KITROSER v. HURT, No. SC 11-25 (Fla. March 22, 2012)
The corporate shield doctrine is set out clearly under Florida law as essentially the distinction between a corporate officer acting on one’s own and a corporate officer acting on behalf of one’s corporation. Doe v. Thompson, 620 So. 2d 1004 (Fla. 1993). Generally, the acts of a corporate employee performed in a corporate capacity do not form the basis for jurisdiction over a corporate employee in an individual capacity. Id. (internal citations omitted). In Kitroser v. Hurt, No. SC 11-25 (Fla. March 22, 2012), the Florida Supreme Court further clarified this rule – that acts performed by a person exclusively in his corporate capacity not in Florida but in a foreign state may not form the predicate for exercise of personal jurisdiction over the employee in the forum state. Id. (emphasis in original).
In Kitroser, Dale Dickey (“Dickey”), an employee of Airgas Carbonic, Inc. (Airgas), negligently operated a commercial vehicle which struck and killed Rhina Castro Lara (“Castro Lara”). Castro Lara’s estate and survivors filed a wrongful death action against Airgas, which was a foreign corporation, Dickey and five additional Airgas employees. Kitroser alleged that the five Airgas employees were personally responsible for Castro Lara’s death due to their negligent training and supervision of Dickey and either knew or should have known he was an unsafe driver. The Airgas employees admitted that the alleged negligent actions took place in Florida, but moved to dismiss for lack of jurisdiction, arguing that they were protected by the corporate shield doctrine since they did not live in Florida and were acting solely on behalf of their employer. The Honorable Timothy P. McCarthy, presiding over the case in trial court, however, denied the nonresident employees’ motions to quash service and dismiss the complaint for lack of personal jurisdiction, and an appeal followed.
On appeal, the Fourth District Court of Appeals reversed the trial court’s decision and certified the following question to the Florida Supreme Court:
WHERE AN INDIVIDUAL, NON-RESIDENT DEFENDANT COMMITS NEGLIGENT ACTS IN FLORIDA ON BEHALF OF HIS CORPORATE EMPLOYER, DOES THE CORPORATE SHIELD DOCTRINE OPERATE AS A BAR TO PERSONAL JURISDICTION IN FLORIDA OVER THE INDIVIDUAL DEFENDANT?
The Florida Supreme Court answered the foregoing certified question in the negative.
The parties disputed whether the corporate shield doctrine applied to shield nonresident corporate defendants from operation of Florida’s long arm statute. Kitroser argued that the doctrine’s application was dependent upon the physical location of the actor, whereas the Airgas employees contended that the exclusive relevant inquiry was whether the actions occurred within the scope of employment and thus on behalf of the corporation.
The Florida Supreme Court deemed Kitroser’s argument to be correct that if an individual commits a tortious act while present in the State of Florida, that individual may be haled into a Florida court regardless of employment status, stating as follows: “Our precedent and the statutory language of section 48.193 have never suggested that an actor who is present in Florida and commits tortious acts in-state is excepted from personal jurisdiction because he or she works on behalf of a corporation. Rather, our case law holds that a nonresident employee-defendant who works only outside of Florida, commits no acts in Florida, and has no personal connection with Florida will not be subject to personal jurisdiction of Florida courts simply because he or she is a corporate officer or employee.” Id.
It was accordingly held that where an individual, non-resident defendant commits negligent acts in Florida, whether on behalf of a corporate employer or not, the corporate shield doctrine does not operate as a bar to personal jurisdiction in Florida over the individual defendant, and that jurisdiction properly applies to any person who commits torts within this state. The court further stated that “to hold otherwise would be tantamount to providing corporate employees with a form of diplomatic immunity and would abolish the legislative goal inherent in adopting a long-arm jurisdictional statute.”
The Florida Business Corporation Act, codified at Florida Statute section 607.0101, et seq., provides in pertinent part, as follows, with regard to director liability:
A director is not personally liable for monetary damages to the corporation or any other person for any statement, vote, decision, or failure to act, regarding corporate management or policy, by a director, unless:
(a) The director breached or failed to perform his or her duties as a director; and
(b) The director's breach of, or failure to perform, those duties constitutes:
1. A violation of the criminal law, unless the director had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful. A judgment or other final adjudication against a director in any criminal proceeding for a violation of the criminal law estops that director from contesting the fact that his or her breach, or failure to perform, constitutes a violation of the criminal law; but does not estop the director from establishing that he or she had reasonable cause to believe that his or her conduct was lawful or had no reasonable cause to believe that his or her conduct was unlawful;
2. A transaction from which the director derived an improper personal benefit, either directly or indirectly;
3. A circumstance under which the liability provisions of s. 607.0834 are applicable;
4. In a proceeding by or in the right of the corporation to procure a judgment in its favor or by or in the right of a shareholder, conscious disregard for the best interest of the corporation, or willful misconduct; or
5. In a proceeding by or in the right of someone other than the corporation or a shareholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property
Fla. Stat. § 607.0831 (2012) (emphasis added).
The foregoing rule is better known as the business judgment rule, which has been traditionally applied to protect corporate directors from personal liability. Hollywood Towers Condo. Ass’n v. Hampton, 40 So. 3d 784 (Fla. 4th DCA 2010). However, the presumption of correctness is limited in nature as demonstrated by the Third District Court of Appeal’s decision in Aerospace Accessory Serv., Inc. v. Abiseid, 943 So. 2d 866 (Fla. 3d DCA 2006). In Aerospace Accessory Service, Roberto Abiseid (“Abiseid”) was an officer, director and salesperson for Aerospace. He earned a 10% commission on services and parts sold by him. International Aero Components (“IAC”) was a customer of Aerospace.
Abiseid had received a corporate directive from the President and the board of directors of Aerospace prohibiting him from extending additional credit to IAC; this directive was issued because IAC’s account with Aerospace was delinquent. Despite this directive, Abiseid extended additional credit in the amount of $65,000 to IAC, and subsequently IAC filed for Chapter 11 bankruptcy thus causing Aerospace to suffer additional financial loss. Aerospace accordingly filed an action seeking recovery from Abiseid for the loss.
Abiseid, however, attempted to seek protection under Florida Statute section 607.0831 arguing that he received no benefit from his noncompliance with the directive and was accordingly protected by the statute. The Third District Court of Appeal rejected this argument finding that Abiseid’s unilateral action was in direct conflict with the protected decision of the board of directors, and that Abiseid’s violation of the corporate decision was nothing more than a breach of that corporate decision.
At the conclusion of its opinion, the Third District Court of Appeal succinctly noted:
If we accepted Abiseid's argument we would be granting an individual director the authority to veto corporate policy. Corporate chaos would be the result, as each director could act on his own whim. Certainly section 607.0831(1)(a), (1)(b)(2) was not enacted in order to create situations wherein a director could individually repeal duly established corporate policy and escape liability for damages caused by his or her unilateral action.
Aerospace Accessory Serv., Inc., 943 So. 2d at 867-68.
Although an arbitration award is final and binding in nature, the Florida Arbitration Code sets forth several provisions, further discussed below, that give new meaning to the words “final and binding”. By way of example, certain requirements of the Florida Arbitration Code are summarized below.
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Defamation is generally defined as the unprivileged publication of false statements which naturally and proximately result in injury to another. Wolfson v. Kirk, 273 So. 2d 774 (Fla. 4th DCA 1973). To establish a cause of action for defamation, a plaintiff must show: (1) That the defendant published a false statement about the plaintiff; (2) To a third party; and (3) That the falsity of the statement caused injury to the plaintiff. See Razner v. Wellington Regional Med. Ctr., Inc., 837 So. 2d 437 (Fla. 4th DCA 2002). Only those statements that are false rise to the level of defamation. Id. Also, statements of pure opinion are not actionable. Florida Med. Ctr., Inc. v. New York Post Co., Inc., 568 So. 2d 454 (Fla. 4th DCA 1990).
There are four categories of statements that constitute slander per se:
1. Imputing to another a criminal offense amounting to a felony;
2. Imputing to another a presently existing venereal disease or other loathsome and communicable disease;
3. Imputing to another, the other being a woman, acts of unchastity;
4. Imputing to another conduct, characteristics or a condition incompatible with the proper exercise of his lawful business, trade, profession, or office.
See Wolfson, 273 So. 2d at 777 (internal citations omitted).
The application of the punitive damages rule above was recently made by the Fourth District Court of Appeal in Lawnwood Med. Ctr., Inc. v. Sadow, 43 So. 3d 710 (Fla. 4th DCA 2010), where a surgeon (Dr. Samuel H. Sadow) brought an action against a hospital for breach of contract and slander per se seeking compensatory damages for both claims and punitive damages for the slander per se action. In the trial court proceeding, the jury found the hospital liable on the breach of contract claim and fixed damages at $2,817,000, reduced to $1,517,000. In separate proceedings on the slander per se claim, the jury found Lawnwood liable for the slanders; that Lawnwood specifically intended to harm him by its per se slanderous statements; that, in fact, it had actually injured him by the statements; and that he suffered no compensatory damages from the slanders but that he was entitled to punitive damages of $5,000,000 from the hospital. Id. at 712. The Fourth District Court of Appeal, affirmed the punitive damages award, and set forth the following interesting discussion in its supporting opinion.