Court Opinion

ID: 3175000
Source: CourtListenerOpinion
Date Created: 2016-02-05 09:56:40.429117+00
Date Added: 2024-06-11T09:17:29.945125
License: Public Domain

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
                     MOTION AND, IF FILED, DETERMINED

                                             IN THE DISTRICT COURT OF APPEAL
                                             OF FLORIDA
                                             SECOND DISTRICT

JOE SAMUEL BAILEY, individually, and   )
on behalf of LASERSCOPIC SPINAL        )
CENTERS OF AMERICA, INC.;              )
LASERSCOPIC MEDICAL CLINIC LLC;        )
LASERSCOPIC DIAGNOSTIC IMAGING         )
AND PHYSICAL THERAPY, LLC;             )
LASERSCOPIC SPINAL CENTER OF           )            Case No. 2D13-612
FLORIDA, LLC; and LASERSCOPIC          )
SPINE CENTERS OF AMERICA, INC.,        )
                                       )
           Appellants/Cross-Appellees, )
                                       )
v.                                     )
                                       )
JAMES S. ST. LOUIS, D.O.; MICHAEL W. )
PERRY, M.D.; EFO HOLDINGS L.P.;        )
EFO LASER SPINE INSTITUTE, LTD.;       )
LASER SPINE INSTITUTE, LLC; LASER )
SPINE MEDICAL CLINIC, LLC; LASER       )
SPINE PHYSICAL THERAPY, LLC;           )
LASER SPINE SURGICAL CENTER, LLC; )
and EFO GENPAR, LP,                    )
                                       )
           Appellees/Cross-Appellants. )
___________________________________ )

Opinion filed February 3, 2016.

Appeal from the Circuit Court for
Hillsborough County; Richard A. Nielsen,
Judge.

Stephen N. Zack, Jennifer G. Altman, and
Shani Rivaux of Boies, Schiller & Flexner,
LLP, Miami; and Stuart C. Markman and
Kristin A. Norse, and Robert R. Ritsch, of
counsel, of Kynes, Markman & Felman,
P.A., Tampa, for Appellants/Cross-
Appellees.

Stacy D. Blank, Joseph H. Varner, III, and
Bradford D. Kimbro of Holland & Knight LLP,
Tampa, for Appellees/Cross-Appellants.

CASANUEVA, Judge.

              The Appellants seek review of a final judgment entered after a bench trial

on their claims against the various Appellees for breach of fiduciary duty, defamation,

slander per se, violation of the Florida Deceptive and Unfair Trade Practices Act

(FDUTPA), conspiracy, and tortious interference as to several individuals and entities.

In this appeal, the Appellants challenge the amount of damages they were awarded for

their breach of fiduciary duty claim, and they challenge the trial court's failure to award

any damages for their FDUTPA claim. They also argue that the trial court erred in

finding that some of their claims were barred by the statute of limitations. We reverse

the award of damages because we cannot determine what evidence the trial court relied

upon to determine the amount, and the amount of damages awarded appears to be a

small percentage of the damages presented at trial. We also reverse the trial court's

finding that the facts did not support an award of punitive damages and the trial court's

finding that Appellants were not entitled to damages for their FDUTPA claim. We do not

find merit in the other arguments raised on appeal and affirm those points without

discussion.

              The Appellees filed a cross-appeal arguing that the trial court erred in

awarding damages for conspiracy, that a release signed in a previous lawsuit precluded

two of the Appellants' claims, that the trial court erred in finding the Appellees liable for

                                             -2-
tortious interference with terminated employees, and that the trial court erred in

awarding damages for the slander claim. We do not find merit in any of the Appellees'

arguments in their cross-appeal and do not discuss them further.

                                        DAMAGES

Out-of-Pocket Damages

              During trial, the Appellants called two expert witnesses to opine as to the

amount of damages they suffered. In its order, the trial court accepted the calculations

of only one of the experts "as to out of pocket losses," and it found that the expert

testified that the Appellants suffered out-of-pocket damages of $6,831,172.1

              Yet, the final judgment awards the Appellants less than one-fourth of this

amount, $1,600,000, and the trial court provides no explanation for its reduced award.

In order to perform appellate review, the trial court's rationale must be made available.

Accordingly, we reverse and remand for further proceedings for the trial court to explain

how it arrived at this amount. If the passage of time has made this impossible, the trial

court should so find and conduct a second trial on the issue of damages.

Disgorgement Damages

              The Appellants argue that the trial court erred in denying their request for

disgorgement damages for the claims of breach of fiduciary duty and tortious

interference. The Appellees claim that the trial court's award of $1,600,000 to the

Appellants included disgorgement damages. The Appellees state in their brief that the

              1
               The order on appeal consists of over 130 pages. In an effort to keep this
opinion as succinct as possible, we will address the facts as they relate to the errors
that require reversal.

                                            -3-
trial court awarded disgorgement damages on the claims for breach of fiduciary duty,

tortious interference, and civil conspiracy based on tortious interference. See

Zippertubing Co. v. Teleflex Inc., 757 F.2d 1401, 1411 (3d Cir. 1985) (holding that the

trial court correctly permitted the plaintiffs to prove as damages the amount of the

defendant's profits in their claim for tortious interference, because this rule was

"consistent with the policy of discouraging tortious conduct by depriving the tortfeasor of

the opportunity to profit from wrongdoing"); see also Colo. Interstate Gas Co. v. Nat.

Gas Pipeline Co. of Am., 661 F. Supp. 1448, 1479 (D. Wyo. 1987) (holding that plaintiff

was entitled to damages relating to the defendant's profits for tortious interference with

contract), reversed on other grounds, 885 F.2d 683 (10th Cir. 1989); King Mountain

Condo. Ass'n v. Gundlach, 425 So. 2d 569, 572 (Fla. 4th DCA 1982) (noting that

disgorgement damages are an equitable remedy). But see Developers Three v.

Nationwide Ins. Co., 582 N.E.2d 1130, 1135 (Ohio Ct. App. 1990) ("[A]n award of

defendant's profits is not the only means of discouraging a tortfeasor from interfering

with a business relationship while calculating that his profits will exceed the injured

party's losses."); Marcus, Stowell & Beye Gov't Sec., Inc. v. Jefferson Inv. Corp., 797

F.2d 227, 232 (5th Cir. 1986) (holding that disgorgement damages were not proper for

claim of tortious interference).

              Again, the failure of the trial court order to specifically indicate whether it

was awarding disgorgement damages and, if so, to specify the amount of disgorgement

damages hinders this court's review of the award. Regardless, the evidence presented

at trial suggests that if the trial court intended to award disgorgement damages, the

award was grossly insufficient. The Appellants' expert witness testified that based on

                                             -4-
the profits that the Appellees realized up to the trial date, disgorgement damages would

be approximately $271,000,000.2 See Pidcock v. Sunnyland Am., Inc., 854 F.2d 443,

446 (11th Cir. 1988) ("[O]nce it has been determined that a purchaser acquired property

by fraud, any profit subsequently realized by the defrauding purchaser should be

deemed the proximate consequence of the fraud.").

              The Appellees suggest that the trial court limited the amount of

disgorgement damages awarded because the management initiatives of Bill Horne, who

became Laser Spine Institute's chief executive officer in November 2005, were part of

what made Laser Spine Institute successful. We agree that a plaintiff generally may not

recover disgorgement damages if any portion of the profits is attributable to the

defendant's "special or unique efforts . . . other than those for which he is duly

compensated." Siebel v. Scott, 725 F.2d 995, 1002 (5th Cir. 1984) (quoting Nelson v.

Serwold, 576 F.2d 1332, 1338 n. 3 (9th Cir. 1978)). "Aggressive and enterprising

management activities may break the causal chain between the fraud and the profits."

Pidcock, 854 F.2d at 447. However, there is an exception to this rule. Even if gains in a

company's profits are attributable to extraordinary management activities, such profits

are still subject to disgorgement if the activities are performed as part of the

management's regular salaried responsibilities. Id. at 448. "[A]ctions taken by a

corporate officer or director do not qualify as 'extra' efforts unless they go well beyond

the efforts for which the officer or director is duly compensated." Lawton v. Nyman, 357

F. Supp. 2d 428, 443 (D.R.I. 2005).

              2
             The trial court found that Laser Spine Institute's gross revenue from 2005
to 2009 was approximately $283,000,000.

                                            -5-
              In the present case, the trial court noted that Mr. Horne was a "highly-

compensated executive as the CEO of the Laser Spine Institute (LSI), earning $400,000

in salary and $300,000 in bonus" and that his profit distributions from LSI and related

entities provided an additional income of $1,500,000 a year. Considering Mr. Horne's

income from the Appellees' business, the evidence did not support any finding that his

"extra" efforts went well beyond the efforts for which he was duly compensated. The

trial court found that Mr. Horne was at work "every day during the first few years of his

tenure." He would begin his day at 7:00 a.m. by greeting patients before and after

surgery, he would work on sales and marketing during the day, and he would spend his

evenings, until 10:00 p.m., calling patient prospects. Although we do not question Mr.

Horne's ability to successfully manage the Appellees' business or the fact that he

worked long days, it would be difficult to conclude that his efforts in greeting patients in

the morning, working on sales and marketing during the day, and calling patient

prospects during the evening were efforts that went beyond those for which he was

compensated approximately $2,000,000 a year. Therefore, even if the gains in the

Appellees' profits are attributable to his extraordinary management activities, such

profits are still subject to disgorgement because the activities were efforts for which he

was duly compensated. See Pidcock, 854 F.2d at 448.

Punitive Damages

              The trial court found that the Appellants did not establish a factual basis

for punitive damages. Section 768.72(2), Florida Statutes (2006), provides that "[a]

defendant may be held liable for punitive damages only if the trier of fact, based on

clear and convincing evidence, finds that the defendant was personally guilty of

                                            -6-
intentional misconduct or gross negligence." The term "intentional misconduct" was

defined by our legislature to mean "that the defendant had actual knowledge of the

wrongfulness of the conduct and the high probability that injury or damage to the

claimant would result and, despite that knowledge, intentionally pursued that course of

conduct, resulting in injury or damage." § 768.72(2)(a). In turn, "gross negligence" was

defined to mean "that the defendant's conduct was so reckless or wanting in care that it

constituted a conscious disregard or indifference to the life, safety, or rights of persons

exposed to such conduct." § 768.72(2)(b).

              At trial, a plaintiff is required to establish the entitlement to an award of

punitive damages by clear and convincing evidence. § 768.725.

              When claims for punitive damages are made, the respective
              provinces of the court and jury are well defined. The court is
              to decide at the close of evidence whether there is a legal
              basis for recovery of punitive damages shown by any
              interpretation of the evidence favorable to the plaintiff. . . .
              Once the court permits the issue of punitive damages to go
              to the jury, the jury has the discretion whether or not to
              award punitive damages and the amount which should be
              awarded.

Wackenhut Corp. v. Canty, 359 So. 2d 430, 435-36 (Fla. 1978) (citation omitted).

              We note that this case was tried without a jury and, therefore, the trial

court was required to determine, first, whether there was a legal basis for the recovery

of punitive damages and, second, whether to award punitive damages and the amount

which should be awarded. The language of the order clearly shows that the trial court

determined, under the first prong of the test, there was no legal basis for the recovery of

punitive damages.

                                             -7-
             The trial court did not explain its reasoning for this ruling. However, it

recognized that "[p]unitive damages are appropriate when a defendant engages in

conduct which is fraudulent, malicious, deliberately violent or oppressive, or committed

with such gross negligence as to indicate a wanton disregard for the rights of others."

W.R. Grace & Co.—Conn. v. Waters, 638 So. 2d 502, 503 (Fla. 1994). We conclude

that the factual findings made by the trial court support an award of punitive damages.

             The trial court found that Joe Samuel Bailey, Ted Suhl, Dr. James St.

Louis, and Dr. Michael Perry formed several businesses: Laserscopic Spinal Centers of

America, Inc., and Laserscopic Spine Centers of America, Inc. (the parent holding

companies), as well as Laserscopic Spinal Centers of Florida, LLC, Laserscopic

Surgery Center of Florida, LLC, Laserscopic Medical Clinic, LLC, and Laserscopic

Diagnostic Imaging and Physical Therapy, LLC (collectively referred to as Laserscopic

Spinal). All four directors had an ownership interest in Laserscopic Spinal, which was

organized to provide minimally invasive spinal surgery. Laserscopic Spinal's business

model was unique, and Dr. St. Louis was one of between four and ten surgeons in the

country who specialized in endoscopic minimally invasive spine surgery.

             Laserscopic Spinal began providing services to patients in August 2004.

Revenues for the company showed significant growth results between August and

October 2004, and the number of surgical procedures performed increased in each of

the three months. Between $75,000 and $100,000 in revenue was generated in August

2004, $250,000 in September 2004, and $650,000 in October 2004.

             Laserscopic Spinal met with William Esping, the managing director of EFO

Holdings L.P., and Robert Grammen, a partner with EFO, about the possibility of EFO

                                           -8-
providing a loan to Laserscopic Spinal. To obtain the loan, Laserscopic Spinal provided

a copy of its business plan to Mr. Esping and Mr. Grammen upon the express and

agreed condition that the materials would be kept confidential. Laserscopic Spinal also

provided its financial information to EFO and allowed EFO to conduct a due diligence

investigation on site. After conducting its due diligence, EFO did not offer a loan to

Laserscopic Spinal but instead offered to invest $3,000,000 in Laserscopic Spinal in

exchange for fifty-five percent interest in the company, permanent control of the board,

and a preferential seven percent return on its invested capital with the agreement that

no distributions could be made to other investors until EFO's invested capital was

repaid. When Mr. Bailey called Mr. Grammen to discuss EFO's unexpected terms, Mr.

Grammen told Bailey that "you're going to accept this offer or we're going to take your

doctors and we're going to take your company. And we're going to go up the street, and

we're going to do it ourselves." EFO made good on its threat.

              In order to make Dr. St. Louis and Dr. Perry angry at and suspicious of Mr.

Bailey, Mr. Grammen and another individual raised concerns regarding Laserscopic

Spinal's expenses, operations, and capitalization without conducting any investigation

into such. The records that were provided to EFO during the due diligence period were

used by EFO to mislead Dr. St. Louis and Dr. Perry to incorrectly believe that Mr. Bailey

was improperly using and misappropriating corporate assets. The trial court found that

EFO "intentionally engaged in activities designed to develop a relationship with St. Louis

and Perry and cause them to question Bailey's integrity. [It] did this in an effort to

leverage [its] position in the negotiations to force a sale of Laserscopic with the support

of St. Louis and Perry."

                                            -9-
              When another individual who had an option to purchase an investor's

interest in Laserscopic Spinal refused to sell his option to EFO, Mr. Grammen

threatened that they would lose the company. When the investor stated that he would

sue if Mr. Grammen and EFO interfered with the business, Mr. Grammen was not

concerned and indicated that EFO would make ten times whatever damages they might

have to pay in a lawsuit.

              Two days after EFO's offer to invest in Laserscopic Spinal, Dr. St. Louis

and Dr. Perry told Mr. Bailey that they were leaving Laserscopic Spinal to establish a

competing venture with EFO. While Dr. St. Louis and Dr. Perry were owners, officers,

directors, and employees of Laserscopic Spinal, they had numerous phone calls with

and met privately with Mr. Esping and Mr. Grammen. The trial court found that Dr. St.

Louis and Dr. Perry conspired with EFO to establish a competing business. The

incorporation documents for the competing business, Laser Spine Institute, LLC, were

signed twenty-two days after EFO's offer to invest in Laserscopic Spinal.

              Notably, taking Laserscopic Spinal's two physician-officers and setting up

a competing business was not all that the Appellees did here.3 The trial court found that

they "made use of Laserscopic's business plan, confidential documents, key personnel

including the entire surgical team and other employees, internal forms and documents,

and patient leads. Defendants obtained the critical head start and benefit of time and

know-how, which gave them a significant advantage in the market." Laser Spine

Institute created a business plan, which EFO admitted was a "cut and paste job" of

              3
               Dr. Perry had a noncompete agreement with Laserscopic Spinal, but Dr.
St. Louis did not have such an agreement with Laserscopic Spinal.

                                          - 10 -
Laserscopic Spinal's confidential business plan that EFO had received during due

diligence. Laser Spine Institute then used Laserscopic Spinal's confidential business

plan to seek funding from lenders. Laser Spine Institute never created its own

comprehensive business plan.

              Dr. St. Louis and Dr. Perry falsely told Laserscopic Spinal employees that

Mr. Bailey was stealing corporate assets. Dr. St. Louis also told employees that Mr.

Bailey had many aliases, was a wanted felon, and had "possible" sexual offenses. The

trial court specifically found that all of these allegations were false and, furthermore,

"[there was] no evidence that St. Louis and Perry had a good faith belief the statements

about Bailey were accurate at the time that they were made."

              But it was not enough to gut Laserscopic Spinal, the Appellees deboned it

with surgical skill. Dr. St. Louis, Dr. Perry, and EFO paid numerous employees to quit

working at Laserscopic Spinal and continued to pay them until Laser Spine Institute was

ready to open. Dr. Perry also incited employees to quit by falsely telling them that Mr.

Bailey was going to fire them. Dr. St. Louis told one employee to stop scheduling

surgeries, which directly affected at least ten patients. Laserscopic Spinal's list of

patient lists and leads, accounts payable information, and operating room supplies were

also misappropriated. As many as thirty to forty patients of Laserscopic Spinal were

scheduled for surgery by Laser Spine Institute. Patients of Laserscopic Spinal were

sent a notice by Laser Spine Institute stating that their clinic had simply moved

locations. Laser Spine Institute created a patient success story advertisement, which

actually featured a patient of Laserscopic Spinal.

                                            - 11 -
             After Dr. St. Louis and Dr. Perry left Laserscopic Spinal, Mr. Bailey sought

to hire another surgeon who specialized in minimally invasive spine surgery. Dr. St.

Louis and Dr. Perry contacted that surgeon and discouraged him from joining

Laserscopic Spinal. Mr. Grammen also contacted the surgeon and stated that he

believed Laserscopic Spinal would fail and offered to pay the surgeon not to work for

Laserscopic Spinal.

             In a similar, but less egregious case, this court found that the trial court

erred in finding that the facts did not support an award of punitive damages. In

Mortellite v. American Tower, L.P., 819 So. 2d 928, 931 (Fla. 2d DCA 2002), the

majority shareholder of a company did not disclose to the minority shareholder that

there was an offer to purchase one hundred percent of the company's stock. Instead,

the majority shareholder convinced the minority shareholder to sell him his interest in

the company for a fraction of what it was worth. Id. A week later, the company was

sold to the third party. Id. This court held that punitive damages were appropriate for

the breach of fiduciary duty claim. Id. at 935; see S & S Toyota, Inc. v. Kirby, 649 So.

2d 916, 917 (Fla. 5th DCA 1995) (holding that punitive damages were properly awarded

where Toyota misrepresented the vehicle it sold to Appellee as a one-owner, low-

mileage, used car with 26,000 miles when the vehicle actually had six prior owners and

Toyota was informed that the odometer reading was inaccurate).

             In this case, the Appellees' "behavior transcends the level of simple

negligence, and even gross negligence, and enters the realm of wanton intentionality,

exaggerated recklessness, or such an extreme degree of negligence as to parallel an

intentional and reprehensible act." Am. Cyanamid Co. v. Roy, 498 So. 2d 859, 861 (Fla.

                                          - 12 -
1986) (citation omitted). The factual findings made by the trial court support an award

of punitive damages against Dr. St. Louis, Dr. Perry, EFO Holdings L.P., and EFO

Genpar, LP. We reverse for the trial court to determine the appropriate amount of

punitive damages, if any, to award the Appellants. See Wackenhut Corp., 359 So. 2d at

435-36.

            FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT

              Despite the fact that the trial court found that many actions of EFO

Holdings and EFO Genpar violated the Florida Deceptive and Unfair Trade Practices

Act (FDUTPA), it found that the Appellants were entitled to only injunctive relief against

the two Appellees pursuant to section 501.211(2), Florida Statutes (2006), because it

was a competitor and not a consumer.

              One purpose of FDUTPA is to protect "the consuming public and

legitimate business enterprises from those who engage in unfair methods of

competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of

any trade or commerce." § 501.202(2) (emphasis added). This section, by legislative

directive, is to be construed liberally to promote the above policy. § 501.202. The

Appellants' FDUTPA claim is based on section 501.211, which authorizes a private

cause of action for injunctive relief, § 501.211(1), and damages, § 501.211(2).

              Prior to 2001, section 501.211 provided as follows:

              (1) Without regard to any other remedy or relief to which a
              person is entitled, anyone aggrieved by a violation of this
              part may bring an action to obtain a declaratory judgment
              that an act or practice violates this part and to enjoin a
              person who has violated, is violating, or is otherwise likely to
              violate this part.

                                           - 13 -
             (2) In any individual action brought by a consumer who has
             suffered a loss as a result of a violation of this part, such
             consumer may recover actual damages, plus attorney's fees
             and court costs as provided in s. 501.2105 . . . .

(Emphasis added.)

             Based on the plain language of this version of the statute, courts have

determined that competitors could seek declaratory relief under section 501.211(1), but

that only consumers could seek damages under section 501.211(2). See Del Monte

Fresh Produce Co. v. Dole Food Co., 136 F. Supp. 2d 1271, 1295 (S.D. Fla. 2001); see

also Warren Tech., Inc. v. Hines Interests Ltd. P'ship, 733 So. 2d 1146, 1148 (Fla. 3d

DCA 1999).

             However, effective July 1, 2001, the legislature amended section

501.211(2), Florida Statutes (2001), by inserting the word "person" in place of the word

"consumer": "In any action brought by a person who has suffered a loss as a result of a

violation of this part, such person may recover actual damages, plus attorney's fees and

court costs as provided in s. 501.2105."

             As noted by Niles Audio Corp. v. OEM System Co., 174 F. Supp. 2d 1315,

1319-20 (S.D. Fla. 2001), "the Florida Legislature's replacement of the word consumer

with the word person, demonstrates an intent to allow a broader base of complainants,

including competitors such as [the appellant], to seek damages." (Emphasis omitted.)

In Niles Audio Corp, the court found that the appellant could bring a claim for both

damages and declaratory relief pursuant to section 501.211. Id. at 1320; see also In re

G-Fees Antitrust Litig., 584 F. Supp. 2d 26, 44 (D.D.C. 2008) (finding that the 2001

amendment allowing a damages action by any "person" eliminated the requirement that

an action for damages had to be brought by a consumer); Furmanite Am., Inc. v. T.D.

                                           - 14 -
Williamson, Inc., 506 F. Supp. 2d 1134, 1146-47 (M.D. Fla. 2007) (holding that plaintiff

had standing to bring FDUTPA claim for damages against the defendant, a competitor,

for the misappropriation of trade secrets and confidential information).

              We agree that section 501.211(2) evinces a legislative directive that the

remedy of damages is not limited to a consumer. "When the Legislature makes a

substantial and material change in the language of a statute, it is presumed to have

intended some specific objective or alteration of law, unless a contrary indication is

clear." Mangold v. Rainforest Golf Sports Ctr., 675 So. 2d 639, 642 (Fla. 1st DCA

1996).

                                      CONCLUSION

              We reverse the final judgment as to the award of damages and remand for

the trial court to award either out-of-pocket or disgorgement damages and specifically

note the basis for the amount of such award. The trial court must also revisit the issue

of punitive damages because there is clearly a factual basis for such, and it must

determine the appropriate amount of punitive damages, if any, to award the Appellants.

Finally, the trial court must determine the amount of damages that are appropriate for

the violations by EFO Holdings and EFO Genpar of FDUTPA. The final judgment is

otherwise affirmed.

LaROSE and SALARIO, JJ., Concur.

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