Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Fla. Dist. App.: Competitor could recover damages under Florida deceptive practices law, (Feb 5, 2016)

By Michael Menzhuber, J.D., LL.M.

A trial court’s refusal to award damages under the Florida Deceptive and Unfair Trade Practices Act to a competitor of the defendant was reversed and remanded by the Florida District Court of Appeals. Although a prior version of the Act authorized the award of damages only to a “consumer,” the 2001 amendments replaced the word “consumer” with “person” (Bailey v. St. Louis, February 3, 2016, Casanueva, D.).

A Florida circuit court entered an award of damages for Joe Samuel Bailey and the several medical businesses that he formed on their breach of fiduciary duty claim against EFO Holdings L.P., EFO Gen Par, LP, EFO Laser Spine Institute, LTD. and their owners and officers. The circuit court, however, refused to award damages on the plaintiffs’ claims under Deceptive and Unfair Trade Practices Act. Bailey and his businesses appealed the amount of damages awarded on their breach of fiduciary duty claim and the trial court’s failure to award any damages for the Deceptive and Unfair Trade Practices Act claim.

After accepting the out-of-pocket damages calculations of a expert (approximately $6.8 million), the trial court awarded less than one-fourth of that amount ($1.6 million), without explanation. Consequently, the appellate court reversed and remanded for the trial court to explain how it arrived at its out-of-pocket damage award.

The plaintiffs argued that the trial court also erred in denying their request for disgorgement damages and that the amount of these damages would be approximately $271 million. The defendants responded that the trial court’s damage award included disgorgement damages because the management initiatives of one of the defendant’s CEO were what made it successful.

The appellate court agreed that disgorgement damages cannot be recovered if any portion of the profits are attributable to a defendant’s special or unique efforts. However, it noted an exception to that rule when the efforts or activities were performed as part of the management’s regular salaried responsibilities. After considering the CEO’s annual income, which was over $2 million, the appellate court determined that his “extra efforts” did not go beyond the efforts for which he was compensated.

The trial court recognized that punitive damages are appropriate when a defendant engages conduct that is fraudulent, malicious, deliberately violent or oppressive, or committed with such gross negligence as to indicate a wanton disregard for others. After also noting that the defendants had set up a competing business using plaintiffs’ confidential information and had disparaged Bailey to his employees, the appellate court reversed and remanded the trial court’s decision to deny punitive damages.

On the Deceptive and Unfair Trade Practices Act claim, the trial court found that the plaintiffs were entitled to injunctive relief, but not damages, because the statute authorized damages to only a “consumer.” However, 2001 amendments to the Act replaced the term “consumer” with “person.” This amendment evinced a legislative directive that the remedy is not limited to a consumer. Based on the plain language of the amended statute, courts have determined that competitors may seek damages under the Act.

The case is No. 2D13-612.

Attorneys: Stephen N. Zack (Boies, Schiller & Flexner LLP) for Joe Samuel Bailey. Stacy D. Blank (Holland & Knight LLP) for James S. St. Louis, D.O.

Cases: StateUnfairTradePractices FloridaNews