Steffen v. Harris & Robinson

• Decision Date: 19 September 2003
• Docket Number: No. 802CV1462T30TGW.,802CV1462T30TGW.
• Citation: 283 F.Supp.2d 1272
• Parties: Terri L. STEFFEN, et al. Plaintiffs, v. GRAY, HARRIS & ROBINSON, P.A. d/b/a Gray Harris Robinson Shackleford Farrior and Geoffrey T. Hodges, Defendants.
• Court: U.S. District Court — Middle District of Florida

283 F.Supp.2d 1272

Terri L. STEFFEN, et al. Plaintiffs, v. GRAY, HARRIS & ROBINSON, P.A. d/b/a Gray Harris Robinson Shackleford Farrior and Geoffrey T. Hodges, Defendants.

No. 802CV1462T30TGW.

United States District Court, M.D. Florida, Tampa Division.

September 19, 2003.

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David A. Maney, Maney, Damsker, Harris & Jones, P.A., Harley Edward Riedel, II, Stichter, Riedel, Blain & Prosser, P.A., Tampa, FL, for Terri L. Steffen, Plaintiffs.

Frank H. Gassler, Katherine C. Lake, Fowler White Boggs Banker, P.A., Tampa, FL, for Gray Harris & Robinson, P.A. dba Gray Harris Shackleford Farrior, Geoffrey T. Hodges, Defendants.

ORDER

MOODY, District Judge.

THIS CAUSE comes before this Court upon Defendants' Motion for Summary Judgment and memorandum of law (Dkts.# 43, 44) and Plaintiff's response (Dkt.# 55) thereto.¹ Defendants filed a reply (Dkt.# 66), and at this Court's request both parties filed supplemental memoranda (Dkts.# 78, 85). In addition, Defendants filed a Motion to Strike Steffen's Third Declaration in Opposition to Motion for Summary Judgment (Dkt.# 90) and Plaintiffs filed a response (Dkt.# 92) thereto. After close consideration, this Court concludes that summary judgment should be granted because Terri L. Steffen is unable to show any alleged negligence by Defendants proximately caused her damages.

I. BACKGROUND

This is a legal malpractice action, arising out of a lengthy litigation odyssey between Paul A. Bilzerian² and the Securities and Exchange Commission (the "SEC"). Bilzerian is the husband of Steffen. In 1989, Bilzerian was convicted of securities fraud.³ In 1991, the SEC obtained summary judgment against him in a separate civil action and later a disgorgement order for over sixty two million dollars.⁴ Then in 1991, Bilzerian filed for bankruptcy after transferring most of his interests in jointly owned assets to his wife, Steffen, in her individual name. Bilzerian (and Steffen for a brief time in the bankruptcy court) battled the SEC and other creditors in the bankruptcy court, the district court, and the United States Court of Appeals for the Eleventh Circuit. The litigation related to Bilzerian's bankruptcy ended in 1998. In 2000, the SEC obtained an order holding Bilzerian in civil contempt. In 2001, the D.C. Court froze the assets of Bilzerian, his family (including Steffen), and several family friends and incarcerated Bilzerian. In 2002, Steffen settled with the SEC to obtain the release of Bilzerian from prison and of her previously frozen assets.

During this litigation odyssey in 1994-1995, Steffen and Bilzerian employed Defendants for estate planning and asset protection purposes. On the advice of Defendants, Steffen and Bilzerian transferred into the direct or indirect control of a foreign self-settled trust (the "Trust") almost all of their property, including: (1) a piece of real property located in Crosslake, Minnesota, held by Steffen, individually (the "Minnesota Property");⁵ (2) Steffen's and Bilzerian's homestead held jointly by the parties (the "Homestead"); (3) another piece of real property located in Tampa, Florida, held jointly by the parties (the "Taray Property");⁶ and (4) Bicoastal Holding Corporation ("BHC") stock (the "Bicoastal Stock") held jointly. At the time that the Trust was formed, BHC appears to have had at least 600,000 options and/or warrants for Cimetrix, Inc. ("Cimetrix") stock, which were later exercised.⁷

Steffen claims that the transfer of this property to the Trust subjected her assets to a direct claim by the SEC. She settled that claim in 2002, and allegedly lost over fifty percent of that property to the SEC. Steffen alleges that Defendants committed legal malpractice when Defendants advised her to establish the Trust and transfer her property. Before reaching the merits of Defendants' motion, some more detailed factual background is required.

A. INITIAL TRANSFERS

In February 1991, while the SEC's motion for summary judgment was pending in the original civil enforcement action, Bilzerian transferred his interest to Steffen in the Minnesota Property that he and Steffen previously owned jointly. In May 1991, after summary judgment was granted in the civil enforcement action, Bilzerian transferred to Steffen his interests in the Homestead and Taray Property, which the couple also had previously owned jointly. In other words, Bilzerian divested himself of almost all of his assets, except for his interest in the Bicoastal Stock, as the SEC attempted to obtain a disgorgement order against him.⁸

B. BILZERIAN'S BANKRUPTCY

In August 1991 (approximately three months after purportedly transferring almost all of his assets to his wife), Bilzerian filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida. Bilzerian sought to discharge any claim of the SEC as well as several other sizeable judgment creditors.

The SEC filed a dischargeability action against Bilzerian, seeking to prevent the discharge of the SEC's disgorgement claim.⁹ Bilzerian filed a motion to dismiss the SEC's action, claiming that the SEC did not have standing to bring a dischargeability action. The bankruptcy court agreed and dismissed the SEC's dischargeability action with prejudice. The SEC appealed, and in May 1995, the district court reversed. See SEC v. Bilzerian (In re Bilzerian), 1995 WL 934184 (M.D.Fla.1995).¹⁰

On remand, the SEC sought summary judgment, arguing collateral estoppel barred the discharge of the disgorgement order. The bankruptcy court denied the SEC's motion and sua sponte granted summary judgment to Bilzerian. In October 1996, the district court again reversed the bankruptcy court and entered summary judgment in favor of the SEC, concluding that the disgorgement order was nondischargeable. See SEC v. Bilzerian (In re Bilzerian), 1996 WL 885850 (M.D.Fla.1996), aff'd 153 F.3d 1278, reh'g en banc den. 166 F.3d 355 (11th Cir. 1998).¹¹

C. ADVERSARY PROCEEDING AGAINST STEFFEN

In addition to the dischargeability action, the trustee of Bilzerian's bankruptcy case brought an adversary proceeding against Steffen, seeking in part to avoid the real property transfers from Bilzerian to Steffen.¹² In October-November 1993, Steffen and the trustee negotiated a settlement of the trustee's claims against the estate (the "Release"). The Release stated that Steffen (and the three pieces of real property and the BHC stock) were released from "all claims, demands, suits, causes of action, or liabilities whatsoever, legal or equitable, known or unknown, now existing or hereafter arising that have been, could have been or could be asserted as a result of the transfer of any assets of the estate."¹³ The Release purported to be on behalf of "all creditors of [Bilzerian's] bankruptcy estate."

In November 1993, the trustee, Bilzerian, and Steffen sought court approval of the settlement. The SEC objected to the settlement, arguing, in relevant part, that the Release language was too broad and purported to release their fraudulent transfer claims against Steffen. On January 4, 1994, the bankruptcy court overruled the SEC's objections, but required language to be inserted into the Release substantially narrowing what actions were being released. The language inserted reads that:

This release shall not operate to release non-bankruptcy causes of action, if any, which are available to Creditors against Bilzerian and/or Steffen under any applicable non-bankruptcy law; is limited to the powers of a trustee uniquely granted to a trustee under 11 U.S.C. §§ 544(a) and (b), 547, and 548; and shall have no effect on adversary proceedings 92-502, 92-573, and 93-822, all now pending in the United States Bankruptcy Court for the Middle District of Florida.

On February 23, 1994, the bankruptcy court granted the motion to compromise, overruled the SEC's objections, and approved the settlement and the form of the Release with the inserted language.

D. POST RELEASE TRANSFERS

In June 1994 (a couple of weeks after the bankruptcy settlement was finalized), Steffen transferred ownership of the Homestead and Taray Property back to her and Bilzerian jointly.¹⁴ The transfer allegedly occurred because Steffen wanted Bilzerian's help in disputing a property tax assessment on their Homestead which required Bilzerian to be an owner. Despite transferring title into both their names, Bilzerian (by an unrecorded side agreement) agreed Steffen: (1) would get the Homestead Property in the event of divorce; and (2) had the right to demand and compel Bilzerian to transfer his interest in the Homestead at any time.

At around the same time, Cimetrix granted BHC options and/or warrants to purchase 6,000,000 shares of its common stock for $0.16 per share. Bilzerian was the President, Chief Executive Officer, and director of Cimetrix.¹⁵ Bilzerian never directly received a salary from Cimetrix for his services.¹⁶ Instead, BHC entered into annual consulting agreements in which Cimetrix agreed to pay BHC for Bilzerian's services and part of Bilzerian's and Steffen's personal expenses. BHC never paid Bilzerian any salary either, but did grant Bilzerian and Steffen a dividend of the options and/or warrants of 5,400,000 shares of Cimetrix stock and also paid part of Bilzerian's and Steffen's personal expenses.¹⁷

E. ESTABLISHMENT OF THE TRUST AND RELATED ENTITIES

In 1994, Steffen went to Defendants for estate planning and asset protection purposes. Defendants advised Steffen to transfer her property into a complex ownership structure of family owned trusts, companies, and partnerships. On December 29, 1995, Steffen and Bilzerian established a foreign self settled trust in the Cook Islands. From the date of its establishment until December 1998, Bilzerian served as both a trustee and a beneficiary.

By 1997, the Trust held or controlled all of Steffen and Bilzerian's assets. In December 1995, Bilzerian and Steffen transferred all their...