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Kaplan v. Regions Bank, an Alabama Banking Corp.

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

September 25, 2019

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

          ORDER

          Charlene Edwards Honeywell United States District Judge

         This cause comes before the Court upon the Report & Recommendation filed by Magistrate Judge Christopher P. Tuite on August 7, 2019 (the “R&R”). Doc. 104. In the R&R, Magistrate Judge Tuite recommends that Regions Bank’s (“Regions”) Amended Motion to Strike Kaplan’s Jury Demand (the “Motion”) be granted and Regions’ Amended Request to Take Judicial Notice on Amended Motion to Strike Jury Trial Demand (the “Amended Request to Take Judicial Notice”) be granted-in-part. Id. at 14.

         All parties were furnished copies of the R&R and were afforded the opportunity to file objections pursuant to 28 U.S.C. § 636(b)(1). Marvin I. Kaplan (“Kaplan”) timely objected to the R&R (the “Objection”). Doc. 107. Upon consideration of the R&R, the Objection, Regions’ response thereto, and this Court’s independent examination of the file, it is determined that the R&R should be adopted and Kaplan’s Objection should be overruled.

         I. Background

         A. Introduction

         This action arises from an earlier case in the Middle District of Florida, styled Regions Bank v. Kaplan, et al., No. 8:12-cv-1837-T-17MAP (M.D. Fla.) (“Kaplan I”), in which Regions sued Kaplan and several of his investment entities for, inter alia, fraudulent concealment, civil conspiracy, conversion, and aiding and abetting. Doc. 113 ¶¶1, 48, 57. Kaplan began investing with Smith Advertising & Associates (“SAA”) in 2008, which involved providing short-term loans to SAA that supplied “bridge financing” for SAA’s printing contracts with cities and municipalities. Id. at ¶¶8–9, 13. The loans from investors like Kaplan purportedly provided SAA with additional cash flow to front the cost of printing contracts for its clients, and various printing vendors would give a discounted price to SAA in exchange for SAA’s upfront payment. Id. at ¶9. Rather than passing the savings from the discount along to its customers, SAA would allegedly charge its customers the full price of the printing vendor’s services, retain the savings, and split the discount with the investor as an “incentive.” Id. at ¶10. Kaplan formed several limited liability companies or used existing ones to invest with SAA over the course of the next few years as the size of deals grew larger. Id. at ¶14.

         B. The “Bundled Deals” and the Deposit Agreement

         The nature of the deals changed in 2011, however, as Todd Smith (“Smith”), one of the officers of SAA, offered a purported investment opportunity, known as the “bundled deals.” Id. at ¶¶14, 16. Under these “bundled deals, ” SAA would repay Kaplan in full within a much shorter time frame, often the same day as Kaplan’s initial investment, because the bundled deals allegedly corresponded to SAA’s cash flow and were based on multiple contracts that were “bundled” together. Id. at ¶17. To execute the “bundled deals, ” Smith would contact Kaplan regarding certain proposed print contracts and short-term investments. Id. at ¶19. After Kaplan and Smith agreed to terms, Smith would create promissory notes for the investment loans with respect to each of Kaplan’s investment companies, write checks for both the principal repayment and incentive payment, and overnight these items to Kaplan. Id. The next day, Kaplan would wire the principal investment from his investment companies to SAA. Id. On the same day, Kaplan would receive the repayment checks and promissory notes from Smith and deposit the checks upon the investments’ agreed “maturity” date, which was typically the following day. Id.

         Kaplan’s investment companies opened bank accounts (the “Entity Accounts”) with Regions to better accommodate the large wire transfers for the “bundled deals.” Id. at ¶23. Kaplan had previously opened a personal checking account (the “Personal Account”) with Regions, as well. Id. at ¶7; Doc. 55 at 2. In opening the Personal Account and the Entity Accounts, Kaplan purportedly received the Deposit Agreement for each account (the “Deposit Agreement”). See Doc. 55 at 2–3. Kaplan does not dispute that he received the Deposit Agreement for each account. See Doc. 58 at 2. The Deposit Agreement contains a jury waiver provision, which is discussed in further detail below. Doc. 56-3 at 2–3, 7. Kaplan reviewed online the balances of the Entity Accounts to ensure sufficient funds existed before wiring any funds to SAA, but Regions’ systems did not possess the ability to distinguish between “cleared” and “available” funds.[1] Doc. 113 ¶¶23– 24. Kaplan invested in the “bundled deals, ” which progressively grew larger, without incident from November 2011 through January 2012. Id. at ¶26.

         C. Kaplan I

         In January of 2012, Kaplan made a series of wire transfers for large sums of money to SAA. Id. at ¶¶28–29, 31–32, 36. Unbeknownst to Kaplan, however, Regions had placed a hold on the reimbursement checks for one of the agreements between Kaplan and SAA after SAA’s bank alerted Regions to possible fraud in SAA’s account. Id. at ¶33. SAA’s reimbursement checks to Kaplan for these transfers subsequently failed to clear and were returned. Id. at ¶¶ 34, 36–37, 41– 42, 46–47. As a result, the Entity Accounts were overdrawn by millions of dollars. See Id . at ¶¶42, 48.

         Regions thereafter filed the Kaplan I lawsuit against Kaplan, Kaplan’s investment entities, and others, seeking damages for the overdrafts. Id. at ¶48. Regions filed an amended complaint in Kaplan I in 2013, which asserted tort claims against Kaplan and his investment companies for, inter alia, fraudulent concealment, civil conspiracy, conversion, and aiding and abetting. Id. at ¶57. The trial in Kaplan I commenced in June of 2016. Id. at ¶60. The court subsequently ruled in favor of Kaplan and against all of Regions’ tort claims. Id. at ¶61.

         D. Present Action, Jury Trial Waiver, and Procedural History

         Kaplan initiated this action in November of 2017, alleging claims against Regions for malicious prosecution and abuse of process. Doc. 1 ¶¶67–87. The Court dismissed Kaplan’s abuse of process claim in August of 2018. Doc. 37 at 10. In relevant part, Kaplan alleges that Regions brought claims against Kaplan for fraudulent concealment, conversion, aiding and abetting conversion, and civil conspiracy in Kaplan I when it knew or should have known that such claims lacked a factual basis. Doc. 113 ¶69. Kaplan demands a jury trial for its claim. Doc. 32. Regions moves to strike this jury trial demand and also requests the Court to take judicial notice of numerous filings and documents in Kaplan I. Docs. 55, 57.

         In support of its argument that Kaplan’s jury trial demand should be struck, Regions points to the jury waiver clause in the Deposit Agreement. Doc. 55 at 15–18. As previously mentioned, Kaplan received the Deposit Agreement when he opened the Personal Account and Entity Accounts. See Id . at 2–3; Doc. 58 at 2. The Deposit Agreement contains the following language on its second page:

ARBITRATION AND WAIVER OF JURY TRIAL. THIS AGREEMENT CONTAINS PROVISIONS FOR BINDING ARBITRATION AND WAIVER OF JURY TRIAL. YOUR ACCEPTANCE OF THIS AGREEMENT INCLUDES YOUR ACCEPTANCE OF AN AGREEMENT TO SUCH PROVISIONS. WHEN ARBITRATION IS INVOKED FOR CLAIMS SUBJECT TO ARBITRATION, YOU AND REGIONS WILL NOT HAVE THE RIGHT TO PURSUE THAT CLAIM IN COURT OR HAVE A JURY DECIDE THE CLAIM AND YOU WILL NOT HAVE THE RIGHT TO BRING OR PARTICIPATE IN ANY CLASS ACTION OR SIMILAR PROCEEDING IN COURT OR IN ARBITRATION.

Doc. 56-3 at 2. The Deposit Agreement’s jury waiver clause is located within a section of the Deposit Agreement entitled “ARBITRATION AND WAIVER OF JURY TRIAL.” Id. at 3. In relevant part, that section provides, “Whether any controversy is arbitrated or settled by a court, you and we voluntarily and knowingly waive any right to a jury trial with respect to such controversy to the fullest extent allowed by law.”[2] Id. at 7 (emphasis in original). The Deposit Agreement defines “any controversy . . . between [Kaplan] and [Regions]” as a “Claim, ” which the Deposit Agreement affords a broad meaning. Id. at 3. Specifically, the Deposit Agreement provides:

Claim has the broadest possible meaning and includes, but is not limited to, any controversy, claim, counterclaim, dispute or disagreement arising out of, in connection with or relating to any one or more of the following: (1) the interpretation, execution, administration, amendment or modification of the Agreement or any agreement; (2) any account; (3) any charge or cost incurred pursuant to the Agreement or any agreement; (4) the collection of any amounts due under the Agreement, any agreement or any account; (5) any alleged contract or tort arising out of or relating in any way to the Agreement, any account, any agreement, any transaction, any advertisement or solicitation, or your business interaction or relationship with us; (6) any breach of any provision of the Agreement; (7) any statements or representations made to you with respect to the Agreement, any agreement, any account, any transaction, any advertisement or solicitation, or your business, interaction or relationship with us; (8) any property loss, damage or personal injury; (9) any claim, demand or request for compensation or damages from or against us; (10) any damages incurred on or about our premises or property; or (11) any of the foregoing arising out of, in connection with or relating to any agreement which relates to the Agreement, any account, any credit, any transaction or your business, interaction or relationship with us.

Id. at 3–4 (emphasis in original). The Deposit Agreement also states that the “waiver of jury trial shall survive your death, the closing of your account and the termination of any of your business or transaction(s) with us, any bankruptcy to the extent consistent with applicable bankruptcy law and shall also survive as to any Claim covered within the scope of this [Deposit] Agreement.” Id. at 6–7.

         Upon consideration of the Motion, the Amended Request to Take Judicial Notice, the response in opposition to the Motion, the reply, the supplemental reply, and the parties’ oral arguments, Magistrate Judge Tuite issued the R&R. (Doc. 104). Magistrate Judge Tuite recommends that the Court: (1) grant the Motion; and (2) grant-in-part the Amended Request to Take Judicial Notice insofar as it relates to the Deposit Agreement. Id. at 14.

         Following the entry of Magistrate Judge Tuite’s R&R, this Court ordered Kaplan to show cause as to why this action should not be dismissed for lack of subject matter jurisdiction as a result of Kaplan’s failure to properly plead diversity of citizenship. Doc. 111 at 4. Kaplan subsequently filed a response and an amended complaint. Docs. 112, 113. Aside from omitting the abuse of process claim and adding allegations to clarify the citizenship of the parties, the amended complaint is identical to the original complaint.[3] See Doc. 112 at 2; Doc. 113 ¶¶2–3.

         II. Legal Standard

         When a party makes a timely and specific objection to a magistrate judge’s report and recommendation, the district judge “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1)(C). With regard to those portions of the report and recommendation not objected to, the district judge applies a clearly erroneous standard of review. See Gropp v. United Airlines, Inc., 817 F.Supp. 1558, 1562 (M.D. Fla. 1993). The district judge may accept, reject, or modify, in whole or in part, the magistrate judge’s findings or recommendations. 28 U.S.C. § 636(b)(1)(C). The district just may also receive additional evidence or recommit the matter to the magistrate judge with instructions. Id; Local R. M.D. Fla. 6.02(a). “The district court retains the discretion to consider new evidence and argument raised for the first time in an objection to a report and recommendation.” Cooper v. Dolgencorp, LLC, No. 5:11-cv-158-Oc-10GJK, 2011 WL 13323145, at *1 n.2 (M.D. Fla. June 24, 2011) (citing Williams v. McNeil, 557 F.3d 1287, 1292 (11th Cir. 2009)).

         III. Analysis

         Kaplan raises two main objections to the R&R: (1) Magistrate Judge Tuite erred in concluding that the malicious prosecution claim falls within the scope of the jury waiver; and (2) Magistrate Judge Tuite erred in concluding that the Deposit Agreement permits the jury waiver to survive termination and cover claims arising thereafter. Doc. 107 at 4–12. The Court will address each objection.

         A. Judge Tuite Correctly Decided that the Malicious Prosecution Claim Falls Within the Scope of the Jury Waiver

         Kaplan argues that Magistrate Judge Tuite erred in concluding that the malicious prosecution claim in this action falls within the scope of the jury waiver of the Deposit Agreement. Upon review, the ...


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