Empire World Towers, LLC v. CDR CRéances, S.A.S., Nos. 3D11–155

• Court: Court of Appeal of Florida (US)
• Writing for the Court: ROTHENBERG
• Citation: 89 So.3d 1034
• Decision Date: 03 July 2012
• Docket Number: Nos. 3D11–155,3D11–159.
• Parties: EMPIRE WORLD TOWERS, LLC, et al., Appellants, v. CDR CRÉANCES, S.A.S., Appellee.

89 So.3d 1034

EMPIRE WORLD TOWERS, LLC, et al., Appellants,
v.
CDR CRÉANCES, S.A.S., Appellee.

Nos. 3D11–155, 3D11–159.

District Court of Appeal of Florida,
Third District.

May 30, 2012.
Rehearing Denied July 3, 2012.

[89 So.3d 1037]

Holland & Knight, LLP, and Rodolfo Sorondo, Jr., and Christopher N. Bellows, for appellants Leon Cohen, Maurice Cohen, and Sonia Cohen.

Devine Goodman Rasco & Wells, P.A., and Lawrence D. Goodman, Robert J. Kuntz, Jr., and Lindsey H. Lamchick; Hicks, Porter, Ebenfeld & Stein, P.A., and Dinah S. Stein, for appellants Lea Cohen, et al.

Kasowitz, Benson, Torres & Friedman LLP, and Marcos Daniel Jiménez, Scott B. Cosgrove, and Ann M. St. Peter–Griffith; Ross & Girten, and Laurie Waldman Ross, for appellee.

Before WELLS, C.J., and SHEPHERD and ROTHENBERG, JJ.

ROTHENBERG, J.
THE FACTUAL AND PROCEDURAL HISTORY I. Background

Leon Cohen, Maurice Cohen, and Sonia Cohen (collectively, the “Cohens”) appeal from a final order granting CDR Créances' (the “Bank”) motion to strike the defendants' pleadings and enter a default judgment based on fraud on the court (the “Motion to Strike”). Lea Cohen and thirty-four Florida corporations (the “Corporate Defendants”) ¹ owned or controlled by the Cohens appeal from a final judgment and an order appointing a receiver that grants the Bank, as a default sanction, ownership and control of the Corporate Defendants' real property. This Court consolidated the appeals for all appellate purposes. Based on the following, we reverse the default sanction with respect to Lea Cohen, and affirm it as to the remaining defendants.

The litigation below commenced when the Bank sued the defendants. The complaint alleges the Bank's predecessor-in-interest, Société de Banque Occidentale, loaned money to Euro–American Lodging Corporation, a Cohen company, for the purposes of purchasing and renovating a New York City hotel. The loan was secured by the revenues generated by the hotel and two mortgages on the hotel property, among other assets. The complaint alleges the Cohens diverted hotel revenues from the hotel, sold the hotel, kept the sale proceeds, hid the stolen money in offshore bearer share corporations ² and Swiss bank accounts (collectively, the “Offshore Entities”), and ultimately used these funds to purchase and maintain several Florida properties owned by the Corporate Defendants (the “Florida Properties”).

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³ In the complaint, the Bank sought to enjoin the transfer of the Florida Properties (count two), and to impose a constructive trust on them (count three).⁴

II. The Motion to Strike and Evidentiary Hearing

On August 13, 2010, the Bank filed its Motion to Strike, alleging the defendants schemed to defraud the trial court by submitting perjured deposition testimony, suborning and attempting to suborn perjury, and forging corporate documents, all in an effort to conceal the Cohens' ownership interests in the Corporate Defendants and Offshore Entities. On October 1, 2010, the trial court commenced an evidentiary hearing on the Motion to Strike, and received evidence over a three-day period. After the hearing, the trial court concluded the defendants intended to defraud the Florida court, and struck their pleadings. Upon review of the case law and the voluminous record, we affirm in part, and reverse in part.

LEGAL ANALYSIS I. The Trial Court Properly Struck the Cohens' and the Corporate Defendants' Pleadings
A. The Case Law

The striking of a party's pleadings “has long been an available and often favored remedy for a party's misconduct in the litigation process.” Bertrand v. Belhomme, 892 So.2d 1150, 1152 (Fla. 3d DCA 2005). The rationale underlying the sanction is that “a party who has been guilty of fraud or misconduct in the prosecution or defense of a civil proceeding should not be permitted to continue to employ the very institution it has subverted to achieve her ends.” Id. (quoting Metro. Dade Cnty. v. Martinsen, 736 So.2d 794, 795 (Fla. 3d DCA 1999)). Of course, the dismissal of a party's pleadings is a severe sanction, and thus should be administered only in the most egregious cases. Bertrand, 892 So.2d at 1152. As a result, an order striking pleadings for fraud upon the court is reviewed under a “narrowed” abuse of discretion standard. Williams v. Miami–Dade Cnty. Pub. Health Trust, 17 So.3d 859, 859 (Fla. 3d DCA 2009).

The proponent of a motion to strike pleadings must prove, by clear and convincing evidence, “that a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system's ability impartially to adjudicate a matter by improperly influencing the trier of fact or unfairly hampering the presentation of the opposing party's claim or defense.” Cox v. Burke, 706 So.2d 43, 46 (Fla. 5th DCA 1998) (quoting Aoude v. Mobil Oil Corp., 892 F.2d 1115, 1118 (1st Cir.1989)).

On the spectrum of sanctionable conduct, perjury is perhaps the most egregious. Indeed, “few crimes ... strike more viciously against the integrity of our system of justice than the crime of perjury.” Martinsen, 736 So.2d at 796 (Sorondo, J., concurring). Accordingly, Florida appellate courts have readily affirmed the dismissal of pleadings against a party that engages in perjury when that perjury permeates throughout the trial proceedings and is related to a party's claim or defense. Babe Elias Builders Inc. v. Pernick, 765 So.2d 119, 120–21 (Fla. 3d DCA 2000) (affirming the trial court's entry of default judgment where the defendant instructed his employees to prepare fraudulent invoices,

[89 So.3d 1039]

suborned their perjury regarding the legitimacy of these fraudulent invoices, and testified falsely regarding these actions, holding that “where a party perpetrates fraud on the court which permeates the entire proceedings, dismissal of the entire case is proper”); see also Papadopoulos v. Cruise Ventures Three Corp., 974 So.2d 418, 419–20 (Fla. 3d DCA 2007) (“Papadopoulos has forfeited his right to seek redress for his claimed injuries based upon his material misrepresentations and omissions that go to the heart of his claims.”); Martinsen, 736 So.2d at 794–95 (remanding for dismissal of the plaintiff's case because her “untruthful sworn statements,” and her “misrepresentations and omissions ... went to the heart of her claim and subverted the integrity of the action”); Cox, 706 So.2d at 47;Mendez v. Blanco, 665 So.2d 1149, 1150 (Fla. 3d DCA 1996) (holding that the trial court did not abuse its discretion in dismissing the plaintiff's complaint where he “committed serious misconduct by repeatedly lying under oath during a deposition”); O'Vahey v. Miller, 644 So.2d 550, 551 (Fla. 3d DCA 1994) (holding that the plaintiff's repeated lies in discovery, uncovered only by the “assiduous efforts of opposing counsel,” “constituted such serious misconduct” that dismissal of the case was required).

B. The Trial Court Was Justified In Striking the Cohens' and the Corporate Defendants' Pleadings.

In striking the Cohens' and the Corporate Defendants' pleadings, the trial court made specific factual findings that the Cohens attempted to defraud the Florida trial court and conceal their ownership interests in the Offshore Entities and Corporate Defendants by: (1) producing fabricated corporate documents; (2) committing perjury in affidavits and depositions; and (3) suborning the perjury of material witnesses and providing them with scripts of lies to repeat under oath. As demonstrated below, these conclusions were supported by overwhelming clear and convincing evidence.

(i) The Cohens produced falsified and forged documents in the Florida litigation.

The record reflects that the Cohens fabricated evidence to prove the Florida Properties were purchased and maintained with “clean” funds from a “private lender,” Whitebury, rather than with money stolen from the Bank. Specifically, the Cohens created and produced a series of sham promissory notes reflecting that ALR and other Corporate Defendants borrowed nearly $60 million from Whitebury. At the hearing on the Motion to Strike, Mr. Habib Levy, Maurice Cohen's brother-in-law, testified that to conceal the Cohens' ownership interest in Whitebury, the Cohens fabricated a “Whitebury Shareholder Affidavit,” forging Mr. Levy's signature as the putative 100% owner of Whitebury, and falsely notarizing it as authentic. The record reflects that, in reality, Whitebury was Maurice Cohen's “personal investment company.” Mr. Levy testified he neither owned Whitebury nor signed the Whitebury documents, and “the first time [he] ever heard of Whitebury was when Mauricio was arrested.”

(ii) The Cohens perjured themselves in deposition testimony, and invited the Florida trial court to accept the perjured depositions.

The Bank also presented evidence establishing that the Cohens committed perjury. In July 2009, Maurice and Leon Cohen appeared for deposition in the related New York litigation, and denied possessing any ownership interest in the Offshore Entities and Corporate Defendants. Early in the Florida litigation, the Cohens filed a motion for a protective order, inviting the trial court to accept the perjured testimony in lieu of live testimony at a lis pendens

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bond hearing. As the Cohens intended, the perjured depositions were introduced into evidence without objection at this hearing.

At the hearing on the Motion to Strike, the Bank established the deposition testimony was false. Specifically, the Bank introduced recorded telephone calls between Maurice Cohen and his HSBC bankers, as well as an unproduced document the Bank independently obtained, in which Maurice Cohen and Leon Cohen acknowledged they were the beneficial owners of ALR. Significantly, although the trial court had issued at least three discovery orders ⁵ directing the defendants to reveal the identities of the beneficial owners of the Corporate Defendants, and to produce all documents relating thereto, the defendants claimed to...