Fraudulent Transfers

What are fraudulent transfers?

Creditors may become frustrated when they discover a debtor has engaged in an unfair transaction that hampers their ability to collect payment. However, creditors are not without a remedy if a debtor has engaged in questionable activity. Florida’s Uniform Fraudulent Transfer Act (“FUFTA”) permits courts to set aside fraudulent transfers. Crucially, a fraudulent transfer claim under FUFTA may involve a claim of actual or constructive fraud, which require no proof of the defendant’s intent to defraud.

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What legal issues arise related to fraudulent transfers?

FUFTA lists the following as scenarios indicating an intent to defraud:

The transfer or obligation was to an insider.
The debtor retained possession or control of the property transferred after the transfer.
The transfer or obligation was disclosed or concealed.
Before either the transfer or creation of the debt, the debtor had been sued or threatened with suit.
The transfer was of substantially all the debtor’s assets.
The debtor absconded.
The debtor removed or concealed assets.
The debtor was insolvent or became insolvent shortly after the transfer or obligation was incurred.
The transfer occurred shortly before or shortly after a substantial debt was incurred.
The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.

What are relevant laws related to fraudulent transfers in Florida?

Both statutory law and common law govern fraudulent transfer claims. Statutorily, a cause of action exists under FUFTA, codified under chapter 726 of Florida Statutes, to prevent debtors from defrauding creditors by becoming insolvent.

In Florida, courts have further clarified this field of law. This case law has been critical in establishing what must be proven by the plaintiff and what defenses are available to the defendant in a fraudulent transfer case. For example, in Branch Banking & Trust Co. v. Hamilton Greens, LLC, the court reiterated that a plaintiff establishes a prima facie case of fraud when (1) there was a creditor to be defrauded; (2) there was a transfer of property that could have been applied to payment of the debt due; and (3) there was a debtor intending fraud.

What is required to prove a case of a fraudulent transfer in Florida?

The elements of a fraudulent transfers claim under FUFTA are:

The debtor made the transfer or incurred with actual intent to hinder, delay, or defraud any creditor of the debtor; or
The debtor made a transfer without receiving reasonably equivalent value; and
The debtor did either of the following:
- Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
- Intended to incur, or believed or reasonably should have believed that they would incur, debts beyond their ability to pay as they became due.

When a set of facts is appropriate to meet the requirements of a fraudulent transfer claim, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to seek appropriate remedies, such as:

Appointment of a receiver
Attachment against the asset
Avoidance of the transfer
Injunctive relief

To see what actions may be available for your unique situation, please contact our office to set up your initial consultation.

What are common defenses to a fraudulent transfer claim in Florida?

The primary defenses to fraudulent transfer claims in Florida include the following:

Fair consideration: A defendant may argue that they received fair consideration in exchange for the transferred property.
Immunity: There may be no cause of action under FUFTA against a party who assists or aids a fraudulent transfer where that party does not come into possession of the asset.
Statute of limitations: The defendant may argue that the statute of limitations, four years from the time of the transfer or, in some situations, one year after the transfer was or could reasonably have been discovered by the plaintiff, bars the plaintiff’s claim.

When defending against a fraudulent transfer claim in Florida, one core strategy is to focus on disproving the element of intent by providing evidence of the defendant’s actual intent or demonstrating that the defendant had a legitimate business purpose for making the transfer. In addition, this defense may involve presenting witness testimony, documents, or other evidence to prove that the defendant’s actions lacked the intention to defraud.

To see what defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Have more questions about a fraudulent transfer-related situation?

Crucially, this overview of fraudulent transfers does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.