Value of Severability Clause

Posted by David Adelstein on June 16, 2018
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Severability clauses have become fairly commonplace in contracts.  Cut and paste provisions.  However, these clauses can provide tremendous value.  A sample of a severability clause is as follows:

If any provision of this Agreement, the deletion of which would not adversely affect the receipt of any material benefit by or in favor of any party or substantially increase the burden of any party to this Agreement, shall be held to be invalid or unenforceable to any extent, the same shall not affect in any respect whatsoever the validity or enforceability of the remainder of this Agreement.

There are numerous ways to draft this type of clause with the essence being that if anything in the contract is deemed invalid or unenforceable, the balance of the provision and contract shall remain in full force and effect.  Such a provision, regardless of how it is worded, is known as a severability clause. 

An example of the application of the severability clause can be found in Premier Compounding Pharmacy, Inc. v. Larson, 43 Fla. L. Weekly D1340a (Fla. 4th DCA 2018), dealing with a non-compete agreement between a pharmacy and pharmacist. 

The non-compete agreement in the case contained language that the pharmacy (employer) could obtain injunctive relief without posting an injunction bond.  Requiring a temporary injunction to be posted without a bond is contrary to Florida Statute s. 542.335(j) which states in relevant part, “No temporary injunction shall be entered unless the person seeking enforcement of a restrictive covenant gives a proper bond, and the court shall not enforce any contractual provision waiving the requirement of an injunction bond or limiting the amount of such bond.”

Based on this statute, the language in the non-compete agreement that allowed the employer to move for a temporary injunction without posting a bond was not legal. 

Without going into all of the details of the case, the appellate court maintained that the language in the non-compete agreement that allowed the employer to move for a temporary injunction without posting a bond can be eliminated from the provision, with valid legal obligations remaining in the agreement, i.e., the temporary injunction can be  issued while requiring the employer to post a bond pursuant to Florida law.  

Additionally, the provision also allowed the employer to recover attorney’s fees in obtaining the injunctive relief.  The trial court denied the employer’s request for fees (although the injunction was entered) finding the provision unenforceable because of the preceding invalid sentence that allowed the employer to obtain an injunction without posting a bond.  No different than the appellate court eliminating the “without a bond” from the provision, the court held that, “because the extent of unenforceability of the provision goes solely to the ‘no bond’ requirement of the injunction, the remainder of the provision and the agreement is still enforceable, including the attorney’s fees provision.” Premier Compounding Pharmacy, Inc., supra.

Hence, while the provision at-issue was contrary to Florida law, the severability provision provided value in simply eliminating the invalid language and enforcing the remainder of the provision.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Considerations when Multiple Proposals for Settlement are Served on Separate Defendants

Posted by David Adelstein on February 17, 2019
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I have previously discussed proposals for settlement / offers of judgment (“proposals for settlement”).  A proposal for settlement is a statutory vehicle pursuant to both Florida Statute s. 768.79 and Florida Rule of Civil Procedure 1.442 to create an argument to recover attorney’s fees based on the judgment amount.  (See this article for more on proposals for settlement).

For a plaintiff (party seeking affirmative relief), the plaintiff must obtain a judgment 25% greater than the proposal for settlement amount. When there are multiple defendants, the plaintiff needs to serve a proposal for settlement on each defendant. 

In Cassedy, Jr. v. Wood,44 Fla.L.Weekly D422a (Fla. 1st DCA 2019), a landlord sued his tenants for breach of a lease when the tenants vacated the property and stopped paying rent.  The lease agreement provided that if collection was required by the landlord, the tenant was required to pay 10% of the judgment amount to cover attorney’s fees.  I have no clue why the attorney’s provision in the lease included this language versus the standard prevailing party attorney’s fees language.

The landlord, obviously knowing the lease would not make him whole for purposes of recovering his attorney’s fees based on that interesting attorney’s fees language, also served a proposal for settlement on each of his tenants.  The proposal for settlement required each tenant, independent of the other tenants, to pay the landlord $25,000.   If the landlord recovered a judgment 25% greater than any proposal for settlement amount, the landlord would now have an argument to recover his attorney’s fees from the date he served the proposal for settlement on forward.

The landlord recovered a judgment of $83,657.60 against the tenants.  The tenants were jointly and severally liable for this amount, meaning they were ALL on the hook for this total amount and the landlord could collect this judgment amount from any one or a combination of the tenants.  This makes sense since likely all of the tenants were on the lease and signed the lease.

The trial court denied attorney’s fees pursuant to the proposal for settlements, which was subject to a de novo standard of appellate review.  The appellate court reversed.

The tenants argued the separate $25,000 proposal for settlement amounts should be aggregated (totaling $75,000) for purposes of determining whether the judgment amount was 25% greater than the proposals for settlement amount for purposes of determining whether attorney’s fees should be awarded.  This was shot down on appeal.  There is no requirement that separate proposals for settlement be aggregated and there was no dispute that the landlord recovered a judgment against all the defendants ($83,657.6) 25% greater than the $25,000 proposal for settlement amounts, especially since all of the tenants were jointly and severally liable for the judgment.

The tenants also argued that the landlord could not recover attorney’s fees pursuant to the lease and also through a proposal for settlement.  This was shot down on appeal.  “Based on the imposition of a penalty pursuant to section 768.79 [Florida Statutes] and its mandatory application if all requirements are met, we find a party is not precluded from receipt of attorney’s fees under a contract and the [proposal for settlement] statute simultaneously.”  Cassedy, Jr., supra.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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A Party may Not Expand the Scope of Judicial Review of an Arbitration Clause

Posted by David Adelstein on October 14, 2018
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Arbitration is a creature of contract.  This means if you are going to arbitrate a dispute, as opposed to litigating a dispute, there must be an agreement to arbitrate.  However, whether a dispute should be arbitrated pursuant to the terms of the contract is an area that has been heavily litigated for a couple of reasons: 1) a party does not want to arbitrate the dispute and, therefore, files a lawsuit versus a demand for arbitration and 2) an opposing party that has been sued wants to enforce an arbitration provision in a contract.  As a result, an order granting or denying arbitration is an appealable non-final order

In a recent construction dispute between a general contractor and its millwork subcontractor, National Millwork, Inc. v. ANF Group, Inc., 43 Fla.L.Weekly D2207a (Fla. 4th DCA 2018), the subcontractor filed a lawsuit against the general contractor and the general contractor’s payment bond.  The general contractor moved to stay the litigation and compel arbitration pursuant to the arbitration provision in the subcontract.  The subcontractor argued that the arbitration provision was unenforceable, and, therefore, void, because it expanded the scope of judicial review after an arbitrator renders an arbitration award contrary to the Revised Florida Arbitration Code in Florida Statutes Chapter 682 (and, specifically, Florida Statute s. 682.014). 

The arbitration clause in the subcontract empowered the court to address on judicial review any failure by the arbitrator to properly apply the law and if the court or arbitrator failed to properly apply the law then this was subject to appellate review. 

This clause was creating an appellate basis to challenge an arbitration award based on a party’s position that the arbitrator did not correctly apply the law.  However, challenging an arbitrator’s award is very limited to discrete statutory circumstances and a party’s position that the arbitrator did not correctly apply the law is not one of them.   For this reason, the millwork subcontractor claimed the arbitration provision is void against public policy because it expanded the statutory circumstances to challenge an arbitration award set forth in the Revised Florida Arbitration Code.  The appellate court agreed: “A party may not expand the scope of judicial review of an arbitration agreement.”  National Millwork Inc., supra

The contract had a severability clause, an important clause in contracts.  Based on the severability clause, the appellate court remanded the issue back to the trial court to determine whether the unenforceable language in the arbitration clause that expanded judicial review of an arbitrator’s award could be severed from the clause such that the parties are still required to arbitrate without the expanded judicial review.   In other words, the appellate court wanted the trial court to determine whether severing the unenforceable language would still retain the essence of the arbitration clause or whether the entire clause was unenforceable because the offending language was integral to the agreement to arbitrate.  See National Millwork, Inc. supra, citing Obolensky v. Chatsworth at Wellington Green, LLC, 240 So.3d 6 (Fla. 4th DCA 2018).

It would seem that the offending language expanding the scope of judicial review of an arbitration award could be, and should be, severed.  This is the value and point of a severability clause in a contract.  It is uncertain why the appellate court did not make this ruling instead of remanding the matter back to the trial court which could lead to a further appeal.  Severing the offensive language still requires the parties to arbitrate, which is the basis of the arbitration clause, but without the appellate recourse / judicial review of a party challenging the arbitrator’s award based on an incorrect application of law. 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Leading Questions Forming Basis of Appeal

Posted by David Adelstein on August 07, 2016
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During a direct examination at trial, a party will always tiptoe on the fine line of asking the witness leading questions in order to elicit the desired testimony.  Leading questions, in most circumstances, are objectionable during direct examination because it allows the lawyer asking questions to basically testify while leading the witness to the answer he or she is seeking.   Look, a lawyer will ask leading questions if he/she can get away with it—until the trial court sustains objections.  But, just because a trial court sustains an objection does not necessarily mean the lawyer will stop asking leading questions during direct examination.  If a lawyer can get away with leading a witness during direct examination to elicit the testimony needed, the lawyer will do so and probably should do so. 

When do leading questions in a civil trial become so over-the-top to warrant a new trial? They really do not! “[L]eading questions do not result in an error that will warrant a new trial.” Moore v. Gillet, 96 So.3d 933, 944 (Fla. 2d DCA 2012).

In Moore, during the defense, direct examination of a treating doctor was being conducted. The doctor was serving as a defense witness. The trial court sustained numerous objections that the defense was leading the defense witness. At some point, and despite there not being an objection or motion for mistrial by the plaintiff, the trial court terminated the defense’s questions of its witness due to the persistent leading questions.

At the conclusion of the trial, the trial court ordered a new trial upon motion by the plaintiff. One of the reasons the trial court granted the new trial was due to the defense’s persistent leading questions. The defense appealed the trial court granting a mistrial.

With respect to leading questions, the appellate court held that the issue was not properly preserved for appeal because the plaintiff did not move for a mistrial at the time of the questions. The trial court ceasing the defense’s examination of a defense witness due to leading questions was a severe remedy that the plaintiff agreed to. The plaintiff did not make a contemporaneous motion for mistrial based on the leading questions, but rather, accepted the trial court terminating the defense’s direct examination.   But, even if the plaintiff did contemporaneously move for a mistrial, the leading questions would not warrant a new trial because leading questions generally do not form the basis of error for purposes of an appeal.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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The Nonparty Fabre Defendant

Posted by David Adelstein on February 20, 2016
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I want to discuss the concept of a “Fabre defendant.” This is an important concept in negligence cases, particularly personal injury and property damage cases.

A ‘Fabre defendant’ is a nonparty defendant whom a party defendant asserts is wholly of partially responsible for the negligence alleged [by the plaintiff].Salazar v. Helicopter Structural & Maintenance, Inc., 986 So.2d 620, n.1 (Fla.2d DCA 2007).

As further explained in Florida Statute s. 768.81(3):

(3) Apportionment of damages.–In a negligence action, the court shall enter judgment against each party liable on the basis of such party’s percentage of fault and not on the basis of the doctrine of joint and several liability.

(a) 1. In order to allocate any or all fault to a nonparty, a defendant must affirmatively plead the fault of a nonparty and, absent a showing of good cause, identify the nonparty, if known, or describe the nonparty as specifically as practicable, either by motion or in the initial responsive pleading when defenses are first presented, subject to amendment any time before trial in accordance with the Florida Rules of Civil Procedure.

2. In order to allocate any or all fault to a nonparty and include the named or unnamed nonparty on the verdict form for purposes of apportioning damages, a defendant must prove at trial, by a preponderance of the evidence, the fault of the nonparty in causing the plaintiff’s injuries.

This means in order to allocate fault to a Fabre defendant (a nonparty) the named defendant must a) plead the fault of the nonparty and identify the nonparty in an affirmative defense, and, importantly b) prove at trial by a preponderance of evidence the fault of the nonparty (the Fabre defendant) causing plaintiff’s injuries in order to get that nonparty on the verdict form for purposes of having the jury allocate damages to the nonparty.  

Simply identifying the nonparty in an affirmative defense is not good enough. The burden of proof is on the named defendant to prove the nonparty’s negligence at trial to get that nonparty on the verdict form as a Fabre defendant. R.J. Reynolds Tobacco Company v. Grossman, 96 So.3d 917, 919-20 (Fla. 4th DCA 2012) (nonparty Fabre defendant may not be included on verdict form until defendant proves nonparty’s negligence at trial) . However, a named defendant cannot rely on the vicarious liability of a nonparty to prove that nonparty’s fault in order to get that nonparty identified on the verdict form. See Nash v. Wells Fargo Guard Services, Inc., 678 So.2d 1262, 1263 (Fla. 1996) (security company could not name hospital that hired it as Fabre defendant since hospital would only be vicariously liable based on the negligence of the security company).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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How the Defense of Set-Off Applies

Posted by David Adelstein on December 25, 2015
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Set-off is a popular topic or defense raised in civil disputes.

In contract actions, set-off must be raised as an affirmative defense and proven at trial (and determined by the trier of fact) or else the defendant waives the right to assert set-off. See Felgenhauer v. Bonds, 891 So.2d 1043, 1045 (Fla. 2d DCA 2004).

What about tort actions such as negligence actions in disputes involving personal injury or property damage? For instance, say a plaintiff sues three defendants in negligence for the same damage. Prior to trial, the plaintiff settled with two of the defendants for a total of $100,000 and gave the defendants releases. The remaining defendant proceeds to trial but a) thinks its liability is no more than $100,000 and b) wants to reap the benefit of the $100,000 already obtained by the plaintiff from the other two defendants. In tort actions, set-off is not an affirmative defense to be determined by the trier of fact “but is a determination regarding damages to be made by the court after the [jury] verdict is rendered [in a jury trial].” Felgenhauer, 891 So.2d at 1045.

On this point, Florida Statutes s. 46.015 and 768.041 similarly state:

 

s. 46.015

(1) A written covenant not to sue or release of a person who is or may be jointly and severally liable with other persons for a claim shall not release or discharge the liability of any other person who may be liable for the balance of such claim.

(2) At trial, if any person shows the court that the plaintiff, or his or her legal representative, has delivered a written release or covenant not to sue to any person in partial satisfaction of the damages sued for, the court shall set off this amount from the amount of any judgment to which the plaintiff would be otherwise entitled at the time of rendering judgment.

(3) The fact that a written release or covenant not to sue exists or the fact that any person has been dismissed because of such release or covenant not to sue shall not be made known to the jury.

 

s. 768.041

(1) A release or covenant not to sue as to one tortfeasor for property damage to, personal injury of, or the wrongful death of any person shall not operate to release or discharge the liability of any other tortfeasor who may be liable for the same tort or death.

(2) At trial, if any defendant shows the court that the plaintiff, or any person lawfully on her or his behalf, has delivered a release or covenant not to sue to any person, firm, or corporation in partial satisfaction of the damages sued for, the court shall set off this amount from the amount of any judgment to which the plaintiff would be otherwise entitled at the time of rendering judgment and enter judgment accordingly.

(3) The fact of such a release or covenant not to sue, or that any defendant has been dismissed by order of the court shall not be made known to the jury.

 

Typically, these set-off statutes apply when the plaintiff received money from a defendant / tortfeasor who was vicariously liable for the other defendant’s acts. Felgenhauer, 891 So.2d at 1045-46.   (The vicariously liable party is responsible to the plaintiff to the same extent as the primary [defendant] actor; both are jointly liable for all of the harm that the primary actor has caused. See Grobman v. Posey, 863 So.2d 1230 (Fla. 4th DCA 2003)). Stated differently, “[s]ettlement proceeds must be set off against the jury verdict where defendants [the settling defendant and non-settling defendant] are liable for the same injury.” Yellow Cab Co. of St. Petersburg, Inc. v. Betsey, 696 So.2d 769, 772 (Fla. 2d DCA 1996).

The objective is to prevent the plaintiff from obtaining a windfall by obtaining overlapping compensation for the same damages. Cornerstone SMR, Inc. v. Bank of America, N.A., 163 So.3d 565, 569 (Fla. 4th DCA 2015). But, where there are separate and distinct claims involving different elements of damages, set-off is inappropriate. Gordon v. Marvin M. Rosenberg, D.D.S., P.A., 654 So.2d 643, 645 (Fla. 4th DCA 1995). For this reason, when settling with one defendant in a dispute under different theories of liability /claims involving different elements of damages, it is important to allocate the settlement amount in the release agreement between the claims. “Where a settlement is undifferentiated and general [and not allocated amongst the claims], the aggregate of the amount of the settlement should be set off against the judgment [to prevent the appearance of double recovery for the same damages].” Cornerstone SMR, 163 So.2d at 569.

Let’s break this down as applied to the above hypothetical. First, releasing the two defendants prior to trial does not operate as a release of the remaining defendant. Second, the court shall set-off any amount the plaintiff received from the other two defendants in the judgment the plaintiff receives since it involves the same damage, meaning the set-off would reduce the jury verdict and would be embodied in the final judgment. And, third, the fact that the other two defendants were released and then dismissed from the action in consideration of $100,000 prior to trial shall not be disclosed to the jury because this does not need to be proven at trial by the remaining defendant or impact any rulings at trial.  

On the other hand, if there was an argument that there were separate theories of liability / claims against the other two defendants and potentially different elements of damages, the plaintiff would want to allocate the settlement consideration in the release agreement to these separate theories of liability / claims to create the argument that set-off is not appropriate. (See also this article for an example regarding the application of set-off in a multiparty construction dispute.) 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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Proving Affirmative Defenses and the Affirmative Defense of Comparative Negligence

Posted by David Adelstein on April 01, 2015
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When a defendant is sued, the defendant will typically assert affirmative defenses (or defenses to the claims asserted by the plaintiff).  Just like a plaintiff has the burden of proof to prove its claims against a defendant, the defendant has the burden of proof to prove its affirmative defenses.

The recent opinion in Bongiorno v. Americorp., 40 Fla L. Weekly D760c (Fla. 5th DCA 2015) exemplifies that a defendant that asserts an affirmative defense has the burden of proving that defense.   This case was a personal injury negligence case. The defendant argued that the plaintiff’s negligence contributed to her negligence, i.e., the affirmative defense of comparative negligence.   The reason the defendant argued this is to reduce its damages exposure.

For instance, let’s assume the jury found that the plaintiff’s damages were $100,000 but that the plaintiff was 50% responsible for her damages. This would have the effect of the court reducing the plaintiff’s damages by 50% or, in this hypothetical, $50,000, in the judgment.

Florida’s standard jury instruction dealing with comparative negligence provides:

501.4 COMPARATIVE NEGLIGENCE, NON-PARTY FAULT AND MULTIPLE DEFENDANTS

In determining the total amount of damages, you should not make any reduction because of the negligence, if any, of (claimant). The court will enter a judgment based on your verdict and, if you find that (claimant) was negligent in any degree, the court in entering judgment will reduce the total amount of damages by the percentage of negligence which you find was caused by (claimant).

[The court will also take into account, in entering judgment against any defendant whom you find to have been negligent, the percentage of that defendant’s negligence compared to the total negligence of all the parties to this action.]*

*Use the bracketed paragraph above only when there is more than one defendant; the reference to “responsibility” in this additional instruction is designed for use in strict liability cases.

However, the point is that even if you wanted to assert comparative negligence as an affirmative defense, the burden would be upon you (the defendant) to prove this defense. The Court in Bongiorno explained:

Comparative negligence is an affirmative defense; thus, the party asserting the defense bears the burden of proving that the negligence of the other party was a cause of the accident.

***

The four elements necessary to prove a negligence claim [and, thus, a comparative negligence defense] include: (1) a duty to conform to a certain standard of conduct; (2) a breach of the duty; (3) proximate cause; and (4) damages.

Bongiorno, supra (internal quotations and citations omitted).

Notably, in Florida, when it comes to negligence claims, a defendant can only be liable for his/her/its pro rata percentage of fault. See Fla. Stat. 768.81(3) (“In a negligence action [or an action based on a theory of negligence], the court shall enter judgment against each party liable on the basis of such party’s percentage of fault and not on the basis of the doctrine of joint and several liability.”). This means that joint and several liability no longer applies in negligence actions; this is why a defendant’s allocated percentage of fault, especially when there are multiple defendants, becomes important. With the affirmative defense of comparative negligence, as mentioned above, the defendant’s pro rata percentage of fault may be reduced based on the pro rata percentage of fault caused by the plaintiff that contributed to the plaintiff’s damages.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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