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Legal Trends: Limiting Liability
Some judges and lawyers say yes. Now a case involving a former University of South Florida physician and a house he dubbed "The Money Pit Part 2" could decide the question. The case, expected to be argued before the state Supreme Court this spring, is drawing particular interest from consumer groups and the real estate community. But it has potentially important implications for virtually all businesses because it could cut off recovery by victims of wrongful and shady dealings.
Dr. Kirk Woodson's lawsuit began when he and his wife decided to move to upscale South Tampa, soon after Woodson accepted a position on USF's ob-gyn staff. The couple found a nearly new house they liked and agreed to pay the asking price of $475,000.
But the Woodsons claim that the builder-sellers and their agent disguised or failed to disclose a host of problems, and even blocked a pre-closing inspection. "Basically we got pushed off and run around," Woodson says.
The problems the Woodsons say they eventually discovered included buckling ceilings, leaking windows and brickwork and a master bathroom that was pulling away from the house. Eventually, Woodson hung his sarcastic label on the house and moved his family out. The agent and sellers have denied any wrongdoing.
When the Woodsons sued the sellers and their agent for fraud, they got another surprise: A circuit court judge dismissed much of their case. In November, the Second District Court of Appeal (DCA) headquartered in Lakeland affirmed. The DCA's majority cited a 1993 state Supreme Court decision, Casa Clara Condominium Association v. Charley Toppino & Sons Inc., which dismissed another lawsuit by homeowners against the makers of allegedly defective construction materials.
In that case, the state Supreme Court based its decision on an increasingly powerful doctrine known as the economic loss rule. It says that if a plaintiff has suffered only economic loss to the property in question - and not some personal injury or damage to other property - the plaintiff is limited to breach-of-contract remedies and can't sue for the seller's wrongdoing, also known as a tort. That's important because plaintiffs often can collect more damages under a tort theory, such as civil fraud.
The so-called economic loss rule has developed rapidly around the country in the last 20 years or so. It was intended largely to prevent modern consumer tort actions, such as negligence and product liability, from vitiating the traditional self-protections that business people write into their contracts. But some judges and lawyers now think the economic loss rule has gotten out of hand by preventing plaintiffs from suing even for intentional torts such as fraud. In dissent in the Woodsons' case, in fact, appeals judge Chris Altenbernd argued that the majority's decision has done just that.
"If the majority's reasoning is correct, both fraud and negligent misrepresentation have been essentially abolished in Florida," he wrote.
Even if the Woodsons lose at the state Supreme Court level on civil fraud claims, they're not out of court. They have other claims pending, especially against their sellers. But most of their other counts wouldn't allow the range of damages - such as punitive damages - that are available in a fraud suit. In the Woodsons' case, that's important. "Psychologically it's been devastating," Woodson says of his family's experience. "We'll never get over it."
Legal Briefs
When Tallahassee business lawyer Carl Pennington and his partners merged their respected corporate law firm with former House Speaker Ralph Haben's up-and-coming lobbying outfit, some observers viewed the union as Tallahassee's latest shot at creating a mega-firm with statewide impact.
If so, it missed. Thirty-lawyer Pennington & Haben has undergone a major restructuring, when Haben and lobbying partner Ron Richmond withdrew to form their own firm. A short time later, high-profile lobbyist John French followed them out the door.
People close to Haben attribute his move in part to a desire to simplify life following his recent remarriage. But another key to the decision appeared to be Haben's inability to sell his partners on his vision of the firm's future.
Haben had hoped to establish a firm with offices in Tallahassee and Miami that would offer one-stop shopping for clients who wanted to consolidate their business and lobbying work. But some of his partners balked at the cost of expansion. The differences emerged in September when Haben encountered internal resistance to his proposal for opening a South Florida office to draw new clients.
It seems that Haben and his former partners couldn't agree on how to grow the firm. "You need a constant infusion of business to keep that monster going," Haben says of his own long-range plans for the firm. "I arrived at the position that we were either going to get bigger or we were going to get smaller."
For years casual observers have puzzled over the way Florida's Supreme Court spends its time. If the seven justices aren't tunneling through the mountainous record of a death-penalty case, it seems they're nit-picking some first-year practitioner's performance in a Bar complaint. Meanwhile, much of Florida's case law is developing in the five intermediate courts of appeal - and sometimes growing in five different directions as a result.
It's all because of the Supreme Court's peculiar jurisdiction rules, which require the court to decide some minor cases, such as Bar complaints, and often prevent it from taking many big cases. The rules could be changing, however. A panel of judges and lawyers has recommended, among other things, re-examining the Supreme Court's jurisdiction.
"The number of cases has not only increased but the number of justices remains the same," explains Justice Gerald Kogan, who co-chaired the panel, known as the Bench/Bar Implementation Committee. "We've got to look into this. We will really be heading for trouble if we don't."
