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Punitive damages may be awarded in civil actions as a form of punishment to deter others from engaging in conduct similar to the defendant.  Punitive damages are only available for certain claims, such as intentional torts, and only if the defendant is personally guilty of the misconduct.  Actions for tortious interference, conversion, and other business torts may give rise to an award of punitive damages.

 

Before a claim for punitive damages may be asserted, Section 768.72 of the Florida Statutes requires “a reasonable showing by evidence in the record or proffered by the claimant which would provide a reasonable basis for recovery of such damages.”  In other words, a defendant cannot be subject to a claim for punitive damages, and financial worth discovery, unless and until the trial court determines that there is a reasonable evidentiary basis to recover punitive damages. The plaintiff must seek leave to amend the complaint and proffer a reasonable evidentiary basis for punitive damages before the court.

The Fourth DCA recently confirmed that the Florida statute requires more than mere allegations and stated:

an evaluation of the evidentiary showing required by section 768.72 does not contemplate the trial court simply accepting the allegations in a complaint or motion to amend as true.

Instead, trial courts must determine whether the plaintiff established a reasonable evidentiary basis to recover punitive damages and to show that the misconduct rises to a level of culpability that supports punishment.  Without such a showing, a claim for punitive damages is precluded.

Defendants faced with claims for punitive damages should closely scrutinize whether the plaintiff has established the necessary evidentiary basis and be prepared to challenge any unsupported claims.

 

Contractual forum selection clauses may be “mandatory” or “permissive”.  However, there are times when a forum selection clause that appears to be permissive is actually mandatory.  Florida’s Third District Court of Appeal recently addressed such a situation in Quick Cash, LLC, v. Tradenet Enterprises Inc., 3rd DCA Case No. 3D16-1640 (Fla. 3d DCA Feb. 22, 2017).

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In Quick Cash, the Third DCA was asked to consider whether this clause required the parties to litigate in California:

This purchase order shall be deemed entered into and performed in the State of California and Buyer consents to the jurisdiction of the State of California for purposes of enforcement of the terms hereof.

The Court noted that there are no “magic words” that need to be used to make a forum selection clause mandatory, but stated that:

the test is whether, when read as a whole, the forum selection clause indicates that the parties intended to try a case in the specified forum and to the exclusion of all others.

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Finding that allowing the case to proceed in Florida would “render meaningless” the exclusivity language in the forum selection clause, the Court ruled that the trial court properly dismissed the case for lack of jurisdiction and improper venue.  So, while no specific language is required to make a forum selection clause mandatory, viewing such a clause in a way that makes “words of exclusivity” meaningless is not proper.

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Copyright: pockygallery / 123RF Stock Photo

In Florida, the duty to preserve evidence relevant to a case may arise long before a complaint is filed.  A party’s duty to preserve evidence is triggered once litigation is reasonably anticipated.  The duty extends to any evidence that a party:

  • knows, or
  • reasonably should know

is relevant to the anticipated action, including electronically stored information.

The failure to preserve relevant evidence, also known as the spoliation of evidence, may result in the imposition of sanctions and a rebuttable presumption shifting the burden of proof in the underlying action.  A court may exercise a “leveling mechanism” due to the spoliation of evidence if it finds that:

  • the evidence existed at one time;
  • the party had a duty to preserve the evidence; and
  • the evidence was critical to the opposing party’s ability to prove its prima facie case or defense.

Under Rule 1.380(e) of the Florida Rules of Civil Procedure, a party cannot be sanctioned for the failure to produce electronically stored information that was lost due to the “routine, good faith operation of an electronic information system.”  However, the Committee Notes to Rule 1.380 are clear that a party cannot avoid discovery obligations by allowing relevant evidence to be destroyed in the routine operation of an electronic information system.

To avoid becoming a spolier, companies and other large institutions that routinely destroy electronically stored information, such as emails, should consider implementing procedures to save and preserve relevant electronic information.

Can a foreclosure sale be held when interrelated counterclaims remain pending?  Florida’s Second District Court of Appeal recently addressed this issue in DeLong v. Paradise Lakes Condominium Association, Inc., 2nd DCA Case No. 2D16-547 (Fla. 2nd DCA Feb. 22, 2017).

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In DeLong, a condominium association was granted a summary final judgment of foreclosure.  However, the condominium Owner’s interrelated counterclaims had not been resolved.  Accordingly, the appellate court found that the Association’s summary final judgment was neither final, nor appealable.

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The Second DCA, treating the appeal as a proceeding for writ of certiorari, concluded that the trial court

departed from the essential requirements of law when it authorized the sale of the property prior to the rendition of an appealable final judgment … .

DeLong should serve as a reminder that a foreclosure sale may not proceed until a final appealable order has been entered and all interrelated claims have been resolved.

In late-2016, the Florida Supreme Court finally addressed the application of the statute of limitations in a re-filed mortgage foreclosure action.  In Bartram v. U.S. Bank, N.A., Fl. Sup. Ct. Case No. SC14-1265 (Fla. Nov. 3, 2016), the Court ruled that the statute of limitations does not bar a lender from filing a new foreclosure action after dismissal of a prior foreclosure action, as long as there was a default within the preceding five years.  Now, Florida’s appellate courts are being asked to further refine the scope of Bartram.

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In Desylvester v. The Bank of New York Mellon, Fla. 2nd DCA Case No. 2D15-5053 (Fla. 2nd DCA Feb. 22, 2017), the Second District answered the question of whether a re-filed foreclosure action that relied upon an initial payment default more than five years earlier was time-barred.  Applying Bartram, the Second DCA found that such a claim would not be barred because the allegation of default in the re-filed Complaint stated, not only the initial default date, but also a failure to make

all subsequent payments.

The lender was able to avoid the statute of limitations by alleging that the borrowers were in

a continuing state of default.

 

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The Court made a point of distinguishing Desylvester from Collazo v. HSBC Bank USA, N.A., 41 Fla. L. Weekly D2315 (Fla. 3d DCA Oct. 13, 2016). Unlike in Desylvester, the lender in Collazo, had tried its case “on the basis of a date of default that was outside of the five-year statute of limitations period.”  The continuing state of default at the time of the re-filed Complaint in Desylvester was the key distinction.

 

In Desylvester, the Second DCA has made clear that, when re-filing a mortgage foreclosure action based upon an initial default that is more than five years earlier, the lender must allege that the borrower continued to miss subsequent payments and remained in a continuing state of default up to the date that the new Complaint is filed.

Florida’s Second District Court of Appeal recently addressed an interesting question concerning whether Florida’s Consumer Collection Practices Act applies to an action seeking a deficiency decree. In the situation presented, the appellate court answered the question in the negative.

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In Dyck O’Neal, Inc. v. Kami Ward, Fla. 2d DCA Case No. 2D15-2989 (Fla. 2nd DCA Jan. 27, 2017), the 2nd DCA was presented with the issue of whether compliance with Fla. Stat. § 559.715, a provision of Florida’s Consumer Collection Practices Act (“FCCPA”) that requires written notice of assignment of a consumer debt at least 30 days before any action to collect that debt, is required in a deficiency action following a foreclosure judgment. Specifically, after a final judgment of foreclosure was entered against Ms. Ward and the property was sold at auction for $100, the judgment was assigned to Dyck O’Neal, Inc., which then filed a deficiency action against Ms. Ward. Ms. Ward defended by arguing that she had not received notice of the assignment at least 30 days before the deficiency action was filed. The trial court agreed and granted summary judgment in her favor.

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The appellate court reversed, finding that FCCPA (Fla. Stat. §§ 559.55 – 559.785) did not apply because a deficiency action is not an action to collect a consumer debt on a note, but rather an action to obtain a monetary judgment on a foreclosure judgment.

Because a deficiency action is not an action to collect consumer debt, section 559.715’s [notice] requirement … does not apply.

The Second District’s opinion provides guidance to lenders as to the applicability of FCCPA to deficiency actions and precludes the assertion of this defense in such cases.

 

A trial court may not rely on a legal opinion offered by a party’s expert witness.  Florida’s Third District recently reversed dismissal of a mortgage foreclosure action based on this rule in Citibank, N.A., v. Martin and Jitka Olsak, 3rd DCA Case No. 3D15-1032 (Nov. 30, 2016).

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In Olsak, the borrowers called as a witness at trial a mortgage foreclosure fraud investigator and securitization officer, who was not a lawyer.  He testified that, in his opinion the plaintiff, which was a trust, was not allowed to acquire a promissory note that had been endorsed in blank and that the endorsement on the Olsaks’ note violated certain IRS provisions.  Relying on this opinion, the trial court entered judgment for the borrowers, finding that the plaintiff trust had not acquired an interest in the note or mortgage and, thus, did not have standing to foreclose.

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The appellate court reversed because “even witnesses qualified as experts, generally are precluded from providing testimony in the form of legal conclusions.” It follows that opinion testimony about legal conclusions are inadmissible, so it is reversible error for a trial court to rely on expert opinions to decide questions or law.  Finding that the borrowers’ expert witness offered only legal opinions, not facts, and that the trial court based its rulings on that testimony, reversal was required.  It probably didn’t help that the appellate court found the expert’s testimony to be “often of dubious relevance” and of “questionable probative value.”

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Olsak is a good reminder that, regardless of whether or not expert opinions may be relevant, those opinions are not admissible if they are simply legal conclusions.

 

That look you get when you realize you just bought property at a foreclosure sale that is still subject to liens …

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Foreclosure plaintiffs should take note of the Fourth District Court of Appeal’s recent decision in James Ober v. Town of Lauderdale-By-The-Sea, 4th DCA Case No. 4D14-4597 (Fla. 4th DCA Aug. 24, 2016).  In that case, the Court held that the recording of a lis pendens can “discharge liens that exist or arise prior to the judgment of foreclosure,” but that liens that accrue between entry of the foreclosure judgment and the date of the foreclosure sale are not affected.

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In Ober, after a final judgment of foreclosure had been entered in a prior mortgage foreclosure action, but before the foreclosure sale had been conducted, a municipality recorded a series of liens on the subject real property.  After the property was sold at foreclosure sale, the purchaser sought to quiet title and the municipality sought to foreclose its liens.

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In analyzing the claims, the Fourth District Court of Appeal noted that the relevant statute, Fla. Stat. §48.23, does not provide an end date for a lis pendens.  After considering related statutory provisions and cases that discussed the continuing validity of a lis pendens in other contexts, the Court concluded that a lis pendens terminates “along with the action” or 30 days after the final judgment is entered (assuming an appeal is not timely filed).  Accordingly, the Court rejected the quiet title claim and allowed enforcement of the municipal liens that were recorded and based upon conduct that occurred after the date of the foreclosure judgment.  Foreclosure plaintiffs and those purchasing at foreclosure sales must remember to consider any liens that are recorded after foreclosure judgment has been entered.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

The United States Court of Appeals for the Ninth Circuit, in a recent unpublished opinion in Casault v. One West Bank, FSB, et al., U.S.C.A. 9th Cir. Case No. 14-55494 (Aug. 4, 2016), affirmed the dismissal of the borrowers’class action complaint against various banks, servicers and trustees.  The borrowers in Casault claimed that they relied upon offers to modify loans that were allegedly contained in advertisements, websites and mailings, as well as actions taken after they started the loan modification process, and attempted to assert claims for fraud and improper foreclosure under California law.

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The 9th Circuit found that the borrowers had failed to properly allege their claims.  First, the Court determined that it was not reasonable for the borrowers to rely on the loan modification offers, because those offers did not promise or guarantee a loan modification. Second, the Court found that the foreclosures were based upon the borrowers’ failure to pay, not due to reliance upon misrepresentations or omissions that were allegedly made after they started the loan modification process.  Finally, the appellate court outright rejected the borrowers’ argument that the loan servicer had taken over the loans because it had made advances while the loans were delinquent.

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Many recent appellate opinions throughout the country have made it more difficult for lenders to foreclose mortgages and have even awarded damages to borrowers.  The Casault opinion shows that there is, in fact, a limit to this trend.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.

Judge Lorna Schofield has agreed to stay a Fair Credit Reporting Act case until the U.S. Supreme Court issues its highly anticipated ruling in Robbins v. Spokeo, Inc. By entering a stay in Ernst v. Dish Network, LLC, S.D. N.Y. Case No. 12-Civ-8794 (LGS), the Southern District of New York joins several other courts that have agreed to put FCRA cases on hold.  Judge Schofield found that the Spokeo ruling would “likely clarify whether or not the named Plaintiffs and potential class members in [Dish Network] have Article III standing.”  The key issue in Spokeo is whether a mere violation of FCRA, without any alleged concrete harm, is sufficient to confer standing.  Judge Schofield found that the interests of the Court and the public are better served by staying Dish Network and that the potential prejudice in doing so would be minimal.

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The Southern District of New York joins U.S. District Courts from the District of New Jersey, the Northern and Eastern Districts of California, the Middle and Western Districts of Pennsylvania, and the Northern District of Ohio in deciding to take a “wait and see” approach in FCRA cases until the Supreme Court rules in Spokeo.  One notable exception is the Western District of Missouri, which denied a request for stay in Woods v. Caremark PHC, LLC, W.D. Mo. Case No. 4:15-cv-00535-SRB.  However, the Caremark court did base its decision on a case involving a Telephone Consumer Protection Act claim.

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Copyright: flippo / 123RF Stock Photo

The Southern District of Florida has not addressed this specific issue yet, but if Judge Marcia Cooke’s ruling in Boise v. ACE USA, Inc., S.D. Fla. Case No. 15-Civ-21264-Cooke/Torres, is any indication, it would appear that this Court would also be receptive to staying a FCRA case until a ruling is issued in Spokeo.  Judge Cooke, after considering the anticipated brevity of the delay, the lack of prejudice to the plaintiff, and the potentially wasted time, expense and resources, stayed Boise, which involved claims under TCPA, based upon the fact that Spokeo may be dispositive of whether the plaintiff in that case has Article III standing.

The willingness of so many courts to stay FCRA (and even some TCPA) cases is just another indication of the broad impact that the Spokeo ruling is likely to have.


David Greene is a commercial litigation partner in Fox Rothschild’s West Palm Beach office.  His practice focuses primarily on banking litigation, real estate litigation, title insurance litigation, and construction litigation. You can reach David at 561-804-4441 or dgreene@foxrothschild.com.