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Florida |
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764 So. 2d 878;
25 Fla. L. Weekly D 1879
TRANSPETROL, LTD., Appellant,
v. RODOLJUB RADULOVIC, RAMOIL HOLDING CO., LTD.,
RAMOIL MANAGEMENT CO., THOMAS O. KATZ, RUDEN,
McCLOSKY, SMITH, SCHUSTER & RUSSELL, P.A.,
and J.D. GILBERT & COMPANY, Appellees.
CASE NO. 4D99-2807
COURT OF APPEAL OF FLORIDA,
FOURTH DISTRICT
764 So. 2d 87825 Fla. L.
Weekly D 1879
August 9, 2000, Opinion Filed
SUBSEQUENT HISTORY:
[*1] Released for Publication August 25, 2000.
PRIOR HISTORY:
Appeal from the Circuit Court for the Fifteenth
Judicial Circuit, Palm Beach County; Edward
Fine, Judge; L.T. Case No. 96-6566 AI.
DISPOSITION: Affirmed.
COUNSEL: Richard
H. Levenstein of Kramer, Sewell, Sopko &
Levenstein, P.A., Stuart, and Timothy J. Carey
and Brigitte T. Nuss of Chapman and Cutler,
Chicago, Illinois, for appellant.
Sidney A. Stubbs of Jones Foster Johnston &
Stubbs, P.A., West Palm Beach, and John H. Pelzer
of Ruden, McClosky, Smith, Schuster & Russell,
P.A., Fort Lauderdale, for appellees.
JUDGES: WARNER,
C.J., GUNTHER and STEVENSON, JJ., concur.
OPINIONBY: WARNER
OPINION:
WARNER, C.J.
In this case of international
financial intrigue, the trial court dismissed
the complaint against the tax lawyers and accountants
who were sued for fraud and RICO violations.
We affirm the dismissal of the complaint, holding
that, as to the fraud count, appellant failed
to allege any reliance on the misrepresentations
in which the lawyers and accountants participated.
As to the RICO count, we hold that there were
no allegations that the lawyers and accountants
participated in the operation and management
of the "enterprise. [*2] "
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Appellant, TransPetrol,
a Bermudian corporation, was engaged in the
business of buying, selling, and shipping commodities
in international commerce. It entered into a
series of agreements to sell various commodities
with Ramoil Holding, the sole owner of which
was Rodoljub Radulovic, who also owned Ramoil
Management Co., another defendant. As part of
the sale of commodities, TransPetrol would also
assist Ramoil Holdings with financing the transactions
with third parties when Ramoil was unable to
provide letters of credit or bank guarantees.
The multiple transactions
recited in TransPetrol's complaint against Ramoil
and Radulovic commenced in 1992. Two sales of
oil and sugar occurred that year. TransPetrol
then loaned Ramoil substantial sums of money
between January and July of 1993, but was only
partially repaid by Ramoil's delivery of small
cargoes of oil. In November of 1993, TransPetrol
agreed to provide financial assistance to Ramoil
in connection with the acquisition and sale
of medical equipment and supplies and later
that month agreed to finance Ramoil in connection
with a contract of sale of sugar. Finally, in
December of 1993 TransPetrol sold oil to Ramoil
Holding. Payment [*3] was to be made in January
1994.
All of these transactions
resulted in a substantial debt owed by Ramoil
to TransPetrol. In order to collect it, TransPetrol
attached accounts of Ramoil and others in 1995.
Radulovic induced TransPetrol to lift the attachment
by offering a $ 220,000 payment and promises
to make payments by November 1, 1995. While
the $ 220,000 payment was made, the November
payment was not. Significant monies still remained
due.
TransPetrol alleged in its
complaint that commencing in November 1993 through
1996 Radulovic and Ramoil made a series of fraudulent
transfers of property to hide their assets from
creditors. The complaint alleges that appellee,
Thomas Katz, and his law firm Ruden, McClosky,
Smith, Schuster & Russell, P.A., as well
as appellee J.D. Gilbert & Company, an accounting
firm, participated in or aided the fraudulent
conveyances or "recharacterizations"
of millions of dollars of Ramoil Holding payments.
Specifically, the complaint alleges that fraudulent
tax returns were created in 1994 through 1996.
In 1996, the lawyers and accountants allegedly
characterized as a corporate investment a multi-million
dollar payment from Ramoil's accounts for Radulovic's
[*4] personal house. Later, the complaint alleges
that when Ramoil's other assets were sold and
the proceeds pocketed by Radulovic individually,
the lawyers and accountants "caused these
disbursements to be recast and mischaracterized"
with the intent to defraud the creditors of
Ramoil and Radulovic, including TransPetrol.
However, nowhere in the complaint is it alleged
that any of the claimed fraudulent financial
documents were ever delivered to TransPetrol,
or that they were created prior to any of the
transactions from which the debt to TransPetrol
arose. Nevertheless, TransPetrol alleges that
had it been aware of the multiple "illegal
acts" by Ramoil and Radulovic, it would
have discontinued business with Ramoil holding
and would not have agreed to lift the attachment
it had secured in 1995.
The complaint names the lawyers
and the accountants in two counts: one for common
law fraud and one for RICO violations. The trial
court dismissed the fraud count because it failed
to show reliance on the part of TransPetrol
on the various documents prepared by the lawyers
and accountants on which the claim of fraud
was based. While TransPetrol alleges that the
defendants fraudulently omitted to [*5] advise
TransPetrol of their unlawful conduct, no duty
is alleged. A defendant's knowing concealment
or non-disclosure of a material fact may only
support an action for fraud where there is a
duty to disclose. See Don Slack Ins., Inc. v.
Fidelity & Cas. Co. of N.Y., 385 So. 2d
1061 (Fla. 5th DCA 1980). "Such duty arises
when one party has information that the other
party has a right to know because of a fiduciary
or other relation of trust or confidence between
them." State v. Mark Marks, P.A., 654 So.
2d 1184, 1189 (Fla. 4th DCA 1995), approved
by, 698 So. 2d 533 (Fla. 1997)(citation omitted).
In the instant case, there is no confidential,
contractual, or fiduciary relationship between
TransPetrol and the lawyers and accountants.
They represented Ramoil and Raduolvic, not TransPetrol.
There are no allegations to support a relationship
which would give rise to a duty to disclose.
TransPetrol claims that the
lawyers' and accountants' liability for fraud
is predicated upon their knowing participation
in the scheme of Ramoil and Radulovic, not their
independent duty owed toward TransPetrol. The
cases upon which it relies, however, are [*6]
distinguishable. In Nessim v. DeLoache, 384
So. 2d 1341 (Fla. 3d DCA 1980), a seller represented
that the yacht it was selling was in good condition,
despite knowing that it had latent defects.
The buyer relied on the representation, purchased
the yacht, and then sued for fraud when he discovered
the defects. The court held that an action for
fraud exists where one party has superior knowledge
and intentionally fails to disclose a material
fact. See id. at 1344. Unlike the present case,
the parties in Nessim were in the relationship
of buyer and seller, and the seller knew and
intended the buyer to rely on his representation.
Similarly, in Nicholson v. Kellin, 481 So. 2d
931 (Fla. 5th DCA 1985), a buyer/seller relationship
existed, and the claim was based upon a material
misrepresentation of fact, not a duty to disclose.
Finally, TransPetrol relies
on Nerbonne, N.V. v. Lake Bryan International
Properties, 689 So. 2d 322 (Fla. 5th DCA 1997),
in which a party was held liable for participating
in a fraudulent land sale scheme, noting that
"parties concurring with promoters in defrauding
a corporation are liable for [*7] the resulting
loss." 689 So. 2d at 325 (citations omitted).
However, in Nerbonne, the injured plaintiff
alleged that he had relied upon a stock offering
memo, the falsity of which was known by the
defendants, both of which participated in the
fraud. In the present case, TransPetrol did
not allege that it relied on anything drafted
or prepared by the lawyers and accountants.
Nerbonne is thus distinguishable.
TransPetrol failed to allege
any duty to it on the part of the lawyers and
accountants to disclose the alleged falsity
of the financial documents, nor did it show
any reliance by TransPetrol on the alleged scheme
of fraudulent transfers and the documents created
by it. Furthermore, the alleged false financial
documents were created after TransPetrol had
incurred the losses to Ramoil through the commodities
transactions. Thus, the complaint failed to
state a cause of action for fraud.
The trial court also dismissed
the count alleging RICO violations based upon
the economic loss rule. As the appellees concede,
the rule does not apply where there is no contract
between the parties in litigation. See Southland
Constr., Inc. v. Richeson Corp., 642 So. 2d
5, 8 (Fla. 5th DCA 1994). [*8] In the instant
case, there was no contractual relationship
between TransPetrol and the lawyers or accountants.
However, we affirm the trial
court on a "right for the wrong reason"
analysis, because the complaint fails to properly
plead a cause of action against the lawyers
and accountants. The elements of a RICO civil
action are: 1) violation of 18 U.S.C. §
1962; 2) injury to business or property; and
3) that the violation caused the alleged injury.
See Bill Buck Chevrolet, Inc. v. GTE Florida,
Inc., 54 F. Supp. 2d 1127, 1132 (M.D. Fla. 1999),
aff'd by, 216 F.3d 1092 (11th Cir. 2000). While
the complaint is sufficient as to the first
two elements, we conclude that it has not alleged
that the racketeering activity was the proximate
cause of the injury suffered by TransPetrol.
See Beck v. Prupis, 162 F.3d 1090, 1095 (11th
Cir. 1998), aff'd by, 120 S. Ct. 1608 (2000).
In Beck, the president of
the company filed a RICO action against directors
of the company claiming that he was caused to
make several unwise financial decisions resulting
in injury because, in part, the defendants failed
[*9] to inform him of their illegal activities
within the corporation and their creation of
false financial statements for the corporation.
In affirming summary judgment for the directors,
the Eleventh Circuit noted that failure to inform
the president of illegal activities was not
sufficient to show an intent to defraud Beck.
More particularly, in addressing proximate cause
the court stated:
also, Beck has presented no
evidence that this omission proximately caused
his losses. He has repeatedly stated that had
he known about the illegal activities, he would
not have made the same financial decisions.
As noted above, however, this type of "but
for" causation is insufficient to sustain
a claim of fraud. Instead, proximate cause is
required, meaning that this omission must have
been a "substantial factor" in his
decisionmaking. See Cox v. Administrator United
States Steel & Carnegie, 17 F.3d 1386, 1399
(11th Cir. 1994); see also Brandenburg v. Seidel,
859 F.2d 1179, 1189 (4th Cir. 1988) (stating
that the inquiry in determining the existence
of proximate cause is "whether the conduct
has been so significant and important a cause
that the defendant should be [*10] held responsible"
(quoting W. Page Keeton et al., Prosser and
Keeton on the Law of Torts § 42 (5th ed.
1984))).
162 F.3d at 1097. In addition, the court held
that creation of false financial documents could
not serve as the basis of a claim for fraudulent
inducement that would support the RICO proximate
cause requirement because there was no showing
that these documents were intended to induce
Beck in his financial dealings. Specifically,
the court noted that Beck had failed to show
that he "actually saw, let alone relied
upon, any false financial statements prior to
making his financial decisions." Id. (footnote
omitted).
Likewise, in this case TransPetrol
never alleged that it relied upon any of the
false statements created by the parties in making
its financial decisions. The allegations of
the complaint show that the financial decisions
to engage in business with Ramoil were made
prior to the involvement of the lawyers and
accountants. There is no allegation that TransPetrol
saw any of the documents it contends are false
and fraudulent, or that those documents were
created to induce TransPetrol to take any action.
Therefore, we conclude in line with Beck that
the [*11] complaint fails to state a cause of
action for RICO violations.
Affirmed.
GUNTHER and STEVENSON, JJ., concur
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