Yacht Market in Brazil Reaches High Tide in Sales

The Associated Press has reported today that booming commodity prices fueled by Chinese demand, along with some of the world's biggest offshore oil discoveries, have created an expanding, new class of wealthy Brazilians. They, in turn, are boosting the international yacht market even as it suffers in the U.S. and Europe. The number of millionaire households in South America's biggest national is forecast to more than triple by 2020. Their spending, along with that of a newly swollen middle class, has protected Brazil more than any other nation in the region from economic shocks since 2008.

A May report on the geography of wealth from the U.S.-based consulting from Deloitte forecasts that U.S. and European national will remain the global centers for wealthy households during the next decade. Nonetheless, emerging market economies are reportedly likely to prove to be more dynamic in terms of growth rates, creating significant opportunities for wealth managers seeking to gain a share of these potentially lucrative markets. The boom in Brazil's yacht market attests to that growth.

Annual boat sales in Brazil have grown up to 30 percent annually since 2008. Meanwhile, in the more traditional boating markets in the U.S. and Europe, sales of high-end boats have dropped by 70 percent, analysts have reported.

If you are interested in reading the entire article published in the Daily Business Review, please feel free to contact me at miamipandi@comcast.net or motero@houckanderson.com.

Pushing the Limits of Contractual Indemnity

Encountering indemnity agreements in contracts and leases is common, and parties and the courts are constantly exploring the limits to which a party can be indemnified, even if the incident occurred because of its own negligence and/or on property it exclusively controlled.  One such case was recently decided in Constable v. Northglenn, LLC, 2011 Lexis 232 (Colo. March 21, 2011).  While this case was not decided in Florida, it is instructive on why such clauses attract litigation.

Facts

Northglenn was the owner of a shopping center and Constable leased commercial space from Northglenn.  A lawsuit was filed by a woman who slipped on ice in the shopping center parking lot.  The tenant, Constable, asserted that the indemnity provision in the lease favoring Northglenn was void as against public policy because it failed to clearly express an intent to indemnify Northglenn for its own negligence, and because it attempted to relieve Northglenn of “nondelegable duties” for which Northglenn had exclusive control - the care and maintenance of the parking lot.  The lease provision provided that Constable would indemnify Northglenn for liability for bodily injury sustained by anyone on the “premises” or elsewhere in the shopping center as long as the person was present to visit Constable’s shop or as a result of her business.  The only real exception was that there was no obligation to indemnify for Northglenn’s gross negligence or intentional torts; a high if not insurmountable hurdle in a normal premises liability case. 

Moreover, the lease required Northglenn as owner of the shopping center to maintain the community areas, including the parking lot.  However, Constable’s only remedy for failure to fulfill this obligation was for Constable to cause the maintenance to be performed by Constable and deduct any expense from the rent. 

Holding

The trial court held that the indemnity provision was unenforceable and granted summary judgment in Constable’s favor.  However, on the first appeal, the Colorado Court of Appeals reversed in favor of Northglenn finding that the lease clearly reflected an intent that Constable indemnify Northglenn for injuries sustained in community areas by her customers.  The first appellate court also concluded that the indemnity provision did not violate a duty made “nondelegable” by statute and therefore did not violate public policy.  The Colorado Supreme Court granted a petition to review on the question of whether the indemnity provision was or was not void as against public policy.  The Colorado Supreme Court essentially agreed with the appeals court and upheld the indemnity provision in favor of Northglenn.

The Colorado Supreme Court stated that Colorado public policy prevented an agreement to indemnify for damages resulting from someone’s own intentional or willful wrong acts.  However, this rule did not apply to agreements to hold a party harmless for its own negligence.  The Court stated that, in commercial settings, it has been willing to uphold broad language of indemnity, including language which generally provided that Constable would indemnify Northglenn for liability which could only have arisen due to Northglenn’s own negligence.  In short, when it comes to ordinary negligence claims and concepts, commercial parties were held to be free to contract in a broad fashion.  There clearly are legal tensions between private parties’ right to contract, and courts and legislators restricting indemnity clauses as a matter of public policy.  

The Supreme Court also rejected the argument that the indemnity provision violated the Colorado Premises Liability Act, which imposed a nondelegable duty on Northglenn to use reasonable care in maintaining its parking lot for the protection of shopping center patrons.  The Court found that an agreement to indemnify against liability for the breach of a duty was not the same as delegating that duty to another.  The purported distinction that the indemnity provision did not shift a “non-delegable” duty from Northglenn (the landlord) to Constable (the tenant) is simply wrong from a practical standpoint.  An indemnity agreement in a commercial lease was held to be an appropriate way of allocating risk of injury to patrons who are present to do business with a tenant and of inducing a landlord to enter into the lease.  The Court held that the provision did not violate general Colorado public policy or the particular statute in question, and the judgment was affirmed denying the tenant’s motion for summary judgment and providing indemnity to the landlord. 

Florida law

A thorough analysis of the applicable case law throughout the United States indicates divergent views on indemnity. Even so, most courts do agree upon the basic premise that: "A contract of indemnity will not be construed to indemnify the indemnitee against losses resulting from his own negligent acts unless such intention is expressed in clear and unequivocal terms." 41 Am. Jur. 2d Indemnity section 15 at p. 700. 

The basic premise under Florida law is that if the indemnitee is seeking to hold the indemnitor liable for the indemnitee's sole negligence, general clauses which "indemnify...against any and all claims" or equivalent language is not clear enough to authorize indemnification for negligence committed by the indemnitee alone. See, University Plaza Shopping Center, Inc. v. Stewart, 272 So. 2d 507 (Fla. 1973).
 Thoughts

Broad indemnity language in commercial contracts and leases may be given enforcement. Absent statutes which have been adopted in several states, broad indemnity provisions will be enforced as a matter of common law.

Courts may narrowly construe even state remedial statutes to preserve indemnity clauses in commercial contracts and leases. 

While the concept seems counter-intuitive, courts will enforce provisions indemnifying a party against its own negligence. 

Cases such as this have historically been what leads legislators to enact limitations and restrictions on indemnity language in certain situations such as construction contracts, residential real estate leases, commercial real estate leases, and the like.  Overbearing indemnity clauses inevitably lead to legislative limitations.

In challenging such an indemnity provision, it is helpful if a party can find some expression of statutory or legislative intent which directly or implicitly voids such an indemnity provision, such as the asserted Colorado Premises Liability Act in this case which was held not to be applicable, but an excellent counter-argument nonetheless.

If you are interested in obtaining copies of the decisions cited or wish to reach me, you may do so at miamipandi@comcast.net or motero@houckanderson.com.

Broward County Approves MOU Regarding Containerized Cargo at Port Everglades

Today, the Broward County Board of County Commissioners today unanimously approved a Memorandum of Understanding (MOU) with the Florida East Coast Railway (FEC) to construct and operate an Intermodal Container Transfer Facility (ICTF) on 42.5 acres of land at Port Everglades.

The ICTF in the Southport area of Port Everglades will facilitate the transfer of containerized cargo through the Port onto the FEC rail line via a connecting rail spur. The proposed ICTF is unique compared to similar facilities in other ports in that both domestic and international cargo would be handled on the site. These cargos are currently being handled on a 14-acre site on Andrews Avenue owned by the FEC. A combined near-dock facility at the Port should result in competitive transfer and shipping fees for port clients, thus increasing the Port's competitive advantage compared to other ports. Positive environmental benefits are also envisioned by the reduction of truck traffic on local roadways. By relocating from the smaller facility on Andrews Avenue, Route 84 highway congestion will also be reduced.

In addition, the project is anticipated to create 760 construction jobs and the cargo activity passing through the ICTF is expected to support 2,100 local/regional jobs in the long term.

Commissioners noted that the ICTF has been a long-standing goal for Broward County.  Business leaders from the community provided supporting comments emphasizing the project's value to creating jobs and bolstering economic growth in the region.

The MOU calls for a 30-year agreement between the FEC and Broward County with two 10-year renewal options.  Broward County will contribute the land for the project and participate in joint marketing efforts.  The total cost of the project including land value is $72.8 million, of which $18 million would be funded by the Florida Department of Transportation grants.  Now that the MOU has been approved, FEC will move forward to secure an additional $30 million State of Florida Infrastructure Bank loan.  The balance of the funding is from FEC equity.

In July 2011, the Florida Department of Transportation (FDOT) broke ground for the Eller Drive Overpass, which is a critical first step in moving the ICTF forward by allowing for an at-grade rail connection directly into Southport. This project is fully funded by the state and is estimated to cost $42 million. FDOT's Eller Drive Overpass project will consist of a four-lane bridge overpass on the primary entrance to the Port. This overpass will allow for construction of an at-grade rail spur to Southport while facilitating unrestricted movement to and from container and cruise terminals and to I-595 and the Florida Turnpike highway systems. The project also involves the widening, realignment, and construction of service roads parallel to the Overpass.

Port Everglades is one of the nation's leading container ports and a trade gateway to Latin America and Caribbean. Port Everglades has direct access to the interstate highway system, is within two miles of the Florida East Coast Railway hub and is just one mile from the Atlantic Shipping Lanes. Ongoing capital improvements and expansion ensure that Port Everglades will have the ability to handle future growth in container traffic. A world-class cargo handling facility, Port Everglades serves as an ideal point of entry for products shipped around the world.

More information about Broward County's Port Everglades and a video illustrating the Port's 20-year Master/Vision Plan is available on the Internet at http://www.porteverglades.net/ and http://www.portevergladesmasterplan.com/.

If you wish to reach me, you may contact me at miamipandi@comcast.net or motero@houckanderson.com.

Arbitration Award in Yacht Construction Contract Upheld

In CAT CHARTER, LLC v. SCHURTENBERGER, 23 Fla. L. Weekly Fed. C106a (11th Cir. July 13, 2011), the U.S. Court of Appeals for the Eleventh Circuit issued a detailed opinion on what is required in rendering an arbitration award. It is a "must read" for lawyers and parties that insert arbitration clauses in their yacht construction clauses.

Facts

This case arises out of a dispute over the construction of a yacht. Daniel and Patricia Ryan are Massachusetts citizens who, in anticipation of retirement and with an eye toward the construction of a vessel, formed a Delaware limited liability corporation, Cat Charter, LLC (“Cat Charter”). The Ryans, through Cat Charter (collectively, the “Plaintiffs”), agreed to pay Mutihull Technologies, Inc. (“MTI”), a Florida business owned solely by Walter Schurtenberger (collectively, the “Defendants”), to construct a vessel to be known as the Magic. But the Defendants never delivered the Magic, despite receiving roughly $2 million from the Plaintiffs. As a result, the parties entered into binding arbitration pursuant to their written agreement, which stated in pertinent part:

"The parties agree that any dispute between themselves arising out of this agreement or the performance thereof shall be settled by binding arbitration according to the rules and procedures of the American Arbitration Association and that proper venue of such arbitration shall be Key West, Florida. Further the parties agree that the substantially prevailing party shall recover the cost of such arbitration and reasonable attorney's fees; the arbitration award may be entered in any court of competent jurisdiction."

The Plaintiffs filed their Statements of Claim with the American Arbitration Association (the “AAA”), assertingd six separate claims against the Defendants: (1) deceptive and unfair trade practices under Fla. Stat. § 501.201; (2) rescission; (3) breach of contract; (4) fraud or alternative misrepresentation; (5) breach of fiduciary duty; and (6) civil remedy for criminal practices under Florida law. The Defendants answered, denying the Plaintiffs' claims and arguing that the construction of Magic had proceeded according to the terms of the "cost plus" contract entered into in 2005. Both parties requested an award of reasonable attorneys fees.  

Following discovery, a five-day hearing, and post-trial briefing, the Panel issued a unanimous arbitration award (the “Award”) on December 7, 2009. The Award stated, in pertinent part:

"1. On the claim of the Claimants, CAT CHARTER, LLC; DANIEL RYAN; and PATRICIA RYAN (hereinafter collectively “Claimants”), for violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), we find that Claimants have proven their claim against Respondents, MULTIHULL TECHNOLOGIES, INC. (hereinafter “MTI”), and WALTER SCHURTENBERGER (“SCHURTENBERGER”), by the greater weight of the evidence;

2. On the claim of the Claimant, CAT CHARTER, LLC, for breach of contract by Respondent MTI, we find that Claimant, CAT CHARTER, LLC has proven its claim against MTI by the greater weight of the evidence;

3. All other claims of the Claimants are hereby denied. All counter-claims of the Respondents, MTI and SCHURTENBERGER, are denied;

4. On the claim of the Claimants for entitlement to attorney's fees in this arbitration proceeding and entitlement to an award of arbitration expenses and costs, inclusive of the arbitrators' fees and costs, we find that Claimants are the substantially prevailing parties in this arbitration and are entitled to an award of such fees and costs against the Respondents, MTI and SCHURTENBERGER.

5. On the claim of the Respondents for entitlement to attorney's fees and costs in this arbitration, we find that Respondents are not the substantially prevailing parties in this arbitration, and said claim is denied;

6. On the claim by Claimants for civil theft which the Arbitrators have denied, the Arbitrators find that Claimants raised a claim that had substantial fact and legal support pursuant to Fla. Stat. § 772.104(3). More specifically, we find that the issues relating to missing resin and the cost of the skiff presented substantial fact issues raised by Claimants, justifying denial of any attorney's fees for Respondents; . . . "

The Panel then ordered the Defendants to “jointly and severally pay” the Plaintiffs more than $2 million in damages, fees, costs, and interest. The Panel also granted the Plaintiffs a first lien on the Magic.

The Trial Court

The Plaintiffs filed a motion to confirm the Award in the District Court for the Southern District of Florida. The Plaintiffs attached to this motion the Award, their Amended Statement of Claim to the Panel, and a host of other exhibits. They made no mention of the agreement requiring the Panel to provide a reasoned award, and they presented no argument regarding the sufficiency of the reasons provided. The Defendants responded with a motion to vacate the Award on the ground that the Panel exceeded its authority by failing to issue a reasoned award as required by the parties' agreement. The Defendants never complained to the Panel regarding the form of the Award or requested a modification of the Award after it was delivered; they first raised their concern over the lack of reasons provided by the Panel in their motion to vacate.

The District Court vacated the arbitration award, agreeing with the Defendants that the Panel had exceeded its powers within the meaning of the law by failing to provide a satisfactorily reasoned award. Cat Charter LLC v. Schurtenberger, 691 F. Supp. 2d 1339, 1344-45 (S.D. Fla. 2010) [22 Fla. L. Weekly Fed. D224a]. The court further ruled that remand to the Panel was barred by the operation of the common law doctrine functus officio. Id. at 1345. This doctrine means that the parties would be required to begin a new arbitration proceeding before a new panel in order to settle the controversy surrounding the Magic. In other words, the district court determined that the Award was so deficient that it warranted sending the parties back to square one, ostensibly granting the Defendants a second bite at the apple because of a perceived technical defect in the form of the Award.

The Eleventh Circuit

The Eleventh Circuit held that the Panel's actions survive scrutiny under the law. The Court reasoned "[t]he context of the Panel's statements and the fact that the Award provides detailed reasons regarding one claim, however, lead us to disagree with the Defendants. Put simply, the controversy here turned primarily upon credibility determinations made by the Panel. Either the transaction proceeded along the lines of a duly executed contract -- the Defendants' story -- or the transaction surrounding construction of the Magic was punctuated by misrepresentations and dubious behavior on the Defendants' part -- the Plaintiffs' story." The Court found that "in the swearing match between the Plaintiffs and the Defendants, the Panel found the Plaintiffs' witnesses to be more credible. We certainly cannot say that this statement is devoid of any statements offered as a justification; the reason for the Plaintiffs' victory is plainly provided."

Thus, the Eleventh Circuit reversed and remanded the trial court's decision, as  it found the Award was a reasoned one.

Conclusion

It is imperative that the parties to a contract that calls for arbitration have a clear indication of how that arbitration is to proceed. If it is under arbitration rules that allow the parties to decide how the arbitration to proceed, it is recommended that findings of fact and conclusions of law be requested, so there is some expanded reasoning as to why an arbitration panel finds as it does. Without findings of fact and conclusions of law, the courts are left to try and figure out why a panel ruled as it did.
If you are interested in receiving a complete copy of this decision or wish to reach me, you may do so at miamipandi@comcast.net or motero@houckanderson.com.

US Supreme Court Weighs In On Personal Jurisdiction Over Foreign Companies

For the first time in more than two decades, the U.S. Supreme Court has weighed in on issues of personal jurisdiction. On June 27, 2011, the Court addressed the constitutional limits of "general" and "specific" jurisdiction in Goodyear Luxembourg Tires, S.A. v. Brown, No. 10-76, 564 U.S. __ (June 27, 2011), and J. McIntyre Mach., Ltd. v. Nicastro, No. 09-1343, 564 U.S. __ (June 27, 2011).

 

In Goodyear Luxembourg Tires, S.A. v. Brown, a unanimous Court held that a court may only exercise general jurisdiction over a foreign defendant where the defendant's contacts in the forum state are "continuous and systematic." Importantly, the Court held that merely placing a product in the "stream of commerce" with the expectation that the product might be bought or sold in the forum state falls "far short" of the continuous and systematic contacts necessary to establish general jurisdiction.

In J. McIntyre Mach., Ltd. v. Nicastro, a majority of the Court agreed that a foreign defendant whose product was distributed throughout the United States and ended up in New Jersey, where it caused injury, was not subject to jurisdiction in New Jersey. Although there was no majority opinion, six justices agreed that a state court cannot exercise specific jurisdiction over a foreign manufacturer solely because it knew or should have known that its product "might" be sold in New Jersey.

1. Goodyear Luxembourg Tires, S.A. v. Brown

In Goodyear, Justice Ginsburg, writing for a unanimous Court, addressed the limits of a state court's general jurisdiction over foreign subsidiaries of a U.S. parent corporation. The Court reaffirmed its decision in International Shoe and stressed the importance of "continuous and systematic" contacts for the exercise of general jurisdiction. The case arose from a bus accident outside Paris in which two boys from North Carolina were killed. The boys' parents commenced an action for wrongful death damages in North Carolina state court. The parents alleged that the bus accident was caused by a tire failure and named as defendants The Goodyear Tire & Rubber Company ("Goodyear USA"), an Ohio corporation, and three of its subsidiaries, which were organized and operated in Turkey, France, and Luxembourg, respectively.

The subsidiaries manufactured tires primarily for European and Asian markets. These tires differ in size and construction from tires ordinarily sold in the United States. Moreover, the foreign subsidiaries were not registered to do business in North Carolina; had no place of business, employees, or bank accounts in the state; did not design, manufacture, or advertise their products in the state; and did not solicit business in the state or sell or ship tires to North Carolina customers. However, other Goodyear USA affiliates distributed a small percentage of their tires within North Carolina, generally in response to custom orders. Goodyear USA did not contest the North Carolina court's jurisdiction over it, but Goodyear USA's foreign subsidiaries maintained that North Carolina lacked adjudicatory authority over them. The foreign subsidiaries moved to dismiss the claims against them for want of personal jurisdiction. The North Carolina trial court denied the motion, and the North Carolina Court of Appeals affirmed. The North Carolina courts held that the court had jurisdiction over the foreign subsidiaries because the companies had placed their tires into the stream of commerce and allowed them to be sold in North Carolina. The North Carolina Supreme Court denied discretionary review and the U.S. Supreme Court granted certiorari.

The Court held that the connection between the foreign subsidiaries and North Carolina was limited and that it was an inadequate basis for the exercise of general jurisdiction. The Court first reviewed its decisions in Perkins v. Benguet Consol. Mining Co., 342 U.S. 437 (1952), and Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984), in which the Court addressed general jurisdiction over a foreign corporation. Based on these holdings, the Court concluded that the foreign subsidiaries' "attenuated connections to [North Carolina] fall far short of the 'the continuous and systematic general business contacts' necessary to empower North Carolina to entertain suit against them on claims unrelated to anything that connects them to the State."

The Court also reviewed the "stream-of-commerce metaphor," which is typically invoked when "a nonresident defendant, acting outside the forum, places in the stream of commerce a product that ultimately causes harm inside the forum." The Court held that the North Carolina court's stream-of-commerce analysis elided the essential difference between specific and general jurisdiction. The Court explained that the flow of a manufacturer's products into the forum may bolster an affiliation germane to specific jurisdiction, but that these ties do not warrant a determination that, based on these ties, the forum has general jurisdiction over a defendant.
Notably, the Court declined to address the respondents' alternate ground for affirming the decision below — that jurisdiction over the foreign subsidiaries was appropriate because Goodyear USA and the subsidiaries were a "unitary business."

2. J. McIntyre Mach., Ltd. v. Nicastro

In McIntyre, by a 6-to-3 vote, the Court reversed a finding of jurisdiction by the New Jersey Supreme Court over a foreign manufacturer. Justice Kennedy wrote the plurality opinion, which Chief Justice Roberts, and Justices Scalia and Thomas joined. Justices Breyer and Alito agreed that the New Jersey Supreme Court's decision should be reversed, but limited their concurrence to the Court's prior precedent and cautioned that the Court should not set down any new law until its contemporary implications are discussed. Justice Ginsburg wrote a dissenting opinion, which was joined by Justices Sotomayor and Kagan.

This case arose from injuries sustained by Nicastro, a New Jersey worker who lost four fingers while using a metal shearing machine. Nicastro commenced a products liability action against J. McIntyre Machinery, Ltd. (J. McIntyre), the manufacturer of the machine, in New Jersey state court. J. McIntyre was incorporated in England, and sold the subject machine through its exclusive U.S. distributor, McIntyre Machinery America, Ltd., which is headquartered in Stow, Ohio, to the plaintiff's employer. J. McIntyre moved to dismiss, asserting that the court lacked personal jurisdiction over it. Nicastro argued that the court had jurisdiction over J. McIntyre and primarily relied on three facts: (1) a U.S. distributor agreed to sell J. McIntyre's machines in this country; (2) J. McIntyre officials attended trade shows in several states, although not in New Jersey; and (3) at most, four J. McIntyre machines ended up in New Jersey. The trial court granted J. McIntyre's motion, finding that the English manufacturer did not have sufficient minimum contacts with New Jersey to justify the state's exercise of personal jurisdiction over it. The Appellate Division reversed and permitted the parties to conduct discovery to establish whether New Jersey had the authority to exercise jurisdiction over J. McIntyre. At the conclusion of jurisdictional discovery, the trial court again granted J. McIntyre's motion to dismiss for lack of personal jurisdiction. The Appellate Division again reversed.

The New Jersey Supreme Court granted J. McIntyre's petition for certification and held that New Jersey courts could exercise jurisdiction over J. McIntyre. In particular, the New Jersey Supreme Court found that New Jersey's courts can exercise jurisdiction over a foreign manufacturer of a product so long as the manufacturer "knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states." Applying that test, the court concluded that the manufacturer was subject to jurisdiction in New Jersey. The U.S. Supreme Court granted certiorari.

In Justice Kennedy's plurality opinion, he addressed "[w]hether a person or entity is subject to the jurisdiction of a state court despite not having been present in the State either at the time of the suit or at the time of the alleged injury, and despite not having consented to the exercise of jurisdiction." Justice Kennedy explained that, "[t]he principal inquiry in cases of this sort is whether the defendant's activities manifest an intention to submit to the power of a sovereign. In other words, the defendant must 'purposefully avail' itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." This "purposeful availment," the plurality explained, can mean advertising in the forum, shipping goods there, or otherwise "targeting" a state.

Justice Kennedy rejected Justice Brennan's theory of personal jurisdiction based on "general notions of fairness and foreseeability," which was raised in Justice Brennan's concurring opinion in Asahi. Rather, the plurality held that the touchstone of personal jurisdiction is the defendant's activities targeted at the forum state. As such, according to Justice Kennedy, a defendant's transmission of goods will only permit the exercise of jurisdiction when the defendant targeted the forum. "As a general rule, it is not enough that the defendant might have predicted that its goods will reach the forum State." Justice Kennedy emphasized that, "it is the defendant's actions, not his expectations, that empower a State's courts to subject him to judgment," and that personal jurisdiction "requires a forum-by-forum, or sovereign-by-sovereign, analysis." He recognized that this rule would allow for the possibility that "a litigant may have the requisite relationship with the United States Government but not with the government of any individual State."

Applying this rule to the matter at bar, Justice Kennedy concluded that J. McIntyre had not engaged in conduct purposefully directed at New Jersey. Therefore, New Jersey's courts lacked jurisdiction over this foreign manufacturer. Justices Breyer and Alito agreed that the New Jersey Supreme Court's decision should be reversed, but they declined to join Justice Kennedy's opinion. Rather, they found that New Jersey lacked jurisdiction by simply relying on the Court's prior decisions, none of which, they emphasized, held "that a single isolated sale, even if accompanied by the kind of sales effort indicated here, is sufficient" to establish personal jurisdiction. Justices Breyer and Alito explained, "the relevant facts found by the New Jersey Supreme Court show no 'regular . . . flow' or 'regular course' of sales in New Jersey; and there is no 'something more,' such as special state-related design, advertising, advice, marketing, or anything else." The Justices found that Nicastro failed to demonstrate any specific effort by J. McIntyre to sell in New Jersey. Thus, the Court had no need to establish "strict rules that limit jurisdiction where a defendant does not 'inten[d] to submit to the power of a sovereign' and cannot 'be said to have targeted the forum.'" Justices Breyer and Alito expressed concern about changing the law as suggested by the plurality without a better understanding of the relevant contemporary commercial circumstances. They urged the Court to revisit these kinds of "contemporary commercial circumstances" in the appropriate personal jurisdiction case, and with the participation of the solicitor general.

Justice Ginsburg filed a dissenting opinion, which was joined by Justices Sotomayor and Kagan. The dissenters would have held that the New Jersey courts did have jurisdiction over J. McIntyre. In their view, the goal of the company was "simply to sell as much as it can, wherever it can" and "to avoid product liability litigation in the United States" if at all possible. The rest of the Court, they felt, had effectively allowed foreign manufacturers to avoid the jurisdiction of state courts simply by hiring an independent distributor. Here, they contended J. McIntyre "availed itself of the market of all States in which its products were sold by its exclusive distributor," and it therefore should be subject in any of them to suits arising out of events occurring there.

Conclusion

It is significant for foreign companies that the Court addressed lower court decisions blending the concepts of specific and general jurisdiction. The Court's decision in Goodyear demonstrates that general jurisdiction requires that a corporation have "continuous and systematic" contacts with the state and that the "stream of commerce" analysis is not relevant in this context.

The Court's decision in J. McIntyre is arguably more ambiguous. For now, it is apparent that the mere use of an independent distributor to sell goods in the United States, without more, will not create personal jurisdiction over a foreign manufacturer. Consequently, this holding will make it more difficult for a plaintiff to assert jurisdiction over a component part manufacturer whose product ends up in a larger product that is sold by a distributor in a foreign state.

The Court, however, left many questions unanswered. There is still no majority agreement on the proper exercise of jurisdiction when a case presents "contemporary commercial circumstances" regarding the sale of a product. It is similarly unclear if a foreign defendant who directs his conduct at the entire United States may in principle be subject to the jurisdiction of the courts of the United States but not of any particular state, as the plurality suggests.

It should be expected that we will see more about these fundamental and important issues in the future, in the lower courts and again soon in the Supreme Court. While the Court has denied certiorari in four other personal jurisdiction cases, on June 28, 2011, the Court granted certiorari, vacating and remanding a personal jurisdiction case, Dow Chem. Canada ULC v. Fandino, No. 10-250 (U.S. June 28, 2011), to the California Court of Appeal for further consideration in light of the Court's decision in J. McIntyre. The California court's interpretation of the Court's decision in J. McIntyre will be the first of many grappling with the questions left unanswered in J. McIntyre.

If you wish to receive copies of these opinions or wish to contact me, you may do so at miamipandi@comcast.net or motero@houckanderson.com.

Offer of Judgment Invalid Where Insurer Required to Tender in Excess of Policy

In GONZALEZ v. CLAYWELL, 36 Fla. L. Weekly D1784a (Fla. 1st DCA August 15, 2011), the plaintiff issued a proposal for settlement to the defendant.  As background, the State of Florida Offer of Judgment Statute creates a right to recover reasonable costs and attorney’s fees incurred after a settlement offer is made when (1) a party has served a demand or offer for judgment, and (2) that party has recovered at trial a judgment at least twenty-five (25) percent more or less than the demand or offer. Dictiomatic, Inc. v. United States Fidelity & Guaranty Company, 127 F. Supp. 2d 1239, 1244 (Fla. 1999).

In the case at bar, the plaintiff suffered significant injuries in a vehicular collision and offered to settle her lawsuit for $240,000, if Gonzalez's insurance company, GEICO, tendered a check in the amount of $240,000 made payable to her. The offer was not accepted and, after a jury trial, the plaintiff was awarded a total judgment of $394,029.71, which was affirmed on appeal. Gonzalez v. Claywell, 24 So. 3d 1260 (Fla. 1st DCA 2009).

However, the Court found the plaintiff's proposal for settlement invalid and unenforceable. This is because it was impossible for Gonzalez to meet the conditions of the proposal. Specifically, the proposal required that GEICO, a nonparty, tender a check well in excess of its policy limits of $25,000, even though there has been no determination that GEICO is liable to pay more than its policy limits. The Court reasoned that because the proposal contained a condition that Gonzalez could not possibly perform, and divested him of independent control of the decision to settle, it was invalid and unenforceable.

If you are interested in receiving a copy of this decision or wish to reach me, you may do so at miamipandi@comcast.net or motero@houckanderson.com.

Class Action Suit Against Royal Caribbean Cruises Ltd.

The Maritime Executive reported today that all persons or entities who purchased Royal Caribbean securities from April 23, 2009 through and including July 27, 2011 ("Class Period") have filed a class action lawsuit against Royal Caribbean Cruises Ltd. and certain of its officers, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, 15 U.S.C. Sections 78j(b) and 78t(a); and SEC Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. Section 240.10b-5.

The Complaint alleges that throughout the Class Period, defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the company's business, operations, and prospects. Specifically, the defendants are alleged to have made false and/or misleading statements and/or failed to disclose that: (1) the company improperly accounted interest expenses related to the amortization of certain financing fees related to certain of the company's export credit agency guaranteed loans; (2) the company lacked adequate internal and financial controls; and (3) as a result of the foregoing, the company's statements were materially false and misleading at all relevant times.

On July 27, 2011, after the market closed, the company disclosed "an error in the previous accounting treatment of interest expense relating to its amortization of certain financing fees and has revised its past financial statements to reflect the correct accounting." As a result of the "error," the plaintiffs allege that the company admitted that it had overstated the earnings per share ("EPS") for 2009, 2010, and the first quarter of 2011 by $0.05, $0.15 and $0.06, respectively. The company has reduced its full-year earnings guidance by $0.10 per share excluding the "error," and by an additional $0.20 per share upon correcting the "error," rending the company's new outlook for 2011 EPS to a range of $2.85-$2.95, down from a previous range of $3.10-$3.30.

On this news, the company's shares declined $4.50 or more than 12.5% and closed at $31.26 the following day.

If you would like more information on this case or wish to contact me, you may do so at miampandi@comcast.net or motero@houckanderson.com.

Southern District Denies Joinder of Non-diverse Defendants in Coverage Action

In IBIS VILLAS AT MIAMI GARDENS CONDO ASS'N, INC. v. ASPEN SPECIALTY INSURANCE CO., 23 Fla. L. Weekly Fed. D21a (S.D. Fla. May 24, 2011), Judge Abalberto Jordan, President Obama's nominee for the U.S. Circuit Court for the Eleventh Circuit Court of Appeals, held that the plaintiff should not be permitted to join the additional non-diverse defendants in an attempt to defeat the court's diversity jurisdiction. This case is an important one, as insurers routinely attempt to remove cases to federal court on diversity of citizenship grounds. It is considered by most out-of-state insurers that federal court, rather than state court, is a more preferential forum for insurers.

In October of 2010, Ibis Villas filed a one-count complaint against Aspen Specialty Insurance Co. and James River Insurance Co. in Florida state court for breach of contract. Ibis Villas alleges that the defendants breached insurance policies issued to it by failing to provide coverage or payment for damages it sustained to its property on October 24, 2005, due to Hurricane Wilma. The defendants were served with the complaint on January 20, 2011, and on February 10, 2011, removed the case to this court based on diversity jurisdiction. See 28 U.S.C. § 1332.

Justice for Sale? A Review of Private Trials in Florida

Private trials have been an option for Florida for 12 years. A judge-for hire renders a decision that must be rubber-stamped by a circuit judge but can be appealed. Only a few attorneys have offered the service, and most are retired judges. They report its use remains rare. In last several months, numerous individuals have written about Florida's law allowing private trials since 1999 and admit that few lawyers even know that the statute allowing such trials even exists.

No one has promoted the cause more than retired Miami-Dade Circuit Judge Paul Siegel, who advertises offering his first trial for free. Siegel argues that the time has come for lawyers to embrace this option, which offers a speedy trial that likely costs upwards of $20,000. Siegel argues that while the price seems hefty, for cases destined for trial, it offers potential savings by avoiding delays.

Those of us who practice in Miami-Dade county know what these delays are--a rolled-over trial calendar after months spending preparing the case for trial; judges advising the parties after they have advised the court that a case will take one week to try, the court setting the trial schedule from 10:00 am to 4:00 pm, cutting out two hours a day of trial testimony, potentially pushing the case towards mistrial if the one week trial cannot be completed; and the list goes on and on.

Some of the advantages touted in private trials is that it is a good substitute for arbitration. This is because in private trials, the rules of evidence apply, where some argue that arbitration is a "free for all." Another advantage cited is cost. Arbitration is arguably more expensive because the cost of hiring a single judge is lower than hiring three arbitrators and paying administrative fees to entities like the American Arbitration Association. Another advantage of private trials is the fact that they are conducted in secret, which is seen as an advantage by some in family law cases.

The disadvantages of private trials include the fear that private judging could give businesses another avenue for litigating on corporate-friendly turf. The concern is that the rarely used private trial option will gain popularity with credit card companies and cellphone service providers, which can insert clauses in customer agreements forcing customers to resolve disputes before a private judge. Companies already do that with arbitration, but private trials would allow for yet another layer of secrecy--and theoretically before a private judge who would lean in favor of the corporate clientele that funnels the private judge cases. Another cited disadvantage of private trials is that cutting the number of cases tried in public means a reduction in the legal precedent other judges and parties may draw upon. Finally, many representing consumers and average citizens say that the use of private trials basically says that "I have no faith in our current judiciary."

Ultimately, time will tell if private trials will gain traction. In other jurisdictions, it has created a system open mainly to the rich, such as divorcing celebrities, as a way to speed up their breakups, obtain the judge's undivided attention and keep the dispute and the findings, private. The parties will be able to hire a judge who will sit there as a captive audience from 9 in the morning to whenever the parties agree and the case will be heard according to the schedule set by the parties, not a congested docket. While private judging is "not a panacea", it does allow a constructive and practical response to the lack of resources being provided to an overworked, underpaid judiciary, that renders the our judicial system less responsive and more expensive than it should be.

More in-depth reporting on private judging is reported in the Daily Business Review for Miami-Dade County. If you are interested in receiving the full article or wish to contact me, you may do so by writing to me at miamipandi@comcast.net or at motero@houckanderson.com

A Federal District Court Approves Medicare Set-Aside

On July 28, 2011, the Federal District Court for the Western District of Louisiana in

Schexnayder v. Scottsdale Insurance Company, (2011 U.S. Dist. LEXIS 83687) approved a Medicare Set-Aside in a personal injury case brought in the District Court under its diversity jurisdiction.  The matter was settled and a Medicare Set-Aside specialist determined that the appropriate Medicare Set-Aside from the settlement was $239,253.84.  The matter was submitted to CMS who took no action, leaving the parties at a loss on how to obtain approval of the Medicare Set-Aside amount, which was a condition of the settlement.  The plaintiff and defendants made a joint application to the court for approval and the U.S. Magistrate ordered service to be made on the Secretary of Health and Human Services for an evidentiary hearing that was ordered to be conducted in order to determine approval or modification of the proposed set-aside amount.  Health and Human Services advised the court that it would not participate in the evidentiary hearing.  This left the court to take testimony and receive submissions based upon which Magistrate Judge Hanna made findings of fact that approved the set-aside amount. 

Obviously, the federal court can exercise its jurisdiction over the Department of Health and Human Services.  The parties to this litigation acted in the manner that has been advocated consistently, namely that the interests of Medicare be considered actively by both parties in a cooperative manner when reaching a settlement or, for that matter, paying a judgment.  Their cooperation allowed the federal court to exercise its jurisdiction over Health and Human Services and issue an order which, in all likelihood, will be binding upon the United States government, thereby relieving the parties of any further uncertainty with regard to Medicare issues.  This can only happen in the federal system, as state courts do not have jurisdiction over the United States government.  This may be yet one more reason to invoke the diversity jurisdiction of the court when appropriate so that these issues may be determined in a manner that satisfies the interests of all parties.  It is significant that CMS again declined to cooperate with the parties in reaching the Medicare Set-Aside amount and, it is further significant that the set-aside amount did not contain a reduction for procurement costs or attorney’s fees.  This appears to be in conformance with the regulations promulgated under the Medicare Secondary Payer Act.

If you are interested in receiving a copy of this decision or wish to contact me, you may write to me at miamipandi@comcast.net or motero@houckanderson.com.

Is There Caveat Emptor When It Comes to Purchasing the "Love Boat"?

In the case of QUAIL CRUISES SHIP MANAGEMENT LTD. v. AGENCIA DE VIAGENS CVC TUR LIMITADA, 23 Fla. L. Weekly Fed. C92a (11th Cir. July 8, 2011), Quail Cruises Ship Management Ltd. (“Quail”) appeals from the district court's order dismissing its amended complaint for lack of subject matter jurisdiction. The Eleventh Circuit Court of Appeals vacated the district court's order and remand for further proceedings.

Quail, a cruise ship operator, alleged in its amended complaint that the defendants conspired to induce it to purchase the M/V Pacific (“vessel”) -- better known as the eponymous Love Boat from its television days of the 1970s and 1980s -- by fraudulently misrepresenting the vessel's deteriorating and defective condition. Quail alleged that the fraud was orchestrated by Agencia de Viagens CVC Tur Limitada (“CVC”), a tour operating company, and its President Valter Patriani. According to Quail, CVC directed Seahawk North America, LLC (“Seahawk”), a ship management company supervising the vessel's operation, and its President Rodolfo Spinelli, to defer repairs and conceal the vessel's condition. As a part of the concealment effort, Seahawk allegedly influenced Lloyd's Register North America, Inc. (“LRNA”), a maritime classification society, to provide favorable inspections and certify the vessel's seaworthiness. Quail further alleged that, while overseas, CVC and Seahawk representatives made several fraudulent misrepresentations regarding the vessel's condition. In reliance on those representations, as well as those made by LRNA, Quail alleged that it purchased the stock shares of Templeton International Inc. (“Templeton”), the principal asset of which was the vessel.

Quail brought claims for: securities fraud under § 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b), and Securities and Exchange Commission (“SEC”) Rule 10b-5, 17 C.F.R. § 240.10b-5; maritime torts of fraud in the inducement, recklessness, and negligence/negligent misrepresentation; and common law claims of civil conspiracy to commit fraud in the inducement, fraud in the inducement, and breach of fiduciary duty. Quail sought damages for extensive repair work to the vessel, loss of use of the vessel as a passenger cruise ship, and injury to its reputation as a cruise ship operator.

The district court dismissed Quail's amended complaint for lack of subject matter jurisdiction. Applying the Supreme Court's recent decision in Morrison v. Nat'l Australia Bank Ltd., 561 U.S. __, 130 S. Ct. 2869 (2010), which held that § 10(b) and SEC Rule 10b-5 do not apply extraterritorially, the district court concluded that it lacked federal question jurisdiction over the securities fraud claim, because Quail failed to allege that the purchase or sale of the Templeton stock took place within the United States. The court also concluded that it lacked admiralty jurisdiction over Quail's putative maritime tort claims. As a result, the court declined to exercise supplemental jurisdiction over Quail's common law claims. It then dismissed as moot both Patriani's pending motion to dismiss for lack of personal jurisdiction and LRNA's pending motion to dismiss for improper venue based on a forum-selection clause. Quail appeals the dismissal of its amended complaint, and LRNA cross-appeals the concomitant denial (as moot) of its motion to dismiss for improper venue.

The court reviewed Morrison and noted that Quail alleged that “[t]he transaction for the acquisition of the Templeton stock closed in Miami, Florida on June 10, 2008, by means of the parties submitting the stock transfer documents by express courier into this District . . . .”. Given that the Supreme Court in Morrison deliberately established a bright-line test based exclusively on the location of the purchase or sale of the security, the court concluded that the district erred by dismissing Quail's claim, because it was too early in the proceedings to know whether the alleged transfer of title to the shares in the United States lies beyond § 10(b)'s territorial reach.

Although Quail also challenged on appeal the district court's conclusion that it lacked admiralty jurisdiction over Quail's putative maritime tort claims, the court found it unnecessary to address that issue, because those claims form “part of the same case or controversy” as Quail's securities fraud claim, thus providing the district court supplemental jurisdiction over those claims. Thus, the court vacated and remanded for further district court proceedings consistent with the Eleventh Circuit's opinion.

It is therefore too early to tell at this juncture whether "caveat emptor" will ultimately prevail in this case. If you are interested in receiving a complete copy of this decision or wish to contact me, you may do so at miamipandi@comcast.net or motero@houckanderson.com.