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Are Punitive Damages Available for Fraudulent Transfers in Florida?
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Are Punitive Damages Available for Fraudulent Transfers in Florida?

August 10, 2017 Professional Services Industry Legal Blog

Reading Time: 6 minutes

In Florida, fraudulent transfers fall under the Florida’s Uniform Fraudulent Transfer Act (“FUFTA”).  The Florida statutes comprise the FUFTA, and the statutes lay out the elements needed to assert a FUFTA claim, as well the types of remedies that will be afforded when bringing a FUFTA claim.  This article is designed to postulate what types of remedies are awarded in a FUFTA claim, and answer the question of whether or not punitive damages will be included in those remedies.

Pursuant to Florida Statute § 726.108, governing “Remedies of creditors,” states that a creditor may obtain, “subject to the limitations in Florida Statute § 726.109,” the following relief:

  • Avoidance of the transfer or obligation to the extent necessary to satisfy the creditors claim;
  • An attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with applicable law;
  • Subject to the applicable principles of equity and in accordance with applicable rules of civil procedure:
  1. An injunction against further disposition . . .;
  2. Appointment of a receiver . . .; or
  3. Any other relief the circumstances may require.

(2)       If a creditor has obtained a judgment on a claim against the debtor, creditor, if the court so orders, may levy execution on the asset transferred or its proceeds.

Fla. Stat. § 726.108(1)–(2).

In order to answer the question concerning whether or not punitive damages are recoverable under Florida Statute § 726.108, it will first be necessary to analyze the relief that the statute provides.  The statute sets forth six primary remedies available to creditors: (1) avoidance; (2) attachment; (3) injunctive relief; (4) appointment of a receiver; (5) levy and execution; and (6) “any other relief the circumstances require”, the sixth prong of the statute is commonly referred to as “catch-all provision.”  The types of relief available under § 726.108 are “subject to the limitations of §726.109,” which provides, among other things:

Except as otherwise provided in this section, to the extent a transfer is voidable in an action by a creditor under s. 726.108(1)(a), the creditor may recover judgment for the value of the asset transferred, as adjusted under subsection (3), or the amount necessary to satisfy the creditor’s claim, whichever is less.

Fla. Stat. § 726.109(2).

Florida Statute § 726.109(3) further states, “If the judgment . . . is based upon the value of the asset transferred, the judgment must be for an amount equal to the value of the asset at the time of the transfer subject to adjustment as the equities may require.”  Fla. Stat. § 726.109(3).

Florida courts indicate that Florida Statute § 726.108 and Florida Statute § 726.109 offer the creditor the opportunity to select a remedy.  “Reading these provisions together, it appears that the creditors seeking relief under Chapter 726 may choose their remedy—either to avoid a transfer and seek recovery against the asset fraudulently transferred, or to receive a money judgment against the transferee based on the lesser of the value of the asset or the amount of the creditor’s claim.”  In re Davis, 403 B.R. 914, 920 (Fla. M.D. 2009).  Florida state courts further clarify the choice of remedies available as suited to the purpose of FUFTA.  “[FUFTA] is either an action by a creditor against a transfer directed against a particular transaction, which, if declared fraudulent, is set aside thus leaving the creditor free to pursue the asset, or it is an action against a transferee who has received an asset by means of a fraudulent conveyance and should be required to either return the asset or pay for the asset (by way of a judgment and execution).”  Yusem v. South Florida Water Mgmt. Dist., 770 So. 2d 746, 749 (Fla. 4th DCA 2000).

It is well settled that Florida law favors a limited interpretation of the catchall provision to facilitate the use of other remedies provided in FUFTA—that is, the catchall provision does not create new causes of action or entitlement to fees.  However, Florida courts have not decided on the issue as to whether one may recover punitive damages under FUFTA.

Litigants in other states have argued that UFTA’s “catchall provision” provides the courts expansive authority to grant any relief requested—including attorneys’ fees and punitive damages.  However, the results in these jurisdictions are mixed.  CompareVolk Constr. Co. v. Wilmescherr Drusch Roofing Co., 58 S.W.3d 897, 900 (Mo. Ct. App. 2001) (allowing punitive damages under Missouri’s UFTA), Locafrance U.S. Corp. v. Interstate Distribution Servs., Inc., 451 N.E.2d 1222, 1225 (Ohio 1983) (same under Ohio’s Uniform Fraudulent Conveyance Act), and Macris & Assocs., Inc. v. Neways, Inc., 60 P.3d 1176, 1181 (Utah Ct. App. 2002) (same under Utah’s UFTA), with N. Tankers (Cyprus) Ltd. v. Backstrom, 968 F. Supp. 66, 67 (D. Conn. 1997) (no authority to allow punitive damages under Connecticut UFTA), Morris v. Askeland Enters. Inc., 17 P.3d 830, 832–33 (Colo. App. 2000) (no authority to allow punitive damages under Colorado UFTA), Bank of Am. v. WS Mgmt., Inc., 33 N.E.3d 696, 734 (Ill. App. Ct. 2015) (no attorneys’ fees allowed as punitive damages under state version of UFTA and rejecting the “catchall provision” as a basis for providing that relief), and C & A Invs. v. Kelly, 792 N.W.2d 644, 646–47 (Wis. Ct. App. 2010) (remedies under Wisconsin’s UFTA are exclusive and punitive damages are unavailable).

In absence of Florida case law addressing whether FUFTA allows for an award of punitive damages, Courts should construe the statute to give effect to legislative intent.  See Raymond James Fin. Servs., Inc. v. Phillips, 126 So. 3d 186, 190 (Fla. 2013).  The Court must begin with the actual language of the statute because legislative intent is determined primarily from the statute’s text.  Id.  If the statute is clear and unambiguous, the courts will not look beyond the plain language for legislative intent.  Fla. Dep’t of Highway Safety & Motor Vehicles v. Hernandez, 74 So. 3d 1070 (Fla. 2011).  If the meaning of the statute is clear, the court’s task goes no further than applying the plain language of the statute.  Trinidad v. Fla. Peninsula Ins. Co., 121 So. 3d 433, 439 (Fla. 2013).  In this case, the FUFTA statute is unambiguous.

The recovery of any money damages under the catchall provision does not include punitive damages.  To the contrary, a money judgment is expressly limited to the value of the asset at the time of the transfer or the amount necessary to satisfy the creditor’s claim, whichever is less.  See § 726.109(2), Fla. Stat.[1]  There is no ambiguity that the measure of damages is determined by the value of the asset or the creditor’s claim—neither of which could possibly include an additional award of punitive damages.  To allow punitive damages would convert FUFTA from a statute with express limitations on recovery into a statute designed to punish debtors and transferees- probably, not the intent of the legislature.

[1] The catchall provision is limited by the prefatory language of under Section 726.108(1), which states, “[i]n an action for relief against a transfer or obligation under ss. 726.101–726.112, a creditor, subject to the limitations in s. 726.109 may obtain . . . (3) Any other relief the circumstances may require.”  (Emphasis added).

By: Charles B. Jimerson & Frankie Velez, J.D. Candidate 2018

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