Florida Officer-Director Liability for Business Torts
Generally, a director or officer of a corporation does not incur personal liability for [the corporation’s] torts merely by reason of his official character; he is not liable for torts committed by or for the corporation unless he has participated in the wrong. Indeed, Florida courts have found that it is well established that an officer of a corporation who commits or participates in a tort, whether or not it is in furtherance of corporate business and whether or not it is by authority of the corporation, is liable to the injured party whether or not the corporation is also liable. Courts have rationalized this finding by noting that a contrary rule would enable a director or officer of a corporation to perpetrate flagrant injuries and escape liability behind the shield of his representative character, even though the corporation might be insolvent or irresponsible. Florida courts have additionally found that a corporate officer is potentially individually liable for his tortious acts even though such acts were committed in the scope of his employment by the corporation.
Corporate officers can also be held individually liable for corporate acts where there is actual wrongdoing in the form of fraud, self-dealing or unjust enrichment. Although the corporate shield doctrine is applicable to jurisdictional issues, a corporate officer may be joined in the lawsuit given that the corporate shield doctrine has no application when the corporate officer commits an intentional tort. In that regard, courts are generally hesitant to allow corporate officers who commit or participate in wrongful acts, such as intentional torts, to be completely shielded by the corporate form.
Schecter Law’s attorneys have experience with a wide range of business torts disputes. We are equipped to address your most challenging litigation needs with highly skilled legal services and solutions while providing a level of unmatched client commitment combined with reasonable legal fees.
Landmark Florida Supreme Court Decision: Florida’s Economic Loss Rule
In Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., the Florida Supreme Court held, in a five-to-two decision, that the economic loss rule is limited to products liability cases. Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., 2013 WL 828003 (Fla. Mar. 7, 2013). The case came to the Florida Supreme Court for review in the form of a certified question by the United States Court of Appeals for the Eleventh Circuit. The Eleventh Circuit certified a question to the Florida Supreme Court, which was restated by the Florida Supreme Court as follows:
DOES THE ECONOMIC LOSS RULE BAR AN INSURED'S SUIT AGAINST AN INSURANCE BROKER WHERE THE PARTIES ARE IN CONTRACTUAL PRIVITY WITH ONE ANOTHER AND THE DAMAGES SOUGHT ARE SOLELY FOR ECONOMIC LOSSES?
Answering the certified question in the negative, it was held that “the application of the economic loss rule is limited to products liability cases.”
The crux of the underlying lawsuit was essentially a claim by Tiara Condominium Association, Inc. (Tiara) sounding in tort and contract against its insurance broker, Marsh & McLennan Companies, Inc. (Marsh) for failing to provide adequate professional advice where Marsh had advised Tiara that its loss limits coverage was per occurrence, relying upon which advice, Tiara proceeded with expensive remediate efforts. Ultimately, it turned out that the insurer, Citizens Property Insurance Corporation (Citizens), claimed that the loss limit was not as advised by the Marsh, and that it was $50 million in the aggregate, not per occurrence. While a settlement ensued between Tiara and Citizens in an approximate amount of $89 million, the amount was less than the $100 million plus expended by Tiara. Tiara filed suit against Marsh, alleging (1) breach of contract, (2) negligent misrepresentation, (3) breach of the implied covenant of good faith and fair dealing, (4) negligence, and (5) breach of fiduciary duty. A summary judgment was entered as to all counts except negligence and breach of fiduciary duty. It was as to these two claims, the appeals court certified a question to the Florida Supreme Court to determine whether the economic loss rule prohibited recovery, or whether an insurance broker falls within the professional services exception that would allow Tiara to proceed with the claims.
In its analysis, the Florida Supreme Court discusses, at length, the origins and development of the Economic Loss Rule, the pertinent aspects of which are summarized as follows: (1) The rule appeared initially in both state and federal courts in products liability type cases, and historically the doctrine was introduced to address attempts to apply tort remedies to traditional contract law damages. (2) The rule was recognized as the fundamental boundary between contract law, which was designed to enforce the expectancy interests of the parties, and tort law, which imposed a duty of reasonable care thereby encouraging citizens to avoid causing physical harm to others. (3) The contractual privity rule provided that, generally, a tort action is barred where a defendant has not committed a breach of duty apart from a breach of contract. (4) However, an exception to the above rule was also recognized, allowing torts committed independently of a contractual breach, such as for fraud in the inducement. (5) Another situation where the economic loss rule was limited was in the case of neglect in providing professional services.
The Florida Supreme Court subsequently engaged in a discussion regarding the roots of the doctrine originating in the products liability context where the focus of the rule was directed to damages resulting from defects in the product itself. The Court goes on to state that for some time, the Court had been concerned with what they perceived as an “over-expansion of the economic loss rule”, and noting the expression of this concern in various cases.
After going through an extensive analysis of the origin and original purpose of the economic loss rule, and the extension thereof being classified as “unprincipled”, the Florida Supreme Court stated, in pertinent part, as follows:
…[W]e now take this final step and hold that the economic loss rule applies only in the products liability context. We thus recede from our prior rulings to the extent that they have applied the economic loss rule to cases other than products liability. The Court will depart from precedent as it does here ‘when such departure is necessary to vindicate other principles of law or to remedy continued injustice.’”…Stare decisis will also yield when an established rule has proven unacceptable or unworkable in practice…Our experience with the economic loss rule over time, which led to the creation of the exceptions to the rule, now demonstrates that expansion of the rule beyond its origins was unwise and unworkable in practice. Thus, today we return the economic loss rule to its origin in products liability.
Justice Pariente wrote a concurring opinion to address Justice Canady’s assertion in his dissenting opinion that the Court’s decision represents a “dramatic unsettling of Florida law.” The concurring and dissenting opinions can be read in their entirety, at http://www.floridasupremecourt.org/decisions/2013/sc10-1022.pdf
This is certainly a landmark decision, and it will be interesting to see the effects of this case unfolding, and its impact upon Florida tort litigation.
The Relation Back Doctrine
The relation back doctrine set forth in Florida Rule of Civil Procedure 1.190(c) provides that an amended pleading relates back to the date of the original pleading when it arises “out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading…” The rule allows amendments to relate back even though the statute of limitations has run in the interim. Lopez-Loarca v. Cosme, 76 So. 3d 5 (Fla. 4th DCA 2011). The original pleading must give fair notice of the general fact situation out of which the claim or defense arises. Flores v. Riscomp Indus., Inc., 35 So. 3d 146 (Fla. 3d DCA 2010). Two recent district court of appeal opinions discussed the relation back doctrine.
In Kalmanowitz v. Hess, 4D10-4970 (Fla. 4th DCA 2013), the Fourth District Court of Appeal found factual allegations in the original complaint sufficient to give fair notice of the general fact situation out of which a negligent supervision and retention claim arose. Specifically, the original complaint alleged that an employer is responsible for an employee’s fraudulent inducement and that the employer knew or should have known about its agent’s fraudulent scheme. Further, the employer failed to remedy the situation, knowing that investors throughout the state were being defrauded. The amended complaint involved the same conduct set forth in the original. Therefore, the court held that the negligent supervision and retention claims relate back to the date of the original complaint and did not violate the statute of limitations.
Conversely, in Kopel v. Kopel, No.: 3D11-356 (Fla. 3d DCA 2013), the Third District Court of Appeal found no relation back to the original complaint. In order to survive a motion to dismiss after the statute of limitations has passed, an amended complaint must relate back to the original pleading. Here, the fifth amended complaint added a new cause of action that had not been raised until fourteen years after the original pleading. By failing to relate back to the original complaint, the new cause of action in the amended complaint was barred by the statute of limitations. Therefore, the district court reversed and remanded for proceedings consistent with their opinion.
You can read the full opinions here:
(http://www.4dca.org/opinions/April%202013/04-03-13/4D10-4970.op.pdf)
Standing: An Affirmative Defense to Mortgage Foreclosure
To have standing to foreclose, it must be demonstrated that the plaintiff holds the note and mortgage in question. Mazine v. M & I Bank, 67 So. 3d 1129, 1132 (Fla. 1st DCA 2011). The plaintiff must prove that it had standing to foreclose when the complaint was filed. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012).
In Lindsey v. Wells Fargo Bank, N.A., No. 1D12-2406 (Fla. 1st DCA 2013), Lindsey appealed final summary judgment entered in favor of Wells Fargo for mortgage foreclosure. The First District Court of Appeal reversed and remanded because Wells Fargo failed to establish its standing to foreclose.
In March 2007, Lindsey executed and delivered a promissory note to Option One Mortgage. The note was secured by a mortgage on property owned by Lindsey. In January 2009, Lindsey was given notice that he was in default after he stopped making payments on the note. On April 2, 2009, Wells Fargo filed a complaint to foreclose the mortgage. The copy of the note and mortgage attached to the complaint named Option One as the lender and mortgagee.
Wells Fargo filed the original note with the court along with an Assignment of Mortgage dated April 10, 2009. The Assignment of Mortgage did not purport to transfer the note, and the original note filed with the court did not include a special endorsement to Wells Fargo or a blank endorsement.
Wells Fargo subsequently filed a motion for summary judgment. However, the affidavits filed by Wells Fargo did not prove Wells Fargo’s ownership of the note. Nonetheless, the trial court entered a Final Judgment of Mortgage Foreclosure.
The First District Court of Appeal reversed, and held that Wells Fargo failed to demonstrate that it was the holder of the note and mortgage at the time the foreclosure complaint was filed. Although Wells Fargo filed a document showing that the mortgage was assigned to it by Option One, the document did not, however, assign the note.
The attorneys at Schecter Law have vast experience in all aspects of complex commercial and residential mortgage foreclosures. Schecter Law has represented institutional and individual lenders in connection with foreclosing both commercial and residential properties. Our attorneys’ vast experience in the area of Florida foreclosure law enables us to assist our clients in developing creative and cost-effective solutions to mortgage foreclosure and deficiency related issues.
A Breach of a Fiduciary Duty Claim May be Waived
A dispute arose between Band and Libby regarding the development and construction of a luxury condominium. Band, the managing general partner of the development and an attorney, contacted Libby to invite him to become an investor. Band and his former law firm had previously represented Libby on numerous matters. Libby made an initial investment of about $140,000 in exchange for a ten percent interest in the project. Libby received, signed, and returned conflict waiver/disclosure letters relating to the project from Band’s law firm.
After a few years and several issues with the project, Libby declined to pay his contribution to a capital call and in accordance with the partnership agreement, forfeited his initial investment and subsequent contributions totaling over $1,000,000. In Libby’s suit against Band seeking recovery of all contributions, Libby alleged breach of fiduciary duty. Band raised the affirmative defense of waiver. Although the jury believed Band breached his fiduciary duty to Libby, the jury found that Libby waived his claim for breach of fiduciary duty. Libby did not recover any damages from Band. After the trial, Libby filed a motion for judgment notwithstanding the verdict and motion for new trial. The trial court agreed “that as a matter of law, there can be no waiver of a breach of fiduciary duty” and awarded Libby a new trial limited to the issue of damages on the breach of fiduciary duty claim.
In Band v. Libby, No. 2D11-4942 (Fla. 2d DCA 2013), Band argued that the trial court erred in granting Libby a new trial on the issue of damages on the breach of fiduciary duty count. The trial court based its decision to grant relief because it ruled it had committed legal error in allowing the jury to consider Band’s affirmative defense of waiver with regard to Libby’s claim for breach of fiduciary duty. The Second District Court of Appeal was faced with the issue of whether a claim based on a breach of fiduciary duty may be waived.
Finding that a claim based on a breach of fiduciary duty, like any other claim, may be waived, the Second District Court of Appeal ruled in favor of the appellant. The Second District Court of Appeal further acknowledged that a party has the right to interpose the affirmative defense of waiver to a claim based on a breach of fiduciary duty. The trial court order granting a new trial on the issue of damages on the claim of breach of fiduciary duty was reversed, and the case was remanded for entry of a final judgment in accordance with the jury’s verdict.
Relief from Judgment under Florida Rule of Civil Procedure 1.540
Florida Rule of Civil Procedure 1.500(b) provides that “[w]hen a party against whom affirmative relief is sought has failed to plead or otherwise defend as provided by these rules or any applicable statute or any order of court, the court may enter a default against such party.”
In Yale Mortgage Corporation v. Blot, 3D12-1894 (Fla. 3d DCA 2013), Yale Mortgage filed a mortgage foreclosure complaint against Blot. The complaint was served August 26, 2011. In October 2011, the trial court entered a default against Blot who failed to respond to the complaint. The trial court entered a final judgment of foreclosure against Blot on January 12, 2012. Shortly after the property was sold in May of 2012, Blot filed a motion to vacate the default and default final judgment and requested that the trial court vacate the sale. The trial court granted Blot’s motions.
The Third District Court of Appeal reversed the trial court’s order finding in part that Blot failed to show any excusable neglect for failure to answer the complaint. Blot waited until seventy days after Yale Mortgage served the complaint and over two weeks after the default had been entered. A movant seeking relief from a judgment must show that his failure to respond was the result of excusable neglect, the existence of a meritorious defense, and that the movant acted with due diligence in seeking relief. Fla. R. Civ. P. 1.540(b) (2012).
Re-weighing Evidence on Appeal
In Demida Miami Gardens, LLC v. Master Excavators, Inc., the appellants, Demida Miami Gardens, LLC and David Paul appealed a final judgment in the amount of $933,617.43 which was a result of an action to enforce a personal guarantee provided to Master Excavators by Paul. On appeal, two arguments were asserted: one, that the guarantee was unenforceable because there was no consideration, and two, that Master failed to satisfy conditions precedent to its enforcement.
On appeal, both of these arguments were rejected. The court found that while the record contained testimony and evidence supporting the appellants’ arguments, it also contained other competent and substantial testimony and evidence that directly contradicted them. Citing to G & G Fashion Design, Inc. v. Garcia, the Third District Court of Appeal noted that re-weighing the evidence and credibility of the witnesses is not a function ascribed to the appellate courts. G & G Fashion Design, Inc. v. Garcia, 870 So. 2d 870, 873 (Fla. 3d DCA 2004).
Treble Damages Not Assessed Against Representative Who Was Not a Party to the Contract
In Home Construction Management, LLC v. Comet, Inc., 4D11-4022 & 4D12-21 (Fla. 4th DCA 2013), Home Construction Management, LLC. (“HCM”) and representative Abraham Omer appealed a final judgment and damage award for claims relating to providing unlicensed contracting services. HCM was contacted by Comet, Inc. (“Comet”) to complete the construction of a single-family residence in Lantana, Florida. The parties entered into a written contract for completion of the project. Omer represented HCM throughout HCM’s relationship with Comet; neither Omer nor HCM was a licensed contractor. Comet sued for disgorgement of overcharges and treble damages under Fla. Stat. §768.0425(2). The trial court entered a final judgment, which trebled damages in the amount of $41,747.58 in overbillings, making Omer and HCM jointly and severally liable up to the damage amount of $125,242.74.
The Fourth District Court of Appeal affirmed all issues except the application of §768.0425 against Omer individually. §768.0425(1) defines “contractor” as “any person who contracts to perform any construction or building service which is regulated by any state or local law, including, but not limited to, chapters 489 and 633.” As the trial court found that Omer was not a party to the written contract between HCM and Comet, the Fourth District Court of Appeal reasoned that Omer did not “contract to perform” any service as required by §768.0425.
Our attorneys have a vast knowledge of Florida law. We are able to assist our clients in developing creative and cost-effective solutions to contractor related issues.
Aircraft Financing Commission Dispute – Implied Contract Theory
A contract implied in law, or quasi contract, operates where there Is no contract in place to provide a remedy where one party is unjustly enriched, and where that party received a benefit under circumstances that made it unjust to retain it without giving compensation. The plaintiff n Associated Leasing International Corp. v. Alpha Capital Services, Inc. utilized this theory in an attempt to recover a commission on aircraft financing transaction. Associated Leasing International Corp. v. Alpha Capital Services, Inc., 992 So. 2d 283 (Fla. 4th DCA 2008).
An abridged version of the extensive facts of the case is as follows: Herbert Beck (“Beck”) was the owner of Jet Travel, a charter jet service. Beck approached John Casserly (“Casserly”), who was an aircraft broker doing business as Alpha Capital, Inc., and sought his assistance for securing refinancing for a Lear 55 jet. Casserly was successful and received a broker’s fee. Thereafter, in 1995, Beck again approached Casserly regarding refinancing of the Lear 55. Casserly introduced Beck to Associated Leasing (“Associated”) to provide the refinancing. However, before any determination was made by Associated, Jet Travel filed for bankruptcy, and Associated was unable to fund the refinancing.
After Associated turned down the financing, Casserly submitted an application to GE Capital, and made several other inquiries to lenders, including Joe Dini at Finova Capital Corporation. The transaction was never presented to Finova because at the time Casserly was dealing with GE Capital. After over a year of working on the refinancing, the Lear 55 was repossessed by the original lender. GE Capital turned down the transaction, and Casserly stopped working on the refinancing. Beck told Casserly that he was moving back to his home country Austria.
Sometime later, Beck who was doing business as Quicksilver, contacted Ronald Shane, the president of Associated about financing of two smaller Lear jets. Beck told Shane that he had terminated his relationship with Casserly; Shane did not confirm this with Casserly. Shane called Finova and asked if Finova would be interested in working with Beck. Shane was a longtime acquaintance of the president of Finova. Joe Dini called Shane; thereafter Beck flew out and met with Dini; thereafter, Finova made a proposal which was accepted by Beck. Associated was kept informed of the negotiations. Two deals were ultimately made, one as to a Lear 35 jet, and the other as to a Lear 36 jet. A commission was paid by Finova to Associated in connection with the financing transaction. Dini testified that it was expected that if another broker was involved that they would work out any commission split between them.
Casserly sued Associated for commissions on both the Lear 35 jet and the Lear 36 jet under an implied contract theory claiming that Casserly had conferred a benefit on Associated of which Associated knew, and that Associated had retained that benefit; Casserly further alleged that it would be inequitable for Associated to retain the benefit because Casserly was the procuring cause of the commission paid to Associated by Finova. A jury returned a verdict in favor of Casserly, and a final judgment on the verdict was entered by the court. Associated appealed.
On appeal, the Fourth District Court of Appeal reversed finding that no benefit was conferred upon Associated, thereby reversing and remanding for entry of a judgment in the favor of defendants. Casserly contended that he conferred a benefit upon Associated by introducing it to Beck and preparing the financing documents. The court disagreed with this contention and found that neither one of these two items constituted a benefit to Associated: (1) the court found that Casserly’s effort in compiling the documents did not constitute a benefit conferred upon Associated because the documents were prepared for the benefit of GE Capital and Beck in order to close on the prior financing transaction for the Lear 55. (2) The introduction of Beck to Associated for purposes of obtaining refinancing of the Lear 55 did not constitute a benefit upon Associated in connection with the financing of the Lear 35 and Lear 36 jets, and furthermore there was no testimony that the Lear 35 and 36 transactions were considered to be part of the same transaction as the Lear 55. (3) Additionally, there was no evidence presented that Associated was aware of the “benefit” of the introduction of Beck; Casserly had introduced Beck to Associated in hopes of Associated’s refinancing of the Lear 55, and thus Associated’s contact was as a lender, not a broker.
Contract litigation is replete with a variety of issues whether you are seeking to enforce a contract, or defending against enforcement of it. The attorneys at Schecter Law have the knowledge and experience to tackle complex contractual disputes and can assist you or your business with all of your business contract litigation needs.
Lack of Personal Jurisdiction – Breach of Contract Action by Broker for Failure to Pay a Commission on Aircraft Sale
In Corporacion Aero Angeles, S.A. v. Fernandez, 69 So. 3d 295 (Fla. 4th DCA 2011), the plaintiff, Jamie Gaston Fernandez (“Fernandez”) brought an action for breach of contract arising out an oral brokerage agreement for the sale of a jet owned by Aero Angeles, a Mexican corporation (“Aero”). Fernandez claimed that he was not paid a commission in connection with the sale, and filed suit seeking damages. Aero contended that it did not enter into a contract with him to pay a commission. The aircraft in question was a Falcon 900B jet; it was Aero’s only asset according to Antonio Ortiz Palero (“Palero”), the general director of Aero, and the pilot of the aircraft. The jet was used primarily for personal use, and was headquartered in Mexico. It was never offered for charter flights to Florida or for Florida residents. Palero testified that the company had no business in Florida, and nor did it have employees, offices, phone listings, bank accounts, leases or sales in Florida. The entity furthermore did not do business in Florida, nor did it have an agent in Florida for service of process.
When the owner of Aero decided to buy a new aircraft, he directed Palero to sell the Falcon. Palero contacted Fernandez about selling the aircraft. The testimony indicated that Aero would not pay a commission, nor would it engage an exclusive broker, but instead the owner expected a certain price, and the broker could keep anything received over that price.
Fernandez testified that he approached several buyers in Florida and advertised the plane in national magazines. He received one offer that was rejected, and received another call thereafter from Canadian clients. The buyers viewed the plane in Mexico and placed a $500,000 deposit held by an Oklahoma escrow agent. Palero met with the Canadian clients in Montreal and worked out a contract. Thereafter, Palero accepted a purchase price of $18,575,000, and the $575,000 was to be for Fernadez or the other brokers involved. The sale closed in Canada, and neither party paid Fernandez a commission.
Several years later, Fernandez sued Aero. Aero moved to dismiss for lack of personal jurisdiction, and an evidentiary hearing was held. After the hearing, the court determined that there were sufficient contacts to provide jurisdiction. Aero appealed the determination of jurisdiction.
On appeal, the court reversed the finding of jurisdiction. Applying the two prong test set forth in Venetian Salami Co. v. Parnethais, 554 So. 2d 499 (Fla.1989), the appellate court found that the first prong bringing the action within Florida’s long arm statute had been satisfied; in a breach of contract action, where no place of payment is designated, the payment is presumed to be made at the residence of the creditor which in this case was Florida.
The second prong of Venetian Salami which required sufficient minimum contacts, was however, not satisfied. To satisfy minimum contacts, a defendant’s contacts (1) must be related to plaintiff’s cause of action or have given rise to it, (2) must involve some act by which defendant has purposefully availed itself of the privilege of conducting activities within this forum, and (3) the defendant’s contacts with the forum must be such that the defendant should reasonably anticipated being haled into court there.
According to the appellate court’s findings, none of these criteria were met. While the trial court determined that a contract existed to sell the plane to Canadian buyers, the trial court did not determine that Aero gave Fernandez an exclusive listing agreement. Aero’s contacts with Florida in relation to the sale of the plane to Canadian buyers were non-existent. Neither the plane, the owner, nor even Palero came to Florida in connection with the sale. No contract was delivered in Florida; no closing took place in Florida, and no deposit was escrowed in Florida. The determination of jurisdiction was accordingly reversed, with directions to dismiss the cause for lack of jurisdiction.
Jurisdictional disputes of this kind often lead to lengthy and complicated legal battles, at times even involving extensive jurisdictional discovery. The attorneys at Schecter Law are experienced in this field, and can assist you whether you are a non-resident of Florida seeking to resist personal jurisdiction, or whether you are seeking to impose personal jurisdiction over a non-resident defendant in Florida state courts.
