Judge 'Compelled' to Rule for South Florida Developers in Attorney Fees Dispute
"Although the buyers' misconduct was reprehensible ... this court lacks a mechanism to punish the miscreant defendants," Fourth District Court of Appeal Judge Alan Forst wrote.
January 25, 2018 at 03:44 PM
5 minute read
Fourth District Court of Appeal Judge Alan Forst seemed to have his hands tied in a case involving an attorney who took a clandestine $100,000 payment from South Florida developers to act against his client in a real estate deal.
Forst sat on the appellate panel adjudicating whether to award attorney fees to widows who claim lawyers and developers defrauded them on a $6.2 million sale of a Boca Raton cemetery following their husbands' deaths.
After trial in Palm Beach Circuit Court, “the jury entered a verdict against the buyers on all counts,” according to the appellate ruling. But jurors also found the women sustained no damages from the transaction. They awarded no compensatory damages, but included $2 million in attorney fees and costs for a $2.11 million award against a corporate defendant and another $100,000 against a principal, Edward Falcone.
That lack of compensatory damages became a central issue in the case, because the defense argued it showed the jury believed the widows suffered no losses as a result of the fraud.
The appeal turned on whether an award of attorney fees as a punishment for the developers went beyond the goal of damages in tort cases, which seek to “restore the injured party to the position it would have been in had the wrong not been committed,” according to the appellate court.
The Fourth DCA ruled in favor of the defendants Wednesday, finding the award improper in a case where the plaintiff did not seek to rescind the contract, yet sought attorney fees to cover the transaction.
“Once the sellers picked affirmance over rescission, their damages were limited to the difference between the sale price and the fair market value at the time of the sale,” Judge Spencer Levine wrote, with Judge Jefferey Kuntz concurring.
But Forst seemed especially torn.
“Although the buyers' misconduct was reprehensible, in the absence of compensatory damages, this court lacks a mechanism to punish the miscreant defendants,” he wrote in a special concurrence. “Accordingly, I am compelled to concur with the majority opinion.”
The case involved developers—brothers Arthur and Edward Falcone—and their company DFG Group LLC, who were the buyers in the deal with the widows.
The sellers hired Boca Raton-based Sachs Sax Caplan and its attorneys Michael D. Masanoff and Michael D. Karschto to handle the transaction. But their court pleadings show the women later learnt the buyers paid Masanoff $100,000, which he never disclosed to his clients.
The two sides disagree on the nature of the payment. The plaintiffs called it a kickback. Their claims eventually led to a settlement with the attorneys, and revocation of Masanoff's law license in 2014, with leave to seek readmission to the Florida Bar within five years.
Defense attorneys characterized it as a finder's fees, which Masanoff demanded from the buyers.
'Far From Over'
The Falcones purchased Heritage Manor of Memorial Park Inc. after the project's previous developers died, and the development company could not meet construction costs. Their court pleadings claim the successor developers assumed a high risk, purchasing a business and real estate parcel embroiled in litigation by clients who paid thousands for burial sites that had not been built. At trial, they called on appraisers who valued the real estate parcel at about $4 million, and said the business had zero value.
“From day one, my clients argued through the courts and have always maintained that we paid in excess of the fair market value when we purchased it,” defense attorney William J. Cornwell, of Weiss Handler & Cornwell in Boca Raton, said. “Regardless of whether a lawyer violated his ethical obligations to the his client, they were never damaged.”
The litigation has been hard-fought for about 12 years, with more than 2,450 docket entries since 2005.
Lead counsel for the plaintiffs, Michael J. Avenatti of Eagan Avenatti in Newport Beach, California, suggested his clients might seek rehearing or review before Florida's Supreme Court after this week's ruling.
“The opinion does not exonerate the Falcones for their proven fraudulent conduct,” Avenatti said. “In fact, the judges went out of their way to make it clear their conduct aimed at the two widows was shown at trial to be abhorrent. As a result, we are exploring our options. This is far from over.”
Barred by legal precedent governing awards for damages, Forst seemed to call for another resolution to the long-running case.
In a footnote to the five-page ruling he wrote, “Just as the bar disciplinary process was utilized to punish the deceptive attorneys in this case, perhaps there is a non-judicial mechanism, outside of our purview, to similarly punish the attorneys' partners-in-deception, the buyers.”
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