Court Opinion

ID: 4113695
Source: CourtListenerOpinion
Date Created: 2017-01-06 17:01:18.164541+00
Date Added: 2024-06-11T14:22:41.366182
License: Public Domain

Case: 15-13636   Date Filed: 01/06/2017   Page: 1 of 20

                                                                      [PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS

                      FOR THE ELEVENTH CIRCUIT
                        ________________________

                          Nos. 15-13636; 15-14529
                        ________________________

                     D.C. Docket No. 1:14-cv-20368-KMM

HSI CHANG,
a.k.a. Mark Chang,

                                               Plaintiff - Appellant,

versus

JPMORGAN CHASE BANK, N. A.,

                                               Defendant - Appellee.

                        ________________________

                 Appeals from the United States District Court
                     for the Southern District of Florida
                        ________________________

                              (January 6, 2017)

                     ON PETITION FOR REHEARING
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Before ROSENBAUM and JILL PRYOR, Circuit Judges, and UNGARO, * District
Judge.

JILL PRYOR, Circuit Judge:

       Defendant JPMorgan Chase Bank, N.A. (the “Bank”) moved for panel

rehearing and rehearing en banc of an opinion originally filed on November 8,

2016. We grant the motion for panel rehearing, vacate our prior opinion, and

substitute for it the following opinion.

       Plaintiff Hsi Chang appeals the district court’s denial of his motion for leave

to file a proposed Second Amended Complaint. The district court denied the

motion because the allegations set forth in the proposed Second Amended

Complaint failed to state claims for negligence, gross negligence, or aiding and

abetting fraud or conversion against the Bank. We disagree that the amendment

would be futile.

       The allegations in Chang’s proposed Second Amended Complaint reflect

that Olga Padgett-Perdomo, a Bank vice president, knowingly assisted Charles

Gordon in stealing money that Gordon’s company, OPT Title and Escrow, Inc.,

had agreed hold in escrow in an account with the Bank. More specifically, Chang

alleged that Padgett-Perdomo (1) opened at the Bank an account for OPT Title that

       *
          Honorable Ursula Ungaro, United States District Judge for the Southern District of
Florida, sitting by designation.

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was labeled as an escrow account, even though OPT Title had not complied with

the Bank’s procedures for opening an escrow account; (2) wrote a letter overstating

the balance in the escrow account after Gordon had stolen Chang’s money from the

account; and (3) surreptitiously received $100,000 from Gordon.

       Although Chang was not a Bank customer, these allegations, if proven, are

sufficient to establish that the Bank owed Chang a duty of care and, therefore, the

Bank may be held liable under negligence theories. Additionally, these facts are

sufficient to state claims against the Bank for aiding and abetting fraud and

conversion because Chang plausibly claims that the Bank rendered substantial

assistance to Gordon in the commission of the fraud and misappropriation. Thus,

after careful consideration and with the benefit of oral argument, we hold that the

district court erred in denying Chang’s motion seeking leave to file the proposed

Second Amended Complaint. Accordingly, we reverse the district court’s denial of

the motion as well as the judgment dismissing Chang’s claims with prejudice, and

remand the case for further proceedings. 1

       1
          After dismissing Chang’s claims with prejudice, the district court awarded attorney’s
fees to the Bank. Because we reverse the underlying judgment, we also vacate the award of fees.

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                                 I.      BACKGROUND

A.     The Fraudulent Scheme 2

       This case arises out of a scheme in which Charles Gordon stole $750,000

from Chang. Gordon owned and served as the chief executive officer of OPT

Title, a Florida corporation, and Ziggurat (Panama), S.A., a Panamanian

corporation. Ziggurat’s purported business was to secure for its clients multi-

million dollar loans from global banking institutions and underwriters. Gordon

told Ziggurat’s clients that because the financial institutions required proof of their

liquidity to obtain financing, the clients needed to deposit a percentage of the total

amount to be financed in an escrow account OPT Title maintained with the Bank.

Gordon had clients transfer the escrow funds into an account at the Bank titled

“OPT Title & Escrow Inc Escrow Account” (the “OPT Escrow Account”). Instead

of holding the funds in escrow, however, Gordon diverted the money to pay

Ziggurat’s operating expenses and his personal expenses. Under this scheme,

Gordon diverted more than $3,000,000.

       In January 2010, Chang was approached about advancing $750,000 to fund

an escrow deposit for a Ziggurat client who was attempting to obtain financing to

       2
          For purposes of determining whether Chang stated a claim for relief in his proposed
Second Amended Complaint, we accept his well-pled allegations as true and construe them in
the light most favorable to Chang. See Chaparro v. Carnival Corp., 693 F.3d 1333, 1335 (11th
Cir. 2012).

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build a Caribbean resort. Chang was told that if the financing did not close within

90 days, his deposit would be refunded. In February 2010, Chang wired $750,000

to the OPT Escrow Account, believing OPT Title would hold the money in escrow.

But once Chang’s money was deposited in the OPT Escrow Account, Gordon

immediately transferred it to another account with the Bank where it was

commingled with other funds and stolen. Believing that his money was still in the

OPT Escrow Account, when the loan failed to close within 90 days, Chang agreed

to extend the escrow period.

      Subsequently, Gordon’s fraud was uncovered. He was indicted on a federal

wire-fraud charge and pled guilty. To date, Chang has not recovered his $750,000.

B.    Chang’s Claims Against the Bank

      Chang filed this lawsuit against the Bank in federal district court based on

diversity jurisdiction. He amended his complaint once as a matter of right. Before

the Bank responded to Chang’s First Amended Complaint, the district court

entered an order setting the case for trial and requiring the parties to complete

discovery 70 days prior to trial.

      The Bank then moved to dismiss the First Amended Complaint with

prejudice for failure to state a claim. Chang opposed the motion to dismiss and also

filed a motion seeking leave to file a Second Amended Complaint. In the proposed

Second Amended Complaint, Chang alleged that Padgett-Perdomo assisted Gordon

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in carrying out his scheme. Chang alleged that she prepared the paperwork to open

OPT Title’s accounts and permitted Gordon to name the OPT Escrow Account as

an escrow account even though OPT Title had not complied with the Bank’s

procedures for opening an escrow account. He also alleged that Padgett-Perdomo

wrote a letter on Bank letterhead representing that OPT Title’s “[e]scrow account”

had “deposits in a business checking and savings account in the seven digit

amounts” when in fact the total balance in all OPT Title’s accounts with the Bank

was less than $100,000 (the “Seven-digit Letter”). Second Am. Compl. at ¶ 35

(Doc. 29-1). 3 In exchange, Chang alleged, Gordon paid $100,000 to an entity

Padgett-Perdomo controlled several months after she opened OPT Title’s accounts.

      In his proposed Second Amended Complaint, Chang asserted causes of

action against the Bank for negligence, gross negligence, aiding and abetting fraud,

and aiding and abetting conversion. The Bank opposed Chang’s motion for leave

to file a Second Amended Complaint, arguing that the allegations were insufficient

to establish that the Bank or Padgett-Perdomo knew about the fraudulent scheme

or provided substantial assistance to Gordon.

      The district court granted the Bank’s motion to dismiss, dismissed the First

Amended Complaint with prejudice, denied as futile Chang’s motion for leave to

file the proposed Second Amended Complaint, and instructed the clerk of court to

      3
          Citations to “Doc.” refer to docket entries in the district court record in this case.

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close the case. As to the proposed Second Amended Complaint, the court

concluded that Chang failed to state a claim for any of the causes of action because

his allegations were insufficient to show that the Bank or Padgett-Perdomo knew

about Gordon’s fraud or that they had substantially assisted the fraud. Even

though the court credited Chang’s allegations that Gordon illicitly loaned Padgett-

Perdomo $100,000, it concluded that Chang “fail[ed] to allege any connection

between the secret loan and Gordon’s misappropriation, for example, an illicit quid

pro quo arrangement whereby Gordon secretly loaned the employee money in

exchange for her concealing his fraud.” Chang v. JPMorgan Chase Bank, N.A.,

No. 14-cv-20368, 2014 WL 7564668, at *11 (S.D. Fla. Dec. 8, 2014). Chang

timely appealed the district court’s order granting the Bank’s motion to dismiss

and denying his motion to amend.4

       After the district court dismissed Chang’s claims with prejudice, the Bank

moved to recover its attorney’s fees from Chang under Florida’s offer-of-judgment

statute. See Fla. Stat. § 768.79. The district court granted the Bank’s motion and

       4
          After the district court dismissed the complaint, Chang filed a motion under Federal
Rule of Civil Procedure 59(e) asking the district court to alter or amend its order dismissing his
claims with prejudice and denying him leave to amend his complaint. The district court denied
Chang’s motion, concluding that even considering the new allegations Chang set forth in his
Rule 59(e) motion, he failed to establish that the Bank or Padgett-Perdomo knew of, or
substantially assisted, Gordon’s fraud and thus failed to state claims for relief. Chang timely
appealed the denial of his motion to alter or amend the judgment. Because we conclude that the
district court erred in denying his motion for leave to amend, we need not address whether the
district court erred in denying the Rule 59(e) motion.

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awarded it $48,702.80 in attorney’s fees. Chang timely appealed this order as well.

Chang’s consolidated appeals are now before the Court.

                           II.     STANDARD OF REVIEW

       We review a district court’s denial of a motion to amend a complaint for

abuse of discretion. 5 See Harris v. Ivax Corp., 182 F.3d 799, 802-03 (11th Cir.

1999). But we review de novo “the underlying legal conclusion of whether a

particular amendment to the complaint would be futile.” Id. Under the Federal

Rules of Civil Procedure, a district court “should freely give leave” to amend a

complaint “when justice so requires.” Fed. R. Civ. P. 15(a)(2). But “a district

court may properly deny leave to amend the complaint under Rule 15(a) when such

amendment would be futile,” such as “when the complaint as amended is still

subject to dismissal” because, for example, it fails to state a claim for relief. Hall

v. United Ins. Co. of Am., 367 F.3d 1255, 1262-63 (11th Cir. 2004) (internal

quotation marks omitted).

       To state a claim for relief, “a complaint must contain sufficient factual

matter, accepted as true, to state a claim to relief that is plausible on its face.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “A

       5
          Chang has abandoned any argument that the district court erred when it concluded that
his First Amended Complaint, which included no allegations about Gordon’s payment to
Padgett-Perdomo, failed to state a claim because he does not challenge this determination on
appeal. See Sapuppo v. Allstate Floridian Ins. Co., 739 F.3d 678, 680 (11th Cir. 2014).

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claim has facial plausibility when the plaintiff pleads factual content that allows

the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Id. The plausibility standard “asks for more than a sheer

possibility that a defendant has acted unlawfully.” Id. In other words, the

allegations in the complaint “must be enough to raise a right to relief above the

speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

“Determining whether a complaint states a plausible claim for relief will . . . be a

context-specific task that requires the reviewing court to draw on its judicial

experience and common sense.” Iqbal, 550 U.S. at 679.

                                III.   DISCUSSION

      The primary issue before us is whether the district court erred in denying

Chang leave to file the proposed Second Amended Complaint on the ground that

the amendment was futile because Chang failed to state a claim. Because Chang’s

proposed Second Amended Complaint stated plausible claims for relief with

respect to each cause of action asserted, we conclude that the district court erred in

denying Chang leave to amend.

A.    The Negligence Claim

      We begin by reviewing the district court’s conclusion that Chang’s proposed

Second Amended Complaint failed to state a claim for negligence. Under Florida

law, “[t]o maintain an action for negligence, a plaintiff must establish that the

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defendant owed a duty, that the defendant breached that duty, and that this breach

caused the plaintiff damages.” Fla. Dep’t of Corr. v. Abril, 969 So. 2d 201, 204

(Fla. 2007). To determine whether Chang stated a claim for relief, we must decide

whether his allegations were sufficient to establish that the Bank owed a duty to

Chang, a noncustomer.

      Florida, like other jurisdictions, recognizes that as a general matter, “a bank

does not owe a duty of care to a noncustomer with whom the bank has no direct

relationship.” Eisenberg v. Wachovia Bank, N.A., 301 F.3d 220, 225 (4th Cir.

2002); see Conder v. Union Planters Bank, N.A., 384 F.3d 397, 399 (7th Cir. 2004)

(discussing “the many cases that refuse . . . to impose on banks a general duty of

care toward persons who are not their customers and to whom therefore they have

no contractual obligations”); Sroka v. Compass Bank, No. 2006-CA-1117,

2006 WL 2535656, at *1 (Fla. Cir. Ct. Aug 31, 2006) (“As a matter of law, a bank

does not owe a duty to non-customers regarding the opening and maintenance of

its accounts.”). But there is an exception to this rule: a bank may be liable to a

noncustomer for its customer’s misappropriation when a fiduciary relationship

exists between the customer and the noncustomer, the bank knows or ought to

know of the fiduciary relationship, and the bank has actual knowledge of its

customer’s misappropriation. See Chaney v. Dreyfus Serv. Corp., 595 F.3d 219,

232 (5th Cir. 2010) (applying New York law); Atlanta & St. A.B. Ry. Co. v.

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Barnes, 95 F.2d 273, 276 (5th Cir. 1938) (recognizing that a bank may be held

liable for misappropriation under Florida law “when the bank knows that an actual

misappropriation is intended or is in progress”). 6 We conclude that the Bank owed

Chang a duty because his allegations are sufficient to establish (1) OPT Title owed

Chang a fiduciary duty; (2) the Bank, through Padgett-Perdomo, was aware of this

fiduciary relationship; and (3) the Bank, through Padgett-Perdomo, knew that

Gordon was misappropriating money from the escrow account.

       1.       Existence of a Fiduciary Relationship Between Chang and OPT
                Title

       First, the allegations in Chang’s proposed Second Amended Complaint

sufficiently established that OPT Title owed him a fiduciary duty. Chang alleged

that OPT Title agreed to hold his money in escrow and return it intact to him

regardless of whether Ziggurat ultimately obtained financing for the underlying

development project. Because OPT Title held Chang’s funds in escrow under that

agreement, it owed him a fiduciary duty under Florida law. See Watkins v. NCNB

Nat’l Bank of Fla., N.A., 622 So. 2d 1063, 1064 (Fla. Dist. Ct. App. 1993)

(“[E]scrow holders have a fiduciary duty to exercise reasonable skill and ordinary

diligence.”).

       6
         Decisions of the former Fifth Circuit rendered prior to close of business on September
30, 1981, are binding on this Court. See Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th
Cir. 1981) (en banc).

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      2.    The Bank’s Knowledge of the Fiduciary Relationship

      Second, Chang sufficiently alleged that the Bank knew or should have

known of the fiduciary relationship between OPT Title and Chang. We can infer

from Chang’s allegations that the Bank, through its employee Olga Padgett-

Perdomo, knew that OPT Title was acting as a fiduciary to Chang.

      Accepting Chang’s allegations as true, they support the conclusion that

Padgett-Perdomo knew OPT Title owed a fiduciary duty to those, like Chang, who

deposited money in the OPT Escrow Account. Because Chang alleged that

Padgett-Perdomo permitted the OPT Title account to be labeled an “escrow

account,” we can infer that she knew or should have known OPT Title was

supposed to hold money deposited in that account in escrow and thus that OPT

Title owed a fiduciary duty to those who sent the escrow money.

      The Bank argues that even if Padgett-Perdomo knew about the fiduciary

relationship, her knowledge should not be imputed to the Bank. We disagree.

Under Florida law, knowledge an agent or employee acquires within the scope of

her authority generally may be imputed to her principal or employer. See Beck v.

Deloitte & Touche, 144 F.3d 732, 736 (11th Cir. 1998) (recognizing that under

Florida law knowledge of officer is generally imputed to corporation); see also

Bank of China, N.Y. Branch v. NBM LLC, 359 F.3d 171, 179 (2d Cir. 2004)

(recognizing that bank employee’s knowledge may be imputed to bank). However,

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under Florida law “an exception to the imputation rule exists where an individual is

acting adversely to the corporation. In that situation, [her] knowledge and conduct

are not imputed to the corporation.” Beck, 144 F.3d at 736 (internal quotation

marks omitted); Restatement (Third) of Agency § 5.04 (2006) (explaining that an

agent’s knowledge will not be imputed to the principal when “the agent acts

adversely to the principal in a transaction or matter, intending to act solely for the

agent’s own purposes or those of another person”). Stated another way, an agent’s

knowledge will be imputed to the principal unless the agent’s interest is “entirely

adverse” to the principal’s interest, meaning the “actions must neither be intended

to benefit the corporation nor actually cause short- or long-term benefit to the

corporation.” Beck, 144 F.3d at 736 (citing Seidman & Seidman v. Gee, 625 So. 2d
1, 3 (Fla. Dist. Ct. App. 1992)).7 Thus, imputation is permitted when an agent’s

actions were “designed to turn the corporation into an ‘engine of theft’ against

outsiders,” as opposed to when an agent took actions that diminished the assets of

the corporation itself. Gee, 625 So. 2d at 3.

       7
          We acknowledge that in a decision issued before Beck an intermediate appellate Florida
court used a different standard to determine whether an agent’s knowledge should be imputed to
the principal. See Joel Strickland Enters., Inc. v. Atl. Discount Co., 137 So. 2d 627, 629 (Fla.
Dist. Ct. App. 1962) (recognizing exception to imputation rule when the agent was “in reality
acting in his own business or for his own personal interest and adversely to the principal”
without considering whether some benefit flowed to the principal). But under our prior
precedent rule, we must adhere to the formulation of the adverse interest exception recognized in
Beck and consider whether Padgett-Perdomo’s interests were entirely adverse to the Bank’s.
See LeFrere v. Quezeada, 582 F.3d 1260, 1265 (11th Cir. 2009) (“Our prior panel precedent
rules applies to decisions . . . that address state law issues.”).

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      Accepting as true Chang’s allegations, we conclude that Padgett-Perdomo’s

knowledge can be imputed to the Bank because her interests were not entirely

adverse to the Bank’s. She learned about OPT Title’s fiduciary relationship while

performing her job at the Bank. We acknowledge that under Chang’s allegations,

Padgett-Perdomo learned about the fiduciary relationship while working to further

Gordon’s fraudulent scheme to use the OPT Escrow Account to steal money

deposited as escrow funds. Certainly, at this time Padgett-Perdomo was working

to further her own and Gordon’s interests. But we cannot say her interests were

entirely adverse to the Bank’s interests because her actions brought the Bank some

short-term benefit. See Beck, 144 F.3d at 736. After all, OPT Title entered into a

banking relationship with the Bank that involved very substantial deposits. In

addition to the deposits, Chang alleged—and the documents attached to the

proposed Second Amended Complaints reflect—that the Bank collected wire and

service fees from OPT Title. These allegations support the inference that Gordon

used the Bank as an engine for his theft by using the escrow account to collect

funds that he then misappropriated. At least at the motion to dismiss stage, we

may impute Padgett-Perdomo’s knowledge to the Bank; thus, we conclude that

Chang’s allegations were sufficient to establish that the Bank knew that OPT Title

was acting as Chang’s fiduciary.

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      3.    The Bank’s Knowledge of Gordon’s Misappropriations

      Third, Chang adequately alleged in his proposed Second Amended

Complaint that the Bank knew Gordon was misappropriating money held in the

OPT Escrow Account. We can infer from Chang’s allegations that Padgett-

Perdomo knew about and assisted in Gordon’s scheme to steal the escrow money.

More specifically, Chang alleged that Padgett-Perdomo labeled OPT Title’s

account as an escrow account even though OPT Title had failed to comply with the

Bank’s procedures for opening escrow accounts, falsely represented the balance in

the OPT Escrow Account in the Seven-digit Letter, and secretly received $100,000

from Gordon paid to an entity she controlled.

      The Bank argues that we cannot infer that Padgett-Perdomo knew about

Gordon’s fraudulent scheme from the $100,000 payment because Gordon paid

Padgett-Perdomo four months after he misappropriated Chang’s funds. But

Chang’s allegations support the inference that Gordon paid Padgett-Perdomo for

her ongoing assistance in and cover up of his fraudulent scheme. Chang alleged

that Padgett-Perdomo assisted Gordon both before and after Chang’s money was

stolen. He alleged that before the theft occurred, Padgett-Perdomo assisted Gordon

by allowing him to name the account an escrow account. And Chang alleged that

after the theft occurred Padgett-Perdomo authored the Seven-digit Letter

misrepresenting and overstating the balance in the OPT Escrow Account.

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       The district court rejected Chang’s allegations as insufficient because it

concluded the allegations showed nothing more than that the Bank and Padgett-

Perdomo engaged in routine banking services. We cannot agree. Even if Chang

has no explicit allegation that Padgett-Perdomo knew about Gordon’s fraud, such a

direct allegation was unnecessary because Chang’s allegations support an inference

that Padgett-Perdomo knew that Gordon was misappropriating money. See Ave.

CLO Fund, Ltd. v. Bank of Am., N.A., 723 F.3d 1287, 1297 (11th Cir.

2013) (recognizing that actual knowledge may be established through inference).

       Furthermore, Padgett-Perdomo’s knowledge that Gordon had

misappropriated the money can be imputed to the Bank. As we explained in

Section III.A.2 above, under Florida law we may impute Padgett-Perdomo’s

knowledge to the Bank because her interests were not entirely adverse to those of

the Bank, which gained some benefit from her conduct.

       Although banks generally owe no duty to noncustomers, Chang’s allegations

as set forth in his proposed amended complaint were sufficient to establish that the

Bank owed him a duty, and thus he stated a claim for negligence. The district

court erred when it denied him leave to amend. 8

       8
        For the same reasons, we conclude that the district court erred by refusing to allow
Chang to amend his gross negligence claim. Notably, the Bank relies solely on its argument
about why Chang failed to state a claim for negligence to support its argument about gross
negligence.

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B.    The Aiding and Abetting Fraud Claim

      We now turn to whether the district court erred in denying Chang’s motion

for leave to amend on the basis that he failed in his proposed amended complaint to

state a claim for aiding and abetting fraud. We conclude that Chang stated a claim

for relief with respect to this cause of action as well.

      Although no Florida court has explicitly recognized a cause of action for

aiding and abetting fraud, Florida courts have assumed that the cause of action

exists. ZP No. 54 Ltd. P’ship v. Fid. & Deposit Co. of Md., 917 So. 2d 368, 371-

72 (Fla. Dist. Ct. App. 2005) (explaining that aiding and abetting fraud “may well

be a valid cause of action in Florida”). Florida courts have presumed that a tort

claim for aiding and abetting fraud has three elements: (1) the existence of “an

underlying fraud”; (2) that “[t]he defendant had knowledge of the fraud”; and (3)

that “[t]he defendant provided substantial assistance to advance the commission of

the fraud.” Id. at 372. We have already explained above why Chang’s allegations

are sufficient to establish that the existence of an underlying fraud and the Bank’s

knowledge of the fraud.

      Regarding the third element, we conclude Chang plausibly alleged that the

Bank provided substantial assistance to advance the commission of the fraud.

“Substantial assistance occurs when a defendant affirmatively assists, helps

conceal or fails to act when required to do so, thereby enabling the breach to

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occur.” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 295 (2d Cir. 2006) (internal

quotation marks omitted). Mere inaction “constitutes substantial assistance only if

the defendant owes a fiduciary duty directly to the plaintiff.” Id. (internal

quotation marks omitted). Because “banks do have a duty to safeguard trust funds

deposited with them when confronted with clear evidence indicating that those

funds are being mishandled,” a bank’s inaction—that is, its failure to stop the theft

of such trust funds—can constitute substantial assistance. Id.; see In re First

Alliance Mortg. Co., 471 F.3d 977, 995 (9th Cir. 2006) (explaining that a bank’s

performance of ordinary business transactions for a customer “can satisfy the

substantial assistance element of an aiding and abetting claim if the bank actually

knew those transactions were assisting the customer in committing a specific tort”

(internal quotation marks omitted)). Put another way, to establish that a bank

substantially assisted a fraudulent scheme to steal trust funds, knowledge of the

underlying fraud “is the crucial element.” In re First Alliance Mortg. Co.,
471 F.3d at 995 (internal quotation marks omitted).

      Here, Chang’s allegations are sufficient to establish that the Bank provided

substantial assistance through its inaction. Chang’s allegations establish that the

Bank (through Padgett-Perdomo) knew that OPT Title was holding the funds in

escrow and about Gordon’s ongoing fraud. Thus, the bank owed a fiduciary duty

to Chang. Under these particular circumstances, the Bank’s failure to warn Chang

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or stop Gordon’s fraud is sufficient to constitute substantial assistance. 9 See

Lerner, 459 F.3d at 295.

       Considering the allegations in the proposed Second Amended Complaint,

Chang stated a claim for aiding and abetting fraud, and the district court erred

when it concluded that the amendment would have been futile. 10 Because Chang

stated claims for negligence, gross negligence, aiding and abetting fraud, and

aiding and abetting conversion, we hold that the district court erred when it refused

to allow him to amend his complaint. Upon remand, the district court should

permit Chang to file his proposed Second Amended Complaint.

                                   IV.    CONCLUSION

        For the reasons set forth above, we reverse the district court’s order denying

Chang’s motion seeking leave to amend and remand the case for further

proceedings consistent with this opinion. Because we reverse the judgment in

       9
         We note that Chang’s allegations certainly are sufficient to establish that Padgett-
Perdomo substantially assisted Gordon’s fraud through her affirmative actions including adding
“escrow” to the name of the OPT Escrow Account and authoring the Seven-digit Letter as well
as her receipt of $100,000 from Gordon. A more difficult question is whether Padgett-
Perdomo’s actions may be imputed to the Bank such that we can say the Bank actively assisted
Gordon with the fraud. After all, the imputation cases discussed above address only when an
agent’s knowledge may be imputed to her employer. See Section III.A.2 above. We need not
answer whether Chang’s allegations are sufficient to impute Padgett-Perdomo’s actions to the
Bank, however, because, as explained above, Chang’s allegations are sufficient to establish that
the Bank provided substantial assistance through its inaction.
       10
          For the same reasons, we also conclude that Chang stated a claim for aiding and
abetting conversion and the district court erred in denying him leave to amend. The parties
implicitly concede that Chang’s aiding-and-abetting-conversion claim rises or falls with his
aiding-and-abetting-fraud claim.

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favor of the Bank, we vacate the district court’s award of attorney’s fees to the

Bank based on Florida’s offer of judgment statute.

      REVERSED IN PART, VACATED IN PART, AND REMANDED.

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