Articles Posted in Business Litigation

Published on: June 8, 2024

MIAMI BUSINESS LITIGATION: PUNITIVE DAMAGES FOR FRAUD

Plaintiffs commonly pursue punitive damages when asserting fraud claims. The purpose of punitive damages is to punish unlawful conduct. State Farm Mut. Auto. Ins. Co. v. Brewer, 191 So. 3d 508 (Fla. 2d DCA 2016). They are available when a defendant commits intentional misconduct or gross negligence. Fla. Stat. § 768.72. Punitive damages are especially relevant in claims involving fraud because the claim necessarily includes intentional misconduct. 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.

A plaintiff must move to amend its complaint to include a claim of punitive damages before it can seek discovery on the issue. Id. The amendment will be allowed if the plaintiff makes a “reasonable showing by evidence in the record or proffered by the claimant which would provide a reasonable basis for recovery” of punitive damages. Id. Subsequently, at trial, the plaintiff must then prove entitlement to punitive damages by clear and convincing evidence. Id.

So what constitutes a reasonable showing of evidence that provides a reasonable basis for punitive damages? Florida case law provides some guidance. The trial court must “make a preliminary determination of whether a reasonable jury, viewing the totality of proffered evidence in the light most favorable to the movant, could find by clear and convincing evidence that punitive damages are warranted.” Fed. Insurance Company v. Perlmutter, 376 So. 3d 24 (Fla. 4th DCA 2023). The plaintiff’s evidentiary proffer is “merely a representation of what evidence the defendant proposes to present and is not actual evidence.” Estate of Despain v. Avante Group, Inc., 900 So. 2d 637 (Fla. 5th DCA 2005). However, the analytical framework for making the requisite determination is unclear. Some cases hold that the trial court’s sole role is to review proffered evidence and determine whether a jury could return a punitive damages verdict. Estate of Despain, 800 So. 2d 637 (stating trial court must not weigh the evidence in determining a motion to amend to add punitive damages); Perlmutter, 376 So. 3d 24 (same). Other cases hold that the trial court’s role requires a weighing of the evidence to determine credibility of the proffered evidence. KIS Group, LLC v. Moquin, 263 So. 3d 63 (Fla. 4th DCA 2019) (stating that motion to amend to add punitive damages “necessarily requires the court to weigh the evidence and act as a factfinder”).

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Published on: June 1, 2024

MIAMI BUSINESS LITIGATION: NON-COMPETE AGREEMENTS AND “CONFIDENTIAL INFORMATION”

By Mavrick Law Firm

Under Florida law, enforcement of a non-compete agreement requires requires proof of at least one “legitimate business interest.” Fla. Stat. § 542.335 (“The person seeking enforcement of a restrictive covenant shall plead and prove the existence of one or more legitimate business interests justifying the restrictive covenant.”). A failure to plead or prove the existence of a legitimate interest justifying the non-compete covenant can void its enforcement. Id. (“Any restrictive covenant not supported by a legitimate business interest is unlawful and is void and unenforceable.”). Florida’s non-compete statute specifically references a nebulous legitimate business interest called “valuable confidential business…information.” Florida and federal cases interpreting the meaning of the term “valuable confidential business information” have reached different conclusions depending on the factual context. See Proudfoot Consulting Co. v. Gordon, 576 F.3d 1223 (11th Cir. 2009) (“It is unclear under Florida law when confidential information will justify a broad restriction that prevents an employee from working for a competitor.”). 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.

Some courts have determined that a person possesses valuable confidential business information when the employee is in a position to engage in unfair competition against the former employer. See Autonation v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004). For example, in Open Magnetic Imaging, Inc. v. Nieves–Garcia, 826 So.2d 415 (Fla. 3d DCA 2002) (per curiam), Florida’s Third District Court of Appeal held that the defendant’s knowledge about a confidential database created as part of a confidential strategic marketing plan was a legitimate business interest because a competitor hired the defendant as its marketing representative. By contrast, in Austin v. Mid State Fire Equip. of Cent. Florida, Inc., 727 So.2d 1097 (Fla. 5th DCA 1999), the Florida appellate court refused to enforce the non-compete designed to protect pricing information known to the former employee because the former employee was only a technician that did not “set up service runs or set prices.”

Other courts appear to use a slightly higher standard advocated by the drafters of Florida Statue § 542.335, Senator John Grant and Thomas Steele. Senator Grant and Mr. Steele contend courts should look to the definition of threatened misappropriation used in trade secrets law to determine whether a defendant’s knowledge of confidential information justifies a restrictive covenant. See John A. Grant & Thomas Steele, Restrictive Covenants: Florida Returns to the Original “Unfair Competition” Approach to the 21st Century, 70 Fla. B.J. 53 (Nov. 1996) (hereinafter “Grant & Steele”). Under this approach, Valuable Confidential Information exists when disclosure of the information would be inevitable. Id. At least one Florida decision appears to have enforced a restrictive covenant based on the inevitable disclosure theory. See Proudfoot Consulting Co., 576 F. 3d 1223 (citing Fountain v. Hudson Cush–N–Foam Corp., 122 So.2d 232 (Fla.3d DCA 1960) (finding that employee’s “knowledge of the trade secrets would be so entwined with his employment” that “it would seem logical to assume that his employment by a competitor … would eventually result in a disclosure of this information”)).

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Published on: May 29, 2024

FORT LAUDERDALE BUSINESS LITIGATION: INTERPRETING ARBITRATION CONTRACTS

By Mavrick Law Firm

Many business contracts contain arbitration provisions, which often creates a question as to whether the contracting parties must resolve their dispute in arbitration. Florida courts consider three elements when determining whether to enforce a contractual arbitration provision. They are (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived. Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999). 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.

The second element generally requires further analysis because courts must determine the scope of the arbitration provision to decide if the claims at issue are subject to mandatory arbitration. Airbnb, Inc. v. Doe, 336 So. 3d 698 (Fla. 2022). Arbitration provisions can be narrow or broad depending on the language of the provision. Jackson v. Shakespeare Foundation, Inc., 108 So. 3d 587 (Fla. 2013). Narrow provisions typically contain the phrase, “arising out of.” Id. An example is “all claims arising out of this contact shall be arbitrated.” This type of provision will only require the contracting parties to arbitrate claims bearing a direct relationship to the contract. Id.

Conversely, broad arbitration provisions require contracting parties to arbitrate claims that have a significant relationship to the contract. Id. There must be a contractual nexus between the contract and the claim asserted. Id. In other words, resolution of the claim “requires either reference to, or construction of, a portion of the contract.” Id. Broad arbitration provisions usually contain the phrase “relating to” and often join the narrow phrase “arising out of.” For example, a broad arbitration may be written to state “all claims arising out of or relating to this contact shall be arbitrated.”

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Published on: May 25, 2024

MIAMI BUSINESS LITIGATION: PROVING A TRADE SECRET

By Mavrick Law Firm

Florida and federal statutes generally define a “trade secret” to be information that the owner takes reasonable measures to keep secret and the information derives “independent economic value” from not being generally known to others. Courts ordinarily view the existence of a trade secret as a question of fact. The United States Court of Appeals for the Fifth Circuit, in Lear Siegler, Inc. v. Ark-Ell Springs, Inc., 569 F.2d 286 (5th Cir. 1978), appropriately observed that a trade secret “is one of the most elusive and difficult concepts in the law to define.” In many cases, the existence of a trade secret is not obvious. It requires an ad hoc evaluation of all the surrounding circumstances. Accordingly, the Lear Siegler decision explained that the question of whether certain information constitutes a trade secret typically is best “resolved by a fact finder after full presentation of evidence from each side.” 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.

The Defend Trade Secrets Act is a federal law that, at 18 U.S.C. section 1893(3), defines trade secret to mean “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patters, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if…(A) the owner thereof has taken reasonable measures to keep such information secret…and (B) the information derives independent economic value, actual or potential, from not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” State trade secret law, called the Uniform Trade Secret Act, has a similar definition of trade secret. In addition, federal and state courts sometimes use six common law factors from the Restatement of Torts to evaluate whether a trade secret exists:

(1) the extent to which the information is known outside of the plaintiff’s business;

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Published on: May 22, 2024

FORT LAUDERDALE BUSINESS LITIGATION: FLORIDA UNIFORM TRANSFER ACT

By Mavrick Law Firm

The Florida Uniform Fraudulent Transfer Act (“FUFTA”) is a powerful tool because it provides creditors with remedies against debtors attempting to conceal assets. Through FUFTA, Florida adopted a Uniform Fraudulent Transfer Act that many states adopted. FUFTA allows creditors to sue debtors trying to avoid paying a debt. 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.

FUFTA provides two different theories for a claim of fraudulent transfer: actual fraud and constructive fraud. The “actual fraud” theory applies when a debtor conveys an asset or accepts an obligation with actual intent to hinder a creditor. Myers v. Brook, 708 So. 2d 607 (Fla. 2d DCA 1998) (citing Fla. Stat. § 726.105). Because actual intent can be difficult to prove, the creditor can establish various “badges of fraud” to demonstrate a debtor’s fraudulent intent. Fla. Stat. § 726.105. These badges can include the following:

Whether the transfer or obligation was to an insider, which includes individuals or business entities related to or associated with the debtor. See Stat. § 726.102(8).

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Published on: May 18, 2024

MIAMI BUSINESS LITIGATION: CONTRACT “LIQUIDATED” DAMAGES

By Mavrick Law Firm

Liquidated damages are determinable with exactness from the cause of action as pleaded by a mathematical calculation or by application of a rule of law. Boulos v. Yung Sheng Xiamen Yong Chem. Indus. Co., 855 So.2d 665 (Fla. 4th DCA 2003). Many contracts contain a liquidated damage provision that attempts to ascribe an automatic amount of damage owed to the non-breaching party in the event of a breach. RKR Motors, Inc. v. Associated Unif. Rental & Linen Supply, Inc., 995 So. 2d 588 (Fla. 3d DCA 2008) (“A liquidated damages provision is a clause in a contract that determines in advance the measure of damages in the event of a contractual breach.”). Florida law permits these types of provisions. Goldblatt v. C.P. Motion, Inc., 77 So. 3d 798 (Fla. 3d DCA 2011) (“Florida law is well settled that the parties to a contract may stipulate in advance the amount that is to be paid or retained as liquidated damages in the event of a contract breach.”). 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.

Liquidated damages provisions are not always enforceable. To be enforceable, a liquidated damages clause must satisfy two conditions:

First, the damages consequent upon a breach must not be readily ascertainable.

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Published on: May 15, 2024

FORT LAUDERDALE BUSINESS LITIGATION: THIRD-PARTIES ENFORCING NON-COMPETE AGREEMENTS

By Mavrick Law Firm

A third-party can enforce a contract even though it is not a party to that contract if the contracting parties expressly intended to primarily and directly benefit the third-party. Bochese v. Town of Ponce Inlet, 405 F.3d 964 (11th Cir. 2005) (“Under Florida law, a third party is an intended beneficiary of a contract between two other parties only if a direct and primary object of the contracting parties was to confer a benefit on the third party.”). One should not assume all contractual benefits befalling a third-party allows that third-party to enforce the contract because the benefit may only be incidental. Id. (“If the contracting parties had no such purpose in mind, any benefit from the contract reaped by the third party is merely ‘incidental,’ and the third party has no legally enforceable right in the subject matter of the contract.”) (collecting cases). Therefore, the court must determine whether the contracting parties entered the agreement for the direct and substantial purpose of conferring a benefit on the third-party. Id. 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.

Ordinarily, the contract does not need to contain an express third-party beneficiary provision to allow that third-party to enforce the contract because courts look to the nature or terms of a contract to determine whether the contracting parties’ manifested an intent to benefit the third-party. Jenne v. Church & Tower, Inc., 814 So. 2d 522 (Fla. 4th DCA 2002) (“Florida law looks to “nature or terms of a contract” to find the parties’ clear or manifest intent that it “be for the benefit of a third party.” (citing Am. Sur. Co. of New York v. Smith, 130 So. 440 (Fla. 1930)). However, restrictive covenants are an exception to the rule. Florida Statute § 542.335 requires that “the restrictive covenant expressly identif[y] the person as a third-party beneficiary of the contract and expressly state[ ] that the restrictive covenant was intended for the benefit of such person.” Therefore, a third-party cannot enforce a restrictive covenant unless the contract contains an express provision allowing that third-party to do so. See Cellco P’ship v. Kimbler, 68 So. 3d 914 (Fla. 2d DCA 2011) (“The undisputed evidence was that Alltel and Cellco did not merge and that Alltel did not assign the restrictive covenant rights to Cellco. As a result, Cellco cannot enforce the Alltel–Kimbler agreement because it is not a party to the agreement nor is it a third-party beneficiary, assignee, or successor in interest.”).

Tusa v. Roffe, 791 So. 2d 512 (Fla. 4th DCA 2001) illustrates this point of law well. Tusa was a pizza restaurant and entered a contract with Roffe to rent commercial space needed to make and sell pizzas. Id. The lease contract prohibited Roffe from leasing other property on the premises to anyone who sold pizza. Id. About two months later, Roffe leased space to KKA, which also sold pizza. Id. The Roffe/KKA lease contained a provision prohibiting KKA from selling pizzas. Id. Tusa quickly discovered KKA was a pizza restaurant and commenced a lawsuit against KKA and Roffe to stop KKA from selling pizza. Id. The court dismissed Tusa’s lawsuit against KKA because the Roffe/KKA lease did not contain a provision expressly identifying Tusa as a third-party beneficiary to the contract. Id. However, the court also determined Roffe breached the Roffe/Tusa lease because Roffe allowed KKA to open a pizza restaurant on premises in violation of Tusa’s restrictive covenants. Id. (“The only reasonable interpretation of the covenant’s language that would support its protective purpose is if Roffe was prohibited from leasing space to another restaurant that sold pizza in the same building as Tusa’s restaurant.”).

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Published on: May 11, 2024

MIAMI BUSINESS LITIGATION: AMBIGUOUS CONTRACT AND PAROL EVIDENCE

By Mavrick Law Firm

The parol evidence rule is a substantive rule of law that limits the introduction of evidence to interpret the meaning of a contractual provision. King v. Bray, 867 So. 2d 1224 (Fla. 5th DCA 2004) (“The parol-evidence rule is a substantive rule of law and… provides that a written document intended by the parties to be the final embodiment of their agreement may not be contradicted, modified or varied by parol evidence.”). The general rule prohibits the use of parol evidence to interpret contracts. As Florida’s Fifth District Court of Appeal explained in King v. Bray, 867 So. 2d 1224 (Fla. 5th DCA 2004), courts presume the parties entering the contract intended their writing “to be the sole expositor of their agreement.” As an example, the parol evidence rule would prohibit the introduction of evidence regarding an oral agreement the parties entered contemporaneously with the written agreement. Madsen, Sapp, Mena, Rodriguez & Co., P.A. v. Palm Beach Polo Holdings, Inc., 899 So. 2d 435 (Fla. 4th DCA 2005) (“The parol evidence rule provides that a contemporaneous oral agreement may not be used to vary the terms of a written agreement unless there is ambiguity as to the meaning of the contract.”). 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.

Contractual ambiguity is an exception to the parole evidence rule. When the term of a contract is ambiguous, parol evidence is admissible to “explain, clarify or elucidate” the ambiguous term. Strama v. Union Fid. Life Ins. Co., 793 So.2d 1129 (Fla. 1st DCA 2001) (citation omitted). However, a trial court cannot admit parol evidence until it first determines the term in dispute is ambiguous. See Weisfeld-Ladd v. Estate of Ladd, 920 So. 2d 1148 (Fla. 3d DCA 2006). Ambiguous terms are susceptible to more than one meaning. Friedman v. Va. Metal Prods. Corp., 56 So.2d 515 (Fla.1952). The court must determine whether the provision in question is susceptible to more than one meaning because it is a question of law. Strama v. Union Fid. Life Ins. Co., 793 So. 2d 1129, 1132 (Fla. 1st DCA 2001) (“The initial determination of whether the contract term is ambiguous is a question of law for the court, and, if the facts of the case are not in dispute, the court will also be able to resolve the ambiguity as a matter of law.”). Thereafter, the fact finder determines the correct interpretation of the ambiguous provision assuming the parties disagree on the interpretation. Universal Underwriters Ins. Co. v. Steve Hull Chevrolet, Inc., 513 So.2d 218 (Fla. 1st DCA 1987). (“Where the terms of the written instrument are disputed and reasonably susceptible to more than one construction, an issue of fact is presented as to the parties’ intent which cannot properly be resolved by summary judgment.”).

Non-compete contracts are no exception. The parol evidence rule prohibits introduction of evidence intended to demonstrate the meaning of a restrictive covenant provision unless a party shows the covenant is susceptible to more than one meaning. Thompson v. Squibb, 183 So.2d 30 (Fla. 2d DCA 1966). (“In construing restrictive covenants[,] the question is primarily one of intention, and the fundamental rule is that the intention of the parties as shown by the agreement governs, being determined by a fair interpretation of the entire text of the covenant.”); Barnett v. Destiny Owners Ass’n, Inc., 856 So. 2d 1090 (Fla. 1st DCA 2003) (holding that when a restrictive covenant is ambiguous, parol evidence regarding the developer’s intent is material). Application of the parol evidence rule in a restrictive covenant lawsuit may enable the party opposing enforcement to create a factual issue and avoid early judgment. See Evergreen Communities, Inc. v. Palafox Pres. Homeowners’ Ass’n, Inc., 213 So. 3d 1127 (Fla. 1st DCA 2017) (finding that the “language in the declaration of covenants and restrictions that expressed the developer’s personal intent to develop the property for commercial use is ambiguous as to whether the developer intended to create a restriction on the property such that it could only be used for commercial purposes” and reversing summary judgement because an ambiguity existed).

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Published on: May 8, 2024

FORT LAUDERDALE BUSINESS LITIGATION: EXTRAORDINARY OR SPECIALIZED TRAINING

By Mavrick Law Firm

Restrictive covenants like non-compete agreements and non-solicit agreements are valid if supported by one or more legitimate business interests. Fla. Stat. § 542.335. Those legitimate business interests often include the protection of trade secrets, valuable information that does not qualify as trade secret, existing customers, or future prospective customers. Id. However, legitimate business interests can also include extraordinary or specialized training. Id. This type of legitimate business interest is often pleaded by a former employer seeking to enforce its restrictive covenant against a former employee, but commonly rejected by the fact-finder. Below we identify the facts needed to successfully assert an extraordinary or specialized training legitimate business interest claim and provide some examples demonstrating why claims for extraordinary or specialized training frequently fail. 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.

All training does not qualify as extraordinary or specialized training. “To constitute a protectible interest,… the provi[sion] of training or education must be extraordinary.” Hapney v. Cent. Garage, Inc., 579 So. 2d 127 (Fla. 2d DCA 1991), reh’g denied and opinion modified, (Fla. 2d DCA May 15, 1991). Therefore, the training must go “beyond what is usual, regular, common, or customary in the industry in which the employee is employed. Id. Courts reason that extraordinary training allows employees to gain unique skills or an enhanced sophistication that makes it unfair for those employees to use the new skills to compete. Id.

It is difficult to precisely distinguish between training that does and does not qualify as a legitimate business interest because it is a fact-based inquiry that varies industry to industry. Id. Notwithstanding, the case law provides some guidance by demonstrating that routine training does not meet the extraordinary standard. In IDMWORKS, LLC v. Pophaly, 192 F. Supp. 3d 1335 (S.D. Fla. 2016), the court ruled the plaintiff’s training was not a legitimate business interest for three reasons. First, the training provided by the former employer to the former employee was typical of most industries because the plaintiff failed to produce evidence demonstrating the training went beyond industry norms. Id. (“The only testimony about training within the industry came from the Defendant, who testified that the training he received was not different from training he would expect to receive at other companies in the industry.”). Second, the former employer’s provision of a database containing training materials did not create a legitimate business interest because the evidence established that many other companies can access the same database for those same training materials. Id. Third, the evidence revealed that the training materials provided by the employer were optional. Id; see also Autonation, Inc. v. O’Brien, 347 F. Supp. 2d 1299 (S.D. Fla. 2004) (“O’Brien testified that he was not required to attend the various training seminars and only ‘popped in and out’ of the meetings. Accordingly, AutoNation has not demonstrated any specialized training exceeding what would be common or typical in the industry.”).

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Published on: May 4, 2024

MIAMI BUSINESS LITIGATION: COURT-APPOINTED RECEIVER ASSERTING CORPORATE CLAIMS

By Mavrick Law Firm

The United States Court of Appeals for the Eleventh Circuit, in Wiand v. ATC Brokers Ltd., 96 F.4th 1303 (11th Cir. 2024), recently issued an opinion regarding a receiver’s standing to assert fraudulent transfer claims and other torts on behalf of the entity it is overseeing. To understand this new appellate decision, it is necessary to know why a receiver may be appointed and the powers a receiver has. Receivership is usually created to protect the rights of creditors. Freeman v. Dean Witter Reynolds, Inc., 865 So. 2d 543 (Fla. Dist. Ct. App. 2003). A receiver has the rights and remedies possessed by the person or corporation in receivership and can bring claims that were previously owned by the person or corporation in receivership. However, a receiver is not a class representative for all creditors. A receiver cannot therefore pursue claims owned directly by the creditors. 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.

In the Wiand decision, the Eleventh Circuit distinguished between certain claims a receiver has standing to sue for on behalf of the company in receivership and other claims the receiver cannot sue for due to a lack of standing. Standing requires an individual have “a sufficient stake in an otherwise justiciable controversy” so that he or she can “obtain judicial resolution of that controversy.” Jamlynn Invs. Corp. v. San Marco Residences of Marco Condo. Ass’n, 544 So. 2d 1080 (Fla. 2d DCA 1989). A plaintiff must prove it suffered an injury that is concrete and particularized, the injury is fairly traceable to the defendant’s conduct, and it is likely the plaintiff’s injury will be redressed by a favorable decision. Fla. Wildlife Fed’n, Inc. v. S. Fla. Water Mgmt. Dist., 647 F. 3d 1296 (11th Cir. 2011). Receivers of a corporation have standing to bring fraudulent transfer claims against the company’s principals or transfer recipients to claw-back fraudulently transferred funds. Wiand v. Lee, 753 F.3d 1194 (11th Cir. 2014) (“A receiver of entities used to perpetrate a Ponzi scheme does not have standing to sue on behalf of the defrauded investors but does have standing to sue on behalf of the corporations that were injured by the Ponzi scheme operator.”). Receivers possess standing to sue because they effectively remove the company’s “evil zombies” thereby freeing the company from the zombies’ “evil spell.” Scholes v. Lehmann, 56 F.3d 750 (7th Cir. 1995) (“The appointment of the receiver removed the wrongdoer from the scene. The corporations were no more Douglas’s evil zombies. Freed from his spell they became entitled to the return of the moneys…”).

By contrast, receivers generally lack standing to pursue other tort claims because the company’s torts are imputed to the receiver. See Perlman v. PNC Bank, N.A., 38 F.4th 899 (11th Cir. 2022) (affirming dismissal of aiding and abetting claims for lack of subject matter jurisdiction because the receiver lacked standing). This is because the receiver does not have the same cleansing effect as fraudulent transfer claims. Wiand v. ATC Brokers Ltd., 96 F.4th 1303 (11th Cir. 2024) (“[F]raudulent-transfer claims must be treated differently for standing purposes: fraudulent transfers are “cleansed through receivership” as a matter of course, but common-law torts by third parties are not.”). However, the receiver can overcome imputation of the company’s bad acts and gain standing to sue for other torts if the receiver proves the receivership entity was separate and distinct from the tort. ATC Brokers Ltd., 96 F.4th 1303. To do this, the company in receivership must have at least one honest board member or stockholder. Isaiah v. JP Morgan Chase Bank, 960 F.3d 1296 (“[U]nless the corporation in receivership has at least one honest member of the board of directors or an innocent stockholder, the fraud and intentional torts of the insiders cannot be separated from those of the corporation itself and the corporation cannot be said to be an entity separate and distinct from the individual tortfeasors.”). The honest actor is required because a company in receivership cannot suffer injury and is considered a sham if created to perpetrate a fraud. ATC Brokers Ltd, 96 F.4th 1303. The honest actor ensures the company in receivership had some legitimate purposes.

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