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Weatherly v. Pershing, L.L.C.

United States Court of Appeals, Fifth Circuit

December 19, 2019

PATSY WEATHERLY; EDITH WICHMAN; MICHELLE MORRISON; FELIX BRAVO; JON HANNA, et al, Plaintiffs-Appellants
v.
PERSHING, L.L.C., Defendant-Appellee ETHEL BRONSTEIN; MAURICIO BIGIT POSADA; MIRAM DINORA MORENO DE BIGIT; MARTHA G. BLANCHET; JOSE LUIS CABRERA ROCA, et al, Plaintiffs-Appellants
v.
PERSHING, L.L.C., Defendant-Appellee JOSE DIAZ; NANCY DIAZ; HERMAN DITTMAR; MAGALY VARGAS DITTMAR; AMADEO MONTERO, et al, Plaintiffs-Appellants
v.
PERSHING, L.L.C., Defendant-Appellee TOM HAWK; SALMA BARBAR; ALBERTO BARBAR; BERNARDO RAMON CHAMORRO; JOSE E. COLMENARES, et al, Plaintiffs-Appellants
v.
PERSHING, L.L.C., Defendant-Appellee ROBERT POWELL; CARLOS ALFONSI; ERIKA ALFONSI; IDA ALTERIO; RAQUEL BASSAN; ROBERTO CALDERON; LINDA CALDERON; ROBERTO CALVO MURILLO; DIANA CASTRESANA; ANTONIO DOTTI; DELFINA LA ROSA; JESUS GARCIA; MARIA FERNANDA GONZALEZ; PABLO GUEDEZ; HE HUANG; RAFAEL CAMACHO, Plaintiffs-Appellants
v.
PERSHING, L.L.C., Defendant-Appellee BRAULIO A. VARGAS ESPINOSA; EDUARDO BELMONTE; MAURO BELMONTE; LAURA RUIZ; GIAN PAOLO BELMONTE, et al, Plaintiffs-Appellants
v.
PERSHING, L.L.C., Defendant-Appellee

          Appeals from the United States District Court for the Northern District of Texas

          Before SOUTHWICK, WILLETT, and OLDHAM, Circuit Judges.

          DON R. WILLETT, CIRCUIT JUDGE:

         These consolidated cases arise from the notorious Stanford Ponzi scheme, the second-biggest investor fraud in U.S. history. Convicted financier Allen Stanford, now serving a 110-year prison term, sold billions of dollars' worth of bogus CDs to unwitting investors, many of them retirees seeking "safe" investments for their life savings, paying each new investor-victim "profits" out of funds solicited from newly duped investor-victims. Stanford oversaw a sprawling international financial empire. And a phony one.

         Stanford used Stanford Group Company to refer investors to Stanford International Bank, Ltd. Plaintiffs-Appellants (the Investors) purchased what they thought were low-risk CDs from SIBL. Defendant-Appellee, Pershing, provided clearing services for SGC.[1] The Investors allege that Pershing breached its fiduciary duty and committed indirect fraud under Florida law. But there is a snag. Both claims were filed late under Florida's statute of limitations. The Investors contend that they were entitled to more time-that the statute of limitations should be tolled because they were putative class members in a previous class action against Pershing. The district court disagreed, holding that the Investors' claims were late and had no hope of tolling relief.

         The question on appeal is simply stated: Are the Investors entitled to tolling? They are not. The Florida Legislature has laid out an exclusive list of tolling exceptions, and class actions are not on the list. The foremost task of legal interpretation is divining what the law is, not what the judge-interpreter wishes it to be. We cannot embellish Florida law under the guise of interpreting it. All to say, we decline to infer such an exception where one does not plainly exist. Embroidering the statute may scratch an equitable itch, but "law, without equity, though hard and disagreeable, is much more desirable for the public good, than equity without law: which would make every judge a legislator, and introduce most infinite confusion."[2] Judges must resist the temptation to alter a statute to realign perceived inequities, particularly where, as here, the legislature has proven itself adept at listing exceptions.

         The federal policy of tolling for putative class members cannot override the governing statute. Because we hold that the Investors' claims are barred by Florida's statute of limitations, we do not reach the merits of those claims.

         We AFFIRM the district court's judgment.

         I

         Stanford's infamous Ponzi scheme became public in February 2009, when the SEC filed its civil complaint. The story was in national newspapers within two days. Later that year, class counsel for swindled investors filed Turk v. Pershing, LLC, No. 9-02199 (N.D. Tex. Nov. 18, 2009), alleging that Pershing, as Stanford's clearing agent, (1) "was aware or should have been aware of Stanford's scheme" and (2) profited from Stanford's shady dealings. Turk had a putative nationwide class of all persons who bought Stanford CDs. But counsel in Turk eventually offered to narrow its Florida subclass to exclude plaintiffs who did not transfer money directly through Pershing.

         This case stems from Turk counsel's attempt to narrow its Florida subclass; the plaintiffs here are those former Turk plaintiffs who did not transfer money directly through Pershing. The Investors filed Weatherly, the first of these cases, on November 20, 2013, and the other five cases between January 28, 2015, and February 2, 2015-all in the Southern District of Florida. The cases were transferred to the Northern District of Texas, home of the Stanford multidistrict litigation.

         The Investors assert two claims against Pershing. First, they allege that Pershing committed indirect fraud under Florida law.[3] Second, they allege Pershing aided and abetted Stanford's breaches of fiduciary duty under Florida law.[4] A four-year statute of limitations applies to both claims.[5]

         Pershing moved for summary judgment. It argued that all claims were barred by limitations and that the Investors lacked evidence to establish elements on each claim. The district court granted the motion based on the limitations defense. It assumed the Investors should have known of their claims, at the latest, by November 18, 2009, when the Turk class action was filed. Because the Investors filed the first of these cases on November 20, 2013-four years and two days later-these cases were untimely. The district court rejected the argument that the limitations period tolled while the Investors were putative members of the Turk class. It did not address Pershing's merits-based arguments.

         II

         The standards governing this appeal are well settled.

         First, the standard of review. We review "grant of summary judgment de novo, applying the same standard on appeal that is applied by the district court."[6]

         Second, the summary-judgment standard. Under Rule 56, summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."[7]We review "a district court's determinations of state law de novo."[8]

         III

         Without tolling, all six cases were indisputably filed late. The Investors claim that Florida law and federal law support tolling during putative class actions. Pershing says, "no" on both counts. Pershing also contends that not only do the Investors lose under the statute of limitations, but summary judgment is warranted on the merits. We find that neither Florida nor federal law offer the Investors tolling relief, so we decline to reach the merits.

         A

         We begin our discussion with Florida law. Because the Investors filed these cases in federal court in Florida, we apply Florida substantive law to the question of whether the Investors' presence in the Turk lawsuit tolled the statute of limitations for their claims in this case.[9] The Florida Supreme Court has not decided whether a statute of limitations is tolled during a putative class action. So we must make "an Erie guess as to what the [Florida] Supreme Court would most likely decide."[10] We base our guess, "[a]s a practical matter," on:

(1) decisions of the state supreme court in analogous cases, (2) the rationales and analyses underlying state supreme court decisions on related issues, (3) dicta by the state supreme court, (4) lower state court decisions, (5) the general rule on the question, (6) the rulings of courts of other states to which state courts look when formulating substantive law and (7) other available sources, such as treatises and legal commentaries.[11]

         When making an Erie guess, we do not "adopt innovative theories of state law" but aim simply "to apply that law as it currently exists."[12] And we "are emphatically not permitted to do merely what we think best; we must do that which we think the state supreme court would deem best."[13]

         Here, a statute governs the question before us. And when a statute controls, our first stop (and usually our last) is the statutory text. "Text is the alpha and omega of the interpretive process."[14] Our precedent demands "unswerving fidelity to statutory language, "[15] meaning we take lawmakers at their word and presume they meant what they said.[16]

         Florida law happens to provide a statutory list of grounds for tolling its statutes of limitations. As the district court recognized, and as all parties agree, putative class actions are not on the list. In Florida, statutes of limitations are tolled by:

(a) Absence from the state of the person to be sued.
(b) Use by the person to be sued of a false name . . . .
(c) Concealment in the state of the person to be sued so that process cannot be served on him or her.
(d) The adjudicated incapacity, before the cause of action accrued, of the person entitled to sue. . . .
(e) Voluntary payments by the alleged father of the child in paternity actions during the time of the payments.
(f) The payment of any part of the principal or interest of any obligation or liability founded on a written instrument.
(g) The pendency of any arbitral proceeding pertaining to a dispute that is the subject of the action.
(h) The period of an intervening bankruptcy . . . .
(i) The minority or previously adjudicated incapacity of the person entitled to sue . . . .[17]

         Importantly, the statute itself, in the very next subpart, declares that the above list is exclusive-explicitly disclaiming any other grounds for tolling: "A disability or other reason does not toll the running of any statute of limitations except those specified in this section, s. 95.091 [tax actions], the Florida Probate Code, or the Florida Guardianship Law."[18] The Florida Supreme Court generally takes a straightforward view of § 95.051(2)'s exclusivity provision. The State's high court has held that "the tolling statute specifically precludes application of any tolling provision not specifically provided therein."[19] And the tolling statute "delineates an exclusive list of conditions that can 'toll' the running of the statute of limitations."[20]

         Despite the clear language of § 95.051 and the Florida Supreme Court's insistence that all other tolling provisions are excluded, the Investors contend that two Florida Supreme Court cases-Lance v. Wade[21] and Engle v. Liggett Group, Inc.[22]-have essentially added class actions to the statutory list. The Investors argue that Lance and Engle stand for the proposition that, in Florida, "class members are entitled to tolling while a putative class action is pending."[23] But the Florida Supreme Court did not actually announce this rule in either case, and we are not inclined to find innovative theories of state law while making an Erie guess.

         In Lance, the court reversed a plaintiff class's judgment-decertifying the class-because Florida law did not recognize class actions based on fraud on individual contracts.[24] But the court granted the decertified class members a measure of relief from the harsh result of decertification:

We find that the members of this class, having apparently relied on this cause of action, should be entitled to proceed individually without prejudice against the sellers for breach of contract, fraud, specific performance, or rescission. Given the circumstances of this action, we find that the purchasers should not be subject to the defenses of the statute of limitations or laches, providing that their actions are commenced within a reasonable time after the remand of this decision.[25]

         The passage above is the last full paragraph of the opinion and is introduced with the phrase: "We find that the members of this class . . ."[26] The language the Investors rely on is in the last substantive sentence of the opinion and begins with: "Given the circumstances of this action."[27] If the Florida Supreme Court wanted to introduce into Florida law, in plain contravention of a Florida statute, that all future putative class action claimants are entitled to tolling, this was an odd way to do it. The more logical read is that the court simply provided equitable relief from a limitations defense because the decertified class members relied on the faulty cause of action. And that reliance arose because the lower court allowed the class action to proceed to a jury verdict. The Florida Supreme Court thus allowed a "reasonable time" for class members to refile individually. The Lance court provided a narrow exception for an exceptional circumstance, not a rule of general applicability.

         The Investors' other Florida Supreme Court case is Engle v. Liggett Group, Inc. In Engle, the court reversed in part the trial court's decision that a tobacco case would proceed as a class action in three phases: (1) liability and punitive damages; (2) aggregate compensatory damages; and (3) individual compensatory damages.[28] After the first and second phases, the Florida Supreme Court held that "continued class action treatment is not feasible and that upon remand the class must be decertified."[29] But the court made it easier for individual class members to proceed with their claims:

Individual plaintiffs within the class will be permitted to proceed individually with the findings set forth above given res judicata effect in any subsequent trial between individual class members and the defendants, provided such action is filed within one year of the mandate in this case.[30]

Engle was even more peculiar than Lance.[31] The Florida Supreme Court later explained in an Engle-progeny case that the Engle court "did not decertify the class in a traditional sense."[32] Rather, the court "conferred upon the class members two benefits:" (1) equitable tolling for one year, and (2) res judicata effect of Phase One's common core findings.[33] So the court saw itself as conferring an equitable benefit on the Engle class members, not developing a generally applicable tolling doctrine for all future class actions.

         Unlike the case before us, both Lance and Engle involved certified classes that were later decertified on appeal. And plaintiffs in both cases had already tried their cases to favorable jury verdicts. The Florida Supreme Court did not cite Florida's tolling statute or even use the word "toll" in either case. That silence is not dispositive. But it is curious. If the court was creating a ...


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