James Fratangelo v. John Olsen ( 2018 )

Third District Court of Appeal
State of Florida
Opinion filed December 21, 2018.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D18-1016
Lower Tribunal No. 15-18158
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James Fratangelo, et al.,
Petitioners,
vs.
John Olsen,
Respondent.
On Petition for Writ of Certiorari from the Circuit Court for Miami-Dade
County, William Thomas, Judge.
Gunster, and Angel A. Cortinas and Jonathan H. Kaskel, for petitioners.
Buchanan Ingersoll & Rooney PC, and Jennifer Olmedo-Rodriguez and
Mark S. Auerbacher, for respondent.
Before ROTHENBERG, C.J., and SUAREZ and LAGOA, JJ.
SUAREZ, J.
James Fratangelo et al.1 (“Fratangelo”) petition for writ of certiorari and to
quash the trial court’s April 20, 2018 non-final Order, and to instruct the trial court
1 The Petitioners include Fratangelo and several of his companies: 21 Assets
Management Holdings, LLC (“21-AMH”); Assets Recovery 23, LLC (“AR23”);
BLB Trading, LLC; AMH 21 Trust; AMH 21, LLC; Assets Recovery 24, LLC;
and Assets Recovery 27, LLC.
to enter final judgment for Fratangelo, or, alternatively, to instruct the trial court to
enter final judgment based on the twenty-six assets and remaining counts that were
tried in the November 27, 2017 bench trial. We dismiss the petition, as Fratangelo
has failed to show any required irreparable harm.
FACTS
James Fratangelo, John Olsen, and Daniel Coosemans2 together owned
multiple limited liability companies (“LLCs”) and subsidiaries formed to invest in
and rehabilitate low or non-performing assets. Two primary LLCs are at issue in
this appeal: 21-AMH, and AR23. Olsen was the original owner of 21-AMH, but
Fratangelo eventually became a 50% owner. Effective January 1, 2013, Olsen and
Fratangelo entered into purchase and sale agreements (“General Agreements”), to
divest Olsen of his role in 21-AMH and to leave Fratangelo sole owner, at least on
paper.3 Around March of 2014, Fratangelo and Olsen decided to part ways, and to
wind up their multiple business relationships. Effective September 1, 2014, Olsen
2 Coosemans settled his case against Fratangelo. The trial court granted
Coosemans’ motion to enforce that December 1, 2017 Settlement Agreement, and
Fratangelo’s appeal from that order is currently pending before this Court, see
3D18-705.
3The trial court found that, based on evidence in the record, Olsen and Fratangelo
continued to make management decisions regarding 21-AMH even after the
purchase and sale agreement.
2
and Fratangelo entered into Amended Agreements wherein Olsen agreed to release
Fratangelo from any and all claims arising before that effective date, including all
claims arising from disposition of 21-AMH assets, including the subsidiaries. The
Amended Agreements also provided for division of assets and an accounting for
any missing, unknown, or concealed assets (the “Missing Assets”).
Olsen ultimately sued Fratangelo for 1) breach of the 21-AMH agreement;
2) breach of the AR23 agreement; 3) joint venture; 4) declaratory relief; 5)
equitable accounting; and 6) unjust enrichment. Olsen alleged that Fratangelo sold
or transferred assets of 21-AMH and AR23 prior to the effective dates of the
General and Amended Agreements, hiding these transactions from Olsen and
thereby diminishing the number and value of missing assets.
FIRST TRIAL
The trial court dismissed Olsen’s joint venture count and entered a partial
final judgment in favor of Fratangelo regarding the Release, determining the
Release was valid and enforceable, and that Olsen expressly agreed to extinguish
any claims involving 21-AMH arising prior to September 1, 2014. The court
found that Olsen had sufficient information to determine the identity of Missing
Assets and to demand liquidation under the General Agreements, and had no
membership interest in 21-AMH after the effective date of first General
Agreement. The trial court directed the parties to prepare a joint list of all potential
Missing Assets. The parties submitted a list of 525 potential Missing Assets.
3
 At the end of the discovery period, the trial court granted partial summary
judgment in favor of Fratangelo by concluding 460 of the potential Missing
Assets were actually sold and payment was made to Olsen.
 The trial court granted partial summary judgment in favor of Fratangelo on
Olsen’s claims regarding thirty-two additional assets, concluding those were
not Missing Assets. Seven of those had been transferred to a subsidiary of
21-AMH.
 The trial court granted partial summary judgment in favor of Fratangelo on
Olsen’s claims regarding seven additional assets, concluding they had been
charged off and Olsen had abandoned any claims to them.
 The trial court granted partial summary judgment on Olsen’s breach of
contract claims against five more assets, but allowed Olsen’s claims as to
those five assets to proceed for equitable accounting.
SECOND TRIAL
At the time of the second trial in front of a successor judge, only twenty-six
assets remained to be determined. The trial court denied Olsen’s motion to
bifurcate the issues of liability and damages, and proceeded to conduct an eight-
day bench trial, during which the trial court, upon considering new testimony and
evidence, revisited and reversed several of the prior partial summary judgments.
The trial court found that the parties were partners, and that disposition of certain
4
assets prior to the September 1, 2014 Amended Agreement could result in
cognizable claims against Fratangelo. The court found that Olsen did not release
Fratangelo from claims arising out of those asset transfers, that Fratangelo had
breached the General Agreements, and that Olsen was entitled to recover the value
of assets transferred prior to September 1, 2014, and for revenue generated from all
Missing Assets. The trial court determined that,
Based on the facts presented, the Court finds that the greater weight of
the evidence shows Defendants breached obligations by failing and
refusing to disclose and/or account for Missing Assets; failing to make
appropriate distributions; and failing to provide cooperation in regards
to documenting and liquidating or transferring "Transferred Assets."
The trial court ordered a third trial for equitable accounting, explaining that
without such an accounting Olsen was not capable of fully quantifying his
damages. Fratangelo moved for entry of final judgment and reconsideration of the
non-final Order, arguing it was based on 1) an impermissible finding of an unpled
partnership; 2) due process violations stemming from the un-noticed
reconsideration and reversal of prior partial summary judgments; 3) erroneous
retention of jurisdiction to allow Olsen to pursue an equitable accounting. The trial
court denied the motion, and Fratangelo here petitions for a writ of certiorari
seeking to quash that order and enter judgment in his favor.
ANALYSIS
We note that the Petitioners seek review of the trial court’s non-final order
via petition for certiorari, rather than by waiting until the litigation has concluded
5
to take an appeal from the as yet undetermined Final Judgment. Therefore, our
standard of review is not what it would be for an appeal from a final judgment. A
non-final order for which no appeal is provided by rule is reviewable by certiorari
only in extremely limited circumstances. The non-final order is reviewable only if
the order is a departure from the essential requirements of law and thus causes
material injury to the petitioner throughout the remainder of the proceedings,
effectively leaving no adequate remedy on appeal.4 See Bd. of Trs. of Internal
Improvement Trust Fund v. Am. Educ. Enters., 99 So. 3d 450, 454 (Fla. 2012);
Williams v. Oken, 62 So. 3d 1129, 1132 (Fla. 2011) (quoting Reeves v. Fleetwood
Homes of Fla., Inc., 889 So. 2d 812, 822 (Fla. 2004)); Allstate Ins. Co. v.
Langston, 655 So. 2d 91, 94 (Fla. 1995). The threshold question that must first be
addressed by this Court, before we may address the petition itself, is whether there
is a showing of a material injury/irreparable harm that cannot be corrected on
appeal. See Citizens Prop. Ins. Corp. v. San Perdido Ass'n, Inc., 104 So. 3d 344,
351 (Fla. 2012) (holding that before certiorari can be used to review non-final
orders, the appellate court must focus on the threshold jurisdictional question of
whether there is a material injury that cannot be corrected on appeal). Only after
irreparable harm has been established can an appellate court then review whether
4 Many of the arguments raised in the petition are arguments which may be
appropriate and relevant for review upon appeal of a final judgment but not on
certiorari review of a non-final order.
6
the petitioner has also shown a departure from the essential requirements of law.
Id.
We first consider the threshold jurisdictional issue of irreparable harm.
Fratangelo claims that as a result of the trial court’s non-final order he has suffered
prospective loss of business and impaired relationships with employees and
vendors. He asserts he has suffered irreparable harm because 1) companies with
which he previously did business, or was negotiating to do business with, have
been reluctant to engage in business with him; 2) prospective lenders have notified
him that his reputation stemming from this lawsuit may impair his ability to
conduct future business; 3) prospective principals to a proposed new company
have expressed “concern and reluctance” to proceed as a result of the trial court’s
order; and 4) some of his employees have received negative emails about their
employment with Fratangelo’s companies. As a matter of law, however, none of
these claimed damages rise to the level of an irreparable injury that cannot be
addressed on appeal from a final judgment. Fratangelo’s claims of reputational
harm and others’ “reluctance” to engage in prospective business deals are too
prospective and speculative in nature to invoke the certiorari jurisdiction of this
Court, which may be exercised only upon a proper, legally recognized showing of
irreparable harm. See Martin–Johnson, Inc. v. Savage, 509 So. 2d 1097, 1100 (Fla.
1987) (recognizing that to establish the type of irreparable harm necessary in order
to permit certiorari review, a party cannot simply claim that continuation of the
7
lawsuit would damage one's reputation); Holden Cove, Inc. v. 4 Mac Holdings,
Inc., 948 So. 2d 1041, 1042 (Fla. 5th DCA 2007) (stating irreparable harm cannot
be premature or speculative). Without this threshold showing of irreparable harm,
Fratangelo has not met the required jurisdictional threshold for us to consider the
petition and, therefore, the petition for certiorari must be dismissed.
We write further only to state that, even had that jurisdictional threshold
been met, certiorari would still not be an appropriate remedy. Fratangelo’s due
process arguments fail to consider that prior to final judgment, a successor judge
has the power to vacate or modify a predecessor's interlocutory rulings, such as an
order on a motion for summary judgment. Because the trial judge here had not
entered a final judgment in the case, he could modify his previous rulings and
those of his predecessor. See Tingle v. Dade Cty Bd. of Cty Commissioners, 245
So. 2d 76, 78 (Fla. 1971) (successor judge may “vacate or modify the interlocutory
rulings or orders of his predecessor in the case.”); Wasa Int'l Ins. Co. v. Hurtado,
749 So. 2d 579 (Fla. 3d DCA 2000). To be sure, the facts became more fully
developed once the litigation entered the second trial phase. During the second trial
phase, the court found substantial competent evidence that Fratangelo breached the
General Agreements by hiding and transferring assets for his own gain. Fratangelo
has not made any convincing argument that the equitable accounting ordered by
the trial court is error. Indeed, after hearing the evidence presented, the trial court
specifically held that the contract demands between the litigants involve extensive
8
or complicated accounts and that it was not clear that the remedy at law is as full
and adequate as it is in equity.5 In light of the 8-day bench trial during which the
trial court heard extensive additional evidence and weighed the credibility of
multiple witnesses, the trial court was free to revisit any prior interlocutory, non-
final orders entered by the predecessor judge – including, but not limited to, the
findings of fact and conclusions of law made by the predecessor judge in the
September 6, 2016 Order. Accordingly, we find the Petitioner’s due process
arguments and reliance on St. Petersburg Hous. Auth. v. J.R. Dev., 706 So. 2d
1377, (Fla. 2d DCA 1998), and Levy v. Ben-Shmuel, 255 So. 3d 493 (Fla. 3d DCA
2018), to be inapposite, as the facts in both of those cases arose out of final
judgments and not, as here, from a non-final order. This litigation is not ended, and
until a Final Judgment is rendered, the Petitioners have not met their burden to
establish either irreparable harm or a departure from the essential requirements of
the law.
Having found no material or irreparable harm that cannot be remedied on
appeal from a final judgment, we dismiss the petition.
Lagoa, J., Concurs.
5 We find Fratangelo’s concern that the trial court has given Olsen “unfettered
access” to confidential financial records to be easily remedied by a motion filed in
the trial court to seal those records to prevent unauthorized disclosure. See e.g.,
Eberhardt v. Eberhardt, 666 So. 2d 1024 (Fla. 4th DCA 1996) (holding that
discovery requiring production of personal income tax returns in case involving
claim for breach of contract and accounting, in and of itself, not irreparable harm).
9
James Fratangelo v. John Olsen
Case No. 3D18-1016
ROTHENBERG, C.J. (dissenting).
10
The petitioners, James Fratangelo (“Fratangelo”) and several of his
companies, 21 Assets Management Holdings, LLC (“21-AMH”), Assets Recovery
23, LLC (“AR23”), BLB Trading, LLC (“BLB”), AMH-21 Trust, AMH 21, LLC
(“AMH 21”), Assets Recovery 24, LLC (“AR24”), and Assets Recovery 27, LLC
(“AR27”) (collectively, “the petitioners”), seek certiorari review of the trial court’s
non-final April 20, 2017 order issued after a bench trial. Because the record
reflects that the trial court departed from the essential requirements of law,
resulting in irreparable harm that cannot be adequately remedied on direct appeal,
the petition should be granted.
The Underlying Lawsuit
Fratangelo, respondent John Olsen (“Olsen”), and Daniel Coosemans
(“Coosemans”) entered into a business relationship in 2007 wherein they formed
limited liability companies for the purpose of purchasing performing and non-
performing first and second mortgages, home equity loans, lines of credit, credit
card debt collections, non-performing auto loans, and REO properties (“distressed
assets”). Through these limited liability companies, the parties improved the
performance of the loans and the payment of debts or liquidated them for a
negotiated cash settlement. The parties’ relationships were governed by fully
integrated limited liability company operating agreements.
There were three sets of companies, which the parties generally refer to as
the “Miami Companies,” the “Panama Companies,” and the “Virgin Island
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Companies.” The Miami Companies included 21-AMH and its subsidiaries, BLB,
AMH-21 Trust and AMH 21. The Panama Companies included AR23, AR24, and
AR27. The Virgin Island Companies included various companies, which will not
be identified as they are not relevant to this petition. At various times, the parties
were members of and managed their businesses through two primary limited
liability companies: (1) 21-AMH, the Miami Company, operated by Fratangelo
and Olsen; and (2) AR23, the Panama Company, which was managed by
Coosemans.
In August 2011, Olsen withdrew from AR23 and thereafter Fratangelo and
Coosemans each had a 50% membership in AR23. The operating agreement was
therefore amended to reflect that as of August 2011, Olsen had no membership
interest in AR23.
On January 1, 2013, Olsen also entered into a purchase and sale agreement
with Fratangelo (“the original 21-AMH agreement) wherein he divested his
membership interest in 21-AMH (the Miami Company). Pursuant to this
agreement, Fratangelo was to pay Olsen $300,000 within 24 months; Olsen was to
receive the redemption assets listed on Schedule A and the sold assets listed on
Schedule B; and Fratangelo was to receive the assets listed on Schedule C.
Although, as of January 1, 2013, Olsen no longer had an ownership interest
in 21-AMH, and he never had an ownership interest in any of the 21-AMH
subsidiaries, Olsen continued to maintain a working relationship with Fratangelo
12
and worked as the asset manager of one of Fratangelo’s companies, Asset
Recovery Management Co.
On September 1, 2014, Fratangelo and Olsen executed an amended and
restated purchase and sale agreement (“the amended 21-AMH agreement”) which
was then attached to and incorporated into the original purchase and sale
agreement. The amended 21-AMH agreement provided that Olsen would receive
millions of dollars in assets in exchange for signing a broad release, whereby Olsen
agreed to release and forever discharge Fratangelo and 21-AMH from any and all
claims related to Fratangelo’s acts or omissions prior to September 1, 2014. Olsen
also agreed to assume 21-AMH’s non-bank debt in exchange for additional assets.
The amended 21-AMH agreement also provides for the distribution of assets
not listed on Schedules A, B, or C, and which were referred to in the amended 21-
AMH agreement as the “missing assets.” The “missing assets” provision of this
agreement, however, limited the distribution of the “missing assets” to those assets
owned by 21-AMH prior to the “effective date,” which was the date Fratangelo
and Olsen entered into the amended 21-AMH agreement: September 1, 2014.
Paragraph 3.(g) of the amended 21-AMH agreement provides in relevant part as
follows:
Missing Assets. . . . In the event as of the Effective Date any of the
Asset Companies owns any other assets (other than its interest in
entities that are parties to this Agreement, and other than as set forth
in clause (h) below), either directly or indirectly, then Fratangelo (the
“Paying Partner”) shall pay Olsen (“the Payee Partner”) one-half
(1/2) of the net market value of such asset.
13
The procedure for distribution of the missing assets was also provided.
Olsen was required to make a written demand for his 50% share of the net market
value of an identified missing asset; Fratangelo would confirm that the asset
identified by Olsen was an asset owned by 21-AMH as of September 1, 2014 and
was not listed on Schedules A, B, or C; Fratangelo would sell the missing asset;
and then Fratangelo would distribute 50% of the net market value of the missing
asset to Olsen.
However, as already stated, the amended 21-AMH agreement also included
a broad release whereby Olsen agreed to release and forever discharge Fratangelo
and 21-AMH from any and all claims related to Fratangelo’s acts or omissions
prior to September 1, 2014. The release language in paragraph 4.3. of the amended
21-AMH agreement provides as follows:
Seller hereby waives, releases and forever discharges Fratangelo and
the Company from and against all manner of actions, cause and causes
of action, suits, debts, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements,
promises, obligations, liabilities, costs, expenses, losses, damages,
judgments, executions, claims and demands, of whatever kind and
nature, in law or in equity, whether known or unknown, whether or
not concealed or hidden, arising out of or relating to any matter, cause
or thing whatsoever, that Seller may have had or now has by reason of
any matter or thing whatsoever arising out of any or in any way
connected to the Company or the Redemption Assets, excluding the
obligations of Fratangelo and/or the Company hereunder, under that
certain General Agreement among Fratangelo, the Company, Olsen
and other parties thereto dated as of September 1, 2014 and that
certain [sic] General Agreement among Fratangelo, Daniel
Coosemans, Olsen and other parties thereto dated as of September 1,
2014 (collectively, the “General Agreements.”).
14
After executing the amended 21-AMH agreement, Olsen came to believe
that in the months prior to the agreed-upon September 1, 2014 effective date,
Fratangelo and 21-AMH sold or transferred assets of the Asset Companies, thereby
diminishing the number and value of the missing assets. Olsen sued the petitioners
for: (1) breach of the 21-AMH amended agreement (referred to as the “General
Agreement”); (2) breach of the AR23 agreement; (3) joint venture; (4) declaratory
relief; (5) equitable accounting; and (6) unjust enrichment. Olsen’s count for joint
venture sought to pierce the corporate veil of the various limited liability
companies and have the trial court declare that Olsen and Fratangelo were joint
venturers.
The Trial Court’s Interim Rulings
A. Olsen’s claim for joint venture
Olsen sought in his amended complaint to have his relationship with
Fratangelo and Coosemans declared a joint venture. In order to establish the
existence of a joint venture, Olsen sought to pierce the corporate veil of the various
limited liability companies in which he and Fratangelo were associated. On
January 11, 2016, the trial court (Judge Jennifer Bailey) granted the petitioners’
motion to dismiss Olsen’s joint venture claim (count III), but gave Olsen ten days
to amend count III. Olsen failed to amend his joint venture claim. Olsen therefore
abandoned his joint venture claim thus leaving intact the designation and
protections provided to limited liability companies.
15
B. Olsen’s motion for a temporary injunction
Olsen sought to enjoin the sale or transfer of the petitioners’ assets. On
February 9, 2016, Judge Bailey conducted a hearing on Olsen’s motion for
injunctive relief and denied the motion.
C. Partial final judgment following a bench trial
In order to limit the issues, Judge Bailey bifurcated the case and conducted a
two-day bench trial on the petitioners’ affirmative defense of release. The issue
tried was the effect of the release language contained in the amended 2l-AMH
agreement and Olsen’s claims regarding asset transfers between January 1, 2013
and September 1, 2014.
It was undisputed that in 2013, when Olsen and Fratangelo decided to seek
financing in the amount of $10 million, and because Olsen had outstanding IRS tax
liens of approximately $1.5 million, which would have precluded obtaining the
financing, Olsen agreed to be removed from the company. 21-AMH’s counsel
prepared the necessary documents, including an assignment of Olsen’s
membership interest and a purchase agreement for the sale of Olsen’s interest in
21-AMH to Fratangelo. Olsen acknowledged that he signed the assignment of his
membership interest transferring his membership interest to Fratangelo as of
January 1, 2013.
Between January 1, 2013 and August 2014, Olsen continued to work with
Fratangelo as an asset manager. Olsen testified that during that time he
16
participated in management and decision making regarding 21-AMH, he had
access to the database of all 21-AMH’s assets, and he was intimately involved in
the daily operations of the company. However, in August 2014, when Olsen came
back from vacation, he discovered that Fratangelo had vacated the premises with
the employees and the company’s records and files. As a result, the parties’
longtime transactional attorney, who took a neutral position regarding Olsen and
Fratangelo because she had represented them both over the years, drafted the 2014
agreements. These documents were signed by Olsen and Fratangelo on October 1,
2014, and made effective September 1, 2014. The signed documents contained a
general agreement, an amended purchase and sale agreement, and the release
provision previously provided in this opinion, and which was the subject of the
bifurcated trial.
At the bifurcated trial, Olsen claimed that between January 2013 and
September 2014, Fratangelo transferred assets from 21-AMH to other companies
he unilaterally controlled without Olsen’s consent or authorization. Fratangelo
contended that he had the authority to sell these assets because he was the sole
owner of 21-AMH during that time, but more importantly, he contended that any
transfers from 21-AMH between January 21, 2013 and September 1, 2014 were
not subject to Olsen’s claims because Olsen signed the release releasing Fratangelo
from any claims regarding these assets.
Judge Bailey issued a partial final judgment following the bifurcated trial,
17
finding for Fratangelo on his affirmative defense of release on September 6, 2016.
Specifically, Judge Bailey found that the amended 21-AMH agreement and the
release language in paragraph 4.3.1 were clear and unambiguous, and that pursuant
to the release, Olsen specifically released Fratangelo and “the Company” from all
actions and against all sums of money and accounts “known or unknown, whether
or not concealed or hidden.”
Judge Bailey noted that “[t]here is no warranty with regard to the assets
here. . . . The parties agreed to accept asset distribution free and clear of any issues
with regard to each other, the company as well as their respective assets.” Judge
Bailey additionally noted that during that time Olsen and Fratangelo were
adversaries; it was undisputed that Olsen had sufficient documents under his own
control to double-check that each of the assets had been accounted for; and he
should have performed due diligence before he signed the agreement which
contained an extremely broad release. Thus, Judge Bailey concluded that although
Olsen may now regret signing the release, he signed as a sophisticated business
person, the release is valid and binding, Fratangelo is not liable to Olsen for claims
arising from 21-AMH’s asset transfers between January 1, 2013 and September 1,
2014, and thus Olsen is only entitled to 50% of the net market value of the missing
assets owned by 21-AMH on September 1, 2014.
D. The potential missing assets
Following the issuance of Judge Bailey’s partial final judgment granting
18
Fratangelo’s affirmative defense of release, the parties prepared a Joint Missing
Asset List, which listed 525 potential missing assets. On February 16, 2017, the
trial court granted partial summary judgment in favor of the petitioners, concluding
that 460 of the 525 potential missing assets were missing assets that had been sold
and for which Olsen had been paid.
On March 16, 2017, the trial court granted partial summary judgment in
favor of the petitioners regarding an additional thirty-two of the potential missing
assets, concluding that they were not missing assets. On November 16, 2018, the
trial court granted partial final judgment in favor of the petitioners regarding an
additional twelve assets, thus leaving only approximately twenty-six potential
missing assets to be tried.
E. The trial court’s pre-trial rulings
In November and December 2017, the successor judge, Judge William
Thomas (“the successor judge”), conducted an eight-day bench trial regarding the
remaining potential missing assets. Prior to trial, the successor judge:
(1) granted the petitioners’ motion in limine to preclude Olsen from
submitting any evidence contrary to the partial final judgment
issued by Judge Bailey on September 6, 2016; and
(2) denied Olsen’s motion to bifurcate the trial on issues of liability
and damages.
The Trial
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A. The trial court failed to honor its pre-trial rulings and other prior
judgments rendered during the litigation
Based on the successor judge’s pre-trial rulings, the petitioners proceeded to
trial on the remaining twenty-six potential missing assets expecting that the trial
court would honor its rulings. Thus, based on the successor judge’s pre-trial
rulings, no evidence should have been introduced concerning: (1) any unpled
partnership; (2) any assets other than the remaining twenty-six potential missing
assets; or (3) the transfer or disposition of any assets between January 1, 2013 and
September 1, 2014, and Olsen was required to prove all of his remaining claims at
the bench trial, not have a second bite of the apple following the trial.
The record, however, reflects that the successor judge failed to honor his
pre-trial rulings and allowed Olsen to try, over strenuous objection by the
petitioners, his unpled claim of partnership; allowed Olsen to introduce evidence in
support of Olsen’s claim that he had an ownership interest in 21-AMH after
January 1, 2013; sua sponte reversed his prior summary judgment order regarding
seven assets and allowed Olsen to introduce evidence regarding these assets;
retried the issue of the release contained in the amended 21-AMH agreement; and
concluded that the disposition of assets prior to September 1, 2104 were subject to
Olsen’s claims.
The successor judge then concluded that Olsen and Fratangelo were partners
in a joint venture, despite: Judge Bailey’s dismissal of Olsen’s joint venture claim
without prejudice; Olsen not amending
20
his complaint to plead either a joint venture or a partnership; and Fratangelo’s
objections to defending against an unpled claim with no notice. Also without
notice, in direct violation of his own pre-trial ruling, and in contravention of Judge
Bailey’s order granting summary judgment in favor of the petitioners on their
defense of release, the successor judge: found that Olsen did not release the
petitioners from claims arising out of asset transfers prior to September 1, 2014;
allowed Olsen to present evidence and make argument regarding the disposition of
assets prior to September 1, 2014; concluded that Fratangelo’s unauthorized
transfers of assets was not protected by the release provisions contained in the
amended 21-AMH agreement; and the petitioners were liable to Olsen for these
assets.
B. The trial court departed from the essential requirements of law
A denial of due process is a per se departure from the essential requirements
of law requiring certiorari relief. Haines City Cmty. Dev. v. Heggs, 658 So. 2d
523, 527 (Fla. 1995) (“Failure to observe the essential requirements of law means
failure to accord due process of law within the contemplation of the Constitution,
or the commission of an error so fundamental in character as to fatally infect the
judgment and render it void”) (quoting State v. Smith, 118 So. 2d 792, 795 (Fla.
1st DCA 1960)).
There is nothing more fundamental than the right to notice and a meaningful
opportunity to be heard. “Procedural due process serves as a vehicle to ensure fair
21
treatment through the proper administration of justice where substantive rights are
at issue, and requires fair notice and a real opportunity to be heard at a meaningful
time and in a meaningful manner.” Crosby v. Fla. Parole Comm’n, 975 So. 2d
1222, 1223 (Fla. 1st DCA 2008); see also Mullane v. Cent. Hanover Bank & Tr.
Co., 339 U.S. 306, 314 (1950) (holding that the notice required to satisfy due
process must reasonably convey the required information, apprise interested parties
of the pendency of the action, and afford them a meaningful opportunity to present
their objections); Keys Citizens for Responsible Gov’t, Inc. v. Fla. Keys Aqueduct
Auth., 795 So. 2d 940, 948 (Fla. 2001) (“Procedural due process requires both fair
notice and a real opportunity to be heard.”).
(1) The petitioners were denied procedural due process when they were
forced to defend against an unpled claim at trial
The petitioners were denied procedural due process where, without notice,
the trial court permitted Olsen to present evidence on a claim dismissed by the
predecessor judge, and then awarded relief on Olsen’s unpled claim. As this Court
has repeatedly held, it is error to allow a plaintiff to proceed on an unpled claim
and for the trial court to assess liability on the unpled claim. See Sunbeam
Television Corp. v. Mitzel, 83 So. 3d 865, 875 (Fla. 3d DCA 2012); see also
Agrofollajes, S.A. v. E.I. DuPont De Nemours & Co., 48 So. 3d 976, 995 (Fla. 3d
DCA 2010) (disapproved on other grounds) (holding that “when a plaintiff pleads
one claim but tries to prove another, it is error for a trial court to allow the
plaintiffs to argue the unpled issue at
22
trial); Michael H. Bloom, P.A. v. Dorta-Duque, 743 So. 2d 1202, 1203 (Fla. 3d
DCA 1999) (“It is well settled that a defendant cannot be found liable under a
theory that was not specifically pled.”).
It is also well-settled law that a trial court lacks jurisdiction to enter
judgment on an issue not raised by the pleadings. See Bank of Am., N.A. v. Nash,
200 So. 3d 131, 135 (Fla. 5th DCA 2016) (holding that judgment granting relief
outside the pleadings is void); Cunha v. Mann, 183 So. 3d 1113, 1115 (Fla. 3d
DCA 2015) (holding that judgment granting relief outside the pleadings is voidable
on appeal); Wachovia v. Mortg. Corp. v. Posti, 166 So. 3d 944, 945 (Fla. 4th DCA
2015); Paulk v. Paulk, 25 So. 3d 672, 674 (Fla. 2d DCA 2010) (holding that the
trial court lacks jurisdiction to enter judgment outside the pleadings).
Olsen had pled that the relationship between the parties was one of a joint
venture. Judge Bailey dismissed the joint venture count; Olsen did not replead the
existence of a joint venture, thereby abandoning the claim; and Olsen failed to
plead the existence of a partnership. The governing documents also clearly reflect
that Fratangelo and Olsen chose to operate as members of limited liability
companies, not as partners. A partnership is a “residual form of . . . business
association, existing only if another form does not.” § 620.8202(2), Fla. Stat.
Uniform Cmt. 2.; Houri v. Boaziz, 196 So. 3d 383, 389-90 (Fla. 3d DCA 2016)
(finding that it was error to disregard the limited liability company as joint
ventures); Marriott Int’l, Inc. v. Am. Bridge Bahamas, Ltd., 193 So. 3d 902, 910
23
(Fla. 3d DCA 2015) (“As a matter of law, a corporation is not a joint venture”)
(Scales, J., concurring).
(2) The petitioners were denied procedural due process when they were
forced to defend at trial claims decided in their favor prior to trial
Summary judgment was granted in favor of the petitioners regarding their
affirmative defense of release. Summary judgment was also granted in their favor
on the majority of the assets Olsen claimed were missing assets, for which he was
entitled to receive his 50% interest. Additionally, just prior to trial, the petitioners
filed, and the successor judge granted, a motion in limine to preclude Olsen from
submitting any evidence contrary to the partial final judgment issued by Judge
Bailey on September 6, 2016 (wherein Judge Bailey found for the petitioners on
their defense of release). Thus, the petitioners expected that the trial would be
limited to a determination of whether any of the remaining listed twenty-six
potential missing assets were, in fact, missing assets subject to partial disbursement
to Olsen.
The successor judge, however, with no notice to the petitioners, and over
repeated objections by the petitioners, permitted Olsen to relitigate the effect of the
very broad release he signed and to present evidence regarding assets he claimed
were missing assets and which were not in the remaining twenty-six identified
assets the petitioners were prepared to address at trial. Although we recognize that
a trial court has the inherent authority to revisit an earlier ruling either it has made
or a predecessor judge has made, it
24
must provide notice and a meaningful opportunity to the party or parties to prepare
for and to defend its position. See Wright v. Wright, 654 So. 2d 674, 674 (Fla. 5th
DCA 1995) (“While a trial court may modify [an interlocutory order], elementary
notions of procedural due process which include notice and a meaningful
opportunity to be heard apply . . . .”).
The successor judge’s mid-trial revisiting of issues resolved prior to trial,
without notice, without allowing the petitioners a meaningful opportunity to
prepare for, and over the petitioners’ repeated objections was a clear departure
from the essential requirements of law and from one of the most basic and
fundamental protections to be afforded every litigant.
(3) The petitioners were denied procedural due process, when, after denying
pretrial Olsen’s motion to bifurcate liability and damages, the trial court
reversed its position after trial
Prior to trial, Olsen moved to bifurcate the issues of liability and damages.
The trial court denied Olsen’s motion to bifurcate liability and damages and
declared that all remaining issues would be tried during the trial. Olsen proceeded
to trial on his claims, wherein he sought damages on revenue from the missing
assets earned prior to the sale of those assets, and damages arising from the
approximately twenty-six remaining missing assets that the trial court determined
would be tried. Olsen failed to present any competent evidence regarding damages
relating to his claimed damages on the revenue earned by the missing assets or to
prove that any of the remaining twenty-six potential missing assets were missing
25
assets. Thus, Olsen failed to prove his damages, and the trial court found no
damages for either category.
However, instead of entering judgment in favor of the petitioners, the trial
court concluded that Olsen was entitled to an equitable accounting in order to
prove his damages. This too was a departure from the essential requirements of
law. See Cleveland v. Crown Fin., LLC, 212 So. 3d 1065, 1069 (Fla. 1st DCA
2017) (holding that “courts generally do not provide parties with an opportunity to
retry their case upon a failure of proof”); Correa v. U.S. Bank, Nat’l Ass’n, 118 So.
3d 952, 956 (Fla. 2d DCA 2013) (noting that counsel should have been aware of its
burden and citing to cases refusing to give a party a second bite of the apple);
Allard v. Al-Nayem Int’l, Inc., 59 So. 3d 198, 202 (Fla. 2d DCA 2011) (stating that
a party’s failure to prove damages is an improper ground for rehearing).
Equitable accounting is a remedy, not a mechanism to provide a plaintiff,
who failed to prove his damages at trial, with another opportunity to do so post
trial. The law is also well settled that a court cannot exercise its equitable powers
where an express contract exists and where the plaintiff has an adequate remedy at
law. Ocean Commc’ns, Inc. v. Bubeck, 956 So. 2d 1222, 1225 (Fla. 4th DCA
2007) (“Defendants correctly state that a plaintiff cannot pursue an equitable
theory . . . if an express contract exists.”); Lake Tippecanoe Owners Ass’n v. Nat’l
Lake Devs., Inc., 390 So. 2d 185, 187 (Fla. 2d DCA 1980) (holding that a court
cannot exercise equitable powers when a plaintiff has an adequate remedy at law);
26
Rosen v. Rosen, 167 So. 2d 70, 72 (Fla. 3d DCA 1964) (holding that jurisdiction to
impose equitable remedies assumes that no adequate remedy exists at law).
The trial appeared to recognize this well-established legal concept, but then
it failed to apply it to Olsen’s equitable accounting claim. When addressing
Olsen’s unjust enrichment claim, the trial court correctly concluded that Olsen was
not entitled to relief because he was entitled to relief pursuant to the contract
(agreements). However, when addressing Olsen’s equitable accounting claim, the
trial court concluded that because the underlying transactions were complex,
Olsen’s ability to prove his contractual damages was insufficient. See Bankers Tr.
Realty, Inc. v. Kluger, 672 So. 2d 897, 898 (Fla. 3d DCA 1996) (concluding that a
plaintiff may obtain an equitable accounting if he demonstrates that the contract
demands involve extensive or complicated accounts and it is clear that the remedy
at law is inadequate).
Olsen, however, failed to establish either of these two requirements:
complexity or an inadequate remedy at law. He offered no evidence regarding
complexity and both agreements contain a straight forward formula for payment of
the missing assets. He is entitled to one-half of the net market value of the missing
21-AMH assets, and one-third of the net market value of the missing AR23 assets.
And, the parties created a list of these assets prior to trial. The number of
transactions does not make them complex nor establish a need for an equitable
accounting. Managed Care Sols., Inc. v. Essent Healthcare, Inc., 694 F. Supp. 2d
27
1275, 1280 (S.D. Fla. 2010) (concluding that the fact that the aggregation of
thousands of receivables might be required did not make calculation of damages
unduly complex).
Olsen was also provided with a full opportunity to conduct discovery, and as
Judge Bailey found in the partial final judgment she issued on September 6, 2016:
Olsen had sufficient source documents under his own control to
double-check that each and every asset in 21AMH throughout the
history of the LLC had been accounted for. Olsen simply failed to do
his due diligence . . . . The asset listing process began in spring 2014
at a time when Olsen had full access to all the records, and Olsen
never lost access to the underlying source spread sheets.
The successor judge thus departed from the essential requirements of law by
permitting Olsen to pursue his equitable accounting claim post trial after he failed
to prove his damages under the express written agreements.
C. The majority opinion
The majority opinion’s answer to the identified due process violations is its
argument that a successor judge has the power to vacate or modify a predecessor
judge’s interlocutory rulings. While that statement is true, a successor judge does
not have the authority to enter a judgment on an issue not raised in the pleadings,
see Nash, 200 So. 3d at 135; Cunha, 183 So. 3d at 1115; Posti, 166 So. 3d at 945;
Sunbeam; 83 So. 3d at 875, Agrofollajes; 48 So. 3d at 995; Paulk, 25 So. 3d at
674; Bloom, 743 So. 2d at 1203.
Due process also mandates that if a successor judge wishes to revisit a prior
ruling either by a predecessor judge or
28
by itself, he or she must provide notice and a meaningful opportunity to the party
or parties to defend the earlier ruling. Wright, 654 So. 2d at 674. The trial court in
the instant case violated all of these well-settled principles and denied Fratangelo
his right to even the most rudimentary protections of procedural due process.
D. The petitioners have established irreparable harm that cannot be
adequately remedied on appeal
Based on the successor judge’s rulings, Olsen must be given access to
Fratangelo’s confidential and personal financial records from the beginning of their
relationship to the present. Because Judge Bailey dismissed Olsen’s joint venture
claim, and Olsen did not amend his pleadings to pursue the existence of either a
joint venture or a partnership, Olsen was not entitled to delve into Fratangelo’s
personal financial records. However, the successor judge has now reversed the
partial final judgment issued by Judge Bailey, without providing notice to
Fratangelo or affording him with a meaningful opportunity to defend himself
against Olsen’s claims; concluded that the parties were partners; and has concluded
that the amended 21-AMH agreement did not release Fratangelo or 21-AMH from
claims Olsen may have had regarding assets and asset transfers from January 1,
2013 through September 1, 2014. Thus, Olsen is now entitled to access to
Fratangelo’s confidential financial records, which he did not previously have
access to.
In Mana v. Cho, 147 So. 3d 1098, 1098-99 (Fla. 3d DCA 2014), this Court
granted Mana’s petition for certiorari
29
relief and quashed the portion of the trial court’s order requiring Mana to produce
his personal financial information. This Court concluded that we had jurisdiction
because permitting the discovery constituted a departure from the essential
requirements of law “and the discovery of confidential financial information is the
type of ‘cat out of the bag’ discovery that can cause material injury that cannot be
adequately redressed on appeal.” Id. at 1100; see also Diaz-Verson v. Walbridge
Aldinger Co., 54 So. 3d 1007, 1011 (Fla. 2d DCA 2010) (granting certiorari and
quashing the trial court’s order denying petitioner’s motion for a protective order,
concluding that petitioner’s personal financial information was not relevant to the
issues raised in the pleadings and disclosure of personal financial information
would result in irreparable harm).
Similarly, Olsen failed to plead partnership, the issue of the parties’
relationship was definitively tried and determined by Judge Bailey, and the issue
was not tried by consent. Thus, the disclosure of Fratangelo’s personal financial
information is not relevant to any issue raised in the pleadings, and disclosure is
the type of “cat out of the bag” discovery that will result in irreparable harm.
Fratangelo had also asserted and submitted proof of actual on-going harm
based on the trial court’s rulings flowing from the issues improperly tried with no
notice to Fratangelo. For example, Fratangelo submitted proof that, based on the
trial court’s April 20, 2018 order, a company with which Fratangelo has had a
long-standing and significant business relationship has instructed its employees to
30
not engage with Fratangelo in any way, and prospective principals with whom
Fratangelo had been negotiating with regarding the start of a new business are now
demonstrating a reluctance to include Fratangelo as a member of any new
company. Fratangelo’s employees have received and are continuing to receive
threatening emails, warning them that their continued relationship with Fratangelo
will harm them, and prospective lenders have notified Fratangelo that they are
aware of the trial court’s findings in its April 20, 2018 order and these findings are
negatively impacting their ability to do business with him.
In Zimmerman v. D.C.A. at Welleby, Inc., 505 So. 2d 1371, 1373 (Fla. 4th
DCA 1987), the Fourth District Court of Appeal concluded that the loss of
potential sales constituted irreparable harm because of the difficulty in determining
how many sales were lost and what the profit would have been on each lost sale.
Thus, the Fourth District found that because the damages would be speculative and
unascertainable, the remedy at law would be inadequate and the harm irreparable.
Id.; see also K.G. v. Fla. Dep’t of Children & Families, 66 So. 3d 366, 368 (Fla. 1st
DCA 2011) (“A petitioner can show irreparable harm by demonstrating either that
the injury cannot be redressed in a court of law or that there is no adequate legal
remedy.”); City of Oviedo v. Alafaya Utils., Inc., 704 So. 2d 206, 207 (Fla. 5th
DCA 1998) (affirming temporary injunction based on the incalculable loss that
would occur if the injunction was not granted).
Here too, the loss and harm to Fratangelo will be difficult to measure and
31
prove. Thus, his damages will be speculative and unascertainable, his remedy at
law will be inadequate, and he will suffer irreparable harm. Because Fratangelo
was denied procedural due process, the trial court’s findings cannot stand. Failure
to grant his petition, requiring him to open his books and accounts and disclose
personal financial information, and allowing his business relationships to continue
to deteriorate, will result in irreparable harm that cannot be remedied on direct
appeal. Thus, Fratangelo’s petition should be granted.
Conclusion
The petitioners have demonstrated both a clear departure from the essential
requirements of law and irreparable harm that cannot be remedied on appeal.
There is nothing more fundamental than the right to notice and a meaningful
opportunity to be heard. Fratangelo was denied that fundamental right when the
successor judge re-tried issues previously tried and resolved in Fratangelo’s favor
and also tried unpled issues, all without notice to Fratangelo and over Fratangelo’s
objection. The harm: granting Olsen access to Fratangelo’s business and personal
financial information, and allowing the trial court’s findings (based on the
improperly tried issues) to stand until resolution of the entire case, is incapable of
measurement and thus constitutes irreparable harm that cannot be remedied on
appeal. I, therefore, dissent from the majority’s dismissal of the petition.
32