Kleiman v. Wright

1

IRA KLEIMAN, as the Personal Representative of the Estate of David Kleiman, Plaintiff-Appellant, W&K INFO DEFENSE RESEARCH, LLC, Plaintiff, v. CRAIG WRIGHT, Defendant-Appellee.

No. 22-11150

United States Court of Appeals, Eleventh Circuit

October 26, 2023

DO NOT PUBLISH

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 9:18-cv-80176-BB

Before WILSON, ROSENBAUM, and LUCK, Circuit Judges.

PER CURIAM

This appeal involves an ownership dispute stemming from the origins of the cryptocurrency Bitcoin. The Estate of David Kleiman ("Estate") sued Craig Wright, an Australian computer scientist and self-described inventor of Bitcoin claiming that (David) Kleiman and Wright, who were friends formed a partnership to develop the original Bitcoin protocol, to mine bitcoin, and to develop related blockchain technology. The Estate asserts that it is entitled to half of the bitcoins-purportedly worth billions-mined through the alleged partnership. A jury ultimately found that no partnership existed and returned a verdict against the Estate, which now appeals.^[1]

On appeal, the Estate asserts that the verdict should not stand for three reasons. First, in the Estate's view, the district court's instructions on partnership formation did not accurately reflect current law under Florida's Revised Uniform Partnership Act of 1995 ("FRUPA") Fla. Stat. §§ 8001 et seq. Second according to the Estate, the court applied the wrong legal standard and abused its discretion when it vacated sanctions imposed by the magistrate judge that would have deemed as true essential factual elements of the Estate's partnership claim. And third, the Estate maintains that the district court abused its discretion by denying a new trial based on opposing counsel's repeated violations of an in limine order prohibiting evidence of the "sibling relationship" between David Kleiman and Ira Kleiman, David's brother and the personal representative of the Estate. We consider each argument in turn, but ultimately, we affirm.

I. JURY INSTRUCTIONS

In evaluating jury instructions, our standard of review is "simultaneously de novo and deferential." Bhogaita v. Altamonte Heights Condo. Ass'n, Inc., 765 F.3d 1277, 1285 (11th Cir. 2014). That is, "[w]e review jury instructions de novo to determine whether they misstate the law or mislead the jury to the prejudice of the objecting party but give the district court wide discretion as to the style and wording employed." Id. (quotation marks omitted).

Under longstanding Florida law, a "partnership is created only where both parties contribute to the labor or capital of the enterprise, have a mutuality of interest in both profits and losses, and agree to share in the assets and liabilities of the business." Williams v. Obstfeld, 314 F.3d 1270, 1275 (11th Cir. 2002) (quotation marks omitted); see Kislak v. Kreedian, 95 So.2d 510, 514 (Fla. 1957). In other words, a partnership "must consist of the following elements: (1) a common purpose; (2) a joint proprietary interest in the subject matter; (3) the right to share profits and duty to share losses; and (4) joint control or right of control." Williams, 314 F.3d at 1275-76. "These requirements are strictly construed and the absence of even one is fatal to the finding of a partnership." Dreyfuss v. Dreyfuss, 701 So.2d 437, 439 (Fla. 3d DCA 1997); see Austin v. Duval Cnty. Sch. Bd., 657 So.2d 945 (Fla. 1st DCA 1995).

The Estate admits that the district court's instructions to the jury were consistent with this caselaw, notably Williams and Dreyfuss. But, in the Estate's view, these decisions are not controlling because the alleged partnerships at issue predated FRUPA, which took effect in 1995. The Estate maintains that FRUPA replaced the strict common-law test, which required four or five factors to be proven, "with a totality of the circumstances test, under which no single factor is dispositive."

Florida law requires statutes enacted "in derogation of the common law [to] be strictly construed." Ady v. Am. Honda Fin. Corp., 675 So.2d 577, 581 (Fla. 1996). "[A]ny legislative intent either to abolish or to limit the common law must indicate such change clearly, or else the rule of common law stands." Larmoyeux v. Montgomery, 963 So.2d 813, 820 (Fla. 4th DCA 2007).

Here, the Estate has failed to show that FRUPA abrogated the common law or otherwise changed the rules of partnership formation relevant to its claim. FRUPA's general rules for partnership formation are largely unchanged from the Uniform Partnership Act ("UPA"), which Florida adopted in 1972. Pinellas Cnty. v. Lake Padgett Pines, 333 So.2d 472, 474 (Fla. 2d DCA 1976); see generally John Larson, Florida's New Partnership Law: The Revised Uniform Partnership Act and Limited Liability Partnerships, 23 Fla. St. U. L. Rev. 201, 205-06 (1995).

For instance, the Estate relies on FRUPA's definition of a partnership: "[T]he association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership." Fla. Stat. § 620.8202(1). But UPA similarly defined a partnership as "an association of two or more persons to carry on as co-owners a business for profit." Larson, supra at 205 n.9. FRUPA merely added the clause, "whether or not the persons intend to form a partnership," and "recast" UPA's "definition" as an "operative rule of law." Fla. Stat. § 620.8202, cmt. n.1. Notably, "[n]o substantive change in the law [was] intended" by these modifications. Id.

The Estate also cites FRUPA's profit-sharing presumption. Among its rules for "determining whether a partnership is formed," FRUPA provides that "[a] person who receives a share of the profits of a business is presumed to be a partner." Fla. Stat. § 620.8202(3)(c) (emphasis added). That marked a changed from UPA, which stated a person's receipt of profits of a business was "prima facie evidence" that the person was a partner. Larson, supra at 205 n.9. Thus, FRUPA "recast[s]" the sharing of profits as a "rebuttable presumption of a partnership, a more contemporary construction, rather than as prima facie evidence thereof." Fla. Stat. § 620.8202, cmt. n.3. Beyond that, though, "no substantive change [was] intended" to the profit-sharing rule. Id.

These minor revisions cannot sustain the Estate's claim that FRUPA substituted a new test for determining partnership formation, let alone clearly so. See Larmoyeux, 963 So.2d at 820. After all, "[l]ike its predecessor, [F]RUPA makes no attempt to answer in every case whether a partnership is formed." Fla. Stat. § 620.8202, cmt. n.3. While FRUPA revised UPA's partnership definition to clarify that intent to form a partnership is not relevant to formation, intent is not one of the four required factors Williams identifies for establishing a partnership. 314 F.3d at 1275-76. It does not follow that, because intent is not relevant, courts must evaluate the other factors under a totality-of-the-circumstances approach.

Nor is such an approach required because FRUPA "recast" the sharing of profits as a "rebuttable presumption of a partnership, . . . rather than as prima facie evidence thereof." Fla. Stat. § 620.8202, cmt. n.3. As the party asserting its existence, the Estate bore the burden of establishing the formation of a partnership by a preponderance of the evidence. See, e.g., Watson Realty Corp. v. Quinn, 435 So.2d 950, 950 (Fla. 1st DCA 1983) ("[P]laintiff's burden of proof is that of a preponderance or greater weight of the evidence."). And the application of a rebuttable presumption is not inconsistent with requiring a jury to apply the four partnership factors listed above, since it's up to the jury to determine whether any such presumption has been rebutted.

Notably absent from the Estate's briefing is any Florida caselaw that supports its position. The Estate cites one Florida case that cites FRUPA but is otherwise silent about the issues here. See Rafael J. Roca, P.A. v. Lytel &Reiter, Clark, Roca, Fountain &Williams, 856 So.2d 1, 5-6 (Fla. 4th DCA 2003) (distinguishing but not criticizing Dreyfuss). The Estate's other cases that do address similar issues are from out of state and of limited persuasive value.^[2]Even assuming we would endorse a more flexible approach as a matter of first impression, we are governed by existing Florida law. And we see no indication that Florida courts have moved away from the common-law test.

For these reasons, FRUPA did not abrogate prior caselaw on partnership formation insofar as it required proof of certain factors. See Larmoyeux, 963 So.2d at 820. Accordingly, we reject the Estate's claim that the district court erred in instructing the jury on partnership formation.

II. SANCTIONS

"We review a district court's order denying a motion for sanctions for abuse of discretion." Fuentes v. Classica Cruise Operator Ltd., Inc., 32 F.4th 1311, 1321 (11th Cir. 2022). This standard gives the district court a "range of choice" so long as the court does not rely on an erroneous legal standard or make a clear error of judgment. Id.; see Higgs v. Costa Crociere S.P.A. Co., 969 F.3d 1295, 1304 (11th Cir. 2020). "In other words, a district court has broad, yet not unbridled, discretion in deciding whether to impose evidentiary sanctions." Fuentes, 32 F.4th at 1321 (quotation marks omitted).

A. Background

During litigation, the Estate sought discovery from Wright about his bitcoin holdings, which it believed were relevant to establish the universe of bitcoin mined during the alleged partnership between David Kleiman and Wright. A magistrate judge broadly agreed and, on March 14, 2019, ordered Wright to produce a list of his bitcoin holdings as of the last day in...