MIAMI BUSINESS LITIGATION: LITIGATION PRIVILEGE DOES NOT PROTECT ALL ACTS

Companies in business litigation often want to sue persons who make slanderous statements or outright lies about them during legal proceedings. Under Florida’s absolute litigation privilege, a defendant may slander and lie and still be absolutely immune from a later lawsuit for defamation, tortious interference with a business relationship, and some other causes of action, so long as the slander and lies were made in the courtroom or during the formal discovery process and had some relation to the litigation. Some litigants have tested the limits of what could be considered an act done in the course of or in relation to litigation to avoid liability for such statements. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

An example of this occurred in the case of Arko Plumbing Corp. v. Rudd, 230 So. 3d 520 (Fla. 3d DCA 2017), Arko Plumbing Corporation (Arko) identified cracks in pipes, assisted homeowners in filing claims under their insurance policies, and replaced the damaged cast-iron pipes. Arko used a MotoMon Global Positioning System, an internet-based computer program, that recorded historical and real-time access to the location of Arko’s service vans. John Collucci (Collucci), a former Arko employee possessed a, still-active password to the MotoMon program. Michael Rudd (Rudd) and his law firm, Rudd & Diamond, P.A., represented insurance companies on claims that they breached homeowner’s insurance policies by not covering Arko’s repairs to the homeowners’ damaged pipes. Colluci assisted Rudd and his firm by providing access to the historical location information for eighteen Arko clients. Rudd and his firm issued subpoenas to Arko for its MotoMon information, including information related to location of Arko service vans at specific residences. Rudd and his firm conducted examinations under oath required by the insurance policy and asked questions based information they obtained through the Motomon system concerning Arko’s historical location information of its service vans.

Arko filed a lawsuit against Rudd and his firm, and various other defendants, including Collucci. Arko’s claims against Rudd and his firm were based on: (a) their unauthorized access to the MotoMon account, and (b) the questions asked during the examination under oath, which were based on information from the MotoMon system. Rudd and his firm moved for summary judgment based on, among other things, the litigation immunity privilege and because the information on the MotoMon program was not a trade secret under Florida law. The trial court granted the motion for summary judgment. Arko moved for rehearing, but it was denied. Arko immediately appealed.

Florida’s litigation immunity privilege provides absolute immunity “to any act occurring during the course of a judicial proceeding … so long as the act has some relation to the proceeding.” Echevarria, McCalla, Raymer, Barrett & Frappier v. Cole, 950 So.2d 380 (Fla. 2007). In business litigation, the absolute privilege does not apply “where an attorney steps outside of both the courtroom and the formal discovery process to investigate a claim.” DelMonico v. Traynor, 116 So.3d 1205 (Fla. 2013). As an alternative, a “qualified privilege” applies “to statements made by attorneys as they undertake informal investigation during pending litigation and engage in ex-parte, out-of-court questioning of nonparty witnesses, ‘so long as the statements are relevant to the subject of inquiry’ in the underlying suit.” DelMonico v. Traynor, supra. If the trial court determines that the qualified privilege applies, the burden is on the plaintiff to prove the additional element of express malice (wickedness).

Arko contended the trial court erred in granting summary judgment because: the litigation immunity privilege did not apply to the defendants’ unauthorized access to Arko’s MotoMon account or to their examination questions, and if it did that Rudd and the firm acted with express malice. Arko also contended that the information contained in Arko’s MotoMon account was a trade secret and subject protection under Florida’s trade secret act.

On appeal, the appellate court considered the following three issues: “(1) does the litigation privilege extend to Rudd and his firm’s accessing Arko’s MotoMon account; (2) does the absolute or qualified privilege apply to Rudd’s questions at the examination under oath; and (3) was the information on Arko’s MotoMon account a trade secret. On the first issue, the appellate court held that “[w]hile the absolute and qualified litigation privilege applies to statements and acts that have some relation to a judicial proceeding, a review of the Florida Supreme Court’s litigation privilege decisions shows that the statements and acts must be communicative.” The appellate court held that Rudd’s access of Arko’s MotoMon account on his law firm computer was a noncommunicative act. The appellate court stated “[j]ust as sneaking into an old friend’s house to look at the books in his library doesn’t communicate anything to the friend, accessing the account using Collucci’s password did not communicate information to another person.” The appellate court held that “Rudd’s sitting at his computer and accessing Arko’s MotoMon account was not a communication subject to the privilege.”

On the second issue, Akro contended that though the examination questions under oath were communications, they were not part of the formal discovery process, so the qualified privilege should apply. Rudd contended that examination questions under oath were like a deposition and should be considered part of the litigation process. If Rudd was correct, the questions were covered by the absolute litigation immunity privilege. The difference is that under the qualified privilege Arko must show that Rudd’s primary motive in asking the questions was to injure Arko’s reputation. The appellate court rejected Rudd’s argument that the examination was analogous to a deposition and so the absolute privilege did not apply.

However, the appellate court held that the qualified privilege applied because Rudd’s questions were part of the informal investigation during pending litigation and had some relation to the lawsuit against the insurance company. The appellate court further held that the trial court erred in finding that Arko presented no summary judgment evidence that Rudd acted with express malice. Rudd’s questions about Arko committing fraud were based on the information provided by Arko’s former employee Collucci. Arko presented summary judgment evidence that Collucci’s illegal acts caused his termination from Arko and demonstrated how Collucci wanted revenge against Arko and its management. Rudd and his firm based their examination questions on the information that Collucci shared with them. Rudd knew of conflicting information about Collucci’s credibility, including that he left Arko on bad terms, had lied under oath, and had been promised payment for his testimony, and did not investigate Collucci’s criminal background, including that he was on probation and had abused heroin. Rudd then used Collucci’s information to ask an Arko client about Arko’s fraud. A summary judgment motion in business litigation cannot be granted when there is a genuine issue of material fact in dispute. Such an issue must be heard by the jury. The appellate court held that the question of express malice was a genuine disputed fact for the jury.

On the third issue, the appellate court held that Arko’s summary judgment evidence created a genuine issue of material fact that the information on the MotoMon account was a trade secret. In business litigation, customer information has been found to be a trade secret. Sea Coast Fire, Inc. v. Triangle Fire, Inc., 170 So.3d 804 (Fla. 3d DCA 2014). A trade secret is information…that…[d]erives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.” Section 688.002, Florida Statutes. Arko’s summary judgment evidence showed that Arko’s GPS tracking device on its trucks linked up to the MotoMon program to capture in real time the customers and potential customers that Arko trucks visited to provide plumbing services. The appellate court held that customer addresses, the dates of visits to customers, and the length of time the truck was at the customer’s home would have been valuable to Arko competitors because with it they could have solicited Arko customers and offered plumbing services that undercut Arko’s prices. Arko kept this information from its competitors and the public by requiring a password to access the MotoMon program.

The appellate court reversed the summary judgment entered in favor of Rudd and his firm and remanded the case back to the trial court for further proceedings consistent with its opinion. Peter Mavrick is a Miami business litigation attorney who also practices business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.