Judge Makar’s warnings regarding property repairs and insurance claims

On Friday, the First District Court of Appeal issued an opinion that vindicated a waiver and release of a contractor as signed by a condo association.

A straightforward decision, but the concurring opinion reveals facts important to associations and homeowners alike.

In Landmark American Insurance Co. v. Santa Rosa Beach Development Corp I, a condominium development suffered structural damages allegedly caused by Hurricanes Ivan and Dennis.  The insurance claim developed into a lawsuit, wherein the insurer attempted to join the developer and general contractor, alleging property defects stemming from the original construction two years before the hurricanes.

Santa Rosa County’s Judge Marci Goodman, in reading certain release provisions contained in repair contracts, let the developer and general contractor off the hook.  Specifically, the development suffered water intrusion damage due to problems with exterior cladding, which the developer and contractor agreed to repair.

The repair contract release stated, in pertinent part, as follows:

Association … shall proceed directly against the manufacturer and applicator in the event any claim arises with respect to the sufficiency or adequacy of such repairs, or otherwise arising out of or relating to such repairs in any way, and shall make no claim against Developer or Contractor with respect thereto.

…  Association … will not sue or seek any relief whatsoever against Developer or Contractor … for the conditions which Developer undertakes herein to correct.

In a broad release, the Developer and Contractor protected themselves against claims based both on their repairs and their original workmanship.   The First DCA upheld the trial court’s conclusion that this release protected the Developer and Contractor.

In a special concurrence, Judge Makar indicated that this holding gives strength to a claim by an insurer against the insured for breach of the insurance contract.  The wrongful impairment of an insurer’s right to subrogate may act as a complete defense to an action on the policy.

The warning is clear: beware of construction and repair contracts after you obtain your property owner’s policy.  To the extent those contracts contain waivers of any rights against the contractor, you may be breaching your own insurance policy and might find yourself out in the cold when disaster strikes.

As discussed in Dennis Wall’s insurance law blog, an Iowa appellate court also addressed the issues presented last week and ruled similarly, holding that waivers in the contractor’s documents impaired the insurer’s subrogation rights.

So, you’re saying the government CAN’T intentionally drown us?

As a Florida waterfront homeowner, my mouth waters in anticipation at the thought of one day suing the federal government for the eventual rising tides that will keep me from being able to access my place by anything but a boat or helicopter.  Has that door now opened?

Today, the U.S. Supreme Court handed down its decision in Arkansas Game & Fish Commission v. United States, which, as the Washington Post describes, allows property owners to “seek compensation if the government is responsible for flooding their lands, even if the condition is not permanent.”

To be more specific, the government-induced flooding of any duration isn’t exempt from the Takings Clause.

In all seriousness, the Court was talking about the more obviously government-induced flooding, such as when water is intentionally released from a dam and destroys land.  This is markedly different than when a government-constructed canal overflows due to a “flood of unprecedented severity.”  Due to such unforeseeable conditions, the government doesn’t have to provide “just compensation,” but there is little justification for a government failing to compensate the public for intentionally damaged land, no matter the fact that the government’s action was quick.  As Justice Ginsburg points out (writing for a unanimous Court, except for the recused Justice Kagan):

The Takings Clause is designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.

I am hopeful that Justice Ginsburg doesn’t mean that we all should be flooded.  But maybe that’s why the government is throwing salt on those ice shelves.

We have recognized … that no magic formula enables a court to judge, in every case, whether a given government interference with property is a taking. In view of the nearly infinite variety of ways in which government actions or regulations can affect property interests, the Court has recognized few invariable rules in this area.

So, just in case you think there is some bright-line holding here that has anything to do with the sea level rise, Justice Ginsburg says we’ll deal with that when the day comes.  The opinion very explicitly states that it is not creating “a blanket temporary-flooding exception to our Takings Clause jurisprudence.”  An opinion that is, perhaps, limited to its facts but nonetheless revealing as to the “foreseeability” factor at play in the Takings Clause analysis.

Justice Ginsburg ends the tale with a footnote offering one glimmer of hope for us folks worried that the beach and our parking lots will soon be gone.

The Commission is endeavoring to reclaim the land through a restoration program.  The prospect of reclamation, however, does not disqualify a landowner from receipt of just compensation for a taking.

So, the government can’t use the old excuse that “another Ice Age is just around the corner.”

Splitting hairs on a murdering minor’s right to parole

On Friday, the First District Court of Appeal became yet another judicial panel declining to extend the 2010 U.S. Supreme Court’s Graham v. Florida.  This time, a defendant convicted of homicide still received the protections of Graham because of a quirky plea agreement.

In Graham, the U.S. Supreme Court held that a life sentence without parole for a non-homicidal charge violates the Eighth Amendment–the “cruel and unusual” one–if the crime was committed as a minor.  Or so that’s how the First DCA’s majority would have us read it.  The dissent says that Graham stands for the proposition, as stated by Justice Kennedy in delivering the opinion of the Court, that “[t]he Constitution prohibits the imposition of a life without parole sentence on a juvenile offender who did not commit homicide.”

What’s the difference?  Well, in the first phrasing, if you have multiple crimes charged together, you can get life without parole for the murder charge but not for the simultaneous possession of controlled substances.  Under the second phrasing, you could get put away for life without a snowball’s chance of getting out… on either charge… as long as you’re convicted of murder.

The First DCA dealt with this distinction in Akins v. State.  The defendant was charged for his minor indiscretions, involving alleged first-degree murder, attempted first-degree felony murder, and, well, some felonies obviously.  The plea agreement had him guilty for second-degree murder (instead of first-degree) and guilty of attempted first-degree felony murder.  A sentence cap of 40 years per count was included in the agreement.

Here’s where it got quirky.  Before sentencing, the Florida Supreme Court eliminated the crime of attempted felony murder.  So, the parties stipulated to substitute the charge of attempted first-degree murder.  Then the defendant appealed the sentence of 27 years concurrent sentences (notwithstanding the plea agreement) because, lo and behold, you can’t stipulate to substituting charges on an indictment.    The First DCA agreed with the defendant, and, on remand, a new information was filed.  The jury came back convicting the defendant of attempted first-degree murder with a sentence of life without parole.  A total backfire on defendant’s appeal from enforcement of his own plea agreement.

In any event, flash forward 13 years–yes, all that happened in the mid-90s, so he missed the Truman Show (filmed here on the Emerald Coast) and the breaking of the Curse of the Bambino–and Graham offers a glimmer of hope.

Even though Akins was convicted of murder, his life without parole sentence was on the attempted murder count.  Chief Judge Benton said this distinction made a difference.  Believing it was rotely applying Graham on a charge-by-charge basis, the majority reversed the life sentence.  To be clear:

We see nothing in Graham that would permit imposing life sentences without parole for nonhomicide offenses, even if the juvenile has committed a homicide in some earlier episode or, as here, was earlier sentenced to a term of years for a homicide.

In dissent, Judge Rowe explained that the “clear line” in Graham deals with, according to the text of Graham, “a juvenile offender who did not commit homicide.”  Akins was convicted of homicide!  So, Judge Rowe says, there is no Eighth Amendment violation.

Judge Rowe appears to be getting at the point that the homicidal youth has not reason to be surprised if he ends up with a life without parole sentence.  After all, he killed somebody.  But consider a situation where a teenager kills another, gets convicted by a jury of second-degree murder, and gets a short imprisonment because the jury believed there were mitigating factors.  It is later discovered that, at the time of the murder, the teenager was actually engaged in sexual battery of his victim.  When the second jury sees this, it thinks this teenager must be punished to the full extent.  Does this jury get to use the Judge Rowe rule to essentially overrule the first jury (and therefore obfuscate the double jeopardy theory)?

Artists protecting their work after termination of employment/independent contract

On Avvo’s Legal Question & Answers forum, a Vero Beach tattoo artist asked the following question (although I have rephrased it in the blockquote):

I am an independent contractor and recently left a tattoo shop.  I requested that the shop remove pictures of my tattoo work, but the shop has not done so.  What can I do to make them remove the pictures?  The shop was only allowed to use the pictures to promote me, not the shop.

It is very common for artists who are not completely solo to find themselves in situations where their creative work is used after termination of their employment relationship for advertising of the business.  As I wrote in my response to this inquiry, the first type of dispute that comes to mind is whether there is copyright infringement by the tattoo shop displaying your work.

If all of the facts provided are accurate, the author of the question is, in fact, in the right.  Under the current version of the Copyright Act, you generally own your own creative work unless it is a work “made for hire.”  While before the current version of the Act, there were some courts that found a presumption that work made during the course of a business relationship were the employer’s property, the Copyright Act now makes it clear that you must either be an “employee” when creating the work or have an express agreement that the work was made for hire.

Thus, when you are not an employee but acting in some other capacity, and there is no agreement in your employer’s favor as to who owns what, you own it and can enforce those provisions of the Copyright Act regarding publication, copying, and display.

But it is important to note a few things.  To call yourself an “independent contractor” (even if both you and your employer called you that, and even if there was a written contract and you were treated for tax purposes as an independent contractor) may not be conclusive proof that you were, in fact, an independent contractor. According to the U.S. Supreme Court in Community for Creative Non-Violence v. Reid, to determine whether you are an “employee” under the Copyright Act, you look to the law of agency. Factors relevant to this inquiry include, among other things: (1) the employer’s right to control the manner and means by which you created your work; (2) the skill required; (3) the owner/source of the instruments and tools used; (4) location of the work; (5) duration of the relationship; and (6) payment arrangements. Notably, if you were required to be in the shop for set hours to handle whatever potential clients walked into the shop, you may have an uphill battle trying to prove that you were not an “employee” for purposes of the Copyright Act.

In this and other contexts, the “independent contractor” v. “employee” debate is a case-by-case factual struggle and requires a well-crafted factor-by-factor analysis and presentation to the court.

The first step is the cease-and-desist letter.

Chime in on payment of oil spill claims

Since capping the leak, the news on the Deepwater Horizon oil spill has been sparse.  But the multi-district litigation is progressing before the Louisiana federal court, and individuals and businesses continue to file claims for damages sustained with the Gulf Coast Claims Facility, an entity developed pursuant to BP’s statutory obligations as a responsible party.  Many of these claims have gone unpaid and unanswered.

Claims Administrator Kenneth Feinberg will appear in Tallahassee next week before the Florida House Economic Affairs Committee to answer lawmakers’ questions about why claimants have had such difficulty in getting paid and speaking directly with decision-makers.  The appearance is scheduled for February 18 at 8 a.m. in Webster Hall.

Until then, the public has the opportunity to chime in on the criteria for evaluating claims and the methodology for determining the amount to be paid to claimants.  The Claims Facility has posted a proposal, which includes sample calculations for individuals and businesses and supposed expert reports.

The proposal sets forth the requirement that claimants establish an “identifiable link” between losses and the oil spill:

Evidence establishing this connection is required. For example, a claimant might provide documentation of cancelled orders for goods or services, disruptions to the supply of Gulf seafood, a termination of employment or reduction in wages that an employer confirms was caused by the Oil Spill, etc.  Likewise, the GCCF will not presume that a claimant’s 2010 income or profits would have been greater or less than the claimant’s 2009 income or profits. Providing financial information about losses sustained in 2010 is but one form of proof, and will not be sufficient documentation for many individuals and businesses …

In discussing final payment calculations, the proposal states that the Claims Facility takes into account both documented losses and a “future losses factor,” which essentially assumes that losses in 2011 will be 70% of those sustained in 2010 and losses in 2012 will be 30% of those sustained in 2010.  This works out neatly to a payout of two times any documented 2010 losses.  There are exceptions for oyster harvesters, who get twice that amount, and those who sustained damages of at least $500,000.  Those who don’t like the “future losses factor” are free to pursue an interim payments option.

Several comments have already been sent in via email and mail and are posted daily on the Claims Facility webpage.  These comments often focus on the fact that not all businesses “fit the mold” of the proposal.  The Claims Facility will review all public comments and then adopt final rules for determining and paying on claims.

The proposal and comments can be viewed here: http://www.gulfcoastclaimsfacility.com/methodology

All public comments must be received by February 16.

Social media – no right to privacy during discovery

Share with one, share with all.  Not a mantra accepted by many Facebook and MySpace users who set their profiles to “Friends Only.”  But the New York Supreme Court recently landed another blow to the social media users’ right to privacy claims.  In Romano v. Steelcase, Inc., the court granted access to and copies of all of the plaintiff’s private records and information from her social networking accounts.  The information tended to disprove that the plaintiff was unable to engage in an active lifestyle after allegedly suffering serious injuries from a fall from a defective desk chair.  The court cited cases from Canada and across the United States and noted that refusing access to private postings goes against the trend towards liberal discovery policies and “would condone … attempt[s] to hide relevant information behind self-regulated privacy settings.”

The lessons learned from this trend are numerous.  For example, an employer with a restrictive covenant over his past employees can use social media to determine the past employee’s current business endeavors and solicitations.  Or, as occurred in an Indiana federal court this year, a sexual harassment claimant may have her wall postings and messages reviewed to determine if there was emotional or mental distress.  The court in that case stated as follows:

“Although privacy concerns may be germane to the question of whether requested discovery is burdensome or oppressive and whether it has been sought for a proper purpose in the litigation, a person’s expectation and intent that her communications be maintained as private is not a legitimate basis for shielding those communications from discovery.  …  [A] requesting party is not entitled to access all non-relevant material on a site, but … merely locking a profile from public access does not prevent discovery either.”

(Click here to read the full Order in EEOC v. Simply Storage Management, LLC)

But once social media is discoverable in a court near you, your expenses during discovery may skyrocket.  Before producing the full extent of your wall and every wall to which you’ve ever posted, your attorney will need to review for information that shouldn’t be produced because it is prejudicial or otherwise objectionable.  The party receiving discovery from its opponent or third-party provider encounters the same problems.  Given the transient, dynamic, and voluminous nature of social networking profiles, the experience of sophisticated information technology professionals who conduct structured searches is necessary to keep down the costs of having your attorney laying eyes on and analyzing every post.  For example, KAGM employs IT professionals and is establishing other connections with experts who can assist in discovery.

One should proceed with the presumption that every “tweet” is an electronic record that will be held for an eternity.  Once it is out there, you cannot get it back.  Companies who want to avoid the staggering costs of such e-discovery should take the preventative measure of adding social media to their information governance plan.  A failure to do so puts a company at risk.  Adding social media to your governance plan may be more than a mere recommendation.  The Financial Industry Regulatory Authority issued guidance in January 2010 regarding the monitoring and maintaining of records by financial services firms on social media site usage.  Regulations in other industries are sure to follow.

Is arbitration the smart choice?

Recently, I traveled to Pensacola with a client to take on the mysterious world of arbitration.  For one-and-a-half days, we sat at a long table with the defendant and a relatively omnipotent construction lawyer who we paid to listen to two disgruntled companies and two stubbornly determined attorneys.  We walked away after closing arguments, traveled back home, and waited a couple weeks to get an award letter from the arbitrator.  What luck!  KAGM’s client is victorious.  But this sounds a lot different than your typical lawsuit, involving a salaried judge bound tightly by precedent, sitting high upon a bench, and determining your fate before you exit the courtroom.  Arbitration is common in the construction and government contracting world from where my client hails, because it’s generally required by the contracts.  Litigants may opt for arbitration when not required by contract for various reasons:

  • Quicker resolution.  This lawsuit where close to seven figures were at stake could have been tied up in discovery, motions to compel, and the slow-moving court dockets for a while.  Instead, we opted, as is generally the case in arbitration, to allow no depositions, prohibit more than one round of discovery, and obtain a final award just seven months after filing the arbitration demand with the American Arbitration Association.  The drawback, however, is that a drawn out discovery process, while time-consuming and expensive, allows the parties to smoke out every possible fact that could be relevant to their argument.  With just one round of discovery, you might learn something new and not be able to ask follow-up questions until the final hearing.
  • Cheaper.  The client had times where he questioned whether this was true.  After all, for a $500,000 construction lawsuit, you have to pay the American Arbitration Association $6,200 just to file the claim.  Then another $2,500 if you make it to a first hearing.  Add that to the arbitrator’s travel and hourly fees and you’re talking about a significant investment that you will incur even if you end up settling the case.  But see the above bullet point on quicker resolutions.  The attorney time saved in streamlined discovery can easily make up the difference.
  • Ease of presentation.  Many claims require the introduction of vague and less reliable evidence.  For example, in construction cases, a party may have to rely heavily on affidavits and memories of conversations with employees who are unavailable for the hearing.  Or a party may have to present a cumbersome set of daily reports and invoices to substantiate damages.  Well, the affidavits and prior conversations might be excluded by a court as hearsay.  The reports and invoices, if contested, might have to go through the excruciating process of authentication.  Our arbitrator allowed everything to come into evidence, believing he could sort out what was relevant and probative.  The drawback, of course, is that your opponent can easily get prejudicial evidence into the record.
  • A “fair” and final resolution by a knowledgeable decision-maker.  The parties generally confer and attempt to agree on the arbitrator based on, among other things, arbitration experience and subject matter expertise.  A lawyer who has spent his career litigating contracting cases may understand the issues that come up on a construction site better than a Circuit Judge that spends one hearing making a child custody decision and the next figuring out whether a real estate broker is entitled to commissions.  Couple this experience in your arbitrator with the fact that he is less bound to the strict confines of black letter law than a trial court.  He might find a breach of contract but choose not to award lost profits, based on an inequitable result.  This balance of equities can have its advantages and disadvantages.  Many worry that arbitrations have a tendency to “split the baby.”  That is, in close calls, the claimant will essentially just get about half of what he seeks.  But where you feel wronged and your case is weak, you might be able to obtain a small award in arbitration while you’d be barred from bringing your claims in a court.

There are various other reasons why parties prefer arbitration, including the fact that it allows parties to continue working relationships without creating the bad blood that can develop during adversarial litigation.  Further, while arbitrators should beware of a manifest disregard of the law, their awards generally are not appealable unless a party can show that a bias.  Thus, the parties feel a sense of finality once the award letter is delivered.

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