Regions Bank, an Ala. Banking Corp. v. Kaplan, CASE NO. 8:12-CV-1837-T-17MAP.

258 F.Supp.3d 1275

REGIONS BANK, an Alabama banking corporation, Plaintiff,

v.Marvin I. KAPLAN, an individual, et al., Defendants.

CASE NO. 8:12-CV-1837-T-17MAP.

United States District Court, M.D. Florida, TAMPA DIVISION.

Signed June 23, 2017

David Stuart Garbett, Joseph D. Perkins, Garbett, Stiphany, Allen & Roza, PA, Jonathan H. Kaskel, Gunster, Yoakley & Stewart, PA, Miami, FL, for Plaintiff.

Donald Grayson Peterson, Jon Douglas Parrish, Jonathan Michael Weirich, Parrish, White & Yarnell, P.A., Naples, FL, Mark James Ragusa, Gunster, Yoakley & Stewart, P.A., Tampa, FL, for Defendant.

MEMORANDUM OPINION

ELIZABETH A. KOVACHEVICH, United States District Judge

The Court presided over a bench trial from May 2, 2016 through May 25, 2016 on the remaining claims asserted by Plaintiff Regions Bank against Defendants Marvin I. Kaplan, R1A Palms, LLC ("R1A"), Triple Net Exchange ("TNE"), LLC, MK Investing, LLC ("MKI"), and BNK Smith, LLC ("BNK") ("Kaplan Parties") in the Corrected Second Amended Complaint (Dkt. 671):

Count VI       R1A           Fraudulent Concealment
Count VII      R1A           Aiding and Abetting
Count XIII     TNE           Fraudulent Concealment
Count XIV      TNE           Aiding and Abetting
Count XX       MKI           Fraudulent Concealment
Count XXI      MKI           Aiding and Abetting
Count XXVII    BNK           Fraudulent Concealment
Count XXVIII   BNK           Aiding and Abetting
Count XXIX     Kaplan        Fraudulent Concealment
Count XXXIII   Kaplan
               Kaplan Cos.   Civil Conspiracy

In the Joint Pretrial Statement, the issues which remain to be litigated are:

(Dkt. 649, Exh. N):

Issues of Fact

1. Whether Kaplan Parties used the Kaplan Accounts to kite with SAA;

2. Whether Kaplan Parties deposited the First Deal Checks knowing they were issued on insufficient funds in SAA's account with BBG;

3. Whether Kaplan Parties failed to disclose material facts to Regions including that they would be or were involved in wires-for-checks transactions, kiting, illegal use of the Kaplan Accounts, depositing checks knowing they were issued on insufficient funds;

4. Whether Kaplan Parties knowingly diverted or attempted to divert funds from the Kaplan Accounts after Kaplan Parties became aware of issues involving the SAA account at BBG;

5. Whether Kaplan Parties knowingly diverted recoveries from SAA instead of reducing the overdrafts.

(Dkt. 649, Exh. R.):

Issues of Law

1. Whether Kaplan Parties knowingly conducted a kite between/among the Kaplan Accounts and SAA's Account with BBG;

2. Whether the Kaplan Parties are liable for conversion with respect to the overdrafts in the Kaplan Accounts resulting from the dishonor and return of the First Deal Checks;

3. Whether the Kaplan Parties are liable for fraudulent concealment with respect to the overdrafts in the Kaplan Accounts resulting from the dishonor and return of the First–Deal Checks;

4. Whether the Kaplan Parties are liable for aiding/abetting with respect to the overdrafts in the Kaplan Accounts resulting from the dishonor and return of the First–Deal Checks;

5. Whether the Kaplan Parties are liable for conspiracy with respect to the overdrafts in the Kaplan Accounts resulting from the dishonor and return of the First–Deal Checks;

6. Whether the Kaplan Parties are liable for punitive damages on the tort claims.

I. Preliminary Issues

A. Regions and the Kaplan Parties stipulated that Articles 3, 4, and 4A of Florida's Uniform Commercial Code apply to the dispute between Regions

and the Kaplan Parties. The Parties do not stipulate as to whether the Code displaces or does not displace all common law principles with respect to this dispute. (Dkt. 649, Exh. J, p. 122)

B. Judicial Notice as to Formation of Kaplan Entities

The Court takes judicial notice of the records of the State of Florida Division of Corporations as follows:

MK Investing, LLC was formed on March 26, 2010;

BNK Smith, LLC was formed on October 3, 2011.

C. Judicial Notice of Related Criminal Cases

In Case No. 8:16–CR–36–T–33TGW, Marcia Caulder was charged in an Information (Dkt. 1) with Conspiracy to Commit Wire and Mail Fraud in violation of 18 U.S.C. Sec. 371. Defendant Caulder entered into a plea agreement (Dkt. 3). The Court accepted Defendant Caulder's plea and adjudicated Defendant Caulder guilty (Dkt. 16). Defendant Caulder was sentenced on September 21, 2016 to 60 months imprisonment, a 3 year term of supervised release, a special assessment of $100.00, restitution of $57,797,575.90, to be paid jointly and severally with Tanisha Melvin (Case No. 8:16–CR–34–T–17JSS), Amber Mathias (Case No. 8:16–CR–35–T–35MAP) and Gary Todd Smith (Case No. 8:16–CR–120–T–17TGW), and forfeiture of $120,000.00 (Dkt. 33). A Corrected Judgment was entered on October 18, 2016 (Dkt. 37). The Corrected Judgment lists each victim and the restitution amounts due to each victim.

In Case No. 8:16–CR–34–T–17TGW, Defendant Tanisha Melvin was charged in an Information (Dkt. 1) with Conspiracy to Commit Wire and Mail Fraud in violation of 18 U.S.C. Sec. 371. Defendant Melvin entered into a plea agreement (Dkt. 4). The Court accepted Defendant Melvin's plea and adjudicated Defendant Melvin guilty (Dkt. 18). Defendant Melvin is set for sentencing on June 30, 2017 (Dkt. 45).

In Case No. 8:16–CR–35–T–17MAP, Defendant Amber Mathias was charged in an Information (Dkt. 1) with Conspiracy to Commit Wire and Mail Fraud in violation of 18 U.S.C. Sec. 371. Defendant Mathias entered into a plea agreement (Dkt. 5). The Court accepted Defendant Mathias' plea and adjudicated Defendant Mathias guilty. Defendant Mathias will be sentenced on a date to be determined.

In Case No. 8:16–CR–120–T–17TGW, Gary Todd Smith was charged in an Indictment with Conspiracy to Commit Mail and Wire Fraud in violation of 18 U.S.C. Sec. 1349 (Count One), and Wire Fraud Affecting a Financial Institution in violation of 18 U.S.C. Sec. 1343 (Count Two) (Dkt. 18). Case No. 8:16–CR–120–T–17TGW was commenced on May 5, 2014 with the filing of a Criminal Complaint against Defendants Gary Todd Smith and Gary Truman Smith. Joint motions to extend the time to file an indictment were granted. The Indictment was filed on March 16, 2016.

The Government filed a Notice of Maximum Penalties, Elements of Offense, Personalization of Elements, and Factual Basis (Dkt. 51). On June 7, 2017, Defendant Gary Todd Smith entered an open plea of guilty to Counts One and Two of the Indictment. Defendant Gary Todd Smith will be sentenced on a date to be determined.

To the extent that any findings of fact may constitute conclusions of law, they are adopted as such. To the extent that any conclusions of law may constitute findings of fact, they are adopted as such.

II. Findings of Fact

1. The operative complaint is the Corrected Second Amended Complaint (Dkt. 671).

The Parties

2. Regions Bank is a banking corporation organized and existing under the laws of Alabama, with its principal place of business in Birmingham, Alabama. Regions Bank is a citizen of Alabama. (Dkt. 649, Exh. F, Stipulated Facts ("SF"), p. 115). Regions Bank operates branches in Sarasota, Florida.

3. At all material times, Marvin I. Kaplan resided in Sarasota, Florida. (Dkt. 649, SF, p. 115).

4. R1A Palms, LLC ("R1A"), Triple Net Exchange, LLC ("TNE"), MK Investing, LLC ("MKI"), and BNK Smith, LLC ("BNK") (the "Kaplan Entities") are limited liability companies. (Dkt. 649, SF, p. 115).

5. R1A Palms, LLC, MK Investing, LLC and BNK Smith, LLC were organized under Florida law, with their principal place of business in Sarasota County, Florida. (Dkt. 649, SF, p. 115).

6. Triple Net Exchange, LLC is a limited liability company organized under Delaware law, with its principal place of business in Sarasota County, Florida. (Dkt. 649, SF, p. 115). TNE maintained a deposit account with Regions Bank in Florida out of which this action arises; TNE breached its agreement with Regions Bank requiring acts to be performed in Florida. Regions Bank alleges that TNE committed torts in Florida. (Dkt. 671).

7. Marvin I. Kaplan owned, managed and controlled the Kaplan Entities (R1A, TNE, MKI, BNK). (Dkt. 649, SF, p. 115).

8. In his capacity as owner and managing agent, Marvin I. Kaplan directed all deposit and withdrawal activities on the deposit accounts maintained by the Kaplan Entities with Regions Bank.

Jurisdiction

9. The Complaint was filed in Sarasota County Circuit Court on February 23, 2012, and was removed on August 13, 2012. Cross–Defendant Bridgeview Bancorp, Inc. removed this case on the basis of federal question jurisdiction. The Counterclaim/Crossclaim included claims for violation of 18 U.S.C. Sec. 1962(c), (d) and for breach of 12 C.F.R. Part 229 (Dkt. 3, Count IV; Counts XII, XIII).

10. Counterclaim/Crossclaim Plaintiffs Marvin I. Kaplan and the Kaplan Entities filed an Amended Counterclaim/Crossclaim (Dkt. 93), which included claims for violation of 18 U.S.C. Sec. 1962(c), (d) and for breach of 12 C.F.R. Part 229 (Dkt. 93, Counts IV, V; Counts XV, XVI).

11. The Court denied Motions to Dismiss the RICO and RICO conspiracy claims, and the claims for breach of 12 C.F.R. Part 229 (Dkt. 244).

12. On reconsideration, the Court granted Motions to Dismiss the RICO and RICO conspiracy claims (Dkts. 351, 378).

13. The Court granted Motions for Summary Judgment in favor of Bridgeview Bank Group and Wells Fargo Bank, N.A. on the claims for breach of 12 C.F.R. Part 229 (Dkts. 655, 656).

14. In the Corrected Second Amended Complaint, Regions Bank alleges jurisdiction pursuant to 28 U.S.C. Sec. 1332 because the amount in controversy exceeds $75,000.00, exclusive of interest and costs, and the action is between citizens of different states.

Chronology of Kaplan and Kaplan Entities with SAA/Smiths

15. SAA was run and operated by Gary and Todd Smith. (Dkt. 649, SF, p. 115).

16. At all relevant times, Smith Advertising and Associates, Inc. ("SAA") maintained a deposit account with Bridgeview Bank Group in Illinois. (PI. Exhs. 349D, 349E).

17. During the relevant...