Court Opinion

ID: 3050577
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:31:50.523421+00
Date Added: 2024-06-11T11:49:23.859482
License: Public Domain

Case: 13-10143       Date Filed: 04/01/2014       Page: 1 of 8

                                                                       [DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                     No. 13-10143
                               ________________________

                          D.C. Docket No. 9:11-cv-80416-KLR

CORDELL CONSULTANT, INC. MONEY
PURCHASE PLAN AND TRUST,
a Virginia corporation,

                                                                          Plaintiff-Appellant,

                                             versus

ELIOT C. ABBOTT,
DALE S. BERGMAN, et al.,

                                                                      Defendants-Appellees.
                              ________________________

                      Appeal from the United States District Court
                          for the Southern District of Florida
                            _________________________
                                    (April 1, 2014)

Before ANDERSON and GILMAN,* Circuit Judges, and JOHNSON,** District
Judge.
____________
*Honorable Ronald Lee Gilman, United States Circuit Judge for the Sixth Circuit, sitting by
designation.

**Honorable Inge Prytz Johnson, United States District Judge for the Northern District of
Alabama, sitting by designation.
              Case: 13-10143     Date Filed: 04/01/2014    Page: 2 of 8

PER CURIAM:

      We have had the benefit of oral argument in this case, and have very

carefully considered the briefs of the parties and relevant parts of the record. This

case involves allegations that four lawyers, and through them their law firm, aided

and abetted a client in fraudulently procuring a $7 million loan from plaintiff in

April 2007. Plaintiff also alleges that the same actions constitute a civil

conspiracy. The district court dismissed plaintiff’s Second Amended Complaint

(“SAC”). We conclude that this was error.

                                          I.

      In the Fed. R. Civ. P. 12(b)(6) posture of this appeal, we assume that all

well-pled factual allegations are true and draw all reasonable inferences in favor of

the plaintiff. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1948

(2009). Because the claims sound in fraud, Rule 9(b) requires that the

circumstances of the fraud must be stated with particularity. See Am. United Life

Ins. Co. v. Martinez, 480 F.3d 1043, 1064-65 (11th Cir. 2007). However,

allegations of knowledge and intent are not subject to the particularity requirement.

Fed. R. Civ. P. 9(b).

                                          II.

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                 Case: 13-10143        Date Filed: 04/01/2014        Page: 3 of 8

       We address first the claim that the four lawyers aided and abetted their

client’s scheme to induce plaintiff to make a $7 million loan based on

misrepresentations. The elements of this claim under Florida law are as follows:

(1) the existence of an underlying fraud; (2) the defendants’ knowledge of the

fraud; and (3) the defendants’ provision of substantial assistance to advance the

commission of the fraud. ZP No. 54 Ltd. P’ship v. Fid. & Dep. Co. of Md., 917

So. 2d 368, 372 (Fla. Dist. Ct. App. 2005).

       The first element – an underlying fraud – is sufficiently pleaded. The SAC

also contains ample allegations that all four individual defendant-lawyers knew not

only that their client was engaged in a Ponzi scheme, but also that he planned to

defraud lenders by obtaining loans based on false financial statements in an effort

to prevent the scheme from collapsing. More significantly, it is alleged that these

defendants knew that the financial statement used to obtain the April 2007 loan –

upon which they all intended plaintiff to rely in making the loan – was false. 1

       1
                 For purposes of our decision, it is not crucial whether defendants actually assisted
the client in preparing the financial statement, or whether they merely knew and intended for
plaintiff to rely on a preexisting financial statement.

        In light of our conclusion that the pleadings sufficiently allege that all four individual
defendants knew of the misrepresentation with respect to the financial statement, furthermore,
we need not address other misrepresentations alleged by plaintiff. However, if the allegations of
the SAC are true, all four defendants had much more extensive knowledge than we describe
here, which might include knowledge of other misrepresentations to this plaintiff with respect to
the instant $7 million loan and with respect to at least one previous loan (in February 2007).

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                Case: 13-10143        Date Filed: 04/01/2014       Page: 4 of 8

There were express allegations to that effect, and ample supporting allegations of

fact. For example, the client allegedly made extensive disclosures to all four

individual defendants, such that they knew that the client unlawfully withdrew

funds from his qualified intermediary companies (“QIs”) and used those funds to

purchase properties in his personal name (or that of a controlled entity). 2 It is also

alleged that all four individual defendants knew that the financial statement used to

obtain the April 2007 loan falsely listed such properties as the client’s own and

vastly understated his liabilities.

       We now turn to the third element – whether the four defendant-lawyers

provided substantial assistance to advance the fraud against this plaintiff with

respect to the April 2007, $7 million loan. In relation to this issue, the parties refer

to two of the lawyers as “transactional lawyers” and two of the lawyers as

“litigation lawyers.” We will discuss each pair of lawyers in turn.

       2
                 If the allegations of the SAC are true, all four individual defendants also had
extensive knowledge of the client’s practices. They had read previous legal opinions concluding
that the client’s withdrawals from the QIs and his use of those funds to buy properties in his
personal name constituted at least violations of contractual and fiduciary duties, and very likely
constituted fraudulent and criminal activity in the nature of a Ponzi scheme. Extensive research
conducted by a member of defendants’ own firm tended to corroborate these opinions. In short,
the allegations provide plausible support for plaintiff’s allegation that all four individual
defendants knew that the client was conducting a criminal Ponzi scheme, unlawfully
withdrawing funds from early QIs, and replacing them with funds unlawfully withdrawn from
later QIs.

                                                4
               Case: 13-10143     Date Filed: 04/01/2014    Page: 5 of 8

      We readily conclude that there are ample, particularized allegations that the

two “transactional lawyers” substantially assisted the April 2007 fraud on plaintiff.

The two transactional lawyers allegedly prepared the loan documents for the $7

million loan, closed the loan, and delivered the loan documents to plaintiff, all the

while knowing that the loan documents contained false statements. They intended

for the plaintiff to rely on a written financial statement that they allegedly knew

falsely represented, as the client’s own property, properties which the client had

purchased with funds unlawfully withdrawn from the QIs. They also allegedly

knew that the financial statement vastly understated the client’s liabilities.

      We likewise conclude that there are sufficient, particularized allegations that

the two “litigation lawyers” substantially assisted the fraud against this plaintiff.

We note that the SAC alleges that the two litigation lawyers directed and

supervised at least some of the actions taken by the two transactional lawyers in

relation to the April 2007 loan. We also note that the litigation lawyers were

allegedly responsible for the client relationship and for billing the client. We need

not decide, however, whether the foregoing is sufficient to constitute the required

substantial assistance because, in addition to the foregoing, it is alleged that the

two litigation lawyers specifically advised the client to borrow the $7 million at

issue from plaintiff. This advice was given notwithstanding that the two litigation

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              Case: 13-10143     Date Filed: 04/01/2014    Page: 6 of 8

lawyers allegedly had full knowledge of the client’s Ponzi scheme and his intent to

use the proceeds to continue and conceal the scheme. More significantly, this

advice was given notwithstanding the allegations that the two litigation lawyers

knew that the client would obtain the loan based upon a false financial statement.

We conclude that the foregoing constitutes sufficient, particularized allegations

satisfying the substantial assistance requirement.

                                          III.

      Next, we address the plaintiff’s civil-conspiracy claim. The elements of the

claim under Florida law are as follows:

      (a) an agreement between two or more parties, (b) to do an unlawful
      act or to do a lawful act by unlawful means, (c) the doing of some
      overt act in pursuance of the conspiracy, and (d) damage to plaintiff as
      a result of the acts done under the conspiracy.

Raimi v. Furlong, 702 So. 2d 1273, 1284 (Fla. Dist. Ct. App. 1997). “Each

coconspirator need not act to further a conspiracy; each ‘need only know of the

scheme and assist in it in some way to be held responsible for all of the acts of his

coconspirators.’” Charles v. Fla. Foreclosure Placement Ctr., LLC, 988 So. 2d

1157, 1160 (Fla. Dist. Ct. App. 2008) (quoting Donofrio v. Matassini, 503 So. 2d

1278, 1281 (Fla. Dist. Ct. App. 1987)).

      There is no doubt that obtaining a loan based upon false representations is

unlawful. The pleadings sufficiently allege that plaintiff was damaged as a result

                                           6
                Case: 13-10143        Date Filed: 04/01/2014       Page: 7 of 8

of the alleged fraud. Thus, we need address only the allegations relating to the

requirements of an agreement and an overt act.

       We conclude that there are sufficient, particularized allegations, with respect

to all four defendant-lawyers, satisfying both the agreement element and the overt-

act element. There are specific allegations that the two litigation lawyers advised

the client to obtain the $7 million loan from plaintiff, knowing that the client would

use a false financial statement. The client allegedly agreed and implemented the

advice. The client implemented the advice by joining with the two transactional

lawyers, who were partners of the litigation lawyers, in preparing and jointly

submitting knowingly false loan documents to plaintiff in order to induce the loan.

These allegations are both sufficiently particularized and also sufficient to support

reasonable inferences of agreement and an overt act.

                                               IV.

       For the foregoing reasons, and with respect to both the aiding-and-abetting-

fraud claim and the civil-conspiracy claim, we conclude that the district court erred

in dismissing plaintiff’s claims against all four individual defendant-lawyers

pursuant to Rule 12(b)(6).3 Because the defendant-law firm can be vicariously

       3
              We recognize that the four defendant-lawyers deny the allegations and vigorously
deny both having aided and abetted the client’s fraud and also having agreed with the client to do
an unlawful act. Obviously, we express no opinion on the ultimate outcome of this case.

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              Case: 13-10143        Date Filed: 04/01/2014      Page: 8 of 8

liable if one or more of the individual defendants is ultimately found liable, see

Fla. Stat. § 621.07, it was also error to dismiss the claims against the defendant-law

firm. Accordingly the judgment of the district court is reversed 4 and the case is

remanded for further proceedings not inconsistent with this opinion.

      REVERSED and REMANDED.

      4
             Appellee’s motion for attorney’s fees is denied.

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