Regions Bank v. Marvin I. Kaplan ( 2021 )

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[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 17-15478
____________________
REGIONS BANK,
an Alabama banking corporation,
Plaintiff-Counter-Defendant-Appellant-
Cross-Appellee,
versus
MARVIN I. KAPLAN,
an individual,
Defendant-Counter-Claimant-Cross-Claimant
Cross-Defendant-Appellee-Cross-Appellant,
BRIDGEVIEW BANK GROUP,
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2 Opinion of the Court 17-15478
Counter-Defendant-Cross-Claimant-
Counter-Claimant-Appellee,
R1A PALMS, LLC,
a Florida limited liability company,
TRIPLE NET EXCHANGE, LLC,
MK INVESTING, LLC,
BNK SMITH, LLC,
BRIDGEVIEW BANKCORP, INC.,
et al.,
Defendants-Counter-Claimants,
LIGHTHOUSE POINTE, LLC,
Defendant-Cross-Defendant-
Appellee,
WELLS FARGO, N.A.,
a national banking association,
as successor by merger with Wachovia
Bank, N.A.,
Defendant.
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17-15478 Opinion of the Court 3
____________________
No. 18-13220
____________________
REGIONS BANK,
an Alabama banking corporation,
Plaintiff-Counter Defendant-
Appellant,
versus
MARVIN I. KAPLAN,
an individual,
R1A PALMS, LLC,
a Florida limited liability company,
TRIPLE NET EXCHANGE, LLC,
MK INVESTING, LLC,
BNK SMITH, LLC, et al.,
Defendants-Counter Claimants-
Appellees,
LIGHTHOUSE POINTE, LLC,
WELLS FARGO, N.A.,
a national banking association, as
successor by merger with Wachavia
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4 Opinion of the Court 17-15478
Bank, N.A.,
Defendants-Cross Defendants-
Appellees.
____________________
Appeals from the United States District Court
for the Middle District of Florida
D.C. Docket No. 8:12-cv-01837-EAK-MAP
____________________
Before WILLIAM PRYOR, Chief Judge, ROSENBAUM, and LUCK, Cir-
cuit Judges.
LUCK, Circuit Judge:
Regions Bank sued Marvin Kaplan and the companies1 he
controlled to recover unpaid overdraft fees resulting from a check
kiting 2 scheme run by Gary Todd Smith and his company, Smith
Advertising and Associates. See United States v. Smith, 853 F.
App’x 589, 590–91 (11th Cir. 2021) (discussing the scheme). Kaplan
1 We refer to Kaplan and his companies collectively as “Kaplan.”
2 “Check kiting is the practice of writing a check against a bank account where
funds are insufficient to cover it and hoping that before it is presented for pay-
ment to the payor bank, covering deposits (real or feigned) will have been
made. In effect, to kite a check is to use a bad check to temporarily obtain
credit.” United States v. Morales, 978 F.2d 650, 653 n.6 (11th Cir. 1992).
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countersued and also joined and crossclaimed against Bridgeview
Bank Group—one of the banks where Smith had an account. After
more than five years of litigation, the district court held a three-
week bench trial and finally disposed of all the parties’ claims. Both
Regions and Kaplan appeal parts of the district court’s dismissal or-
der, summary judgment orders, and findings and conclusions after
the bench trial; Kaplan appeals some of the magistrate judge’s dis-
covery orders; and Regions also appeals as insufficient the district
court’s order granting sanctions against Kaplan. After careful re-
view of the record, and with the benefit of oral argument, we af-
firm.
I. FACTUAL BACKGROUND AND PROCEDURAL
HISTORY
In 2008, Kaplan, through his companies, R1A Palms, LLC;
Triple Net Exchange, LLC; MK Investing, LLC; and BNK Smith,
LLC, started making short-term loans to Smith Advertising.
Kaplan thought Smith needed the loans to take advantage of dis-
counts offered by his printers for paying printing costs before they
were due. Kaplan made the loans by wiring money to Smith’s bank
account at Bridgeview. Then, Smith would pay the loan back and
split the printing discounts with Kaplan as interest on the loans.
Between 2008 and 2011, Kaplan made hundreds of short-term loans
to Smith as part of the scheme to split the printing discounts.
Then, in November 2011, Smith offered Kaplan an oppor-
tunity to participate in so-called “bundled loan deals.” Smith told
Kaplan that he found a way to “bundle” multiple print deals
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together and time the payments to secure the printing discounts
and repay the principal in a much shorter timeframe. Kaplan be-
lieved the bundled deals worked this way: (1) Smith and Kaplan
would agree on a loan amount; (2) Smith would mail Kaplan
checks and promissory notes reflecting the discounts, principal re-
payment, and incentive payments; (3) Kaplan would wire the loan
amounts to Smith’s account at Bridgeview; and (4) Kaplan would
later receive the checks from Smith and deposit them, usually on
the same day as the wire. Kaplan’s companies each maintained a
deposit account with Regions, which Kaplan used to facilitate the
bundled loan deals. Regions’s deposit account agreement required
the account holder (Kaplan) to honor any payment made from an
account and also required that any “special instructions” as to how
Regions should handle the account be in writing.
On January 19, 2012, Kaplan and Smith agreed to the first
bundled loan deal, and Smith mailed the corresponding checks and
promissory notes to Kaplan. The next morning, Kaplan wired
$9,700,000 to Smith. Later that morning, Kaplan received and de-
posited checks from Smith totaling $10,061,375. Regions provi-
sionally credited—but did not “clear”—the deposited funds to
Kaplan’s accounts while it waited for Bridgeview to honor Smith’s
checks. This meant that the funds showed as “available” in
Kaplan’s account even though Bridgeview had not yet paid Re-
gions. The next day, Kaplan internally transferred $2,000,000 be-
tween his accounts using the provisional availability from Smith’s
ten million dollar payment.
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Smith and Kaplan then agreed to a second bundled loan deal,
to take place on January 23, 2012. At 8:00 a.m. on January 23,
Kaplan wired $10,450,000 to Smith. By 11:15 a.m., Kaplan received
and deposited checks from Smith totaling $11,956,035. Later that
day, Kaplan also agreed to participate in a third bundled loan deal.
But on the morning of January 24, 2012, before the third deal
took place, Kaplan discovered that Regions hadn’t credited the sec-
ond deal checks to his accounts. Kaplan called Regions, and the
Regions employee told him that a hold had been placed on the
checks. Regions later gave Kaplan written notice that Bridgeview
wouldn’t honor the first deal and second deal checks. Bridgeview
marked the dishonored checks with the return code: “Refer to
Maker.”
After the first deal checks were dishonored, Smith sent
Kaplan replacement checks from his account at Wells Fargo Bank.
Kaplan received and deposited the Wells Fargo checks, but they
too were dishonored. Because Kaplan had wired out the provision-
ally credited funds from the dishonored checks, Kaplan’s accounts
were overdrawn, and he incurred more than six million dollars in
overdraft fees. After the checks were dishonored, Regions reported
Kaplan—and his social security number—to Wells Fargo, the Se-
cret Service, and Fraud-Net, a fraud database run by the Florida
Bankers Association, accusing him of check kiting.
Regions also sued Kaplan in Florida state court to recover
the overdraft fees resulting from the dishonored first deal checks.
Regions asserted claims for conversion, fraudulent concealment,
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aiding and abetting fraudulent concealment, civil conspiracy,
breach of contract, transfer-warranty liability (as codified at Florida
Statutes section 674.207), chargeback/refund liability (as codified
at Florida Statutes section 674.2141), and indorser liability (as codi-
fied at Florida Statutes section 673.4151).
Kaplan countersued Regions for defamation, “false light” in-
vasion of privacy, negligence, and negligent misrepresentation.
Kaplan alleged that Regions was liable for defamation and invasion
of privacy because it: (1) sued Kaplan and accused him of check
kiting; (2) reported Kaplan to Fraud-Net; and (3) told Wells Fargo
and the Secret Service that Kaplan had kited checks. And Kaplan
alleged that Regions had acted negligently by provisionally credit-
ing the funds to his account and by representing to him that he had
sufficient funds to make the wire transfers.
Kaplan also joined Bridgeview as a third-party defendant and
raised six crossclaims against it: conspiracy to defraud; breach of
Florida Uniform Commercial Code section 4-302(a); breach of 12
C.F.R. section 229; fraud; negligence; and negligent misrepresenta-
tion. Kaplan alleged that Bridgeview fraudulently induced him to
wire additional funds into Smith’s account by marking Smith’s dis-
honored checks as “Refer to Maker” (which was, Kaplan argued,
an improper return designation) and Bridgeview acted negligently
by failing to return the dishonored checks with a proper return des-
ignation in a timely manner. Bridgeview removed the case to the
Middle District of Florida.
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A. Regions’s Motion to Dismiss
Regions moved to dismiss Kaplan’s defamation and invasion
of privacy counterclaims. It argued that Kaplan’s defamation claim
was barred by Florida’s litigation privilege, and, thus, Regions was
entitled to absolute immunity for suing Kaplan and accusing him
of check kiting. Regions also argued that it was entitled to a quali-
fied privilege for reporting Kaplan to Fraud-Net, Wells Fargo, and
the Secret Service because Kaplan had not alleged that Regions
acted with express malice and the acts were done in good faith
“with an interest to be upheld” and “limited in scope to a specific
purpose and published on a proper occasion and manner.” Lastly,
Regions argued that Kaplan’s invasion of privacy claim failed be-
cause Florida did not recognize a “false light” invasion of privacy
tort.
The district court granted Regions’s motion to dismiss with
prejudice. It concluded that Florida’s litigation privilege provided
Regions absolute immunity for suing Kaplan and accusing him of
check kiting because those actions “relate[d] to” Regions’s claims
against Kaplan. The district court also concluded that Regions had
a qualified privilege for reporting Kaplan to Fraud-Net, Wells
Fargo, and the Secret Service because the reports were made in
good faith with an interest to be upheld. The defamation claim
failed, the district court determined, because Kaplan hadn’t pleaded
that Regions made the report with express malice. Finally, the dis-
trict court interpreted Kaplan’s “false light” invasion of privacy
claim as one for “public disclosure of private facts” and dismissed it
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with prejudice because Fraud-Net was a secured, online database
and Regions’s publication of Kaplan’s social security number did
not constitute publication to the general public or “to so many per-
sons that the information was substantially certain to become pub-
lic knowledge.”
After the district court granted the motion, Kaplan filed an
amended complaint reasserting—verbatim—the defamation and
invasion of privacy claims that had been dismissed with prejudice.
In response, Regions sought statutory sanctions, 28 U.S.C. § 1927,
and sanctions under the district court’s inherent authority because
Kaplan refiled without permission the same claims that had been
dismissed with prejudice. Regions separately moved for rule 11
sanctions because Kaplan had acted with an improper, harassing
purpose in refiling the claims. The district court re-dismissed the
claims, but deferred ruling on sanctions until the end of the case.
B. Kaplan’s Motions to Compel Discovery
During discovery, Kaplan moved to compel production of
documents pertaining to Bridgeview and Regions’s handling of
Smith’s account and their fraud-prevention policies and proce-
dures. Regions opposed Kaplan’s discovery requests because they
were “overbroad” and “impose[d] undue burdens on Regions,”
Smith’s account records were protected by Florida law, and the
Bank Secrecy Act prohibited Regions from disclosing suspicious ac-
tivity reports. Bridgeview also opposed Kaplan’s discovery re-
quests because they were overbroad and sought disclosure of in-
formation protected by federal law.
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After a hearing, the magistrate judge denied Kaplan’s mo-
tion to compel production as to Bridgeview and denied part of his
motion as to Regions. The magistrate judge explained that he de-
nied the motion because Kaplan’s discovery requests were over-
broad and asked for suspicious activity reports that were protected
from disclosure by the Bank Secrecy Act. Kaplan did not seek re-
view by the district court of the denial of his discovery motions.
C. Motions for Summary Judgment
1. Bridgeview’s Motion for Summary Judgment
Bridgeview sought summary judgment on Kaplan’s cross-
claims, arguing that it could not be held liable for violating Florida
Uniform Commercial Code section 4-302(a) or 12 C.F.R. section
229 by marking Smith’s dishonored checks “Refer to Maker” be-
cause that marking was permissible under the then-existing regula-
tions. Kaplan’s common-law claims of fraud, negligence, and neg-
ligent misrepresentation failed, Bridgeview continued, because
they were preempted by the Florida Uniform Commercial Code
and federal regulations. And Bridgeview contended that Kaplan’s
conspiracy-to-defraud claim failed because there was no summary
judgment evidence that Bridgeview knew about Smith’s scheme or
had agreed to conspire with Smith.
The district court granted summary judgment for
Bridgeview on all six crossclaims. As to the Florida Uniform Com-
mercial Code and federal regulation claims, the district court con-
cluded as a matter of law that “Refer to Maker” was an appropriate
marking under the existing banking regulations. As to the claims
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for fraud, negligence, and negligent misrepresentation, the district
court concluded that the claims were preempted by the Florida
Uniform Commercial Code and federal regulations. And, as to
Kaplan’s conspiracy claim, it failed because there was no evidence
that Bridgeview had “actual knowledge” of Smith’s scheme.
2. Regions’s Motion for Summary Judgment
Regions also moved for summary judgment. It argued that
it was entitled to summary judgment on its non-tort claims against
Kaplan (i.e., its breach of contract claim and its claims under Flor-
ida’s transfer-warranty liability statute, chargeback/refund liability
statute, and indorser liability statute). As to the breach of contract,
Regions asserted that there was no dispute that the overdrafts in
Kaplan’s accounts were genuine and there was no dispute that, un-
der its deposit agreement with Kaplan, he was liable for the over-
drafts. As to the claims for transfer-warranty liability, charge-
back/refund liability, and indorser liability, Regions argued that
Kaplan was liable for the dishonored checks because Regions had
transferred the money at Kaplan’s direction and that Kaplan’s de-
fense—Regions’s alleged failure to mitigate—was not valid under
the deposit agreement.
Regions also moved for summary judgment on Kaplan’s
negligence and negligent misrepresentation counterclaims. Re-
gions argued that it was entitled to summary judgment because it
had not (negligently or otherwise) represented to Kaplan that
Smith’s funds had cleared into his account. And Kaplan did not
check his bank balance before wiring money to Smith. So, even if
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Regions had negligently stated that the funds from the dishonored
checks were cleared, it did not cause Kaplan’s injury.
The district court agreed across the board. It first granted
summary judgment for Regions on its breach of contract and stat-
utory claims. As to the breach of contract claim, the district court
agreed that the deposit agreements required Kaplan to pay for the
overdrafts and related fees, and that it was “undisputed that checks
on which Regions extended provisional credit were dishonored
and returned” after Kaplan had already wired out the provisional
funds for “additional deals,” resulting in the overdrafts. Therefore,
it concluded, Kaplan was required by the deposit agreement to
make up for the shortfall from the dishonored checks. And as to
statutory claims for transfer-warranty liability, chargeback/refund
liability, and indorser liability, the district court also concluded
that, because Regions acted in good faith, any negligence or failure
to mitigate was legally irrelevant. The district court also granted
Regions summary judgment on Kaplan’s negligence and negligent
misrepresentation counterclaims because there was no evidence
supporting Kaplan’s allegation that Regions had represented to him
that the funds were cleared before he wired the money to Smith.
3. Kaplan’s Motion for Summary Judgment
Finally, Kaplan moved for summary judgment on Regions’s
remaining claims—conversion, fraudulent concealment, aiding
and abetting fraudulent concealment, and civil conspiracy. He ar-
gued that he couldn’t be held liable for conversion because Regions
had not shown that he had taken “specific and identifiable” money.
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Nor, he continued, did Regions prove the “unauthorized act” nec-
essary to sustain an action for conversion. As to the latter three
claims—fraudulent concealment, aiding and abetting fraudulent
concealment, and civil conspiracy—Kaplan insisted that he
couldn’t be liable because there was no evidence of his knowledge
of the check kiting scheme.
The district court agreed only as to the conversion claim,
concluding that Kaplan was entitled to summary judgment because
Regions failed to show that he took “specific and identifiable
money” and had not shown that he committed “an unauthorized
act which deprived Regions of the funds.” But the district court
denied summary judgment on Regions’s remaining claims—fraud-
ulent concealment, aiding and abetting fraudulent concealment,
and civil conspiracy—because the evidence was disputed whether
Kaplan knew he was kiting checks.
D. Bench Trial
The district court then held a three-week bench trial on Re-
gions’s claims for fraudulent concealment, aiding and abetting
fraudulent concealment, and civil conspiracy. At trial, there was
no dispute that Smith had kited checks, but Kaplan testified that he
didn’t know about Smith’s scheme. The district court credited
Kaplan’s testimony and found that he didn’t knowingly and inten-
tionally engage in check kiting. Thus, the district court entered
judgment for Kaplan on Regions’s remaining three claims.
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E. Regions’s Motion for Sanctions
After the bench trial, but before the district court ruled, Re-
gions renewed its motion for sanctions—under the district court’s
inherent authority, section 1927, and rule 11—against Kaplan, his
counsel, Jon D. Parrish, and Parrish’s law firm, Parrish, White &
Yarnell, P.A. Regions argued that sanctions were warranted be-
cause: Kaplan reasserted defamation and invasion of privacy coun-
terclaims after the district court had dismissed them with prejudice;
and Kaplan alleged Regions was negligent without any evidentiary
support.
As to rule 11 sanctions, the district court found that reassert-
ing the dismissed defamation and invasion of privacy claims,
“while troubling,” was “relatively minor” and so a sanction award
of $1,000 would sufficiently deter Parrish without the need to use
section 1927 or its inherent authority. But, as to Regions’s requests
for sanctions under section 1927 or the district court’s inherent au-
thority for litigating the negligence and negligent misrepresenta-
tion claims without evidentiary support, the district court declined
to impose sanctions because “there was insufficient evidence to
conclude” that Parrish had acted in bad faith.
II. STANDARDS OF REVIEW
We review de novo the district court’s dismissal of Kaplan’s
defamation and invasion of privacy claims, Cambridge Christian
Sch., Inc. v. Florida High Sch. Athletic Ass’n, 942 F.3d 1215, 1229
(11th Cir. 2019), accepting only the “well-pleaded facts” in the com-
plaint and any “reasonable inferences drawn from those facts,”
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16 Opinion of the Court 17-15478
Gonzalez v. Reno, 325 F.3d 1228, 1235 (11th Cir. 2003) (citation
omitted). See Fed. R. Civ. P. 12(b)(6). “To survive a motion to
dismiss, a complaint must contain sufficient factual matter, ac-
cepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted and in-
ternal quotation marks omitted). “Where a complaint pleads facts
that are merely consistent with a defendant’s liability, it stops short
of the line between possibility and plausibility of entitlement to re-
lief.” Id. (citation and internal quotation marks omitted).
We review de novo the district court’s grant of summary
judgment, viewing the evidence and all factual inferences in the
light most favorable to the nonmoving party. Mize v. Jefferson
City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996). A district court
should grant summary judgment only when “there is no genuine
dispute as to any material fact and the movant is entitled to judg-
ment as a matter of law.” Fed. R. Civ. P. 56(a).
We review for clear error the district court’s bench trial fac-
tual findings. Bellitto v. Snipes, 935 F.3d 1192, 1197 (11th Cir.
2019). “A factual finding is clearly erroneous when although there
is evidence to support it, the reviewing court on the entire evidence
is left with the definite and firm conviction that a mistake has been
committed.” Id. (citation and internal quotation marks omitted).
“If the district court’s account of the evidence is plausible in light
of the record viewed in its entirety, the court of appeals may not
reverse it.” Id. at 1197–98 (citation omitted).
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Finally, we review for abuse of discretion the district court’s
sanctions order and its denial of Kaplan’s motions to compel dis-
covery. Hernandez v. Acosta Tractors Inc., 898 F.3d 1301, 1305 n.2
(11th Cir. 2018) (sanctions); Holloman v. Mail-Well Corp., 443 F.3d
832, 837 (11th Cir. 2006) (motion to compel).
III. DISCUSSION
Regions and Kaplan have both appealed the district court’s
orders and findings. We begin with Regions’s arguments on appeal
and then turn to Kaplan’s.
A. Regions’s Appeal
Regions appeals three of the district court’s orders and find-
ings. First, Regions argues that genuine issues of material fact pre-
cluded summary judgment for Kaplan on its conversion claim. Sec-
ond, Regions contends that the district court’s bench trial findings
for Kaplan on its fraudulent concealment, aiding and abetting
fraudulent concealment, and civil conspiracy claims were clearly
erroneous because the evidence showed that Kaplan knew about
the check kiting scheme. And third, Regions claims that the district
court abused its discretion by awarding only $1,000 in sanctions
against Kaplan’s counsel.
1. Regions’s Conversion Claim
The district court entered summary judgment for Kaplan on
Regions’s conversion claim because Regions failed to show two of
the required elements of conversion—“specific and identifiable
money” and “an unauthorized act which deprive[d] [Regions] of
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that money.” Regions contends this was error because: (a) the
money was specifically identifiable since it derived from specific
checks deposited en masse and was used specifically for outgoing
wires; and (b) Kaplan’s authorization to use the funds doesn’t pre-
clude an unauthorized act.
An action for conversion of money requires: (1) specific and
identifiable money; (2) possession or an immediate right to possess
that money; (3) an unauthorized act which deprives plaintiff of that
money; and (4) a demand for return of the money and a refusal to
do so. See United States v. Bailey, 419 F.3d 1208, 1214 (11th Cir.
2005) (discussing the elements of conversion under Florida law);
Gasparini v. Pordomingo, 972 So. 2d 1053, 1056 (Fla. Dist. Ct. App.
2008) (explaining that “[f]or money to be the object of conversion
there must be an obligation to keep intact or deliver the specific
money in question, so that money can be identified”) (citation and
quotation marks omitted). Funds are specifically identifiable if “de-
livered at one time, by one act and in one mass, or where the de-
posit is special and the identical money is to be kept for the party
making the deposit, or where the wrongful possession of such
property is obtained.” Belford Trucking Co. v. Zagar, 243 So. 2d
646, 648 (Fla. Dist. Ct. App. 1970) (“An example is where a specific
sum of money is to be held in constructive trust until the occur-
rence of a specified event.”). Additionally, “an action for conver-
sion of money can only be maintained where the money at issue
has been kept separate.” Transcapital Bank v. Shadowbrook at
Vero, LLC, 226 So. 3d 856, 864 (Fla. Dist. Ct. App. 2017) (citation
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and quotation marks omitted); see Walker v. Figarola, 59 So. 3d
188, 190 (Fla. Dist. Ct. App. 2011) (“[I]n order for there to be a con-
version where money is involved, there must be an obligation to
keep intact or deliver the specific money in question, so that money
can be identified.” (citation and internal quotation marks omitted)).
“The requirement that the money be identified . . . does not permit
as a subject of conversion an indebtedness which may be dis-
charged by the payment of money generally.” Belford Trucking
Co., 243 So. 2d at 648.
Here, the money in Kaplan’s accounts came from multiple
checks that were not all deposited at once and that were moved
and transferred between multiple accounts, with wires sent from
different accounts over several days. The funds were deposited
into demand deposit accounts, and they were not “kept separate”
from Kaplan’s other money in his accounts. See Transcapital Bank,
226 So. 3d at 864. Nor was Kaplan obligated by law or contract to
“keep intact or deliver the specific money in question.” See
Walker, 59 So. 3d at 189. None of these facts suggest that the funds
were “specific and identifiable” or could not “be discharged by the
payment of money generally.” Belford Trucking Co., 243 So. 2d at
648. Because the funds were not “specific and identifiable,” we
need not consider whether Kaplan’s use constituted an unauthor-
ized act. The district court did not err in granting summary judg-
ment for Kaplan on Regions’s conversion claim.
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2. Regions’s Fraudulent Concealment, Aiding and Abetting
Fraudulent Concealment, and Civil Conspiracy Claims
The district court held a bench trial on Regions’s fraudulent
concealment, aiding and abetting fraudulent concealment, and civil
conspiracy claims. These three claims were based on Regions’s al-
legation that Kaplan knew that he was check kiting with Smith. Af-
ter three weeks of testimony, the district court found that Kaplan
had no knowledge of the check kiting, so each of these claims nec-
essarily failed. On appeal, Regions argues that this “is the rare
bench fact-finding warranting reversal” because there was “over-
whelming evidence that [Kaplan] knowingly kited.”
Each of these claims required Kaplan to have knowledge of
the check kiting scheme. See Cote v. R.J. Reynolds Tobacco Co.,
909 F.3d 1094, 1106 n.6 (11th Cir. 2018) (explaining that fraudulent
concealment requires that “the defendant knew or should have
known the material fact should be disclosed” under Florida law);
Sun Life Assurance Co. of Can. v. Imperial Premium Fin., 904 F.3d
1197, 1214 (11th Cir. 2018) (explaining that defendant’s
“knowledge of the fraud” is an element of aiding and abetting fraud
under Florida law); Donofrio v. Matassini, 503 So. 2d 1278, 1281
(Fla. Dist. Ct. App. 1987) (explaining that a conspirator must “know
of the scheme” to be held liable for civil conspiracy under Florida
law). Because the district court did not clearly err by finding that
Kaplan lacked knowledge of the kiting scheme, it was not error to
rule for Kaplan on each of these claims.
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At trial, Regions’s expert testified that it was impossible to
tell just by looking at Kaplan’s account statements whether the
checks he deposited were supported by sufficient funds—“You
would have to look at the account balances in [Smith’s] account.”
Regions argues that “[t]his did not apply to Kaplan given his
knowledge of the Bundled Deal predicate and admitted manipula-
tion of the float,” (i.e., the provisionally available funds). But
Kaplan never admitted that he was manipulating the float; rather,
he specifically testified that he “never thought [he] was leveraging
any float.” Kaplan also testified that he didn’t know whether Smith
was leveraging the float because he “didn’t know how much
money [Smith] had in [his] bank [account].” Indeed, Kaplan testi-
fied that he didn’t know that Smith had insufficient funds to cover
the checks. Kaplan emphasized that he thought that “Smith had
reserves” and that “[he] didn’t know what was in [Smith’s] account.
This was only one deal to them.”
Regions argues that Kaplan should’ve known that the bun-
dled loan deals were fraudulent because the “[d]aily returns were
absurd.” However, Kaplan and Smith “completed hundreds of
short[-]term loan transactions” between 2008 and 2011 without any
issues. Kaplan “just knew [he] was making money, and [he] was
going with it,” so he didn’t investigate when he started the bundled
loan deals because “[e]verything was doing well.”
After a three-week trial, the district court credited Kaplan’s
testimony and concluded that “there [was] no evidence that . . .
Kaplan had actual knowledge that ‘the transactions were not
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22 Opinion of the Court 17-15478
legitimate.’” Although Regions presented some evidence to the
contrary, “choosing between plausible but competing views of the
record is a classic exercise of a district court’s factfinding function
that we are not permitted to redo on appellate review.” NLRB v.
Hartman & Tyner, Inc., 714 F.3d 1244, 1252 (11th Cir. 2013). In-
deed, “[w]here there are two permissible views of the evidence, the
factfinder’s choice between them cannot be clearly erroneous.”
Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985). And
“[t]he grip of the clearly erroneous standard is even tighter when
the district court hears testimony, giving it the opportunity to ob-
serve the demeanor of witnesses.” W. Ala. Women’s Ctr. v. Wil-
liamson, 900 F.3d 1310, 1316 (11th Cir. 2018); see also Anderson,
470 U.S. at 575 (“When findings are based on determinations re-
garding the credibility of witnesses, Rule 52(a) demands even
greater deference to the trial court’s findings; for only the trial
judge can be aware of the variations in demeanor and tone of voice
that bear so heavily on the listener’s understanding of and belief in
what is said.”).
Here, the district court reasonably relied on Kaplan’s testi-
mony and his previous successful dealings with Smith and found
that he did not know that Smith had insufficient funds in his ac-
count or that the bundled loan deals were fraudulent. “[W]e are
obliged to accept” the district court’s findings of fact unless they are
clearly erroneous. Eggers v. Alabama, 876 F.3d 1086, 1094 (11th
Cir. 2017). And, after reviewing the entire record, we conclude that
the district court’s findings of fact are not clearly erroneous.
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17-15478 Opinion of the Court 23
3. Regions’s Motion for Sanctions
The district court imposed $1,000 in rule 11 sanctions on
Kaplan’s counsel, Parrish, and his law firm because Parrish refiled
the defamation and invasion of privacy counterclaims after the dis-
trict court dismissed them with prejudice. Regions argues that the
district court abused its discretion by: (1) imposing only a $1,000
rule 11 sanction for refiling the defamation and invasion of privacy
counterclaims after they were dismissed because it was too little to
be an effective deterrent; (2) denying additional sanctions for the
same conduct under section 1927 and the district court’s inherent
authority; and (3) denying sanctions for asserting negligence and
negligent misrepresentation claims without sufficient evidence.
None of these alleged errors were an abuse of discretion.
The district court did not abuse its discretion in awarding
$1,000 in rule 11 sanctions. This court and our sister circuits have
upheld or imposed sanctions of a similar size and found that they
were a sufficient deterrent. See, e.g., Malautea v. Suzuki Motor
Co., 987 F.2d 1536, 1546 (11th Cir. 1993) (upholding $5,000 sanc-
tion for each defendant and $500 sanction for each defense attor-
ney); Clark v. United Parcel Serv., Inc., 460 F.3d 1004, 1011 (8th Cir.
2006) (concluding that “a sanction of $1,000 is reasonable and con-
sistent with the principle that a sanction be ‘limited to what is suf-
ficient to deter repetition of such conduct or comparable conduct
by others similarly situated’”) (quoting Fed R. Civ. P. 11(c)(2)); Har-
rell v. United States, 4 F.3d 996, 996 (7th Cir. 1993) (awarding
$1,000 sanction to “deter future frivolous” filings). “Familiar with
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24 Opinion of the Court 17-15478
the issues and litigants, the district court is better situated than the
court of appeals to marshal the pertinent facts and apply the fact-
dependent legal standard mandated by Rule 11.” Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 402 (1990).
Nor did the district court abuse its discretion in declining to
award additional sanctions for the same conduct—reasserting the
defamation and invasion of privacy counterclaims—under section
1927 or its inherent authority. “[B]ecause a court’s inherent pow-
ers are so potent, they must be exercised with restraint and discre-
tion.” Malautea, 987 F.2d 1546. “[A] district court’s authority to
issue sanctions for attorney misconduct under [section] 1927 is ei-
ther broader than or equally as broad as the district court’s author-
ity to issue a sanctions order under its inherent powers,” Amlong
& Amlong, P.A. v. Denny’s, Inc., 500 F.3d 1230, 1239 (11th Cir.
2007), so a district court’s power under section 1927 should be sub-
ject to the same restraint. Because the district court had already
awarded what it deemed to be sufficient sanctions under rule 11, it
was not an abuse of discretion to refuse to award further sanctions
under section 1927 or its inherent authority. See Chambers v.
NASCO, Inc., 501 U.S. 32, 50 (1991) (“[W]hen there is bad-faith
conduct in the course of litigation that could be adequately sanc-
tioned under the Rules, the court ordinarily should rely on the
Rules rather than the inherent power.”).
Finally, the district court did not abuse its discretion by de-
clining to award sanctions on the negligence and negligent misrep-
resentation counterclaims. Regions argues that the district court
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17-15478 Opinion of the Court 25
should have imposed sanctions because Kaplan asserted the negli-
gence and negligent misrepresentation counterclaims without rea-
sonable evidentiary support. In its view, because Kaplan couldn’t
recall any specific conversations with Regions or its employees to
support his misrepresentation claim, had his counsel done the re-
quired prefiling factual inquiry, the claims never would have been
filed.
But the factual record belies this contention. It was not sanc-
tionable for Kaplan to argue that Regions acted negligently because
Kaplan orally instructed Regions not to wire uncleared funds, even
if the claim was eventually rejected.
“Although sanctions are warranted when the claimant ex-
hibits a ‘deliberate indifference to obvious facts,’ they are not war-
ranted when the claimant’s evidence is merely weak but appears
sufficient, after a reasonable inquiry, to support a claim under ex-
isting law.” Baker v. Alderman, 158 F.3d 516, 524 (11th Cir. 1998).
Nor is it sanctionable conduct to argue for ultimately unsuccessful
extensions of the existing law made in good faith. See id. (“[T]he
purpose of Rule 11 is to deter frivolous lawsuits and not to deter
novel legal arguments or cases of first impression.”); Laborers Loc.
938 Joint Health & Welfare Tr. Fund v. B.R. Starnes Co. of Fla.,
827 F.2d 1454, 1458 (11th Cir. 1987) (holding that sanctions were
not warranted where the issues “were fairly debatable and not eas-
ily resolved”); Fed R. Civ. P. 11(b)(2) (explaining that sanctions may
not be awarded for “nonfrivolous argument for the extension,
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26 Opinion of the Court 17-15478
modification, or reversal of existing law or the establishment of
new law”).
Here, Kaplan’s claims survived Regions’s motion to dis-
miss—they didn’t suddenly become sanctionable when the district
court granted summary judgment for Regions. While it is sanc-
tionable to knowingly allege a claim without evidentiary support,
the district court did not abuse its discretion in finding that Kaplan
had made the allegations in good faith, even if his memory of his
communications with Regions executing the wire transfer ulti-
mately did not constitute a negligent misrepresentation. Thus, we
conclude that the district court did not abuse its discretion in deny-
ing Regions’s request for sanctions.
B. Kaplan’s Appeal
This brings us to Kaplan’s appeal. It can be divided into four
parts. First, Kaplan argues that the district court erred by granting
summary judgment for Regions on its breach of contract, transfer-
warranty liability, chargeback/refund liability, and indorser liabil-
ity claims.
Second, Kaplan contends that the district court shouldn’t
have dismissed his defamation and invasion of privacy counter-
claims. And it shouldn’t have granted summary judgment for Re-
gions on his negligence, negligent misrepresentation, and fraud
counterclaims.
Third, Kaplan argues that the district court erred by granting
summary judgment for Bridgeview on his crossclaims under
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17-15478 Opinion of the Court 27
section 302 of the Florida Uniform Commercial Code and 12 C.F.R.
section 229 and his common-law fraud, negligence, and negligent
misrepresentation crossclaims.
Fourth and finally, Kaplan contends that the magistrate
judge abused his discretion by denying his motions to compel dis-
covery into how Regions and Bridgeview handled Smith’s account.
1. Regions’s Claims against Kaplan
Kaplan argues that the district court erred by granting sum-
mary judgment for Regions on its breach of contract claim and its
statutory claims for transfer-warranty liability, chargeback/refund
liability, and indorser liability. We’ll consider the deposit agree-
ment claim first, and then consider the statutory claims together.
a. Region’s Breach of Contract Claim
The district court granted summary judgment for Regions
on its breach of contract claim, concluding that, as a matter of law,
Kaplan was liable for the overdraft charges incurred when
Bridgeview dishonored the first deal checks. Kaplan argues that
the district court failed to properly consider whether Regions miti-
gated its damages or acted in good faith and exercised ordinary care
when it: (a) provisionally credited the funds from Smith’s checks
and marked them “available”; (b) disregarded Kaplan’s oral instruc-
tion to wire out only cleared funds; and (c) failed to discover
Smith’s check kiting scheme earlier.
But, as the district court explained, under Florida law, de-
pository banks “generally have no duty to investigate transactions
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28 Opinion of the Court 17-15478
made by authorized agents of the account holder.” Lamm v. State
St. Bank & Tr., 749 F.3d 938, 948 n.7 (11th Cir. 2014). Rather, Re-
gions was subject only to a duty of good faith and ordinary care.
See Fla. Stat. § 674.103, cmt. 2 (“The agreements may not disclaim
a bank’s responsibility for its own lack of good faith or failure to
exercise ordinary care . . . .”).
Here, there was no genuine dispute that Regions acted in
good faith and exercised ordinary care. First, Regions, “in accord
with the Deposit Agreement” and “common practice in the bank-
ing industry,” marked the provisionally credited funds as “availa-
ble” the next day. The commentary to the Florida Uniform Com-
mercial Code permits marking funds as provisionally available the
next day—without waiting for them to clear—because “the vast
majority” of checks are ultimately settled without issue. See Fla.
Stat. § 674.2141 cmt. 1 (“Statistically, this practice of settling provi-
sionally first and then awaiting final payment is justified because
the vast majority of such cash items are finally paid, with the result
that in this great preponderance of cases it becomes unnecessary
for the banks making the provisional settlements to make any fur-
ther entries.”). In other words, there was no evidence that Re-
gions’s acceptance of Smith’s checks and its marking of the funds
as available the next day was a failure to exercise ordinary care.
Second, Kaplan’s oral instruction not to wire uncleared
funds didn’t create an issue of fact as to Regions’s good faith and
ordinary care because the deposit agreements required any special
instructions from the account holder to be in writing. Thus,
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17-15478 Opinion of the Court 29
Kaplan’s oral instruction not to wire uncleared (but provisionally
available) funds couldn’t override the express terms of the deposit
agreement. Regions acted in good faith and with ordinary care in
abiding by the express terms of its deposit agreement with Kaplan.
And third, Regions had no duty to investigate Smith’s suspi-
cious activity, see Lamm, 749 F.3d at 948 n.7, so it couldn’t have
been a breach of its obligation to act in good faith when it failed to
discover Smith’s check kiting scheme—a scheme which, the district
court found, even Kaplan didn’t know about.
In sum, the district court correctly granted summary judg-
ment to Regions on its breach of contract claim because there was
no genuine dispute that Regions acted in good faith when it provi-
sionally credited funds to Kaplan’s account for the ultimately dis-
honored first deal checks.
b. Regions’s Statutory Claims: Transfer-Warranty Liability,
Chargeback/Refund Liability, and Indorser Liability
Kaplan next argues that the district court erred by granting
summary judgment for Regions on its statutory claims for breach
of Florida’s transfer-warranty liability, chargeback/refund liability,
and indorser liability statutes because the district court failed to
consider whether Regions acted in good faith. Again, he faults Re-
gions for: (a) providing provisional funds and marking them “avail-
able”; (b) disregarding Kaplan’s oral instruction to wire out only
cleared funds; and (c) not discovering the check kiting sooner.
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30 Opinion of the Court 17-15478
Taking the transfer-warranty liability and chargeback/re-
fund liability statute claims first, both require only that Regions act
in good faith. See Fla. Stat. § 674.207(2)–(3) (requiring that the
check be accepted “in good faith”); id. § 674.2141(4)(b) (“The right
to charge back is not affected by . . . [f]ailure by any bank to exercise
ordinary care with respect to the item . . . .”); see also id.
§ 674.2141(4)(b) cmt. 5 (“[C]harge-back is permitted even if non-
payment results from the depositary bank’s own negligence. The
customer’s protection is found in the general obligation of good
faith . . . .”). Good faith means “honesty in fact and the observance
of reasonable commercial standards of fair dealing.” Id.
§ 673.1031(1)(d). The “honesty in fact” component is subjective,
requiring “actual, not constructive, knowledge of the wrongdoing
tantamount to dishonesty or bad faith.” See Any Kind Checks
Cashed, Inc. v. Talcott, 830 So. 2d 160, 164–65 (Fla. Dist. Ct. App.
2002) (citation omitted). The fair-dealing component is objective.
Id. “Although fair dealing is a broad term that must be defined in
context, . . . it is concerned with the fairness of conduct rather than
the care with which an act is performed. Failure to exercise ordi-
nary care in conducting a transaction is an entirely different con-
cept than failure to deal fairly in conducting the transaction.” Fla.
Stat. § 673.1031 cmt. 4.
Again, the summary judgment evidence is undisputed that
Regions acted in good faith. There was no evidence that Regions
had actual knowledge of the check kiting scheme. Nor is there any
question that Regions acted fairly; as discussed above, it acted
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17-15478 Opinion of the Court 31
consistently with its deposit agreement, and with industry practice
in making funds available the next day. Fla. Stat. § 674.2141 cmt.
1. Although the deposit account agreements permitted Kaplan to
give special written instructions to the contrary, he failed to do so.
Thus, the district court correctly granted summary judgment on
Regions’s transfer-warranty liability and chargeback/refund liabil-
ity claims.
For the same reasons, the district court did not err in con-
cluding that Kaplan was liable under Florida’s “indorser liability
statute”—section 673.4151(1)(a) 3—because Regions indorsed the
checks on Kaplan’s behalf pursuant to the deposit agreements.
Kaplan argues that Regions was required to act in good faith and
exercise ordinary care in making these indorsements based on an
implied covenant of good faith and fair dealing in each deposit
agreement. But, to the extent Regions had a duty of good faith and
ordinary care in indorsing the checks, Kaplan has identified no evi-
dence that it breached that duty.
2. Kaplan’s Counterclaims against Regions
Kaplan argues that the district court erred in granting Re-
gions’s motion to dismiss his counterclaims for defamation and in-
vasion of privacy, and in granting summary judgment for Regions
3 Section 673.4151(1)(a) provides that: “if an instrument is dishonored, an in-
dorser is obliged to pay the amount due on the instrument: (a) [a]ccording to
the terms of the instrument at the time it was indorsed . . . .” Fla. Stat.
§ 673.4151(1)(a).
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32 Opinion of the Court 17-15478
on his counterclaims for negligence and negligent misrepresenta-
tion. We address each in turn.
a. Kaplan’s Defamation Counterclaim
The district court granted Regions’s motion to dismiss
Kaplan’s defamation claim because Florida’s qualified privilege ap-
plied to Regions’s reporting to Fraud-Net and the Secret Service
that it suspected Kaplan of check kiting. Kaplan argues that the
district court erred by dismissing his defamation claim because he
sufficiently pleaded express malice, negating Regions’s qualified
privilege.
Florida law provides a common law “qualified privilege”
against defamation claims for communications made in good faith
between persons with a common interest in the subject matter of
the communications. See, e.g., Nodar v. Galbreath, 462 So. 2d 803,
809 (Fla. 1984) (“A communication made in good faith on any sub-
ject matter by one having an interest therein, or in reference to
which he has a duty, is privileged if made to a person having a cor-
responding interest or duty, even though it contains matter which
would otherwise be actionable, and though the duty is not a legal
one but only a moral or social obligation.”) (citation omitted). This
qualified privilege changes the plaintiff’s burden of proof: “in order
for the plaintiff to recover, he is called upon affirmatively and ex-
pressly to show malice in the publisher.” Coogler v. Rhodes, 21 So.
109, 112 (Fla. 1897).
Here, Regions, Fraud-Net, and the Secret Service had a com-
mon interest in preventing check kiting. The disclosure to the
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17-15478 Opinion of the Court 33
Secret Service also benefited from a presumptively qualified privi-
lege because it was made to law enforcement. See Fridovich v.
Fridovich, 598 So. 2d 65, 69 (Fla. 1992) (“[D]efamatory statements
voluntarily made by private individuals to the police or the state’s
attorney prior to the institution of criminal charges are presump-
tively qualifiedly privileged.” (footnote omitted)).
Although “[t]he existence of a qualified privilege vanishes if
the statement is made with malice,” Healy v. Suntrust Serv. Corp.,
569 So. 2d 458, 460 (Fla. Dist. Ct. App. 1990), it was Kaplan’s burden
to plead this, Nodar, 462 So. 2d at 810 (noting that “[t]he privilege
. . . raises a presumption of good faith and places upon the plaintiff
the burden of proving express malice”). “[T]he gravamen of ex-
press malice is the abuse of a privileged occasion by improper mo-
tives on the part of the speaker.” Id, at 811 n.8. “Where a person
speaks upon a privileged occasion, but the speaker is motivated
more by a desire to harm the person defamed than by a purpose to
protect the personal or social interest giving rise to the privilege,
then it can be said that there was express malice and the privilege
is destroyed.” Id. at 811. “Strong, angry, or intemperate words do
not alone show express malice; rather, there must be a showing
that the speaker used his privileged position ‘to gratify his malevo-
lence.’” Id. (citation omitted). But, “[i]f the occasion of the com-
munication is privileged because of a proper interest to be pro-
tected, and the defamer is motivated by a desire to protect that in-
terest, he does not forfeit the privilege merely because he also in
fact feels hostility or ill will toward the plaintiff.” Id. at 811–12.
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34 Opinion of the Court 17-15478
Kaplan argues that this allegation was enough to allege ex-
press malice:
In fact, . . . Regions sought only to discredit Kaplan in
an effort to distract attention from the fact that, had
[it] followed [its] own procedures or proper banking
practice, the Investment Companies owned by
Kaplan would not have lost millions of dollars to the
Conspirators because they would have known that
the first checks had not cleared Bridgeview and would
not have invested, and potentially lost, the additional
funds.
But this allegation does not demonstrate that Regions was “moti-
vated more by a desire to harm the person defamed” or that Re-
gions sought to “gratify [its] malevolence.” Id. at 811. Instead, it
showed only that Regions was motivated in part by a desire “to
distract attention” from its financial losses. Kaplan, therefore,
failed to allege that Regions acted “with the primary motive of grat-
ifying ill will, hostility, and [its] desire to harm” Kaplan. See
Crestview Hosp. Corp. v. Coastal Anesthesia, P.A., 203 So. 3d 978,
983 (Fla. Dist. Ct. App. 2016). Accordingly, the district court didn’t
err by concluding that Kaplan failed to plead express malice, and it
therefore properly dismissed Kaplan’s defamation counterclaim.
b. Kaplan’s Invasion of Privacy Counterclaim
The district court also granted Regions’s motion to dismiss
Kaplan’s counterclaim for invasion of privacy. In Florida, the tort
of invasion of privacy includes publication of private facts. Jews for
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17-15478 Opinion of the Court 35
Jesus, Inc. v. Rapp, 997 So. 2d 1098, 1102 (Fla. 2008) (explaining that
invasion of privacy consists of three distinct torts: (1) intrusion
upon the seclusion of another; (2) commercial appropriation of
one’s name or likeness; and (3) publication of private facts). To
establish a claim for publication of private facts, a plaintiff must
show “[1] the publication, [2] of private facts, [3] that are offensive,
and [4] are not of public concern.” Cape Publ’ns, Inc. v. Hitchner,
549 So. 2d 1374, 1377 (Fla. 1989). Kaplan argues that the district
court erred in concluding that Regions’s alleged publication of his
social security number to Fraud-Net didn’t satisfy the publication
requirement because Fraud-Net was “widely available to numer-
ous agencies and/or fields.” Kaplan’s argument fails for three rea-
sons: he didn’t plead facts satisfying the publication requirement;
and even if he had, he failed to plead facts demonstrating that the
publication was offensive and not of public concern.
“[T]he publicity given to private facts must be to the public
at large or to so many persons that the matter must be regarded as
substantially certain to become public knowledge.” Williams v.
City of Minneola, 575 So. 2d 683, 689 (Fla. Dist. Ct. App. 1991). The
district court took judicial notice of the fact that Fraud-Net is “a
dynamic, secured, online database created to help financial institu-
tions and law enforcement in the fight against financial crime,” and
that “[o]nly banks, credit unions and law enforcement agencies
may register for ‘Fraud-Net.’” 4 Because Fraud-Net is both secured
4Kaplan appears to fault the district court for taking judicial notice of what
Fraud-Net is. The district court did not err by taking judicial notice of these
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36 Opinion of the Court 17-15478
and restricted to limited membership, a submission to Fraud-Net is
not a disclosure to the public at large or a disclosure that is substan-
tially certain to become public knowledge.
Kaplan also didn’t satisfy the offensiveness requirement.
Although private, publication of a social security number is not of-
fensive. See Post-Newsweek Stations Orlando, Inc. v. Guetzloe,
968 So. 2d 608, 613 (Fla. Dist. Ct. App. 2007) (concluding that the
publication of “medical records of [plaintiff] and his family, and
communications between [plaintiff] and his attorneys,” was not
highly offensive “merely because of their nature”); In re Haley, 418
B.R. 432, 437 (Bankr. M.D. Fla. 2009) (finding it “clear” that the
publication of certain information, including an unredacted social
security number, was “not deemed to be highly offensive to a rea-
sonable person”).
Finally, Kaplan didn’t satisfy the no-public-concern require-
ment. “The right of privacy does not prohibit the publication of
matter which is of legitimate public or general interest. At some
facts. See, e.g., Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322
(2007) (“[C]ourts must consider the complaint in its entirety, as well as other
sources courts ordinarily examine when ruling on Rule 12(b)(6) motions to
dismiss, in particular, documents incorporated into the complaint by refer-
ence, and matters of which a court may take judicial notice.”). After all, “[t]he
court may judicially notice a fact that is not subject to reasonable dispute be-
cause it . . . can be accurately and readily determined from sources whose ac-
curacy cannot reasonably be questioned.” Fed. R. Evid. 201(b)(2). Kaplan has
given us no reason to doubt the accuracy of the facts judicially noticed by the
district court.
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17-15478 Opinion of the Court 37
point the public interest in obtaining information becomes domi-
nant over the individual’s desire for privacy.” Jews for Jesus, 997
So. 2d at 1104 (internal quotation omitted); see also Valentine v.
C.B.S., Inc., 698 F.2d 430, 432 (11th Cir. 1983) (“[U]nder Florida law
the publication of facts regarding matters of legitimate public or
general interest will not support an invasion of privacy action.”).
“[T]he requirement of lack of public concern is a formidable obsta-
cle.” Cape, 549 So. 2d at 1377. Here, there was a legitimate public
interest in preventing bank fraud. See Lewis v. BT Inv. Managers,
Inc., 447 U.S. 27, 43 (1980) (“[P]rotecting the citizenry against fraud
[is] undoubtedly [a] legitimate state interest[].”); see also United
States v. Berroa, 856 F.3d 141, 171 (1st Cir. 2017) (Lipez, J., concur-
ring in part and dissenting in part) (“The bank fraud statute, by con-
trast, is based upon an interest in preventing federally regulated
and insured banks from being victimized by fraud.”); Ford Motor
Co. v. Tex. Dep’t of Transp., 264 F.3d 493, 503 (5th Cir. 2001) (hold-
ing that there is a “legitimate state interest[]” in preventing “frauds,
unfair practices, discrimination, impositions, and other abuses of
[its] citizens”) (cleaned up). Publication of Kaplan’s suspected fraud
and his social security number on Fraud-Net served that interest
because it allowed banks and law enforcement to identify poten-
tially fraudulent accounts and transactions. Although the publica-
tion of a social security number generally may not be in the public
interest, in the context of preventing bank fraud through limited
disclosure on a secure and limited network designed expressly for
the purpose of preventing bank fraud, publication served the public
interest.
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38 Opinion of the Court 17-15478
c. Kaplan’s Negligence and Negligent Misrepresentation Coun-
terclaims
Kaplan argues that the district court erred in granting sum-
mary judgment for Regions on his negligence and negligent mis-
representation counterclaims because: (a) Regions acted unrea-
sonably in provisionally crediting funds; (b) Regions should have
known about the check kiting; and (c) the district court failed to
consider whether Regions acted consistently with reasonable in-
dustry standards. These arguments fail for many of the same rea-
sons we discussed above.
Regions did not act negligently in provisionally crediting
funds. Florida Statutes chapter 674 expressly permits banks to pro-
visionally credit funds. Fla. Stat. § 674.104(1)(k) (“A settlement
may be either provisional or final.”). “Action or nonaction ap-
proved by [chapter 674] is the exercise of ordinary care; and, in the
absence of special instructions, action or nonaction, consistent with
. . . a general banking usage not disapproved by [chapter 674] is
prima facie the exercise of ordinary care.” Id. § 674.103(3). As dis-
cussed above, provisionally crediting funds is also consistent with
industry practice. See id. § 674.2141 cmt. 1. And Regions did not
act negligently in failing to discover the check kiting because, as we
explained previously, Regions had no duty to investigate. Lamm,
749 F.3d at 948 n.7 (“[T]he Florida Supreme Court and this Court
have held that [depository banks] generally have no duty to inves-
tigate transactions made by authorized agents of the account
holder.”).
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17-15478 Opinion of the Court 39
Finally, Regions did not make any negligent misrepresenta-
tions to Kaplan. Kaplan’s theory is that he thought the funds had
cleared because they were in his account and he had previously told
a Regions employee orally that only cleared funds should be
marked as available. So, when he checked his balance and saw
“available funds,” he interpreted it to mean cleared funds.
To state a claim for negligent misrepresentation, a plaintiff
must show that: (1) “the defendant made a misrepresentation of
material fact that he believed to be true but which was in fact false;
(2) the defendant was negligent in making a statement because he
should have known the representation was false; (3) the defendant
intended to induce the plaintiff to rely on the misrepresentation;
and (4) injury resulted to the plaintiff acting in justifiable reliance
upon the misrepresentation.” Spec. Marine & Indus. Supplies, Inc.
v. Venus, 66 So. 3d 306, 309 (Fla. Dist. Ct. App. 2011) (cleaned up).
But Kaplan could not justifiably rely on a purported oral
agreement with a Regions employee that it would wire only
cleared funds because the agreement was contrary to the deposit
agreements and not in writing (as was required by the deposit
agreements). For example, one of the deposit agreements said that
Kaplan “acknowledge[d] and agree[d] that no . . . oral representa-
tions or communications . . . which vary the terms and conditions
of this Agreement shall constitute a modification or amendment of
the terms and conditions of this Agreement.”
Kaplan’s testimony also eviscerated his claim. Kaplan testi-
fied that Regions never told him the funds he wired had cleared.
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40 Opinion of the Court 17-15478
And, Kaplan admitted at deposition that he had “heard of available
funds” but that “[he] just didn’t believe they were cleared funds.”
So, when Regions informed Kaplan about his “available funds,”
Kaplan could not claim that he reasonably believed that the sum
referred to his “cleared” funds. Accordingly, the district court did
not err in entering summary judgment in favor of Regions.
3. Kaplan’s Crossclaims against Bridgeview
Kaplan appeals the district court’s summary judgment for
Bridgeview on his Florida Uniform Commercial Code section 4-
302, 12 C.F.R. section 229, fraud, negligence, negligent misrepre-
sentation, and conspiracy crossclaims. We consider each in turn.
a. Kaplan’s Florida Uniform Commercial Code section 4-302 and
12 C.F.R. section 229 Crossclaims
Under Florida Uniform Commercial Code section 4-302 and
12 C.F.R. section 229, if a bank does not pay a check written by one
of its account holders, it must promptly return it to the depository
bank and include a reason for nonpayment. 12 C.F.R. § 229.31 (“If
a paying bank determines not to pay a check in the amount of
$5,000 or more, it shall provide notice of nonpayment [to the de-
positary bank within two days].”); id. (“A paying bank returning a
check shall clearly indicate on the front of the check that it is a re-
turned check and the reason for return.”); Fla. Stat. § 674.402(3) (“A
payor bank’s determination of the customer’s account balance on
which a decision to dishonor for insufficiency of available funds is
based may be made at any time between the time the item is re-
ceived by the payor bank and the time that the payor bank returns
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17-15478 Opinion of the Court 41
the item or gives notice in lieu of return, and no more than one
determination need be made.”).
In this case, Bridgeview—the payor bank—refused to pay
Smith’s checks and marked them “Refer to Maker.” Kaplan con-
tends that “Refer to Maker” isn’t a valid designation, relying on
proposed revisions to the regulations requiring banks to “clearly
indicate on the front of the check that it is a returned check and the
reason for return.” See Availability of Funds and Collection of
Checks, 76 Fed. Reg. 16877 (proposed Mar. 25, 2011). In these re-
visions, Kaplan notes, the Board of Governors of the Federal Re-
serve proposed changing the existing guidance to provide that
‘“Refer to Maker’ by itself,” is not “an appropriate reason for return
in any case.” Id.At the time of the transactions at issue, however, the pro-
posed change hadn’t gone into effect yet—thus “Refer to Maker”
was a valid return code. See 12 C.F.R. § 229, app. E. (“A reason
such as ‘Refer to Maker’ may be appropriate in certain cases . . . .”).
Therefore, there was no genuine dispute that Bridgeview complied
with the applicable federal regulations.
Further, the statute underlying Kaplan’s cause of action, 12
U.S.C. section 4010(e), provides that no bank can be held liable for
“any act done or omitted in good faith in conformity with any rule,
regulation, or interpretation thereof by the Board of Governors of
the Federal Reserve System, notwithstanding the fact that after
such act or omission has occurred, such rule, regulation, or inter-
pretation is amended, rescinded, or determined by judicial or other
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42 Opinion of the Court 17-15478
authority to be invalid for any reason.” Because—at the time—the
regulations provided that “Refer to Maker” was an available and
appropriate return designation, Bridgeview was not liable for fol-
lowing the federal banking regulations. See 12 C.F.R. § 229, app.
E.
Lastly, Kaplan doesn’t contest the district court’s conclusion
that Bridgeview used the “Refer to Maker” for appropriate reasons.
As Bridgeview explained below, it used the “Refer to Maker” des-
ignation because it had started but not yet finished closing the ac-
count; since the account wasn’t closed yet, no other return reason
was appropriate.
In sum, there was no genuine dispute that Bridgeview acted
appropriately by marking the dishonored first and second deal
checks “Refer to Maker.”
b. Kaplan’s Fraud, Negligence, and Negligent Misrepresentation
Crossclaims
The district court also entered summary judgment for
Bridgeview on Kaplan’s fraud crossclaim (for fraudulently inducing
Kaplan to wire additional funds into Smith’s account by using the
“Refer to Maker” designation) and negligence and negligent mis-
representation crossclaims (for failing to return the bounced checks
with a proper return designation in a timely manner). The district
court granted summary judgment because these claims were di-
rected at the same conduct asserted in Kaplan’s statutory “Refer to
Maker” crossclaims, and, thus, were “displaced by” the Florida Uni-
form Commercial Code and the federal regulations. Kaplan argues
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17-15478 Opinion of the Court 43
that the district court erred by determining that his common law
crossclaims were preempted and by ignoring evidence of
Bridgeview’s knowledge of Smith’s scheme. We disagree.
All of Kaplan’s allegations pertain to Bridgeview’s use of the
“Refer to Maker” designation and are covered by federal regula-
tions and the Florida Uniform Commercial Code, Article 4 (Florida
Statutes Chapter 674). The federal statute authorizing Kaplan’s
“Refer to Maker” claim, 12 U.S.C. section 4007(b), provides that
“[t]his chapter and regulations prescribed under this chapter,” in-
cluding 12 C.F.R. section 229.31(e), “supersede any provision of the
law of any State, . . . which is inconsistent with this chapter or such
regulations.” Similarly, under Florida law, where the Florida Uni-
form Commercial Code regulates “exactly the same duty” as ex-
isted under common law, then the Florida Uniform Commercial
Code preempts the common-law cause of action. Corfan Banco
Asuncion Para. v. Ocean Bank, 715 So. 2d 967, 971 (Fla. Dist. Ct.
App. 1998). So, both the federal regulations and Florida law
preempt Kaplan’s common law crossclaims.
In this case, federal regulations require a bank to provide a
reason for the return of a check. 12 C.F.R. § 229.31(e) (“A paying
bank returning a check shall clearly indicate on the front of the
check that it is a returned check and the reason for return.”). And
the Florida Uniform Commercial Code governs the “methods of
sending and presenting” checks. Fla. Stat. §§ 674.204, .301. Because
the use of the “Refer to Maker” return code is covered by Florida’s
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44 Opinion of the Court 17-15478
Uniform Commercial Code and federal regulations, Kaplan’s
claims are preempted.
Kaplan argues that these claims aren’t preempted because
Bridgeview knew illegal activity was occurring in Smith’s account.
Kaplan points to Smith’s bank statements and an affidavit from
Bridgeview’s president explaining that Bridgeview decided to close
Smith’s account due to the increased volume of wire transfers.
Although knowledge of the underlying fraud can overcome
statutory preemption in some circumstances, see, e.g., Regions
Bank v. Provident Bank, Inc., 345 F.3d 1267, 1279 (11th Cir. 2003)
(holding that the Florida Uniform Commercial Code “does not
preempt a state law claim if money is transferred by wire to a party
that knows or should have known that the funds were obtained
illegally”), this evidence is insufficient to establish Bridgeview’s
knowledge of Smith’s illegal scheme. Even in the light most favor-
able to Kaplan, neither Bridgeview’s president’s affidavit nor
Smith’s bank statements show that Bridgeview knew or should
have known about the fraud. At most, the number of wires gave
Bridgeview reason to be suspicious about the account activity, but
suspicion about account activity is not the same as knowledge of
the underlying fraud. And Kaplan doesn’t allege that Bridgeview
deliberately shut its eyes to fraud such that it “should have known.”
See Schmidt v. McKay, 555 F.2d 30, 37 (2d Cir. 1977) (“[A]lthough
a plaintiff may not shut his eyes to facts which call for investigation,
mere suspicion will not suffice as a ground for imputing knowledge
of the fraud.”); Nathel v. Siegal, 592 F. Supp. 2d 452, 469 (S.D.N.Y.
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17-15478 Opinion of the Court 45
2008) (“Even where a bank was on notice of ‘red flags’ that indi-
cated certain accounts may have been vehicles for fraudulent activ-
ity and referred the case to its internal fraud unit, the bank had only
suspicions but not actual knowledge of the fraud.”). Without any
other evidence supporting his assertion that Bridgeview knew
about Smith’s fraud, the district court properly granted summary
judgment on Kaplan’s fraud claim.
c. Kaplan’s Conspiracy to Defraud Crossclaim
Finally, the district court also granted summary judgment
for Bridgeview on Kaplan’s claim that Bridgeview conspired with
Smith to defraud because there was no evidence that Bridgeview
had actual knowledge of the scheme or that it provided anything
other than routine check processing for Smith’s checking account.
Kaplan argues that three pieces of evidence show that this was er-
ror: (1) that Bridgeview “engaged in a high risk practice of allowing
continuous negative balances in the [Smith] account[] for long pe-
riods of time, creating very serious questions about [Bridgeview]’s
participation and motives”; (2) that Bridgeview “sudden[ly]
deci[ded] to close the [Smith] account, and subsequent[ly] de-
lay[ed] in closing the account until January 24”; and (3) that
Bridgeview used the “Refer to Maker” designation.
Even in the light most favorable to Kaplan, none of these
facts create a triable issue of fact as to whether Bridgeview engaged
in a conspiracy to defraud Kaplan. First, as we already explained,
Bridgeview’s use of the “Refer to Maker” designation was appro-
priate under the circumstances because it was a permissible return
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46 Opinion of the Court 17-15478
code under then-existing federal regulations. Second, as discussed
above, Bridgeview’s president explained that Bridgeview closed
Smith’s account because of the increased volume of wire transfers,
and allowed Smith to keep his account open for a short period “out
of common courtesy” to give Smith “ample notice and an oppor-
tunity to establish a new banking relationship.” Without other ev-
idence, it’s not a reasonable inference that Bridgeview actually did
so to enable Smith’s check kiting scheme. And third, although
there were “intraday provisionally negative account balances,”
Bridgeview explained that the bank was “never at risk as the ac-
count was always positive by the time checks were paid.” Kaplan
points us to no conflicting evidence establishing a genuine issue of
material fact. Based on the summary judgment record, no reason-
able jury could find that Bridgeview knew about the fraud or con-
spired with Smith. Kaplan relies on implausible inferences, which
are insufficient to survive summary judgment. See Matsuhita Elec.
Indus. v. Zenith Radio Corp., 475 U.S. 574, 593 (1986) (“[C]ourts
should not permit factfinders to infer conspiracies when such infer-
ences are implausible . . . .”).
4. Kaplan’s Motions to Compel Discovery
Before trial, Kaplan moved to compel discovery of Regions’s
and Bridgeview’s handling of Smith’s account—including whether
there were any suspicious activity reports related to the account—
to determine whether Regions and Bridgeview exercised reasona-
ble care and acted in good faith. Regions and Bridgeview both op-
posed the requests because, they contended, any suspicious activity
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17-15478 Opinion of the Court 47
reports were privileged and because the requests were overbroad.
A magistrate judge denied Kaplan’s request for discovery as it re-
lated to Bridgeview and denied it in part as to Regions. Kaplan did
not seek review of the magistrate judge’s order by the district
court, but he now contends that the magistrate judge abused its
discretion because the suspicious activity report privilege didn’t ap-
ply.
Kaplan’s failure to seek review of the magistrate judge’s or-
der by the district court is fatal. See, e.g., Smith v. School Bd. of
Orange Cnty., 487 F.3d 1361, 1365 (11th Cir. 2007) (“[W]here a
party fails to timely challenge a magistrate’s nondispositive order
before the district court, the party waived his right to appeal those
orders in this [c]ourt.”). “A party may not assign as error a defect
in [a non-dispositive] order not timely objected to.” Fed. R. Civ. P.
72(a). Thus, Kaplan has forfeited any argument that the magistrate
judge abused its discretion.
AFFIRMED.