General Florida Law News & Updates

Perishable Agricultural Commodities Act (“PACA”) creates a trust to protect produce suppliers.

In a recent S.D. of Florida Bankruptcy Case, the issue before the Court was whether a PACA trust is the type of trust that gives rise to actionable fiduciary capacity under Section 523(a)(4) – the exception to discharge of debt “for fraud or defalcation while acting in a fiduciary capacity”.

Although the Court admitted that the decision was “a close one,” it concluded that a PACA trust does not satisfy the requirements for finding “fiduciary capacity” under Section 523(a)(4).  The Court found that a PACA trust falls short because (1) it does not require segregation of assets unless and until a court orders segregation after a showing of dissipation; and (2) the trust assets may be used for non-trust purposes.

The Court reasoned that language of § 523(a)(4) is clear that only debts incurred while acting in a fiduciary capacity are nondischargeable.  Accordingly,  the hallmarks of a technical trust relationship must exist prior to any alleged defalcation for a trust to be considered a technical trust.  Applying that standard, the Court concluded that a PACA trust is not a technical trust until a court imposes additional duties and restrictions after a prior showing of malfeasance by produce dealers.   As a result, the Defendant produce dealers’ debt to the Plaintiff produce suppliers could not be excepted from discharge under § 523(a)(4) of the Bankruptcy Code.


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

 

 

 

IRA and 401(k) retirement accounts are generally exempt from claims of creditors pursuant to Section 222.21, Florida Statutes and Section 522 of the Bankruptcy Code.  For this reason, these types of retirement accounts can be a useful asset protection tool.  However, as I have mentioned in previous blog posts, there are exceptions to every rule!

Beware – prohibited transactions can cause the assets in your IRA or 401(k) account to LOSE their exempt status!  Terms like “set it and forget it,” and “we are programmed to receive,” come to mind when I think of these types of accounts.  Playing around with IRA or 401(k) funds, especially self-directed accounts, is risky business!

By example, in a S.D. Fla. Bankruptcy Case, the Court concluded that the funds in the Debtor’s Merrill Lynch IRA were not exempt because the Debtor engaged in prohibited transactions pursuant to the Internal Revenue Code and the funds in his two other IRA accounts were not exempt because they constituted funds from the Merrill Lynch IRA which had lost its exempt status.


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

In the US, it is almost universally established that BBB grades are opinion statements entitled to absolute privilege under the First Amendment of the Constitution. Some inroads on BBB liability have been made by attacking statements other than the rating. Specifically, in Caribbean Cruise Line, Inc. v. Better Business Bureau of Palm Beach County, Inc. d/b/a Better Business Bureau of Southeast Florida and the Caribbean, Case No. 4D13-3916, a trial court found that the BBB’s representations regarding systems and practices could be defamatory if the Plaintiff could prove the falsity of the statements.

On the other hand, in Canada, ratings seem to be the fair subject of a defamation suit. In Walsh Energy Inc. v. Better Business Bureau of Ottawa-Hull Incorporated, 2018 ONCA 383 (Hoy A.C.J.O., Huscroft and Paciocco JJ.A.), April 19, 2018, a Canadian appeals court found that the plain and ordinary meaning of a D- grade issued by the BBB to a business could be legqally defamatory. While the BBB ultimately prevailed on one of the defenses it asserted in the litigation, the Canadian court, unlike US courts, found that the plain and ordinary meaning of a D- rating was actionable.

While the Canadian model has no impact on the status of US consumer bureau defamation law, the distinction between Canadian law and US law is interesting especially for US plaintiffs that have been frustrated by the BBB’s opinion statement defense.


W Mason is an Partner with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W has previously written on several issues pertaining to litigation involving consumer bureau defamation. W focuses his practice on commercial litigation throughout Florida, with an emphasis on litigation involving consumer bureaus and various Better Business Bureau affiliates. You can reach W at (561) 804-4432 or wmason@foxrothschild.com.

The 2017 revisions to the A201 improves the Contractor’s ability to request and obtain financial information from the owner throughout the project. On most projects, Owner’s typically create a single purpose legal entity, usually an LLC, that owns the real property where construction takes place. The legal entity typically enters into the construction contract with the Contractor. The A201 recognizes that the entity entering in to the construction Contract on behalf of the Owner most likely has little or no assets. As such, it provides the Contractor with the ability to request reasonable evidence of the Owner’s ability to pay.

The 2017 revisions of Section 2.2 continues to allow the Contractor to request reasonable evidence (1) prior to commencement, (2) after failure to make a timely payment, (3) after a material change in the work that materially affected the contract sum, or (4) after identification of a reasonable concern over the Owner’s ability to pay. While the 2007 A201 did not impose an express timeline on the Owner or a consequence for the Owner’s failure to provide the reasonable evidence, the 2017 revision requires the Owner to provide the reasonable evidence within 14 days after the Contractor’s request. If the Owner fails to provide reasonable evidence within 14 days, the Contractor may stop work. If the request is made due to a change materially affecting the Contract sum, the Contractor may only stop the work related to the change. Significantly, the 2017 A201 expressly provides that the contract time and sum shall be increased by the amount of the Contractor’s reasonable costs and delay, plus interest. Given that Section 2.2 of the 2017 A201 has more “teeth” in favor of the Contractor, practitioners representing owners may want to consider revisions to Section 2.2 accordingly.


W Mason is an partner with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W is Board Certified in Construction Law by the Florida Bar Association. W focuses his practice on construction and commercial litigation throughout Florida. You can reach W at (561) 804-4432 or wmason@foxrothschild.com.

My November, December, and February posts, discussed details of homestead protection in Florida including requirements, benefits and pitfalls.  If you are married, another asset protection and estate planning tool available to you is Tenants by the Entirety (“TBE”) ownership.  In Florida, a married couple may own several types of property TBE, including, but not limited to, bank accounts, real property (including their homestead) and personal property.   In fact, Florida law presumes that property acquired by a married couple is TBE property if the “six unities” of TBE ownership are present.  The six unities required for TBE ownership are (1) unity of possession (joint ownership and control); (2) unity of interest (the interests in the account must be identical); (3) unity of title (the interests must have originated in the same instrument); (4) unity of time (the interests must have commenced simultaneously); (5) survivorship; and (6) unity of marriage (the parties must be married at the time the property became titled in their joint names).

Under Florida law, the benefit of owning property TBE is that it is exempt from process to satisfy debts owed to individual creditors of either spouse.  This is because an interest in TBE property is not equivalent to one half of the equity in the property, but rather, an inseverable interest in the whole owned by both spouses.

However, TBE is not a perfect asset protection tool as it can be broken, severed, and/or create unwanted liability.

  •  TBE property is not exempt from process to satisfy joint debts of both spouses;
  •  TBE protection dissolves if one of the spouses passes away;
  •  TBE protection is broken by divorce; and
  •  TBE ownership of cars, boats and/or other recreational vehicles could result in liability for both spouses under the dangerous instrumentality doctrine.

TBE ownership is not right for everyone or every situation, but it is worth considering if it is available to you.


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

In my August post, I discussed two cases.  In the Failla case, the Eleventh Circuit affirmed the District Court’s opinion that “once the debtor decides to ‘surrender’ secured property… [w]hile the debtor need not physically deliver the property to the secured party, the debtor is precluded from taking any action which would interfere with the secured creditor’s ability to obtain legal title to, and possession of, the property through legal means.”  Thereafter, the S.D. Bankruptcy Court held, in the Kurzban case, that “the Eleventh Circuit did not rule that a debtor’s decision to surrender lasted in perpetuity“.

As of October 1, 2018, a new statute which expands on the spirit of both the Failla and Kurzban cases will apply to all foreclosure cases filed on or after October 1, 2018.  Specifically, Senate Bill No. 220 was signed into law by Florida Governor Rick Scott this month and will become effective as Section 702.12, Florida Statutes.

Section 702.12 will streamline the foreclosure process for mortgage lenders where bankrupt borrowers have filed an intention to surrender the lender’s property, not withdrawn that intention, and the Bankruptcy Court has entered a final order either granting the bankruptcy debtor(s) a discharge, or confirming a repayment plan that provides for surrender of the property.  If these circumstances are present, the statute provides mortgage lenders with a rebuttable presumption that the borrower has waived any defenses to foreclosure.  The statute further provides that the court shall take judicial notice of Bankruptcy Court orders upon the request of lender.

While Section 702.12 is a positive new law for mortgage lenders, the advice in my August post, still applies – Do NOT sit on your rights!   Section 702.12(3), similar to the ruling in Kurzban, provides that the borrower is not precluded from raising a defense based on the mortgage lender’s action or inaction subsequent to the filing of the bankruptcy document which evidenced the borrower’s intention to surrender the mortgaged property to the mortgage lender.


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

Florida House Bill 7061 and Florida Senate Bill 1384 propose to raise the jurisdictional amount in controversy limit for county courts from $15,000 to $50,000. Not only does this change expand county court jurisdiction at the trial court level, it also means that circuit courts, rather than district courts of appeal, will have jurisdiction over appeals in cases up to $50,000. Currently, it almost never makes economic sense to appeal a county court decision because the amount in controversy is so low at $15,000. As such, Circuit Courts are rarely called upon to decide appeals.  However, if the amount in controversy limit is raised to $50,000, circuit courts will undoubtedly see many more appeals from county court decisions. As a result of the expanded appeals jurisdiction and appeal case load of the circuit courts, appeals practitioners will effectively have opinions from twenty active appeals circuits to reconcile when handling a county court appeal. Keep in mind that circuit court judges are less equipped to handle the expanded appeals case load as they already carry massive trial court case loads and do not have law clerks like appeals judges to perform the research and writing tasks required for appellate work.

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W Mason is an partner with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W is Board Certified in Construction Law by the Florida Bar Association. W focuses his practice on construction and commercial litigation throughout Florida. You can reach W at (561) 804-4432 or wmason@foxrothschild.com.

In my November and December posts, I discussed the basics regarding protection of your Florida Homestead from forced sale by creditors and some of the exceptions.

A recent decision from the Second District Court of Appeal of Florida provides a good reminder of another Florida Homestead pitfall.

The Florida Constitution, Article X, Section 4 provides as follows: “There shall be exempt from forced sale under process of any court, and no judgment, decree[,] or execution shall be a lien thereon, … property owned by a natural person.”  As such, the plain language of the Florida Constitution requires that the owner of the property be a natural person to claim the homestead exemption.

While there is case authority which provides that property held in a revocable living trust may qualify for homestead protection, property titled in the name of a corporation, a limited liability company, or a partnership doesn’t qualify.  This is because an individual must have an ownership interest in a residence that gives the individual the right to use and occupy it as his or her place of abode, to qualify for Florida’s homestead exemption.  Be careful how you title your home!


  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.

Perhaps the most significant change to the A201-2017 is the inclusion of a comprehensive insurance exhibit. Prior to the inclusion of the insurance exhibit in the 2017 update, parties to an AIA construction contract would often draft a separate insurance exhibit or rider that was reviewed and approved by their insurance agents. The new standard form insurance exhibit, which becomes Exhibit A to a comprehensive owner-contractor agreement, alleviates the need to create a separate exhibit from scratch.

The new insurance exhibit uses a “check-box” list of insurance requirements that the owner and contractor can use to allocate insurance requirements for the project. Because the insurance provisions are set forth in the standard exhibit, the parties can reduce their reliance on their insurance professionals to negotiate and approve the insurance requirements for a project. The insurance exhibit is used with the 201 and incorporated into any contract using the A101, A102, or A103. It is not incorporated into the simplified A104 or A105.

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W Mason is an partner with the law firm Fox Rothschild LLP. W practices in Fox Rothschild’s Litigation department in West Palm Beach, Florida. W is Board Certified in Construction Law by the Florida Bar Association. W focuses his practice on construction and commercial litigation throughout Florida. You can reach W at (561) 804-4432 or wmason@foxrothschild.com.

In the case of Mantiply v. Horne (In re Horne), 876 F.3d 1076 (11th Cir. 2017) the Eleventh Circuit decided an issue of first impression in the Circuit: Whether the Bankruptcy Code authorizes payment of attorneys’ fees and costs incurred by debtors in successfully pursuing an action for damages resulting from the violation of the automatic stay and in defending the damages award on appeal.

The stay violator argued on appeal that the debtors were not entitled to appellate fees as a matter of law under Section 362(k)(1) of the Bankruptcy Code because the statute only provides for mandatory fees for damages and attorneys’ fees incurred in ending a stay violation, not incurred in pursuing a damages award nor fees incurred in defending a damages award on appeal.

The Eleventh Circuit disagreed with the stay violator and held that Section 362(k)(1) of the Bankruptcy Code specifically departs from the American Rule and authorizes costs and attorneys’ fees incurred by the debtor in ending a willful violation of an automatic stay, prosecuting a damages violation, and defending those judgements on appeal.

Specifically, the Court reasoned that, unlike Section 330, Section 362(k) specifically and explicitly provides for the recovery of “costs and attorneys’ fees” in the measure of damages arising from a willful violation of the automatic stay, allowing for a departure from the American Rule.  Moreover, nothing in the text of Section 362(k)(1) limits the scope of attorneys’ fees to solely ending a stay violation.  Instead, Section 362(k)(1) speaks to full recovery of damages including fees and cost incurred from violating the stay.  The Court noted that this result makes sense in the context of bankruptcy litigation where the lion’s share of damages from violations of the automatic stay are attorneys’ fees and the debtors are least able to afford them.

The Takeaway?  While there are always exceptions to the rule, it is generally best to attempt to settle “willful” stay violations early on.  The damages in what may seem like a simple matter, escalate quickly.  If you choose to litigate and lose, you could be responsible for paying “actual damages, including costs and attorneys’ fees” to the debtor(s) for all the proceedings related to the stay violation dispute and, to add insult to injury, your own attorneys’ fees and costs.


 

  Heather L. Ries is an attorney with the Financial Restructuring and Bankruptcy Department of the law firm of Fox Rothschild LLP. Heather focuses her practice in matters related to bankruptcy, creditors’ rights, commercial workout and foreclosure disputes, and commercial litigation. You can contact Heather at 561-804-4419 or hries@foxrothschild.com.