Wiand v. Catholic Charities, Diocese of Venice Inc.

Filing 70

ORDER adopting 54 REPORT AND RECOMMENDATION re 31 MOTION to dismiss Plaintiff's First Amended Complaint and Memorandum Of Law In Support Thereof filed by Catholic Charities, Diocese of Venice Inc. and granting in part and denying in part the motion as set out in the order. Signed by Judge Elizabeth A. Kovachevich on 9/26/2011. (SN)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

BURTON W. W1AND, as Receiver for
VALHALLA INVESTMENT PARTNERS,
LP.; VIKING FUND, LLC; VIKING IRA
FUND. LLC; VICTORY FUND, LTD.;
VICTORY IRA FUND. LTD.; and SCOOP
REAL ESTATE, LP..
Plaintiff.

Case No. 8:10-CV-247-T-17MAP

v.

CATHOLIC CHARITIES, DIOCESE OF
VENICE, INC.,
Defendant,

ORDER ADOPTING THE REPORT AND RECOMMENDAHON OK THE
MAGISTRATE JUDGE

This case involves a lawsuit by Plaintiff. Burton \V. Wiand. as Receiver for Valhalla
Investment Partners. L.P.: Viking Fund. LLC: Viking IRA Fund, LLC; Victory Fund. Ltd.;
Victory IRA Fund. Ltd.. and Scoop Real Estate. L.P.; ("Plaintiff) to recover funds from
Defendant. Catholic Charities. Diocese of Venice, ("Defendant") under the Florida Uniform

Fraudulent Transfer Act ("FUFTA"; see Fla. Stat. § 726.101 et seq.) and for unjust enrichment.
Defendant moved to dismiss the amended complaint, and made the following arguments: (1) that

the complaint failed to meet the specificity requirements of Rule 9(b) of the Federal Rules of
Civil Procedure: (2) that the amended complaint failed to state a claim under Rule 12(b)(6); (3)
that certain FUFTA claims are time barred; and (4) that the Defendant is a subsequent transferee

that took in good faith and, therefore, the fraud claim is not voidable under Florida Statute
Section 726.109(1).

I

This Court, under authority of 28 U.S.C. § 636(b)(1)(B). Rule 72(b) of the Federal Rules
of Civil Procedure, and Rule 6.02. Local Rules of the Middle District of Florida, referred the

motion to the Honorable Mark A. Pizzo, United States Magistrate Judge, by Order of Referral

dated February 2, 2010 (Doc. No. 4). After considering the parties' submissions and oral
arguments. Judge Pizzo. on July 11. 2011. filed a Report and Recommendation ("R & R") (Doc.
No. 54) in which he recommends that the motion to dismiss be granted with regard to certain
transfers that occurred more than four years before Plaintiff filed the initial complaint, and that
the motion be denied in all other respects.

On July 25. 2011. Plaintiff filed its Limited Objection to the Magistrate Judge"s July 7.
2011 R & R (Doc. No. 58) ("Plaintiffs Objections"). After reviewing Judge Pizzo's findings in
light of Plaintiffs objections, this Court adopts the Magistrate Judge's report and
recommendation.
I.

STANDARD OF REVIEW

Under the Federal Magistrate's Act, 28 U.S.C. § 636. a United Slates District Judge may

designate a United States Magistrate Judge to conduct hearings in order to submit proposed
findings of fact and recommendations in an R & R for the disposition of a motion to dismiss. 28

U.S.C. § 636(b)(1)(B). Within fourteen days after being served with a copy of the R & R. any
party may file written objections to the proposed findings and recommendations, and the district

judge "shall make a de novo determination of those portions of the [R & R] to which objection is
made." 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3): Gropp v. United Airlines. Inc., 817 F.
Supp. 1558. 1560 (M.D. Fla. 1993). For portions of the R & R to which no objections are made,

the district judge should review the findings under the clearly erroneous standard. Id. at 1562.
The clearly erroneous standard "is significantly deferential, requiring a definite and firm

conviction that a mistake has been committed.'* Concrete Pipe & Prods, of Cal.. Inc. v. Const.

Laborers Pension Trustfor S. ('al.. 508 U.S. 602, 623 (1993). After such review, the district
judge may "accept, reject, or modify in whole or in part, the findings or recommendations made

by the magistrate." 28 U.S.C. § 636(b)(1)(C); Fed. R. Civ. P. 72(b)(3).
II.

BACKGROUND

The lawsuit in this case stems from a Securities and Exchange Commission (SEC)
enforcement action addressing the aftermath of a massive Ponzi scheme that Arthur Nadel. a
hedge fund manager, perpetuated. See SEC v. Arthur Nadel. el al.. Case No. 8:09-cv-87-T26TBM (M.D. Fla.). Plaintiff was appointed the receiver in that action, and is attempting to
recover funds that Defendant received in the form of charitable contributions from Nadel's

scheme. Plaintiff has sued Defendant under FUFTA and for unjust enrichment in order to
recover the funds.

HI.

FINDINGS TO WHICH THERE WERE NO OBJECTIONS

No objections were filed to the R & R"s findings that (1) the heightened pleading
requirement of Rule 9(b) of the Federal Rules of Civil Procedure was inapplicable to FUFTA
claims because unlike common law fraud claims. FUFTA claims are asserted against a person or
entity that did not deal directly with the plaintiff and therefore the plaintiff generally possesses

little information about the alleged transfer; (2) the plaintiffs adequately stated a claim for actual
fraud under Fla. Stat. § 725.105( 1)(a); (3) the plaintiffs adequately stated a claim for constructive

fraud under Fla. Stat. §§ 726.105(l)(b) and 726.106(1): (4) the defendants' equitable defense that
it was a subsequent transferee should not be considered al the motion to dismiss stage: and (5)
the statute of limitations barred plaintiffs' unjust enrichment claims for transfers dated before
January 20, 2006. four years prior to the original complaint.

The Court has reviewed these findings and determines that they are not clearly erroneous.
Therefore, the court adopts in full the findings of the R & R to which there were no objections,
and incorporates these findings by reference.

IV.

PLAINTIFF'S OBJECTIONS INVOLVING WHETHER CERTAIN CLAIMS
ARE TIME-BARRED

fhe Plaintiff filed a limited objection to the R & R. arguing that the R & R incorrectly
concluded that certain FUFTA claims were time-barred because looked it only at Fla. Stat. §

726.110 and failed to consider and apply equitable tolling or the continuing wrong doctrine.
(Doc. 58). The Plaintiff concedes that "[i]f that FUFTA language was the only consideration . . .
then the R & R would have reached the correct result," but that "neither FUFTA nor other law or

rule precludes application of tolling or similar doctrines, such as the continuing wrong doctrine."
(Doc. 58). The Court has conducted a de novo review of the R & R's finding that the plaintiffs
FUFTA claims for constructive fraud under Fla. Stat. § 726.110 are time-barred, and determines

that the claims are indeed time-barred, and that neither equitable tolling nor the continuing
wrong doctrine apply, for reasons discussed below.
A. FUFTA Claims

A Rule 12(b)(6) dismissal on statute of limitations grounds is appropriate when it is
"apparent from the face of the complaint" that the claim is time-barred. LaGrasta v. First Union

Securities. Inc.. 358 F.3d 840. 845 (11th Cir. 2004). Under Fla. Stat. § 726.110:
A cause of action with respect to a fraudulent transfer or obligation ... is extinguished
unless action is brought
(1) Under § 726.105(1 )(a), within four years after the transfer was made or the obligation
was incurred or. if later, within one year after the transfer or obligation was or could
reasonably have been discovered by the claimant:
4

(2) Under § 726.105(1 )(b). within four years after the transfer was made or the obligation
was incurred.

The magistrate judge correctly determined that although the statute contains a discovery

provision for actual fraud under Fla. Stat. § 726.105( I)(a), which permits claims for such fraud
to be brought within one year of the discovery of the fraud, the statute does not include such a
provision for constructive fraud under Fla. Stat. § 726.106(1). The R & R explained that "[a]
well-settled principle of statutory construction provides that when the legislature has included a
specific provision in one part of the statute and omitted it in another part of the same statute, the
court must assume the omission was intentional." (R & R at 13). Thus, from the plain language
of the statute and basic principles of statutory construction, it is clear that the Plaintiffs
constructive fraud claims under Fla. Slat. § 726.106(1) dated prior to January 20, 2006, are timebarred under Fla. Stat. § 726.110.

B. Equitable Toll inn

"Equitable tolling is a doctrine under which plaintiffs may sue after the statutory time period
has expired if they have been prevented from doing so due to inequitable circumstances." Ellis v.

General Motors Acceptance Corp.. 160 F.3d 703. 706 (11th Cir.1998). Equitable tolling should
be "applied sparingly" by the courts. Steed v. Head, 219 F.3d 1298. 1300 (11th Cir. 2000).
Equitable tolling is available and appropriate where the plaintiff untimely files his complaint
because of "extraordinary circumstances that are both beyond his control and unavoidable even
with diligence." Sandvikv. U.S.. 177 F.3d 1269. 1271 (11th Cir. 1999).

Under Florida Statutes § 95.051(1). eight circumstances are enumerated under which the running
of time under any statute of limitations is tolled. Absent from this list is any circumstance which
could be relevant to this case. Additionally, § 95.051(2) expressly precludes the use of any

tolling provision not listed: "No disability or other reason shall toll the running of any statute of
limitations except those specified in this section. § 95.091. the Florida Probate Code, or the
Florida Guardianship Law." While the Plaintiffargues that the legislature "has not expressed
any intent to preclude tolling doctrines from applying to FUFTA claims," this is incorrect

because the legislature could have included either a discovery provision within § 726.110 for
constructive fraud, or it could have included a relevant provision among the enumerations in §

95.051. However, the legislature did neither, and thus, the legislature has made clear its intent to
exclude all tolling exceptions not listed in the statute. HCA Health Sens, of Florida. Inc. v.
Hillman, 906 So.2d 1094. 1098-1100 (Fla.Dist.Ct.App.2004). As a result, equitable tolling does
not apply in this case.
C. Continuum Wroim Doctrine

The Plaintiff argues that the continuing wrong doctrine should apply to this case because
of the allegations of a continuous Ponzi scheme that defrauded the investors, fhe Plaintiff cites

two cases for support of this argument. Halkey-Roberts Corp. v. Mackal. 641 So. 2d 445, 447
(Fla. 2d DCA 1994) and Laney v. Am. Equity Inv. Life Ins. Co.. 243 F. Supp.2d 1347. 1357
(M.D. Fla. 2003); however, neither case is directly on point with the circumstances of this case.

Both cases recognize the continuing tort doctrine, which tolls the statute of limitations for certain
continuous tortious conduct. But. in this case, the Plaintiff has brought statutory claims under
FUFTA, and does not provide support for applying the continuous tort doctrine to a FUFTA

claim. See In re Burton IViand Receivership Cases. 2008 WL 818504. *9 (M.D. Fla. Mar. 26.
2008) (noting the lack of authority for application of the continuing tort doctrine to FUFTA,
since a FUFTA claim "is not . . . an independent cause of action in tort"). Therefore, the court

finds that the continuing tort doctrine does not apply to constructive fraud under Fla. Stat. §
726.106(1).
V.

CONCLUSION

The Court has reviewed all findings ofthe magistrate judge in the R & R, and adopts the
R & R by reference herein. Accordingly, it is hereby
ORDERED:

1.

fhe motion to dismiss is GRANTED as to the Plaintiffs constructive fraud claims

(Count One) brought under the Florida Uniform Fraudulent 'Transfer Act. Fla. Stat. §§
726.105(l)(b) or 726.106(1), and the Plaintiffs unjust enrichment claims (Count Two)
pertaining to transfers dated before January 20, 2006.
2. In all other respects, the motion to dismiss is DENIED.
3.

DONE and ORDERED in Chambers in Tampa, Florida, thisstf2^?dayof September. 2011.

Copies to: All parties and counsel of record.