Please see my update, over on Fox’s In the Weeds, regarding whether Florida cities and municipalities can exert local control over the location of medical marijuana dispensaries.

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Dori K. Stibolt is a partner with the law firm of Fox Rothschild LLP.  Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.

Please see my post, over on Fox’s In the Weeds, regarding litigation over the Florida Legislature’s failure to include or permit smoking of medical marijuana in the recently passed legislation implementing Amendment 2.

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Dori K. Stibolt is a partner with the law firm of Fox Rothschild LLP.  Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.

On June 27, a massive ransomware attack now known as “Petya” spread across the globe in a similar fashion to the WannaCry cyberattack in May. In our recent Privacy & Data Security alert, Fox Chief Privacy Officer and Partner Mark McCreary breaks down what we know about the attack, how to address it if your organization falls victim to it, and how to minimize the risks of future attacks:

Petya Cyberattack ScreenshotYesterday’s worldwide cyberattack once again exploited a vulnerability that has been known to experts for many months. These attacks are sure to continue and the best defense is knowledge. Awareness of how malware works and employee training to avoid the human error that may trigger an infection can prevent your organization from becoming a victim.

This latest ransomware variant, referred to as “Petya,” is similar in many respects to the “WannaCry” ransomware that affected hundreds of thousands of computers in mid-May, using the same Eternal Blue exploit to infect computers. The purpose of this Alert is to provide you some information believed or known at this time.

How Is a Computer Infected?

Experts believe the Petya malware is delivered in a Word document attached to an email. Once initiated by opening the Microsoft Word document, an unprotected computer becomes infected and the entire hard drive on that computer is encrypted by the program. This is notably different from WannaCry, which encrypted only files.

Once Petya is initiated, it begins seeking other unprotected computers in the same network to infect. It is not necessary to open the infected Microsoft Word document on each computer. An infection can occur by the malware spreading through a network environment.

To read Mark’s full discussion of the Petya attack, please visit the Fox Rothschild website.

Mark also notes that “I continue to stress to clients that in addition to hardening your IT resources, the absolute best thing your business can do is train employees how to detect and avoid malware and phishing.  In-person, annual privacy and security training is the best way to accomplish this.”

I previously blogged on the spoliation of evidence in Florida courts.  In federal cases, federal law governs the imposition of sanctions for spoliation of evidence.  Federal courts may consider state law in deciding whether to impose sanctions for spoliation, so long as it is consistent with federal law.

Close-up of a woman sending text messages on her mobile phone
Copyright: andreypopov / 123RF Stock Photo

In the Eleventh Circuit, the duty to preserve evidence arises when litigation is “pending or reasonably foreseeable.”  A party must preserve all relevant documents, including electronic communications like emails and text messages, once litigation is reasonably anticipated.

If a party fails to preserve evidence, a federal court may presume, or instruct the jury to presume, the information was unfavorable to the party.  This is known as an adverse inference instruction.

In the Eleventh Circuit, an adverse inference will be drawn “only when the absence of that evidence is predicated on bad faith.”  Federal courts will examine the circumstances surrounding the missing evidence to determine whether the party acted in bad faith.

To satisfy the bad faith requirement, the party must have acted with more than “mere negligence.”  The party does not necessarily have to act with malice for the absence of evidence to be predicated on bad faith, although malice is relevant to the degree of the party’s culpability.

Recently, the US District Court for the Southern District of Florida determined that a company’s failure to preserve the plaintiff’s employment application warranted an adverse inference instruction in an employment discrimination case.  However, the Court also recently found that a defendant’s failure to preserve text messages, despite a clear obligation to do so, was at worst negligent and did not warrant an adverse inference instruction.

Other sanctions that may be imposed due to a party’s spoliation of evidence include a dismissal of the action or entry of a default judgment.  As a result, once litigation is reasonably anticipated, even if not then pending, parties should take reasonable measures to preserve all relevant evidence, including text messages, to avoid an adverse inference sanction, or worse.

Section 363 of Title 11 of the United States Code (“Bankruptcy Code”) authorizes trustees (and Chapter 11 debtors-in-possession) to use, sell, or lease property of a debtor’s bankruptcy estate outside of the ordinary course of business upon bankruptcy court approval.  Some of the key benefits for purchasers are the ability to purchase assets free and clear of liens under Section 363(f) and obtain protections from adverse consequences of any appeal under Section 363(m).

Under 363(f), the trustee or debtor-in-possession may sell property of the debtor’s bankruptcy estate free and clear of all liens, claim and encumbrances as long as: (1) applicable non-bankruptcy law permits it; (2) the interested party consents; (3) such interest is a lien and the sale price of the property is greater than the value of all liens; (4) the interest of the interested party is in bona fide dispute; or (5) the interested party could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of its interest.

Once the Court finds that property of the Debtor’s estate can be sold to you pursuant to Section 363(f), you should ensure that the Order includes findings under Section 363(m) of the Bankruptcy Code that you purchased the property in “good faith”.  The practical implication of securing a 363(m) finding is that once you, as a the good faith purchaser, close on the sale (assuming the court does not grant a stay pending any appeal), the sale cannot be undone by reversal or modification of the sale order.  No one can “un-ring bell” (except in very rare situations…for instance, a bad faith involuntary case).

However, you cannot just assume that a 363(m) finding will occur.  Ensuring that you such a valuable finding requires some planning and work on your part.  If possible, you should take an active role in the trustee’s/debtor’s motion to approve the sale.  Remember, although the debtor or trustee generally makes a good faith presentation to the court, it is the purchaser’s burden to make sure the evidentiary burden has been met to establish good faith.

Some questions to consider:

Does the motion seek a good faith finding under Section 363(m) and at least an initial analysis of the factual basis for a good faith finding?

What are the relationships between the debtor and the proposed purchasers?

Is this an arms length transaction?

Is there any risk that potential bidders and/or the debtor could be accused of price controlling, anti-bid rigging, fraud or collusion during the auction process?

AND

Does the motion seek waiver of the 14 day stay of the sale order under Bankruptcy Rule 6004(h) – so that you can close immediately?  The ability to close sooner prevents delay and relieves that debtor/trustee from overhead and burden of securing the assets for 2 more weeks.

The bankruptcy sale process has its challenges, obstacles and traps for the unwary. However, with proper planning, it can yield optimal results for the seller, purchaser and creditors.


  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.

Please see my update, over on Fox’s In the Weeds, on the Florida Legislature’s success in passing a medical marijuana bill during the recent special session.  Now we wait on Governor Rick Scott to sign the bill, which he is expected to do.

Once Gov. Scott signs the bill into law, Florida Statute s. 381.986 (Compassionate use of low-THC and medical cannabis law) will be amended to state the following:

This section does not limit the ability of an employer to establish, continue, or enforce a drug-free workplace program or policy.  This section does not require an employer to accommodate the medical use of marijuana in any workplace or any employee working while under the influence of marijuana.  This section does not create a cause of action against an employer for wrongful discharge or discrimination. Marijuana, as defined in this section, is not reimbursable under chapter 440.

What that means is that employers will have some protections to maintain drug free workplaces and to discipline or terminate employees under the influence of medical marijuana.  But with all new laws, litigation establishing rights of employers and employees is likely.

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Dori K. Stibolt is a partner with the law firm of Fox Rothschild LLP.  Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.

Please see my update on Florida’s upcoming special session which might include medical marijuana over on Fox’s In the Weeds.

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Dori K. Stibolt is a partner with the law firm of Fox Rothschild LLP.  Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.

46059778 - letters flying into mail box

You have been served” – the famous phrase uttered by process servers everywhere, may never be heard by a bankruptcy defendant.

Why?

Well, Bankruptcy Rule 7004 bestows the rare privilege of nationwide service of process by FIRST CLASS U.S. MAIL of a Summons and Complaint on defendants (with a few exceptions).   In bankruptcy cases, a Summons and Complaint that comes in the mail is just as valid as if a process server knocked on your front door, handed you the lawsuit, looked you in the face and said, “you have been served.”

46795384 - shock.

Bankruptcy adversary proceedings move quickly, and generally an adversary defendant only has 30 days after the date of the issuance (not mailing, not receipt) of the Summons to respond to the Complaint.  A Scheduling Order often accompanies the Summons and Complaint and outlines all the substantive deadlines for discovery and trial leading up to the pretrial conference, which is generally within 90 days.

Accordingly, if you are served with a Summons in a bankruptcy case, notifying you that an adversary proceeding has been filed against you, best take it seriously and seek out legal advice from a qualified bankruptcy attorney as soon as possible!


  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 Florida, the economic loss rule previously prevented parties who allocated their risks and remedies in a contract from bringing a tort action.  For many years, the economic loss rule only applied in two circumstances:

  1. When the parties negotiated remedies in a contract, and
  2. In products liability cases, when the defective product damaged only itself and not persons or other property.

Although seemingly straightforward, the rule proved problematic, as courts had difficulty determining when the rule barred a tort action between contracting parties.  As a result, numerous exceptions were created, such as in cases involving professional malpractice and negligent misrepresentation.

Then, in 2013, the Florida Supreme Court amended the economic loss rule.  In Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc., the Court receded from prior case law and held that the economic loss rule only applied to products liability cases.  The Court recognized the confusion surrounding the rule, stating that “its application and parameters are somewhat ill-defined.”

The Court focused on the origin of the rule and explained that it was intended to prohibit a party from bringing a tort action to recover purely economic losses to a product because contract, rather than tort, principles were more appropriate to resolve economic loss without personal injury or property damage.  The Court believed there had been an

unprincipled extension of the rule.

Although the Court in prior decisions tried to return the economic loss rule to its original purpose, it felt it simply had not gone far enough and held:

Young man showing time out hand gesture, frustrated screaming to stop isolated on grey wall background. Too many things to do. Human emotions face expression reaction
Copyright: sifotography / 123RF Stock Photo

we now take this final step and hold that the economic loss rule applies only in the products liability context.

 

Many have interpreted the Court’s decision as an unsettling of Florida law, including Justice Canady in his dissenting opinion, who, along with critics of the decision, believe it undermined contract law while expanding tort law.  However, proponents of the decision believe it will have little impact on contract law.  As Justice Pariente stated in a concurring opinion:

“The majority’s conclusion that the economic loss rule is limited to the products liability context does not undermine Florida’s contract law or provide for an expansion in viable tort claims.  Basic common law principles already restrict the remedies available to parties who have specifically negotiated for those remedies, and, contrary to the assertions raised in dissent, our clarification of the economic loss rule’s applicability does nothing to alter these common law concepts.  For example, in order to bring a valid tort claim, a party still must demonstrate that all of the required elements for the cause of action are satisfied, including that the tort is independent of any breach of contract claim.

(emphasis added).

Since the Court’s decision in Tiara, both state and federal courts deciding cases under Florida law have cited to Justice Pariente’s concurrence and required parties to show that the alleged tort is independent of any breach of contract claim.  Courts will continue to dismiss tort actions if they are “basically a repackaged breach of contract claim.”

In practice, it appears that more and more plaintiffs will be able to survive the dismissal stage post-Tiara by pleading an independent tort in a complaint.  Although the economic loss rule no longer applies to actions between contracting parties, the independent tort doctrine is alive and well in Florida and should continue to act as a barrier to tort actions brought simply to circumvent contract remedies.  Thus, depending on the stage of litigation, parties should move for dismissal, summary judgment, and directed verdict based on the independent tort doctrine if it becomes apparent that the damages sought in tort are identical to the damages for breach of contract.

Please find another update on Florida medical marijuana over on Fox’s In the Weeds.

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Dori K. Stibolt is a partner with the law firm of Fox Rothschild LLP.  Dori defends and counsels management in labor and employment litigation matters pertaining to wage and overtime claims, discrimination, harassment, retaliation, leave/restraint, and whistle-blower claims.  You can contact Dori at 561-804-4417 or dstibolt@foxrothschild.com.