The Nature of Parties' Relationships

Parties sometimes assume that there exists a business relationship, even though negotiations have not yet matured into something that can be legally described as a “business relationship.” This assumption may present problems, including the false belief that actionable conduct has occurred.

In Realauction .com, LLC v. Grant Street Group, Inc., 4D10-548 and 4D10-1894 (Fla. 4th DCA 2011), Plaintiff assumed that it had a business relationship with Broward County, a political subdivision of Florida. Plaintiff had been in negotiations with Broward County to become the County’s provider of internet auction and tax collection services. However, an agreement had not been reached between Plaintiff and Broward County. While negotiations were ongoing, Defendant sent an email to Broward County, stating that Plaintiff “is involved in multiple law suits and is currently being sued… because of their business practices.” Plaintiff sued, based upon the theory of tortious interference with a business relationship.

The court laid out the elements for a claim of tortious interference with a business relationship: (1) the existence of a business relationship not necessarily evidenced by an enforceable contract under which plaintiff has rights; (2) defendant’s knowledge of such relationship; (3) intentional and unjustified interference with such relationship; and (4) damage to plaintiff.

The court reasoned that Plaintiff was required to put on evidence that, “in all probability, the County would have engaged into the contract for services but for” Defendant’s email. The court held that Plaintiff failed to make such a showing, and thus had no claim against Defendant. To maintain its action, Plaintiff in the first place would have required evidence that it met the test for a “business relationship” within the first element of a claim for tortious interference with a business relationship.

Time Over Substance

Untimeliness can ruin an otherwise actionable claim. The statutes and common law each contain different mechanisms for a plaintiff to avoid becoming time-barred by the statute of limitations. However, certain prerequisites need to be satisfied before a plaintiff can use any such mechanism.

In Black Diamond Properties, Inc. v. Haines, 5D10-764 (Fla. 5th DCA 2011), Plaintiffs alleged that Defendants misled them through advertising, leading Plaintiffs to believe that they were purchasing a 1/750th interest in a golf course and facilities, when in reality they were purchasing a 1/750th interest in a not-for-profit company that held the mere option to purchase the subject golf course and facilities. At trial, Plaintiffs were awarded damages. One appeal, Defendants claimed that Plaintiffs action was time-barred, having not been brought within the four-year statute of limitations. Plaintiffs argued that they were permitted to proceed with their claims based upon two theories: (1) equitable estoppel; and (2) the continuing tort doctrine.

To assert equitable estoppels, a plaintiff must claim that the plaintiff recognized the basis for suit, but forewent pursuing the suit until the statutory period had run because of further actions by the would-be defendant. Plaintiffs in Black Diamond Properties, Inc. did not allege that they knew the basis of their cause of action during the statutory period, and thus the court ruled that Plaintiffs could not avail themselves of relief under the theory of equitable estoppel.

The continuing tort doctrine applies when there are continual tortious acts. The mere presence of continuing harmful effects from completed acts is insufficient to trigger the continuing tort doctrine. In Black Diamond Properties, Inc., the court reasoned that the tortious act was completed upon the purchase of the fractional ownership, and therefore the continuing tort doctrine did not apply. Plaintiffs, who were awarded damages based on the substance of Defendants’ conduct, had their award reversed because they waited too long to realize that Defendants had committed actionable conduct.

Interpretation Between Contracts

A frequent problem in contract drafting is what effect is given to other contracts and agreements entered into by some or all of the parties. It is critical that a party be aware the potential effect of other agreements on the contract that is being developed, particularly in terms of how a court will interpret various provisions of each agreement.

In International Engineering Services, Inc. v. Scherer Construction & Engineering of Central Florida, LLC, No. 5D10-2764 (Fla. 5th DCA 2011), Plaintiff subcontractor sued Defendant contractor for a breach of the subcontract. Plaintiff performed all the work required under the subcontract, but Defendant failed to pay Plaintiff. Defendant alleged one affirmative defense: there was a “pay-when-paid” clause in the contract, which stated that Defendant was only required to pay Plaintiff once the owner had paid Defendant.

Typically, risk of non-payment from an owner falls upon the contractor, not the subcontractor. The court in International Engineering Services, Inc. reasoned that the parties could shift the burden of such risk, but that the contract must unambiguously express the intention of the parties to do so. In International, the pay-when-paid clause unambiguously shifted the burden to the subcontractor. However, another clause in the contract incorporated the agreement between Defendant and the owner. That agreement contained a clause that provided that the owner was not obligated to pay Defendant until Defendant had paid Plaintiff. The court ruled that an ambiguity existed, and therefore the contract must be interpreted in favor of the Plaintiff subcontractor.

Overstepping Fiduciary Boundaries

With fiduciary power comes fiduciary responsibility. In the case of an ancillary estate, that means that an executor may not utilize assets of the ancillary estate to pay debts of the main estate. An ancillary estate arises where a decedent devises property elsewhere, but dies “leaving assets in this state, credits due from residents in this state, or liens on property in this state.” Fla. Stat. § 734.102(1).

In Lehman v. Lucom, No. 4D09-1805 (Fla. 4th DCA 2011), Appellant attempted to claim rights as a co-executor of a multi-million dollar Panamanian estate which had an ancillary estate in Florida. The court denied Appellant’s attempts to be considered a co-executor of the main estate. Appellant was, however, found to be an executor of the ancillary estate. Subsequently, Appellant “improperly used funds of the ancillary estate to fund his litigation in Panama over the domiciliary estate and to clear his name from personal attacks.”

The general potential impropriety of such actions notwithstanding, the court held that Appellant breached his fiduciary duty to the ancillary estate, reasoning that Fla. Stat. § 734.102 provides an order of priority for payment. Appellant had dissipated such a substantial portion of the funds that there were not funds available for the payment of expenses, which fund availability comes before Appellant’s reimbursements. Of particular issue was the fact that Appellant used funds from an estate of which he was an executor to cover expenses he incurred in attempting to discharge duties for an estate of which he was not an executor. Appellant was found to have acted in bad faith because he failed to operate within his role.

Hidden Clauses

It is important to thoroughly review all clauses of a contract, even the clauses that appear in every contract. In Lower Fees, Inc. v. Bankrate, Inc., No. 4D10-1695 (Fla. 4th DCA 2011), an integration clause became the focus of a dispute. Typically, an integration clause, also called a merger and integration clause, will express that the parties to a contract agree that the contract that they are executing represents the entire agreement between the parties, at least as to the issues covered therein. An integration clause allows the subject contract to supersede any prior understandings or agreements between the parties as to the subject matter of the contract.

In Lower Fees, Plaintiff attempted to sue for rescission of a contract due to fraudulent inducement. The following language appeared within the integration clause of the contract in dispute: "No representation, inducement, promise, understanding, condition, or warranty not set forth in this Agreement has been made or relied on by the parties." Plaintiff contended that such language was mere merger and integration language, while Defendant contended that such language formed a "no reliance clause" within the integration clause. A no reliance clause differs from an integration clause inasmuch as integration does not outright dismiss the presence of or prior reliance on representations of a party.

Plaintiff laid out four bases for its position: (1) the agreement in its entirety was procured by fraud; (2) the claimed misrepresentations did not concern the subject matter of the agreement; (3) the claimed misrepresentations were not expressly contradicted by the agreement; and (4) the "no reliance clause" does not specifically bar fraud claims.

The court in Lower Fees allowed Plaintiff to proceed, reasoning that "a fraudulent inducement claim cannot be defeated by a contractual agreement unless the contract specifically states a fraud claim is not sufficient to negate the contract." However, the court was required to explain away distinctions between an integration clause and the purported "no reliance clause." The outcome would have been more certain were Plaintiff to have negotiated the offending language away during the stage of contract drafting.

Pecuniary Interest in Advice and Opinions

Expertise carries with it a duty under Florida law. When a person or business renders an opinion in a field in which they hold expertise, that opinion is more than a gratuity, even when there is no consideration involved in the decision to render the opinion.

In Blumstein v. Sports Immortals, Inc., No. 3D10-42 (Fla. 4th DCA 2011), the court confronted a negligent misrepresentation made by a sports memorabilia company. The plaintiff had been approached by a third party for a loan, which loan the third party attempted to secure by the collateral of a collection of baseball memorabilia. The plaintiff and the third party had the memorabilia appraised by the defendant. The defendant was alleged to have negligently misrepresented that a number of autographs were authentic, thus invalidating the defendant's eventual appraisal.

The court explained that, normally, such a misrepresentation would not be actionable. However, because the defendant is in the business of providing the particular type of information that it provided to the plaintiff, the defendant had a sufficient "pecuniary interest" to require it to have used a level of care and diligence in delivering its opinion.

Individuals and business entities should be wary of delivering advice about the particular type of information such individuals or entities are in the business of knowing, the irony of this blog post notwithstanding.

There is Little Litigation Privilege Online

The "litigation privilege" is a privilege that provides immunity from claims of defamation for statements made during a judicial proceeding. The question is this: what does "during a judicial proceeding" mean? Does it encompass statements made outside of the courtroom while an action is ongoing, particularly where online publication of statements is concerned?

In Ball v. D'Lites Enterprises, Inc., No. 4D09-4859, Florida's Fourth District Court of Appeals decided that the litigation privilege was narrow in this instance. Plaintiffs attempted to argue that D'Lites did not provide its franchises with a reasonable means to make their products meet the nutritional requirements that D'Lites promised would be possible. D'Lites then placed "warnings" on its website, stating that Plaintiffs had violated certain trademarks, and that Plaintiffs' attempt to pass off as a D'Lites franchise was a "hoax." When Plaintiffs sued D'Lites for defamation, D'Lites attempted to use the litigation privilege, claiming that the statements on its website were in relation to the proceeding regarding nutritional requirements.

The Court held that the statements by a party on its commercial website do not constitute statements made in connection with judicial proceedings, and therefore denied D'Lites litigation privilege defense. However, under the Court's ruling, there is a limitation to its narrowing of the exception: if the website were to post papers submitted to the Court which are a part of the proceeding, then the litigation privilege would apply.