IN THE CIRCUIT COURT OF THE NINTH JUDICIAL CIRCUIT, IN

IN THE CIRCUIT COURT OF THE NINTH JUDICIAL CIRCUIT,

IN AND FOR ORANGE COUNTY, FLORIDA

FORTINBRAS ENTERPRISES LP,

HT INVESTMENTS, LLC, SILVER

ROCK TACTICAL ALLOCATION

FUND LP, AND SILVER ROCK

CONTINGENT CREDIT FUND LP,

PLAINTIFFS,

ONE FLORIDA BANK,

DEFENDANT.

CASE NO.: 2023-CA-014704-O

COMPLEX BUSINESS LITIGATION

DEFENDANT ONE FLORIDA BANK’S MOTION TO DISMISS

Filing # 183968769 E-Filed 10/13/2023 05:46:16 PM

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Defendant One Florida Bank, pursuant to Florida Rules of Civil Procedure

1.140(b)(6) and 1.110(f), respectfully requests that this Court dismiss Plaintiffs’

Complaint because Plaintiffs cannot state a claim for fraudulent transfer, whether

intentional or constructive. In support, One Florida Bank states:

INTRODUCTION

Plaintiffs allege that they loaned money to a Louisiana LLC, Lighthouse

Management (sometimes referred to as “Lighthouse Management” or

“Lighthouse”). Then, Plaintiffs say, Lighthouse Management fraudulently

transferred that money away, repaying loans previously made to it and to a related

entity—Prepared Managers, LLC

—by One Florida Bank. Soon after paying off

those loans, Lighthouse collapsed, leaving Plaintiffs with worthless notes. Plaintiffs

further point to connections between One Florida Bank and Lighthouse, speciously

suggesting One Florida Bank knew of Lighthouse’s financial state and was somehow

complicit in a fraudulent scheme by accepting repayment of its loans.

But the Note Agreement between Plaintiffs and Lighthouse, which the

Complaint implicitly incorporates by reference, tells a much different story.

Reviewing the Note Agreement, it becomes clear that not only did Plaintiffs know

about Lighthouse and Prepared’s debts to One Florida Bank; and not only did

Plaintiffs approve of Lighthouse using loan proceeds to repay those debts; but

Sometimes referred to as “Prepared Managers” or “Prepared.”

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Plaintiffs expressly required that Lighthouse use loan proceeds to pay off its and

Prepared’s debt to One Florida Bank as a condition of their loan. Yet Plaintiffs now

have the temerity to claim those authorized transfers were fraudulent. In doing so,

Plaintiffs—who happen to be sophisticated hedge funds—stretch the doctrine of

fraudulent transfer beyond all recognition in a shameless effort to have Defendant—

a community bank—bail Plaintiffs out of their failed speculation in the Louisiana

homeowner’s insurance industry.

Indeed, courts across the country recognize that creditors who participate in

or ratify an alleged fraudulent transfer cannot then seek to have that transfer avoided.

Because Plaintiffs required the transfers they now call fraudulent as a very condition

of their loan to Lighthouse, they cannot state any fraudulent transfer claim.

And if this Court disagrees, it should still dismiss the Complaint without

prejudice for violating Florida Rule of Civil Procedure 1.110(f), which prohibits

comingling discreet claims for relief in a single count. Specifically, Count I of

Plaintiffs’ Complaint impermissibly alleges two separate fraudulent transfers—

made at different times, for different amounts, and under differing circumstances.

Plaintiffs’ effort to combine these claims is tactical. Indeed, the larger of the two

transfers is both weaker on its merits and susceptible to its own set of affirmative

defenses. But Plaintiffs’ effort to insulate the larger, weaker transaction from

individualized scrutiny impermissibly muddles the two transfers, rather than

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facilitating a clear presentation of the issues as required. And so, even if this Court

is disinclined to dismiss on the merits, it should still dismiss Count I of Plaintiffs’

Complaint, requiring Plaintiffs—if they can in good faith do so—to plead their two

distinct intentional fraudulent transfer claims in two distinct counts.

BACKGROUND

Plaintiffs—Fortinbras Enterprises LP (Fortinbras), HT Investments, LLC

(HT), and Silver Rock Tactical Allocation Fund LP and Silver Rock Contingent

Credit Fund LP (together, Silver Rock) (collectively, “Plaintiffs”)—are hedge funds

and investment advisor entities. See Compl. ¶¶ 16–19. Defendant, One Florida Bank,

is a Florida-based community bank. See id. ¶ 20. Between 2019 and 2021, in three

separate transactions, One Florida Bank loaned money to two insurance-related

entities: Lighthouse Management and Prepared Managers. Id. ¶¶ 44–48. Lighthouse

Management later also borrowed money from Plaintiffs, and Lighthouse used some

of that money to repay One Florida Bank’s loans. Id. ¶¶ 11–12. Plaintiffs now claim

that the repayment of those loans was fraudulent.

Lighthouse Management, the alleged debtor to Plaintiffs, was a licensed

managing general agent under Louisiana law, meaning that it ran all or almost all of

various insurance companies’ day-to-day activities. See id. ¶¶ 7, 23. It was also

The facts recited are those alleged in Plaintiffs’ Complaint, which Defendant largely

denies but accepts as true for the purposes of this Motion to Dismiss.

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related to two companies: Lighthouse Excalibur Insurance Company and Lighthouse

Property Insurance Corporation. Id. ¶¶ 2–3. The Complaint groups these companies

together as the “Lighthouse Entities.” Id. ¶ 3. The Whites—Patrick White and his

father Lawrence White—allegedly “controlled and indirectly held the beneficial

interests in all of” the Lighthouse Entities. Id.

A related group of entities—but, importantly, not the “debtor” for the purpose

of Plaintiffs’ claims—are what the Complaint calls the “Prepared Entities.” Id. These

consist of Prepared Holdings LLC, which owned Prepared Managers, LLC. Prepared

Managers, in turn, was the managing general agent of Prepared Insurance Company.

Id. Prepared Insurance Company itself was owned, since June 2020, by Lighthouse

Insurance Company. Id. ¶ 26. The Whites indirectly owned a 70% interest in the

Prepared Entities through Prepared Holdings. Id. ¶ 3.

In December 2019, One Florida Bank loaned Lighthouse Management

$5,000,000. Id. ¶ 44. In September 2020, One Florida Bank loaned Prepared

Managers $6,000,000. Id. ¶ 45. Sometime later in 2021, “Lighthouse Management

established a revolving line of credit at One Florida Bank up to a principal amount

of $10,000,000.” Id. ¶ 46. By December 2021, Lighthouse Management owed One

Florida Bank $13,800,000 on its two loans, and Prepared Managers owed One

Florida Bank $5,200,000. Id. ¶¶ 47–48.

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After a Louisiana conservation proceeding against Prepared Managers and the

Lighthouse Entities concluded in an August 2021 settlement agreement, it became

clear that the Lighthouse Insurance Companies would need additional funding. See

id. ¶¶ 49–53. In early September 2021, Patrick White, along with Lighthouse

Management’s re-insurance broker, TigerRisk Partners LLC, contacted Fortinbras

with a proposal seeking an investment of between $40 and $60 million, which would

be partially used to pay back its lender. Id. ¶¶ 61–62. Fortinbras apparently

conducted “initial diligence” and sent Lighthouse Management a term sheet that

“contemplated that Fortinbras would purchase $60,000,000 in notes from

Lighthouse Management” and that “approximately $14,000,000 of that sum would

be used to repay existing ʻdebt.’” Id. ¶ 62.

Fortinbras began its due diligence process in September 2021. Id. ¶ 65.

According to Plaintiffs, they were especially interested in Lighthouse Management’s

exposure after Hurricane Ida, which had recently ravaged Louisiana. Id. ¶ 66.

As Plaintiffs tell it, between October and December 2021, TigerRisk and Patrick

White repeatedly misled Plaintiffs regarding the Lighthouse Entities’ exposure

stemming from Hurricane Ida-related claims. Id. ¶¶ 68–74. Patrick White also

allegedly concealed the existence of the previous conservation proceeding. Id. ¶ 5.

Eventually, on December 22, 2021, Plaintiffs executed a note agreement (the Note

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Agreement) with Lighthouse Management. Id. ¶ 78; Exhibit A.

In the Note

Agreement, Plaintiffs agreed to buy $65,000,000 in secured notes from Lighthouse

Management. Compl. ¶ 78.

The Note Agreement specifically references both Lighthouse and Prepared

Managers’ debt to One Florida Bank. Exhibit A at 9 (Section 1.10, defining “Existing

“[W]here the terms of a legal document are impliedly incorporated by reference into the

complaint, the trial court may consider the contents of the document in ruling on a motion

to dismiss.” One Call Prop. Servs. Inc. v. Sec. First Ins. Co., 165 So. 3d 749, 752 (Fla. 4th

DCA 2015) (holding that, when complaint referred to an insurance policy and standing to

sue was based on assignment of the policy, trial court did not err by considering policy);

Air Quality Assessors of Fla. v. S.-Owners Ins. Co., 354 So. 3d 569, 571 (Fla. 1st DCA

2022) (holding that insurance policy was incorporated by reference when assignee of

policy sought compensation under policy); Veal v. Voyager Prop. & Cas. Ins. Co., 51 So.

3d 1246, 1249 (Fla. 2d DCA 2011) (holding that, when complaint referenced a settlement

agreement and was based on the terms of that agreement, agreement was incorporated by

reference). Here, the Complaint references the Note Agreement throughout and describes

its terms in at least seven paragraphs. Compl. ¶¶ 8–9, 12, 78–82. And, as in the cases cited

above, Plaintiffs’ ability to sue, as well as their theory of liability, relies on the Note

Agreement. In that regard, Plaintiffs allege that they (except Fortinbras) were “part[ies] to

the Note Agreement,” attempting to show their status as a “creditor” (a necessary

prerequisite to any fraudulent transfer claim), see Isaiah v. JPMorgan Chase Bank, 960

F.3d 1296, 1302 (11th Cir. 2020), and further allege that the Note Agreement sets forth the

“require[ment] [of] the contribution of Prepared Mangers if . . . proceeds were used to

satisfy Prepared Managers’ debt to One Florida Bank,” Compl. ¶ 12. Indeed, on the last

point, Plaintiffs allege that the Prepared Managers “contribution” required under the Loan

Agreement “never took place” to argue that “Lighthouse Management received nothing of

value in return for th[e] payment.” Compl. ¶ 12—an essential element of their claims. See

id. ¶ 110(iii) (alleging in Count I that “Lighthouse Management received no consideration

at all” with regard to transfer on behalf of the Prepared Management); id. ¶ 112 (alleging

in Count II that the “transfer to satisfy debts owed by Prepared Managers was made . . .

without receiving a reasonably equivalent value in exchange”); id. ¶ 115 (same in Count

III). Thus, the Note Agreement is incorporated by reference in Plaintiffs’ Complaint and

this Court may consider it in adjudicating this motion to dismiss.

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Indebtedness” as outstanding loan agreements “between the Issuer [Lighthouse] and

One Florida Bank” and “between Prepared Managers and one Florida Bank”).

the Note Agreement, Plaintiffs and Lighthouse agreed that a significant portion of

Plaintiffs’ loan was to be used to pay off that “Existing Indebtedness” of Lighthouse

and Prepared to One Florida Bank. Indeed, the Note Agreement describes the

transaction between Plaintiffs and Lighthouse in these terms:

“Transaction” means, collectively, (a) the issuance of the Notes on the

Closing Date, (b) the repayment of Existing Indebtedness, (c) the

creation and perfection of the Liens pursuant to the Security

Documents, (d) the issuance of Warrants, (e) the consummation of any

other transactions in connection with the foregoing, and (f) the payment

of the Transaction Expenses.

In full, the Note Agreement states:

“Existing Indebtedness” means (i) any Indebtedness of the Issuer

outstanding on or before the Closing Date under (x) the Loan Agreement

between the Issuer and One Florida Bank, a Florida corporation dated

December 17, 2019, as amended prior to the date hereof, and the documents,

instruments and agreements in connection therewith, in the principal amount

not to exceed $5,000,000.00 (which amount is outstanding as of the date

hereof), and (y) the Revolving Line of Credit Loan Agreement between the

Issuer and One Florida Bank, a Florida corporation, dated 2021, as amended

prior to the date hereof, and the documents, instruments and agreements in

connection therewith, in the principal amount not to exceed $10,000,000.00

(which amount is outstanding as of the date hereof), and (ii) solely in

connection with the Prepared Managers Contribution, any Indebtedness of

Prepared Managers under the Loan Agreement between Prepared Managers

and One Florida Bank, dated as of September 18, 2020, as amended prior to

the date hereof, and the documents, instruments and agreements in

connection therewith, in the principal amount not to exceed $6,000,000.00

(which amount is outstanding as of the date hereof).

Exhibit A at 9 (Section 1.01).

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Id. at 23 (Section 1.01) (emphasis added).

Repayment of One Florida Bank’s loans served Plaintiffs’ interests: it ensured

Plaintiffs—not One Florida Bank—held a first priority secured interest in

Lighthouse’s assets. Section 4.01 of the Note Agreement provides that “[t]he

obligation of each Initial Purchaser [i.e., Plaintiffs] to purchase the Notes hereunder

on the Closing Date is subject to satisfaction of . . . each of the following conditions

precedent: . . . all registrations, notices or actions” necessary “to establish a valid

and perfected first priority security interest” in Plaintiffs’ favor must be “effected,

given or made,” including “[f]inal unfiled forms of UCC-3 termination statements

with respect to the liens securing Existing Indebtedness” as to Lighthouse. Id. at 42–

43 (Section 4.01(b)); see also id. at 45 (Section 4.01(m)) (providing that “[o]n the

Closing Date, after giving effect to the Transaction [the repayment of Existing

Indebtedness], none of [Lighthouse Holdings], [Lighthouse Management] or any of

their Subsidiaries shall have any Indebtedness for borrowed money except (i) the

Notes”). In other words, Plaintiffs required that Lighthouse Management pay off its

loans from One Florida Bank to ensure that Plaintiffs would be in first position by

having a priority secured interest in Lighthouse’s assets. And if there were any

lingering doubt, the Note Agreement later adds the following warranty under the

heading “Use of Proceeds”: “The proceeds from the sale of the Notes on the Closing

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Date will be used (i) to repay the Issuer’s Existing Indebtedness.” Id. at 58 (Section

6.15) (emphasis added).

Though Plaintiffs make much of the fact that Lighthouse Management paid

off Prepared Managers’ debt, as noted above, the Note Agreement required that too.

See id. at 58 (Section 6.15) (providing that the “proceeds from the sale of the Notes

on the Closing Date will be used . . . . (iii) solely in connection with and substantially

simultaneous to the Prepared Managers Contribution, to repay the Existing

Indebtedness of Prepared Managers”). Again, that payment served Plaintiffs’

interests: under the Note Agreement, through a series of transactions, Prepared

Managers was to be contributed to Lighthouse Management “substantially

simultaneous” to the loan payoff. Id. at 19 (Section 1.01, defining “Prepared

Managers Contribution”); id. at 58 (Section 6.15). That way, Plaintiffs would have

all their collateral wrapped up in one entity, in which they would have a priority

secured interest.

The day the parties executed the Note Agreement, HT and Silver Rock

transferred $63,700,000 to Lighthouse Management. Compl. ¶ 79. Lighthouse

Management in turn loaned $47,000,000 to Lighthouse Holdings, which then

contributed it to Lighthouse Property Insurance Company. Id. In exchange, Plaintiffs

gained a security interest in, “among other things,” “all of the assets and equity

interests in Lighthouse Management.” Id. ¶ 80.

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The same day, as directed by the Note Agreement, Lighthouse Management

“directed the transfer of” $13,822,665.41 to One Florida Bank to pay its debt. Id.

¶ 83. One Florida Bank received the payment the next day. Id. On February 2, 2022,

Lighthouse transferred $5,200,000 to One Florida Bank to satisfy Prepared

Managers’ debt. Id. ¶ 84. Yet Plaintiffs now claim that these transfers rendered

Lighthouse insolvent. Id. ¶¶ 87–88.

Eventually, on February 4, 2022, Patrick White disclosed to Plaintiffs that the

Lighthouse Entities were in financial distress. Id. ¶ 94. On March 29, 2022, the

Louisiana Department of Insurance “filed a Petition for Renewed Conservation and

Injunctive Relief, and obtained the Renewed Conservation Order, placing” the

Lighthouse Entities and Prepared Managers “back into conservation pursuant to

provisions of the Louisiana Insurance Code.” Id. ¶ 97. Eventually the Louisiana

Department of Insurance agreed to transfer to HF and Silver Rock all of Lighthouse

Management’s assets and its claims against Prepared Managers—that agreement

was later approved by a Louisiana court. Id. ¶¶ 102–03. In October 2022, the court

authorized Lighthouse Management’s liquidation. Id. ¶ 104.

In late August 2023, Plaintiffs filed this action under Florida’s Uniform

Fraudulent Transfer Act (UFTA). Broadly, the UFTA bars two types of transfers. The

first is an intentional fraudulent transfer; in other words, a transfer made “[w]ith

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actual intent to hinder, delay, or defraud any creditor

of the debtor.” § 726.105(1)(a),

Fla. Stat. To prove an intentional fraudulent transfer, Plaintiffs must show an intent

to defraud by the transferor. Typically, this involves showing the presence of certain

“badges of fraud.” Gen. Elec. Co. v. Chuly Int’l, LLC, 118 So. 3d 325, 327 (Fla. 3d

DCA 2013) (citing Beal Bank, SSB v. Almand Assocs., 780 So. 2d 45, 60 (Fla. 2001));

see also § 726.105(2)(a)–(k), Fla. Stat. (codifying badges of fraud).

The second prohibited transfer is a constructive fraudulent transfer, which

occurs when a debtor transfers all of their assets away without consideration and

they are insolvent or the transfer renders them insolvent. § 726.106(1), Fla. Stat.;

§ 726.105(1)(b), Fla. Stat. Constructive fraudulent transfer requires that the plaintiff

show (1) that the debtor was insolvent at the time of the transfer or became insolvent

through the transfer and (2) that the transfer was not for reasonably equivalent value.

See, e.g., United States v. Exec. Auto Haus, Inc., 234 F. Supp. 2d 1253, 1257 (M.D.

Fla. 2002).

Based on Lighthouse’s two transfers to One Florida Bank, Plaintiffs allege

three counts. In Count I, Plaintiffs combine Lighthouse’s initial payment of its own

debt with its payment of Prepared Managers’ debt and allege without differentiation

Notably, Plaintiff Fortinbras was neither a party to the Note Agreement nor a purchaser

of notes. See Exhibit A at PDF pgs. 2, 8. Accordingly, Fortinbras has no apparent right to

payment under the Note Agreement and thus is not a creditor who can bring a claim for

fraudulent transfer. See § 726.102(4)–(5), Fla. Stat. (defining “creditor” to mean a person

who has a claim, which includes a right to payment).

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that both “Transfers”—a defined term used throughout the Complaint—were

intentionally fraudulent. Compl. ¶¶ 107–10. In doing so, Plaintiffs assert that the

combined “Transfers” satisfied five of eleven statutory “badges” of fraud. In Counts

II and III, Plaintiffs allege that the second transfer (the Prepared Managers transfer)

was also constructively fraudulent under § 726.105(1)(b)(2), Fla. Stat. and

§ 726.106(1), Fla. Stat., respectively. Compl. ¶¶ 111–17.

Because Plaintiffs bargained for and ratified the very transactions they now

challenge, and alternatively because Plaintiffs impermissibly plead multiple claims

in a single count, One Florida Bank moves to dismiss.

ARGUMENT

I. Motion to Dismiss Standard.

A motion to dismiss tests a pleading’s legal sufficiency. Nationstar Mortg.,

LLC v. McDaniel, 288 So. 3d 1235, 1236 (Fla. 5th DCA 2020). And when the facts

supporting a defense appear on the complaint’s face and documents incorporated by

reference,

the defense may be raised in a motion to dismiss and the Court must

dismiss. Lewis v. Morgan, 79 So. 3d 926, 928 (Fla. 1st DCA 2012) (affirming grant

of motion to dismiss based on affirmative defense appearing on face of complaint);

Bott v. City of Marathon, 949 So. 2d 295, 296 (Fla. 3d DCA 2007) (holding that,

when defense appears on complaint’s face, dismissal with prejudice is proper); see

See supra footnote 3.

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also Wash. State Inv. Bd. v. Odebrecht S.A., 461 F. Supp. 3d 46, 78–79 (S.D.N.Y.

2020) (granting motion to dismiss fraudulent transfer claim based on affirmative

defense of ratification); In re Lyondell Chem. Co., 503 B.R. 348, 383–84 (Bankr.

S.D.N.Y. 2014), as corrected (Jan. 16, 2014) (granting motion to dismiss fraudulent

transfer claim because ratification defense “appear[ed] on the face of the

complaint”), abrogated on preemption grounds by In re Tribune Co. Fraudulent

Conveyance Litig., 818 F.3d 98 (2d Cir. 2016).

Further, “[e]ach claim founded upon a separate transaction or occurrence . . .

shall be stated in a separate count . . . when a separation facilitates the clear

presentation of the matter set forth.” Fla. R. Civ. P. 1.110(f). Failure to comply with

Rule 1.110(f) “may ‘warrant dismissal of a complaint.’” Taubenfeld v. Lasko, 324

So. 3d 529, 541 (Fla. 4th DCA 2021) (quoting Collado v. Baroukh, 226 So. 3d 924,

927 (Fla. 4th DCA 2017)); see also Baroukh, 226 So. 3d at 927 (“[A]n action may

be dismissed for failure to comply with the Florida Rules of Civil Procedure.” (citing

Fla. R. Civ. P. 1.420(b)).

II. This Court must dismiss the Complaint with prejudice because

Plaintiffs ratified the transactions they now seek to unwind.

Simply put, because Plaintiffs required Lighthouse Management to repay its

and Prepared Managers’ debts as an express condition to the Note Agreement, they

cannot now claim the payment was fraudulent.

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A. Ratification is a Defense to Fraudulent Transfer.

“Because a fraudulent transfer is not void, but voidable, courts have generally

held that it can be ratified by a creditor who is then estopped from seeking its

avoidance.” First State Bank of Nw. Ark. v. McClelland Qualified Pers. Residence

Tr., No. 5:14-CV-130 (MTT), 2015 WL 5595566, at *6 (M.D. Ga. Sept. 21, 2015)

(quotations omitted).

Indeed, courts across the country have recognized “the

overwhelming authority that such knowledge can bar claims for both actual and

constructively fraudulent transfers.” Id. at *6 n.16.

In line with this authority,

“[e]stoppel [or ratification] can be a defense to a fraudulent transfer action under

Florida law.” In re Brit. Am. Ins., No. 09-31881-EPK, 2013 WL 211314, at *13

(Bankr. S.D. Fla. Jan. 18, 2013), report and recommendation adopted sub nom. In

re Brit. Am. Isle of Venice (BVI) Ltd., No. 12-81329-CIV, 2013 WL 1566648 (S.D.

To be sure, the transfers at issue here are not fraudulent, but even assuming they were at

the motion to dismiss stage, Plaintiffs could not void them.

Fraudulent transfer law has been around since the Elizabethan Era. Indeed, the UFTA now

adopted in Florida is based on a 1571 English law, Statute of 13 Elizabeth. Plus, as its name

suggests, Florida’s Fraudulent Transfer Act is a Uniform Act. As such, both because these

concepts are so old and because they have now been collated in a uniform act, the UFTA

is identical or nearly identical to uniform acts from many other states. It is also

substantively identical to a federal bankruptcy provision, 11 U.S.C. § 548. Claims under

the federal act are “analogous in form and substance to those under” the UFTA and are

“frequently analyzed contemporaneously” with UFTA claims. In re Able Body Temp.

Servs., Inc., 626 B.R. 643, 656 (Bankr. M.D. Fla. 2020) (quotations omitted); see also In

re PSN USA, Inc., No. 02-11913-BKC-AJC, 2011 WL 4031147, at *4 (Bankr. S.D. Fla.

Sept. 9, 2011), aff’d, 615 F. App’x 925 (11th Cir. 2015) (same). Accordingly, authorities

from other jurisdictions interpreting the uniform or federal fraudulent transfer provisions

are persuasive.

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Fla. Apr. 12, 2013); see also § 726.111, Fla. Stat. (“Unless displaced by the

provisions of [§§] 726.101-726.112, the principles of law and equity, including . . .

estoppel, laches, fraud, misrepresentation, duress, coercion, mistake, insolvency, or

other validating or invalidating cause, supplement those provisions.”).

“[T]he general principle [is] that a creditor who knowingly authorized or

sanctioned a transaction cannot then claim to have been defrauded by the transaction

. . . .” SL EC, LLC v. Ashley Energy, LLC, No. 4:18-CV-01377-JAR, 2020 WL

7181580, at *8 (E.D. Mo. Dec. 7, 2020); see also In re Adelphia Recovery Tr., 634

F.3d 678, 691 (2d Cir. 2011) (“A fraudulent transfer . . . can be ratified by a creditor

who is then estopped from seeking its avoidance.” (quoting In re Best Prod. Co., 168

B.R. 35, 57 (Bankr. S.D.N.Y. 1994)); Lane v. Eggleston, 284 F. 743, 745 (5th Cir.

1922) (stating that a creditor cannot “avoid [a transfer], after he has voluntarily

assented to it”); Lincoln Nat’l Life Ins. Co. v. Inzlicht-Sprei, 16CV5171PKCRML,

2020 WL 1536346, at *12 (E.D.N.Y. Mar. 31, 2020), aff’d, 847 F. App’x. 97 (2d Cir.

2021) (holding that, when representative of allegedly defrauded party signed sale

documents, the plaintiff could not state a fraudulent transfer claim based on sale);

First State Bank of Nw. Ark., 2015 WL 5595566, at *6 n.16 (holding that “a creditor

with knowledge of a transfer at the time credit was advanced can be barred from

attacking the transfer.”); In re Lyondell, 503 B.R. at 383–84 (Bankr. S.D.N.Y. 2014)

(holding that “[c]reditors who authorized or sanctioned the transaction, or, indeed,

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participated in it themselves, can hardly claim to have been defrauded by it, or

otherwise to be victims of it.”); Rozan v. Rozan, 129 N.W.2d 694, 705 (N.D. 1964)

(“The creditor must not have participated in or assented to the conveyance of which

he complains, for if he has he cannot afterwards be heard to assert that the transfer

was fraudulent per se as to him.” (internal citation omitted)).

In turn, “[r]atification is the act of knowingly giving sanction or affirmance to

an act which would otherwise be unauthorized and not binding” and may be “express

or implied, or may result from silence or inaction.” Adelphia, 634 F.3d at 691

(quotation omitted); see also ABC Salvage, Inc. v. Bank of Am., N.A., 305 So. 3d

725, 729 (Fla. 3d DCA 2020) (“Under Florida law, [r]atification of an agreement

occurs where a person expressly or impliedly adopts an act or contract entered into

in his or her behalf by another without authority.” (quotation omitted)).

B. Plaintiffs ratified the challenged transactions because they not only

knowingly approved of the transactions but required them.

Plaintiffs plainly ratified the transactions of which they now complain because

the Note Agreement between Plaintiffs and Lighthouse Management not only

acknowledged the transactions Plaintiffs now wish to void, but it also required them.

As courts have explained in analogous situations, lenders cannot bring claims for

fraudulent transfer when they “not only knew that their loans would be used to pay

[the defendant]; they not only consented that their loans be used to pay [the

defendant]; they required that their loans be used to pay [the defendant].” U.S. Bank

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Nat. Ass’n v. Verizon Commc’ns Inc., 479 B.R. 405, 411 (N.D. Tex. 2012) (emphasis

in original) (holding that, when bank lent money to alleged fraudulent transferor for

the express purposes of purchasing Verizon’s yellow pages business, the transfer of

funds to realize that purchase could not constitute fraudulent transfer).

So too here.

Plaintiffs knew their loans would be used to pay One Florida Bank; they consented

to their loans being used to pay One Florida Bank; and they required their loans be

used to pay One Florida Bank.

See also In re Refco, Inc. Sec. Litig., No. 07 MDL

1902 GEL, 2009 WL 7242548, at *11 (S.D.N.Y. Nov. 13, 2009) (recommending

granting motion to dismiss because “[t]he Credit Agreement provides that the funds

from Refco could be used only for the purchase of PlusFunds shares, and could only

be disbursed with the permission of Refco. Refco was thus intimately involved with

and voluntarily participated in what the Plaintiff [standing in Refco’s shoes] readily

asserts was a fraudulent transaction.”), report and recommendation adopted sub

nom. In re Refco Sec. Litig., No. 07 MDL 1902 JSR, 2010 WL 5129072 (S.D.N.Y.

U.S. Bank addressed fraudulent transfer claims brought by a bankruptcy trustee under 11

U.S.C. § 548. 479 B.R. at 409; In re Able Body, 626 B.R. at 656 (§ 548 claims are analogous

to Florida fraudulent transfer claims); see also 11 U.S.C. § 544(b)(1) (stating that a

bankruptcy trustee “may avoid any transfer of an interest of the debtor in property or any

obligation incurred by the debtor that is voidable under applicable law by a creditor holding

an unsecured claim that is allowable”). The issue was thus whether banks that had loaned

money to the transferor had a valid fraudulent transfer claim that the bankruptcy trustee

could assume and prosecute. U.S. Bank, 479 B.R. at 411.

Though Plaintiffs indeed required the transfers, One Florida Bank need only show that

Plaintiffs ratified the transactions through participation or affirmance. Adelphia, 634 F.3d

at 691.

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Jan. 12, 2010); Odebrecht S.A., 461 F. Supp. 3d at 78–79 (granting motion to dismiss

fraudulent transfer claim under New York law because the debtor’s offering

memoranda disclosed to the lender that the loan proceeds would be transferred and

how they would be used).

No doubt Plaintiffs will argue ratification requires knowledge of “all material

matters.” Ashley Energy, 2020 WL 7181580, at *9; see also Flaherty v. Flaherty,

128 So. 3d 920, 923 (Fla. 2d DCA 2013) (“Ratification occurs when a party entitled

to rescind a voidable contract fails to do so after the discovery of facts that warrant

a rescission.”). And fair enough, the Complaint alleges that Patrick White concealed

information about Lighthouse’s finances.

But that deception “is irrelevant.” U.S. Bank, 479 B.R. at 411. “[P]laintiff[s’]

claims are for fraudulent transfers, not for fraud.” Id. The question on a fraudulent

transfer claim is not whether Plaintiffs were fraudulently induced into loaning money

to Lighthouse Management; the question is whether Lighthouse’s transfers to One

Florida Bank are voidable. In other words, the question is not whether the debtor

used fraud to obtain the funds transferred—that’s a fraud claim against the debtor

(not the recipient of a later transfer). Instead, the relevant question is whether the

debtor transferred the funds in a way that was either intended to evade a debt or

rendered the debtor unable to pay the debt and the transfer was not for equal value.

Gulf Coast Produce, Inc. v. Am. Growers, Inc., No. 07-80633-CIV, 2008 WL 660100,

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at *6 (S.D. Fla. Mar. 7, 2008) (explaining that “[t]he fraudulent act” in a fraudulent

transfer claim is “the clandestine act of hiding money”). How the money came into

the debtor’s hands in the first place is irrelevant. Id. (“[A] fraudulent transfer claim

is significantly different from other fraud claims . . . .”); U.S. Bank, 479 B.R. at 411

(“As the court has already explained, fraud is simply not an aspect of a fraudulent

transfer claim.” (quotations omitted)).

The point is that it does not matter when it comes to suing One Florida Bank

whether Plaintiffs were somehow “‘duped’ or ‘tricked’” into loaning money to

Lighthouse. U.S. Bank, 479 B.R. at 411. “Because [Lighthouse’s] lenders . . . had

full knowledge of the transfers from [Lighthouse to One Florida Bank], they” cannot

bring “fraudulent transfer claims.” Id.

So too, even if Plaintiffs are correct (as they allege) that Prepared Managers

was never contributed to Lighthouse per the terms of the Note Agreement, such a

failure would be a simple breach of the Note Agreement.

Indeed, if Lighthouse had

breached this requirement, Plaintiffs’ remedies were set out in the Note Agreement:

acceleration, specific performance, or “any available remedy to collect the payment

of principal, premium (including Yield Protection Premium), and interest on the

Notes.” Exhibit A at 70 (Section 8.03(a)). In other words, the appropriate relief for

Perhaps Lighthouse would also have a claim against Prepared for unjust enrichment.

That may explain why the Louisiana Insurance Commissioner agreed to transfer

Lighthouse’s claims against Prepared to Plaintiffs. Compl. ¶¶ 102–03.

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Lighthouse’s breach was a suit against Lighthouse for breach of the Note Agreement.

And Plaintiffs’ articulated theory of fraudulent transfer—where the debtor

transferred funds to the expressly approved party, but failed to satisfy every

contractual condition in the process—would turn virtually every breach of contract

claim involving uses of funds into a fraudulent transfer.

Plaintiffs’ claims concern the flow of money between Lighthouse and

Plaintiffs—they have nothing to do with One Florida Bank factually or legally. To

the contrary, Plaintiffs knew exactly what Lighthouse would do with the money

Plaintiffs lent—repay One Florida Bank—because that’s what Plaintiffs required

Lighthouse to do. Indeed, Plaintiffs structured the entire transaction around such

payments. See id. at 23 (Section 1.01, defining the “Transaction” to include

“repayment of Existing Indebtedness,” which was defined to include both

Lighthouse and Prepared’s debt with One Florida Bank). Accordingly, Plaintiffs

cannot void those transfers, and this Court should dismiss with prejudice. Odebrecht

S.A., 461 F. Supp. 3d at 78–79 (granting motion to dismiss noting that creditor’s

awareness of debtor’s use of proceeds was “fatal” to fraudulent transfer claim); In re

Lyondell, 503 B.R. at 383–84, 392 (dismissing fraudulent transfer claim noting that

claim cannot survive in light of creditor’s knowledge of use of funds).

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III. In the alternative, this Court should dismiss Count I with leave to

amend because Plaintiffs impermissibly comingle claims.

On top of its fatal, substantive flaws, Plaintiffs’ Complaint suffers from

pleading defects. “Each claim founded upon a separate transaction or occurrence . . .

shall be stated in a separate count . . . when a separation facilitates the clear

presentation of the matter set forth.” Fla. R. Civ. P. 1.110(f). Failure to comply with

Rule 1.110(f) “may ‘warrant dismissal of a complaint.’” Taubenfeld, 324 So. 3d at

541 (quoting Collado, 226 So. 3d at 927).

Count I is an impermissible chimera of two independent fraudulent transfer

claims and thus subject to dismissal under Rule 1.110(f). In Count I, Plaintiffs

challenge both the December 2021 and February 2022 transfers. Blending the

transfers together, Plaintiffs allege that the “[t]he value of the consideration received

by the debtor was not reasonably equivalent to the value of the assets transferred or

the amount of the obligation incurred.” Compl. ¶ 110. This was so, Plaintiffs say,

because “Lighthouse Management received no consideration at all in return for the

approximately $5,200,000 transferred [in February] to One Florida Bank to

extinguish a debt owed by Prepared Managers.” Id. But the December transfer of

$13,800,000 was undisputedly for equivalent value—it completely extinguished

Lighthouse Management’s antecedent debt. § 726.104(1), Fla. Stat. (providing that

“[v]alue is given for a transfer or an obligation if, in exchange for the transfer or

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obligation, property is transferred or an antecedent debt is secured or satisfied”

(emphasis added)).

Whether a transfer was for less than equivalent value is itself a key

consideration when deciding whether fraud occurred. See § 726.105(2)(h), Fla. Stat

(codifying that the lack of value is a badge of fraud and presence of value cuts against

finding of fraud). The complete defense of good faith also requires reasonably

equivalent value. § 726.109(1), Fla. Stat. By bundling the two transfers together in

one claim, Plaintiffs impermissibly attempt to assign the alleged lack of equivalent

value from the February Prepared transfer to the December Lighthouse transfer

(which Plaintiffs do not allege lacked equivalent value).

Indeed, the Court need look no further than Plaintiffs’ other claims to see the

issue. Counts II and III both concern only the Prepared transfer, and both counts

allege constructive fraudulent transfer. If Plaintiffs truly believed that the December

Lighthouse and February Prepared transfers can be aggregated into one transfer for

less than equivalent value, why do Plaintiffs risk leaving $13,800,000 on the table

by not including the Lighthouse transfer in Counts II and III?

Moreover, though

Plaintiffs want it both ways: they want to treat the two transfers as one when the exchange

of reasonably equivalent value is only a factor to consider and must be proven by Defendant

(along with good faith) in support of its affirmative defense, but they want to treat the two

transfers as separate when Plaintiffs bear the burden to disprove the presence of reasonably

equivalent value. See Mane FL Corp. v. Beckman, 355 So. 3d 418, 428 (Fla. 4th DCA 2023)

(noting that reasonably equivalent value need not be “dollar-for-dollar” (quotation

omitted)).

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Counts II and III allege nearly identical theories about the same transfer, Plaintiffs

still separate them into two counts. So too Plaintiffs should be required to separate

Count I into two counts, one for each distinct loan payoff transaction.

In sum, because the two transfers alleged in Count I must be evaluated on their

own distinct merits, pleading them in separate counts “facilitates the clear

presentation of the matter[s] set forth” in Plaintiffs’ complaint. Fla. R. Civ. P.

1.110(f). And because Plaintiffs have intentionally failed to do that here, this Court

must dismiss. See Collado, 226 So. 3d at 928 (dismissal proper where Plaintiff

violates Florida Rules).

CONCLUSION

Plaintiffs rolled the dice: they made a risky bet by investing in struggling

insurance entities in the wake of a major hurricane. As part of that bet (to secure their

first position as a creditor) Plaintiffs required Lighthouse Management to repay its

and Prepared Managers’ debts to One Florida Bank. Now, out of their money and

feeling burned, Plaintiffs set their sights on the only solvent target—One Florida

Bank. But the transactions were not fraudulent, nor were they made to evade an

impending debt or judgment. Rather, Plaintiffs themselves required that the

transactions be made. Having done so, they cannot now cry foul. For these reasons,

this Court must dismiss.

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CERTIFICATE OF GOOD FAITH

CONFERENCE PURSUANT TO BCP 5.3

Counsel for Defendant, Thomas A. Zehnder, hereby certifies that on October

10, 2023 he conferred by telephone with counsel for Plaintiffs, Ben Curtis, Kelly

Shami, and Brian Glueckstein, in a good faith effort to resolve the issues raised in

this motion, and they notified undersigned counsel that Plaintiffs oppose the relief

requested.

Respectfully submitted this 13

day of October, 2023.

/s/ Thomas A. Zehnder

Thomas A. Zehnder

Florida Bar No. 0063274

Dustin Mauser-Claassen

Florida Bar No. 0119289

Quinn Ritter

Florida Bar No. 1018135

KING, BLACKWELL, ZEHNDER

& WERMUTH, P.A.

25 East Pine Street

Orlando, FL 32801

Telephone: (407) 422-2472

Facsimile: (407) 648-0161

tzehnder@kbzwlaw.com (Primary)

dmauser@kbzwlaw.com (Primary)

qritter@kbzwlaw.com (Primary)

[email protected]om (Secondary)

courtfilings@kbzwlaw.com (Secondary)

Counsel for Defendant

One Florida Bank

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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on October 13, 2023, I filed the foregoing using

the State of Florida ePortal Filing System, which will serve a copy by email on all

counsel listed on the Service List below. I further certify that I have served a true

and correct copy on Brian D. Glueckstein, Esq. (glueckstein[email protected]) with

Sullivan & Cromwell LLP, via email, who is out-of-state counsel for Plaintiffs and

has not yet filed his motion for pro hac vice.

/s/ Thomas A. Zehnder

Thomas A. Zehnder

Florida Bar No. 0063274

Counsel for Defendant

One Florida Bank

SERVICE LIST

Oliver Benton Curtis III

Kelly Shami

McDermott Will & Emery, LLP

333 SE 2nd Avenue, Suite 4500

Miami, FL 33131

[email protected]om

[email protected]m

Counsel for Plaintiffs