Florida Supreme Court Overrules $28.6 Million Jury Verdict in Favor of Bar Owner

On March 7, 2024, the Florida Supreme Court issued a significant ruling in the case of Guardianship of Jacquelyn Anne Faircloth, Petitioner v. Main Street Entertainment, Inc., Respondent, effectively overruling a $28.6 million verdict against Potbelly’s, a bar that served alcohol to an underage patron involved in a serious traffic accident. This case highlights the complexities of Florida’s “Dram Shop” Statute and the intricate relationship between alcohol service, negligence, and liability.

The subject incident occurred in November 2014, when 20-year-old Devon Dwyer collided with 18-year-old Jacquelyn Faircloth as she crossed the street. Both individuals were intoxicated at the time, resulting in catastrophic injuries to Faircloth. In response, Faircloth's guardians filed a lawsuit against Potbelly’s and Cantina 101, alleging violations of Florida’s Dram Shop Statute, Section 768.125, which holds vendors accountable for unlawfully serving alcohol to underage patrons when such service leads to injury.

The Complaint asserted that both Dwyer and Faircloth were intoxicated, with Dwyer’s impaired driving causing the accident and Faircloth’s intoxication leading her to step into the street in front of Dwyer’s vehicle. During the trial, Potbelly’s admitted to knowingly serving alcohol to Dwyer (Cantina 101 defaulted). Critically, Potbelly’s sought to invoke a comparative fault defense, claiming that Faircloth's actions contributed to the accident. The trial court, however, rejected this defense, characterizing the action as an intentional tort due to the willful misconduct required under Section 768.125. The jury found Potbelly’s liable.

Following the trial court's decision, Potbelly’s appealed to the First District Court of Appeals. The appellate court sided with Potbelly’s, asserting that the trial court should have allowed the bar to present a comparative fault defense under Section 768.81. The appellate court clarified that, while the Dram Shop Statute necessitates willful conduct for liability, such conduct does not equate to an intentional tort; rather, it falls under the realm of negligence.  The matter was then appealed to the Florida Supreme Court.

The Florida Supreme Court upheld the appellate court’s conclusions, emphasizing that the willfulness requirement of Section 768.125 does not alter the essential link between the seller’s actions and the resulting injury. The Court elaborated that the statute limits liability to certain actors but does not eliminate the negligence framework established under common law. In its evaluation, the Supreme Court noted that Potbelly’s acknowledgment of serving alcohol to a minor constituted willfulness and created an unreasonable risk of harm. This knowledge, coupled with the circumstances of the case, framed Potbelly’s actions as negligent rather than intentionally tortious. 

The Florida Supreme Court’s ruling in this case serves as a pivotal clarification of the application of Florida’s Dram Shop Statute. By affirming the distinction between negligence and intentional torts, the Court has reinforced the necessity for bars and alcohol vendors to exercise caution in their service practices, particularly regarding underage patrons. This decision underscores the importance of understanding the nuances of negligence law in the context of alcohol service and related injuries.

An Update on New York State Litigation Financing Agreements

In April 2024 the Office of Court Administration (“OCA”) sought public comment on proposed amendments to Sections 202.67 and 207.38 of the Uniform Civil Rules for the Supreme Court and County Court (22 NYCRR §§ 202.67 & 207.38), to require disclosure of information relating to litigation financing agreements. The comment period closed in May 2024 and OCA is scheduled to discuss the proposal in September 2024.

Litigation funding is the practice of a third-party funding litigation for a plaintiff with the promise of repayment after a successful litigation. Generally, this is an unregulated industry in New York. While the proposed rule modifications have been introduced to restrict the use and/or scope of litigation funding agreements, the New York Court’s Advisory Committee on Civil Practice Law and Rules proposes to require disclosure of the agreements in certain cases. Advocates for litigation funding say that the agreements allow plaintiffs who would not otherwise be able to bring claims to court. Opponents of litigation funding argue that the agreements are predatory and reduce the recovery of the injured parties. New York does not currently have any regulations on litigation funding agreements, and the only way to receive information on the agreement is through discovery as part of litigation.

The proposed regulations would require the disclosure of funding agreements in civil cases involving wrongful death and personal injury where the Court must approve the settlement of the case. The disclosures would not just affect litigation funding agreements but also certain other ways of funding litigation. The amended rules affect contingency agreements, deferred payment agreements, and any money borrowed against the anticipated settlement.

The Advisory Committee on Civil Practice Law and Rules requested public comment and the majority of comments wanted to expand the rules to all litigation funding agreements. For example, the City of New York Law Department wrote in support of the proposal that the unregulated litigation funding industry is full of concerns regarding the behavior of the funding companies and the abuses that could and do occur. As an example, the case of Guss v. City of New York is given, where the litigation funding loans were $4,250 at the start of litigation and when litigation was finished and the loans came due, with interest, the amount was $2,838,487.65, an interest rate of over 60%.  The New York State Trial Lawyers Association (“NYSTLA”) opposed parts of the proposal.

If adopted, the proposal would bring the NYCRR in line with other jurisdictional rules, such as Rule 7.1.1 in the United States District Court of the District of New Jersey, requiring: (1) the identity of the funder(s); (2) whether the funder’s approval is necessary for litigation decisions; and (3) a brief description of the nature of the financial interest in the litigation.

Supreme Court of New Jersey Holds Scooters are Ineligible for PIP Benefits

A low-speed electric scooter (LSES) is a common sight in some areas, but how are the riders classified for insurance purposes? In Goyco v. Progressive Insurance Co. the Supreme Court of New Jersey held that a LSES is not considered a pedestrian or an automobile and thus a rider of a LSES is not eligible for PIP benefits.

On November 22, 2021, David Goyco was riding a LSES in Elizabeth, New Jersey, when an automobile struck and injured him. Goyco subsequently made a claim for PIP benefits from his insurer, Progressive. Progressive denied the claim, saying that the LSES was not an automobile, and Goyco was not a pedestrian at the time of the accident as he was operating the LSES. The definitions used in the policy conformed to the definitions used in the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -35 also known as the No-Fault Act.

The No-Fault Act defines a pedestrian as “any person who is not occupying, entering into, or alighting from a vehicle propelled by other than muscular power and designed primarily for use on highways, rails and tracks.” N.J.S.A.39:6A-2(h). The No-Fault Act requires PIP benefits for individuals if the insured individual is a pedestrian or “occupying, entering into, alighting from or using an automobile.” Goyco claims that the class of pedestrian should include LSES operators as LSES operators are grouped with bicycles in N.J.S.A. 39:1-1. However, the definitions in N.J.S.A. 39:1-1 only apply to Subtitle 1, and the No-Fault Act is in Subtitle 2, so unless the No-Fault Act brings in the definition explicitly N.J.S.A. 39:1-1 does not apply.

The Court in its analysis of whether Goyco was a pedestrian for purposes of the No-Fault Act, looked to the ordinary meaning of words not explicitly defined in the act. The first was the term “vehicle”, with the Court finding that a LSES falls within the various ordinary definitions of a “vehicle”. Next was whether the LSES was powered by muscular power, Goyco’s LSES was powered by a rechargeable electric battery and was not designed to be operated by other means. In prior case law a moped that could be pedaled manually was declared to be “propelled by other that muscular power” because the plaintiff was using the motor at the time of the accident and had intended to continue in the same manner. Nunag v. Pa. Nat. Mut. Cas. Ins. Co., 541 A.2d 306 (N.J. App. Div. 1988). Using the precedent and the facts present in this matter the court found that LSES are not propelled by muscular power. Finally, the Court used the ordinary meaning of highway to mean a public road and found that the LSES was designed to be used on public roads. All three elements mean that the LSES did not fulfill the requirements to be a pedestrian as defined by the No-Fault Act.

Padilla v. An Concludes Duty Should be Imposed on Vacant Lot Owners to Maintain Reasonable Sidewalks

Plaintiff, Alejandra Padilla, allegedly tripped and fell while walking on the public sidewalk abutting a vacant commercial lot owned by Defendants, Young Il An and Myo Soon An. Plaintiff claimed that the Defendants were negligent for failing to reasonably maintain the sidewalk. Defendants moved for summary judgment, arguing they did not owe Plaintiff a duty of care. The trial court granted Defendants’ motion and the Appellate Division affirmed.

On appeal, the New Jersey Supreme Court was asked to determine whether owners of vacant commercial lots have a common law duty to maintain the public sidewalks abutting those lots in reasonably good condition. The Court began its analysis by noting that whether a duty exists is ultimately a question of fairness. According to the Court, there is something “profoundly unfair” about commercial property owners purchasing vacant lots and having no responsibility whatsoever for maintaining the area where the general public traverses.

Furthermore, the New Jersey Supreme Court pointed out the difficulty of employing a case-by-case, commercial property-by-commercial property approach to determining when a duty is owed. Specifically, Defendants’ suggestion to base liability on profitability or a path to profitability to be an unworkable approach that will lead to inconsistent results and unfairly harm the public. Conversely, a bright-line rule that commercial property owners owe a duty is the most workable rule to protect the general public and to ensure consistency in commercial sidewalk liability law.

Ultimately, the New Jersey Supreme Court held all commercial landowners, including owners of vacant commercial lots, have a duty to maintain the public sidewalks abutting their property in reasonably good condition and are liable to pedestrians injured as a result of their negligent failure to do so. This rule “will clarify the scope of commercial sidewalk liability and provide clear guidance to courts, commercial property owners, and the public.”  Undoubtedly, this ruling will affect how litigants address cases with vacant commercial lots.

The Corporate Transparency Act Found Unconstitutional Only Two Years After Its Passing

In order to reveal or “crack down” anonymous shell companies Congress passed the Corporate Transparency Act. The Act became effective on January 1, 2021, due to Congress’ override. This act requires certain business entities (“reporting companies”) to file, in the absence of an exemption, information on their beneficial owners with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. FinCen is authorized to disclose information: to U.S. federal law enforcement agencies, with court approval to certain other enforcement agencies, to non-US law enforcement agencies, prosecutors or judges based upon a request of a U.S., federal law enforcement agency, and with consent of the reporting company, to financial institutions and their regulators. This Act was to shift the collection burden from financial institutions to the reporting companies. Additionally. it was to impose stringent penalties for willful non-compliance and unauthorized disclosures. More than 32 million entities were estimated to be affected by this Act and required to file.

The filing required the business name, current address, state of information, and tax identification number for each entity. Furthermore, the filing required the name, birth date, address, and a government-issued photo ID. A driver’s license or a passport of every direct and indirect owner sufficed. Since the indirect owners were included in this Act, it created a broad range of who would qualify as an indirect owner and the requirement of their personal information. High penalties were issued to those that failed to comply.

On March 1, 2024, the Corporate Transparency Act was ruled unconstitutional in the U.S. District Court of Alabama. This act was seen as already complicated because it applied to both direct ownership and beneficial ownership. The Plaintiffs in this case were the National Small Business Association (NSBA). One concern about the CTA was that private information is required to be filed such as a driver’s license or passport, home address, and a social security number which can lead to identity theft. Second, there was a short deadline. For example, the time frame for a change including a minor who turned 18 and was an owner of shares must be reported within 30 days. Compliance with the CTA caused a burden on small businesses and large and public businesses were exempt. The high penalty fines for failure to comply included a $500 daily civil penalty, fines of up to $10,000, and a two-year prison term for those that did not submit or update ownership information with FinCen. Furthermore, if parties knowingly failed to comply, that triggered a $500 per day civil penalty, $250,000 in fines, and a five-year federal prison sentence.

The recent ruling only affects the CTA compliance and filing requirements for NSBA members. The CTA still requires that law firms and other professionals that form business entities to file under the CTA. The severe penalties are still intact and business entities should analyze the law and comply with its requirements.

NY Appellate Division Finds No Duty to the Public for Event Sponsor

In a recent ruling from the New York Appellate Division’s Second Judicial Department, the Court affirmed a Kings County Supreme Court decision to dismiss the plaintiff’s Complaint against an event sponsor in a trip-and-fall case, finding that merely sponsoring an event did not create a duty to the public without control of the involved premises.

In Paden v. Brooklyn Museum of Arts, et al., plaintiff Francisca Paden was allegedly injured when she tripped over a sign on the sidewalk outside of the Brooklyn Museum of Art. The sign was advertising the “2018 CFDA Fashion Awards in partnership with Swarovski,” an event being hosted by the defendant museum and sponsored by Swarovski, a well-known jewelry retailer. The plaintiff filed suit to recover damages for personal injuries, naming as defendants the Brooklyn Museum of Art and Swarovski North America, Ltd., Swarovski Retail Ventures, Ltd., and Swarovski Digital Business USA Inc. Swarovski then moved to dismiss the Complaint, for failure to state a cause of action against them. The trial court granted their motion on the basis that there was no evidence that Swarovski owned, occupied, controlled, or used the property adjacent to where the incident occurred. The plaintiff then appealed the Decision.

The main issue in front of the Appellate Division was whether Swarovski owed a duty of care to the plaintiff. The Court, citing Smith v. Dutchess Motor Lodge, noted in their opinion that in order to establish common-law negligence, a plaintiff must demonstrate (1) a duty owed by the defendant to the plaintiff, (2) a breach of that duty, and (3) that the breach constituted a proximate cause of the injury. Further, in citing Torres v. City of New York, the Court went on to note that “liability for a dangerous or defective condition on property is predicated upon ownership, occupancy, control or special use of the property.”

In this case, the plaintiff was unable to prove that Swarovski had any responsibility for the location and maintenance of the sign, and was unable to demonstrate that Swarovski owned, occupied, controlled, or made special use of the property adjacent to the sidewalk where the plaintiff had tripped. As such, the Court held that the plaintiff did not sufficiently plead that Swarovski owed her a duty of care, and upheld the Supreme Court’s ruling to dismiss the plaintiff’s Complaint against Swarovski.

This ruling demonstrates that although the sign on the sidewalk was advertising a Swarovski-sponsored event, since the sign was located on property that was not owned, occupied, controlled, or made special use of by Swarovski, they had no responsibility for the location of the sign, and thus, did not owe any duty to the plaintiff. This ruling establishes an important precedent by shielding defendants against actions in which they lack ownership or control of a situation, and emphasizes the principle that a party’s legal duty or responsibility must be proportionate to their ability to affect the circumstances.