Bornstein v. Marcus

• Decision Date: 22 July 2015
• Docket Number: No. 4D13–4098.,4D13–4098.
• Parties: Stuart N. BORNSTEIN, Appellant, v. Ira MARCUS, individually, Ira Marcus, P.A., a Florida corporation, and Granada, LLC, a Florida limited liability company, Appellees.
• Court: Florida District Court of Appeals

169 So.3d 1239

Stuart N. BORNSTEIN, Appellant

v.Ira MARCUS, individually, Ira Marcus, P.A., a Florida corporation, and Granada, LLC, a Florida limited liability company, Appellees.

No. 4D13–4098.

District Court of Appeal of Florida, Fourth District.

July 22, 2015.

Xavier A. Franco and George E. McArdle of McArdle & Perez, P.A., Coral Gables, for appellant.

Robert M. Klein and Mark J. Sullivan of Klein Glasser Park Lowe & Pelstring, P.L., Miami, for appellees Ira Marcus and Ira Marcus, P.A.

Opinion

LEVINE, J.

The issue for our consideration is whether the trial court erred in striking appellant's pleadings as a “sham” and entering a final judgment in favor of a law firm and its principal. The complaint centered on whether appellant deserved credit for $50,000 paid to the firm. The trial court found that appellant's claim was a sham because only appellant's company had the right to bring the claim since appellant treated the $50,000 as a capital contribution to the company. We find the trial court erred in striking the pleading as a sham because the record does not support the trial court's conclusion that the pleading was a sham. As a result, we reverse and remand. We also reverse the trial court's dismissal of certain tort claims under the economic loss rule, as the Florida Supreme Court recently clarified that the rule is limited to the products liability context.

In 2009, appellant Stuart Bornstein, Alan Potamkin, and their company Granada, LLC, entered into a retainer and contingent fee agreement with appellee Ira Marcus, P.A., for legal representation with a claim against the City of Coral Gables. Pursuant to the fee agreement, the firm would be entitled to 40% of the gross recovery. Additionally, the firm was to be paid two retainers totaling $50,000. The firm was also to be paid $28,150 for past due billings and $10,000 for expert witness fees. $50,000 would be applied as a credit against any recovery. Appellant signed the fee agreement individually and as a managing member.

Appellant wrote checks to the firm for $23,150, $10,000, and $5,000. Granada wrote checks to the firm for $30,000 and $40,000. After appellant sent a check to the firm for $23,150, appellant sent an e-mail saying, “I messed up giving u my personal check. I should have written it to Granada and cut u a check from Granada. Not a big deal, I can clear that up later if necessary.”

In 2010, the City offered to settle the case for $1.45 million. Although under the fee agreement the firm would have been entitled to $580,000, in order to promote acceptance of the settlement, the firm agreed to reduce its fees to $450,000. Appellant agreed to the settlement, and the firm sent Granada $880,816, after subtracting $450,000 for fees and $119,184 in other expenses.

Thereafter, in a series of e-mails, appellant claimed that pursuant to their fee agreement, the firm should have credited the $50,000 retainer against the $450,000 agreed fee, and the firm should have retained only $400,000 from the settlement. The firm disagreed, claiming that it already lowered its fee from $580,000 to $450,000.

Appellant filed a complaint against the firm and its principal, asserting causes of action for breach of contract, breach of fiduciary duty, conversion, and civil theft. Appellant claimed that the firm failed to credit the $50,000 retainer against the fee award as required by the fee agreement. An amended complaint added Granada as a plaintiff.

The firm moved to dismiss the tort claims under the economic loss rule because they were based on a duty created solely by contract. The court granted the motion with prejudice as to the counts against the firm for breach of fiduciary duty, conversion, and civil theft. The court denied the motion as to the count against the firm for breach of contract and the counts against the firm's principal for breach of fiduciary duty, conversion, and civil theft.

Subsequently, during discovery at a deposition, appellant admitted that he treated the $50,000 payment to the firm as a capital contribution to Granada on his tax return. Appellant denied that he got the return of the $50,000 capital contribution when he received his distribution of $330,000 from the approximately $880,000 settlement. When the firm asked, “And you received a return of that [“$55,000 capital contribution made in 2009”] when you got the distribution of $330,000,” appellant answered, “Right.” Later, however, when the firm asked, “So, if the $50,000 was part of your capital, you got it returned when you got the distribution,” appellant responded, “That's absurd. I don't think anybody in this room believes that.”

A year later, the firm filed a sworn motion to strike the amended complaint as a sham pursuant to rule 1.150. The firm claimed that appellant filed the complaint asserting that the funds belonged to him personally, when in fact appellant no longer had any claims to the funds since he treated the funds as a capital contribution to Granada. In sum, the firm argued that if the funds were appellant's capital contribution to Granada, then appellant no longer had a claim to the funds and Granada would be the correct party to bring the action. The firm claimed that the sham emanated from the fact that appellant swore under oath that the funds were a capital contribution to Granada, while his complaint asserted a personal claim for the return of the funds.

After an evidentiary hearing, the trial court entered an order granting the firm's motion to strike appellant's pleadings and entered a final judgment. The trial court found that appellant's action was based on his claim that the $50,000 retainer belonged to him. The trial court determined that the tax returns and appellant's testimony showed that the funds were a capital contribution to Granada, and as such, only Granada had the right to bring a claim. The trial court found that there were “patently inconsistent factual conflicts” in the record.

Appellant argued later in a motion for rehearing that the firm failed to meet the high standard on a motion to strike. The trial court denied the motion for rehearing, stating that “the Court is convinced that the claims stricken by the Court were ‘inherently false and clearly known to be false at the time the pleading was made.’ ” From that ruling, this appeal follows.

An order striking a pleading as a sham is reviewed for abuse of discretion. Gonzalez v. City of Homestead, 825 So.2d 1050, 1054 (Fla. 3d DCA 2002).

A trial court may strike a party's pleading if deemed by the trial court as a sham under Florida Rule of Civil Procedure 1.150, which provides as follows:

(a) Motion to Strike. If a party deems any pleading or part thereof filed by another party to be a sham, that party may move to strike the pleading or part thereof before the cause is set for trial and the court shall hear the motion, taking evidence of the respective parties, and if the motion is sustained, the pleading to which the motion is directed shall be stricken. Default and summary judgment on the merits may be entered in the discretion of the court or the court may permit additional pleading to be filed for good cause shown.

A pleading is considered a sham only “when it is palpably or inherently false, and from the plain or conceded facts in the case, must have been known to the party interposing it to be untrue.” Rhea v. Hackney, 157 So. 190, 193 (Fla.1934). Thus a sham pleading is one “good on its face but absolutely false in fact.” Id. at 194.

For a trial court “to justify the striking of a pleading for being sham or false it must be so undoubtedly false as not to be subject to a genuine issue of fact.” Meadows v. Edwards, 82 So.2d 733, 735 (Fla.1955). The motion to strike a pleading as being a sham “should be tested by the same standards as a motion for a summary judgment....” Id. For a trial court to strike a pleading as a sham the “falsity thereof [must] clearly and indisputably appear[ ].... [I]t...