Monday, December 3, 2012

New Federal and State Opinions from Florida


Nitro-Lift Techs., L.L.C. v. Howard, 2012 U.S. LEXIS 8897 (U.S. Nov. 26, 2012) rejected the Oklahoma rationale for not applying the Federal Arbitration Act using the statutory construction principle that “where two statutes address the same subject, one specific and one general, the specific will govern over the general.”  The Supreme Court of Oklahoma reasoned that their state statute restricting non-compete clauses in contracts trumped the general federal act.  The U.S. Supreme Court stated:

But the ancient interpretive principle that the specific governs the general (generalia specialibus non derogant) applies only to conflict between laws of equivalent dignity. Where a specific statute, for example, conflicts with a general constitutional provision, the latter governs. And the same is true where a specific state statute conflicts with a general federal statute. There is no general-specific exception to the Supremacy Clause, U.S. Const. Art.VI, cl.2.

The Oklahoma decision was reversed in a per curiam unanimous opinion.  It follows a similar path as the decision out of the West Virginia Supreme Court in Marmet Health Care Ctr., Inc. v. Brown, 132 S. Ct. 1201 (U.S. 2012).

The moral of the story is that state supreme courts are being directed to tow the line and stop placing obstacles in the path to arbitration, which I consider a salutary goal now that I am an arbitrator/mediator.


Rota-Mclarty v. Santander Consumer United States, 2012 U.S. App. LEXIS 24447 (4th Cir. Nov. 28, 2012) shows the difference between how a federal court as opposed to a Florida court deals with a claim of waiver of arbitration.  Florida courts would have found waiver under the facts of this case.  The Fourth Circuit did not.

The case reversed an order denying Santander’s motion to compel arbitration based on waiver.  The plaintiff filed a putative class action in state court against Santander on March 9, 2010, alleging violations of various Maryland consumer protection laws for undisclosed finance charges and other unfair business practices. On April 13, 2010, Santander removed the complaint to federal court on the basis of diversity. Santander filed an answer the next day, and within a month the parties had agreed on a bifurcated discovery schedule. During the brief discovery period that ensued, Santander took plaintiff’s deposition on both stage one and stage two issues, and plaintiff took another deposition and sought production of various documents.

On September 30, 2010, Santander moved to compel non-class arbitration, claiming the delay in seeking arbitration was caused by uncertainty in the law regarding whether it would be forced into class arbitration, which was clarified by Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S.Ct. 1758, 1775 (2010). Santander waited longer, until a district court had applied Stolt-Nielsen in the consumer context, to file its motion.

In denying Santander's motion, the district court deemed the underlying transaction purely intrastate in nature, and applied Maryland law rather than the Federal Arbitration Act.  The court found there was an enforceable arbitration agreement but found that Santander had waived its right to compel arbitration through unjustified delay and by having participated significantly in discovery.

The circuit court first determined that the parties’ agreement fell within the scope of the FAA, noting that the reach of the statute is broad, as it includes “a contract evidencing a transaction involving commerce.” 9 U.S.C. § 2.  The underlying transaction was a consumer credit arrangement between a citizen of one state and a financing company in another. Although diversity of citizenship is not by itself enough to determine the nature of a transaction, the financing originated from a foreign state.  Reliance upon funds from a foreign source in a transaction is sufficient to implicate the FAA.

          Under the FAA, a party may lose its right to compel arbitration if it “is in default in proceeding with such arbitration.” 9 U.S.C. § 3. This principle of “default” is akin to waiver, but not identical. Unlike some waiver doctrines, the circumstances giving rise to a statutory default are limited and, in light of the federal policy favoring arbitration, are not to be lightly inferred and the party opposing arbitration bears a heavy burden to prove default. 

Generally, a litigant defaults on its right to invoke the FAA where it so substantially utilizes the litigation machinery that to permit arbitration would prejudice the party opposing it.  Where a party fails to demand arbitration during pretrial proceedings, and, in the meantime, engages in pretrial activity inconsistent with an intent to arbitrate, the party later opposing a motion to compel arbitration may more easily show that its position has been compromised, i.e., prejudiced.

The dispositive determination is whether the opposing party has suffered actual prejudice. Two factors are instructive: (1) the amount of the delay; and (2) the extent of the moving party’s trial-oriented activity.  The moving party’s reason for delay is not relevant.

Here, the length of delay was deemed relatively short—at most, six and a half months—from the date plaintiff filed her complaint in state court—to the filing of the motion to compel arbitration in federal court.  Also nothing in the record supported a finding that plaintiff was prejudiced by the length of the delay itself. Her general assertion that she “committed substantial resources to the case on the premise that the Court would have an opportunity to rule on a motion for class certification,” was both unsubstantiated and unconvincing.  Although incurring significant expense as a result of extended litigation can be part of actual prejudice, such cases usually involve resources expended specifically in response to motions filed by the party who later seeks arbitration.  Consequently, the court concluded the district court erred to the extent it based its determination of default on the length of delay.

The second factor looks to the nature and extent of Santander’s litigation activities. Here, Santander “utilized the litigation machinery” in a few—mostly minimal—ways: it removed the complaint to federal court, filed an answer, proposed a bifurcated discovery plan, took plaintiff’s deposition on both phase one and phase two issues, and waited for clarity in the law. No dispositive motions were filed.  Plaintiff engaged in some discovery as well, but she failed to tether her discussion of litigation activities to any actual prejudice. She does not explain how either her deposition or the documents produced would be to Santander’s advantage, or unavailable in arbitration. The mere participation in discovery is not sufficient to indicate default. Consequently, plaintiff failed to establish the prejudice necessary to justify finding Santander defaulted on its right to enforce the arbitration agreement under the FAA.


L.B. v The Naked Truth III, Inc., --- So. 3d --- (Fla. 3d DCA November 28, 2012)
On rehearing, Judge Rothenberg filed a long dissent from the prior decision to reverse the trial judge (the learned Scott Silverman) for certain evidentiary rulings.  See the original post here:;postID=6599906294881477864

and the dissent here:


Vargas v. Deutsche Bank Nat'l Trust Co., 2012 Fla. App. LEXIS 20336 (Fla. 3d DCA Nov. 28, 2012) affirmed the trial court for ratifying the report and recommendation of the general magistrate finding that no loan modification agreement had been reached by the parties.  The majority reasoned that Vargas never filed a motion under either rule 1.530 or 1.540.  Judge Rothenberg dissented after reviewing the record and concluding that the magistrate’s findings were not supported by competent substantial evidence.  She also took issue with the majority using the statute of frauds when it was never argued below or on appeal.  But she did not address how the Vargases’ motion to enforce loan modification agreement was cognizable after a final judgment had been entered and it did not qualify either under rule 1.530 or 1.540.


Wolff v. Piwko, 2012 Fla. App. LEXIS 20339 (Fla. 3d DCA Nov. 28, 2012) reversed an order vacating a default final judgment based on a motion filed 364 days after the entry and recordation of the judgment.  Instead of reviewing the motion under rule 1.540(b), the trial court vacated the judgment on the basis that the pleading and notices did not comport with due process, even though sent to defendant’s address of record in the court order authorizing the withdrawal of his counsel.


Carr v. Eslinger, --- So. 3d --- (Fla. November 30, 2012) reversed an order granting judgment on the pleadings.  The court rejected the argument that the trial court could not grant the motion because a prior judge had denied a motion to dismiss based on the same grounds.  A successor judge may revisit any nonfinal order previously entered.  But it nevertheless reversed because the trial judge should have granted leave to amend.


Philip Morris United States, Inc. v. Kayton, 2012 Fla. App. LEXIS 20440 (Fla. 4th DCA November 28, 2012) involved a verdict for $8 million in compensatory and $16 million in punitive damages.  The court rejected Philip Morris’ arguments that the trial court erred in: (1) using the Engle Phase I findings conclusively to establish the conduct elements of plaintiff's claims; (2) denying Philip Morris’s motion for judgment on plaintiff’s claim for conspiracy to commit fraudulent concealment; and (3) denying Philip Morris’s motion for new trial or remittitur of the jury’s awards of compensatory damages, but the court reversed the punitive damages award because the trial court erred in barring Philip Morris from asserting the statute of repose as an affirmative defense to plaintiff’s claim for conspiracy to commit fraudulent concealment.  The court approved the amount of punitive damages but remanded to determine entitlement, which will be resolved when the jury determines whether the decedent reasonably relied on statements or omissions made by Philip Morris’s co-conspirators within the statute of repose.  The trial court had stricken defendant’s statute of repose defense based on the generalized Engle Phase I findings, but this is an individualized defense that can only be adjudicated based on the particular circumstances of each plaintiff’s case.


State Farm Fla. Ins. Co. v. Aloni, 2012 Fla. App. LEXIS 20445 (Fla. 4th DCA Nov. 28, 2012) quashed an order allowing discovery, prior to a determination of coverage, of activity log notes, emails and photographs contained in the claim file as work product.  In this case, the trial court departed from the essential requirements of the law in compelling disclosure of the claim file materials without the requesting party proving need and the inability to obtain the substantial equivalent of this material without undue hardship.


Fundamental Long Term Care Holdings v. Estate of Jackson, 2012 Fla. App. LEXIS 20323 (Fla. 2d DCA Nov. 28, 2012) rejected the argument that proceedings supplementary under F.S. § 56.29 require that a newly impleaded defendant be served with a summons and complaint for the court to have personal jurisdiction over that newly impleaded defendant.  The court explained that proceedings supplementary under § 56.29 are special statutory proceedings subsequent to judgment to aid a judgment creditor in collecting his judgment against the judgment debtor. 

To initiate proceedings supplementary, the statute requires that the judgment creditor have an unsatisfied judgment and file an affidavit averring that the judgment is valid and outstanding. § 56.29(1).  The statutory procedure was designed to avoid the necessity of the judgment creditor initiating an entirely separate action. While § 56.29(1) provides that an affidavit be filed to commence the proceedings, motions are commonly used also. Once entitlement to the proceedings has been established, third parties not before the court may be brought into the proceedings by impleader.  Unless the civil rules provide to the contrary, the statutory procedure set forth in § 56.29 controls.  

The court concluded that there is no explicit rule requiring that a plaintiff wishing to initiate proceedings supplementary against a new third party must file an impleader complaint and serve process of that complaint on the new third party.  It therefore looked to the procedure in § 56.29, which directs a plaintiff to file an affidavit attesting that the plaintiff holds an unsatisfied judgment as well as a motion to require the defendant in execution to appear before the court. The trial court is then to enter an order requiring the defendant to appear before the court for an examination concerning the defendant's property.  

The appellate court reviewed a series of cases and concluded that they only implicitly suggested that an impleader complaint must be filed.  The court also reviewed a series of cases where the impleading of new defendants had occurred by motion and concluded that the Estate properly followed the procedure set forth in section 56.29. Therefore, the trial court did not lack personal jurisdiction over the appellants on the basis of insufficient service of process.


1 comment:

  1. We must reject the idea that every time a law's broken, society is guilty rather than the lawbreaker. It is time to restore the American precept that each individual is accountable for his actions.