Federated Life Insurace Company v. Fifth Third Bank et al
Filing
119
ORDER adopting #112 REPORT AND RECOMMENDATIONS re #69 MOTION to intervene reopen interpleader, and set aside judgment MOTION to Reopen Case MOTION to Set Aside filed by Seminole Tribe of Florida, Inc. United States Magistrate Judge Carol Mirando's Report and Recommendation #112 is ACCEPTED as to its findings on Seminole Tribe of Florida's request to set aside the judgment, as well as to Federated Life Insurance Company's request for oral argument and attorney's reasons. For the reasons set forth herein, the Court need not accept, reject, or modify the Report and Recommendation as to its findings on Seminole's request to intervene. Seminole Tribe of Florida, Inc.'s Motion to Intervene as Defendant, Reopen Interpleader, and Set Aside Judgment #69 is DENIED. Federated Life Insurance Company's request for oral argument #91 and request for attorney's fees (Doc. 90 at 10) are DENIED.Signed by Judge Sheri Polster Chappell on 3/30/2017. (LMF)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
FEDERATED LIFE INSURANCE
COMPANY,
Plaintiff,
v.
Case No: 2:14-cv-568-FtM-38CM
FIFTH THIRD BANK, ROBERT E.
TARDIF, FLORIDA PETROLEUM
COMPANY LLC, EVANS ENERGY
PARTNERS LLC, KC
TRANSPORTATION LLC, E2 REAL
ESTATE LLC and EVANS
OKEECHOBEE LLC,
Defendants.
/
OPINION AND ORDER1
This matter comes before the Court on United States Magistrate Judge Carol
Mirando’s Report and Recommendation (Doc. 112) dated January 31, 2017. Judge
Mirando recommends denying Seminole Tribe of Florida, Inc.’s Motion to Intervene as
Defendant, Reopen Interpleader, and Set Aside Judgment (Doc. 69).2 Seminole has filed
timely objections to the Report and Recommendation. (Doc. 115). Interpleader Plaintiff
1
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2 Judge Mirando also recommends denying Interpleader Plaintiff Federated Life
Insurance Company’s requests for oral argument (Doc. 91) and attorney’s fees (Doc. 90
at 10).
Federated Life Insurance Company and Interpleader Defendants Fifth Third Bank and
Evans Energy Partners, LLC have responded to Seminole’s objections. (Doc. 116; Doc.
117; Doc. 118). Thus, the Report and Recommendation is ripe for review.
INTRODUCTION
This case started as a statutory interpleader action to resolve potential claims to
life insurance policies (hereinafter, the “Policies”). It commenced in September 2014 and
resolved thirteen months later with Evans Energy and Fifth Third splitting the Policies’
proceeds.
Seminole played no role in the interpleader action. The reason for its non-action
is disputed. According to Seminole, it is the victim of a conspiracy headed by certain
interpleader defendants and other participants to deprive it of the Policies’ proceeds.
Seminole maintains that the conspirators colluded to keep it in the dark about the
interpleader because they knew Seminole had the sole interest in the Policies. The
opposing view is that Seminole’s former chief financial officer, Michael Ulizio, knew of the
interpleader action during its pendency, and he elected not to make a claim on Seminole’s
behalf because he determined that it had no claim to the Policies. The plot thickens,
however, because Seminole maintains that Ulizio participated in the conspiracy. It also
points an accusatory finger at Christopher Lombardo, Esq., who not only represented
Evans Energy in this action and other related matters, but also Seminole in another case.
Having been left out of the interpleader, Seminole wants the Court to set aside the
judgment and reopen the case. Seminole charts this course because, now that the money
has been disbursed, it wants to assert cross-claims against the named defendants and
bring a third-party complaint against non-parties Ulizio and Kousay Askar, who controlled
2
Evans Energy. Seminole’s proposed causes of action are conversion, civil theft, breach
of the duty of loyalty, breach of fiduciary duty, and conspiracy. (Doc. 69-1; Doc. 115-1).
Against this backdrop, the Court will outline the facts pertinent to the issues at hand.
BACKGROUND3
Federated Life initially issued the Policies to Evans Oil Company, LLC to insure
the life of its sole owner, Randy Mural Long. Evans Oil assigned its rights to the Policies
to Fifth Third as collateral for a loan. When Evans Oil petitioned for bankruptcy months
later, Florida Petroleum Company, LLC purchased certain assets of Evans Oil. That
tenure did not last long, as Florida Petroleum assigned its interests in the assets to Evans
Energy, KC Transportation, LLC, E2 Real Estate, LLC, and Evans Okeechobee, LLC.
Askar controlled all four companies.
Seminole thereafter purchased assets from Evans Energy and KC Transportation.
(Doc. 69-2). At that time, Evans Energy owed Fifth Third $5.625 million. Thus, as part of
Seminole’s consideration for the assets, it gave Fifth Third a Term Note for $5.625 million,
eliminating Evans Energy’s debt. (Doc. 69-4).
Whether the Policies were included in the above assignments and asset purchases
was – and still is – disputed. Indeed, in the months following Long’s death, Federated
Life received inquiries regarding the Policies. Unsure of who had valid claims to the
Policies, Federated Life filed this statutory interpleader action against Fifth Third, Florida
Petroleum, and Robert E. Tardif, as trustee for the bankruptcy estate of Randy Mural
3
Because the Report and Recommendation details at length the facts of this case, the
Court will recite, for brevity’s sake, only the facts pertinent to the issues before it.
3
Long.4
(Doc. 1).
Federated Life amended its pleading, adding Evans Energy, KC
Transportation, E2 Real Estate, and Evans Okeechobee as named defendants. (Doc.
20).
In January 2015, the Court found interpleader to be appropriate. (Doc. 35). Thus,
Federated Life deposited the Policies’ proceeds into the Court’s Registry,5 and the
interpleader defendants made their claims. (Doc. 37; Doc. 38). Nine months later, Fifth
Third, Evans Energy, KC Transportation, E2 Real Estate, Evans Okeechobee, and
Florida Petroleum resolved their claims and agreed that Fifth Third and Evans Energy
would split the Policies’ proceeds. (Doc. 64). Consequently, the Court directed the Clerk
of Court to release the proceeds and close the case.6 The Clerk entered judgment on
October 22, 2015. (Doc. 68).
During the above events, Ulizio served as Seminole’s CFO. He held that position
from 2012 until January 29, 2016. Ulizio worked for Seminole when it purchased Evans
Energy’s assets in May 2013. (Doc. 84 at ¶ 7). At that time, Ulizio claims that neither
Seminole nor he knew that Evans Energy had purchased the Policies. (Id. at ¶ 8).
According to Ulizio, Seminole did not purchase the Policies from Evans Energy – a fact
that Seminole now disputes. (Id. at ¶ 10; Doc. 69-5 at ¶ 7). And Ulizio alleges that he did
not learn of the Policies until after Long died. (Doc. 84 at ¶ 9).
4
The Court eventually entered default judgment against Robert E. Tardif, Trustee for the
Bankruptcy Estate of Randy Long. (Doc. 60).
5 On February 27, 2015, the Court dismissed with prejudice Federated Life from the
interpleader action and discharged it from further liability. (Doc. 57).
6 Evans Energy received $2,257,955.93 (Doc. 66), while Fifth Third Bank received
$1,756,187.87 (Doc. 67).
4
Pertinent here, Ulizio also claims that he learned of the interpleader action in late
February 2015. (Doc. 84 at ¶ 12). As CFO, Ulizio avers that he “investigated the facts of
the interpleader action and determined that [Seminole] did not maintain an interest in the
[Policies’] proceeds.” (Id. at ¶¶ 15, 21). Ulizio states that he told Seminole’s president
and board member of the interpleader and Seminole’s non-interest in the proceeds. (Id.
at ¶¶ 16-17). Despite Seminole’s disinterest, he assisted Evans Energy and Fifth Third
in settling their claims to the Policies. (Id. at ¶ 18). Ulizio also instructed Lombardo, on
behalf of Seminole, to disburse the settlement proceeds to Evans Energy. (Id. at ¶ 20;
Doc. 69-11).
According to Tena Grandit, Seminole’s former financial controller and current
executive director of finance, Ulizio told her in “mid-2015” that Long had died and “possibly
had an insurance policy on his life which might benefit [Seminole].” (Doc. 69-9 at 9).
Grandit maintains that Ulizio told her that “he would follow up on the matter and let [her]
know if anything was discovered. Ulizio did not discuss the matter with [her] again.” (Id.
at ¶ 7). Grandit says that Ulizio never followed up with her. (Id.).
On February 11, 2016, approximately four months after judgment had been
entered, Seminole held a Board meeting in which Long’s death was mentioned. (Doc.
69-5 at ¶ 8). Grandit advised the Board of her conversation with Ulizio. (Doc. 69-9 at
¶ 9). Upon this information, the Board discussed “whether any insurance existed on his
life which could inure to the benefit of [Seminole].” (Doc. 69-5 at ¶ 8). From there, the
Board tasked Marc Solomon, Seminole’s general counsel, to investigate the matter. (Id.
at ¶ 10).
5
Five days after the Board meeting, Solomon emailed Lombardo requesting all
correspondence and documents relating to the interpleader action. (Id. at ¶ 11).
Lombardo responded with copies of the wire transfer of the proceeds and an email from
Ulizio that directed him to release the proceeds to Askar. (Id.). According to Solomon,
this was his first notice of the interpleader. (Id. at ¶ 12). On February 22, 2016, Solomon
sent a demand letter to Lombardo, requesting the return of the Policies’ proceeds. (Id. at
¶ 13). From there, Seminole continued to investigate the matter.
In June 2016, eight months after judgment was entered, Seminole filed the instant
motion to set aside the judgment and intervene as an interpleader defendant. (Doc. 69).
The undersigned referred the motion to Magistrate Judge Mirando for a report and
recommendation. Judge Mirando recommends denying the motion (Doc. 112), to which
Seminole objects (Doc. 115).
Seminole raises several objections to the Report and Recommendation. First, it
maintains that the Report and Recommendation misapplies the imputation of knowledge
doctrine in deciding that the motion to intervene is untimely. Second, it argues that the
Report and Recommendation errs in finding that Ulizio acted in his capacity as Seminole’s
CFO when he declined to intervene in the underlying interpleader action. Third, Seminole
avers that the Report and Recommendation ignores essential facts concerning Ulizio’s
actions as CFO. Fourth, it challenges the Report and Recommendation’s findings on
disputed facts without an evidentiary hearing. For their parts, Federated Life, Fifth Third,
and Evans Energy vie for the Court to accept and adopt the Report and Recommendation.
(Doc. 116; Doc. 117; Doc. 118).
6
STANDARD OF REVIEW
A district judge “may accept, reject, or modify in whole or in part, the findings or
recommendations made by the magistrate judge.” 28 U.S.C. § 636(b)(1). The district
judge “shall make a de novo determination of those portions of the report or specified
proposed findings or recommendations to which objection is made.” Id. And “[t]he judge
may also receive further evidenced or recommit the matter to the magistrate judge with
instructions.” Id.
DISCUSSION
A. Motion to set aside judgment
The logical (and only) starting point is Seminole’s request to set aside the
judgment. Absent setting aside this final order, this Court can take no further action.
Under Rule 60 of the Federal Rules of Civil Procedure, a “court may relieve a party or its
legal representative from a final judgment, order, or proceeding [.]” Fed. R. Civ. P. 60(b).
A Rule 60(b) motion must be made “within a reasonable time” and, in any event, not more
than one year after judgment for reasons based an opposing party’s fraud,
misrepresentation, or misconduct. Fed. R. Civ. P. 60(c).
“The purpose of Rule 60(b) is to balance the principle of finality of a judgment with
the interest of the court in seeing that justice is done in light of the facts.” Stansell v.
Revolutionary Armed Forces of Colombia, No. 8:09-cv-2308, 2013 WL 12132057, at *3
(M.D. Fla. Apr. 29, 2013) (citing Hesling v. CSX Transp., Inc., 396 F.3d 632, 638 (5th Cir.
2005) (holding that the “desire for a judicial process that is predictable mandates caution
in reopening judgments”)). The trial court enjoys broad discretion to grant relief under
7
Rule 60(b). See Edwards v. Joyner, 566 F.2d 960, 961-62 (5th Cir. 1978)7 (“Motions
under Rule 60(b) are addressed to the sound discretion of the district court, whose ruling
will not be disturbed absent a showing of abuse of that discretion.”); see also Waddell v.
Hendry Cty. Sheriff’s Office, 329 F.3d 1300, 1309 (11th Cir. 2003).
As an initial matter, Rule 60(b) restricts the right to reopen a judgment to a party
or its legal representative. Fed. R. Civ. P. 60(b). Thus, as a non-party to the underlying
interpleader action, Seminole must establish standing to set aside the judgment. Its focal
effort to achieve standing is moving to intervene under Rule 24 of the Federal Rules of
Civil Procedure. But Seminole need not intervene to have standing because, even as a
non-party, its interests are directly affected by the final judgment. See Kem Mfg. Corp. v.
Wilder, 817 F.2d 1517, 1521 (11th Cir. 1987) (stating “a nonparty only has standing to
raise a challenge of fraud on the court [under Rule 60(b)] if the nonparty’s interests are
directly
affected
by
the
final
judgment”).
Consistent
with
the
Report
and
Recommendation, the Court finds that Seminole has standing to assert a Rule 60(b)
motion. (Doc. 112 at 19). And because Seminole clears this hurdle, the Court need not
address the merits of Seminole’s motion to intervene. Instead, the Court will move directly
to whether Seminole has shown by clear and convincing evidence that the judgment
should be set aside.
Rule 60(b) enumerates six reasons that a court may set aside a final judgment.
Two of which are pertinent here. The first is for “fraud (whether previously called intrinsic
or extrinsic), misrepresentation, or misconduct by an opposing party[.]” Fed. R. Civ. P.
7
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the
Eleventh Circuit adopted as precedent the decisions of the former Fifth Circuit rendered
prior to October 1, 1981.
8
60(b)(3). The second is the residual ground – “any other reason that justifies relief.” Fed.
R. Civ. P. 60(b)(6). The Court will address each reason in turn.
To prevail on the first exception, “the moving party must prove by clear and
convincing evidence that the adverse party obtained the verdict through fraud,
misrepresentation, or other misconduct.” Waddell, 329 F.3d at 1309; see also Cox
Nuclear Pharmacy, Inc. v. CTI, Inc., 478 F.3d 1303, 1314 (11th Cir. 2007). In addition,
the movant must show that the alleged fraud prevented it from making a full and fair
presentation of its case. See Waddell, 329 F.3d at 1309.
Even accepting Seminole’s factual allegations as true, it falls short of showing
fraud by clear and convincing evidence. The crux of Seminole’s argument is that Evans
Energy and Fifth Third colluded with Ulizio to conceal Seminole’s interest in the Policies
so that they could share the proceeds. (Doc. 69 at 13). Seminole also argues that Evans
Energy and Fifth Third both failed to alert the Court of its interests in the Policies.
Seminole further offers separate arguments as to Evans Energy and Fifth Third Bank. As
to Evans Energy, Seminole takes issue with Lombardo answering this action by stating
that Evans Energy had a sole interest in the Policies. (Id. at 13-14). Seminole claims
that Lombardo knew of Seminole’s superior interest, as he had previously acknowledged
Seminole as Evans Energy’s successor. (Id. at 14). For Fifth Third’s part, Seminole
claims that the bank received nearly half of the Policies’ proceeds without ever mentioning
Seminole’s Term Note. (Id.). And to make matters worse, Seminole maintains that Fifth
9
Third should have credited the $1.8 million it received to the amount due on Seminole’s
Term Note. (Id. at 15).8
To be sure, Evans Energy sold certain assets to Seminole, and as consideration,
Seminole assumed Evans Energy’s debt to Fifth Third and delivered to it a Term Note for
$5.625 million. But whether Evans Energy’s interest in the Policies were included in the
sale to Seminole is contested. To that end, the Court is hard-pressed to find that Evans
Energy had committed Rule 11 fraud by stating that it had a sole interest in the Policies’
proceeds. Similarly, whether Fifth Third should have credited the proceeds to the amount
due on Seminole’s Note does not constitute fraud, misrepresentation, or misconduct.
Seminole’s attempt to create fraud through this complex web of facts and inferences is
unconvincing.
Moreover, while Rule 60(b)(3) aims to redress judgments unfairly obtained,
Seminole wants to take this case one step further and litigate the alleged misconduct by
Ulizio, Evans Energy, and Fifth Third. The state law claims that Seminole proposes to
assert in its crossclaims and third-party complaint – breach of the duty of loyalty, breach
of fiduciary duty, conversion, civil theft, and conspiracy – are better suited for a separate
action. These claims are still available to Seminole without the Court having to set aside
the judgment. So, while Seminole may prefer to stay in federal court, the Court is not
obligated to set aside its judgment when Seminole has another reasonable course of
Based on Seminole’s proposed amended answer, cross-claims, and third party
complaint attached to its objections to the Report and Recommendation (Doc. 115-1), it
appears that it may be abandoning claims against Fifth Third. For purposes of this Order,
the Court will consider the claims as presented to Judge Mirando for the Report and
Recommendation.
8
10
action to resolve this matter and will not be prejudiced. The Court, therefore, declines to
award Seminole the extraordinary remedy of setting aside the judgment.
As to timeliness, the Court finds suspect that Seminole waited four months before
bringing the instant motion. Even without imputing Ulizio’s knowledge on Seminole and
taking that it first learned of the underlying interpleader action in February 2016, it offers
nothing more than its need to investigate the matter further as grounds for not moving to
intervene earlier.
One last point on Rule 60(b)(3) – the facts of this case do not fit neatly under this
subsection’s purview. This rule is usually invoked when the moving party was unable to
present an otherwise meritorious claim fully and fairly at trial because the opposing side
misrepresented or provided fraudulent information during discovery. See, e.g., Johnson
v. Law Offices of Marshall C. Watson, P.A., 348 F. App’x 447, 448 (11th Cir. 2009) (“[O]nly
the most egregious misconduct, such as bribery of a judge or members of a jury, or the
fabrication of evidence by a party in which an attorney is implicated, will constitute a fraud
on the court.” (citation omitted)); In re Braga, 272 F.R.D. 621, 626 (S.D. Fla. 2011) (stating
a party moving under [Rule] 60(b)(3) must prove the “existence of an unconscionable plan
designed to improperly influence the court in its decision”). This is not one of those cases.
Further complicating matters is Seminole accusing its own CFO of colluding with Evans
Bank and Fifth Third to keep it out of this action. Although these points alone are not
dispositive, they are telling in the applicability of Rule 60(b)(3).
Seminole’s attempt to set aside the judgment under Rule 60(b)(6)’s residual
provision fares no better. (Doc. 69 at 12-13). As stated, Rule 60(b)(6) offers relief from
judgment for “any other reason that justifies relief.” This catchall provision “offers relief
11
from judgment only to accomplish justice and only in the most ‘extraordinary’
circumstances.” See Harduval v. Gen. Dynamics Corp., 801 F. Supp. 597, 612-13 (M.D.
Fla. 1992). Indeed, “the structure and phraseology of Rule 60(b) indicate that subsection
six was intended as a residual clause, to be used only in dealing with a request for relief
not falling within clauses one through five.” Id. at 613 (citations omitted); see also Gelinas
v. Accelerated Benefits Corp., No. 6:13-cv-249, 2005 WL 2656575, at *1-2 (M.D. Fla. Oct.
18, 2005). Because fraud and misconduct is the foundation of Seminole’s motion to set
aside the judgment, the Court need not consider its secondary argument under Rule
60(b)(6). However, given Seminole’s fraud argument does not fit squarely within Rule
60(b)(3)’s purview, the Court will forge ahead.
Here, Seminole maintains that its due process rights have been violated because
it was deprived any opportunity to assert a claim to the Policies’ proceeds before the
funds were distributed. (Doc. 69 at 12). But its case law support for this proposition
addresses Rule 19, which governs joinder, a related, but separate principle than Rule
24’s intervention. And all but one case is non-binding authority. Moreover, for the
reasons discussed supra, Seminole may seek judicial redress against Ulizio, Evans
Energy, and Fifth Third by filing a separate suit alleging the same cross-claims and thirdparty claims that it wishes to assert here. At bottom, the Court finds that Seminole has
failed to establish extraordinary circumstances to set aside the judgment and to disrupt
the finality of this action.
Finally, Seminole maintains that an evidentiary hearing regarding its Rule 60(b)
motion is required. The Court disagrees. A court is not obligated to convene a hearing
on a Rule 60(b) motion, but it may choose to do so in its discretion. See Cano v. Baker,
12
435 F.3d 1337, 1342-43 (11th Cir. 2006); see also Atkinson v. Prudential Prop. Co., Inc.,
43 F.3d 367, 374 (8th Cir. 1994). Based on the parties’ extensive briefing and exhibits,
an evidentiary hearing would have been redundant.
The Court has carefully and
completely considered the record as a whole and is able to determine the pending motion
based on the parties’ papers. Consequently, the Court finds that an evidentiary hearing
is not needed, and that Judge Mirando did not err in failing to hold one.9
In conclusion, the Court denies Seminole’s motion to the extent it requests to set
aside the judgment entered on October 22, 2015.
B. Federated Life’s request for attorney’s fees
Next, Federated Life requests its reasonable attorney’s fees, not in a separate
motion, but in its response to Seminole Tribe’s motion. (Doc. 90 at 10). As the Report
and Recommendation finds, this request is procedurally improper. See Fed. R. Civ. P.
54(d)(2)(A) (“A claim for attorney’s fees and related nontaxable expenses must be made
by motion unless the substantive law requires those fees to be proved at trial as an
element of damages.”). As such, Federated Life’s offhand request for its attorney’s fees
is denied.
Accordingly, it is now
ORDERED:
(1) United States Magistrate Judge Carol Mirando’s Report and Recommendation
(Doc. 112) is ACCEPTED as to its findings on Seminole Tribe of Florida’s
request to set aside the judgment, as well as to Federated Life Insurance
For the same reasons, the Court adopts the Report and Recommendation’s
recommendation to deny Federated Life’s request for oral argument. (Doc. 112).
9
13
Company’s request for oral argument and attorney’s reasons. For the reasons
set forth herein, the Court need not accept, reject, or modify the Report and
Recommendation as to its findings on Seminole’s request to intervene.
(2) Seminole Tribe of Florida, Inc.’s Motion to Intervene as Defendant, Reopen
Interpleader, and Set Aside Judgment (Doc. 69) is DENIED.
(3) Federated Life Insurance Company’s request for oral argument (Doc. 91) and
request for attorney’s fees (Doc. 90 at 10) are DENIED.
DONE and ORDERED in Fort Myers, Florida this 29th day of March 2017.
Copies: All Parties of Record
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