PAUL G. HYMAN, JR., Bankruptcy Judge.
According to the allegations of the Amended Complaint, Palm Beach Finance Partners, L.P. ("PBF I") and Palm Beach Finance II, L.P. ("PBF II" and together with PBF I, the "Palm Beach Funds") were investors in the purchase financing operation run by Thomas Petters and Petters Company, Inc. (collectively, "Petters"). To facilitate these investing activities, the Palm Beach Funds created an affiliated entity, PBFP Holdings, LLC ("PBFP Holdings"). In soliciting investments, Petters represented to investors that investment funds would be used to finance consumer electronic merchandise transactions. Petters claimed he would arrange for the sale and delivery of consumer
Petters, however, was not operating a legitimate purchase financing operation. Petters was running a Ponzi scheme
The Plaintiff alleges that M & I, as Petters' primary depository bank, received fraudulent transfers, knew of Petters' fraud, and engaged in wrongdoing which allowed Petters' fraud to continue undetected. Central to the Plaintiffs allegations of wrongdoing is the Deposit Account Management Agreement ("DAMA"), attached to the Amended Complaint as Exhibit 1, executed by Petters and M & I for the stated purpose of providing assurance to certain parties (the "Protected Parties"), which included PBFP Holdings and PBF I, that deposits into the PCI Account which should have been paid to a Protected Party would be properly transferred to the Protected Party.
In order to state a claim for relief under Federal Rule of Civil Procedure 8(a)
When a plaintiff asserts claims based upon fraud or mistake, simply meeting the pleading requirements of Rule 8(a) is insufficient to survive a Rule 12(b)(6) motion to dismiss. In addition, Federal Rule of Civil Procedure 9(b)
Mizzaro v. Home Depot, Inc., 544 F.3d 1230, 1237 (11th Cir.2008) (quoting Tello v. Dean Witter Reynolds, Inc., 494 F.3d 956, 972 (11th Cir.2007)). However, "Rule 9(b) does not require a plaintiff to allege specific facts related to the defendant's state of mind." Id. "[M]alice, intent, knowledge, and other conditions of a person's mind" may be pled generally. FED.R.CIV.P. 9(b).
"In construing allegations of actual fraud in an action brought by a bankruptcy trustee, the `particularity' standard of ... Rule 9(b) is somewhat relaxed." Cox v. Grube (In re Grube), Adv. No. 10-8055, 2013 WL 343459, at *9 (Bankr.C.D.Ill. Jan. 29, 2013) (citing Zazzali v. AFA Fin. Grp., LLC (In re DBSI, Inc.), 477 B.R. 504 (Bankr.D.Del.2012)); see also, Ivey v. First-Citizens Bank and Trust Co. (In re Whitley), Adv. No. 12-02028, 2013 WL
"Such flexibility afforded to trustees in bankruptcy with respect to the pleading requirements is [usually] appropriate `[g]iven the inevitable lack of knowledge concerning the acts of fraud previously committed against the debtor, a third party.'" In re Arizen Homes, 2009 WL 393863, at *2. However, when a trustee does not suffer from this lack of knowledge, the need to relax Rule 9(b)'s heightened pleading requirements does not exist. In such cases, the trustee will be held to the usual Rule 9(b) standard. See Roberts v. Balasco (In re Ernie Haire Ford, Inc.), 459 B.R. 824, 837 (Bankr.M.D.Fla.2011).
Generally, allegations of fraud based on information and belief
On July 3, 2012, the Court entered an Order Granting Motion to Dismiss (ECF No. 50) (the "July 3 Order"), which dismissed without prejudice the Plaintiffs Complaint (ECF No. 1) (the "Initial Complaint"). The Plaintiff now argues that based upon the "law of the case" doctrine, the issues decided by the Court in the July 3 Order cannot now be re-litigated by the parties or reconsidered by the Court with respect to the Defendants' current Motion to Dismiss the Amended Complaint. The Plaintiffs argument does not accurately reflect the "law of the case" doctrine.
Because the Court's July 3 Order was not a final judgment, the law of the case doctrine does not apply, and the Court may reconsider any issue ruled upon in that Order.
In the July 3 Order, the Court dismissed the Plaintiffs Initial Complaint as a class example of a "shotgun" pleading.
The Defendants assert that the Amended Complaint still exhibits all the objectionable characteristics of a shotgun pleading. However, the Amended Complaint incorporates several important changes aimed at avoiding the issues inherent in shotgun pleadings. First, the Plaintiff condensed the Amended Complaint by removing certain allegations and exhibits. The Amended Complaint stands at 48 pages long and contains 236 numbered paragraphs; in contrast, the Plaintiffs Initial Complaint was 66 pages long and contained 322 numbered paragraphs. Second, not every claim simply reasserts and realleges every preceding paragraph. In Count I, for example, the Plaintiff "reasserts the allegations set forth in paragraphs 1 through 29, 62 through 76, 101 through 134, 143 through 155 and 160 through 163." Am. Compl. 1164. Accordingly, the Court finds that the Plaintiff sufficiently corrected this pleading deficiency and the Amended Complaint no longer constitutes a shotgun pleading.
Counts I through IV assert fraudulent transfer claims pursuant to 11 U.S.C. §§ 541, 544, 548, 550, and Fla. Stat. §§ 726.105, 726.106, and 726.108. Specifically, the Plaintiff alleges that M & I was a transferee of funds which were received on
The Eleventh Circuit has "carved out an equitable exception" to the literal interpretation of the statutory term "transferee" in the context of fraudulent transfer actions, which is known as the "mere conduit" rule. Martinez v. Hutton (In re Harwell), 628 F.3d 1312, 1322 (11th Cir.2010) (citing Nordberg v. Sanchez (In re Chase & Sanborn Corp.), 813 F.2d 1177, 1178-80 (11th Cir.1987)). The mere conduit rule:
Perlman v. Bank of America, N.A., No. 11-80331-CV, 2012 WL 1886617, at *2 (S.D.Fla. May 23, 2012) (citing In re Harwell, 628 F.3d at 1323). In evaluating the good faith portion of the mere conduit rule,
Perlman v. Bank of America, 2012 WL 1886617, at *2 (citing Wiand v. Waxenberg, 611 F.Supp.2d 1299, 1319 (S.D.Fla. 2009)).
Ordinarily, it is not appropriate for the Court to determine the applicability of the mere conduit defense at the motion to dismiss stage. The mere conduit rule is an affirmative defense. Id.; see also, Steinberg v. Barclay's Nominees (Branches) Ltd., No. 04-60897-CIV, 2008 WL 4601042, at *7 (S.D.Fla. Sept. 30, 2008). "Florida courts have ... made it abundantly clear that any affirmative defense... may be considered in resolving a motion to dismiss [only] 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) (internal citations omitted). Additionally, as noted above, one of the necessary elements of the defense is the defendant's "good faith." The issue of good faith is a question of fact, and as a result, it is generally inappropriate to determine whether a party acted in good faith at the motion to dismiss stage. Kapila v. Integra Bank, N.A. (In re Pearlman), 440 B.R. 569, 577 & n. 32 (Bankr.M.D.Fla.2010) (citing Notinger v. Costa (In re Robotic Vision Sys., Inc.), 374 B.R. 36, 59 (Bankr. D.N.H.2007); Miller v. McCown De Leeuw & Co., Inc. (In re Brown Schools), 368 B.R. 394, 408 (Bankr.D.Del.2007)). These two characteristic thus generally prevent courts from applying the mere conduit defense as a basis for dismissal at the pleading stage.
In considering the Defendants' first Motion to Dismiss, the Court refused to dismiss the Plaintiffs fraudulent transfer claims on the basis of the mere conduit rule because the Court determined that the Initial Complaint failed to affirmatively and clearly show on its face that M & I
M & I now asks the Court to reconsider its decision that it would be inappropriate at the motion to dismiss stage to determine that M & I acted in good faith so as to warrant application of the mere conduit defense. As previously discussed, the "law of the case" doctrine does not preclude the Court from reconsidering any part of its July 3 Order. However, for the following reasons, the Court still finds that it would be inappropriate to determine at the motion to dismiss stage that M & I acted in good faith.
As the Court emphasized in its July 3 Order, the mere conduit defense is an affirmative defense, and an affirmative defense — especially one which turns on a fact-intensive analysis of a party's good faith — is generally not an appropriate basis for dismissal at this stage. Were the Court to dismiss the Plaintiffs fraudulent transfer claims on the basis of this defense at this time, the Court would have to make the determination that as a matter of law, the Plaintiffs allegations affirmatively and clearly show that M & I acted in good faith.
M & I cites several decisions — none of which is binding on this Court — that purportedly support M & I's position that the Plaintiffs fraudulent transfer claims should be dismissed on the basis of the mere conduit defense. Particularly, M & I cites to Judge Hurley's decision in Perlman v. Wells Fargo Bank, N.A, No. 10-81612-CV, 2012 WL 3289826 (S.D.Fla. Aug. 10, 2012). In Perlman v. Wells Fargo, Judge Hurley dismissed the plaintiffs fraudulent transfer claims based on the mere conduit defense, reasoning that "because banks have the `right to assume that individuals who have the legal authority to handle [an] entity's accounts do not misuse the entity's funds,' ... the alleged atypical transactions and other red flags do not comprise `facts or circumstances [that] would have induced an ordinarily prudent [bank] to make inquiry.'" 2012 WL 3289826, at *2 (quoting O'Halloran v. First Union Nat'l Bank of Fla., 350 F.3d 1197, 1205 (11th Cir.2003); Waxenberg, 611 F.Supp.2d at 1319). Although the Court does not dispute that this is an accurate statement of the law, the Court notes that in reaching his decision, Judge Hurley did not consider which party had the burden of pleading and proving the mere conduit defense. In fact, Judge Hurley's statement that the allegations were "insufficient to allege bad faith under the bad-faith exception to the mere conduit defense of a
The correct placement of the burden of pleading is always critical and cannot be overlooked. In the context of a motion to dismiss, the defendant's burden of pleading an affirmative defense means that it will rarely be appropriate for a court to grant a motion to dismiss based upon an affirmative defense. This is especially true when the affirmative defense is comprised of factually intensive elements, such as good faith.
For the reasons discussed above, the Court finds that there is simply no basis in the Amended Complaint or the accompanying documents to conclude that as a matter of law, the Plaintiffs allegations, viewed in a light most favorable to the Plaintiff and taking into account M & I's duty to plead and prove the affirmative defense, affirmatively and clearly show that M & I acted in good faith. The Court therefore finds that it would be inappropriate at this stage in the proceedings to find that the mere conduit defense merits dismissal of Counts I-IV.
In Count V of the Amended Complaint, the Plaintiff asserts a claim for aiding and abetting fraud against M & I. Specifically, the Plaintiff alleges that M & I "knew that [Petters] was perpetrating a fraud or engaging in other wrongful acts through the M & I Account" and that "M & I provided substantial assistances to the Petters Ponzi Scheme." Am. Compl. ¶¶ 195, 196. As a result of this alleged knowledge and conduct, the Plaintiff asserts that "M & I is responsible for all damages incurred by the Palm Beach Funds by virtue of the Petters Ponzi Scheme." Am. Compl. ¶ 197.
"It is uncertain whether Florida recognizes a claim for aiding and abetting fraud." Koch v. Royal Wine Merck., Ltd., ___ F.Supp.2d ___, ___, 2012 WL 6045926, at *12 (S.D.Fla.2012) (citing ZP No. 54 Ltd. P'ship v. Fid. & Deposit Co. of Md., 917 So.2d 368, 371-72 (Fla. 5th DCA 2005)). If it does,
To begin with, the Plaintiff merely makes a general and conclusory allegation that "M & I knew that [Petters] was perpetrating a fraud or engaging in other wrongful acts through the M & I Account." Am. Compl. ¶ 195. "While the element of actual knowledge may be alleged generally, the plaintiff still must accompany that general allegation with allegations of specific facts that give rise to a strong inference of actual knowledge regarding the underlying fraud." Lamm v. State Street Bank & Trust Co., 889 F.Supp.2d 1321, 1332 (S.D.Fla.2012) (internal quotations and citations omitted); see also, Groom v. Bank, of Am., 2012 WL 50250, at *4 (citing Rosner v. Bank of China, 349 Fed.Appx. 637, 639 (2d Cir. 2009)); Platinum Estates, Inc. v. TD Bank, N.A., No. 11-60670-CIV, 2012 WL 760791, at *3 (S.D.Fla. Mar. 8, 2012) ("conclusory statement that a defendant `actually knew' [is] insufficient to support an aiding and abetting claim where the facts in the complaint only suggest[ ] that the defendant 'should have known that something was amiss.'"). The United States District Court for the Northern District of Texas considered and dismissed a similar claim for aiding and abetting fraud for
Litson-Gruenber v. JPMorgan Chase & Co., No. 7:09-CV-056-0, 2009 WL 4884426, at *3 (N.D.Tex. Dec. 16, 2009) (internal citations omitted) (emphasis added).
Here, the specific allegations made by the Plaintiff which purportedly support the general allegation that M & I had actual knowledge that Petters was perpetrating a fraud suggest only that M & I should have known that something was wrong. The Plaintiff asserts that M & I knew of the manner in which the Petters purchase financing transactions were conducted and of the "representations, recitals and responsibilities" contained in the DAMA. Am. Compl. ¶ 195. Neither of these allegations indicate that anyone at M & I had actual knowledge of Petters' fraud. Instead, they merely suggest that M & I should have known of Petters' fraud had they been paying closer attention and looked into some of "suspicious" transactions.
Moreover, the Plaintiff states that M & I knew of Petters' fraud as a result of M & I's "implied actual notice that no funds flowed from any retailer customers and that instead, the M & I Account was funded primarily from phony suppliers and lender sources." Id. (emphasis added). The Plaintiffs use of the phrase "implied actual notice" is significant. Although the Plaintiff is correct in his assertion that implied actual notice is not the same as constructive notice, the Plaintiff fails to recognize that implied actual notice is also not the same as actual knowledge. In fact, implied actual notice is defined as "notice inferred from the fact that the person had means of knowledge, which it was his duty to use and which he did not [use], or as it is sometimes called implied actual notice." First Fed. Sav. & Loan Ass'n of Miami v. Fisher, 60 So.2d 496, 499 (Fla.1952); see also Kapila v. Gunn (In re Gunn), No. 04-23331-BKC-RBR, 2005 WL 2445909, at *5 (Bankr.S.D.Fla. Jan. 12, 2005). Stated differently, "`implied actual notice' requires (1) actual knowledge of (2) highly suspicious circumstances, coupled with (3) an unaccountable failure to react to them." Shacket v. Philko Aviation, Inc., 841 F.2d 166, 170 (7th Cir.1988). These definitions reveal that implied actual notice necessarily signifies a lack of actual knowledge because implied actual notice is defined as having the means to acquire actual knowledge. For example, an individual with implied actual notice of fraudulent conduct has actual knowledge of suspicious circumstances and a duty to investigate further, but still lacks actual knowledge of the underlying fraud. Therefore, even assuming, as the Plaintiffs allegations might suggest,
Furthermore, even assuming that implied actual notice constitutes actual knowledge for the purposes of aiding and abetting liability, the Plaintiff fails to plausibly allege that M & I had implied actual notice of the Petters' fraud — M & I had no duty to investigate its customer's banking activities and thus, did not have "means of knowledge" which it had a duty to use. First Fed. Sav. & Loan Ass'n of Miami v. Fisher, 60 So.2d at 499. "Florida law does not require banking institutions to investigate transactions." Lawrence v. Bank of Am., 455 Fed.Appx. at 907 (holding that plaintiffs allegations that "the transactions were atypical and therefore Bank of America should have known of the Ponzi scheme" were insufficient to trigger aiding and abetting liability). In fact, a bank "has the right to assume that individuals who have the legal authority to handle the entity's accounts do not misuse the entity's funds." O'Halloran v. First Union Nat'l Bank of Fla., 350 F.3d 1197, 1205 (11th Cir.2003). Finally, although M & I agreed to provide more than "ordinary banking services" when it entered into the DAMA, as discussed more fully below, neither the terms of the DAMA nor the resulting "relationship" between M & I and the Palm Beach Funds placed any duty upon M & I to investigate Petters business practices. In fact, the provisions of the DAMA permitted M & I to rely on any information given to it by Petters. Therefore, even assuming that implied actual notice is the equivalent of actual knowledge, M & I had no duty to investigate into its customer's business practices — even in the face of suspicious business transactions — and accordingly, had no implied actual notice.
For the reasons discussed above, the Plaintiff fails to adequately allege that M & I had actual knowledge of the Petters Ponzi Scheme. Accordingly, the Court will dismiss Count V without prejudice.
In Counts VI and VII, the Plaintiff asserts claims for fraudulent inducement and fraudulent misrepresentation,
Claims for fraudulent inducement and fraudulent misrepresentation must meet the heightened pleading standard of Rule 9(b), which requires that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." In order to state a claim for relief which satisfies Rule 9(b)'s heightened pleading standard, "a complaint must `identify (1) the precise statements, documents or misrepresentations made; (2) the time and place of and persons responsible for the statement; (3) the content and manner in which the statements misled the plaintiff; and (4) what the Defendants gain[] by the alleged fraud.'" Travelers Prop. Cas. Co. of Am. v. Charlotte Pipe & Foundry Co., No. 6:11-cv-19-Orl-28GJK, 2012 WL 983783, at *6 (M.D.Fla. Mar. 22, 2012) (quoting West Coast Roofing & Waterproofing, Inc. v. Johns Manville, Inc., 287 Fed.Appx. 81, 86 (11th Cir.2008)); see also, Ziemba v. Cascade Intern., Inc., 256 F.3d 1194, 1202 (11th Cir.2001). Additionally, "when multiple defendants are accused of misrepresentation, specific allegations are required as to each; a complaint should advise each defendant of the nature of his participation in the fraud." Id. (citing Ambrosia Coal & Constr. Co. v. Pages Morales, 482 F.3d 1309, 1317 (11th Cir.2007)); see also, Begualg Inv. Mgmt. Inc. v. Four Seasons Hotel Ltd., No. 10-22153-CIV, 2011 WL 4434891, at *4 (S.D.Fla. Sept. 23, 2011) (dismissing plaintiffs fraudulent inducement claim for failing to detail "the required who, what, where, when, how of the allegedly false statements and ... to specify each [d]efendant's participation in the alleged fraud").
In Count VI, the Plaintiff alleges that the Defendants represented to the Palm Beach Funds that M & I would, based on a review of transaction lists provided by Petters (the "Transaction Lists"), transfer certain retailer monies which were deposited into the M & I Account to an account established by the Palm Beach Funds at M & I (the "Holdings Account"). Am. Compl. ¶ 200. This representation, according to the Plaintiff, was knowingly false at the time it was made. Am. Compl. ¶ 201. The Plaintiff alleges that this alleged misrepresentation is evidenced by the following: (1) an email dated February 18, 2008 (the "Flynn/Howse email") from Flynn to Craig Howse ("Howse"), an attorney representing the Palm Beach Funds, discussing a draft of the DAMA;
In Count VII, the Plaintiff identifies two alleged misrepresentations: (1) that M & I would transfer retailer monies that were deposited into the M & I Account to the Holdings Account based on a review of the Transaction Lists; and (2) that the Holdings Account would have a limited purpose and would be funded only by transfers effectuated by M & I based on a review of Transaction Lists. Am. Compl. ¶¶ 207-08. The first alleged misrepresentation is evidenced, according to the Plaintiff, by the same facts which evidence the misrepresentation
Am. Compl. ¶ 208.
Despite the above-recited allegations, the Plaintiff fails to allege the precise statements or misrepresentations made, the time and place of and persons responsible for the statements, to whom the statements were made, and how each defendant participated in the alleged fraud. The core of a fraudulent inducement or misrepresentation claim is the existence of a specific misrepresentation made by a defendant to a plaintiff which was false at the time it was made. A plaintiff asserting such a claim thus should be able to identify who made the statement, approximately when the statement was made, and to whom the statement was made. Here, however, there is no allegation regarding who made the alleged misrepresentation. There is no allegation regarding when or how the misrepresentation was made. There is no allegation identifying to whom the misrepresentation was made. There is no allegation distinguishing between M & I and Flynn and detailing the respective roles each played in the alleged fraud. Because of these deficiencies, Counts VI and VII fail to meet Rule 9(b)'s heightened pleading standard.
The Plaintiff asserts that in construing allegations of actual fraud in an action brought by a bankruptcy trustee, such as the Plaintiff here, Rule 9(b)'s heightened pleading standard must be relaxed in order to accommodate a trustee's inevitable lack of knowledge. Although the Court agrees in principle, relaxation of Rule 9(b)'s heightened standard does not save the Plaintiffs claims for fraudulent inducement and fraudulent misrepresentation for two reasons. First, as discussed above, relaxing Rule 9(b)'s pleading standard is only appropriate when the trustee in question suffers from a "`lack of knowledge concerning the acts of fraud previously committed against the debtor, a third party.'" In re Arizen Homes, 2009 WL 393863, at *2. However, when a trustee does not suffer from this lack of knowledge, the need to relax Rule 9(b)'s heightened pleading standard does not exist, and the trustee will be held to the usual Rule 9(b) standard. Based upon the length of time the Plaintiff has been employed as the Palm Beach Funds' bankruptcy trustee and the amount of discovery taken in the main bankruptcy case and the various adversary proceedings, the Court finds that the Plaintiff does not suffer from the lack of knowledge which would justify relaxing Rule 9(b)'s heightened standard. Second, even when Rule 9(b)'s heightened standard is relaxed in the context of claims brought by bankruptcy trustees, the standard is only "somewhat" relaxed. "`[T]he person charged with fraud [must still] have a reasonable opportunity to answer the complaint and ... adequate information to frame a response.'" In re Brandon Overseas, 2010 WL 2812944, at *5 (quoting In re Arizen Homes, 2009 WL 393863, at *2). Relaxation of Rule 9(b)'s standard does not remove the requirement of particularity in
For the reasons discussed above, the Court finds that Counts VI and VII — the Plaintiffs claims for fraudulent inducement and fraudulent misrepresentation — still fail to meet Rule 9(b)'s particularity requirement and must be dismissed.
The Plaintiff, in Count VIII, asserts a claim for conspiracy to commit fraud
There are several fatal flaws inherent in the Plaintiffs claim for conspiracy to commit fraud. First, the Plaintiffs claim for conspiracy to commit fraud must be dismissed because the Plaintiff fails to properly plead his underlying fraud claims. "[B]ecause a civil conspiracy claim is not an independent cause of action in Florida," if a court dismisses the predicate claim, such as the Plaintiffs claim for fraud here, the court must also dismiss the conspiracy claim. Behrman v. Allstate Life Ins. Co., 178 Fed.Appx. 862, 863 (11th Cir.2006); Marlborough Holdings Grp., Ltd. v. Azimut-Benetti, Spa, No. 11-14932, 2013 WL 375178, at *6 (11th Cir. Jan. 13, 2013) (holding that "a claim that is found not to be actionable cannot serve as the basis for a conspiracy claim"); Am. United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1067 (11th Cir.2007); see also, Begualg Inv. Mgmt., 2011 WL 4434891, at *6.
Second, the Plaintiff fails to plead with the requisite specificity "the required who, what, where, when, how of the alleged conspiracy." Begualg Inv. Mgmt., 2011 WL 4434891, at *6. For instance, the Plaintiffs conclusory allegation that "[u]pon information and belief, the Defendants and ... [Petters] committed conspiratorial acts in furtherance of this wrong" is not sufficient. "The doing of some overt act in pursuance of the conspiracy" is a necessary element of a claim for conspiracy, and the Plaintiff must identify specific acts done in furtherance of the conspiracy. Pleading this element "upon information and belief is also not sufficient in this context because the subject matter of this
Finally, although the Plaintiff has chosen to assert his claim for conspiracy to commit fraud against both Defendant M & I and Defendant Flynn, the Plaintiff fails to distinguish between the two defendants in order specify each Defendant's participation in the alleged conspiracy to commit fraud. In fact, not once within Count VIII does the Plaintiff refer to either "M & I" or "Flynn" — the two are simply lumped together as "Defendants" throughout the claim. This is not sufficient to meet the notice pleading requirements of Rule 8(a) as neither Defendant is on notice of its role in the alleged conspiracy.
For the reasons just discussed, the Court finds that the Plaintiff fails to state a claim for conspiracy which is plausible on its face, and therefore, Count VIII must be dismissed.
In Count X, the Plaintiff asserts a claim for gross negligence against M & I, the core of which focuses on the Holdings Account. Specifically, the Plaintiff alleges that:
Am. Compl. ¶¶ 232-35. In its July 3 Order, the Court discussed at great length the terms of the DAMA and concluded that M & I's limited duty to act — and thus, its duty to act carefully — never arose. For the reasons discussed below, the Court finds that the Plaintiff still fails to plausibly allege a duty of care as the text of the DAMA has not changed and the Plaintiffs allegations are simply an attempt to plead around the Court's previous holding that M & I's duty of care never arose.
According to the terms of the DAMA, from time to time funds came into the PCI Account in connection with Petters' purchase financing operation. Some of these funds should have been paid to one of "several financial entities ... designated as third party beneficiaries (the Protected Parties)." Am. Compl. Ex. 1. PBFP Holdings and PBF I were each named as Protected Parties. Id. at ¶ 1(b). The stated purpose of the DAMA was to "provide legal assurance to the Protected Parties that deposits into the [PCI Account] which should have been paid into a Protected Part[y's] lock box or directly to a Protected
M & I had the express duty to "manage and control [the PCI] Account in accordance with the guidelines and procedures established by [the DAMA.]" Id. at ¶ 1(d). According to the guidelines and procedures established by the DAMA, PCI was required to:
Id. at ¶ 2(b). Upon receiving a Transaction List, M & I was required to:
Id. at ¶ 2(c). In performing these limited duties under the DAMA, M & I was "entitled to rely ... upon any [writing or other message] received by M & I from Petters and reasonably believed by M & I to be genuine and correct and to have been signed, sent or made by an authorized person." Id. at ¶ 6(a)(ii).
The DAMA also required each Protected Party to "establish an account with M & I into which M & I [was to] transfer moneys on deposit in the Deposit [A]ccount which are to be released to the Protected Party as provided in Section 2(c)." Id. at ¶ 3. In order to comply with this provision, the Palm Beach Funds opened the Holdings Account. There is no language in the DAMA which provides that M & I would be the only party permitted to transfer money into the accounts established by the Protected Parties. Nevertheless, the Plaintiff alleges that M & I understood that the Holdings Account would be funded exclusively by M & I following a review of Transaction Lists.
Despite the Plaintiffs continued assertions to the contrary, the contractual language of the DAMA is clear: M & I merely undertook an obligation to provide the limited service described above, which was conditioned upon the receipt of Transaction Lists.
Here, the Plaintiff did not allege in the Amended Complaint that M & I received a Transaction List from Petters. In fact, the Plaintiff alleges that M & I was transferring money into the Holdings Account "without ... receiving weekly [T]ransaction [L]ists from Petters." Am. Compl. ¶ 138. Because it is clear from the Plaintiffs allegations that M & I never received a Transaction List, M & I's duty to act pursuant to the terms of the DAMA never arose as a matter of law. Because M & I's duty to perform never arose, M & I's duty of care never arose.
Finally, although not raised by M & I in its Motion to Dismiss, the Plaintiff fails to allege the type of culpable behavior necessary to maintain a claim for gross negligence. "Florida law defines `gross' negligence as `an act or omission that a reasonable, prudent person would know is likely to result in injury to another.'" NOB Holdings Corp. v. Liberty Mut. Ins. Co. (In re PSN USA Inc.), 426 B.R. 916, 922 (Bankr.S.D.Fla.2010) (quoting Eller v. Shova, 630 So.2d 537, 540 n. 3 (Fla. 1993)). In other words, "gross negligence must be predicated on a showing of chargeable knowledge or awareness of the imminent danger spoken of and "the act of omission complained of must occur in a manner which evinces a conscious disregard of consequences, as distinguished from a careless disregard thereof (as in simple negligence) or from the more extreme willful or wanton disregard thereof (as in culpable or criminal negligence)." Tran v. Waste Mgmt., Inc., 290 F.Supp.2d 1286, 1294 (M.D.Fla.2003). There is nothing in the Plaintiffs allegations that distinguishes it from a claim for ordinary negligence or indicates a "conscious disregard of the consequences."
For the reasons discussed above, the Court finds that the Plaintiff fails to state a claim for gross negligence which is plausible on its face. As a result, Count X must be dismissed.
In its July 3 Order, the Court dismissed the Plaintiffs breach of fiduciary duty claim asserted against M & I for failure to sufficiently allege that M & I owed a fiduciary duty to the Palm Beach Funds. Although the Plaintiff, in his Amended Complaint,
In order to state a claim for breach of fiduciary duty, the Plaintiff must allege the existence of a fiduciary duty owed by M & I to the Palm Beach Funds. "A fiduciary relationship may be either express or implied." Hogan v. Provident Life and Accident Ins. Co., 665 F.Supp.2d 1273, 1287 (M.D.Fla.2009) (citing Maxwell v. First United Bank, 782 So.2d 931, 933 (Fla. 4th DCA 2001)). An implied fiduciary duty is "`premised upon the specific factual situation surrounding the transaction and the relationship of the parties' and exist[s] where `confidence is reposed by one party and a trust accepted by the other.'" Id. (internal citations omitted); see also, Greenberg v. Miami Children's Hosp. Research Inst., Inc., 264 F.Supp.2d 1064, 1071 (S.D.Fla.2003). Stated differently, "[i]n order for a confidential or fiduciary relationship to exist under Florida law, there must be substantial evidence showing some dependency by one party and some undertaking by the other party to advise, counsel, and protect the weaker party." Lanz v. Resolution Trust Corp., 764 F.Supp. 176, 179 (S.D.Fla.1991) (citing Cripe v. Atlantic First Nat. Bank, 422 So.2d 820 (Fla.1982)). The mere fact that "one party places trust or confidence in the other does not create a confidential relationship in the absence of some recognition, acceptance or undertaking of the duties of a fiduciary on the part of the other party." Id. (citing Harris v. Zeuch, 103 Fla. 183, 137 So. 135 (1931)).
In his Amended Complaint, the Plaintiff alleges the existence of an implied fiduciary duty owed by M & I to the Palm Beach Funds:
Am. Compl. ¶¶ 227, 228. The conclusory statement that "M & I accepted the trust and confidence placed in it by the Palm Beach Funds" is insufficient to allege the existence of a fiduciary duty. Furthermore, the "evidence" recited by the Plaintiff of M & I's acceptance of the trust and confidence placed in it by the Palm Beach Funds also fails to plausibly allege the existence of an implied fiduciary duty. As discussed below, the "evidence" — especially read in the context of the DAMA — does not allow the court to draw the reasonable inference that M & I accepted in any way the trust and confidence the Palm Beach Funds allegedly placed in it. Iqbal, 556 U.S. at 663, 129 S.Ct. 1937, 173 L.Ed.2d 868.
To begin with, "[u]nder Florida law, banks ordinarily do not owe fiduciary duties to their customers." Lamm v. State Street Bank, 2012 WL 3828287, at *7 (citing Jaffe v. Bank of America, N.A., 667 F.Supp.2d 1299, 1319 (S.D.Fla.2009)). Thus, the Palm Beach Funds' establishment of the Holdings Account, at which
July 3 Order at 15-16. It is implausible that the execution of the DAMA, a contract which imposed no fiduciary duty on any party, and discussions relating to the DAMA would help establish the existence of an implied fiduciary duty. The Court therefore finds that the Plaintiff fails to plausibly allege that M & I accepted the trust and confidence allegedly placed in it by the Palm Beach Funds.
Accordingly, the Plaintiffs breach of fiduciary duty claim must be dismissed as the Plaintiff fails to plausibly allege the existence of a fiduciary duty.
For the reasons discussed in the preceding sections, the Court denies the Defendants' Motion to Dismiss to the extent that it seeks dismissal of Counts I, II, III, and IV. The Court grants the Defendants' Motion to Dismiss to the extent that that Counts V, VI, VII, VIII, IX, and X fail to state claims for relief which are plausible on the face of the Amended Complaint.
The Court dismisses Counts V, VI, VII, VIII, IX, and X without prejudice to the Plaintiff filing a second amended complaint which complies with the terms of this Order. In the event the Plaintiff elects to file a second amended complaint and the Defendants file a motion to dismiss that complaint, the Court shall not consider any new arguments which could have been raised in previous motions to dismiss.
The Court, being fully advised in the premises and for the reasons discussed above, hereby
1. The Defendants' Motion to Dismiss (ECF No. 72) is
2. The Defendants' Motion to Dismiss is
3. The Defendant's Motion to Dismiss is
4. Counts V, VI, VII, VIII, IX, and X are
