Articles Posted in Business Litigation

Breach of contract claims benefit from a relatively long statute of limitations. In Florida, a plaintiff has five years to assert a claim for breach of a written contract. Fla. Stat. § 95.11 (providing a five-year statute of limitations for written contracts). The statute of limitations begins to run when the contract is breached. State Farm Mut. Auto. Ins. Co. v. Lee, 678 So. 2d 818 (Fla. 1996) (“A cause of action on a contract accrues and the statute of limitations begins to run from the time of the breach of contract”). This is somewhat unique when contrasted against other claims under Florida law, where statutes of limitation generally begin running when the plaintiff knew or should have known the claim accrued. See, e.g., Wood v. Eli Lilly & Co., 701 So. 2d 344, 347 (Fla. 1997) (The “statute of limitations for DES negligence actions begins to run on the date the plaintiff knew or should have known of his or her injury”); Fla. Stat § 95.031 (“An action founded upon fraud… must be begun… with the period running from the time the facts giving rise to the cause of action were discovered or should have been discovered…”).  Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm  Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Florida’s statute of limitation law seemingly creates a bright line rule for business litigation claims founded on a breach of contract.  Five years after a contract is breached, the plaintiff is time-barred from asserting a claim on that contract. State Farm Mut. Auto. Ins. Co., 678 So. 2d 818. This is true even if damages do not result or become ascertained until some point in the future because the action is founded on the breach of duty and not the consequent injuries. Med. Jet, S.A. v. Signature Flight Support-Palm Beach, Inc., 941 So. 2d 576 (Fla. 4th DCA 2006) (“Florida has followed this general rule that a cause of action for breach of contract accrues at the time of the breach, ‘not from the time when consequential damages result or become ascertained.’”). Fradley v. Dade Cnty., 187 So. 2d 48 (Fla. 3d DCA 1966) (holding that the limitations period begins running from the date of the breach because the “action is founded on the breach of duty and not the consequent injuries”).

The 2008 mortgage foreclosure crisis blurred this bright line. During this period, many homeowners were financially underwater.  They could not afford to pay their mortgages. Banks filed voluminous mortgage foreclosure complaints.  This overwhelmed the judicial system and caused backlogs for the banks and the courts. See Kevin F. Jursinski, The Mortgage Foreclosure Crisis In Florida: A 21st Century Solution, 84 FL Bar Journal 91 (2010).  As a result, many banks did not timely file their contractual foreclosure lawsuits. The judiciary seems to have rescued the banks by allowing them to file their contractual foreclosure actions outside the five-year window, so long as the bank changed the breach date to one that fit inside the limitations period. See Bartram v. U.S. Bank Nat. Ass’n, 211 So. 3d 1009 (Fla. 2016). In return, banks had to forego damages resulting from all unpaid mortgage payments that were owed before the statute of limitations expired. Id. (“As the Fourth District explained, under Singleton, a “new default, based on a different act or date of default not alleged in the dismissed action, creates a new cause of action.”). Id. The Supreme Court of Florida justified the rule because of “‘the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship,’ an ‘adjudication denying acceleration and foreclosure’ does not bar subsequent foreclosure actions based on separate and distinct defaults.” Id. (quoting Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004)).

The Private Securities Litigation Reform Act (PSLRA) requires plaintiffs to meet a heightened pleading standard before they can participate in discovery. Congress passed the PSLRA because many plaintiffs filed frivolous securities fraud lawsuits based on minimal facts, and then used the discovery process to manufacture evidence establishing their claims. See Novak v. Kasaks, 216 F.3d 300, 310 (2d Cir. 2000) (“Congress plainly sought to impose a stricter nationwide pleading standard and did so.”). Plaintiffs, in effect, weaponized securities laws. Winer Family Tr. v. Queen, 503 F.3d 319, 326 (3d Cir. 2007) (“One of the purposes of the PSLRA’s heightened pleading requirements is to limit abusive securities class-action suits.”). PSLRA plaintiffs knew they could commence lawsuits with scant facts and subsequently obtain information giving the impression of securities fraud. Id. PSLRA plaintiffs also knew the act of suing was usually enough to force the defendants into settlement because PSLRA lawsuits are extremely expensive and onerous to defend. Id. As a result, Congress required a private securities law plaintiff to present evidence of securities fraud before the parties engaged in pretrial discovery. 15 U.S.C.A. § 78u-4.  Peter Mavrick is a Fort Lauderdale business litigation attorney.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

A PSLRA plaintiff must allege facts demonstrating the existence of the following elements to be entitled to discovery: “(1) a material misrepresentation (or omission), (2) scienter, i.e., a wrongful state of mind, (3) a connection with the purchase or sale of a security, (4) reliance, often referred to in cases involving public securities markets (fraud-on-the-market cases) as ‘transaction causation,’ (5) economic loss, and (6) ‘loss causation,’ i.e., a causal connection between the material misrepresentation and the loss.” Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (2005) (internal citations omitted and emphasis removed). For allegations regarding material misrepresentations or omissions, the plaintiff must “specify each statement alleged to have been misleading, the reason… why the statement is misleading” and all facts on which any belief was formed (assuming allegations were based on information and belief). 15 U.S.C.A. § 78u-4. And for the scienter component, the plaintiff must particularly allege the “facts giving rise to a strong inference that the defendant acted with the required state of mind.” Id. The scienter allegations must be “cogent” and “compelling” “in light of other explanations.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007).

Discovery is automatically stayed in PSLRA cases unless, and until, the plaintiff alleges the requisite facts to satisfy the PSLRA’s heightened pleading standard. See In re Equifax Inc. Sec. Litig., 2018 WL 3023278 (N.D. Ga. June 18, 2018). The stay is mandated by Congressional statute. 15 U.S.C.A. § 78u-4 (“All discovery and other proceedings shall be stayed during the pendency of any motion to dismiss…”). However, an exception to the discovery stay exists when a party demonstrates discovery is necessary to preserve evidence or to prevent undue prejudice. Id. Undue prejudice occurs when (1) the plaintiffs would be unable to make informed decisions about their litigation strategy due to a rapidly shifting landscape because they are the only major interested party without documents forming the core of their proceedings, In re Bank of Am. Corp. Sec., Derivative, & Employment Ret. Income Sec. Act (ERISA) Litig., 2009 WL 4796169 (S.D.N.Y. Nov. 16, 2009), or (2) the plaintiff lacks access to documents that were previously produced in other lawsuits or to the government. New York State Teachers’ Ret. Sys. v. Gen. Motors Co., 2015 WL 1565462 (E.D. Mich. Apr. 8, 2015). The facts giving rise to both scenarios generally arise infrequently. Therefore, PSLRA defendants usually should not fear engaging in expensive discovery until the plaintiffs satisfy the PSLRA’s heightened pleading standard.

Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) can be a powerful statute because plaintiffs can bring a wide variety of claims due to the expansive nature of what constitutes an unfair method of competition. FDUTPA prohibits “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Fla. Stat. § 501.204. A plaintiff needs to allege only that a defendant committed a deceptive act or unfair practice, causation, and actual damages to state a FDUTPA claim. Baptist Hosp., Inc. v. Baker, 84 So. 3d 1200 (Fla. 1st DCA 2012) (providing the elements of a FDUTPA claim). Precedent from the Supreme Court of Florida, in PNR, Inc. v. Beacon Prop. Mgmt, Inc., 842 So.2d 773 (Fla. 2003), expansively defined “unfair practice” to mean an act “that offends established public policy and one that is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.”  The amorphous nature of “unethical, oppressive, and unscrupulous acts” seemingly provides plaintiffs an almost endless opportunity to assert FDUPTA claims.  The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

FDUTPA can provide plaintiffs with an opportunity to assert unique fact patterns that give rise to a cognizable cause of action. However, a plaintiff asserting a FDUPTA claim must think carefully about its claimed damages to avoid early dismissal.

Claiming actual damages can be a limiting factor to recovering under FDUTPA, despite the expansive definition of “unfair practices.”  For example, the plaintiff must prove that a consumer suffered damages based on the definition of unfair practices. Caribbean Cruise Line, Inc. v. Better Bus. Bureau of Palm Beach Cnty., Inc., 169 So. 3d 164 (Fla. 4th DCA 2015). As just stated, the PNR decision defines “unfair practices” to mean acts that are substantially injurious to consumers.  This requirement can be problematic if the plaintiff did not directly suffer the injury or engage in a consumer transaction. See Stewart Agency, Inc. v. Arrigo Enterprises, Inc., 266 So. 3d 207 (Fla. 4th DCA 2019) (granting summary judgment because the plaintiff “could not identify any transaction where [the defendant] sold a vehicle with a Takata recall notice without disclosing that information to the consumer”); Leon v. Tapas & Tintos, Inc., 51 F. Supp. 3d 1290 (S.D. Fla. 2014) (dismissing the plaintiff’s complaint for lack of standing because he did not engage in a consumer transaction, i.e. the purchase of goods or services); see also Fla. Stat. § 501.203 (defining consumer to mean “an individual; child,…; business; firm; association; joint venture…”).

Arbitration is a voluntary process to resolve disputes and is favored by the courts.  The Federal Arbitration Act (commonly referred to as the “FAA”) sets forth the requirements for arbitration and rules for judicial review and confirmation of an arbitration decision.  Judicial review of commercial arbitration awards is narrowly limited under the FAA.  The United States Court of Appeals for the Eleventh Circuit, in Davis v. Prudential Securities, Inc., 59 F.3d 1186 (11th Cir. 1995), explained that the FAA presumes the confirmation of arbitration awards.  Earlier precedent from the Eleventh Circuit in Robbins v. Day, 954F.2d 682 (11th Cir. 1992), explained that federal courts should defer to an arbitrator’s decision whenever possible.  Under the FAA, 9 U.S.C. Section 10(a), there are four statutory grounds to vacate (i.e., overturn) an arbitration decision: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party may have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, an award upon the subject matter submitted was not made.  Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm  Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Federal courts narrowly construe the “manifest disregard for the law” basis for vacating an arbitration award.  The Montes decision explained that this ground for vacating an arbitration award requires clear evidence that the arbitrator was “conscious of the law and deliberately ignore[d] it.”  A showing that the arbitrator merely misinterpreted, misstated, or misapplied the law is insufficient.  Federal courts rarely determine that arbitration awards warrant vacatur based on the manifest disregard of the law standard set forth in Montes.  For example, Univ Commons-Urbana, Ltd. v. Universal Constructors, Inc., 304 F.3d 1331 (11th Cir. 2002), did not overturn the arbitration award based on the arbitrator’s alleged disregard of the law, stating in pertinent part that, “we have no indication of the arbitrators’ reasons for [their award], and thus, we have no reason to believe that they disregarded the law in doing it.”  Similarly, Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217 (11th Cir. 2000), determined that even if the arbitrator applied the wrong legal standard, the appellant did not show that “that this alleged error was intentional or that the arbitrator made a conscious decision not to follow the appropriate legal standard.”  Scott v. Prudential Securities, Inc., 141 F.3d 1007 (11th Cir. 1998), held that the appellant’s arguments did not “approach the type of disregard for the law that we found in Montes” and the record and briefs showed “nothing more than a disagreement over the application of the law not its manifest disregard.”

In many business litigation cases, the issue of damages is an important issue at trial.  For many cases, the parties will have expert witness on the issue of damages.  Precedent from the United States Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S.Ct. 2786 (1993), held that the “Frye standard,” i.e., the long dominant legal standard that “expert” testimony must have “general acceptance” in the scientific community or other relevant areas of knowledge, was no longer the legal standard for admitting expert testimony in evidence.  The Supreme Court stated in pertinent part: “The merits of the Frye test have been much debated, and scholarship on its proper scope and application is legion.  Petitioners’ primary attack, however is not on the content but on the continuing authority of the rule.  They contend that the Frye test was superseded by the adoption of the Federal Rules of Evidence.  We agree…The drafting history makes no mention of Frye, and a rigid ‘general acceptance’ requirement would be at odds with the ‘liberal thrust’ of the Federal Rules of Evidence…Frye made ‘general acceptance’ the exclusive test for admitting expert scientific testimony.  That austere standard, absent from, and incompatible with, the Federal Rules of Evidence, should not be applied in federal trials.”  Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm  Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.