General Civil Litigation

The past few years have shown that litigation continues to be a viable vehicle for bringing about societal change, particularly when legislative action does not follow changes in public opinion on high profile issues. The same sex marriage litigation that culminated in same sex marriage bans being declared unconstitutional in Obergefell v. Hodges is perhaps the most prominent, but far from the only, recent example of such litigation resulting in a major societal shift.

But so-called “impact litigation” has its limits. If a recent 11th Circuit opinion is any indication, changing the culture of aquatic theme parks may be beyond those limits.

There has been extensive recent news and entertainment media coverage criticizing the practice of keeping orcas/killer whales in captivity for entertainment purposes. And public opinion appears to have swung against the practice. According to a 2012 poll, 50% of adults in the US were opposed to the practice, versus 21% who said they were in favor of it. Even Sea World, the most famous aquatic park in the United States, reportedly announced in 2016 that it planned to phase out killer whale shows.

Federal law, however, does not prohibit keeping killer whales in captivity for entertainment. Certain animal rights activists think it should. They brought suit against a Miami aquatic park, hoping to convince the courts that it is unlawful to keep captive an orca/killer whale that has been designated an endangered species.

But in People for the Ethical Treatment of Animals, Inc. v. Miami Seaquarium Festival Fun Parks, LLC, the United States Court of Appeals for the Eleventh Circuit recently rejected that argument. Its decision indicates that the court was not convinced, at least based on the record presented to it, that keeping orcas in captivity is inherently harmful to them.

The whale in question was a Southern Resident Killer Whale. SRKWs were designated an endangered species in 2005, but captive whales were excluded from that designation until 2013. That year, the court’s opinion points out, the National Marine Fisheries Service (NMFS) removed the exclusion based on a petition by PETA, the plaintiff in the case.

PETA brought suit under the Endangered Species Act (ESA). The ESA, among other things, makes it “unlawful for any person to…take any [endangered] species” in United States territory or on the high seas. The orca at issue, named Lolita, had been held in captivity since 1970, long before its species was designated endangered, so PETA could not argue that capturing it was unlawful.

But the prohibition on “taking” under the ESA is broader than simply capturing or killing a member of an endangered species. The statute defines “take” to mean “to harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect, or to attempt to engage in any such conduct.”

PETA argued that Miami Seaquarium’s treatment of Lolita, including the tank where she was kept (Lolita is 20 feet long; her tank is 80 feet wide at its widest point and 20 feet deep at its deepest point), sharing that tank with dolphins, and exposure to the sun, amounted to harming or harassing Lolita. The district court granted summary judgment against PETA, interpreting the words “harm” and “harass” in the ESA to be limited to actions that are fatal or potentially fatal to the animal.

The 11th Circuit disagreed that the meanings of the words “harm” and “harass” in the ESA are so limited. But the court of appeals nonetheless found that those words could not simply be read according to their dictionary definitions. The dictionary definition of “harm” includes causing hurt or injury, and PETA identified injuries that it said were caused by Lolita’s living conditions at Miami Seaquarium.

But the 11th Circuit said the context of the terms “harm” and “harass” in the ESA had to be considered to determine the degree of harm or harassment necessary to violate the statute. It applied the interpretive principle noscitur a sociis, “a word is known by the company it keeps,” and noted that the other acts listed together with “harm” and “harass” all appeared to be actions posing a “serious threat” to the animal. So “harm” and “harass” had to be read as applying only to actions posing a “serious threat” to the animal. The court of appeals found support for its conclusion in the purpose of the ESA, conservation, which it said is “is a broad means aimed at preventing a specific end: extinction,” as well as in federal agency interpretations of the terms.

Finally, the court revealed a serious concern that perhaps underlies the entire debate: if PETA’s position were accepted, any entity holding a member of an endangered species in captivity would likely be subject to ESA liability on an ongoing basis. In the face of continuous liability, it would be untenable for an aquatic park to continue to hold a killer whale in captivity.

That, I suspect, was precisely the societal change that PETA sought to accomplish: forcing aquatic parks to free orcas (or at least any orca that is a member of endangered species) from captivity. If the 11th Circuit’s decision is any indication, effectuating such a societal change is beyond the reach of impact litigation.

Florida commercial fishing industry, meet the Supreme Court of the United States. The Supreme Court has agreed to hear three cases from Florida in its current term, two of which involve commercial fishing.

In the most recently granted case, the state of Florida is set to do battle with the state of Georgia, in a dispute over Georgia’s consumption of water from two rivers that flow south through Georgia before converging and flowing through northwest Florida into the Gulf of Mexico. On November 3, 2014, the Supreme Court granted Florida’s motion for leave to file its complaint against Georgia, which is tantamount to the Supreme Court agreeing to hear the case. I will preview that case in my next post.  

This post focuses on a second case from Florida involving commercial fishing, Yates v. United States, which has been on the Supreme Court’s docket since late April. Oral argument has been set for today, November 5, 2014. While affecting fewer Floridians, the case has drawn participation from a host of amici curiae (literally, “friends of the court,” parties not directly involved with the case that want to weigh in to assist the Court in reaching its decision), indicating that it is seen as having the potential to have significant legal consequences.

Is Throwing Fish Overboard a Federal Crime?  

In Yates, the Supreme Court is reviewing the Eleventh Circuit’s interpretation of a federal statute that, at first blush, would seem to have nothing to do with commercial fishing. But the 11th Circuit concluded that it is fully applicable to commercial fishermen.

The statute, 18 U.S.C. section 1519, was passed in the wake of the Enron scandal, as part of the Sarbanes Oxley Act (SOX). Intended to avoid a repeat of the type of fraud perpetrated by Enron on investors and employees, SOX imposed more stringent accounting and financial reporting requirements for public companies, as well as other reforms.

Section 1519 was intended to close a loophole that allowed Enron to avoid punishment for its concerted efforts to destroy evidence and thwart investigation of its fraud. Accordingly, the statute makes it a crime to destroy or conceal “any record, document, or tangible object with the intent to impede, obstruct, or influence” a federal investigation. 

Other than federal prosecutors, few would have thought that Congress had John Yates in mind when it passed section 1519. Yates was the captain of a commercial fishing boat that was fishing for red grouper in the Gulf of Mexico in August 2007, when an FWC Officer boarded his vessel to inspect for compliance with fishing regulations. (At the time, Yates’ boat was fishing in federal waters, and the FWC officer had been deputized by the National Marine Fisheries Service.)

The FWC officer measured red grouper he suspected were shorter than 20 inches long, the minimum size then-current regulations allowed to be harvested. He found 72 undersized red grouper, issued a regulatory citation, and placed the undersized red grouper in wooden crates in the fish box on Yates’ boat, instructing Yates and his crew not to disturb them.

After returning to shore, the FWC officer measured the crated fish in the fish box, and found only 69 red grouper to be undersized, three fewer than before. He believed Yates and his crew had replaced the original fish with other fish. A member of Yates’ crew said Yates had instructed the crew to throw some undersized fish overboard.

As a result, prosecutors charged Yates with violating section 1519. Harvesting undersized fish is a civil regulatory violation, which could have subjected Yates only to paying a fine and having his fishing license suspended.

But because he had allegedly thrown undersized fish overboard, he faced criminal penalties under section 1519. He was eventually convicted and sentenced to spend 30 days in jail. Due to the conviction, he has been unable to find work as a captain.

The issue in the case before the Supreme Court is whether throwing fish overboard falls within the conduct made illegal by section 1519. More precisely, the issue is whether throwing fish overboard amounts to destroying or concealing a “tangible object” as that term is used in section 1519.

The 11th Circuit had little trouble concluding that it does. Its reasoning was simple. The Supreme Court has instructed that statutes should be interpreted according to the plain meaning of their terms. Unless the words are ambiguous, courts aren’t supposed to look to the intent behind the law. The term “tangible object” doesn’t appear to be ambiguous. And it literally means any physical object. A fish is a physical object. So the statute would seem to apply to Yates, even though Congress may not have intended it to apply to him.

There is no circuit split on the issue to resolve, which is the primary basis on which the Supreme Court generally agrees to hear cases. No other court of appeals is known to have confronted the issue whether a fish is a “tangible object” under section 1519. And the language of the statute seems clear enough.

So why would the Supreme Court take up the case? The answer may be that the case cries out for placing some limits on the doctrine of blindly applying federal criminal statutes, without any consideration of legislative intent, practical outcomes, or the appropriateness of making conduct a federal crime — at least in some circumstances.

The Supreme Court’s 2014 decision in Bond v. United States may provide a clue as to the Court’s thinking. In that case, the government invoked a statute dealing with chemical warfare to prosecute a woman who had tried to poison her former best friend, after discovering that she was pregnant with the woman’s husband’s child. Although the woman’s conduct fell under the literal meaning of the statute, the Supreme Court looked further. The statute’s wording may not have been ambiguous in itself, but Congressional overreach made it ambiguous in a sense:

[T]he ambiguity derives from the improbably broad reach of the key statutory definition given the term—“chemical weapon”—being defined; the deeply serious consequences of adopting such a boundless reading; and the lack of any apparent need to do so in light of the context from which the statute arose—a treaty about chemical warfare and terrorism. We conclude that, in this curious case, we can insist on a clear indication that Congress meant to reach purely local crimes, before interpreting the statute’s expansive language in a way that intrudes on the police power of the States.

Similar concerns about making it a federal crime to throw fish overboard may have motivated the Supreme Court to take up Yates. Most of the large contingent of amici curiae–including libertarian and pro-business groups, professors, criminal defense lawyers, and former House Financial Services Committee Chairman Michael Oxley, the Oxley in Sarbanes Oxley–urge the Court to go in a similar direction in Yates as it did in Bond. Many of the amicus briefs focus on what they call “overcriminalization” of conduct under federal law, and ask the Supreme Court to impose limits on the permissible reach of federal criminal law.

SOX seems like a good statute to use to advance that argument. It was controversial when passed, with some saying its requirements are too onerous, and it is highly disliked by Wall Street and others in the business community.   

But the question remains whether the majority of the Supreme Court will consider prosecuting a commercial fisherman under SOX a “curious” enough case to justify looking beyond the unambiguous words of the statute. If so, the bigger issue will be how the Court draws the line as to when courts may look behing the plain meaning of statutory terms when determining the scope of conduct made illegal by a federal criminal statute.    

Avenues of communication have dramatically expanded over the past few decades, with email, social media, the proliferation of mobile phones, and text messaging making it easier and easier to make contact with the vast majority of people. Whether they want to be in contact with us or not.

Rules for service of process in most jurisdictions were written long before these developments. It remains the rule that when serving process (notifying a defendant that a lawsuit has been filed against him/her/it), personal service (hand delivery) is required. And that requirement is not likely to go away anytime soon, for the simple reason that there is no more effective way to ensure that someone is informed that he/she/it is being sued than to deliver the lawsuit into that person’s hands.

But sometimes a process server can’t find the defendant for personal service. If the plaintiff has made a diligent search for the defendant and still can’t find him/her/it, the rules in most jurisdictions allow for substitute service of process, where service of process can be transmitted to the defendant by some means other than in-person delivery.

In the realm of substitute service of process, the reality that so many forms of communication are now available is beginning to have an impact. Despite that rules of court have not changed, courts are now taking into account the availability of modern forms of communication when considering both whether a plaintiff has made sufficient efforts to locate the defendant before resorting to substitute service of process, and the means that should be used to deliver the lawsuit to the defendant when substitute service of process is appropriate.

Coastal Capital Venture, LLC v. Integrity Staffing Solutions, Inc., a recent decision of Florida’s Second District Court of Appeal (2nd DCA) in Lakeland, Florida, illustrates how modern forms of communication have impacted the search a plaintiff must make before resorting to substitute service of process. In that case (in which Bushell Appellate Law, P.A. represents the defendants/appellants) the plaintiff obtained a default judgment after using substitute service of process by mailing a copy of the lawsuit to the Secretary of State.

The plaintiff contended that substitute service of process was appropriate, because it had conducted a diligent search. It had tried multiple times to serve the defendants at a condominium they owned, and had hired an investigator to conduct a “skip trace,” which did not uncover another address for them.

But the defendants/appellant argued, and the 2nd DCA agreed, that the search was inadequate because the plaintiff had failed to look to the most obvious source to find out where the defendants could be served. Here’s where modern communication came into play: the plaintiff’s president and one of the defendants (who was the principal of the two corporate defendants and the husband of the other individual defendant) had been exchanging text messages during the time period when the plaintiff was trying to serve process. And despite text messages from the defendant saying he was in California, the plaintiff didn’t ask the defendant where he could be located and served with process.

Coastal Capital stands as a lesson that if a plaintiff has a defendant’s cellphone number (as is frequently true in commercial and family litigation and some other types of disputes), the plaintiff must try calling and texting the defendant before resorting to substitute service. And there is no reason to think that the result would have been different if the plaintiff had had the ability to contact the defendant via social media rather than text messaging.      

On the other side of the coin are some recent decisions on how substitute service should be carried out. The goal of service of process, after all, is to make sure the defendant has notice of the lawsuit. So courts have understandably begun recognizing that communication via social media can be an effective way to accomplish substitute service of process. For example, a New York family court judge recently issued an order allowing service of process to be made via Facebook (in conjunction with service by regular mail to the last known physical address) after attempts to locate the defendant at her last known physical address were unsuccesful.

And a few federal court decisions have also authorized substitute service of process via email and social media, but so far they have been confined to substitute service on international defendants. One such decision authorized substitute service of process via Facebook in conjunction with email, while another authorized substitute service via Facebook and Linkedin in conjunction with email. 

Service of process rules may not have changed as means of communication have expanded. But as court are increasingly recognizing, newer means of communication should not be ignored when deciding whether substitute service is appropriate, or in deciding the best way to effectuate substitute service when it is appropriate. 

Last week, two federal courts of appeals–the 4th Circuit and D.C. Circuit–considered whether the IRS reasonably interpreted the Affordable Care Act as allowing the IRS to give tax credits to taxpayers that purchase health insurance through an exchange set up by the federal government. Both courts of appeals considered the same statutory text, the same legislative history, the same regulation, and the same arguments. And they applied the same legal principles.

Yet they reached opposite results. In King v. Burwell, the 4th Circuit found the IRS’s interpretation reasonable. In Halwig v. Burwell, the DC Circuit found the IRS’s interpretation unreasonable. How?

Given that the issue was the propriety of an IRS regulation, both courts proceeded under the framework of Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984). That analysis requires the court to determine whether the statute states an unambiguous direction on the issue addressed by the regulation. If it does, then the court must determine whether the regulation is consistent with the statutory command. If the statute is ambiguous and leaves room for agency interpretation, courts defer to the agency’s regulation so long as it is reasonable.

Both courts focused on the language of the statutory provisions. The difference between the two courts’ conclusions turned on disagreement over whether 26 U.S.C. section 36B(b)(2), which establishes the amount of premium assistance that is to be provided, unambiguously directs that only taxpayers who purchase coverage through a state-run plan receive premium assistance. More specifically, the courts of appeals disagreed about the impact of surrounding statutory provisions on the proper interpretation of section 36B.

The ACA Provisions at Issue    

Under section 36B(a), an “applicable taxpayer” (defined as a taxpayers whose income is between 100% and 400% of the poverty line) is entitled to a tax credit “equal to the premium assistance credit amount of the taxpayer…” The term “premium assistance credit amount” is defined in section 36B(b)(1) as the sum of monthly “premium assistance amounts,” as defined in section 36B(b)(2).  

The challenge to the IRS’s regulation allowing tax credits for taxpayers purchasing insurance on a federally established exchange was that section 36B(b)(2), in conjunction with section 36B(c)(2), defines the “premium assistance amount” as calculated solely based on premiums for coverage purchased through a state-established exchange. In defining “premium assistance amount,” Section 36B(b)(2) states that       

The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of—

(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 [1] of the Patient Protection and Affordable Care Act, or

(B) the excess (if any) of—

(i) the adjusted monthly premium for such month for the applicable second lowest cost silver plan with respect to the taxpayer, over

(ii) an amount equal to 1/12 of the product of the applicable percentage and the taxpayer’s household income for the taxable year.

Section 36B(c)(2), in turn, defines “coverage month” as any month in which “as of the first day of such month the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act…” 

According to the plaintiffs, these provisions unambiguously mean that a taxpayer can have no “coverage months” unless he or she is enrolled in a state-established exchange. So the statute does not provide any subsidy amount for taxpayers who are enrolled in exchanges established by the federal government in lieu of a state.

Reading the Provisions in Context

Both courts recognized that these statutory provisions cannot be read in isolation, but rather must be understood in the context of the statute as a whole. So both proceeded to analyze sections 1311 and 1321 of the ACA, which deal with establishing exchanges by the state and federal government.

Section 1311, read literally, requires all states to establish exchanges. It defines “Exchange” as “a governmental agency or nonprofit entity that is established by a State…” But section 1321 says that states may “elect” to set up exchanges, thus making it an option rather than a mandate. And if a state does not elect to itself establish the exchange, section 1321 directs the federal government to “establish and operate such Exchange within the State…” 

The two courts differed on how to understand the command that the federal government set up “such Exchange within the State.” Both agreed that it means that a federally established exchange is the functional equivalent of a state-established exchange and that a federal exchange must be understood as an exchange established under the authority of section 1311. But the courts disagreed about whether that makes it reasonable to understand the phrase “Exchange established by the State under section 1311” as including a federal exchange.

According to the DC Circuit, “section 1321 creates equivalence between state and federal Exchanges in two respects: in terms of what they are and the statutory authority under which they are established.” But it does not change the identity of who is establishing the exchange. The DC Circuit understood Section 36B(b)(2)(a) to have 3 elements: “(1) an Exchange (2) established by the State (3) under section 1311.” And, it explained, the only reasonable way to understand the statute is that a federal exchange is not an exchange “established by the State.” So the statute unambiguously sets the subsidy amount for coverage purchased through a federal exchange at zero. As such, the DC Circuit found the IRS regulation contravened the statute and could not stand.

According to the 4th Circuit, on the other hand, it is at least as reasonable to understand the interplay of sections 1311 and 1321 as requiring the federal government to set up an exchange essentially on behalf of the state when the state does not. So a federal exchange can reasonably be understood to be encompassed within the provisions defining premium assistance amounts. Because such an interpretation was reasonable, even if not the only plausible interpretation, the statutory provisions were ambiguous. And because they were ambiguous, the IRS’s interpretation of the statute was permissible, and the courts required to defer to it.

In short, two federal courts of appeals reached opposite conclusions about the propriety of the IRS’s regulation because they disagreed about whether the statutory provisions, read in context, are ambiguous. And perhaps that should not be surprising, given the complexity of the ACA. Indeed, the concurring and dissenting opinions reflect that there was disagreement even among the judges on each panel about how to interpret the statute.

Update (09-04-14): At the government’s request, the D.C. Circuit has voted to rehear the Halwig case en banc, and vacated the ruling of the panel. Grants of rehearing en banc are rare, but it’s not all that surprising that review by the entire court would be granted in this case, given the magnitude of the case and that the decision conflicted with a decision of another court of appeals. But even if the en banc court reaches the same result as the 4th Circuit, I would still expect the Supreme Court to eventually take up the issue. Although in run-of-the-mill cases, the Supreme Court is more likely to grant certiorari if there is circuit split, the Court can review any case it chooses, so long as there is a federal issue involved. And it has shown a penchant for taking on cases involving high profile, controversial issues of national import, whether there is a circuit split or not.  

With the collapse of multiple large scale Ponzi schemes in recent years, Federal courts in Florida and elsewhere have been wrestling with so-called “clawback” suits. The way Ponzi schemes work is that the schemers induce investors to give them money that is supposed to be invested, usually with high returns promised.

But because the promised returns are unsustainable and the schemers syphon off investors’ funds for their own personal use, the schemers cannot pay the promised returns to investors when they seek to liquidate their investments. Thus, the Ponzi schemers recruit additional investors, and instead of investing the funds received, they use the funds to pay the earlier investors the principal and earnings promised.

Typically, Ponzi schemes collapse and are discovered when the new money coming in is insufficient to pay the amount promised to withdrawing earlier investors. Investors that withdraw early often see the return of the principal they invested and also receive “earnings” on that principal. When a Ponzi scheme collapses, there are usually insufficient funds to return the principal given to the Ponzi schemers by the remaining investors, much less the promised earnings. 

In a clawback suit, the bankruptcy trustee or receiver appointed to oversee the wind-up of an entity involved in a Ponzi scheme seeks to recover funds paid to the earlier investors in order to achieve a more equitable distribution of funds as between earlier and later investors. The theory of the suits is that the transfers to the earlier investors were fraudulent transfers, which may be recovered under fraudulent transfer statutes, such the Florida Uniform Fraudulent Transfer Act (FUFTA), Florida Statutes §726.101 et seq.

But Ponzi scheme clawback suits aren’t the typical fraudulent transfer suit. In Wiand v. Lee (decided June 2, 2014), the Eleventh Circuit addressed the viability of such suits under FUFTA, and resoundingly endorsed them. 

The clawback suit in Wiand resulted from the collapse of a Ponzi scheme run by Arthur Nadel, in which he induced investments into certain hedge funds. Wiand was the receiver for those funds. Lee was an early investor that had withdrawn its investment and was paid back its principal, plus profits. Wiand sought return of the profits.

The 11th Circuit held that a transfer made in furtherance of a Ponzi scheme satisfies the requirements of the “actual fraud” provision of FUFTA. Under the actual fraud provision, a transfer is fraudulent when the debtor made the transfer “with actual intent to hinder, delay, or defraud any creditor of the debtor…” Courts have interpreted that provision to mean there must be “[1] a creditor to be defrauded, [2] a debtor intending fraud, and [3] a conveyance of property which is applicable by law to the payment of the debt due.”

Although the second element, fraudulent intent, is usually determined based on “badges of fraud,” the 11th Circuit held that proof that a transfer was made in furtherance of a Ponzi scheme is sufficient to show fraudulent intent without the need to consider the “badges of fraud.”

The more difficult questions were who was the creditor and debtor and whether the funds received by Lee were “property of the debtor,” as required by FUFTA to recover them. Money from the hedge funds was transferred to Lee by Nadel.

The court of appeals explained that the hedge funds were the creditors, because when Nadel illegally transferred money from them, he became a debtor to them for the funds he illegally removed. It then turned to the issue of whether the funds were “property of the debtor.”

Although “property of the debtor” would appear to mean Nadel’s property given that he was the debtor, the 11th Circuit held otherwise. According to the court, under Florida law, “property of the debtor” means “property which is applicable by law to the payment of the debt due.” Because the funds removed created the debt owed by Nadel to the hedge funds, the funds he removed were “applicable by law to the payment of the debt due.”   

Addressing the receiver’s cross-appeal, the 11th Circuit held that pre-judgment interest should be awarded in FUFTA cases as a matter of course, except in limited circumstances where specific equitable factors counsel otherwise. The denial of prejudgment interest was reversed, with a remand for determination of whether any recognized equitable considerations justified the denial of prejudgment interest. 

U.S. federal courts are characteristically wary of overstepping their bounds when adjudicating cases involving foreign governments or issues and events occuring in foreign countries. That can pose a challenge for U.S. companies engaged in international business, especially with foreign governments. When such business dealings go sour, the ability to enforce contract rights in U.S. courts can be critical.

Recent decisions of the Eleventh Circuit and other federal courts of appeals should give comfort to U.S. companies that do business with foreign governments that they can enforce their contract rights in U.S. courts. Lawyers can help keep their clients’ disputes in U.S. courts by ensuring that their contracts include clauses protecting the right to do so.

The Eleventh Circuit’s recent decision in GDG Acquisitions, LLC v. Government of Belize, decided April 22, 2014, illustrates that point. The dispute arose from a deal in which International Telecommunications, Ltd. (Intelco) leased telecommunications hardware to the government of Belize.

The Facts

Although Intelco was actually a Belizean company, the deal was negotiated in Florida and Washington, D.C. It was financed by a U.S. bank located in Miami. The deal closing was in Miami, where the government of Belize also took possession of the equipment. A month before suit was filed, Intelco assigned its rights against Belize to GDG, a U.S. company owned by the founder and director of Intelco.

The lease agreement included (1) a choice of law clause specifying that Florida law controlled; (2) a choice of forum clause, in which the government of Belize “submit[ted] to the exclusive jurisdiction of” the federal and state courts in Florida and consented to suit in those courts; and (3) a clause in which the government of Belize waived objections to Florida forums and claims that such forums were inconvenient.

After the government of Belize neither returned the equipment at the end of the lease term nor continued making lease payments, GDG filed suit in the Southern District of Florida. In response, Belize contended that the minister who signed the lease agreement did not have authority under Belizean law to bind the government. It moved to dismiss the complaint on the ground that the suit should be adjudicated in Belize.

The District Court dismissed the suit based on the alternative grounds of forum non conveniens and the doctrine of international comity. On appeal, the Eleventh Circuit disagreed.

Forum Selection Clauses Control the Forum Non Conveniens Analysis

Regarding forum non conveniens, the Eleventh Circuit found fault in the district court’s failure to give sufficient weight to the forum selection clause in its analysis. Under the U.S. Supreme Court’s recent decision in Atlantic Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Tex., 134 S. Ct. 568 (2013), a forum selection clause, if enforceable, “carries near determinative weight” in evaluating whether to dismiss a suit for forum non conveniens. 

The Eleventh Circuit left it for the district court to decide in the first instance whether the forum selection clause was enforceable, as well as whether the clause is permissible or mandatory, i.e., whether the clause requires that litigation take place in Florida, or merely permits litigation in Florida but allows suit to be brought in other jurisdictions as well. The court of appeals made clear, though, that if the clause is enforceable and mandatory, it will “control except in unusual cases.”

A valid and mandatory forum selection clause will trump other forum non conveniens considerations such as where it would be more expeditious to litigate based on where witnesses and evidence are located. Even if litigation in another forum may be more convenient, enforcing forum selection clauses in international transactions is paramount:

This approach is consonant with the Supreme Court’s longstanding recognition “that privately bargained-for forum-selection clauses [are] a necessary component of the expanded international commercial relationships of our time.” Estate of Myhra v. Royal Caribbean Cruises, Ltd., 695 F.3d 1233, 1240 (11th Cir. 2012) 

International Comity is Applied Sparingly When a Foreign Court Has Not Already Exercised Jurisdiction Over the Dispute

The Eleventh Circuit also rejected the argument that principles of international comity supported deferring to Belizean courts to resolve the dispute. There are two kinds of comity, the court explained.

In the first kind, U.S. courts consider whether to respect or enforce a judgment by a court in another nation. In such cases, comity favors generally recognizing and enforcing such judgments, so long as the foreign court was competent and the judgment was neither fraudulent nor violative of “American public policy notions of decency and justice.” 

But it is more rare for U.S. courts to apply comity “prospectively,” i.e., to decline to hear a case when there has been no adjudication, and no litigation is pending, in a foreign jurisdiction. To apply comity prospectively, courts weigh the interests of the United States and the foreign nation in using a foreign forum as well as whether the foreign forum is adequate.

Comity rarely wins the day in that calculus. In fact, the Eleventh Circuit noted that only once has it ever “sustained the dismissal of a lawsuit” based on comity in such circumstances. That case involved a special situation where the U.S. government had reached an international agreement with the German government to resolve all Holocaust era claims through a private foundation set up to resolve all such claims. Due to that agreement, both the U.S. government and the foreign government had a strong interest in having the case resolved in a foreign forum.

But that was an unusual situation that does not support applying comity in a “garden variety” commercial dispute. That the government of Belize may now, as a litigant, claim to have a strong interest in litigating in its own courts does not make international comity appropriate.

Litigants Against Foreign Governments Have Recently Fared Well in the 2nd Circuit as Well

This favorable outcome for a private business in a commercial dispute against a foreign government comes on the heels of a successful effort to hold the government of Argentina accountable for defaulted bonds in the Second Circuit. NML Capital, Ltd. v. Republic of Argentina, like GDG, involved a forum selection clause and choice of law clause making litigation proper in the U.S. (New York) and the law of a U.S. state (New York) controlling.

The issue was not one of forum but of the power of a U.S. court to enforce judgments against a foreign sovereign. Thedistrict court imposed an injunction requiring Argentina to pay its debts to the holders of the defaulted bonds in parity with its payments to holders of later issued bonds as required by contract, despite that the Argentinian legislature had passed a law forbidding the government from making payments on the earlier bonds. 

On appeal, the Second Circuit rejected Argentina’s argument that the injunction violated the Foreign Sovereign Immunities Act, under which U.S. courts cannot exercise control over the property of a foreign state. Although Argentina contended that the injunction effectively exercises control over its funds by requiring it to pay money to the bondholders, the Second Circuit held that the injunction was permissible. The determinative factor was that the injunction did not technically force Argentina to pay money to anyone — it merely required that if Argentina paid money to one group, it must also pay the other group on par. Argentina has filed a petition for certiorari asking the Supreme Court of the United States to overturn that ruling.


No doubt litigation arising from international transactions will continue to pose special challenges for litigants seeking relief in U.S. courts, particularly when foreign governments are involved. But, so long as international agreements are drafted so as to preserve the ability to litigate in U.S. courts, these cases illustrate that those obstacles can be overcome.  


Courts’ power to do justice in civil cases depends on their ability to enforce their judgments, i.e., to compel parties to pay up when they are found liable. But courts are also wary of extending their power outside of their own territory, and thus encroaching on the power of courts in other states and countries.   

In a pair of March 2014 decisions, the latter consideration prevailed, as a Florida appellate court narrowly interpreted the power of Florida courts to exercise jurisdiction over assets located outside of Florida.

In the first case, Sargeant v. Al-Saleh, decided March 5, 2014, the Fourth District Court of Appeal (based in West Palm Beach) reversed an order of the 15th Judicial Circuit, which had required that stock certificates evidencing ownership of corporations located abroad be turned over to satisfy a judgment.

The judgment in Sargeant resulted from litigation over a failed oil shipping deal, in which a jury awarded $28.8 million in favor of Mohammed Al-Saleh (reportedly the brother-in-law of the king of Jordan, according to the Palm Beach Post). To satisfy the judgment, Al-Saleh sought to compel the defendants, businessmen Harry Sargeant III and Mustafa Abu-Naba’a, to turn over stock certificates for corporations they owned. The defendants countered that Florida courts do not have jurisdiction to order the turnover of the stock certificates to the corporations they own, because they are located in the Bahamas, Jordan, the Isle of Man, and the Dominican Republic.

On appeal, the 4th DCA agreed. Finding no controlling Florida cases on point, the court was swayed by policy considerations, which it said favor letting courts in foreign jurisdictions determine rights to property located in those jurisdictions.

UPDATE: The Sargeant case has garnered considerable attention in the legal community and the media. Paul Sullivan of the New York Times has a great write-up about the potential impacts of the decision in his May 9, 2014 column, with insights and reactions from several Florida lawyers, including me. The article also notes that, unsurprisingly, the appellees (who were denied access to the defendants’ foreign assets as a result of the decision on appeal) plan to ask the Supreme Court of Florida to hear the case. Whether the Court will agree to take up the case is anyone’s guess.  

In the second case, Edelsten v. Mawardi, decided March 19, 2014, the court dealt with a slightly different attempt to take control of assets located outside of Florida. The plaintiff in that case sued a Florida parent company and its Ohio subsidiary in connection with a failed business deal involving an apartment complex in Dayton, Ohio, which was owned by the Ohio subsidiary. A circuit court appointed a receiver to manage the apartment complex until the dispute was resolved. The 4th DCA reversed.

Just as the court had held that Florida courts cannot order the transfer of foreign stock certificates, the 4th DCA held that Florida courts are not empowered to exercise jurisdiction to appoint a receiver over a corporation located in another state. It is true that the circuit court was empowered to appoint a receiver over the Florida parent corporation, but that does not mean that it can exercise control over an Ohio subsidiary and its property in Ohio. Showing wariness of trampling on another jurisdiction, the 4th DCA was particularly troubled by the fact that appointing a Florida resident as a receiver over an Ohio corporation was in direct contravention of Ohio law, under which only an Ohio resident may be appointed as a receiver over an Ohio corporation. The court, thus, remanded to the circuit court to terminate the appointment of the receiver over the Ohio corporation and the apartment complex. 

These decisions are sure to have a significant impact on litigation in Florida. With so much interstate and international business taking place in Florida, litigation involving out of state and foreign corporations and assets located outside of Florida is far from uncommon.

But while the court’s deference to other jurisdictions has resulted in limiting the power of Florida courts, the decisions do not mean that out of state and foreign assets can never be reached. They do mean, however, that after obtaining a judgment, litigants may need to resort to courts in other jurisdictions to enforce them.   

Is a Facebook friendship really a friendship? Can judges be “friends” with attorneys on Facebook? Florida judges and legal ethicists have been debating these questions for more than four years. Florida District Courts of Appeal have now begun to offer their opinions, as Facebook friending has emerged as an issue in motions to recuse trial court judges. But definitive answers remain illusory. 

Back in 2009, the Judicial Ethics Advisory Committee of the Florida Bar thought it had resolved the issue when it released an ethics opinion weighing in on these issues. According to the JEAC’s opinion, a judge is not permitted to be Facebook friends with a lawyer who may appear before him or her.  

But more than three afters that opinion was released, at an educational program discussing this topic, a justice of the Florida Supreme Court reminded appellate judges and lawyers that the JEAC’s opinion is not necessarily authoritative. The JEAC is an advisory committee, the justice pointed out, and the Supreme Court of Florida is the ultimate arbiter of legal and judicial ethics in Florida. 

During the same discussion, other Florida appellate court judges offered varying viewpoints about the propriety of Facebook friending. Judges are permitted to be friends with lawyers in real life, one pointed out, so why can’t they also be Facebook friends with lawyers? Another took the view that because Facebook is so public, allowing a lawyer to list a judge as his/her Facebook friend might create a forum for a lawyer to try to woo clients by giving the impression of having special influence over the judge presiding over their cases, or might cause opposing parties to fear that the judge might be biased in favor of his/her “friend.”

The 4th DCA Frowns on Facebook Friendship

Now Facebook friendship has become an issue in litigation. In September 2012, the Fourth District Court of Appeal in West Palm Beach became the first Florida appellate court to address Facebook friendship between judges and lawyers in Domville v. State, 103 So. 3d 184 (Fla. 4th DCA 2012). Agreeing with the reasoning of the JEAC’s opinion, the 4th DCA held that a judge was required to recuse himself from a case in which the prosecutor was his Facebook friend.

It may be that the prosecutor’s Facebook friendship with the judge entailed no special influence over the judge whatsoever, the 4th DCA explained. But the existence of the Facebook friendship could “create in a reasonably prudent person a well-founded fear of not receiving a fair and impartial trial” and that fear is sufficient to require the judge’s recusal. The Supreme Court of Florida declined to hear the appeal. 

The 5th DCA Disagrees 

On January 24, 2014, in Chace v. Loisel, the Fifth District Court of Appeal in Daytona Beach became the second Florida District Court of Appeal to weigh in. Making clear that the issue is far from settled, the 5th DCA called into question the 4th DCA’s understanding of the implication of Facebook friendship:

 We have serious reservations about the court’s rationale in Domville. The word “friend” on Facebook is a term of art. A number of words or phrases could more aptly describe the concept, including acquaintance and, sometimes, virtual stranger. A Facebook friendship does not necessarily signify the existence of a close relationship. Other than the public nature of the internet, there is no difference between a Facebook “friend” and any other friendship a judge might have. Domville’s logic would require disqualification in cases involving an acquaintance of a judge. Particularly in smaller counties, where everyone in the legal community knows each other, this requirement is unworkable and unnecessary.

To require judges to step aside from hearing cases based on Facebook friendships, the 5th DCA explained, is to misunderstand “the true nature of a Facebook friendship,” and doing so “casts a large net in an effort to catch a minnow.”

Both Courts Agree That Some Facebook Friending is Out of Bounds

Despite its criticism of Domville, the 5th DCA held that the trial court in Chace should have followed the 4th DCA’s guidance and recused herself. Why? 

For two reasons. First, at the time that the motion to recuse was made, Domville was the only decision of a Florida appellate court on the issue of Facebook friendship. When there is only one appellate court decision on an issue, every trial court in the state is required to apply the law as interpreted in that decision.  

Second, the Facebook activity of the judge in Chace was worse and more likely to result in bias than merely being Facebook friends with one of the parties’ lawyers. The judge in Chace actually sent a Facebook friend request to one of the parties, i.e., Ms. Chace, while her divorce litigation was pending before the judge. On her attorney’s advice, Ms. Chace didn’t accept the request, and feared the judge might hold it against her.

The 5th DCA found the judge’s conduct of reaching out to a litigant with a case pending before her more troubling than a mere Facebook friendship between a judge and an attorney. It regarded Ms. Chace’s fear of bias as well founded, and ordered the judge to recuse herself.

An Open Question

The reality is that most judges are former litigators, and most former litigators have friends — on Facebook and in real life — who are litigators. But it is also a reality that even without Facebook friendships, many litigants are suspicious of the relationships between judges and lawyers.

It is unlikely that judges will ever be banned from having real life friendships with lawyers. At least in the short term, judges in Broward, Palm Beach, Martin, St. Lucie, Indian River, and Okeechobee Counties cannot be Facebook friends with lawyers appearing before them. It remains an open question whether they, and judges throughout the state, will be able to maintain Facebook friendships with lawyers in the long run.   

It’s not uncommon to see pro se litigants butt heads with trial judges. It’s less common to see attorneys doing so. Knowing that they will likely appear before the same judge in the future, most lawyers take great pains to put aside personal grievances in the interest of protecting their clients, current and future.

One Tampa lawyer seems to have gotten under the skin of 13th Judicial Circuit Court Judge Tracy Sheehan. And not just any lawyer, but the supervising chief of the Juvenile Division of the Public Defender’s Office for that Circuit. For her part, Judge Sheehan presides over the Juvenile Division of the 13th Judicial Circuit Court.

She went so far as to recuse herself from all cases in which the defendant is represented by an assistant public defender under the lawyer’s supervision. So the presiding judge of the Juvenile Division essentially disqualified herself from hearing any case in which a juvenile is represented by the Public Defender’s office–which is true in most juvenile cases. Can she do that? 

She can. In its decision in Holt v. Sheehan (filed October 11, 2013), the Second District Court of Appeal of Florida had no problem in principle with Judge Sheehan recusing herself from this broad swath of cases, even though it meant that either the chief judge would need to assign a different judge to handle juvenile cases, or the Public Defender would need to assign a different attorney to supervise the assistant public defenders who handle such cases.

In fact, the court noted, it is not uncommon for a judge to recuse herself from all cases in which a particular attorney is involved. That typically occurs in a different type of situation, however, such as where judicial ethics require a judge to recuse herself from all cases in which her parent, child, spouse, or other close relative represents one of the parties.

But the Second District did not approve of the manner in which Judge Sheehan executed her decision to recuse. The judge should have coordinated with the Chief Judge and Public Defender, according to the court. And she should not have filed a “blanket disqualification order” in a particular case, instead handling the issue through internal court procedures.

Most troubling to the court of appeal, though, was the contents of the judge’s order, in which she publicly disparaged the attorney, call her

incompetent, untrustworthy and extremely dilatory in matters related to her legal duties, based upon Attorney X’s actions and inactions in this Division over the past month and based upon Attorney X’s ten year tenure at the Courthouse which has developed her widespread reputation as an inept supervisor and mean spirited individual who publically berates her underlings as “stupid” and “idiotic.”

No doubt the lawyer in question was not pleased to see these comments memorialized in the public record. 

And the 2nd DCA was not happy about the judge’s departure from the measured tones in which judges usually express themselves from the bench. Indeed, the 2nd DCA judges commented that they had “never seen an order comparable to this one filed in a specific court file.” They suggested that Judge Sheehan’s decision “has the flavor of one made in a moment of frustration and exhaustion” and that she re-evaluate it after additional deliberation.

The bottom line for judges is this: They can recuse themselves from all cases in which a particular attorney is involved, and they should do so if they believe their ability to be impartial could be reasonably questioned. But no matter how strong a judge’s feelings may be, blanket recusals are an internal matter of court procedure, and publicly airing personal feelings and opinions should be avoided.

For lawyers, the bottom line remains the same: Don’t butt heads with the judges who preside over your clients’ cases. The Second District stepped in this time, but there’s no guarantee that they will jump in to save your reputation.

People make mistakes. Even lawyers. Even judges. We are all human after all, and to be human is to be fallible. In the pressure-packed environment of a trial or hearing, the probability that a mistake will be made is even greater.

Part of the job of an appellate lawyer is to comb through the record of what happened in the trial court, and with the benefit of a fresh perspective, find the errors, and explain to the appellate court what errors the trial judge made. But that is not the end of the story. Not even close. If it was, one would expect every appeal to result in reversal. The reality is otherwise.

Why? There are a host of reasons–ranging from the failure of the side that lost to preserve the issue (by making the argument to the trial judge) to the deference given to the trial judge in making certain decisions that he or she is in a better position to make–and there isn’t nearly enough space here to get into all of them.

The Harmless Error Doctrine

One of the most significant factors–at least when the decision being appealed was reached after a full-blown trial–is the doctrine of harmless error. It has been the subject of recent debate, and the Supreme Court of Florida is poised to set down the definitive word on the issue some time after it resumes its opinion cycle after the summer hiatus.

Harmless error, in a nutshell, is the idea that sometimes a trial judge’s ruling, even though incorrect, was too insignificant in the context of all of the trial evidence the jury saw to have impacted their decision. The doctrine exists because the law recognizes that trials are a tremendous ordeal and after so much effort by the parties, the trial judge, and the jury members, the results should not lightly be tossed aside.

After the two sides and the judge have spent so much time preparing for and conducting the trial, and the members of the jury have sacrificed their time to listen and deliberate and reach a decision, appellate courts are understandably hesitant to undo the result. On the other hand, the law is the law, and litigants have the right and expectation that the law will be applied correctly in their cases, whether or not that may cause inconvenience.

“Harmless error” is where appellate courts draw the line. In Florida, there is actually a statute that prohibits courts from reversing unless “in the opinion of the court to which application is made, after an examination of the entire case it shall appear that the error complained of has resulted in a miscarriage of justice.”

Drawing Lines 

But it is a lot easier to say that an error will not result in reversal when it is harmless than it is to figure out when an error was, in fact, harmless. How does the court know whether there has been “a miscarriage of justice”? Judges do not have the option of calling the jurors and asking them whether their decision would have been different if they had not heard testimony they should not have been allowed to hear, or if they had seen evidence they should have been allowed to see.

So appellate courts have created tests to be used as a substitute. Most recently, the Fourth District Court of Appeal of Florida (4th DCA), sitting en banc, wrestled with what test to use in its late 2011 decision in Special v. Baux, 79 So. 3d 755 (Fla. 4th DCA 2011) (en banc).

The court began by observing that prior decisions of the Supreme Court of Florida and District Courts of Appeal of Florida reflect two ways of looking at whether there was a “miscarriage of justice.”

One approach asks whether the result would have been the same if the error had not been made. That is, looking at all of the evidence, if the jury had seen what it was supposed to see, would it have reached the same decision anyway? If so, the error is harmless. If not, a new trial is required. The 4th DCA called this test a results-oriented approach.

The second approach looked at whether the error had “an adverse effect upon the jury’s verdict.” In other words it asks whether the error “contributed to the verdict.” Was the wrongfully admitted or excluded evidence something that played a part in the jury’s decision? The 4th DCA called this approach an “effect on the fact-finder” test.

Prior 4th DCA decisions had used the results-oriented approach, and every other District Court of Appeal had also adopted some variation of the results-oriented test. Nonetheless, in Special, the 4th DCA declared that approach to be inconsistent with Florida Supreme Court precedent, and that it improperly requires the appellate court to weigh the evidence, which is not the role of an appellate court.

In its place, the Fourth DCA became the first Florida District Court of Appeal to expressly adopt the “effect on the fact-finder approach.” The rule in civil cases, it said, should be that an error is harmless only if it is more likely than not that the error did not contribute to the verdict.

Are There Really Two Approaches? 

I am not convinced that the case law reflects two different approaches so much as two ways of describing the same approach. In my view, when prior cases describe harmless in two different ways, they are doing nothing more than describing the same coin from two opposite sides. Language in prior cases describing the harmless error test as asking whether the error “affected the verdict” may be stating nothing more than the other side of the question of of whether the verdict (i.e., the “result”) would have been different if not for the error.

If they are two approaches, the only difference between the two tests that I can think of is that under the “effect on the fact-finder” approach, an error can be harmful if it is something that the jury likely would have considered in the jury roorm, even if without the error, the jury would have reached exactly the same verdict relying on the other evidence in the case. 

A Better Test?  

I have a hard time understanding why the 4th DCA unanimously endorsed the “effect on the fact-finder” approach. How can there ever be “a miscarriage of justice” when the jury would have reached the same verdict? 

I understand the 4th DCA’s concerns about appellate courts re-weighing the evidence. The first thing any appellate attorney learns is that one should never make an argument that asks the appeals court to weigh the evidence to conclude that the jury reached the wrong verdict.

But examining the trial evidence seems unavoidable in performing a harmless error analysis regardless of the approach. That is particularly true in Florida, where the harmless error statute requires that harmless error be determined based on “an examination of the entire case.” Determining whether the error likely had an effect on the jury does not avoid that problem because one cannot determine how important evidence is without looking at its context.

I also understand the 4th DCA’s goal of enhancing predictability by creating a test that is intended to be less vague and to leave less room for arbitrariness. But I do not see how speculating about whether the jury considered particular evidence is any less vague than speculating about what result the jury would have reached if not for the error.

The 4th DCA also seems to have been concerned that its prior harmless error test was too stringent, i.e., that it made it too difficult to obtain a reversal. I have not done a statistical analysis, but I read almost every opinion issued by every DCA and the Florida Supreme Court. In my observation, which is informed but admittedly unscientific, the 4th DCA had as high a reversal rate before Special as any DCA in Florida.

So however its test was nominally described, I am not sure it was any more stringent in practice than the standards used by other DCAs. In my estimation, the 4th DCA’s ultimate formulation of the test, that an error will only be found to be harmless when the beneficiary of the error shows that is “more likely than not that the error did not contribute to the judgment” throws the balance too far in favor of reversal.

Under this test, I would expect that very few errors will be found to be harmless, and reversal will become increasingly common. As I said at the outset, there are errors in every trial. There is some evidence of this happening already. No doubt that is a good thing for parties that lose at trial. For parties that obtain favorable jury verdicts, not so much.

We Should Not Have to Wait Long for Clarification 

The real impact of the rule set down in Special has yet to be determined. The 4th DCA certified to the Supreme Court of Florida the question of what harmless error standard should be used in civil cases as a question of great public importance and the Supreme Court has taken up the issue. Briefing is complete, and the Supreme Court heard oral argument in April. It is now ripe for a ruling.

So we should not have too wait long to know how likely it will be that future mistakes, which will surely be made, will result in a new trial.