Case Summaries Through January 25, 2017
Prepared by Peter F. Valori and Amanda Fernandez
1. Tiara Condo. Assoc., Inc. v. Marsh & McLennan Co., 110 So. 3d 399 (2013)
Supreme Court of Florida
March 7, 2013
Marsh, an insurance broker, secured for Tiara a windstorm policy. After Tiara’s condominium sustained significant damage caused by two hurricanes, Marsh informed Tiara that the loss limits coverage was per occurrence, meaning Tiara would be entitled to $100 million. Following Marsh’s assurances, Tiara proceeded with expensive remediation efforts. Later, Tiara found out that the loss limit was actually $50 million in the aggregate, not per occurrence as represented by Marsh. Tiara brought an action against Marsh for Marsh’s failure to advise Tiara of its complete insurance needs, and for Marsh’s failure to advise Tiara of its belief that Tiara was underinsured. The trial court granted summary judgment in favor of Marsh on all claims, and Tiara appealed to the Eleventh Circuit. The circuit court certified the question of the viability of the economic loss rule to the Florida Supreme Court.
Majority Opinion: (Labarga, J.)
The Court held that the application of the economic loss rule is limited to products liability cases. The Court receded from its prior rulings to the extent that they applied the economic loss rule to cases other than products liability. Because this case does not involve products liability, the Court did not decide whether the economic loss rule applied.
Concurrence: (Pariente, J.)
Justice Pariente opined that the Court’s decision was not a departure from precedent, but instead clarified that the economic loss rule was always intended to apply only to products liability cases. Justice Pariente further opined that tort claims interconnected with breach of contract claims should be analyzed and dismissed based on common law principles of contract, rather than the economic loss rule. Instead, “fundamental contractual principles” already restrict remedies in situations involving contractual privity.
2. Altenel, Inc. v. Millenium Partners, LLC, 947 F.Supp.2d 1357 (S.D. Fla. 2013)
S.D. Florida (Williams, J.)
March 12, 2013
Plaintiff purchased hotel condominium units through a real estate project owned and operated by Defendants. Plaintiff alleges that Defendants represented that Plaintiff’s hotel units would be integral to a hotel operation unit with the Four Seasons, and that Plaintiff’s hotel units would be profitable. Plaintiff asserted that Defendants’ misrepresentations induced Plaintiff to purchase units at an inflated price and to execute the voluntary rental agreement. The court held that Plaintiff’s claims cannot be dismissed on the basis of economic loss rule because Tiara limited the economic loss rule to products liability cases. However, Justice Pariente’s concurrence makes clear that other common law principles may bar tort claims. Because the misrepresentations are contradicted by contracts and because the fraud claims are time barred, the court held Plaintiff’s fraud claims are dismissed.
3. Wiand v. Wells Fargo Bank, N.A., 938 F.Supp. 2d 1238 (M.D. Fla. 2013)
M.D. Florida (Whittemore, J.)
April 5, 2013
Nadel orchestrated a massive Ponzi scheme by purporting to deposit money into hedge funds from investors. Plaintiff is the receiver for the hedge funds. Plaintiff alleges that Defendant, the bank where the hedge funds were maintained, had knowledge of Nadel’s scheme and assisted Nadel in stealing the money. The customers alleged the bank was negligent and owed a duty to the hedge fund customers. The Defendant argued the negligence claim was barred by the economic loss rule. The court held that the Defendant’s argument that the Plaintiff’s negligence claim is barred by the economic loss rule must be rejected after Tiara because the economic loss rule only applies to products liability cases.
4. F.D.I.C. v. Pearl, No. 8:12-cv-1813-T-30TBM, 2013 WL 1405941 (M.D. Fla. Apr. 8, 2013)
M.D. Florida (Moody, J.)
April 8, 2013
Plaintiff is the receiver for Colonial Bank. Defendant was contracted to appraise a property. The appraisal was used for a refinance transaction with Taylor, Bean, & Whitaker Mortgage Corp. (“TBW”). TBW used its line of credit at Colonial Bank to fund the loan. Plaintiff alleges that Defendant’s appraisal was negligently prepared and contained material misrepresentations, and that the loan was funded in reliance on the appraisal. Plaintiff alleges that if TBW knew the true market value of the property, the loan would not have been funded. Defendant argued that Plaintiff’s claim for negligent misrepresentation should be dismissed under the economic loss rule. The court held that Tiara limited the application of the economic loss rule to products liability cases and, therefore, the economic loss rule does not apply to Plaintiff’s negligent misrepresentation claim. Furthermore, the court held that the economic loss rule has never barred traditional tort claims such as professional negligence or fraud.
5. Kuehne v. FSM Capital Management, No. 12-80880-CIV, 2013 WL 1814903 (S.D. Fla. Apr. 29, 2013)
S.D. Florida (Rosenbaum, J.)
April 29, 2013
Plaintiff, a professional golfer, hired Defendant to manage Plaintiff’s increasingly complex finances based on Defendant’s representation that he possessed expertise in accounting. After the parties’ relationship ended, Plaintiff learned that he had income-tax liabilities and penalties. Plaintiff alleges that Defendant breached its Management Agreement, made fraudulent misrepresentations to Plaintiff, and was grossly negligent in managing Plaintiff’s tax accounts. Defendant argued that Plaintiff’s claims should be dismissed under the economic loss rule. The court held that Defendant cannot use the economic loss rule as a basis to dismiss Plaintiff’s claims because this case is not a products liability case.
6. LBCMT 2007-C3 W. Broad Street, LLC v. WSG Development Co., No. 3:12-cv-455-JAG, 2013 WL 1897128 (E.D. Va. May 6, 2013)
E.D. Virginia (Gibney, J.)
May 6, 2013
Sheppard and Wolman set up WSG Development Inc. to manage several retail projects, and separate corporations for the various projects. The Lenders controlled separate loans to each of Sheppard and Wolman’s corporations (the “Borrowers”). Some of the Borrowers defaulted on their loans, and under the loan agreements were supposed to forward their rent payments to the Lenders. Instead, Defendant took and kept the Borrower’s collected rents rather than transmitting the payments to Plaintiff. Plaintiff filed suit for conversion of the rents. Defendant argued that Plaintiff’s conversion claim is barred by the economic loss rule. The court found that because the economic loss doctrine applies only to product liability cases, the rule does not bar Plaintiff’s claim.
7. B&E Gibson Enterprises, Inc. v. Darngavil Enterprises, LLC, No. 6:12-CV-1865-Orl-31GJK, 2013 WL 1969288 (M.D. Fla. May 13, 2013)
M.D. Florida (Presnell, J.)
May 13, 2013
Plaintiff was granted leave to amend its complaint in light of Tiara. Plaintiff claims that Defendant falsely represented the amount of profit it would earn if it entered into a lease with Defendant. The Lease Agreement stated that compensation was expressly tied to the number of shipments and contained a merger clause. The claims of fraudulent misrepresentation and civil conspiracy that were previously dismissed based on the economic loss rule were repled. The court found that the express terms in the contract render Plaintiff’s alleged reliance unjustifiable and, accordingly, dismissed the counts for fraudulent misrepresentation and civil conspiracy.
8. F.D.I.C. v. Group One Mortgage, Inc., No. 12-81300-CIV, 2013 WL 2035150 (S.D. Fla. May 14, 2013)
S.D. Florida (Marra, J.)
May 14, 2013
Plaintiff was appointed as receiver for AmTrust. AmTrust and Defendant entered into a loan purchase agreement, in which Defendant sold and/or delivered to AmTrust mortgage loans. Bashwiner, Defendant’s loan officer, made several misrepresentations in the underwriting package for a loan. Plaintiff filed suit for negligent supervision. Defendant argued that Plaintiff’s claim for negligent supervision was barred under the economic loss rule. The court rejected Defendant’s argument on the basis that the economic loss rule applies only in products liability cases.
9. Freeman v. Sharpe Resources Corp., No. 6:12-cv-1584-Orl-22TBS, 2013 WL 2151723 (M.D. Fla. May 16, 2013)
M.D. Florida (Conway, J.)
May 16, 2013
Plaintiff claimed he lost $1.3 million dollars based on Defendants’ misrepresentations. Defendants asked Plaintiff to loan money to develop coal mineral rights that they owned in West Virginia. Defendants also represented that they would hold Plaintiff’s money in escrow and would return the money in 60 days if the loan did not close. The loan never closed, and despite repeated demands, Plaintiff’s money was not returned. Plaintiff alleges in his complaint that Defendants converted his money and made false misrepresentations to induce the loan from Plaintiff. Defendants argued that Plaintiff’s complaint was barred by the economic loss rule. The court adopted and confirmed Magistrate Judge Smith’s Report and Recommendation. Judge Smith found that fundamental contractual principles continue to bar tort claims where there is no independent breach of contract. Under common law, fraud in the inducement is a tort distinct from breach of contract. Judge Smith held that Defendants’ statement that Plaintiff’s $1.3 million would be held in escrow are intertwined with the Agreement, but Defendants’ other representations are independent torts, and, therefore, not barred under contract law.
10. In re Mouttet, 493 B.R. 640 (Bankr. S.D. Fla. 2013)
U.S. Bankruptcy Court, S.D. Florida (Isicoff, J.)
May 16, 2013
Debtor Mouttet and a group of individuals decided to bring the lottery to Jamaica. Debtor sought loans to obtain a lottery and gaming license in Jamaica, which were guaranteed by Debtor. Debtor also obtained a loan to expand lottery business in Central America, which was guaranteed by Debtor. The loans were assigned to Talisman, and Talisman brought action against the Debtor seeking recovery based on the guarantees because the loans were never repaid. Among other claims, the Plaintiff alleged fraud. The court dismissed the causes of action for fraud because the complaint lacked the specificity required under Rule 9. The court, however, noted that the Defendant’s argument that the claim of fraud would be barred by the economic loss rule was not valid after Tiara because the economic loss rule only applies to products liability cases.
11. Continent Aircraft Trust v. Diamond Aircraft Indus., Inc., No. 11-61663-CIV, 2013 WL 2285539 (S.D. Fla. 2013)
S.D. Florida (Moreno, J.)
May 23, 2013
Plaintiff owns an aircraft manufactured by Defendant. Plaintiff claims it relied on statements made by Defendant that the engines would be covered by warranty when purchasing the aircraft. Plaintiff seeks to recover from Defendant damages it suffered for to the loss of the warranty, including value of the engines, expenses incurred in repairing the engines, and the diminution in value of the aircraft. Defendant argued that Plaintiff’s claim for fraud should be dismissed under the economic loss rule. The court held that Florida law allows claims for torts committed independent of the contract breach, such as fraudulent misrepresentation, negligent misrepresentation, and fraudulent concealment. Here, the intentional tort is independent from the breach of the aircraft sales agreement. Additionally, Tiara limited the economic loss rule to products liability cases. Therefore, the court held that rule did not apply in this case.
12. Deman Data Systems, LLC v. Schessel, No. 8:12-cv-2580-T-24EAJ, 2013 WL 2708538 (M.D. Fla. June 11, 2013)
M.D. Florida (Bucklew, J.)
June 11, 2013
Defendant was employed by Plaintiff. As a condition of employment, Defendant executed a restrictive covenant. The employment of the Defendant was terminated and the Defendant violated the restrictive covenant by deleting and storing certain confidential information from Plaintiff’s server, contacting and soliciting Plaintiff’s customers, utilizing Plaintiff’s trade secrets in forming his own company, and accessing, without authorization, confidential information. Plaintiff claimed a breach of fiduciary duty, but Defendant argued that the claim was barred by the economic loss rule because the only source of fiduciary duty was the employment agreement. The court rejected Defendant’s argument because Tiara limited the economic loss rule to products liability cases.
13. Thermal Dynamics Intern., Inc. v. Safe Haven Enterprises, LLC, No. 13-721 (CKK), 2013 WL 3379306 (D.D.C. July 8, 2013)
District of Columbia (Kollar-Kotelly, J.)
July 8, 2013
Defendants subcontracted with Plaintiff to perform work at the United States Embassy in Yemen. Plaintiff contended that Defendants breached its duty by misrepresenting that it would pay Plaintiff when it received payment from the State Department. Defendants received payment from the State Department, but never paid Plaintiff’s final invoice. Plaintiff alleged that Defendants breached their duty by representing that Defendants would pay Plaintiff upon receipt of payment from the State Department. The Defendants moved to dismiss Plaintiffs claims for fraudulent misrepresentation. The court held that Plaintiff cannot sustain a claim for negligent or fraudulent misrepresentation based on misrepresentations that are inseparable from the subcontract. The court further noted that Plaintiff could not sustain a claim under Florida law either. Under Tiara, a party may bring a claim based on negligent or fraudulent misrepresentation made prior to the formation of the contract, but not for misrepresentations made after the contract.
14. Lehman Brothers Holdings, Inc. v. Campbell, No. 3:12-cv-259, 2013 WL 3479525 (E.D. Tenn. July 10, 2013)
E.D. Tennessee (Campbell, J.)
July 10, 2013
Defendant was hired by a mortgage lender to appraise two condominium units in Florida. Plaintiff later purchased the mortgages underlying the properties on the secondary mortgage market. The loans went into default. Plaintiff claimed that its loss was the direct result of Defendant’s overvaluation of the properties in the appraisal. Plaintiff did not assert that it was in privity of contract with Defendant and did not assert a breach of contract claim. Defendant moved to dismiss Plaintiff’s negligent misrepresentation claims under the economic loss rule. The court held that because the parties were not in privity, the economic loss rule does not apply. Additionally, because Tiara limits the application of the economic loss rule to products liability claims, Defendant could not use the rule to challenge Plaintiff’s negligence claims.
15. Smith v. Questar Capital Corp., No. 12-cv-2669 (SRN/TNL), 2013 WL 3990319 (D. Minn. Aug. 2, 2013)
D. Minnesota (Nelson, J.)
August 2, 2013
Defendant sold securities that were issued by DBSI to Plaintiff, an investor. DBSI is a now defunct Ponzi-Scheme. Plaintiff alleged that Defendant should have known that DBSI was a Ponzi scheme and should have informed customers. Defendant also made assurances that DBSI was a safe and well-established company that would provide reliable returns. Plaintiff alleged that he relied on Defendant’s misrepresentations about DBSI. Defendant argued that the economic loss doctrine barred Plaintiff’s negligence claims. The court held that the economic loss rule does not preclude recovery on Plaintiff’s negligence claims under either Florida or Minnesota law. As to Florida law, the court held that the economic loss rule applies only to products liability cases, and the instant case is not a products liability case.
16. Burns v. Winnebago Industries, Inc., No. 8:13-cv-1427-T-24MAP, 2013 WL 4437246 (M.D. Fla. Aug. 16, 2013)
M.D. Florida (Bucklew, J.)
August 16, 2013
Plaintiff bought from a dealer an RV manufactured by the Defendant. Plaintiff discovered corrosion on the RV. Plaintiff contended that Defendant failed to make numerous disclosures to him about the RV, including the RV being prone to corrosion. Plaintiff filed suit for negligent misrepresentation and fraudulent concealment. Defendant argued that Plaintiff’s claims were barred by the economic loss rule. The court found this case to be a products liability case. After Tiara, the court found it was unclear whether the economic loss rule still applied to negligent misrepresentation and fraudulent inducement claims in the products liability context. The court held that the exceptions to the economic loss rule for fraudulent inducement and negligent misrepresentation do not apply.
17. Winn Dixie Stores, Inc. v. Apsen Transportation, LLC, No. 6:13-cv-791-Orl-31GJK, 2013 WL 4780125 (M.D. Fla. Sept. 5, 2013)
M.D. Florida (Presnell, J.)
September 5, 2013
Plaintiff alleged that Defendants accepted a shipment, which Defendants agreed to transport to Winn Dixie in Orlando, Florida. Winn Dixie argued that the Defendants failed to deliver the shipment. Plaintiff filed suit for: (1) breach of contract; (2) breach of bailment obligation; (3) torts claims; and (4) alternative breach of contract claims. Defendants argued claims 2 and 3 should be dismissed under the economic loss rule. The court held claims 2 and 3 cannot be dismissed based on the economic loss rule because the doctrine is now only applicable to products liability cases.
18. Munoz Hnos, S.A. v. Editorial Televisa International, No. 3D12-2688, 2013 WL 4823150 (3d DCA Sept. 11, 2013)
3rd DCA (Rothenberg, J.)
September 11, 2013
Plaintiff entered into a settlement agreement with Defendant, wherein Plaintiff received advertising credits. Plaintiff argued that Defendant breached the agreement by not approving the assignment of Plaintiff’s advertising credits. Plaintiff also alleged that Defendant materially misrepresented that the credits could be assigned to any third party in order to induce Plaintiff to settle. Plaintiff filed suit for: (1) breach of contract; (2) breach of implied covenant; (3) negligent misrepresentation; and (4) fraud. The trial court initially dismissed Plaintiff’s claim for negligent misrepresentation and fraud based on the economic loss rule. The court, however, found that Plaintiff’s claims were not barred by the economic loss rule based on Tiara, and reversed and remanded.
19. F.D.I.C. v. Floridian Title Group, Inc., No. 12-21890-CIV, 2013 WL 5237362 (S.D. Fla. Sept. 17, 2013)
S.D. Florida (Moreno, J.)
September 17, 2013
FDIC is the receiver for BankUnited. Defendant served as the closing agent on five mortgage loans made by BankUnited. Plaintiff alleged that Defendant knew that four of the five mortgages were not made at arms-length, and that Defendant did not report this to BankUnited even though it was required to do so as the closing agent. Defendant argued that Plaintiff’s breach of fiduciary duty and negligent misrepresentation claims are barred by the economic loss rule. The court held that because this case is not a products liability case, the economic loss rule does not apply. Defendant also asserted that the tort claims were inextricably intertwined with the breach of contract claims. The court, however, found that the economic loss rule was not rebranded as the “Inextricably Intertwined Rule.”
20. Tews v. Valdeon, No. 12-23026-CIV, 2013 WL 5333205 (S.D. Fla. Sept. 23, 2013)
S.D. Florida (Moreno, J.)
September 23, 2013
The parties entered into an oral agreement to form Florida Discount Properties. Under the agreement, Plaintiff was to provide capital to purchase properties, and the initial investment would then be returned to the Plaintiff. Plaintiff provided $400,000 in capital, but Defendant only returned $250,000. Plaintiff demanded the remaining capital, but it was never returned. Plaintiff filed suit against Defendant for: (1) breach of fiduciary duty; (2) conversion; (3) unjust enrichment; (4) civil theft; and (5) constructive trust. Defendant argued that claims 1, 2, and 4 are barred by the economic loss rule. The court held that under Tiara the economic loss rule applies only to products liability cases, and because this is not a products liability case, the economic loss rule does not apply.
21. Stonecreek-AAA, LLC v. Wells Fargo Bank N.A., No. 1:12-cv-23850-MGC, 213 WL 5416970 (S.D. Fla. Sept. 26, 2013)
S.D. Florida (Cooke, J.)
September 26, 2013
Plaintiff entered into an agreement with trustee to prepare and submit an application for mortgage insurance to HUD. Defendant was to arrange for placement of the resulting loan after approval of the application. Plaintiff alleged that Defendant falsely misrepresented that Plaintiff would receive approval within 90 days, but Defendant never completed the application. Defendant moved to dismiss Plaintiff’s complaint, arguing that Plaintiff’s tort claims were barred by the economic loss rule. In ruling on the motion to dismiss, the court looked to Justice Pariente’s concurrence in Tiara. The court found that although the economic loss rule may not apply here after Tiara, the Plaintiff may still bring a valid tort claim based on breach of contract if the tort is distinguishable from the breach. The court held it could not dismiss Plaintiff’s tort claims because (1) the contract claims may be dismissed on standing, and (2) it is unclear whether the tort claims are distinguishable from the contract claims based on the amended complaint.
22. Alpha Data Corp. v. HX5, LLC, No. 1D12-2885, 2013 WL 5663214 (1st DCA Oct. 18, 2013)
1st DCA (Per Curiam)
October 18, 2013
Appellant is a government contractor that provided information technology and engineering services. Appellant filed a complaint against Apellees for: (1) theft of trade secrets; (2) breach of teaming agreement; (3) breach of “Mentor-Protege Agreement;” (4) promissory estoppel; (5) breach of fiduciary relationship; (6) unjust enrichment. The court reversed the trial court’s decision dismissing the fraudulent inducement claim under the economic loss rule, because under Tiara the economic loss rule is limited to products liability cases.
23. Zoom Tan, LLC v. Heartland Tanning, Inc., No. 2:12-cv-684-FtM, 2013 WL 5720140 (M.D. Fla. Oct. 21, 2013
M.D. Florida (Steele, J.)
October 21, 2013
Plaintiff operates a high end tanning salon. Defendant marketed to Plaintiff a line of commercial tanning beds, stating that the beds were precision engineered and would provide flawless tanning. Relying on these representations, Plaintiff ordered a large quantity of the tanning beds. The tanning beds, however, had a number of defects. Plaintiff sued for: (1) breach of contract; (2) breach of express warranties; (3) breach of implied warranties; and (4) negligent misrepresentation. Defendant moved to dismiss the negligent misrepresentation claim based on the economic loss rule. The court held that Defendant’s argument was without merit because the Supreme Court of Florida in Tiara limited the economic loss rule to products liability, and this case was not a products liability case.
24. Aprigliano v. American Honda Motor Co., Inc., No. 13-22066-CIV-ALTONAGA, 2013 WL 5788771 (S.D. Fla. Oct. 28, 2013)
S.D. Florida (Altonaga, J.)
October 28, 2013
Defendant manufactured a motorcycle, the GL 1800, and marketed the motorcycle as a luxury motorcycle that has a smooth, vibration free ride. The GL 1800, however, suffered from a defective design. Plaintiffs sought monetary compensation for the cost of repairs and the diminution in value of their GL 1800, alleging: (1) strict liability; (2) negligent misrepresentation; (3) negligent failure to warn; (4) breach of express warranty; and (5) fraudulent concealment. Defendant argued that claims 1, 2, and 3 are barred by the economic loss rule. The court recognized that Tiara limited the economic loss rule to products liability cases, and that this case is clearly a products liability case. As to claim 1, the court held that Plaintiff may not recover purely economic losses under a strict liability theory because the Plaintiff did not allege any damage to people or property besides the GL 1800. As to claims 2 and 3, the court noted that negligent misrepresentation claims were barred by the economic loss rule in the products liability context in Burns. In addition, the court stated that the exception to the economic loss rule for negligent misrepresentation developed in contractual privity cases, not products liability cases. Therefore, the court barred claims 1, 2, and 3 under the economic loss rule.
25. Joyeria Paris, SRl v. Gus & Eric Custom Svcs., Inc., No. 13-22214-CIV, 2013 WL 6633175 (S.D. Fla. Dec. 17, 2013)
S.D. Florida (O’Sullivan, J.)
December 17, 2013
Plaintiff and Defendants made an oral agreement that the Defendants would sell Plaintiff’s gold to customers in Florida, and in exchange, Defendants would receive half of one percent of each sale as their commission. Plaintiff discovered that the Defendants were keeping the entire proceeds of the sale. Plaintiffs filed claims for breach of contract and fraud. Plaintiffs alleged that the Defendants had induced them to enter into a business relationship by misrepresenting that they would accept a half percentage commission. Defendants argued that Plaintiff’s claim for fraud should be dismissed based on the economic loss rule. Plaintiff argued that the economic loss rule was not applicable to this case after Tiara, because this case was not a products liability case. The court, however, noted Justice Pariente’s concurrence, which found that common law concepts were not altered by Tiara, and, therefore, a tort claim is not barred if it is independent from the breach of contract. The court held that the Plaintiff failed to plead a proper cause of action for fraud because the alleged fraud was based on misrepresentations that made up the same conduct as the breach of contract claim.
26. BVI Marine Const. Ltd. v. ECS-Florida, LLC, No. 12-80225-CIV, 2013 WL 6768646 (S.D. Fla. Dec. 20, 2013)
S.D. Florida (Marra, J.)
December 20, 2013
Plaintiff entered into a Charter Party with the Defendant to furnish the Defendant with vessels and equipment in order to drill holes as part of a pier-building project. Because the Defendant did not get paid for the drilling, the Defendant failed to pay the Plaintiff under the terms of the Charter Party. Plaintiff initially brought a single breach of contract claim, but the Plaintiff later amended the Complaint to add tort claims due to Tiara. Plaintiff alleged that Florida law governed the case, and, therefore, the economic loss rule did not bar Plaintiff’s tort claims because Tiara limited the economic loss rule to products liability cases. Defendant, on the other hand, argued that maritime law governed this case, and, therefore, the maritime economic loss rule precluded the Plaintiff’s tort claims. In order to determine whether Florida law or maritime law applied, the court fist analyzed whether there was a conflict between the Florida economic loss rule and maritime law. After determining that there was a conflict between Florida’s economic loss rule and the maritime economic loss rule, the court examined whether the maritime law was weak or strong. Because there was no indication that admiralty law will follow the direction of the Florida economic loss rule, the court held that maritime law applied and barred the Plaintiff’s tort claims.
27. Tiara Condo. Assoc., Inc. v. Marsh, USA, Inc., No. 08-80254-CIV-HURLEY, 2014 WL 109140 (S.D. Fla. Jan. 13, 2014)
S.D. Florida (Hurley, J.)
January 13, 2014
Marsh renewed its motion for summary judgment, which required the court to determine whether Marsh breached its fiduciary duty to Tiara by not notifying Tiara of its complete insurance needs. Originally, the court granted summary judgment in favor of Marsh on all claims. The Eleventh Circuit affirmed summary judgment, but as to the extent the claims were based on Marsh’s failure to advise Tiara on its coverage, the circuit court determined that reliance on the economic loss rule, which would bar the tort claims, raised an unsettled question of Florida law and certified the question to the Supreme Court of Florida. The Florida Supreme Court limited the economic loss rule to products liability cases. Relying on the Florida Supreme Court’s decision, the Eleventh Circuit held that the economic loss doctrine did not preclude Tiara’s tort claims and remanded these claims for further consideration.
In its renewed motion for summary judgment, Marsh contended that it had no extra-contractual duty, and, also, that Florida’s independent tort rule precluded these claims. Under the independent tort rule, a tort action is barred where a defendant has not committed a breach of duty apart from a breach of contract. The court noted that the independent tort rule is a predecessor of the economic loss rule. Therefore, the court reasoned that the Florida Supreme Court’s restriction of the economic loss rule would also impact the independent tort rule and “arguably” restrict the application of the independent tort rule in the same way that it limited the application of the economic loss rule. The court held that it did not need to reach a decision on the issue because the independent tort rule did not apply in this case. The court found that Tiara’s tort claims were based on a breach of duty which was not contractually based, and, therefore, outside the reach of the independent tort rule. In addition, the court found there were genuine issues of material fact as to: (1) whether a special relationship existed between Marsh and Tiara, which would create an enhanced duty; (2) whether Marsh breached the duty by failing to advise Tiara of its complete coverage needs; and (3) whether Tiara would have modified the terms and conditions of the coverage had Marsh properly advised Tiara.
28. F.D.I.C. v. Lennar Corp., No. 2:12-CV-595-FTM-38, 2014 WL 201663 (M.D. Fla. 2014)
M.D. Florida (Chappell, J.)
January 17, 2014
Plaintiffs alleged that Defendants operated a mortgage-fraud scheme by recruiting passive investors to use their identities and credit profiles to apply for mortgages and purchase residential property. Plaintiffs alleged that Defendants induced the Plaintiff Taylor Bean into funding sham mortgage loans to finance their fraud scheme by providing Taylor Bean with false valuations and false written certifications. Defendants moved to dismiss the Plaintiffs’ Amended Complaint by arguing that Taylor Bean’s claims were barred by the economic loss rule. The Court held that the Florida Supreme Court recently curtailed the economic loss rule in Tiara so that it had no relevance to the claims at issue in this case. The Court also found that even prior to the Court’s decision in Tiara, the economic loss rule would not have barred the Plaintiffs’ claims because the economic loss rule has never barred traditional tort claims such as professional negligence or fraud.
29. Lookout Mountain Wild Animal Park, Inc. v. Stearns Zoological Rescue &Rehab Cntr., Inc., No 12-13811, 2014 WL 211890 (11th Cir. Jan. 21, 2014)
11th Circuit (Per Curiam)
January 21, 2014
Plaintiff, and animal park, alleged tort claims against the Defendants for allegedly stealing and converting animals and equipment that belonged to the Plaintiff. The Eleventh Circuit Court of Appeals affirmed the judgment of the United States District Court, which granted judgment as a matter of law in favor of the Defendants. The Court held that no reasonable jury could find that the Defendant converted the property or committed civil theft because the evidence indicated that the animals and equipment had been donated to the Defendants. The Court also cited to Justice Pariente’s concurrence in Tiara, finding that the Plaintiff failed to identify any tortious acts that are sufficiently independent of the alleged breach of the contract to render the tort claims viable.
30. Remington v. Newbridge Sec. Corp., No. 13-60384-CIV, 2014 WL 505153 (S.D. Fla. Feb. 7, 2014)
S.D. Florida (Cohn, J.)
February 7, 2014
Defendant had a securities-broker agreement with the Plaintiffs (the “Customer Agreement”). Plaintiffs allege that defendant breached the Customer Agreement by charging excessive handling fees for processing transactions. Plaintiffs contend that the handling fees were actually hidden commissions. Plaintiff Finkel also alleged a claim for negligence for breach of a duty of care owed by broker-dealer to their customers aside from the breach of contract claim. The Defendant moved for summary judgment, and argued that the Plaintiffs’ breach of contract and negligence claims fail as a matter of law. Defendant further argued that the negligence claim should be dismissed as duplicative because defendant did not owe a duty of care beyond that imposed by the Agreement. The Court held that a plaintiff may maintain side-by-side negligence and contract claims based on the same underlying acts if those acts violate a legal duty independent of obligations imposed by the contract. The Court found that here the contract and negligence claims were not duplicative because the Plaintiff Finkel alleged that defendant breached a duty of care owed by broker-dealers to their customers, which is independent of its obligation under the Customer Agreement.
31. Gill-Samuel v. Nova Biomedical Corp., No. 13-62591-CIV, 2014 WL 1661496 (S.D. Fla. Apr. 9, 2014)
S.D. Florida (Rosenbaum, J.)
April 9, 2014
Defendant is a manufacturer of prescription blood-glucose test strips. Defendant had to recall millions of test trips. Plaintiff used the test strips, and because of the false high reading due to the product defect, plaintiff sought medical treatment that was unnecessary. Plaintiff brought an action on behalf of all persons who purchased the test strips and were subject to the recall, and on behalf of a subclass of these persons who also incurred additional medical expenses due to the strips defect. Defendant moved to dismiss plaintiff’s action and asserted that her claims are barred by the economic loss rule. Defendant suggested that the economic loss rule barred any tort claim based on purely economic damages. The Court held, however, that Tiara makes clear that this rule applies to tort claims arising from depressed economic expectations concerning the product itself only, these being more properly cognizable under warranty law. The Court found that Plaintiff’s alleged injury does not arise solely from depressed economic expectations concerning the test strips because she incurred unnecessary medical treatment which extended beyond damage to the product itself. The Court, however, dismissed the class-action allegation of the group who merely purchased the defective strips because the injury suffered by this group is injury to the product itself, which is barred by the economic loss rule.
32. Lamm v. State Street Bank & Trust, No. 12-15061, 2014 WL 141072 (11th Cir. Apr. 14, 2014)
11th Circuit (Jordan, J.)
April 14, 2014
Plaintiff engaged James Tagliaferri and his investment firm as his investment advisors. Plaintiff opened up two accounts with Chase Bank and gave the investment firm broad authority to invest his assets in both accounts. In 2007, State Street took over the accounts. Mr. Tagliaferri proceeded to invest plaintiff’s money into risky and highly speculative stocks. In settling these transactions, State Street accepted on behalf of the plaintiff promissory notes. It turned out that the promissory notes were worthless. Plaintiff sued State Street, alleging that they had a duty to notify the plaintiff that the securities in his account were worthless. State Street moved to dismiss the plaintiff’s claims under the economic loss rule. The Court held that the Plaintiff’s claims were no longer barred by the economic loss rule after the Tiara decision, because the decision limited the economic loss rule to products liability cases. The Court noted, however, that it is unclear after Tiara whether a party must still demonstrate that the tort is independent of any breach of contract claim. The Court found that defendant’s conduct amounted to an independent tort, but plaintiff’s claim fails because the plaintiff failed to show any authority imposing on State Street an extra duty of care.
33. Kaye v. Ingenio, Filiale de Loto-Quebec, Inc., No. 13-61687-CIV, 2014 WL 2215770 (S.D. Fla. May 29, 2014)
S.D. Florida (Rosenbaum, J.)
May 29, 2014
Plaintiff developed a new method for playing interactive lottery games and obtained two patents for his invention. Defendant, the research-and-development subsidiary of the Quebec provincial lottery negotiated with the Plaintiff to purchase his patents. Plaintiff and the Defendants purchase compromise was memorialized in two agreements: an Assignment Agreement and a License Agreement. Under the License Agreement, the Plaintiff had the right to prosecute all infringements of the patents in the event the Defendant decided not to. In 2009, the Plaintiff became aware of a widespread infringement of the patents and informed the Defendant. Instead of informing the Plaintiff whether or not it would pursue the infringers or allow the Plaintiff to pursue, the Defendant made unreasonable demands, such as requiring the Plaintiff to post a bond before instituting proceedings. To date, the Defendant has not made a decision whether to initiate proceedings or allow the Plaintiff to proceed. As a result, the Plaintiff brought claims against the Defendant for fraud in the inducement and unjust enrichment, and seeks remedies in the form of rescission, accounting, and constructive trust. The Defendant contends that the Plaintiff has not brought the appropriate claims, but that his tort claims should actually be a breach of contract claim. The Plaintiff argued that his tort claim and any breach of contract claim are distinct. The Court reviewed the Tiara decision, and found that even though Tiara clarified that the economic loss rule applies only to cases involving products liability, this does not mean that parties in contractual privity may recast breach of contract claims as tort claims. The Court held that in order to set forth a claim in tort between parties in contractual privity, a party must allege action beyond and independent of breach of contract that amount to an independent torts, as noted by Justice Pariente in her concurrent in Tiara. The Court held that the Plaintiff’s claims of fraud are the same as a potential breach of contract claim. While the intial promise may have been fraudulent, the terms of the purported fraud were memorialized in the License Agreement. Therefore, any failure to comply with those terms would be a breach of the contract. In addition, if the Plaintiff proves a breach of the agreement, he will receive the full anticipated value of his bargain, despite the purported fraud.
34. R/V Beacon, LLC v. Underwater Archeology & Exploration Corp. No. 14-CIV-22131, 2014 WL 4930645 (S.D. Fla. Oct. 1, 2014)
S.D. Florida (Bloom, J.)
October 1, 2014
Plaintiff owns and operates a vessel equipped for research and salvage operations, including treasure salvage. Defendant entered into a three year contract with Plaintiff, wherein Defendant agreed to charter the vessel for use in a treasure hunting enterprise. In 2011, however, the salvage operation came to a halt, and Defendant demanded that Plaintiff pay for several improvements to the vessel. Although Plaintiff made several advancements to Defendant for such improvements, Defendant abandoned the vessel in the Dominican Republic. Accordingly, Plaintiff commenced an action, asserting claims for breach of contract, breach of oral contract, and fraud. Defendant argued that Plaintiff’s claims for fraud were barred by the maritime economic loss rule. The Court found that although the Florida Supreme Court recently limited the application of the economic loss rule to products liability cases in Tiara, such limitation had not been imposed in cases governed by maritime law. As such, the Court held that Plaintiff’s fraud claims that were premised on Defendant’s failure to abide by the Charter were barred by the maritime economic loss rule.
35. Tulepan v. Roberts, No. 14-cv-80574, 2015 WL 235441 (S.D. Fla. Jan. 16, 2015)
S.D. Florida (Middlebrooks, J.)
January 16, 2015
Plaintiff managed, leased, and maintained shopping centers owned by Defendant. The parties entered into an Employee Compensation Agreement, which provided that Plaintiff was to receive bonus payments. Instead of receiving the bonus payments, Plaintiff entered into an oral agreement with Defendant, whereby Plaintiff would receive an equity interest in certain shopping centers (the “Investment Agreement”). The Investment Agreement was later memorialized in the Amended and Restated Operating Agreement of the shopping centers, which stated that Plaintiff had an ownership interest in the entities which owned the shopping centers. Plaintiff was later terminated from his employment and filed suit against Defendant.
In his Amended Complaint, Plaintiff alleged that Defendant refused to pay Plaintiff income, expenses, bonuses and interest payments, which were owed to Plaintiff. Plaintiff’s Amended Complaint alleged six counts for: (1) conversion; (2) violation of Florida Civil Theft Statute; (3) breach of trust/constructive fraud; (4) recovery of unpaid wages; (5) breach of Employee Compensation Contract; and (6) breach of Investment Agreement. Defendant moved to dismiss the Amended Complaint and for partial summary judgment arguing, among other things, that Defendant’s claim for conversion is barred because the claim is already addressed by the terms of the contracts between the parties.
The Court observed that Tiara did not negate common law contract principals and agreed with Justice Pariente’s concurrence, which recognized that common law contract principles behave similarly to the economic loss rule, in that, for a plaintiff in contractual privity to bring a valid tort claim, he must still prove the tort is independent of any breach of contract. Thus, the Court held, that even in light of Tiara, fundamental contract principles continue to bar a tort claim where a defendant has not committed a breach of duty independent of his breach of contract. As such, the Court held that because the conversion claim as to Plaintiff’s unpaid wages were not beyond and independent from Defendant’s alleged failure to comply with the terms of the parties’ contracts, the Plaintiffs claim for conversion was barred.
36. Greenberg v. Pike Electric Corp., No. 8:14-cv-795-T-33TBM, 2015 WL 477370 (M.D. Fla. Feb. 5, 2015)
M.D. Florida (Hernandez Covington, J.)
February 5, 2015
Plaintiff initiated an action for unpaid overtime pursuant to the Fair Labor Standards Act. Defendants filed an Amended Answer and Affirmative Defenses, which included counterclaims for conversion, fraud, and unjust enrichment based upon Plaintiff allegedly falsely reporting his time. Plaintiff argued that Defendant’s fraud claim was barred by the economic loss rule. The Court, however, held that Plaintiff was relying on authority that pre-dated Tiara, which held that the application of the economic loss rule is limited to products liability cases. As such, the Court held that the economic loss rule does not bar Defendant’s fraud claim.
37. Surety Bank v. Dunbar Armored, Inc., No. 14-81368-CIV (S.D. Fla. Feb. 25, 2015)
S.D. Florida (Hurley, J.)
February 5, 2015
Plaintiff and Defendant entered into a Central Vault Agreement, whereby Defendant agreed to deliver cash on behalf of Plaintiff to its customers. One of the customers listed for delivery was UR Check Cashing. Subsequently, UR Check Cashing closed its retail store operations and moved its office to second floor interior corridor. UR Check Cashing informed Defendant of the change of address and Defendant agreed to deliver cash to the new location without first informing Plaintiff. The change in delivery by UR Check Cashing coincided with IR Check Cashing launching a fraudulent bulk checking-buying scheme, which caused Plaintiff to lose $820,279.51 in monies delivered by Defendant. Plaintiff alleges that had it known that UR Check Cashing had moved its operation to an interior corridor of a building, that it would have immediately discovered the fraudulent scheme. Plaintiff filed suit against Defendant for breach of express contract, reformation of contract, and negligence.
Defendant argued that Plaintiff’s negligence claim was barred under Florida’s independent tort rule. The Court held that the independent tort rule posits that “where a breach of contract is combined with some other conduct amounting to an independent tort, the breach can be considered negligence. The Court, however, found that Plaintiff failed to point to any authority, which would support a duty on the part of Defendant to monitor or report suspicious customer activity. As such, the Court held that Plaintiff’s claim for negligence failed.
38. Marian Farms, Inc. v. SunTrust Banks, Inc., 135 So. 3d 363 (Fla. 5th DCA 2014)
5th Circuit (Griffin, J.)
January 3, 2014
Plaintiff alleged in its Fourth Amended Complaint that it allegedly suffered damages when Defendant allowed fraudulent or unauthorized conduct of an employee. The trial court dismissed Plaintiff’s Fourth Amended Complaint because it found that the Plaintiff failed to allege the basis for any theory of liability or independent duty owed to the Plaintiff by Defendant that was distinct from its depositor relationship. The Fifth Circuit, however, reversed the order, finding that the Plaintiff alleged independent torts and causes of action separate from Defendant wrongful disbursement of funds on deposit.
39. Carl’s Furniture, Inc. v. APJL Consulting, LLC, No. 15-30023-CIV, 2015 WL 1467726 (S.D. Fla. Mar. 30, 2015)
S.D. Florida (Altonaga, J.)
March 30, 2015
In order to facilitate the closing of its three furniture stores in Broward County, Plaintiff entered into an agreement with Defendant, whereby Defendant would be Plaintiff’s exclusive agent in conducting sales and auction of Plaintiff’s merchandise, furnishings, fixtures and equipment. Plaintiff later discovered that Defendant had mis-credited Plaintiff’s furniture auction sales to Defendant’s account. Despite Plaintiff’s demands, Defendant refused to provide certain accounting and sales reconciliations. Plaintiff, therefore, filed an action is state court alleging: (1) breach of contract; (2) an accounting; (3) deceit; and (4) breach of a letter agreement.
Defendant filed a Notice of Removal, asserting subject matter jurisdiction pursuant to the Court’s diversity jurisdiction on the basis of the Melendez Defendants (who are employees of the Defendant company) fraudulent joinder. Plaintiff filed a motion requesting the case to be remanded to state court because Plaintiff has stated a colorable claim for deceit against the Melendez Defendants. Defendant argued that Plaintiff cannot assert a deceit claim against an employee of a company because the deceit claim is not separate or distinct from the breach of contract claim asserted against the company.
The Court disregarded the cases cited by Plaintiff, which follow Justice Pariente’s concurrence in Tiara, because in those cases the parties were in contractual privity, and here the Plaintiff was not in privity with the Melendez Defendants. The Court then analyzed a case cited by Defendant, Ben-Yishay v. Mastercraft Dev., LLC, in which the federal court applied the economic loss rule even though the parties were not in contractual privity. The Court noted that although Justice Pariente’s concurrence in Tiara suggests that Ben-Yishay is still good law, the Florida Supreme Court has not adopted Justice Pariente’s concurrence as controlling law. Therefore, the Court held that because there is tension between the authorities relied upon by Plaintiff and Defendant, the Court must resolve any uncertainties in Plaintiff’s favor. As such, the Court held that Plaintiff could proceed with its deceit claim.
40. Burdick v. Bank of America, N.A., No. 14-62137-CIV-COHN, 2015 WL 1780982 (S.D. Fla. Apr. 14, 2015)
S.D. Florida (Cohn, J.)
April 14, 2015
Plaintiff originally obtained a mortgage with the now defunct Countrywide Home Loans, Inc. (“Countrywide”). Defendant Bank of America, N.A. (“Bank of America”) purchased Countrywide and took over servicing the debt. Plaintiff alleges that Bank of America wrongfully charged Plaintiff for force-placed insurance. Bank of America rejected Plaintiff’s attempt to make his regular mortgage payment and initiated foreclosure proceedings. Defendant Green Tree Servicing, LLC (“Green Tree Servicing”) later took over the mortgage and continued the foreclosure proceeding. The Plaintiff alleged that Green Tree Servicing and Defendant Green Tree Insurance Agency (“Green Tree Insurance”) wrongfully force-placed and charged Plaintiff for additional insurance on the property. The Plaintiff also alleged that he notified Green Tree Servicing that the additional force-placed insurance was improper, but Green Tree Servicing failed to conduct an investigation in response to the letter. Plaintiff then filed suit alleging: (1) violation of the Federal Fair Debt Collections Practices Act against Green Tree Servicing; (2) violation of the Real Estate Settlement Procedures Act against Green Tree Servicing; (3) negligence against Green Tree Servicing; (4) negligence against Bank of America; and (5) tortious interference against both Green Tree Servicing and Green Tree Insurance. Defendants moved to dismiss Plaintiff claims.
The Court dismissed the Plaintiff’s negligence claims because the claims should have sounded in contract rather than in negligence. The Court held that only when the breach of contract is attended by some additional conduct which amount to an independent tort that such a breach can constitute negligence. Here, Plaintiff alleges that Bank of America and Green Tree Servicing violated their duties to properly service Plaintiff’s mortgage, which duties arise from the mortgage contract and promissory note. As such, the Court held that Plaintiff had not alleged that Defendants’ purported negligence is independent of any breach of contract claim as Florida law requires pursuant to Tiara.
41. Tran Chiropractic Wellness Center, Inc. v. Aetna, Inc., No. 8:14-cv-47-T-36EAJ, 2015 WL 2026681 (M.D. Fla. Apr. 30, 2015)
M.D. Florida (Honeywell, J.)
April 30, 2015
Plaintiffs are chiropractic facilities. Plaintiffs allege that they provide medically necessary and appropriate chiropractic and related services to patients covered under healthcare plans issued by Defendant. Defendant regularly paid bills for services rendered by Plaintiffs to patients. But, beginning in October 2012, Aetna “flagged” all bills submitted by Plaintiffs. By “flagging” the Plaintiffs’ accounts, Aetna now required the receipt of all records concerning any chiropractic or medical treatment procedures before supposedly processing Plaintiffs’ accounts for payment. Despite Plaintiffs providing all the required documents, Defendant falsely denied all claims. Plaintiffs filed an action against Defendant alleging, among other cause of action, fraud. Defendant moved to dismiss Plaintiffs’ count for fraud contending that the fraud claim is barred because it is based on the same underlying facts as the breach of contract claim.
The Court held that the economic loss rule applies only to product liability cases as held in Tiara. In addition, the Court held that even relying on Justice Pariente’s concurring opinion in Tiara, which states that “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,” the fraud claim survives because it is not based on the same facts as the breach of contract claims. Therefore, the Court denied Defendant’s Motion to Dismiss.
42. Cafaro v. Zois, No. 15-CV-80150, 2015 WL 3821752 (S.D. Fla. Jun. 2, 2015)
S.D. Florida (Bloom, J.)
June 2, 2015
This case involves a dispute over the breach of a rent-to-own agreement involving the sale and lease of a multi-million dollar condominium. In the purchase agreement, Defendant promised to deliver to Plaintiff marketable title to the property. Prior to the parties execution of the Agreement, the property was encumbered by a mortgage held by SummitBridge Investments, LLC (“SummitBridge”) securing loan obligations owed by Defendant in excess of $7.9 million. Prior to the closing of the purchase agreement, Summit Bridge initiated foreclosure proceeding against Defendant. In the foreclosure action, the court appointed a receiver and ordered that purchase agreement with Plaintiff could not be consummated without approval from SummitBridge and an order from the Court. In addition, unknown to Plaintiffs, the Defendant owed the IRS $3,600,177.77 in delinquent taxes. Moreover, prior to the closing, and after the foreclosure action was initiated by SummitBridge, Defendant granted a second mortgage on the property to Apple Chase Investors, LLC.
As a result of the foregoing, Plaintiff sent a letter to counsel for Defendant demanding adequate assurance that Defendant would be able to deliver marketable title to the property. Plaintiff also notified Defendant that he was suspending performance under the purchase agreement. Thereafter, the closing date came and went without Defendant transferring to Plaintiff marketable title to the property.
Plaintiff alleges that Defendant knew that he could not deliver marketable title and had no intention to deliver marketable title, but rather Defendant intended to fraudulently induce Plaintiff into entering the purchase agreement and to make payments under the agreement. Also, Plaintiff alleged that Defendant anticipatorily breached the purchase agreement. Defendant moved to dismiss Plaintiff’s complaint for failure to state a cause of action.
As to the fraud claim, the Court recognized that the Supreme Court limited the application of the economic loss rule to products liability cases. Recognizing that Tiara did not upset fundamental contractual principals, which continue to delineate the general boundary between contract law and tort law, the Court determined that a tort claim can be stated alongside a claim for breach of contract where the plaintiff has alleged conduct that does not itself constitute breach of the contract at issue. The Court noted that while Plaintiff’s allegations that Defendant falsely represented that he would deliver marketable tittle was identical to the allegations that he breached the agreement, Plaintiff’s other allegations, such as Defendant’s nondisclosure of the IRS tax delinquency, did not constitute breach of contract. As such, the Court held that Plaintiff’s claim for fraud was not barred by “what remains of the economic loss rule” because the Plaintiff stated a claim for fraud in the inducement separate and apart from his claim for the breach of the agreement because Plaintiff’s allegations
43. Kolmat Do Brasil, LDTA v. Evergreen United Investments, LLC, No. 14-81320-CIV, 2015 WL 3606277 (S.D. Fla. Jun. 8, 2015)
S.D. Florida (Marra, J.)
June 5, 2015
Plaintiff Kolmat Do Basil, LDTA (“Kolmat”) is a Brazilian corporation whose business involves construction of luxury resorts in Brazil and Central America. Plaintiff Berneri is the manager of Kolmat. During 2013, Plaintiff began plans to build a resort in Brazil. Defendant Mariani approached Berneri with an opportunity to secure a loan to fund the resort. The parties enter into an investment agreement, whereby Evergreen would loan Kolmat $30 million at a 4.5% interest rate, and Kolmat agreed, as a condition precedent to the loan, to invest $3 million into units of Defendant GSA Income and Development Fund, LP (“GSA”). Then, after Kolmat deposited the $3 million dollars, the loan was never issued to Kolmat. Plaintiffs allege that the loan was merely a conspiracy by Defendants to steal Plaintiffs funds.
Defendant Admiral moved to dismiss Plaintiffs claims for fraud in the inducement and fraudulent misrepresentation on the additional basis that these claims are barred by the economic loss doctrine. The Court noted that in Tiara, the Florida Supreme Court held that the economic loss rule only applies to product liability claims. The Court also noted that the Eleventh Circuit in Lamm v. State Street Bank and Trust held that Tiara “may have left intact a separate hurdle, namely that a ‘party still must demonstrate that … the tort is independent of any breach of contract claim.’” The Court held that it would defer addressing the doctrine at this time based on lack of clarity in the Second Amended Complaint coupled with the lack of clarity of the Florida economic loss rule as identified in Lamm.
44. Miller v. Samsung Electronics America, Inc., No. 14-4076, 2015 WL 3965608 (D.N.J. Jun. 29, 2015)
D. New Jersey (Salas, J)
June 29, 2015
Plaintiff is a Florida resident who purchased a Chromebook. Defendant is a New York corporation, with its principal place of business in New Jersey, who advertises, markets, sells or offers for sale a variety of consumer electronic, including the Chromebook. Plaintiff alleges that Defendant advertised that the Chromebook has a USB 3.0 SuperSpeed port, even though the Chromebook does not in fact have that port. Plaintiff’s amended complaint alleges seven causes of action: (1) violation of New Jersey Consumer Fraud Act, or, in the alternative, the Florida Deceptive and Unfair Trade Practices Act and Florida’s misleading advertising statute; (2) violation of the New Jersey Trust in Consumer Contract, Warranty, and Notice Act; (3) common law fraud and misrepresentation; (4) breach of implied warranties in violation of N.J.S.A.; (5) declaratory judgment; (6) breach of express warranty; (7) equitable class relief pursuant to Federal Rule of Civil Procedure 23(b)(2). Defendant moved to dismiss Plaintiff’s amended complaint.
Defendant argued that Plaintiff’s common law fraud claim is barred by the economic-loss rule. The Court recognized that Tiara recently narrowed the scope of the economic-loss doctrine to application only in the products liability context. The Court held that Defendant’s contention that Tiara eliminated any exception to the economic loss doctrine for fraudulent inducement or misrepresentation is not supported by relevant law. Instead, the Court held that such claims may be barred by the economic loss rule when they sound in products liability. The Court determined that Plaintiff’s fraud claim does not arise out of the products liability context because Plaintiff’s allegations are not that the Chromebook suffers from a defect in design or manufacturing, but rather that Defendant specifically marketed the Chromebook as containing a USB port that it does not have. As such, Plaintiff’s fraud claim is not limited by the economic-loss doctrine.
45. Lucarelli Pizaa & Deli v. Posen Construction, Inc., No. 2D14-4311, 2015 WL 4923706 (Fla. 2d DCA Aug. 19, 2015).
An employee of Defendant allegedly damaged a natural gas line resulting in an interruption of gas service to a sizeable region. Plaintiffs claim that they lost profits in their respective businesses because the gas supply to their buildings was interrupted. Plaintiffs attempted to certify a class of commercial gas users. The trial court denied the motion for certification, finding that a majority of the class members suffered no injury. Plaintiffs appealed the trial court denial.
The Court held that the trial court’s decision was not error because a cause of action in negligence requires proof of actual loos or damage. The Court noted that over the years, courts have expanded the tort of negligence by creating duties to protect plaintiff in situation that do not result in personal injury or property damage. In Curd v. Mosaic Fertilizer, 39 So. 3d. 1216 (Fla. 2010), the Supreme Court of Florida permitted fisherman to recover in negligence for purely economic losses when the fishermen’s livelihood was threatened by pollution. Also, in Tiara, the Supreme Court of Florida limited the economic loss rule in the context of the liability of an insurance broker. The Court recognized that an insurance broker, like other economic professionals, fits into a special professional category where the standard of care includes a duty to protect the economic interests of clients or affected parties. The Court questioned whether the Supreme Court in Curd or Tiara intended to allow customers of a local utility company who have suffered only economic loss to sue every contractor or automobile driver that negligently ruptures a gas line, knocks down a power pole, or otherwise disrupts utility service. The Court held, however, that this issue was not within the scope of the appeal.
- Lefevre v. La Cote Basque Winehouse, No. 8:15-cv-1428-T-23TBM, 2015 WL 6704107 (M.D. Fla. Nov. 3, 2015).
November 3, 2015
Plaintiff was employed by Defendant as a server for approximately three years until the termination of his employment in April of 2015. Plaintiff brought suit against Defendant alleging violation of the Fair Labor Standards Act and civil theft. Defendant moved to dismiss Plaintiff’s complaint, alleging that because a contractual relationship exists between the parties, Plaintiff’s claim for civil theft should be barred by the economic loss rule. The Court held that Tiara receded from prior Florida Supreme Court rulings to the extent that they applied the economic loss rule to cases other than products liability cases. The Court further held that because the action did not involve products liability, the economic loss doctrine is inapplicable.
- Stone Invest Dakota, LLC v. Bastos, No. 15-61406-CIV-DIMITROULEAS, 2015 WL 6997979 (S.D. Fla. Nov. 12, 2015)
S.D. Florida (Dimitrouleas, J.)
November 12, 2015
Defendant was a licensed Florida real estate broker and president of Paul Real Estate. Paul Real Estate was not registered with the Florida Department of Business and Professional Regulations as a licensed real estate broker. Defendant, under the umbrella of Paul Real Estate, profited from the sale of real estate investment opportunities in North Dakota and Montana Oil Fields to Plaintiff. Defendant’s activities have since been branded a Ponzi scheme. In reliance upon multiple misrepresentations by Defendant, plaintiff invested more than $452,000. Some of the money was swallowed by the Ponzi scheme, but a portion of the money was returned to Defendants and was supposed to be held in an escrow account on behalf of Plaintiff. Plaintiff’s money, however, vanished from the bank account. Plaintiff alleged that as a result of Defendant’s fraudulent misrepresentations, inducements, negligence, and related activities in connection with the sale of the subject real estate investment opportunities, Defendant was responsible for the investment losses suffered by Plaintiff, as well as the dissipation of Plaintiff’s money that was allegedly held in escrow.
Defendant contended that Plaintiff’s claims for breach of fiduciary duty, negligence conversion, negligent misrepresentation, and fraudulent misrepresentation were all barred by the economic loss rule. The Court, however, rejected Defendants argument. The Court held that Tiara receded from prior rulings to the extent that they applied the economic loss rule to cases other than those involving products liability. Because this action did not involve products liability, the Court held that the economic loss doctrine was inapplicable. The Court also held that even before Tiara, Plaintiff’s claims for breach of fiduciary duty, conversion, and fraudulent misrepresentation would not have been barred by the economic loss doctrine. In addition, Plaintiff did not plead the existence of a written contract between Plaintiff and Defendant, nor did he plead sufficient fats to demonstrate that Plaintiff and Defendant were in contractual privity. As such, the Court denied Defendant’s motion to dismiss.
- Prewitt Enterprises, LLC v. Tommy Constantine Racing, LLC, No. 4D11-4208, 2016 WL 313954 (Fla. 4th DCA Jan. 27, 2016)
District Court of Appeal of Florida, Fourth District (Forst, J.)
January 27, 2016
Plaintiff sought to join a championship auto-racing team that was already fully funded. Defendant invited Plaintiff to join his team. Defendant specifically told Plaintiff that he did not require Plaintiff’s money in order to run the team, and indicated that he was already fully funded. The parties entered into a written agreement, which contained a requirement that Plaintiff pay Appellee nearly one million dollars and did not contain an integration clause. Before the first race, Defendant called Plaintiff and informed him that the team would not be racing because Defendant did not have the money necessary to pay for certain components of the car. Plaintiff then terminated the contract and file suit against Defendant for: (1) fraudulent inducement based upon Defendant’s misrepresentation of his finances; and (2) breach of contract for failure to provide a team.
At trial, the jury found for Plaintiff on both counts. Post trial, Defendant moved for judgment notwithstanding the verdict, which the judge granted based upon the economic loss rule. Plaintiff appealed the trial court’s grant of judgment notwithstanding the verdict.
Although the trial court relied on the economic loss rule in granting Defendant’s motion for judgment notwithstanding the verdict, the parties agreed on appeal that the economic loss rule no longer applied. Defendant, however, argued that Justice Pariente’s concurrence the Tiara case makes clear that a tort must still be independent from a contractual breach under the common law. The Fourth District Court of Appeal held that Defendant’s false representations were of present fact, and, therefore, constituted fraud in the inducement. As such, the Court held that the fraudulent misrepresentations did not merge with the breach of contract claim, and the independent tort doctrine did not support the trial court’s grant of Defendant’s motion for judgment notwithstanding the verdict.
52. Thermoset Corp. v. Bldg. Materials Corp. of Amer., No. 14-60268 CIV-COHN/SELTZER, 2014 WL 11775929 (S.D. Fla. Jun. 4, 2014)
Southern District of Florida (Cohn, J.)
June 4, 2014
Plaintiff is a roofing contractor and was hired to install a roof system at an airport in Nassau, Bahamas. Plaintiff consulted with Defendant, a manufacturer of roofing material, regarding the appropriate materials to be used for the project. Defendant recommended that Plaintiff use a particular water-based adhesive to secure the roofing membrane to the substrate. After installation, areas of the roof became detached. Defendant inspected the roof and realized that the adhesive was defective. Thereafter, Plaintiff obtained a substitute adhesive and repaired and replaced large portions of the roof.
Although Defendants accepted return of some of the defective adhesive and paid to provide repair-related material to Plaintiff, Plaintiff contended that it had not been fully reimbursed for its losses. As such, Plaintiff commenced an action against Defendant for several claims including breach of implied warranty and negligent misrepresentation. Defendant moved to dismiss Plaintiff’s claims, including dismissal of the negligent misrepresentation claim based on Florida’s economic loss rule.
Plaintiff conceded that the facts of the case, which involve damages resulting from product defects, fall within the scope of the economic loss rule. Plaintiff argued, however, that its claim for negligent misrepresentation fell within the negligent misrepresentation exception to the rule. The Court decided, however, to follow the reasoning of Burns v. Winnebego Industries, Inc. and Apriglianp v. Amer. Honda Motor Co., which barred the plaintiff’s negligent misrepresentations claims because the alleged claims did not cause damages beyond those provided by warranty law. As such, the Court dismissed Plaintiff’s negligent misrepresentation claim because the warranty claim and the negligent misrepresentation claim relied on the same basic facts and harm.
53. Azure, LLC v. Figueras Seating U.S.A., Inc., No. 12-cv-23670-UU, 2013 WL 12093811 (S.D. Fla. Jul. 18, 2013)
Southern District of Florida (Ungaro, J.)
July 18, 2013
Plaintiff is a manufacturer’s sales representative company. Defendant is a company that manufactures and distributes seating products. Plaintiff entered into a sales agreement with Defendant, whereby Plaintiff would act as an independent contractor with the exclusive right to market, promote and sell Defendant’s products in Minnesota, North Dakota, South Dakota, and Wisconsin. Plaintiff claimed that is successfully solicited Defendant’s seating for two projects, one in Qatar, and one in Saudi Arabia. Defendant then terminated the sales agreement without paying Plaintiff a commission for the two projects.
Plaintiff thereafter commenced an action against Defendant alleging claims for: (1) breach of contract; (2) promissory estoppel; (3) fraud; (4) negligent misrepresentation; (5) and unjust enrichment. Defendant then moved to dismiss the case, arguing that Plaintiff’s claims for fraud and negligent misrepresentation were barred by common law principles. The Court denied Plaintiff’s motion to dismiss holding that Plaintiff’s tort claims are independent from the contract claim and, therefore, are not barred by common law principles. Plaintiff alleged in its fraud claim that Defendant intentionally misrepresented its intention to compensate Plaintiff for sales on the projects, and alleged in its negligent misrepresentation claim that Defendant was negligent in its representation as to the commissions on the projects. As such, the Court held that because the fraud and misrepresentation claims were attended by some additional conduct that was not alleged with respect to the breach of contract claim, the tort claims were not barred by common law principles.
54. Brenmar Holdings, LLC v. Regions Bank, N.A., No. 15-cv-23755-GAYLES, 2016 WL 4270206 (S.D. Fla., Aug. 15, 2016)
Southern District of Florida (Gayles, J.)
August 15, 2016
Plaintiffs sought a loan to purchase and construct an office for their business, Mar’s Contractors, Inc. Plaintiffs applied for the loan under the Small Business Administration 504 Program (“SBA Program”) with Defendant, Regions Bank. On the date of the closing of the loan, Plaintiffs executed and delivered to Defendant two promissory notes with the understanding that Defendant would convert, close and process the loan to the SBA Program. Defendant, however, failed to process, convert, and/or close the loan for the SBA Program.. Defendant’s failure to process, close and/or convert the loan allowed the maturity date to expire and the loan to become due without the conversion being completed. The Plaintiffs then defaulted on the loan, and Defendant sold and assigned the loan to a third party who foreclosed on the underlying property. Plaintiffs then filed an action against Defendant for negligence and breach of fiduciary duty. Defendant moved to dismiss both claims.
As to the negligence claim, Plaintiffs alleged that Defendant breached a duty of reasonable care owed to Plaintiff to process and convert the loan to the SBA Program. The Court held that there is no tort duty to process a loan competently, and, therefore, Plaintiffs failed to identify a duty that Defendant owed them apart from those specifically granted by the contract. The Court cited to Tiara for the proposition that a breach of contract alone cannot constitute a cause of action in tort; it is only when the breach of contract is attended by some additional conduct, which amount to an independent tort, that such breach can constitute negligence.
55. Merlin Petroleum Co., Inc. v. Sarabia, No. 8:16-cv-1000-T-30TBM, 2016 WL 3126753 (M.D. Fla. Jun. 3, 2016).
Middle District of Florida (Moody, J.)
June 3, 2016
Defendant agreed in writing to repay an existing debt that he owed to Plaintiff. Defendant, however, failed to make any payment under the agreement. Plaintiff brought a cause of action against Defendant for breach of contract and fraudulent inducement. Defendant moved to dismiss the complaint.
Defendant argued that the fraudulent inducement claim is barred under Florida’s economic loss rule. The Court held that Florida law makes clear that the economic loss rule is inapplicable because Tiara limited the application of the economic loss rule to products liability cases.