05-0243 SUSAN FIXEL, INC. V. ROSENTHAL

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State: Florida

Court: Florida Third District Court

Docket No: 05-0243 SUSAN FIXEL, INC. V. ROSENTHAL

Case Date: 02/01/2006

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IN THE DISTRICT COURT OF APPEAL OF FLORIDA THIRD DISTRICT JANUARY TERM, 2006

SUSAN FIXEL, INC., Appellant, vs. ROSENTHAL & ROSENTHAL, INC., etc., Appellee.

** ** ** ** ** ** LOWER TRIBUNAL NO. 00-26279 CASE NO. 3D05-243

Opinion filed February 1, 2006. An Appeal from the Circuit Court for Miami-Dade County, Peter R. Lopez, Judge. Adorno & Yoss and Jan Douglas Atlas and Samantha Tesser Haimo and Jeffrey A. Backman (Fort Lauderdale), for appellant. Alan K. Fertel and H. Eugene Lindsey and Catherine Shannon Christie and Milton M. Ferrell, for appellee.

Before GREEN, RAMIREZ, and ROTHENBERG, JJ.

ROTHENBERG, Judge. Susan Fixel, Inc. (Fixel, Inc.) appeals various rulings by the trial court, including a directed verdict entered on its

claims against Rosenthal & Rosenthal Inc. (R&R) for breach of fiduciary duty and negligent misrepresentation, and a summary judgment entered against its claim for fraud in the inducement. We affirm. Fixel, Inc. was in the business of selling apparel. In

1997, it entered into an agreement with R&R, whereby R&R acted as Fixel, Inc.'s factor, purchasing its receivables based upon a credit-risk evaluation. In addition to being Fixel, Inc.'s Fixel,

factor, R&R was the factor for C&L Textiles Corp. (C&L).

Inc. and C&L also did business together, with C&L providing textiles for Fixel, Inc.'s designs. In October of 1998, Fixel,

Inc. entered into a written manufacturing agreement with C&L, pursuant to which C&L became responsible for Fixel, Inc.'s

production and shipping, and C&L cancelled an outstanding debt owed to it by Fixel, Inc. agreement, there was In deciding to enter into this that Fixel, Inc. relied upon

testimony

representations of R&R as to C&L's solid financial condition, which Fixel, Inc. alleges were false. The parties operated

under the agreement for a time, and then on March 4, 1999, C&L notified Fixel, Inc. of its intent to terminate the agreement. The parties terminated the agreement on July 1, 1999, and

several months later Fixel, Inc. ceased operations. Subsequently, Fixel, Inc. sued R&R, C&L, and two of C&L's principals. In its Third Amended Complaint, Fixel, Inc. alleged

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claims

against

R&R

for

fraud

in

the

inducement,

negligent

misrepresentation, fraudulent misrepresentation, and breach of fiduciary duty. The trial court dismissed these claims with On appeal, complaint

prejudice, and Fixel, Inc. appealed to this court. this court reversed, finding that Fixel, Inc.'s

adequately set forth the claims alleged, and reversed the trial court's dismissal. Susan Fixel, Inc. v. Rosenthal & Rosenthal, On remand, Fixel, Inc. for fraudulent

Inc., 842 So. 2d 204 (Fla. 3d DCA 2003). voluntarily dismissed its claim

misrepresentation, and after the case proceeded to discovery, R&R moved for summary judgment on the remaining claims against it. The trial court entered summary judgment on the fraudulent

inducement claim, but denied the motion for summary judgment on the breach of fiduciary duty and negligent misrepresentation

claims.

The court also granted Fixel, Inc.'s motion for leave

to amend its complaint to add a claim for punitive damages. Prior to trial, Fixel, Inc. voluntarily dismissed its claims against C&L and its two principals. requesting that the court It filed a motion in limine R&R from eliciting any

prohibit

testimony regarding such dismissal, and the trial court denied the motion. At trial, the trial court did not permit James Reto, CPA, Fixel, Inc.'s of damages Fixel, expert, Inc., to or Norman Fixel, one the of the

principals

testify

regarding

damages

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Fixel, Inc. allegedly suffered. moved for a directed as verdict. to

After the plaintiff rested, R&R The trial court finding granted that the

directed

verdict

punitive

damages,

R&R's The

conduct did not rise to the level of outrageous conduct.

court also granted a directed verdict as to breach of fiduciary duty and negligent misrepresentation, holding that the evidence offered did not establish a viable damage claim. We first address Fixel, Inc.'s claim that the trial court abused its discretion in excluding the testimony of Mr. Reto, Fixel, Inc.'s expert witness on damages. The trial court

disallowed the testimony based upon a finding that Mr. Reto relied upon speculative information in formulating his

conclusions, and that he used an incorrect date in determining the market value of the business. Mr. Reto based his damages calculation on future revenue and cash flow projections that had been prepared by Norman

Fixel. his own

Mr. Reto never verified these projections nor prepared projections. These projections could not be

independently supported as they assumed that Fixel, Inc. would receive $3 million from investors, though no such funding was ever given; Fixel, Inc. was a start-up company that had never turned a profit and its costs only increased over time; and no comparable companies existed to assist in the valuation process. Thus we agree that Mr. Reto's damage calculations were too

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speculative, and conclude that the trial court did not abuse its discretion in excluding his testimony. See Montage Group, Ltd.

v. Athle-Tech Computer Sys., Inc., 889 So. 2d 180, 195 (Fla. 2004)(concluding that a plaintiff's proof of claimed business damages were inadequate to support the jury's business damage award because it was "far too speculative and uncertain"); North Dade Cmty. Dev. Corp. v. Dinner's Place, Inc., 827 So. 2d 352, 353 (Fla. 3d DCA 2002)(reversing an award of future profits when the only evidence supporting the award was a page of projected earnings in a business prospectus that was "little more than an unsupported wish list of what the lessee hoped would occur in the coming years"); Forest's Mens Shop v. Schmidt, 536 So. 2d 334, 336-37 (Fla. 4th DCA 1988)(reversing a damages award

against a plaintiff who had not realized a profit during the two years that he had been the sole owner of his business and whose losses increased as his sales increased, when the testimony in support of the damages award ignored this lack of profitability in the past, explaining that the testimony was too speculative to allow an award of lost future profits). Fixel, Inc. asserts that we should not rely on the above authorities, as they relate to lost profit damages while Fixel, Inc. is seeking damages based upon the market value of its

business at the time of its destruction. inappropriate to use purely speculative

We disagree. forecasts

It is as of future

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revenue to determine the market value of a business as it is to use such speculative See forecasts Group, in determining 889 So. lost 2d future at 199

profits.

Montage

Ltd.,

(recognizing that the value of a business reflects its future profits). We also conclude that the trial court did not abuse its discretion in excluding Mr. Reto's testimony, based upon a

finding that Mr. Reto had relied upon an incorrect date when determining sought the market for the value of the of business. its Fixel, Inc. "If a

damages

destruction

business.

business is completely destroyed, the proper total measure of damages is the market value of the business on the date of the loss." Montage Group, Ltd., 889 So. 2d at 193 (emphasis

added)(citing Polyglycoat Corp. v. Hirsch Distribs., Inc., 442 So. 2d 958, 960 (Fla. 4th DCA 1983)). trial court properly found that the In the instant case, the date of Fixel, Inc.'s

alleged loss was the date that it ceased operations, which was in late 1999, not on October 11, 1998, the date relied upon by Mr. Reto. As the expert's opinion valuing the company was based

upon an incorrect date of loss, it was not relevant; it would not have assisted the jury when assessing any possible damages; and it would only have confused the jury in making that

determination.

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Fixel, Inc. however, asserts that despite the deficiencies in Mr. Reto's testimony, he should not have been precluded from testifying, as these deficiencies went to the weight, rather than the admissibility of the evidence. In support of its

position, Fixel, Inc. cites to Weese v. Pinellas County, 668 So. 2d 221 (Fla. 2d DCA 1996). an expert's testimony based In Weese, the trial court excluded upon a finding that he used an

incorrect date in calculating business damages, and the Second District Court of Appeal reversed. did not reverse based upon a However, the Second District that the expert

determination

should have been allowed to present his evidence even if he used an incorrect date of valuation as Fixel, Inc. claims. Rather,

it reversed because it found that the expert did, in fact, use the correct date of valuation in making his determination. at 222-23. Fixel, Inc. additionally relies on Rochelle v. State Road Department, 196 So. 2d 477 (Fla. 2d DCA 1967). In Rochelle, the Id.

trial court struck the testimony of a property appraiser based upon the method of evaluation he used to appraise the property. The Second District used of by reversed, the finding did it that not was the method to of the

evaluation competency

appraiser because

relate not so

his

testimony

totally

inadequate or improper that the adoption of the method would require departing from all common sense and reason or would

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require formula.

the

adoption

of

an

entirely

new

an

unauthenticated

Id. at 479.

Instead, the Second District found that

the appraiser used a new but valid and reliable formula, and that his testimony should have been tested by the jury for its weight rather than being excluded by the trial court on the basis of competency. however, go Id. beyond The the deficiencies use of a in new Mr. Reto's of

testimony, evaluation.

method

He relied upon speculative information and used a

date of valuation completely unconnected to the date of loss. These deficiencies prevent his evaluation from being valid and reliable. As his opinions were based on a totally incorrect

premise, the trial court properly excluded Mr. Reto's testimony. As Norman Fixel, one of the principals of Fixel, Inc., intended to testify using the same incorrect date of valuation and

speculative information as Mr. Reto had relied on, the trial court properly excluded his testimony as well. As a result of the trial court's rulings excluding the damages testimony, it granted a directed verdict as to Fixel, Inc.'s damages claim. Fixel, Inc. asserts this was error, as

its failure to establish compensatory damages should not have precluded a claim for nominal damages. As our review of the

record establishes that Fixel, Inc. did not raise this argument below, we conclude that the issue is not subject to appellate

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review.

Dade County School Bd. v. Radio Station WQBA, 731 So.

2d 638, 644 (Fla. 1999). Fixel, Inc. also argues that the trial court erred in

striking its punitive damages claim.

Again we disagree, as the

trial court properly found that there was insufficient evidence to submit the issue to the jury. Punitive damages are limited

to truly culpable behavior and should not be awarded unless the defendant "acted with malice, gross negligence or oppression." See Capital Bank v. MVB, Inc., 644 So. 2d 515, 521 (Fla. 3d DCA 1994). Fixel, Inc. failed to present evidence of gross or

flagrant conduct, and in fact, Mrs. Fixel testified that R&R would never want to harm her company, and Mr. Fixel testified that he did not believe that R&R's representative intentionally lied. Moreover, Fixel, Inc. failed to bring forth evidence that In fact, there was

R&R's representations were, in fact, false.

evidence at trial that, at the time that R&R's representative allegedly made representations to Fixel, Inc. regarding C&L's solid financial condition, C&L, which was owned by the

Greenbergs, who had been in the garment industry for years with a good reputation, was showing a profit and had the financial wherewithal Punitive to meet must its be obligations proportionate under to the the agreement. actual harm

damages

inflicted on the plaintiff, and since the actual harm was not ascertainable, the punitive damages claim must fail. See

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Liggett Group, Inc. v. Engle, 853 So. 2d 434, 451 (Fla. 3d DCA 2003). Another issue raised by Fixel, Inc. is the trial court's ruling over its objection allowing R&R to disclose the dismissal of the previous defendants and in allowing R&R to question one of Fixel, Inc.'s witnesses concerning his prior history of

litigation. it is not

We agree that these decisions were error. precluded by statute, the fact that

Even if Inc.

Fixel,

dismissed other defendants is irrelevant. the litigiousness of a witness is

It is also clear that Zabner v. We

inadmissible.

Howard Johnson's Inc. of Fla., 227 So. 2d 543 (Fla. 1969). conclude, evidence however, was that the beyond introduction a of the doubt

objected-to under the

harmless

reasonable

circumstances of this case. jury verdict, the evidence trial

As this is not an appeal from a that or Fixel, one Inc. of dismissed other was

defendants

prior

to

that

its

witnesses

litigious, did not unfairly prejudice Fixel, Inc.

The trial

court entered a directed verdict due to Fixel, Inc.'s failure to present evidence on damages, not based upon the credibility of the witnesses. Finally, Fixel, Inc. argues that the trial court erred in granting R&R's motion for summary judgment relating to Fixel, Inc.'s fraud in the inducement claim. However, at the summary

judgment hearing, the evidence was uncontroverted that Fixel,

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Inc. continued to accept performance from C&L even after it discovered that C&L supposedly did not have the financial

wherewithal to fulfill its obligations under the manufacturing agreement. Therefore, since it chose to continue its agreement

with C&L after discovering that R&R's alleged representations about C&L's solid financial conditions were untrue, R&R's

misrepresentations were not the cause of any damages, and Fixel, Inc. waived its claim of fraud. Mazzoni Farms, Inc. v. E.I.

DuPont De Nemours and Co., 761 So. 2d 306, 313 (Fla. 2000). Accordingly, we affirm the directed verdict against the

breach of fiduciary duty and negligent misrepresentation claims, and the summary judgment entered against the claim for fraud in the inducement. Affirmed.

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