ENDACOTT V. INTERNATIONAL

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NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DISPOSED OF. IN THE DISTRICT COURT OF APPEAL OF FLORIDA THIRD DISTRICT JULY TERM, A.D. 2005 ROBERT ENDACOTT, Appellant, vs. ** ** ** INTERNATIONAL HOSPITALITY, INC., ** et al., ** Appellees. ** CASE NO. 3D03-2718 LOWER TRIBUNAL NO. 01-05921 Opinion filed September 14, 2005. An Appeal from the Circuit Court for Miami-Dade County, Ronald Dresnick, Judge. Lauri Waldman Ross; Tilghman & Vieth, P.A. and H. Mark Vieth, for appellant. Kenny Nachwalter, P.A. and Richard H. Critchlow; Stephens, Lynn, Klein, LaCava, Hoffman & Puya, P.A. and Sherryll Martens Dunaj, for appellees. Before LEVY, SHEPHERD, and CORTIÃ AS, JJ. CORTIÃ AS, Judge. The plaintiff, Robert Endacott ( Endacott ), appeals from a final order granting the defendants , Holland & Knight s ( H&K ) and Allen, Norton & Blue s ( ANB ), motions for final summary judgment on Endacott s malicious prosecution claims, and a nonfinal order denying Endacott s motion for leave to amend his complaint to add a claim against H&K for punitive damages. We affirm. In April 1995, Endacott created the Miami Casino Project ( Project ), which entailed building a five-star casino onboard a ship, namely a Small Waterplane Area Twin ( SWATH vessel ), based at the Port of Miami. LLC ( Inverness ) International corporation Inverness owned the Hospitality, set and up IHI to own concept Inc. and operate subsequently formed the Project. a Canadian casino business. was the vessel Inverness Group, for ( IHI ) Hull Cruiseco, a partnership, to own and operate the SWATH vessel. limited Endacott served as Inverness managing member. Inverness contracted with BSM Joint Venture ( BSM ), which agreed to build the SWATH vessel and provide on-site design, engineering, and construction supervision marine facility in Houston, Texas. with Gornitzki, underwriter. Thompson & Little at a Brown & Root Inverness also contracted ( GTL ), a securities Inverness and GTL agreed that GTL would act as an agent to provide financing and raise capital to build the SWATH vessel and operate the casino ( GTL Agreement ). and GTL subsequently entered into 2 another IHI, Cruiseco, agreement, which provided, among other things, that Endacott would devote his full time and attention to IHI ( Amalco Operating Agreement ). Endacott signed both the GTL and the Amalco Operating Agreement. Roy Gaul ( Gaul ), the on-site construction manager for BSM, estimated that the SWATH vessel would be built by August 1997 at a cost of $22 million, exclusive of other costs such as construction construction supervision. problems, However, incurred cost Gaul encountered overruns, and missed project deadlines. In December 1996, Inverness, GTL, IHI, and Cruiseco entered into a Second Operating Agreement, which named Endacott as IHI s Chairman of the Board, President, and CEO for a three-year term, and allowed him to receive two million restricted IHI shares, thereby making him IHI s largest individual shareholder. Thereafter, Endacott hired a Chief Financial Officer, Marc Feller ( Feller ), to resolve Gaul s budget and cost overruns, as well as a special consultant, Chuck Merkel, to investigate the construction of the SWATH vessel. Endacott initiated a forensic audit, which revealed that Gaul had significantly underestimated the cost of construction and independently Project changed Gaul s expenditures Endacott initial fired were estimates. Gaul and the design of approximately the $8-10 Consequently, withheld 3 SWATH money in vessel. million February due to over 1997, certain contractors because of their alleged non-performance. However, Endacott wanted to continue working with the other BSM joint venturers, Aker Marine ( Aker ) and Martran Consultants ( Martran ). Throughout this course of events, Inverness retained H&K as its counsel. that H&K IHI s In 1997, IHI also retained H&K. reviewed officer Gaul s contract, employment employment contract. and contracts, Endacott claims drafted including and reviewed Endacott s Endacott further claims that H&K advised Inverness to enter into an agreement with BSM, whereby 1) Aker and Martran would remain active on the Project, 2) Gaul would be replaced by John Waterhouse, on behalf of Elliott Bay, for dayto-day management of the Project, and 3) IHI would pay certain outstanding invoices ( Heads of Agreement ). As part of the Heads of Agreement, Aker and Martran allegedly requested that they H&K be released drafted those from any prospective releases. However, consequential the parties damages. dispute whether IHI s Board of Directors authorized Endacott to instruct H&K to draft those releases and enter into a final version of the Heads of Agreement, which included those releases. On June 18, 1997, after Endacott allegedly secured a new $14 million ship financing commitment, IHI terminated him as CEO, but reappointed him Chairman of the Board at the same pay rate. Endacott claims that Amelia Maguire ( Maguire ), H&K s 4 corporate attorney in charge of the IHI file, subsequently visited Endacott at his home, and was angry and upset because Endacott s termination as CEO jeopardized the Project. Endacott further claims that Maguire set up a meeting between Endacott and John Thompson ( Thompson ), a member of GTL, to broker a settlement of IHI/Endacott claims after his termination. At that meeting, Thompson allegedly threatened to bury Endacott in litigation and to cooperate with IHI. ruin his reputation if he did not Afterward, Maguire allegedly told Endacott that he should seriously consider cooperating with Thompson.1 After Endacott s termination, H&K and Goodman & Carr ( G&C ), a Canadian law firm, began analyzing IHI s potential claims against Endacott. Thomas Loffredo, On August 8, 1997, H&K s associate, prepared a memorandum ( H&K memorandum ) stating that IHI calculated a $7,000,000 cost overrun on the Project caused by a delay in opening the casino SWATH vessel, and a $32,000,000 cost overrun caused at least in part by Endacott s failure to devote his best efforts to IHI s interests in constructing the gaming vessel. In Donovan, response prepared memorandum ), to a H&K s memorandum, memorandum analyzing causes 1 on of G&C s August action 12, lawyer, 1997 which Brian ( G&C s could be The parties dispute what Maguire was referring to when she told Endacott to consider cooperating with Thompson, and whether Maguire knew of the threats at that time. 5 asserted against Endacott by IHI in Ontario. G&C s memorandum provided, in relevant part: (3) Unfortunately, the only apparently strong cause of action we can currently assert against Endacott is for the overpayment of US$25,000.00 in respect of his salary from IHI for January 1997. (4) It may be possible to add claims for breach of fiduciary duty or negligent execution of corporate duties resulting in losses to IHI (i.e. cost overruns and delays); however, at present, we have no strong evidence that any of Endacott s activities caused these damages. On August 18, 1997, G&C filed against Endacott in Ontario, Canada. a Statement of Claim The Statement of Claim included claims against Endacott, under Canadian law, for breach of statutory funds, duties, interference misappropriation in IHI s of $100,000 business in affairs company following Endacott s termination, $25,000 double payment in salary, and cost overruns on the Project. However, before the Statement of Claim was served, Endacott sued IHI and others in Illinois, claiming that IHI breached its employment contract by terminating him and refusing to provide him severance pay. The Illinois action was eventually dismissed on forum non conveniens grounds. Thereafter, Endacott initiated a lawsuit against IHI in Miami, Florida, for breach of his alleged employment contract and breach of a separate contract to pay him a fee for arranging financing for IHI ( underlying action ). 6 On behalf of IHI, H&K filed a counterclaim alleging that Endacott breached his fiduciary duty by 1) signing employment contracts, including his own, without approval from IHI s board of directors and compensation committee, 2) failing to adequately supervise the Project, and 3) releasing and indemnifying Aker and Martran without approval from IHI s Board of Directors. Endacott responded to IHI s counterclaim with third-party claims and contribution. Consequently, ANB replaced H&K as IHI s counsel. H&K provided ANB against lawyers H&K with for indemnification assistance and background information, and allowed them to review and copy documents related to the action. Before trial began, IHI withdrew parts of its breach of fiduciary duty counterclaim against Endacott for unapproved employment contracts and unapproved releases, but retained the part relating to failure to adequately supervise the Project. In support of bringing its counterclaim, IHI claimed that Endacott was personally responsible for supervising every aspect of the Project. directives from IHI further claimed that Endacott violated IHI s Board of Directors concerning the construction of the SWATH vessel. Endacott moved for a directed verdict on IHI s counterclaim for breach of fiduciary duty for failure to adequately supervise the Project, which the trial court ultimately granted. The trial court held that IHI failed to provide the requisite expert 7 testimony regarding the standard for the legal and fiduciary duties of a corporate CEO. The trial court also held that IHI presented evidence that Endacott may have breached a fiduciary duty by violating at least one directive of IHI s Board of Directors regarding the construction of the SWATH vessel, but that IHI ultimately failed to prove specific damages caused by a breach of that fiduciary duty. A jury trial was conducted, in which the jury returned a verdict in favor of Endacott, awarding him $600,000 in employee severance pay and $200,000 on his claim that IHI owed him a fee for arranging financing on the Project. After the jury award, IHI made a motion for judgment in accordance with its motion for directed verdict on the $600,000 award, claiming that the employment agreement between IHI and Endacott was barred by the statute of frauds. The trial court granted IHI s motion, and this court affirmed that decision in Endacott v. International Hospitality, Inc., 796 So. 2d 1177 (Fla. 3d DCA 2001). Endacott subsequently brought a malicious prosecution action against H&K, ANB, IHI, two individual IHI members, and IHI s Chairman. but used the Endacott did not assert a claim against G&C, Canadian action as a prosecution claim against H&K and ANB. basis for his malicious Endacott sought leave to amend his complaint to add a claim for punitive damages against 8 IHI, H&K, and the two individual IHI members, but the trial court deferred ruling on his motion.2 H&K and ANB moved for summary judgment on Endacott s claim for malicious prosecution. After conducting hearings on the motions for summary judgment, the trial court entered an order 1) granting H&K s and ANB s motions for summary judgment based on its finding that the defendants had probable cause to assert the counterclaim against Endacott, and 2) denying Endacott s earlier motion for leave to amend to add a claim for punitive damages with respect to H&K. The first issue on Endacott appeals these rulings. appeal is whether the trial court properly found that the defendants had probable cause to pursue IHI s counterclaim against Endacott. We review the trial court s entry of summary judgment in favor of the defendants de See Volusia County v. Aberdeen at Ormond Beach, L.P., 760 novo. So. 2d 126 (Fla. 2000). In order to prevail in a malicious prosecution action, the plaintiff must establish: (1) the commencement or continuance of an original judicial proceeding; (2) its legal causation by the present defendant defendant in the against the original present plaintiff proceeding; (3) who its was bona the fide termination in favor of the present plaintiff; (4) a lack of 2 The trial court eventually default against IHI. granted 9 Endacott s motion for probable cause for such proceeding; (5) the presence of malice; and (6) damages conforming to legal standards resulting to the present plaintiff. Alamo Rent-A-Car, Inc., v. Mancusi, 632 So. 2d 1352 (Fla. 1994); Burns v. GCC Beverages, Inc., 502 So. 2d 1217 (Fla. 1986); Scozari v. Barone, 546 So. 2d 750 (Fla. 3d DCA 1989). If the plaintiff is unable to prove any one of these elements, the malicious prosecution action will fail. Alamo, 632 So. 2d at 1355; Burns, 502 So. 2d at 1218. The two elements at issue here are whether the defendants lacked probable cause, and whether the defendants acted with malice in pursuing IHI s counterclaim against Endacott. In granting the defendants motions for summary judgment, the trial court focused on the element of probable cause. The effect of the defendants motions for summary judgment was to shift the burden to Endacott to prove that a material question of fact existed as to whether the defendants brought the suit without See, e.g., Wright v. Yurko, 446 So. 2d 1162 probable cause. (Fla. 5th DCA 1984). In a malicious prosecution action against attorneys, the plaintiff s standard for showing lack of probable cause appears to be higher than the standard in other malicious prosecution actions. In an action against an attorney, [i]t is the attorney s reasonable and honest belief that his client has a tenable claim that is the attorney s 10 probable cause for representation, client must and not prevail. the C.A. attorney s Hansen conviction Corp. v. that Wicker, his Smith, Blomqvist, Tutan, O Hara, McCoy, Graham & Lane, P.A., 613 So. 2d 1336, 1338 (Fla. 3d DCA 1993)(quoting Central Fla. Mach. Co., Inc. v. Williams, 424 So. 2d 201, 203 (Fla. 2d DCA 1983)). An attorney has the duty to represent the client zealously, not to C.A. Hansen Corp., 613 So. insure that the client will succeed. 2d at 1338. Furthermore, so long as the attorney investigates the facts and law, and prosecutes a claim which a reasonable lawyer would regard as tenable, the plaintiff has no right to assert malicious prosecution against lawyer s efforts prove unsuccessful. the attorney if the Id. Endacott contends that H&K lacked probable cause to assert the counterclaim against him, and that H&K was on notice that it lacked probable cause before it filed the counterclaim. In support of his position, Endacott relies on G&C s memorandum, reciting that H&K did not offer sufficient Endacott s activities caused cost overruns. evidence that Endacott contends that G&C s memorandum pointed out the lack of causation between Endacott s conduct, cost overruns, and scheduling problems. In response, H&K contends that G&C s memorandum made clear that H&K s analysis was limited to Florida, not Canadian, law, and that the factual background Canadian law firm, not H&K. was to be provided by the H&K further contends that G&C s 11 memorandum merely recited that G&C needed more evidence before filing its clearly Statement stated of that, Claim at in Canada. present, G&C s there was memorandum insufficient evidence to show that Endacott s activities caused cost overruns on the project, but that [i]t may be possible to add claims for breach of fiduciary duty or negligent execution of corporate duties resulting in losses to IHI. Thus, G&C s memorandum was not determinative evidence that H&K lacked probable cause to later bring behalf of the IHI, underlying especially counterclaim after H&K against had the Endacott on opportunity to gather more evidence in support of IHI s counterclaim. More importantly, G&C, not H&K, filed the Statement of Claim against Endacott. partly Canada, responsible we agree for with However, even assuming that H&K was filing the the trial Statement court that existed to file the Canadian action as well. Claim filed in Canada asserted several of Claim probable in cause The Statement of additional claims against Endacott, which were not included in H&K s memorandum. For example, Paragraph 13(i) of the Statement of Claim included allegations that Endacott failed to devote his full time, attention, and best efforts to the Project because he was involved with unrelated large scale ventures, and was involved in the financing matters of an unrelated company. Although not included in the final version, in a draft of the Statement 12 of Claim, the unrelated company was named as Aqua Chem Inc., whose acquisition partner was Rush Creek LLC. IHI contends that Endacott failed to adequately supervise the Project because he was working as a consultant for Rush Creek LLC, while he was CEO of IHI and, therefore, he could not have been devoting his full time and attention to the Project as required by the Amalco Operating Agreement. Endacott allegedly entered into an agreement with Rush Creek LLC on February 6, 1997, and collected more than $680,000 for his services. Furthermore, Paragraph 13(ii) of the Statement of Claim alleged that Endacott used IHI s offices, facilities, and funds in his activities with the unrelated Endacott without company. Finally, unilaterally corporate Paragraph terminated authority, the and 13(iv) Brown that he & alleged Root provided that contract false and were not misleading information to IHI s Board of Directors. These allegations in the Statement of Claim addressed in either H&K s or G&C s memoranda. Therefore, it is clear that the content in H&K s and G&C s memoranda was not the sole basis for pursuing IHI s counterclaim against Endacott. Furthermore, plaintiff, the in instigating defendants need an only action show that against they had the a reasonable belief that the claim was valid based on the facts and circumstances known to them. The defendants need not be Wright, 446 So. 2d at 1166. certain 13 of the outcome of the underlying proceeding to have probable cause for bringing the counterclaim. See Goldstein v. Sabella, 88 So. 2d 910, 911 (Fla. 1956); Applestein v. Preston, 335 So. 2d 604, 607 (Fla. 3d DCA 1976). Instead, as attorneys, the defendants are entitled to rely on their client s representations of fact. Baron v. 581 Fieldstone, So. 2d 649, 650 See, e.g., (Fla. 3d DCA 1991)(reversing an award of attorney s fees on the basis that counsel acted in good faith based on representations from his client in accordance with Section 57.105, Florida Statutes (1998)); Moiel v. Sandlin, 571 S.W.2d 567, 570 (Ct. App. Tex. 1978)(stating that [u]nless lack of probable cause for a claim is obvious from the facts disclosed by the client or otherwise brought to the attorney s attention, he may assume the facts so disclosed are substantially correct ). relied on IHI s representations of In the instant case, H&K fact and filed the counterclaim only after IHI authorized H&K to do so. Endacott further contends that the facts relied on by H&K and ANB to show probable cause are disputed and, therefore, the jury must determine their existence before the court determines their legal effect. See Alamo, 632 So. 2d at 1357; Glass v. Parish, 51 So. 2d 717 (Fla. 1951)(holding that, in a malicious prosecution action, conflicts in facts should be resolved by the jury but probable cause should be determined by the court). Probable cause only becomes a 14 question for the jury when material facts are disputed. City of Pensacola v. Owens, 369 So. 2d 328, 329 (Fla. 1979); C.A. Hansen Corp., 613 So. 2d at 1339. When the facts relied upon to show probable cause are undisputed, the existence or nonexistence of probable cause is a pure question of law to be determined by the court under the facts and circumstances of each case. C.A. Hansen Corp., 613 So. 2d at 1339; see also City of Pensacola, 369 So. 2d at 32930. However, in the instant case, it is undisputed that, in pursuing IHI s counterclaim against Endacott, H&K and ANB relied on the following undisputed facts in support of IHI s claim that Endacott drafted unapproved employment contracts: (1) IHI s January 10, 1997 meeting minutes, signed by Endacott, stating that IHI s Board of Directors authorized Endacott to retain counsel to draft agreements to be presented to the Compensation Committee for review and consideration before presentation to the board for approval; (2) IHI s June 19, 1997 meeting minutes stating that [t]he Compensation Committee informed the board that . . . [the management contracts] of Messrs. Endacott, Felteau and Sheppard had not been processed by the Compensation Committee; and (3) on or about June 21, 1997, after Endacott was terminated, Endacott sent signed employment contracts for himself, Felteau, and Sheppard to H&K. 15 In support of IHI s claim that Endacott failed to adequately supervise the Project, H&K and ANB relied on the following undisputed facts: (1) as part of the Amalco Operating Agreement, Endacott agreed to devote his full time and attention to IHI; (2) Endacott admitted in his affidavit that he was the managing director responsible for overseeing all aspects of the [P]roject; (3) Endacott was providing consulting services to an unrelated company, Rush Creek LLC, while he was CEO of IHI; (4) Endacott received approximately $680,000 for the services he constructing provided the to SWATH Rush Creek vessel LLC; increased (5) the budget substantially of while Endacott was CEO of IHI; and (6) IHI s Chief Financial Officer, Feller, had information regarding costs attributable to Endacott s failure to adequately supervise the construction of the SWATH vessel. Finally, in support of its claim that Endacott released Aker and Martran without IHI s approval, H&K and ANB relied on the following undisputed facts: (1) IHI s March 10, 1997 meeting minutes, Directors signed by authorized Endacott, reflecting management to that implement IHI s Board of the Heads of Agreement after the Board of Directors had [a] discussion of the Heads of Agreement which Mr. Endacott reported was based on advice from [H&K]; (2) IHI s March 10, 1997 meetings made no mention of releasing Aker and Martran; (3) H&K representatives 16 did not attend the March 10, 1997 meeting; and (4) before filing IHI s counterclaim, several IHI board member informed H&K that IHI never authorized Endacott to release Aker and Martran. We find that these undisputed facts provided the defendants with sufficient counterclaim. probable cause to initiate and pursue IHI s Based on these undisputed facts provided by IHI, H&K and ANB had a reasonable and honest belief that IHI had a tenable claim against Endacott. Therefore, Endacott has failed to prove that a genuine issue of material fact exists as to whether H&K and ANB lacked probable cause to institute the counterclaim in the underlying action. Endacott also contends that ANB lacked probable cause to continue pursuing IHI s counterclaim against Endacott. Endacott relies on a letter drafted by ANB s attorney, Rodolfo Gomez, demonstrating concern that Endacott may have been duped by Gaul. Endacott counterclaim infers against that him IHI after dropped Gomez two parts drafted the of IHI s letter. However, there can be no claim for malicious prosecution where at least part of the counterclaim for breach of fiduciary duty was asserted with probable cause. See, e.g., May v. Fundament, 444 So. 2d 1171 (Fla. 4th DCA 1984); Moity v. Bodin, 489 So. 2d 474 (La. Ct. App. 1986); Joseph H. Held & Assocs., Inc. v. Wolff, 39 S.W.3d 59 (Mo. Ct. App. 2001). Furthermore, to prevail on a claim for malicious continuation of prosecution, 17 the plaintiff must show that probable cause was lacking at all stages of the underlying proceeding. F. Supp. 1442, 1462 (M.D. Fla. Ware v. United States, 971 1997)(malicious prosecution action where former criminal defendant who had been acquitted failed to show that probable cause was lacking at all stages of the underlying prosecution, from indictment to acquittal). Therefore, probable cause ANB only needs to pursue to IHI s demonstrate counterclaim that for it breach had of fiduciary duty, whether it be on the basis of the unapproved employment contracts, unapproved releases, adequately supervise the Project. or failure to Just as H&K had probable cause to bring the counterclaim for breach of fiduciary duty, we find that, based on the undisputed facts provided by IHI, ANB had probable cause to continue pursuing the counterclaim for breach of fiduciary duty for failure to adequately supervise the Project. Endacott further contends that ANB demonstrated a lack of probable cause when, in the underlying action, it failed to provide expert testimony and conceded that it had no evidence of damages caused by Endacott. However, termination of an underlying civil proceeding in favor of the present plaintiff is not sufficient cause. evidence that the defendants See Wright, 446 So. 2d at 1166. lacked probable Although ANB failed to provide an expert or evidence of a specific dollar amount of 18 damages caused by Endacott, the trial court found that the defendants presented sufficient evidence to establish that they had probable cause to pursue their counterclaim against Endacott for breach of fiduciary duty. Specifically, in the underlying action, the trial court stated: You have presented evidence that [Endacott] disobeyed the orders of his board of directors and moved the contract from Brown & Root to Atlantic Marine. And that would support a cause of action for breach of fiduciary duty or negligence without expert testimony. But what s the damage attributable. You haven t proved up any specific dollar amount of damages attributable to that action. Based on undisputed facts, we find that Endacott has failed to prove that a genuine issue of material fact exists as to whether H&K and ANB lacked counterclaim against him. probable cause to pursue IHI s H&K and ANB had a reasonable and honest belief that IHI had a tenable claim against Endacott for breach of fiduciary duty and, therefore, had probable cause to See, e.g., C.A. Hansen Corp., 613 pursue IHI s counterclaims. So. 2d at 1339. Endacott s failure to prove that the defendants lacked probable cause is fatal to his action. So. 2d at 1218. See Burns, 502 Because resolution of the issue of probable cause is dispositive, we need not address the issue of malice. See C.A. Hansen Corp., 613 So. 2d at 1339. The second properly denied issue on appeal Endacott s is motion 19 whether for the leave to trial amend court his complaint to add a claim against H&K for punitive damages. We review the trial court s refusal to permit Endacott to amend his pleadings for abuse of discretion. See Williams v. Palm Beach Cmty. Coll. Found., Inc., 862 So. 2d 917 (Fla. 4th DCA 2003); G.B. Holdings, Inc. v. Steinhauser, 862 So. 2d 97 (Fla. 4th DCA 2003). We find that the trial court properly denied Endacott s motion for leave to amend his complaint to add a claim against H&K for punitive damages. In order to recover punitive damages, the plaintiff must provide the court punitive damages. with a reasonable evidentiary basis for Globe Newspaper Co. v. King, 658 So. 2d 518, 520 (Fla. 1995); see § 768.72, Fla. Stat. (1999). The plaintiff is required to show gross misconduct or willful and wanton disregard of a plaintiff s rights. Alamo, 632 So. 2d at 1357; see also Louis v. Costco Wholesale Corp., 719 So. 2d 1226, 1228 (Fla. 4th DCA 1998). lacked probable cause Since Endacott failed to prove that H&K to pursue IHI s counterclaim against Endacott, he cannot prove that H&K engaged in gross misconduct or acted in willful and wanton disregard of Endacott s rights. Affirmed. 20

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