1. finance
2. bank
3. bank account

E-Copy Received Jan 15, 2014 9:57 AM
IN THE DISTRICT COURT OF APPEAL OF FLORIDA
FOURTH DISTRICT
CORNERSTONE SMR, INC.,
Appellant,
:
4DCA CASE NO.: 13-2064
L.T. CASE NO.: CACE 08-40096
:
v.
:
BANK OF AMERICA, N.A., ETC.
:
Appellee.
:
_______________________________/
On Appeal from the Circuit Court of the Seventeenth
Judicial Circuit In and For Broward County, Florida
______________________________________________________
INITIAL BRIEF OF APPELLANT, CORNERSTONE SMR, INC.
________________________________________________________
ANDREW S. BERMAN
Florida Bar No. 370932
Young, Berman, Karpf & Gonzalez, P.A.
1101 Brickell Ave., Ste. 1400 N
Miami, FL 33131
(305) 945-1851 (phone)
(305) 377-2291 (direct)
(786) 219-1980 (telefax)
Email: [email protected]
Counsel for Appellant, Cornerstone
3128.001/00154375.WPD-
TABLE OF CONTENTS
Certificate of Font .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Table of Citations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv, v
Statement of Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Summary of the Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARGUMENT
I.
THE TRIAL COURT ERRED AS A MATTER OF LAW IN
OFFSETTING ANY PORTION OF CORNERSTONE’S
SETTLEMENT WITH SCHAFER AGAINST ITS RECOVERY
FROM THE BANK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A.
Standard of Review.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B.
Not only is there no threat of a double recovery by
Cornerstone, but assuming it is paid every penny by both
tortfeasors, it will still not be made whole for its loss.. . . . . . . . . . . 14
i.
The damages from the settlement and
judgment do not overlap because the
settlement can be fully applied to a period for
which the Bank is not liable in damages to
Cornerstone.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ii.
The setoff should be applied against
Cornerstone’s entire claim of loss, not just
that portion recovered from the Bank.
Otherwise, it is the Bank that receives a
windfall. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3128.001/00154375.WPD-
ii
iii.
Any claim that the literal reading of the Florida
setoff statute requires a dollar for dollar offset
against the amount determined collectible against
the Bank is absurd on these facts.. . . . . . . . . . . . . . . . . . . . . . 22
Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
CERTIFICATE OF FONT
We certify that the font used herein is Times New Roman - 14 point.
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iii
TABLE OF CITATIONS
Arcadia Partners, L.P. v. Tompkins, 759 So. 2d 732 (Fla. 5th DCA 2000). . . 14, 25
Bay Country v, Town of Cedar Grove, So. 2d 164 (Fla. 2008). . . . . . . . . . . . . . . 14
Blasland, Bouck & Lee, Inc. v. City of N. Miami, 283 F.3d 1286 (11th Cir. 2002)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 21
Gordon v. Marvin M. Rosenburg, D.D.S., P.A, 654 So. 2d 643 (Fla. 4th DCA 1995)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15, 17, 25
Gouty v. Schnepel, 795 So2d 959 (Fla. 2001).. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Las Olas Tower Co. v. City of Ft. Lauderdale, 742 So. 2d 308 (Fla. 4th DCA 1999)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Sanchez v. Fernandez, 915 So. 2d 192 (Fla. 4th DCA 2005). . . . . . . . . . . . . . . . . 14
Sompo Japan Ins., Inc. V. Nippon Cargo Airlines Company, Ltd. (“NCA”), 522 F.3d
776 (7th Cir. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
State v. Burris, 875 So. 2d 408 (Fla. 2004).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Waukon Auto Supply v. Farmers & Merchants Savings Bank, 440 N.W.2d 844 (Iowa
1989). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
FLORIDA STATUES:
§ 46.015(2)(2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
§ 673.4061(2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3128.001/00154375.WPD-
iv
§ 673.4201 (2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
§ 768.041(2)(2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 22, 24
3128.001/00154375.WPD-
v
PRELIMINARY STATEMENT
This is an appeal by Appellant/Plaintiff, Cornerstone SMR, Inc.
(“Cornerstone”), from a Final Judgment following a non-jury trial.
Appellee/Defendant, Bank of America, N.A., will be referred to as the “Bank.”
Reference to the record on appeal will be by the symbol “(R.__)” and to the trial
transcript included in the record by the symbol “(T.__)”. Reference to Cornerstone’s
trial exhibits shall be by the symbol “(Pl. Ex. __”) and to the Bank’s by the symbol
“(Def. Ex. __)”. All emphasis is ours unless otherwise indicated.
STATEMENT OF THE CASE AND FACTS
Overview
Cornerstone is a corporation that was formed to acquire networks and FCC
licenses to be used to operate a two-way radio dispatch company. It has tower sites
similar to a cellular phone network and its customer base are fleet owners, such as
taxi cab companies, who have dispatch radios. Cornerstone sells air time services and
radios to its customers.
(T.54-55.)
When it was formed in 2002, most of
Cornerstone’s officers and directors resided outside of Florida. (T.58.) It had two
employees in Florida, one of whom was Janette Schafer (“Schafer”). (T.56.) She
handled the financial end of the business. (T.56.)
As Cornerstone was a startup that had not yet fully acquired its network of
3128.001/00154375.WPD-
1
radio towers, it issued a Private Placement Memorandum to raise capital. In
exchange for their investments, investors received stock in Cornerstone. Between
2003 and 2007, Cornerstone raised about $7.3 million from investors. (T.60-65, 274.)
From inception, Cornerstone banked with the Bank. (T.60.) As investor
checks and other deposits were received by Cornerstone, the checks were to be
deposited into its checking account with the Bank. (T.63.)
Cornerstone’s bookkeeper, Schafer, and her husband owned a corporation
named, Justtime, Inc., (“Justtime”), that also had a checking account at the Bank.
(T.94.) From July 2002 to July 2007 – a period of five (5) years – Schafer received
scores of checks payable to Cornerstone that she was required to deposit into
Cornerstone’s checking account at the Bank. (T.63, 95.) During that time period,
however, she systematically and wrongfully endorsed the checks with Justtime’s
account information and deposited them into Justtime’s checking account at the Bank.
(T.73-74, 98-100.)
Her misconduct, and the Bank’s admitted failure to follow its
own internal operating procedures which would have prevented it, (Pl. Ex. 5, pp. 2229, 32-37, 41, 43), effected a conversion of $478,490.00 of Cornerstone funds.1 (Pl.
1
In about 15 or 20 instances, Schafer’s effort was thwarted by a Bank teller who
followed proper Bank procedures. (T.99.) In those rare cases she would re-stamp the
back of the check with the Cornerstone stamp and deposit the check where it
belonged. (T.99.) Obviously, those checks form no part of Cornerstone’s claim, but
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2
Ex. 1.)2
After Cornerstone settled with Schafer, the case proceeded to a non-jury trial
against the Bank. The trial court found for Cornerstone on its claim of conversion
under Florida Statutes Section 673.4201 (2011) against the Bank, but reduced its
ultimate recovery by two elements: [1] conversions for which recovery was barred
by the statute of limitations (before October 11, 2005) and [2] a pro rata portion of
the value of Schafer’s prior settlement with Cornerstone.
The issue raised by Cornerstone on appeal is that it believes the trial court erred
in offsetting the Schafer settlement (using some pro rata formula) against the net
recovery from the Bank rather than the entire or gross proven loss suffered – the
entire “claim” by Cornerstone against Schafer and the Bank – which included
damages for individual conversions not recoverable against the Bank due to the
statute of limitations. Under Cornerstone’s thesis, the setoff against its entire “claim”
would not result in any reduction of the judgment against the Bank.
the 15 to 20 instances show that when Bank employees properly followed Bank
protocols, Cornerstone was protected from embezzlement.
2
From time to time Cornerstone used a figure of $483,490.00 as the total of its
principal loss. That figure was later reduced by $5,000 to $478,490.00.
3128.001/00154375.WPD-
3
The Case and Facts Germane to Appellate Issue
The facts relevant to this main appeal are limited and largely, if not entirely,
undisputed because the issue on appeal is a narrow one. We will leave to the Bank
the responsibility for setting forth the facts relevant to its cross-appeal to the extent
they go beyond this presentation.
On August 27, 2008, Cornerstone filed suit against the Bank, the former
bookkeeper of Cornerstone, Schafer, and her corporation, Justtime, Inc. (R.1-11.)
The claims against the Bank were for conversion, breach of the covenant of good
faith and fair dealing and breach of fiduciary duty. The claims against Schafer and
Justtime were for civil theft and conversion relating to their theft of checks payable
to Cornerstone which were wrongfully deposited into Justtime’s account at the Bank.
An additional claim was brought against Schafer for breach of fiduciary duty and
against Justtime for an accounting.
On April 8, 2010, as part of a plea bargain in connection with criminal charges
pending against her, (T.101-103), Schafer entered into a Settlement Agreement with
Cornerstone, (Def. Ex. 18), whereby she agreed, among other things, as follows:[1]
to plead guilty; [2] to agree to 10 years probation which includes a payment of $1,500
per month as restitution to Cornerstone; [3] to make a restitution payment in the sum
of $32,000 to Cornerstone, which has been received; and [4] to assign her shares in
3128.001/00154375.WPD-
4
Cornerstone back to Cornerstone. The total value of her payout to Cornerstone over
10 years, not reduced to present value, is $180,000. As a result of the Settlement
Agreement, Schafer and Justtime were dismissed from the case, (R.119, 123),which
thereafter proceeded only against the Bank.
In their Pre-Trial Stipulation dated February 10, 2011, (R.656), Cornerstone
and the Bank stipulated, in part, as follows:
a.
Both Cornerstone and Justtime had checking accounts at
the Bank;
b.
The Bank’s policies and procedures provided that a proper
endorsement on checks payable to a corporation which are
presented for deposit should include a stamp indicating
“For Deposit Only” with the business name or payee, and
must be deposited into an account titled the same as the
payee;
c.
From July 1, 2002 through July 11, 2007, Schafer endorsed
126 checks payable to Cornerstone, Cornerstone SMR,
Cornerstone SMR, Inc., or Cornerstone SMR Company, by
placing a “For Deposit Only” or “For Deposit, xxxx
[Justtime account number]” on the reverse side of the
checks, indicating the checking account number of Justtime
and not Cornerstone. (A list of the checks and their
amounts is attached as Exhibit A to the Pre-Trial
Stipulation and was introduced into evidence as Plaintiff’s
Exhibit 6.)
d.
The Bank deposited the checks into Justtime’s account and
they were credited to Justtime. The Bank did not stipulate
to the total face amounts of the checks, but the evidence at
trial supported the figure of $478,490. (Pl. Ex. 6.)
3128.001/00154375.WPD-
5
e.
None of the endorsements on the back of the checks
included the words “Cornerstone” or the like.
f.
None of the checks was credited to Cornerstone.
g.
Cornerstone’s settlement with Schafer calls for payments
of $212,000 over a 10 year period.
h.
As of the date of the stipulation, Schafer has paid
Cornerstone at least $41,000 according to the terms of the
Settlement Agreement.
i.
The Bank is entitled to a setoff that will reduced
Cornerstone’s claim against the Bank in the value of
Schafer’s settlement with Cornerstone.
On January 25 and 26, 2012, the case was tried non-jury to the Honorable Mily
Rodriguez Powell. The material evidence offered by Cornerstone at trial may be
summarized as follows:
<
a list of the checks payable to Cornerstone but deposited
into Justtime’s account. (Pl. Ex. 6);
<
the Bank’s internal operating procedures titled “Practice
and Procedure Manuals”. (Pl. Ex. 3);
<
testimony of the Bank’s Marketing Operations Manager,
Elizabeth Leon, who conceded that it failed to follow its
own procedures which, if followed, would have prevented
the deposit of checks payable to Cornerstone into
Justtime’s account. (Pl. Ex. 5);3
3
Plaintiffs’ Exhibit 5 is the deposition of Elizabeth Leon. She was designated as the
Bank’s representative to testify about its policies and procedures regarding
3128.001/00154375.WPD-
6
<
that 126 checks made payable to Cornerstone were
converted by the Bank due to their improper endorsements
by Schafer and deposit into Justtime’s checking account.
(Pl. Ex. 6); and
<
total damages against the Bank, before prejudgment
interest, of $478,490. (Pl. Ex. 1, T.74).
According to Cornerstone’s calculation, the interest on each check negotiated
through the date of trial, January 25, 2012, was $271,650.36. (T.27, Pl. Ex. 2.) The
total principal and interest loss was calculated by Cornerstone to be $750,140.36.4
From that sum Cornerstone conceded that the Bank was entitled to an offset of
$212,000, representing some restitution from Schafer.5
(T.27.) In addition,
Cornerstone argued that the lost use of the $180,000 (due to the long payout) was
worth another $44,214.27 in damages. (T.27.) When it all shook out Cornerstone
asked for a judgment of $582,354.63 against the Bank.6 (T.27.)
acceptance of checks for deposit within a specified time frame. (Pl. Ex. 5, p.7.) She
testified that the stipulated facts did not conform to the Bank’s policies and
procedures. (Pl. Ex. 5, pp. 22-29, 32-37, 41, 43.)
4
$478,490.00 (principal loss) plus $271,650.36 (interest) = $750,140.36.
5
$180,000 ($1,500 per month over 10 years) + $32,000 (payment upon signing) =
$212,000.
6
At that moment in the proceeding, Cornerstone contested the Bank’s claim that
Schafer’s canceled shares had any value and did not consider the value of her LLC
shares, offered but rejected in settlement discussions, all of which was ultimately
deemed by the trial judge in the Final Judgment to be a valid offset against the Bank’s
3128.001/00154375.WPD-
7
The Bank defended by claiming, inter alia, that most of Cornerstone’s claim
was barred by the four (4) year statute of limitations. It also offered evidence and
expert testimony that Cornerstone did not properly supervise or check up on Schafer,
which was at least a contributing factor to its loss such that it should be comparatively
at fault pursuant to Florida Statutes Section 673.4061. (T.35.) The Bank offered
much of that same evidence as a defense to Cornerstone’s reply that the statute of
limitations was tolled by the Bank’s fraudulent conduct.7 The Bank further offered
expert testimony to calculate what it believed to be a proper offset due to the Schafer
Settlement Agreement, which, in addition to the payments therein, also included the
value of stock of Cornerstone surrendered by Schafer and the value of her LLC
shares.8
Almost six (6) months later, on June 22, 2012, the trial judge entered the Final
claim. The total of that additional offset was determined to be $90,750 for the
Cornerstone stock and $16,875 for the LLC stock that Cornerstone rejected in
settlement.
7
Cornerstone now concedes that upon the evidence presented tolling does not apply
to its claim for conversion against the Bank; it does not concede, however, that it does
not apply to the claim against Schafer because of her fraudulent concealment.
8
These LLC shares were offered by Schafer to Cornerstone in settlement, but
Cornerstone didn’t want them. (T.277.) They were not part of the settlement.
Nevertheless, the value of $16,875 was introduced into evidence and accepted by the
Court as part of the offset of the judgment against the Bank. For purposes of the issue
raised herein, this is immaterial.
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8
Judgment. (R.1048.) It rejected the Bank’s defense of comparative fault and found
the Bank liable for conversion, but determined that because of the statute of
limitations, Cornerstone could only recover for checks converted from October 11,
2005 to June 11, 2007. The total principal amount on those 48 checks was
$146,743.23. To that sum it added prejudgment interest in the amount of $61,794.65
to reach a total recoverable loss against the Bank of $208,537.88. It then recognized
the sum of $319,625 as the value of the Schafer settlement and then offset $86,576
of that amount against the $208,537.88, which offset it denominated as a “pro-rata
offset for settlement payments reduced to present value, shares of Cornerstone and
LLC shares”. The trial court then entered judgment for Cornerstone and against the
Bank for the difference or $121,861.88.
Both sides timely moved for rehearing, each challenging the trial court’s offset
calculation. (R.1028, 1042.) The Bank argued that the entire settlement value
($319,625) should be offset against the $146,743.23 recovered against it, which
would reduce the judgment to zero. Cornerstone argued the polar opposite; that the
offset should be against the total damages actually suffered and claimed against the
Bank and Schafer, plus prejudgment interest, regardless of whether any portion was
barred by the statute of limitations. Under Cornerstone’s analysis there would be no
reduction in the amount found to be recoverable against the Bank.
3128.001/00154375.WPD-
9
In substance, the Bank claimed that anything other than its calculation results
in a windfall to Cornerstone, while Cornerstone argues that any offset on these facts
results in no windfall at all because, between the Settlement Agreement with Schafer
and the full recovery against the Bank, it will not receive even one full recovery from
its total claim, much less a windfall.
Cornerstone’s calculation in its Motion for Rehearing, (R.1042), was as
follows:
Damages
Statutory Interest
$483,490.009
$271,650.36
$755,140.36
Offsets found by judge
Cornerstone’s loss
($319,625)10
$435,515.36
Since Cornerstone’s loss of $435,515.36, after full offset, was greater than the
$146,743.23 recovered against the Bank, it argued that no offset required or
9
This figure is an error; it should be $5,000 lower or $478,490.00, but the difference
is immaterial to the analysis.
10
The trial judge calculated the offsets as follows:
$1,500 10 year payout $180,000
Up front payment
$ 32,000
Value of redeemed stock $ 90,750
Schafer’s LLC shares
$ 16,875
$319,625
3128.001/00154375.WPD-
10
permitted.11
The trial judge denied both motions for rehearing (R.1046, 1069), and this
appeal and cross-appeal follow.
SUMMARY OF THE ARGUMENT
The trial court erred as a matter of law in reducing Cornerstone’s judgment of
conversion against the Bank by a pro rata portion of its settlement with another
tortfeasor, Schafer. Under no scenario will Cornerstone be made whole for its total
proven principal loss of $478,490.00. Its settlement with Schafer was valued by the
trial judge at $319,625 and its principal recovery against the Bank, before reduction,
was $146,743.23, because most of Cornerstone’s claim against the Bank was found
to have been barred by the statute of limitations. Those combined recoveries are less
than Cornerstone’s total proven loss.
First, the Schafer settlement can be applied to a time period that does not
involve any ultimate recovery against the Bank; hence there is no overlap in damages.
The Bank’s liability was limited to conversions occurring after October 11, 2005.
The bulk of Cornerstone’s losses occurred before then. As against Schafer, however,
she agreed to a settlement that did not account for any time bar of any portion of the
11
Even if the prejudgment interest is removed, Cornerstone’s mitigated loss is $478,490
- $319,625 = $163,865, which still exceeds the principal amount of the conversion
recovery against the Bank ($146,743.23). Thus, no double recovery without offset.
3128.001/00154375.WPD-
11
claim against her. Cornerstone would also argue that her embezzlement was not time
barred because she fraudulently concealed it (a reply not sustainable against the
Bank’s defense). The amount of proven loss occurring before October 11, 2005 and
not tagged on the Bank is $331,746.77. Crediting the Schafer settlement ($319,625)
against that figure from the earlier time period does not make Cornerstone whole.
There is no reason why the Schafer settlement must be applied to the Bank’s
judgment when the policy is to prevent double recovery and the settlement is still
short in making Cornerstone whole for its earlier damages, which do not overlap with
those tagged on the Bank. To do as the trial court did is only to punish the victim,
Cornerstone, without discharging the setoff statute’s purpose to avoid a double
recovery.
Second, the credit or settlement setoff should be applied against Cornerstone’s
total proven loss of $478,490 without interest (or $750,140.36 with interest), not just
that portion of the total claim recovered against the Bank. The Bank so stipulated
before trial in the Pretrial Stipulation. The stipulation aside, Florida courts have not
squarely addressed this issue, but out of state cases with similar setoff statutes or
policies have. Those cases look to whether a plaintiff will receive a windfall or
double recovery without the credit or offset. One court squarely held that the credit
or offset is to be against the entire proven loss, not the discrete recovery against the
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12
particular defendant seeking the setoff. Following that logic, the offset here would
still result in a recovery against the Bank for the full amount for which it was found
to be liable for conversion.
Third, The Bank’s argument that the literal language of Section 768.041(2)
requires a dollar for dollar setoff against the amount it was determined to be
responsible for is absurd. The statute appears to have assumed that the amount sued
for and that recovered would always be the same. This case illustrates the fallacy of
that assumption, where the loss claimed is a series of independent torts/conversions
spanning a period of years. A court should ordinarily apply the plain meaning of a
statute except when it results in an absurdity that undermines the statute’s purpose.
Here, the Bank’s interpretation would mean that Cornerstone recovers zero for the
Bank’s adjudicated conversion, while being left substantially under compensated for
its total proven losses. That does not advance the purpose of the statute one bit (to
prevent a double recovery) and only serves to punish the victim of the theft.
ARGUMENT
I.
THE TRIAL COURT ERRED AS A MATTER OF LAW IN
OFFSETTING ANY PORTION OF CORNERSTONE’S
SETTLEMENT WITH SCHAFER AGAINST ITS
RECOVERY FROM THE BANK .
A.
Standard of Review
Cornerstone’s argument is that the trial court erred by applying the setoff
3128.001/00154375.WPD-
13
statute to reduce the judgment against the Bank. This is a pure question of law,
review by this Court is de novo. See eg. Bay County v. Town of Cedar Grove, 992 So.
2d 164 (Fla. 2008)(statutory interpretation is a question of law subject to de novo
review); Sanchez v. Fernandez, 915 So. 2d 192 (Fla. 4th DCA 2005)(questions of law
reviewed de novo).
B.
Not only is there no threat of a double
recovery by Cornerstone, but assuming it is
paid every penny by both tortfeasors, it
will still not be made whole for its loss.
Two Florida statutes address the issue of setoff. They are Florida Statutes §
46.015(2)(2011) and § 768.041(2)(2011). They are substantially similar and for these
purposes identical. Section 768.041(2), which applies to tort claims provides that:
At trial if any defendant shows that the plaintiff ... has
delivered a release or covenant not to sue any person, firm,
or corporation in partial satisfaction of the damages sued
for, the court shall set off this amount from the amount of
any judgment to which the plaintiff would be otherwise
entitled at the time of rendering the judgment.
It is black letter Florida law that the purpose of setoff is to prevent a party from
recovering twice for the same damages. See Blasland, Bouck & Lee, Inc. v. City of N.
Miami, 283 F.3d 1286, 1295 (11th Cir. 2002); Arcadia Partners, L.P. v. Tompkins,
759 So. 2d 732, 739 (Fla. 5th DCA 2000) (The purpose of 46.015(2) is to prevent the
award of double damages.); Gordon v. Marvin M. Rosenburg, D.D.S., P.A, 654 So.
3128.001/00154375.WPD-
14
2d 643, 644 (Fla. 4th DCA 1995)(Section 768.041 “was designed to prevent duplicate
or overlapping compensation for identical damages.”).12 “When one has separate
claims a setoff is inappropriate.” Gordon, 654 So. 2d at 645. Claims are separate and
distinct when they involve different elements of damages. Id.
In this case, there is no overlap or threat of double recovery to Cornerstone
because the damages covered by the Settlement Agreement with Schafer can be
applied to a different period of time than that covered by the judgment against the
Bank.
Moreover, Cornerstone’s total proven loss from the multiple separate
conversions exceeds the combined recoveries from the Settlement Agreement with
Schafer and the judgment against the Bank (before offset); thus it will never be made
whole and the Bank was therefore entitled to no offset against the limited judgment
secured against it.
i.
The damages from the settlement and
judgment do not overlap because the
settlement can be fully applied to a period
for which the Bank is not liable in damages
to Cornerstone.
Cornerstone settled with Schafer in connection with her criminal case. The
trial judge valued her settlement package, including a long term payout (but without
12
“The applicability of these setoff statutes is predicated on the existence of other
tortfeasors who are liable for the same injury.” Gouty v. Schnepel, 795 So2d 959, 965
(Fla. 2001).
3128.001/00154375.WPD-
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any present value reduction) to be $319,625.13 At the time of trial the total loss to
Cornerstone was, $478,490 plus prejudgment interest of $271,650.3614 for a total of
$750,140.36 for the loss period of July 2002 through July 2007. Since the Bank was
held not liable for the bulk of the separate conversion losses – which occurred in the
early years before October 11, 2005 due to the statute of limitations – the entire
settlement with Schafer, if applied to losses before October 10, 2005 for which she
was admittedly responsible, does not even cover Cornerstone’s losses for that time
period, to wit:
Cornerstone’s total loss:
Bank’s responsibility in later years
Loss not pinned on Bank
$478,490.00
($146,743.23)
$331,746.77
The sum of $331,746.77 constitutes that portion of Cornerstone’s loss for
which the Bank was held not liable due to the statute of limitations. Thus, if the
$319,625 Schafer settlement is applied to those early period individual conversion
losses of $331,746.77, they do not overlap at all with the damages ultimately pinned
13
It is curious how the Bank would be entitled to a credit for the $1,500 per month not
yet paid pursuant to a 10 year payout, which may provide some insight into how the
trial judge calculated the offset. But we still do not fully understand the judge’s math.
14
This interest may have been calculated upon a slightly higher principal amount of
$483,490, but that difference is immaterial to this analysis.
3128.001/00154375.WPD-
16
on the Bank ($146,743.23).15
Since the damages covered by the Settlement Agreement with Schafer and the
judgment against the Bank can cover separate periods of time, there is no overlap in
damages and hence no right of offset at all because the damages cover different
diverted checks for different time periods. Each wrongfully deposited check is a
separate, independent conversion giving rise to its own discrete damages. Gordon.
ii.
The setoff should be applied against
Cornerstone’s entire claim of loss, not just
that portion recovered from the Bank.
Otherwise, it is the Bank that receives a
windfall.
The Bank argued that the settlement amount must be setoff, dollar for dollar,
against the full recovery against it. This was contrary to the Bank’s pretrial
stipulation that “BANK OF AMERICA is entitled to a setoff that will reduce
CORNERSTONE’s claim against BANK OF AMERICA in the value of SCHAFER’s
settlement with CORNERSTONE,” (R.656), not just Cornerstone’s ultimate recovery
15
The Schafer Settlement Agreement was obviously not limited by any statute of
limitations because [a] that issue had not yet been judicially resolved and [b] the
settlement sum exceeded the sums that could have been legally pinned on Schafer if
the statute applied. Regardless, any party is permitted to waive the limitations
defense and resolution of Schafer’s criminal problem was certainly ample motivation
for her to do so. Moreover, while Cornerstone could not toll the statute as to the
Bank, because the Bank was not involved in any fraud or coverup, it could toll the
statute as to Schafer because she was the embezzler who concealed her misdeeds.
3128.001/00154375.WPD-
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on that claim against the Bank. The claim was far greater than the ultimate recovery,
but the recovery was limited due to the statute of limitations. The trial judge should
have been bound by this stipulation and calculated the offset as Cornerstone
proposed. This should end the inquiry on appeal and mandate reversal.
As it went the trial judge did not accept the Bank’s argument – or it would
have entered judgment for zero dollars – but did nevertheless use some sort of prorata setoff that Cornerstone does not understand to offset a portion of the settlement
($86,676.00) against the sums for which it found the Bank liable ($208,537.88). In
so doing the trial judge misapplied the setoff statute as a matter of law. No portion
of Cornerstone’s recovery against the Bank was subject to offset.
We begin with the following calculation: $478,490 (Cornerstone’s principal
loss) minus $319,625 (Schafer settlement) equals $163,865. The sum of $163,865
is Cornerstone’s uncompensated loss, which still exceeds the principal amount of the
conversion recovery against the Bank of $146,743.23. There is thus no double
recovery without any offset and the offset statute should not come into play.
Our research reveals that Florida appellate courts have surprisingly not
addressed this discrete issue of how or whether to apply an offset in this context,
where [1] there is no risk of a double recovery because the plaintiff cannot be made
whole under any scenario and [2] the loss was the result of a series of individual
3128.001/00154375.WPD-
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torts/conversions. But cases from out of state have addressed this precise issue and
are instructive and persuasive, as they derive from the same policy against double
recovery as is embodied in the applicable Florida setoff statutes.
The first, Waukon Auto Supply v. Farmers & Merchants Savings Bank, 440
N.W.2d 844 (Iowa 1989), was decided by the Supreme Court of Iowa and is factually
similar. Waukon Auto sued the bank for allowing its manager to cash checks for
himself, resulting in embezzlement. After the manager’s conduct was discovered, he
was fired and gave $5,800 to Waukon Auto to repay for some of the money he had
taken. Waukon Auto then sued the bank. Although the petition alleged $35,000 in
losses, only $25,160 of the total losses sustained were attributable to checks cashed
by the bank. The Supreme Court of Iowa held that the trial judge erred as a matter
of law when it applied a pro tanto reduction to setoff the $25,160 by the $5,800
repaid by the manager, observing that the bank “failed to show that without crediting
it with the $5800, Waukon Auto would receive more than full compensation for its
total damages.” Id. at 851.
Iowa’s pro tanto credit rule provides a dollar-for-dollar credit against a
plaintiff’s claim received in settlement from other tortfeasors. That rule, like
Florida’s, is designed to prevent unjust enrichment and a double recovery. Id. Since
the policy of the applicable Florida statutes is identical to the Iowa rule, this decision
3128.001/00154375.WPD-
19
should be persuasive. As Cornerstone will receive no windfall without the offset, no
offset should have been applied.
Next, Sompo Japan Ins., Inc. v. Nippon Cargo Airlines Company, Ltd.
(“NCA”), 522 F.3d 776 (7th Cir. 2007), also rejected setoff when the plaintiff will not
be fully compensated for its losses. Decided under Illinois law, the federal appeals
court expressly rejected the defendant’s argument that the prior settlements should
be applied to its capped liability.16 The court held that the defendant’s capped
liability of $74,450, in damages should not be reduced one penny by the settlement
amounts of the other tortfeasors ($108,500), which would have reduced its liability
to zero. The court explained that because the defendant’s liability was limited to
$74,450 and the total damages were $271,304 the plaintiff “will not recover even one
full compensation for its injuries, much less ‘double recovery.’” Id. at 788.17
Here, as in Waukon and Sompo, Cornerstone receives no unfair windfall
because the Schafer settlement combined with the Bank judgment (before offset) is
less than Cornerstone’s total loss. On the other hand, like the defendant in Sompo,
the Bank would receive a hefty windfall were this Court to accept its interpretation
16
This limit of liability was pursuant to the Warsaw Convention.
17
The combined recoveries of $108,500 + $74,450.84 = $182,950.84, which is less than
the plaintiffs’ total loss of at least $271,304.
3128.001/00154375.WPD-
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of Florida’s setoff statute or even the trial court’s. After all, the Bank’s liability is
already capped by the statute of limitations, much as the defendant in Sompo’s was
capped by the Warsaw Convention, thereby already offering a substantial shield from
responsibility for most of Cornerstone’s total proven loss.
If we substitute the Bank for the defendant in Sompo, and the facts here for the
facts there, the below passage from that opinion would read as follows:
[the Bank] is entitled to a setoff of settlement amounts, but
the amount must be subtracted from [Cornerstone’s] total
proven damages rather than from [the Bank’s] limited
liability under [the statute of limitations].”
Id. at 789. Cf. Blasland, Bouck & Lee, Inc. v. City of N. Miami, 283 F.3d 1286, 1296
(11th Cir. 2002)(“The Florida setoff statute allows an award to be reduced by a setoff
compensation ‘of the damages sued for’ not just the damages the party was entitled
to recover.”).
Cornerstone’s total proven damages are $750,140.36. Offsetting the Schafer
settlement of $319,625 from that figure still leaves Cornerstone with a loss of
$435,515.36. The total recovery from the Bank of $208,537.88 (before any setoff)
does not come close to creating a double recovery to Cornerstone. To the contrary,
adding the gross value of the Schafer settlement and the Bank judgment before offset,
3128.001/00154375.WPD-
21
Cornerstone is still out $226,977.48.18 Thus, no offset is necessary or proper.
iii.
Any claim that the literal reading of the Florida
setoff statute requires a dollar for dollar offset
against the amount determined collectible against
the Bank is absurd on these facts.
In its motion for rehearing below, (R.1028), the Bank argued that the plain
language of Section 768.041(2) required that the offset from the Schafer Settlement
Agreement be applied to the $146,743.23 sum (the base amount of its judgment
before interest) because that is the amount, “the plaintiff would otherwise be entitled
at the time of rendering the judgment.” (R.1028.) The quoted language is lifted from
Section 768.041(2). The Bank further argued that its interpretation was required to
avoid a windfall to Cornerstone.
Respectfully, the Bank’s argument is absurd. A similar argument was rejected
in Sompo, where a defendant unsuccessfully argued that its capped liability should
have been reduced to zero by offsetting settlements with other defendants, even
though the plaintiff would not be made whole with all recoveries combined.
There, as here, the defendant argued that the setoff statute provides that a
plaintiff’s settlement with a joint tortfeasor “reduces the recovery on any claim”
against the non settling defendant. 740 Ill. Comp. Stat. 100.2(c). In the defendant’s
18
As noted earlier, if interest calculations are removed, there is still no double recovery
without any offset.
3128.001/00154375.WPD-
22
view in Sompo,the term “recovery” like the phrase “the amount the plaintiff would
otherwise be entitled at the time of rendering the judgment” in Florida’s statute,
means the amount finally collected by a plaintiff. Ergo, the plain meaning of the
statute requires the court to apply the setoff against the amount finally collectible by
the plaintiff; in that case the limited recovery of $74,450.84 which would have
reduced the judgment to zero.
The Sompo federal appellate court held that in practice, the “plain meaning”
reading of the statute makes no sense. It favorably cited the trial court’s ruling on the
point:
[i]f the setoff were to be deducted from the “amount finally
collected” by a plaintiff ... the latter would no longer be the
amount “finally collected.” Applying the “plain meaning”
leads to an absurd result.
Sompo went on to cite to an Illinois state court case interpreting its similar
statute to Florida’s and noted that, “[t]he court focused on the plaintiff’s proven
damages, not the defendant’s ultimate liability.” Id. at 787. In further noting the
purpose of the statute is to avoid a double recovery, the court stated that, “[t]he setoff
right is plaintiff-centered, rather than focused on the unique characteristics of the
defendant.” Id. at 788.
Applied here, while Florida courts are loathe to disregard the plain meaning of
a statute, they will do so if a literal or ordinary meaning would lead to absurd results.
3128.001/00154375.WPD-
23
See State v. Burris, 875 So. 2d 408, 410 (Fla. 2004)(plain and ordinary meaning must
control, unless this leads to an unreasonable result or a result clearly contrary to
legislative intent); Las Olas Tower Co. v. City of Ft. Lauderdale, 742 So. 2d 308, 312
(Fla. 4th DCA 1999)(literal interpretation need not be given language used when to
do so would lead to an unreasonable conclusion, defeat legislative intent or result in
manifest incongruity).
The Bank’s interpretation of the statute – that the setoff applies dollar for dollar
against Cornerstone’s limited recovery against it – is truly absurd when applied here
– where Cornerstone suffered a loss from a series of separate conversions spanning
a period of 5 years – because it would result in a windfall to the Bank (reducing the
judgment to zero) while severely shortchanging its victim, Cornerstone. It appears
that the plain language of Section 768.041(2) presumed that the “damages sued for”
and “the amount of any judgment” would always be the same figure. This case
illustrates the fallacy of that presumption where the damages were not the result of
single tortious act, but of a series of acts spanning many years, some of which are
outside the statute of limitations against the Bank, but not Schafer.19
Section 768.041(2) is designed to avoid a double recovery, not punish plaintiffs
19
Either because Schafer waived the statute of limitation as part of the settlement to
avoid prison or her fraudulent concealment tolled its running. (In contrast, the Bank
engaged in no fraudulent conduct.)
3128.001/00154375.WPD-
24
who engage in conduct that is promoted and highly favored by courts, viz: settlement
of claims.20 The Bank’s literal interpretation would not in any way advance the policy
behind the statute and would degrade the equally important policy in favor of
settlement, by giving disincentive to settle suits involving multiple defendants for fear
of unwittingly compromising claims against other responsible tortfeasors.
The only sensible interpretation of the statute on these facts is that the offset
is calculated against Cornerstone’s entire claim, which was $750,140.36 with
prejudgment interest or $478,490 without it. When that calculation is made, the
amount recovered from the Bank, when combined with the Schafer settlement, does
not exceed Cornerstone’s loss and hence does not give rise to a double recovery; in
fact, if every penny is paid by Schafer and the Bank, Cornerstone is still not made
whole once, let alone twice.21
20
Arcadia Partners, L.P. v. Tompkins, 759 So. 2d 732, 739 (The purpose of 46.015(2)
is to prevent the award of double damages.); Gordon v. Marvin M. Rosenburg,
D.D.S., P.A, 654 So. 2d 643, 644 (Section 768.041 “was designed to prevent
duplicate or overlapping compensation for identical damages.”).
21
Again, the Schafer settlement valued by the trial judge at $319,625, when combined
with the liability pinned on the bank of $146,743.23 equals $466,368.23, which is
less that the principal amount of Cornerstone’s total loss of $478,490, if interest
calculations are ignored. And this is before the 10 year Schafer payout is reduced to
present value, which would only worsen the gap between the recovery and
Cornerstone’s total loss. Interest calculations, which are part of Cornerstone’s
compensatory damages, would also widen the gap.
3128.001/00154375.WPD-
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In sum, any interpretation of the setoff statutes to require a setoff of the Schafer
judgment against Cornerstone’s recovery against the Bank, as contrasted with
Cornerstone’ total proven loss – whether dollar for dollar as argued by he Bank or
pro rata as applied by the trial court – would yield an absurd result that does not
promote the purpose for the setoff statutes and which is to be scrupulously avoided
by basic interpretive principles.
CONCLUSION
For the foregoing reasons the Final Judgment should be reversed with
instructions to enter judgment in favor of Cornerstone and against the Bank for the
full $146,743.23 plus pre and post-judgment interest.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing was
furnished via e-mail to: Tricia J. Duthiers, Esq., Liebler, Gonzalez & Portuondo,
P.A., [email protected], 44 W. Flagler Street - 24th Floor, Miami, Florida 33131 and
Edward B. Cohen, Esq., Schwartz Gold Cohen Zakarin & Kotler, P.A.,
[email protected], 54 W. Boca Raton Blvd., Boca Raton, Florida 33432 on this
15th day of January, 2014.
YOUNG, BERMAN, KARPF & GONZALEZ, P.A.
Attorneys for Appellant
1101 Brickell Ave., Ste. 1400 N
Miami, Florida 33131
3128.001/00154375.WPD-
26
Tel: (305)945-1851
Direct: (305) 377-2291
Fax: (786)219-1980
E-mail: [email protected]
By: /s/ Andrew S.Berman
ANDREW S. BERMAN
Florida Bar No.: 370932
3128.001/00154375.WPD-
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