DICKINSON WRIGHT, PLLC and PETER WEBSTER v. THIRD REEF HOLDINGS, LLC and BFC-BSI, LLC

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT

DICKINSON WRIGHT, PLLC, a Michigan limited liability company, and
PETER WEBSTER,
Appellants,

v.

THIRD REEF HOLDINGS, LLC, a Florida limited liability company,
directly and derivatively on behalf BFC-BSI, LLC, a Delaware limited
liability company,
Appellee.

No. 4D17-1842

[April 18, 2018]

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm
Beach County; Donald W. Hafele, Judge; L.T. Case No.
502015CA014306XXXXMB.

David P. Ackerman and E. Raul Novoa, Jr., of Ackerman LLP, West
Palm Beach, for appellants.

Justin B. Kaplan, Derek R. Young and Matthew S. Sarelson of Kaplan,
Young & Moll Parrón, PLLC, Miami, and Daniel M. Samson, B.C.S. of
Samson Appellate Law, Miami, for appellee.

MAY, J.

A Michigan lawyer and his law firm appeal an order denying their
motions to dismiss an amended complaint for lack of personal jurisdiction.
They argue the trial court erred in failing to conduct an evidentiary hearing
before ruling on the motions to dismiss, and in denying their motions.

Because the affidavits filed by both sides created a conflict in the
evidence, the trial court was required to conduct an evidentiary hearing.
Volkswagen Aktiengesellschaft v. Jones, 227 So. 3d 150, 155 (Fla. 2d DCA
2017). Because it failed to do so, we reverse and remand the case for that
purpose. In doing so, we do not comment on the sufficiency of either the
allegations or the proof to establish personal jurisdiction.

The plaintiffs alleged the Michigan lawyer and his law firm committed
tortious acts and participated in a conspiracy to reduce the equity of the
plaintiff BFC-BSI, LLC, through a fraudulent recapitalization. A Florida
investor, Third Reef, held an interest in BFC-BSI. The details of the
recapitalization are unnecessary to our holding so we will not elaborate on
the multiple parties and nature of the recapitalization. Suffice it to say,
things did not go well, resulting in litigation.

In December 2012, litigation was filed in California, alleging wrongful
conduct in the recapitalization. In that litigation, the law firm defended a
Michigan resident, who was the Michigan manager of BFC-BSI. That case
went to arbitration.

The next year, the same Michigan resident/manager hired the law firm
to represent BFC-BSI in an action against other persons and entities
involved in the recapitalization. The lawsuit was dismissed for lack of
complete diversity and was not refiled.

In the Florida action, the investor Third Reef, sued the Michigan
resident/manager, other defendants from the California and Michigan
actions, and the lawyer and his firm. The complaint alleged claims for
negligence, fraud, breach of fiduciary duty, aiding and abetting a breach
of fiduciary duty, aiding and abetting fraud, and conspiracy to commit
fraud. The wrongdoing was tied to the recapitalization. The complaint
alleged that each defendant had “committed tortious acts in Florida in
furtherance of those conspiracies. Consequently, each of the conspiring
defendants is subject to the personal jurisdiction of the Florida court
pursuant to Florida Statute section 48.193(1)(a).”

The complaint alleged that the Michigan resident/manager and the law
firm “actively solicited input and confidential information from BFC-BSI’s
members,” including Third Reef, and that information was used to “protect
[the Michigan resident/manager], themselves and their conspirators to the
detriment of BFC-BSI and its members.”

The lawyer and law firm individually moved to dismiss for failure to
state a claim and lack of personal jurisdiction. The law firm alleged it had
its principal place of business in Detroit, Michigan, and the alleged
conduct took place from 2012 through 2015 when the law firm was not
registered to do business in Florida. It did not maintain an office in Florida
nor a telephone or fax number. 1

1 The law firm subsequently registered to do business in Florida in June 2016,
almost six months after the initial complaint was filed. None of its five attorneys
had anything to do with this case.

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 The lawyer’s motion denied allegations that he was part of any
conspiracy or otherwise subject to personal jurisdiction. He alleged he
was a member of the Michigan bar and was never licensed to practice in
Florida. He appeared pro hac vice in Florida once through local counsel in
unrelated litigation.

The lawyer also attested that he did not provide legal advice to Third
Reef, never represented it, had no involvement in the recapitalization
agreement, and did not conspire with anyone to deprive Third Reef of its
capital investment. His only contact with the other defendants was in this
litigation. His role in the Michigan litigation was to represent his clients.
There were no issues involving Florida activities in that suit.

Third Reef filed a response, arguing there were sufficient Florida
contacts for personal jurisdiction over the lawyer and the law firm.
Attached to the response was the BFC-BSI California manager’s affidavit.
He attested that the lawyer solicited information related to the
recapitalization, motivations for key actions, strategy and policy, litigation
philosophy, financial capacity, and other subjects relevant to the claims
against the Michigan resident/manager. He also attested that he and
Third Reef shared this information.

At the first of two hearings on the motions, counsel argued there was
no attorney-client relationship to Third Reef, only to the Michigan
resident/manager. And, the law firm had no duty to divulge attorney-
client communications or confidences from him to Third Reef. Counsel
also argued there was no cause of action for conspiracy against a lawyer
for simply representing a client, and that any alleged conspiratorial acts
occurred before the attorney-client relationship commenced.

Third Reef responded that “the [lawyer was] complicit in expressly
affirming lies that are material to the loss, the loss in terms of redemption
of BFC-BSI’s shares in a company here in Florida.”

At the second hearing, Third Reef pointed to allegations in the operative
complaint where it was alleged that “[a]t various times described . . . the
attorneys provided legal services to, and represented or purported to
represent the interests of BFC-BSI and the members of BFC-BSI, including
Third Reef.” It alleged the Michigan resident/manager and lawyers
“actively solicited input and confidential information from the members,
including Third Reef.” These allegations formed the basis of tortious

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conduct including conspiracy and aiding and abetting. It argued that the
Michigan resident/manager and law firm coerced Third Reef and others to
sign global releases in furtherance of the conspiracy.

After the two non-evidentiary hearings, the trial court denied the
motions to dismiss. The order provides in part:

This Court adopts the holding from NHB Advisors, Inc. v.
Czyzyk, 95 So. 3d 444 (Fla. 4th DCA 2012), and concludes
that there is specific jurisdiction over the Law Firm
Defendants because the Second Corrected Amended
Complaint successfully alleges a cause of action for
conspiracy, as this Court explained on the record at the
conclusion of the hearing, and because the Law Firm
Defendants’ affidavits fail to specifically deny that the other
alleged co-conspirators committed tortious acts in
furtherance of the conspiracy in Florida.

From this order, the lawyer and law firm appeal.

We have de novo review of an order on a motion to dismiss for lack of
personal jurisdiction. Wendt v. Horowitz, 822 So. 2d 1252, 1256-57 (Fla.
2002).

The Florida Supreme Court announced a two-prong test to determine
whether personal jurisdiction extends to a non-resident defendant: (1)
whether the complaint alleged sufficient facts for application of the Florida
long-arm statute; and (2) if so, whether there are sufficient ‘minimum
contacts’ alleged to meet due process requirements. Venetian Salami Co.
v. Parthenais, 554 So. 2d 499, 502-03 (Fla. 1989).

Where the defendants submit affidavits to prove the absence of
jurisdiction, the burden of proof shifts to the plaintiffs to present affidavits
or other evidence supporting their jurisdictional allegations.
Instrumentacion, Ltda. v. Philips Elecs. N. Am. Corp., 951 So. 2d 1001, 1002
(Fla. 3d DCA 2007). When the affidavits cannot be harmonized, the trial
court must hold a limited evidentiary hearing to determine jurisdiction.
Venetian Salami, 554 So. 2d at 503.

The lawyer and law firm argue that even if the complaint’s allegations
were sufficient, they rebutted them by affidavit. The affidavits denied
participation in any alleged tortious conduct, which was sufficient to shift
the burden of proof back to Third Reef to provide affidavits or other
evidence supporting personal jurisdiction. See Cty. of Cumberland, New

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Jersey v. Kwap, 220 So. 3d 1207, 1209 (Fla. 4th DCA 2017) (holding that
once a defendant’s affidavit refutes the plaintiff’s allegations, the burden
shifts back to the plaintiff to prove jurisdiction); see also Elmex Corp. v.
Atl. Fed. Sav. & Loan Ass’n., 325 So. 2d 58, 62 (Fla. 4th DCA 1976).

Here, the trial court did not recognize that the lawyer and law firm’s
affidavits shifted the burden back to the plaintiff, Third Reef. It did not
conduct an evidentiary hearing on the factual disputes created by the
conflicting affidavits. Instead, it listened to legal argument and ruled on
conflicting affidavits.

If the parties’ evidence cannot be harmonized by the trial court, then
“the trial court must hold a limited evidentiary hearing to resolve the
jurisdictional issue.” Volkswagen Aktiengesellschaft, 227 So. 3d at 155
(citing Venetian Salami, 554 So. 2d at 503); see also Packaging &
Distribution Res., LLC. v. Duke Realty Ltd., 194 So. 3d 509, 510 (Fla. 4th
DCA 2016).

We therefore reverse and remand the case to the trial court for a limited
evidentiary hearing to resolve the factual dispute so that it can then rule
on the jurisdictional issue raised.

Reversed and remanded for an evidentiary hearing.

WARNER and CIKLIN, JJ., concur.

* * *

Not final until disposition of timely filed motion for rehearing.

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