Bancor Group Inc. v. Rodriguez

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

CASE NO.: 22-cv-20201-GAYLES/TORRES

BANCOR GROUP INC., et al.,

Plaintiffs,

v.

GABINA RODRIGUEZ, et al.,

Defendants.

_____________________________/

ORDER

THIS CAUSE comes before the Court on Plaintiffs’ Motion for Partial Summary

Judgment (“Plaintiff’s Motion”), [ECF No. 261]; Directors Gabina Rodriguez, Keith Parker,

Carlos Rodriguez, and Gustavo Macias’ Motion for Summary Judgment (“Directors’ Motion”),

[ECF No. 263]; and Director Louis Ferreira’s Motion for Summary Judgment (“Ferreira’s

Motion”). [ECF No. 264].1 The action was referred to Chief Magistrate Judge Edwin Torres,

pursuant to 28 U.S.C. § 636(b)(1)(B), for a ruling on all pretrial, non-dispositive matters, and for a

Report and Recommendation on any dispositive matters. [ECF No. 9]. On July 5, 2023, Judge Torres

issued his report recommending that Plaintiffs’ Motion be denied, Directors’ Motion be denied,

and Ferreira’s Motion be granted in part and denied in part (the “Report”). [ECF No. 361].

Plaintiffs, Directors, and Ferreira have each timely objected to the Report. [ECF Nos. 366, 367, 368].

A district court may accept, reject, or modify a magistrate judge’s report and

recommendation. 28 U.S.C. § 636(b)(1). Those portions of the report and recommendation to which

1 Unredacted versions of Plaintiffs’ Motion and the Directors’ Motion were filed at ECF Nos. 259, 268.

objection is made are accorded de novo review, if those objections “pinpoint the specific findings

that the party disagrees with.” United States v. Schultz, 565 F.3d 1353, 1360 (11th Cir. 2009); see

also Fed. R. Civ. P. 72(b)(3). Any portions of the report and recommendation to which no specific

objection is made are reviewed only for clear error. Liberty Am. Ins. Grp., Inc. v. WestPoint

Underwriters, L.L.C., 199 F. Supp. 2d 1271, 1276 (M.D. Fla. 2001); accord Macort v. Prem, Inc.,

208 F. App’x 781, 784 (11th Cir. 2006).

In his Report, Judge Torres finds that (1) genuine issues of material fact exist as to whether

the business judgment rule shields Defendants’ conduct and whether Defendants’ alleged fiduciary

breaches proximately caused damage to Eastern National Bank, N.A.,2 (2) Plaintiffs are not asking

the Court to enforce a regulatory consent order, (3) Ferreira cannot be held liable for conduct that

occurred before he joined the bank, (4) the Court has supplemental subject matter jurisdiction over

the claims against Ferreira, and (5) Plaintiffs are not entitled to summary judgment on nine of

Defendants’ alleged defenses. [ECF No. 361]. The Court has reviewed the Report and the

objections and has conducted a de novo review of the record. The Court agrees with Judge Torres’s

finding that the Directors and Ferreira’s Motions should be denied. The Court also agrees that

Plaintiffs’ Motion should be denied except as to the Thirteenth Defense.

In their Thirteenth Defense, Defendants state that “Plaintiffs’ claims are barred because

this action was filed with an improper motive, not in the best interest of the ENB and in pursuit of

Plaintiffs’ own personal interests as opposed to the shareholders of ENB.” Id. at 44. Plaintiffs

moved for summary judgment as to the Thirteenth Defense because “improper motive” is not an

2 In his objections, Ferreira contends that Judge Torres failed to address his arguments as to causation. Not so. Ferreira

mistakenly reads the Report as disposing of all the claims against him. However, the Report only found that Ferreira

could not be held liable for events that preceded his membership on the Board. With respect to the purported breaches

that occurred after Ferreira joined the Board, the Report found general issues of material fact as to causation for the

claims against all Defendants. See [ECF No. 361 at 6-7].

affirmative defense to a breach of fiduciary duty claim. In response, and for the first time,

Defendants argued that Plaintiffs’ motive is relevant to whether Plaintiffs’ have standing to bring

this derivative action under Federal Rule of Civil Procedure 23.1(a).

Rule 23.1(a) provides that a “derivative action may not be maintained if it appears that the

plaintiff does not fairly and adequately represent the interests of shareholders or members who are

similarly situated in enforcing the right of the corporation or association.” Fed. R. Civ. P. 23.1(a).

Defendants argue, and Judge Torres agreed, that if Defendants can prove that Plaintiffs initiated

this action with an improper motive, Plaintiffs might not have standing under Rule 23.1(a) to bring

this action. This argument, however, does not save the Thirteenth Defense.

First, improper purpose is not a defense to a breach of fiduciary duty claim. See e.g.,

PetMed Express, Inc. v. Healthy Pets, Inc., No. 09-cv-23533, 2010 WL 11505139, at *1 n.1 (S.D.

Fla. Feb. 10, 2010) (striking “improper purpose” affirmative defense because “assertions of

improper purpose . . . are [not] properly addressed by way of . . . an affirmative defense.”).

Therefore, as pled, the Thirteenth Defense fails as a matter of law.

Second, the Thirteenth Defense, on its face, does not raise lack of statutory standing under

Rule 23.1(a) as a defense.3 Properly pled affirmative defenses must provide defendants with “fair

notice of the nature of the defense and the grounds upon which it rests.” Dionisio v. Ultimate

Images & Designs, Inc., 391 F. Supp. 3d 1187, 1192 (S.D. Fla. 2019). To the extent Defendants

intended to raise lack of statutory standing under Rule 23.1(a) as an affirmative defense, they

failed. Indeed, the Thirteenth Defense does not even reference Rule 23.1(a).4 Defendants cannot

3 “The shareholder derivative standing requirements of Federal Rule of Civil Procedure 23.1 involve prudential limi-

tations, not constitutional limitations.” First Hartford Corp. v. Pension Plan & Trust v. U.S., 194 F.3d 1279, 1290

(Fed. Cir. 1999). Prudential—or statutory—standing “encompasses various limitations, including the general prohi-

bition on a litigant’s raising another person’s legal rights.” The Wilderness Soc. v. Kane County, Utah, 632 F.3d 1162,

1168 (10th Cir. 2011) (internal quotation omitted).

4 Moreover, even if Defendants had asserted Rule 23.1(a), lack of standing is not an affirmative defense. Bluegreen

Vacations Unlimited, Inc. v. Timeshare Lawyers P.A., No. 20-24681, 2023 WL 3198192, at * 22 (S.D. Fla. May 2,

amend their affirmative defenses via a response to a summary judgment motion. Accordingly,

Plaintiffs are entitled to summary judgment as to the Thirteenth Defense.”

CONCLUSION

After careful consideration, it is ORDERED AND ADJUDGED as follows:

(1) Judge Torres’s Report and Recommendation, [ECF No. 361], is ADOPTED in

part;

(2) Plaintiffs’ Motion for Partial Summary Judgment, [ECF No. 261], is GRANTED

in part as to the Thirteenth Defense and otherwise DENIED;

(3) Directors Gabina Rodriguez, Keith Parker, Carlos Rodriguez, and Gustavo Macias’

Motion for Summary Judgment, [ECF No. 263], and Director Louis Ferreira’s

Motion for Summary Judgment, [ECF No. 264]. are DENIED.

DONE AND ORDERED in Chambers at Miami, Florida, this 3rd day of October, 2023.

DARRIN P. GAYLES

UNITED STATES DI ICT JUDGE

2023) (granting summary judgment in favor of plaintiff on defendant’s affirmative defense of lack of standing under

the Lanham Act because the defense was a “mere deniall[], going to the elements of [plaintiff's] prima facie case, and

not appropriately labeled as [an] affirmative defense[].”).

5 The Court notes that Defendants have likely waived any arguments regarding statutory (or prudential) standing under

Rule 23.1(a). While the Eleventh Circuit has not decided the issue, See Wolff Cash 4 Titles, 351 F.3d 1348, 1358

(11th Cir. 2003), other appellate courts have held that prudential standing requirements, unlike Article III standing,

may be waived. See e.g. The Wilderness Soc., 632 F.3d at 1168 n.1 (“[P]rudential standing is not a jurisdictional

limitation and may be waived.”); Ensley v. Cody Res., Inc., 171 F.3d 315, 320 (5" Cir. 1999) (holding that statutory

standing can be waived). Here, Defendants have had multiple attempts to raise the issue under Rule 23.1(a), yet chose

not to do so. In their Motion to Dismiss [ECF No. 21], Defendants argued that Plaintiffs failed to comply with the pre-

suit demand requirements of Rule 23.1(b) but never mentioned standing under Rule 23.1(a). Further, Defendants did

not raise statutory standing as an issue in response to Plaintiffs’ Motion for Preliminary Injunction. The Court also

notes that even if Defendants had not waived the issue of statutory standing, that would be a determination for the

Court, not a jury.