Regions Bank v. Kaplan et al

Filing 353

ORDER granting 276 motion to dismiss Counterclaim and Crossclaim of Bridgeview Bank Group. Signed by Judge Elizabeth A. Kovachevich on 3/30/2015. (JM)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
REGIONS BANK,
etc.,
Plaintiff,
v.

CASE NO. 8:12-CV-1837-T-17MAP

MARVIN I. KAPLAN, etc.,
et al.,
Defendants.
/
MARVIN I. KAPLAN, etc.,
et al.,
Counterclaim/Crossclaim
Plaintiffs,
v.
REGIONS BANK, etc.,
et al.,
Counterclaim/Crossclaim
Defendants.
/
ORDER
This cause is before the Court on:
Dkt. 276
Dkt. 280

Motion to Dismiss Counterclaim and Crossclaim
Response in Opposition

Counterclaim/Crossclaim Defendants Marvin I. Kaplan, R1A Palms, LLC, Triple
Net Exchange, LLC, MK Investing, LLC and BNK Smith, LLC (“Kaplan Parties”) move to
dismiss the Counterclaim and Crossclaim of Bridgeview Bank Group (“Bridgeview”)(Dkt.
271).

Case No. 8:12-CV-1837-T-17MAP
I. Background
Bridgeview’s Counterclaim and Crossclaim includes the following:

Count I
Count II

Violation of Secs. 772.103(3), 772.104, Ra. Stat.
Violation of Secs. 772.103(4), 772.104, Ra. Stat.

In the Counterclaim and Crossclaim, Bridgeview alleges that Marvin I. Kaplan
was recruited to be an integral part of a check kiting scheme involving the Kaplan
Parties and Smith Advertising & Associates, Inc., Gary T. Smith, G. Todd Smith and
Lucy B. Smith (“the Smiths”). The Kaplan Parties would transfer monies to the Smiths
and immediately accept one or more checks, which were to be cashed after a thirty
days period had expired. Bridgeview alleges that Kaplan and the Kaplan Parties knew
upon acceptance of the checks that the funds were not available in the Smiths’
accounts] at Bridgeview, on which the funds were drawn.

Bridgeview further alleges

that Kaplan agreed to and did discuss the alleged check kiting scheme with the Smiths.

The alleged scheme began in August, 2009 with Kaplan’s personal investment of
fifty thousand dollars ($50,000.00) and continued via a series of separate agreements
until January 23, 2012. The Smiths sent checks as proceeds and profits on discrete
investment deals by mail to Kaplan and the Kaplan Parties; the checks were deposited
into accounts of Kaplan and the Kaplan Parties, and on the same day Kaplan and
Kaplan Parties wired funds to the Smiths’ accounts at Bridgeview. The Kaplan Parties
would wire up funds for each successive deal as the Kaplan Parties received credit
from the previously deposited checks. As soon as provisional credit was provided to
Kaplan, he directed the Kaplan Parties to wire additional funds, with each successive
wire (or groups of wires) increasing in amount. (Dkt. 271, p. 55, par. 22).

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Case No. 8:12-CV-1837-T-17MAP
On January 20, 2012, in furtherance of the check kiting scheme, the Kaplan
Parties wired nine million seven hundred thousand dollars ($9,700,000.00) from their
accounts at Regions Bank to the Smiths’ accounts at Bridgeview. On January 23,
2012, in furtherance of the check kiting scheme, the Kaplan Parties wired ten million
four hundred fifty thousand dollars ($10,450,000.00) from their accounts at Regions
Bank to the Smiths’ accounts at Bridgeview.

Bridgeview alleges that on January 20, 2012, Kaplan and the Kaplan Parties
knew that upon acceptance of the checks and deposit of the checks into the Kaplan
Parties’ account at Regions Bank that the funds were not available in the Smiths’
account upon which the funds were drawn. After the checks were deposited into the
Kaplan Parties’ account at Regions Bank, the Kaplan Parties and the Smiths agreed to
participate in another check kiting scheme. On January 23, 2012, after wiring the funds
to Bridgeview, the Kaplan Parties received checks for repayment and “incentive
payments” by overnight mail and deposited the checks the same day the initial wire
transfer took place.

Bridgeview timely returned the checks for the January 20, 2012 and January 23,
2012 transactions. Bridgeview alleges that the check kiting scheme was employed as
an attempt to defraud a financial institution or to obtain moneys, funds or other property
under the control or custody of a financial institution by means of false or fraudulent
pretenses or representations. (Dkt. 271, p. 56, par. 31). Bridgeview further alleges that
the check kiting scheme employed the act of depositing items, as defined in Sec.
674.104(1 )(i), Fla. Stat. in a bank or depository with the intent to defraud.
In Count I, Bridgeview alleges that the four LLCs (R1A, Triple, MK, BNK)
deposited checks and initiated wires on January 20, 2012 and January 23, 2012, in
furtherance of the check kiting scheme. Bridgeview further alleges that the Kaplan
Parties with the Smiths were employed by or associated with an enterprise, the check
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Case No. 8:12-CV-1837-T-17MAP
kiting scheme, and engaged in the activities stated above with full knowledge of their
purpose to defraud. Bridgeview further alleges that the Kaplan Parties with the Smiths
conducted or participated, directly or indirectly, in the conduct of the check kiting
scheme through a pattern of criminal activity in which all knowingly engaged, and that
the criminal activities engaged in by the Kaplan Parties together with the Smiths
included engaging in or conspiring to engage in acts of bank fraud and mail and wire
fraud in violation of Secs. 832.04 and 832.05, Ra. Stat. and 18 U.S.C. Sec. 1961 (1)(B)
and 18 U.S.C. Secs. 1341 and 1344.

Bridgeview alleges that the Kaplan Parties participated directly in the predicate
acts of wire fraud, in that each party was an active participant in wiring monies to the
Smiths’ account at Bridgeview, and depositing checks with the intent to defraud, that
there were two or more acts of such criminal activities, and that Bridgeview, as a
proximate and factual result of the criminal activity, suffered damages and/or injury,
including but not limited to wire transaction fees, FIS processing fees and Federal
Reserve fees directly attributable to the actions of the Kaplan Parties.

Bridgeview seeks a judgment against the Kaplan Parties for actual damages,
statutory damages, reasonable attorney’s fees, costs, and other appropriate relief.

In Count II, Bridgeview alleges that Kaplan, the Kaplan Parties and the Smiths
entered into and conspired to violate Sec. 772.103(3), Ra. Stat. Bridgeview alleges the
Kaplan directed R1A, Triple, MK and BNK and orchestrated the deposit of checks and
the initiation of wires by each entity on January 20, 2012 and January 23, 2012, in
furtherance of the check kiting scheme. Bridgeview alleges that, as a proximate and
factual result of the criminal activity, Bridgeview has suffered damages and/or injury,
including wire transaction fees, FIS processing fees and Federal Reserve fees directly
attributable to the actions of Kaplan and the Kaplan Parties’ actions. Bridgeview seeks
a judgment against Kaplan and the Kaplan Parties for actual damages, statutory
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Case No. 8:12-CV-1837-T-17MAP
damages, attorney’s fees, costs, and other appropriate relief.

II. Standard of Review

“Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a “short
and plain statement of the claim showing that the pleader is entitled to relief.” “[D]etailed
factual allegations” are not required, Bell Atlantic v. Twomblv. 550 U.S. 544, 555 (2007),
but the Rule does call for sufficient factual matter, accepted as true, to “state a claim to
relief that is plausible on its face,” icL, at 570. A claim has facial plausibility when the
pleaded factual content allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. Id., at 556. Two working principles
underlie Twomblv. First, the tenet that a court must accept a complaint's allegations as
true is inapplicable to threadbare recitals of a cause of action's elements, supported by
mere conclusory statements. ]cL, at 555. Second, only a complaint that states a
plausible claim for relief survives a motion to dismiss. Determining whether a complaint
states a plausible claim is context-specific, requiring the reviewing court to draw on its
experience and common sense. k L at 556. A court considering a motion to dismiss
may begin by identifying allegations that, because they are mere conclusions, are not
entitled to the assumption of truth. While legal conclusions can provide the complaint's
framework, they must be supported by factual allegations. When there are
well-pleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement to relief. See Ashcroft v.
labal. 129 S.Ct. 1937, 1955-1956 (2009)(quoting Bell Atlantic v. Twomblv. 550 U.S. 544
(2007).

III. Discussion
In their Motion to Dismiss, Kaplan Parties argue that the factual allegations of
Bridgeview’s Counterclaim/Crossclaim are vague and conclusory, such that the
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Case No. 8:12-CV-1837-T-17MAP
dismissal is appropriate. The Kaplan Parties further argue that, as to Count II,
Bridgeview has made no factual allegations that rise to the level sufficient to show that
Kaplan or any Kaplan Party agreed to participate in any alleged check kiting scheme.
The Kaplan Parties argue that Bridgeview has made conclusory allegations which are
based on allegations made by the Kaplan Parties in their claims against Bridgeview in
the Amended Counterclaim/Crossclaim (Dkt. 93).

Florida courts look to decisions interpreting the federal statute in interpreting
Sec. 772.103, Ra. Stat. Jackson v. BellSouth Communications. 372 F.3d 1250, 126364 (11th Cir. 2004). The allegations of the second phase of the investment scheme
commencing in November, 2011, identify particular acts of wire fraud carried out by the
Kaplan Parties in January, 2012 in furtherance of the alleged check kiting scheme. In
order to prove a pattern of racketeering in a civil or criminal RICO case, a plaintiff must
show at least two racketeering predicates that are related, and that they amount to or
pose a threat of continued criminal activity. H.J.. Inc. v. NW Bell Tel. Co.. 492 U.S.
229, 240 (1989). “A party alleging a RICO violation may demonstrate continuity over a
closed period by proving a series of related predicates extending over a substantial
period of time.” ]d., at 242.

Continuity refers to either a closed period of repeated conduct, or to past
conduct that by its nature projects in the future with a threat of repetition. In an openended case that relies on allegations of a threat of repetition, a plaintiff can meet his
burden by establishing either that the racketeering acts themselves include a specific
threat of repetition extending indefinitely into the future or that the predicate acts of
offenses are part of an ongoing entity’s regular way of doing business.

The relevant period for determining continuity is the time during which the
predicate acts take place, not the time during which the entire scheme to defraud takes
place. Coauina Investments v. TD Bank. N.A.. 760 F.3d 1300 (11th Cir. 2014). This
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Case No. 8:12-CV-1837-T-17MAP
case involves a closed period of repeated conduct. According to the allegations of
Bridgeview’s Counterclaim and Crossclaim, the acts of wire fraud took place on two or
more occasions in January, 2012. Courts have found that a period of time that is less
than twelve months does not constitute a substantial period of time. Jackson v.
BellSouth Communications. Inc.. 372 F.3d 1250 (11th Cir. 2004).

Sec. 1962(d) of the RICO statutes makes it illegal for anyone to conspire to
violate one of the substantive provisions of RICO, including Sec. 1962(c). Am. Dental
Ass’n v. Cigna Corp.. 605 F.3d 1283,1293 (11th Cir. 2010). “A plaintiff can establish a
RICO conspiracy claim in one of two ways: 1) by showing that the defendant agreed to
the overall objective of the conspiracy; or 2) by showing that the defendant agreed to
commit two predicate acts.” Republic of Panama v. BCCI Holdings (Luxembourg) S.A..
119 F.3d 935, 950 (11th Cir. 1997). “A plaintiff need not offer direct evidence of a RICO
agreement; the existence of conspiracy ‘may be inferred from the conduct of the
participants.’” Am. Dental Ass’n. 605 F.3d at 1293.

A. Conclusory Factual Allegations

The Florida RICO claim involves a closed period of activity that took place
during January, 2012. The Court relies on cases that hold that less than twelve
months is not a substantial amount of time. The Court grants the Motion to Dismiss
not due to the presence of conclusory factual allegations, but because the amount of
time during which the predicate acts took place is not substantial.
B. Count II - Conspiracy to Violate Sec. 772.103(3), Ra. Stat.

The Kaplan Parties argue that Bridgeview has made only formulaic allegations
that Kaplan, the Kaplan Parties and the Smiths entered into a conspiracy to violate Sec.
772.103(3). Bridgeview responds that Bridgeview has sufficiently alleged the
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Case No. 8:12-CV-1837-T-17MAP
agreement between the Kaplan Parties and the Smiths, as well as the factual support to
justify a finding that, given the totality of the circumstances, the Kaplan Parties
knowingly participated in a check kiting scheme with the intent to defraud a financial
institution.

Bridgeview argues that the factual allegations justify one reasonable

inference that outweighs all reasonable inferences to the contrary, that the Kaplan
Parties knew that there was no investment that could possibly justify the rates of return
the Kaplan Parties were supposed to receive, and that depositing monies into a bank
account and wiring funds to cover such checks is clearly indicative of fraudulent intent.

Where a plaintiff fails to state a substantive RICO claim, and the conspiracy
count adds no additional allegations, the conspiracy claim necessarily fails. Rogers v.
Nacchio. 241 Fed. Appx. 602, 609 (11th Cir. 2007). In this case, the facts underlying
the alleged agreement to carry out a check kiting scheme to defraud a financial
institution do not extend for a sufficient period of time to establish a Florida RICO claim.
The Court finds that the conspiracy claim based on the same allegations fails.

After consideration, the Court grants the Motion to Dismiss as to Count II.
Accordingly, it is

ORDERED that the Motion to Dismiss (Dkt. 276) is granted.

DONE and ORDERED in Chambers, in Tampa, Florida on thi _______ . >f
March, 2015.

Copies to:
All parties and cuunsm ui muuiu
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