Court Opinion

ID: 4640946
Source: CourtListenerOpinion
Date Created: 2020-12-09 16:04:29.414244+00
Date Added: 2024-06-11T08:00:18.285438
License: Public Domain

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
                              FOURTH DISTRICT

   BRIDGE FINANCIAL, INC., a Florida for-profit corporation, ADAM
        PALAS, ALEXANDER PALAS, and SERGIO NATIVI,
                          Appellants,

                                      v.

                   J. FISCHER & ASSOCIATES, INC.,
                      a Florida for-profit corporation,
                                  Appellee.

                               No. 4D19-348

                            [December 9, 2020]

  Appeal and cross-appeal from the Circuit Court for the Fifteenth
Judicial Circuit, Palm Beach County; Jeffrey Gillen, Judge; L.T. Case No.
502009CA008358XXXXMB.

  Leonard S. Feuer of Leonard Feuer, P.A., West Palm Beach, for
appellants.

  John R. Whittles and Elizabeth F. Olds of Mathison Whittles, LLP, Palm
Beach Gardens, for appellee.

LEVINE, C.J.

    Appellants Adam Palas, Alex Palas, and Sergio Nativi worked at appellee
J. Fischer & Associates, Inc. (“JFA”). Appellants were terminated after they
copied JFA’s entire server, including the client list, and formed their own
competing business, appellant Bridge Financial, Inc.            After their
termination, appellants solicited JFA’s clients, allegedly causing a
decrease in JFA’s revenue. JFA sued, and a jury entered a verdict in favor
of JFA.

    Appellants appeal, raising a litany of issues. Appellants argue that the
trial court erred in (1) denying their motion for new trial because the client
list was not a trade secret; (2) denying their motion for new trial because
they did not tortiously interfere with JFA’s business relationships, (3)
denying their motion for new trial because JFA’s owner provided false
testimony, (4) admitting expert testimony on damages, (5) striking their
affirmative defense of good faith, (6) denying their motion for judgment on
the pleadings as to FUTSA preemption, and (7) prohibiting testimony on
why appellants copied JFA’s server. JFA cross-appeals, challenging a
judgment on the pleadings in favor of Adam Palas, who is a 5% owner of
JFA, for tortious interference. We affirm on all issues, but write only to
address issues 1, 2, and 7 on direct appeal as well as the issue on cross-
appeal.

    JFA sued appellants for misappropriation of trade secrets, tortious
interference with a business relationship, civil conspiracy, conversion,
breach of duty of loyalty, and breach of fiduciary duty. Before trial, the
trial court granted JFA’s motion in limine to limit evidence accusing JFA’s
owner, Jay Fischer, of tax fraud. The trial court also granted a motion for
judgment on the pleadings in favor of Adam Palas for tortious interference
because, as a shareholder of JFA, he could not interfere with himself. At
trial, the following testimony was given.

    Fischer is a tax accountant and financial advisor. Fischer worked with
his father for a number of years until they sold their company and client
list to another firm that later became Pinnacle Taxx Advisors. Fischer
stayed on as a manager. While at Pinnacle, Fischer hired Adam Palas and
Alex Palas.

    In 2006, Fischer formed his own company, JFA, and purchased the
client list from Pinnacle, paying $140,000 to $160,000. Pinnacle had
1,500 to 2,000 clients, some of whom were the original clients of Fischer
and his father. Adam Palas and Alex Palas came to work for Fischer at
JFA. Fischer also hired Sergio Nativi. Fischer later sold Adam Palas a 5%
share. JFA’s client retention rate was over 90%. JFA prepared over 2,000
tax returns its first year.

    JFA maintained its client list on the server, which was password
protected. The client list consisted not only of clients’ names and
addresses but also copies of the clients’ tax returns and all the information
used to prepare those returns such as W-2 forms, 1099 forms, business
records, receipts, social security numbers, dates of birth, childcare
information, and health records. JFA spent a significant amount of time,
effort, and money in developing the client list, which was not publicly
available.

   While employed at JFA, appellants set up their own corporation, Bridge
Financial, and copied JFA’s entire server, including the client list.
Appellants also drafted a letter on JFA’s computer system announcing the
opening of their competing firm and offering each client a “detailed

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checklist tailored to your specific account.” Fischer terminated appellants
upon discovering that they were planning on leaving and soliciting clients.

    Appellants subsequently solicited JFA’s clients, offering them a $100
flat rate fee. Approximately 420 clients converted to Bridge Financial. The
year after appellants left, JFA prepared 600 less returns than the year
before. The loss of clients resulted in lost revenue from both tax
preparation and referrals. JFA’s expert forensic accountant estimated a
range of damages between $247,030, assuming a growth rate of 7.84%,
and $763,242, assuming the historical growth rate of 15.86%.

    The jury found appellants liable on all six counts and awarded JFA a
total of $255,770 in damages. Following the denial of their motion for new
trial, appellants appeal. JFA cross-appeals.

   As to the first issue, appellants argue that the trial court erred in
denying their motion for new trial because JFA’s client list did not qualify
as a trade secret. An order denying a motion for new trial is reviewed for
abuse of discretion. Izquierdo v. Gyroscope, Inc., 946 So. 2d 115, 117 (Fla.
4th DCA 2007). Section 688.002(4), Florida Statutes (2017), of Florida’s
Uniform Trade Secret Act (“FUTSA”), defines “trade secret” as follows:

      [I]nformation, including a formula, pattern, compilation,
      program, device, method, technique, or process that:

      (a) Derives independent economic value, actual or potential,
      from not being generally known to, and not being readily
      ascertainable by proper means by, other persons who can
      obtain economic value from its disclosure or use; and

      (b) Is the subject of efforts that are reasonable under the
      circumstances to maintain its secrecy.

   “A customer list can constitute a ‘trade secret’ where the list is acquired
or compiled through the industry of the owner of the list and is not just a
compilation of information commonly available to the public.” E. Colonial
Refuse Serv., Inc. v. Velocci, 416 So. 2d 1276, 1278 (Fla. 5th DCA 1982).
As this court has explained:

      To qualify as a trade secret, there must be evidence that a
      customer list “was the product of great expense and effort,
      that it included information that was confidential and not
      available from public sources, and that it was distilled from

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      larger lists of potential customers into a list of viable
      customers for [a] unique business.”

Zodiac Records Inc. v. Choice Env’t Servs., 112 So. 3d 587, 590 (Fla. 4th
DCA 2013) (citation omitted).

    We find the trial court did not abuse its discretion in denying the motion
for new trial. The evidence demonstrated that JFA’s client list was a trade
secret. JFA purchased the client list from Pinnacle. The client list
included not only the clients’ names and addresses but also copies of the
clients’ tax returns and all the information used to prepare those returns.
JFA spent a significant amount of time, effort, and money developing the
client list, which was kept on JFA’s password protected server and was not
publicly available.

   As the next issue, appellants claim the trial court erred in denying their
motion for new trial as to tortious interference because the client list is not
a trade secret. Because we conclude that the client list is a trade secret,
appellants’ argument also fails.

    Finally, appellants claim the trial court erred in prohibiting testimony
of why they copied JFA’s server, specifically that Fischer was committing
tax fraud. A trial court’s ruling on a motion in limine is reviewed for abuse
of discretion, as limited by the rules of evidence. Edwards v. State, 39 So.
3d 447, 448 (Fla. 4th DCA 2010).

    We find that the trial court did not abuse its discretion in excluding
allegations that Fischer committed tax fraud. Moreover, any error in
excluding evidence was harmless because, contrary to appellants’
contention, the jury did in fact hear testimony of why appellants copied
JFA’s server. See Blanco v. State, 89 So. 3d 933, 936 (Fla. 3d DCA 2012);
Connell v. Green, 330 So. 2d 473, 475 (Fla. 1st DCA 1976). This testimony
included evidence that Adam Palas accused Fischer of underreporting
income and that, as a result of the accusation, Fischer paid additional
taxes. Additionally, Adam Palas testified that he instructed Nativi to copy
the server because he thought his profit distribution was low, and he
wanted to independently verify the amount his 5% distribution should
have been. Thus, the trial court did not abuse its discretion in granting
the order in limine and, even if it did, any error was harmless.

   As to the cross-appeal, JFA argues that the trial court erred in granting
a judgment on the pleadings in favor of Adam Palas as to tortious
interference with a business relationship because although he was a 5%
minority shareholder of JFA, he was not personally a party to the

                                      4
relationship between JFA and its customers. The elements of tortious
interference with a business relationship are (1) the existence of a business
relationship; (2) knowledge of the relationship on the part of the defendant;
(3) an intentional and unjustified interference with the relationship by the
defendant; and (4) damage to the plaintiff as a result of the breach of the
relationship. Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812,
814 (Fla. 1994).

    In finding that tortious interference does not exist against one who is a
party to the business relationship, the trial court relied on Palm Beach
County Health Care District v. Professional Medical Education, Inc., 13 So.
3d 1090 (Fla. 4th DCA 2009). In Palm Beach County Health Care, this
court stated that “[f]or the interference to be unjustified, the interfering
defendant must be a third party, a stranger to the business relationship.”
Id. at 1094 (citation omitted). “[A] defendant is not a stranger to a business
relationship, and thus cannot be held liable for tortious interference, when
it has a supervisory interest in how the relationship is conducted or a
potential financial interest in how a contract is performed.” Id. “[A] cause
of action for tortious interference does not exist against one who is himself
a party to the business relationship with which there has allegedly been
interference.” Am. Nat’l Title & Escrow of Fla., Inc. v. Guarantee Title &
Trust Co., 810 So. 2d 996, 999 (Fla. 4th DCA 2002).

    We agree with the trial court that, as a shareholder in JFA with a 5%
interest in the company, Adam Palas could not interfere in a business
relationship with himself. ULQ, LLC v. Meder, 666 S.E.2d 713 (Ga. Ct.
App. 2008), is instructive. In that case, a company alleged a claim against
a former officer, who still had a 10% ownership interest in the company,
for tortious interference with contractual and business relationships
arising out of his actions following his termination. Id. at 715. The
appellate court found that the tortious interference claim failed because
the former officer was not a stranger to the business or contractual
relationships. Id. at 720. The court explained that “[w]here a defendant
has a financial interest in one of the parties to the contract or in the
contract, the defendant is not a stranger to the contract or business
relationship, even though it is not a signatory to the contract.” Id. (citation
omitted). Because the former officer “was admittedly a ten percent owner
in [the company] (a party to the business relationships or contracts) at the
time he allegedly interfered, and therefore could not have been a stranger.”
Id.; see also Morris v. Buvermo Props., Inc., 510 F. Supp. 2d 112, 120
(D.D.C. 2007) (“As a part owner of [the corporation, the defendant] is a
party to the contract . . . and thus cannot be sued for tortious interference
with his own contract.”). Similarly, in this case, because Adam Palas was

                                      5
a partial owner in JFA, he was not a stranger to a business relationship,
and thus cannot be held liable for tortious interference.

  In conclusion, we affirm the trial court in all respects as to the direct
appeal and cross-appeal.

   Affirmed.

WARNER and ARTAU, JJ., concur.

                           *         *        *

   Not final until disposition of timely filed motion for rehearing.

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