Freeman v. First Union Nat. Bank, No. SC03-896.

• Court: United States State Supreme Court of Florida
• Writing for the Court: PER CURIAM.
• Citation: 865 So.2d 1272
• Parties: Lewis B. FREEMAN, etc., et al., Appellants, v. FIRST UNION NATIONAL BANK, etc., et al., Appellees.
• Decision Date: 29 January 2004
• Docket Number: No. SC03-896.

865 So.2d 1272

Lewis B. FREEMAN, etc., et al., Appellants,
v.
FIRST UNION NATIONAL BANK, etc., et al., Appellees

No. SC03-896.

Supreme Court of Florida.

January 29, 2004.

865 So.2d 1273

Patrice A. Talisman of Hersch & Talisman, P.A., Miami, FL; Scott Silver of Silver Garvett & Henkel, Miami, FL; Robert C. Josefsberg, Miami, FL; Ervin Gonzalez of Colson, Hicks, Eidson, et al., Coral Gables, FL; and Steven Mishan, Miami, FL, for Appellants

Elliot H. Scherker, Holly R. Skolnick, and Julissa Rodriguez of Greenberg Traurig, P.A., Miami, FL, for Appellees.

PER CURIAM.

We have for review a question of Florida law certified by the Eleventh Circuit Court of Appeals that is determinative of a cause pending in that court and for which there appears to be no controlling precedent. Freeman v. First Union Nat'l, 329 F.3d 1231, 1234 (11th Cir.2003). We have jurisdiction. See art. V, § 3(b)(6), Fla. Const. The Court certified the question of whether Florida's Uniform Fraudulent Transfer Act created a cause of action for damages in favor of a creditor against an aider or abettor to a fraudulent transaction.¹ We answer the certified question in the negative for the reasons set forth in our analysis below.

FACTS

District Court

In federal district court, the creditor plaintiffs (hereinafter appellants) brought suit against First Union Bank (hereinafter First Union). Appellants sought monetary damages for First Union's role in an alleged fraudulent Ponzi scheme conducted

865 So.2d 1274

by a company called Unique Gems.² The appellants alleged that First Union, as a banking institution servicing Unique Gems' financial transactions, aided and abetted in the fraudulent transfers of money by Unique Gems to the harm of Unique Gems' creditors.³ The district court dismissed the claim with prejudice, citing the failure to state a cause of action under Florida law for the aiding and abetting claim against First Union. The district court held that Florida's Uniform Fraudulent Transfer Act (hereinafter FUFTA) only allows creditors to set aside fraudulent transfers under a theory of cancellation. The district court considered FUFTA to be similar to the fraudulent transfer provision of the Bankruptcy Code, and held that FUFTA does not provide for aider and abettor liability

In its order, the district judge analyzed the purpose and function of the FUFTA, stating:

The equitable remedies identified under the UFTA only permit creditors to set aside fraudulent transfers made to transferees. Specifically, § 726.108(1) permits creditors to: (1) avoid a fraudulent transfer made to a transferee; (2) request that a court attach assets transferred to a transferee; (3) obtain an injunction that enjoins the disposition of assets by a transferee; and, (4) request that a receiver be appointed to assume control over assets transferred to a transferee.

Additionally, courts have held the UFTA is modeled after the fraudulent transfer provisions in the Bankruptcy Code.

(Citation and footnote omitted.)

In dismissing the claim for failure to state a cause of action under Florida law, the district court explained:

Theoretically, the claim requires Plaintiffs plead Defendants (1) had actual knowledge of the fraudulent transfers and (2) that they substantially assisted UGI, its affiliates, and/or principals in effecting the transfers. However, the Court notes the dearth of case law supporting

865 So.2d 1275

such a claim. Moreover, as detailed supra, the Court recognizes the limitations of the UFTA in light of its available remedies; only permitting creditors to set aside fraudulent transfers made to transferees.... Each and every case cited by Plaintiffs recognizes aiding and abetting common law fraud, or another cause of action, but not an UFTA violation.... [A]ttaching common law aiding and abetting liability to UFTA violations is inapposite in light of the remedies available under the statute.

(Citation and footnotes omitted.) The creditors appealed.

Eleventh Circuit

On appeal from the district court's dismissal, the Eleventh Circuit noted that despite the lower court's holding, FUFTA differs from the Bankruptcy Code in important ways. Freeman, 329 F.3d at 1233-34. The Eleventh Circuit found that FUFTA is broader than the Bankruptcy Code because it includes a "catch-all" phrase providing for "any other relief the circumstances may require." Id. at 1233. The Eleventh Circuit also noted that in addition to the catchall phrase, FUFTA provides the court with broad equitable powers because it "unambiguously states that all common law remedies supplement its application." Id. at 1234. The Eleventh Circuit examined Florida case law, but ultimately concluded that "[t]he jointly filed aiding and abetting claim is problematic because the lower Florida courts have not expressly approved such a cause of action and the Florida Supreme Court has not yet examined this question." Id. at 1232 (footnote omitted). Thus, the Eleventh Circuit certified the following...