Flatirons Bank v. the Alan W. Steinberg Limited Partnership ( 2017 )

Third District Court of Appeal
State of Florida
Opinion filed December 6, 2017.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D15-1396
Lower Tribunal No. 13-4048
________________
Flatirons Bank,
Appellant,
vs.
The Alan W. Steinberg Limited Partnership,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Stanford Blake
and Barbara Areces, Judges.
Perez & Rodriguez, P.A., and Javier J. Rodriguez, Johanna Castellon-Vega,
and Freddy X. Muñoz, for appellant.
Schwed Kahle & Kress, P.A., and Lloyd R. Schwed and Douglas A. Kahle
(Palm Beach Gardens), for appellee.
Before ROTHENBERG, C.J., and SALTER and SCALES, JJ.
SCALES, J.
Appellant, plaintiff below, Flatirons Bank (“Flatirons”) appeals the trial
court’s final judgment in favor of Appellee, defendant below, The Alan W.
Steinberg Limited Partnership (“Steinberg”). We affirm because the trial court’s
determination that Steinberg was not unjustly enriched is supported by competent,
substantial evidence; and because Flatirons’s unjust enrichment claim against
Steinberg was filed beyond the applicable statute of limitations. Further,
Flatirons’s claim under the Colorado civil theft statute was properly dismissed.
I. Facts
While somewhat complicated, the relevant facts are not in dispute. Flatirons
is a small community bank located in Boulder, Colorado. In early 2009, Flatirons’s
former board chairman and president, Mark Yost, arranged for Flatirons to issue
bogus lines of credit which enabled Yost to steal approximately $3,845,000.00
from Flatirons.
Flatirons discovered Yost’s fraud in August of 2010. In March of 2012,
Flatirons’s resulting investigation revealed that, on January 20, 2009, Yost
transferred $1,000,000.00 from one of the bogus lines of credit to an account at
Elevations Credit Union in Colorado. The Elevations account receiving the funds
was owned by ICP II LP, an entity controlled by Yost.
Later on January 20, 2009, Yost transferred the sum of $1,050,000.00 from
the ICP II LP account at Elevations to another account at Elevations owned by the
2
Yost Partnership. The Yost Partnership was a Colorado limited partnership that
operated from October of 1991 until August of 2010. The Yost Partnership was an
investment vehicle controlled by Yost. Limited partners of the Yost Partnership
invested cash into the Yost Partnership with the expectation that their investments
would be responsibly managed by Yost and would realize positive returns.
Later that same day on January 20, 2009, the Yost Partnership transferred
$1,000,000.00 from the Yost Partnership account, through an account at Merrill
Group in New York, to a Florida bank account owned by Steinberg. Steinberg is a
New York limited partnership that also was a limited partner and investor in the
Yost Partnership.1 From January of 2000 through January of 2004, Steinberg
invested a total of $2,200,000.00 into the Yost Partnership.
As it turns out, not only was Yost embezzling funds from Flatirons, he was
grossly misleading the Yost Partnership investors and limited partners regarding
the status of their investments. For example, in 2005, the total assets for the Yost
Partnership were approximately $11,500,000.00, but were reported to investors at
over $30,000,000.00. In January of 2009, total Yost Partnership assets were
approximately $1,200,000.00, but were reported at over $28,000,000.00.
Indeed, on January 20, 2009, the date on which the Yost Partnership
transferred $1,000,000.00 to Steinberg, the actual value of Steinberg’s interest in
1 Yost had no ownership in Steinberg.
3
the Yost Partnership was only $138,179.90 – a far cry from the $2,200,000.00
Steinberg had invested in the Yost Partnership.2
Seeking to recoup some of the stolen funds, on February 1, 2013, Flatirons
filed a three-count complaint against Steinberg in the Miami-Dade Circuit Court.
Flatirons alleged that: (i) Steinberg was unjustly enriched by Yost’s conduct
(Count I); (ii) under Colorado’s civil theft statute, Steinberg was required to repay
the $1,000,000.00 to Flatirons (Count II); and (iii) Steinberg had converted
Flatirons’s funds and was therefore liable to Flatirons (Count III).
The trial court dismissed Flatirons’s statutory and conversion claims. The
case proceeded to a bench trial on Flatirons’s unjust enrichment claim, and
Steinberg’s two principal affirmative defenses to same (that Flatirons’s claim was
barred by Florida’s four-year statute of limitations and that Flatirons had unclean
hands).
After the trial, the trial court made several findings of fact:
- Flatirons and Steinberg had no relationship with each other;
- Steinberg received the $1,000,000.00 in good faith and without
knowledge of Yost’s fraud;
2 The Yost Partnership’s $1,000,000.00 transfer to Steinberg was only part of
Yost’s efforts to mollify Yost Partnership investors and limited partners. The
record reflects that, of the $3,845,000.00 Yost stole from Flatirons, approximately
$2,650,000.00 was used to make payments to Yost Partnership investors and
limited partners.
4
- Upon receiving the $1,000,000.00 transfer, Steinberg actually suffered a
net loss of approximately $1,200,000.00 as a result of the Yost
Partnership’s fraud and misconduct;
- As a result of Steinberg’s investment into the Yost Partnership, Steinberg
had paid adequate consideration for the $1,000,000.00 that the Yost
Partnership transferred to Steinberg; and
- Flatirons conferred no direct benefit on Steinberg.
Ultimately, the trial court entered final judgment for Steinberg, determining
that Flatirons failed to establish its unjust enrichment claim against Steinberg. The
trial court also determined that Flatirons’s unjust enrichment claim against
Steinberg was barred by Florida’s four-year statute of limitations. Flatirons timely
appealed this final judgment, including the trial court’s earlier dismissal of
Flatirons’s claim under Colorado’s civil theft statute.3
II. Standard of Review
We review de novo both the trial court’s dismissal of Flatirons’s statutory
civil theft claim and the trial court’s determination that Flatirons’s unjust
enrichment claim was barred by Florida’s statute of limitations. Saltponds Condo.
Ass’n, Inc. v. Walbridge Aldinger Co., 979 So. 2d 1240, 1241 (Fla. 3d DCA
2008). We review the trial court’s findings of fact regarding Flatirons’s unjust
3 Flatirons did not appeal the trial court’s dismissal of Flatirons’s conversion claim.
5
enrichment claim to determine whether those findings are supported by competent,
substantial evidence. Reimbursement Recovery, Inc. v. Indian River Mem’l Hosp.,
Inc., 22 So. 3d 679, 682 (Fla. 4th DCA 2009).
III. Analysis
A. Flatirons’s claim based on Colorado’s civil theft statute
The trial court dismissed Flatirons’s claim under Colorado’s civil theft
statute,4 holding that Colorado’s civil theft statute was inapplicable to claims based
primarily on activity occurring in Florida. The trial court reasoned that because the
Florida Legislature has enacted a civil theft statute,5 Florida’s statute – rather than
Colorado’s – would apply because Flatirons’s claim against Steinberg was
premised entirely upon Steinberg’s receipt of the stolen funds occurring
exclusively in Florida.6
4 Colorado’s civil theft statute reads, in relevant part, as follows:
All property obtained by theft, robbery, or burglary shall be restored
to the owner, and no sale, whether in good faith on the part of the
purchaser or not, shall divest the owner of his right to such property.
The owner may maintain an action not only against the taker thereof
but also against any person in whose possession he finds the property.
Colo. Rev. Stat. § 18-4-405 (2013).
5 See § 772.11, Fla. Stat. (2013).
6Understandably, Flatirons did not seek recovery against Steinberg under Florida’s
civil theft statute. Unlike the Colorado statute, Florida’s civil theft statute provides
no right of action against an innocent third party in possession of stolen property.
6
On appeal, Flatirons argues that the trial court erred by not applying Florida
“conflict of laws” tort jurisprudence to determine which civil theft statute applied.
Flatirons argues that the trial court should have performed the “significant
relationships test” required by Bishop v. Florida Specialty Paint Co., 389 So. 2d
999 (Fla. 1980) (adopting the significant relationships test to determine which
forum’s law applies in a tort action brought in Florida); and that, had the trial court
correctly applied the Bishop test, Colorado’s civil theft statute would govern
Flatirons’s claim because Colorado, rather than Florida, has the most significant
relationships to the occurrence and the parties.
The record reflects that the trial court reviewed the four corners of
Flatirons’s complaint, along with its extensive exhibits, in search of a nexus
between the state of Colorado and Flatirons’s claim against Steinberg. We engage
in the same exercise, de novo, Morejon v. Mariners Hosp., Inc., 197 So. 3d 591,
593 (Fla. 3d DCA 2016), and agree with the trial court. While Yost’s theft of
Flatirons’s funds may have occurred in Colorado, nothing alleged in Flatirons’s
complaint or reflected in its exhibits, reveals any conduct, activity or omission by
Steinberg that would warrant subjecting Steinberg to a Colorado statutory cause of
action. Because Flatirons’s complaint is devoid of allegations establishing any
nexus between Steinberg and Colorado, we need not speculate on what allegations
may be sufficient to require a party, in a Florida state court, to defend against
7
another state’s purely statutory cause of action. Suffice to say that when, as here, a
complaint is devoid of allegations of conduct, activities or omissions occurring in
another state, a Florida trial court has no basis to subject a defendant to a cause of
action created by another state’s legislature.7
The dissent adopts Flatirons’s argument and suggests that the trial court
reversibly erred by not conducting the significant relationships test established in
Bishop. See dissenting opinion at 18. Bishop holds that, in a personal injury case,
the law of the state where the injury occurred generally determines the rights and
liabilities of the parties, except that the law of another state will govern a particular
issue in the case if that other state has a more significant relationship to that issue.
Bishop, 389 So. 2d at 1001.
Flatirons neither provides authority that would expand Bishop’s significant
relationships test to a cause of action based on a state statutory remedy nor
7 We note that, from a practical perspective, had Steinberg engaged in activity in,
or had sufficient minimum contacts with, Colorado so to establish personal
jurisdiction, Flatirons surely would have brought this suit in Colorado. While we
need not, and do not, reach any constitutional issue, we do note that subjecting
Steinberg to Colorado’s civil theft statute – when it would defy a reasonable
expectation to hale Steinberg into a Colorado court – may implicate the same due
process principles upon which modern personal jurisdiction jurisprudence is based.
In both its general jurisdiction jurisprudence, Daimler AG v. Bauman, 134 S. Ct.
746 (2014) and its specific jurisdiction jurisprudence, Bristol Meyers Squibb Co. v.
Super. Ct. of Cal. San Francisco Cty., 137 S. Ct. 1773 (2017), the United States
Supreme Court’s recent trend has been to limit the reach of a court over a
defendant where the activity has minimal affiliation with or connection to the
forum state.
8
provides authority that would expand Bishop’s significant relationships test to a
contract action. Flatirons mis-focuses its analysis on Yost’s fraudulent conduct
occurring in Colorado, rather than on Steinberg’s innocent conduct resulting from
its contractual relationship with the Yost Partnership, i.e., its receipt of funds in
Florida.8 Absent at least some controlling, or even persuasive, authority, we are not
inclined to subject a Florida defendant to another state’s civil theft statute when
there is no allegation or inference that the Florida defendant undertook (or omitted)
any activity in the other state; and of further consideration, when Florida maintains
its own civil theft statute.
B. Flatirons’s unjust enrichment claim
After conducting an extensive evidentiary hearing on Flatirons’s unjust
enrichment claim, the trial court entered a detailed final judgment in Steinberg’s
favor. Essentially, the trial court found that Flatirons had failed to establish the
elements of unjust enrichment.9 We affirm because the trial court’s findings are
8 The dissent engages in the same analysis. In citing to Hertz Corp. v. Piccolo, 453
So. 2d 12 (Fla. 1984), the dissent seeks to establish that Bishop’s significant
relationships test controls the instant case because Colorado’s civil theft statute is
substantive in nature rather than procedural. See dissenting opinion at 19-20. This
detour, though, ignores the cause of action underlying Hertz Corp’s conflict of
laws analysis: a tort alleging personal injury that arises from a motor vehicle
accident.
9 The elements of a cause of action for unjust enrichment are: (i) plaintiff has
conferred a direct benefit on the defendant, who has knowledge thereof; (ii)
defendant voluntarily accepts and retains the conferred benefit; and (iii) the
circumstances are such that it would be inequitable for the defendant to retain the
9
supported by competent, substantial evidence. Specifically, the record supports the
trial court’s factual finding that Steinberg had no knowledge that the sums it
received on January 20, 2009, were tainted in any way, or, for that matter,
originated from Flatirons. Thus, the trial court correctly determined that Flatirons
had not established that Steinberg knowingly and voluntarily accepted any direct
benefit conferred upon it by Flatirons. E & M Marine Corp. v. First Union Nat’l
Bank, 783 So. 2d 311, 312-13 (Fla. 3d DCA 2001); Coffee Pot Plaza P’ship v.
Arrow Air Conditioning & Refrigeration, Inc., 412 So. 2d 883, 884 (Fla. 2d DCA
1982); Nursing Care Servs., Inc. v. Dobos, 380 So. 2d 516, 518 (Fla. 4th DCA
1980).10
Additionally, and alternately, the trial court held that Flatirons’s unjust
enrichment claim was precluded by Florida’s four-year statute of limitations.11 The
benefit without paying the value thereof to the plaintiff. Extraordinary Title Servs.,
LLC v. Fla. Power & Light Co., 1 So. 3d 400, 404 (Fla. 3d DCA 2009).
10 The dissent suggests that the trial court’s unjust enrichment verdict in
Steinberg’s favor was not supported by competent, substantial evidence. See
dissenting opinion at 27-31. While different triers of fact certainly can reach
different conclusions, our standard of review requires affirmance if competent,
substantial evidence supports the trial court’s findings. Reimbursement Recovery,
Inc., 22 So. 3d at 682. The record supports Steinberg’s good faith belief that its
account held the sum of $1,814,824.56, and that the $1,000,000 it received from
Yost was not tainted. The record also supports the inference that Flatirons’s
negligence contributed to Yost’s fraudulent activities and that Flatirons was in a far
better position than Steinberg to minimize Yost’s damage. Thus, competent,
substantial evidence exists in the record to support the trial court’s conclusion that
it would not be inequitable for Steinberg to retain the funds it received from Yost.
10
trial court concluded that Flatirons’s cause of action accrued on January 20, 2009,
when the Yost Partnership transferred the funds to Steinberg’s Florida account.
Flatirons’s filed its complaint on February 1, 2013, more than four years after the
alleged benefit was conferred.
The statute of limitations for an unjust enrichment claim begins to run at the
time the alleged benefit is conferred and received by the defendant. Beltran, M.D.,
125 So. 3d at 859; Barbara G. Banks, P.A. v. Thomas D. Lardin, P.A., 938 So. 2d
571, 577 (Fla. 4th DCA 2006); Swafford v. Schweitzer, 906 So. 2d 1194, 1195-96
(Fla. 4th DCA 2005).
As it did below, Flatirons argues on appeal that, because its cause of action
against Steinberg was “founded upon fraud,” Florida’s delayed discovery doctrine12
11 Section 95.11 reads, in relevant part, as follows:
Actions other than for recovery of real property shall be commenced
as follows:
(3) Within four years.--
(k) A legal or equitable action on a contract, obligation, or liability not
founded on a written instrument, including an action for the sale and
delivery of goods, wares, and merchandise, and on store accounts.
§ 95.11(3)(k), Fla. Stat. (2013); Beltran, M.D. v. Vincent P. Miraglia, M.D., P.A.,
125 So. 3d 855, 859 (Fla. 4th DCA 2013).
12 Florida’s delayed discovery doctrine is codified in section 95.031(2)(a), and
reads, in relevant part, as follows:
An action founded upon fraud under s. 95.11(3) . . . must be begun
11
applies, and the statute of limitations did not begin to run until Flatirons knew or
should have known of Yost’s theft, which at the earliest occurred in August of
2010. While a feature of Flatirons’s unjust enrichment claim might have been
Yost’s fraud and deceit, Flatirons’s unjust enrichment claim against Steinberg is
not “founded upon fraud” so as to implicate Florida’s delayed discovery doctrine.13
Further, our Supreme Court has made clear that the delayed discovery doctrine is
inapplicable to extend the limitations period for unjust enrichment claims. Davis v.
Monahan, 832 So. 2d 708 (Fla. 2002); Brooks Tropicals, Inc. v. Acosta, 959 So. 2d
288, 296 (Fla. 3d DCA 2007).14 Therefore, the trial court correctly ruled that
Flatirons’s unjust enrichment claim was barred by Florida’s four-year statute of
limitations.
within the period prescribed in this chapter, with the period running
from the time the facts giving rise to the cause of action were
discovered or should have been discovered with the exercise of due
diligence, instead of running from any date prescribed elsewhere in s.
95.11(3) . . . .
§ 95.031(2)(a), Fla. Stat. (2013) (emphasis added).
13 In this respect, we disagree with the dissent’s view on the applicability of the
delayed discovery doctrine to this case. See dissenting opinion at 31-35. We also
disagree with the dissent’s view on the applicability of equitable tolling. See
dissenting opinion at 35-37. Neither Yost’s nor Steinberg’s actions prevented
Flatirons from a timely asserting of its rights.
14 Without citation to any authority, Flatirons suggests that Davis has been
abrogated by the Legislature’s 2003 amendment to section 95.031(2)(a). We reject
this argument without further comment.
12
IV. Conclusion
The trial court properly dismissed Flatirons’s statutory claim against
Steinberg and correctly ruled that Flatirons’s unjust enrichment claim was
precluded by Florida’s statute of limitations. Additionally, the trial court’s factual
findings regarding Flatirons’s unjust enrichment claim are supported by competent,
substantial evidence.
Affirmed.
SALTER, J., concurs.
13
Flatirons Bank v. The Alan W. Steinberg Limited Partnership
Case No. 3D15-1396
ROTHENBERG, C.J. (dissenting).
Flatirons Bank (“Flatirons”), a Colorado bank and the plaintiff below,
appeals: (1) the trial court’s order dismissing Count II of the amended complaint,
which asserts a claim for civil theft under Colorado’s rights in stolen property
statute, Colo. Rev. Stat. §18-4-404 (2013), against the defendant below, the Alan
W. Steinberg Limited Partnership (“Steinberg”); and (2) a final judgment entered
in favor of Steinberg following a non-jury trial as to Flatirons’ claim for unjust
enrichment pled in Count I of the amended complaint. As will be demonstrated in
this dissent, the trial court clearly erred by dismissing Count II and by entering
final judgment in favor of Steinberg as to Count I.
First, the trial court erred by dismissing Count II without first performing a
conflict of laws analysis, which requires the court to determine which state has the
most significant relationship to the matter and, thus, which state’s law should be
applied. The majority attempts to cure this obvious error, but it too has erred
because it has failed to follow clear precedent from the Florida Supreme Court and
this Court specifying the analysis that must be performed and instead applies its
own test. The record, however, reflects that had the requisite analysis been
performed, the unassailable conclusion would have been that Colorado has the
most significant relationship to the matter, and therefore, Colorado law should be
14
applied. And, under Colorado law, Flatirons has a viable “rights in stolen
property” claim. Second, as to Count I, Flatirons’ unjust enrichment claim, the
majority affirms the trial court’s findings that Flatirons failed to meet its burden of
proof and that Flatirons’ unjust enrichment claim is precluded by Florida’s statute
of limitations. I respectfully disagree as to both findings.
THE FACTS
I agree with the majority opinion that the relevant facts are not in dispute.
Yost Partnership, LP (“the Yost Partnership”) was an investment vehicle that
operated from October 1991 until August 2010. At all times relevant to this case,
the Yost Partnership was managed and operated by Mark Yost (“Yost”) in
Colorado. The Yost Partnership accepted money from investors for the purpose of
trading securities, sometimes on margin, and making other investments in
companies and real estate. Steinberg, which is located in Florida, began making
investments in the Yost Partnership in 2000. Steinberg’s investments with the
Yost Partnership from January 10, 2000 through January 2, 2004 totaled
$2,200,000, and these investments were sent to, accepted by, and managed by Yost
in Colorado.
By all accounts, the Yost Partnership was a legitimate company that suffered
a sharp decline in 2005 due to bad investment decisions made by Yost, who is the
President, the Chairman of the Board, and the largest shareholder of the Yost
15
Partnership, and who was domiciled in Colorado. In order to hide this decline, the
Yost Partnership began defrauding its investors by misrepresenting the company’s
assets and the value of each of the limited partner’s assets.
On September 29, 2008, Yost and other investors purchased Flatirons, a
bank in Boulder, Colorado, through a holding company. Yost, who held the largest
shares in the holding company, was able to secure the positions of president,
Chairman of the Board, and loan officer, and he also became the contact person for
Flatirons. Based on these roles, Yost opened two lines of credit at Flatirons—one
on January 16, 2009 for L. John Drahota, and the other on February 12, 2009 for
Peter Gotsch. Neither Drahota nor Gotsch, who were personal friends of Yost,
were aware of or authorized these lines of credit. Yost forged their signatures on
the documents that were necessary to open these lines of credit and on the
subsequently issued promissory notes and loan agreements. After fraudulently
securing these lines of credit, Yost submitted false collateral information, financial
statements, and tax returns. Thereafter, by using the Drahota and Gotsch lines of
credit, Yost fraudulently caused Flatirons to transfer a total of $3,845,000 from
Flatirons to various accounts that Yost controlled, an amount which was then used
by Yost to make payments to the Yost Partnership investors in order to conceal the
declining value of their Yost Partnership membership interests. All of these acts
were committed in Colorado.
16
This appeal relates to the $1 million Yost caused Flatirons to transfer to
Steinberg in Florida, through the use of the Colorado Drahota line of credit, as a
purported “redemption” of a portion of Steinberg’s investments in the Yost
Partnership. On January 20, 2009, using the Drahota line of credit, Yost had $1
million transferred to an account at Elevations Credit Union (“the credit union”) in
Colorado in the name of an entity controlled by Yost; transferred $1,050,000 from
the first credit union account to another account at the credit union in Colorado in
the name of the Yost Partnership; and then transferred $1 million from the Yost
Partnership account in Colorado to Steinberg in Florida. However, on January 20,
2009, when Steinberg received the $1 million, Steinberg was clearly not entitled to
the $1 million return on its investments because, at the time, Steinberg’s
membership interest in the Yost Partnership was worth only $138,179.90.
Yost’s fraudulent activities were not discovered until August 2010, when
Flatirons contacted Gotsch to inquire about a missed loan payment. This phone
call led to a full investigation and the revelation of Yost’s fraud. It was not until
March 2012, however, that Flatirons discovered that Steinberg had received $1
million of the stolen funds. Based upon a request by the Receiver appointed during
the Yost Partnership investigation, Flatirons did not immediately initiate its action
against Steinberg. However on February 1, 2013, less than one year after the
17
discovery of the $1 million transfer to Steinberg, Flatirons filed its complaint
seeking the return of the fraudulently transferred $1 million to Steinberg.
As previously stated, Flatirons appeals the trial court’s dismissal of Count II
filed under Colorado’s rights in stolen property statute, Colo. Rev. Stat. § 18-4-
405, and the final judgment entered in favor of Steinberg as to Flatirons’ unjust
enrichment claim pled in Count I. Each ruling and the majority’s findings
regarding Counts I and II will be addressed below.
ANALYSIS
I. Dismissal of Count II
The trial court dismissed Count II of Flatirons’ amended complaint, which
alleges statutory civil theft and seeks recovery under Colorado’s rights in stolen
property statute, C.R.S. § 18-4-405. The trial court dismissed Count II based on its
conclusion that because the lawsuit was filed in Florida, and there exists a similar
statute in Florida, a claim under the Colorado statute could not proceed in Florida.
However, as will be fully discussed below, the trial court clearly and reversibly
erred by dismissing Flatirons’ Colorado rights in stolen property claim without first
performing a conflict in laws analysis and applying the “significant relationships
test” as set forth in the Restatement (Second) of Conflict of Laws §145-146 (1971),
adopted by the Florida Supreme Court in Bishop v. Florida Specialty Paint Co.,
389 So. 2d 999, 1001 (Fla. 1980).
18
In adopting the Restatement (Second), the Florida Supreme Court in Bishop
specifically stated as follows:
Instead of clinging to the traditional lex loci delicti rule, we
now adopt the “significant relationships test” as set forth in the
Restatement (Second) of Conflict of Laws §145-146 (1971):
s 145. The General Principle
(1) The rights and liabilities of the parties with respect to an
issue
in tort are determined by the local law of the state which, with
respect to that issue, has the most significant relationship to the
occurrence and the parties under the principles stated in s 6.
(2) Contacts to be taken into account in applying the principles
of s 6 to determine the law applicable to an issue include:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury
occurred,
(c) the domicil, residence, nationality, place of
incorporation and place of business of the parties, and
(d) the place where the relationship, if any, between the
parties is centered.
These contacts are to be evaluated according to their relative
importance with respect to the particular issue.
Bishop, 389 So. 2d at 1001.
Several years after Bishop was decided, the Florida Supreme Court clarified
that when determining whether to apply Florida law or the law of another state
under Florida’s conflict of laws jurisprudence, the court must first determine if
substantial rights and duties are affected or, in other words, if substantive law is an
issue. Hertz Corp. v. Piccolo, 453 So. 2d 12, 14 (Fla. 1984). “[I]f substantive law
19
be an issue, the rule adopted by this court in [Bishop] applies: ‘[T]he local law of
the state where the injury occurred determines the rights and liabilities of the
parties, unless, with respect to the particular issue, some other state has a more
significant relationship.’” Id. at 14 (internal citations omitted) (some alteration in
original). In other words, the Court held that if the alternative state’s statute is
substantive, then the significant relationships test adopted in Bishop controls.
This Court and other appellate courts of this state have performed the
conflict of laws analysis and have applied the significant relationships test adopted
in Bishop with respect to tort issues. For example, this Court applied the test set
forth in Bishop in Avis Rent-A-Car Systems, Inc. v. Abrahantes, 517 So. 2d 25(Fla. 3d DCA 1987), and concluded that, although the lawsuit was filed in Florida,
Cayman Island law should have been applied, and therefore, the trial court’s failure
to apply Cayman Island law was reversible error. See also Barker v. Anderson,
546 So. 2d 449, 450 (Fla. 1st DCA 1989) (concluding that the significant
relationships test controlled the issue of which state’s law was applicable, where
the lawsuit was filed in Florida but the injury occurred in Georgia and, after
performing the Bishop analysis, finding that the trial court correctly applied
Georgia law).
The trial court erred by failing to follow Bishop, Abrahantes, and Barker,
and by dismissing Flatirons’ rights in stolen property claim filed pursuant to
20
Colorado law, Colo. Rev. Stat. §18-4-405, based on its mistaken conclusion that
because there is a similar Florida statute, Florida law must be applied in the Florida
court. The issue is not whether Florida law could be applied, but rather, the issue
is whether Florida law should be applied.
Colorado Revised Statute section 18-4-405, Colorado’s rights in stolen
property statute, provides that the transfer of stolen property to another does not
divest the owner of his right to the property, and the owner may maintain an action
against any person in whose possession he finds the property. Colorado’s rights
in stolen property statute differs from Florida law because Florida law protects
innocent third parties in possession of stolen property while Colorado’s law does
not. Because the difference between Colorado law and Florida law regarding this
issue is substantive, as opposed to procedural, the trial court was required to
perform a conflict of laws analysis to determine whether Colorado or Florida has
the most significant relationship to the occurrence and the parties. See Hertz
Corp., 453 So. 2d at 14 (“The controlling question therefore is whether the
Louisiana direct action statute is substantive. If it is, then the Bishop rule dictates
that the Louisiana statute controls the question of indispensable parties. If the
Louisiana statute is procedural, then Florida Law controls.”).
Had the trial court performed the significant relationships test, it would have
been required to consider the following undisputed record evidence. Flatirons is a
21
Colorado bank with its principal place of business in Boulder, Colorado. Over $3
million was stolen from Flatirons in Colorado by Yost, who resided in Colorado.
The fraudulent lines of credit that were opened by Yost, were opened in Colorado.
One million dollars of the $3 million stolen by Yost from Flatirons in Colorado
was transferred from Flatirons to a Colorado credit union account in the name of
an entity controlled by Yost, and then the funds were transferred from that account
to another account at the same Colorado credit union in the name of the Yost
Partnership. The Yost Partnership is an Illinois limited partnership, which was
managed and operated by Yost in Colorado since 2000. One million dollars of the
stolen funds were ultimately transferred to an account controlled by Steinberg.
Steinberg, a New York limited partnership with its principal place of business in
Florida, was an investment vehicle with over $60 million in assets, and it made
several investments in the Yost Partnership, investments which were managed by
Yost in Colorado between January 2000 and January 2004.
As these undisputed facts clearly reflect, the theft and the injury occurred in
Colorado; the party who committed the theft resided in Colorado; and the entity the
funds were stolen from was located in Colorado. Thus, under Bishop, the law of
Colorado must be applied unless Florida has a more significant relationship to the
theft and resulting loss. “[T]he local law of the state where the injury occurred
determines the rights and liabilities of the parties, unless, with respect to the
22
particular issue, some other state has a more significant relationship. . . .”
Bishop, 389 So. 2d at 999 (emphasis added); see also Hertz Corp., 453 So. 2d at
14. The only relationship Florida has to the theft is that the stolen funds were
transferred to Steinberg, whose principal place of business was in Florida.
Because Florida does not have a more significant relationship to the case and the
injury occurred in Colorado, Colorado law controls.
The trial court erred by failing to perform a conflict of laws analysis, and for
that reason alone, the dismissal of Count II must be reversed as a matter of law.
The majority, however, performs its own analysis, affirms the dismissal of Count
II, Flatirons’ claim under Colorado’s rights in stolen property statute, and
concludes that based on the four corners of the amended complaint and the
extensive exhibits, there is no nexus between the state of Colorado and Flatirons’
claim against Steinberg. The majority’s “no nexus” conclusion is premised on its
finding that there is nothing alleged in the amended complaint or reflected in the
exhibits that would warrant subjecting Steinberg to a Colorado statutory cause of
action.
The majority is, however, confusing personal jurisdiction jurisprudence with
a conflict of laws analysis. The issue is not whether Flatirons could have or should
have filed its complaint against Steinberg in Colorado. The complaint was filed in
Florida, and there is no dispute that venue in Florida is proper. The issue is,
23
whether, after performing a conflict of laws analysis, as adopted by the Florida
Supreme Court in Bishop, Colorado law should be applied in Count II.
To reiterate, under section 145 of the Restatement (Second) of Conflict of
Laws, adopted by the Florida Supreme Court in Bishop, when determining which
state has the most significant relationship to the “occurrence and the parties,” the
court is required to consider:
(a) the place where the injury occurred,
(b) the place where the conduct causing the injury occurred,
(c) the domicile, residence, nationality, place of incorporation and
place of business of the parties, and
(d) the place where the relationship, if any, between the parties is
centered.
Bishop, 389 So. 2d at 1001. Had the trial court and the majority performed the
significant relationships test, they would have been required to consider the
following undisputed record evidence as it relates to the four factors above.
(a) The place where the injury occurred
The $1 million transferred to Steinberg was stolen from Flatirons in
Colorado. Flatirons is a Colorado financial institution located in Colorado and thus
the injury occurred in Colorado. Therefore, as to the first factor, only Colorado has
a significant relationship to the occurrence.
(b) The place where the conduct causing the injury occurred
The conduct that caused the injury to Flatirons also occurred in Colorado,
not Florida. Yost opened fraudulent lines of credit at Flatirons in Colorado, and he
24
forged the signatures on the documents necessary to open these lines of credit and
on the promissory notes and loan agreements in Colorado. After submitting this
false collateral information, financial statements, and tax returns in Colorado, Yost
fraudulently caused Flatirons to transfer $3,845,000 from Flatirons to various
accounts in Colorado. The $1 million ultimately transferred to Steinberg was
transferred from the funds stolen in Colorado. Thus, as to this factor, only
Colorado has a significant relationship to the occurrence.
(c) The domicile, residence, nationality, place of incorporation and place of
business of the parties
This factor is weighted equally as to Colorado and Florida. Yost was
domiciled in Colorado, where all of these acts and the injury occurred. The Yost
Partnership was managed and operated by Yost in Colorado since 2000. On the
other hand, Steinberg is a New York limited partnership with its principal place of
business in Florida. Thus, as to this factor, both Colorado and Florida have a
significant relationship to the occurrence and the parties.
(d) The place where the relationship, if any, between the parties is centered
Colorado is also the place where the relationship between the parties was
centered. Steinberg, an investment vehicle, invested substantial money with the
Yost Partnership. These investments were sent to the Yost Partnership, and Yost
managed the investments in Colorado. In order to hide the results of Yost’s poor
investment decisions, Yost began defrauding the Yost Partnership investors by
25
issuing false reports regarding the company’s assets and creating fraudulent lines
of credit to funnel money into the Yost and Yost Partnership accounts. The $1
million Yost wired to Steinberg was not earned by the Yost Partnership’s
investments. Rather, it was stolen from Flatirons. Thus, the relationship between
Yost, the Yost Partnership, and Steinberg was based on Steinberg’s investments in
the Colorado-based Yost Partnership, and the relationship between Flatirons and
Steinberg was as a result of Yost’s attempt to hide the poor health of the Yost
Partnership and Yost’s misrepresentation of the company’s assets.
In summary, the trial court erred by dismissing Count II without performing
a conflict in laws analysis as mandated by Bishop. The majority has also erred by
(1) failing to apply Bishop, Abrahates, and Barker, decisions from the Florida
Supreme Court, this Court, and the First District Court of Appeal; (2) applying its
own “nexus” analysis; and (3) incorrectly determining that the allegations and the
exhibits were insufficient to “warrant” subjecting Steinberg to a Colorado statutory
cause of action. The allegations and exhibits clearly establish that Colorado has
the most significant relationship to the occurrence at issue in Count II—Yost’s
theft of money from a Colorado bank and his transfer of that money to Steinberg in
Florida.
II. Count I—unjust enrichment
26
After conducting a non-jury trial on Flatirons’ unjust enrichment claim, the
trial court entered a final judgment in favor of Steinberg, finding that: (1) Flatirons
failed to satisfy its burden of proof; and (2) the unjust enrichment claim was barred
by the statute of limitations. The majority affirms these findings. For the
following reasons, I disagree.
(a) Flatirons met its burden of proof
To prevail on its claim for unjust enrichment, Flatirons was required to
prove that: (1) Flatirons conferred a benefit upon Steinberg; (2) Steinberg had
knowledge of the benefit conferred; (3) Steinberg voluntarily accepted and retained
the conferred benefit; and (4) the circumstances are such that it would be
inequitable for Steinberg to retain the benefit conferred without paying Flatirons
the value of that benefit. Fla. Power Corp. v. City of Winter Park, 887 So. 2d
1237, 1242 n.4 (Fla. 2004); Extraordinary Title Servs., LLC v. Fla. Power & Light
Co., 1 So. 3d 400, 404 (Fla. 3d DCA 2009).
(1) Flatirons conferred a benefit upon Steinberg
At trial, the parties stipulated that the $1 million Steinberg received from
Yost came from (was stolen from) Flatirons. Direct contact or privity between
Flatirons and Steinberg is not required. See Aceto Corp. v. TherapeuticsMD, Inc.,
953 F. Supp. 2d 1269, 1288 (S.D. Fla. 2013); Williams v. Wells Fargo Bank N.A.,
2011 WL 4368980, at *9 (S.D. Fla. 2011).
27
(2) Steinberg had knowledge of the benefit conferred
It was undisputed that Steinberg had full knowledge of the transfer of $1
million into its account. The majority concludes that the record supports the trial
court’s finding that Steinberg had no knowledge that the money it received was
tainted. However, the majority does not provide any authority in support of its
position that Florida law requires that the recipient of the conferred benefit,
Steinberg, must have had knowledge that the benefit conferred was fraudulent.
The only citation provided by the majority, E & M Marine Corp. v. First Union
National Bank, 783 So. 2d 311, 312-13 (Fla. 3d DCA 2001), does not support that
position. The issue in E & M Marine was whether First Union, which held a
promissory note on a thirty-two foot vessel and which took possession of the vessel
after the vessel was repaired, should be required to pay for the repairs when the
owner failed to pay for the repairs and the owner defaulted on the note. This Court
concluded that First Union was not liable for the repairs because it did not request,
authorize, or have knowledge of the repairs.
In the instant case, Steinberg was aware of and accepted the fraudulent
transfer. Although Steinberg might not have initially known that the money
transferred to its account had been stolen from Flatirons and that Steinberg was not
entitled to a $1 million return on its investment in the Yost Partnership, Steinberg
was ultimately made aware of the stolen nature of the funds, and it is undisputed
28
that despite Steinberg’s full appreciation of the theft and its lack of entitlement to
any appreciation or return on its lost investment in the Yost Partnership, it still
refused to return the illegally transferred funds to which Steinberg clearly was not
entitled.
(3) Steinberg voluntarily accepted and retained the benefit conferred
It is undisputed that between January 2000 and January 2004, Steinberg
invested $2.2 million in the Yost Partnership. Gary Frohman, the corporate
representative of Steinberg, testified at trial that he was aware that the Yost
Partnership had the ability to trade on margin and that Steinberg could lose all or
part of its capital investment, and this is exactly what happened. By 2009, when
Steinberg received the $1 million stolen from Flatirons, the Yost Partnership’s
assets totaled only $1.2 million, and Steinberg’s $2.2 million investment had
shrunk to $138,179.90. Thus, the $1 million “redemption” payment made to
Steinberg was a benefit that Steinberg was not entitled to receive.
Although Steinberg was unaware that Yost had lost most of Steinberg’s
investment at the time it received the $1 million “redemption” payment, when
Steinberg learned the truth—that when it received the $1 million transfer its
investment was valued at only $138,179.90, and thus it was not entitled to a $1
million return or a redemption of its investment—it refused to return the funds that
it then knew had been stolen from Flatirons.
29
(4) The circumstances are such that it would be inequitable for Steinberg to
retain the $1 million
Although a thief can transfer legal title to money to a good faith recipient
who has given good and adequate consideration for the money, Steinberg gave
absolutely no consideration for the $1 million windfall it received. That is because
when it received the $1 million from Yost, the actual value of its investment
totaled only $138,179.90, and thus it had realized only a loss, not a profit from its
investment. Steinberg had lost over $2 million. It did not earn $1 million from its
$2.2 million investment.
To allow Steinberg to retain the $1 million it clearly is not entitled to would
be inequitable because the $1 million Steinberg received was stolen from Flatirons
by Yost. The Yost Partnership operated as a legitimate investment company for
many years. It was only after Yost’s poor investment decisions resulted in a sharp
decline of the company’s assets that Yost began defrauding the investors and
stealing money from Flatirons to hide the true value of the company and the
investors’ assets. Yost’s transfer of the stolen funds to Steinberg, whose
investment shrank from $2.2 million to $138,179.90, was made in furtherance of
Yost’s scheme to hide the true value of Steinberg’s investment. To allow
Steinberg to keep the $1 million it is clearly not entitled to would result in an
unjustified windfall for Steinberg to the detriment of an innocent victim—
Flatirons.
30
It is important to note that Flatirons is an innocent victim. This was not a
Ponzi scheme, and Flatirons was not an investor. Steinberg was aware of the risk
associated with its investment; Yost attempted to make investment decisions that
would generate a profit for the Yost Partnership investors; Yost’s investment
decisions resulted in the loss of most of Steinberg’s $2.2 million investment, not a
profit of $1 million; and if Steinberg is permitted to retain this $1 million windfall,
Flatirons, an innocent victim, will be made to pay for Yost’s poor investment
decisions. This is a classic unjust enrichment claim.
(b) Flatirons’ unjust enrichment claim is not barred by the statute of
limitations
The trial court and the majority have concluded that Flatirons’ unjust
enrichment claim is barred by Florida’s four-year statute of limitations. The
majority correctly notes that the statute of limitations for an unjust enrichment
claim begins to run when the alleged benefit is conferred and received by the
defendant. See § 95.11, Fla. Stat. (2013); Beltran, M.D. v. Vincent P. Miraglia,
M.D., P.A., 125 So. 3d 855, 859 (Fla. 4th DCA 2013). The monies at issue were
transferred to Steinberg on January 20, 2009, but Flatirons filed its lawsuit on
February 1, 2013, four years and eleven days after the money was transferred. In
other words, eleven days too late. Thus, unless either the delayed discovery
doctrine or equitable tolling applies, Flatirons’ unjust enrichment claim is barred
by the statute of limitations.15
31
(1) The delayed discovery doctrine
The majority concludes that the delayed discovery doctrine is inapplicable to
unjust enrichment claims and cites to Davis v. Monahan, 832 So. 2d 708 (Fla.
2002), and Brooks Tropicals, Inc. v. Acosta, 959 So. 2d 288, 296 (Fla. 3d DCA
2007). However, neither Davis nor Brooks prohibit application of the delayed
discovery doctrine to unjust enrichment claims founded on fraud. In fact, the
Florida Supreme Court in Davis specifically noted the fraud exception to the
limitation of the application of the delayed discovery doctrine. Davis, 832 So. 2d
at 709. In quashing the Fourth District Court of Appeal’s decision applying the
delayed discovery doctrine to evaluate the plaintiff’s claims for breach of fiduciary
duty, civil theft, conspiracy, conversion, and unjust enrichment, the Florida
Supreme Court specifically recognized that although “the Florida Legislature has
stated that a cause of action accrues or begins to run when the last element of the
cause of action occurs,” there is an exception “for claims of fraud and products
liability in which the accrual of the causes of action is delayed until the plaintiff
15 Flatirons correctly does not rely on the doctrine of equitable estoppel, which
requires misconduct by the opposing party, because Flatirons does not contend that
Steinberg was guilty of any misconduct. See Major League Baseball v. Morsani,
790 So. 2d 1071, 1076-77 (Fla. 2001) (noting that equitable estoppel differs from
other legal theories that may relieve a party of the statute of limitations, such as
equitable tolling, in that “[e]quitable estoppel presupposes a legal shortcoming in a
party’s case that is directly attributable to the opposing party’s misconduct”).
32
either knows or should know that the last element of the cause of action occurred.”
Id. at 709 (footnote omitted).
Section 95.11(3), Florida Statutes (2013), is the applicable statute governing
the limitations period for Flatirons’ unjust enrichment claim, which the parties
agree is four years. Florida’s delayed discovery doctrine, as codified in section
95.031(2)(a), Florida Statutes (2013), provides, in relevant part, as follows:
An action founded upon fraud under s. 95.11(3) . . . must be begun
within the period prescribed in this chapter, with the period running
from the time the facts giving rise to the cause of action were
discovered or should have been discovered with the exercise of due
diligence, instead of running from any date prescribed elsewhere in s.
95.11(3) . . . .
(emphasis added).
Flatirons’ unjust enrichment claim against Steinberg is founded upon fraud.
Yost fraudulently misappropriated over $3 million from Flatirons and transferred
$1 million of the $3 million to Steinberg in 2009. Yost concealed the fraudulent
nature of his acts. Flatirons first discovered the misappropriation in 2010 and the
fraudulent transfer to Steinberg in 2012. Flatirons filed its lawsuit against
Steinberg within one year of discovering the fraudulent transfer to Steinberg, well
within the four-year statute of limitations of its initial discovery of Yost’s
wrongdoing.
The Florida Supreme Court and other courts have applied the delayed
discovery doctrine to similar facts. For example, the Florida Supreme Court in
33
Miami Beach First National Bank v. Edgerly, 121 So. 2d 417 (Fla. 1960), affirmed
this Court’s decision to apply delayed discovery principles in an action filed by the
Edgerlys (the depositors) against the bank for cashing a check drawn from their
account which allegedly contained a forged endorsement. The Court held that the
statute of limitations did not begin to run until discovery of the fact that a right,
which will support a cause of action, has been invaded. Id. at 420. “[T]he statute
[of limitations] did not begin to run until the depositors knew, or in the exercise of
ordinary business care would have discovered, that the endorsement on the subject
check was forged, which is a question of fact to be determined by the trier of fact.”
Id.In Butler University v. Bahssin, 892 So. 2d 1087 (Fla. 2d DCA 2004), the
Second District Court of Appeal applied the delayed discovery doctrine to Butler
University’s (“Butler”) action founded on the misappropriation of Butler’s
property by George Verdak, a former employee of Butler, to an innocent recipient,
Jennifer Bahssin. The complaint alleged that when Verdak left Butler, he took
valuable dance costumes, sets, and other items belonging to Butler with him and
sold them to Bahssin, an art dealer. In applying the delayed discovery doctrine, the
Second District noted that “[t]he facts contained in Butler’s proposed amended
complaint are that it was prevented from discovering the loss of its property
34
through the active concealment of Verdak’s original misappropriation by his
successors in interest until Bahssin purchased the costumes in 2002.” Id. at 1092.
In both Edgerly and Butler, the delayed discovery doctrine was applied to
causes of action to recover property from a third party who had not committed
the fraud that resulted in a loss to the owner of the property. Although the bank in
Edgerly did not endorse the check, the Florida Supreme Court applied the delayed
discovery doctrine to allow the account holder to seek recovery of its
misappropriated funds from the bank that cashed the allegedly forged check. In
Butler, the Second District applied the delayed discovery doctrine to allow Butler
to seek recovery of its misappropriated costumes, etc. from Bahssin, who
innocently purchased the stolen costumes from Verdak.
It is therefore error to preclude the application of the delayed discovery
doctrine to Flatirons’ unjust enrichment claim against Steinberg. Although
Steinberg did not commit the fraud, neither did Butler or Bahssin. However, in all
three cases, the action was “founded upon fraud,” and the injured party did not
immediately discover the theft due to the fraudster’s concealment of the fraud.
(2) Equitable tolling
The majority fails to address Flatirons’ alternative equitable tolling
argument. “The doctrine of equitable tolling was developed to permit under certain
circumstances the filing of a lawsuit that otherwise would be barred by a
35
limitations period.” Machules v. Dep’t of Admin., 523 So. 2d 1132, 1133 (Fla.
1988) (footnote omitted).
The tolling doctrine is used in the interests of justice to accommodate
both a defendant’s right not to be called upon to defend a stale claim
and a plaintiff’s right to assert a meritorious claim when equitable
circumstances have prevented a timely filing. Equitable tolling is a
type of equitable modification which focuses on the plaintiff’s
excusable ignorance of the limitations period and on [the] lack of
prejudice to the defendant.
Id. at 1134 (citations and quotation omitted) (alteration in original). Equitable
tolling, unlike equitable estoppel, does not require active deception or misconduct,
and “[g]enerally, the tolling doctrine has been applied when the plaintiff has been
misled or lulled into inaction, has in some extraordinary way been prevented from
asserting his rights, or has timely asserted his rights mistakenly in the wrong
forum.” Id.In the instant case, Yost concealed the fraudulent transfer of monies from
various Flatirons accounts to the Yost Partnership investors in order to deceive the
investors about the sharp decline in the company’s and the investors’ assets. Based
on his position of trust, Yost was able to open lines of credit by submitting forged
documents and false supporting documents without garnering suspicion or a high
level of scrutiny. When Flatirons discovered the thefts, it conducted an
investigation and eventually learned that $1 million of the stolen funds had been
transferred into Steinberg’s account. Based on a request by the Receiver, Flatirons
36
delayed the filing of its complaint for approximately eleven months. Due to the
concealment by Yost and because Flatirons honored the Receiver’s request,
Flatirons filed its complaint on February 1, 2013. The filing of the complaint was
within one year of Flatirons’ discovery of the $1 million transfer to Steinberg, but
eleven days too late if the limitations period is calculated to run from the date of
the transfer as opposed to the date of the discovery of the transfer.
Steinberg is clearly not entitled to the $1 million it received from Yost. At
the time of the transfer, Steinberg’s investment had shrunk to $138,179.90 due to
poor investment decisions made by Yost, not due to any fraud. Thus, the $1
million represents a windfall to which Steinberg is not entitled, to the detriment of
Flatirons, an innocent victim. Under these circumstances, the doctrine of equitable
tolling should be applied to allow Flatirons to pursue its unjust enrichment claim
against Steinberg.
CONCLUSION
The trial court erred by dismissing Count II, a claim brought by Flatirons
under Colorado Revised Statutes, section 18-4-405, without performing a conflict
of laws analysis as required by Florida law. The majority also errs by failing to
properly perform the same conflict of laws analysis. Thus, the dismissal of Count
II should be reversed and remanded with directions to the trial court to perform a
37
conflict of laws analysis under the test adopted by the Florida Supreme Court in
Bishop.
The trial court erred by entering judgment in favor of Steinberg on Count I,
unjust enrichment, because Flatirons met its burden of proof and the unjust
enrichment claim is not barred by the statute of limitations. Under the delayed
discovery doctrine, the unjust enrichment claim was timely filed, or in the
alternative, equitable tolling is applicable based on the circumstances of this case,
and therefore, Flatirons should be permitted to pursue its unjust enrichment claim
against Steinberg.
Accordingly, I respectfully disagree with the majority opinion.
38