"To Split or Not to Split"

Florida’s 2nd District Court of Appeals (“2nd DCA”) recently issued an opinion impacting fee splitting contingency agreements between law firms. Harmon Parker, P.A. vs. Santek Management, LLC a/a/o The Gerber Law Group, P.A., Case No. 2D18-4632. (September 25, 2020), dealt with a dispute between two law firms over the division of $3.16 million in contingency attorneys’ fees, which was derived from an $8 million personal injury settlement. In Harmon, the Plaintiff in the underlying case was rendered a quadriplegic from a car accident. He then executed a Contract for Representation with Gerber Law Group (“Gerber”), and the Contract provided for contingency attorneys' fees consistent with the schedule established in rule 4.15(f)(4)(B)(1) a.-d. of the Rules Regulating the Florida Bar. Plaintiff also entered a Personal Injury Contingency Fee Contract with Swope, Rodante, P.A. (“Swope”). Thereafter, the parties (Plaintiff, Gerber and Swope) filed a verified petition for approval of the attorneys’ fee contract, which was approved. Then, trial was set. At that time, Gerber had little to prepare for trial and recognized its lack of resources and experience to properly try the case. As such, Gerber contracted with Harmon Parker (“Parker”). The Plaintiff subsequently terminated their contract with Swope and contracted with Gerber and Parker. Following settlement, Gerber sought additional attorney’s fees from Parker. The trial court found that Harmon breached the agreement and granted directed verdict for Gerber. Harmon appealed.

On appeal, the 2nd DCA reasoned that Gerber and Harmon failed to comply with Rule 4-1.5 (f) (4) (D). The Rule applies to those situations where a contingency fee is to be split between lawyers not in the same firm. Because of the nature of the fee-splitting arrangement set forth in the parties’ agreement, Gerber and Harmon were required to seek court approval for that arrangement. Rule 4-1.5(f)(4)(D)(iii) required, amongst other requirements, that the petition filed with the court to be sworn, signed by all counsel, and to disclose in detail the service to be performed by each counsel. Here, Harmon, on behalf of Plaintiff, filed an unsworn petition for approval. Gerber did not sign the petition, and no Gerber attorney attended the hearing on the petition. Likewise, rule 4-1.5(f)(4)(D)(iii) required Gerber and Harmon to accept substantially equal active participation in the legal services.  The 2nd DCA found the noncompliance by both Gerber and Harmon to be substantial and significant. Accordingly, the 2nd DCA concluded that the fee-splitting agreement between Gerber and Harmon was void as against public policy and, thus, unenforceable.

New York Appellate Division Rules in Favor of Shopping Mall Tenants

In a recent decision by the Second Department of New York’s Appellate Division in July, the Court ruled in favor of mall shop owners in a premises liability matter. Athenas v. Simon Prop. Group, LP, 185 A.D. 3d 884 (2d Dept. 2020).  In this matter, the Court found that shopping mall tenants were entitled to summary judgment, wherein a patron was injured after slipping on a liquid cleaner spilled on the floor because the location where the accident occurred was within the common area of the mall, and the tenants had no contractual or common law duty to maintain it.

The plaintiff in this matter was allegedly injured when she slipped on cleaner in the interior common area of the mall, causing her to fall and sustain injuries.  The cleaner had been spilled by a janitor whom the defendant tenants had employed to clean their shops once a week as the janitor was making her way towards them.  Both the mall owner, Simon Properties, and the defendant tenants filed summary judgment motions independently.

In the defendant tenants’ motion, they asserted that they owed no duty to plaintiff as the accident occurred in the common area of the mall; as such, they were under no obligation (contractual or common law) to maintain it. According to New York law, “a tenant’s common law duty to maintain premises in a reasonably safe condition is limited to those areas which it occupies and controls, or makes a special use of.” See Knight v. 177 W. 26 Realty, LLC, 103 N.Y.S.3d 503 (2d Dept. 2019). Here, because plaintiff allegedly fell in the common area, the defendant tenants demonstrated they neither owned, nor had any control over the area where the plaintiff allegedly fell.

Moreover, the tenant defendants were able to dispute any liability as to the actions of the janitor under the theory of respondent superior because the janitor was an independent contractor.  Per the Court, “The determination of whether an employer-employee relationship exists turns on whether the alleged employer exercises control over the results produced, or the means to achieve the results. Control over the means is the more important consideration” See Abouzeid v. Grgas, 743 N.Y.S. 2d 165 (2d Dept. 2002).  The court also considers five factors in making this determination: whether the worker (1) worked at his or her convenience; (2) was free to engage in other employment; (3) received fringe benefits; (4) was on the employer’s payroll; and (5) was on a fixed schedule. Bynog v. Cipriani Group, 770 N.Y.S.2d 692 (2003).

The tenant defendants presented evidence that the janitor did not have fixed hours or days on which she worked.  Further, the janitor had several other clients for whom she performed cleaning services; she was paid cash without any tax withholdings and received no benefits or compensation.  Nor did the tenant defendants exert any supervision or control on the janitor and she independently decided which cleaning agents to use and where to use them.

The Appellate Division was convinced by the tenant defendants’ arguments and ruled that these tenant defendants had demonstrated their prima facie entitlement to summary judgment, dismissing the plaintiff’s complaint as to them by demonstrating that they did not create the alleged hazardous condition or have actual or constructive notice of it.

Speculation is Not a Dangerous, Hazardous, or Defective Condition

Recently, the Second Judicial Department for the Supreme Court of the State of New York, Appellate Division addressed the question of whether a plaintiff’s premises liability negligence claims can survive a defendant’s Motion for Summary Judgment when the claims are based on speculation in Julia Coloni v. Stino, Inc., 2020 N.Y. Slip. Op. 05184 (2d Dept. 2020).  When a plaintiff’s claims are based upon a speculative dangerous, hazardous, or defective condition upon a property, the necessary element of “causation” of a negligence action cannot be established.  The Second Department found that when a plaintiff cannot identify a specific dangerous, hazardous, or defective condition, the trier of fact would be required to speculate as to the causation of a plaintiff’s fall and injuries as well as other key factors of an action.

In Coloni, the plaintiff allegedly sustained injuries when she was lawfully upon the premises of a restaurant, operated by the defendant, for a luncheon. The luncheon occurred in the restaurant’s party room which had wall-to-wall carpeting.  At some point, the plaintiff fell and sustained injuries.  The plaintiff commenced an action in the trial court to recover for her personal injuries sustained in a fall allegedly caused by the carpeting in the defendant’s restaurant which was maintained in a dangerous, hazardous, and/or defective condition. 

The plaintiff appeared for her deposition during discovery and gave testimony as to the accident dynamics; however, the plaintiff was unable to identify the cause of her fall.  In particular, the plaintiff’s testimony revealed “she did not know what caused her left foot to get stuck on the carpeting.”  The defendant moved for Summary Judgment before the trial court on the basis that plaintiff’s negligence action would cause a trier of fact to speculate as to the cause of plaintiff’s fall. The trial court granted the defendant’s motion which the Second Department affirmed.

Summary Judgment is difficult to obtain on negligence actions as the defendant must establish it did not create the defective condition which cause a plaintiff’s fall and lacked knowledge, both actual and constructive, of the alleged defective condition for a sufficient length of time.  Though, when a “plaintiff cannot identify the cause of his or her fall without engaging in speculation” a trier of fact’s determination on the issue of causation would likewise be speculative.  The Second Department found that because plaintiff was unable to identify the cause of her fall a jury would base a determination upon the plaintiff’s supposition which does not create a triable issue.  Moreover, the Second Department found that plaintiff’s deposition failed to present any triable issues on the element of causation thereby requiring a court to grant the defendant’s Summary Judgment motion as a matter of law.

From a defense perspective, Coloni, teaches us the importance of obtaining all the accident dynamics and the importance of establishing whether a known, definitive cause for a plaintiff’s fall exists.  If a plaintiff cannot identify the cause of his or her fall, entering the realm of speculation, then like in Coloni, then the likelihood of a successful Motion for Summary Judgment brought by a defendant being granted by a court is not mere speculation, but probable. 

When Generally Reserving Your Rights Is Not Enough

Recently the Superior Court of Pennsylvania held that an insurer’s reservation of rights (“ROR”) letter that failed to clearly communicate the extent of the rights being reserved and the reason for same, resulted in presumptive prejudice to the insured.  The Court cautioned that any such reservation of rights “must fairly inform the insured of the insurer’s position and must be timely, although delay in giving notice will be excused where it is traceable to the insurer’s lack of action or constructive knowledge of the available defense.”  See Selective Way Ins. Co. v. MAK Servs., 2020 PA Super 103.

Defendant was in the business of snow and ice removal and in a “comedy of errors” obtained insurance coverage from Plaintiff/Insurance Company that excluded various types of coverage including “snow and ice removal.”  Thereafter an individual slipped, fell, and filed suit against Defendant.  The individual alleged that Defendant was negligent in removing snow and ice.   Plaintiff/Insurance Company appointed defense counsel to represent the Defendant in the slip/fall lawsuit and also sent a ROR letter.  The ROR letter did not acknowledge or discuss the snow and ice removal exclusion contained in the Policy. 

Thereafter defense counsel retained by Plaintiff/Insurance Company defended the matter for approximately eighteen months.  Also thereafter, Plaintiff/Insurance Company filed a declaratory judgment and averred that Defendant’s “potential negligence is based solely upon ice and snow removal activity, and the [Policy] specifically excludes a defense and indemnity for any damages arising from snow and ice removal activity . . . .”  The trial court entered judgment in favor of Plaintiff/Insurance Company and found that the Insurance Company had no duty to defend or indemnify Defendant related to the slip/fall lawsuit.  Defendant filed an appeal and the Superior Court summarized the issue on appeal: “[Defendant] is essentially challenging the sufficiency of [Plaintiff/Insurance Company’s] reservation of rights letter, and thereby its preservation of the snow and ice removal exclusion.”

First the Court examined the timeliness of the Insurance Company’s letter.  The Court noted that the general principle is that a ROR letter sent close-in-time to the institution of a potentially covered legal action is "timely" under Pennsylvania law.  In this case the Insurance Company sent the letter approximately three weeks after of the filing of the slip/fall lawsuit.

Second, the Court examined whether the ROR letter was “‘fairly inform[ed] the insured of the insurer's position’ to validly preserve defenses to coverage under the policy.”  In this case, the Court found that the ROR letter may have sufficiently apprised Defendant that future exigencies might affect coverage; however, the letter did not provide notice “of the existing coverage issue appearing on the face of the Policy, i.e., the snow and ice removal exclusion.”  

The Court concluded that the Insurance Company’s ROR letter failed to “clearly communicate” the extent of the rights being reserved, which resulted in presumptive prejudice to Defendant.  As a result of this prejudice, the Insurance Company should have been estopped from asserting a policy exclusion for the first time eighteen months later without sufficient notice.  The Court reversed the trial court’s decision and remanded the matter for further proceedings.

New Jersey Reduces Requirements of Arbitration Agreements

The New Jersey Supreme Court recently reversed the Appellate Division’s decision in Marilyn Flanzman v. Jenny Craig, Inc., et al.  In doing so the Supreme Court overturned the Appellate Division’s decision that companies and individuals entering into an employment agreement with an arbitration agreement in New Jersey must carefully draft the agreements to include a forum for the arbitration or the method and rules for the arbitration or they will run the risk that the arbitration agreement will be unenforceable and invalid.   The Appellate Division had originally held that an arbitration provision is unenforceable when the agreement fails to identify where or how the parties are to arbitrate the matter.  The Supreme Court Decision rejected the Appellate Division’s broad reading of Atalese v. U.S. Legal Services Group, L.P., which set forth that arbitration agreements must plainly and unambiguously set forth an agreement to arbitrate and to forego the right to litigate in court. 

The lawsuit in Flanzman was originally instituted following alleged discrimination against an eighty-six (86) year old worker who was terminated by Jenny Craig, Inc. after working for the company for twenty-six years (26).  Plaintiff alleged that she was terminated due to her age, and as such, filed the lawsuit in state court.  The defendant, her employer, then filed a motion to compel arbitration at the trial court level based upon an arbitration agreement in the employment agreement which the plaintiff signed in 2011.  The arbitration agreement established that the parties would arbitrate all disputes between them “in lieu of a jury or civil trial” and that the arbitration would be binding.  Notably, the arbitration agreement failed to identify where the arbitration was to occur. 

The trial court in Flanzman originally granted the defendant employer’s motion to compel the arbitration, but on appeal the Appellate Division reversed the trial court’s holding because the arbitration agreement did not select an “arbitral institution.”  The Appellate Division held failing “to identify in the arbitration agreement the general process for selecting an arbitration mechanism or setting… deprived the parties from knowing what rights replaced their right to judicial adjudication,” and therefore, there could not have been a “meeting of the minds” between the parties when entering into the agreement.  According to the Appellate Division, the decision in Flanzman does not violate the language of the FAA because the Court made it clear that it did not impose additional requirements that would not be applied to other types of contracts. 

The New Jersey Supreme Court has now rejected the Appellate Division’s findings and has reversed the Appellate Division’s decision.  In doing so, the Appellate Division noted that policies favor arbitration agreements, as set forth and codified in the FAA and NJAA.  Both the FAA and NJAA establish “default” provisions which allow courts, upon a party’s application, to rule over the selection and appointment of an arbitrator, should the issue be left open.  As such, this has eased the requirements set forth by the Appellate Division’s decision previously imposed upon parties entering into an arbitration agreement that they must ensure that the agreement establishes the arbitration forum or the method and rules by which the matter is to be arbitrated.   

Liability Waivers in the Age of COVID-19

It is after Labor Day, which means football is back and slowly, schools are back in session. The return of school- and football- across much of the country this month has sparked a lengthy debate those of us in litigation defense and insurance fields are all too familiar with: what value is there in the protection of a liability waiver? The COVID-19 pandemic raises other questions about the legal impact, enforceability and practicability of such waivers.

Liability waivers are nothing new in the entertainment, sports, nursing home and insurance industries and their use was common in pre-pandemic life. Most parents who have enrolled a child in little league or gymnastics or almost any person who has bought a ticket to a sporting event have signed a liability waiver. In the COVID-19 age, the concept of having liability waivers signed is simple: anyone who wants to participate in a certain activity signs what is intended to be a legal document stating that (1) he or she assumes the risk of contracting COVID-19 through their participation and (2) agrees that the business, employer, school, college or even venue, is not liable for any COVID-19 related harms.

One document that releases and holds harmless entities from all COVID-19 related liability sounds great on paper. That said, while there are different types of waivers (hold harmless agreements, pre-injury waivers, assumption of risk waivers), the one thing that is certain is the uncertainty of the waiver’s enforceability. Different states take different approaches the enforceability question.

In Florida, for example, the law on liability waivers is that the waiver must be in clear, unequivocal language to be enforceable. UCF Athletics Ass’n v. Plancher, 121 So.3d 1097, 1101 (Fla. 5th DCA 2011). To be effective, the wording of such clauses must be so clear and understandable that an ordinary and knowledgeable person will know what he or she is contracting away. Raveson v. Walt Disney World Co., 793 So.2d 1171, 1173 (Fla. 5th DCA 2001)Waivers are strictly construed against the party seeking to relieve itself from liability. Gillette v. All Pro Sports, LLC, 135 So.3d 369, 370 (Fla. 5th DCA 2014). Further, liability waivers in Florida are unenforceable to disclaim against intentional, criminal or reckless conduct. Fresnedo v. Porky’s Gym III, 271 So.3d 1185 (Fla. 3d DCA 2019). 

Some attorneys might tell you that means in Florida, all you have to do is put the COVID-19 waiver in clear, unequivocal language and avoid reckless behavior. But the definition of what constitutes “reckless conduct” varies, and smart plaintiff’s lawyers are already filing complaints noting that engaging in certain activities in the midst of a global health pandemic is per-se reckless. That hypothetical and these early cases alone should raise red flags as to how thorny the law around liability waivers can be.

Other states have different rules.

Many states do not recognize parental waivers; in other words, waivers signed by parents for their children are not enforceable. This complicates the use of waivers in the school re-opening context.

Louisiana is one state that bars the use of waivers completely. Meanwhile, Georgia tends to follow Florida, but a fascinating and potentially COVID-19 related applicable exception emerges from a Supreme Court case that holds waivers can, at times, violate public policy, especially when “the consideration for the waiver contract is contrary to good morals and the law.” Carrion v. Smokey, Inc., 298 S.E. 2d 584, 585 (Ga. Ct. App. 1982) Tennessee had long favored expansive liability waivers, but a recent decision from their state Supreme Court changed that, noting that “bargaining power and leverage” will now be key considerations in determining what is enforceable. Copeland v. HealthSouth/Methodist Rehabilitation Hospital, LP, 565 S.W.3d 260 (Tenn. 2018). The Tennessee decision reflects a judicial trend in the waiver context, as courts increasingly look to bargaining power, a concept that is particularly interesting in the context of college sports and potential NCAA member institutional use of waivers.

At present, courts are only beginning to field legal challenges posed by COVID-19 liability waivers, even as state legislatures begin to act, further muddying the waters.

According to the American Tort Reform Association, 13 states and the District of Columbia have passed COVID-19 laws to limit the liability of health care providers and businesses. Governors of other states have issued executive orders limiting the liability of health care providers and some businesses. These new laws create constitutional questions, as well as enforceability ones.

All told, the debate over the use of liability waivers in the COVID-19 age is just beginning, but one thing seems certain: at a time of great uncertainty, the use or considered use of a liability waiver as a potential way to insulate from liability seems more widespread than ever.