FLORIDA BUSINESS LITIGATION: DEFENSE AGAINST CLAIMS ASSERTING “INTRACORPORATE CONSPIRACY”

Aggrieved litigants can claim they are victims of a conspiracy – that a group of persons has agreed to perform an unlawful act and damaged them. Such claims can expose multiple parties to liability for the same conduct by allegedly contributing to harm against the plaintiff. A “conspirator” can be found responsible for a harm that he did not personally cause, as long as he performed an “overt act” in the assistance of others in the “conspiracy.” Walters v. Blankenship, 931 So.2d 137 (Fla. 5th DCA 2006). Peter Mavrick has successfully represented clients in Palm Beach, Broward, and Miami-Dade business litigation and related arbitration proceedings.

Florida courts have carved out an exception to the broad reach of conspiracy claims in a legal doctrine called the “intracoporate conspiracy doctrine.” In general, when a party is involved in a conspiracy only because he was acting on behalf of another, such as when an employee does something for his company, he can evade liability for conspiracy under the intracorporate conspiracy doctrine. The philosophy behind this rule is that when someone is acting entirely on behalf of another, and not on his own behalf, that person is not really “conspiring” with anyone. After all, a company cannot exist without its agents, i.e., the people employed by the company.

The intracorporate conspiracy doctrine, however, does not shield an alleged conspirator if he has a sufficient personal stake in the conspiracy. Greenberg v. Mount Sinai Medical Center of Greater Miami, Inc., 629 So. 2d 252 (Fla. 3d DCA 1993). By contrast, an employee that is simply doing what his boss has directed him to do and is paid a salary for that work is not “conspiring” with his employer. Courts have also held that the mere fact that an employee would be paid a larger bonus if the conspiracy succeeded is not deemed a sufficient personal stake to form a conspiracy. HRCC, Ltd. v. Hard Rock Int’l (USA), Inc., 302 F.Supp.3d 1319 (M.D. Fla. 2016). The law is not clear how much of a “personal stake” must a person have in order for the intracorporate conspiracy to no longer operate as shield against liability for a conspiracy claim. Florida cases have historically been vague as to the degree of a personal stake that is necessary for a participant to be found to a conspirator.

Florida’s Fourth District Court of Appeal (which includes Broward County and Palm Beach County) sought to clarify the personal stake exception in Mancinelli v. Davis, 217 So. 3d 1034 (Fla. 4th DCA 2017). In that case, an alleged victim of a conspiracy contended that the owner of a company abused his authority within a corporation to illegally extort one of its customers in a scheme to increase the money he would receive from the sale of the business. The basis for this claim was that prospective purchasers of companies often use a multiplier of current revenue to estimate how much a company will make in the future. Therefore, prospective purchasers of companies are willing to pay more to the owners for those companies when those companies have a high revenue, because they are under the impression that the revenue will continue to increase in the future. The alleged victim in Mancinelli v. Davis claimed that the owner of the company and the company itself conspired to extort the alleged victim by artificially inflating short-term profits to the detriment of long-term profits. The seller would be able to claim that his company was more profitable in the long-term than it really was, and receive a premium on the profit of the sale. In such a situation, the company would have a stake separate from the seller who owned the company.

The appellate court determined that the seller profiting from the illegal actions of his own company is not necessarily independent enough to be in the conspiracy. However, the appellate court suggested that the owner in such a situation could potentially have a sufficiently strong personal stake to form a conspiracy and found that the alleged victim would have the opportunity to claim facts which could qualify as a sufficient personal stake.

Despite this clarification from the Fourth District Court of Appeal, Florida courts continue to struggle with what qualifies as a sufficient “personal stake.” Courts have reached conflicting opinions on this matter with even the same facts and parties. Several pending Florida cases in federal courts are struggling with the issue as to whether a lawyer or law firm that helps a “timeshare exit company” get regretful buyers out of their timeshares can be deemed to have conspired with the timeshare exit company. In Wyndham Vacation Ownership v. Reed Hein & Associates, LLC, 618CV02171GAPDCI, 2019 WL 2232241 (M.D. Fla. May 23, 2019), the a Florida federal court determined that the fee of $1,200 per file paid to lawyers and firms by the timeshare exit companies are not independent personal stake, because this personal stake is not derived from the timeshare exit companies’ stake. Yet another Florida federal court decision dealing with those same facts and same defendants came to the opposite conclusion in Orange Lake Country Club, Inc. v. Reed Hein & Associates, 617CV1542ORL31DCI, 2018 WL 5279135 (M.D. Fla. Oct. 24, 2018).

Cases also conflict as to whether the alleged victim or conspirator has the legal burden to prove whether applicability of the intracorporate conspiracy doctrine. Compare Mancinelli v. Davis, 217 So. 3d 1034 (Fla. 4th DCA 2017) (finding that it is the burden of an alleged victim of a conspiracy to prove the independence of the conspirators because it is a fundamental element of a conspiracy claim) and Balthazar Mgmt., LLC v. Beale St. Blues Co., Inc., 17-CV-81214, 2019 WL 1958548 (S.D. Fla. Apr. 9, 2019) (finding that it is the alleged conspirator’s burden to prove the doctrine applies).

Peter Mavrick is a commercial litigation attorney who had successfully represented many clients in business disputes. This article does not serve as a substitute for legal advice tailored to a particular situation.