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

/in , /by

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:

/in /by

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:

/in /by

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

/in /by

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:

/in /by

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.

Realtors’ tip: If you want that house, come with cash.

/in /by

By Rebecca San Juan
September 13, 2021

In South Florida’s super-charged real estate market, cash gives buyers a leg up — and those offers are rising faster than the newest condo buildings in Brickell.

For one Peruvian couple — like so many others — there was never even a second thought about how they would do their deal. They came with cash and bought a $4.85 million condo unit at the Miami Beach condo hotel 1 Hotel & Homes South Beach in June, according to the buyer’s representative, Romina Grinberg, a Realtor Associate at Brown Harris Stevens.

“In this market, they [sellers] are expecting cash buyers,” she said. “It’s important that your buyer is as aggressive as possible. Cash is always better because it’s not contingent on a buyer getting a loan and getting approved.”

Cash buyers comprised 41% of all deals in June in Miami-Dade County, compared with 26% in the same month last year, according to the Miami Association of Realtors. In Broward County, cash buyers made up 48% of all transactions in June versus 27% in June 2020.

The volume of cash buyers exceeded the national average of 23%, according to data from the National Association of Realtors.

With an influx of new arrivals from across the country, Realtors told the Miami Herald that buyers are striving to beat the competition in the intensely competitive market by appealing to sellers with the faster, fewer hassles and more certain process that comes with cash.

“Sellers dictate this to some degree,” said Ron Shuffield, CEO of Berkshire Hathaway HomeServices EWM Realty. “Buyers want to remove as many obstacles as possible to the seller.”

Some Realtors and experts are predicting that the number of cash deals is only going to increase in the months and years ahead.

While cash buyers may sometimes have the edge over purchasers with traditional financing like a mortgage, they are now finding that their main competition is, in fact, other cash buyers.

One of Compass Realtor Ivan Chorney’s clients competed against two other prospective buyers for a single-family home on the Venetian Islands that had been on the market for only 24 hours. Chorney’s client offered $16.7 million cash.

“Unfortunately, we lost that one,” recalled Chorney. The seller opted for $17.1 million in cash.

“Often is the case,” he said, “that people need to experience a little bit of pain to put their best foot forward at the next opportunity.”

Wesley Ulloa, a Realtor, sold her Coral Gables residence of 11 years in July. She scrambled to find a new house for her, her husband and a baby on the way. After losing out multiple times, Ulloa found that just the offer to pay in cash gave her an edge.

For her fifth bid on a home — a 2-story Spanish-style house in Coral Gables — Ulloa signed a contract saying she didn’t need financing, an indication to the seller that she’d pay in cash. However, she secured a loan commitment ahead of her scheduled closing at the end of September and got the place.

“The opportunity is that you’re going to get the property and you could still get the loan,” she said.

It’s not only people from other states who are coming to Southern Florida armed with cash, it’s also buyers from abroad, said Gay Cororaton, senior economist and director of housing and commercial research at the National Association of Realtors.

“[Domestic] boomers are retiring with significant equity,” Cororaton told the Herald. “We know Florida is the No. 1 destination for foreign buyers. Half of those buyers will go to Miami. In Miami, about 23% of the market is foreign buyers, [nearly] 10 times the rate nationally of 3%.”

Grinberg said she saw an uptick in foreign cash buyers begin a few months ago. At the start of the year, most of her buyers came from New York and California. Now, most are from Argentina, Mexico and Peru.

Miltiadis Kastanis, a Realtor Associate for Douglas Elliman, who has six prospective clients looking to buy in Miami from Austria, Germany and the United Kingdom, said foreigners go with cash for a good reason.

“They are likely to buy in cash because it’s easier for Europeans to close a deal in cash,” Kastanis said. “It’s not easy for them to get lending in the U.S.”

Miami remains a hot spot for Europeans, Kastanis said, since, “culturally, they like our international flare. It’s a familiar yet different setting for them. Europeans are drawn to the culture and climate of Miami.”

Cash-only deals offer several benefits, including speeding up the closing process, which can be attractive to some sellers looking for quick action, as well as reducing the likelihood that a deal could fall through if a potential buyer doesn’t get the financing they were seeking.

“If you go to someone that is going with a mortgage versus cash, you’d go with cash, because, if they [the financed buyer] can’t get a mortgage, you’d have to go back to the market again,” Shuffield said. “You don’t know for sure if someone would qualify for a loan.”

“The opportunities for the buyer is that they can prioritize their offer over other offers,” said Florida Atlantic University professor and real estate economist Ken H. Johnson. “Cash offers have fewer inspection periods; less due diligence will be requested by the buyer.”

Some cash buyers, eager to seal the deal, may have to live with common issues that can reduce the value of a home, including a roof in need of repair, damaged air conditioning system, or plumbing problems.

“For most cash buyers, they are buying as is,” Johnson added. “Other buyers [with a mortgage] would have either moved onto another property or offered less.”

Sellers in cash-only deals should proceed with caution, he advised.

“The sellers have people lining up for their home,” he said. “During the negotiation process, you want to verify that the people have the cash on hand.”

If possible, sellers and their brokers may want to check where the funds are coming from since there exists some risk of money laundering, said Andrew Ittleman, founder and partner of the downtown Miami-based law firm Fuerst Ittleman David & Joseph.

“If we are talking about someone coming to a closing with a big briefcase with money, that’s a red flag,” Ittleman said. “[But] if we are talking about John Smith and he’s going to make a wire transfer from his [U.S.] bank account to the closing agent, we can have a level of confidence that his bank has done some vetting on him. They know he has some legitimate source of income to support that purchase.”

Strengthening the Stem Cell Industry Through Better Regulation

/in /by

By Andrew Ittleman
April 06, 2021

After Congress adopted the 21st Century Cures Act in 2016, giving the U.S. Food and Drug Administration (FDA) authority to streamline the approval process for qualifying regenerative medicine advanced therapies (RMATs), FDA announced a new regulatory framework for the regenerative medicine industry.

The policy’s framework included new and revised guidance documents, as well as a period of “enforcement discretion” that has allowed industry participants to engage with FDA to determine if they needed to apply for FDA marketing authorization. As the end of the enforcement discretion period approaches, regulators must provide additional assistance to the RMAT industry to ensure its further development.

FDA’s Center for Biologics Evaluation and Research regulates stem cell and other regenerative medicine products, but last year was also tasked with overseeing vaccine and drug development for COVID-19. Under the original FDA policy, the period of enforcement discretion would have ended in November 2020, but likely due to the COVID-19 crisis, FDA announced that it would extend the period through May 2021.

During the enforcement discretion period, FDA has designated 52 products so far for its RMAT approval process. FDA approved one such product earlier this year, a positive sign that it is fulfilling its mission under the 21st Century Cures Act to approve cellular products for the treatment of complex, previously incurable conditions.

Nevertheless, compliance has been slower than expected, and in spite of its enforcement discretion, FDA has continued to act against “bad actors,” typically in the form of warning letters to manufacturers and promoters of products derived from donated birth tissue, as well as public safety notifications and consumer alerts. It was no surprise when FDA—and the Federal Trade Commission (FTC) in some instances—began targeting unapproved stem cell products advertised as miracle cures for COVID-19.

Consequently, a binary picture of the RMAT industry has developed, with legacy biotech firms seeking FDA approvals at one end of the spectrum, sellers of snake oil on the other, and not much in between.

But this picture is incomplete. In reality, there is much more to this industry—such as licensed practitioners who have safely treated patients with their own tissue for years—and these practitioners have found themselves caught in the crossfire, with the media routinely lumping them into the pool of bad actors.

But are the practicing physicians treating their patients at many major institutions breaking the law? Of course not.

In addition to defining what products are regulated, FDA regulations also exempt certain procedures, such as when a doctor uses autologous platelet-rich plasma or bone marrow concentrate to treat certain conditions.

When doctors perform these exempted medical procedures, the question of whether they do so responsibly is answered by “the quintessentially state-law standards of reasonable medical care,” which also define whether physicians have sufficient data and provide remedies in the event of malpractice.

Nor are these physicians “experimenting” on their patients. Medical procedures are developed differently than mass-produced drugs, and mostly without the large pre-market trials called for by the media. As an example, doctors have treated patients using coronary artery bypass grafts for 100 years, and the procedures have continually evolved based on physician research in clinical settings.

Another exempted procedure, a parathyroidectomy with subsequent implantation of a portion of the tissue to preserve parathyroid function, was first studied in the early 1970s on 29 patients in a clinical setting and reported in 1975. Based on that initial study, the procedure soon became “a widely accepted technique” and is now expressly exempt from FDA regulation.

Of course, these exempted procedures also occupy a different portion of the market than regulated cellular products. For instance, concentrated autologous bone marrow may be an optimal treatment modality for patients suffering from minor orthopedic conditions and is already available at a relatively low cost.

For patients with more severe or acute injuries, however, culture-expanded cell-based treatments are likely a better option, but only one has been approved since 1997. That product, which involves culture-expanded cartilage-derived cells, costs over $40,000. Due to its high price, the product is not reimbursable for patients with mere osteoarthritis. This phenomenon is common among approved drugs.

In sum, for all of its dimensions, the regenerative medicine industry is defined poorly, and better regulatory support is needed for it to mature. FDA should take the following regulatory steps with permanence and structure in mind.

First, FDA should continue honoring its mandate under the 21st Century Cures Act by designating and approving RMAT therapies with the urgency they deserve.

Second, FDA should recognize its role as a federal regulator, well suited to continue enforcing against bad actors, and particularly those manufacturing and distributing unapproved birth tissue products in interstate commerce.

Third, FDA must recognize its limitations. As a federal regulator, it is poorly suited to oversee and regulate every doctor in the country, as those “police powers” have historically been left to the individual states.

Fourth, in May, FDA should end its era of enforcement discretion. The industry has had sufficient time to study FDA regulations and establish compliance.

Finally, to balance its resources and priorities, it is critical that FDA invites the individual states, medical boards, and accrediting organizations to pitch in on its regulation of the industry. Indeed, state laws typically define and govern the standards for medical procedures, but state laws defining and governing regenerative medicine procedures are at best underdeveloped. To bridge this gap, FDA should establish partnerships similar to those that help it shoulder its massive burden of regulating food, animal food, eggs, blood banks, medical devices, and mammography facilities.

The Mammography Quality Standards Act (MQSA) is a sound analog. In 1990, the U.S. General Accounting Office determined that most mammography facilities lacked adequate quality assurance programs and were providing images of unacceptable quality. In response, the MQSA authorized FDA to publish quality standards and create accrediting bodies to inspect facilities and enforce FDA’s quality standards. The MQSA remains the law today, and FDA’s MQSA Inspection Contract Program features 42 contracts with state, local, and territorial agencies, as well as the American College of Radiology.

FDA can create a similar partnership program for the exempt and lower risk portions of the regenerative medicine industry with the following key features:

  • Accreditation bodies, including state agencies and nonprofits with explicit standards for the certification process and the accrediting bodies themselves;
  • Quality standards, including quality assurance and control programs at each facility for patient safety purposes;
  • Procedural and informed consent standards, including those I outlined in an earlier essay;
  • Certificate and recertification requirements, mandatory for any facility providing regenerative medicine services in the United States;
  • Application for a certificate, requiring facilities to provide detailed explanations of the procedures available, the equipment used, and background information for key personnel;
  • Data standards, including the extent to which physicians may use shared or “pooled” data for the substantiation of health claims;
  • Inspections, detailing the manner by which FDA’s partners must inspect certified facilities; and
  • Sanctions, including monetary fines, suspensions, and revocations to punish violations.

By taking these actions, FDA will preserve its resources, provide individual states the direction they need to exercise their police powers, and allow the regenerative medicine industry to reach its true potential.

Miami Lawyer Leads Startup’s COVID-19 Screening Device to FDA Approval

/in , /by

By Raychel Lean
April 06, 2021

Andrew S. Ittleman

A first-of-its-kind screening device for identifying COVID-19 biomarkers has secured emergency approval from the U.S. Food and Drug Administration, with the help of Miami’s Fuerst Ittleman founding partner Andrew S. Ittleman.

It took a year of “elbow grease, communication and patience” to get to this point, according to Ittleman, who said he’s learned the importance of building rapport and respect with the FDA, as it navigated a public health emergency.

To read more, click here.

AML Compliance Game Changer:

/in /by

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:

/in /by

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.