McGlinchey Commercial Law Bulletin
Do I Have Standing in Florida State Court? Not So Fast.Read Time: 5 mins
McGlinchey’s Commercial Law Bulletin is a biweekly update of recent, unique, and impactful cases in state and federal courts in the area of commercial litigation.
Pacetti’s Apothecary v. Rebound Bracing & Pain Sol. Inc., 2d Dist. Greene, No. 2023-Ohio-93.
In this appeal, the Second Appellate District affirmed the trial court’s decision finding that a late fee provision in a contract was a penalty and not an enforceable liquidated damages clause.
The Bullet Point: While parties are free to enter into contracts that contain damages provisions, for public policy reasons, sometimes such provisions are not enforceable. “One such circumstance is when stipulated damages constitute a penalty. Because the sole purpose of contract damages is to compensate the nonbreaching party for losses suffered as a result of a breach, [p]unitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable.” To determine whether a stipulated damages provision is for liquidated damages or punitive in nature, courts apply the following test: “[w]here the parties have agreed on the amount of damages, ascertained by estimation and adjustment, and have expressed this agreement in clear and unambiguous terms, the amount so fixed should be treated as liquidated damages and not as a penalty, if the damages would be (1) uncertain as to amount and difficult of proof, and if (2) the contract as a whole is not so manifestly unconscionable, unreasonable, and disproportionate in amount as to justify the conclusion that it does not express the true intention of the parties, and if (3) the contract is consistent with the conclusion that it was the intention of the parties that damages in the amount stated should follow the breach thereof.”
Jomar Group LTD v. Brown, 5th Dist. Holmes, No. 2023-Ohio-98.
Here, the Fifth Appellate District affirmed the trial court’s decision finding an enforceable contract existed between the parties and ordering specific performance of the same.
The Bullet Point: To be entitled to specific performance, a party must establish the following: “[t]he contract must be concluded, certain, unambiguous, mutual, and based upon a valuable consideration; it must be perfectly fair in all its parts; it must be free from any misrepresentation or misapprehension, fraud or mistake, imposition or surprise; it cannot be an unconscionable or hard bargain; its performance must not be oppressive upon the defendant; and, finally, it must be capable of specific execution through a decree of the court.”
Standing to Foreclose
Deutsche Bank Nat’l Trust Co. v. Talliere, 8th Dist. Cuyahoga, No. 2023-Ohio-75.
In this case, the Eighth Appellate District affirmed the trial court’s decision to grant the plaintiff judgment on its claim for foreclosure, finding that it had presented sufficient evidence that it had possession of the promissory note and thus standing to foreclose.
The Bullet Point: As an initial matter, the appellate court found that in a foreclosure action, the plaintiff only needs to meet its burden of proof by a preponderance of the evidence, not the heightened clear and convincing evidence standard the defendant argued should apply. Regarding standing to foreclose, standing is “[a] party’s right to make a legal claim or seek judicial enforcement of a duty or right.” To have standing in a foreclosure action, the plaintiff must be the “hold[er of] the note and have an interest in the mortgage when the foreclosure complaint is filed.” “Constructive possession exists when an agent of the owner holds the note on behalf of the owner.” “Consequently, a person is a holder of a negotiable instrument, and entitled to enforce the instrument, when the instrument is in the physical possession of his or her agent.”
Fees and Costs Under the FDUTPA Are Discretionary
Gonzalez v. Nobregas, No. 3D21-1826 (Fla. 3d DCA Jan. 18, 2023)
The Third District affirmed a trial court’s denial of fees and costs under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), Florida’s UDAAP statute.
The Bullet Point: FDUTPA vests the trial court with discretion to award fees and costs to the prevailing party. The factors a trial court may consider in determining fee entitlement under the FDUTPA include: (1) the scope and history of litigation; (2) the ability to pay fees; (3) whether an award of fees would deter future conduct; (4) the merits of the respective positions of the parties; (5) whether the claim was frivolous, unreasonable, or groundless; (6) whether claims or defenses were raised to frustrate or stall; and (7) whether the claim was brought to resolve a significant issue under the FDUTPA. In this appeal, the Third District examined whether the trial court abused its discretion in denying fees and costs to the prevailing party in a FDUTPA action.
The Third District concluded that based on the record, the discretionary nature of prevailing party fees under FDUTPA, and the analytical framework, the trial court did not abuse its discretion in denying fees and costs under FDUTPA are discretionary. The Third District also affirmed that a proposal for settlement was ineffective at shifting fees and costs due to a failure to strictly comply with Fla. Stat. § 768.79(2) and Florida Rule of Civil Procedure 1.442. However, the Third District did reverse in part, finding that Fla. Stat. § 57.041 makes recovery of costs mandatory, unlike FDUTPA. In addition, the Accordingly, the denial of fees and costs based on the FDUTPA claim was affirmed.
Injury in Fact Required for Standing in Florida
Saleh v. Miami Gardens Square One, Inc., No. 3D21-1724 (Jan. 11, 2023)
The Third District concluded the trial court properly dismissed a complaint as legally insufficient for failure to plead an injury in fact and that the Fair and Accurate Credit Transactions Act (FACTA) requires an actual injury irrespective of the standing analysis.
The Bullet Point: The Third District followed the Fourth District’s 2022 opinion in Southam v. Red Wing Shoe Co. Inc., 343 So. 3d 106 (Fla. 4th DCA 2022), finding that in order to have the standing to pursue a claim in a Florida Court the Plaintiff must have standing, and standing requires an injury in fact. A mere violation of the statute, absent harm, does not create a viable claim. This continues the trend of Florida Court’s aligning with the federal Article III standard for standing.
This appeal stems from the trial court’s dismissal of the plaintiff’s FACTA claim, which was premised on two printed receipts he received from the defendants that displayed the first six and last four digits of his credit card account numbers. The defendants moved to dismiss the action, arguing that the plaintiff lacked standing because he failed to assert an injury in fact. The plaintiff maintained he had standing because the defendants were aware of the FACTA’s requirements and thus willfully violated the statute. The trial court ultimately dismissed the action, finding the plaintiff lacked standing because he asserted no legal injury.
On appeal, the plaintiff conceded that he did not and cannot establish he suffered actual harm based on the receipts because he retained possession of them. The Third District, therefore, concluded that he lacks standing to pursue his claim, agreeing with the Fourth District that standing in Florida requires an injury in fact. The Third District also found that irrespective of the plaintiff’s standing, FACTA itself requires an actual injury for a claim to exist, so the absence of any such injury supported dismissal.
Successor Corporate Liability
J&R United Indus., Inc. v. Miron, No. 3D21-1781 (Fla. 3d DCA Jan. 4, 2023)
The Third District examined whether the liability of a selling predecessor corporation could be imposed upon the buying successor company.
The Bullet Point: The liability of a selling predecessor corporation generally will not be imposed upon the buying successor company unless: (1) the successor expressly or impliedly assumes the obligations of the predecessor; (2) the transaction is a de facto merger; (3) the successor is a mere continuation of the predecessor; or (4) the transaction is a fraudulent effort to avoid liabilities of the predecessor. The imposition of liability pursuant to these exceptions is based on the notion that no corporation should be permitted to avoid liability through corporate transformation in form only. In this case, the trial court found there was evidence to support the last three exceptions and, after a bench trial, entered final judgment against the successor corporation. On appeal, the Third District affirmed the final judgment, concluding competent, substantial evidence supports the trial court’s findings.