Court Opinion

ID: 620690
Source: CourtListenerOpinion
Date Created: 2012-01-11 16:41:46+00
Date Added: 2024-06-11T17:50:53.251198
License: Public Domain

[DO NOT PUBLISH]

                      IN THE UNITED STATES COURT OF APPEALS

                                   FOR THE ELEVENTH CIRCUIT
                                    ________________________            FILED
                                                               U.S. COURT OF APPEALS
                                            No. 11-12401         ELEVENTH CIRCUIT
                                        Non-Argument Calendar        JAN 11, 2012
                                      ________________________        JOHN LEY
                                                                       CLERK
                           D.C. Docket No. 8:09-cv-02162-VMC-TGW

RITA LAWRENCE,
individually and on behalf of all others
similarly situated,
BARBARA KANN,
individually and on behalf of all others
similarly situated,
RAYMOND K. FERWERDA,
individually and on behalf of all others
similarly situated,

llllllllllllllllllllllllllllllllllllllll                          Plaintiffs - Appellants,

                                                 versus

BANK OF AMERICA, N.A.,

llllllllllllllllllllllllllllllllllllllll                           Defendant - Appellee.

                                     ________________________

                           Appeal from the United States District Court
                               for the Middle District of Florida
                                 ________________________

                                           (January 11, 2012)
Before TJOFLAT, EDMONDSON, and FAY, Circuit Judges.

PER CURIAM:

      This case involves a putative class action. Plaintiffs Rita Lawrence, Barbara

Kann, and Raymond K. Ferwerda appeal from an order dismissing their complaint

against Bank of America, and closing the case. On appeal, Plaintiffs argue the

district court erroneously concluded that Plaintiffs had failed to plead facts

sufficient to raise a plausible inference that Bank of America had knowledge of a

Ponzi scheme and substantially assisted in its operations. Plaintiffs further argue

that the court erred in denying Plaintiffs’ request for leave to amend their initial

complaint. For the reasons set forth below, we affirm.

                                              I.

A.    Background

      We restate the following facts as alleged by Plaintiffs, accepting them as

true and construing them in the light most favorable to Plaintiffs.1 From 2006

until early 2009, Beau Diamond (“Diamond”), through his company Diamond

Ventures LLC, operated a Ponzi scheme by convincing investors to deposit

millions of dollars into a Bank of America account (“Diamond Ventures

Account”) he controlled for the purpose of trading that money in the off-exchange

      1
          Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009).

                                               2
foreign currency markets. Diamond guaranteed both the safety of the total

principal amount of money deposited by the investors, and a monthly profit of

between 2.75% and 5%. Based on the substantial deposits made by Diamond, the

Diamond Ventures Account was transferred to Bank of America’s Premier

Banking Division. The Premier Banking Division was known for providing its

clients with “close, personal attention,” by more in-depth review of the clients’

accounts. To obtain such review, Premier Banking Representatives could access

the Diamond Ventures Account and obtain daily updates on major deposits and

wire transfers.

      Plaintiffs alleged Bank of America had knowledge of Diamond’s fraudulent

activity, not only through his account activity, but also because of information he

provided. Diamond made exceptionally large deposits into the Diamond Ventures

account. Tellingly, millions of dollars streamed out of the Diamond Ventures

Account to fund personal and gambling expenditures for Diamond. Additionally,

Diamond engaged in atypical business transactions, such as numerous wire

transfers unrelated to any legitimate business activity. And as to the information

Diamond provided to Bank of America, he informed Bank of America of his

personal history and the nature of his business, which was an “investment club.”

Bank of America does not permit investment clubs.

                                          3
      Plaintiffs further alleged that Premier Banking Representatives knew of

Diamond’s fraudulent activity through their standard review of Diamond’s account

statements. Account statements reflected that approximately $37,600,000 was

deposited by 200 investors, and $15,400,000 was transferred from Diamond

Ventures to foreign exchange companies. However, account statements did not

indicate that Diamond profited from money transferred to foreign exchange

companies. Nevertheless, Diamond sent investors 2,300 checks totaling more than

$15,600,000. The Premier Banking Representatives, therefore, should have

known that the money being sent to investors came from new client deposits,

rather than profits from foreign exchange companies.

B.    Procedural History

       Plaintiffs’ complaint alleged three causes of action against Bank of

America, all based on the theory of aiding and abetting: (1) common law fraud; (2)

conversion; and (3) breach of fiduciary duty. The causes of action were based on

Bank of America’s knowing support and facilitation of the Ponzi scheme operated

by Diamond. Bank of America moved to dismiss the complaint, arguing that

Plaintiffs had failed to comply with Federal Rule of Civil Procedure 12(b)(6). The

district court granted the motion to dismiss.

      Plaintiffs thereafter moved for reconsideration of the dismissal order. In the

                                          4
alternative, Plaintiffs requested leave to amend their initial complaint to include

newly acquired evidence. The newly acquired evidence included an employee of

Bank of America, a Premier Banking Representative, allegedly informing another

customer that he knew of Diamond’s investment club and that other customers

were happy with Diamond. The district court denied the motion, concluding, in

part, that Plaintiffs’ belated grounds for amendment were futile.2

                                               II.

       We review de novo a district court’s order granting a motion to dismiss.

Belanger v. Salvation Army, 556 F.3d 1153, 1155 (11th Cir. 2009). We review for

abuse of discretion the district court’s refusal to grant leave to amend, although we

exercise de novo review as to the denial of leave to amend based on futility. SFM

Holdings Ltd v. Banc of Am. Sec., LLC, 600 F.3d 1334, 1336 (11th Cir. 2010).

                                              III.

       Plaintiffs first argue that the district court erroneously dismissed their

complaint because the allegations are more than sufficient to raise a plausible

inference that Bank of America had knowledge of the Ponzi scheme and

substantially assisted in its operations. We disagree.

       2
         We decline to address all bases of the district court’s conclusion. We address only
whether Plaintiffs’ grounds for amendment were futile because it is dispositive.

                                                5
       To survive a motion to dismiss, the Supreme Court has held that a plaintiff

must include in the complaint “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, --,

129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp v. Twombly, 550 U.S. 544,

570 (2007)). “A 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 requires “more

than a sheer possibility that a defendant has acted unlawfully.” Id. (citing

Twombly, 550 U.S. at 555-56).

       Given that all of Plaintiffs’ claims are predicated on the theory of aiding and

abetting, we need only consider whether Plaintiffs adequately alleged the elements

of such a claim. In Florida,3 a plaintiff must allege: (1) an underlying violation on

the part of the primary wrongdoer; (2) knowledge of the underlying violation by

the alleged aider and abetter; and (3) the rendering of substantial assistance in

committing the wrongdoing by the alleged aider and abettor. AmeriFirst Bank v.

Bomar, 757 F. Supp. 1365, 1380 (S.D. Fla. 1991); ZP No. 54 Ltd. P’ship v. Fid. &

       3
          We apply Florida law because the district court had diversity jurisdiction over this
matter, and “[f]ederal courts adjudicating state law claims apply the substantive law of the state
where they render decisions.” Am. United Life Ins. Co. v. Martinez, 480 F.3d 1043, 1059 (11th
Cir 2007) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938)).

                                                 6
Deposit Co. of Md., 917 So. 2d 368, 372 (Fla. 5th DCA 2005).

      Reviewing the complaint, we agree with the district court that Plaintiffs’

allegations fall short of Twombly’s requirements. Plaintiffs alleged that Bank of

America authorized numerous deposits, withdrawals, and wire transfers involving

large amounts of money and that the Premier Banking Representatives received

substantial commissions. Although Plaintiffs alleged the transactions were

atypical and therefore Bank of America should have known of the Ponzi scheme,

such allegations are insufficient under Florida law to trigger liability. Florida law

does not require banking institutions to investigate transactions. Home Fed. Sav.

& Loan Ass’n of Hollywood v. Emile, 216 So. 2d 443, 446 (Fla. 1968); cf.

O’Halloran v. First Union Nat’l Bank of Fla., 350 F.3d 1197, 1205 (11th Cir.

2003) (finding that banks have the “right to assume that individuals who have the

legal authority to handle the entity’s accounts do not misuse the entity’s funds”).

Therefore, Bank of America, in providing only routine banking services, was not

required to investigate Diamond’s transactions. To be liable, the bank would have

had to have actual knowledge of Diamond’s fraudulent activities. These

allegations simply fail to make that “plausible.” Twombly, 550 U.S. at 570.

                                        IV.

                                          7
      The second issue we must consider is whether the district court was required

to permit amendment of the initial complaint. Plaintiffs argue that they were

improperly denied leave to amend the complaint because futility was never

demonstrated by the district court and is not obvious based on the pleadings.

Again, we disagree.

      “Denial of leave to amend is justified by futility when the ‘complaint as

amended is still subject to dismissal.’” Burger King Corp. v. Weaver, 169 F.3d

1310, 1320 (11th Cir. 1999) (quoting Halliburton & Assoc., Inc. v. Henderson,

Few & Co., 774 F.2d 441, 444 (11th Cir. 1985)).

      Plaintiffs argue that their new allegations were sufficient to state a claim.

For example, Plaintiffs sought to include allegations that a Premier Banking

Representative informed another Bank of America customer that he knew about

Diamond’s investment club, and his Diamond Ventures customers were happy

with their investment. As a result, the customer invested an additional amount of

money in Diamond Ventures. This information was sufficient, Plaintiffs contend,

to demonstrate Bank of America’s involvement in the Ponzi scheme.

      Like the district court implicitly found, we find that it is not plausible that

positive comments about Diamond Ventures necessarily establishes Bank of

America’s participation in a Ponzi scheme. Rather, such a positive comment

                                           8
would more easily be interpreted to demonstrate Bank of America’s lack of

awareness of Diamond’s fraudulent activities. Accordingly, there was no abuse of

discretion in denying the request for leave to amend the complaint because this

amendment would have been futile.

                                         V.

      The district court properly concluded that Plaintiffs’ allegations regarding

actual knowledge failed to state a claim for relief under Florida aiding and abetting

law. In addition, the district court acted within its discretion when it denied

Plaintiffs’ futile request to amend the complaint.

      AFFIRMED.

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