Phelan v. Lawhon ( 2017 )

Third District Court of Appeal
State of Florida
Opinion filed March 29, 2017.
Not final until disposition of timely filed motion for rehearing.
________________
Nos. 3D16-1858; 3D16-1838; 3D16-1675
Lower Tribunal No. 15-19884
________________
Damon Phelan, et al.,
Appellants,
vs.
Michael Kevin Lawhon, et al.,
Appellees.
Appeals from a non-final order from the Circuit Court for Miami-Dade
County, John W. Thornton, Jr., Judge.
Mound Cotton Wollan & Greengrass and Lionel F. Rivera and Brooke D.
Oransky (Fort Lauderdale) and Barry Temkin (New York, NY); Akerman LLP and
Kathy M. Klock and Jonathan B. Butler (West Palm Beach); Greensfelder, Hemker
& Gale and Donald D. McBride and David W. Ybarra and Garrett C. Reuter, Jr.
(St. Louis, MO), for appellants.
Kozyak Tropin & Throckmorton and Charles W. Throckmorton and Vincent
Alexander; Shapiro, Blasi, Wasserman and Aram C. Bloom (Boca Raton), for
appellees.
Before WELLS, ROTHENBERG and SALTER, JJ.
SALTER, J.
These three consolidated appeals were commenced by fourteen of twenty
defendants from a non-final circuit court order denying their motions to dismiss for
lack of personal jurisdiction. We affirm the order of denial as to twelve of those
defendants, reversing the order only as to two of the defendants, Marc R. Chenot
and Kevin J. Haberberger.
I. The Third Amended Complaint
The Third Amended Complaint, referred to in this opinion as the
“Complaint,” was brought by three plaintiffs (appellees here) against the fourteen
defendant/appellees and six other Florida-resident or Florida-connected
defendants. The underlying dispute involves individuals and companies alleged to
have: severed affiliations with plaintiff/appellee The Northwestern Mutual Life
Insurance Company (“NML”); wrongfully used confidential information regarding
NML insureds and policies; “twisted” or “churned”1 NML’s insureds and policies;
tortiously interfered with the appellees’ advantageous business relationships; and
1 “Twisting” refers generally to “the making of misrepresentations or
misstatements of facts or incomplete comparisons of policies for the purpose of
inducing the surrender of insurance in one company and the taking of insurance in
another.” Steven Plitt et al., Couch on Ins. §55:21 (3d ed. Dec. 2016). “Churning”
describes acts of “[e]ngaging an account in excessive trading for the purpose of
producing commissions rather than acting on behalf of one’s client.” Hayden,
Stone, Inc. v. Brown, 218 So. 2d 230, 235 (Fla. 4th DCA 1969). The terms are
defined more particularly, and such conduct is proscribed, in sections
626.9541(1)(l) (twisting) and 626.9541(1)(aa) (churning), Florida Statutes (2016).
2
conspired as a group to engage in those activities in order to derive commissions
from their new relationships with The Massachusetts Mutual Life Insurance
Company (“Mass Mutual”).2 The other two plaintiffs are Michael Kevin Lawhon
(“Lawhon”), an NML general agent individually and through South Florida Group,
LLC, a Florida LLC owned and operated by Lawhon.
The Complaint includes 230 numbered paragraphs in 92 pages of detailed
allegations, sixteen separate causes of action, and 36 numbered exhibits
comprising another 450 pages. The appellants filed motions to dismiss for lack of
personal jurisdiction, together with affidavits in support of those motions.3 In
addition, jurisdictional discovery was taken, and each side relies on answers to
interrogatories, documents, and deposition testimony to support its position here.
II. Denial of the Motions; Three Separate Appeals
In July 2016, the trial court entered a ten-page omnibus order denying the
various motions to dismiss the Complaint for lack of personal jurisdiction. Three
groups, a total of fourteen defendants, filed separate appeals and are represented by
separate counsel in these consolidated appeals.
A. Case No. 3D16-1675
2 Mass Mutual itself is not a defendant.
3 The defendants filed motions to dismiss the Complaint for failure to state a cause
of action, all of which were denied in a separate order. The order denying those
motions is not presently appealable.
3
The ten appellees in this appeal (the “Missouri-Illinois Defendants”),4 were
agents and field managers for NML working primarily in St. Louis, Missouri, and
nearby areas of Missouri and Illinois. Each of them left NML in 2014 and
became agents of Mass Mutual working under the direction of former NML
general agent, and later Mass Mutual general agent for the St. Louis area, appellee
Damon Phelan (“Phelan”). Phelan (who has appealed individually in Case No.
3D16-1858, as detailed below) left NML and became the Mass Mutual general
agent for that area in August 2013. The Complaint alleges that Phelan was
responsible as general agent for reviewing the suitability and marketing of the
Mass Mutual policies and products recommended by the Missouri-Illinois
Defendants.
Each of the Missouri-Illinois Defendants, except Chenot and Haberberger,
became members of defendant Visionary Wealth Advisors, LLC (“VWA”), a
Delaware limited liability company authorized to conduct business in Florida.
VWA’s officers and managing members include defendants and appellees (in
consolidated Case No. 3D16-1838, also detailed below) Brett G. Gilliland
(“Gilliland”) and Timothy G. Hammett (“Hammett”). The Complaint alleges that
4 Marc R. Chenot; Daniel W. Clinard; Richard M. Collop; Jeffrey C. Fox; Kevin J.
Haberberger; Ronald G. Jones, Jr.; Tyler Niermann; Joseph Reiniger; Mia
Vieregge; and Scott Vieregge. Haberberger’s contract with Mass Mutual was
terminated in March 2016, six months after the plaintiffs filed their circuit court
lawsuit in Miami.
4
VWA regularly conducts substantial business operations out of offices in Miami,
St. Louis, and Edwardsville, Illinois. Two Florida-resident defendants, who did
not seek dismissal for lack of personal jurisdiction and thus are not appellees here,
Ricardo J. Ludert (“Ludert”) and Charles R. Downs, Jr. (“Downs”), also conduct
VWA business from their office in Miami.
The Complaint alleges that Downs, also an NML agent for many years,
became a co-general agent for Mass Mutual in Miami shortly after Phelan and
other defendants left NML. The Complaint also alleges that Downs breached
NML regulations applicable to him under his contract by copying, electronically
and physically, trade secrets of NML regarding hundreds of NML policyholders,
before his July 2014 termination. The Complaint further alleges that Missouri-
Illinois Defendants Clinard, Fox, Jones, and Scott Vieregge also copied and stole
electronic and physical copies of such trade secrets before their respective
termination dates with NML.
B. Case No. 3D16-1838
Three defendants are the appellees in this consolidated appeal—Gilliland,
Hammett, and Gilliland Hammett Capital Management, LLC (“GHCM”).
Gilliland, a resident of Illinois, is the chief executive officer and a managing
member of VWA, which does business in Florida, as already noted. Hammett, a
5
resident of Missouri, is the president and a managing member of VWA. GHCM is
a Missouri LLC and is also a managing member of VWA.
Gilliland, Hammett, and GHCM are alleged to have done business in Florida
and engaged in a conspiracy with Florida-based defendants including VWA.
Gilliland and Hammett were NML agents who terminated their contracts and left
NML within months after Phelan and the Miami-based defendants did the same,
with each becoming agents for Mass Mutual and Phelan. The Complaint alleges
that Hammett also improperly acquired from NML, and disseminated, trade secret
and other confidential data in order to further his wrongful activities as a Mass
Mutual agent.
C. Case No. 3D16-1858
Phelan is the only appellee in this third of the three consolidated appeals.
The Complaint alleges that he was an NML agent and general agent for 23 years,
until mid-2013; that he left NML and became a general agent for Mass Mutual in
August 2013; that he recruited NML agents in 2014 to join Mass Mutual for his
own benefit; that Florida resident defendant Downs was one such agent, with
Downs’ improper sales of Mass Mutual products for replacement of NML
insurance products approved by Phelan; and that Phelan also established a satellite
Mass Mutual agency in Tallahassee, Florida.5
5 One of Phelan’s two affidavits in support of dismissal of the Complaint disputed
that he (individually) has a place of business in Florida, but he conceded that “one
6
III. Analysis
A. Standard of Review and Issues for Review
Our review of the order denying the non-Florida residents’ motions to
dismiss for lack of jurisdiction is de novo. Wendt v. Horowitz, 822 So. 2d 1252,
1256 (Fla. 2002). We consider two inquiries in each of the consolidated cases.
The first is governed by Florida’s long-arm statute, section 48.193, Florida Statutes
(2015), and the process detailed in Venetian Salami v. Parthenais, 554 So. 2d 499
(Fla. 1989). “Because this case arises from a motion to dismiss for lack of
personal jurisdiction, we derive the facts from the affidavits in support of the
motion to dismiss, and the transcripts and records submitted in opposition to the
motion to dismiss.” Wendt, 822 So. 2d at 1254. The second inquiry is also
described in Venetian Salami and Wendt, but addresses the requirement that the
defendants’ activities satisfy the “minimum contacts” test under the United States
Constitution.
Importantly, the Supreme Court of Florida has held that “telephonic,
electronic, or written communications into Florida may form the basis for personal
jurisdiction under section 48.193(1)(b)6 if the alleged cause of action arises from
of the MassMutual [sic] agents currently under my supervision is located in
Tallahassee and I maintain a Florida securities license so that I can supervise that
agent . . . .”
6 Section 48.193(1)(b) has since been renumbered section 48.193(1)(a)2, Florida
Statutes (2015).
7
the communications,” Wendt, 822 So. 2d at 1260, and that “[t]here is no question
that physical presence is not necessarily required to satisfy the constitutionally
mandated requirement of minimum contacts,” Id. at 1257-58.
In addressing allegations that a non-resident defendant committed a tort in
Florida through acts and communications directed into the state from outside
Florida, “[t]he appropriate inquiry is whether the tort as alleged occurred in
Florida, and not whether the alleged tort actually occurred.” Machtinger v. Inertial
Airline Servs., Inc., 937 So. 2d 730, 734 (Fla. 3d DCA 2006).
B. Conspiracy
The allegations and Counts of the Complaint relating to a conspiracy among
the Florida defendants and the non-resident defendants are dispositive in the
present case. The trial court’s closely-reasoned order aptly summarized the matter:
The heart of this matter is the alleged civil conspiracy to
commit tortious acts which has targeted and damaged the Plaintiffs
and injured clients within the State of Florida. Pursuant to the
allegations, the conspiracy’s main focus was the recruitment of
insurance sales agents and the improper replacement of insurance
policies.
A series of Florida cases has found personal jurisdiction over non-resident
defendants engaged in conspiracies that include tortious or statutorily-prohibited
actions as against Florida residents. In Execu-Tech Business Systems, Inc. v. New
Oji Paper Co. Ltd., 752 So. 2d 582 (Fla. 2002), non-Florida residents having no
actual physical presence in Florida were haled into a Florida court based on
8
allegations that they conspired to fix wholesale and retail prices of thermal fax
paper throughout the United States, including Florida, in violation of the Florida
Deceptive and Unfair Trade Practices Act. In Machtinger, a non-resident
defendant was alleged to have directed fraudulent misrepresentations to the
plaintiff’s officers in Florida, and to have conspired with other non-resident
defendants in doing so. This Court found personal jurisdiction over the defendant
under the long-arm statute and minimum contacts based on Wendt. Machtinger,
937 So. 2d at 736 (“Directing a conspiracy toward Florida establishes sufficient
minimum contacts to satisfy due process. Wendt, 822 So. 2d at 1259.”).
Similarly, in NHB Advisors, Inc. v. Czyzyk, 95 So. 3d 444 (Fla. 4th DCA
2012), it was alleged (as here) that a non-resident defendant participated in a
conspiracy with corporate officers based in Florida, in breach of the officers’
fiduciary duties, to (a) obtain and use confidential information, and (b) hire away
key corporate employees, in order to compete with the corporation. The Fourth
District reversed an order dismissing the complaint for lack of personal
jurisdiction:
Moreover, if a plaintiff has successfully alleged a cause
of action for conspiracy among the defendants to commit
tortious acts toward the plaintiff, and if the plaintiff has
successfully alleged that any member of that conspiracy
committed tortious acts in Florida in furtherance of that
conspiracy, then all of the conspirators are subject to the
jurisdiction of Florida through its long-arm statute.
9
Id. at 448 (emphasis provided).
The allegations in the Complaint regarding conspiracy meet the
requirements of Florida law as to all but two of the Missouri-Illinois Defendants,
Chenot and Haberberger. “A civil conspiracy requires: (a) an agreement between
two or more parties, (b) to do an unlawful act or to do a lawful act by unlawful
means, (c) the doing of some overt act in pursuance of the conspiracy, and (d)
damage to plaintiff as a result of the acts done under the conspiracy.” Raimi v.
Furlong, 702 So. 2d 1273, 1284 (Fla. 3d DCA 1997). The alleged conspiracy must
demonstrate “an actionable underlying tort or wrong,” and that independent tort or
wrong must “constitute a cause of action if the wrong were done by one person.”
Id. (quoting Blatt v. Green, Rose, Kahn & Piotrkowski, 456 So. 2d 949, 951 (Fla.
3d DCA 1984)).
In the present case, the allegations in the Complaint include evidence that
the Florida-based defendants joined Phelan’s migration from NML to Mass
Mutual, along with Gilliland, Hammett, and GHCM; and that all appellees except
Phelan, Chenot, and Haberberger were officers, managing members, or members
of VWA. The plaintiffs alleged that VWA was used as an ostensibly independent
advisor to recommend Mass Mutual insurance and investment products to replace
NML products in violation of applicable regulatory prohibitions against twisting
and churning.
10
The Complaint also alleges that Phelan signed another NML agent based in
Florida, non-party Tyler Huston, as a Mass Mutual agent under Phelan’s
supervision. Following the recruitments of NML agents on behalf of Mass Mutual,
reliance on VWA, use of improperly removed trade secrets regarding NML
insureds and their policies, and wrongful interference with NML insureds and
business, the Complaint alleges extraordinary financial success by the
collaborators and co-conspirators. The Complaint includes affidavits and
statistical compilations showing volumes of replacement activity (NML products
replaced with Mass Mutual policies, with the defendants in their new Mass Mutual
roles) that far exceed historical Mass Mutual percentages. Indeed, Mass Mutual’s
own compliance monitoring through replacement exception reports
(disproportionate replacement volume versus new-policy sales) picked up the
anomalies.7
C. Appellants Chenot and Haberberger
The issue is only close with respect to two of the Missouri-Illinois
Defendants in Case No. 3D16-1675, Chenot and Haberberger. Neither is affiliated
7 Because pretrial discovery has been limited to jurisdictional issues, the
plaintiff/appellees have not yet had an opportunity to delve into many particulars
regarding the replacement activity. The disproportionate volume of replacement
activity, however, is circumstantial evidence that corroborates the possession of
confidential information and concerted activity by the defendants. “The existence
of a conspiracy and an individual’s participation in it may be inferred from
circumstantial evidence.” Donofrio v. Matassini, 503 So. 2d 1278, 1281 (Fla. 2d
DCA 1987).
11
with Florida-based VWA, according to the record before us, and neither is
specifically alleged to have been in active concert with other defendants in the
wider conspiracy that included actors, trade secrets, or policyholders in Florida.
For example, the allegations and exhibits relating to Chenot and Haberberger list
replacement policies in Illinois, Missouri, Arkansas, Georgia, and Alabama, but
none in Florida.
Arguably, though without expressing any opinion as to the law of those
jurisdictions, there might be local claims of tortious interference or regulatory
violations as to Chenot or Haberberger outside Florida. The allegations in the
Complaint, however, do not specifically link those two defendants to the multi-
state conspiracy (and to the resident and non-resident co-conspirators) relied upon
by the trial court to uphold personal jurisdiction in the present Florida lawsuit.
Accordingly, in Case No. 3D16-1675, we reverse the non-final order under review
insofar as it denies dismissal for lack of personal jurisdiction as to appellants
Chenot and Haberberger.
D. Corporate Shield
The final issue warranting consideration is the argument by Gilliland,
Hammett, and GHCM (Case No. 3D16-1838) that “Florida’s corporate shield
doctrine prevents a finding that personal jurisdiction exists in Florida” as to each of
them, citing Doe v. Thompson, 620 So. 2d 1004, 1006 (Fla. 1993). The argument
12
fails, however, based on the exception identified in Doe itself, as reiterated in a
more recent opinion by the Supreme Court of Florida:
An exception to the corporate shield doctrine limits the scope of
the doctrine’s protection. Specifically, a corporate officer who
commits fraud or other intentional misconduct outside of Florida may
be subject to personal jurisdiction. See Doe, 620 So. 2d at 1006;
Oesterle v. Farish, 887 So. 2d 412 (Fla. 4th DCA 2004).
Kitroser v. Hurt, 85 So. 3d 1084, 1088 n.3 (Fla. 2012).
Gilliland, Hammett, and GHCM may not claim the benefit of the corporate
shield doctrine, in light of the unrebutted allegations of intentional misconduct
against each of them.
IV. Conclusion
Regarding Case No. 3D16-1675, we affirm the trial court’s Omnibus Order
Denying Defendants’ Various Motions to Dismiss the Third Amended Complaint
for Lack of Jurisdiction (“Order”) as to all of the appellants except Marc R. Chenot
and Kevin J. Haberberger. As to those two appellants, we direct the trial court to
dismiss Chenot and Haberberger for lack of personal jurisdiction.
Regarding Case No. 3D16-1638, we affirm the Order in all respects and as
to all three appellants: Brett G. Gilliland, Timothy G. Hammett, and Gilliland
Hammett Capital Management, LLC. Regarding Case No. 3D16-1858, we affirm
the Order in all respects as to appellant Damon Phelan.
Affirmed in part; reversed in part.
13