendants to avoid alleged fraudulent transfers made by Rollaguard and Shamrock Jewelers (together, the "Debtors")
In response to the original complaints, each of the Defendants filed a motion to dismiss [ECF No. 26, Adv. Proc. No. 16-01755-EPK; ECF No. 26, Adv. Proc. No. 16-01756-EPK; and ECF No. 21, Adv. Proc. No. 16-01757-EPK]. In the motions to dismiss, the Defendants raised substantially similar arguments in opposition to the original complaints and adopted each other's arguments. The Court permitted the parties to brief the motions to dismiss in full [ECF Nos. 38 and 39, Adv. Proc. No. 16-01755-EPK; ECF Nos. 42 and 43, Adv. Proc. No. 16-01756-EPK; and ECF Nos. 30 and 31, Adv. Proc. No. 16-01757-EPK].
On July 27, 2017, the Court entered a consolidated order dismissing with prejudice
The Trustee then filed an omnibus motion seeking reconsideration of the Dismissal Order and the judgments under Fed. R. Civ. P. 59(e), 60(b)(6), and 15(a)(2), made applicable here by Fed. R. Bankr. P. 9023, 9024, and 7015, respectively, and/or permission to file an amended complaint in each adversary proceeding [ECF No. 50, Adv. Proc. No. 16-01755-EPK; ECF No. 57, Adv. Proc. No. 16-01756-EPK; and ECF No. 40, Adv. Proc. No. 16-01757-EPK]. The Trustee asked the Court to reconsider several legal issues addressed in the Dismissal Order. The Trustee argued that the bank deposits alleged in the original complaints were "transfers" avoidable as fraudulent transfers, that it was not proper for the Court to address the "conduit defense" at the motion to dismiss stage and so the Court should not have ruled that none of the Defendants are "transferees" subject to judgment under relevant law, and that the original complaints contained sufficient allegations to overcome the other shortcomings relied on by the Court in dismissing the original
The Court entered two orders in connection with the Trustee's omnibus motion for reconsideration and/or for permission to filed amended complaints. In the first order, the Court denied the Trustee's request for the Court to reconsider its legal rulings in dismissing these adversary proceedings [ECF No. 51, Adv. Proc. No. 16-01755; ECF No. 58, Adv. Proc. No. 16-01756; ECF No. 41, Adv. Proc. No. 16-01757]. In that first order the Court also ruled that, because the Court had entered judgments in favor of the Defendants, in order to obtain permission to file the proposed amended complaints the Trustee must first obtain relief from judgment under Fed. R. Bankr. P. 9023 (incorporating Fed. R. Civ. P. 59) or Fed. R. Bankr. P. 9024 (incorporating Fed. R. Civ. P. 60), and only then would the Trustee have the benefit of the more lenient standard under Fed. R. Bankr. P. 7015 (incorporating Fed. R. Civ. P. 15). The Court set a hearing to permit the Trustee to show the Court how it could satisfy these requirements.
On November 7, 2017, the Court held a hearing on the Trustee's request for permission to amend the complaints. At the end of that hearing, after an extensive and detailed review of the alleged new evidence and the proposed amended complaints, the Court made a ruling on the record. That oral ruling was incorporated into a written order, which is the second order addressing the Trustee's motion for reconsideration and/or permission to file amended complaints [ECF No. 69, Adv. Proc. No. 16-01755-EPK; ECF No. 76, Adv. Proc. No. 16-01756-EPK; and ECF No. 58, Adv. Proc. No. 16-01757-EPK]. Among other things, the Court ruled that the Trustee had not satisfied the standards of Fed. R. Bankr. P. 9023 or 9024 because, first, the Trustee had obtained the so-called new evidence before the Court granted the motions to dismiss and had
It is useful to draw attention to this last point — that nothing in the discovery materials that the Trustee pointed to as the catalyst for its proposed amended complaints would cause the Court to change any of its rulings in the Dismissal Order. The proposed amended complaints include changes to nearly every page of the original complaints. While the Trustee has moved some text around, and added color to the allegations in the form of more negative sounding phrasing and semantic flourishes, there are few actually new factual allegations in the proposed amended complaints. Indeed, from the way the proposed amended complaints were revised as compared to the original complaints, it appears that the text was modified in part to make it seem that there was significant actually new material. Only through a painstaking review of the redlined proposed amended complaints, highlighter in hand, was the Court able to identify the truly new factual allegations. In the end, the few new factual allegations are simply more of the same kinds of allegations that the Court found insufficient in the Dismissal Order, coupled with conclusory statements that do not necessarily follow from the concrete factual allegations.
Not surprisingly then, in the November 7, 2017 oral ruling the Court specifically stated with regard to the claims presented in counts I through V — "Even if Rule 15 applied at this stage of the litigation, and it does not because the newly discovered evidence argument fails, the proposed amendments would be futile." [Page 202, Line 25 — Page 203, Line 3 in ECF No. 83, Adv. Proc. No. 16-01755-EPK; ECF No. 91, Adv. Proc. No. 16-01756-EPK; and ECF No. 73, Adv. Proc. No. 16-01757-EPK]. In its ruling on appeal, the District Court interpreted this sentence as applying only to the negligence claims presented in count V. It appears that the District Court's conclusion resulted from an unfortunate inclusion of the quoted sentence in a paragraph of the transcript addressing only count V. But this Court intended the quoted statement to apply to all of proposed amended counts I though V. Indeed, a review of the Court's oral ruling will reveal that the Court addressed each of counts I through V prior to that statement, indicating that the proposed amendments did not resolve the Court's concerns in the Dismissal Order. The Court went on to consider the new counts VI and VII of the proposed amended complaints, ruling that those claims suffered from the same shortcomings as the similar counts III and IV and so the amendments to include counts VI and VII would be futile. Thus, the Court has already ruled that the proposed amended complaints would be futile as to nearly all of the claims presented. The only claims not explicitly included in the Court's futility analysis at the hearing on November 7, 2017 were the Trustee's fraudulent transfer claims arising from satisfaction of overdrafts. At that time, the Court denied the Trustee's proposed amendments incorporating those claims based solely on the Trustee's failure to satisfy the requirements of Fed. R. Bankr. P. 9023 or 9024.
The Trustee appealed the Court's consolidated Dismissal Order, the judgments entered in favor of the Defendants, and the two orders denying the Trustee's motion to reconsider and denying the Trustee's request for permission to file amended
On appeal, the District Court ruled that this Court had applied an incorrect standard in denying the Trustee's request for permission to file amended complaints [ECF No. 90, Adv. Proc. No. 16-01755-EPK; ECF No. 98, Adv. Proc. No. 16-01756-EPK; and ECF No. 80, Adv. Proc. No. 16-01757-EPK]. Specifically, the District Court ruled that the standard under Fed. R. Bankr. P. 7015 (incorporating Fed. R. Civ. P. 15) applies to a request to amend a complaint even after judgment is entered. The District Court remanded the matter to this Court and directed this Court to consider the Trustee's request for permission to file amended complaints under the standard set out by the Supreme Court in Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962).
The Trustee's request for permission to file amended complaints is well presented in the motions originally filed by the Trustee, in which the Trustee argues the same standard required by the District Court on remand, among other arguments [ECF No. 50, Adv. Proc. No. 16-01755-EPK; ECF No. 57, Adv. Proc. No. 16-01756-EPK; and ECF No. 40, Adv. Proc. No. 16-01757-EPK]. The Defendants recently filed notices stating that they do not intend to attempt to appeal the District Court's order remanding this matter and, while they would be willing to file additional briefs if requested by this Court, stating that they believe the record is sufficient for the Court to rule on the Trustee's request for permission to file amended complaints [ECF No. 92, Adv. Proc. No. 16-01755-EPK; ECF No. 100, Adv. Proc. No. 16-01756-EPK; and ECF No. 82, Adv. Proc. No. 16-01757-EPK]. The Court agrees and does not find it necessary to require additional briefing. The Court has carefully reviewed the Trustee's motion and the proposed amended complaints.
Anthony T. Simpson was the Managing Member of Rollaguard and David Tabony was the Chief Financial Officer and Vice President of Rollaguard. Prior to the filing of this chapter 7 case, Mr. Simpson was removed as managing member and resigned all management responsibilities with respect to Rollaguard. Rollaguard was then controlled by a group of independent investors. Mr. Tabony caused Rollaguard to file the chapter 7 petition commencing this case on December 30, 2014.
Mr. Simpson was also the President of Shamrock Jewelers and his spouse, Debra Simpson, was the Vice President of Shamrock Jewelers. Mr. Simpson was the sole member of Shamrock Jewelers Loan & Guarantee, LLC. Shamrock Jewelers and Shamrock Jewelers Loan & Guarantee, LLC are sometimes referred to together as the "Shamrock Entities."
Rollaguard represented itself as a manufacturer of traceable security cases used to transport valuable items, such as jewelry and sensitive documents. Rollaguard, under the control of Mr. Simpson, sought
Shamrock Jewelers operated a jewelry store in Florida from approximately 1965 to 2015. Shamrock Jewelers also claimed to operate a pawn brokerage business. Mr. Simpson created Shamrock Jewelers Loan & Guarantee, LLC to help facilitate the pawn brokerage business. The pawn brokerage business contemplated a series of pawn-loan transactions where the Shamrock Entities would provide short-term loans to customers in exchange for jewelry. The Shamrock Entities, under the control of Mr. Simpson, raised capital from investors in order to finance the purported pawn brokerage business. However, the Shamrock Entities did not in fact engage in any pawn brokerage. In addition, capital investments raised by Mr. Simpson on behalf of Rollaguard were routinely used by the Shamrock Entities.
Mr. Simpson manipulated Rollaguard and the Shamrock Entities to defraud investors and obtain funds for himself. Prior to filing these adversary proceedings against the Defendants, the Trustee obtained, among other relief, a final default judgment of $2,208,407.60 against Mr. Simpson and his spouse for pre-petition transfers from Rollaguard. ECF No. 70, Adv. Proc. No. 15-01311-EPK. It appears that Mr. Tabony and Ms. Simpson were each without knowledge of any wrongdoing by Mr. Simpson.
The Debtors maintained four bank accounts at TD Bank from December 2010 through November 2013, three bank accounts at PNC Bank from December 2010 through December 2014, and three bank accounts at JPMC Bank from July 2014 through March 2015. During the four-year period before the commencement of this chapter 7 case, the Debtors deposited monies into and withdrew monies from the various bank accounts maintained at TD Bank, PNC Bank, and JPMC Bank.
As in the original complaints, in counts I and II of the proposed amended complaints the Trustee argues that the Debtors' regular deposits to the various bank accounts maintained at TD Bank, PNC Bank, and JPMC Bank constitute actual fraudulent transfers avoidable under section 548 or under section 544 incorporating Florida law. In other words, the Trustee argues that each time one of the Debtors deposited funds into its own unrestricted accounts at TD Bank, PNC Bank, or JPMC Bank, that deposit constituted a fraudulent transfer to the relevant Defendant that the Trustee may avoid under applicable law. The Trustee seeks a judgment avoiding each such transfer and a money judgment against each of the Defendants.
In counts I and II of the proposed amended complaints, the Trustee describes a new category of claims arising from the Debtors' repayment or satisfaction of overdrafts in their accounts with the Defendants.
To prove his fraudulent transfer claims, the Trustee must show that there
Under the actual fraud provision of section 548, the Trustee "may avoid any transfer ... of an interest of the debtor in property," made within two years before the filing of a bankruptcy petition, if the debtor made such transfer "with actual intent to hinder, delay, or defraud" any existing or future creditor. 11 U.S.C. § 548(a)(1)(A). Under section 544(b)(1), the Trustee "may avoid any transfer of an interest of the debtor in property ... that is voidable under applicable law by a creditor holding an [allowable] unsecured claim." The Trustee argues that he can avoid the relevant transfers under section 544(b)(1) because they are voidable under Florida law, specifically Florida Statutes § 726.105(1)(a). Under this provision, a transfer made within four years before the filing of a bankruptcy petition is avoidable if the debtor made such transfer "[w]ith actual intent to hinder, delay, or defraud any creditor of the debtor[.]" Fla. Stat. § 726.105(1)(a).
The Trustee's fraudulent transfer claims under section 544(b), incorporating Florida law, are analogous "in form and substance" to their bankruptcy counterparts in section 548(a)(1) "and may be analyzed contemporaneously." Woodard v. Stewart (In re Stewart), 280 B.R. 268, 273 (Bankr. M.D. Fla. 2001) (citations omitted). "The only material difference between the state and bankruptcy provisions is the favorable four-year look-back period under the Florida law." Kapila v. Suntrust Mortg. (In re Pearlman), 515 B.R. 887, 894 (Bankr. M.D. Fla. 2014) (citations omitted).
The Debtors' deposits into their own unrestricted bank accounts maintained at the Defendants do not constitute "transfers" within the meaning of that term under section 101(54) or Florida law, and so cannot form the basis for the Trustee's fraudulent transfer claims (other than the claims relating to satisfaction of overdrafts, addressed below). While the Eleventh Circuit has not ruled on this specific issue, Eleventh Circuit case law provides persuasive support for the conclusion that there is no avoidable transfer when a debtor deposits its own funds to its own unrestricted bank account. Numerous other courts, including circuit courts of appeal, have so ruled.
Section 101(54) defines "transfer," in pertinent part, as any "mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with ... property; or ... an interest in property." 11 U.S.C. § 101(54)(D)(i)-(ii). For this purpose, Florida statutes define the term "transfer" in an essentially identical manner: "`Transfer' means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset[.]" Fla. Stat. § 726.102(14).
Technically, when one makes a deposit with a bank, the bank becomes the owner of the funds. It is presumed that the bank will use the funds to make loans to others. The depositor becomes a creditor
On the other hand, the overwhelming majority of courts considering the issue have ruled that the special rights of a depositor vis-a-vis the bank take precedence over the technical legal relationship, at least for purposes of fraudulent transfer analysis. See, e.g., Ivey v. First Citizens Bank & Trust Co. (In re Whitley), 848 F.3d 205, 208-10 (4th Cir. 2017), cert. denied, ___ U.S. ___, 138 S.Ct. 314, 199 L.Ed.2d 207 (2017) (holding that "when a debtor deposits or receives a wire transfer of funds into his own unrestricted checking account in the regular course of business, he has not transferred those funds to the bank that operates the account [because] the debtor is still free to access those funds at will"); In re Prescott, 805 F.2d 719, 729 (7th Cir. 1986) (holding that "to the extent a deposit is made into an unrestricted checking account, in the regular course of business and withdrawable at the depositor's will, it is not avoidable by the trustee") (citing Katz v. First Nat'l Bank of Glen Head, 568 F.2d 964, 969 (2d Cir. 1977), cert. denied, 434 U.S. 1069, 98 S.Ct. 1250, 55 L.Ed.2d 771 (1978)); Katz, 568 F.2d at 969 ("It is well settled that deposits in an unrestricted checking account, made in the regular course of business, do not constitute transfers within the meaning of the Bankruptcy Act.") (citations omitted); Wiand v. Wells Fargo Bank, N.A., 86 F.Supp.3d 1316, 1327 (M.D. Fla. 2015), aff'd, 677 F. App'x 573 (11th Cir. 2017) (holding that since the principal "was essentially transferring funds to and from himself, he (and the entities he controlled) never disposed of or parted with the `assets' and therefore no transfers took place."); In re Tonyan Constr. Co., 28 B.R. 714, 728-29 (Bankr. N.D. Ill. 1983) ("Ordinarily, a deposit in an unrestricted checking account does not constitute a parting with property, because it `results in substituting for currency, bank notes, checks, drafts, and other bankable items a corresponding credit with the bank, which may be checked against[.]'") (quoting Citizens' Nat'l Bank of Gastonia, N.C. v. Lineberger, 45 F.2d 522, 527 (4th Cir. 1930)); In re Perry, 336 F.Supp. 420, 425 (D.S.C. 1972) (ruling that "deposits and subsequent set-offs are not transfers" because they "result in a substitution of credit for various forms of commercial paper or currency" and "are withdrawable at the will of the depositor") (citing Joseph F. Hughes & Co. v. Machen, 164 F.2d 983, 986-87 (4th Cir. 1947)).
This line of cases recognizes that when a depositor places its own funds in an unrestricted bank account, the depositor is not truly disposing of or parting with the funds as contemplated by the definition of the term "transfer." For all practical purposes, the depositor to a traditional demand deposit account retains complete autonomy over the funds, with the unfettered ability to withdraw them, transfer them to other accounts, use them to write checks, or use them to make wire or other electronic payments. Whitley, 848 F.3d at 209-10 (summarizing cases that hold bank deposits do not constitute transfers
That a deposit into one's own unrestricted bank account is not a transfer under fraudulent transfer law is consistent with decades of case law in this and other circuits analyzing whether a particular defendant is an initial or subsequent transferee of a fraudulent transfer. Section 550(b) provides an important distinction between initial and subsequent transferees. Only a subsequent transferee may take advantage of the value and good faith defense provided in that section. Nearly all of the reported decisions involving fraudulent transfers of money involve payments made by check, wire transfer, or other electronic transfer from a debtor's bank account.
The legislative history of section 101(54), which defines "transfer," states that the term includes "[a] deposit in a bank account or similar account." S. Rep. No. 95-989, at 27 (1987) (the "Senate Report"). Taken out of context, this statement seems to support the conclusion that every deposit into every bank account is a "transfer." But the Senate Report "did not ... distinguish between different types of deposits; it merely articulated the general principle that `transfer' is meant to encompass an array of transactions." In re Whitley, 848 F.3d at 208. The Senate Report merely provides support for the breadth of the concept of transfer, to include deposits into bank accounts when that act is otherwise within the scope of the term, meaning when it involves disposing of or parting with an interest in property. When a debtor deposits funds into the account of another, or into an account where the debtor's interests are legally transcribed, for example, such a deposit may be a transfer. A debtor's regular deposits into the debtor's own unrestricted bank accounts are not transfers within the meaning of section 101(54) or Fla. Stat. § 726.102(14).
The Debtors' deposits into their own unrestricted bank accounts, other than those relating to satisfaction of overdrafts, are not "transfers" that may be subject to avoidance as fraudulent transfers. For this reason alone, such claims have no basis in law and the proposed amendments to those portions of counts I and II would be futile. This is the same legal ruling made by the Court in the Dismissal Order and nothing in the proposed amended complaints has any impact on that ruling. The Court notes that this ruling eliminates the vast majority of the Trustee's fraudulent transfer claims in the proposed amended complaints.
The claims presented in counts I and II of the proposed amended complaints, other than claims relating to satisfaction of overdrafts, also fail because the Defendants are not transferees of the deposited funds within the meaning of the relevant statutes. The Defendants lacked control over the deposited funds, making the Defendants "mere conduits" under Eleventh Circuit precedent. See Martinez v. Hutton (In re Harwell), 628 F.3d 1312 (11th Cir. 2010). Thus, even if the Debtors' deposits to their own unrestricted bank accounts could be considered transfers for purposes of fraudulent transfer analysis, the Defendants are not transferees from whom the Trustee may recover.
Section 550(a)(1) provides that, to the extent a transfer is avoided under sections 548 or 544, "the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property, from[,]" among others, "the initial transferee of such transfer." Neither the Bankruptcy Code nor its legislative history define the term "transferee." In re Harwell, 628 F.3d at 1317 (citing Bonded Fin. Servs., Inc. v. European Am. Bank, 838 F.2d 890, 893 (7th Cir. 1988)). As the Eleventh Circuit has explained, "[t]he term `initial transferee' is a term of art whose meaning in any given transaction is not always straightforward." Andreini & Co. v. Pony Express Delivery Servs., Inc. (In re Pony Express Delivery Servs., Inc.), 440 F.3d 1296, 1300 (11th Cir. 2006).
"A `literal or rigid interpretation' of the term [initial transferee] leads to the conclusion that `the first recipient of the debtor's fraudulently-transferred funds is an initial transferee.'" In re Custom Contractors, LLC, 745 F.3d at 1349 (quoting In re Harwell, 628 F.3d at 1322). "Recognizing the inequity that would result if every initial recipient of fraudulently-transferred funds could be forced, as an initial transferee, to return the funds to the bankrupt's estate, [the Eleventh Circuit] crafted an exception — grounded in the equitable powers of the bankruptcy court — known as the `mere conduit or control test.'" Id. The hallmark of the mere conduit or control test is the recognition that certain recipients of a debtor's assets cannot legally exercise control over those
A debtor's own bank, where the debtor maintains its demand deposit accounts, is nearly always a conduit that cannot be held liable under section 550. As discussed above, when one deposits funds into a typical demand deposit account, the bank technically becomes the owner of the funds. The bank may use the funds to make loans to others. The depositor is a creditor of the bank, with the right to demand immediate repayment at any time. See In re Custom Contractors, LLC, 745 F.3d at 1350. But the bank-depositor relationship is not a typical debtor-creditor relationship. The Eleventh Circuit has repeatedly pointed to the depository bank as the ultimate example of a conduit for purposes of transferee analysis. For example, the Eleventh Circuit recently stated, "[o]ur case law ... stands for the proposition that, when a bank receives funds in the form of a deposit, the attendant obligations owed to the transferor — namely to return the funds upon request — are sufficiently important that we will not hold the bank liable as an initial transferee in spite of the significant control it exercises over the funds." Id. (citing In re Chase & Sanborn Corp., 848 F.2d at 1200-02); cf. In re Harwell, 628 F.3d at 1324 ("In the vast majority of cases, a client's settlement funds transferred in and out of a lawyer's trust account will be just like bank transfers, and lawyers as intermediaries will be entitled to mere conduit status because they lack control over the funds. Mere conduits, such as lawyers and banks, do not have an affirmative duty to investigate the underlying actions or intentions of the transferor."). Following this Eleventh Circuit precedent, the Sixth Circuit ruled that a bank will not be held liable as an initial transferee because the bank does not gain dominion and control over a debtor's deposits by virtue of the bank being the debtor's depository bank. Meoli v. Huntington Nat'l Bank, 848 F.3d 716, 725-28 (6th Cir. 2017). Courts in this circuit have regularly applied this concept. See, e.g., Super Vision Int'l, Inc., v. Mega Int'l Commercial Bank Co., 534 F.Supp.2d 1326, 1344 (S.D. Fla. 2008), aff'd, No. 08-15031, 2009 WL 1028034, 2009 U.S. App. LEXIS 8089 (11th Cir. 2009) (granting motion to dismiss a fraudulent transfer claim against a bank which was alleged to have accepted the debtor's transfers of funds into accounts owned by the debtor at the bank) (citing In re Chase & Sanborn Corp., 848 F.2d at 1200); In re Colombian Coffee Co., 75 B.R. 177, 179 (S.D. Fla. 1987) ("[I]t would be both problematical and preposterous were courts to" find a depository bank a transferee under federal bankruptcy law when the bank "possessed no discretion with respect to the disposition of the funds — it was constrained to follow the debtor's instructions.").
To establish the mere conduit defense, a defendant must show both that it did not have legal control over the assets that it received and that the defendant "acted in good faith and as an innocent participant in the fraudulent transfer." In re Harwell, 628 F.3d at 1323. The context of Harwell is instructive. The defendant was the debtor's former counsel. Id. at 1314. In anticipation of collection attempts on a judgment entered in another state,
The mere conduit defense is an affirmative defense to fraudulent transfer liability. Mukamal v. BMO Harris Bank N.A. (In re Palm Beach Fin. Partners, L.P.), 488 B.R. 758, 769 (Bankr. S.D. Fla. 2013) (citing Perlman v. Bank of Am., N.A., 2012 WL 1886617, at *2, 2012 U.S. Dist. LEXIS 71663 at *5 (S.D. Fla. 2012)); Perlman v. Bank of Am., N.A., 561 F. App'x 810, 813 (11th Cir. 2014) ("[T]he `mere conduit' theory must be affirmatively proved by the one seeking to obtain its protection."). It is not necessary for a complaint to anticipate defenses. In re Palm Beach Fin. Partners, L.P., 488 B.R. at 771. For this reason, it is generally not proper to dismiss a complaint because it fails to negate an affirmative defense. Id.
On the other hand, a court may consider an affirmative defense at the pleading stage "when the complaint affirmatively and clearly shows the conclusive applicability of the defense to bar the action." Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1277 (11th Cir. 2004) (quotations omitted); Bingham v. Thomas, 654 F.3d 1171, 1175 (11th Cir. 2011) (citations omitted). In this case, the Trustee had ample reason to challenge the Defendants' good faith. As discussed below, the Trustee claims that the Defendants aided and abetted Mr. Simpson's wrongful acts. The Trustee had the incentive to paint as bleak a picture as possible of the Defendants' knowledge and actions. Before the Trustee filed his motion seeking permission to file amended complaints, the Trustee had the benefit of this Court's Dismissal Order which stated these same things. And so, with new text in the proposed amended complaints, the Trustee explicitly attempts to negate the Defendant's good faith.
While the Trustee included some additional relevant language in the proposed amended complaints compared to the Trustee's original complaints, the Trustee's overall presentation on this issue remains the same. The Trustee alleges that there were circumstances that should
When the fraudulent transfer defendant is a banking institution that conducts routine banking services and the transfer in question is a deposit into the debtor's own demand deposit account, lack of good faith may only be proven by showing that the defendant had actual knowledge that the debtor was acting in an illegal manner. In the proposed amended complaints, among other similar allegations, the Trustee alleges that the Defendants knew that Rollaguard was a startup company, the Defendants knew that Rollaguard was obtaining all of its revenue from investors, the Defendants knew that Mr. Simpson controlled both Rollaguard and Shamrock Jewelers and that these were separate entities, and the Defendants allowed Mr. Simpson to transfer funds among the accounts at each Defendant at will. Elsewhere in the proposed amended complaints,
In each proposed amended complaint, the Trustee added a few allegations tailored to the specific Defendant that the Trustee suggests indicate actual knowledge on the part of the relevant Defendant. In paragraphs 36 and 47(g) of the proposed amended complaint against PNC Bank, the Trustee alleges that PNC Bank had actual knowledge that Mr. Simpson was defrauding investors because a bank manager learned that Mr. Simpson had "produced fraudulent letters purporting to confirm available bank balances" and an investor sought confirmation of the bank balances from PNC Bank. Yet there is no specific information in these paragraphs from which one could ascertain the materiality of the bank balance discrepancy. It is quite a jump in logic to go from the fact that Mr. Simpson provided bank balances to an investor that proved to be inaccurate to the conclusion that Mr. Simpson is involved in a fraud. Similarly, in paragraph 47(e) of that same proposed amended complaint, the Trustee alleges that PNC Bank had learned that Mr. Simpson had provided "one false wire confirmation number... in order to hinder, delay, or defraud" a creditor. All we know from this allegation is that Mr. Simpson gave a wire confirmation number to someone that was not correct. There is nothing in that paragraph or elsewhere in the proposed amended complaint that would lead anyone to conclude that providing an incorrect wire transfer confirmation number was indicative of fraud. In paragraph 47(f) of that same proposed amended complaint, the Trustee alleges that PNC Bank knew Mr. Simpson "was pledging funds to third parties ... that were not available on deposit" and that a bank officer stated that he or she was "`very comfortable' with this arrangement." In support of the Trustee's request to file the proposed amended complaints, the Trustee filed all of the discovery that the Trustee argued supported the amendments to the complaints and the Court reviewed those documents in preparation for the hearing on November 7, 2017. Among the documents the Trustee obtained from PNC Bank is an internal memo dated February 6, 2014. That memo reads as follows: "Comment: client indicated a wire was on its way for $15,000. As of 12:20, I am still waiting on a trace number to confirm the incoming wire. As the business banker, I am very comfortable with the owner and the business. I recommend paying this item." The text of paragraph 47(f) of the proposed amended complaint would lead one to conclude that a banker at PNC Bank had expressed he was "very comfortable" with an ongoing practice of
Although the conduit defense is an equitable doctrine developed over decades, it is only relatively recently that the Eleventh Circuit explicitly ruled that the conduit defense involves an affirmative good faith requirement, in a case involving a stark instance of bad faith as the defendant was in fact conspiring with the debtor to defraud a particular creditor. In re Harwell, 628 F.3d at 1323-24. Since that decision, there has been scant case law addressing the nature of the good faith required to support the conduit defense. In light of the Eleventh Circuit's consistent rulings on the scope of duties of depository banks in this context, cited above, a depository bank should not be held to a standard less than actual knowledge.
Yet even if the Defendants here were held to an inquiry notice standard, the proposed amended complaints would not be sufficient. The Court must look behind the Trustee's bald statements that the Defendants knew Mr. Simpson was committing fraud, converting investor funds to his own ends, and breaching his fiduciary duties to the Debtors, to the underlying factual allegations from which the Trustee asks the Court to make those conclusions. There must be a nexus between those underlying factual allegations and the Debtors' fraudulent purpose such that the Defendants would reasonably be expected to connect what they know with the conclusion that the Debtors were acting in a
Taking as proven all of the allegations in the proposed amended complaints, the Defendants acted in good faith in receiving the Debtors' deposits into their own bank accounts. The accounts in question were routine demand deposit accounts. The Debtors maintained complete autonomy over those accounts. The Defendants initiated all transactions at the request of the person with authority to direct them. In light of these facts, other than in connection with claims relating to satisfaction of overdrafts, none of the Defendants are "transferees" from whom the Trustee may seek judgment under section 550. Those claims presented in counts I and II of the amended complaints based on the Debtors' deposits into their own unrestricted bank
To be clear, those portions of counts I and II of the amended complaints expressing claims related to satisfaction of overdrafts, as discussed in more detail below, do not present the same concerns with regard to the "transfer" and "transferee" requirements of applicable law. When a bank permits a customer to overdraw its account, the bank is making a loan to the customer. When the bank customer satisfies that overdraft by making a deposit to the account, the customer is repaying credit made available by the bank. The satisfaction of an actual bank overdraft is a potentially avoidable transfer. In that instance, the bank is a transferee under applicable law as it is receiving the repayment for the bank's own account.
But all of the Trustee's fraudulent transfer claims in counts I and II of the proposed amended complaints, including both those arising solely from the Debtors' deposits into their own unrestricted bank accounts as well as those arising from satisfaction of overdrafts, suffer from a fatal shortcoming. In order to prove these claims, the Trustee must show that the alleged transfers were made with actual intent to hinder, delay, or defraud creditors. The proposed amended complaints do not contain sufficient allegations to plausibly support the conclusion that the Debtors deposited their own funds into their own unrestricted bank accounts or satisfied their own overdrafts with the intent to hinder, delay, or defraud creditors, as required by the relevant statutes.
Because actual intent to hinder, delay, or defraud is difficult to prove, courts look to the totality of the circumstances surrounding the allegedly fraudulent transfer, and this often involves analyzing the traditional badges of fraud. Dev. Specialists, Inc. v. Hamilton Bank, N.A. (In re Model Imperial, Inc.), 250 B.R. 776, 791 (Bankr. S.D. Fla. 2000) (citing Dionne v. Keating (In re XYZ Options, Inc.), 154 F.3d 1262, 1271-72 (11th Cir. 1998)). The commonly listed badges of fraud include: (1) the transfer was to an insider; (2) the debtor retained possession or control of the property transferred after the transfer; (3) the transfer was not disclosed or was concealed; (4) before the transfer was made the debtor had been sued or threatened with suit; (5) the transfer was of substantially all of the debtor's assets; (6) the debtor absconded; (7) the debtor removed or concealed assets; (8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred; (9) the debtor was
Before the Court engages in a review of the allegations in the proposed amended complaints intended to support a finding of actual intent to defraud, it is useful to consider what needs to be proven in this regard. In prosecuting a fraudulent transfer claim based on actual intent, it is typically not sufficient to show that the debtor intended to defraud someone and the debtor also made a transfer. Just because a debtor is involved in a fraudulent scheme does not mean that every transfer made by that debtor is made with fraudulent intent.
Id. In the present case, the transfers at issue are the Debtors' deposits into their own bank accounts maintained at the Defendants and the Debtors' satisfaction of overdrafts in those same accounts. The proposed amended complaints must include allegations of fact which, if proven, show that the Debtors had fraudulent intent in taking those specific actions.
The Trustee alleges that Mr. Simpson regularly caused Rollaguard to transfer money to the Shamrock Entities, thereby placing such funds out of the reach of Rollaguard's creditors and using such funds for Mr. Simpson's personal benefit. But these and similar allegations focus on what happened to the funds after they were in Rollaguard's accounts, not on Rollaguard's deposits into those accounts or Rollaguard's satisfaction of overdrafts in those accounts, the alleged transfers at issue here. That Rollaguard, acting through Mr. Simpson, had fraudulent intent in transferring funds out of its bank accounts maintained at the Defendants is not probative on the issue of whether Rollaguard had fraudulent intent when it deposited funds into its own bank accounts or satisfied overdrafts in those accounts.
The Trustee alleges that the Debtors removed property from the reach of their creditors by depositing monies in their own bank accounts and by satisfying their own overdrafts. Let us focus on the actual transfers alleged in this case. The transfers at issue in the proposed amended complaints do not involve any Debtor depositing its funds into an account owned by another Debtor or satisfying the overdrafts of another Debtor. The "transfers" in question are each Debtor's deposits into its own bank accounts and each Debtor's satisfaction of its own overdrafts. These activities, by themselves, did not remove funds from the reach of any Debtor's creditors.
The Trustee alleges that Mr. Simpson was causing the Debtors to engage in various fraudulent or deceptive schemes at the time of the deposits and satisfaction of overdrafts that the Trustee is attempting to avoid in these cases. The Trustee states that it was necessary for Mr. Simpson and the Debtors to have bank accounts in order to effectuate Mr. Simpson's fraudulent scheme, and so the Trustee alleges that each time the Debtors deposited funds into their own bank accounts or satisfied their own overdrafts those acts were imbued with the bad intent of Mr. Simpson and the Debtors. But this argument goes too far. Nearly every fraudulent scheme, from complex Ponzi schemes to the most straightforward bait and switch, involves the use of a bank account, a brokerage account, or some other financial accommodation. To suggest that a fraudster's mere use of a bank or financial institution as an intermediary to accomplish the fraud means that each transaction with the intermediary is also tainted with fraudulent intent is to make the bank or other financial intermediary a target for the debtor's creditors, even where the bank or other
The Trustee alleges that the Debtors were not paying their debts as they became due. This allegation is sometimes helpful to support the conclusion that a failing debtor made a transfer with the intent to place the asset out of view of the debtor's creditor body generally. In this case, the allegation lends nothing to the question of whether the Debtors' deposits into their own unrestricted bank accounts or satisfaction of their own overdrafts were done with fraudulent intent. As discussed above, those acts had no material impact on the Debtors' ability to pay creditors and are not in themselves stained with bad intent.
The proposed amended complaints do not contain sufficient allegations that, if proven, would plausibly support the conclusion that the Debtors deposited their own funds into their own unrestricted bank accounts or satisfied their own overdrafts with the intent to hinder, delay, or defraud creditors, as required by the relevant statutes. None of the Trustee's claims set out in counts I and II of the proposed amended complaints state claims under applicable law and thus the proposed amendments would be futile. With regard to most of the Trustee's actual fraud claims, excluding only those relating to satisfaction of overdrafts, this is the same ruling the Court made in its original Dismissal Order. Here, the Court extends that ruling to those portions of counts I and II relating to satisfaction of overdrafts. Nothing in the proposed amended complaints would cause the Court to change that ruling. The Court notes that this ruling eliminates all the Trustee's fraudulent transfer claims.
In summary, the proposed amendments to counts I and II would be futile for the following reasons. With regard to those claims based on the Debtors' deposits into their own unrestricted bank accounts and which deposits are not alleged to constitute satisfaction of overdrafts in the relevant account (a) the deposits are not transfers subject to avoidance under applicable law, and (b) the Defendants are not transferees of such deposits from whom the Trustee may recover under applicable law. Each of these reasons is by itself sufficient to deny amendment with regard to such claims. With regard to all claims presented in counts I and II, including those arising from the satisfaction of overdrafts as well as those arising solely from the Debtors' deposits into their own unrestricted bank accounts, the proposed amended complaints lack specific allegations to support the Trustee's claims that the alleged transfers were made with actual intent to hinder, delay, or defraud creditors. This is a separate reason to deny amendment to counts I and II with regard to claims arising from deposits, and is also a reason to deny amendment to counts I and II with regard to claims arising from satisfaction of overdrafts. None of the claims stated in counts I and II of the proposed amended complaints meet the standard for amendment
As in the original complaints, in counts III and IV of the proposed amended complaints the Trustee argues that the Defendants had actual and/or constructive knowledge of Mr. Simpson's suspicious activity, that they rendered substantial assistance to Mr. Simpson by violating federal banking regulations and banking norms, and that the Defendants are therefore liable for aiding and abetting Mr. Simpson's conversions of investor funds. The Trustee seeks a money judgment against each of the Defendants.
Counts VI and VII in the proposed amended complaints are new. In counts VI and VII, the Trustee argues that the Defendants had actual and/or constructive knowledge of Mr. Simpson's breach of his fiduciary duties to the Debtors, that they rendered substantial assistance to Mr. Simpson by allowing the Debtors' bank accounts to remain open and by permitting Mr. Simpson to cause the Debtors to make allegedly atypical transactions in those accounts and otherwise by providing Mr. Simpson an "unregulated platform" to effectuate his schemes, and that the Defendants are therefore liable for aiding and abetting Mr. Simpson's breach of fiduciary duties to the Debtors. The Trustee seeks a money judgment against each of the Defendants.
In support of the claims in counts III, IV, VI and VII, the Trustee maintains that the Defendants disregarded federal banking regulations thereby allowing Mr. Simpson to use the Debtors' bank accounts to take funds for himself at the expense of the Debtors' creditors. For example, the Trustee alleges that, during the respective banking relationships, the Defendants failed to respond properly when Mr. Simpson purchased cashier checks where the "remitter" was a different person or entity from the owner of the bank account. The Trustee alleges that some of the Defendants failed to respond properly to Mr. Simpson's purchasing of cashier checks using monies from multiple bank accounts, or withdrawing monies from one bank account and consecutively depositing those monies in another account, in order to purchase cashier checks. The Trustee maintains that, under these circumstances, the Defendants improvidently sold cashier checks to Mr. Simpson at the expense of the Debtors' creditors, because the Defendants should have known that the recipients would be misled as to the source of the payments.
Under Florida law, to state a claim for aiding and abetting, a plaintiff must allege: "(1) an underlying violation on the part of the primary wrongdoer; (2) knowledge of the underlying violation by the alleged aider and abetter; and (3) the rendering of substantial assistance in committing the wrongdoing by the alleged aider and abettor." Lawrence, 455 F. App'x at 906-07 (citing AmeriFirst Bank v. Bomar, 757 F.Supp. 1365, 1380 (S.D. Fla. 1991); ZP No. 54 Ltd. P'ship v. Fid. & Deposit Co. of Md., 917 So.2d 368, 372 (Fla. 5th DCA 2005)). There appears to be no dispute that underlying violations exist. Mr. Simpson misappropriated funds from the Debtors for his own personal use and other improper uses. The Court focuses on the latter two elements.
"[W]hen a claim of aiding and abetting is asserted against a bank, the second element — knowledge — will only be satisfied if the plaintiff pleads facts demonstrating that the bank had `actual knowledge' of the wrongdoings." Perlman, 559 F. App'x at 993 (citing Lawrence, 455 F. App'x at 907). "And while actual knowledge may be shown by circumstantial evidence, the circumstantial evidence must demonstrate that the aider and abettor actually knew of the underlying wrongs committed." Id. (citing Wiand v. Wells Fargo Bank, N.A., 938 F.Supp.2d 1238, 1244 (M.D. Fla. 2013)). Importantly, in the context of aiding and abetting claims against banks, Florida law does not require banks to investigate their customers' transactions. Lawrence, 455 F. App'x at 907 (citing Home Fed. Sav. & Loan Ass'n of Hollywood v. Emile, 216 So.2d 443, 446 (Fla. 1968)); O'Halloran v. First Union Nat'l Bank of Fla., 350 F.3d 1197, 1205 (11th Cir. 2003) (finding that banks have the "right to assume that individuals who have the legal authority to handle the entity's accounts do not misuse the entity's funds").
The allegations in the proposed amended complaints, if proven, would not raise a plausible inference that any of the Defendants actually knew Mr. Simpson was engaged in conversion or breach of fiduciary duty. Some of Mr. Simpson's actions were suspicious. But mere suspicion is not sufficient to trigger any obligation by the Defendants to investigate. Lawrence, 455 F. App'x at 907; Perlman, 559 F. App'x at 993-94. Since the proposed amended complaints fail to plead sufficient facts to support a plausible inference that the Defendants had actual knowledge of Mr. Simpson's wrongful acts, the proposed amendments in counts III, IV, VI and VII would be futile. This is the same ruling the Court made in the Dismissal Order with regard to the claims presented in counts III and IV of the original complaints and nothing in the proposed amended complaints would cause the Court to change its ruling. While the Trustee has added some additional language in the proposed amended complaints, most of these allegations
Likewise, counts III, IV, VI and VII do not contain sufficient allegations to plausibly support the inference that the Defendants rendered substantial assistance to Mr. Simpson's conversions or breach of fiduciary duties. "Substantial assistance occurs when a defendant affirmatively assists, helps conceal or fails to act when required to do so, thereby enabling the breach to occur." Hsi Chang v. JPMorgan Chase Bank, N.A., 845 F.3d 1087, 1098 (11th Cir. 2017) (quoting Lerner v. Fleet Bank, N.A., 459 F.3d 273, 295 (2nd Cir. 2006)). "Mere inaction `constitutes substantial assistance only if the defendant owes a fiduciary duty directly to the plaintiff.'" Id. (quoting Lerner, 459 F.3d at 295). There is nothing in the proposed amended complaint that would lead the Court to believe that any of the Defendants affirmatively assisted or concealed Mr. Simpson's wrongful acts. The Trustee's claims are based on alleged failures to act by the Defendants. In this case, the Trustee is the stand-in for the Debtors, so the Trustee must show that the Defendants had a duty to the Debtors that they failed to satisfy. The Trustee has not plead sufficient facts to show that any of the Defendants owed any duty to the Debtors, fiduciary or otherwise, other than the duty to complete banking transactions as directed by the Debtors' authorized agent, which duty they faithfully complied with. As discussed below in connection with count V, the Defendants' duties arising under the banking regulations and customary banking practices pointed to by the Trustee are not duties for the benefit of the Debtors. Nor do the Trustee's allegations support the conclusion that any of the Defendants breached any duty whatsoever relevant to this case. "Red flags" and mere suspicions are insufficient to trigger any obligation by the Defendants to investigate. Lawrence, 455 F. App'x at 907; Perlman, 559 F. App'x at 993-94. Such "red flags" or suspicions are not sufficient to elevate the Defendants' alleged inactions into the realm of "substantial assistance." Since the proposed amended complaints do not plead sufficient facts to plausibly support the inference that any of the Defendants rendered substantial assistance to Mr. Simpson's conversions or breach of fiduciary duties, the proposed amendments to counts III, IV, VI and VII would be futile. This is substantially the same ruling the Court made in the Dismissal Order with regard to the claims presented in counts III and IV of the original complaints and nothing in the proposed amended complaints would cause the Court to change its ruling. While the Trustee has added some additional language in the proposed amended complaints, the allegations are simply more of the types that the Court found wanting in the Dismissal Order. To the extent there are new, specific allegations aimed at individual Defendants, these are conclusory in nature and are not supported by concrete allegations, as discussed more fully in the Court's analysis of the conduit defense. The Trustee relies on
In summary, the proposed amendments to counts III, IV, VI and VII would be futile for two independent reasons. First, the Trustee does not plead sufficient facts which, if proven, would support the conclusion that the Defendants had actual knowledge of Mr. Simpson's wrongful acts. Second, the Trustee does not plead sufficient facts which, if proven, would support the conclusion that any of the Defendants rendered substantial assistance to Mr. Simpson's conversions or breach of fiduciary duties. None of the claims stated in counts III, IV, VI and VII of the proposed amended complaints meet the standard for amendment under Fed. R. Bankr. P. 7015 as set out in Foman v. Davis.
As in the original complaints, in count V of the proposed amended complaints, the Trustee argues that the Defendants were negligent in processing wire transfers from the Debtors' bank accounts. According to the Trustee, state and federal law, "including but not limited to Chapter 670 of the Florida Statutes," imposed a duty of care on the Defendants "to correctly, cautiously, and prudently process the [withdrawals] subject to commercially reasonable security procedures." The Trustee alleges that the Defendants breached that duty by violating federal banking regulations or by lacking good faith in processing the wire transfers due to their actual or constructive knowledge of Mr. Simpson's suspicious activities. As a result, the Trustee alleges that the Defendants caused damage to the Debtors in the amounts transferred by wire from the various bank accounts maintained at the Defendants and seeks money judgments.
To plead a claim for negligence under Florida law, the Trustee must allege a duty, a breach of that duty, causation, and damages. Virgilio v. Ryland Group, Inc., 680 F.3d 1329, 1339 (11th Cir. 2012). Under Florida law, "establishing the existence of a duty ... is a minimum threshold legal requirement that opens the courthouse doors to the moving party, and is ultimately a question of law for the court rather than a jury." Williams v. Davis, 974 So.2d 1052, 1056 n.2 (Fla. 2007) (citing McCain v. Florida Power Corp., 593 So.2d 500, 502 (Fla. 1992)); Virgilio, 680 F.3d at 1339. A duty of care may arise from four sources: "`(1) legislative enactments or administration regulations; (2) judicial interpretations of such enactments or regulations; (3) other judicial precedent; and (4) a duty arising from the general facts of the case.'" Clay Elec. Co-op., Inc. v. Johnson, 873 So.2d 1182, 1185 (Fla. 2003) (quoting McCain, 593 So.2d at 503 n.2).
The Trustee seeks to establish a duty of care under state and federal law, "including but not limited to Chapter 670 of the Florida Statutes," "to correctly, cautiously, and prudently process the [withdrawals] subject to commercially reasonable security procedures." The essence of the Trustee's negligence claim is that the Defendants failed to monitor the Debtors' bank accounts and discover Mr. Simpson's fraudulent activity.
Florida law does not impose an independent duty on banks, in the course of routine banking services, to monitor transactions made by authorized agents of the account holder in order to protect the
Likewise, Chapter 670 of the Florida Statutes, titled "Uniform Commercial Code — Fund Transfers," does not impose a general duty on banks to monitor customer accounts for fraud or misappropriation for the benefit of the customers themselves. To the extent federal banking statutes and regulations, such as the Bank Secrecy Act, impose duties on banks, "those duties extend to the United States, not a bank's customers." Wiand, 86 F.Supp.3d at 1322.
Nor does any duty on the part of the Defendants arise from the general facts of the case. As discussed above, "red flags" or mere suspicions are insufficient to trigger any obligation by the Defendant banks to investigate. Lawrence, 455 F. App'x at 907; Perlman, 559 F. App'x at 993-94.
Because the existence of a duty of care is essential to a claim for negligence and no duty exists here, the proposed amendments to count V would be futile. This is the same ruling made by the Court in its original Dismissal Order. Nothing in the proposed amended complaints would cause the Court to change that ruling. None of the claims stated in count V of the proposed amended complaints meet the standard for amendment under Fed. R. Bankr. P. 7015 as set out in Foman v. Davis.
In the original Dismissal Order, the Court ruled that certain of the Trustee's claims relating to Shamrock Jewelers Loan & Guarantee, LLC were barred by the in pari delicto defense. In the proposed amended complaints, the Trustee no longer pursues claims relating to Shamrock Jewelers Loan & Guarantee, LLC. See note 1, supra. The Court ruled that none of the other claims stated in the original complaints were at that point in the proceedings barred by the in pari delicto defense, and the Court's analysis in the Dismissal Order applies equally to the claims stated in the proposed amended complaints. In addition, the fact that the Trustee now alleges that Mr. Simpson had been removed from control of Rollaguard prior to the commencement of this case likely provides another basis for ruling that the in pari delicto defense does not bar the Trustee's claims relating to that entity at this stage of the proceedings. See Mukamal v. Nat'l Christian Charitable Found., Inc. (In re Palm Beach Fin. Partners, L.P.), 588 B.R. 633, 647 (Bankr. S.D. Fla. 2018) (citing Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995)).
For the foregoing reasons, the Court hereby DENIES the Plaintiff's request, contained in the Trustee's omnibus motion [ECF No. 50, Adv. Proc. No. 16-01755-EPK; ECF No. 57, Adv. Proc. No. 16-01756-EPK; and ECF No. 40, Adv. Proc. No. 16-01757-EPK], to file amended complaints in these adversary proceedings.
