Wiand v. Wells Fargo Bank, N.A.

• Decision Date: 09 February 2015
• Docket Number: Case No. 8:12–cv–557–T–27EAJ.
• Citation: 86 F.Supp.3d 1316
• Parties: Burton W. WIAND, as Court–Appointed Receiver for Scoop Real Estate L.P. et al., Plaintiff, v. WELLS FARGO BANK, N.A., et al., Defendants.
• Court: U.S. District Court — Middle District of Florida

86 F.Supp.3d 1316

Burton W. WIAND, as Court–Appointed Receiver for Scoop Real Estate L.P. et al., Plaintiff

v.WELLS FARGO BANK, N.A., et al., Defendants.

Case No. 8:12–cv–557–T–27EAJ.

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

Signed Feb. 9, 2015.

Christopher Craig Casper, Sean P. Keefe, Terry Alan Smiljanich, Sean Estes, James, Hoyer, Newcomer & Smiljanich, PA, Tampa, FL, for Plaintiff.

Beth A. Cronin, Dale W. Cravey, Marie Tomassi, Trenam Kemker, St. Petersburg, FL, Charles M. Harris, Jr., Jason H. Baruch, Marvin E. Barkin, George Elias Nader, Richard M. Hanchett, Trenam Kemker, Tampa, FL, for Defendants.

ORDER

JAMES D. WHITTEMORE, District Judge.

BEFORE THE COURT are the Receiver's Renewed Motion for Partial Summary Judgment (Dkt. 228), the opposition of Wells Fargo Bank, N.A. (“the Bank”) (Dkt. 255), the Bank's Motion for Summary Judgment on Plaintiff's Third Amended Complaint (Dkt. 231), and the Receiver's opposition (Dkt. 251). As requested, supplemental briefs were filed by the Bank (Dkt. 323) and the Receiver (Dkt. 324). Upon consideration, the Bank's motion is GRANTED and the Receiver's motion is DENIED.

I. Introduction

Although the Receiver exhaustively describes Arthur Nadel's Ponzi scheme in more than 17 pages of his Renewed Motion for Partial Summary Judgment (Dkt. 228), it is undisputed that Nadel perpetrated a Ponzi scheme between 1999 and 2009. See Wiand v. Lee, 753 F.3d 1194, 1201 (11th Cir.2014). He controlled six hedge funds, Scoop Real Estate, L.P. (“SRE”), Victory Fund, Ltd., Victory IRA Fund, Ltd., Valhalla Investment Partners, L.P., Viking Fund, LLC, and Viking IRA Fund, LLC, and raised millions of dollars from investors, much of which Nadel stole. Nadel's Ponzi scheme was eventually discovered in early 2009 and he was indicted and ultimately pleaded guilty to six counts of securities fraud, one count of mail fraud, and eight counts of wire fraud (Dkt. 189; Ex. K, L–M). He died in federal prison in 2012.

Nadel used two management companies, Scoop Capital, LLC and Scoop Management, Inc. to manage the hedge funds. Nadel, the management companies, and the hedge funds SRE and Victory Fund had accounts at SouthTrust Bank, which merged with Wachovia Bank, and finally with Wells Fargo Bank, N.A., the only remaining Defendant (Dkt. 213 ¶¶ 4, 27–29, 102). According to the Third Amended Complaint, the Bank invested in two of the hedge funds, SRE and Viking Fund, and in the course of its investment, received monthly performance statements and a private placement memorandum (Id. ¶¶ 63–72, 76, 78). The Bank allegedly requested audited financial statements of the hedge funds, which were never provided, and in 2008, demanded full redemption of its investment in the funds (Id. at ¶¶ 79–80).

Burton Wiand was appointed Receiver for the hedge funds and filed this action. He alleges that Nadel opened at least 12 accounts at the Bank, two of which were personal accounts designated as d/b/a accounts for Valhalla Investments and Viking Fund (Id. at ¶¶ 27–28), but alleges that Nadel lacked authority to open these accounts (Id. at ¶¶ 41–42, 47–51, 56). According to the Receiver, these d/b/a accounts were used by Nadel to convert money from the funds (Id. at ¶¶ 27–28, 44). In addition to investing in SRE and Victory Fund and maintaining several accounts for Nadel and the entities he controlled, the Bank loaned money to Nadel on four occasions from 2001 to 2008, after conducting due diligence inquiries. Incident to these loans, the Bank received security interests in four parcels of real property, including Nadel's residence in Sarasota (Id. at ¶¶ 82–86, 88).

The Receiver alleges that Nadel frequently transferred large sums of money between his accounts which triggered fraud alerts and generated special reports in the Bank's record-keeping system (Id. ¶¶ 45–46, 57–58, 91–92, 95–96, 98). He contends that during the course of Nadel's fraudulent activities, the Bank failed to follow federal regulations and its internal procedures concerning money laundering and verification of customers.

The Receiver's Third Amended Complaint (Dkt. 213) is the operative pleading. The remaining claims are for common law negligence (Counts I and II), avoidance of fraudulent transfers (Count III), and unjust enrichment (Count IV). The Bank moves for summary judgment on all counts. The Receiver moves for partial summary judgment on the Ponzi presumption and to extinguish the Bank's affirmative defenses.

II. Standard

Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A genuine factual dispute exists only if a reasonable fact-finder ‘could find by a preponderance of the evidence that the [non-movant] is entitled to a verdict.’ ” Kernel Records Oy v. Mosley, 694 F.3d 1294, 1300 (11th Cir.2012) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). A fact is material if it may affect the outcome of the suit under the governing law. Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997).

The moving party bears the initial burden of showing the court, by reference to materials on file, that there are no genuine disputes of material fact that should be decided at trial. Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir.2004) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). If the moving party fails to demonstrate the absence of a genuine dispute, the motion should be denied. Kernel Records, 694 F.3d at 1300 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 160, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) ; Clark v. Coats & Clark, Inc., 929 F.2d 604, 606–08 (11th Cir.1991) ). Once the movant adequately supports its motion, the burden shifts to the nonmoving party to show that specific facts exist that raise a genuine issue for trial. Dietz v. Smithkline Beecham Corp., 598 F.3d 812, 815 (11th Cir.2010). The nonmoving party must “go beyond the pleadings,” and designate specific facts showing that there is a genuine dispute. Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593–94 (11th Cir.1995) (citing Celotex, 477 U.S. at 324, 106 S.Ct. 2548). A mere scintilla of evidence in the form of conclusory allegations, legal conclusions, or evidence that is merely colorable or not significantly probative of a disputed fact cannot satisfy a party's burden. Avirgan v. Hull, 932 F.2d 1572, 1577 (11th Cir.1991) ; Kernel Records, 694 F.3d at 1301.

The evidence presented must be viewed in the light most favorable to the nonmoving party. Ross v. Jefferson Cnty. Dep't of Health, 701 F.3d 655, 658 (11th Cir.2012). If there is a conflict between the parties' allegations or evidence, the nonmoving party's evidence is presumed to be true. Shotz v. City of Plantation, Fla., 344 F.3d 1161, 1164 (11th Cir.2003). “Although all justifiable inferences are to be drawn in favor of the nonmoving party,” Baldwin Cnty. v. Purcell, 971 F.2d 1558, 1563–64 (11th Cir.1992), “inferences based upon speculation are not reasonable.” Marshall v. City of Cape Coral, 797 F.2d 1555, 1559 (11th Cir.1986). If a reasonable fact finder evaluating the evidence could draw more than one inference from the facts, and if that inference introduces a genuine dispute over a material fact, the court should not grant summary judgment. Samples ex rel. Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir.1988). However, if the nonmovant's response consists of nothing more than a repetition of conclusory allegations, summary judgment is not only proper, but required. Morris v. Ross, 663 F.2d 1032, 1034 (11th Cir.1981), cert. denied, 456 U.S. 1010, 102 S.Ct. 2303, 73 L.Ed.2d 1306 (1982).

III. Discussion

A. The Bank's Motion for Summary Judgment

1. Count I: Common Law Negligence for Customers Victory and SRE

The Bank moves for summary judgment on the Receiver's common law negligence claim filed on behalf of Wachovia customers Victory and SRE on several theories, including that the conduct complained of violated no duty owed by the Bank to its customers. Under Florida law, “[d]uty exists as a matter of law and is not a factual question for [a] jury to decide.” Lamm v. State Street Bank and Trust, 749 F.3d 938, 947 (11th Cir.2014) (quoting McCain v. Florida Power Corp., 593 So.2d 500, 503 (Fla.1992) ). While “[b]anks owe a duty to customers” (Dkt. 77 p. 10), the relevant question is the scope of that duty.

Florida law recognizes four sources of duties of care: statutes and regulations, judicial interpretations of legislation, judicial decisions, and duties arising from the facts of a particular case. See Curd v. Mosaic Fertilizer, LLC, 39 So.3d 1216, 1227–28 (Fla.2010). None of these create the duty of care alleged in Count I by the Receiver.

In summary, the Receiver argues that in addition to a general duty to exercise ordinary care to its customers, the Bank owed a duty to its customers to meet the standard of care in the banking industry, as defined by federal banking rules and regulations, and a more specific duty to investigate suspicious transactions made by customers such as Nadel. Additionally, the Receiver urges that by providing “deposit account services to a known hedge fund manager like Nadel, the bank “created a zone of risk that those accounts ... would be misused, including as an instrument of fraud.” (Dkt. 251, p. 11–12). The Receiver argues that the “interwoven nature” of the Bank's relationship with Nadel and the hedge funds he controlled created a foreseeable zone of risk giving rise to a duty of care, citing McCain v. Florida Power Corp., 593 So.2d at 503 (“Where a defendant's conduct creates a foreseeable zone of risk, the law generally will recognize a duty placed upon defendant either to lessen the risk or see that sufficient precautions are taken to protect others from the harm that the risk poses.”) (Dkt. 251, p. 8–10).

More specifically, the Third...