Title: Kenneth Friedman, M.D. v. Heart Institute of Port St. Lucie, Inc.
Citation: N/A
Docket Number: SC02-502
State: Florida
Issuer: Florida Supreme Court
Date: September 25, 2003

Supreme 
Court 
of 
Florida
____________
No. SC02-502
____________
KENNETH FRIEDMAN, M.D.,
Petitioner,
vs.
HEART INSTITUTE OF PORT ST. LUCIE, INC.,
Respondent.
[September 25, 2003]
CORRECTED OPINION
LEWIS, J.
We have for review Friedman v. Heart Institute of Port St. Lucie, Inc., 806
So. 2d 625 (Fla. 4th DCA 2002), which expressly and directly conflicts with the
decision in Rosen v. Zoberg, 680 So. 2d 1050 (Fla. 3d DCA 1996).  Jurisdiction is
proper under article V, section 3(b)(3) of the Florida Constitution.  As explained
herein, we approve the decision below and disapprove that portion of the Rosen
decision which conflicts with concepts set forth herein.
Facts and Procedural History
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Petitioner Friedman, a physician, was employed by the respondent medical
corporation until his termination by the corporation on January 11, 2000. 
Subsequently, the corporation filed an action alleging that Friedman was in violation
of his employment agreement with the medical group.  Specifically, the corporation
contended that the doctor had opened a competitive practice within fifty miles of
his former employer, breaching his agreement not to compete with the Heart
Institute.  In accordance with the parties' contract, the medical corporation sought
injunctive relief to prohibit Friedman from competing within a fifty mile radius of a
described intersection or, in the alternative, liquidated damages in the amount of
$300,000.
Subsequently, the medical corporation was permitted to amend its complaint
to include an additional count asserting violation of Chapter 726 of the Florida
Statutes, the Florida Uniform Fraudulent Transfer Act (hereinafter "FUFTA").  The
corporation alleged that Friedman had fraudulently transferred the proceeds from
the sale of his home, over $400,000, to his fiancee, Christie LeMieux, in an effort to
divest himself of assets.  LeMieux was added as a party to the civil action. 
Friedman then moved to stay the fraudulent transfer claim and its concomitant
discovery until after the medical corporation obtained a judgment on the underlying
claim for damages resulting from breach of contract.  The trial court denied the
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stay, and Friedman petitioned the Fourth District Court of Appeal for certiorari
review of the trial court's order.
The Fourth District denied the petition, stating succinctly:
In order to proceed under the Fraudulent Transfer Act it is not
necessary that the creditor have a judgment.  A "creditor" under the
act is a "person who has a claim."  A "claim" on which a creditor can
proceed can be "unliquidated, . . . contingent, . . . unmatured."  The
physician recognizes that it is unnecessary for the hospital to have a
judgment in order to seek relief against the transferee, but argues that
the claim should be stayed . . . . 
In section 726.108 the Act authorizes the court to grant a
creditor broad relief against the transferee of a fraudulent transfer,
including an injunction against further disposition of the asset or the
appointment of a receiver to take charge of the asset.  A stay of the
fraudulent transfer proceedings would preclude the trial court from
granting relief under section 726.108 pending the outcome of the claim
for damages.  We therefore conclude that the trial court did not abuse
its discretion in denying the stay and deny certiorari.
Friedman, 806 So. 2d at 626-27 (citations omitted).  On November 18, 2002, this
Court granted review of the Fourth District's decision.  See Friedman v. Heart Inst.
of Port St. Lucie, Inc., 832 So. 2d 104, 104 (Fla. 2002) (table).
Analysis
The applicable statutory provisions in this area of the law are exceedingly
clear.  A "creditor" who possesses a "claim" may seek a number of remedies to
prevent the fraudulent transfer of assets.  Among the remedies are avoidance of the
transfer, attachment, an injunction, appointment of a receiver, and "any other relief
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the circumstances may require."  § 726.108(1)(b), Fla. Stat. (2002).  A transfer is
fraudulent if made "without receiving a reasonably equivalent value in exchange for
the transfer or obligation and the debtor was insolvent at that time or the debtor
became insolvent as a result of the transfer or obligation."  § 726.106(1), Fla. Stat.
(2002).
To utilize the protections of chapter 726, however, a plaintiff must show that
he or she has a "claim" which qualifies the party as a "creditor."  See § 726.102(4),
Fla. Stat. (2002).  As defined in section 726.102, a "claim" is broadly constructed
and "means a right to payment, whether or not the right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured."  § 726.102(3), Fla. Stat.
(2002).  Thus, as is universally accepted, as well as settled in Florida, "A 'claim'
under the Act may be maintained even though 'contingent' and not yet reduced to
judgment."  Cook v. Pompano Shopper, Inc., 582 So. 2d 37, 40 (Fla. 4th DCA
1991); see also Money v. Powell, 139 So. 2d 702, 703 (Fla. 2d DCA 1962) ("In
this state contingent creditors and tort claimants are as fully protected against
fraudulent transfers as holders of absolute claims.").
Two of Florida's district courts of appeal have addressed the issue of
whether dependant claims under FUFTA should be stayed pending resolution of
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underlying substantive claims.  In Rosen, the plaintiff filed an action against her
attorney for damages in connection with the "churning" of legal files and
accompanying overbilling and emotional distress.  See Rosen, 680 So. 2d at 1051. 
After the attorney's insurance carrier had previously been placed in receivership,
Rosen filed an action alleging that the defendant had violated FUFTA by
transferring or placing liens on his assets in favor of relatives or entities under his
control.  See id.  The trial court refused to stay the FUFTA claim pending the
resolution of the overbilling, or "Rosen I," claims.  See id.
On appeal, the Third District reversed and remanded, stating:
[W]e hold that the trial court abused its discretion in denying Rosen's
motions to stay Rosen II.  The record demonstrates that resolution of
Rosen I is dispositive of Rosen II.  If Rosen does not prevail in
Rosen I, she is not a creditor, and there is no basis for setting aside
the transactions attacked in Rosen II.  A stay is the proper vehicle to
avoid a waste of judicial resources.  On remand, the court shall enter
an order staying this action pending resolution of Rosen I.
Id. at 1052 (citations omitted).  Thus, under Rosen, it is an abuse of discretion if a
trial judge fails to stay a dependent FUFTA claim pending resolution of underlying
substantive claims, and a FUFTA claimant cannot proceed as a "creditor" if he or
she does not already possess a judgment.
In the decision below, the court reached an entirely opposite conclusion.  As
noted, the district court here determined that "[a] stay of the fraudulent transfer
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proceedings would preclude the trial court from granting relief under section
726.108 pending the outcome of the claim for damages."  Friedman, 806 So. 2d at
627.  Therefore, the lower appellate court determined that the trial court did not
abuse its discretion in denying the stay, and denied certiorari.  See id.  Under the
Fourth District's decision, the progression of a dependent FUFTA claim is not
always stayed as a matter of course, because the statute automatically endows
plaintiffs under the Act with "creditor" status.  This status allows FUFTA claimants
to effect the progression of their cases to judgment at the same time their
substantive underlying claims are also being litigated and resolved.
The petitioner's arguments in favor of the validity of Rosen fail in the face of
the clarity of chapter 726 and the well-settled principle that "[a] 'claim' under the
Act may be maintained even though 'contingent' and not yet reduced to judgment." 
Cook, 582 So. 2d at 40; see also Invo Florida, Inc. v. Somerset Venturer, Inc., 751
So. 2d 1263 (Fla. 3d DCA 2000); Money, 139 So. 2d at 703. Indeed, if
automatically staying discovery and progression of FUFTA claims was standard
and a failure to do so an abuse of discretion, the goal of protecting creditors from
wrongful asset transfers would likely be nearly entirely frustrated.  Therefore, we
disapprove the Third District's conclusion that a claimant which does not possess a
judgment "is not a creditor," Rosen, 680 So. 2d at 1052, and would not be entitled
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to proceed under the applicable statutory provisions as to putatively fraudulent
transactions.  As noted by the court below, under section 726.102(3) and (4), a
creditor is merely a person who "has a claim," and a "claim" may be "unliquidated,
. . . contingent, [or] unmatured."  Friedman, 806 So. 2d at 626 (quoting §
726.102(3)-(4), Fla. Stat. (2002)).  Thus, a creditor such as the medical group in the
instant case may seek the benefits under FUFTA, and any motion to stay the
chapter 726 claim would be properly addressed to the sound discretion of the trial
court.
While the instant action does not present any cognizable constitutional
questions for resolution by this Court, and we do not today consider any
constitutional issues, reference to our decision in Rasmussen v. South Florida
Blood Service, Inc., 500 So. 2d 533 (Fla. 1987), certainly guides our consideration
of any privacy concerns corollary to this cause.  In Rasmussen, the plaintiff sought
discovery of various blood donation records from the South Florida Blood
Service, in an attempt to ascertain the source of his AIDS infection.  See id. at 534. 
Justice Barkett, writing for the majority, offered the following observations and
conclusions:
The potential for invasion of privacy is inherent in the litigation
process.  Under the Florida discovery rules, any nonprivileged matter
that is relevant to the subject matter of the action is discoverable.  The
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discovery rules also confer broad discretion on the trial court to limit
or prohibit discovery in order to protect a party or person from
annoyance, embarrassment, oppression, or undue burden or expense. 
Under this authority, a court may act to protect the privacy of the
affected person.
In deciding whether a protective order is appropriate in a
particular case, the court must balance the competing interests that
would be served by granting discovery or by denying it.  Thus, the
discovery rules provide a framework for judicial analysis of challenges
to discovery on the basis that the discovery will result in undue
invasion of privacy.  This framework allows for broad discovery in
order to advance the state's important interest in the fair and efficient
resolution of disputes while at the same time providing protective
measures to minimize the impact of discovery on competing privacy
interests.
Id. at 535 (quotation marks and citations omitted).  
Under Florida law, the petitioner's concerns regarding the effect of discovery
on dependent FUFTA claims are more properly addressed not by automatically
staying the actions, but by other means and the placement of discretionary
limitations upon discovery by trial courts.  "[T]he constitutional right of privacy
undoubtedly expresses a policy that compelled disclosure through discovery be
limited to that which is necessary for a court to determine contested issues . . . ." 
Woodward v. Berkery, 714 So. 2d 1027, 1036 (Fla. 4th DCA 1998).  Thus, as is
always the case, "the scope and limitation of discovery is within the broad
discretion of the trial court."  SCI Funeral Servs. of Fla., Inc. v. Light, 811 So. 2d
796, 798 (Fla. 4th DCA 2002).
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In exercising its discretion to prevent injury through abuse of the action or
the discovery process within the action, trial courts are guided by the principles of
relevancy and practicality.  Clearly, "the disclosure of personal financial information
may cause irreparable harm to a person forced to disclose it, in a case in which the
information is not relevant."  Straub v. Matte, 805 So. 2d 99, 100 (Fla. 4th DCA
2002); see also Mogul v. Mogul, 730 So. 2d 1287, 1290 (Fla. 5th DCA 1999).  As
noted by this Court, "As appropriate, the trial court may conduct an in-camera
inspection of the subject records.  In that context, the trial court may balance (on
an ad hoc basis) ‘the right to privacy and the right to know.’"  Alterra Healthcare
Corp. v. Estate of Shelley, 827 So. 2d 936, 945-46 (Fla. 2002); (quoting Montana
Human Rights Div. v. City of Billings, 649 P.2d 1283, 1290 (Mont. 1982));
see also Pyszka, Kessler, Massey, Weldon, Catri, Holton & Douberley, P.A. v.
Mullin, 602 So. 2d 955, 955 (Fla. 3d DCA 1991).  Additionally, Florida's trial
courts are endowed with the authority to require the proponent of a claim to post
bond.  See, e.g., Med. Facilities Dev., Inc. v. Little Arch Creek Props., Inc., 675
So. 2d 915, 918 (Fla. 1996).  
Certainly, the substance of the Florida Rules of Civil Procedure, buttressed
by litigant-protecting caselaw, strikes the proper balance between allowing
appropriate discovery and protecting litigants' privacy and equitable interests. 
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While the general rule in Florida is that personal financial information is ordinarily
discoverable only in aid of execution after judgment has been entered, see Gruman
v. Bankers Trust Co., 379 So. 2d 658, 659 (Fla. 3d DCA 1980); Cooper v. Fulton,
117 So. 2d 33, 35-36 (Fla. 3d DCA 1960), where materials sought by a party
"would appear to be relevant to the subject matter of the pending action," the
information is fully discoverable.  Epstein v. Epstein, 519 So. 2d 1042, 1043 (Fla.
3d DCA 1988).  A party's finances, if relevant to the disputed issues of the
underlying action, are not excepted from discovery under this rule of relevancy, and
courts will compel production of personal financial documents and information if
shown to be relevant by the requesting party.  See id.; Jacobs v. Jacobs, 50 So. 2d
169, 173 (Fla. 1951); Florida Gaming Corp. of Delaware v. American Jai-Alai, Inc.,
673 So. 2d 523, 524 (Fla. 4th DCA 1996) (“[T]he financial information at issue was
relevant to the calculation of damages under the breach of contract count. 
Discovery of these matters was proper.”); Citibank, N.A. v. Plapinger, 461 So. 2d
1027, 1027 (Fla. 3d DCA 1985); Ashcraft v. Harvey, 315 So. 2d 530, 531 (Fla. 4th
DCA 1975).
As we stated in Martin-Johnson, Inc. v. Savage, 509 So. 2d 1097 (Fla.
1987), "Litigation of a non-issue will always be inconvenient and entail considerable
expense of time and money for all parties in the case. . . . [W]e do not ignore
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petitioner's valid privacy interest in avoiding unnecessary disclosure of matters of a
personal nature.  We believe, however, that our discovery rules provide sufficient
means to limit the use and dissemination of discoverable information via protective
orders."  Martin-Johnson, 509 So. 2d at 1100.  Dependent FUFTA claims should
not automatically be stayed, and any motion requesting halting the progression of
an action is properly addressed and resolved by the trial court in the exercise of its
sound discretion as to both how the action may proceed and the discovery matters
related thereto.  We see no need to limit this discretion with specific rules or
formulas, and note that there are a number of decisions which provide guidance for
courts performing the balancing of the various interests affected by a party's
motion seeking to stay a civil action.  See, e.g., Landis v. N. Am. Co., 299 U.S.
248, 251 (1936); Volmar Distribs., Inc. v. New York Post Co., Inc., 152 F.R.D.
36, 38 (S.D.N.Y. 1993); Guirola-Beeche v. United States Dep't of Justice, 662 F.
Supp. 1414, 1416 (S.D. Fla. 1987).
Conclusion
In accordance with the foregoing, we approve the decision of the Fourth
District below, Friedman v. Heart Institute of Port St. Lucie, Inc., 806 So. 2d 625
(Fla. 4th DCA 2002), and disapprove that portion of Rosen v. Zoberg, 680 So. 2d
1050 (Fla. 3d DCA 1996), to the extent it conflicts with Friedman and is
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inconsistent with this opinion.
It is so ordered.
ANSTEAD, C.J., and WELLS, PARIENTE, QUINCE, CANTERO, and BELL,
JJ., concur.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.
Application for Review of the Decision of the District Court of Appeal - Direct
Conflict
Fourth District - Case No. 4D01-3526
(St. Lucie County)
Robert W. Wilkins of Berrocal and Wilkins, Jupiter, Florida; David B.B. Helfrey
and Philip C. Graham of Helfrey, Simon & Jones, PC., St. Louis, Missouri; and
Roy L. Morris, Arlington, Virginia,
for Petitioner
Andrew C. Hall, Adam Lamb, Michael L. Cotzen, and Doron Weiss of Hall, David
and Joseph, P.A., Miami, Florida; and Stephen Navaretta of Navaretta and
Navaretta, P.A., Port St. Lucie, Florida,
for Respondents