ORDER ADOPTING MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION AND GRANTING SUMMARY JUDGMENT AGAINST PLAINTIFFS
THE MATTER was referred to the Honorable Edwin G. Torres, United States Magistrate Judge for a Report and Recommendation on Plaintiffs Veronica Kelly, Lil Simon, and Ron Baum’s Motion for Partial Summary Judgment on Liability for Violations of FDUTPA (D.E. No. 119), filed on May 27, 2009, and Defendant’s Motion for Summary Judgment (D.E. No. 165), filed on August 14, 2009. The Magistrate Judge filed a Report and Recommendation (D.E. No. 216) on October 30, 2009. The Court has reviewed the entire file and record. The Court has made a de novo review of the issues that the objections to the Magistrate Judge’s Report and Recommendation present, and being otherwise fully advised in the premises, it is
ADJUDGED that United States Magistrate Judge Edwin G. Torres’s Report and Recommendation (D.E. No. 216) is AFFIRMED and ADOPTED. Most of the Plaintiffs’ objections concern Magistrate Judge Torres’s finding that Defendant did not go beyond rendering traditional legal services to its clients. The Plaintiffs rely on this Court’s early discovery order compelling Defendant to produce records over Defendant’s objection that the work product immunity applied because it was engaged in the practice of law. The Court did not have the benefit of a fully-developed record at that time and, now that it does, it agrees with Magistrate Judge Torres’s finding that Defendants were engaged in the practice of law. It is therefore
ADJUDGED that:
1. Plaintiffs Veronica Kelly, Lil Simon, and Ron Baum’s Motion for Partial Summary on Liability for Violations of FDUTPA is DENIED.
2. Defendant Palmer, Reifler & Associates, P.A.’s Motion for Summary Judgment is GRANTED and summary judgment is entered in the Defendant’s favor and against each of the Plaintiffs on all counts.
3. This case is CLOSED and all pending motions are DENIED as moot.
VERONICA KELLY, a citizen of Pennsylvania, LIL SIMON, a citizen of Florida, and RON BAUM, a citizen of Florida, individually and on behalf of all others similarly situated,
vs.
PALMER, REIFLER & ASSOCIATES, P.A., a Florida partnership,
Defendant.
REPORT AND RECOMMENDATION ON MOTIONS FOR SUMMARY JUDGMENT
This matter is before the Cоurt on Defendant Palmer, Reifler & Associates, P.A.’s (“Palmer Law Firm” or “the firm”) Motion for Summary Judgment [D.E. 165] and Plaintiffs Veronica Kelly, Lil Simon, and Ron Baum’s (collectively, “Plaintiffs”) Motion for Partial Summary Judgment on Liability for Violations of FDUTPA [D.E. 119]. The Honorable Federico A. Moreno referred this case to the undersigned Magistrate Judge for all pretrial proceedings [D.E. 62], After considering the motions and related filings, and the entire record in this case, the Court recommends that Defendant’s motion for summary judgment be Granted, and Plaintiffs’ motion be Denied, for the reasons set forth below.
/. BACKGROUND
This lawsuit concerns demand letters sent by the Palmer Law Firm pursuant to various states’ civil theft recovery statutes. These statutes, which have been enacted in all fifty states, allow retail stores and other commercial entities to recoup losses sustained as a result of retail theft. The Palmer Law Firm has been retained by numerous retailers and commercial entities to pursue civil damages and penalties against individuals detained in the clients’ stores for shoplifting, pursuant to these civil theft recovery statutes.
Plaintiffs Veronica Kelly, Lil Simon, and Ron Baum or their children received civil theft demand letters from the Palmer Law Firm. Plaintiff Kelly, who resides in Pennsylvania, received three letters from the firm in connection with an incident at J.C. Penney involving her minor child. [D.E. 119-5 1 at 2 ¶ 3]. The first letter Kelly received stated:
Dear Pareni/Guardian of [ ]:
This Law Firm represents JCPEN-NEY concerning its claim against you in connection with an incident involving your child in their store 67 on 3/1/2008.
Pursuant to “Damages in actions on retail theft” statute, 42 Pa.C.S.A. § 8308, JCPENNEY may proceed with a civil penalty action against you.
You may settle this matter by making payment to us in the amount of $202.00 within twenty (20) days of the date of this letter. Upon receipt of full pаyment and clearance of funds, you willreceive a written release of the civil penalty claim.
Payment should be made payable and mailed to [the Palmer Law Firm.] ....
Should payment fail to be made, we will review the file for the possibility of further civil action and may choose to request pre-litigation attorney’s fees. Therefore, to avoid a higher demand request, please make payment in full according to the terms stated or call our office to set up suitable payment arrangements.
[Id. at 4 (emphasis in original) ]. The letter was signed by a lawyer admitted to practice law in Pennsylvania as “Of Counsel for the Firm.”
The second letter to Ms. Kelly noted her failure to pay pursuant to the prior written demand, and advised in pertinent part:
Pursuant to the “Damages in actions on retail theft” statute, 42 Pa.C.S.A. § 8308, JCPENNEY may now proceed with litigation against you.
You may stop a lawsuit from being fíled and settle this matter by making payment to us in the amount of $477.00 within ten (10) days of the date of this letter. ....
* * *
Should payment fail to be made, our client may then proceed to file a lawsuit against you, in which case our client may seek attorney’s fees, court costs and other legal expenses throughout the litigation. In such case, you would be served by the Sheriff or other means with a summons requiring you or your attorney to appear in court to defend the action. If successful in any such litigation, we estimate that our client would be seeking a final judgment of damages, attorney’s fees and court costs in excess of the amount demanded herein.
Please make payment according to the terms herein to avoid such action.
[Id. at 5 (emphasis in original) ]. The third letter Kelly received was similar to the second letter, аgain noting her failure to pay and demanding $477.00. [Id. at 6]. Kelly has refused to pay because her daughter assured her that she did not steal anything from the retailer. [Id. at 3 ¶ 5].
Plaintiff Simon received three letters in connection with an incident at Wal-Mart involving her adult child, Michael, who resides with her in Florida. [D.E. 119-6 at 2 ¶¶ 3, 5; D.E. 165-3 at 5-6]. The first two letters, sent by Wal-Mart, demanded payment of $200.00. [D.E. 119-6 at 2 ¶ 4], The third letter was sent by the Palmer Law Firm and signed by James R. Palmer of the firm. [Id. at 4]. It was similar to the second letter the firm sent to Kelly and demanded payment of $275.00 to “stop a lawsuit from being filed and settle this matter.” [Id.]. Simon paid $280 to the Palmer Law Firm and received a written release. [Id. at 3 ¶ 6; D.E. 165-3 at 24, 30].
Plaintiff Baum received one letter from the Palmer Law Firm in connection with an incident at Macy’s involving his minor child. [D.E. 165-5 at 11, 22], He paid the $200 demand amount and received a written release. [D.E. 192 ¶ 123; D.E. 165-5 at 23-25, 27].
The Palmer Law Firm has approximately 90 employees, six of whom are lawyers. [D.E. 119-2 at 24-26]. The firm associates with attorneys in other states (the “of counsel” attorneys) who, the firm asserts, render advice on the substantive law of his or her state, respond to opposing parties’
The firm’s demand letters are based on information provided to the firm by their retail clients, often but not always in an electronic format. [Id. at 72, 78; D.E. 119-12 ¶¶ 4, 6], For some of its clients, the firm conducts an individual review of the information provided by the client. [7d]. For many other clients, the firm relies, at least initially, on the internal review and loss prevention procedures set up by the individual retailers and discussed with the firm. [Id.]. For some but not all of its clients, the firm manually calculates the demand amount that is set forth in the letters. [Id.]. For many clients, there is no separate review by an attorney prior to the firm sending out a demand letter that is signed by an attorney. [Reifler Depo. at 78-79, 8; D.E. 119-12 ¶ 6]. Reifler estimated that close to one million written releases have been sent out by the firm, meaning close to twenty-five percent of the people who received demand letters paid in response thereto. [Reifler Depo. at 94-95]. The firm offers many of its retail clients the option of litigation services, often by separate agreement. [D.E. 119-9 at 4 ¶ 2.3.e; D.E. 119-10 at 2, § 5; Reifler Depo. at 81-82]. Between June 2000 and June 2008 (the month the present lawsuit was filed), fifteen civil recovery lawsuits had been filed by the Palmer Law Firm after a demand letter had been sent. [D.E. 119-13 at 8-9]. By October 2008, seventy-seven cases had been filed. [Id.].
Plaintiffs have sued to stop the Palmer Law Firm’s practice of sending demand letters that are allegedly deceptive, unfair, and oppressive and whose purpose is “to harass, intimidate and coerce consumers into paying a large fine by threatening civil action (which they have no intention of filing) by a local attorney (that has no involvement in the case) and a visit from the ‘sheriff (which they know won’t happen).” [D.E. 11 at 2 ¶ 3]. According to Plaintiffs, the Palmer Law Firm collects information from its retail clients and, utilizing sophisticated computer software, automatically generates misleading demand letters, calculates demand amounts, and affixes a local attorney’s signature to the demand letter, all without attorney review. [Id. at ¶ 4],
Plaintiffs have asserted the following claims against the Palmer Law Firm: damages for violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1964(c) (Count I); declaratory and injunctive relief under 18 U.S.C. § 1964(a) (Count II); money had and received (Count III); unjust enrichment (Count IV); and violation of Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”), Fla. Stat. § 501.201, et seq. (Count V).
Plaintiffs seek certification of two subclasses. 2 Plaintiff Kelly seeks to represent the “Injunctive Class,” which is defined as:
All individuals in the United States, who after June 26, 2004, received a letter from the Palmer Law Firm demanding civil damages pursuant to a state civil recovery statute. The class excludes all persons that were [ ] either sued by the Palmer Law Firm or convicted of retail theft.
[D.E. 11 at 11 ¶ 41].
Plaintiffs Simon and Baum seek to represent the “Monetary Class,” which is defined as:
All individuals in the United States, who after June 26, 2004, received a letter from the Palmer Law Firm demanding civil damages pursuant to a state civil recovery statute and made a payment. The class excludes all persons that were either sued by the Palmer law Firm or convicted of retail theft.
[Id.].
The Palmer Law Firm moves for summary judgment in its favor on all of Plaintiffs’ claims, as discussed below. Plaintiffs move for partial summary judgment on liability for violations of FDUTPA. 3
II. ANALYSIS
A. Summary Judgment Standard
Summary judgment is appropriate where “the pleadings, depositions, answers to interrоgatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.”
Imaging Bus. Mach., LLC. v. BancTec, Inc.,
B. Preliminary Standing Issues
1. Plaintiff Veronica Kelly
The Palmer Law Firm argues that Plaintiffs Veronica Kelly and Lil Simon lack standing to bring this action. With regard to Kelly (who seeks only injunctive relief in this case), the Palmer Law Firm argues that her claims under RICO and FDUTPA are moot. The argument is based on the fact that the Palmer Law Firm has ceased sending civil demand letters to her and has stipulated that it will not take further action against her or her daughter regarding the underlying alleged theft incident. 4
The doctrine of voluntary cessation provides an exception to the general rule that a case is mooted by the end of the offending behavior.
Sheely v. MRI Radiology Network, P.A.,
Voluntary cessation of allegedly offensive conduct moots a claim only “if it is clear that the defendant has not changed course simply to deprive the court of jurisdiction.”
Nat’l Advertising Co. v. City of Miami,
The Palmer Law Firm has not met its burden. We see nothing in the record that bars the firm from sending Kelly demand letters again. The sworn declaration from one of the firm’s partners that it will not do so is insufficient in this regard. Moreover, the Palmer Law Firm continues to send demand letters to other individuals. This is precisely the practice that Kelly seeks to prevent through her suit for injunctive relief. Her claims are not moot.
The Palmer Law Firm also argues that Kelly cannot sustain her FDUTPA claim because, not having paid anything to the firm, she did not suffer actual damages. The firm incorrectly recites the standard she must satisfy: (1) a deceptive act or practice; (2) causation; and (3) actual damages. [D.E. 165 at 7-8 (citing
Rollins,
However, Kelly is seeking only
injunctive
relief. Fla. Stat. § 501.211(1) permits a claim for injunctive relief by “anyone aggrieved” by an unfair or deceptive act. We find, and the firm does not seriously dispute, that Plaintiff Kelly was “aggrieved” by receipt of allegedly misleading demand letters from the Palmer Law Firm. Therefore, the argument that she cannot satisfy the injury requirement of FDUTPA is unavailing.
See, e.g., Klinger v. Weekly World News, Inc.,
2. Plaintiff Lil Simon
The Palmer Law Firm challenges Plaintiff Lil Simon’s standing to sue because the civil demand letter was not sent to her but to her adult child, Michael Simon, over whom she does not have legal guardianship. The firm argues that it is Michael’s substantive rights, not Lil’s, that would have been violated if Plaintiffs’ allegations are true. Moreover, the firm points out that the payment was made by Lil’s husband, though admittedly by credit card from their joint account. The firm thus asserts that Lil was not injured, is not the real party in interest here, and lacks standing to sue on behalf of her son.
Plaintiffs counter that Lil is not suing to assert her son’s rights but her own. They note that the demand letter was received “at her home and [Lil] made the payment to Palmer with her own money on behalf of her son who lives at home and is on disability due to various mental and physical disabilities.” [D.E. 191 at 4]. They contend that Lil suffered a direct monetary damage as a result of the Palmer Law Firm’s conduct and thus is an “aggrieved” person under the FDUTPA statute, specifically § 501.211(1). [Id.]. Moreover, they claim it is the firm’s “admitted practice ... to specifically target parents for payment” of the demand amounts. [Id.].
We find that Lil does have standing. She testified that she received a letter demanding money from the Palmer Law Firm, read it with her son Michael, and wаs worried that if she didn’t pay the debt demanded therein, legal consequences might ensue, including the filing of a lawsuit against them and an assessment of attorney’s fees. [D.E. 165-3 at 17-19]. Consequently, she paid the demand amount.
[Id.
at 24]. That the letter was addressed to her son because of his actions and the payment was physically made by her husband is of no moment. Lil read the letter, felt intimidated, and approved payment from a joint account.
[Id.
at 30]. She has suffered a monetary loss as a
C. Florida’s Litigation Privilege
The Palmer Law Firm contends that Plaintiffs’ claims are barred in blanket fashion by the litigation privilege. In Florida, the litigation privilege “essentially provides] legal immunity for actions that occur in judicial proceedings.”
Echevarria, McCalla, Raymer, Barrett & Frappier v. Cole,
Just as participants in litigation must be free to engage in unhindered communication, so too must those participants be free to use their best judgment in prosecuting or defending a lawsuit without fear of having to defend their actions in a subsequent civil action for misconduct.
Id.
at 384 (quoting
Levin, Middlebrooks, Mabie, Thomas, Mayes Mitchell, P.A v. U.S. Fire Ins. Co.,
In our case, the question is whether the litigation privilege can be invoked for communications made prior to initiation of a judicial proceeding. The court in
Echevarria
expressly declined to determine at what point the litigation privilege could first be asserted,
id.
at 383 n. 1, but the Fourth District Court of Appeal addressed the issue head-on in
Pledger v. Burnup & Sims, Inc.,
Quoting from an old Florida Supreme Court decision, the Pledger court recognized that the privilege could be invoked for acts that occurred prior to litigation:
This privilege extends to the protection of the judge, parties, counsel, and witnesses, and arises immediately upon the doing of any act required or permitted by law in the due course of the judicial proceeding or as necessarily preliminary thereto.
Id.
at 1326 (quoting
Ange v. State,
At the same time, however, the court recognized that the “absolute privilege afforded to necessarily preliminary publications is not without limitation.”
Id.
(citing
Myers v. Hodges,
Pledger
ultimately found that a question of fact existed as to whether the defendants’ pre-suit publication of allegedly defamatory statements had been a good-faith attempt at pre-litigation settlement negotiations or whether it had been done with the express intent to injure the plaintiff.
Id.
at 1328. Accordingly, in the face of contradictory evidence on the question of good faith, the court reversed the lower court’s summary ruling in favor of the defendants.
Id.
(if the privilege is qualified and there is sufficient evidence to indicate that the privilege may have been exceeded or abused, the issue of fact must be submitted to the jury; citing Axelrod).
See also Silver v. Levinson,
Citing Echevarria and Pledger, the Palmer Law Firm asserts that an absolute litigation privilege applies to its demand letters. The firm points out that § 772.11(1) requires a demand letter as a condition precedent to filing suit to recover civil theft damages. 5 The demand letters, the firm asserts, were sent in an attempt to settle valid tort claims the retailers had against Plaintiffs. Releases were provided upon receipt of settlement funds, further evidencing the purpose for which the letters were sent. Consequently, the firm argues, the litigation privilege applies, the content of the letters are protected, and Plaintiffs’ FDUTPA and RICO claims based on the content of the letters cannot be sustained.
But Echevarria and Pledger do not stand for the proposition that the Palmer Law Firm is automatically entitled to absolute immunity with regard to its demand letters. It is true that § 772.11(1) requires written notice prior to initiating a civil theft recovery action, which at first blush suggests absolute immunity because the letters were sent as required by statute. Yet upon further examination, given the number of letters sent over a multiyear period (literally millions) and the number of lawsuits actually initiated over that same time period (no more than fifteen prior to this lawsuit being filed), and given the firm’s retainer agreement that provides (in many instances) for the possibility of litigation services but only pursuant to a separate agreement, we conclude that Plaintiffs have sufficiently raised a question of fact as to whether the demand letters were truly intended as a condition precedent to filing suit as required by § 772.11(1), i.e., whether they were necessarily preliminary to judicial proceedings, or, as Plaintiffs argue, whether they were sent merely as a “scare tactic.” We find, as did the court in Pledger, that there is conflicting evidence in this record as to whether the Palmer Law Firm acted in good faith in sending the demand letters. But for our rulings infra on other defenses, the issue of the firm’s good faith in sending demand letters should be resolved by a jury.
D. FDUTPA Claims
1. Attorney Conduct Under FDUTPA
The Palmer Law Firm also contends with a broad brush that FDUTPA does not apply to attorney conduct and thus Plaintiffs’ FDUTPA claims must be dismissed. The statute itself does not explicitly mention the legal profession in this context. The firm acknowledges that to date, no Florida court has held that attorney conduct will not give rise to a FDUTPA claim.
6
But the firm cites decisions from courts outside of Florida in which those states’ unfair trade practices acts were found to not apply to attorney conduct. Generally, the rationale in those
We are bound by Florida Supreme Court precedent on matters of Florida law.
See, e.g., United States v. Berdeal,
In Florida, legislative intent is the polestar that guides the court’s inquiry as to the meaning of a statute.
Knowles v. Beverly Enters.-Florida, Inc.,
The Legislature must be understood to mean what it has plainly expressed and this excludes construction. The Legislative intent being plainly expressed, so that the act read by itself or in connection with other statutes pertaining to the same subject is clear, certain and unambiguous, the courts have only the simple and obvious duty to enforce the lawaccording to its terms. Cases cannot be included or excluded merely because there is intrinsically no reason against it. Even where a court is convinced that the Legislature really meant and intended something not expressed in the phraseology of the act, it will not deem itself authorized to depart from the plain meaning of the language which is free from ambiguity. If a Legislative enactment violates no constitutional provision or principle it must be deemed its own sufficient and conclusive evidence of the justice, propriety and policy of its passage. Courts have then no power to set it aside or evade its operation by forced and unreasonable construction.
Id.
(quoting
Van Pelt v. Hilliard, 75
Fla. 792, 798,
We discern no ambiguity in FDUTPA as to whether attorneys per se are excluded from its provisions. They simply are not mentioned, and the firm has not offered any plausible basis for finding ambiguity under the present statutory scheme. In the absence of contrary precedent on this issue from the Florida Supreme Court, or even any guidance from Florida’s district courts of appeal, we decline the Palmer Law Firm’s invitation to read attorney conduct out of the statute based only upon an attorney’s status under the law.
See generally
Fla. Stat. § 501.202(2) (the Florida Legislature expressed its intent that the provisiоns of FDUTPA be “construed liberally to promote” various policies including the protection of the “consuming public ... from those who engage in ... unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.”);
Citibank (South Dakota) N.A. v. Nat'l Arbitration Council, Inc.,
No. 3:04-cv-1076-J-32MCR,
Echevarria,
discussed above, indirectly supports our conclusion that FDUTPA does not exclude attorney conduct even though that specific issue was never raised in the case. The issue presented there was whether the litigation privilege could be invoked when a statutory cause of action was being litigated, just as it could when tortious behavior was at issue.
We hold, therefore, that attorneys are not automatically exempt from the operation of the statute. That said, clearly the usual course of legal practice will not implicate the statute because express prerequisites required to invoke FDUTPA will not ordinarily be satisfied. The following discussion illustrates the point.
2. Consumer Engaged in Transaction under FDUTPA
Plaintiffs claim that the Palmer Law Firm has violated and continues to violate FDUTPA by:
mass mailing civil recovery demand letters to consumers nationwide that give the false impression that: (1) lawyers have evaluated the claim against them; (2) it intends to file a lawsuit against them on behalf of the retailer if they fail to pay; (8) it is entitled to “pre-litigation attorneys fees”; and (4) it is collecting a valid debt rather than making a demand on an unadjudicated tort claim.
[D.E. 119 at 1], The firm counters that Plaintiffs were not consumers engaged in trade or commerce under the statute so their FDUTPA claims fail as a matter of law.
FDUTPA prohibits “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Fla. Stat. 501.204(1). The stated purpose of this act is to “protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.” Fla. Stat. § 501.202(2). The statute does not define “unfair and deceptive act or practice” but we note that the provisions of the act are to be “construed liberally.” Fla. Stat. § 501.202. A practicе is unfair under the FDUTPA if it “offends established public policy” or is “immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers.”
PNR, Inc. v. Beacon Prop. Mgmt., Inc.,
The Palmer Law Firm argues first that Plaintiffs lack standing to maintain a claim because they did not purchase services or goods from the firm and therefore are not “consumers” able to sue for a FDUTPA violation.
7
There are several cases that support the firm’s argument that only consumers may sue for damages under FDUTPA.
See, e.g., Kertesz v. Net Transactions, Ltd.,
However, other cases hold that non-consumers may sue under FDUTPA. The rationale in these cases is that the 2001 legislative amendments to § 501.211(2) broadened the scope of FDUTPA, to authorize any person or entity who suffered a loss as a result of an unfair or deceptive trade practice or act to bring a suit for damages. Prior to 2001, subsection (2) provided that in an individual action brought “by a
consumer”
who suffered a loss as a result of a violation of the act, “such
consumer”
could recover actual damages. In 2001, the Florida Legislature replaced the word “consumer” with the word “person.”
See
2001 Laws of Fla. ch. 2001-39 § 6 (amending § 501.211(2) as de
We agree with these latter cases. Applying a liberal construction to § 501.211(2), as we are compelled to do when construing the provisions of FDUTPA,
see
§ 501.202, we see no reason not to conclude that replacing the term “consumer” with “person” served to broaden the reach of the statute so that more than just
consumers
could avail themselves of the protection of this statute.
9
We agree with
Nevertheless, we are also constrained to find that summary judgment for the firm is still required because Plaintiffs have not satisfied the “trade or commerce” element of FDUTPA.
10
As noted earlier, FDUTPA prohibits unfair or deceptive acts or practices “in the conduct of any trade or commerce.” § 501.204(1). The term “trade or commerce” is defined as “the advertising, soliciting, providing, offering, or distributing, whether by sale, rental, or otherwise, of any good or service, or any property, whether tangible or intangible, or any other article, commodity, or thing of value, wherever situated.” Fla. Stat. § 501.203(8). Plaintiffs contend that their dealings with the Palmer Law Firm constituted “trade or commerce” because, thrоugh the demand letters, the firm solicited and offered them a release, a “thing of value,” in exchange for money. [D.E. 191 at 16]. They cite
Sweringen v. New York State Dispute Resolution Ass’n (NYSDRA),
No. 05-CV-438 (NAM7DRH),
Swenngen
is not applicable to our analysis. The defendant in that case was an organization that mediated disputes between individuals sexually abused by priests as children and the Roman Catholic Diocese of Albany, New York.
Plaintiffs’ reliance on
Sweringen
is unavailing аs the New York deceptive trade practices statute does not contain a “trade or commerce” element expressly found in the Florida statute. The ease is factually distinguishable as well. The allegedly deceptive conduct in that case did not pertain to offers of settlement and release between two parties, but rather to representations made by the dispute resolution organization of its impartiality and neutrality in mediating disputes. The case had nothing substantively to do with the release of legal claims for money or whether such
In any event, we do not agree with Plaintiffs that the Palmer Law Firm’s pursuit of civil theft remedies under § 772.11 falls within the meaning of “trade or commerce” such that the firm could be subject to liability under FDUTPA. While it has some initial appeal, we do not find that the firm’s offer to settle and release claims for money constitutes soliciting and offering to Plaintiffs a “thing of value” under the act.
It is worth reiterating that the purpose of FDUTPA is to “protect the consuming public and legitimate business enterprises” from “unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce.” § 501.202 (emphasis supplied). The Palmer Law Firm’s acts— conduct ostensibly occurring during the exercise of a legal remedy — had zero connection whatsoever to any “trade or commerce.”
There is scant authority in Florida on the issue of whether conduct occurring in the pursuit of legal remedies such as occurred here constitutes “trade or commerce” under FDUTPA. In
Trent v. Mortgage Elec. Registration Sys., Inc.,
[UJnder the plain language of the statute, [the defendant] did not “advertise, solicit, provide, offer or distribute” anything. What [the defendant] did is obtain a legal interest in a note from third party lenders (becoming the “holder” of the note so that it could lawfully foreclose) and then proceeded to foreclosure. That [the defendant] communicated presuit with plaintiffs that it was a “creditor” or “owned” the debt does not fall within the purview of “trade or commerce.”
Id. at 1365 n. 12.
On the other hand,
Hinson
involved the FDUTPA claim of an electrical contractor who damaged a utility company’s underground lines, then claimed that the bill for damages sent by the utility pursuant to state law was in excess of the total sum of the utility’s losses.
The parties have not identified, nor have we located, any Florida state court case that squarely addresses this issue. We have located a few cases from other states that offer guidance, though. These courts have concluded that conduct in pursuit of legal remedies is not “trade or commerce” under their respective states’ unfair trade practices acts. In
Dalesandro v. Longs Drug Stores Cal., Inc.,
In
Begelfer v. Najarian,
The court in
Benvenuti Oil Co. v. Foss Consultants, Inc.,
No. CV010485270S,
We recognize that FDUTPA is to be construed liberally. Yet we find Plaintiffs’ attempt to include pre-suit demand letters within the scope of the term “trade or commerce” simply misses the mark. We will not hold under these facts that soliciting or offering a release in exchange for money is the equivalent of soliciting or offering a “thing of value” under FDUTPA. There is simply no connection or nexus to trade or commerce between these parties through the firm’s demand letters. And absent that important nexus, the entire FDUTPA statutory scheme simply does not apply to these particular circumstances, even if a reasonable juror could find that the firm’s conduct amounted to deceptive conduct. A contrary result would, indeed, expose a great deal of prelitigation tactics by attorneys to potential exposure under the statute, which is a result not contemplated by the statute. Thus, even though a lawyer’s status per se is not a bar to relief (because certainly some lawyers may engage in trade or commercial transactions while аcting as lawyers), the particular conduct at issue here does not fall within the statute’s umbrella.
We have no choice, therefore, but to recommend that summary judgment be granted for the Palmer Law Firm on this
E. RICO Claims
1. “Enterprise”
Plaintiffs allege that the Palmer Law Firm violated 18 U.S.C. § 1962(c), which makes it unlawful “for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise’s affairs through a pattern of racketeering activity .... ” To prevail on their RICO claims, Plaintiffs must prove (1) a conduct; (2) of an enterprise; (3) through a pattern; (4) of racketeering activity.
Williams v. Mohawk Indus., Inc.,
The Palmer Law Firm first focuses on the “enterprise” element in seeking summary judgment in its favor on Plaintiffs’ RICO claims. The firm argues that Plaintiffs have failed to establish that the firm is separate and distinct from the RICO enterprise itself. The firm also argues that Plaintiffs have not demonstrated that the firm participates in the operation or management of the alleged enterprise. As discussed below, both are undisputably necessary to sustain a RICO claim.
Plaintiffs allege that the RICO enterprise is comprised of: (1) the Palmer Law Firm; (2) retailers that contract with the firm to collect civil theft damages; (3) local attorneys around the country who contract with the firm and allow it to sign civil demand letters on the local attorneys’ behalf (“of counsel” attorneys); and (4) APIS Asset Protection Information System, a web-based management tool that the firm utilizes for loss prevention produced by New York-based RuMe Interactive Corporation (“RIC”) and Learn It Solutions. [D.E. 11 ¶ 26]. Plaintiffs claim that the Palmer Law Firm “uses a system that allows it to manipulate and control civil theft collection threats to customers and conceal the true facts about that collection.” [Id. ¶ 29]. The firm allegedly “controls and operates the RICO enterprise as follows:
(a) By developing themselves, and, through the PLFE [Palmer Law Firm Enterprise], a scheme whereby the retailers provide the Palmer Law Firm with consumer information;
(b) By agreeing that this consumer information would be processed using software developed by RIC and other third party entities in order to generate a form demand letter;
(c) By engaging local attorneys to allow their names to be affixed on the form demand letters without attorney review;
(d) By agreeing to use and using millions of these form letters to demand from consumers a computer-generаted amount via the U.S. mail and other methods;
(e) By engaging and paying RIC and other third party entities to develop automated systems for collecting the demanded amounts;
(f) By agreeing to and using those systems to process claims and demand payments.
[ID.]
An enterprise includes “any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). An enterprise is “proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.”
United States v. Turkette, 452
U.S. 576, 583,
To establish a valid enterprise to sustain RICO liability, Plaintiffs must prove that each party to the enterprise is separate and distinct from the other.
E.g., Cedric Kushner Promotions, Ltd. v. King,
As our court has previously explained:
[b]ecause a corporation can only function through its employees and agents, any act of the corporation can be viewed as an act of such an enterprise, and the enterprise is in reality no more than the defendant itself. Thus, where employees of a corporation associate together to commit a pattern of predicate acts in the course of their employment and on behalf of the corporation, the employees in association with the corporation do not form an enterprise distinct from the corporation.
Florida Evergreen Foliage v. E.I. Dupont De Nemours & Co.,
Here, the Palmer Law Firm argues that it was merely providing legal services to its retail clients and, as an agent of those clients, cannot be deemed an entity separate and distinct from the enterprise.
The record reflects that the firm represents retail stores and other commercial entities in an effort to assist them recover damages under civil theft recovery statutes. [See, e.g., D.E. 165-11 ¶2], Natt Reifler, the Palmer Law Firm partner who supervises the legal department and collections, described the types of services the firm provided to its clients. [D.E. 119-12 ¶ 15]. They include: communicating regularly with current and prospective clients; reviewing, evaluating, and analyzing state statutes and discussing their applicability with particular clients; reviewing, evaluating, and analyzing narratives provided by retail clients to determine whether the facts give rise to civil retail theft claims; preparing demand letters; communicating with opposing counsel and opposing parties; negotiating and settling retail theft claims on behalf of clients; preparing various legal documents for clients; filing lawsuits on behalf of clients, and attending court proceedings and mediations in those cases. [Id]. Reifler avers that the firm is “directed by its retail clients on a case-by-case basis on how to proceed in representing their rights and interests with respect to their claims, including filing lawsuits to recover damages when the retailers deem it appropriate.” [D.E. 165-11 ¶ 3]. 11
The aforementioned activities are included within some of the services performed by a law firm engaged in a civil recovery practice. Some of the work clearly was legal in nature. If the Palmer Law Firm were acting as an agent for its clients, it cannot be deemed an entity separate and distinct from the enterprise for RICO liability purposes. But Plaintiffs claim that the firm went beyond the mere provision of traditional legal services and actively participated in directing the enterprise. According to Plaintiffs, the firm created and operated a fraudulent civil theft collection scheme that it “openly touted and marketed ... as its own proprietary (and lucrative) business idea.” [D.E. 191 at 9].
12
Plaintiffs say the firm decided who to send demand letters to, yet it hired so few
Again, however, even if the firm’s legal services took a backseat to its collection services on behalf of the client, that still does not make the firm any less of an “agent” for purposes of defining the members of the enterprise. The Palmer Law Firm’s tactics, even if deceptive or extortionate, were not separate and apart from its corporate client seeking to obtain a civil recovery from the Plaintiffs. They were and are, for RICO purposes, the same actors. The corporate client simply utilized its attorney/agent to do what the corporate client would theoretically be entitled to do under the respective civil recovery statutes. We cannot find, on this record, that the two were acting distinctly such that they could be deemed part of an “enterprise” under the statute.
Moreover, to hold the Palmer Law Firm liable under § 1962(c), Plaintiffs must prove, in addition to distinctiveness, that the firm participated in the operation or management of the enterprise itself. In
Reves v. Ernst & Young,
In order to “participate, directly or indirectly, in the conduct of such enterprises’s affairs,” one must have some part in directing those affairs. Of course, the word “participate” makes clear that RICO liability is not limited to those with primary responsibility for the enterprise’s affairs, just as the' phrase “directly or indirectly” makes clear that RICO liability is not limited to those with a formal position in the enterprise, but some degree in directing the enterprise’s affairs is required. The ‘operation or management’ test expresses this requirement in a formulation that is easy to apply.
Id.
at 179,
We similarly conclude that the Palmer Law Firm did not participate in the operation or management of the enterprise in our case. Courts following
Reves
have
Based on the record before us, we also find that the Palmer Law Firm did not go beyond rendering traditional legal services to its clients. Although the clients delegated some tasks and authority to the firm, the clients ultimately retained control over the litigation, dictating when to file suit, who to pursue with a demand letter, and whether to accept a settlement.
Petri,
The essence of Plaintiffs’ complaint is that the firm used computer software to generate thousands of demand letters that automatically calculated a demand amount, wrongfully threatened a lawsuit, and electronically affixed an attorney’s signature without attorney review. [D.E. 192 at 3 ¶ 30], Whether the services the firm provided were proper or fell below the standard of care recognized for lawyers in Florida, they were provided as an agent for an employer, and RICO liability will not attach.
See, e.g., Florida Evergreen,
Plaintiffs cite
Bocciolone v. Solowsky,
No. 08-20200-CIV,
As for the other alleged members of the Palmer Law Firm Enterprise, the “of counsel” lawyers from around the country were similarly agents of the retail clients who provided legal and other services in their respective jurisdictions. Moreover, Plaintiffs have not refuted the firm’s assertion that it was never associated with RuMe Interactive Corporation or Learn It Solutions. Accordingly, because the Palmer Law Firm and the “of counsel” lawyers were agents of independently operating
Plaintiffs also assert a violation of 18 U.S.C. § 1962(d), which makes it unlawful to conspire to violate § 1962(c). However, as Plaintiffs have not produced evidence that supports a violation of § 1962(c), their § 1962(d) claim fails as well.
See Gilmore,
Based on the foregoing, because we find that Plaintiffs have failed to establish the existence of an enterprise or, if one existed, that the Palmer Law Firm participated in the operation or management of the enterprise, we are again constrained to recommend that the firm’s motion for summary judgment on Plaintiffs’ RICO claims be granted. 15
2. Noerr-Pennington Doctrine
The Palmer Law Firm argues that Plaintiffs’ RICO claims are barred by the Noerr-Pennington doctrine because the pre-litigation demand letters are protected communications under the Petition Clause of the First Amendment. In light of our determination that Plaintiffs have not established RICO violations, we need not rule on the Noerr-Pennington issue. We note, however, that the firm’s argument for application of this limited doctrine, which arises in the antitrust context and involves dealings with governmental agencies, likely has little application to the claims raised in this case. But we need not delve into this issue given the more relevant arguments raised in opposition to this RICO claim.
3. Proximate Cause to Sustain RICO Claim
The Palmer Law Firm finally argues that Plaintiffs Kelly and Simon lack the requisite proximate cause to sustain their RICO claims. The firm contends that neither of these Plaintiffs relied on the allegedly misleading and deceptive statements in the civil demand letters when deciding whether or not to make payments to the Palmer Law Firm. The firm points to deposition testimony by Kelly and Simon in which they acknowledge they mistrusted the statements in the demand letters, and Simon explains she paid only as a matter of convenience, to “get it off our back.” [D.E. 165-3 at 24]. Consequently, the firm contends, Plaintiffs Kelly and Simon lack the requisite proximate cause to sustain RICO claims. 16
Again, however, based on our determination above that Plaintiffs have not pre
F. Unjust Enrichment and Money Had and Received Claims
The Palmer Law Firm also seeks entry of judgment in its favor on the remaining claims in the complaint for “money had and received” and unjust enrichment claims (Counts III and IV). In the former, Plaintiffs assert that the firm received and obtained money from them and class members through unfair, unreasonable, and unconscionable practices that conferred no true benefit on class members, and the firm should be required to refund such amounts and cease future collection efforts. In their unjust enrichment count, Plaintiffs claim that the Palmer Law Firm received, and continues to receive, a benefit at the expense of the Monetary Class, by deceptively charging, attempting to collect, and collecting amounts under circumstances in which it would be inequitable for the firm to retain the money.
In Florida, the elements of both causes of action are the same.
See Equilease Corp. v. Hentz,
The Palmer Law Firm argues that these claims should be rejected because the firm did not receive a benefit to which it was not entitled. It is the firm’s position that Plaintiffs Simon and Baum voluntarily settled tort claims for which they owed damages to the firm’s retail clients pursuant to Florida’s civil theft statute, Fla. Stat. § 772.11. The firm explains that the demand letters were sent pursuant to the procedure outlined in § 772.11(1), which requires written notice before a party can file a lawsuit under this statute. Plaintiffs thereafter made payment to the firm and in exchange, received written releases from further liability or obligation to the retail clients, as required by § 772.11(1). The firm says it did not collect anything more than what this statute authorizes and no more than that which it was statutorily entitled to receive. [D.E. 165 at 19-20],
Plaintiffs counter that the pre-suit notice requirement of § 772.11(1) does not “immunize” the Palmer Law Firm “from liability for its abusive conduct in its civil recovery ‘practice.’” [D.E. 191 at 19].
In response, the firm posits that even if Plaintiffs’ allegations of deception were true, they nevertheless cannot prevail on the money had and received and unjust enrichment claims because:
money paid under a mistake of facts cannot be reclaimed, where the plaintiff has derived a substantial benefit from the payment, nor where the defendant received it in good faith in sаtisfaction of an equitable claim, nor where it was due in honor and conscience.
Pensacola & A.R. Co. v. Braxton,
Initially, we conclude that Plaintiff Kelly cannot prevail as a matter of law on either of these claims. She paid nothing to the Palmer Law Firm which, therefore, never received any money, property, or other benefit from her. Summary judgment for the firm should be granted as to Counts III and IV with regard to Kelly.
As for Plaintiffs Simon and Baum, we think that they, too, cannot prevail on these claims. Even if the demand letters were misleading, Plaintiffs settled potential tort claims against them, thus receiving a substantial benefit in the process. Plaintiffs have failed to raise any disputed issues of material fact in connection with either of these claims sufficient to send them to the jury. 18
Accordingly, we also have to recommend summary judgment for the Palmer Law Firm on Counts III and IV.
For the foregoing reasons, this Court recommends that
1. Defendant Palmer, Reifler & Associates, P.A.’s Motion for Summary Judgment [D.E. 165] be GRANTED and that summary judgment be entered in Defendant’s favor and against each Plaintiff on all counts.
2. Plaintiffs Veronica Kelly, Lil Simon, and Ron Baum’s Motion for Partial Summary Judgment on Liability for Violations of FDUTPA [D.E. 119] be DENIED.
3. Pursuant to Local Magistrate Rule 4(b), the parties have ten (10) business days from the date of this Report and Recommendation to serve and file written objections, if any, with the Honorable Federico A. Moreno, United States District Judge. Failure to timely file objections shall bar the parties from a
de novo
determination by the District Judge of an issue covered in the report and bar the parties from attacking on appeal the factual findings contained herein.
R.T.C. v. Hallmark Builders, Inc.,
Notes
. Docket Entry 119 is Plaintiffs' Motion for Partial Summary Judgment on Liability for Violations of FDUTPA. The majority of the documents filed in support of the motion were designated "confidential'' by the Palmer Law Firm and were referred to in the pleadings but not filed. This procedure was followed in accordance with our Order denying without prejudice Plaintiffs’ motion to file its summary judgment motion and exhibits under seal. [D.E. 116]. A courtesy copy of the motion was, however, provided to the Court. Having reviewed the materials, we do not find good cause for them to be sealed. Accordingly, we order Plaintiffs to immediately file with the Clerk of Court those materials previously withheld when D.E. 119 was filed. As an aside, we note that Judge Moreno recently denied the Palmer Law Firm’s motion to file under seal the depositions of the firm’s corporate representatives. [D.E. 212].
. Plaintiffs' motion for class certification [D.E. 124] will be the subject of a separate
. No party requested a hearing on these motions.
. Natt Reifler submitted a sworn declaration to this effect on behalf of the Palmer Law Firm. [D.E. 105-3 at 6, ¶ 8(c) ].
. The Pennsylvania statute that applies in Plaintiff Kelly’s case, 42 Pa. Cons.Stat. § 8308, contains a similar notice requirement.
. The firm mentions it has found no case deciding this issue under the Federal Trade Commission Act, which is explicitly entitled to “due consideration and great weight” in construing FDUTPA. See Fla. Stat. § 501.204(2).
. Subsection 501.211(2) provides that "[i]n any action brought by a person who has suffered a loss as a result of а violation of this part, such person may recover actual damages, plus attorney’s fees and court costs ....” § 501.211(2). This is in contrast with § 501.211(1), which provides for injunctive relief rather than damages for "anyone aggrieved by a violation of this part ....” § 501.211(1). These two subsections were discussed previously in Sections II.B.l. and II.B.2., supra.
. We note that the vast majority of cases analyzing FDUTPA are federal cases.
See Kertesz,
. We respectfully disagree with the reasoning of our sister court in
Kertesz,
But in 2001, the Legislature made two changes to FDUTPA that are relevant to the issue before us. As noted, the Legislature replaced the word "consumer” with "person.” (The term "person”, the Committee Staff noted, "is understood to include a business.” See Senate Staff Analysis at 6.) The Legislature also amended the definition of "consumer” in § 501.203(7) to add "business” and "any commercial entity, however denominated.” See Laws of Fla. Ch. 2001-39 § 1 (amending § 501.203(7) as described). So at the same time the Legislature expanded the definition of "consumer,” it replaced the term "consumer” with "person” in the section providing for monetary remedies for a violation of the statute.
To us, this evinces an intent to expand the applicability of the remedies provision to more than just consumers. If the purpose had been to assure that businesses could avail themselvеs of the remedies under § 501.211(2), given “inconsistent court interpretations” in which "remedies available to individual consumers have not always been available to business consumers,” see Senate Staff Analysis at 4, that purpose could have been accomplished by the change to the definition of "consumer” (in § 501.203(7)), such that the term "consumer” did not have to be replaced with “person” in § 501.211(2). Thus a non-consumer (like a competitor, either individually or through a corporate form) could seek relief under the statute so long as the trade or commerce element of the statute was satisfied.
. Whether certain acts and practices fall within the scope of "trade or commerce” is a separate question from whether a plaintiff has standing to sue under FDUTPA.
. According to the firm, the retail clients initially determine which suspected shoplifters to pursue for civil theft damages based on the retailers' own internal loss prevention and investigation procedures. [See, e.g., D.E. 213 at 72-73, 78], The retailers then send relevant information about the individuals to the Palmer Law Firm, which conducts its own independent review of some but not all of the files, depending on the level of internal review conducted by the retailer. [Id.'] According to Reifler, this includes reviewing its clients’ procedures to determine what level of review was conducted and what the clients' expectations were. [Id.]. The firm then generates a civil demand letter for the retailer.
. To carry out its collection scheme, Plaintiffs say, the Palmer Law Firm generated civil demand letters based on electronic files received from retail clients that contained a minimal amount of information about the individuals, including age, date of detention, address, and value of the merchandise. [D.E. 192 at 5 ¶ 2]. The firm then used computer software to generate form demand letters that automatically calculated the demand amounts and electronically affixed attorneys’ signatures to the letters.
[Id.
¶ 3]. The demand letters were sent out without an attorney having reviewed the claim or the letter itself prior to mailing.
[Id.
at 6 ¶ 9]. The letters implied that if payment were not made, civil litigation would ensue.
[Id.
at 5 ¶ 5], However, the firm knew it was highly unlikely that a lawsuit would ever be filed, having filed only 15 lawsuits on behalf of retail clients in the four years prior to commencement of this action.
[Id.
at 6 ¶ 6]. Indeed, many of the firm's contracts with retail clients did not even provide for litigation services; that representation could be provided, though, under an en
. There is no evidence that this proposal, which was submitted to the Target Corporation, was ever accepted by Target, and Target is not currently a client of the Palmer Law Firm. [D.E. 119-2 at 54-55, 62-63],
. We note as well that we do not necessarily agree that Bocciolone's holding alters the result here based upon the prior discussion as to whether or not the firm can constitute a separate actor for RICO enterprise purposes. That issue was not addressed in this decision. And we also do not necessarily agree that Bocciolone’s statement of the law that is addressed in the decision is correct in the Eleventh Circuit.
. In urging us to find that the Palmer Law Firm's business relationship with its clients goes beyond the offering оf traditional legal services, Plaintiffs claim the Court has already determined that the firm’s “collection scheme” is not the practice of law. [D.E. 191 at 9]. Plaintiffs are referring to Judge Moreno's ruling that the attorney-client privilege did not apply because the firm was "not engaging in the practice of law when its computer generates and sends out thousands of civil demand letters each month.” [D.E. 61 at 1], We agree with that particular conclusión based on the argument then being made, but we note the ruling was made in the context of a motion to compel, at an early stage of litigation, and does not control our conclusion now as we consider case-dispositive motions with supporting documentation.
. Plaintiffs concede that Kelly does not meet the injury requirement of a RICO claim so they have voluntarily withdrawn her individual RICO claim. [D.E. 191 at 8 n. 4],
. In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.1981) (en banc), the Eleventh Circuit adopted as precedent all decisions of the former Fifth Circuit Court of Appeals decided prior to October 1, 1981.
. Plaintiffs focus on the allegedly deceptive civil recovery practices employed by the Palmer Law Firm but do not claim the amount of money Simon and Baum paid was excessive under § 772.11(1). They do assert generally that the firm uses a software system to "automatically calculate an excessive demand amount" [D.E. 192 at 5 ¶ 35], but they have not shown that the settlement amounts they paid to the Palmer Law Firm were out of line with the damages authorized by the statute, nor that the retailers were not entitled to pursue civil theft claims against them. Notwithstanding Plaintiff Simon’s testimony that she did not believe her son stole anything from Wal-Mart and she only paid because she wanted to аvoid being sued and incur additional legal expenses [D.E. 165-3 at 12-13, 18, 20, 24, 49-50], the record reflects that her son was arrested for shoplifting and appeared in court, where adjudication was withheld. [Id. at 15]. Plaintiff Baum’s daughter was charged with misdemeanor petty theft at Macy’s; after completing community service hours, the charges were dropped. [D.E. 165— 5 at 11, 18, 20-22], Given the record, neither of these Plaintiffs can legitimately claim that there was no possible basis for recovery under § 772.11, which contemplates civil recovery for attempted shoplifting. See § 772.11(1) ("Any person who proves by clear and convincing evidence that he or she has been injured in any fashion by reason of any violation of ss. 812.012-812.037 ... has a cause of action ....”); Fla. Stat. § 812.014 (theft includes endeavoring to obtain or use the property of another with the intent to temporarily or permanently deprive the other person of a right to the property or to appropriate the property to his or her own use).
Furthermore, with respect to the claim that the Palmer Law Firm demanded excessive attorneys' fees that were "completely arbi