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Archive for the ‘Professional Liability and MPL’ Category

Florida Legislature Rewrites Laws for Condo Community Associations

Posted on: June 22nd, 2017

By: Melissa A. Santalone

Florida House Bill 1237, a bill which proposed significant changes to several laws governing condominium community associations, passed both houses of the Florida Legislature in the 2017 legislative session and is expected to go into effect as of July 1, 2017. The bill, written in response to public outcry over corruption and criminal activity in condo communities in South Florida, revised aspects of the Florida Statutes  to prohibit certain conflicts of interest for condo boards and board members; apply criminal penalties for certain actions by board members; and impose new requirements for financial statements, recordkeeping, and elections, among other things. Here are just some of the key changes pertaining to conflicts of interest and newly criminalized activities:

Conflicts of Interest

  • An association is prohibited from hiring an attorney who also represents the management company for the association.
  • A board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title in lieu of foreclosure.
  • An association, unless it is a timeshare condo association, may not employ or contract with any service provider that is owned or operated by a board member or officer, or any person who has a financial relationship with a board member or officer, or certain relatives of board members or officers, unless the board member or officer owns less than 1 percent of the equity shares.
  • If, after transfer of control to the association, 50% or more of the units in the community are owned by a party contracting to provide maintenance or management services to an association or by a board member or officer of such a party, the contract may be cancelled by majority vote of the unit owners other than the contracting party or the officer or board member of the contracting party.
  • Certain disclosures must be made by any officer or director proposing to engage in activity that is a conflict of interest. If the board votes against taking the action, the officer or director must notify the board in writing of his or her intention not to take the action or to withdraw from office. If the board finds an officer or director violated this provision, the officer or director shall be deemed removed from office.
  • A rebuttable presumption of a conflict of interest exists if, without prior notice, (1) a director or officer of an association or certain of their relatives enters into a contract for goods or services with the association or (2) a director or officer or certain of their relatives holds an interest in a corporation or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

Newly Criminalized Activity

  • Officers, directors, and managers are prohibited from soliciting, offering to accept, or accepting any kickback for his or her own benefit or that of his or her immediate family, and violation of this provision is considered a violation of the criminal law. A violation of this provision may also subject an officer, director, or manager to civil penalties.
  • Forgery of a ballot envelope of voting certificate used in an election is a felony of the third degree and punishable by up to 5 years in prison.
  • The theft or embezzlement of funds of a condo association is considered a theft and punishable pursuant to Fla. Stat. § 812.014.
  • The destruction of or refusal to allow inspection or copying of an official record of a condo association in furtherance of a crime is punishable as tampering with physical evidence or as obstruction of justice.
  • An officer of director charged by information or indictment with a crime referenced above must be removed from office until the end of his or her period of suspension or the end of his or her term, whichever occurs first.
  • If a criminal charge is pending against the officer or director, he or she may not be appointed or elected to a position as an officer or director of any association and may not have access to the official records of any association, except pursuant to court order.
  • If the charges against the officer or director is resolved without a finding of guilt, the officer or director must be reinstated for the remainder of his or her term in office, if any.

These changes to the laws governing condo community associations will serve to complicate board and board member compliance with the new provisions. For guidance on these changes to condo association law or any aspect of Florida law governing community associations, please contact the attorneys in FMG’s Tampa office.

Can Wrongdoers Do No Wrong?

Posted on: January 31st, 2017

By: Kevin R. Stone

In Goldstein, Garber & Salama, LLC v. J.B., the Georgia Court of Appeals was faced with a case in which a nurse anesthetist (Paul Serdula) sexually assaulted a dental patient (J.B.) while she was sedated for a surgical procedure.  Serdula pleaded guilty and went to prison.  J.B. filed a civil lawsuit against the dental practice (GGS) where the assault occurred.  At the time of trial, Serdula was not a defendant in the lawsuit.  Still, he was included on the verdict form so the jury could apportion fault between him and GGS.  Surprisingly, the jury determined that (1) Serdula, who committed the intentional assault, was 0% at fault; and (2) GGS was 100% at fault for Serdula’s actions, leaving it on the hook for the entire $3.7 million verdict.

The Court of Appeals held that the verdict was not void or plainly erroneous even though a literal reading of it indicates that Serdula, who undisputedly committed the assault, bears no fault.  In his dissent, Judge Ray astutely noted that “A finding that Serdula did not contribute to J.B.’s injuries is wholly incomprehensible.  A finding that Serdula was not at fault would logically be a finding that he did nothing wrong.  If he did nothing wrong by molesting J.B., how then can GGS be liable for negligently placing him in the position to molest her?  A finding of no fault on Serdula’s part would seemingly equate to a finding of no fault on GGS’ part.”

The issue is now before the Georgia Supreme Court (Case No. S16G0744) and the consequences of the outcome are far-reaching.  If the opinion stands as is, it allows a jury to hold an allegedly negligent actor at 100% fault for intentional, criminal acts that were undisputedly committed by someone else.  The Georgia Defense Lawyers Association (GDLA) submitted an amicus brief in support of the dissent’s view of the apportionment issue.  We will continue to follow this case and keep you updated.

For any questions, please contact Kevin Stone at kstone@fmglaw.com.

Third-Party Lending May be Bad Investment for Attorneys: Litigation Finance and Champerty Affect Validity of Fee Agreements and Ethical Duties

Posted on: November 1st, 2016

istock_000023265222_large_1By: Meaghan Londergan

Once universally disfavored, litigation finance (funding of lawsuits through third-party lending) is now commonly used to pursue litigation against well-funded defendants. However, the longstanding doctrine of “champerty” in many states provides the defense bar with a mechanism to prevent the buying and selling of lawsuits by third parties. While many jurisdictions have repealed the champerty defense, where applicable, it can result in invalid fee agreements, ethical violations and potential malpractice actions.

            Relying on the “doctrine of “champerty,” the Superior Court of Pennsylvania recently held invalid a contingency fee agreement between Bruce McKissock—an attorney at Marshall, Dehenney, Coggin & Werner—and Polymer Dynamics, Inc. (“PDI”). In 1999, McKissock—then of McKissock & Hoffman—represented PDI in a suit against Bayer Corporation in the Eastern District Court of Pennsylvania. The jury returned a verdict of $12.5 million against Bayer. In 2008, PDI and McKissock entered into a new fee agreement increasing his contingency fee to 33% and appealed to the Third Circuit. Because PDI could not afford to appeal, a third party, Litigation Fund Investors, funded the litigation in exchange for principal paid out of McKissock’s 33% contingency fee. The Third Circuit affirmed the lower court’s verdict.

            After Investors were paid out of McKissock’s fee, insufficient funds were left to pay McKissock. McKissock filed claims against the Investors in the Superior Court of Pennsylvania alleging he had a lien on the recovery funds pursuant to the fee agreement. The Court denied his claims, holding the 2008 Fee Agreement was champertous and unenforceable. In Pennsylvania, a fee agreement is invalid if: (1) an investor has no legitimate interest in a suit; (2) the investor gives money to carry out the suit; and (3) the investor is entitled to a share of the proceeds. A loan is valid if an investor has no expectation of benefiting from the litigation proceeds. Unlawful litigation finance agreements have financial and ethical implications for attorneys.

            How a state applies the champerty defense determines what agreements are enforceable and what ethical implications exist. While investors want to be informed about the lawsuit, attorneys must not waive attorney/client privilege without informed consent. Some states require an attorney to disclose this risk before entering into a litigation finance agreement. Further, litigation finance must not affect the duty owed to a client or influence a lawyer’s professional judgment.

            The Superior Court’s recent decision shows that regulation of litigation finance is alive and well in Pennsylvania. Fee agreements that involve champerty may be deemed invalid, and attorneys must always recognize privilege and duty concerns when addressing third-party financing.

 

FDA Continues to Fight the First Amendment But Facteau Deals Another Blow

Posted on: August 18th, 2016

Doctor workplace with digital tablet and stethoscope

By: Kristian Smith

Last month, a federal jury in Massachusetts acquitted two executives of medical device company Acclarent, Inc. of 14 felony counts of fraud related to off-label promotion of Acclarent’s “Stratus” device. United States v. Facteau, et al. stemmed from the distribution of Acclarent’s Relieva Stratus Microflow Spacer (“Stratus”) for off-label use. Although Stratus was cleared by the FDA as a medical device intended to maintain an opening to a patient’s sinus and provide moisture by using a saline solution, Acclarent’s CEO, William Facteau, and Vice President of Sales, Patrick Fabian, promoted the product off-label, as a steroid delivery device. The FDA claimed that Facteau and Fabian had misbranded the device and had committed fraud on the FDA by intending to use the device in a way other than its cleared use.

Although Facteau and Fabian were convicted on 10 misdemeanor counts relating to the same charges, the jury still accepted that it is not a crime for device manufacturers to make truthful, non-misleading statements about off-label use. The jury instead convicted Facteau and Fabian based on their conduct, mainly because of a violation of the Park Doctrine, which provides that responsible corporate officers can be liable for misdemeanor violations of the Federal Food, Drug and Cosmetic Act (“FDCA”) even if the corporate officer had no intent to commit, or even knowledge of, the offense.

This is only one of many recent victories for medical device companies in the off-label promotion realm.

In February, a Texas jury acquitted medical-device manufacturer Vascular Solutions and its CEO of all counts in a criminal case that alleged the company illegally promoted Vari-Lase, a device to treat varicose veins, off-label. The Vascular Solutions case was particularly memorable for the trial judge’s jury instruction that it is not a crime for a device company to provide doctors with truthful, non-misleading information about off-label product uses. This was a significant blow to the FDA’s long-standing practice of discouraging (and prosecuting) off-label promotion.
In 2015, in Amarin Pharma, Inc. v. FDA, a federal judge in New York found that Amarin, a drug manufacturer, was entitled to engage in truthful and non-misleading speech promoting the off-label use of its medical device, and such speech could not form the basis of a prosecution for misbranding. This decision was based in large part on the Second Circuit’s 2012 watershed decision in U.S. v. Caronia, where the Court held that to avoid infringing on the First Amendment, misbranding provisions of the FDCA could not be construed to prohibit and criminalize truthful off-label promotion of FDA-approved drugs.

Even with more and more federal courts embracing Caronia, the FDA continues to prosecute drug and device manufacturers (and their corporate officers) for off-label promotion. With the decisions in Facteau and Vascular Solutions, though, it looks like the FDA will have a more difficult path to prosecution than ever before.

Ninth Circuit Issues Two Significant FDCPA Rulings To Debt Collector Law Firms

Posted on: August 18th, 2016

option 3By: Bill Buechner

The Fair Debt Collection Practices Act requires that debt collectors send a notice to the consumer containing certain required disclosures, either in the “initial communication” with the consumer in connection with the collection of a debt or within 5 days thereafter. 15 U.S.C. § 1692g.  In this validation notice, the debt collector must provide several disclosures, including the amount of the debt owed, the name of the creditor to whom the debt is owed, and the debt collector’s obligation to provide a verification of the debt if the consumer disputes in writing all or part of the debt within 30 days of receiving the notice.    Federal courts throughout the country have been divided as to whether these disclosure requirements apply only to the initial debt collector, or whether subsequent debt collectors must also comply with these disclosure requirements.   For example, unpublished decisions issued by the Third Circuit and Tenth Circuit previously have held that the disclosure requirements set forth in § 1692g only apply to the initial debt collector.

The Ninth Circuit, however, recently issued a decision holding that subsequent debt collectors must comply with the notice provisions of § 1692g. Hernandez v. Williams, Zinman & Parham, — F.3d —, 2016 WL 3913445 (9th Cir. July 20, 2016).  The Ninth Circuit held that the language of § 1692g was ambiguous as to whether it applies to just the initial debt collector or whether it also applies to subsequent debt collectors.  However, the Ninth Circuit concluded that the overall structure and purpose of the FDCPA demonstrates that Congress intended § 1692g to apply akso to subsequent debt collectors. Id. at *3.   In particular, the Ninth Circuit expressed concern that a contrary ruling would create significant loopholes that could hinder consumers’ efforts to dispute their debts or obtain verification of their debts. Id. at *5-8.  The Ninth Circuit also concluded that requiring subsequent debt collectors to comply with § 1692g would further the remedial purpose of the FDCPA by giving consumers updated information concerning their debts and additional opportunities to verify their debts after they have changed hands. Id. at *8-9.  Significantly, the Federal Trade Commission and the Consumer Financial Protection Bureau, which have regulatory and enforcement authority under the FDCPA, submitted amicus briefs arguing that subsequent debt collectors must comply with the notice provisions of § 1692g.

The Ninth Circuit’s ruling abrogates several district court decisions within the Ninth Circuit that held that only the initial debt collector was required to comply with the notice provisions of § 1692g. Accordingly, debt collectors that contact consumers who reside within the Ninth Circuit should send notices that comply with § 1692g even if they are not the first debt collector attempting to collect on the debt at issue.

Debt collectors who contact consumers in other jurisdictions (even those where there is favorable case law) should re-assess whether they should send notices to consumers that comply with § 1692g even if they are not the first debt collector that has attempted to collect on the debt.    To the extent that the FTC and/or the CFPB decide to file amicus briefs in other cases, courts in other jurisdictions may be persuaded to follow Hernandez and hold that subsequent debt collectors must comply with the notice provisions of § 1692g.

Another Ninth Circuit panel very recently addressed the FDCPA’s requirement that debt collectors “disclose in subsequent communications that the communication is from a “debt collector.” 15 U.S.C. § 1692e(11).   In Davis v. Hollins Law, — F.3d —, 2016 WL 4174747 (9th Cir. August 8, 2016), the debt collector and the consumer had been negotiating a possible resolution of the debt in a series of phone calls and email exchanges over the course of approximately two weeks.   At that point, the debt collector left a voicemail message with the consumer that did not expressly state that the call was from a debt collector.   Instead, the voicemail message stated, “Hello, this is a call for Michael Davis from Gregory at Hollins Law.   Please call sir, it is important, my number is 866-513-5033.”

The consumer filed suit, asserting that this voicemail message violated § 1692e(11) because it did not reveal that the voicemail message was from a debt collector. The Ninth Circuit reversed the district court’s grant of summary judgment in favor of the consumer and held that the voicemail message did not violate § 1692e(11).  The Ninth Circuit held that, given the extent of prior communications between the consumer and the debt collector (and its employee in particular), the voicemail message was sufficient to disclose that the communication was from a debt collector. Id. at *4. Thus, the Ninth Circuit reiterated that § 1692e(11) does not require the debt collector to use any specific language as long as it is sufficient to disclose that the communication is from a debt collector. Id.

Davis reached a commonsense conclusion under the facts of the case.  However, the safest course of action for debt collectors is to include an explicit statement in any voicemail message left with the consumer that the communication is from a debt collector, even if the debt collector has had an ongoing dialogue with the consumer regarding the debt.