Dimick v. Ray

• Decision Date: 27 December 2000
• Docket Number: No. 4D00-728.,4D00-728.
• Citation: 774 So.2d 830
• Parties: Douglas DIMICK, individually and Douglas Dimick as Trustee of the Dimick Family Irrevocable Trust, Appellants, v. Bradley RAY, Jean Johnstone, Churchill Technology, Inc. and Stark Industries, Inc., Appellees.
• Court: Florida District Court of Appeals

774 So.2d 830

Douglas DIMICK, individually and Douglas Dimick as Trustee of the Dimick Family Irrevocable Trust, Appellants, v. Bradley RAY, Jean Johnstone, Churchill Technology, Inc. and Stark Industries, Inc., Appellees.

No. 4D00-728.

District Court of Appeal of Florida, Fourth District.

December 27, 2000.

Delmer C. Gowing III and Robert R. Adler of Delmer C. Gowing III, P.A., Delray Beach, for appellants.

Daniel S. Rosenbaum and Danielle K. Brewer of Becker & Poliakoff, P.A., West Palm Beach, for Appellees-Bradley Ray and Stark Industries, Inc.

Joseph D. Farish, Jr., Peter Bassaline and Robert V. Romani of Farish, Farish & Romani, West Palm Beach, for Appellee-Jean Johnstone.

STEVENSON, J.

This is an appeal of a final summary judgment for the defendants in a civil action by a minority shareholder against the two majority shareholders and two corporations. The basis of the appeal of the final summary judgment is predicated on appellants' challenge to the trial court's order denying appellants' motion for leave to amend its complaint, filed prior to the hearing on the motion for summary judgment. We hold that the trial court abused its discretion in denying the motion to amend and in entering final summary judgment.

Procedural Background

Appellants, Douglas Dimick, individually and as Trustee of the Dimick Family Irrevocable Trust, (hereinafter singularly referred to as Dimick), was a minority shareholder in Stark Industries, Inc. On May 22, 1995, Dimick filed a complaint, alleging that the majority shareholders, Bradley Ray and Jean Johnstone, entered into a series of Share Exchange Agreements whereby Stark Industries ultimately merged with Churchill Technology, Inc. Dimick alleged that he was not notified of this agreement, that his interests were improperly diluted thereby, and that Churchill, Ray and Johnstone violated provisions of the Florida Business Corporation Act, Chapter 607, Florida Statutes. In his original five-count complaint, Dimick named as defendants Churchill Technology, Rai Hamilton (Churchill's chief executive officer), Bradley Ray, and Jean Johnstone. An amended complaint was filed on October 11, 1996. This amended three-count complaint dropped a request for declaratory relief and added a charge of breach of fiduciary duty against Ray and Johnstone. Later, represented by newly retained counsel, Dimick filed a voluntary dismissal on October 1, 1997.

On the same day that the original complaint was voluntarily dismissed, October 1, 1997, Dimick filed a new four-count complaint. This new complaint contained most of the same allegations against Johnstone and Ray concerning their alleged violations of the Florida Business Corporation Act, but dropped Churchill and Stark Industries as defendants and added a fraud count against Bradley Ray. In response to the named defendants' December 2, 1997, motion to dismiss for failure to join indispensable parties, the trial court required Dimick to join Churchill and Stark Industries as party defendants. On February 3, 1998, Dimick then filed its "First Amended Complaint" naming Churchill and Stark Industries as defendants.

On December 7, 1999, Johnstone filed a motion for summary judgment, to which Ray and Stark joined, on counts I, II and III, arguing that Stark was a Michigan corporation, that none of the defendants were subject to the Florida Business Corporation Act, and that counts I, II and III alleged only violations of the Florida act. On December 17, 1999, in response to the motion for summary judgment, Dimick filed the motion for leave to amend the First Amended Complaint which is the subject of this appeal. In his motion, Dimick sought to amend the complaint to assert violations of Michigan corporate law. In addition, Dimick sought to add an allegation that Ray and Johnstone further diluted his interests in Stark by improperly, and without notice to him, transferring AR/Mediquest, an asset of Stark, to another company in which Dimick was not a stockholder. Dimick argued that he only became aware of this claim while in the process of discovery. This new allegation increased the potential damages in the lawsuit by some four million dollars.

The trial court denied Dimick's motion to amend, finding that (1) Dimick abused the privilege to amend, (2) appellees would be prejudiced by the amendment, (3) the proposed Second Amended Complaint was substantially different and stated different causes of action, and (4) the proposed amendment would be futile. The trial court then entered final summary judgment for the defendants as to counts I, II and III, which were all based on alleged violations of Florida Statutes Chapter 607, since there was no dispute that Florida corporate law was not applicable to the defendants. Count IV, a fraud count against Bradley Ray, remained pending.

Discussion

A trial judge's ruling on a motion to amend a complaint will be reviewed on appeal for an abuse of discretion. See N. Am. Speciality Ins. Co. v. Bergeron Land Dev., Inc., 745 So.2d 359 (Fla. 4th DCA 1999); Life Gen. Sec. Ins. Co. v. Horal, 667 So.2d 967, 969 (Fla. 4th DCA 1996). Florida Rule of Civil Procedure 1.190(a), which governs amendments prior to trial, provides in pertinent part that leave of court to permit amendments of pleadings "shall be given freely when justice so requires." The public policy of Florida favors liberality in permitting amendments to pleadings so that the resolution of disputes will be on their merits:

Under the rule, a test of prejudice is the primary consideration in determining whether a motion for leave to amend should be granted, and leave to amend should not be denied unless the privilege has been abused or the pleading is clearly not amendable. New River Yachting Center v. Bacchiocchi, 407 So.2d 607, 609 (Fla. 4th DCA 1981), rev. denied, 415 So.2d 1360 (Fla.1982).

Leavitt v. Garson, 528 So.2d 108, 110 (Fla. 4th DCA 1988). Amendments should be liberally granted, particularly when the motion is made prior to the hearing on a motion for summary judgment. See Soucy v. Casper, 658 So.2d 1017, 1018 (Fla. 4th DCA 1995)(citing Smith v. Barrett, 564 So.2d 582 (Fla. 4th DCA 1990), and Leavitt v. Garson).

Abuse of the amendment process

No abuse of the amendment process has been shown. Here, we do not have a virtual endless stream of amendments, all failing to state even a basic cause of action, such as occurred in Kohn v. City of Miami Beach, 611 So.2d 538 (Fla. 3d DCA 1992). There, the plaintiff failed in four attempts to cure defects in his complaint. The Third District stated:

While there is no magical number of amendments which are allowed, we have previously observed that with amendments beyond the third attempt, dismissal with prejudice is generally not an abuse of discretion. There is simply a point in litigation when defendants are entitled to be relieved from the time, effort, energy, and expense of defending themselves against seemingly vexatious claims.

Id. at 539 (citations omitted).

After Dimick filed the voluntary dismissal and this new action, there was only one prior amendment to the complaint, and that was occasioned because appellees filed a motion to dismiss for failure to add an indispensable party. The First Amended Complaint added these new defendants. To the extent that amendments of the original complaint which were filed prior to the voluntary dismissal of the original complaint should be considered at all, the record shows that there was only one such amendment and that amendment streamlined the complaint from five (5) counts down to three (3).

Prejudice to the defendants

The trial court's finding that appellees will be "prejudiced" by the amendment is likewise not borne out by the record. It is axiomatic that under Florida law, the trial court must liberally allow amendments to a complaint unless the defendant would be "prejudiced" thereby. The cases have analyzed this prejudice element primarily in respect to the defendant's ability to prepare for the new allegations prior to trial on the merits. For instance, in McCullough v. McCullough, 156 Fla. 321, 23 So.2d 139 (1945), Frenz Enterprises, Inc. v. Port Everglades, 746 So.2d 498 (Fla. 4th DCA 1999), Designers Tile International Corp. v. Capitol C Corp., 499 So.2d 4 (Fla. 3d DCA 1986), and Santi v. Zack Co., 287 So.2d 127 (Fla. 3d DCA 1973), all cited in the trial court's order, amendments were not allowed which proposed to add new and different causes of action either during trial or after the trial had been completed. The prejudice in adding new causes of action or claims in those cases was obvious since the defendants had already fully prepared for, and in some instances, had actually completed the trial when the plaintiffs sought to add different claims. In the instant case, while Michigan corporate law may be different from Florida law concerning some of the issues involved, the case is still at the summary judgment stage. Any prejudice resulting from the amendment's focus on Michigan rather than Florida law would be easily addressed by allowing additional time for appellees to research the appropriate legal standards involved.¹ Likewise, while it does appear that Dimick's proposed addition of claims involving AR/Mediquest adds significant claims which had not been made previously, since the case is still at the summary judgment stage, additional time...