Regions Bank v. Kaplan
| Decision Date | 18 April 2016 |
| Docket Number | CASE NO. 8:12-CV-1837-T-17MAP |
| Court | U.S. District Court — Middle District of Florida |
| Parties | REGIONS BANK, etc., Plaintiff, v. MARVIN I. KAPLAN, etc., et al., Defendants. MARVIN I. KAPLAN, etc., et al., Counterclaim/Crossclaim Plaintiffs, v. REGIONS BANK, etc., et al., Counterclaim/Crossclaim Defendants. |
This cause is before the Court on:
The material recited facts are drawn from the Parties' Statements of Undisputed Facts and other record evidence; the facts are either undisputed or taken in the light most favorable to non-movants Counterclaim/Crossclaim Defendants.
Three sets of checks are at issue:
"First Deal" Checks
$10,857,300.
"Second Deal" Checks
$11,956,035.
WFB Replacement Checks
$ 9,850,000.
WFB Replacement Check 1409 was returned "NSF." Crossclaim/Counterclaim Plaintiffs do not dispute that Check 1409 was properly returned.
The record evidence includes consideration of the following exhibits within Dkt. 539, among others:
Bridgeview Bank Group ("BBG") is the Illinois bank where Smith Advertising and Associates ("SAA") had checking accounts; Account *8201 is the checking account involved in this case. In general, after R1A Palms. LLC ("R1A"), Triple Net Exchange, LLC ("TNE"), MK Investing, LLC ("MKI") and BNK Smith LLC ("BNK") agreed to enterinto "investments" consisting of short term loans to Smith Advertising and Associates ("SAA"), SAA would send checks to those entities, which represented interest, incentives, and return of principal. Counterclaim/Crossclaim Plaintiff Kaplan deposited checks from SAA into checking accounts of R1A, TNE, MKI and BNK at Regions Bank. Kaplan, on behalf of the Kaplan Entities, wired funds from Regions Bank to SAA's account at BBG to participate in ongoing "deals." The "Refer to Maker" ("RTM") claims against BBG arise from BBG's dishonor of SAA checks drawn on BBG. (Dkt. 542, pars. 79(a)-(ff)).
On Friday, January 20, 2012, Counterclaim/Crossclaim Plaintiff Kaplan wired out $9,700,000.00 (R1A: $8,600,000; MKI: $1,100,000) (Dkts. 541-3, p. 9; 541-6, p. 4) to SAA. On Friday, January 20, 2012, Counterclaim/Crossclaim Plaintiff also deposited checks totaling $10,857,300.00 ("First Deal" Checks) to the accounts of R1A, TNE, MKI and BNK at Regions. (Exhs. 78, 81, 82, 83). The notes sent to Counterclaim/Crossclaim Plaintiffs totaled $9,500,000.00. Regions presented the First Deal Checks to BBG on Monday, January 23, 2012. BBG dishonored the First Deal Checks and notified Regions that the Checks were dishonored on Tuesday, January 24, 2012.
On Monday, January 23, 2012, Counterclaim/Crossclaim Plaintiff Kaplan wired out $10,450,000.00 (R1A: $9,200,000.00; MKI: $1,250,000.00)(Exh. 90) to SAA. Counterclaim/Crossclaim Plaintiff Kaplan, by an agent, deposited checks in the amount of $11,956,035.00 ("Second Deal" Checks) into the accounts of Counterclaim/Crossclaim Defendants on Monday, January 23, 2012. (Exhs. 91, 94, 95, 96). The notes Counterclaim/Crossclaim Plaintiff Kaplan received totaled $10,550,000.00. Regions presented the Second Deal Checks to BBG on Tuesday, January 24, 2012. BBG dishonored the Second Deal Checks and notified Regions that the Checks were dishonored on Wednesday, January 25, 2012.
SAA maintained a checking account at Wells Fargo Bank, N.A. ("WFB") (Account No. xxxx-xxxx-3952). On Wednesday, January 25, 2012, SAA wired $1,406,035.00 from its SAA WFB 3952 Account to R1A's account at WFB. (Dkt. 538-3, p. 6 shows a wire transfer from Wells Fargo Bank, N.A. to Wachovia Bank, N.A. of Florida for checks "63465, 63438, 63464, 63468, 63440, 63466, 63467, 63461," beneficiary is R1A Palms, LLC; Dkt. 539, Ex. 286.)
On Thursday, January 26, 2012, Defendant Kaplan deposited 21 checks ("WFB Replacement Checks") drawn by SAA on the SAA WFB Account to accounts of R1A, TNE, MKI and BNK at Regions Bank. These checks totaled $10,550,000, and were replacement checks for checks drawn by SAA on the SAA BBG Account, which BBG had dishonored. The purpose of the WFB Replacement Checks was to repay Regions Bank for the overdrafts in the accounts of R1A, TNE, MKI and BNK. Regions Bank placed a hold on these funds.
Regions Bank contacted Wells Fargo to indicate that checks of more than $10 million drawn on the SAA WFB Account were deposited, and that Defendant Kaplan was depositing checks drawn on SAA's Account with BBG which had been returned "Refer to Maker." Regions Bank provided Wells Fargo with copies of the WFB Replacement Checks. Upon receiving copies of the WFB Replacement Checks, Wells Fargo investigated the activity in the SAA WFB Account, which showed a balance of $11,301.53. Wells Fargo placed a debit restriction on the SAA WFB Account.
Regions presented the WFB Replacement Checks for payment on Thursday, January 26, 2012. When the checks were presented for payment, WFB's return and processing system flagged them, and sent the checks for manual review and processing consistent with the debit restraint. The first WFB Replacement Check, in the amount of $700,000.00 was returned "NSF" and the remaining WFB Replacement Checks were returned "Refer to Maker." WFB dishonored the 20 WFB ReplacementChecks and notified Regions that the Checks were dishonored on Friday, January 27, 2012.
Defendant Plaintiff Marvin Kaplan is a sophisticated businessman who owned and managed R1A, TNE, MKI and BNK. Defendant Kaplan was the authorized representative for banking transactions for R1A, TNE, MKI and BNK. Defendant Kaplan entered into the Deposit Agreements and Wire Transfer Agreements for the accounts of R1A, TNE, MKI and BNK. Defendant Kaplan received a copy of the Deposit Agreement. The Deposit Agreement explains Regions "Funds Availability Policy."
In his deposition, Defendant Marvin Kaplan testified that he has conducted business with 20-25 banks and has operated hundreds of bank accounts. Defendant Kaplan further testified that he understood the meaning of "cleared funds," "available funds," "next day availability," and a "hold" on funds availability.
It is undisputed that Defendant Kaplan initiated all wire transfers for the accounts of R1A, TNE, MKI and BNK by a telephone call to Regions Money Transfer Department in Birmingham, Alabama. In his deposition, Defendant Kaplan testified that at the time Defendant Kaplan initiated wire transfers, he did not inquire whether funds were available, but made the wire transfer after viewing the account balances online, which indicated "available" funds. Defendant Kaplan admitted that he knew that the payment order to carry out the wire transfer would not be executed if funds were not available. Defendant Kaplan did not inquire as to funds availability at the time of his phone call placing the payment order. Defendant Kaplan carried out internal transfers between accounts via online access to the accounts.
Defendant Kaplan began the investment activities with the Smiths and SAA in 2008. Defendant Kaplan testified that, in general, Defendant Kaplan agreed to a deal, wired funds to SAA that day, and later received SAA checks returning principal and a profit via a FedEx package. The checks for profit were immediately deposited, and usually the principal repayment checks were deposited after 30 days. Defendant Kaplan testified that he did not request or examine the underlying deal documentation, such as purchase orders to SAA, SAA invoices to customers, SAA purchase orders to vendors, or vendor invoices offering prepayment discounts, with one exception in 2011. Defendant Kaplan continued to participate in the deals offered to him because of the extraordinary returns.
Defendant Kaplan opened the accounts at Regions because of the higher limit on wire transfers. Defendant Kaplan's investment activities changed in November, 2011. Larger amounts of money were involved in each deal. The deals typically involved the Kaplan's agreement to participate on Day 1, Kaplan's wiring out of funds to SAA and receipt of SAA notes and checks for principal, interest and incentives on Day 2, with the immediate deposit of the checks on Day 2. The amount of the checks received was always substantially greater than the amount of the outgoing wire earlier the same day. The circular movement of funds took place almost daily from December 1, 2011 to January 24, 2012. (Dkt. 541-3). Defendant Kaplan testified that the...
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