Third District Court of Appeal
State of Florida
Opinion filed October 6, 2021.
Not final until disposition of timely filed motion for rehearing.
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No. 3D20-0670
Lower Tribunal No. 16-6231
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Yair Barak,
Appellant,
vs.
ACS International Projects, Ltd., etc.,
Appellee.
An appeal from the Circuit Court for Miami-Dade County, Veronica
Diaz, Judge.
Yair Barak, in proper person.
The Bobadilla Law Firm, and D. Fernando Bobadilla, for appellee.
Before LINDSEY, MILLER, and LOBREE, JJ.
MILLER, J.
Appellant, Yair Barak, challenges a final judgment rendered in favor of
appellee, ACS International Projects, Ltd., an Israeli corporation (“ACS
Israel”). The primary issue on appeal is whether Article 4A of the Uniform
Commercial Code, as adopted and codified in chapter 670, Florida Statutes
(2021), preempts ACS Israel’s civil theft and conversion claims. Concluding
the claims are not preempted, we affirm as to all issues, save the calculation
of damages and prejudgment interest. 1
1
Barak raises a myriad of other issues on appeal, none of which warrant
reversal. See Christopher Advert. Grp., Inc. v. R & B Holding Co., Inc.,
883
So. 2d 867, 875 (Fla. 3d DCA 2004) (finding no prejudice in the premature
filing of an amended complaint where the defendant did not tender the
purloined funds within thirty days of receipt of the civil theft letter); Hebert v.
State,
25 So. 3d 612, 614 (Fla. 1st DCA 2009) (holding that evidence of
specific intent to commit theft may be demonstrated “by circumstantial
evidence found in the surrounding circumstances of the event”); 12 Fla. Jur.
2d Conversion and Replevin § 7 (2021) (“To be a proper subject of
conversion, each coin or bill need not be earmarked, but there must be an
obligation to keep intact or deliver specific money in question so that such
money can be identified. Money is capable of identification where it is
delivered at one time, by one act and in one mass, or where the deposit is
special, and the identical money is to be kept for the party making the
deposit, or where wrongful possession of such property is obtained.”)
(footnotes omitted); Edwards v. Landsman,
51 So. 3d 1208, 1214 (Fla. 4th
DCA 2011) (quoting P.V. Constr. Corp. v. Kovner,
538 So. 2d 502, 504 (Fla.
4th DCA 1989)) (“Under Florida law, ‘an officer of a corporation who commits
or participates in a tort, whether or not it is in furtherance of corporate
business and whether or not it is by authority of the corporation, is liable to
the injured party whether or not the corporation is also liable.’”); Kendall
Healthcare Grp., Ltd. v. Madrigal,
271 So. 3d 1120, 1123 (Fla. 3d DCA 2019)
(holding “although the trial judge adopted verbatim the [plaintiffs]’ proposed
order, the record before this Court reflects that the trial judge did not delegate
its independent judgment”).
2
BACKGROUND
Because Barak asserted his Fifth Amendment privilege against self-
incrimination in this litigation, the relevant facts of record are undisputed.
After performing certain contractually obligated services, ACS Israel invoiced
the Venezuelan state-owned petroleum company, Petroleo de Venezuela,
S.A. (“PDVSA”), seeking payment by way of an electronic funds transfer. To
allay concerns regarding possible wire fraud, the parties entered into a risk
of loss agreement providing that any damages incurred after the wire was
originated would be borne by ACS Israel.
Barak, a former business partner of ACS Israel, created a Florida
limited liability company denominated as “ACS International Projects, Ltd.”
(“ACS Florida”) and opened a Mercantil Commercebank, N.A. account under
the same name. Unbeknownst to ACS Israel, he furtively persuaded PDVSA
to order payment be made to ACS Florida.
PDVSA initiated two separate wire transfer payment orders, totaling
$1,566,921.60, through its bank, Banco Espirito Santo. Mercantil accepted
both wires and subsequently deposited the funds into ACS Florida’s account.
The funds were then transferred to several entities owned by Barak.
After learning of the apparent fraud, ACS Israel obtained a temporary
injunction in the circuit court, freezing ACS Florida’s account, and filed suit
3
against Barak alleging fraud, conversion, civil theft, and conspiracy and
seeking the imposition of a constructive trust and damages. It subsequently
served Barak with a civil theft letter, demanding the return of $1,566,921.60
within thirty days.
A successful banking recall with the Society for Worldwide Interbank
Financial Transactions (“SWIFT”) yielded $1,364,666.40 in recovered funds
within the thirty-day demand period. Some months later, ACS Israel
recouped an additional $182,546.35 by way of a second SWIFT recall.
After the pleadings closed, the parties filed competing summary
judgment motions. Concluding the grand theft and conversion claims were
not preempted by the remedies codified in Article 4A of the Uniform
Commercial Code, the trial court granted summary judgment in favor of ACS
Israel. Thereafter, the court rendered final judgment, awarding damages in
the amount demanded in the civil theft notice and prejudgment interest on
the trebled damages. The instant appeal ensued.
STANDARD OF REVIEW
As the operation of preemption constitutes a pure issue of law, “we
apply a de novo standard of review.” See Marcy v. DaimlerChrysler Corp.,
921 So. 2d 781, 783 (Fla. 5th DCA 2006).
LEGAL ANALYSIS
4
The resolution of this appeal requires an analysis as to the reach of
Article 4A of the Uniform Commercial Code, as adopted in chapter 670,
Florida Statutes. Rapid developments in financial technology have enabled
commercial consumers to expeditiously exchange value through electronic
means. While such transactions “have become ubiquitous,” forming an
“integral element of the banking experience for many [commercial]
consumers,” they carry “inevitable risks.” Stephanie L. Tang, Increasing the
Role of Agency Deference in Curbing Online Banking Fraud,
91 N.D. L. Rev.
329, 330–31 (2015). In particular, the increased use of automated
clearinghouse (“ACH”) services and wire transfers has precipitated surges in
banking fraud. Robert W. Ludwig, Jr., Salvatore Scanio, & Joseph S. Szary,
Malware and Fraudulent Electronic Funds Transfers, Who Bears the Loss,
Fidelity L. J. 101, 103 (Oct. 2010).
Article 4A of the Uniform Commercial Code was developed to address
disputes arising out of misdirected or unauthorized electronic funds transfers
and payment orders. Prior to its enactment, “there was no comprehensive
body of law—statutory or judicial—that defined the judicial nature of a
[commercial] funds transfer or the rights and obligations flowing from
payment orders.” U.C.C. § 4A-102 cmt. The drafters endeavored to deliver
clarity to this area of the law by establishing “uniform and predictable rights,
5
duties, and liabilities for arm’s-length funds transfers between various
commercial parties and their banks.” Michael G. Tanner & JoAnne
Eichelberger, Bank Customers Beware: Recovery of Unauthorized
Electronic Funds Transfers Isn’t So Easy, 91 Fla. B. J. 36, 36 (Apr. 2017).
In crafting the provisions of Article 4A, the drafters made “[a] deliberate
decision . . . to use precise and detailed rules to assign responsibility, define
behavioral norms, allocate risks and establish limits on liability, rather than
to rely on broadly stated, flexible principles.” U.C.C. §4A-102, cmt. Further,
“a critical consideration was that the various parties to funds transfers need
to be able to predict risk with certainty, to insure against risk, to adjust
operational and security procedures, and to price funds transfer services
appropriately.” Id.
Although indubitably expansive, Article 4A is not exhaustive. The
drafters “intended that Article 4A would be supplemented, enhanced, and in
some places, superceded by other bodies of law . . . the [A]rticle is intended
to synergize with other legal doctrines.” Regions Bank v. Provident Bank,
Inc.,
345 F.3d 1267, 1275 (11th Cir. 2003) (alterations in original) (quoting
Thomas C. Baxter & Raj Bhala, The Interrelationship of Article 4A with Other
Law, 45 Bus. Law. 1485, 1485 (1990)). This is consistent with the
proposition that “[u]nless displaced by the particular provisions of [the
6
Uniform Commercial Code], the principles of law and equity . . . shall
supplement its provisions.” § 671.103 Fla. Stat. Hence, other sources of
law may supplement, but not supplant the provisions of the UCC, and where
the provisions of the Code “do not venture, the claimant need not turn back;
he or she may seek other guides, statutory or judicial.” Sheerbonnet, Ltd. v.
Am. Exp. Bank, Ltd.,
951 F. Supp. 403, 408 (S.D.N.Y. 1995); see also 15A
Am. Jur. 2d Commercial Code § 18 (2021).
Under Article 4A, a bank receiving a payment order ordinarily bears
the risk of any misdirected funds transfer. U.C.C. § 4A-202(a)–(b). That risk
may be shifted to the customer under two defined circumstances. The first
is where the customer is deemed to have authorized the transfer, and the
second is where the parties stipulated to the use of a commercially
reasonable security procedure. Id.
Article 4A only purports, however, to allocate liability as between
“parties” to the funds transfer, a term narrowly defined as including only the
originator, sender, beneficiary, and enabling financial institutions. U.C.C. §§
4A-103–104; §§ 670.103–.104, Fla. Stat. The text is wholly silent as to the
rights and remedies of all others.
In the instant case, ACS Israel and Barak were not parties to either of
the underlying transactions. Further, both wire transfers were clearly
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authorized. Liability was not therefore predicated upon the mechanics of the
transfers, but rather upon tortious conduct initiated by Barak after the
transfers were completed. Hence, Article 4A affords no remedy. See §
670.209, Fla. Stat.
Under these circumstances, barring the asserted claims would yield
the absurd result of divesting ACS Israel of any avenue of redress and
shielding Barak from liability. As “[i]t could hardly have been the intent of the
drafters [of Article 4A] to enable a party to succeed in engaging in fraudulent
activity,” such a result would contravene legislative intent. Simple Helix, LLC
v. Relus Techs., LLC,
493 F. Supp. 3d 1087, 1107 (N.D. Ala. 2020) (quoting
Regions,
345 F.3d at 1276). Consequently, concluding this “is not a situation
covered by any of the particular provisions of [Article 4A],” we find the trial
court did not err in eschewing preemption. Schlegel v. Bank of Am., N.A.,
628 S.E.2d 362, 368 (Va. 2006); see also Sheerbonnet,
951 F. Supp. at 409;
Koss Corp. v. Am. Exp. Co.,
309 P.3d 898, 904 (Ariz. Ct. App. 2013).
Barak further contends that ACS Israel, as the guarantor under the risk
of loss agreement and mere intended beneficiary of the misappropriated
funds, was barred from maintaining suit by operation of section 670.402(6),
Florida Statutes. See § 670.402(6), Fla. Stat. (“The right of the sender of a
payment order to be excused from the obligation to pay the order as stated
8
in subsection (3) or to receive refund under subsection (4) may not be varied
by agreement.”). Under the facts presented, PDVSA was not excused from
its obligation and there was no right to a refund. Thus, heeding the
fundamental tenet of freedom of contract that parties are endowed with the
right to agree to terms governing their private affairs so long as the terms do
not violate law or public policy, we reject this argument. Franks v. Bowers,
116 So. 3d 1240, 1247 (Fla. 2013).
Upon ACS Israel’s partial confession of error and our independent
review of the record, however, we are constrained to reverse the
computation of damages and prejudgment interest. On remand, the trial
court shall award threefold “the actual damages sustained.”2 See §
772.11(1), Fla. Stat.; Standard Jury Instructions–Civil Cases (No. 98-3),
720
So. 2d 1077 (Fla. 1998); see also Ocala Jockey Club, LLC v. Rogers,
981
So. 2d 1245, 1247 (Fla. 5th DCA 2008); Haddad v. Cura,
674 So. 2d 168,
2
The civil theft statute is remedial in nature, and the term “actual damages,”
in the absence of any statutory definition, is used synonymously with
“compensatory damages.” See § 812.037, Fla. Stat. (“Notwithstanding s.
775.021, ss. 812.012–812.037 shall not be construed strictly or liberally, but
shall be construed in light of their purposes to achieve their remedial goals.”);
Snyder v. Bell,
746 So. 2d 1096, 1098 (Fla. 2d DCA 1999) (“Florida’s civil
theft statute is without question remedial, rather than punitive, in nature.”);
see also, Ross v. Gore,
48 So. 2d 412, 414 (Fla. 1950) (“Since it is used
synonymously with ‘compensatory damages’ in many of our decided cases,
we think it is fair to assume that ‘actual damages’ mean ‘compensatory
damages.’”).
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169 (Fla. 3d DCA 1996); Barbe v. Villeneuve,
505 So. 2d 1331, 1333 (Fla.
1987); Villeneuve v. Atlas Yacht Sales, Inc.,
483 So. 2d 67, 69 (Fla. 4th DCA
1986); Sebastiano v. Sclafani,
984 So. 2d 673, 673 (Fla. 4th DCA 2008);
Vining v. Martyn,
660 So. 2d 1081, 1082 (Fla. 4th DCA 1995). Any funds
derived from collateral sources shall be offset against the trebled actual
damages, and prejudgment interest shall be calculated from the date of each
respective loss and awarded only on actual damages. See AVP Destiny,
LLC v. FD Destiny, LLC,
267 So. 3d 1048, 1050 (Fla. 4th DCA 2019);
Greenburg v. Grossman,
683 So. 2d 156, 157 (Fla. 3d DCA 1996).
Affirmed in part; reversed in part; and remanded.
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