ICMFG & Assocs., Inc. v. Bare Bd. Grp., Inc.

• Decision Date: 17 March 2017
• Docket Number: Case No. 2D15–3557,2D15–4588
• Citation: 238 So.3d 326
• Parties: ICMFG & ASSOCIATES, INC., Tom Coghlan, Bonnie Del Grosso, Michael Doyle, Appellants, v. The BARE BOARD GROUP, INC., Appellee.
• Court: Florida District Court of Appeals

238 So.3d 326

ICMFG & ASSOCIATES, INC., Tom Coghlan, Bonnie Del Grosso, Michael Doyle, Appellants,

v.The BARE BOARD GROUP, INC., Appellee.

Case No. 2D15–3557

2D15–4588

District Court of Appeal of Florida, Second District.

Opinion filed March 17, 2017

Ceci Culpepper Berman and Thomas J. Seider of Brannock & Humphries, Tampa; Robert W. Hitchens of Hitchens & Hitchens, P.A., St. Petersburg, for Appellants.

Kelly J. Ruoff and Marie Tomassi of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill, & Mullis, P.A., St. Petersburg, for Appellee.

WALLACE, Judge.

The Appellants, ICMfg and Associates, Inc. (ICM); Tom Coghlan; Bonnie del Grosso; and Michael Doyle, appeal an Order on Trial and a final judgment entered in favor of The Bare Board Group, Inc. (BBG), following a bench trial limited to the issue of damages. We hold that the trial court did not abuse its discretion in striking the Appellants' pleadings and in entering a default against them as a sanction. However, we conclude that the trial court erred in ruling that the default previously entered against the Appellants made it unnecessary for BBG to prove a connection between the Appellants' tortious conduct and BBG's claimed lost profits. Accordingly, we reverse the awards for lost profits, including the prejudgment interest thereon, and remand for a new trial limited to the issue of BBG's claim for lost profits. We affirm the other damages awards and the awards of attorney's fees and costs.

I. THE FACTS AND PROCEDURAL BACKGROUND

A. Introduction

BBG is a Florida corporation that was formed in 2002. It is a supplier of printed computer circuit boards. At the time of the events pertinent to the underlying litigation, Mr. Coghlan and Ms. del Grosso were both officers, directors, and highly compensated employees of BBG. Each of them also owned shares of BBG.

Both Mr. Coghlan and Ms. del Grosso were previously acquainted with Mr. Doyle because all three of them were involved in the printed computer circuit board industry. Mr. Doyle planned to establish a printed computer circuit board business. Lacking the funds to do so, he approached Mr. Coghlan and Ms. del Grosso for financing. They both advanced money to Mr. Doyle with knowledge of his plans. Mr. Doyle incorporated ICM as a Florida corporation in March 2010.

B. The Parties' Claims

The litigation in the underlying case began in March 2012 with the filing of a complaint for declaratory judgment by ICM, Mr. Coghlan, and Ms. del Grosso against BBG. Mr. Coghlan and Ms. del Grosso had resigned as officers, directors, and employees of BBG on January 13, 2012. At the time of their resignations, Mr. Coghlan and Ms. del Grosso each held 11.087% of the outstanding shares of BBG. A shareholder agreement granted BBG the first right of redemption of those shares upon the termination of the employment of Mr. Coghlan and Ms. del Grosso with BBG. In their complaint, ICM, Mr. Coghlan, and Ms. del Grosso alleged that the parties had a dispute regarding the proper value of the shares of stock and that they were in doubt about their rights under the shareholder agreement. They asked the trial court for declaratory relief to resolve the dispute.

BBG answered the complaint and raised various affirmative defenses. In an amended counterclaim, BBG added Mr. Doyle as a counter-defendant¹ and made the following pertinent allegations:

1. BBG is a Florida corporation, in good standing, with its principal place of business in Pinellas County, Florida.

2. ICM is a Florida corporation first established on March 22, 2010[,] with its principal place of business in Pinellas County, Florida.

3. Coghlan and B. del Grosso are each long-time employees and minority shareholders, and officers of BBG, and held positions as directors of BBG for several years.

4. On January 13, 2012, Coghlan and B. del Grosso each unexpectedly announced to BBG his and her resignation as employees of BBG.

5. While holding the position of officer and director of BBG, Coghlan and B. del Grosso each owed fiduciary duties to BBG, to include performing its duties in and for the best interest of the corporation [and] to present all business opportunities which came to their attention to BBG if it involved the present corporate activity of BBG.

6. Coghlan and B. del Grosso, while serving as officers of BBG and as members of its four-person board of directors, knowingly and deliberately undertook a course of conduct, undisclosed to BBG, to divert BBG customers and other BBG customer opportunities to ICM, which is a competitor of BBG and [for] which Coghlan and B. del Grosso were initially named as ICM's officers and directors.

7. Only upon an investigation by BBG after the sudden resignations of Coghlan and B. del Grosso on January 13, 2012[,] were these surreptitious activities of diverted corporate business and opportunities and the existence of ICM discovered by BBG.

8. Doyle is a resident of Pinellas County, Florida, was the initial Vice President of ICM, and has been involved in the same industry as BBG for several years with other entities in Pinellas County, Florida.

....

11. BBG has retained the law firm of Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A.[,] to bring suit on their behalf and have agreed to pay a reasonable fee for their services.

12. All conditions precedent to the maintenance and institution of this lawsuit have been performed, have been waived, or have otherwise been satisfied.

In addition, BBG alleged that Mr. Coghlan and Ms. del Grosso had violated their fiduciary duties to BBG by diverting its customers and business opportunities to ICM and by generally interfering with BBG's business. BBG alleged further that Mr. Doyle and Ms. del Grosso and others had aided and abetted the breach of fiduciary duties by Mr. Coghlan and Ms. del Grosso for the purpose of benefitting ICM's business. BBG alleged that these activities had caused damages to it, including the loss of its rightful business and profits.

BBG alleged six causes of action in its amended counterclaim as follows: Count I, breach of fiduciary duty (Coghlan and B. del Grosso); Count II, aiding and abetting breach of fiduciary duty (ICM and Doyle); Count III, civil conspiracy to defraud (ICM, Coghlan, B. del Grosso, and Doyle); Count IV, fraud (Coghlan and B. del Grosso); Count V, violation of the Florida Deceptive and Unfair Trade Practices Act, sections 501.201–.213, Florida Statutes (2011) (FDUTPA) (ICM, Coghlan, B. del Grosso, and Doyle); and Count VI, tortious interference with business relationships (ICM, Coghlan, B. del Grosso, and Doyle). The Appellants answered the amended counterclaim and raised various affirmative defenses.

C. Discovery Abuse, Fraud, and Sanctions

With regard to the claims asserted by BBG in its amended counterclaim, the timing, nature, and extent of the involvement of Mr. Coghlan and Ms. del Grosso with ICM were critical issues. The record supports the conclusion that the Appellants engaged in a concerted effort to interfere with BBG's attempts to discover evidence favorable to BBG on these issues. This effort included the repeated disregard of discovery obligations, noncompliance with court orders to make discovery, false deposition testimony, and the failure to disclose that two of ICM's tax returns had been amended after BBG had requested copies of the returns. The amendments to the two tax returns deleted the names of Mr. Coghlan and Ms. del Grosso from the original returns as two of the shareholders of ICM and listed Mr. Doyle instead as the sole shareholder. Nevertheless, BBG was persistent, and it ultimately obtained copies of the tell-tale original tax returns through a subpoena duces tecum for deposition directed to ICM's accountant.

After BBG finally obtained copies of the original tax returns, it moved for sanctions against the Appellants. The trial court conducted a hearing on the motion. After the hearing, the trial court entered a lengthy order that outlined the Appellants' derelictions in detail. The trial court then set forth its conclusions of law as follows:

18. The Court, having heard argument from counsel and considering its findings of fact under the totality of the circumstances, hereby GRANTS BBG's Motion for Sanctions for Counter–Defendants' Destruction of Evidence and Commission of Fraud on the Court.

19. A deliberate and contumacious disregard of the court's authority will justify the striking of pleadings as will bad faith, willful disregard or gross indifference to an order of the court, or conduct that evinces deliberate callousness. Mercer v. Raine, 443 So.2d 944, 946 (Fla. 1983) ; Bailey v. Woodlands Co., Inc., 696 So.2d 459 (Fla. 1st DCA 1997) (affirming dismissal of party's pleading based on finding a pattern of willful noncompliance or disregard of the rules of civil procedure.)

20. [Recitation of pertinent factors under Kozel v. Ostendorf, 629 So.2d 817, 818 (Fla. 1993) omitted.]

21. Here, Counter–Defendants ICM and Doyle, based on the above findings of fact, have personally engaged in and are responsible for a pattern of willful noncompliance and contumacious disregard of the rules of civil procedure that has prejudiced BBG through undue expense and delay in this litigation. The Court has reviewed the deposition testimony of Doyle and finds him not to be credible in his responses, not complete in his responses, and to have made numerous attempts to mislead the parties in responding to discovery.

22. A court has a duty and an obligation to strike a party's pleadings if the party commits a fraud during discovery. Long v. Swofford, 805 So.2d 882, 884 (Fla. 3d DCA 2001).

23. Counter–Defendants have committed fraud in the discovery process by intentionally concealing and then ultimately altering evidence, namely the 2010 and 2011 tax returns, central to the issues in this litigation—Coghlan's and del Grosso's involvement with ICM while officers and directors of BBG. In addition, the Court finds Coghlan's and del Grosso's [deposition] testimony that they were not

...