Motion,Ex Parte: Gayla Susan Levin Plaintiff vs. TD Bank NA, et al Defendant

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                                *** FILED: BROWARD COUNTY, FL HOWARD FORMAN, CLERK 5/3/2013 5:31:11 PM.****

Electronically Filed 05/03/2013 05:31:12 PM ET

IN THE CIRCUIT COURT OF THE
17TH JUDICIAL CIRCUIT, IN AND FOR
BROWARD COUNTY, FLORIDA

CASE NO.: 12-35089 (07)
(Complex Litigation Unit)

GAYLA SUSAN LEVIN,

Plaintiff,
Vv.

TD BANK, N.A; SCOTT W. ROTHSTEIN;
FRANK A. SPINOSA; and ROSANNE
CARETSKY,

Defendants.
/

PLAINTIFF’S OPPOSITION TO DEFENDANT’S, TD BANK, N.A., MOTION TO
DISMISS PLAINTIFF’S COMPLAINT

I. Introduction

In response to the extensive allegations in Plaintiff's 47 page Complaint, TD Bank’s new
counsel submits a memorandum that is little more than a litany of arguments previously rejected
by this Court. In Razorback Funding, No. 09-062943, this Court reviewed hundreds of pages of
legal arguments and conducted extensive oral argument and decided upon the necessary elements
for each of the alleged causes of action.’ Plaintiff alleges only 2 claims against TD Bank (and its
agents Frank Spinosa and Rosanne Caretsky): (1) civil conspiracy, and (2) aiding and abetting
fraud. TD Bank’s prior counsel made near identical arguments regarding the requirements of

“reliance” and “proximate cause” for these claims which the Court summarily rejected:

' For example, for some claims (that have not been asserted in this case) such as breach of fiduciary duty, Plaintiff
must show that TD Bank owed the Plaintiff a duty.

-1-TD BANK: “The problem is ... 9.5 million dollars was invested before
March 27" ... how in the world is there reliance; how in the world is
there a direct fraud or indirect fraud by TD; what did they rely on?”. . . .

THE COURT: What I've got from your argument was that no direct
statements were made or representations made or account statements
furnished to any of the Plaintiffs. . .

PLAINTIFFS’ COUNSEL: So, it's kind of become an urban myth in this
case and the Defendants are pleased to repeat it. You heard it from Mr.
Tew yesterday and from both Defendants today that look, if you don't
have direct contact with the Bank or with a hedge fund that somehow
you're not injured by them. But, Judge, that's just not the case. They
joined the conspiracy and you're injured by the conspiracy, then they're
responsible. . . .

THE COURT: ... The point was made that they pled actual knowledge.
And they've pled it in the context of, with all this other evidence, yes, it
may be viewed as constructive as they had to have known, not should
have known. A fair reading of this is they must have known, so
therefore, they're alleged that they knew. And it's for the fact finder to
ultimately conclude who to believe and not to believe. If the trial
unfolds and those who are accused of knowingly participating deny it, it's
for the fact finder under all the facts and circumstances to determine the
truthfulness of the denial. The only person who really knows the truth is
the person who's denying it... .

TD BANK: ... I don't believe, ... they have actually pled actual
knowledge on behalf of the Bank. . . .

THE COURT: They have. There are other places it can be also
interpreted as constructive knowledge, no question. They had to have
known or they should have known. ... but if you put it altogether, that's
what they are saying: Under all these circumstances they had to have
known, ergo they knew. And of course, many of the Defendants are
telling me, no, they didn't know, they were just sent in as investors who
lost their money. All of that, if this is not resolved amicably or in
another court, by agreement or otherwise, will be decided by the fact
finder. Most likely a jury. And so far I haven't heard anything of that, so
Tassume it's going to be by jury... .

See Razorback Hr’g on Mot. to Dismiss, November 19, 2010.
Indeed, after nearly 3 % years of litigation, TD still labors under the misapprehension that

the secondary claims for aiding and abetting and civil conspiracy require some type of direct

-2-connection between a plaintiff and a secondarily liable defendant. (Def’s Mem. in Support of
Mot. to Dismiss at 9-10(hereinafter “Def’s Mem.”)). In so doing, TD ignores the simple truth
that “duty” or “direct connections” are nowhere to be found in the elements for the claims of
aiding and abetting fraud or civil conspiracy to defraud, which are set forth in sections II-B and
II-C, respectively. Additionally, in light of the detailed allegations of the Complaint, TD’s
arguments regarding the issue of scope of employment and the allegations of actual knowledge
are appropriate in closing arguments to a jury, not in support of a motion to dismiss where all of
those allegations are taken as true. Accordingly, TD’s motion must be denied in its entirety.
Il. ARGUMENT

In ruling on the TD’s motion to dismiss, all of the factual allegations in the Complaint
must be accepted as true. Gomez v. Fradin, 41 So. 3d 1068, 1070 (Fla. 4th DCA 2010); Smith v.
2001 S. Dixie Highway, Inc., 872 So. 2d 992, 993 (Fla. 4th DCA 2004). The Court must also
draw all reasonable inferences in favor of the Plaintiff. Francis v. Sch. Bd. of Palm Beach
County, 29 So. 3d 441, 442-43 (Fla. 4th DCA 2010); Goodall v. Whispering Woods Ctr., L.L.C.,
990 So. 2d 695, 697 (Fla. 4th DCA 2008). Despite these well-established principles, TD often
denies or ignores the factual allegations of the Complaint, or argues that the evidence permits
alternative inferences. Such alternative inferences are for the jury and are inappropriate for
determination on a motion to dismiss. Applying the proper standards here, Defendant’s motion
to dismiss must be denied.

A. The Complaint Properly Alleges that the Acts of TD Bank’s Employees were
Committed Within the Scope of Their Employment

As a threshold matter, it is axiomatic that whether the tortious acts of employees fall
within their scope of employment is an issue that should be decided at trial by a jury rather than

the court at summary judgment, let alone at the pleadings stage. See Carnival Corp. v. Hertz

-3-Corp., 748 So. 2d 323, 325 (Fla. 3d DCA 1999) (“Generally, whether the tortious acts of an
employee fall within the scope of employment is an issue to be determined by the jury”); Woods
v. City of Miami, 646 So. 2d 836 (Fla. 3d DCA 1994) (citing Burroughs Corp. v. American
Druggists Ins. Co., 450 So.2d 540, 544 (Fla. 2d DCA 1984) for the proposition that, as to the
issue of scope of employment, “only where the facts are completely settled and the inferences to
be drawn from the facts lead to but one conclusion can it be said that the issue is one which may
be decided by the court as a matter of law”).

With the foregoing in mind, at the very least Plaintiffs allegations that Frank Spinosa,
Rosanne Caretsky, and Jennifer Kerstetter were acting within the scope of their employment with
TD when aiding and abetting Rothstein’s scheme are more than sufficient to survive a motion to
dismiss. TD myopically hones in on a few factors showing personal benefit to Spinosa and
Caretsky and essentially ignores the benefit it received by having $6.8 billion flowing through
the Bank as a result of Rothstein’s Ponzi. The test for determining if an employee’s acts were
done within the course and scope of their employment is whether the employee “(1) was
performing the kind of conduct he was employed to perform, (2) the conduct occurred within the
time and space limits of the employment, and (3) the conduct was activated at least in part by a
purpose to serve the employer.” Gowan v. Bay County, 744 So. 2d 1136, 1138 (Fla. Ist DCA
1999) (emphasis added). Under Florida law, the allegation Spinosa and Caretsky received
kickbacks on the side is in no way determinative of whether their illegal activities were done at
least in part to further the interests of TD Bank. This is particularly true in light of the allegation

that they did not even receive these kickbacks or “gifts” until well after becoming accomplices toRothstein’s scheme.”

Regardless of the timing of their gifts, Florida law makes clear that a personal benefit for
an employee does not in and of itself mean that the misconduct was not motivated in part to
serve the employer’s interests. For example, in Salit v. Ruden, McClosky, Smith, Schuster &
Russell, P.A., 742 So. 2d 381 (Fla. 4th DCA 1999), the court held that allegations of a direct
benefit to an employee from their misconduct does not negate allegations that the actions were
done, at least in part, for the benefit of the employer. “It is not a fatal repugnancy in pleading to
say that an employee realizes personal benefit from his conduct, while at the same time
benefitting, at least in part, his employer. That the employee personally profits from his actions
does not negate, in all circumstances, the vicarious liability of the employer for the acts of the
employee.” Jd. at 385. See also United States v. Gold, 743 F.2d 800, 823 (11th Cir. 1984)
(affirming the jury instruction of the district court that “[t]o be acting within his employment, the
agent first must have intended that his act would have produced some benefit to the corporation
or some benefit to himself and the corporation second”) (emphasis added).

Moreover, although the pleadings need only show some benefit to an employer for scope

of employment purposes, the allegations in the case sub judice unquestionably demonstrate that,

? Although beyond the four corners of the Complaint, the reason this issue should be left to a jury is best illustrated
by the deposition of John M. Tolomer, TD former Florida Market President. Tolomer testified in the Razorback
case that Spinosa’s conduct in cultivating and maintaining the Bank’s relationship with Rothstein was decidedly
within his scope of employment:

Q. And you’re familiar with [RRA] and Mr. Spinosa’s efforts to develop them as a client for the
bank?

A. Yes.
Q. Was that the type of marketing that he was typically doing for the bank?
A. Yes.

Q. In other words, was there anything out of the ordinary that Spinosa was doing with respect to
that client as far as your concerned?

A. No.if anything, TD’s interests were paramount to those of its employees and TD received far more

pecuniary value from the illicit activities than the token gifts bestowed upon Spinosa and

Caretsky:

Over $6.8 billion Ponzi dollars flowed through Rothstein/RRA’s TD Bank
escrow, trust, and operating accounts. (Comp. § 23.)

During Rothstein’s two-year relationship with TD Bank, the Bank processed over
9000 fraudulent Rothstein-related transactions totaling over $6.8 billion, including
nearly $1.7 billion in Rothstein-related intra-bank transfers, noticeably beyond the
normal banking practices of a law firm the size of RRA. (Comp. { 67.)

In the relevant period, compensation of TD Bank’s executives was tied to the
level of client deposits. (Comp. § 54.)

With the help of Rothstein’s massive deposits—consisting primarily of stolen
investor money—TD Bank was able to set a company record for deposits in
Florida. (Comp. 59.)

TD Bank had a financial as well as reputational motivation for participating in the
Rothstein Ponzi Scheme. Rothstein’s infusion of investor money into TD Bank
inflated the Banks’ assets, earned it fees, and enhanced its reputation in the
community, especially with the high net-worth people Rothstein associated with
during this time. In addition, TD Bank executives earned bonuses based on the
large deposits Rothstein ran through the Bank. (Comp. § 75.)

The cases relied upon by TD are inapposite. First, none of TD’s cases were decided at

the motion to dismiss stage. Moreover, all of the Florida appellate court cases relied upon by TD

are factually distinguishable as they deal with an employee’s commission of a sexual assault that

was not even arguably committed in part to further the interests of the employer. See Agriturf

Mgmt., Inc. v. Roe, 656 So. 2d 954 (Fla. 2d DCA 1995) (sexual assault committed by employee

of landscaping company “did not occur in furtherance of the business objectives” of the

employer); Goss v. Human Services Associates, Inc., 79 So. 3d 127, 132 (Fla. Sth DCA 2012)

(“sexual assault was not within the course and scope of . . . employment because the act was not

in furtherance of [perpetrator’s] employment”); Iglesia Cristiana La Casa Del Senor, Inc. v.

L.M., 783 So. 2d 353, 357 (Fla. 3d DCA 2001) (no evidence introduced that sexual assault by a

-6-pastor was at least in part motivated by his desire to serve the church). TD’s reliance on Roberts
and Commerce Bank of St. Joseph, from New York and Kansas, respectively, for the sweeping
proposition that an employee who accepts a bribe is never acting within the scope of their
employment is likewise misplaced because that is simply not the law in Florida. See Salit, supra.
Those cases also do not contain either allegations of, or evidence supporting, a benefit to the
employer such as that alleged in Plaintiff's Complaint.

TD places its greatest reliance on the unreported decision of the Third Circuit in Estate of
Beim v. Hirsch, 121 Fed. Appx. 950 (3d Cir. 2005), which, according to TD, contains “nearly
identical allegations” Like TD’s other authority, that case was not decided on a motion to
dismiss, but on summary judgment. Furthermore, the “nearly identical” allegations in that case
fail to even suggest that the employee’s conduct was motivated in part by serving the employer.
Conversely, the instant case concerns an employer who encouraged its executives through
lucrative bonuses to increase deposits. Simply put, increasing deposits was an essential
component to TD’s employees’ jobs. Through the misconduct of Spinosa, Caretsky, and
Kerstetter, in the performance of that job, TD received the benefit of hundreds of millions of
dollars in deposits running through its accounts.

Finally, in its memorandum of law in support of its motion to dismiss, TD ignores the
very caselaw to which it cites in failing to mention that the requirement that an employer be
motivated in part by the employer’s interests is relaxed where “the employee purported to act on
behalf of the employer or when the employee was aided by the agency relationship.” See Goss,
79 So. 2d at 132. See also Restatement (Second) of Agency § 219 (1958) (“A master is not
subject to liability for the torts of his servants acting outside the scope of their employment,

unless: . . . he was aided in accomplishing the tort by the existence of the agency relation”).B. The Complaint Properly Alleges Aiding and Abetting Fraud

The case law makes clear that causes of action based on aiding and abetting are
recognized in the state of Florida. See Witt v. La Gorce Country Club, Inc., 2009 WL 1606437
(Fla. 3d DCA June 10, 2009) (aiding and abetting fraud in the inducement); O’Halloran v.
PricewaterhouseCoopers LLP, 969 So. 2d 1039 (Fla. 2d DCA 2007) (aiding and abetting breach of
fiduciary duty); Morgan Stanley & Co. Inc. y. Coleman (Parent) Holdings Inc., 955 So. 2d 1124
(Fla. 4th DCA 2007) (aiding and abetting fraud); Wrinkle v. Cooper, 885 So. 2d 957 (Fla. lst DCA
2004) (aiding and abetting breach of fiduciary duty); Rohlwing v. Myakka River Real Properties,
Inc., 884 So. 2d 402 (Fla. 2d DCA 2004) (aiding and abetting breach of fiduciary duty and aiding
and abetting fraud); Acadia Partners, L.P. v. Tompkins, 759 So. 2d 732 (Fla. 5th DCA 2000) (aiding
and abetting fraudulent transfer).

The cases in which the courts take the time to analyze the issue likewise support the
legitimacy of aiding and abetting causes of action in Florida. For example, in ZP No. 54 Limited
Partnership v. Fidelity and Deposit Co. of Maryland, 917 So. 2d 368 (Fla. 5th DCA 2005), the
court, after examining the case law, including Freeman v. First Union Nat'l Bank, 865 So. 2d 1272
(Fla. 2004), determined that it was likely that aiding and abetting fraud was a valid cause of action
in Florida. Jd. at 371-72. In Amerifirst Bank v. Bomar, 757 F. Supp. 1365 (S.D. Fla. 1991), the
court unequivocally found that “the majority of case law, including that in Florida, recognizes a
cause of action for aiding and abetting common law torts, such as aiding and abetting breach of
fiduciary duty.” Jd. at 1380 (citing Ft. Myers Development Corp. v. McWilliams Co., 122 So. 264,
268 (Fla. 1929)). In the face of this abundance of authority, Barnett cites to but one case, which
does not even support his tenuous position. Based on the forgoing, it is apparent that Barnett’s

argument that aiding and abetting claims are not recognized in Florida is without merit.

-8-The elements of aiding and abetting fraud are: (1) an underlying fraud; (2) the
defendant’s knowledge of wrongful conduct; and (3) the defendant’s substantial assistance to
advance the wrongful conduct. See ZP No. 54 Ltd. P’ship v. Fidelity & Deposit Co., 917 So. 2d
368, 372 (Fla. 5th DCA 2005); In re Caribbean K Line, Ltd., 288 B.R. 908, 919 (S.D. Fla. 2002).
The underlying fraud by Rothstein is beyond dispute. The Complaint also well establishes TD’s
knowledge and substantial assistance.

1. Plaintiff Properly Pled the Underlying Fraud

Defendant appears to confuse the pleading requirements for aiding and abetting fraud and
civil conspiracy with those for the underlying tort upon which those secondary liability claims
are based. TD claims that Plaintiff’s allegations are insufficient because, other than one group of
Plaintiffs, they do not allege reliance on any representations made by TD or its employees. As
discussed in greater detail in section II-C, infra, there is simply no requirement that a plaintiff
bringing claims for aiding and abetting or civil conspiracy have a direct connection with an
allegedly secondarily liable defendant. Moreover, the underlying tort for fraud that must be
specifically pled is that committed by the primary tortfeasor, in this case Scott Rothstein, rather
than a fraud committed by TD, the secondarily liable accomplice. Accepting TD’s logic,
Plaintiff would have been required to allege that TD Bank aided and abetted its own fraudulent
misrepresentation. This is not only unsupported in the law, but wholly illogical.

As for Rothstein’s underlying fraud, there can be no doubt that Plaintiff's Complaint
satisfies the pleading requirements of Fla. R. Civ. P. 1.120. It is difficult to imagine how
Plaintiff's allegations relating to the Ponzi scheme could be any more specific. In fact, TD does
not even challenge the sufficiency of Plaintiff's allegations relating to Rothstein’s fraud. Thus,
the only issue is whether TD aided and abetted Rothstein or agreed to and did something to assist

him.Plaintiff properly pled the underlying cause of action for fraud committed by Scott
Rothstein. A cause of action for fraudulent misrepresentation requires allegations that: (1) the
perpetrator made a false statement concerning a material fact; (2) the perpetrator knew that the
representation was false; (3) the perpetrator intended that the representation induce the plaintiff
to act on it; (4) the plaintiff's reliance was justified; and (5) the plaintiffs reliance on the
representation caused damages. Johnson v. Davis, 480 So. 2d 625, 627 (Fla. 1985); Assad v.
Mendell, 511 So. 2d 682, 683 (Fla. 3d DCA 1987). In section VII of the Complaint, the Plaintiff
alleged facts in compliance with the specificity requirements of Rule 1.120(b) by “including who
made the false statement, the subject of the false statement, the time frame in which it was made
and the context in which the statement was made.” Bankers Mut. Capital Corp. v. U.S. Fid. &
Guar. Co., 784 So. 2d at 490; see also Cedars Healthcare Group, Ltd. v. Mehta, M.D., 16 So. 3d
914, 918 (Fla. 3d DCA 2009); Williams v. Bear Stearns & Co., 725 So. 2d 397, 400-01 (Fla. Sth
DCA 1998).

The Plaintiff's allegations have put TD on notice of the specific misrepresentations which
form the basis for their underlying claims of fraud against Scott Rothstein. That Rothstein
sometimes used intermediaries, such as Banyon or Curtis Lyman to deliver these representations,
either knowingly or unknowingly, is immaterial. “It is not necessary that a direct statement be
made to [a] representee in order to give rise to the right to rely upon the statement, for it is
immaterial whether it passes through a direct or circuitous channel in reaching him, provided it
be made with the intent that it shall reach him and be acted on by the injured party.” Harrell v.
Branson, 344 So. 2d 604, 606 (Fla. Ist DCA 1977); see also In re U.S. Oil & Gas Litig., No. 83-
1702-Al-CIV, 1988 WL 28544, at *13 (S.D. Fla. February 8, 1988) (citing Harrell for the

proposition that it is “not necessary for fraud liability that [a] direct statement be made to

-10-representee in fraud action”).

This is true even if the person making the false statement does not know who the specific
representee will prove to be. In First Florida Bank, N.A. v. Max Mitchell & Co., 558 So.2d 9
(Fla. 1990), the Florida Supreme Court, citing the Restatement, recognized that:

[I]n the case of the fraudulent misrepresentation . . . it is not necessary that the
maker should have any particular person in mind as the intended, or even the
probable, recipient of the information. In other words, it is not required that the
person who is to become the plaintiff be identified or known to the defendant as
an individual when the information is supplied. It is enough that the maker of the
representation intends it to reach and influence either a particular person or
persons, known to him, or a group or class of persons, distinct from the much
larger class who might reasonably be expected sooner or later to have access to
the information and foreseeably to take some action in reliance upon it. It is
enough, likewise, that the maker of the representation knows that his recipient
intends to transmit the information to a similar person, persons or group. It is
sufficient, in other words, insofar as the plaintiffs identity is concerned, that the
maker supplies the information for repetition to a certain group or class of persons
and that the plaintiff proves to be one of them, even though the maker never had
heard of him by name when the information was given.

Id. at 15. Thus, the Plaintiff has properly alleged fraudulent misrepresentations either by
Rothstein directly or through intermediaries.

2. TD had actual knowledge of Rothstein’s misconduct.

To show knowledge of fraud in establishing liability for aiding and abetting, the plaintiff
need only allege that the defendant had a general awareness that his role was part of an overall
activity that is improper. Woods y. Barnett Bank of Fort Lauderdale, 765 F.2d 1004, 1009 (11th
Cir. 1985). Moreover, under Florida law, knowledge may be generally averred. See Fla. R. Civ.
P. 1.120(b) (“Malice, intent, knowledge, mental attitude, and other condition of mind of a person
may be averred generally”); Carida v. Holy Cross Hosp., Inc., 427 So. 2d 803, 806 n.5 (Fla. 4th
DCA 1983). In examining a defendant’s general awareness of wrongdoing, “the surrounding
circumstances and expectations of the parties [are] critical, because knowledge of the [improper

conduct] must usually be inferred.” Woods, 765 F.2d at 1009 (citing Woodward v. Metro Bank
-ll-of Dallas, 522 F.2d 84, 95-96 (Sth Cir. 1975)). In other words, knowledge is established by
circumstantial evidence.

In this context, one way knowing assistance can be inferred is from atypical banking
transactions. Woodward, 522 F.2d at 97 (“In a case combining silence/inaction with affirmative
assistance, the degree of knowledge required should depend on how ordinary the assisting
activity is in the business involved.”). As the court in Woods explained:

Although it is perhaps a common practice for a bank to write such a reference for

one of its customers, the act of issuing a letter containing statements of which the

writer has no knowledge, without even minimal investigation to determine

whether its contents are accurate, solely for the purpose of ‘currying favor’ with a

good client, can hardly be regarded as the ‘daily grist of the mill.’ Moreover, [the

bank employee] was aware that the [party] receiving this letter would rely on this

letter, treating it as an expression of confidence.

765 F.2d at 1012; see also Lerner v. Fleet Bank, N.A., 459 F.3d 273, 295 (2nd Cir. 2006);
Woodward, 522 F.2d at 96-97; Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1121
(C.D. Cal. 2003); Smith v. First Union Nat’l Bank, No. 00-4485, 2002 WL 31056104, at *2-4
(S.D. Fla. Aug. 23, 2002) )(actual knowledge proven with allegations of “atypical” banking
activities including a pattern of large transfers between accounts, large size of the accounts and
the tremendous increase in volume of the transfers); Benson v. JPMorgan Chase Bank, Nos. C-
09-5272 EMC, C-09-5560 EMC, 2010 WL 1526394 (N.D. Cal. 2010). Beyond atypical
transactions, Plaintiff specifically alleges actual knowledge, which is shown by TD’s clear
opportunity and strong financial motive to aid the principal. Wight v. BankAmerica Corp., 219
F.3d 79, 91 (2d Cir. 2000) (citing Cohen v. Koenig, 25 F.3d 1168, 1173 (2d Cir. 1994) and
Turkish v. Kasenetz, 27 F.3d 23, 28 (2d Cir.1994)).

For example in Neilson, the district court found that the plaintiff had sufficiently alleged

“actual knowledge” to defeat a motion to dismiss where plaintiff alleged the bank co-mingled

-12-investors money, accepted bribes, allowed hundreds of thousands of dollars in overdrafts, and
treated the accounts as “one common pool of fungible and liquid assets.” 290 F. Supp. 2d at
1110. Similarly, in Benson, the district court denied the bank’s motion to dismiss finding
“actual knowledge” based on similar allegations to the present case. 2010 WL 1526394. There,
the bank had a “close relationship” with the Ponzi schemer, the account was among the largest
handled by the branch, the bank assigned senior bank officers to assist with deposits into the
account, and the events occurred at a local rather than large national branch of the bank. /d. at *4.

Applying these principles, the Complaint comfortably alleges knowledge. TD Bank’s
knowledge is not only alleged but specifically shown by numerous atypical activities and
transactions to assist Rothstein:

e Prepared fraudulent “lock letters” as part of the Ponzi Scheme

e Prepared letters legitimizing fraudulent bank account statements used in the Ponzi
Scheme

¢ Hosted fraudulent Ponzi Scheme investor “shows” at TD Bank branches
¢ Gave Rothstein blank TD Bank letterhead to use in the Ponzi Scheme
¢ Lied to investors and others to help keep the Ponzi Scheme going

e Ignored fraud in the Rothstein/RRA accounts despite receiving a huge number of
fraud alerts on those accounts

© Opened dozens of Rothstein/RRA accounts without determining the true purpose
of the account or type of account

© Opened new Rothstein/RRA accounts without complying with TD Bank’s “New
Application Management System” (“NAMES”) and “Know Your Customer”
requirements

e “Released” Rothstein/RRA deposits from fraud review, despite AML and fraud
alerts

¢ Cleared Rothstein/RRA deposits almost instantly, in violation of TD Bank policy

¢ Ignored thousands of suspicious deposits and withdrawals greater than $10,000

-13-e Never reviewed $1.4 billion in extremely questionable intra-account transfers
made by Rothstein

e Allowed Rothstein to cover massive overdrafts with transfers from RRA trust
accounts

¢ Concealed from Rothstein investors the fact that their accounts contained
insufficient funds

¢ Facilitated large transfers by Rothstein from RRA trust accounts to operating
accounts

e Facilitated transfers by Rothstein between RRA trust accounts, though each
account had a different trust beneficiary

e Facilitated large wire-transfers from Rothstein/RRA accounts though they
contained insufficient funds

¢ Approved and completed an illegal $16,000,000 wire-transfer of investor money
in October 2009 to then-fugitive Rothstein in Morocco

(Comp. { 13.)

TD Bank’s knowledge is likewise demonstrated by the unusually high financial benefit it
received as a result of the scheme. TD Bank was the financial epicenter of the Ponzi scheme.
Hundreds of millions, if not billions, of Ponzi dollars flowed through RRA’s TD Bank escrow,
trust, and operating accounts. By way of example, from February 17, 2009 to February 19, 2009,
40 transfers were made, totaling approximately $50 million; from April 13, 2009 to April 14,
2009, 37 transfers were made, totaling approximately $20 million; and from July 24, 2009 to
July 31, 2009, 71 transfers were made, totaling approximately $40 million. (Comp. § 70.)
Plaintiff further alleges that in October alone, more money passed through RRA’s Fort
Lauderdale based trust accounts at TD than most bank braches are likely to see in a decade. Id. J
11.) Most tellingly, in the summer of 2009, Rothstein delivered at least $50,000.00 and
$25,000.00 in cash to Spinosa and Caretsky, respectively, for their continued cooperation and

participation in the Ponzi scheme. Jd. § 103.

-14-The cases cited by the TD Defendants bear little resemblance to this case, beyond the fact
that they involve banks as defendants. For example, the TD Defendants rely upon the recent
decision in MLSMK Inv. Co. v. JP Morgan Chase & Co., 737 F. Supp. 2d 137 (S.D.N.Y. 2010).
In the MLSMK case, the plaintiff had failed to plead constructive knowledge, let alone actual
knowledge, in support of its claim for aiding and abetting breach of fiduciary duty. Jd. at 145.
Unlike the plaintiffs in that case, the Plaintiff here alleges actual fraudulent representations by
TD’s employees over a sustained period of time. Furthermore, the Plaintiff in this case alleges
bribes -- specific payments to multiple TD employees. Nothing in the MLSMK allegations even
comes close to resembling the extraordinary fraudulent conduct of the TD Bank Defendants.

3. TD Bank and its Employees substantially assisted Rothstein’s fraud.

TD Bank’s employees were not merely derelict bank officials but were active participants
in Rothstein’s Ponzi scheme. The affirmative acts of the TD Defendants in the scheme establish
substantial assistance. Substantial assistance of a fraud is a fact-based inquiry based on the
totality of circumstances. Rudolph v. Arthur Andersen & Co., 800 F.2d 1040, 1045-46 (11th Cir.
1986); E.S. Bankest, L.C., v. BDO, No. 04-17602-BKC-AJC, 2010 WL 1417732 at *20 (S.D.
Fla. April 6, 2010). For example, in Woods the court found that the vice president of a bank
provided substantial assistance when he wrote, without investigation, a letter of recommendation
that he knew would be relied upon by the recipient as an expression of confidence in an
underwriting firm that, ultimately, was engaged in a fraudulent scheme. 765 F.2d at 1012.

The holding in Woods applies with greater force here. Here, the Plaintiff details multiple
instances where TD employees composed letters containing information intended to instill
confidence in the Plaintiff that the settlement funds existed and would only be released directly
to them. Spinosa gave the Rothstein scheme a vote of confidence that he knew would be relied

upon by potential investors. Complaint f¥ 8-9, 47.
-15-Certainly, the act of propagating erroneous account information qualifies as an atypical
transaction, particularly when combined with the allegation that another bank employee
repeatedly and systematically issued lock letters for accounts that never contained more than
$100. In no way can the activities of Caretsky, Kerstetter, and Spinosa be fairly characterized as
the daily grist of the mill. Even if TD can explain these activities, it cannot do so in a motion to
dismiss, where all reasonable inferences are drawn in favor of the Plaintiff. Any argument
concerning additional, innocuous reasonable inferences in favor of the TD Defendant should be
saved for the jury. See Bankers Mut. Capital Corp. v. U.S. Fid. & Guar. Co., 784 So. 2d 485,
490 (Fla. 4th DCA 2001) (when ruling on a motion to dismiss a court is required to consider all
well-pleaded allegations of the complaint as true and draw all reasonable inferences in favor of
the plaintiff).

TD’s participation in the scheme extended to numerous overt acts that helped further
Rothstein’s illicit activities. While any one of these actions could constitute “substantial
assistance,” when viewed together as the law requires, they unquestionably provided Rothstein
with substantial assistance. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-
23 (2007) (finding that the proper inquiry in determining “substantial assistance” is “whether all
of the facts alleged, taken collectively, give rise to a strong inference of scienter, not whether any
individual allegations, scrutinized in isolation meets that standard.”); First Alliance Mortgage
Co. v. Lehman, 471 F.3d 977, 995 (9th Cir. 2006) (rejecting the bank’s argument that it only
provided “significant assistance” to the business and not the fraud, finding that “[iJn a situation
where a company’s whole business is built like a house of cards on a fraudulent enterprise, that is
a distinction without a difference”).

Taken in their totality, the factual allegations in the Complaint show that by providing

-16-false bank account statements, meeting with investors, and issuing lock letters meant to bolster
Rothstein’s claims that investor monies were being protected, the TD Defendants were an
integral component of Rothstein’s scheme who were generally aware of improper conduct by
Rothstein at the time they were taking affirmative steps to assist him in laundering this money.
See Benson, 2010 WL 1526394, at *4 (“the sum of the allegations establish that [the bank’s]
actions played a critical role in the facilitation of the ponzi scheme... . [the bank] provided
essential banking services that allowed the Ponzi scheme to continue of a period of time.”).
Thus, the Plaintiff has a well-pleaded claim for aiding and abetting fraud.

The issue of Proximate Cause is not Ripe for Consideration:

Throughout Defendant’s supporting memorandum, it claims that Plaintiff cannot
demonstrate that her injuries were proximately caused by its misconduct. First, to the extent this
issue is ripe for consideration at the pleadings stage, it only even only arguably applies to the
aiding and abetting claims, as it is indisputable that members of a conspiracy are liable for all of
the acts of their coconspirators, whether they occurred before or after they entered the
conspiracy. See Donofrio v. Matassini, 503 So. 2d 1278, 1281 (Fla. 2d DCA 1987) (“A
conspirator need not take part in the planning, inception, or successful conclusion of a
conspiracy. The conspirator need only know of the scheme and assist in it in some way to be
held responsible for al/ of the acts of his coconspirators”) (emphasis added); Koch v. Royal Wine
Merchants, Ltd., 23 Fla. L. Weekly Fed. D 385 (S.D. Fla. Dec. 5, 2012) (“In a conspiracy, every
act and declaration of each member of the confederacy in pursuance of the original concerted
plan and with reference to the common object is, in contemplation of law, the act and declaration
of them all, even with respect to actions that took place before a conspirator joined) (citations

omitted); In re U.S. Oil & Gas Litig., 1988 WL 28544 at *17 (S.D. Fla. 1988) (“once the

-17-existence of a conspiracy is established, and a party's membership in the conspiracy is
established, that party will be liable for the acts of all members of the conspiracy in furtherance
of the conspiracy regardless of the nature of his own actions”). See also Beck v. Prupis, 162 F.3d
1090, 1099 n.18 (11th Cir. 1998), aff'd, 529 U.S. 494 (2000) (“a civil conspiracy plaintiff must
prove that someone in the conspiracy committed a tortious act that proximately caused his injury;
the plaintiff can then hold other members of the conspiracy liable for that injury”) (emphasis
added).

As to the non-civil conspiracy claims, Defendant alleges that certain Plaintiffs claims for
aiding and abetting fraud are barred because their initial investments occurred prior to any
specifically alleged incidents of TD’s aiding and abetting Rothstein. In so doing, TD asks this
Court to do the impossible and pinpoint at the pleading stage a date certain that TD acquired
actual knowledge of Rothstein’s scheme. That issue is properly resolved by a fact finder or, at
the earliest, at the close of discovery. See Springtree Properties, Inc. v. Hammond, 692 So. 2d
164, 167 (Fla. 1997) (“In cases where the evidence raises any issue of material fact, the evidence
is conflicting, or the evidence permits differing reasonable inferences as to proximate cause, the
question of foreseeability as it relates to proximate cause must be left to the finder of fact”). See
also Rincon v. ABC Cutting Contractors, Inc., 706 So. 2d 322, 324 (Fla. 4th DCA 1997)
(“Generally, issues of proximate cause and foreseeability as related to proximate cause are fact
questions for the jury, not resolved by summary judgment”); Penske Truck Leasing Co., LP v.
Moore, 702 So. 2d 1295, 1298 (Fla. 4th DCA 1997) (citing Springtree Properties, Inc.); Prime
Hospitality Corp. v. Simms, 700 So. 2d 167, 169 (Fla. 4th DCA 1997) (same).

Here, Plaintiff alleges that Rothstein’s banking relationship with TD began as early as

2007, well before the Plaintiff made their her investments. (Comp. § 77.) Plaintiff further

-18-alleges that TD’s employees began actively participating in multiple investor shows in 2008.
(Comp. { 82.) Although the Plaintiff began investing in early 2008, it is simply too soon to
know whether those initial investments were made before TD Bank’s knowing participation in
Rothstein’s scheme or after. However, because the Plaintiff is alleged to have made investments
with Rothstein in mid to late 2009, the issue of proximate cause has less to do with defeating
Plaintiffs aiding and abetting claims than it does with serving as a basis to reduce the damages
for same. By way of example, if a plaintiff invested $100,000.00, half before and half after TD’s
participation, it could still be said that $50,000.00 of that plaintiff's losses were the proximate
consequence of TD’s actions. Unlike claims for fraud against Rothstein himself, proximate
cause in the context of aiding and abetting does not relate to a particular investor’s reliance on
the actions of the defendant (TD), but on whether their damages fall within the category of
damages that are a foreseeable consequence of that defendant’s participation in Rothstein’s
scheme. Accordingly, at the very worst, it is premature to dispose of any aiding and abetting
claims on the off chance that a particular Plaintiff's initial investments were made prior to the
date certain of TD Bank’s knowing participation in Rothstein’s Ponzi scheme.

Cc. The Complaint properly alleges Civil Conspiracy to Defraud.

Conspiracy, like aiding and abetting, is typically shown by inference from circumstantial
evidence. “[A] conspiracy usually is susceptible of no other proof than that of circumstantial
evidence. ... Associations formed among those accomplished in criminal endeavor are seldom
manifested by clear and direct evidence and proof of existence of such conspiracies must rest
upon inferences drawn from relevant and competent evidence.” Anheuser Busch, Inc. v.
Campbell, 306 So. 2d 198, 199-200 (Fla. Ist DCA 1975) (citations omitted). Proof of a tacit,
rather than an explicit, agreement is sufficient. Halberstam v. Welch, 705 F.2d 472, 477(D.C.

Cir. 1983); see also Norfolk Monument Co. v. Woodlawn Memorial Gardens, Inc., 394 U.S. 700,
-19-704 (1969) (“[I]t is settled that no formal agreement is necessary to constitute an unlawful
conspiracy”). Often the factual allegations concerning assistance are the very ones from which
an inference of a tacit agreement can be found. Halberstam, 705 F.2d at 478.

As with the aiding and abetting claim, TD argues that Plaintiff failed to plead the
underlying fraud, but mistakenly overlooks the fact that the underlying fraud that must be
specifically pled is the one committed by Rothstein. See section II-B(1), supra. TD further
claims that Plaintiff failed to specifically allege that TD Bank knowingly entered into an
agreement with Rothstein. Plaintiff is not required, however, to allege the agreement element of
a claim for civil conspiracy with particularity. It is true that the heightened pleading
requirements that govern fraud are also applicable to claims for civil conspiracy to defraud. See
Ocala Loan Company v. Smith, 155 So. 2d 711, 716 (Fla. 1st DCA 1963). Critically, this
heightened requirement only applies to the underlying fraud that forms the gist of the civil
conspiracy claim, not to the agreement, which relates to a state of mind. Jd. (“The gist of a civil
action for conspiracy is not the conspiracy itself, but the civil wrong which is done pursuant to
the conspiracy and which results in damage to plaintiff. The purpose of [the predecessor to Rule
1.120], which requires that the circumstances constituting fraud shall be stated with such
particularity as the same may permit, is to enable the court to determine whether upon the facts
pleaded there is at least a prima facie showing of fraud”); see also Dozier & Gay Paint Co., Inc.
v. Dilley, 518 So. 2d 946, 949 (Fla. 1st DCA 1988) (same). TD does not even attempt to argue
that Plaintiff failed to plead Rothstein’s fraud with particularity.

As for the agreement itself, Fla. R. Civ. P. 1.120 provides that “[mJalice, intent,
knowledge, mental attitude, and other condition of mind of a person may be averred generally.”

The Plaintiff has alleged that each Defendant “knowingly acted in concert to market and

-20-implement the illegal Ponzi scheme” and that “[t]here was a meeting of the minds between and
among TD Bank, through its employees, Rothstein, and other individuals and entities, both
known and unknown, to commit the unlawful acts alleged herein.” Plaintiff is not required to
support their factual allegations of an agreement with direct evidence, but merely with facts from
which conspiratorial intent can be reasonably inferred. See Lockheed Martin Corp. v. Boeing
Co., 314 F. Supp. 2d 1198, 1217 n.3 (M.D. Fla. 2004) (recognizing that an agreement may be
inferred from circumstances). “[S]ince direct evidence is ordinarily in the possession and control
of the alleged conspirators and seldom can be obtained, a conspiracy usually is susceptible of no
other proof than that of circumstantial evidence. . . . Associations formed among those
accomplished in criminal endeavor are seldom manifested by clear and direct evidence and proof
of existence of such conspiracies must rest upon inferences drawn from relevant and competent
evidence.” Anheuser Busch, Inc. v. Campbell, 306 So. 2d 198, 199-200 (Fla. lst DCA 1975)
(citations omitted). Moreover, proof of a tacit, rather than an explicit, agreement is sufficient to
satisfy the requirement. Halberstam v. Welch, 705 F.2d 472, 477(D.C. Cir. 1983); see also
Norfolk Monument Co. v. Woodlawn Mem’! Gardens, Inc., 394 U.S. 700, 704 (1969) (“[I]t is
settled that no formal agreement is necessary to constitute an unlawful conspiracy”). Often
times, the factual allegations concerning assistance are the very ones from which an inference of
a tacit agreement can be found. Halberstam, 705 F.2d at 478.

Here, the allegations showing aiding and abetting likewise establish conspiracy. Facts
such as issuing deceptive lock letters, providing false account statements; lending the bank’s
credibility to help promote Rothstein’s investor presentations, ignoring bank regulatory
requirements and committing money laundering in massive amounts; and accepting cash bribes

allow a reasonable person to conclude that the TD Defendants agreed explicitly or at least tacitly,

-21-to participate with Rothstein in his fraudulent scheme. Additionally, TD Bank’s argument that it
merely received an incidental benefit from the Ponzi scheme is wholly unsupportable when
taking the allegations in the Complaint as true. That argument is for a jury to decide rather than
the Court on a motion to dismiss.

Finally, one theme running through TD’s memorandum of law in support of its Motion to
Dismiss is the suggestion that Plaintiff's failure to allege either a direct relationship TD or that
the Bank made any affirmative representations to her is fatal to her claims. Essentially, TD
claims, as it has unsuccessfully in earlier cases before this Court, that there can be no liability for
either aiding and abetting fraud or civil conspiracy absent such a direct relationship. Such
arguments ignore the simple truth that “duty” or “direct connections” are nowhere to be found in
the elements for the claims of aiding and abetting fraud or civil conspiracy to defraud, which are
set forth supra. The only time duty becomes an issue with these secondary liability claims is
when a plaintiff brings a claim for aiding and abetting fraud based solely on a defendant’s silence
or inaction. In that limited scenario, the plaintiff generally cannot satisfy the substantial
assistance element for an aiding and abetting claim without also showing an underlying duty on
the part of the defendant. See Woods v. Barnett Bank of Fort Lauderdale, 765 F.2d 1004, 1010
(11th Cir. 1985) (citing Woodward v. Metro Bank of Dallas, 522 F.2d 84 (Sth Cir. 1975)). Even
under those circumstances, however, the duty requirement is excused when the allegations show
a high level of conscious intent. In any event, none of the Defendants in this case are alleged to
have participated in Rothstein’s scheme through mere silence or inaction. Moreover, a claim for
civil conspiracy to commit fraud “does not involve the breach of a duty peculiar to the other

Defendants,” as it is axiomatic that we all owe a duty to refrain from committing an intentional

-22-tort against anyone else. See Gonzalez v. Lloyds TSB Bank, PLC, 552 F. Supp. 2d 1200, 1209-10
(Cal. C.D. 2006).

Because Rothstein was the principal in a multi-layered Ponzi, it necessarily required the
commission of a series of interrelated frauds. When several intentional torts are committed in
furtherance of a larger conspiracy, they are considered interdependent and a defendant can be
liable as a co-conspirator for their participation in furtherance of the larger conspiracy. See In re
Vitamins Antitrust Litig., 320 F. Supp. 2d 1, 16 (D.D.C. 2004). In Vitamins Antitrust, the court
addressed this issue in the context of the agreement to join in the conspiracy:

Although ‘mere knowledge of another similarly motivated conspiracy or an

overlap in personnel do not prove one overall agreement,’ there may be an intent

to join an overall, conspiracy if the “common purpose of a single enterprise ....

motivate[s] cach participant and each act.’ United States v. Snider, 720 F.2d 985,

988 (8th Cir.1983). The Supreme Court has explained that a party progresses from

mere knowledge of an endeavor to intent to join it when there is ‘informed and

interested cooperation, stimulation, instigation. And there is also a ‘stake in the

venture’ which, even if it may not be essential, is not irrelevant to the question of

conspiracy.’ Direct Sales Co. v. United States, 319 U.S. 703, 713, 63 S.Ct. 1265,

87 L.Ed. 1674 (1943).

Id.

Even at the summary judgment stage, interdependence between various branches of a
common conspiracy may be established by fairly minimal evidence. See id. (citing United States
vy, Gatling, 96 F.3d 1511, 1522 (D.C.Cir.1996)). In determining whether a series of frauds are
part of an overreaching conspiracy to defraud, a court should consider whether the participants
shared a common goal, the interdependence between the alleged participants in the conspiracy,
and the overlap among alleged participants. United States v. Graham, 83 F.3d 1466, 1471 (D.C.
Cir. 1996). Accordingly it is TD’s participation in Rothstein’s series of frauds that made up his

Ponzi that is relevant to consideration of the issue of whether that involvement rose to a level of

co-conspirator, not its direct connection to any one particular investor. Those investors who

-23-relied specifically on TD’s representations are actually in less need of the protections afforded by
secondary liability claims such as civil conspiracy and aiding and abetting fraud because they
have an alternative avenue of relief via a direct claim for fraudulent
misrepresentation/inducement.

D. PLAINTIFF HAS STANDING TO BRING THEIR CLAIMS

Defendant’s argument that Plaintiff lacks standing because her claims belong to the
bankruptcy trustees in Rothstein, Rosenfeldt, Adler, P.A., Case No. 09-34791-RBR, Banyon
1030-32 Estate, Case No. 10-33691-RBR, or Banyon Income Fund Estate, Case No. 11-40929-
BKC-RBR is both premature and legally infirm. First, the issue of whether a cause of action
belongs to a corporation or the individual shareholders is determined by the body of the
Complaint. See Braun y. Buyers Choice Mortg. Corp. ex rel. McAloon, 851 So. 2d 199, 203
(Fla. 4th DCA 2003) (quoting Alario v. Miller, 354 So. 2d 925, 926 (Fla. 2d DCA 1978), for the

proposition that “““‘[i]t is the body of the complaint which determines whether the injury is direct
as to the stockholder and the cause of action individual to him or is indirect as to the stockholder
and the cause of action [belonging to] the corporation”). See also Karten v. Woltin, 23 So. 3d
839, 840-41 (Fla. 4th DCA 2009) (same). Looking to the allegations, there can be no doubt that
Plaintiff herself was victimized by Rothstein’s fraud, irrespective of whether their money passed
through Banyon to reach him.

Moreover, under the circumstances alleged herein, where Plaintiff alleges the complicity
of Banyon principal Frank Preve, at the very least Plaintiff should be given the opportunity to
present evidence that the only parties who could seek relief are the