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Zelaya/Capital International Judgment, LLC v. Zelaya

United States Court of Appeals, Eleventh Circuit

October 23, 2014

ZELAYA/CAPITAL INTERNATIONAL JUDGMENT, LLC, Plaintiff - Appellant,
v.
JOHN ZELAYA, et al., Defendants - Appellees

Appeals from the United States District Court for the Southern District of Florida. D.C. Docket No. 1:06-cv-21213-JAL.

For ZELAYA/CAPITAL INTERNATIONAL JUDGMENT, LLC (13-10005, 12-15351), Plaintiff - Appellant: Hector Formoso-Murias, Formoso-Murias, PA, MIAMI, FL.

For DEUTSCHE BANK TRUST COMPANY AMERICAS, Plaintiff - Appellee (13-10005): Nelson C. Bellido, Concepcion Martinez & Bellido, CORAL GABLES, FL.

For JOHN ZELAYA (13-10005, 12-15351), Defendant - Appellee: Paul C. Huck, Jr., Hunton & Williams, LLP, MIAMI, FL; Richard Charles Wolfe, Wolfe Law Miami, PA, MIAMI, FL.

For DEUTSCHE BANK TRUST COMPANY AMERICAS, Interested Party - Appellee (13-10005): Scott Allen Burr, Nelson C. Bellido, Marian Grace Kennady, Concepcion Martinez & Bellido, CORAL GABLES, FL; Philippe Zimmerman, Moses & Singer, NEW YORK, NY.

For U.S. SECURITIES AND EXCHANGE COMMISSION, Defendant - Appellee (13-10005): Marsha C. Massey, U.S. Securities & Exchange Commission, Office of the General Counsel, WASHINGTON, DC.

For CITIGROUP GLOBAL MARKETS, INC, MORGAN STANLEY SMITH BARNEY, Interested Party - Appellees (13-10005): Charles Leroy Pickett, Jr., Ciklin Lubitz Martens & O'Connell, WEST PALM BEACH, FL.

For SERVICE (13-10005): Myron Beldock, Vera M. Scanlon, Bedlock Levine Hoffman, NEW YORK, NY; Patricia Morales Christiansen, Attorney at Law, WEST PALM BEACH, FL; Alvin Bruce Davis, Squire Patton Boggs (U.S.) LLP, MIAMI, FL; Mia Burroughs Fraser, DLA Piper, LLP (U.S.), MIAMI, FL; Michael I. Goldberg, Jason Samuel Oletsky, Akerman, LLP, MIAMI, FL; Robin Lea Hanger, Attorney at Law, ARLINGTON, VA; Matthew Leonard Jones, Jones & Adams, PA, MIAMI, FL; John Bradford Kent, Marks Gray, PA, JACKSONVILLE, FL; Maxine M. Long, Shutts & Bowen, LLP, MIAMI, FL; Roberto Martinez, Colson Hicks Eidson, CORAL GABLES, FL; Ronald C. Minkoff, Wendy Stryker, Frankfurt Kurnit Klein & Selz, PC, NEW YORK, NY; Francesca Russo, Papy Weissenborn Vraspir Paterno & Puga, PA, CORAL GABLES, FL; Chad Justin Tamaroff, Greenspoon Marder, PA, FORT LAUDERDALE, FL; Louis M. Ursini, III, Adams & Reese, LLP, TAMPA, FL.

For DEUTSCHE BANK TRUST COMPANY AMERICAS, Plaintiff - Appellee (12-15351): Scott Allen Burr, Nelson C. Bellido, Concepcion Martinez & Bellido, CORAL GABLES, FL.

For DENIS KLEINFELD, Defendant - Appellee (12-15351): Richard Charles Wolfe, Wolfe Law Miami, PA, MIAMI, FL.

For CITIGROUP GLOBAL MARKETS INC., MORGAN STANLEY SMITH BARNEY, LLC, Interested Party - Appellee (12-15351): Charles Leroy Pickett, Jr., Ciklin Lubitz Martens & O'Connell, WEST PALM BEACH, FL.

For SERVICE (12-15351): Myron Beldock, Vera M. Scanlon, Bedlock Levine Hoffman, NEW YORK, NY; Nelson C. Bellido, Marian Grace Kennady, Concepcion Martinez & Bellido, CORAL GABLES, FL; Patricia Morales Christiansen, Attorney at Law, WEST PALM BEACH, FL; Alvin Bruce Davis, Squire Patton Boggs (U.S.) LLP, MIAMI, FL; Mia Burroughs Fraser, DLA Piper, LLP (U.S.), MIAMI, FL; Robin Lea Hanger, Attorney at Law, ARLINGTON, VA; Matthew Leonard Jones, Jones & Adams, PA, MIAMI, FL; John Bradford Kent, Marks Gray, PA, JACKSONVILLE, FL; Maxine M. Long, Shutts & Bowen, LLP, MIAMI, FL; Marsha C. Massey, U.S. Securities & Exchange Commission, Office of the General Counsel, WASHINGTON, DC; Ronald C. Minkoff, Wendy Stryker, Frankfurt Kurnit Klein & Selz, PC, NEW YORK, NY; Jason Samuel Oletsky, Akerman, LLP, MIAMI, FL; Francesca Russo, Papy Weissenborn Vraspir Paterno & Puga, PA, CORAL GABLES, FL; Chad Justin Tamaroff, Greenspoon Marder, PA, FORT LAUDERDALE, FL; Louis M. Ursini, III, Adams & Reese, LLP, TAMPA, FL; Philippe Zimmerman, Moses & Singer, NEW YORK, NY.

Before TJOFLAT, JULIE CARNES, and GILMAN,[*] Circuit Judges.

OPINION

Page 1297

GILMAN, Circuit Judge

This case stems from Zelaya/Capital International Judgment, LLC's (ZC's) attempt to collect on a $2,678,137.11 judgment that was entered against John Zelaya in February 2004. The 2004 judgment against Zelaya was rendered by the United States District Court for the Southern District of New York and was registered in the Southern District of Florida in May 2006. ZC, however, was not a party to the suit that led to the judgment. Instead, the prevailing parties in the 2004 case (Thomas Telegades, Peter Tosto, and two investment firms) assigned their interests in the judgment to ZC in May 2009, except that Tosto retained a 25% interest in any amount recovered by ZC.

ZC subsequently sought a writ of execution against Zelaya from the Southern District of Florida in September 2009. Soon afterward, ZC served writs of garnishment on numerous banks that it believed were holding Zelaya's assets, including Deutsche Bank. The Securities and Exchange Commission

Page 1298

(SEC) later intervened in the case, asserting that it was entitled to a portion of Tosto's 25% interest in the 2004 judgment.

In June 2010, Zelaya deposited the full amount of the judgment (plus post-judgment interest) into the district court's registry. The court then dissolved the writs of garnishment against all of the banks, granted Zelaya's motion for a satisfaction of the judgment, and awarded attorney fees and costs to Deutsche Bank. For the reasons set forth below, we AFFIRM the judgment of the district court.

I. BACKGROUND

In 2002, the SEC obtained a $4,480,063.82 judgment against Tosto in the Southern District of New York based on claims of market manipulation. Tosto, in turn, obtained a $2,678,137.11 judgment against Zelaya in the same court in February 2004. The 2004 judgment was subsequently assigned to ZC in May 2009. Tosto, however, retained a 25% interest in any recovery by ZC on the 2004 judgment.

In May 2006, ZC registered the 2004 judgment in the Southern District of Florida. The case remained dormant until September 2009, when a writ of execution was issued against Zelaya. Writs of garnishment were also served on the banks that were believed to hold Zelaya's assets. One of the garnishee banks, Deutsche Bank, filed an answer to the writ of garnishment in November 2009. In its answer, Deutsche Bank disclosed that one of its accounts (held by an entity called " Investors Trust Administration, LLC" ) might be subject to the garnishment.

ZC then moved for a default judgment against Deutsche Bank, arguing that the bank's answer to the writ of garnishment was untimely under Florida law, and that ZC was therefore entitled to an amount from the garnished account sufficient to satisfy the 2004 judgment. The motion for default judgment against Deutsche Bank prompted several rounds of motions practice, multiple subpoenas, and a hearing before a magistrate judge.

In January 2010, the SEC served Zelaya with its own writ of garnishment. The writ contended that the SEC had an interest in the 2004 judgment against Zelaya by virtue of its interest in the 2002 judgment against Tosto. In particular, the writ alleged that Zelaya " may have possession, custody or control of property in which . . . Peter Tosto . . . has a substantial nonexempt interest." The SEC's allegation was premised on the fact that Tosto had retained a 25% interest in whatever amount ZC might collect on the 2004 judgment.

Zelaya was accordingly faced with competing claims. On the one hand, ZC asserted an interest in Zelaya's funds as the assignee of the 2004 judgment against Zelaya. On the other hand, the SEC asserted an interest as the judgment creditor of its 2002 judgment against Tosto. The SEC, moreover, alleged that Tosto's assignment of the 2004 judgment to ZC might have been fraudulent. Zelaya responded to this dilemma by filing a motion in May 2010 for (1) leave to deposit the judgment amount plus post-judgment interest into the registry of the district court, or (2) leave to file an interpleader action.

The magistrate judge assigned to the case held a hearing on Zelaya's motion in June 2010. One day after the hearing, the magistrate judge issued an omnibus order in which he granted Zelaya leave to deposit the disputed funds (the $2,678,137.11 judgment plus post-judgment interest, for a total of ...


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