Wednesday, September 18, 2013

Discovering and Presenting Evidence of Overbilling in Negligence Cases

Where a Plaintiff sues for personal injuries under a theory of negligence, Florida law provides that the Plaintiff may recover for economic damages including, but not limited to, the past medical expenses incurred as a result of the subject accident. Liability for a medical expense usually arises because of a contract implied in fact - services are rendered with the expectation that the patient will pay a reasonable amount in return.  Nursing Care Services, Inc. v. Dobos, 380 So.2d 516, 518 (Fla. 4th DCA 1980). “The patient's obligation is not to pay whatever the provider demands, but only a reasonable amount.” Columbia Hosp. (Palm Beaches) Ltd. P’ship v. Hasson, 33 So. 3d 148, 150 (Fla. 4th DCA 2010) (citation omitted). “The patient is not legally bound by the provider's estimate; the patient may contest reasonableness by counteroffering to pay a lower amount.” A.I. v. State, 677 So.2d 935, 937 (Fla. 4th DCA 1996). Florida Courts have recognized that medical bills are not “binding” as such, because “[f]ees are not typically discussed at the time of treatment.” Id.

          In the context of a personal injury action, Florida Courts have recognized that a Defendant is only liable for the “reasonable value or expense” of the treatment rendered to the Plaintiff. FL. STANDARD JURY INSTRUCTIONS IN CIVIL CASES § 501.2(b).[1] Thus, while the Plaintiff’s required prima facie showing as to “reasonable value” is quite limited,[2] numerous Florida Courts have recognized that the Defendant has a right to contest the reasonableness of the Plaintiff’s past medical bills. See e.g., State Farm Mut. Auto. Ins. Co. v. Bowling, 81 So. 3d 538 (Fla. 2d DCA 2012) (Holding that court erred in excluding defendant’s billing and coding expert who presented testimony that the Plaintiff’s “medical providers fabricated or exaggerated the medical care necessary” for the Plaintiff’s alleged injuries, and that the Plaintiff’s medical bills “did not correlate to the treatment in the [plaintiff’s] medical records.”); Katzman v. Rediron Fabrication, Inc., 76 So. 3d 1060 (Fla. 4th DCA 2011) (Holding that defendant was entitled to discover and present evidence as to whether the LOP physician “has recommended an allegedly unnecessary and costly procedure with greater frequency in litigation cases,” and whether the LOP physician “overcharged for the medical services at issue in the lawsuit,” as same is relevant to the “reasonableness of the cost and necessity of the procedure.”); Columbia Hosp. (Palm Beaches) Ltd. P’ship v. Hasson, 33 So. 3d 148 (Fla. 4th DCA 2010) (Holding that defendant was entitled to discover and present evidence of hospital’s “differences in billing for litigation patients versus non-litigation patients,” as same was relevant “to dispute, as unreasonable, the amount of medical expenses that the plaintiff will seek to recover[.]”); Gulfcoast Surgery Ctr., Inc., v. Fisher, 107 So. 3d 493 (Fla. 2d DCA 2013) (Holding that “internal cost structure information” is “relevant and critical to establishing defendant’s claim of unreasonableness of charges.”); see, Also Crable v. State Farm Mut. Auto Ins. Co., 2012 U.S. Dist. LEXIS 23505, Case No. 5:10-cv-402-Oc-37TBS (M.D. Fla. 2012) (expressly recognizing affirmative defenses of “Treatment/Expense Not Medically Reasonable, Necessary and Related,” “Overbilling,” and “[M]edical records … do not sufficiently support the billing of the CPT codes submitted[.]” as valid in a personal injury action.”) 

          A cursory overview of the aforementioned controlling case law reveals that a Defendant in a personal injury action is entitled to present substantive evidence that the Plaintiff’s medical bills are not reasonable. Indeed, the Defendant may present expert testimony relating to the CPT codes employed by the Plaintiff’s medical providers, and further, may discover and present evidence that the Plaintiff’s medical providers billed and/or treated litigation patients differently than non-litigation patients. As previously noted, medical fees are generally not discussed at the time of treatment, and patients are only obligated to pay a reasonable amount for same. Precluding a Defendant, who will ultimately be held responsible for said medical bills, from contesting the reasonableness of these bills, “has the effect of providing an unnecessary windfall” to either the Plaintiff or the Plaintiff’s medical providers. Thyssenkrupp Elevator Corp. v. Lasky, 868 So. 2d 547 (Fla. 4th DCA 2003).

          In the context of personal injury litigation, where the Plaintiff is treated under a Letter of Protection, the incongruity between the amount charged and the reasonable amount is only exacerbated further. The Plaintiff has no reason to consider the amount billed, as any payment will be taken from the recovery; the provider has every incentive to overbill, as there is no patient (or insurance company) to contest the reasonableness of the charges. Florida Courts have recognized this problem, and have begun addressing same head on. Thus, in Columbia Hosp. (Palm Beaches) Ltd. P’ship v. Hasson, 33 So. 3d 148 (Fla. 4th DCA 2010), the Fourth District held that information relating to a Third Party Hospital’s cost structure was clearly relevant in a personal injury case: “what a health care provider accepts as payment from private non-litigation payors is relevant for a jury to determine what amount is a reasonable charge for the procedure.” Id. at 149. In footnote 3 of its opinion, the Court poignantly observed the following:

As Defendants assert, a hospital’s cost to provide a service no longer bears much relationship to what it charges, but reimbursement rates from third party payors give hospital an incentive to set their usual charges at an artificially high amount, from which discounts are negotiated; cost-shifting results in discriminatorily high charges to uninsured patients, in that every patient is billed at full charges, but only the uninsured are expected to pay those amounts; as a result, actual charges are not instructive on what is reasonable; instead, Defendants argue, a realistic amount is what hospitals are willing to accept.

          As the aforementioned information is relevant to legitimate affirmative defenses (and, indeed, critical to a fair adjudication of the value of the services rendered to the Plaintiff), absent a privilege, these materials are discoverable. Fla. R. Civ. P. 1.280 provides, in relevant part:

(b) Scope of Discovery. Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows:
(1) In General. Parties may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter of the pending action, whether it relates to the claim or defense of the party seeking discovery or the claim or defense of any other party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. It is not ground for objection that the information sought will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.

[1] Specifically, § 501.2(b) provides that a personal injury Plaintiff may recover:

The reasonable [value] [or] [expense] of [hospitalization and] medical [and nursing] care and treatment necessarily or reasonably obtained by (claimant) in the past [or to be so obtained in the future].

[2] See e.g., Garrett v. Morris Kirschman & Co., 336 So. 2d 566 (Fla. 1976) (Holding that lay testimony by the Plaintiff that medical bills were incurred was sufficient evidence to support a jury award).

Friday, May 17, 2013

Dismissal for Fraud Upon the Court Under Federal Law

I have noticed that my piece regarding the standards governing Dismissal for Fraud Upon the Court, in the context of Florida State Court, has been receiving quite a bit of traffic. We are talking dozens and dozens of people per week. Seriously high volume stuff. 

Of course, I am generally surprised when anyone is interested in reading about the law, so I have to assume that most of the folks reading that article are attorneys looking to short circuit a research project. As such, if you happen to have a case in federal court (perhaps via removal for diversity), it might make sense to take note of the distinct standards which apply in that context. Before I lay out some of the governing doctrine, if you want a brief takeaway, it is this: Federal Courts require a substantially heightened showing to warrant dismissal for fraud. 

In Florida state court, dismissal is warranted where it can be demonstrated, by clear and convincing evidence, that a party deliberately engaged in a deception which went to the heart of their claim. This deception can include affirmatively lying under oath, or omitting material information. Thus, failure to disclose prior similar injuries can warrant dismissal of a personal injury case for fraud upon the Court. 

In contrast, Federal Court requires a showing that goes above and beyond “mere perjury.” Federal Courts generally hold that even where a party has demonstrably lied, this is simply evidence to be used in their impeachment. Dismissal for Fraud is warranted where there is long pattern of this type of misconduct, and further, where there has been some type of fabricated evidence beyond mere testimony. Thus, for example, suing upon a forged contract may warrant dismissal. Lying about how much money you were owed (via an oral promise) likely would not. As such, I present the following case law. Note that most of the cases cited are 11th Circuit, and SD-Fla, as my practice is generally centered in Florida.

Courts possess inherent authority to control and regulate the proceedings before them, including  the authority to sanction litigants for abusive practices. Vargas v. Peltz, 901 F. Supp 1572, 1579 (S.D. Fla. 1995); See also Martin v. Automobili Lamborghini Exclusive, Inc., 307 F.3d 1332, 1335 (11th Cir. 2002). Where a party acts in bad faith and continually and flagrantly abuses the judicial process, a Court may use its inherent power to impose severe sanctions, including dismissal with prejudice. See Martin, 307 F.3d at 1335-1336. Federal Courts are additionally empowered to dismiss an action for failing to comply with the Federal Rules of Civil Procedure and Court orders, pursuant to F.R.C.P. § 41(b). Goforth v. Owens, 766 F.2d 1533, 1535 (11th Cir. 1985). Federal Rule of Civil Procedure 41(b) provides:
For failure of the plaintiff to prosecute or comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against the defendant. Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision ... operates as an adjudication upon the merits.

Thus, a Court’s power to dismiss an action with prejudice for Fraud Upon the Court is derived (1) from its inherent authority to regulate the proceeding before it, and (2) from F.R.C.P. § 41(b). Zocaras v. Castro, 465 F.3d 479, 483 (11th Cir. 2006); Idearc Media Corp. v. Kimsey & Associates, P.A., 2009 WL 928556, *3 (M.D. Fla.).

A party commits Fraud Upon the Court where clear and convincing evidence demonstrates that:

a party has sentiently set in motion some unconscionable scheme calculated to interfere with the judicial system’s ability impartially to adjudicate a matter by improperly influencing the trier or unfairly hampering the presentation of the opposing party’s claim or defense.

Vargas, 901 F. Supp. at 1579.

While a finding of Fraud Upon the Court is necessarily fact-intensive, and District Courts are afforded considerable discretion in these matters, such a finding should be reserved for “only the most egregious misconduct, such as bribery of a judge or members of the jury, or the fabrication of
evidence by a party.” Patterson v. Lew, 265 Fed. Appx. 767, 768 (11th Cir. 2008) (quoting Rozier v. Ford Motor Co., 573 F.2d 1332, 1338 (5th Cir. 1978)). Dismissal of a case with prejudice under F.R.C.P. § 41(b) is an extreme sanction, applicable only as a “last resort,” and requires a finding that lesser sanctions will not suffice. Goforth, 766 F.2d at 1535 (citations omitted).

Given the extreme nature of dismissal as a sanction, Courts in the 11th Circuit hold that Fraud Upon the Court does not generally encompass fraud between the parties, nondisclosure of material evidence, or perjury. Patterson, 265 Fed. Appx. at 769; (citing S.E.C. v. ESM Group, Inc., 835 F.2d 270 (11th Cir. 1988)). Courts in the 11th Circuit have repeatedly held that lying under oath, in the absence of additional bad conduct by a party, does not constitute Fraud Upon the Court. See e.g., Securities & Exchange Commission v. E.S.M. Group, Inc., 835 F.2d 270, 273-274 (11th Cir. 1988) (“this Court has held that perjury does not constitute fraud upon the court ... [because] [t]his is the type of fraud which litigants should discover; it does not prevent a party from gaining access to an impartial system of justice.”) (internal citations and quotations omitted); Bryant v. Troutman, 2006 WL 1640484 (M.D. Fla.) (finding that “lying under oath, giving misleading answers under oath, thwarting Defendants’ discovery, and concealing the existence and/or extent of both prior and subsequent injuries” in personal injury action did not constitute Fraud Upon the Court); Dewdney v. Eckerd Corp., 2008 WL 2370155 (M.D. Fla.) (finding that numerous “significant inconsistencies” in Plaintiff’s sworn testimony were not so significant as to warrant an involuntary dismissal with prejudice); McCarthy v. American Airlines, Inc., 2008 WL 2517129 (S.D. Fla.) (finding that Plaintiff’s failure to disclose prior injuries and the names of all prior treating physicians in personal injury action did not warrant the “extreme sanction of dismissal”); But see Televideo Systems, Inc. v. Heidenthal, 826 F.2d 915 (9th Cir. 1987) (finding that Defendant’s admitted pervasive pattern of perjury was orchestrated to reap a tactical advantage, and constituted Fraud Upon the Court.)

While perjury alone is generally insufficient to warrant dismissal for Fraud Upon the Court, it is well established that dismissal is appropriate where a party fabricates evidence purporting to substantiate its claims. Vargas, 901 F. Supp at 1579. In Vargas, the Plaintiff produced a pair of panties during a deposition as evidence of sexual harassment, claiming that while she worked for the Defendant he had given her the panties and asked her to pose in them. Id. at 1574. The Defendant submitted affidavits from the manufacturer of the panties which conclusively showed that the subject panties were not actuallymanufactured or sold until well after the Plaintiff had been employed by the Defendant. Id. at 1574-75. The Court found that “Plaintiff’s intentional misconduct in presenting false evidence in support of her claims,” constituted a Fraud Upon the Court, compelling dismissal of the case. Id. at 1579. In McDowell v. Seaboard Farms of Athens, Inc., 1996 WL 684140 (M.D. Fla.), the Court found that Plaintiff had fabricated a diary and submitted it as evidence to bolster his racial discrimination claim against his employer. Id. at 8. Citing Vargas, the Court found that the Plaintiff had committed a Fraud Upon the Court, noting that “when a party fabricates evidence purporting to substantiate its claims, federal case law is well established that dismissal is appropriate.” Id. at *2. While the Plaintiffs in Vargas and McDowell both clearly engaged in perjury, both Courts expressly stated that the submission of fabricated evidence compelled dismissal of the action for Fraud upon the Court. Thus, fabricated evidence was the key distinguishing fact that caused the Plaintiffs’ misconduct to rise to the level of Fraud Upon the Court.

The McDowell and Vargas Courts both approvingly cited Aoude v. Mobil Oil Corp., 892 F. 2d 1115 (9th Cir. 1989), as support for the proposition that dismissal for Fraud Upon the Court is proper where a party fabricates evidence. In Aoude, the Plaintiff’s submission of a forged franchise purchase agreement with an inflated purchase price constituted Fraud Upon the Court, justifying the dismissal of Plaintiff’s complaint with prejudice. Id. at 1118. McDowell and Vargas additionally cited Pope v. Federal Express Corp., 138 F.R.D. 675 (W.D. Mo. 1990), aff’d in relevant part, 974 F.2d 982 (8th Cir. 1992). In Pope, the Plaintiff’s production of a fabricated love note as evidence in support of her sexual harassment claim constituted Fraud Upon the Court and justified dismissal of Plaintiff’scomplaint with prejudice. Id. at 682-83.

While dismissal for Fraud Upon the Court most commonly results from fabricated evidence, 11th Circuit Courts have also found Fraud Upon the Court where a party wrongfully conceals the identity of the real party in interest in the case. In Zocaras v.Castro, the 11th Circuit upheld a dismissal for Fraud Upon the Court where the Plaintiff had filed suit under a false name and “proceed[ed] with that deception right up to trial.” Zocaras, 465 F.3d at 485. In Martin v. Automobili Lamborghini Exclusive, Inc., the 11th Circuit upheld a dismissal for Fraud Upon the Court where the Plaintiffs had engaged in substantial misconduct which included:

1) misleading the court about the real party in interest in the case;
2) engaging in extensive discovery abuse to obstruct revelation of the known falsities in the Complaint;
3) using letters threatening class-action litigation to extort settlement
offers from [Defendants] without any intention of filing a case, and;
4) filing with the court many documents where the signatures of lawyers were forged by [a plaintiff].
Martin, 307 F.3d at 1336 n. 2.

The foregoing case law clearly establishes that in order to dismiss an action for Fraud Upon the Court, there must be egregious misconduct that deliberately interferes with the judicial system’s ability to impartial adjudicate the matter, or hampers the opposing party’s claim or defense. Vargas, 901 F. Supp. at 1579. While fabricating evidence and misleading Courts about the party in interest may constitute Fraud Upon the Court, perjury and non-disclosure of material evidence generally does not. Indeed, where discovery reveals evidence that a party has committed perjury, the opposing party’s defense is not hampered in any way, as they “have ample opportunity to bring those untruths to light at trial.” Bryant, 2006 WL 1640484 at *2.

Thursday, May 9, 2013

Misuse of Motions to Strike Affirmative Defenses: "I do not think it means what you think it means."

In the past several months, I have handled cases in a couple of distinct areas of law, where Plaintiffs’ counsel have filed motions "to strike" the Defendant's Affirmative Defenses. This happens near the very beginning of the litigation, shortly after the Defendant has filed its Answer. While the substance of these motions isn’t entirely uniform, the basic thrust of the argument is that the Defendant has asserted “mere legal conclusions,” and that the Affirmative Defenses as pled don’t contain sufficient factual support. Plaintiffs' counsel contend that the Defendant should have to plead specific facts in its Answer/Affirmative defenses, instead of simply asserting the legal basis for the affirmative defense. 
I am sure that this practice has been going on for a long time, because it seems to be rather widespread. And, call me cynical, but it appears to happen much more frequently (though not always) in cases where the Plaintiff is entitled to prevailing party attorney’s fees. Even when the judge grants the Plaintiff's Motion, the most likely result is that the Defendant has to amend its answer to plead its affirmative defenses with greater specificity (i.e., to change the form of the pleading, rather than the substance of the defense). Simply put, it’s a huge waste of time and money.
While it certainly bothers me to see these motions being used as a bill-churning vehicle, what bothers me more is that these motions have no actual basis in law. The Florida Rules of Civil Procedure are clear on this point, and actual Florida case law is as well. And, stepping back for a moment, let's think about the purpose of such a motion. Why would you be required to plead all of the facts substantiating your defenses at the very beginning of litigation? Isn’t the whole point of discovery to gather the facts you need to substantiate your claims? And, if at the close of discovery, you haven’t pulled together those facts, isn’t the proper vehicle for dispensing with unsupported claims a Motion for Summary Judgment?  
To answer my own questions: I don’t know, yes, and yes. 
Nevertheless, these Motions are filed and granted with great frequency. Most of the time, Plaintiffs' counsel misleadingly cite either (1) cases that discuss the sufficiency of affirmative defenses in the context of summary judgment; or (2) cases that address the pleading requirements when a party asserts an affirmative defense of fraud. See, e.g., Cady v. Chev Chase Sav. And Loan, Inc., 528 So. 2d 136 (Fla. 4th DCA 1988) (an opinion arising from a summary judgment order relating to a foreclosure, which primarily addresses allegations of fraud); Bliss v. Carmona, 418 So. 2d 1017 (Fla. 3d DCA 1982) (an opinion arising from a post-trial final judgment order relating to a foreclosure, which primarily addresses the sufficiency of the appellant’s response); Ridley v. Safety Kleen Corp., 693 So. 2d 934 (Fla. 1996) (an opinion arising from a challenge to a jury verdict on the grounds that the court’s jury instructions relating to the seatbelt defense were improper); Jacobs v Westgate, 766 So. 2d 1175 (Fla. 3d DCA 2000) (an opinion arising from an order granting a directed verdict in a landlord tenant dispute); Langford v. McCormick, 552 So. 2d 964 (Fla. 1st DCA 1989) (an opinion arising from a post-trial final judgment order relating to a probate dispute, which does not address the standards for properly pleading an affirmative defense); Nash v. Wells Fargo Guard Services, Inc., 678 So. 2d 1262 (Fla. 1996) (an opinion arising from an order on a motion for new trial, which sets out standards for naming a Fabre Defendant).
While all of the aforementioned opinions have little pieces of language that can be misleadingly quoted and then strung together into a motion that someone might fall for if they weren't paying attention, the common thread that ties them all together is that they consider the sufficiency of Affirmative Defenses after the close of discovery. And, naturally, after discovery has concluded, the Court would be in the proper position to determine whether the Defendant has uncovered evidence and facts which are sufficient to support the Affirmative Defenses as pled. But, it makes no sense to apply this same test at the beginning of discovery, because it presumes that the Defendant already knows everything there is to know. 
            Next, let’s take a look at the language of the operative rule. Florida Rule of Civil Procedure § 1.140(f) provides that:
“[a] party may move to strike or the court may strike redundant, immaterial, impertinent, or scandalous matter from any pleading at any time.”
Based on the actual language of this rule, a Motion to Strike would only be proper if I asserted the same Affirmative Defense ten times (redundant), if I asserted an Affirmative Defense of Accord and Satisfaction in a Wrongful Death case (immaterial), or if one of my Affirmative Defenses was that the Plaintiff was an alcoholic communist (impertinent, scandalous). I don’t see any language directing the Court to strike allegations which have not yet been factually substantiated. 
            I see that language in this rule: 
            (c) [..] The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, admissions, affidavits, and other materials as would be admissible in evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
            And while it appears that numerous Trial Courts aren’t inclined to adhere to the actual Rules of Civil Procedure (perhaps because Defense Counsel aren’t actually arguing the law), it turns out that multiple Florida Appellate Courts agree that the rules says what they actually say. Thus, these Courts have held that in the context of a motion to strike (i.e., prior to the close of discovery), the proper inquiry is only whether the affirmative defense is “legally sufficient on its face.” Citizens & S. Realty Investors v. Lastition, 332 So. 2d 357, 358 (Fla. 4th DCA 1976). Indeed, at the beginning of discovery, when a party asserts its Affirmative Defenses, the purpose of same is to establish what the Defendant seeks to prove, thereby putting the opposing party on notice. Thus, in Zito v. Washington Federal Sav. & Loan Asso., 318 So. 2d 175 (Fla. 3d DCA 1975), the Third DCA noted:
As in plaintiff’s statement of claim, the requirement of certainty will be insisted upon in the pleading of a defense; and the certainty required is that the pleader must set forth the facts in such a manner as to reasonably inform his adversary of what is proposed to be proved in order to provide the latter with a fair opportunity to meet it and prepare his evidence.
            Further, lest you be concerned that this reading of the rule is only supported by stale law from the 1970s, in Gonzalez v. NAFH Nat'l Bank, 93 So. 3d 1054 (Fla. 3d DCA 2012), the Third DCA reaffirmed the Court’s general prohibition on torturing the English language as follows:

Florida Rule of Civil Procedure 1.140(f) provides that "[a] party may move to strike or the court may strike redundant, immaterial, impertinent, or scandalous matter from any pleading at any time." "A motion to strike a defense tests only the legal sufficiency of the defense." Burns v. Equilease Corp., 357 So. 2d 786, 787 (Fla. 3d DCA 1978). "Where . . . a defense is legally sufficient on its face and presents a bona fide issue of fact, it is improper to grant a motion to strike." Hulley v. Cape Kennedy Leasing Corp., 376 So. 2d 884, 885 (Fla. 5th DCA 1979) (citations omitted); Citizens & S. Realty Investors v. Lastition, 332 So. 2d 357, 358 (Fl. 4th DCA 1976) (reversing an order striking an affirmative defense where "[t]he defense was legally sufficient upon its face and, as reflected, there were evident, bona fide and critical issues of fact . . . created"); Pentecostal Holiness Church, Inc. v. Mauney, 270 So. 2d 762, 769 (Fla. 4th DCA 1972) (finding that a Rule 1.140(f) motion to strike "should only be granted if material is wholly irrelevant, can have no bearing on the equities and no influence on the decision"). An affirmative defense may not be stricken "merely because it appears to a judge that the defendant may be unable to produce evidence at trial to sustain such a defense." Bay Colony Office Bldg. Joint Venture v. Wachovia Mortgage Co., 342 So. 2d 1005, 1006 (Fla. 4th DCA 1977).
            As you can see, at this point, the Motion to Strike is somewhat akin to a Motion to Dismiss. Its purpose, generally, is to test the legal sufficiency of the allegations in the opposing party’s pleading. Its purpose is certainly not to dispatch with legally cognizable defenses that have not yet been proven. Because parties are allowed to conduct discovery before the factual sufficiency of their claims are tested, because that is the whole point of discovery. 
            Now, all that being said, you could probably argue that there is some kind of “common law” Motion to Strike, which exists separate and apart from the actual Florida Rule of Civil Procedure 1.140(f). This is akin to the distinction between a common law Motion for Reconsideration (which can be filed at any time, and can be directed to any non-final order) and a “Motion for Rehearing” which is provided for in Florida Rule 1.530, applies only post verdict, and has a 10 day time limitation. Indeed, it seems that lawyers love to use the word “strike,” almost as much as the word “pursuant.” Strike that. What I meant to say was that if Plaintiffs’ counsel is relying upon some vacuous common law procedural tool, which makes no sense, generally has no real impact on a case and directly conflicts with actual codified rules of civil procedure, they should probably be called on it. Because it’s a damn waste of time and money. Because judge’s salaries are paid by taxpayers. Because inflated attorney’s fee awards in Home Insurance/FLSA/Foreclosure/Condo Association/PIP claims wind up coming out of someone’s pocket, whether it’s all of us (in the forms of higher insurance rates, taxes, etc.), or just one unlucky sap who gets screwed out of an extra $3,000.00+ of home equity, because some greedy Association Law Firm wanted to churn the bill by filing a 16 page form Motion to Strike Affirmative Defenses.
            So the next question is, as a litigant, how do you protect your client from having to incur the time and expense required in defending such a frivolous motion? 
            Well, I would recommend that when you file an Answer and Affirmative Defenses, you (1) assert only meritorious defenses (i.e., limit the number you initially file); and (2) assert whatever general facts  that would support your defense. With respect to (1), you can always move to amend your answer if you discover some new and exciting defense during the course of litigation (I am still searching for “duress”). With respect to (2), while pleading specific facts really isn’t really required (see law, Infra), it will make the Plaintiff’s position on any Motion to Strike far more frivolous.
            Then, when the Plaintiff files their bill-churning Motion to Strike Affirmative Defenses, respond with a 57.105 letter and attached motion for sanctions. And if the Plaintiff doesn’t withdraw their Motion to Strike during the 21 day safe harbor, and insists that you appear for a hearing their Motion to Strike, file your Motion for Sanctions, document your time, show up, and demand attorney’s fees. Since the motion itself is patently frivolous, the Plaintiff’s attorneys will be partly on the hook as well (if you’re worried about a judgment proof Plaintiff).
            By the way, when you’re arguing your Motion for Sanctions, remember that what you’re doing is good for the legal profession, and that it’s the right thing to do. While Defense lawyers aren’t usually paid the big bucks to make arguments with such moral clarity, this is one of those rare instances when you can have your cake and eat it too. Good luck!
            PS – for those of you who can’t “figure it out,” I’ll go ahead and post a primer on filing Motions for Sanctions pursuant to Fla. Stat. § 57.105 at some point in the future. There also happen to be several thorough and informative articles on this subject (in the Florida Bar Journal, for example).

Tuesday, May 7, 2013

Duty, Economic Expectations, and the Impact Rule: What Damages are Recoverable under a theory of Negligence?

This post briefly addresses the scope of Florida's "Impact Rule" in the context of claims of Negligence, and considers how the reasoning underlying the Florida Supreme Court’s impact rule jurisprudence also limits the scope of the common law “duty” owed by a Defendant in the context of a claim of Negligence.

The aforementioned statement may seem to be both dry, and rather vague, so allow me to elaborate a bit. As you may know, the Florida Supreme Court recently abolished the application of the Economic Loss Rule outside the context of products liability causes of action. Tiara Condo. Ass'n v. Marsh & McLennan Cos., 38 Fla. L. Weekly S 151 (Fla. 2013). Previously, the application of this rule served to bar claims for Negligence where the parties were in contractual privity with one another. The general reasoning behind the application of the rule in this context was that parties should not be allowed to sue in tort for disappointed economic expectations, where those disappointed expectations arose from a contract which they had freely bargained for. In such cases, their proper remedy would be to sue for a breach of contract. If their disappointed expectations could not be properly remedied in under a theory of breach of contract, it followed that they should not be allowed to go above and beyond the bargain between the parties and sue under a theory of negligence. To allow such a suit, it was said would cause “contract law to drown in a sea of tort.”

          Unfortunately, the application of this rule was deeply inconsistent, with numerous exceptions being carved out. For example, a party could sue for “independent torts” such as Fraud in the Inducement. Indeed, the contractual privity economic loss rule made almost no sense at all, and the precedent was nearly incomprehensible. As such, the Florida Supreme Court decided to put it out of its misery.

          Now that these alternative iterations of the Economic Loss Rule have been abolished, the question that necessarily follows is whether there will be any limitations on causes of action for disappointed economic expectations sounding in negligence. The answer, it seems, is that these limitations will be found in the scope of the common law duty which parties will be held to. As noted, a number of Florida Supreme Court cases relating to the impact rule can shed some light on these limitations. Accordingly, what follows is an analysis of the common law duty of care, which makes reference to Florida Cases addressing the impact rule. 

In order to support a claim of negligence, a Plaintiff must allege four elements: a duty, breach of that duty, causation, and damages. See, Curd v. Mosaic Fertilizer, L.L.C., 39 So. 2d 1216, 1227 (Fla. 2010) (quoting Clay Elec. Coop., Inc. v. Johnson, 873 So. 2d 1182, 1185 (Fla. 2003)). “[E]stablishing the existence of a duty under [Florida’s] negligence law is a minimum threshold legal requirement that opens the courthouse doors ..., and is ultimately a question of law for the court rather than a jury.” Williams v. Davis, 974 So. 2d 1052, 1057 n. 2 (Fla. 2007) (citing McCain v. Florida Power Corp., 593 So. 2d 500, 502 (Fla. 1992)).

          When determining whether or not a Defendant is subject to a duty in a particular case, the Court must ask whether the Defendant’s conduct creates “a generalized and foreseeable risk of harming others.” McCain, 592 So. 2d at 503. Put more succinctly, the Court must ask whether the Defendant’s conduct created a “foreseeable zone of risk.” Id. (quoting Kaisner v. Kolb, 542 So. 2d 732, 735 (Fla. 1989)). Accordingly, in keeping their premises in a reasonably safe condition, “[a]n owner or occupier of a place of business is not an insurer of his customers' safety; rather, he owes his customers only a duty to protect against those risks which are reasonably foreseeable.” La Villarena, Inc. v. Acosta, 597 So. 2d 336, 338 (Fla. 3d DCA 1992) (quoting Westchester Exxon v. Valdes, 524 So. 2d 452, 455 (Fla. 3d DCA 1988)); see, also Miranda v. Home Depot, Inc., 604 So. 2d 1237 (Fla. 3d DCA 1992). Where the Plaintiff’s injury is a result of an “unusual occurrence,” and it is “neither probable nor foreseeable that someone would injure themselves in this manner,” the Defendant is under no duty to guard against the injury which occurred. Miranda, 604 So. 2d at 1238-1239.

          Moreover, with respect to negligence, the common law does not impose a general duty to protect against intangible, speculative, or economic harms. Rather, the “general standards of care traditionally created by negligence law are standards designed to protect person and property from physical injury.” Monroe v. Sarasota Cnty. Sch. Bd., 746 So. 2d 530, 534 (Fla. 2d DCA 1999) (citing Sarandac Ass’n v. W.R. Frizzell Architects, Inc., 609 So. 2d 1349, 1352-55 (Fla. 2d DCA 1992).

“Where the plaintiff seeks only the recovery of an economic loss, the duty element of negligence serves as an important barrier to the over-extension of liability.” Virgiliov v. Ryland Group, Inc., 680 F. 3d 1329, 1339 (11th Cir. 2012) (citing Indem. Ins. Co. of N.h Am. V. Am. Aviation, 891 So. 2d 532, 546 (Fla. 2004)). Under these circumstances, Florida Courts have refused to impose such a broad duty. Rather, Courts look to the specific relationship between the parties before imposing such a duty. See Monroe v. Sarasota Cnty. Sch. Bd., 746 So. 2d 530, 534 n. 6 (Fla. 2d DCA 1999) (explaining that "[d]ifficult economic loss cases all seem to examine the relationship between the parties to determine whether it warrants creating a duty to protect economic interests outside contract and statutory law"); cf Am. Aviation, 891 So. 2d at 547 (Cantero, J., concurring) ("Courts have considered allowing recovery from service providers for purely economic loss where a special or fiduciary relationship exists.").

          Thus, in Gracey v. Eaker, 837 So. 2d 348 (Fla. 2002), the Florida Supreme Court (finding an exception to the impact rule) emphasized that the Defendant was subject to a “statutory duty” which arose from his “confidential relationship” with the Plaintiffs, which therefore allowed the Plaintiff’s to state a cause of action for “breach of fiduciary duty.” Gracey, 837 So. 2d at 352-4. Similarly, in Fl. Dept of Corr. v. Abril, 969 So. 2d 201 (Fla. 2007), the Florida Supreme Court declined to recognize a generalized duty (in this case, of confidentiality), and again emphasized that the Defendant’s duty was derived from a statute “expressly provides that a patient's medical records are confidential and must not be disclosed without the consent of the patient,” which had the “purpose of protecting individuals from disclosure of highly personal, sensitive information.” Abril, 969 So. 2d at 207.

These clearly limited holdings in Gracey and Abril can therefore be harmonized with previous Florida Supreme Court precedent which notes that “the impact doctrine properly reflects the principle that there must be some level of harm which one should absorb without recompense as the price he pays for living in an organized society.Rowell v. Holt, 850 So. 2d 474, 480 (Fla. 2003) (quoting Gonzalez v. Metro. Dade County Pub. Health Trust, 651 So. 2d 673, 675 (Fla. 1995)).

          To bring this full circle, in Greenacre Props. v. Rao, the Second District Court of Appeals (citing Monroe) recognized that where there is no physical impact, a Plaintiff may generally not recover for any type of damages awardable under a negligence theory

 [A]s a general rule, a party cannot recover damages for emotional distress in the absence of physical injury or illness. However, this "impact doctrine" or "impact rule," which is explained in a long line of cases including Rowell and R.J. v. Humana of Florida, Inc., 652 So. 2d 360 (Fla. 1995) does not merely prevent an award of monetary damages representing a party's "emotional distress" while permitting recovery for other types of damages. Rather, this doctrine generally requires proof of a physical injury or illness before a plaintiff is permitted to recover any type of damages awardable under a negligence theory.
Greenacre Props. v. Rao, 933 So. 2d 19, 25 (Fla. 2d DCA 2006) (emphasis added); see, also Tardif v. People for the Ethical Treatment of Animals, 829 F. Supp 2d 1219 (MD Fla. 2011).

          At this point, the Florida Supreme Court has not clearly weighed in on the scope of common law duty which is owed. Do “reasonably foreseeable” harms include each and every plausible economic harm? Or is negligence law limited to the physical realm (i.e., protecting the person, and physical damage to property)? As noted, the Court’s reasoning in Abril and Gracey suggests that the Court is not inclined to find an unlimited duty, and that there must be some statutory basis for the imposition of same. That being said, Abril and Gracey involved conduct which did have the effect of harming a person (rather than a party’s generalized economic expectations). Further, the “zone of risk” doctrine articulated in McCain does not necessarily imply such limits on the scope of duty. Where the Economic Loss Rule previously barred a cause of action in negligence, the question is clearly open: what is the scope of the duty owed, and what damage may be recovered? 

At this point, it appears that the Second District’s opinion in Monroe v. Sarasota Cnty. Sch. Bd., is particularly instructive (though, not authoritative). 

I hope that the aforementioned discussion has been helpful, and I would also hope that any readers would forgive a lack of clarity, as my time is rather limited. If you are looking for more insight into this matter, or, perhaps, looking to retain appellate counsel on this subject (or any other), please feel free to contact me at Hightower Stratton Wilhelm (contact information on the right).