Coquina Investments v. TD Bank, N.A., 2014 U.S. App. LEXIS 14388 (11th Cir. July 29, 2014):

B. Evidentiary rulings

TD Bank argues that the district court made several evidentiary errors that require a new trial. We review a district court's evidentiary rulings for an abuse of discretion.  [*17] Collins v. Marriott Int'l, Inc., 749 F.3d 951, 959 (11th Cir. 2014). In order to justify granting a new trial, an error must have affected "substantial rights" or caused "substantial prejudice"; otherwise, the error is harmless. Id.; Peat, Inc. v. Vanguard Research, Inc., 378 F.3d 1154, 1162 (11th Cir. 2004).

1. Testimony of Frank Spinosa

TD Bank raises two arguments regarding the testimony of its former regional vice president, Frank Spinosa. First, it contends that the district court erred in allowing Coquina to call Spinosa as a witness even though Spinosa had made it known that he would invoke his Fifth Amendment privilege against self-incrimination. Second, TD Bank avers that the district court compounded its error by permitting Coquina to ask Spinosa questions that were not corroborated by independent evidence in the record and by permitting the jury to draw adverse inferences against TD Bank from Spinosa's refusal to answer those questions. Both arguments fail.

a. Did the district court err in allowing Coquina to call Spinosa as a witness?

The Fifth Amendment privilege against compelled self-incrimination operates differently in criminal and civil contexts. The ordinary rule in a criminal case is that no negative inference from the accused's silence is permitted. See Griffin v. California, 380 U.S. 609, 615, 85 S. Ct. 1229, 1233 (1965). In civil cases,  [*19] however, the Supreme Court has said that "the Fifth Amendment does not forbid adverse inferences against parties . . . when they refuse to testify in response to probative evidence offered against them." Baxter v. Palmigiano, 425 U.S. 308, 318, 96 S. Ct. 1551, 1558 (1976). "Th[is] rule allowing invocation of the privilege [by civil litigants], though at the risk of suffering an adverse inference or even a default, accommodates the right not to be a witness against oneself while still permitting civil litigation to proceed." Mitchell v. United States, 526 U.S. 314, 328, 119 S. Ct. 1307, 1315 (1999).

Spinosa's status as a nonparty witness, rather than a litigant, adds a wrinkle that has not been considered by either the Supreme Court or this court. When a party remains silent in the face of accusation, his silence is indicative of the reliability of the adverse inference drawn against him "if it would have been natural under the circumstances to object to the [accusation] in question." Baxter, 425 U.S. at 319, 96 S. Ct. at 1558 (internal quotation marks omitted). However, a nonparty witness like Spinosa may invoke the privilege for a variety of reasons that are unrelated to the possibility of self-incrimination; for instance, a nonparty may purposefully choose not to contradict incriminating evidence in order to "saddle a defendant with liability by insinuation, particularly where the chance of prosecution of the witness is slim." Charles H. Rabon, Jr., Note, Evening the Odds in Civil Litigation: A Proposed Methodology for Using Adverse Inferences When Nonparty Witnesses Invoke the Fifth Amendment, 42 Vand. L. Rev. 507, 534 n.189 (1989); F.D.I.C. v. Fid. & Deposit Co. of Md., 45 F.3d 969, 978 (5th Cir. 1995) ("The concern is that a non-party who stands in no special relationship to the party at the time of trial may purposefully invoke the privilege solely to discredit the party."). Because the witness cannot be made to explain why the privilege has been invoked, the reliability of the adverse inference drawn from his silence is limited. Cf. Brink's Inc. v. City of New York, 717 F.2d 700, 716-17 (2d Cir. 1983) (Winter, J., dissenting) (analogizing nonparties' invocations of the privilege to hearsay evidence).

Mindful of this potential for inaccuracy and unfairness, other circuits have held that the admissibility of a nonparty's invocation of the Fifth Amendment privilege  [*21] against self-incrimination and the concomitant drawing of adverse inferences should be considered "on a case-by-case basis." Cerro Gordo Charity v. Fireman's Fund Am. Life Ins. Co., 819 F.2d 1471, 1481 (8th Cir. 1987); accord LiButti v. United States, 107 F.3d 110, 123 (2d Cir. 1997); F.D.I.C., 45 F.3d at 978; Rad Servs., Inc. v. Aetna Cas. & Sur. Co., 808 F.2d 271, 277 (3d Cir. 1986). A leading case on this issue is LiButti v. United States from the Second Circuit. LiButti recognized, as we do here, that the "overarching concern" that should guide the admissibility inquiry "is fundamentally whether the adverse inference is trustworthy under all of the circumstances and will advance the search for the truth." 107 F.3d at 124. After surveying pertinent cases from the other circuits, LiButti identified four non-exclusive factors for courts to consider: (1) "the nature of the relevant relationships"; (2) "the degree of control of the party over the non-party witness"; (3) "the compatibility of the interests of the party and non-party witness in the outcome of the litigation"; and (4) "the role of the non-party witness in the litigation." Id. at 123-24 (capitalization altered). LiButti  [*22] made clear that these factors should be applied flexibly and that an invocation is not barred even if not all of the factors are satisfied. See id. We agree with and adopt the LiButti analysis--i.e., that the admissibility of a nonparty's invocation of the Fifth Amendment privilege and the concomitant drawing of adverse inferences should be considered by courts on a case-by-case basis. We also agree that LiButti's non-exclusive factors should be applied flexibly and that the overarching concern is whether the adverse inference is trustworthy under all of the circumstances.

Applying LiButti to our case, we conclude that the district court did not abuse its discretion in allowing Coquina to call Spinosa to the stand for the purpose of having him invoke the Fifth Amendment privilege in the jury's presence.⁹ Three of the four LiButti factors counsel in favor of the trustworthiness of the adverse inferences drawn against TD Bank based upon Spinosa's invocation. First, although Spinosa was no longer employed by TD Bank at the time of trial, there is reason to believe that Spinosa still retained some loyalty to TD Bank. The bank paid Spinosa's legal fees associated with this action. See Rad Servs., 808 F.2d at 276  [*23] (stating that "[a]ny factors suggesting that a former employee retains some loyalty to his former employer--such as the fact that the employer is paying for his attorney"--serves the purpose of "reduc[ing] the chance that the employee will falsely claim to have engaged in criminal conduct for which the defendant employer is liable" (quoting Robert Heidt, The Conjurer's Circle--The Fifth Amendment Privilege in Civil Cases, 91 Yale L.J. 1062, 1119 n.214 (1982))). Moreover, Spinosa's attorney had offered to cooperate in TD Bank's internal investigations on his behalf. Second, the assertion of the privilege likely advanced the interests of both Spinosa and TD Bank in the outcome of this litigation. The chance is remote that Spinosa would have invoked the Fifth Amendment if he neither knew of nor participated in Rothstein's Ponzi scheme because doing so increased his own exposure to criminal prosecution. And third, Spinosa is a "key figure" in this case because his alleged actions and misrepresentations formed the bulk of Coquina's complaint. See Cerro Gordo Charity, 819 F.2d at 1482 (citing the invoking witness's role as a "key figure" in the  [*24] lawsuit as a factor justifying the adverse inference).

9   "The admissibility of a non-party's exercise of the Fifth Amendment against a party . . . is a legal question that we must review de novo. Nevertheless, if such evidence is not inadmissible as a matter of law, the district court's specific determination of relevance and its evaluation of a potential Fed.R.Evid. 403 problem are reviewed for abuse of discretion." F.D.I.C., 45 F.3d at 977.

Further, the record is replete with evidence that Spinosa, while acting as a regional vice president for TD Bank, knew of and participated in Rothstein's fraud. The evidence shows that Spinosa signed "lock letters" falsely claiming that the money held in a TD Bank trust account could be disbursed only to Coquina. Mel Klein and Kathleen White, two of Coquina's investors, testified that Spinosa falsely represented to them that the restriction described in the "lock letters" was both effective and commonplace at the bank. Klein and White also testified that Spinosa told them that there were millions of dollars in the trust account when in fact there was only $100 in the account at the time. Additionally, e-mails between Rothstein and Spinosa show that  [*25] when Rothstein instructed Spinosa to "just answer yes to all [of Rothstein's] questions" in a conference call with Coquina's investors, Spinosa replied, "No problem." The e-mails also indicate that when Rothstein asked Spinosa to wire $16 million for him from RRA's accounts at TD Bank to Morocco, where Rothstein fled after his Ponzi scheme was discovered, Spinosa complied.

Under these circumstances, we have no difficulty concluding that the adverse inferences drawn against TD Bank based upon Spinosa's invocation of the Fifth Amendment privilege--namely, that while acting as TD Bank's regional vice president, Spinosa had knowledge of Rothstein's fraud and assisted in its perpetration--were "trustworthy."¹⁰ LiButti, 107 F.3d at 124. Accordingly, it was appropriate for the district court to allow Coquina to call Spinosa to the stand for the purpose of having him invoke the privilege in the jury's presence.¹¹

10   The jury was instructed that "the knowledge and actions of a bank officer or director, such as" Spinosa, "may be imputed to a bank, such as" TD Bank. TD Bank has not clearly challenged this instruction on appeal. Consequently, we deem a trustworthy adverse inference as to Spinosa's  [*26] knowledge and actions to be also trustworthy as to TD Bank's knowledge and actions.

11   It is of no moment that the district court had found before trial that the adverse inferences drawn against TD Bank based upon Spinosa's invocation of the Fifth Amendment privilege would be untrustworthy. "[C]ourts are free to change their minds." Johnson v. Hamrick, 196 F.3d 1216, 1223 (11th Cir. 1999). Although we would prefer for the district court to have explained its decision to reconsider its prior ruling, we believe that the admissibility of Spinosa's invocations under the facts of this case is not a close enough question for us to require an explanation. Cf. id. at 1223-24 (remanding in the different context of a bench trial involving voting rights issues because the district court did not provide sufficient justification for its reconsideration of a prior finding where the issue was "extremely close").