Category: Business Law

FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT: DEFENSE AGAINST LAWSUIT USING NOERR-PENNINGTON DOCTRINE

The Florida Deceptive and Unfair Trade Practices Act (FDUTPA), § 501.201 et seq., Florida Statutes, is a remedial statute intended “to protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.” § 501.202(2), Fla. Stat.  Rollins, Inc. v. Butland, 951 So. 2d 860 (Fla. 2d DCA 2006), defines a deceptive practice as “one that is likely to mislead” and an unfair practice as “one that offends established public policy” and/or “is immoral, unethical, oppressive, unscrupulous or substantially injurious.”  The explicit wording of FDUTPA and its interpretations by Florida courts are purposefully broad and intended to help protect consumers and businesses against a wide range of deceitful or unfair trade practices.  However, the broad wording and interpretations of FDUTPA could also be harmful to businesses, as they provide an avenue for customers and/or competitors adversely affected by lawful trade practices to bring meritless lawsuits.  A perfect example is when a party brings a FDUTPA claim against a business based on pre-suit communications threatening potential litigation, such as a demand letter or a cease and desist letter.  It is common practice for businesses to send such pre-suit communications as an attempt to curb another party from further engaging in conduct that is either violating the law or some other obligation the party owes to the business without the need for costly litigation.  This is useful in situations that include, inter alia, when a former employee is violating a non-compete agreement, when a party to a contract fails to fulfill his or her contractual obligations, or when a party is infringing on a business’s trademark or interfering with advantageous business relationships.  Despite the practicality of using these pre-suit communications, the recipients typically view it as harassing and threatening conduct forming the basis of FDUTPA claims.

One way businesses can defend against and dismiss these meritless FDUTPA claims is by invoking immunity under the Noerr-Pennington doctrine.  The foundation of Noerr-Pennington immunity arises from the First Amendment’s right to petition and it is traditionally utilized to shield a defendant from antitrust liability for resorting to litigation to obtain an anticompetitive result from the court.  Nevertheless, McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552 (11th Cir. 1992), extended the doctrine to protect “pre-litigative and litigative activities” from claims for unfair trade practices.

Based on the Eleventh Circuit’s reasoning in McGuire Oil Co., Florida federal courts have consistently applied Noerr-Pennington immunity to dismiss actions based on pre-suit communications.  PODS Enterprises, Inc. v. ABF Freight Sys., Inc., 100 U.S.P.Q.2d 1708 (M.D. Fla. 2011), and Atico Intern. USA, Inc. v. LUV N’ Care, Ltd., 2009 WL 2589148 (S.D. Fla. Aug. 19, 2009), both dismissed FDUTPA claims based on pre-litigation letters, holding that pre-suit demand and cease and desist letters are “immunized” under Noerr-Pennington.  Similarly, Rolex Watch U.S.A., Inc. v. Rainbow Jewelry, Inc., 2012 WL 4138028 (S.D. Fla. Sept. 19, 2012), applied Noerr-Pennington to dismiss a defendant’s FDUTPA counterclaim based on pre-suit threats of litigation and alleged injuries it sustained in having to defend against the plaintiff’s trademark infringement suit.  Another example, Marco Island Cable, Inc. v. Comcast Cablevision of S., Inc., 2006 WL 1814333 (M.D. Fla. July 3, 2006), granted partial summary judgment to the defendant for a FDUTPA claim based on pre-suit letters threatening to sue to enforce defendant’s exclusivity contracts.  These cases are just a few examples of how courts have applied the Noerr-Pennington doctrine to help business defend against meritless FDUTPA lawsuits.

The Mavrick Law Firm has extensive experience dealing with the Florida Deceptive and Unfair Trade Practices Act and has successfully defended businesses against FDUTPA lawsuits.  This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.

UNLICENSED CONTRACTORS CANNOT ENFORCE CONSTRUCTION CONTRACTS BUT COULD BE LIABLE UNDER THOSE CONTRACTS

When two parties commit the same wrongdoing and are equally at fault, the court generally will not get involved in their transaction.  That rule is known as the doctrine of “in pari delicto.”  The doctrine of in pari delicto generally will apply to various forms of unlawful contracts.  For example, if two parties enter into an illegal contract to split the profits of a robbery, neither party can seek to have the court enforce the contract when one party refuses to share the profits.  Both parties were equally at fault—or in pari delicto—and the court will leave the parties as they are.  Until recently, some Florida courts applied the doctrine of in pari delicto to construction contracts entered into by unlicensed contractors.

In Earth Trades, Inc. v. T&G Corp., 108 So. 3d 580 (Fla. 2013), an unlicensed subcontractor (“Earth Trades”) entered into a construction contract with a general contractor (“T&G”).  T&G knew that Earth Trades was unlicensed when it entered into the contract.  After a dispute between the parties arose, Earth Trade sued T&G for breach of the contract.  T&G countersued for breach of contract against Earth Trade.  At that point Earth Trade argued that neither T&G nor Earth Trade could enforce the contract because the contract was unlawful.  Earth Trade further argued that because both parties knew that the contract was unlawful, the parties were in pari delicto.  The Florida Supreme Court disagreed.

The Florida legislature amended the statute regarding unlicensed construction contractors in 2003.  As amended, the statute reads as follows: “contracts entered into on or after October 1, 1990, by an unlicensed contractor shall be unenforceable in law or in equity by the unlicensed contractor.”  Fla. Stat. § 489.128(1) (emphasis added).  The statute therefore explicitly makes the contract unenforceable only by the unlicensed contractor and not the party contracting with the unlicensed contractor.  Because the legislature placed the liability on the unlicensed contractor, “the fault of the person or entity engaging in unlicensed contracting is not substantially equal to that of the party who merely hires a contractor with knowledge of the contractor’s unlicensed status.”  Earth Trades, Inc., 108 So. 3d at 587.  Earth Trades was therefore not in pari delicto with T&G even though T&G knew that Earth Trades was unlicensed.

Earth Trades, Inc. serves as a warning to those engaging in unlicensed contracting.  If a construction contract goes sour, the unlicensed contractor will not be able to enforce the contract against the other party.  The other party, however, might be able to enforce the construction contract against the unlicensed contractor.  As the Florida Supreme Court held, “to avoid the draconian effects of the statute, the unlicensed contractor need only comply with the law.”  Earth Trades, Inc. v. T&G Corp., 108 So. 3d at 586-587.

Peter T. Mavrick represents businesses in commercial litigation, labor/employment law, and trade secret and non-competition covenant litigation.  This article is not a substitute for legal advice tailored to a particular situation.  Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.

FRANCHISOR’S LIABILITY FOR FRANCHISEE ACTIONS

Franchise agreements can serve to establish a mutually beneficial relationship for the franchisor and the franchisee.  Under a franchise agreement, the franchisor’s brand is allowed to grow through an independent business, i.e., the franchisee, and the franchisee is able to start a business without having to create a new product or brand.  Because franchisees are generally independent businesses, the franchisor will normally not be liable for the franchisee’s actionable conduct.  However, the franchise agreement and other factual circumstances could render a franchisor vicariously liable for its franchisees’ actions.

In Parker v. Domino’s Pizza, 629 So. 2d 1026 (Fla. 4th DCA 1993), two plaintiffs were harmed as a result of an accident caused by a delivery driver employed by J&B Enterprises, a Domino’s Pizza (“Domino’s”) franchisee.  Under Florida law, an employer can be vicariously liable for his or her employees’ actions.  J&B Enterprises, as the employer of the delivery driver, could therefore be liable for the plaintiffs’ injuries.  The plaintiffs argued, however, that Domino’s also was vicariously liable for the injuries caused by the delivery driver.  The trial court held that Domino’s was not liable to the plaintiffs because the delivery driver was not a Domino’s employee.  On appeal, the appellate court disagreed.

The appellate court held that the operating manual that Domino’s provided to J&B Enterprises was “a veritable bible for overseeing a Domino’s operation,” which contained “prescriptions for every conceivable facet of the business.”  Parker v. Domino’s Pizza, 629 So. 2d 1026, 1029 (Fla. 4th DCA 1993).  Because the manual indicated that Domino’s retained a high degree of control over J&B Enterprises, J&B Enterprises could be considered an agent of Domino’s.  Consequently, the appellate court held that Domino’s could be found liable for the delivery driver’s actions.

Several years later, the same appellate court was presented with a similar question.  In Madison v. Hollywood Subs, Inc., 997 So. 2d 1270, 1270 (Fla. 4th DCA 2009), an individual was shot and killed outside a Miami Subs restaurant.  The restaurant was operated by Hollywood Subs, Inc., a Miami Subs franchisee.  The plaintiff argued that the killing was a result of inadequate security and that both Hollywood Subs, Inc., the franchisee, and Miami Subs, the franchisor, were liable.

The appellate court considered the franchise agreement and found that Miami Subs was not liable for the killing.  As the appellate court found, the “only control provided by the agreement was to insure uniformity in the standardization of products and services offered by the restaurant.”  Madison v. Hollywood Subs, Inc., 997 So. 2d 1270, 1270 (Fla. 4th DCA 2009).  Because Hollywood Subs, Inc. had sole control of the day-to-day operations, it was an independent contractor, and not an agent, of Miami Subs.

As the above cases demonstrate, whether a franchisee is an “agent” or “independent contractor” of a franchisor depends on the facts of each case.  If the franchisor retains the right to control the day-to-day business operations, it can be held liable for its franchisee’s actions.  If, however, the franchisor’s control is limited to maintaining uniformity among its franchisees, then the franchisor would generally not be vicariously liable for its franchisees’ conduct.

Peter T. Mavrick represents businesses in commercial litigation, labor/employment law, and trade secret and non-competition covenant litigation.  This article is not a substitute for legal advice tailored to a particular situation.  Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.

CONTRACT PROVISIONS FOR ATTORNEY’S FEES: FLORIDA’S RECIPROCITY LAW AND THE AMERICAN RULE

The “American rule” holds that each party to a lawsuit will pay for his or her own attorney’s fees regardless of who prevails in the case.  Unless a statute or contractual provision says otherwise, Florida courts will apply the American rule.  For that reason, contracts oftentimes contain provisions stating that if litigation arises under the contract, the losing party must pay the prevailing party’s attorney’s fees.

Florida statutory law, however, requires reciprocity.  In other words, if “a contract contains a provision allowing attorney’s fees to a party when he or she … enforce[s] the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails … with respect to the contract.” Fla. Stat. § 57.105(7).  For example, the following contractual provision is not reciprocal: “Buyer shall pay for Seller’s attorney’s fees if Seller prevails in a claim against Buyer.”  The terms of the contract grant only Seller, not Buyer, the right to attorney’s fees upon prevailing.  However, because Florida law requires reciprocity, Florida courts generally will read that contractual provision as also granting Buyer a right to attorney’s fees upon prevailing in a suit to enforce the contract.

In Fla. Hurricane Prot. & Awning, Inc. v. Pastina, 43 So. 3d 893 (Fla. 4th DCA 2010), a homeowner entered into a contract with a contractor to install shutters.  The contract included the following provision: “Purchaser [i.e., the homeowner,] is responsible for all costs of collection including Attorney’s fees.”  Fla. Hurricane Prot. & Awning, Inc., 43 So. 3d at 894.  The contractual provision is not reciprocal, i.e., it grants only the contractor the right to recover attorney’s fees from the homeowner.  After the contractor failed to install the shutters, the homeowner sued for breach of contract and prevailed.  Relying on Florida’s reciprocity statute, the homeowner sought attorney’s fees from the contractor.  While the trial court agreed with the homeowner and awarded her attorney’s fees, the appellate court disagreed.

The appellate court in Fla. Hurricane Prot. & Awning, Inc. found that the contract between the homeowner and the contractor allowed the contractor to recover attorney fees only in relation to a “collection” action, not a general breach of contract action.  As the court found, Florida’s reciprocity law “is designed to even the playing field, not expand it beyond the terms of the agreement.”  Fla. Hurricane Prot. & Awning, Inc., 43 So. 3d at 895.  Had the contractor brought a collection action against the homeowner and lost, Florida’s reciprocity law would have required that the homeowner be entitled to her attorney’s fees.  However, because the homeowner brought suit alleging a breach of contract, the contractual attorney’s fees provision was never triggered.  In the absence of a contractual provision holding otherwise, the American rule controls, and the homeowner must pay for her own attorney’s fees.  As the court found, “[t]o rule otherwise would be tantamount to re-writing the contract between the parties.  This we will not do.”  Fla. Hurricane Prot. & Awning, Inc., 43 So. 3d at 895-96.

Florida’s reciprocity law will grant reciprocity, nothing more.  As the above case demonstrates, courts will not use Florida’s reciprocity rule to rewrite or expand a contract.  As with many contractual disputes, proper drafting is key.

Peter T. Mavrick represents businesses in commercial litigation, labor/employment law, and trade secret and non-competition covenant litigation. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.

ARBITRATION AGREEMENTS AND THE FLSA: THE EFFECT OF FEE-SPLITTING AND FEE-SHIFTING PROVISIONS

Because arbitration usually is cheaper and faster than litigation, employers often include arbitration agreements in their employment contracts.  However, courts do not always enforce arbitration agreements.  Although federal law favors arbitration, state and federal courts may find an arbitration agreement unenforceable for several reasons.  One such reason is when the arbitration agreement contains a provision that contrary a federal statutory remedy.

Generally, a “fee-splitting” provision is a contractual provision requiring that the parties to an arbitration agreement share (or “split”) the costs of arbitration.  Moreover, a “fee-shifting” provision is a contractual provision that requires the losing party in an arbitration proceeding to pay the prevailing party’s fees and costs associated with the arbitration, i.e., the costs of arbitration “shifts” to the losing party.  “Fee-splitting” and “fee-shifting” provisions would normally not render an arbitration agreement unenforceable.  However, the analysis changes when federal statutory rights are subject to arbitration.  The rule is as follows: an arbitration agreement is unenforceable if the cost of arbitration effectively precludes the employee from vindicating his federal statutory rights.  One such federal statutory right is the right to payment of minimum and overtime wages under the Fair Labor Standards Act (FLSA).

In Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000), the U.S. Supreme Court held that the “risk” that a party will be saddled with prohibitive arbitration costs is too speculative to render an arbitration agreement unenforceable.  Following Green Tree, several federal court have upheld the validity of arbitration agreement containing fee-splitting provision.  For example, in Maldonado v. Mattress Firm, Inc., 2013 U.S. Dist. LEXIS 58742 (M.D. Fla. Apr. 24, 2013), an employee argued that the arbitration agreement’s fee-splitting provision rendered the agreement unenforceable against his FLSA claim.  The federal court held that in order to prevail on his argument, the employee was required to present evidence of (1) the amount of costs he is likely to incur and (2) his inability to pay those costs.  A showing of the “possibility” of incurring prohibitive costs is not sufficient.  The federal court held that the arbitration agreement was enforceable despite the employee’s FLSA claim.

Several months later, a Florida state court held that a fee-shifting provision rendered an arbitration agreement unenforceable against the employee in an FLSA case.  In Hernandez v. Colonial Grocers, Inc., 124 So. 3d 408 (Fla. 2d DCA 2013), the Florida state court held that an arbitration agreement containing a fee-shifting clause was unenforceable because the fee-shifting provision was directly at odds with the FLSA’s remedial purpose.  The FLSA allows the prevailing employee to recover his attorney’s fees and costs.  However, the FLSA does not have a similar provision favoring the employer.  Therefore, the Florida state court in Hernandez held that the fee-shifting provision “renders the potential cost of arbitration to be far greater to [the employee] than the potential cost of civil litigation” and that the arbitration agreement exposes the employee “to a potential liability to which he would not be exposed if the litigation occurred in civil court because the federal statute specifically protects him from such liability.”  Hernandez, 124 So. 3d at 410.  The state court therefore found that the arbitration agreement was unenforceable.

Arbitration can be a much cheaper and quicker alternative to litigation.  However, arbitration is a creature of contract.  If not properly drafted, a court may find that the arbitration agreement is unenforceable and require that the parties litigate their case in court.  Although every case is different, proper drafting is essential to an enforceable arbitration agreement.

Peter T. Mavrick has successfully represented many employers in labor and employment matters.  This article is not a substitute for legal advice tailored to a particular situation.  Employment attorney Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.

 

SUCCESSFULLY USING BUSINESS RECORDS AT TRIAL

Trials in business disputes typically deal with documents such as correspondence, ledgers, contracts, and other business records.  While those documents by themselves are often inadmissible hearsay, business trial attorneys usually get the documents into evidence via the “business records exception” to the rule against hearsay.  The business record exception is based on the concept that records made in the regular course of business are sufficiently reliable to justify their admission into evidence.

In Florida, the business records exception is codified at section 90.803(6)(a), Florida Statutes, which provides:

[T]he following [is] not inadmissible as evidence, even though the declarant is available as a witness:

(6) Records of regularly conducted business activity.

(a) A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinion, or diagnosis, made at or near the time by, or from information transmitted by, a person with knowledge, if kept in the course of a regularly conducted business activity and if it was the regular practice of that business activity to make such memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness, or as shown by a certification or declaration that complies with paragraph (c) and s. 90.902(11), unless the sources of information or other circumstances show lack of trustworthiness.

Florida appellate courts have explained that to secure admissibility under the business record exception, the proponent must show that (1) the record was made at or near the time of the event; (2) was made by or from information transmitted by a person with knowledge; (3) was kept in the ordinary course of a regular conducted business activity; and (4) that it was a regular practice of that business to make such a record.  See, for example, Jackson v. State, 738 So.2d 382 (Fla. 4th DCA 1999).

Additionally, the proponent is required to present this information in one of three formats.  First, the proponent may take the traditional route, which requires that a records custodian take the stand and testify under oath to the predicate requirements.  Second, the parties may stipulate to the admissibility of a document as a business record.  See, for example, Kelly v. State Farm Mut. Auto. Ins., 720 So.2d 1145 (Fla. 5th DCA 1998).  Third and finally, since July 1, 2003, the proponent can establish the business-records predicate through a certification or declaration that complies with sections 90.803(6)(c) and 90.902(11), Florida Statutes.  The certification — under penalty of perjury — must state that the record: (a) was made at or near the time of the occurrence of the matters set forth by, or from information transmitted by, a person having knowledge of those matters; (b) was kept in the course of the regularly conduct activity; and (c) was made as a regular practice in the course of the regularly conducted activity.

The Supreme Court of Florida in Yisreal v. State of Florida, 993 So.3d 952 (Fla. 2008), identified other important considerations.  First, if evidence is to be admitted under one of the exceptions to the hearsay rule, it must be offered in strict compliance with the requirements of that particular exception.  Second, when a document is made for something other than a regular business purpose, it does not fall within the business record exception.  For example, whenever a record is made for the purpose of preparing for litigation, its trustworthiness is suspect and should be closely scrutinized.  See, for example, United States v. Kim, 595 F.2d 755 (D.C. Cir. 1979), which rejected an argument that a document created solely for litigation purposes was admissible as a business-records summary of otherwise admissible records.  Following the reasoning in Kim, the court in Yisreal did not admit a summary of otherwise admissible records, because the underlying records were never tendered into evidence.  The business-records exception to the hearsay rule does not authorize hearsay testimony concerning the contents of business records which have not been admitted into evidence.

With planning, business records are generally easy to admit into evidence.  It simply requires a plan to follow the requirements of the evidence code.  This is done most easily well in advance of trial.

Peter T. Mavrick represents businesses in commercial litigation, labor/employment law, and real property litigation.  Mr. Mavrick has successfully represented many businesses in negotiations, mediations, and litigation.  This article is not a substitute for legal advice tailored to a particular situation.  Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.

APRIL 2013 TRIAL VICTORY FOR MAVRICK LAW FIRM CLIENT

In April 2013, the Mavrick Law Firm represented a victorious client in state court in Broward County, Florida.  The case involved a lawsuit filed by a construction subcontractor against the general contractor in a commercial construction case.  The Mavrick Law Firm successfully defended the general contractor at trial.   The verdict was a complete defense verdict of no liability.  In addition, the Mavrick Law Firm also filed a counterclaim on behalf of the general contractor, and prevailed in that counterclaim at trial.  Attorney Peter Mavrick was lead counsel and was assisted by attorney David Friedman as second chair at the trial.

PERSONAL LIABILITY FOR A CORPORATION’S OBLIGATIONS UNDER FLORIDA LAW: “PIERCING THE CORPORATE VEIL”

In business litigation cases, it is important to evaluate the possibility of “piercing the corporate veil,” whether from the perspective of plaintiff/creditor or defendant/debtor.  While a corporate debtor might be uncollectable due to its lack of financial resources, the story does not always end with the corporation’s own balance sheet.  When a plaintiff/creditor can prove the requirements to pierce the corporate veil, a prudent corporate defendant/debtor and its principals might be more amenable to making substantial efforts to resolve the case rather than taking their chances on an adverse judgment.

As a general principle, corporations are legal entities that function with limited liability.  Corporations are regarded as such because the corporate obligations remain those of the corporate entity, meaning that the corporation’s owners, officers, and shareholders are not held personally liable for corporate debt.  However, in certain situations courts allow a creditor to “pierce the corporate veil” and hold corporate owners personally liable for corporate debts.

In Florida, “piercing the corporate veil” is governed by Florida Supreme Court case Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114 (Fla. 1984), which holds “the corporate veil may not be pierced absent a showing of improper conduct.”  This is not the most detailed description, especially in the legal realm where attorneys are accustomed to applying a particular set of facts to specific multi-factor tests.  In a more recent case, Florida’s Third District Court of Appeal formulated a three factor test in Gasparini v. Pordomingo, 972 So.2d 1053 (Fla. 3d DCA 2008).  Under the Gasparini case, to pierce the corporate veil and hold a shareholder liable for a corporate liability, a creditor must prove the following:

(1)        the shareholder dominated and controlled the corporation to such an extent that the corporation’s independent existence, was in fact non-existent and the shareholders were in fact alter egos of the corporation;

(2)        the corporate form must have been used fraudulently or for an improper purpose; and

(3)        the fraudulent or improper use of the corporate form caused injury to the claimant.

The corporate form can also be pierced under certain circumstances when a creditor seeks to hold a parent corporation liable for the obligation of a subsidiary.  For example, Ocala Breeders’ Sales Co. v. Hialeah, Inc., 735 So. 2d 542 (Fla. 3d DCA 1999), identified the following factors to help determine when the subsidiary is merely an instrumentality of the parent corporation, including whether: (1) the same person controlled both the parent and subsidiary; (2) they operated out of the same facilities as the parent; (3) the subsidiary’s contracts were performed by employees of the parent; (4) the subsidiary was never capitalized; and (5) the subsidiary shared bank accounts and financial obligations with the parent.  All of these factors were established, and the court found that the subsidiary was merely an instrumentality of the parent corporation.  Ocala Breeders’ also clarified what is meant by the term “improper conduct”: “[T]o pierce the corporate veil under Florida law, it must be shown not only that the wholly-owned subsidiary is a mere instrumentality of the parent corporation but also that the subsidiary was organized or used by the parent to mislead creditors or to perpetrate a fraud upon them.”  The court held that a parent corporation defrauded the plaintiff when its subsidiary entered into a contract requiring it to make certain capital improvements.  The subsidiary did not have the ability to fulfill the contract since it was never capitalized.  In that scenario, the court found it appropriate to bypass the personal liability protection afforded to the corporate officers based on an organized effort to perpetrate a fraud on corporate creditors.

Whether representing the plaintiff/creditor or the defendant/debtor, in business litigation it is often prudent to evaluate the possibility of piercing the corporate veil.

Peter T. Mavrick represents business owners in business litigation.  Mr. Mavrick has successfully represented many businesses in negotiations, in response to threatened legal action, and in court.  This article is intended for information purposes only and is not legal advice.  This article is not a substitute for legal advice tailored to a particular client’s situation.  Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida  33311; Email: peter@mavricklaw.com.