Filed: Jan. 11, 2012
Latest Update: Feb. 22, 2020
Summary: [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ FILED U.S. COURT OF APPEALS No. 11-12401 ELEVENTH CIRCUIT Non-Argument Calendar JAN 11, 2012 _ JOHN LEY CLERK D.C. Docket No. 8:09-cv-02162-VMC-TGW RITA LAWRENCE, individually and on behalf of all others similarly situated, BARBARA KANN, individually and on behalf of all others similarly situated, RAYMOND K. FERWERDA, individually and on behalf of all others similarly situated, lllllllllllllllllllllllllllllllllllll
Summary: [DO NOT PUBLISH] IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT _ FILED U.S. COURT OF APPEALS No. 11-12401 ELEVENTH CIRCUIT Non-Argument Calendar JAN 11, 2012 _ JOHN LEY CLERK D.C. Docket No. 8:09-cv-02162-VMC-TGW RITA LAWRENCE, individually and on behalf of all others similarly situated, BARBARA KANN, individually and on behalf of all others similarly situated, RAYMOND K. FERWERDA, individually and on behalf of all others similarly situated, llllllllllllllllllllllllllllllllllllll..
More
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 11-12401 ELEVENTH CIRCUIT
Non-Argument Calendar JAN 11, 2012
________________________ JOHN LEY
CLERK
D.C. Docket No. 8:09-cv-02162-VMC-TGW
RITA LAWRENCE,
individually and on behalf of all others
similarly situated,
BARBARA KANN,
individually and on behalf of all others
similarly situated,
RAYMOND K. FERWERDA,
individually and on behalf of all others
similarly situated,
llllllllllllllllllllllllllllllllllllllll Plaintiffs - Appellants,
versus
BANK OF AMERICA, N.A.,
llllllllllllllllllllllllllllllllllllllll Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(January 11, 2012)
Before TJOFLAT, EDMONDSON, and FAY, Circuit Judges.
PER CURIAM:
This case involves a putative class action. Plaintiffs Rita Lawrence, Barbara
Kann, and Raymond K. Ferwerda appeal from an order dismissing their complaint
against Bank of America, and closing the case. On appeal, Plaintiffs argue the
district court erroneously concluded that Plaintiffs had failed to plead facts
sufficient to raise a plausible inference that Bank of America had knowledge of a
Ponzi scheme and substantially assisted in its operations. Plaintiffs further argue
that the court erred in denying Plaintiffs’ request for leave to amend their initial
complaint. For the reasons set forth below, we affirm.
I.
A. Background
We restate the following facts as alleged by Plaintiffs, accepting them as
true and construing them in the light most favorable to Plaintiffs.1 From 2006
until early 2009, Beau Diamond (“Diamond”), through his company Diamond
Ventures LLC, operated a Ponzi scheme by convincing investors to deposit
millions of dollars into a Bank of America account (“Diamond Ventures
Account”) he controlled for the purpose of trading that money in the off-exchange
1
Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009).
2
foreign currency markets. Diamond guaranteed both the safety of the total
principal amount of money deposited by the investors, and a monthly profit of
between 2.75% and 5%. Based on the substantial deposits made by Diamond, the
Diamond Ventures Account was transferred to Bank of America’s Premier
Banking Division. The Premier Banking Division was known for providing its
clients with “close, personal attention,” by more in-depth review of the clients’
accounts. To obtain such review, Premier Banking Representatives could access
the Diamond Ventures Account and obtain daily updates on major deposits and
wire transfers.
Plaintiffs alleged Bank of America had knowledge of Diamond’s fraudulent
activity, not only through his account activity, but also because of information he
provided. Diamond made exceptionally large deposits into the Diamond Ventures
account. Tellingly, millions of dollars streamed out of the Diamond Ventures
Account to fund personal and gambling expenditures for Diamond. Additionally,
Diamond engaged in atypical business transactions, such as numerous wire
transfers unrelated to any legitimate business activity. And as to the information
Diamond provided to Bank of America, he informed Bank of America of his
personal history and the nature of his business, which was an “investment club.”
Bank of America does not permit investment clubs.
3
Plaintiffs further alleged that Premier Banking Representatives knew of
Diamond’s fraudulent activity through their standard review of Diamond’s account
statements. Account statements reflected that approximately $37,600,000 was
deposited by 200 investors, and $15,400,000 was transferred from Diamond
Ventures to foreign exchange companies. However, account statements did not
indicate that Diamond profited from money transferred to foreign exchange
companies. Nevertheless, Diamond sent investors 2,300 checks totaling more than
$15,600,000. The Premier Banking Representatives, therefore, should have
known that the money being sent to investors came from new client deposits,
rather than profits from foreign exchange companies.
B. Procedural History
Plaintiffs’ complaint alleged three causes of action against Bank of
America, all based on the theory of aiding and abetting: (1) common law fraud; (2)
conversion; and (3) breach of fiduciary duty. The causes of action were based on
Bank of America’s knowing support and facilitation of the Ponzi scheme operated
by Diamond. Bank of America moved to dismiss the complaint, arguing that
Plaintiffs had failed to comply with Federal Rule of Civil Procedure 12(b)(6). The
district court granted the motion to dismiss.
Plaintiffs thereafter moved for reconsideration of the dismissal order. In the
4
alternative, Plaintiffs requested leave to amend their initial complaint to include
newly acquired evidence. The newly acquired evidence included an employee of
Bank of America, a Premier Banking Representative, allegedly informing another
customer that he knew of Diamond’s investment club and that other customers
were happy with Diamond. The district court denied the motion, concluding, in
part, that Plaintiffs’ belated grounds for amendment were futile.2
II.
We review de novo a district court’s order granting a motion to dismiss.
Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009). We review for
abuse of discretion the district court’s refusal to grant leave to amend, although we
exercise de novo review as to the denial of leave to amend based on futility. SFM
Holdings Ltd v. Banc of Am. Sec., LLC,
600 F.3d 1334, 1336 (11th Cir. 2010).
III.
Plaintiffs first argue that the district court erroneously dismissed their
complaint because the allegations are more than sufficient to raise a plausible
inference that Bank of America had knowledge of the Ponzi scheme and
substantially assisted in its operations. We disagree.
2
We decline to address all bases of the district court’s conclusion. We address only
whether Plaintiffs’ grounds for amendment were futile because it is dispositive.
5
To survive a motion to dismiss, the Supreme Court has held that a plaintiff
must include in the complaint “sufficient factual matter, accepted as true, to ‘state
a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, --,
129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp v. Twombly,
550 U.S. 544,
570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.”
Id. The plausibility standard requires “more
than a sheer possibility that a defendant has acted unlawfully.”
Id. (citing
Twombly, 550 U.S. at 555-56).
Given that all of Plaintiffs’ claims are predicated on the theory of aiding and
abetting, we need only consider whether Plaintiffs adequately alleged the elements
of such a claim. In Florida,3 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. AmeriFirst Bank v.
Bomar, 757 F. Supp. 1365, 1380 (S.D. Fla. 1991); ZP No. 54 Ltd. P’ship v. Fid. &
3
We apply Florida law because the district court had diversity jurisdiction over this
matter, and “[f]ederal courts adjudicating state law claims apply the substantive law of the state
where they render decisions.” Am. United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1059 (11th
Cir 2007) (citing Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938)).
6
Deposit Co. of Md., 917 So. 2d 368, 372 (Fla. 5th DCA 2005).
Reviewing the complaint, we agree with the district court that Plaintiffs’
allegations fall short of Twombly’s requirements. Plaintiffs alleged that Bank of
America authorized numerous deposits, withdrawals, and wire transfers involving
large amounts of money and that the Premier Banking Representatives received
substantial commissions. Although Plaintiffs alleged the transactions were
atypical and therefore Bank of America should have known of the Ponzi scheme,
such allegations are insufficient under Florida law to trigger liability. Florida law
does not require banking institutions to investigate transactions. Home Fed. Sav.
& Loan Ass’n of Hollywood v. Emile, 216 So. 2d 443, 446 (Fla. 1968); cf.
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”).
Therefore, Bank of America, in providing only routine banking services, was not
required to investigate Diamond’s transactions. To be liable, the bank would have
had to have actual knowledge of Diamond’s fraudulent activities. These
allegations simply fail to make that “plausible.”
Twombly, 550 U.S. at 570.
IV.
7
The second issue we must consider is whether the district court was required
to permit amendment of the initial complaint. Plaintiffs argue that they were
improperly denied leave to amend the complaint because futility was never
demonstrated by the district court and is not obvious based on the pleadings.
Again, we disagree.
“Denial of leave to amend is justified by futility when the ‘complaint as
amended is still subject to dismissal.’” Burger King Corp. v. Weaver, 169 F.3d
1310, 1320 (11th Cir. 1999) (quoting Halliburton & Assoc., Inc. v. Henderson,
Few & Co.,
774 F.2d 441, 444 (11th Cir. 1985)).
Plaintiffs argue that their new allegations were sufficient to state a claim.
For example, Plaintiffs sought to include allegations that a Premier Banking
Representative informed another Bank of America customer that he knew about
Diamond’s investment club, and his Diamond Ventures customers were happy
with their investment. As a result, the customer invested an additional amount of
money in Diamond Ventures. This information was sufficient, Plaintiffs contend,
to demonstrate Bank of America’s involvement in the Ponzi scheme.
Like the district court implicitly found, we find that it is not plausible that
positive comments about Diamond Ventures necessarily establishes Bank of
America’s participation in a Ponzi scheme. Rather, such a positive comment
8
would more easily be interpreted to demonstrate Bank of America’s lack of
awareness of Diamond’s fraudulent activities. Accordingly, there was no abuse of
discretion in denying the request for leave to amend the complaint because this
amendment would have been futile.
V.
The district court properly concluded that Plaintiffs’ allegations regarding
actual knowledge failed to state a claim for relief under Florida aiding and abetting
law. In addition, the district court acted within its discretion when it denied
Plaintiffs’ futile request to amend the complaint.
AFFIRMED.
9
