First Quarter 2018 - ACC North Florida Chapter Newsletter

FOCUS...on the North Florida Chapter

 

By in-house counsel, for in-house counsel.®

North Florida Chapter News and Information
Chapter President's Letter
By Monique Brown, Data Privacy Lawyer/AVP, Counsel (Deutsche Bank)

Dear Fellow ACC North Florida Members:

When I joined the chapter 7 years ago, I wanted ACC to help me develop a network, gain legal tools to assist me in my in-house role, and attend CLEs focused on my practice area. The North Florida Chapter of ACC well exceeded my expectations. Our wonderful chapter will be featured in the April issue of Attorney at Law magazine. The article will highlight three benefits of being a member: Networking, Educational opportunities and Resources. We value your membership! I encourage you to consider becoming more involved with the chapter by joining one of our ACC Board committees: Communications, Membership, Community Outreach and Sponsors/Programs Committee. Please let us know what we can do to get you more involved or if you have ways to improve our chapter. Simply contact us via nfla@accglobal.com

Very Best,

Monique Brown, President ACC North Florida Chapter

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Upcoming Events

April 4, 2018-  Holland & Knight will host a lunchtime CLE on the topic of Blockchain at its offices at 50 N. Laura Street, Suite 3900.  Check-in begins at 11:30.  More info ...

April 19, 2018 - Adams and Reese LLP Social Event 4:30 - 7:30 at River and Post, 1000 Riverside Ave. Jacksonville, FL 32204. More info ... 

May 8, 2018 Save the Date! Littler will present a CLE followed by a happy hour, from 4 - 6 p.m., venue and topic to be determined.

June 13, 2018 Save the Date! McGuire Woods invites ACC Members and their families to a baseball night with the Jumbo Shrimp.  Game starts at 7:00 p.m. 

Finally, we have several more events we are in the process of planning this year, including a membership event cooking class, a women's afternoon at the spa, painting with a twist, golf at White Oak, and several more CLE opportunities with excellent speakers.  

Do you have pictures from a past event to include in the newsletter? Please send those to Anna.Shea@fisglobal.com.

Please be sure to check our Chapter page for additional information on upcoming events by clicking here.

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Upcoming ACC National Events:

2018 ACC Mid-Year Meeting, April 22-24, 2018, Denver, CO. - The legal landscape is always changing—as is the role of in-house counsel. Come to Denver to up your game and arm yourself with the knowledge and insights you need to solidify your role as a respected business advisor. More info ... 

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Welcome NEW Members for the ACC North Florida Chapter!
ACC North Florida Chapter is pleased to welcome these new members:

 

Kathryn Bongiovanni, CoventBridge Group

Olivia Bowers, FIS

Ben Bruins, FIS

David E. Faliszek, Fidelity National Financial, Inc.

Bradley Gordon, Patriot Rail Company LLC

Karen Hendrix, Interline Brands, Inc.

Kyle Jacobs, Advantus, Corp.

Kevin Jenkins, Deutsche Bank

Mathew Johnston, Physician Group Services

Matt Kita, Fidelity National Information Services, Inc.

William MacQueen, Fortegra Financial Corporation

Tina McColly, FIS

Anthony B. Miller, Florida Agency for State Technology

Heather Owen, GuideWell Source

Matthew Polimeni, The HCI Group

David Robert, Fidelity National Information Services, Inc.

Brian Mitchell Rowland, NorthgateArinso, Inc.

Courtney B. Thompson, Fanatics, Inc.

Jeffrey Totty, Alliance and Associates

Travis Turner, FIS

Cathy VonLuehrte, FIS

Robert Wohn, Deutsche Bank

Michael Wrobel, Fidelity National Information Services, Inc.

 

 

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Community Outreach Committee Update
Heidi Anderson (Fanatics, Inc.) and Megan Wilson (Fidelity National Financial)
​The Community Outreach Committee of the ACC North Florida Board works to connect our ACC Members with local community and charitable initiatives with a focus on service to citizens in Northeast Florida.  We plan service-based opportunities for our Members at least once a quarter to encourage our Members to connect and serve our local community.  Here are a few upcoming initiatives of the Community Outreach Committee:
 
March 20, April 17, May 15, June 19 (third Tuesday of every month) – Advance Directives Nights: in conjunction with Jacksonville Area Legal Aid, attorneys from the ACC (and the private bar) create and execute advance directive documents for income-qualifying individuals on a pro-bono basis. Signing up for Advance Directives Night just got easier!  You can fill in your information on the nights you're able to assist by clicking on this link: Advance Directives Night
 
March 21 – In-house counsel panel discussion with Jacksonville University pre-law students 
 
Early April (date TBD) – In-house counsel panel discussion with University of North Florida pre-law students
 
September – ACC National month of service – more details to come on our September service project! 
 
Late November / early December – Holiday-based service project – we’d love to hear your ideas on any holiday-based service opportunities that may be available to our Committee.
 
 
Please contact Heidi Anderson (heanderson@fanatics.com) or Megan Wilson (megan.wilson@fnf.com) to participate in any upcoming Community Outreach projects or to learn more about the Committee.
 
 
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World Affairs Council - Upcoming Events
By Barbara Johnston, ACC Board of Directors (General Counsel, Regency Centers)
A Special Exclusive Engagement!
Monday, April 9
A Special Engagement for Council Sponsors & Ambassador's Circle Members
The Haskell Company
Global Issues Evening
Tuesday, April 10
A Presidential Look at Latin America and Mexico's Perspective on Hemispheric and Bilateral Relations
Felipe Calderon
President of Mexico (2006-2012)
Annual Member Celebration
Tuesday, May 15
Annual Member Celebration
WJCT Studios
 
Global Business Luncheons
Thursday, March 22
An Update from The Economist: A Washington, D.C. Perspective
James Astill
Washington Correspondent, The Economist
 
Tuesday, April 17
The Future for Bricks and Mortar Retail and Regency Centers
Hap Stein
Chairman and CEO, Regency Centers
 
Wednesday, May 9
An Update from The Fed: Economic Outlook and Monetary Policy
Raphael Bostic
President and CEO, Federal Reserve Bank of Atlanta
 
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Past Event Recap - Jimerson and Cobb Panel Discussion
By Katherine Burgess (Jimerson & Cobb, P.A.)
On February 1st Jimerson & Cobb, P.A. hosted a panel discussion for ACC North Florida Chapter on How to find and manage outside counsel in a way that adds value to your company at the River Club in Jacksonville, FL. 
 
This lively discussion was moderated by Charles Jimerson, Managing Partner of Jimerson & Cobb, P.A., panelists included Ernst Bell (VP, Associate General Counsel with Regency Centers), Brent Zimmerman (General Counsel with Miller Electric Co.), Kimberly Law (Corporate Counsel & Assistant Secretary with Main Street America Group), and James O. Birr, III (Partner at Jimerson & Cobb, P.A.). 
 
Reducing outside counsel costs has consistently been one of the most pressing issues mentioned by corporate counsel.  But it’s not only a matter of reducing costs. The panelist discussed the process of when to hire outside counsel, when and how to establish expectations with outside counsel, budgeting and financial considerations when using outside counsel, as well as effective ways to communicate with outside counsel.  The panel discussion involved a live-polling questionnaire allowing the audience to participate and bring a new level of interaction to the discussion.
 
(Photos by Katherine Burgess)
 
      
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Legal Articles
WHY ATTORNEYS (SHOULD) HATE COMMERCIAL ARBITRATION: The Reasons why Arbitration is an Inferior Dispute Resolution Method
Charles B. Jimerson, Esq and Adam B. Edgecombe, Esq (Jimerson & Cobb, P.A.)

     If asked, many corporate leaders would probably be of the opinion that arbitration is a superior alternative to litigating through the state or federal courts. As commercial litigators, we’re left to deduce that opinion considering how prevalent arbitration clauses are in dated contracts. However, if asked why they feel that way, most corporate leaders (and possibly even some in-house counsel or transactional lawyers) would probably discover that their reasoning is not very well thought-out and the decision was made as a formality without much context. I’m not sure how this myth started, but these days, it is generally thought in the business community that arbitration is what sophisticated, savvy businesses use for dispute resolution. A cheaper alternative, which you can limit your issues and expedite proceedings. While the right to arbitrate a dispute may be preferable in some circumstances, I submit to you that it is not preferable in most commercial environments, and that more consideration should be given by all those involved in the contracting process before blithely preferring the company’s disputes to be handled through arbitration. Having been involved in scores of arbitrations and thousands of lawsuits, I strongly believe that arbitration presents a far less appealing method for resolving legal disputes than the state and federal court systems.  

 

First, arbitration is just as expensive. It does not end up being the cheaper alternative. It does not end up being the faster resolution method either. A complex arbitration is still going to have motion practice, discovery, routine hearings, mediation(s), expert witness testimony and a full-fledged trial. Instead of paying for just your own lawyer, you’re also going to pay half of the rate for 1-3 (or more) very expensive senior lawyers selected as arbitrators, each of which typically charge more than your own counsel. As a corporate taxpayer, your taxes already pay for access to a sophisticated, effective system for resolving legal conflicts—our state and federal court systems— one in which the judge is not paid incrementally to handle your matter versus anyone else’s matter, and one in which the trier of fact is not fiscally incentivized to keep the proceedings going. While arbitrations are geared toward streamlining the issues, I’ve often found that good lawyers and lenient arbitrators broaden the scope of the case under the pretense of fundamental fairness and before you know it, the case is just as complex as a multi-party litigated matter, but without the procedural and systemic safeguards available to guide the course of the action. 

 

Aside from the often inefficient administration of the proceedings, let’s talk about the cost to access the system. Under the current AAA Commercial Arbitration fee schedule, it costs a minimum of $800 to file for arbitration, and that fee goes up to over $7,700 when the amount at issue is over a million dollars, topping out at $12,500 depending on the amount in controversy.  Mind you, those filing fees are on top of the arbitrator’s fee. Have you ever asked yourself what exactly you are getting for that? I know I do every time I am in arbitration. 

 

Second, arbitration is disfavored because there is virtually no right to appeal an arbitration award, even where the arbitrator makes a clear and gross mistake on the governing law.  Even where the arbitration agreement or clause requires the arbitrator to follow the law, your company will have no real recourse if he or she does not do so.  And while most cases do not feature appealable issues, it is a strong comfort to know that you are able to predict how a state or federal court will rule because it is duty bound by to enforce the law. If a judge does make an incorrect ruling in your case, you have the ability to seek a correction. In arbitration, it is a one and done, so cross your fingers the arbitrator liked the color of your tie or blouse that day. 

 

Additionally, discovery is much more difficult in arbitration.  First, obtaining third-party discovery from non-parties can be cumbersome, expensive, confusing, and most times impossible given that the federal courts have split on whether the Federal Arbitration Act allows for pre-hearing third-party discovery; individual state law is also split on this issue.  Sometimes arbitration proceedings severely limit the scope of permissible discovery, and cut off production of key documents or bar taking meaningful depositions, sometimes they don’t. Just depends on the clause or the arbitrator. In circumstances like consumer based, small transactions, that benefits companies. In large commercial contracts, limiting discovery does not benefit you. If you are a lawyer who thinks limited discovery in multi-million dollar commercial proceedings is a good thing, I trust that you have never had the thrill of learning the testimony of a seminal adverse witness or an expert at the final hearing for the first time. I’m sure Pepto-Bismol would love it if that’s how every case unfolded. Most importantly, however, an arbitrator lacks the ability to sanction, or hold in contempt, parties who fail to properly participate in the discovery process. Overall, a party’s right to all forms of discovery is much narrower than that allowed for in state and federal court. While lack of access to information usually benefits the party accused of wrongdoing over the party seeking redress for its injury, that is not a certainty in arbitration given the wild west show that the evidentiary process has become and the whimsical nature in which rulings can be handed down. Nothing is a certainty in arbitration and as someone who is charged with counseling my clients on risks and rewards, I can’t see very many reasons why people voluntarily put themselves into the arbitration coin flipping game. 

 

As noted above, the impact of the lax evidentiary rules in arbitration, compared to litigation in the court system, should not be undersold.  While state and federal evidentiary rules and procedures ensure the accuracy and legitimacy of the evidence presented at trial, arbitration doesn’t offer the same assurances. Evidence is an area where commercial litigators can go from good to great, and arbitration doesn’t offer that opportunity. Misleading questions, questions that lack foundation, questions that call for long narratives. Documents that are unauthenticated. Documents that are rank hearsay. They all typically come in. There is very little opportunity to make the other side work and play fair in arbitration since there are very little evidentiary mandates. For instance, while a party is generally protected from “surprise” or “gotcha” witnesses and evidence at trial, an arbitrator may allow presentation of such evidence, or testimony from such witnesses. Can a party whip up an affidavit from a witness never disclosed, deposed or cross-examined and offer it as dispositive evidence for the key issues of the case? Sure they can. But that is hearsay or hearsay within hearsay you may claim. Pish posh, those types of objections don’t exist in arbitration. Very few objections ever exist in an arbitration proceeding. By voluntarily submitting to arbitration, you are required to trust the senior lawyers (if the appointees are lawyers, in some cases they are not) who are selected in the case will have the acumen, diligence and good judgment to sift through the issues and account for what is good evidence and what is not. Are you comfortable with that? I know I am not. I’d prefer well established rules of law. Rules that have been around as long as our country have; rules designed to ensure due process and a fair outcome. 

 

This is an opinion, it’s my opinion, and it’s a position based upon experience, but I believe that overall commercial arbitration produces poorer outcomes than litigation does.  While judges occasionally make subjective or capricious decisions, the problem is far worse with arbitrators.  Judges touch all manners of cases, with all varieties of litigants, day-in, day-out, and are usually willing to make a one-sided decision where the facts and law so merit. They make those tough calls because they have the law behind them, and in many cases because they are required to. Arbitrators, on the other hand, are much more likely to try and “split the baby” where the law and facts technically support one party, but the other party would face an overly harsh penalty. How does that mentality promote the interests of business? I submit it doesn’t and therefore, companies should opt out of the arbitration split the baby stunt. 

 

For all of these reasons, and many more that my word restrictions are stifling, I implore companies to give strong consideration to whether their business-to-business agreements (and even many of their business-to-consumer agreements) should contain arbitration clauses.  While a narrow segment of specific businesses and industries are well-served by arbitration, it is usually an inferior option for the vast majority of companies and their business dealings. Executives, general counsels, and other business leaders should consult with their outside counsel to determine if arbitration is right for them; more often than not, it probably isn’t. 

 
 
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Charles B. Jimerson is an A-V rated, board certified lawyer whose practice focuses on business litigation, construction law, banking law and eminent domain law. Jimerson & Cobb, P.A. is an award winning law firm with a practice emphasis on litigation and specialized experience in the financial services, real estate development and construction, and manufacturing and distribution sectors. Jimerson & Cobb, P.A. has been named to the Jacksonville Business Journal’s 50 Fastest Growing Companies each year for the past four years, and in 2016 and 2017 was honored as one of the 50 fastest growing law firms in the country. Mr. Jimerson’s online profile can be found at: http://www.jimersoncobb.com/attorneys/charles-b-jimerson/
 
 
Adam Edgecombe practices primarily in Jimerson & Cobb’s condominium and homeowners’ association group, as well as in the construction law and commercial litigation groups.  Mr. Edgecombe’s online profile can be found at: https://www.jimersoncobb.com/attorneys/adam-b-edgecombe/
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When an Employee Takes Her #MeToo Complaint to Social Media
By Nancy Johnson (Littler Mendelson, P.C.)
Although Title VII was passed into law in the United States in 1964, it was not until 1986, more than 20 years after the historic Act was passed, that the U.S. Supreme Court first recognized workplace sexual harassment as a form of unlawful sex discrimination in Meritor Savings Bank v. Vinson.  In 2017 and 2018, more than 30 years after Meritor, claims of sexual harassment are again grabbing headlines at a breathtaking pace largely due to the #MeToo movement.  
 
Almost six months after this movement began, victims still are coming out in force, feeling empowered to voice concerns that have been silenced for a long time.  Harassers who escaped accusations of illegal behaviors for years are now being outed and employers are becoming inundated with complaints to investigate, decide and act upon.  
 
Although sexual harassment in the workplace is not a new phenomenon, the movement of victims speaking out en masse has become a widespread message on social media encouraging individuals to share their stories, and with this movement, the numbers of complaints are ever-increasing.  The EEOC has reported four times the number of hits on its website since December 2017 versus a year earlier.  Some local and state EEO offices have reported over 20% more charges filed in January 2018 versus January 2017.  
 
While the purpose of the movement is unquestionably laudable, the #MeToo movement also provides real concerns for employers.  One such concern, particularly given the origin of the movement, is how to grapple with the implications of publicly aired grievances. If a management employee sees a Facebook posting of an employee that simply notes “#MeToo,” what is that manager to deduce from that?  Is there a problem currently where that employee feels harassed?  Is the manager obligated to follow up and respond? 
 
Some of these answers are unknowable and unanswerable in a general way.  However, there are some things employers can do.  Given this climate, it is clear that employers should preemptively review their non-discrimination, harassment, and social media polices, and policies regarding relationships in the workplace. The primary goal should be to encourage employees to confidentially submit any complaints through an approved internal process, as opposed to posting allegations alongside the employer’s name on social media to the world at large.   However, when they see or become aware of a posting on social media, what are employers supposed to do?  Even if the employer feels no response is legally required, it is not a good idea to try to avoid information.  
 
Instead, here are some tips to consider: 
 
Review your sexual harassment and non-discrimination policies. Well-drafted policies should provide appropriate methods or venues to report complaints of sexual harassment so that employees do not feel the need to resort to publicly airing their grievances on social media. These policies are your first line of defense. Policies should designate who employees may report complaints to, and should provide for the confidentiality of all complaints of sexual harassment or abuse. Additionally, employers should provide an alternative method to report complaints anonymously, if possible. For example, many large employers have 24-hour hotlines in place that allow employees to report complaints of sexual harassment or abuse.
 
Provide regular training on your sexual harassment and non-discrimination policies and how to report instances of sexual harassment or abuse. Encourage employees to speak up! It is always better to know about an issue and address it than to be blindsided by it later.
 
In addition to a rigorous and enforced non-discrimination policy, review your social media policy. Well-drafted social media policies should prohibit employees from defaming the employer, as well as its employees, on social media. Social media policies may also direct employees to the appropriate internal method or forum to submit complaints, such as through human resources.
 
Employers are also advised to discourage use of company affiliation on social media without permission, and if affiliation is permitted, to require the use of a disclaimer. Note, however, that employers may not prohibit employees from discussing or complaining about the terms or conditions of employment (such as compensation) on social media under the National Labor Relations Act (NLRA). If a social media complaint arises about your company, consider obtaining legal advice before taking action against an employee as the law in this area is evolving quickly.
 
Consider if your employees have signed any agreements with non-disparagement provisions that prevent them from making defamatory or disparaging remarks about the company or individual employees in connection with their employment. The non-disparagement provision may apply to remarks against the employer, other employees, or both. Employers concerned about employee complaints on social media may wish to consider incorporating these provisions into any employment agreement, including restrictive covenant agreements (such as confidentiality agreements).
 
In the event that an employer does find itself (or its employees) publicly accused of harassment on social media, the employer must carefully consider how to respond to the allegations, as well as to the alleged victim and harasser, on a case-by-case basis.  
 
Certainly an employer should investigate any complaint it becomes aware of and determine if there is any veracity to it. Although the social media complaint will not have been reported through appropriate channels (as should be provided for in the employer’s policies), and the employer thus may or may not be legally obligated to investigate, the best advice is to conduct a thorough investigation, typically by a third party investigator so as to ensure impartiality, notwithstanding the lack of complete information. The employer could likely experience additional backlash if it fails to take the allegations seriously and respond appropriately. Further, it looks bad—both to the public at large as well as to a court if litigation were to arise—if it appears that the employer ignored the allegations or did not take them seriously.
 
After investigating the allegations as appropriate, the employer must then carefully consider how to respond to both the employee who posted on social media and how to treat the accused harasser. If the allegations are determined to be true, the employer clearly should take appropriate disciplinary action against the harasser in accordance with its policies. A more difficult question, though, is how to deal with the complainant, who may have violated the employer’s social media, harassment, or non-discrimination policies (or possibly even a non-disparagement provision) by complaining on social media. 
 
Although the employer may have grounds to take disciplinary or other action against the complainant, it may be unwise to do so, even if the employer’s investigation determines that the allegations are false. Punishing an employee after reporting sexual harassment is likely to be viewed poorly by the community and other employees—particularly in light of the current social and legal climate. Further, depending on the nature of the complaint, it might be impermissible under the NLRA or some statutes to take action against employees who seek to enlist others in support of a more general cause.
 
Without a doubt, employers should take allegations of harassment on social media seriously and not take disciplinary or other action against current employees who make #MeToo social media posts complaining of harassment unless extreme circumstances justify the action. Even then, the costs and benefits of the discipline must be weighed carefully against the possibility of negative publicity. Above all, employers must educate employees on their policies and procedures for properly reporting instances of harassment or discrimination; by doing so, employers can work to avoid being on the wrong end of the #MeToo movement. 
 
________________
 
Nancy Johnson is an associate in Littler’s Orlando office. She is an experienced litigator representing employers in complex workplace issues. She can be reached najohnson@littler.com.
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Key Provisions in Commercial Leasing: Negotiating Terms that Protect Your Interests
By James O. (“Joby”) Birr, III and Caroline R. Nichols

Commercial leases frequently have multiyear terms and often include renewal rights.  Because the landlord-tenant relationship is intended to endure over a long period of time, all parties to the lease must carefully analyze the lease provisions provision to determine whether they adequately address all possible issues that may arise during the life of the lease, and whether they protect their interests.  While this article does not address every drafting pitfall or issue that may arise under a commercial lease, it highlights several discrete issues that have led to litigation, but could have been avoided through more comprehensive planning prior to lease execution.  

Dispute Resolution and Recovery of Attorneys’ Fees

A well drafted lease agreement will articulate where, when, and how disputes will be resolved, as well as a party’s entitlement to attorneys’ fees and costs.  The parties should specify whether a court or an arbitrator will decide the dispute, and in what venue (forum) the case will be decided.  To best ensure the parties’ choice of venue will be honored, the parties should use terms like “shall” and “exclusively” when referring to the venue for dispute resolution.   Venue selection clauses using these types of terms are referred to as “mandatory” venue selection clauses because they require that litigation/arbitration be brought in one particular forum.  R.S.B. Ventures, Inc. v. Berlowitz, 201 So. 3d 719 (Fla. 4th DCA 2016) (mandatory forum selection clauses must be honored unless unreasonable or unjust).  

 

On the other hand, venue selection clauses using phrases like “litigation may be brought in County X” will be construed to be “permissive,” meaning that a party could initiate suit in County X, but could also initiate suit in another county.  Parties to a lease agreement should avoid these types of permissive venue selection clauses.  Parties should also evaluate whether to include a waiver of jury trial provision in the lease agreement.

 

Parties must also consider whether to include a prevailing party attorneys’ fees provision in the lease.  In Florida, and with some exceptions, a party may only recover its attorneys’ fees if provided for by contract or statute.  Inland Dredging Co., L.L.C. v. Panama City Port Authority, 406 F. Supp. 2d 1277 (N.D. Fla. 2005).  Prevailing party attorneys’ fees provisions should be written broadly enough to encompass attorneys’ fees incurred prior to litigation/arbitration, during litigation/arbitration, during any appeals, and even when fighting about the amount of attorneys’ fees to be awarded to the prevailing party.  Without a broad prevailing party attorneys’ fees provision, there may be fees that a prevailing party be unable to recover from the losing party, such as fighting about the amount of attorneys’ fees to be awarded.  See Waverly at Las Olas Condominium Association, Inc. v. Waverly Las Olas, LLC, 88 So. 3d 386 (Fla. 4th DCA 2012).

Maintenance and Repair of the Premises

Although Florida law imposes statutory duties of repair on residential landlords, those statutory duties do not apply to commercial leases.  Fla. Stat. § 83.51; City of St. Petersburg v. Competition Sails, Inc., 449 So. 2d 852, 853 (Fla. 2d DCA 1984).  Commercial landlords have no duty to repair or maintain the demised premises unless the lease obligates the landlord to make repairs.  Rizzo v. Naranja Lakes Condo. Ass’n Nos. One, Two, Three, Four and Five, 498 So. 2d 451 (Fla. 3d DCA 1986); City of St. Petersburg, 449 So. 2d at 854. However, particularly when a property includes multiple rental units, landlords frequently have an interest in insuring that the exterior of the premises are maintained in a consistent manner, and tenants in such properties generally are unwilling to assume maintenance obligations for the building’s structural components.  Therefore, the landlord and the tenant should delineate each party’s repair and maintenance obligations in the lease.   

Commercial leases commonly require the landlord to “keep and maintain in good order and repair” the exterior of the building, including the roof, exterior walls, and parking lot of the rented premises.  Because these items are the landlord’s depreciable assets and because the items often serve multiple tenants, landlords have an interest in ensuring the proper maintenance of these items.  Tenants similarly may be obligated to “keep and maintain in good order and repair” the interior of the demised premises, including plumbing, electrical, heating, and cooling equipment, often including portions of the HVAC system that are not housed within the interior of the premises.   However, these typical lease provisions often fail to delineate responsibility for items that can no longer be “maintained” or “repaired,” but require replacement.  In such leases, when the building component or system fails, the landlord and tenant may end up in litigation over the responsibility to replace the failed item.  

To avoid any ambiguity and the risks of litigation, both the landlord and tenant should articulate which party must replace items that are beyond their useful life.  Ideally, the lease should clarify the scope of the tenant’s maintenance obligation, stating “maintenance includes all basic maintenance and repairs except replacement,” and should place a monetary cap on the amount a tenant must spend replacing portions of systems, such as “if all or any portion of the HVAC system requires replacement, the cost of which exceeds $1000, landlord shall pay the cost of such replacement.” See e.g. Fischer v. Collier, 143 So. 2d 710 (Fla. 2d DCA 1962).

Furthermore, to avoid any disputes regarding whether an item can be repaired, or whether it must be replaced, the lease should delegate that determination to an independent third party, such as a licensed contractor who is in the business of repairing, maintaining, and replacing the item at issue.    

Options to Purchase the Leased Property.

Tenants who are concerned about protecting their right to continue to use and occupy the leased property in the event the landlord seeks to sell the property may, in addition to negotiating a provision that any sale must be subject to the tenant’s lease, should seek to negotiate an option to purchase the property from the landlord.  Most landlords are reluctant to grant options to purchase to a tenant because the existence of such options may disincentivize potential buyers from seeking to purchase the property or cause delays in the landlord’s negotiation of a sale.  Still, landlords may grant options to purchase in order to attract large, creditworthy tenants, particularly if the tenant is the sole occupant of the building. 

Before granting the tenant any type of option, the landlord must determine whether granting the option requires the consent of any third-parties, such as the landlord’s lender or any of the landlord’s other tenants.  If the landlord has the authority to grant the option, both the landlord and the tenant should negotiate the following key points:  

the type of option; 

the time period in which the tenant may exercise the option;

whether any conditions must be satisfied in order for the tenant to exercise the option;

the mechanism for determining the purchase price if the tenant exercises the option; 

the timing of the closing if the tenant exercises the option; and

dispute resolution procedures in the event a dispute arises out of the tenant’s exercise of the option.  

Options to purchase typically are structured as: (1) a unilateral option to purchase that the tenant may exercise at the tenant’s discretion; (2) a right of first offer option that the tenant may exercise if the landlord decides to sell the property; or (3) a right of first refusal option that provides the tenant the right to purchase the property on terms that the landlord has negotiated with a third party.  The unilateral option to purchase is almost exclusively for the benefit of the tenant, providing the tenant the right to purchase the property at a pre-determined price at any time during the option period, regardless of whether the landlord is interested in selling the property.  To protect against changing market conditions, landlords that grant unilateral options to purchase typically seek to set the option price above current market prices, and insist on a short window in which the tenant can exercise the option.  

Tenants may exercise right of first offer options and right of first refusal options only if the landlord decides to sell the property on the market.  A right of first offer option requires the landlord to notify the tenant of its intent to sell the property, and negotiate with the tenant in good faith to sell the property to tenant before offering the property for sale to third parties.  A right of first refusal option requires the landlord to present to the tenant the material terms of any agreement to sell the property that landlord has negotiated with a third-party.  These options better protect the landlord from a forced sale, and give the landlord the benefit of increasing property values, but third-parties frequently are reluctant to invest time and resources in negotiating a purchase if a tenant has a right first refusal that can deprive that third party of the benefit of their bargain.  

Conclusion

To minimize the risk of future dispute and litigation, it is a good idea to have an experienced real estate attorney review a proposed lease prior to execution to confirm that it properly memorializes the parties’ intent.  Both the attorney and the client should scrutinize each lease provision to ensure that each provision adequately addresses all issues that may arise during the life of the lease, and to ensure the client’s interests are protected.  

 

_____________

 

James O. Birr, III (Joby) is an AV-Preeminent rated, board certified lawyer whose practice focuses on business litigation and construction law. Jimerson & Cobb, P.A. is an award winning law firm with a practice emphasis on litigation and specialized experience in the financial services, real estate development and construction, and manufacturing and distribution sectors. Jimerson & Cobb, P.A. has been named to the Jacksonville Business Journal’s 50 Fastest Growing Companies each year for the past four years, and in 2016 was honored as the 28th fastest growing law firm in the country. Mr. Birr’s online profile can be found at: http://www.jimersoncobb.com/attorneys/james-o-birr/

 

Caroline Nichols joined Jimerson & Cobb, P.A. in 2018, bringing over 15 years of transactional real estate and business experience in both private practice and as in-house counsel for a local real estate development and business brokerage firm.  She represents real estate developers, builders, and business owners with contract formation and the acquisition, divestment, development, and leasing of commercial real property, and with real estate issues in business mergers and acquisitions.  Read her full bio at https://www.jimersoncobb.com/attorneys/caroline-r-nichols/

 

 
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One Privilege Case: Two Analogies, Two Morals
By Lucian T. Pera (Adams and Reese LLP)
In our 24/7/365, always-mobile, all-digital world, how hard is it to mishandle privileged and confidential documents? Easier than ever.
 
Through a series of very unfortunate events, an insurance company and lawyers for their insured turned a coverage dispute involving a claim of arson in a Virginia federal court into a small nightmare touching just about everyone’s poor handling of a claim file.
 
Someone working for the carrier, in what seemed like a good idea at the time, used the file-sharing service Box.com to quickly and cheaply send their entire claim file to their outside counsel, but they neglected to password protect either the file or the folder. Not too long thereafter, a stray email produced in discovery revealed to opposing counsel (counsel for the insured) the unique URL for that folder.
 
Insured’s counsel, being a bit too curious, checked out the URL, downloaded the file, and studied it very carefully. What they did not do, even though numerous documents in the claim file were marked as privileged and confidential, was notify the carrier or its counsel that they had documents to which they were probably not entitled. Serious motion practice ensued, with differing results from, first, the magistrate and then the district court.
 
There was a serious dispute about whether the carrier’s failure to even password-protect the claim file had waived the privilege – the magistrate said it had; the district court disagreed. The magistrate likened the carrier’s conduct to “leaving its claim file on a bench in the public square and telling its counsel where they could find it.” (Not good.) The district court said, No, it’s more like the claim file “having been buried somewhere in a large park, technically publicly-accessible, but for all practical purposes, secured.”
 
But both judges were unhappy with the insured’s counsel. Even if they thought they had a killer argument for waiver – as it turned out, the magistrate agreed – both judges found they had an obligation to immediately notify opposing counsel of their possession of these (at least arguably) privileged documents – not to study them carefully and secretly. The district court lightened the sanctions the magistrate would have imposed on insured’s counsel, but was nevertheless very critical of counsel’s conduct.
 
What do we learn from these two decisions?
 
Moral One: Do the simple, cheap things you can to protect client confidential information, like password-protecting confidential documents place on publicly-accessible file-sharing services.
 
Moral Two: If you get even arguably privileged or confidential information or documents, act like it’s highly privileged, starting immediately.
 
The case is Harleysville Insurance Co. v. Holding Funeral Home, Inc., 2017 WL 1041600 (W.D. Va. Feb. 9, 2017), objections sustained in part and overruled in part, 2017 WL 4368617 (W.D. Va. Oct. 2, 2017).
 
Be careful out there.
 
___________
 
 
Lucian T. Pera is a partner in the Memphis, Tennessee, office of Adams and Reese LLP. He counsels lawyers, law firms, clients and those who do business with lawyers and law firms on ethics and professional responsibility issues. He’s the current president of the Tennessee Bar Association and a past ABA treasurer. Lucian.Pera@arlaw.com
 
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Don’t Get Caught With Your Head in the Sand: What Companies Need to Know About Data Breach Law Today
By Katherine Borello (Nelson Mullins Riley & Scarborough LLP)

               Data breaches are having a moment in the media, but it doesn’t look like it is going to end anytime soon. Attention has turned towards the regulation of data breaches due in part to several high-profile breaches that have occurred over the past few years, including the Uber data breach, where the company concealed the breach from regulators and the public for over a year, and then the devastating Equifax breach, where the social security numbers and other personal information of nearly 143 million consumers was exposed. A recent data breach at Applebee’s third-party point-of-sale company may have a large impact on Floridians.[i]

                Because of these high-profile data breaches, pressure has been put on legislators to update and strengthen regulations on companies who hold the personal information of individuals. In November of 2017, a bill was proposed in the Senate that would have imposed criminal penalties of up to five years in prison for a person who willfully concealed a data breach. In addition, the bill would have increased fines to a maximum of $5 million for failure to report within the designated time.[ii] This bill did not make it out of committee, but it represents the demand on legislators to implement greater protections for consumers and the direction these laws may go in the future. Forty-eight states already have data breach notification laws, but many of these states have proposed new legislation to strengthen their already existing regulations.

                Some important distinctions in the various state data breach and security laws to pay attention to are what information is defined as personal information, which entities are covered, what the notice timing requirements of the regulation are, who has to be notified when a breach occurs, what exemptions the law provides, and what penalties the entity faces for not meeting the notification requirements. Florida’s data breach law is already among the stricter state data breach laws. The Florida Information Protection Act of 2014 (FIPA), which became effective July 1, 2014, expanded the requirements on entities that acquire, maintain, store or use the personal information of Floridians. This law replaced the former data breach notification statute, Fla. Stat. § 817.5681 (2014).

                In Florida, a covered entity is defined as a sole proprietorship, partnership, corporation, trust, estate, cooperative, association, or other commercial entity that acquires, maintains, stores, or uses personal information.[iii] A covered entity has a maximum of thirty-days to notify the Florida Department of Legal Affairs of any breach of security affecting 500 or more individuals in Florida.[iv] In addition, to comply with the statute the covered entity must have in place reasonable measures to protect and secure data in electronic form containing personal information[v] and reasonable measures to dispose of customer records containing personal information within its custody or control when the records are no longer to be retained.[vi] The statute also states that the covered entity must have in place secure disposal, which shall involve shredding, erasing, or otherwise modifying personal information in the records to make it unreadable or undecipherable through any means.[vii]

                If a covered entity fails to comply with the statute’s notification requirements, it faces monetary penalties of up to $500,000.[viii] The personal information that triggers these requirements when a breach occurs includes an individual’s first name or first initial combined with the individual’s last name, in combination with social security number, driver’s license number or other similar number of a government-issued ID, or a financial account number or credit or debit card number combined with the required security code. Additional personal information that was added by FIPA includes information about medical history, mental or physical condition, medical treatment or diagnosis by a healthcare professional, or an individual’s health insurance policy number or subscriber identification number and any unique identifier used by a health insurer to identify the individual.[ix]

While it is important to have strong data breach regulations in place, it leaves companies with nowhere to hide when it comes to properly managing a breach response in accordance with these legal requirements. Companies should consider these new dynamics when responding to data security incidents and ensure events are handled in a defensible and responsible manner. Because of the focus in the media, and the potential impact these breaches can have on people’s financial lives, the stakes for failure are high and extremely unforgiving. It is imperative that companies stay up to date on these regulations to ensure that when a breach occurs, because it will occur, the company responds in accordance with the latest laws.

To read more about developing areas in data breach and security law and to find updates on other legal issues go to https://www.nelsonmullins.com/idea_exchange.



[i] See generally Allison Grande, Applebee’s Franchisee Reveals Payment Card Data Breach (March 5, 2018), https://www.law360.com/articles/1018736/applebee-s-franchisee-reveals-payment-card-data-breach.

[ii] See generally Data Security and Breach Notification Act, S. 2179, 115th Cong. S. 2179 (2017).

[iii] Fla. Stat. §501.171(1)(b) (2017).

[iv] Fla. Stat. §501.171(3)(a) (2017).

[v] Fla. Stat. §501.171(2) (2017).

[vi] Fla. Stat. §501.171(8) (2017).

[vii] Id.

[viii] Fla. Stat. §501.171(9)(b) (2017).

[ix] Fla. Stat. §501.171(1)(g) (2017).

__________________

 

Katie Borello is an associate in Nelson Mullins Riley & Scarborough LLP's Jacksonville office, where she practices with the business litigation group.  Katie counsels and represents businesses on a wide variety of issues, including employment, contract and indebtedness, and real estate matters. https://www.nelsonmullins.com/people/katie-borello#overview

 


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North Florida Chapter News and Information
Chapter President's Letter
Upcoming Events
Welcome NEW Members for the ACC North Florida Chapter!
Community Outreach Committee Update
World Affairs Council - Upcoming Events
Past Event Recap - Jimerson and Cobb Panel Discussion
Legal Articles
WHY ATTORNEYS (SHOULD) HATE COMMERCIAL ARBITRATION: The Reasons why Arbitration is an Inferior Dispute Resolution Method
When an Employee Takes Her #MeToo Complaint to Social Media
Key Provisions in Commercial Leasing: Negotiating Terms that Protect Your Interests
One Privilege Case: Two Analogies, Two Morals
Don’t Get Caught With Your Head in the Sand: What Companies Need to Know About Data Breach Law Today
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