Kendall Healthcare Group v. Madrigal , 271 So. 3d 1120 ( 2019 )

Third District Court of Appeal
State of Florida
Opinion filed March 20, 2019.
Not final until disposition of timely filed motion for rehearing.
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No. 3D18-132
Lower Tribunal No. 15-25652
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Kendall Healthcare Group, Ltd., d/b/a Kendall Regional Medical
Center, et al.,
Appellants,
vs.
Rafael Madrigal, M.D., et al.,
Appellees.
An Appeal from the Circuit Court for Miami-Dade County, Jorge E. Cueto,
Judge.
White & Case LLP, and Raoul G. Cantero, David P. Draigh, and Ryan A.
Ulloa; Taché Bronis Christianson and Descalzo P.A., and Walter J. Taché and
Marissel Descalzo, for appellants.
Ross & Girten, and Lauri Waldman Ross and Theresa L. Girten; Marcus
Neiman & Rashbaum, LLP, and Michael A. Pineiro and Daniel Lawrence
Rashbaum, for appellees.
Before EMAS, C.J., and SCALES and HENDON, JJ.
HENDON, J.
The respondents below, Kendall Healthcare Group, Ltd. d/b/a Kendall
Regional Medical Center, et al. (collectively, “Kendall Regional”), appeal from a
final judgment entered under section 620.2122, Florida Statutes, of the Florida
Revised Uniform Limited Partnership Act (“the Act”), awarding each petitioner,
Dr. Rafael Madrigal, Dr. Juan Suarez, and Dr. Jorge Suarez Melendez
(collectively, “the physicians”), $3.34 million as the “fair value” for each limited
partnership interest (“LP interest(s)”) in Kendall Regional plus prejudgment
interest, compounded quarterly. For the reasons that follow, we affirm the final
judgment except for the calculation of the prejudgment interest and remand for a
recalculation consistent with this opinion.
I. Facts and Procedural History
In 1991, each of the three physicians purchased one LP interest in Kendall
Regional. Following a squeeze-out merger at the end of 2014, the physicians were
informed that each LP interest had been converted into the right to receive $1.1
million and each physician had the option to either accept the $1.1 million offer or
exercise his right to have the “fair value” of his LP interest determined by a court.
The physicians declined the offers and demanded a greater amount as the estimated
fair value for each LP interest. After the physicians’ demands were rejected, they
filed a petition for appraisal against Kendall Regional to determine the “fair value”
of their LP interests under section 620.2122 of the Act.
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At the non-jury trial on the physicians’ petition for appraisal, both sides
presented expert testimony as to the fair value of each LP interest. The experts
utilized the same valuation method, which required each expert to take into
account numerous factors, including the “cost of capital” and whether a “company-
specific risk premium” (“CSRP”) should be added to the discount rate.
The record before this Court indicates that the trial judge actively
participated during the bench trial by asking several questions relating to the
assessment of the fair value of each LP interest. At the conclusion of the trial, the
trial judge made one specific finding as to the equity debt capital. Further, the trial
judge instructed the parties to submit proposed orders, and in doing so, made
statements indicating that he had not made a final determination as to the CSRP
and the cost of capital. For example, the trial court stated: “If you want to address
those issues in your judgments, I would be happy to entertain them.”
In their proposed orders, each party set forth figures relating to the cost of
capital and the CSRP that favored their respective positions. Approximately two
weeks after the proposed orders were submitted, the trial judge adopted the
physicians’ proposed order verbatim, except for changing the title of the order.
The order valued each LP interest at $3.34 million and awarded prejudgment
interest to the physicians, compounded quarterly. Thereafter, the trial court
entered a final judgment. Kendall Regional’s appeal ensued.
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II. Analysis
A. Trial Judge’s Verbatim Adoption of the Physicians’ Proposed Order
Kendall Regional contends that the trial judge failed to exercise its
independent judgment because it adopted verbatim the physicians’ proposed order.
Based on the record before this Court, we disagree.
In Perlow v. Berg-Perlow, 875 So. 2d 383 (Fla. 2004), the Florida Supreme
Court did not prohibit a trial judge from adopting verbatim the proposed order of
one of the parties. However, the Court did caution that a party’s proposed order
“cannot substitute for a thoughtful and independent analysis of the facts, issues,
and law by the trial judge.” Id. at 390. In Perlow, the trial judge adopted verbatim
the proposed order of one party without giving the other party an opportunity for
comments or objections. In reversing the order under review, the Florida Supreme
Court stated:
When the trial judge accepts verbatim a proposed final judgment
submitted by one party without an opportunity for comments or
objections by the other party, there is an appearance that the trial
judge did not exercise his or her independent judgment in the case.
This is especially true when the judge has made no findings or
conclusions on the record that would form the basis for the party’s
proposed final judgment. This type of proceeding is fair to neither the
parties involved in a particular case nor our judicial system.
Id. (footnote omitted). Further, the Florida Supreme Court provided the following
guidance to trial judges when requesting proposed orders:
(1) the trial judge may ask both parties or one party to submit a
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proposed final judgment; (2) if proposed final judgments are filed,
each party should be given an opportunity to review the other party’s
proposed final judgment and make objections; (3) if only one party
submits a proposed final judgment, there must be an opportunity for
review and objections by the opposing party; and (4) prior to
requesting proposed final judgments, the trial judge should, when
possible, indicate on the record the court's findings of fact and
conclusions of law.
Id. at 384.
Based on our review of the record, we reject Kendall Regional’s argument
that the trial judge failed to exercise his independent judgment merely because he
adopted verbatim the physicians’ proposed order. The transcript reflects, and
Kendall Regional has acknowledged, that the trial judge actively participated in the
non-jury trial. The trial judge asked pertinent questions relating to the valuation of
the physicians’ LP interests, and based on those questions and other statements
made by the trial judge during the bench trial, it appears that the trial judge
understood the expert testimony regarding the valuation of the LP interests. See
Cabrera v. Cabrera, 987 So. 2d 753, 755 (Fla. 3d DCA 2008) (“[T]he record before
us indicates that the trial court actively participated in the final hearing. The trial
court’s active participation in the proceedings supports our conclusion that there is
no appearance that the trial court did not exercise its independent judgment when
entering the final judgment in the instant case.”). Further, at the conclusion of the
non-jury trial, the trial court made only one definitive finding of fact—the use of a
30/70 capital structure—and that finding is included in the final order. The
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transcript also indicates that the trial court did not make definitive findings as to
the “cost of capital” or whether a CSRP should be added to the discount rate. The
judge informed the parties that he was leaning in certain directions as to those
factors and informed the parties as follows: “If you want to address those issues in
your judgments, I would be happy to entertain them.” Further, the trial judge
allowed both parties to submit proposed orders, and by doing so, each party’s
submissions likely “apprise[d] the judge of their positions and their disagreements
with the opposing party’s” position. See In re T.D., 924 So. 2d 827, 830 n.2 (Fla.
2d DCA 2005).
Based on the above analysis, although the trial judge adopted verbatim the
physicians’ proposed order, the record before this Court reflects that the trial judge
did not delegate its independent judgment. See Empire World Towers, LLC v.
CDR Créances, S.A.S., 89 So. 3d 1034, 1046 (Fla. 3d DCA 2012). Accordingly,
reversal is not warranted on this basis.
B. Award of Prejudgment Interest, Compounded Quarterly
Kendall Regional does not challenge the trial court’s determinations that the
physicians are entitled to prejudgment interest as of the date of the merger or the
interest rate the trial court applied. However, Kendall Regional contends that the
trial court erred by determining that the prejudgment interest should be
compounded quarterly and argues that the prejudgment interest should be
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calculated using simple interest. We agree.
The physicians have acknowledged that the general rule in Florida is that
interest should not be permitted on a sum that is interest itself—“interest on
interest”—but argue that the general rule is not applicable. In making this
argument, the physicians rely on (1) section 620.2122(1), which requires the trial
court to “determine the fair value of the partnership interests and accrued
interest” (emphasis added); (2) section 620.2122(5), which provides that “[e]ach
partner made a party to the proceeding is entitled to judgment for the amount of the
fair value of such limited partner’s limited partner partnership interests, plus
interest, as found by the court” (emphasis added); and (3) section 620.1107(1)
which provides that “the principles of law and equity supplement [the Act].” We
do not interpret any of these provision as authorizing the trial court to award
compounded prejudgment interest.
In finding that the prejudgment interest should be compounded, the trial
court relied on Computer Task Group, Inc. v. Peierls, 810 So. 2d 977 (Fla. 5th
DCA 2002). The trial court’s reliance was misplaced. First, Computer Group was
decided under section 607.247(8), Florida Statute (1987), which “governs the
interest to be awarded dissenting shareholders in an appraisal proceeding.”
Computer Task, 810 So. 2d at 978. In contrast, in the instant case, prejudgment
interest was awarded pursuant to section 620.2122(1), (5) of the Act, which applies
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to limited partnerships. Second, the language in section 607.247(8) differs
substantially from the language in sections 620.2122(1) and (5). Unlike the
language in sections 620.2122(1) and (5), the language in section 607.247(8)
indicates that the Legislature granted the trial court discretion in determining the
rate of interest based on what “the court may find to be fair and equitable in all the
circumstances.”
Finally, the trial court’s reliance on In re Sunbelt Beverage Corp.
Shareholder Litigation, 2010 WL 26539 (Del. Ch. 2010), was also misplaced.
Unlike section 620.2122, the applicable Delaware statute specifically provides that,
“[u]nless the Court in its discretion determines otherwise for good cause shown,
interest . . . shall be compounded quarterly . . . . ” As the Delaware statute
indicates, if a legislature intends to have interest compounded or to give the trial
court discretion to do so, it knows how to clearly set forth its intent in a statute.
Therefore, based on the above analysis, we reverse the portion of the final
judgment that provides that the prejudgment interest should be compounded
quarterly and remand for a recalculation of prejudgment interest utilizing simple
interest.
Accordingly, we affirm all portions of the final judgment except for the
portion stating that the prejudgment interest should be compounded quarterly and
remand for a recalculation.
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Affirmed, in part; reversed, in part, and remanded for a recalculation of
prejudgment interest.
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