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Archive for the ‘Business Litigation’ Category

Pre-Suit is the New Lawsuit: Florida Supreme Court holds Insurance Carrier Had Duty to Defend Policy Holder during Pre-Suit Proceedings

Posted on: December 22nd, 2017

By: Jake Carroll

Given the pace of construction in Florida over the past three decades, it should come as no surprise that the Sunshine State has a robust statutory scheme for construction defect claims. Indeed, Florida’s Construction Defects Statute, Chapter 558, Florida Statutes (“FCDS”), outlines a complex pre-suit procedure requiring owners to send a “notice of claim” to contractors while identifying any alleged construction and/or design defects in “reasonable detail” before a lawsuit for such defects can be brought. The FCDS also details procedures for building inspection, destructive testing, obtaining construction documents and maintenance records, and utilizing consultants. Under the FCDS, contractors are required to provide a written response to the notice, to accept or dispute each reported defect, and may include offers to repair, partial payment, or partial settlement.

Contractors may represent themselves during the notice process, but do so at their own peril. Instead, contractors are encouraged to retain legal counsel as soon as possible following receipt of a 558 Notice.

However, in the case of Altman Contractors, Inc. (Altman) v. Crum & Forster Specialty Insurance Company (C&F), 42 Fla. L. Weekly S960b, Altman forwarded the notices to its carrier (C&F), seeking coverage and defense under its CGL policy. C&F initially denied Altman’s request on the basis that the Chapter 558 process did not trigger the duty to defend.

The Florida Supreme Court disagreed with C&F, holding that the insurance carrier’s duty to defend may be triggered when a contractor receives a construction defect notice, depending on the language of the policy and the allegations in the notice. The ruling impacts all stakeholders in the construction industry, including owners, condominium associations, developers, contractors, and insurers.

The decision encourages insurer participation in the pre-suit process for resolving defect disputes and may result in more out-of-court resolutions—avoiding complex and expensive litigation that burdens litigants and the court system.

Insurance trade groups warn the decision could drive up premiums for some CGL policies within the construction industry, while other industry professionals note the potential for bad faith claims if carriers refuse to participate in Chapter 558 proceedings where a construction defect claimant is seeking covered damages from the policyholder.

At the very least, contractors should review their CGL policies, comply with the terms of the policies, and forward any FCDS notices to their carriers before issuing a response. Depending on the specific policy language, costs incurred during the Chapter 558 process may be the insurance carrier’s responsibility.

It is also worth noting that parties may choose to opt out of FCDS, if agreed to in writing beforehand. Such provisions are commonly included in construction contracts.

Jake Carroll represents owners, contractors, and design professionals in all construction matters including contract negotiations, payment disputes, and claims resulting from delays, contract terminations, and defective work. Mr. Carroll is licensed to practice in both Georgia and Florida. If you have any questions or would like more information, please contact Mr. Carroll at [email protected].

Another Super Bowl in New Jersey? Unlikely!

Posted on: December 19th, 2017

By: Joshua G. Ferguson

A Third Circuit panel issued an opinion last week in an NFL fan’s class action alleging the National Football League violated New Jersey’s consumer fraud law by failing to make enough 2014 Super Bowl tickets available for sale, finding that the economic factors presented created a plausible theory that the league’s conduct inflated prices.

The three-judge panel reversed the district court’s decision to dismiss the claim brought by Josh Finkelman alleging that the NFL’s lottery ticket policy for the Super Bowl distributed a fraction of the tickets to the public. Plaintiff relied on a statute which requires the sale of 95 percent of all tickets of any event held in New Jersey.  In their amended complaint Plaintiff cited the opinion of sports economist Dr. Daniel Rascher’s that Finkelman paid more on the secondary market for his tickets to Super Bowl XLVIII than he would have had the NFL not withheld more than 5 percent of tickets from sale to the public, and in doing so violated the New Jersey Consumer Fraud Act.

In rendering the decision, The Third Circuit deferred the action to the Supreme Court of New Jersey to certify the meaning of the New Jersey ticket law statute and determine if the NFL’s violation falls within that statute.

For further information or for further inquiries involving hospitality law, you may contact Joshua Ferguson of Freeman Mathis & Gary, LLP, at [email protected].

Data Privacy-As the Spokeo Turns

Posted on: August 29th, 2017

By: Jonathan M. Romvary

As we all know, the data privacy industry has been paying close attention to ongoing saga of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), including this firm’s blog, most recently here, here and here. That spotlight is shining a little brighter on the Ninth Circuit in connection with a ruling earlier this month.

Earlier this month, the Ninth Circuit issued its most recent Spokeo decision, holding, on remand, that the plaintiff, Thomas Robins, satisfied the harm requirement for Article III standing in his FCRA claim against Spokeo. Writing for the Court, Judge Diarmuid F. O’Scannlain set forth a two-step inquiry to determine whether a plaintiff satisfies Article III standing:

(1) Was the statute at issue established to protect the plaintiff’s concrete rights?
(2) Did the specific procedural violations cause or present a material risk of actual harm to plaintiff’s concrete rights?

In regards to the first step, the Court concluded that the FCRA was intended to protect consumers from the dissemination of false information regarding credit ratings, and as such the statute was protecting a concrete right. Judge O’Scannlain reasoned that the information that was allegedly falsely reported by Spokeo is of the type that would be important to those reviewing a consumer report. Next, the Court determined that the alleged FCRA violations presented a legitimate and material risk of actual harm to the Plaintiff. It is important to note that Judge O’Scannlain’s opinion is similar to Justice Ginsburg’s dissent to the Supreme Court’s recent majority opinion, focusing its analysis on the potential harm to the plaintiff’s financial prospects in the workforce as a result of the allegedly false information.

Plaintiffs in data breach litigations are likely rejoicing in the Ninth Circuit’s most recent ruling. Judge O’Scannlain’s opinion effectively dilutes the requirement that concrete harm requirement to standing, and making it easier to maintain their litigation. Relying upon the opinion, an affected individual may argue that, similar to Robins, the potential harm to their financial prospects as a result of a data breach involving credit information is sufficient to satisfy Article III standing. The mere prospect of a harm may now be sufficient to maintain standing, at least before the Ninth Circuit.

However, it is not all bad news for defendants in data breach litigations as it is likely that application of the Ninth Circuit’s ruling will be limited. The fact-intensive analysis by the Ninth Circuit suggests that it will be difficult if not impossible to apply the ruling in a class action context. Further, the Ninth Circuit’s opinion clearly distinguished between threat of harm and threat of the statutory violation itself: while a threatened statutory violation would not satisfy standing requirements, the court concluded that an actual violation accompanied by a threatened harm was sufficient. This likely limits data breach plaintiffs until they can show an actual statutory violation by the defendant company. Finally, this opinion does nothing to bridge the significant circuit split interpreting Spokeo (see In Re: Horizon Healthcare Services Inc. Data breach Litigation, No. 15-2309 (3d Cir. 2017) v. Gubala v. Time Warner Cable, Inc., No. 16-2613 (7th Cir. 2017)).

Unfortunately, we likely wait for the inevitable petition to the U.S. Supreme Court for more guidance.

Remember, the Cyber, Data Security, and Privacy practice group attorneys are here to assist you in responding to data security incidents. Please contact Jonathan Romvary at [email protected] if you have any questions or would like more information on how this developing issue of standing may affect your company. 

Will the Georgia Supreme Court Accept this Rehearsal Dinner Invitation?

Posted on: July 14th, 2017

By: Jake Carroll

On June 30, 2017, the Georgia Court of Appeals released a divided opinion addressing the sufficiency of evidence needed to sustain a claim for food poisoning. The case arises out of a BBQ style rehearsal dinner (the #1 “Fun Rehearsal Dinner Theme” by the where, according to the opinion, 17 guests became ill after eating the food of Big Kev’s BBQ, a Morgan County establishment. Some of the guests later sued, alleging that the food prepared and served by Big Kev’s at the dinner had been negligently prepared, was unsavory and contaminated, and made them ill in the days after the dinner.

On appeal, the Court issued a 5-4 decision holding that a person “may prevail in food poisoning cases in Georgia by establishing that the food at issue was defective or unwholesome.” Georgia law also requires that “in the absence of direct evidence of the defectiveness of the food, recovery can be supported by circumstantial evidence only if every other reasonable hypothesis as to the cause of the [persons]’ illness can be excluded by the evidence brought forward. . . .” The Court upheld the trial court’s decision that the guests did not satisfy their burden of proof.

While this holding is not a notable change in Georgia law, two separate dissents reveal strong disagreement on the bench as to whether the trial court improperly “invaded the province of the jury” or misinterpreted the evidence in failing to satisfy the burden of proof. In either event, attorneys for the rehearsal dinner guests filed their notice of intent to appeal to the Georgia Supreme Court on July 10, 2017, and practitioners are eager to see if the dissent got it right. However, Rule 40 of the Rules of the Supreme Court of Georgia dictates that the high court is unlikely to review the case as to the sufficiency of the evidence, but may review the opinion on the issue of whether the trial court improperly acted as the jury.

For any questions, please contact Jake Carroll at [email protected].

Philadelphia Court Granted Summary Judgment in $18 Million Legal Malpractice Case Rooted in the WorldCom Bankruptcy

Posted on: July 6th, 2017

By: Erin Lamb

A blast from the dot-com bubble past took some of its final breaths in a Philadelphia courtroom recently, when a judge granted summary judgment in a legal malpractice action with its roots in the 2002 bankruptcy of telecommunications giant WorldCom. (The bankruptcy was the largest in U.S. history, until 2008, when it was overtaken in rapid succession by Lehman Brothers and Washington Mutual.)

In Communications Network International, LTD v William Mark Mullineaux, Esquire, et al, the Philadelphia Court of Common Pleas (Philadelphia Court) held that, although Plaintiff’s former attorney may have violated the standard of care on multiple occasions, the client, Communications Network International, LTD (CNI), did not conduct reasonable diligence when it failed to read the Opinion from 2006 that gave rise to the action.

Mr. Mullineaux’s representation of CNI began in March 2001. In February 2001, MCI WorldCom Communications, Inc. (World Com) sued CNI for breach of contract in the United States District Court for the Eastern District of Pennsylvania. CNI hired Mr. Mullineaux to represent them in the litigation. In response, Mr. Mullineaux filed a breach of contract claim on behalf of CNI against WorldCom for “slamming,” a practice that CNI claimed constituted, essentially, the theft of tens of thousands of CNI telephone customers. WorldCom soon filed for bankruptcy. Consequently, CNI’s claims were handled by the bankruptcy judge. In 2006, the bankruptcy court denied CNI’s Motion for Judgment on the Pleadings, granted in part WorldCom’s Motion for Judgment on the Pleadings, and dismissed CNI’s claims. The Court specifically noted the slamming allegations were not properly pled.

At deposition, CNI’s CFO, Mr. Cooke, admitted that Mr. Mullineaux sent him a copy of the bankruptcy court’s opinion back in 2006, shortly after it was issued. He testified that he did not read it. In September 2008, Mr. Mullineaux filed an appeal of the bankruptcy court decision to the United States District Court for the Southern District of New York. Two years later, in September 2010, the Southern District of New York affirmed the bankruptcy court’s rulings, including the holding that the filed-rate doctrine barred most of CNI’s claims Mr. Mullineaux did not send the Order and Opinion to Mr. Cooke until the 30 day appeal period passed. He secured leave from the district court to file the CNI appeal nunc pro tunc; however, the United States Court of Appeals for the Second Circuit dismissed CNI’s appeal as untimely filed and brought the appeals to an end. Consequently, CNI filed its legal malpractice action on December 9, 2014. CNI claimed damages in the approximate amount of $18,000,000.

The Defendants sought summary judgment, based on the running of statues of limitations. The Philadelphia Court of Common Pleas agreed, holding held that the statute began to run when the bankruptcy court ruled against CNI in 2006. The Court relied on Pennsylvania law, which has never tolled the statute of limitations in a legal malpractice claim until appeals have been exhausted. The Court did note that Mullineaux may have violated the standard of care on multiple occasions.

The Court went on to take the client to task for its failure to conduct reasonable diligence. CNI alleged it had lost almost $20 million by 2010, which the court noted constituted a “a hefty incentive for the exercise of attention, knowledge, intelligence and judgment by corporate officers with their own fiduciary duties to the corporation.” As a result, the Court determined that had CNI exercised reasonable diligence it should have at least read the courts’ Opinions denying its claims.

For any questions, please contact Erin Lamb at [email protected].