Regions Bank v. Kaplan
| Decision Date | 19 October 2021 |
| Docket Number | 17-15478,18-13220 |
| Parties | REGIONS BANK, an Alabama banking corporation, Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, v. MARVIN I. KAPLAN, an individual, Defendant-Counter-Claimant-Cross-Claimant Cross-Defendant-Appellee-Cross-Appellant, BRIDGEVIEW BANK GROUP, Counter-Defendant-Cross-Claimant-Counter-Claimant-Appellee, R1A PALMS, LLC, a Florida limited liability company, TRIPLE NET EXCHANGE, LLC, MK INVESTING, LLC, BNK SMITH, LLC, BRIDGEVIEW BANKCORP, INC., et al., Defendants-Counter-Claimants, LIGHTHOUSE POINTE, LLC, Defendant-Cross-Defendant-Appellee, WELLS FARGO, N.A., a national banking association, as successor by merger with Wachovia Bank, N.A., Defendant. REGIONS BANK, an Alabama banking corporation, Plaintiff-Counter Defendant-Appellant, v. MARVIN I. KAPLAN, an individual, R1A PALMS, LLC, a Florida limited liability company, TRIPLE NET EXCHANGE, LLC, MK INVESTING, LLC, BNK SMITH, LLC, et al., Defendants-Counter Claimants-Appellees, LIGHTHOUSE POINTE, LLC, WELLS FARGO, N.A., a national banking association, as successor by merger with Wachavia Bank, N.A., Defendants-Cross Defendants-Appellees. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
DO NOT PUBLISH
Appeals from the United States District Court for the Middle District of Florida D.C. Docket No. 8:12-cv-01837-EAK-MAP
Before William Pryor, Chief Judge, Rosenbaum, and Luck, Circuit Judges.
Regions Bank sued Marvin Kaplan and the companies[1] he controlled to recover unpaid overdraft fees resulting from a check kiting[2] scheme run by Gary Todd Smith and his company, Smith Advertising and Associates. See United States v. Smith, 853 Fed.Appx. 589, 590-91 (11th Cir. 2021) (discussing the scheme). Kaplan
4
countersued and also joined and crossclaimed against Bridgeview Bank Group-one of the banks where Smith had an account. After more than five years of litigation, the district court held a three-week bench trial and finally disposed of all the parties' claims. Both Regions and Kaplan appeal parts of the district court's dismissal order, summary judgment orders, and findings and conclusions after the bench trial; Kaplan appeals some of the magistrate judge's discovery orders; and Regions also appeals as insufficient the district court's order granting sanctions against Kaplan. After careful review of the record and with the benefit of oral argument, we affirm.
In 2008, Kaplan, through his companies, R1A Palms, LLC; Triple Net Exchange, LLC; MK Investing, LLC; and BNK Smith, LLC started making short-term loans to Smith Advertising. Kaplan thought Smith needed the loans to take advantage of discounts offered by his printers for paying printing costs before they were due. Kaplan made the loans by wiring money to Smith's bank account at Bridgeview. Then, Smith would pay the loan back and split the printing discounts with Kaplan as interest on the loans. Between 2008 and 2011, Kaplan made hundreds of short-term loans to Smith as part of the scheme to split the printing discounts.
Then, in November 2011, Smith offered Kaplan an opportunity to participate in so-called "bundled loan deals." Smith told Kaplan that he found a way to "bundle" multiple print deals
5
together and time the payments to secure the printing discounts and repay the principal in a much shorter timeframe. Kaplan believed the bundled deals worked this way: (1) Smith and Kaplan would agree on a loan amount; (2) Smith would mail Kaplan checks and promissory notes reflecting the discounts, principal repayment, and incentive payments; (3) Kaplan would wire the loan amounts to Smith's account at Bridgeview; and (4) Kaplan would later receive the checks from Smith and deposit them, usually on the same day as the wire. Kaplan's companies each maintained a deposit account with Regions, which Kaplan used to facilitate the bundled loan deals. Regions's deposit account agreement required the account holder (Kaplan) to honor any payment made from an account and also required that any "special instructions" as to how Regions should handle the account be in writing.
On January 19, 2012, Kaplan and Smith agreed to the first bundled loan deal, and Smith mailed the corresponding checks and promissory notes to Kaplan. The next morning, Kaplan wired $9, 700, 000 to Smith. Later that morning, Kaplan received and deposited checks from Smith totaling $10, 061, 375. Regions provisionally credited-but did not "clear"-the deposited funds to Kaplan's accounts while it waited for Bridgeview to honor Smith's checks. This meant that the funds showed as "available" in Kaplan's account even though Bridgeview had not yet paid Regions. The next day, Kaplan internally transferred $2, 000, 000 between his accounts using the provisional availability from Smith's ten million dollar payment.
6
Smith and Kaplan then agreed to a second bundled loan deal, to take place on January 23, 2012. At 8:00 a.m. on January 23, Kaplan wired $10, 450, 000 to Smith. By 11:15 a.m., Kaplan received and deposited checks from Smith totaling $11, 956, 035. Later that day, Kaplan also agreed to participate in a third bundled loan deal.
But on the morning of January 24, 2012, before the third deal took place, Kaplan discovered that Regions hadn't credited the second deal checks to his accounts. Kaplan called Regions, and the Regions employee told him that a hold had been placed on the checks. Regions later gave Kaplan written notice that Bridgeview wouldn't honor the first deal and second deal checks. Bridgeview marked the dishonored checks with the return code: "Refer to Maker."
After the first deal checks were dishonored, Smith sent Kaplan replacement checks from his account at Wells Fargo Bank. Kaplan received and deposited the Wells Fargo checks, but they too were dishonored. Because Kaplan had wired out the provisionally credited funds from the dishonored checks, Kaplan's accounts were overdrawn, and he incurred more than six million dollars in overdraft fees. After the checks were dishonored, Regions reported Kaplan-and his social security number-to Wells Fargo, the Secret Service, and Fraud-Net, a fraud database run by the Florida Bankers Association, accusing him of check kiting.
Regions also sued Kaplan in Florida state court to recover the overdraft fees resulting from the dishonored first deal checks. Regions asserted claims for conversion, fraudulent concealment,
7
aiding and abetting fraudulent concealment, civil conspiracy, breach of contract, transfer-warranty liability (as codified at Florida Statutes section 674.207), chargeback/refund liability (as codified at Florida Statutes section 674.2141), and indorser liability (as codified at Florida Statutes section 673.4151).
Kaplan countersued Regions for defamation, "false light" invasion of privacy, negligence, and negligent misrepresentation. Kaplan alleged that Regions was liable for defamation and invasion of privacy because it: (1) sued Kaplan and accused him of check kiting; (2) reported Kaplan to Fraud-Net; and (3) told Wells Fargo and the Secret Service that Kaplan had kited checks. And Kaplan alleged that Regions had acted negligently by provisionally crediting the funds to his account and by representing to him that he had sufficient funds to make the wire transfers.
Kaplan also joined Bridgeview as a third-party defendant and raised six crossclaims against it: conspiracy to defraud; breach of Florida Uniform Commercial Code section 4-302(a); breach of 12 C.F.R. section 229; fraud; negligence; and negligent misrepresentation. Kaplan alleged that Bridgeview fraudulently induced him to wire additional funds into Smith's account by marking Smith's dishonored checks as "Refer to Maker" (which was, Kaplan argued, an improper return designation) and Bridgeview acted negligently by failing to return the dishonored checks with a proper return designation in a timely manner. Bridgeview removed the case to the Middle District of Florida.
8
Regions moved to dismiss Kaplan's defamation and invasion of privacy counterclaims. It argued that Kaplan's defamation claim was barred by Florida's litigation privilege, and, thus, Regions was entitled to absolute immunity for suing Kaplan and accusing him of check kiting. Regions also argued that it was entitled to a qualified privilege for reporting Kaplan to Fraud-Net, Wells Fargo, and the Secret Service because Kaplan had not alleged that Regions acted with express malice and the acts were done in good faith "with an interest to be upheld" and "limited in scope to a specific purpose and published on a proper occasion and manner." Lastly, Regions argued that Kaplan's invasion of privacy claim failed because Florida did not recognize a "false light" invasion of privacy tort.
The district court granted Regions's motion to dismiss with prejudice. It concluded that Florida's litigation privilege provided Regions absolute immunity for suing Kaplan and accusing him of check kiting because those actions "relate[d] to" Regions's claims against Kaplan. The district court also concluded that Regions had a qualified privilege for reporting Kaplan to Fraud-Net, Wells Fargo, and the Secret Service because the reports were made in good faith with an interest to be upheld. The defamation claim failed, the district court determined, because Kaplan hadn't pleaded that Regions made the report with express malice. Finally, the district court interpreted Kaplan's "false light" invasion of privacy claim as one for "public disclosure of private facts" and dismissed it
9
with prejudice because Fraud-Net was a secured, online database and Regions's publication of Kaplan's social security number did not constitute publication to the general public...
To continue reading
Request your trial