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Kaplan v. Regions Bank

United States District Court, M.D. Florida, Tampa Division

August 1, 2018

MARVIN I. KAPLAN, Plaintiff,
REGIONS BANK, an Alabama banking corporation, Defendant.


          Charlene Edwards Honeywell, United States District Judge

         This matter comes before the Court upon the Defendant's Motion to Dismiss and Supporting Memorandum of Law. (Doc. 11), Plaintiff's response in opposition (Doc. 26) and Defendant's reply (Doc. 29). In the Motion, Defendant contends that the Court should dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. 11. It argues that Plaintiff does not properly establish a claim for malicious prosecution or abuse of process. Id. It also argues that Plaintiff attempts to recover damages allegedly sustained by nonparties and includes immaterial allegations. Id. Plaintiff opposes the Motion, and in the alternative, requests an opportunity to amend. Doc. 26. The Court, having considered the Motion and being fully advised in the premises, will grant-in-part Defendant's Motion to Dismiss.


         Plaintiff, Marvin Kaplan, brings this action against Defendant, Regions Bank, for compensatory and special damages, punitive damages, attorneys' fees, and costs. Doc. 1 at ¶ 87. Kaplan alleges two causes of action: Count I for Malicious Prosecution and Count II for Abuse of Process. Id. at 14-15.

         In approximately July 2008, Larry Starr approached Kaplan regarding a potential investment opportunity with Smith Advertising & Associates (“SAA”); he invested $50, 000 in SAA through Starr. Id. at ¶¶ 8, 13. In December 2008, Kaplan was introduced to Todd Smith, who convinced Kaplan to begin dealing directly with SAA and continued to invest in the purported “factoring investments.” Id. at ¶¶ 14, 15. He eventually formed several limited liability companies (“LLCs”) and used existing ones to invest with SAA on a larger scale. Id. at ¶ 14. Kaplan used his bank accounts at Regions Bank to fund the transactions. Id. In February 2011, Todd Smith emailed Larry Starr with a new purported investment opportunity which became known as the “bundled deals.” Id. at ¶ 16. Unbeknownst to Kaplan, the “bundled deals” were a fabricated sham that were all part of Todd Smith's fraudulent transactions, collectively known as the “Smith Scheme.” Id. at ¶ 20.

         Beginning on at least January 23, 2012, Regions Bank knew that Todd Smith was engaged in some form of fraudulent activity but did nothing to alert Kaplan. Id. at ¶ 38. By January 24, 2012, Kaplan's investment company accounts were overdrawn by nearly $12 million. Id. at ¶ 42. Regions Bank filed suit against Kaplan's investment companies and another party on January 30, 2012, seeking damages for the overdrafts (the “Underlying Litigation”). Id. at ¶ 48.

         The Federal Bureau of Investigation (“FBI”) and the United States Secret Service deemed Kaplan to be a victim of a massive, Ponzi-like scheme orchestrated by Todd Smith. Id. at ¶ 55. At trial, the agencies went to great lengths to describe Kaplan's lack of knowledge of the fraudulent scheme until after it collapsed. Id. Regions Bank did not conduct any investigation of the details of the SAA scheme and, in fact, questioned its existence throughout the litigation and at trial. Id. at ¶ 56. Instead, in 2013, Regions Bank amended its original 2012 complaint and levied a series of tort claims against both Kaplan and his companies for fraudulent concealment, civil conspiracy, conversion, and aiding and abetting. Id. at ¶ 57. Regions Bank did this after the FBI confirmed that Kaplan was an innocent victim of the Smith Scheme. Id. at ¶ 55. Regions Bank had access to, and was aware of, the federal indictment but chose to proceed with its claims. Id. at ¶ 57.

         On June 23, 2017, the federal judge presiding over the trial in the Underlying Litigation issued a 41-page Opinion and Order, ruling in favor of Kaplan on all of Regions Bank's tort claims. Id. at ¶ 61. The Order specifically found that “there is no evidence that Marvin I. Kaplan had actual knowledge that ‘the transactions were not legitimate,' in the sense that Marvin I. Kaplan had actual knowledge of the Ponzi scheme, or the transactions were carried on in furtherance of the Ponzi scheme executed by Todd Smith, SAA, and others.” Id. On November 7, 2017, the Court issued an Order of final judgment against Todd Smith, Gary Smith, Lucy Smith, and SAA. Id. at ¶ 62. The Order also held that Kaplan's investment companies were defrauded by the Smith Scheme and awarded the companies more than $75 million in damages. Id. Kaplan has been “blacklisted” in the banking community and labelled a “check-kiter” which has caused a loss of business deals, partnerships, and reputation. Id. at ¶ 64.


         To survive a motion to dismiss under Rule 12(b)(6), a pleading must include a “short and plain statement of the claim showing that the pleader is entitled to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Fed.R.Civ.P. 8(a)(2). Formulaic recitations of the elements of a cause of action are not sufficient. Id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Furthermore, mere naked assertions are not sufficient. Id. The complaint must plead sufficient factual content permitting the reasonable inference that the defendant is liable for malicious prosecution and abuse of process. Id. (quoting Twombly, 550 U.S. at 570). “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. (citation omitted). The court, however, is not bound to accept as true a legal conclusion stated as a “factual allegation” in the complaint. Id.


         a. Count 1: Malicious Prosecution

         Defendant argues that Kaplan cannot assert the rights of, and recover damages sustained by, nonparties. Because Kaplan alleges various wrongs Regions Bank committed against other parties including his LLCs and his wife, it argues that Kaplan has no standing to bring Count I. Kaplan responds that the Complaint is clear that it seeks relief for his damages individually. He maintains that the referenced paragraphs provide background and context; they are not the basis for relief.

         Plaintiffs must assert their own rights and cannot rest upon the rights of others. Granite State Outdoor Adver. v.City of Clearwater, 351 F.3d 1112, 1116 (11th Cir. 2003). The inference drawn from the allegations of the Complaint is that Kaplan was the sole beneficiary of these shell companies and that all of Regions Bank's interactions with Kaplan were done through and by him rather than through the companies. The Complaint goes to great lengths to explain the relationship between Kaplan and Regions Bank rather than the activities undertaken by his companies. The harm incurred by the companies and Kaplan's wife are mentioned as incidental details in the Complaint rather than as a factual basis upon which Kaplan attempts to state his claim. Essentially, in Count I, Kaplan seeks relief for malicious prosecution based on the ...

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