The Impact of Tiara Condominiums: Independent Tort Claims and Jury Trial Waivers Make Their Way to Florida Banking Law
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The newest development concerning independent tort claims and causes of action arising from a breach of contract manifests as a result of Tiara Condo. Ass’n., Inc. v. Marsh & McLennan Co. and is exemplified through the holding of Marian Farms, Inc. v. SunTrust Banks, Inc. Marian Farms, Inc. v. SunTrust Banks, Inc., No. 5D12-886, 2014 Fla. App. LEXIS 57, at *2 (Fla. 5th DCA Jan. 3, 2014); Tiara Condo. Ass’n., Inc., v. Marsh & McLennan Co., 110 So.3d 399, 407 (Fla. 2013). The decision of Marian Farms represents the newly established precedent from Tiara Condo. Ass’n. regarding the implementation of Florida’s economic loss rule and imports its holding to Florida banking law. The decision of Tiara Condo. Ass’n. limits the application of the economic loss rule by finding that the rule now only applies in the products liability context. Id. at 407. This deviation from precedent, which occurred after the order dismissing the plaintiff’s complaint in Marian Farms, consequently changed the outcome in Marian Farms such that the order was reversed and the case remanded. No. 5D12-886, 2014 Fla. App. LEXIS 57, at *3. The net result is that independent torts separate and apart from the depositor agreement will survive dismissal and present issues for a jury to decide.
In Marian Farms, a bank customer brought action against SunTrust Bank arising out of a dishonest employee’s fraudulent conduct. Id. at *1. The trial court found, as a matter of law, that the plaintiff failed to allege the basis for any theory of liability or independent duty owed to the plaintiff by SunTrust distinct from its depositor relationship and otherwise governed by the deposit agreement. Id. SunTrust sought dismissal of the complaint based on Florida’s economic loss rule. Id. On appeal, the court found that Marian Farms was not attempting to recast a breach of its contractual relationship with SunTrust based on the depository agreement (by asserting claims that SunTrust negligently performed its contractual duty), but rather that Marian Farms was alleging independent torts and causes of action separately from SunTrust’s wrongful disbursement of funds on deposit. Id. at *1-2.
Marian Farms alleged three independent causes of action: negligence on the part of SunTrust in accepting forged loan documents and personal guarantees without verifying their authenticity; negligence via a separate transaction, wherein SunTrust accepted obviously forged loan documents without attempting to verify authorization for a loan secured by Marian Farms’ equipment; and negligence on behalf of SunTrust by accepting a forged corporate resolution authorizing the dishonest employee of Marian Farms to make withdrawals from the corporate account, including a representation that authorization had been verified, when in fact, it had not. Id. at *2. The Fifth District Court of Appeal found that under the newly established principles of Tiara Condo. Ass’n. the causes of action were in fact basis for theory of liability, distinct from the action arising through privity of contract. Id.
SunTrust was unable to dismiss the complaint based on Florida’s economic loss rule in light of the decision of Tiara Condo. Ass’n. Id. In Tiara Condo. Ass’n. the Supreme Court of Florida found that the economic loss rule “should not be invoked to bar well-established causes of actions in tort, such as professional malpractice.” 110 So.3d 399 at 406-07 (citing Moransais v. Heathman, 744 So.2d 973, 981 (Fla. 2004). The Court acknowledged that while this was a deviation from previous precedent, it was necessary, as the economic loss rule’s unprincipled expansion was unwise and unworkable in practice. Id. at 407. Thus, the holding signaled a return to what the Court deemed as the original purpose of the economic loss rule: limiting actions in the products liability context. Id. Consequently, the economic loss rule now only applies in the products liability context. Id.
The decision of Tiara Condo. Ass’n., which was released during the proceedings of Marian Farms, Inc., impacted the outcome of Marian Farms, Inc. such that the order dismissing the plaintiff’s complaint was reversed and the order waiving jury trial was reversed. No. 5D12-886, 2014 Fla. App. LEXIS 57, at *3. The court found that even though Marian Farm’s losses arising out of various claims of negligence or other causes of action may have been the same damages resulting from the breach of contract, the claims were still valid and did not control their entitlement to jury trial. Id. Not only was the economic loss rule insufficient to bar Marian Farms’ claims, the jury trial waiver stated in SunTrust’s “Rules and Regulations for Deposit Accounts,” was also found to be inapplicable to independent torts or other causes of action asserted by Marian Farms, as the wrongful act alleged was an act or omission separate from the breach of depository agreement. Id.
The outcomes of these two cases exhibit the newly established precedent regarding the use of the economic loss rule and its application, as the rule will now only be applicable within the context of products liability cases. The true impact on the banking world is yet to be determined, but if the facts of litigated cases parallel the Marian Farms holding, we are likely to see more claims arising from depositor relationships thrown against the wall in hopes that they stick.