Boyd v. Mason et al
MEMORANDUM OPINION & ORDER the magistrate judge's Report and Recommendation (doc 97) is hereby ADOPTED IN PART and REJECTED IN PART. Mr. Small's Motion for Summary Judgment (doc 80) is GRANTED on the merits, and Mr Boyd's claims against Mr Small are hereby DISMISSED WITH PREJUDICE. Signed by Judge Virginia Emerson Hopkins on 5/24/2017. (TLM, )
2017 May-24 PM 03:46
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
ROBERT A. BOYD,
THEODORE MASON and
) Case No.: 2:14-CV-2290-VEH-HGD
MEMORANDUM OPINION AND ORDER
On October 22, 2014, Plaintiff Robert A. Boyd (“Mr. Boyd”) initiated this
lawsuit in the Circuit Court of Jefferson County against Theodore Mason (“Mr.
Mason”), Tom Stanley, and Stanley Small (“Mr. Small”). (Doc. 1-1).1 On
November 25, 2014, Mr. Mason removed this action to federal court on the basis
of diversity jurisdiction. (Doc. 1). On January 29, 2015, Mr. Boyd filed an
amended complaint against Mr. Mason, Mr. Small, and Tom Stanley. (Doc. 14, the
“Amended Complaint”). Mr. Small answered on February 24, 2015, and Mr.
Any page references to (“Doc. __”) correspond with the court’s CM/ECF numbering
Mason answered on March 3, 2015. (Doc. 20, 21).2
On July 26, 2016, Mr. Small filed a Motion for Summary Judgment and
supporting brief.3 (Doc. 80, 81). Mr. Boyd responded on September 30, 2016, and
Mr. Small replied on October 14, 2016. (Docs. 92, 96).The magistrate judge filed
his Report and Recommendation on March 7, 2017. (Doc. 97). He recommended
that Mr. Small’s Motion for Summary Judgment be granted as to Counts 1, 2, 3, 4,
8, and 9, and as to any claim of promissory fraud or fraudulent suppression.
However, he also recommended that the Motion for Summary Judgment be denied
as to Counts 5, 6, 7, and 10.
On March 21, 2017, Mr. Small filed objections to the magistrate judge’s
Report and Recommendation. (Doc. 98). Mr. Boyd responded in turn on April 10,
2017, and Mr. Small replied on April 17, 2017. (Docs. 100, 101). Mr. Small’s
Motion for Summary Judgment is now ripe for this Court’s disposition.
De Novo Review of Objections to Magistrate Judge’s Findings
Before the Court engages in its own analysis, it is important to emphasize
Tom Stanley was dismissed from the action on April 27, 2015. (Doc. 30).
As the magistrate judge noted, “Mason has not filed any motion for summary judgment.
Therefore, these recommendations are made only with regard to the claims against Small.” (Doc.
97 at 27 n.8).
that the magistrate judge is not making any final factual determinations or rulings
on summary judgment, but rather only providing recommendations. Instead, the
Court has reviewed de novo those portions of the record that relate to the parties’
objections and has separately and independently determined the correctness of any
objected-to findings and recommendations.
This accepted process is set forth statutorily in 28 U.S.C. § 636, which
states in part that:
(b)(1) Notwithstanding any provision of law to the contrary–
(A) a judge may designate a magistrate judge to hear and
determine any pretrial matter pending before the court,
except a motion for injunctive relief, for judgment on the
pleadings, for summary judgment, to dismiss or quash an
indictment or information made by the defendant, to
suppress evidence in a criminal case, to dismiss or to
permit maintenance of a class action, to dismiss for failure
to state a claim upon which relief can be granted, and to
involuntarily dismiss an action. A judge of the court may
reconsider any pretrial matter under this subparagraph (A)
where it has been shown that the magistrate judge's order
is clearly erroneous or contrary to law.
(B) a judge may also designate a magistrate judge to
conduct hearings, including evidentiary hearings, and to
submit to a judge of the court proposed findings of fact and
recommendations for the disposition, by a judge of the
court, of any motion excepted in subparagraph (A), of
applications for posttrial relief made by individuals
convicted of criminal offenses and of prisoner petitions
challenging conditions of confinement.
(C) the magistrate judge shall file his proposed findings
and recommendations under subparagraph (B) with the
court and a copy shall forthwith be mailed to all parties.
Within fourteen days after being served with a copy, any party may
serve and file written objections to such proposed findings and
recommendations as provided by rules of court. A judge of the court
shall make a de novo determination of those portions of the report or
specified proposed findings or recommendations to which objection is
made. A judge of the court may accept, reject, or modify, in whole or in
part, the findings or recommendations made by the magistrate judge.
The judge may also receive further evidence or recommit the matter to
the magistrate judge with instructions.
28 U.S.C. § 636(b) (footnotes omitted) (emphases by underlining added).
Regarding the de novo review requirement in particular, a district court’s
obligation is to independently review those portions of the record to which
objections are made, as opposed to reviewing the entire record. See, e.g.,
Washington v. Estelle, 648 F.2d 276, 282 (5th Cir. 1981) (“Both in his brief and at
oral argument, Washington maintains that the District Court erred in reviewing de
novo only the objected to portion of the magistrate’s findings, rather than
reviewing the entire record de novo.”);4 id. (“Based on the language of this order,
we are convinced that the District Judge sufficiently complied with the act which
requires ‘a de novo determination of those portions of the report or specified
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as binding precedent all decisions of the former Fifth Circuit handed
down prior to October 1, 1981.
proposed findings or recommendations to which objection is made.’) (quoting 28
U.S.C. § 636(b)(1)(C)).5
Additionally, it is incumbent upon the parties to timely raise any objections
that they may have regarding a magistrate judge’s findings contained in the report
and recommendation, as the failure to do so subsequently waives or abandons the
issue even if such matter was presented at the magistrate judge level. See, e.g.,
United States v. Pilati, 627 F.3d 1360, 1365 (11th Cir. 2010) (“While Pilati raised
the issue of not being convicted of a qualifying offense before the magistrate
judge, he did not raise this issue in his appeal to the district court. Thus, this
argument has been waived or abandoned by his failure to raise it on appeal to the
district court.”) (emphasis added).
Summary Judgment Standard
In Washington, the district judge’s order adopting the magistrate judge’s proposed
The Court having considered the Findings and Recommendations of the United
States Magistrate filed on September 19, 1979, and the Court further having
reviewed and considered the written objections filed by the Petitioner herein on
October 2, 1979, and the Court having made a de novo review of the objections
raised by the Petitioner and the Court being of the opinion that the findings are
correct and that the objections are without merit,
IT IS, THEREFORE, ORDERED that the Findings, Conclusions and
Recommendations of the United States Magistrate are adopted.
648 F.2d at 282 (emphasis added).
Under Federal Rule of Civil Procedure 56, summary judgment is proper if
there is no genuine dispute as to any material fact and the moving party is entitled
to judgment as a matter of law. FED. R. CIV. P. 56(a); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 2265 (1986)
(“[S]ummary judgment is proper if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.”) (internal quotation marks omitted).
The party requesting summary judgment always bears the initial
responsibility of informing the court of the basis for its motion and identifying
those portions of the pleadings or filings that it believes demonstrate the absence
of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S. Ct. at 2553.
Once the moving party has met its burden, Rule 56(c) requires the non-moving
party to go beyond the pleadings in answering the movant.6 Id. at 324, 106 S. Ct.
at 2553. By its own affidavits – or by the depositions, answers to interrogatories,
and admissions on file – it must designate specific facts showing that there is a
genuine issue for trial. Id.
When Celotex was decided, FED. R. CIV. P. 56(e) encompassed this express
requirement, but now this concept is covered by the language provided for under FED. R. CIV. P.
The underlying substantive law identifies which facts are material and
which are irrelevant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.
Ct. 2505, 2510, 91 L. Ed. 2d. 202 (1986). All reasonable doubts about the facts
and all justifiable inferences are resolved in favor of the non-movant. Chapman v.
AI Transport, 229 F.3d 1012, 1023 (11th Cir. 2000). Only disputes over facts that
might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment. Anderson, 477 U.S. at 248, 106 S. Ct. at
2510. A dispute is genuine “if the evidence is such that a reasonable jury could
return a verdict for the nonmoving party.” Id. If the evidence presented by the nonmovant to rebut the moving party’s evidence is merely colorable, or is not
significantly probative, summary judgment may still be granted. Id. at 249, 106 S.
Ct. at 2511.
How the movant may satisfy its initial evidentiary burden depends on
whether that party bears the burden of proof on the given legal issues at trial.
Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993). If the movant
bears the burden of proof on the given issue or issues at trial, then it can only meet
its burden on summary judgment by presenting affirmative evidence showing the
absence of a genuine issue of material fact – that is, facts that would entitle it to a
directed verdict if not controverted at trial. Id. (citing United States v. Four
Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir. 1991)). Once the moving
party makes such an affirmative showing, the burden shifts to the non-moving
party to produce “significant, probative evidence demonstrating the existence of a
triable issue of fact.” Id. (emphasis added).
For issues on which the movant does not bear the burden of proof at trial, it
can satisfy its initial burden on summary judgment in either of two ways. Id. at
1115-16. First, the movant may simply show that there is an absence of evidence
to support the non-movant’s case on the particular issue at hand. Id. at 1116. In
such an instance, the non-movant must rebut by either (1) showing that the record
in fact contains supporting evidence sufficient to withstand a directed verdict
motion, or (2) proffering evidence sufficient to withstand a directed verdict motion
at trial based on the alleged evidentiary deficiency. Id. at 1116-17. When
responding, the non-movant may no longer rest on mere allegations; instead, it
must set forth evidence of specific facts. Lewis v. Casey, 518 U.S. 343, 358, 116 S.
Ct. 2174, 2183, 135 L. Ed. 2d 606 (1996). The second method a movant in this
position may use to discharge its burden is to provide affirmative evidence
demonstrating that the non-moving party will be unable to prove its case at trial.
Fitzpatrick, 2 F.3d at 1116. When this occurs, the non-movant must rebut by
offering evidence sufficient to withstand a directed verdict at trial on the material
fact sought to be negated. Id.
As neither party has objected to the magistrate judge’s description of the
factual background of the case in his Report and Recommendation, that section is
set out in full, with no alteration:
Plaintiff Robert A. Boyd holds a Bachelor of Science in
Accounting from the University of Alabama, has worked as a Certified
Public Accountant (CPA) for approximately 40 years, and is licensed to
practice in 15 states. (Boyd Depo. at 19, 21). Boyd has been a Certified
Fraud Examiner (CFE) certified by the Association of Certified Fraud
Examiners since 2005. Boyd is a member of an accounting firm and is
a partner in Yeager and Boyd CPAs (Y&B). (Id. at 7). Plaintiff
acknowledges that, during 2012, he carried with him the knowledge
available to a CPA or CFE to identify fraud and had the ability to
exercise professional care and look out for his own financial welfare the
same way he does for his clients. (Id. at 55-57). He holds himself out as
a consultant in the identification, detection and prevention of fraud. (Id.
at 212). Boyd also has served as an expert witness, testifying as a CPA
in a case involving accusations of fraud. (Id. at 41-42).
Defendant Stanley Small is a contractor and owner of Air Comfort
Company, a company that specializes in heating and air conditioning.
(Small Depo. at 19-20). Defendant Theodore Mason is an attorney with
the law firm of Greenberg, Traurig, LLP, and practices in the state of
Pennsylvania. (Mason Depo. at 27, 32). However, Mason also represents
“purchasers of assets by investors who are looking to buy.” (Id. at 33).
According to Small, he and Mason were, prior to the events that are the
basis of this lawsuit, involved in numerous investment deals together,
including bond, real estate and gold deals. (Small Depo. at 58-59).
Among other things, Small had previously provided $150,000 that was
supposed to be invested in a gold mine through a person identified as
A.D. Singh. However, that money was apparently never invested in a
gold mine and was lost or stolen. (Id. at 58-63). Small testified that
Mason “brought the deal” for the gold to Small. (Id. at 63-64). However,
Mason claims that it was Small who introduced him to Singh and
“brought the gold opportunity” to Mason. (Mason Depo. at 64). Small
testified that he later learned that Mason never invested any of his own
money in the deal. (Small Depo. at 61). The money invested by Small
was lost. (Id. at 62).
Small testified that he made attempts to get back the money he
invested in the gold mine. Although the details vary and sometimes
conflict between the testimonies of Small and Mason, it is undisputed
that these attempts to find A.D. Singh and get back the money invested
in the gold scheme led them to an individual known as Brian Malthus,
who represented himself as working for the CIA. (Small Depo. at 88,
130). This, in turn, led them to talk to individuals identified as Foster
and Bell, also allegedly with the CIA, who were supposedly going to
help them get the money back. According to Small, Malthus informed
him that the CIA was aware of Singh and his activities. He advised them
that they could “turn him over” to the IMF7 and there would be a
finder’s fee they could collect. Then, later, Malthus provided them with
“option two.” (Id. at 138-39). Under this option, Malthus offered them
the opportunity to invest in a CIA “trading platform.” According to
Small, the CIA did not want to take down Singh just yet because it
wanted to watch him to see if he would lead it to others who were higher
up in whatever organization in which he was involved. Therefore, in
return for agreeing not to pursue Singh at this time, they were offered
the opportunity to invest in the trading platform. (Id. at 140-44). Small
testified that he and others were told that they would receive eight times
their investment at one point and ten times their investment at another.
(Id. at 144-45). According to Small, he and Mason were both
communicating with Malthus and both thought they were dealing with
a real CIA agent. (Id. at 146). In fact, at one time on a non-video Skype
call, Small was involved in a conversation with Malthus, another
(See Doc. 97 at 7 n.1) (“The ‘IMF’ referred to is presumably the International Monetary
Fund; however, this is never explained nor is there any discussion of what law enforcement
powers, if any, are possessed by the IMF.”).
supposed CIA-agent called Trish Weiss, and Leon Panetta, whom Small
believed was the Director of the CIA.8 (Id. at 148).
In order to participate in the trading platform, Malthus informed
Small that he would need to raise about $1,800,000. (Small Depo. at
145). Upon learning of this investment opportunity, Small contacted
plaintiff Robert Boyd, an accountant with whom he was acquainted from
a prior business deal, to see if any of his clients would be interested in
participating. (Boyd Depo. at 198-99). Boyd learned of this at some time
between July 1 and July 16, 2012. (Id. at 109, 114, 118, 123).
Boyd was unable to explain with any specificity just how the
trading platform was designed to work. However, he believed that it was
“very safe” and that the eight-to-one return was tax-free. (Id. at 185-86).
Boyd testified that Small told him the investment was “a hundred
percent safe” because the deal was “wired in one level below the
President of the United States, namely Leon Panetta.” He was also
convinced it was safe because of the involvement of a “five-star” lawyer
like Ted Mason. (Id. at 197).
In addition to an eight-to-one return, Boyd testified that he was
told by Small that he would receive his investment back within two
months and profits within three months. (Id. at 129-30, 135-37). Boyd
acknowledges that he did nothing to investigate the validity of the
claims or the investment before investing his money, despite being a
trained CFE and having the means and ability to do so. (Id. at 127-28).
Likewise, he did not ask for any background information on the
investment or review any documentation that would verify the
reasonableness and safety of the investment. (Id. at 124-25, 245-46).
Boyd did discuss the trading platform with his brother, Charles
Boyd, who is also a CPA and CFE, to see if he wanted to participate.
Charles Boyd declined because the risk involved was intolerable to him.
(Charles Boyd Depo. at 21, 23-24). Charles Boyd considers lack of
(See Doc. 97 at 7 n.2) (“As it turns out, at the time of the call, Panetta was no longer the
head of the CIA.”).
documentation and unsolicited offers to invest in investment schemes to
be “red flags” that an investment is fraudulent. (Id. at 54).
Instead of providing the names of clients who might be interested
in participating in the trading platform, Boyd chose to participate
himself. (Boyd Depo. at 104-05). On July 16, 2012, Boyd attempted to
make his first investment to the trading platform by wiring $250,000
through Citizens Bank to a bank in Nigeria. (Id.). Citizens Bank refused
to wire the funds because such a transfer raised a fraud alert. (Id. at 9496). According to Boyd, Small then directed him to send $125,000 to
Regions Bank in Mobile in the name of Voncille Smith. Boyd did this
on July 19, 2012. At Mr. Boyd’s request, First Partners Bank wired
$125,000 to the Regions account held by Ms. Smith. Ms. Smith then
wired this money to Nigeria based on information she received from
Stanley Small. (Id. at 163-64; V. Smith Depo. at 28- 29).
Boyd made a second contribution to the investment in the amount
of $250,000 on July 27, 2012. First Partners wired $250,000 to the
Regions account held by Ms. Smith. (Boyd Depo. at 165). Ms. Smith
then wired the money to Nigeria on July 30, 2012.
Small also secured a loan of $100,000 on July 27, 2012, to invest
in the platform. (Small Depo. at 164-65; Silverstein Depo. at 33, 36). In
accordance with this loan, $100,000, less a wire transfer fee of $10, was
wired from Silverstein’s Merrill-Lynch account on July 30, 2012, to
Teldrhein Global Inv. LTD account at United Bank for Africa. (DX 16,
Account Statement for Teldrhein Global; DX 17, Merrill-Lynch wire
confirmation of July 30, 2012).
After this first round of investments, Malthus contacted Small to
see if anyone was interested in participating in a second round of
investments. Small relayed this information to Boyd. The return on this
investment was said to be ten-to-one. (Boyd Depo. at 189; Small Decl.
at ¶¶ 8-9). Boyd was supposed to have his investment returned within
two months and his profits within four months. (Boyd Depo. at 190,
On August 6, 2012, Boyd directed First Partners to wire $62,500
from a Y&B business account to Ms. Smith’s account at Regions. (Boyd
Depo. at 167-68). Although the money came from a Y&B account, Boyd
asserts that the money was his draw and that he had the authority to do
so. (Id. at 74-81). The Y&B partnership agreement requires that each
partner must agree to a partner’s removal of capital or making a draw.
Boyd asserts that none of his partners has any objection or dispute with
these draws. Charles Boyd testified that the money taken by Robert
Boyd was his (Robert’s) draw. Rebecca McCune testified that, although
the partnership agreement required all partners to agree on a draw, “we
aren’t that formal,” and Thomas Carr had no opinion as to whether Boyd
“did anything wrong” by making these draws. (Charles Boyd Depo. at
39-40; McCune Depo. at 33; Carr Depo. at 33-34).
On August 7, 2012, Ms. Smith wired the $62,500 from Boyd to
the United Bank for Africa. (Boyd Depo. at 167-68). On August 13,
2012, Boyd directed First Partners to wire $112,500 from a Y&B
business account to Ms. Smith’s Regions account. She wired this
money, along with money from another investor, to the United Bank for
Africa on August 14, 2012. (DX 21, Wire Transfer; Smith Depo. at 4647).
Based on representations made to him, Boyd expected to receive
his first-leg investment back on or about September 19, 2012. (Boyd
Depo. at 227-28). When he did not receive his investment back on time,
Boyd started to worry and began calling Small quite a bit. (Id. at 229).
Boyd testified that he was not yet convinced that he had a problem
because Small kept giving him reasons why the money had not yet been
delivered. One such excuse was that they had talked to “people at
Langley” or “CIA people” and that the CIA had a committee that met in
October that had to approve the payment. (Id. at 229-30). Boyd testified
that, on another occasion, Small told him that Brian or “one of the guys”
was either sick and in the hospital or had died and that this had delayed
things. (Id. at 231). According to Boyd, as late as April 2014, Small
represented that “the trading platform was still alive and that it would
go.” (Id. at 238). He testified that this went on all the way to May of
2014, with Small assuring him that payment was imminent. (Id. at 232).
Small denies telling Boyd that the investment was “100% safe,”
but admits that he told Boyd that alleged CIA Agent Brian Malthus told
him it was 100% safe and that he told Boyd that Malthus had told him
this. (Small Depo. at 180-81). However, Boyd testified that he has no
information to indicate that Small did not believe that there was a
trading platform or that he did not really believe that they would receive
a return at eight to ten times the amount they invested in the platform.
(Boyd Depo. at 268-69). Small stated that he would not have invested
money in the platform if he had not thought that it was a good deal.
(Small Depo. at 188). He admitted that he “put money into it. Lots of it.”
(Id. at 178-88).
In fact, prior to the due date for receiving the return of his first
investment, Small participated in a second leg of the investment by
securing loans from Mr. Silverstein for $275,000 on August 6, 2012,
and $40,000 on August 31, 2012. (Small Depo. at 164-65; Silverstein
Depo. at 33, 36). This money was wired from Mr. Silverstein’s account
on August 6, 2012, and August 31, 2012, to the Teldrhein Global Inv.
LTD account with the United Bank for Africa.9 None of the money
invested by any party was ever returned and none of the parties has been
able to determine exactly what happened to it.10
(Doc. 97 at 5-13).
(See Doc. 97 at 13) (“In another tangentially related transaction, Boyd also loaned
money to a Steven Miller in the amount of $50,000 in October 2013 with the expectation that
Miller would pay him $75,00 within 45 days. In consideration for Boyd providing the loan to
Miller, Mason agreed in an email to repay Boyd $550,000 “for that loan and for previous
investments.” (DX 31, Oct. 30 email from Mason to Boyd). The text of the email reflects that
“previous investments” is a reference to the trading platform. (Id.). Small was not a party to this
agreement. (Small Decl. at ¶ 13).”).
(See id.) (“Small went so far as to go to CIA Headquarters in Langley, Virginia, to try
to find out what happened to the money and was almost arrested for his efforts. (Small Depo at
In the “Preliminary Matters” section of his Report and Recommendation,
the magistrate judge addressed and disposed of certain claims that were
undisputed by the parties at summary judgment. His recommendations as to those
claims are set out in full as follows:
Counts 1, 2 and 3 of plaintiff’s amended complaint allege violations of
the Racketeer Influenced Corrupt Organizations statute (RICO), 18
U.S.C. § 1961, et. seq. Count 8 of the amended complaint asserts a claim
for breach of contract. Counsel for plaintiff concedes that summary
judgment is due to be granted with regard to Counts 1, 2 and 3. (Doc.
92, Response in Opposition to Summary Judgment, at 37-38). Therefore,
it is RECOMMENDED that Small’s motion for summary judgment as
to these claims be GRANTED.
Furthermore, plaintiff did not submit any opposition to the motion for
summary judgment with regard to the breach of contract claim found in
Count 8, stating in his brief that defendant’s “motion for summary
judgment is due to be denied as to Counts 4, 5, 6, 7, 9, and 10.” (Id. at
38). Consequently, it appears that plaintiff also does not oppose
defendant’s motion for summary judgment as to the claim in Count 8 of
the amended complaint. Therefore, it is RECOMMENDED that
defendant’s motion for summary judgment as to Count 8 be GRANTED,
as well. Based on this, there will be no further discussion of the claims
contained in these four counts.
The remaining claims are as follows: Count 4, Breach of Implied
Covenants of Good Faith and Fair Dealing; Count 5, Fraudulent
Misrepresentation and/or Omission; Count 6, Negligent/Wanton
Misrepresentation; Count 7, Mistake/Innocent Misrepresentation and/or
Omission; Count 9, Breach of Fiduciary Duty; and Count 10, Civil
Conspiracy. (Doc. 14, Amended Complaint).
(Doc. 97 at 2-3). Neither party has contested the magistrate judge’s findings as to
Counts 1, 2, 3, and 811 in subsequent briefing before this Court. Accordingly, the
Court will ADOPT the magistrate judge’s recommendations as to Counts 1, 2, 3,
and 8. Summary judgment is due to be GRANTED as to the claims brought
against Mr. Small in Counts 1, 2, 3, and 8.
Breach of Fiduciary Duty and Breach of Implied Covenant of
Good Faith and Fair Dealing Claims
In his Report and Recommendation, the magistrate judge recommended that
summary judgment be granted on the merits as to Count 4, in which Plaintiff
alleged that Defendants violated the implied covenant of good faith and fair
dealing. (Doc. 97 at 22). He also recommended that summary judgment be granted
on the merits as to Count 9, in which Plaintiff alleged that Defendants breached
their fiduciary duties towards Mr. Boyd. (Id. at 25). Mr. Boyd has not objected to
either recommendation. Accordingly, the Court will ADOPT the magistrate
judge’s recommendations as to these counts. Summary judgment is due to be
GRANTED as to the claims brought against Mr. Small in Counts 4 and 9.
This Court also notes that Count 8 appears to have been brought only against Mr.
Mason. (Doc. 14 at 16). Regardless, Mr. Boyd has not contested the magistrate judge’s
recommendation to grant summary judgment in Count 8 as to Mr. Small.
In Counts 5, 6, and 7 of the Amended Complaint, Mr. Boyd asserted claims
for fraudulent misrepresentation, negligent or wanton misrepresentation, and
innocent or mistaken misrepresentation. Mr. Small has objected to the magistrate
judge’s recommendations as to those counts.
Promissory Fraud and Fraudulent Suppression Claims
In his Report and Recommendation, the magistrate judge granted summary
judgment as to Counts 5, 6, and 7 to the extent that Mr. Boyd intended to raise
claims of promissory fraud or fraudulent suppression. (Doc. 97 at 16-18, 20). As
Mr. Boyd has not objected to the granting of summary judgment on these grounds,
the Court hereby ADOPTS the magistrate judge’s recommendation and GRANTS
summary judgment in Counts 5, 6, and 7 to the extent Mr. Boyd has asserted
promissory fraud or fraudulent representation claims.
Fraudulent Misrepresentation Claims
The magistrate judge recommended that summary judgment be denied to the
extent that Counts 5, 6, and 7 may be construed as asserting fraudulent
misrepresentation claims because Mr. Boyd “has established a prima facie case of
fraudulent misrepresentation under Ala. Code § 6-5-101.” (Doc. 97 at 20). Mr.
Small contends in his objections to the Report and Recommendation, as he did in
his Motion for Summary Judgment (doc. 81 at 33-36), that he is entitled to
summary judgment as to the fraudulent misrepresentation claims because they are
barred by the applicable two year-statute of limitations. For the following reasons,
this Court agrees with Mr. Small and respectfully rejects the magistrate judge’s
recommendation as to Counts 5, 6, and 7.
The elements of a fraudulent misrepresentation claim are (1) a
“misrepresentation of material fact”; (2) “made willfully to deceive, recklessly,
without knowledge, or mistakenly”; (3) which was “justifiably relied on by the
plaintiff under the circumstances” and (4) which “caused damage as a proximate
consequence.” Foremost Ins. Co. v. Parham, 693 So.2d 409, 422 (Ala. 1997). An
innocent misrepresentation is “as much a legal fraud as an intended
misrepresentation,” and the good faith of a party is “immaterial as to the question
whether there was an actionable fraud if the other party acted on the
misrepresentation to his detriment.” Smith v. Reynolds Metals Co., 497 So. 2d 93,
95 (Ala. 1986).
In Alabama, a fraud claim must be brought within two years of the accrual
of the claim. Auto-Owners Ins. Co. v. Abston, 822 So.2d 1187, 1194 (Ala. 2001)
(citing Ala. Code 1975, § 6-2-38(l)). “However, where § 6-2-38(l) has created a
bar to a fraud claim, ‘the claim must not be considered as having accrued until the
discovery by the aggrieved party of the fact constituting the fraud.’ Ala. Code
1975, §6-2-3.” Id. As the Alabama Supreme Court has stated,
“‘“The question of when a party discovered or should have discovered
the fraud is generally one for the jury.”’” Potter v. First Real Estate Co.,
844 So.2d 540, 546 (Ala. 2002)(quoting Ex parte Seabol, 782 So.2d
212, 216 (Ala. 2000), quoting in turn Liberty Nat'l Life Ins. Co. v.
Parker, 703 So.2d 307, 308 (Ala.1997)). “However, a party will be
deemed to have ‘discovered’ a fraud as a matter of law upon the first of
either the actual discovery of the fraud or when the party becomes privy
to facts that would provoke inquiry in a reasonable person that, if
followed up, would lead to the discovery of the fraud.” Dickinson v.
Land Developers Constr. Co., 882 So.2d 291, 298 (Ala. 2003).
Jones v. Kassouf & Co., P.C., 949 So.2d 136, 140 (Ala. 2006) (emphasis added).
In order to succeed on his misrepresentation claims, Mr. Boyd must
establish that he relied on Mr. Small’s representations and that his reliance was in
fact reasonable, a determination that is “based on all of the circumstances
surrounding a transaction, including the mental capacity, educational background,
relative sophistication, and bargaining power of the parties.” Foremost, 693 So.2d
at 421; see also id. (adopting the “reasonable reliance” standard set out in Torres
v. State Farm Fire & Casualty Co., 438 So.2d 757, 758-59 (Ala. 1980) (“In order
to recover for misrepresentation, the plaintiffs’ reliance must, therefore, have been
reasonable under the circumstances. If the circumstances are such that a
reasonably prudent person who exercised ordinary care would have discovered the
true facts, the plaintiffs should not recover.”)). Fraud is considered to have been
discovered “when it ought to have been discovered. It is sufficient to begin the
running of the statute of limitations that facts were known which would put a
reasonable mind on notice that facts to support a claim of fraud might be
discovered upon inquiry.” Auto-Owners Ins. Co., 822 So.2d at 1195 (quoting
Jefferson Cty. Truck Growers Ass’n v. Tanner, 341 So. 2d 485, 488 (Ala. 1977)).12
First, it is undisputed that Mr. Boyd’s brother declined to invest in the
trading platform due to the lack of proper documentation, unsolicited offers to
invest, and other “red flags” that amounted to an intolerable level of investment
risk. (Doc. 97 at 9)(citing Charles Boyd Depo., Doc. 82-6 at 7(21-24), 15(54-55)).
As another district court within this Circuit has noted,
Two limitations to the Foremost [reasonable reliance] rule have been recognized by
Alabama courts. Under Alabama law, an individual is not capable of discovering
fraud of negligent misrepresentation by reading and understand[ing] the terms of a
contract if he or she is illiterate. Potter v. First Real Estate Company, Inc., 844 So.
2d 540, 547 (Ala. 2002). In additional, discovery of the fraud should not be deemed,
as a matter of law, to have occurred upon the plaintiff’s receipt of documents, if such
document is ambiguous, i.e. capable of more than one interpretation, and thus hard
to understand. See Id. (discussing Ex parte Seabol, 782 So. 2d 212, 216-17 (Ala.
2000) (distinguishing Foremost; finding that where underlying documents are not
easily understood, plaintiff’s reliance on oral representations concerning documents
Waldrup v. Hartford Life Ins. Co., 598 F. Supp. 2d 1219, 1230 (N.D. Ala. 2008). The first
limitation is clearly inapplicable, and the second limitation, as set out in Seabol, is factually
distinguishable. In this case, Mr. Small claims that accrual of the statute of limitations was
triggered not by ambiguous documents but by a conversation that Mr. Boyd (a certified
CPA/CFE) had with his brother (also a certified CPA/CFE), a discussion that Mr. Boyd had with
an individual in a bank’s fraud department, and Mr. Boyd’s failure to receive promised funds by
the promised deadline.
Second, it is undisputed that when Mr. Boyd first attempted to invest in the trading
platform by wiring $250,000 to a bank in Nigeria, Citizens Bank refused to wire
the funds because such a transfer raised a fraud alert. (Id. at 9). In fact, when
pressed on his conversation with Citizens Bank, Mr. Boyd testified as follows:
Do you recall that you spoke with Citizens Bank in July of 2012?
Do you recall that you spoke with someone from the Fraud
Department at Citizens Bank in 2012?
Not we. You did, didn’t you?
So in 2012, July, you spoke with a person from the Fraud
Department of Citizens Bank in Pennsylvania.
Is that true?
That is true.
And the person at Citizens Bank told you that they would not wire
money to Nigerian banks because of their fear of fraud; is that
And for that reason, Citizens Bank refused to send money to
Yes, and they investigated.
Is that true or not?
Repeat the question.
That Citizens Bank refused to send the money to Nigeria?
(Doc. 82-1 at 25(95:15-96:19)) (emphasis added). Mr. Boyd had actual
knowledge, based on a conversation he personally had with an individual in the
Fraud Department at Citizens Bank, that the bank refused to complete the wire
fund transfer in question because it had been flagged as fraudulent.
Third, even after the Fraud Department at Citizens Bank brought its
concerns about the transfer to his attention, Mr. Boyd decided to wire $125,000.00
through another bank, Regions Bank, on July 19, 2012. It is undisputed that Mr.
Boyd expected to receive a return on this significant investment on or about
September 19, 2012. (Doc. 91 at 11). Mr. Boyd further testified as follows:
When did you first think something was wrong?
I mean, you get two months out, July 19, that’s September 19 –
You know, maybe on into September when the first money didn’t
come back, but there was such logical reasons given for the delay,
and then –
Let’s just take that first as a time point, and I’m going to ask you
about what reasons were given.
So you get out here two months, and under the agreement, two
months after you put the money in, you’re supposed to get your
money back, your principal back?
So that means by the second half of September, you’re supposed
to get your principal back?
For the first leg. That’s part of that five hundred and fifty
That’s what you expected to happen?
I sure did.
If it was a hundred percent safe, that’s what you would have seen
happen, right? You would have gotten your money back at the
end of the two months?
And then the end of the two-month period came, and you didn’t
get your money back, did you?
(Doc. 82-1 at 58(227:9-228:21)) (emphases added).
Taken together, Mr. Boyd’s testimony establishes that he was privy to facts
and information that would provoke inquiry in the mind of a reasonable person as
to whether a fraud had been perpetrated. By September 19, 2012, at the latest, Mr.
Boyd knew or reasonably should have known that the trading platform scheme
was deeply flawed because he should have started receiving a return on his
investment. In this case, there were numerous “red flags” that would have put a
reasonable person on notice of the fraud.
Mr. Boyd filed his complaint on October 22, 2014, more than two years
after he became aware, or should have become aware, of facts that upon inquiry
would have led to the discovery of the fraudulent scheme. When examined under
these objective standards, the Court finds as a matter of law that the limitations
period for Mr. Boyd’s claims expired prior to October 22, 2014. Therefore, Mr.
Boyd’s misrepresentation claims are barred by the applicable statute of limitations,
and Mr. Small’s Motion for Summary Judgment is due to be GRANTED as to the
misrepresentation claims in Counts 5, 6, and 7.
In Count 10 of the Amended Complaint, Mr. Boyd asserted civil conspiracy
claims against Defendants.13 (Doc. 14 at 17). As the magistrate judge noted (doc.
97 at 26),
[a] plaintiff alleging a conspiracy must have a valid underlying cause of
action. [Drill Parts & Serv. Co. v. Joy Mfg. Co., 619 So. 2d 1280, 1290
(Ala. 1993)]. “[A] conspiracy claim must fail if the underlying act itself
would not support such an action.” Triple J. Cattle, Inc. v. Chambers,
621 So. 2d 1221, 1225 (Ala. 1993).
(Doc. 97 at 26-27) (citing Callens v. Jefferson Cty. Nursing Home, 769 So. 2d
273, 280 (Ala. 2000)). Accordingly, the magistrate judge determined that “the only
remaining underlying tort[s] that could support a claim of civil conspiracy [were]
the misrepresentation claims set out in Counts 5, 6, and 7.” Id. at 26. Because the
magistrate judge believed that Mr. Boyd “alleged valid underlying causes of
action” in Counts 5, 6, and 7, he similarly concluded that Mr. Boyd stated a claim
of civil conspiracy sufficient to survive summary judgment. Id. at 27.
In his objections, Mr. Small agrees that the only remaining underlying
claims that could support a civil conspiracy claim were those found in Counts 5, 6,
and 7. (Doc. 98 at 15). However, he has persuasively argued that summary
judgment is due to be granted as to Counts 5, 6, and 7, leaving no remaining claim
upon which the civil conspiracy claim could rest. Mr. Small also argues that, under
Though the Amended Complaint states generally that Count 10 is brought against
“Defendants,” the Court construes this Count as brought against the two remaining defendants in
this action, Mr. Small and Mr. Mason.
Alabama law, a claim for civil conspiracy “requires intent to harm and cannot be
predicated upon alleged negligent or innocent actions.” Id.
In response, Mr. Boyd does not contest the magistrate judge’s determination
that the only underlying claims that could support his civil conspiracy claim are
the fraudulent misrepresentation claims in Counts 5, 6, and 7. Instead, he argues
that Mr. Small has failed to point to any authority under Alabama law to support
his contention that a civil conspiracy claim requires intent. (Doc. 100 at 4). Mr.
Boyd therefore urges this Court to adopt the magistrate judge’s recommendation
as to Count 10 on this basis. (Id.). In his reply, Mr. Small cited to Alabama case
law allegedly requiring intent to establish a civil conspiracy claim. (Doc. 101 at 8).
Because this Court has independently determined that summary judgment is
due to be granted as to Counts 5, 6, and 7, no underlying cause of action against
Mr. Small remains to support the civil conspiracy claims against him.
Accordingly, this Court need not reach the question of whether intent is required
to establish a civil conspiracy claim under Alabama law, and summary judgment is
due to be GRANTED as to Count 10.14
Furthermore, because this Court has determined that summary judgment will be
granted as to all claims against Mr. Small, the Court need not address Mr. Small’s argument that
Mr. Boyd lacks standing to recover funds that were transferred from a Yeager & Boyd (“Y&B”)
business account and invested in the trading platform. (See Doc. 98 at 16-17, Doc. 101 at 9-11).
Having carefully considered the Report and Recommendation as well as Mr.
Small’s objections, and having reviewed de novo those portions of the record that
relate to those objections, the magistrate judge’s Report and Recommendation
(doc. 97) is hereby ADOPTED IN PART and REJECTED IN PART. Mr.
Small’s Motion for Summary Judgment (doc. 80) is GRANTED on the merits,
and Mr. Boyd’s claims against Mr. Small are hereby DISMISSED WITH
PREJUDICE. The Clerk of Court is hereby DIRECTED to terminate Mr. Small
as a party defendant.15
This case will be set by separate order for a pretrial conference on Plaintiff’s
remaining claims against Mr. Mason.
DONE and ORDERED this the 24th day of May, 2017.
VIRGINIA EMERSON HOPKINS
United States District Judge
Accordingly, the case caption of future filings shall name only “Theodore Mason” as a
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