Bailey v. St. Louis

• Decision Date: 03 February 2016
• Docket Number: No. 2D13–612.,2D13–612.
• Citation: 196 So.3d 375
• Parties: Joe Samuel BAILEY, individually, and on behalf of Laserscopic Spinal Centers of America, Inc.; Laserscopic Medical Clinic LLC ; Laserscopic Diagnostic Imaging and Physical Therapy, LLC; Laserscopic Spinal Center of Florida, LLC; and Laserscopic Spine Centers of America, Inc., Appellants/Cross–Appellees, v. James S. ST. LOUIS, D.O.; Michael W. Perry, M.D.; EFO Holdings L.P. ; EFO Laser Spine Institute, Ltd. ; Laser Spine Institute, LLC; Laser Spine Medical Clinic, LLC ; Laser Spine Physical Therapy, LLC ; Laser Spine Surgical Center, LLC ; and EFO Genpar, LP, Appellees/Cross–Appellants.
• Court: Florida District Court of Appeals

196 So.3d 375

Joe Samuel BAILEY, individually, and on behalf of Laserscopic Spinal Centers of America, Inc.; Laserscopic Medical Clinic LLC ; Laserscopic Diagnostic Imaging and Physical Therapy, LLC; Laserscopic Spinal Center of Florida, LLC; and Laserscopic Spine Centers of America, Inc., Appellants/Cross–Appellees,

v.James S. ST. LOUIS, D.O.; Michael W. Perry, M.D.; EFO Holdings L.P. ; EFO Laser Spine Institute, Ltd. ; Laser Spine Institute, LLC; Laser Spine Medical Clinic, LLC ; Laser Spine Physical Therapy, LLC ; Laser Spine Surgical Center, LLC ; and EFO Genpar, LP, Appellees/Cross–Appellants.

No. 2D13–612.

District Court of Appeal of Florida, Second District.

Feb. 3, 2016.

Rehearing Denied Aug. 3, 2016.

Stephen N. Zack, Jennifer G. Altman, and Shani Rivaux of Boies, Schiller & Flexner, LLP, Miami; and Stuart C. Markman and Kristin A. Norse, and Robert R. Ritsch, of counsel, of Kynes, Markman & Felman, P.A., Tampa, for Appellants/Cross–Appellees.

Stacy D. Blank, Joseph H. Varner, III, and Bradford D. Kimbro of Holland & Knight LLP, Tampa, for Appellees/Cross–Appellants.

CASANUEVA

, Judge.

The Appellants seek review of a final judgment entered after a bench trial on their claims against the various Appellees for breach of fiduciary duty, defamation, slander per se, violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), conspiracy, and tortious interference as to several individuals and entities. In this appeal, the Appellants challenge the amount of damages they were awarded for their breach of fiduciary duty claim, and they challenge the trial court's failure to award any damages for their FDUTPA claim. They also argue that the trial court erred in finding that some of their claims were barred by the statute of limitations. We reverse the award of damages because we cannot determine what evidence the trial court relied upon to determine the amount, and the amount of damages awarded appears to be a small percentage of the damages presented at trial. We also reverse the trial court's finding that the facts did not support an award of punitive damages and the trial court's finding that Appellants were not entitled to damages for their FDUTPA claim. We do not find merit in the other arguments raised on appeal and affirm those points without discussion.

The Appellees filed a cross-appeal arguing that the trial court erred in awarding damages for conspiracy, that a release signed in a previous lawsuit precluded two of the Appellants' claims, that the trial court erred in finding the Appellees liable for tortious interference with terminated employees, and that the trial court erred in awarding damages for the slander claim. We do not find merit in any of the Appellees' arguments in their cross-appeal and do not discuss them further.

DAMAGES

Out–of–Pocket Damages

During trial, the Appellants called two expert witnesses to opine as to the amount of damages they suffered. In its order, the trial court accepted the calculations of only one of the experts “as to out of pocket losses,” and it found that the expert testified that the Appellants suffered out-of-pocket damages of $6,831,172.¹

Yet, the final judgment awards the Appellants less than one-fourth of this amount, $1,600,000, and the trial court provides no explanation for its reduced award. In order to perform appellate review, the trial court's rationale must be made available. Accordingly, we reverse and remand for further proceedings for the trial court to explain how it arrived at this amount. If the passage of time has made this impossible, the trial court should so find and conduct a second trial on the issue of damages.

Disgorgement Damages

The Appellants argue that the trial court erred in denying their request for disgorgement damages for the claims of breach of fiduciary duty and tortious interference. The Appellees claim that the trial court's award of $1,600,000 to the Appellants included disgorgement damages. The Appellees state in their brief that the trial court awarded disgorgement damages on the claims for breach of fiduciary duty, tortious interference, and civil conspiracy based on tortious interference. See Zippertubing Co. v. Teleflex Inc., 757 F.2d 1401, 1411 (3d Cir.1985)

(holding that the trial court correctly permitted the plaintiffs to prove as damages the amount of the defendant's profits in their claim for tortious interference, because this rule was “consistent with the policy of discouraging tortious conduct by depriving the tortfeasor of the opportunity to profit from wrongdoing”); see also

Colo. Interstate Gas Co. v. Nat. Gas Pipeline Co. of Am., 661 F.Supp. 1448, 1479 (D.Wyo.1987) (holding that plaintiff was entitled to damages relating to the defendant's profits for tortious interference with contract), reversed on other grounds,

885 F.2d 683 (10th Cir.1989) ; King Mountain Condo. Ass'n v. Gundlach, 425 So.2d 569, 572 (Fla. 4th DCA 1982) (noting that disgorgement damages are an equitable remedy). But see

Developers Three v. Nationwide Ins. Co., 64 Ohio App.3d 794, 582 N.E.2d 1130, 1135 (1990) (“[A]n award of defendant's profits is not the only means of discouraging a tortfeasor from interfering with a business relationship while calculating that his profits will exceed the injured party's losses.”); Marcus, Stowell & Beye Gov't Sec., Inc. v. Jefferson Inv. Corp., 797 F.2d 227, 232 (5th Cir.1986) (holding that disgorgement damages were not proper for claim of tortious interference).

Again, the failure of the trial court order to specifically indicate whether it was awarding disgorgement damages and, if so, to specify the amount of disgorgement damages hinders this court's review of the award. Regardless, the evidence presented at trial suggests that if the trial court intended to award disgorgement damages, the award was grossly insufficient. The Appellants' expert witness testified that based on the profits that the Appellees realized up to the trial date, disgorgement damages would be approximately $271,000,000.² See Pidcock v. Sunnyland Am., Inc., 854 F.2d 443, 446 (11th Cir.1988)

(“[O]nce it has been determined that a purchaser acquired property by fraud, any profit subsequently realized by the defrauding purchaser should be deemed the proximate consequence of the fraud.”).

The Appellees suggest that the trial court limited the amount of disgorgement damages awarded because the management initiatives of Bill Horne, who became Laser Spine Institute's chief executive officer in November 2005, were part of what made Laser Spine Institute successful. We agree that a plaintiff generally may not recover disgorgement damages if any portion of the profits is attributable to the defendant's “special or unique efforts ... other than those for which he is duly compensated.” Siebel v. Scott, 725 F.2d 995, 1002 (5th Cir.1984)

(quoting Nelson v. Serwold, 576 F.2d 1332, 1338 n. 3 (9th Cir.1978) ). “Aggressive and enterprising management activities may break the causal chain between the fraud and the profits.” Pidcock, 854 F.2d at 447. However, there is an exception to this rule. Even if gains in a company's profits are attributable to extraordinary management activities, such profits are still subject to disgorgement if the activities are performed as part of the management's regular salaried responsibilities. Id. at 448. “[A]ctions taken by a corporate officer or director do not qualify as ‘extra’ efforts unless they go well beyond the efforts for which the officer or director is duly compensated.” Lawton v. Nyman, 357 F.Supp.2d 428, 443 (D.R.I.2005).

In the present case, the trial court noted that Mr. Horne was a “highly-compensated executive as the CEO of the Laser Spine Institute (LSI), earning $400,000 in salary and $300,000 in bonus” and that his profit distributions from LSI and related entities provided an additional income of $1,500,000 a year. Considering Mr. Horne's income from the Appellees' business, the evidence did not support any finding that his “extra” efforts went well beyond the efforts for which he was duly compensated. The trial court found that Mr. Horne was at work “every day during the first few years of his tenure.” He would begin his day at 7:00 a.m. by greeting patients before and after surgery, he would work on sales and marketing during the day, and he would spend his evenings, until 10:00 p.m., calling patient prospects. Although we do not question Mr. Horne's ability to successfully manage the Appellees' business or the fact that he worked long days, it would be difficult to conclude that his efforts in greeting patients in the morning, working on sales and marketing during the day, and calling patient prospects during the evening were efforts that went beyond those for which he was compensated approximately $2,000,000 a year. Therefore, even if the gains in the Appellees' profits are attributable to his extraordinary management activities, such profits are still subject to disgorgement because the activities were efforts for which he was duly compensated. See Pidcock, 854 F.2d at 448

.

Punitive Damages

The trial court found that the Appellants did not establish a factual basis for punitive damages. Section 768.72(2), Florida Statutes (2006)

, provides that “[a] defendant may be held liable for punitive damages only if the trier of fact, based on clear and convincing evidence, finds that the defendant was personally guilty of intentional misconduct or gross negligence.” The term “intentional misconduct” was defined by our legislature to mean “that the defendant had actual knowledge of the wrongfulness of the conduct and the high probability that injury or damage to the claimant would result and, despite that knowledge, intentionally pursued that course of conduct, resulting in injury or damage.” § 768.72(2)(a). In turn, “gross negligence” was defined to mean “that the defendant's conduct was so reckless or wanting in care that it constituted a conscious disregard or indifference to the life,...