Freeman v. First Union Nat. Bank, SC03-896.

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

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.

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 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 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 question to this Court: "Under Florida law, is there a cause of action for aiding and abetting a fraudulent transfer when the alleged aider-abettor is not a transferee?" Id. at 1234. We conclude that the creation of such an action was not contemplated by enactment of the statute.

FUFTA

The appellants argue that the certified question should be answered in the affirmative because they believe that FUFTA, specifically section 726.108(1)(c)3, Florida Statutes (2002), encompasses a separate tort for aiding and abetting a fraudulent transfer, with the wording "[a]ny other relief the circumstances may require." Accordingly, the appellants contend that FUFTA is broad enough to allow a claim for money damages against First Union, which allegedly facilitated the fraudulent transfer of money. The appellees respond that this Court should answer the certified question in the negative because the FUFTA is strictly limited to relief against a "transferee" and First Union was not a transferee in this case.⁴

We begin our analysis by considering the provisions of chapter 726, Florida Statutes, which codifies FUFTA and states in pertinent part:

726.105 Transfers fraudulent as to present and future creditors.—

(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(a) With actual intent to hinder, delay, or defraud any creditor of the debtor;....

726.106 Transfers fraudulent as to present creditors.—

(1) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

(2) A transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer was made to an insider for an antecedent debt, the debtor was insolvent at that time, and the insider had reasonable cause to believe that the debtor was insolvent.

726.108 Remedies of creditors.—

(1) In an action for relief against a transfer or obligation under ss. 726.101-726.112, a creditor, subject to the limitations in s. 726.109 may obtain:

(a) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim;

(b) An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with applicable law;

(c) Subject to applicable principles of equity and in accordance with applicable rules of civil procedure:

1. An injunction against further disposition by the debtor or a transferee, or both, of the asset transferred or of other property;

2. Appointment of a receiver to take charge of the asset transferred or of other property of the transferee; or

3. Any other relief the circumstances may require.

§§ 726.105-.108, Fla. Stat. (2002) (emphasis added). Although the FUFTA statutory scheme provides a "catch-all" phrase that allows courts to award "other relief," we believe that the Legislature intended it to facilitate the use of the other remedies provided in the statute, rather than creating new and independent causes of action such as aider-abettor liability, as the appellants argue.

When considering legislative intent, this Court has consistently explained:

Our purpose in construing a statute is to give effect to the Legislature's intent. State v. J.M., 824 So.2d 105, 109 (Fla. 2002). In attempting to discern legislative intent, we first look to the actual language used in the statute. Joshua v. City of Gainesville, 768 So.2d 432, 435 (Fla.2000). If the statutory language is unclear, we apply rules of statutory construction and explore legislative history to determine legislative intent. Id.; Weber v. Dobbins, 616 So.2d 956, 958 (Fla.1993).

BellSouth Telecommunications, Inc. v. Meeks, 863 So.2d 287, 289 (Fla.2003). On the face of the statute, there is no ambiguity with respect to whether FUFTA creates an independent cause of action for aiding-abetting liability. There simply is no language in FUFTA that suggests the creation of a distinct cause of action for aiding-abetting claims against non-transferees. Rather, it appears that FUFTA was intended to codify an existing but imprecise system whereby transfers that were intended to defraud creditors could be set aside. For example, recently, in Friedman v. Heart Institute of Port St. Lucie, Inc., 863 So.2d 189 (Fla. 2003), this Court analyzed FUFTA, stating:

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