Dictiomatic, Inc. v. U.S. Fidelity & Guar. Co.
| Decision Date | 15 June 1999 |
| Docket Number | No. 94-1692-CIV-PAINE.,No. 93-2123-CIV-PAINE.,93-2123-CIV-PAINE.,94-1692-CIV-PAINE. |
| Citation | 127 F.Supp.2d 1239 |
| Court | U.S. District Court — Southern District of Florida |
| Parties | DICTIOMATIC, INC., a Florida corporation, and Domingo Linale, an individual, Plaintiffs, v. UNITED STATES FIDELITY & GUARANTY COMPANY, a Maryland corporation, Defendant. |
John Joseph Pappas, Butler Burnette & Pappas, Tampa, FL, for plaintiff.
Atlee W. Wampler, III, David Robert Cassetty, Wampler Buchanan & Breen, Miami, FL, for defendant.
ORDER GRANTING DEFENDANT'S MOTION FOR ATTORNEY'S FEES AND COSTS AGAINST PLAINTIFFS AND THEIR COUNSEL
This matter is before the court upon United States Fidelity & Guaranty Company (USF & G)'s Motion for Attorneys' Fees and Costs Against Plaintiffs and Their Counsel (DE 486-1).
Dictiomatic's Breach of Contract claims in Case No. 93-2123 (Count I and II) and USF & G's Declaratory Judgment Action in Case No. 94-1692 were tried before the court.1 Upon consideration of all of the evidence presented in the Plaintiff's case-in-chief, as well as the applicable authority, pursuant to Federal Rule of Civil Procedure 52(c), the court concluded at the end of Plaintiff's case in chief that the Plaintiff had failed to carry its burden of proof by a preponderance of the evidence that Dictiomatic incurred expenses or suffered actual loss of business income as a result of the suspension of operations due to Hurricane Andrew. Pursuant to Rule 52(c), the court entered Findings of Fact and Conclusions of Law. No appeal of this court's final judgment was taken and the Findings of Fact and Conclusions of Law set forth in this court's prior orders remain undisturbed and are incorporated herein by reference.
After a 10 day trial during which the Plaintiff Dictiomatic was permitted ample opportunity to prove the factual allegations of the Complaint, this court dismissed this action with prejudice. The court concluded that the evidence, when weighed in favor of the Plaintiff and accepted as true without regard to credibility considerations, established that on August 23, 1992, the day of Hurricane Andrew, Dictiomatic was a company in debt with de minimis business income, with an overstocked inventory of undesirable products located in Singapore, attempting to posture to sell these products through a speculative marketing scheme that had never proved to be successful in selling electronic products. Further, the company had no more than $5,000 cash on hand and was carrying substantial debt in excess of one million dollars as a result of its investment in the development and manufacture of the T-1200 and T-1500 products and the subsequent lackluster sales thereof. Additionally, the evidence was undisputed that prior to the Hurricane, Dictiomatic did not have sufficient capital available to it to finance the development, manufacture, or marketing of new products. The court also specifically found as a matter of undisputed fact that Dictiomatic's failure to sell its products after August 24, 1992, was not the result of Hurricane Andrew. Rather, the lack of sales was due to the fact that, just as before the Hurricane, the products offered were not in demand.
Notwithstanding the fact that on the day before the Hurricane, Dictiomatic was a fledgling company with no revenue to develop new products, and no foreseeable profits from existing products which were not in demand, in October, 1992 Dictiomatic submitted a written claim to USF & G for business interruption loss of $1,360,747 for alleged lost profits and earned continuing expenses incurred from August 24 through December 31, 1992. It later supplemented its claim to account for alleged loss of business income through June, 1993, when it went out of business. The relevant time frames of alleged lost profits were not supported by the evidence because it was undisputed that Dictiomatic was deprived of use of its business premises for a mere 4 days and that its business was interrupted for a mere 20 days.
Upon hearing the Plaintiff's own evidence, this court specifically found as a matter of fact that the Defendant USF & G acted timely and reasonably in reaching its decision in June, 1993, to deny Plaintiff's claim for this classification of contractual benefits under the business interruption policy. It is relevant to note for the purpose of this motion that these facts were gleaned from Plaintiff's own case and further that these facts were at all times prior to commencement of this action, in the possession of both Plaintiffs.
As a matter of law, to recover under the business interruption policy in this case, Dictiomatic was required to prove that it sustained property damage that is covered under the policy and that the damage was caused by a covered cause of loss; that there was an interruption to the business ("suspension of operations") which was caused by the property damage; and that there was an actual loss of business income during the period of time necessary to restore the business; and that the loss of income was caused by the interruption of the business and not by some other factor or factors. Ramada Inn Ramogreen Inc. v. Travelers Indemnity Co., 835 F.2d 812 (11th Cir.1988); Supermarkets Operating Company v. Arkwright Mutual Ins. Co., 257 F.Supp. 273, 277 (E.D.Pa. 1966); Manduca Datsun, Inc. v. Universal Underwriters Ins. Co., 106 Idaho 163, 676 P.2d 1274 (1984); Berkeley Inn, Inc. v. Centennial Ins. Co., 282 Pa.Super. 207, 422 A.2d 1078 (1980); Royal Indemnity Co. v. Little Joe's Catfish Inn, Inc., 636 S.W.2d 530 (Tex.App.1982); Northwestern States Portland Cement Co. v. Hartford Fire Ins. Co., 360 F.2d 531 (8th Cir.1966); Continental Ins. Co. v. DNE Corp., 834 S.W.2d 930 (Tenn.1992); Great Northern Oil Co. v. St. Paul Fire & Marine Ins. Co., 303 Minn. 267, 227 N.W.2d 789 (1975). Dictiomatic failed to prove that but/for the 20 day suspension of operations, it sustained an actual loss of business income which was caused solely by the hurricane and not by other factors. Because the facts presented during Plaintiff's case in chief at trial supported a finding that Dictiomatic did not suffer a loss of business income during the period of interruption the court found that USF & G was not liable for business interruption proceeds under the insurance policy because its duty to pay never arose. (Citations from prior order omitted).
It is also relevant to the resolution of the present motion for fees, that the applicable law is quite clear — business interruption insurance is intended to return to the insured's business the amount of profit it would have earned had there been no interruption of the business ("suspension of operations") (citations from prior order omitted). As one treatise summarizes, "Generally business interruption endorsements are designed to do for the insured what the business itself would have done had no interruption occurred and the interest protected is the right to income generated by an operating business enterprise". 4 Appleman Ins.L. and P. Section 2329. In the present case, this court found that Dictiomatic failed to prove that but/for Hurricane Andrew it would have realized business income which was lost solely as a result of the Hurricane. Because Dictiomatic failed to establish that it would have realized any income during the time of restoration or immediately thereafter, sufficient to pay normal operating expenses or to generate profits, its claim for compensation under the subject policy failed as a matter of law.
The law is also well established that business interruption insurance may not be used to put Dictiomatic in a better position than it would have occupied without the interruption (citations from prior order omitted). What the Plaintiff sought in this case was a windfall — an infusion of insurance proceeds into a company that was already going out of business. Accordingly, based on the undisputed facts, as a matter of law, Dictiomatic was not entitled to recover business interruption insurance proceeds under the insurance policy (citations from prior order omitted).
It must also be noted that Florida law is clear that a claim for lost profits must be shown with a reasonable degree of certainty. Crain Automotive Group, Inc. v. J & M Graphics, Inc., 427 So.2d 300 (Fla.App.1983); Beverage Canners, Inc. v. Cott Corporation, 372 So.2d 954 (Fla. 3rd DCA 1979); Royal Typewriter Company v. Xerographic Supplies Corporation, 719 F.2d 1092 (11th Cir.1983). In this regard, a satisfactory analysis of lost profits cannot use figures which result in too many variables. Royal Typewriter Company v. Xerographic Supplies Corporation, 719 F.2d 1092 (11th Cir.1983); Beverage Canners, Inc. v. Cott Corporation, 372 So.2d 954 (Fla. 3rd DCA 1979). The law is further well established that in order to recover lost profits, there must be an ongoing business with an established sales record and proven ability to realize profits at the established rate. Daytona Migi of Jacksonville, Inc. v. Daytona Automotive Fiberglass, Inc., 388 So.2d 228 (Fla. 5th DCA 1980); Conner v. Atlas Aircraft Corp., 310 So.2d 352 (Fla.App.1975); Belcher v. Import Cars, Ltd., 246 So.2d 584 (Fla. 3d DCA 1971). Proof of actual profits for a reasonable time prior to the breach is required to establish lost profits. Wash-Bowl, Inc. v. Wroton, 432 So.2d 766 (Fla. 2d DCA 1983); A & P Bakery Supply & Equipment v. Hawatmeh, 388 So.2d 1071 (Fla. 3rd DCA 1980).
In this case, rather than establish lost profits with any degree of certainty based upon a proven ability to realize profits, the Plaintiffs offered only speculative, inflated predictions of future profits, which had no relation to actual profits just prior to the Hurricane. The undisputed facts and the well settled law mandated entry of judgment in favor of the Defendant at the close of the Plaintiff's case-in-chief. The court specifically finds that the...
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