Freeman v. First Union Case Analysis

In Freeman v. First Union National Bank, 865 So. 2d 1272 (Fla. 2004), the Florida Supreme Court held that the fraudulent transfer statute creates no aiding-and-abetting cause of action against those who help move the money.

The court confined its answer to the fraudulent transfer statute, leaving open whether other causes of action could reach the same conduct. The line between helping and receiving turns on who controls the property, not who handles it: First Union itself held the debtor’s bank account and wired the money out, yet the court called the bank a non-transferee.

The Ponzi Scheme Behind the Case

Unique Gems International ran a pyramid scheme built on jewelry assembly. Investors paid a $3,000 deposit for a necklace-making kit worth about $100, on a promise that the company would buy back the finished necklaces for the deposit plus $1,800 per kit. The company never sold the necklaces. Deposits from new investors paid the earlier ones.

According to the complaint, First Union National Bank held the company’s primary account and knew about the scheme. After the State of Florida sued Unique Gems, the bank wrote that it would close the account in ten days, then left it open. Between February 10 and March 5, 1997, the company wired $6.6 million from the account to Liechtenstein. A court froze the account by injunction on March 5, and the bank still allowed another $2 million wire. The account finally closed on July 24, 1997.

The scheme’s court-appointed receiver and a class of the company’s creditors sued First Union in federal court for money damages, alleging the bank aided and abetted the fraudulent transfers. The district court dismissed the claim with prejudice. In the district court’s reading, Florida’s Uniform Fraudulent Transfer Act (FUFTA) lets creditors set aside transfers made to transferees, and nothing in it makes a helper liable in damages.

The Certified Question From the Eleventh Circuit

The Eleventh Circuit could not answer the aiding-and-abetting question from existing Florida law, so it asked the Florida Supreme Court directly. The federal court read Florida’s statute as broader than the fraudulent transfer provisions of the Bankruptcy Code: it contains a catch-all authorizing “any other relief the circumstances may require,” and it states that common-law remedies supplement its provisions. No Florida appellate court had expressly approved an aiding-and-abetting claim, and the Florida Supreme Court had never examined the question.

The certification came in Freeman v. First Union National Bank, 329 F.3d 1231 (11th Cir. 2003). The certified question was: “Under Florida law, is there a cause of action for aiding and abetting a fraudulent transfer when the alleged aider-abettor is not a transferee?”

The Holding: FUFTA’s Remedies Do Not Include Damages Against Helpers

The Florida Supreme Court answered no: the fraudulent transfer statute creates no damages claim against someone who helps a transfer without receiving the property. The court set out the statute’s list of creditor remedies in section 726.108: a creditor can avoid the transfer, attach the transferred asset, enjoin further disposition of the asset, or have a receiver appointed. A catch-all clause adds “any other relief the circumstances may require.” None of those remedies is a damages award against someone who helped.

The receiver argued that the catch-all was broad enough to carry a damages claim against the bank. The court disagreed. The Legislature intended the catch-all to support the remedies already listed in the statute “rather than creating new and independent causes of action” such as aider-abettor liability. Nothing in the statute’s text suggests a damages claim against a party who is not a transferee.

The statute codified what the court called an “existing but imprecise” system for setting aside transfers intended to defraud creditors. The decision was per curiam, with all seven justices concurring. The Eleventh Circuit then applied the answer and affirmed the dismissal in Freeman v. First Union National Bank, 362 F.3d 697 (11th Cir. 2004).

The Boundaries the Court Left in Place

The Florida Supreme Court cautioned in a footnote that its answer was confined to the fraudulent transfer statute. It did not decide whether a creditor could reach the same conduct through some other cause of action. The footnote pointed to BankFirst v. UBS Paine Webber, Inc., 842 So. 2d 155 (Fla. 5th DCA 2003). In BankFirst, the Fifth District affirmed the dismissal of claims against a debtor’s lawyers and financial advisors, holding that neither Florida’s fraudulent conversion statute nor chapter 726 reaches someone who assists a transfer without receiving the property.

The dissent is why the footnote cites the case: Judge Harris would have let the bank proceed on a civil conspiracy theory, and the Florida Supreme Court flagged that possibility without deciding it. Jon Alper was a named defendant in BankFirst; the court affirmed the dismissal of all claims against him and the other professional advisors.

The holding also does nothing for an advisor who stops advising and starts controlling the property. An attorney who takes title to a transferred asset, or who controls when and to whom trust-account funds go, can be pursued as a transferee. An attorney who only drafts the documents cannot.

What Freeman Left for Later Courts

The Eleventh Circuit extended Freeman‘s narrow reading of FUFTA’s catch-all in SE Property Holdings, LLC v. Welch, 65 F.4th 1335 (11th Cir. 2023). Relying on Freeman, the court predicted that the Florida Supreme Court would not allow a money judgment against the transferor, punitive damages, or attorney’s fees under that clause.

Two Florida appellate decisions point the other way on transferor damages. In Hansard Construction Corp. v. Rite Aid of Florida, Inc., 783 So. 2d 307 (Fla. 4th DCA 2001), Florida’s Fourth District read the catch-all to permit a damages award against the transferor. The First District followed Hansard in McCalla v. E.C. Kenyon Construction Co., 183 So. 3d 1192 (Fla. 1st DCA 2016).

The Eleventh Circuit declined to follow either decision. Hansard came before Freeman and, the Eleventh Circuit said, never worked through the statute’s text; McCalla rested on Hansard and never discussed Freeman. No Florida appellate court has disagreed with Hansard or McCalla, which means Florida trial judges are bound to follow them, while federal judges in Florida must follow the Eleventh Circuit’s contrary prediction. The same claim can get opposite answers depending on the courthouse, and only the Florida Supreme Court can settle the difference.

Banks have also defeated fraudulent transfer claims on a second ground. In Isaiah v. JPMorgan Chase Bank, N.A., 960 F.3d 1296 (11th Cir. 2020), a Ponzi scheme receiver’s fraudulent transfer claims against the scheme’s bank failed because routine deposits into the scheme’s own accounts are not transfers to the bank.

What Freeman Means When Planning Around Litigation Exposure

The Freeman decision settles one question: a creditor suing under Florida’s fraudulent transfer statute has no damages claim against someone who merely helped the transfer. The statute’s own remedies are unaffected. The transfer itself can still be avoided. Section 726.109(2) also lets the creditor take a money judgment against the first transferee or the person the transfer benefited, capped at the smaller of the asset’s value and the outstanding claim.

A transfer made with intent to hinder, delay, or defraud a creditor remains avoidable, and the person who received the asset can be made to return it or pay its value. The exception is a buyer who took the asset in good faith and paid something close to what it was worth; section 726.109 protects that buyer. A trustee, family member, or entity that receives the property without paying for it stands fully exposed as a transferee.

What the statute does not give the creditor is a damages claim against those who advised on or processed the transfer; whether another theory of liability could reach them is a question the Florida Supreme Court has never answered. Most of Florida’s fraudulent transfer case law is about proof: the badges of fraud that show intent, and the tracing rules that follow money through accounts. Freeman answers the question that comes before those—who can be sued at all.