Federal Litigation Update: The Eleventh Circuit Clarifies When Expert Reports are Required by Fed. R. Civ. P. 26(a)(2)(B).

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On August 4, 2023, in Cedant v. United States, No. 21-12661, –F.4th–, 2023 WL 4986402 (11th Cir. August 4, 2023), the Eleventh Circuit clarified who must provide expert reports under Fed. R. Civ. P. 26(a)(2)(B). More specifically, the Court clarified what it means to be “retained or specially employed to provide expert testimony” under Rule 26(a)(2)(B).

1. A primer on expert reports and disclosures under Rule 26.  

Federal Rule of Civil Procedure 26 provides the rules for disclosures during civil litigation and the general provisions governing discovery.

Rule 26(a)(2) provides for disclosures related to expert testimony. Under 26(a)(2)(B), “if the witness is one retained or specially employed to provide expert testimony in the case…,” then the expert must provide a written report containing the information required at 26(a)(2)(B)(i)-(vi). This written report must contain: (i) a complete statement of all opinions the witness will express and the basis and reasons for them; (ii) the facts or data considered by the witness in forming them; (iii) any exhibits that will be used to summarize or support them; (iv) the witness’s qualifications, including a list of all publications authored in the previous 10 years; (v) a list of all other cases in which, during the previous 4 years, the witness testified as an expert at trial or by deposition; and (vi) a statement of the compensation to be paid for the study and testimony in the case.

If the witness is not required to provide a report under 26(a)(2)(B), then 26(a)(2)(C) merely requires that the expert disclosure state: (i) the subject matter on which the witness is expected to present evidence under Fed. R. Evid. 702, 703, or 705; and (ii) a summary of the facts and opinions to which the witness is expected to testify.

As the Eleventh Circuit explained, the differences between these disclosures and reports are significant. “For one, a Rule 26(a)(2)(B) written report must be ‘prepared and signed’ by an expert, while a Rule 26(a)(2)(C) disclosure may be submitted by a party on behalf of its expert.” Cedant, 2023 WL 4986402 at *4. Additionally, “because written reports must include the ‘basis and reasons’ for ‘all opinions’ offered by the expert, plus the ‘facts or data considered by the witness,’ they are often sprawling compared to the short summary of opinions required in a Rule 26(a)(2)(C) disclosure.” Id.

2. Cedant clarifies what it means to be “retained” under Rule 26(a)(2)(B) such that an expert report is required.

Cedant involved whether treating physicians who were first hired by their patients to treat rather than to testify are required to provide a report under Rule 26(a)(2)(B). In finding that no report was required, the Eleventh Circuit explained that the term “retained” does not simply mean paying a witness in exchange for expert testimony. Such a “hyper-literalist approach…would render Rule 26(a)(2)(C) a virtual nullity….” Cedant, 2023 WL 4986402 at *5.

Instead, the “retained” v. “nonretained” distinction depends on when and why an expert witness was hired. “A retained expert witness typically will get involved in a case to provide expert testimony and will derive her knowledge of the case from preparation for trial. A non-retained witness, on the other hand, will have at least some first-hand factual awareness of the subject matter of the suit.” Id. at *7. Moreover, “[t]he expert’s job title, the subject or scope of his testimony, and the way that he formed his opinions are irrelevant inquiries for Rule 26(a)(2) purposes.” Id. Instead, “[t]he only question presented by the Rule’s text is whether the witness was retained as an expert or otherwise employed as described in Rule 26(a)(2)(B).” Id. (emphasis supplied). As the Eleventh Circuit succinctly summarized, “whether an expert was ‘retained’ hinges on how she formed her relationship with the party she will testify for—not on the content of the testimony.” Id. at *1.

Here, because the case involved treating physicians and no modification to the default rule occurred, the lower court’s exclusion of these experts for failure to file reports was erroneous. The Eleventh Circuit vacated the order excluding Cedant’s experts and remanded to the lower court to either re-evaluate its filings under Rule 26(a)(2)(C) or issue a new order requesting Rule 26(a)(2)(B) reports for causation witnesses.

3. Expert report requirements under Rule 26(a)(2)(B) and (C) are merely the default rule that can be modified by stipulation or court order.

While Cedant provides clarity on when written expert reports are required, practitioners must remember the approach in Rule 26(a)(2)(B) and (C) is merely the default rule. In fact, the Eleventh Circuit expressly pointed this out in its opinion.

The text of Rule 26(a)(2) offers flexibility for each category of experts. Both subsections (B) and (C) contain language that reports and disclosures must include the specified components “[u]nless otherwise stipulated or ordered by the court.” Fed. R. Civ. P. 26(a)(2)(B)–(C) (emphasis added). Thus, Rule 26 expressly permits district courts (through orders or local rules) and parties (through written stipulations) to modify the usual disclosure requirements. See also 1993 Committee Notes on Rule 26(a)(2) (“By local rules, order, or written stipulation, the requirement of a written report may be waived for particular experts or imposed upon additional persons who will provide opinions under Rule 702.”). This language allows for adjustments to the default rules on a case-by-case basis. Should a district court modify the requirements of Rule 26, the modifications of the default rule would be reviewed for abuse of discretion. Cedant, 2023 WL 4986402 at *1.

Regardless of which side you are on, FIDJ’s seasoned trial and appellate litigators can help you. For more information on how we can assist in your appellate or trial support needs, contact us at 305-350-5690 or info@fidjlaw.com.

Eleventh Circuit Court of Appeals:

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On March 9, 2022, the Eleventh Circuit Court of Appeals denied a petition for permission to appeal an order remanding a case removed to federal court under the Class Action Fairness Act (“CAFA”). In its ruling denying the petition for permissive appeal, the Court addressed the issue of whether an appellate court has jurisdiction to review an order remanding a case brought under CAFA when that order was issued by the district court sua sponte. In holding that it lacked such jurisdiction, the Eleventh Circuit has created a circuit split on the issue. The Order of the Court in Ruhlen v. Holiday Haven Homeowners, Inc., No. 21-90022 (11th Cir. March 9, 2022) can be read here.

Ruhlen stems from an action initially brought in Florida state court by a group of mobile homeowners and their association against various defendants alleging violations of the Florida Antitrust Act and the Americans with Disabilities Act (“ADA”). Plaintiffs filed suit not as a class action under Florida Rule of Civil Procedure 1.220, but instead as a “representative action” under Florida Rule of Civil Procedure 1.222 which allows for mobile homeowners associations to file suits on behalf of homeowners concerning matters of common interest. Defendants removed to the Middle District of Florida based on the ADA and CAFA.

While the case was pending in the Middle District, Plaintiffs amended their complaint to remove the ADA claim and added other state-law based claims. Consequently, the Middle District sua sponte issued an order remanding the case back to state court on the basis that federal question jurisdiction no longer existed because: i) only state-law claims remained; and ii) CAFA does not provide for jurisdiction over these claims because they were brought in a “representative capacity” under Fla. R. Civ. P. 1.222. The Middle District found that 1.222 representative claims are not class actions, as the term is understood for CAFA jurisdiction. Defendants then sought permission to appeal the sua sponte remand to the Eleventh Circuit.

The appealability of class action remand orders is governed by CAFA and codified at 28 U.S.C. § 1453. Prior to CAFA, a district court’s order remanding a class action for lack of subject matter jurisdiction or a defect in the removal process typically was not appealable. 28 U.S.C. § 1447(d). With CAFA’s passage, “a court of appeals may accept an appeal from an order of a district court granting or denying a motion to remand a class action to the State court from which it was removed if application is made to the court of appeals not more than 10 days after entry of the order.” 28 U.S.C. § 1453(c)(1). Under CAFA, appellate review is discretionary. Thus, a party seeking review of “an order of a district court granting or denying a motion to remand a class action” must file a petition for permission to appeal with the circuit court under Federal Rule of Appellate Procedure 5. It is through this vessel that the Eleventh Circuit analyzed its jurisdiction.

While considering the Petition, the Court studied the phrase “an order of a district court granting or denying a motion to remand a class action” as used in 1453(c)(1) and examined whether it applies in cases where a district court issues a sua sponte remand order. In holding that it did not, the Court found that the word “motion”, as the term is ordinarily used, refers to a request made by a party, not an action the court does on its own. The Court considered that an action taken sua sponte is sometimes “colloquially” described as a court acting “on its own motion” and rejected this expansive logic apply to 1453(c)(1): “we find ourselves constrained to conclude (colloquialisms aside) that when a court sua sponte orders a remand, it is not ‘granting’ its own ‘motion’ within the meaning of § 1453(c)(1)—any more than it would be ‘denying’ its own motion in the absence of such an order.” The decision of the Eleventh Circuit was not unanimous, as Judge Rosenbaum authored a dissent.

In her dissent, Judge Rosenbaum characterized the majority’s reading of § 1453(c)(1) as “hypertechnical.” Judge Rosenbaum noted that both the Eleventh Circuit and the Supreme Court characterized sua sponte actions as those being “on [the court’s] own motion.” Thus, the dissent found that based on the Circuit’s own definition of the term “sua sponte”, such an order would qualify as reviewable under § 1453(c)(1).

Judge Rosenbaum reasoned that the phase “granting or denying a motion to remand” with in § 1453(c)(1) was not meant to exclude sua sponte remand orders but to ensure that all remand orders were not subject to either the jurisdictional bar of § 1447(d) or the final judgment rule. Judge Rosenbaum further reasoned that, even if the majority’s textualism approach was correct, treating a sua sponte remand order differently that a remand order granting or denying a motion made by a party would be an absurd construction of the CAFA immediate appealability provision of § 1453(c)(1).

Judge Rosenbaum detailed how the decision of the Eleventh Circuit is in conflict with how other circuits have expressly or implicitly addressed whether sua sponte remand orders are subject to appellate review under § 1453(c)(1). The Ninth Circuit has expressly found that an appellate court has jurisdiction under § 1453(c)(1) to review sua sponte orders of remand. Watkins v. Vital Pharms, Inc., 720 F.3d 1179, 1181 (9th Cir. 2013); see also Kenny v. Wal-Mart Stores, Inc., 881 F.3d 786, 789 (9th Cir. 2018). Additionally, although not expressly reaching the issue, the Seventh and Eighth Circuits have both implicitly held that sua sponte remand orders are reviewable under § 1453(c)(1) because each Circuit has accepted jurisdiction of appeals concerning such issues. See Fox v. Dakkota Integrated Sys., LLC, 980 F.3d 1146, 1151 (7th Cir. 2020) (reviewing a sua sponte CAFA remand); Dalton v. Walgreen Co., 721 F.3d 492, 494 (8th Cir. 2013) (same). Judge Rosenbaum also noted that the D.C. Circuit acknowledged that a sua sponte remand order was “properly before [the] court as the remand order falls within section 1453(c)(1).” In re U-Haul Int’l, Inc., No. 08-7122, 2009 WL 902414, at *2 (D.C. Cir. Apr. 6, 2009) (Rogers, J., dissenting from majority’s decision to decline jurisdiction over appeal).

Judge Rosenbaum further noted that because of the decision, the Eleventh Circuit is the first to hold that sua sponte orders remanding CAFA cases are wholly insulted from appellate review. Whether the issue is ultimately addressed by Congress in an amendment of the statute, or the circuit split is resolved in an appropriate case before the United States Supreme Court remains to be seen. See generally, Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89-90 (2014) (discussing Supreme Court jurisdiction to review denials of petitions for permission to appeal of CAFA cases). For now, practitioners in the Eleventh Circuit must be aware of the Circuit’s unique interpretation of its jurisdiction.

Regardless of which side you’re on, FIDJ’s seasoned trial and appellate litigators can help you. Our appellate and trial support practice group is chaired by Jeffrey J. Molinaro, B.C.S., who is recognized by the Florida Bar as a Board Certified Specialist in Appellate Practice. For more information on how we can assist in your appellate or trial support needs, contact us at 305-350-5690 or info@fidjlaw.com.

Florida Litigation Update:

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On February 23, 2022, the Florida Third District Court of Appeal issued its opinion in New Horizons Condominium Master Association, Inc. v. Harding, and held that under Florida law a defendant does not waive the protections afforded by the business judgment rule even if the defendant did not plead the rule as an affirmative defense. In its opinion, the Third District analyzed case law from around the country to formulate a detailed explanation of the protections afforded by the rule and why it applies by operation of law. The opinion can be read here.

The litigation arose after a condo association approved a settlement with Comcast concerning arrearages. The plaintiff, Harding, sued the condo association alleging that its budget, which included the settlement amount, was ultra vires because it included assessments beyond those required to defray reasonable expenses. In answering the compliant, the condo association did not raise the business judgment rule as an affirmative defense. After Harding moved for summary judgment, the condo association argued that the directors’ decisions were protected by the business-judgment rule and therefore the association was shielded from liability. In granting Harding’s motion for summary judgment, the lower court relied in part on the association’s failure to plead the business judgment rule as an affirmative defense. The association appealed. On appeal, the Third District addressed the issue of whether the failure of the condo association to plead the business judgment rule as an affirmative defense precluded its application.

Under Florida law, the business judgment rule is a codified statutory protection that protects directors of corporations and not-for-profits and managers/members of limited liability companies from liability for actions taken absent a showing of bad faith, self-dealing, or a violation of criminal law. See § 607.0831(1), Fla. Stat. (codifying the business judgment rule as to corporate directors); § 605.04093(1), Fla. Stat. (codifying the business judgment rule as to managers/members of limited liability companies); § 617.0834(1), Fla. Stat. (codifying the business judgment rule as to nonprofit officers and directors). These protections also protect condo associations’ decisions so long as the decision is within the scope of the association’s authority and is reasonable, i.e. not arbitrary, capricious, or in bad faith. Hollywood Towers Condo. Ass’n, Inc. v. Hampton, 40 So. 3d 784, 7878 (Fla. 4th DCA 2010).

In reversing the trial court’s granting of summary judgment, the Third District held that because the business judgment rule is a statutory presumption, a defendant does not need to plead protection under the rule as an affirmative defense for the rule to apply. In so holding, the Third District analyzed the statutory language and as well as authority from other jurisdictions throughout the country. The Third District noted that although the Florida Legislature could have defined the business judgment rule as an affirmative defense that must be pled by the defendant; it did not do so. Instead, based on its review of decisions of courts of other jurisdictions interpreting similar statutes, the Third District held that the Legislature codified the protections of the business judgment rule as a statutory presumption that applies automatically by operation of law. Thus, because the rule is a statutory presumption, protection from liability under the rule does not need to be pled by a defendant as an affirmative defense. As a result, the condo association is now able to argue in opposition to Plaintiff’s summary judgment motion that its board’s actions were protected by the business judgment rule based on the appellate court’s conclusion that the trial court erred in ruling that the association’s failure to plead the rule as an affirmative defense constituted a waiver of the defense.

Left unanswered by the Third District is whether the plaintiff has an affirmative obligation to plead around the business judgment rule. In reaching its decision, the Third District did not expressly hold that the plaintiff had an obligation to affirmative plead around the business judgment rule’s statutory presumption. However, the Third District did note that cases from other jurisdictions “stand for the proposition that a party seeking to challenge a business decision must first establish facts rebutting the presumption of reasonableness.”

The practical effect of the Third District’s decision is that a plaintiff who fails to plead facts that would defeat the business judgment rule would not shift the burden to the defendant to establish that the actions taken were in good faith. Plaintiffs and defendants alike should keep the practical effect of the Third District’s opinion in mind when pleading and defending against claims that are potentially subject to the business judgment rule because improper pleading may subject a claim to dismissal.

Regardless of which side you’re on, FIDJ’s seasoned trial and appellate litigators can help you. Our appellate and trial support practice group is chaired by Jeffrey J. Molinaro, B.C.S., who is recognized by the Florida Bar as a Board Certified Specialist in Appellate Practice. For more information on how we can assist in your appellate or trial support needs, contact us at 305-350-5690 or info@fidjlaw.com.

Florida Supreme Court

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On February 3, 2022, the Florida Supreme Court issued its opinion in Pincus v. American Traffic Solutions, Inc. clarifying that under Florida law, where a plaintiff has received adequate consideration in exchange for a benefit conferred, the plaintiff cannot state a claim for unjust enrichment as a matter of law. A copy of the Florida Supreme Court’s decision can be read here.

The case arose after plaintiff filed a class action lawsuit in the Southern District of Florida against American Traffic Solutions (“ATS”) stemming from the company’s charging of a five percent convenience fee to process payments for red light camera citations. The complaint alleged that the charging of the convenience fee violated numerous Florida laws and that ATS was unjustly enriched as a result. ATS moved to dismiss. The Southern District dismissed plaintiff’s complaint finding the complaint failed to state a cause of action because: (1) ATS’s fee was not prohibited under section 316.0083(b)(4) because the fee was not a “commission” within the meaning of the statute; (2) ATS’s fee was not prohibited under section 318.121 because this statute only applies to violations assessed under chapter 318, Florida Statutes (2017), and Pincus’s violation was assessed under chapter 316, Florida Statutes (2017); and (3) section 560.204 does not provide a private right of action, as violations of this statute are enforced by the Financial Services Commission’s Office of Financial Regulation. Plaintiff appealed. 

On appeal, in addition to its previous arguments, ATS also argued that plaintiff could not state a claim because he had received a benefit in exchange for the fee he paid, to wit: the convenience of being able to pay immediately with a credit card instead of having to mail a check. The Eleventh Circuit determined there was no guiding precedent on this issue or other key issues raised in the case and certified the following questions to the Florida Supreme Court:

(1) Did ATS violate Florida law when it imposed a five percent fee on individuals who chose to pay their red light traffic ticket with a credit card? In particular:

Does the challenged fee constitute a “commission from any revenue collected from violations detected through the use of a traffic infraction detector” under Fla. Stat. § 316.0083(1)(b)(4)? 

Was the fee assessed under Chapter 318 and therefore subject to § 318.121’s surcharge prohibition? 

Was ATS a “money transmitter” that was required to be licensed under Fla. Stat. § 560.204(1)? 

 

(2) If there was a violation of a Florida statute, can that violation support a claim for unjust enrichment? In particular: 

 

  • Does Pincus’s unjust enrichment claim fail because the statutes at issue provide no private right of action?
  • Does Pincus’s unjust enrichment claim fail because he received adequate consideration in exchange for the challenged fee when he took advantage of the privilege of using his credit card to pay the penalty?

Pincus v. American Traffic Solutions, Inc., 986 F.3d 1305, 1320-1321 (11th Cir. 2021). 

In its opinion, the Florida Supreme Court focused solely on question 2(b) concerning adequate consideration finding that its resolution would be dispositive of the case before the Eleventh Circuit. The Court noted that to successfully state a claim for unjust enrichment, a plaintiff is required to allege that it would be inequitable under the circumstances for the defendant to retain the benefit conferred upon it without paying the value thereof. Based on the circumstances presented, the Court held that even if the collection of the fee violated Florida law, ATS’s retention of the fee would not be inequitable because Pincus received adequate consideration in exchange for the privilege to pay by credit card. This adequate consideration included: (1) Pincus did not have to procure postage and a check or money order; (2) he could pay the balance over time; (3) he avoided the risk of his payment being delayed, stolen, or lost en route; (4) he was afforded more time to make the payment because it was instantaneous; and (5) ATS provided immediate confirmation that Pincus’s payment was received and his obligation to pay the penalty was fulfilled. Thus, the Court found that it was not inequitable to retain the processing fee because ATS had provided adequate consideration through a bargained-for-exchange. Phrased differently, it was not inequitable to retain the fee because ATS had already paid the value of the fee to the plaintiff by providing him with numerous benefits associated with using his credit card to pay the citation in lieu of other forms of payment.

The Court’s decision is interesting in multiple respects. First, practitioners should recognize that bargained-for-exchange is not an affirmative defense to unjust enrichment. Instead, it is a defense that attacks the inequity prong of the cause of action. Thus, plaintiff bears the burden of demonstrating any consideration received was inadequate. A defendant can therefore attack the sufficiency of plaintiff’s pleading by pointing to a bargained-for-exchange between the parties concerning the benefit at issue. As inequity is the plaintiff’s burden to establish, plaintiffs who anticipate defendants raising an adequate consideration argument would be wise to allege facts concerning circumstances that demonstrate why the consideration received was inadequate. 

Second, the decision is interesting in that it seems to ignore the underlying illegality of ATS’s actions that was presumed in the question presented by the Eleventh Circuit when addressing the inequity issue. A review of the Court’s opinion makes clear it focused on the consideration received for the benefit conferred. It remains to be seen how this case’s holding is construed as it appears, on the surface, to stand for the broad proposition that bargained-for-exchange will trump any argument that a defendant’s unclean hands prohibits the retention of a benefit received. 

Third, from an opinion prospective, the opinion is an example of judicial restraint in that the Court focused solely on the issue it found to be dispositive rather than answering all questions certified to it by the Eleventh Circuit. In this way, the Court was able to resolve the issue without entangling itself in multiple complex statutory analyses. 

Regardless of which side you’re on, FIDJ’s seasoned trial and appellate litigators can help you. Our appellate and trial support practice group is chaired by Jeffrey J. Molinaro, B.C.S., who is recognized by the Florida Bar as a Board Certified Specialist in Appellate Practice. For more information on how we can assist in your appellate or trial support needs, contact us at 305-350-5690 or info@fidjlaw.com.

Florida Appellate Practice Update:

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On January 6, 2022, the Florida Supreme Court started the new year off with a bang, to wit: the Court amended Florida Rule of Appellate Procedure 9.130 to allow for appeals of nonfinal orders granting or denying motions to amend to add claims for punitive damages. A copy of the Florida Supreme Court’s opinion can be read here.

Previously, because interlocutory review was not expressly provided for under 9.130, the only avenue to challenge an order granting leave to amend to add a claim for punitive damages was via a petition for writ of certiorari. However, certiorari review was limited to ensuring that the procedural requirements established under section 768.72, Florida Statutes were followed. Globe Newspaper Co. v. King, 658 So.2d 518, 519 (Fla. 1995). Under its certiorari jurisdiction, the courts of appeal lacked jurisdiction to review the sufficiency of the evidence considered by the trial court in granting leave to amend. Robins v. Colombo, 253 So.3d 94, 96 (Fla. 3d DCA 2018). Due to this limitation, so long as the procedural requirements of 768.72 were satisfied, defendants could not seek review of the sufficiency of the evidence until after a final judgment was rendered against them.

A delay in challenging the sufficiency of the evidence was potentially problematic for several reasons. A claim for punitive damages allows for otherwise prohibited financial discovery. As Florida’s Third District Court of Appeal has explained, “[f]rom a practical perspective, the granting of a motion for leave to amend a complaint to add a punitive damages claim can be a ‘game changer’ in litigation. Allowing a plaintiff to proceed with a punitive damages claim subjects the defendant to financial discovery that would otherwise be off limits, and potentially subjects the defendant to uninsured losses.” TRG Desert Inn Venture, Ltd. v. Berezovsky, 194 So.3d 516, 520 n.5 (Fla. 3d DCA 2016). Additionally, requiring a defendant to challenge the evidentiary sufficiency of a punitive damages claim only after a money judgment had been entered against it requires the defendant to post a bond to stay execution pending appeal. See generally, Fla. R. App. P. 9.310(b)(1).

The limitations associated with certiorari review resulted in mounting frustrations within the District Courts of Appeal. As a result, several Districts urged the Florida Bar Appellate Rules Committee to amend 9.130 to provide for interlocutory appeals of such orders. See Bentley Condominium Association, Inc. v. Bennett, 321 So.3d 315, 316 n.2 (Fla. 3d DCA 2021); Life Care Ctrs. of Am., Inc. v. Croft, 299 So.3d 588, 591-92 (Fla. 2d DCA 2020); Event Depot Corp. v. Frank, 269 So.3d 559, 565 (Fla. 4th DCA 2019) (Kuntz, J. concurring specially).

The Florida Supreme Court’s opinion was not unanimous. Justice Labarga dissented raising several concerns over the effects of the amendment. Justice Labarga explained that allowing for interlocutory appeals of punitive damage orders could bring about unwarranted and unnecessary delays to civil trials with the ultimate result being that certain plaintiffs, particularly those in personal injury cases, may forgo meritorious claims for punitive damages to avoid delay in exchange for much needed medical and economic relief. Justice Labarga noted that no other state had adopted a rule that provides for the interlocutory appeal of orders granting or denying leave to amend to add a claim for punitive damages.

The majority expressed serious concerns about the need to protect the financial information of defendants in cases where trial judges allow plaintiffs to amend their pleadings to assert punitive damages claims because, again, punitive damages claims can expose defendants to vastly greater financial discovery obligations. However, Justice Labarga explained that those concerns were alleviated through confidentiality orders and already protected by the existing certiorari review model.

Justice Labarga also took issue with the majority’s reliance upon the Rules Committee’s and the Board of Governors of the Florida Bar’s approval of the amendment. Justice Labarga explained that the Rules Committee had previously rejected prior proposals to amend 9.130 to provide for these appeals, but that the proposing subcommittee “felt constrained to propose an amendment upon concluding that the [Florida Supreme] Court’s referral was a directive to do so.” Justice Labarga noted that while the Rules Committee approved the amendment, it also approved the subcommittee’s recommendation that it would not have supported the amendment but for the mandate from the Florida Supreme Court.

It should be noted that the amended rule has the potential to vastly expand the amount of interlocutory appeals before the Florida District Courts of Appeal at the precise time when the Supreme Court is looking for ways to streamline civil litigation. In December 2021, it was reported in the Florida Bar News that the Florida Supreme Court is weighing proposals from the Judicial Management Counsel that would bring “sweeping changes” to Florida’s civil trial system, including tracking cases into “streamlined,” “general,” or “complex” categories and mandatory case management orders setting trial dates and deadlines for completing discovery, depositions, and dispositive motion practice. As chair of the JMC Judge Robert Morris explained, “[c]ontinuances are going to be very difficult to get in this new world…A trial continuance is going to be extremely difficult to get.” A copy of the Florida Bar’s article can be read here.

On its face, there seems to be an incongruence between the expansion of interlocutory appellate remedies and streamlining civil practice into tighter deadlines with less leeway for continuances. The changes proposed by the JMC are relatively commonplace at the federal trial court level. Yet, federal law provides for significantly less interlocutory appellate remedies than Florida.

Of course, the availability of an interlocutory appeal does not preclude initial review of a nonfinal order on appeal from the final order in a case. Fla. R. App. P. 9.130(h). However, the practical result of allowing such a remedy is that parties will seek review at the first opportunity in order to either avoid financial discovery or ensure that an opportunity to take financial discovery is allowed depending upon whether the order grants or denies leave to amend. In such an instance, although the trial court would not lose jurisdiction over the case while the appeal is pending unless a stay is entered, the trial court would be precluded from taking any action that would alter the order on appeal, including by entering a final order in the case until the appeal is resolved. Fla. R. App. P. 9.130(f). Should a backlog in the appellate courts occur, continuances would necessarily be required, thus tempering any perceived streamlining the new proposals will mandate.

With these factors in mind, it remains to be seen how the Florida Supreme Court aligns its efforts at streamlining Florida’s civil trial practice with the ever-growing number of available interlocutory appeals that have the ability to disrupt even the best-intentioned civil case management orders. Perhaps the creation of a Sixth District Court of Appeal in Florida will help with this backlog at some point, but until then Florida trial lawyers will need to be mindful of this significant new rulemaking.

Regardless of which side you’re on, FIDJ’s seasoned trial and appellate litigators can help you. Our appellate and trial support practice group is chaired by Jeffrey J. Molinaro, B.C.S., who is recognized by the Florida Bar as a Board Certified Specialist in Appellate Practice. For more information on how we can assist in your appellate or trial support needs, contact us at 305-350-5690 or info@fidjlaw.com.

AML Compliance Game Changer:

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Anti-Money Laundering Compliance Game Changer: A series on the Anti-Money Laundering Act of 2020.

Part II: The Corporate Transparency Act and Beneficial Ownership Disclosure Requirements

On January 1, 2021, Congress overrode President Trump’s veto and passed the Anti-Money Laundering Act of 2020 (“AMLA”). The AMLA, included as Division F of the omnibus National Defense Authorization Act for fiscal year 2021 (“NDAA”), is widely considered the most comprehensive set of reforms to the Bank Secrecy Act since the USA PATRIOT Act of 2001. The reforms are wide-ranging covering a variety of areas including the creation of an enhanced whistleblower program, beneficial ownership disclosure requirements, clarification and expansion of the definition of “financial institutions” under the BSA’s reach, expanded ability of the US government to seek information from foreign financial institutions and share information with foreign regulators, streamlining and modernizing the SAR/CTR reporting process, and increased penalties for BSA violations. Part II of this series focuses on the Corporate Disclosure Act.

  1. General Overview

The Corporate Disclosure Act, found at sections 6401 to 6403 of the NDAA, will generally require a “reporting company” to disclose “beneficial owner” information to the United States Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). The beneficial ownership information requirement was implemented to deter the creation and use of shell companies which may facilitate money laundering or other illicit activities. The Act will take effect after the Secretary of the Treasury promulgates implementing regulations – which the Secretary must do no later than January 1, 2022.

  1. What is and is not a “reportable company”?

The Act defines a “reportable company” broadly as: “a corporation, limited liability company, or other similar entity that is – (i) created by the filing of a document with the secretary of state or similar office under the law of a State or Indian Tribe; or (ii) formed under the law of a foreign country and registered to do business in the United States by the filing of a document with a secretary of state  or a similar office under the laws of a State or Indian Tribe….”

However, the Act also includes numerous exclusions, including publicly-traded companies; securities issuers; banks; credit unions; bank holding companies; money transmitters; broker dealers; exchanges; investment companies; investment advisors; public accounting firms; and pooled investment vehicles to name a few. Additionally, any entity that: i) employs 20 or more employees on a full-time basis in the United States; ii) gross sales or receipts over $5 million; and iii) an operating presence at a physical United States office are also exempt from the definition of a “reportable company.”

These exceptions make sense from an anti-money laundering and law enforcement perspective. On the one hand, public companies and other entities with more than 20 employees typically exist in broad daylight, and the nature of their business activities and revenues are readily discernible. On the other hand, “shell companies” often have no employees and a single, high value asset, and the nature of the operations, sources of funds, and beneficial owners are impossible to discern. Moreover, shell companies are often registered in jurisdictions that do not require the disclosure of beneficial ownership information, further adding to the difficulties associated with knowing who, exactly, is in charge. Again, it is that latter category of entity – the “shell corporation” – that the Corporate Disclosure Act was designed to address.

  1. What must be reported?

Under the Act, a “reporting company” must provide the following information for its “beneficial owners” and its “applicants”: i) full legal name; ii) date of birth; iii) current, as of the date the report is delivered, residential or business street address; and iv) a “unique identifying number from an acceptable identification document” which includes a driver’s license, US Passport, or other state-issued identification document.

An “applicant” is any individual who: i) files an application to form the entity under the laws of a State or Indian Tribe; or ii) registers or files an application to register a foreign formed entity to do business in the United States. A “beneficial owner” is any individual who directly or indirectly: i) owns or controls 25% of the entity; or ii) exercises “substantial control” over the entity. However, what constitutes “substantial control” is not defined by the Act. It is expected that the Secretary will define “substantial control” when it issues its implementing regulations.

  1. When must applicant and beneficial owner information be reported?

The deadline for a “reporting company” to report beneficial ownership information to FinCEN depends on whether the company is in existence at the time the Act is implemented. “Reporting Companies” in existence at the time the Act is implemented will have two years to submit the information to FinCEN.

“Reporting Companies” which are formed or registered after the Act is implemented will be required to submit the information at the time they are formed or registered. Additionally, should a change in beneficial ownership information occur, “reporting companies” must update their reports to FinCEN no later than one year after the change.

  1. Confidential reporting and agency information sharing.

Although “reporting companies” must report beneficial ownership to FinCEN, the Act requires that FinCEN keep such information confidential. However, FinCEN may share beneficial ownerhip information under certain circumstances, such as: i) in response to a request federal agency engaged in national security, intelligence, or law enforcement activity; ii) with state and local law enforcement upon court order; iii) upon request of certain foreign law enforcement agencies; iv) upon request of certain regulatory agencies; and v) upon request from a financial institution with consent of the “reporting company”.

  1. Penalties for non-compliance.

Under the Act, it is unlawful to willfully fail to report completed or updated beneficial ownership information. The Act also makes it unlawful to willfully provide or attempt to provide false/fraudulent beneficial ownership information. The Act provides for multiple penalties including a civil penalty of $500 per day for each day the violation continues; and a fine up to $10,000, imprisonment up to 2 years, or both.

  1. How to prepare?

Although the regulations implementing the Corporate Disclosure Act have not yet been promulgated, companies should take time to analyze whether they would qualify as a “reporting company” under the Act and if so, should begin to identify potential “applicants” and “beneficial owners.”

Fuerst Ittleman David & Joseph has years of experience assisting businesses with corporate governance and compliance. We also specialize in anti-money laundering law, and represent a wide array of financial institutions in matters involving anti-money laundering compliance. For more information about the Bank Secrecy Act, anti-money laundering compliance, or the new disclosure laws described in this article, contact us by email at info@fidjlaw.com or by phone at 305-350-5690.

Anti-Money Laundering Compliance Game Changer:

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Anti-Money Laundering Compliance Game Changer: A series on the Anti-Money Laundering Act of 2020.

Part I: New BSA/AML Whistleblower Program

On January 1, 2021, Congress overrode President Trump’s veto and passed the Anti-Money Laundering Act of 2020 (“AMLA”). The AMLA, included as Division F of the omnibus National Defense Authorization Act for fiscal year 2021, is widely considered the most comprehensive set of reforms to the Bank Secrecy Act since the USA PATRIOT Act of 2001. The reforms cover a wide variety of areas including the creation of an enhanced whistleblower program, beneficial ownership disclosure requirements, clarification and expansion of the Bank Secrecy Act’s definition of “financial institutions,” expansion of the U.S. government’s authority to seek information from foreign financial institutions and share information with foreign regulators, streamlining and modernizing the Suspicious Activity Report (SAR) and Currency Transaction Report (CTR) reporting processes, and increased penalties for BSA violations. In this article, we focus on AMLA’s complete revamping of the BSA whistleblower program.

The AMLA vastly reshapes the BSA whistleblower program by increasing the rewards associated with whistleblowing. The revised BSA whistleblower reward structure is modeled after the Securities and Exchange Commission Whistleblower Program passed as part of the Dodd-Frank Act of 2010.

Under the prior version of the BSA whistleblower program, rewards for tips leading to successful enforcement actions was discretionary and capped at $150,000. However, under the new AMLA program, in cases where a whistleblower discloses an AML/BSA violation to the government, and the government then brings an enforcement actions that result in its recovery of $1 million or more, the Treasury Department is required pay an award to the whistleblower up to 30 percent of the amount recovered.

In order to be eligible for an award the following requirements must be met. First, the whistleblower must voluntarily report the BSA violation to either their employer, the Treasury Department, or the Department of Justice. Second, the information provided must be “original information.” As defined by the AMLA, “original information” means information that: i) is derived from the independent knowledge or analysis of a whistleblower; ii) is not known to the Treasury Department or DOJ from any other source, unless the whistleblower is the original source of the information; and iii) is not exclusively derived from an allegation made in a judicial or administrative hearing, in a government report, hearing, audit, or investigation, or from the news media, unless the whistleblower is the source of the information. Additionally, the information provided must lead to a successful enforcement action, and the government must recover an amount greater than $1 million.

It is important to note that whistleblowers who acquire “original information” while “acting in the normal course of the job duties of the whistleblower” are ineligible for an award. Thus, from a practical standpoint, BSA/AML compliance personnel will face increased difficulties and/or limited opportunities serving as whistleblowers entitled to participate in the government’s recovery.

In addition to increasing rewards for whistleblowers, the AMLA establishes protections for whistleblowers against retaliatory measures taken by a whistleblower’s employer. The new law provides that if a whistleblower’s employer takes a retaliatory enforcement action against the whistleblower’s, the whistleblower will have the right to file a complaint with the Department of Labor, and should the matter not be fully resolved before the Department within 180 days, directly file a complaint against the employer in federal district court. Penalties associated with a finding of retaliation include: i) reinstatement; ii) 2 times back pay plus interest; iii) compensatory damages; and iv) attorneys’ fees and costs. The AMLA provides provides further protections than the SEC whistleblower program because it protects from retaliation in-house reporting to supervisors.

With increased rewards and heightened protections, it is widely expected that the revamped BSA whistleblower program will result in a significant increase in reporting of BSA violations. In the meantime, financial institutions should begin to prepare for this new era in regulatory compliance by reevaluating and strengthening their AML compliance programs, implementing internal reporting systems for BSA deficiencies, and establishing anti-retaliation policies to ensure protection for those who make reports.

Fuerst Ittleman David & Joseph has years of experience in cases involving whistelblowers – including by having represented whistleblowers and the companies against which other whisteblowers have charged with misconduct. We also specialize in anti-money laundering law, and represent a wide array of financial institutions in matters involving anti-money laundering compliance. For more information about the Bank Secrecy Act, anti-money laundering compliance, or the new AML whistleblower laws described in this article, contact us by email at info@fidjlaw.com or by phone at 305-350-5690.

Foreign-Sourced Injectables and the Ever Present Risk of FDA Enforcement

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By Andrew S. Ittleman
November 2, 2020

The following article was written by Andrew Ittleman for the November 2020 edition of  MedEsthetics Magazine. We repost the article here with MedEsthetics Magazine’s permission.

My first interaction with MedEsthetics Magazine was in 2013. That year, I lectured at the annual AACS Scientific Meeting in Las Vegas about a recent case involving counterfeit Avastin, an infused cancer drug, and how it impacted the medaesthetics industry. In that case, a group of Canadian online pharmacies had distributed the counterfeit product to hundreds of physicians in the United States, who then administered it to patients and, in many cases, were reimbursed by Medicare and Medicaid. Some of those doctors were criminally prosecuted, and all of their names were posted on the FDA’s website, even though none of them knew they had done anything wrong. Of course, as I also discussed in that lecture, it was around that same time that I started receiving calls from doctors who were having their own uncomfortable interactions with the U.S. government as a result of their purchase and use of injectable products from the same group of Canadian pharmacies. Many of those doctors were dermatologists and cosmetic surgeons, and Medesthetics Magazine featured my lecture in its April 2013 issue.

There have been ebbs and flows in the story between then and now, but for the most part it has continued unabated. The cases I have handled for dermatologists and cosmetic surgeons have typically begun when the doctor received an unsolicited fax or email from a company claiming to be a pharmacy and offering discounted prices on injectables, including a variety of fillers and, most often, Botox. Intrigued by the lower price, the doctor purchased the products, they were delivered via next day air, an admin at the office unpacked and stored them with the rest of the clinic’s injectables, and the doctor used them on his patients. Unlike the Avastin case, in every case I have seen, the products have worked just fine, the patients were as satisfied as ever, and the doctor naturally reordered, sometimes again and again without a single adverse incident. Nothing to see here, right?

Unfortunately, no, there’s always more to the story, which is why I have to get involved. There are two main problems: the law, and the ease with which these cases rise to the surface.

First, the law. Remember the unsolicited fax the doctor received? Well, it turns out it came from a pharmacy in Canada. But the product was fine, right? Yes, the product itself was fine, but it was intended for a market other than the United States, such as Canada, the UK, Turkey or Pakistan, and if the doctor himself unpacked it he may have seen that the labeling was different than what he was used to, and may have even been in a foreign language. And had the doctor been an FDA lawyer, he may have understood that when FDA approves a product, it also approves the product’s labeling, so the law treats these foreign versions of approved injectables as unapproved when they enter the country and arrive at the practice. The doctor has violated the law without even knowing it.

Second, the facts. These cases have typically risen to the surface in one of two ways. In some instances, sales reps for the injectable manufacturers have noticed a discrepancy between the volume of products sold to the doctor by the sales rep and the total number of products in the doctor’s inventory. From there, the sales reps have reported the discrepancy to the manufacturer, who then reports it to FDA, who then initiates an investigation, in many cases resulting in prosecution. This trend was reported in a 2016 Reuters Special Report called “Botox Police” which described “low morale” at FDA as a result of the volume of these cases involving no criminal intent on the part of the targeted doctors. In more instances though, these cases have risen to the surface when FDA has cracked down on the Canadian pharmacies distributing the unapproved versions of the products in the United States. Most notably, in 2012 FDA and INTERPOL launched “Operation Pangea V” in which FDA seized customer information from one such group of pharmacies and then posted the names of 250 U.S. doctors on fda.gov. There have been six more Operation Pangeas since then, which reached their crescendo with the U.S. government’s criminal conviction of Kristjan Thorkelson, the Canadian citizen who started the Canada Drugs Online Pharmacy Network. Of course, Mr. Thorkelson was prosecuted in Montana, which was where the unapproved versions of the products were smuggled to be shipped by next day air to the unwitting American purchasers.

These cases, which continue to this day, reveal important phenomena. Primarily, even beyond injectable products, there is still a strong incentive to purchase foreign sourced drugs because they are less expensive. Foreign governments can set price controls for drug products, even Botox, but the United States government cannot, so manufacturers make up the difference here. The Trump Administration has sought to create a legal pathway for the sale of certain foreign sourced drugs in the U.S., but faces regulatory hurdles and bipartisan political opposition. For its part, Allergan has announced that “legalizing prescription drug importation is a highly dangerous way to help people afford their medicines…”

Next, the number of these cases, and the duration of this story, reveals the ease with which they can be prosecuted. In short, when a doctor imports unapproved drug products into the United States, he commits a federal misdemeanor, whether he knows it or not. Under the Food, Drug & Cosmetic Act (FDCA), the “Park Doctrine” – which is named after a 1975 Supreme Court case called United States v. Park – allows the government to seek a misdemeanor conviction against individuals for alleged FDCA violations without proving that the individual was even aware of the violation. Instead, the government need only establish that the violation occurred and that the individual could have prevented or corrected it, a far lower burden for a less serious criminal violation, typically resulting in no prison time.

Even though these misdemeanor cases are less serious than felony cases involving intentional conduct, they can still have grave consequences, especially for doctors. Primarily, doctors are required to report these cases to their medical boards, which can lead to separate sanctions related to their licenses and reputation. Additionally, these misdemeanor cases can lead to collateral cases filed by the U.S. Department of Health and Human Services, resulting in restrictions on the doctors’ ability to receive reimbursements from Medicare and Medicaid, and even to work for other companies that do. And finally, these cases tend to settle quickly, because the threat of fraud and money laundering charges looms behind each of them. In short, keeping in mind that the doctors’ patients were likely never told that they would be injected with an unapproved version of a familiar product, it takes little effort for the government to ratchet the unwitting misdemeanor violation up to a felony fraud violation, and to the extent the doctor deposited the proceeds of that fraud into a bank account, money laundering allegations can also follow. For obvious reasons, these cases rarely, if ever, go to trial.

However, the FDCA does recognize a “good faith” defense to the misdemeanor charges, but establishing good faith requires real due diligence on the doctor’s part. For starters, doctors should be aware that all entities that distribute drug products in the United States are required to register with FDA, and in many instances the individual states, so the doctor would be wise to check on those registrations before purchasing from an unfamiliar distributor. Even if the distributor can survive the initial due diligence, the doctor – as opposed to an admin – should inspect the product’s packaging and confirm that it is, in fact, the U.S. version of the familiar product. The packaging itself, the language in which it is written, and dosing recommendations are all critical features. Finally, to the extent there is any lack of familiarity with the seller, the doctor can request a “guaranty,” in which the seller certifies in writing that the product complies with U.S. law. Of course, none of these efforts provides complete protection from enforcement, but they can lower the risk of worst case scenarios.

In sum, doctors are always free to explore new and less expensive injectable options for their practices. However, FDA has pursued these cases against doctors for the past 8 years with no signs of relenting. So long as this trend continues, doctors should keep in mind the ever present risk of enforcement, and conduct thorough due diligence of all new distributors before even considering injecting their products into patients.

Florida’s Zombie Chevron Problem

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Florida’s Zombie Chevron Problem: An analysis of DHSMV v. Chakrin, binding precedent, and administrative agency deference in light of Art. V, § 21, Fla. Const.

On October 14, 2020, the Florida Second District Court of Appeal issued its opinion in DHSMV v. Chakrin reinstating the suspension of petitioner’s driver’s license. In so doing, the Second District continued to shape and define the role of courts, particularly circuit courts sitting in their appellate capacity, when it comes to administrative agency deference and whether deferential jurisprudence written prior to Art. V, § 21 being added to the Florida Constitution still binds the circuit courts.

In understanding the implications of this decision, a review of Chevron deference and Art. V, § 21, Fla. Const. is important.

  1. A. Chevron Primer.

As administrative law practitioners are well aware, the Chevron doctrine describes the manner by which courts “defer” to administrative agencies’ interpretations of ambiguous statutes over which each respective agency has been delegated rulemaking authority by the legislature. The doctrine gets its name from Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984) in which the United States Supreme Court ruled that in instances where a law passed by Congress is silent or ambiguous with regard to an issue, the courts must defer to an agency’s interpretation of the law it is in charge of implementing unless that interpretation is unreasonable. In the intervening years, Chevron has become a broad sweeping rule of construction which requires deference to the agency’s interpretation even if  the court finds that other interpretations of the statute are reasonable or believes that the agency’s interpretation is not the most reasonable among competing interpretations. As explained in Chevron,

When a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. First, always is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issues, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.

476 U.S. at 842-843.

  1. B. Art. V, § 21 Fla. Const.

Although the Chevron doctrine is a creature of federal case law, until 2018 the doctrine was applied with equal force by Florida courts when considering state administrative agencies’ interpretations of ambiguous Florida laws. However, in 2018, Florida voters passed an amendment to the Florida Constitution which states:

Art. V., SECTION 21. Judicial interpretation of statutes and rules.—In interpreting a state statute or rule, a state court or an officer hearing an administrative action pursuant to general law may not defer to an administrative agency’s interpretation of such statute or rule, and must instead interpret such statute or rule de novo.

Art. V, § 21 thus reshaped the deference afforded by courts to administrative agency interpretations of statutes and rules over which they have jurisdiction. However, an unanswered question is whether the plain language of Art V, § 21 displaced existing case law, i.e. jurisprudence written prior to the 2018 amendment to the Florida Constitution. DHSMV v. Chakrin helps shed light on this issue.

  1. C. The Chakrin Decision.

Chakrin involved a petition for the reinstatement of Chakrin’s driver’s license after it was permanently revoked by DHSMV following Chakrin’s DUI manslaughter conviction. Under the relevant law at issue, even if a party’s license is “permanently” revoked, the party may later have his license reinstated if he meets certain factors, including, as relevant here, being “drug-free” for at least five years prior to the hearing. At Chakrin’s hearing, he admitted to consuming one beer during this period. As a result of this admission, the DHSMV denied reinstatement finding that, due to the consumption of alcohol, Chakrin had not been “drug-free” within the past five years.

Chakrin filed a petition for certiorari in the circuit court arguing that the agency erred in denying the reinstatement of his license because the statute does not specifically reference alcohol use; therefore, the agency’s interpretation of “drug-free” as including “alcohol-free” was a departure from the essential requirements of law. The circuit court agreed and quashed the agency’s decision. As part of its findings, the circuit court found that “the court is no longer required to defer to the Department’s interpretation of the word ‘drug’ and [that it] is not bound by case law relying on such interpretations.” (emphasis added). It was this latter finding that the Second District took issue with when the agency sought second-tier certiorari review.

In quashing the circuit court’s decision and reinstating the agency’s decision to deny reinstatement, the Second District found that the circuit court failed to apply the correct law because it ignored binding precedent which had previously interpreted the statute to include alcohol consumption within the meaning of drug use. In so finding, the Second District clarified that the circuit court’s determination that it was not bound by pre-amendment cases was incorrect. In short, according to the Second District, district courts of appeal decisions represent the law of the land in Florida unless and until they are overruled. The Court noted that there were two potential bases for ignoring such precedent: i) if the plain language of the statute conflicts with prior precedent; or ii) if Art. V, § 21 changed the precedential value of prior cases interpreting the statute under the Chevron standard of deference. However, the Court found neither circumstance existed to allow the circuit court, within the limited scope of its review on certiorari, to disregard prior precedent.

With regard to Art. V, § 21, the Second District found that the constitutional amendment’s language does not address the precedential value of past cases which were based on Chevron deference. While the Court recognized that the amendment begged the question of whether such precedent was outdated, the Court was quick to explain that the decision to overturn precedent is the proper function of the courts which actually make precedent, i.e. the District Courts or the Florida Supreme Court, as opposed to circuit courts even when ruling in a limited appellate capacity. Thus, the circuit court was required to apply the precedent of the district court and could not simply ignore it and substitute its own statutory interpretation.

In its opinion, the Second District also opined on a gap in the appellate rules which distinguish reviews of administrative proceedings in the circuit courts from reviews of county court proceedings which can be heard in either circuit courts or the district courts. Under the current rules, a county court can certify a question of great public importance to the district court. Fla. R. App. P. 9.030(b)(4)(A); Fla. R. App. P. 9.160. The Court explained that in situations where a question exists on whether prior precedent controls, the County to District Court certification process (wherein the district court decides the appellate issue rather than the circuit court) provides an avenue for the precedent-making court to directly address the issue. However, no such certification process exists under statute or the rules of appellate procedure to allow for a certification of great public importance in instances where a circuit court is hearing an appeal of an administrative decision. Whether this gap in the rules is ultimately rectified by future changes remains to be seen.

The practical effect of the Second District’s opinion is that although Chevron deference may now be unconstitutional in Florida, precedent based upon the Chevron doctrine continues to govern unless and until overruled by the court that issued it in the first instance. Thus, agency deference – for the time being – remains a jurisprudential revenant practitioners must be aware of.

The impacts of Art. V, § 21 on administrative/government agency litigation continue to evolve. The administrative law and appellate attorneys of FIDJ have represented clients in administrative litigation and appeals in state and federal courts across the country. For more information on our administrative law and appellate practice groups, you can email us at contact@fuerstlaw.com or call us at 305.350.5690.

Mitigating Losses:

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By Andrew S. Ittleman
May 26, 2020

The following article was written by Andrew Ittleman for the June 2020 edition of MedEsthetics Magazine. We repost the article here with MedEsthetics Magazine’s permission.

The coronavirus pandemic has disrupted virtually every American industry. In many instances, state and local shutdown orders have required businesses to close, and even “essential” businesses have encountered difficulties based on workplace safety concerns, failures in supply chains, and reductions in demand resulting from changed customer behaviors and spending habits.

The coronavirus pandemic has hit the medical aesthetics industry with laser-like precision. Even in the absence of shutdown orders in local jurisdictions, many states have prohibited elective medical procedures altogether, and social distancing requirements have made the unique, in-person interactions between practitioners and their clients difficult, if not outright unlawful. Moreover, unlike other areas of the healthcare space where physicians could recoup some of their lost revenue through telemedicine consultations, cosmetic surgeons and medspas have not been as fortunate. There is simply no replacement for the one-on-one meeting between practitioner and patient in this particular industry.

Ultimately, business owners have been left struggling with questions about how to mitigate past losses and return to work. This article provides an overview of some of the legal issues the medical aesthetics industry may encounter as it enters an unknown future.

Insurance Clauses

Without question, insurance will be the focal point of the legal world for the foreseeable future, keeping in mind the decades of litigation that followed 9/11 (was it one event or two?) and Hurricane Katrina (was it wind damage or flood?). In fact, numerous lawsuits have already been filed against insurers in the U.S. following denials of claims for pandemic-related losses, and this litigation will last for years.

To understand the extent to which your business may be covered for losses related to the coronavirus, the obvious starting point is your policy. As you review it, you will encounter clauses potentially

applicable to the coronavirus, but in most instances they will be vague, subject to further interpretation and provide different coverage based on particular circumstances. For instance, your policy might provide business interruption coverage if your building falls down, but only a deep cleaning if one of your employees is tested positive for Covid-19, unless an exclusion applies. As you review your policy, be on the lookout for the following types of coverage:

Pandemic coverage: Explicit pandemic coverage is rare, and in most instances is something that the insured entity specifically bargained for when purchasing insurance. For instance, Wimbledon, the British Open and many live events in the U.S. purchased and paid for pandemic insurance for years. As a result much of their losses for cancellations in 2020 will be covered. For the rest of us, we will need to look elsewhere in our policies for protection, as “bacteria, mold and viral” exclusions will likely preclude coverage.

Business interruption coverage: Business interruption insurance coverage is intended to protect companies against the loss of income from unexpected events that cause direct physical loss or damage. However, policies often do not define what constitutes a “direct physical loss” necessary to trigger coverage, leaving the judicial system to figure it out. Indeed, there are numerous published court cases studying these clauses based on E. coli, asbestos or other contaminations and odors, but rulings typically turn on state laws and the specific language of the policy. In other instances, pandemics may be explicitly excluded based on changes in the insurance industry dating back to the SARS pandemic, in which case policyholders will face severe difficulties in pursuing their claims in the absence of other technical details in their policies.

Civil authority coverage: Many policies include “civil authority” coverage as a matter of course, which is designed to apply to the actual loss of business income sustained by the insured when access to the insured’s premises is prohibited by order of a civil authority, such as a local or state government. However, in most instances, the civil authority must completely block access to the business premises for the coverage to apply, creating a question regarding how, exactly, the civil authority impacted the policyholder’s business. For instance, whether the civil authority limited business operations or completely closed business premises will be an important question of fact. Likewise—and critical for the medical aesthetics industry—whether the civil authority prohibited elective medical procedures will be another important consideration. Moreover, you will need to determine whether there are exclusions in the policy that preclude coverage if the civil authority loss arises from a noncovered pandemic clause. It should be noted that insurers are already denying claims submitted by healthcare practitioners arising from prohibitions of elective procedures, with several already the subject of federal class action lawsuits.

Contract Clauses

In addition to insurance, practitioners must also be mindful of their contracts with third parties, including suppliers, banks, landlords, key personnel, and other vendors and contractors. These agreements likely assume that business will always be “business as usual,” without an intervening pandemic, shutdown orders and the collapse of the global economy. Whether the parties to these agreements are nevertheless required to perform will again require an interpretation of the agreements themselves and applicable state law. When reviewing your agreements, be mindful of the following clauses and legal concepts:

Force majeure: Force majeure clauses relieve parties from their obligations to perform under a contract when an unforeseen event beyond the parties’ control prevents or delays performance. However, not all force majeure clauses are drafted alike. Some may include an exclusive list of events triggering the application of the clause, some may include a nonexclusive list with broad catchall language and still others may simply define the term without supplying examples. Thus, whether your or your counterparty’s obligations to perform under an agreement will be excused will likely be based on the terms of the force majeure clause, keeping in mind that courts typically construe them narrowly.

Impossibility of performance and frustration of purpose: Even in the absence of a force majeure clause, a party’s performance under a contract may be excused if it was impossible or its purpose was frustrated by overriding events. Generally, the legal doctrine of “impossibility of performance” will apply if the party’s performance has been rendered impossible, and not merely more difficult or inconvenient. Alternatively, the doctrine of “frustration of purpose” applies when the purpose of the agreement, i.e., the reason why the parties entered the agreement in the first place, was substantially frustrated by factors beyond the parties’ control, the nonoccurrence of which was assumed by the parties when they entered the agreement. For instance, if a medspa has a contract to purchase a certain amount of product on a monthly basis from a supplier or an agreement to pay a contractor a monthly fee for services rendered, and both agreements assume that the medspa would be a going concern throughout the duration of the agreements, the medspa’s performance under the agreement may ultimately be excused.

Future Liability

After weeks of government-enforced shutdowns, businesses are reopening and medical practitioners are once again providing elective procedures. However, without Covid-19 vaccines, there are widespread concerns of additional future outbreaks, meaning that it is assumed that people will continue to contract the disease when going about their daily routines. Thus, the question remains, how can your practice or medspa avoid future liability if your patients or employees fall ill with the coronavirus? There is no one-size-fits-all answer, but there are important best practices you can employ to avoid liability down the road.

First things first: can your clinic be held liable if a patient contracts the coronavirus as a result of an elective medical procedure? Setting aside the very real hurdle the patient will face in proving that the elective procedure was the cause of the patient’s illness, it is critical to remember that malpractice and negligence are typically defined by state law as the failure to use “reasonable” care, with the definition of reasonableness driven by what is acceptable and appropriate by similar and reasonably careful professionals. Thus, while you may never be able to completely insulate your clinic from the coronavirus, you can take reasoned, measured and concrete steps to protect yourself and your business from allegations of wrongdoing should that worst case scenario arise.

Perhaps the most effective step you can take is the implementation of a workplace surveillance program. As your business reopens, understand that you and all of your employees and patients present a risk of infection and disease spread. In response, many companies are working with occupational health professionals to develop policies and procedures designed to keep workplaces clean and safe. These programs often include weekly testing for employees, routine temperature checks, cleaning controls, required informational submissions and written policies dictating how employees should conduct themselves if they feel ill or have spent time with someone who recently became sick.

Medical practitioners are also asking additional questions of their patients, including whether they or the people they live with are experiencing symptoms, and whether they work in or have recently visited a high-risk environment, such as a hospital. OSHA, the Centers for Disease Control and Prevention (CDC) and many local authorities have also published recommendations for companies returning to work amid the pandemic, all of which should be reviewed before providing elective procedures.

Civil authorities are important, as their edicts will relate to definitions of “reasonable care” in your local community. As an initial matter, pay attention to them, and review the orders and other bulletins routinely posted on their websites, as they often detail whether and how particular businesses can operate during local health emergencies.

If you provide an elective procedure in a jurisdiction still prohibiting them, you could face fines and penalties, future negligence liability and reputational damage. You may also be consuming medical resources (such as personal protective equipment) sorely needed by local triage units. Moreover, if the elective treatment you provide could require the need for emergency care, the patient’s risk of contracting the coronavirus could be heightened, warranting additional disclosures in informed consents. Finally, whether your insurance policies will protect you if a patient is injured by an elective procedure received during the coronavirus pandemic may also depend on the mandates of civil authorities.

In sum, there are many questions, but perhaps only two certainties. First, there are reasonable steps your practice or medspa can take now to protect your employees and patients from the coronavirus and your business from downstream liability. Second, there is no sign that things will be back to normal for the foreseeable future. Hopefully, you can get back to work without relying on the judicial system, as the courts themselves are not yet fully operational, and in many places were overwhelmed with caseloads even before this pandemic began. Should you have a business dispute resulting from the pandemic, courteous negotiations are always the best measure, as most companies have little appetite for fighting right now. But if litigation is unavoidable, understand that neither the law nor the process is perfect, and it may take years for your case to reach a conclusion, and pursuing it could divert resources away from your reopening efforts. However you proceed, trust that making prudent decisions now will help you carve the path ahead.