Zelaya/Capital Int'l Judgment, LLC v. Zelaya
| Decision Date | 23 October 2014 |
| Docket Number | 13–10005.,Nos. 12–15351,s. 12–15351 |
| Citation | 769 F.3d 1296 |
| Court | U.S. Court of Appeals — Eleventh Circuit |
| Parties | ZELAYA/CAPITAL INTERNATIONAL JUDGMENT, LLC, Plaintiff–Appellant, v. John ZELAYA, et al., Defendants–Appellees. |
Hector Formoso–Murias, Formoso–Murias, PA, Miami, FL, for Plaintiff–Appellant.
Paul C. Huck, Jr., Hunton & Williams, LLP, Richard Charles Wolfe, Wolfe Law Miami, PA, Miami, FL, Charles Leroy Pickett, Jr., Ciklin Lubitz Martens & O'Connell, West Palm Beach, FL, for Defendants–Appellees.
Appeals from the United States District Court for the Southern District of Florida. D.C. Docket No. 1:06–cv–21213–JAL.
Before TJOFLAT, JULIE CARNES, and GILMAN,* Circuit Judges.
This case stems from Zelaya/Capital International Judgment, LLC's (ZC's) attempt to collect on a $2,678,137.11 judgment that was entered against John Zelaya in February 2004. The 2004 judgment against Zelaya was rendered by the United States District Court for the Southern District of New York and was registered in the Southern District of Florida in May 2006. ZC, however, was not a party to the suit that led to the judgment. Instead, the prevailing parties in the 2004 case (Thomas Telegades, Peter Tosto, and two investment firms) assigned their interests in the judgment to ZC in May 2009, except that Tosto retained a 25% interest in any amount recovered by ZC.
ZC subsequently sought a writ of execution against Zelaya from the Southern District of Florida in September 2009. Soon afterward, ZC served writs of garnishment on numerous banks that it believed were holding Zelaya's assets, including Deutsche Bank. The Securities and Exchange Commission (SEC) later intervened in the case, asserting that it was entitled to a portion of Tosto's 25% interest in the 2004 judgment.
In June 2010, Zelaya deposited the full amount of the judgment (plus postjudgment interest) into the district court's registry. The court then dissolved the writs of garnishment against all of the banks, granted Zelaya's motion for a satisfaction of the judgment, and awarded attorney fees and costs to Deutsche Bank. For the reasons set forth below, we AFFIRM the judgment of the district court.
In 2002, the SEC obtained a $4,480,063.82 judgment against Tosto in the Southern District of New York based on claims of market manipulation. Tosto, in turn, obtained a $2,678,137.11 judgment against Zelaya in the same court in February 2004. The 2004 judgment was subsequently assigned to ZC in May 2009. Tosto, however, retained a 25% interest in any recovery by ZC on the 2004 judgment.
In May 2006, ZC registered the 2004 judgment in the Southern District of Florida. The case remained dormant until September 2009, when a writ of execution was issued against Zelaya. Writs of garnishment were also served on the banks that were believed to hold Zelaya's assets. One of the garnishee banks, Deutsche Bank, filed an answer to the writ of garnishment in November 2009. In its answer, Deutsche Bank disclosed that one of its accounts (held by an entity called “Investors Trust Administration, LLC”) might be subject to the garnishment.
ZC then moved for a default judgment against Deutsche Bank, arguing that the bank's answer to the writ of garnishment was untimely under Florida law, and that ZC was therefore entitled to an amount from the garnished account sufficient to satisfy the 2004 judgment. The motion for default judgment against Deutsche Bank prompted several rounds of motions practice, multiple subpoenas, and a hearing before a magistrate judge.
In January 2010, the SEC served Zelaya with its own writ of garnishment. The writ contended that the SEC had an interest in the 2004 judgment against Zelaya by virtue of its interest in the 2002 judgment against Tosto. In particular, the writ alleged that Zelaya “may have possession, custody or control of property in which ... Peter Tosto ... has a substantial nonexempt interest.” The SEC's allegation was premised on the fact that Tosto had retained a 25% interest in whatever amount ZC might collect on the 2004 judgment.
Zelaya was accordingly faced with competing claims. On the one hand, ZC asserted an interest in Zelaya's funds as the assignee of the 2004 judgment against Zelaya. On the other hand, the SEC asserted an interest as the judgment creditor of its 2002 judgment against Tosto. The SEC, moreover, alleged that Tosto's assignment of the 2004 judgment to ZC might have been fraudulent. Zelaya responded to this dilemma by filing a motion in May 2010 for (1) leave to deposit the judgment amount plus postjudgment interest into the registry of the district court, or (2) leave to file an interpleader action.
The magistrate judge assigned to the case held a hearing on Zelaya's motion in June 2010. One day after the hearing, the magistrate judge issued an omnibus order in which he granted Zelaya leave to deposit the disputed funds (the $2,678,137.11 judgment plus postjudgment interest, for a total of $2,892,250.82) into the court's registry. Zelaya deposited the funds five days later.
ZC then filed objections to the magistrate judge's omnibus order. Among its objections, ZC contended that the district court lacked jurisdiction under Rule 69(a) of the Federal Rules of Civil Procedure () and under Florida law to adjudicate the dispute over the ownership of the funds. It also argued that Zelaya's motion amounted to an impermissible collateral attack on the 2004 judgment. Finally, ZC argued that allowing Zelaya to deposit the disputed funds into the court's registry unfairly deprived ZC of property to which it was entitled.
The district court subsequently denied all of ZC's objections to the June 2010 omnibus order, explaining that Rule 67 of the Federal Rules of Civil Procedure commits the decision of whether to grant leave to deposit funds into the registry to the court's sound discretion. It held that the magistrate judge had not erred in allowing Zelaya to deposit the disputed funds into the court's registry pursuant to Rule 67.
Following the deposit by Zelaya, the magistrate judge issued additional orders that further streamlined the proceedings. One of the orders, which was issued in September 2010, dissolved the writs of garnishment against the banks. The magistrate judge reasoned that “Zelaya's deposit into the Court's registry has now obviated the need for the writs associated with the above-listed [garnishment] motions to remain in place.”
Another order granted the SEC's motion to intervene in the case as a matter of right. The magistrate judge noted in the order that the SEC claimed that it was “entitled to at least a portion of the amount currently deposited in the court registry by reason of its [2002] judgment against Tosto” and that it “might be entitled to more if there was indeed a fraudulent assignment by Tosto of his interest in the 2004 judgment against ... Zelaya.”
ZC filed objections to both the dissolution and intervention orders. The district court again denied all of ZC's objections. In affirming the dissolution order, the court explained that the dissolution of the writs of garnishment had not resulted in any prejudice to ZC because the disputed amount was being safeguarded in the court's registry. And the intervention order was proper because, among other things, the SEC had adequately established its interest in part of the 2004 judgment.
ZC next filed a notice of appeal from the order affirming the dissolution of the writs of garnishment. That appeal, however, was dismissed by this court in May 2011 for lack of subject-matter jurisdiction because the dissolution of the writs of garnishment did not constitute a final decision of the district court.
Another dispute arose over a motion by Zelaya seeking an acknowledgement that he had satisfied the judgment, which he filed in December 2010. ZC opposed the motion on the ground that it had not yet received the funds deposited into the court's registry. The magistrate judge recommended that Zelaya's motion be granted. ZC objected to the report and recommendation, contending that a satisfaction of the judgment would violate both Rule 69(a) of the Federal Rules of Civil Procedure and Florida law. The district court denied ZC's objections and adopted the report and recommendation in full in August 2012.
The final part of the procedural history relevant to this appeal is Deutsche Bank's motion for attorney fees and costs, which was filed in October 2010 after the district court had dissolved the writs of garnishment. Deutsche Bank contended that it was entitled to recover these expenses under Florida law (Fla.Stat. § 77.28 ) as a garnishee bank.
The magistrate judge granted Deutsche Bank's motion in part. Characterizing the case as “lengthy and aggressively litigated,” he concluded that Deutsche Bank was statutorily entitled to attorney fees and costs from ZC. The magistrate judge nonetheless determined that the fees and costs were somewhat high. He therefore reduced them by 20%...
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