There have been a number of filings, but I’ve got to hit this one at a time. Some of them are pretty sensational and, well, there’s this one. This one is sad.
The basis of the complaint can be summed up in two points:
- There are regulations which require banks to implement and enforce procedures to identify and report financial scams. As of 2001, ATM Leaseback scams were among the top 10. The plaintiffs allege that, under these regulations, the bank should have uncovered several red flags all related to Joel or Ed getting slapped by a Securities Commission or having registration revoked.
- That NASI used legit processors to receive their legit ATM income, but spent out far more than that on the ATM fees. The other monies deposited into their account often had “ATM Leaseback” written in the memo on the check.
It all boils down to “how could CNB not have known that NASI was a Ponzi so therefore they knew it was a Ponzi.”
Then CNB filed an Anti-SLAPP motion. From what I gather, one premise in this motion is that whatever due diligence CNB performed is considered protected speech. That seem weird on its face, but it actually makes sense. What incentive does a bank have to report suspicious activity if the mere report of suspicious activity gets the pants sued off them?
Then along comes the other premise. The Plaintiffs state that their “knowledge” of CNB’s guilt in this matter all stems from CNB finding this all out through their due diligence. Unfortunately, the law prohibits the disclosure of the due diligence and the results. So, how do you use something that no one is allowed to see to prove that you knew something?
And what do you do when that’s youR only “evidence?”
Well, I should start by stating that the whole thing was dismissed with prejudice and the plaintiff’s must pay the CNB’s legal fees. But that’s not where it’s interesting. You see, the judge totally bitch-slapped the plaintiff’s lawyer. I mean, you know, in the way the court bitch slaps people.
So, the following are from the transcripts posted at Scribd. The legal jargon isn’t too bad, but try not to get too lost in it. I’ve cleaned up the formatting to make it easier to read, but have otherwise quoted exactly as it appears. All page numbers are the PDF ones, not the ones actually on the pages.
Let’s start with the exchange starting on page 12, starting at line 7:
THE COURT: You’re right you submitted some voluminous papers, but once I’ve stricken or sustained most of the evidentiary objections, you don’t really have any meaningful pile of competent evidence that the bank itself through Fitzwilliam or otherwise, but more particularly through what you in your briefs refer to as a due diligence process, was, at least from a triable issue of fact point of view, was on notice other than your surmise that because in the fullness of time it turned out to be a Ponzi scheme. and I think everybody agreed to that. I’ll give you that. That doesn’t mean that the bank at the relevant time was on notice it was a Ponzi scheme.
You have a theory without facts that the bank’s due diligence process to comply with its obligations in reporting to the bank regulators would have come across this and, therefore, surmise why they’re on notice of it. The problem is the way you chose to plead it pleads that they got this knowledge by going about what they have to do to comply with the bank secrecy act and their related regulations, which you cite in the quoted sections or the reference sections of your very own complaint. You know, you might have been able to draft a different pleading that just blamed it all on Fitzwilliam and stepped away from it, but that’s not how you brought the case forward.
MR. NUNEZ: But that is not a requirement of pleading requirement. That’s what i just read to the court.
THE COURT: Well, but you put yourself right in the crosshairs of the Anti-SLAPP statute. And that’s where it all turned badly.
MR. NUNEZ: Well, but what did was, those allegations are evidence of the knowledge, and that’s what your statement seems to indicate. We haven’t gotten to have we provided sufficient evidence. we’ve gotten to —
THE COURT: Well, once you have coverage, that is the question.
MR. NUNEZ: But we haven’t gotten to coverage.
THE COURT: Well, I found coverage, and you’re disputing me on that, but if I find there’s coverage and there are no exceptions, then you have to set forth triable evidence. And I give you that I denied discovery when you sought discovery some several months ago. And that put you in a box. I mean, to be blunt, once you knew you weren’t going to get discovery, it should have been pretty obvious that you were in a bad corner.
Then with this starting on page 15, line 5:
THE COURT: I made a ruling. But now, because an Anti-SLAPP statute is in play, you have to have started the lawsuit through your independent investigation with the facts that allow you to bring the pleading forward if you’re going to confront an Anti-SLAPP statute. You can’t just take a shot in the dark and hope, like typical plaintiff’s litigation, that somehow in discovery you’ll get some facts to support your hypothesis. The Anti-SLAPP statute requires you to come to the courthouse with the facts in hand, if not all the facts that are going to win at a trial before a jury, at least enough facts that show you’ll keep the thing alive in the face of what is essentially an early summary judgment motion.
And then it gets worse for the plaintiff on page 18, line 15:
THE COURT: Is this attached to one of the declarations that’s before me?
MR. NUNEZ: It is not. It is new evidence for which I ask your honor, request judicial notice. This is on the Casey vs. City National Bank case.
THE COURT: Have you served counsel for the bank in advance of this?
MR. NUNEZ: I have not.
THE COURT: Well, what’s the bank’s position?
MS. IRVING: It’s improper, your honor.
THE COURT: Indeed. you can move on to something else, Mr. Nunez.
MR. NUNEZ: May I make a record of what I was going to introduce?
THE COURT: Yes. It’s without any viable justification, but you can make a record and then I will repeat my ruling.
And then the judge gives him a piece of his mind (starting page 19, line 13):
THE COURT: Your request made at the time of oral argument, mindful that your opposition was filed on July 1 of last year and the reply came in on July 15 of last year, is grossly untimely, particularly the failure to give your adversary any advance notice, and it’s denied with prejudice.
To be honest, the more time I spent with your papers, the more I was troubled with how sloppy they were analytically, stylistically, and in every regard, MR. Nunez. It was actually very troubling at what a mediocre effort it was for somebody who wants to be class counsel in an important case.
They then proceed to set up a hearing for the whole named and unnamed issue. You see, when you have a case like this, where CNB and a bunch of as-of-yet unnamed folks (Does) are being sued and any allegations against CNB are dismissed, what happens to the Does? Are they still being sued or does the whole case get thrown out?
Well, as it turns out, the case simply closes.
While there’s been no appeal filed yet, hope may not be lost. Anti-SLAPP is a murky business and the judge express his (and his colleagues’) frustrations over the way the legislation was worded. He’s working in good faith off whatever case law has been established, but he is interested to see how the appeal goes.