BETH BLOOM, District Judge.
This matter is before the Court upon Defendants, Tyco Integrated Security LLC and ADT Security Services Inc., a subsidiary of Tyco International Ltd., Co.'s Motion for Summary Judgment, ECF No. [176] ("Tyco MSJ") and Plaintiff National Union Fire Insurance Company of Pittsburgh, Pennsylvania, as subrogee of Eli Lilly and Company's Motion for Summary Judgment, ECF No. [189] ("NU MSJ") (collectively, the "Motions"). The Court has reviewed the Motions, the parties' submissions in support and opposition thereto, the record in this case, and is otherwise fully advised. For the reasons that follow, National Union's Motion is denied. Tyco's Motion is granted with respect to Count VIII of the Amended Complaint but denied in all other respects.
Defendants, Tyco Integrated Security LLC and ADT Security Services Inc., a subsidiary of Tyco International Ltd., Co. (collectively, "Tyco"),
After substantial discovery and pre-trial litigation, the parties now move for summary judgment on issues concerning whether Florida or Connecticut law applies, the application of a contractual subrogation waiver, and the sufficiency of evidence as to causation, damages, and National Union's claim based on FDUTPA. See Motions, ECF Nos. [176] and [189]. Following review of the vast record presented, the Court finds that National Union's FDUTPA claim is the only issue susceptible to judgment as a matter of law.
At the outset, this Court is obligated to express concern regarding the presentation of evidence in this matter. A summary judgment movant's initial burden consists of a "responsibility [to] inform [] the . . . court of the basis for its motion and [to] identify[] those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir. 1993) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). Although the Court has required the parties to submit indices to their submissions in order to aid in the Court's dissection of the voluminous record, the Court has, nonetheless, encountered a variety of challenges in properly reviewing this case. As a representative example, National Union, in its Statement of Facts, asserts that the "IT information produced in this matter was gathered [] `at the Tyco facility in Boca.'" See Plaintiff's Statement of Undisputed Material Facts, ECF No. [190] ("NU SOF") at ¶ 29. This simple assertion cites three exhibits in support, totaling over three hundred pages of deposition testimony. See ECF Nos. [173-4], [173-5], and [173-6]. The single pincite included with the statement not only references the improper docket entry related to the quotation, but also the incorrect page of the correct docket entry. ECF No. [173-5] at 122:19-24. This is but one example of innumerable instances evincing a complete lack of precision that has been encountered by the Court throughout its review of the Motions. "Judges are not like pigs, hunting for truffles buried in briefs." See United States v. Dunkel, 927 F.2d 955, 956 (7th Cir. 1991) (Posner, J.). "Likewise, district court judges are not required to ferret out delectable facts buried in a massive record." Chavez v. Sec'y Florida Dep't of Corr., 647 F.3d 1057, 1061 (11th Cir. 2011). Judge Posner's admonishment applies with equal force here. On multiple occasions, the parties have frustrated the expeditious resolution of these Motions by failing to specifically cite to relevant portions of the record.
Nevertheless, the following material facts have been garnered from the parties' submissions. The Court hesitates to use the term "undisputed," as the parties contest nearly every shred of evidence presented. Compare NU SOF, ECF No. [190] and Tyco's Statement of Undisputed Facts, ECF No. [177] ("Tyco SOF") with Tyco's Response to NU SOF, ECF No. [246] ("Tyco Resp. SOF") and Plaintiff's Response to Tyco SOF, ECF No. [245] ("NU Resp. SOF").
A party may obtain summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The parties may support their positions by citation to the record, including inter alia, depositions, documents, affidavits, or declarations. Fed. R. Civ. P. 56(c). An issue is genuine if "a reasonable trier of fact could return judgment for the non-moving party." Miccosukee Tribe of Indians of Fla. v. United States, 516 F.3d 1235, 1243 (11th Cir. 2008) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L. Ed. 2d 202 (1986)). A fact is material if it "might affect the outcome of the suit under the governing law." Id. (quoting Anderson, 477 U.S. at 247-48). The Court views the facts in the light most favorable to the non-moving party and draws all reasonable inferences in the non-moving party's favor. See Davis v. Williams, 451 F.3d 759, 763 (11th Cir. 2006). "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which a jury could reasonably find for the plaintiff." Anderson, 477 U.S. at 252. Further, the Court does not weigh conflicting evidence. See Skop v. City of Atlanta, Ga., 485 F.3d 1130, 1140 (11th Cir. 2007) (quoting Carlin Comm'n, Inc. v. S. Bell Tel. & Tel. Co., 802 F.2d 1352, 1356 (11th Cir. 1986)).
The moving party shoulders the initial burden of showing the absence of a genuine issue of material fact. Shiver v. Chertoff, 549 F.3d 1342, 1343 (11th Cir. 2008). Once this burden is satisfied, "the nonmoving party `must do more than simply show that there is some metaphysical doubt as to the material facts.'" Ray v. Equifax Info. Servs., L.L.C., 327 F. App'x 819, 825 (11th Cir. 2009) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L. Ed. 2d 538 (1986)). Instead, "the non-moving party `must make a sufficient showing on each essential element of the case for which he has the burden of proof.'" Id. (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L. Ed. 2d 265 (1986)). Accordingly, the non-moving party must produce evidence, going beyond the pleadings, and by its own affidavits, or by depositions, answers to interrogatories, and admissions on file, designating specific facts to suggest that a reasonable jury could find in the non-moving party's favor. Shiver, 549 F.3d at 1343. Even "where the parties agree on the basic facts, but disagree about the factual inferences that should be drawn from those facts," summary judgment may be inappropriate. Warrior Tombigbee Transp. Co., Inc. v. M/V Nan Fung, 695 F.2d 1294, 1296 (11th Cir. 1983).
In resolving issues presented under Fed. R. Civ. P. 56(c), "the court may not weigh conflicting evidence to resolve disputed factual issues; if a genuine dispute is found, summary judgment must be denied." Carlin Commc'n, Inc. v. Southern Bell Tel. & Tel. Co., 802 F.2d 1352, 1356 (11th Cir. 1986); see also Aurich v. Sanchez, 2011 WL 5838233, at *1 (S.D. Fla. Nov. 21, 2011) ("If a reasonable fact finder could draw more than one inference from the facts, and that inference creates an issue of material fact, then the court must not grant summary judgment." (citing Hairston v. Gainesville Sun Publishing Co., 9 F.3d 913 (11th Cir. 1993))). In particular, summary judgment is inappropriate where the Court would be required to weigh conflicting renditions of material fact or determine witness credibility. See Hairston, 9 F.3d at 919; see also Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) ("It is not the court's role to weigh conflicting evidence or to make credibility determinations; the non-movant's evidence is to be accepted for purposes of summary judgment."); see also Strickland v. Norfolk S. Ry. Co., 692 F.3d 1151, 1154 (11th Cir. 2012) ("Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he [or she] is ruling on a motion for summary judgment or for a directed verdict." (quoting Anderson, 477 U.S. at 255)); Gary v. Modena, 2006 WL 3741364, at *16 (11th Cir. Dec. 21, 2006) (Fed. R. Civ. P. 56 precludes summary judgment where court would be required to reconcile conflicting testimony or assess witness credibility); Ramirez v. Nicholas, 2013 WL 5596114, at *4 (S.D. Fla. Oct.11, 2013) ("The Court may not make the credibility determinations needed to resolve this conflict; only the jury may do so.").
A multitude of issues are presented by the parties' respective Motions and while each individual issue contains a variety of sub-issues, five primary matters are presented for the Court's resolution: (1) whether Connecticut or Florida law governs the claims; (2) whether the claims are barred by the subrogation waiver located in the contract between Eli Lilly and Tyco;
(3) whether National Union has properly demonstrated the element of causation with respect to its claims sounding in negligence; (4) whether the "transfer-in price" is the appropriate measure of damages in this case; and (5) whether National Union has presented evidence as to each element of its claim under FDUTPA. The Court addresses each issue in turn.
"In determining which law applies, a federal district court sitting in diversity must apply the choice of law rules of the forum state." Trumpet Vine Investments, N.V. v. Union Capital Partners I, Inc., 92 F.3d 1110, 1115 (11th Cir. 1996) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)); Grupo Televisa, S.A. v. Telemundo Commc'ns Grp., Inc., 485 F.3d 1233, 1240 (11th Cir. 2007)). This action was commenced in the Southern District of Florida. As such, Florida's choice-of-law rules apply.
As a preliminary matter, a district court engaged in a choice of law analysis must determine which sovereigns have an interest in the application of their laws. Pycsa Panama, S.A. v. Tensar Earth Technologies, Inc., 625 F.Supp.2d 1198, 1218 (S.D. Fla. 2008) aff'd, 329 F. App'x 257 (11th Cir. 2009) (citing Judge v. Am. Motors Corp., 908 F.2d 1565, 1568 (11th Cir. 1990)). This inquiry is critical as a comprehensive choice of law analysis is only required if the matter involves a true conflict. Id. (citing Tune v. Philip Morris, Inc., 766 So.2d 350, 352 (Fla. 2d DCA 2000)). A true conflict exists where "two or more states have a legitimate interest in a particular set of facts in litigation and the laws of those states differ or would produce a different result." Id. (citing Walker v. Paradise Hotel, Ltd., No. 01-3564, 2003 WL 21361662, *2-3 (S.D. Fla. April 25, 2003); see also Fioretti v. Massachusetts Gen. Life Ins. Co., 53 F.3d 1228, 1234 (11th Cir. 1995) (noting the principle that "when the laws of the competing states are substantially similar, the court should avoid the conflicts question and simply decide the issue under the law of each of the interested states"). Alternatively, a false conflict is presented "where the laws of the interested jurisdictions are: (1) the same; (2) different but would produce the same outcome under the facts of the case; or (3) when the policies of one jurisdiction would be furthered by the application of its laws while the policies of the other jurisdiction would not be advanced by the application of its laws." Pycsa, 625 F. Supp. 2d at 1218-19 (citing Tune, 766 So. 2d at 352). The interested sovereigns are Florida and Connecticut and, as evidenced by the parties' submissions, a true conflict exists as Connecticut's statute of limitations will bar National Union's claims. See Tyco MSJ, ECF No. [176] at 2, 4, 7-9 (citing Conn. Gen. Stat. § 52-584).
A district court presented with a choice of law dispute characterizes the legal issue before it, determining whether the issue sounds in tort, contracts, property law, etc. Telemundo, 485 F.3d at 1240. National Union's claims for failure to safeguard undoubtedly sound in tort. In the context of tort actions, "Florida resolves conflict-of-laws questions according to the `most significant relationship' test outlined in the Restatement (Second) of Conflict of Laws." Id. (citing Bishop v. Florida Specialty Paint Co., 389 So.2d 999, 1001 (Fla. 1980)); Pycsa, 625 F. Supp. 2d at 1218 ("In tort cases, Florida applies the `significant relationship' test delineated in § 145 of the Restatement (Second) of Conflict of Laws."). "The test involves consideration of several factors to determine which state has the most contacts with the action or the greatest interest in the outcome." Nelson v. Freightliner, LLC, 154 F. App'x 98, 102 (11th Cir. 2005). The four relevant contacts to be considered are:
Restatement (Second) of Conflict of Laws § 145(2) (1971). Further, § 145 provides that "[t]hese contacts are to be evaluated according to their relative importance with respect to the particular issue." Id. The contacts are then assessed in light of the following policy considerations:
Id. § 6(2). Florida courts have recognized that the protection of justified expectations and predictability play little role in the choice of law analysis in tort cases. Pycsa, 625 F. Supp. 2d at 1219 (citation omitted). Nevertheless, in conducting this analysis, the district court must not "simply add up the factors delineated in section 145(2) and then apply the law of the sovereign with the greatest numerical total." Piamba Cortes v. Am. Airlines, Inc., 177 F.3d 1272, 1298-99 (11th Cir. 1999) (quoting Judge, 908 F.2d at 1569). "Rather, [the district court] must . . . turn to the factors delineated in [§] 6 to determine which sovereign has the most significant contact." Id. (citation omitted).
Generally, in tort cases, the location where the injury occurred is "the decisive consideration in determining the applicable choice of law." Pycsa, 625 F. Supp. 2d at 1219-20 (citing Bishop, 389 So. 2d at 1001). "[T]he place of injury is of particular importance in the case of personal injuries and of injuries to tangible things." Restatement (Second) of Conflict of Laws § 145 cmnt. f (citing Restatement (Second) of Conflict of Laws § 147 (1971) (further citation omitted)). However, as recognized by the Court in Pycsa, "it is equally true that the state where the injury occurred may have little actual significance for the cause of action, and [] other factors may combine to outweigh the place of injury as a controlling consideration." Id. (internal quotation, citation, and formatting omitted). Indeed, "[w]hen the injury occurred in two or more states, or when the place of injury cannot be ascertained or is fortuitous and, with respect to the particular issue, bears little relation to the occurrence and the parties, the place where the defendant's conduct occurred will usually be given particular weight in determining the state of the applicable law." Restatement (Second) of Conflict of Laws § 145 cmnt. f; Howard v. Kerzner Int'l Ltd., No. 12-22184-CIV, 2014 WL 714787, at *3 (S.D. Fla. Feb. 24, 2014) ("[I]t is equally true that Florida courts do not apply the law of the state where the injury occurred if all parties and several significant events are connected with another state.").
According to Tyco, the injury that was suffered as a result of the alleged negligence was the burglary of the Enfield Facility. See Tyco MSJ, ECF No. [176] at 5. Tyco further asserts that while National Union's claims are premised upon a failure to safeguard confidential information, the relief sought exposes National Union's true intentions: to recover the amount of $42,118,354.00 stemming from the theft. Thus, Tyco contends, National Union does not seek redress for the injury of lost privacy but, rather, seeks damages for the lost property occurring in Connecticut and, therefore, the Court should treat the injury as having occurred in Connecticut. National Union frames the injury differently, instead focusing on the cause of action and the related allegations to determine that the injury was not, in fact, the burglary but, rather, the exposure of confidential information regarding the vulnerabilities of the Enfield Facility. See Nat'l Union Resp., ECF No. [242] at 3; see also Nat'l Union MSJ, ECF No. [189] at 7. Consequently, because Tyco is headquartered in Florida, maintains a computer network in Florida, and the purported theft of confidential information was committed by an affiliated group of individuals based in Florida, National Union asserts that Florida is the appropriate law to be applied. See Nat'l Union Resp. SOF, ECF No. [245] at ¶¶ 55, 63, 64, 95, 97-114.
While Tyco's construction is a reasonable one, it is unpersuasive. The injury must be examined in the context of National Union's claims. Although brief in its presentation, National Union's assessment of this issue is persuasive.
National Union's cause of action does not bear a substantial relationship to Connecticut. Rather, the alleged failures and the resulting injury occurred elsewhere. The Villas and their criminal affiliates operate out of Florida and Tyco's pertinent departments are located in Florida. It is reasonable to assume that any acquisition of confidential information occurred in Florida. The fact that National Union may be unable to discern precisely where and when the confidential information was obtained is of no consequence. Tyco cannot demonstrate that the injury, to wit, Tyco's supposed failure to safeguard confidential information, transpired in Connecticut. Tyco is headquartered in Florida, maintains computer servers in Florida, and a substantial portion of Tyco's IT and cybersecurity operations are based in Florida. These facts indicate that, more likely than not, Tyco's failure to safeguard the information is an event that took place in Florida. Accordingly, the particular issue tort at issue did not occur in Connecticut. Although the harm resulting from the injury manifested in Connecticut, the asserted cause of action and theory of liability did not. As presented in the context of this case, the injury is not the theft of pharmaceuticals but, rather, the lost confidential information.
Continuing to assert that National Union's injury materialized in Connecticut, Tyco directs the Court to various cases throughout the United States involving questions of standing in the context of data privacy breaches. See Reply, ECF No. [265] at 3-4. Curiously, Tyco maintains that the fact that no injury has occurred without the misuse of the stolen data is "established data privacy law." Id. A quick perusal of the relevant case law on data privacy reveals that courts have differed substantially on their interpretation of whether the mere theft of confidential information can confer standing upon a plaintiff. For instance, both the Ninth and Seventh Circuits have held that the threat of injury stemming from the release of data may satisfy standing. See Krottner v. Starbucks Corp., 628 F.3d 1139, 1142-43 (9th Cir. 2010) ("Appellants have alleged a credible threat of real and immediate harm stemming from the theft of a laptop containing their unencrypted personal data. . . . On these facts, [] Plaintiffs-Appellants have sufficiently alleged an injury-in-fact for purposes of Article III standing."); Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 634 (7th Cir. 2007) ("[T]he injury-in-fact requirement can be satisfied by a threat of future harm or by an act which harms the plaintiff only by increasing the risk of future harm that the plaintiff would have otherwise faced, absent the defendant's actions."). On the other hand, certain courts have required actual injury in order to satisfy the constitutional standing requirement. See Reilly v. Ceridian Corp., 664 F.3d 38, 44-46 (3d Cir. 2011) (criticizing Pisciotta's "skimpy rationale" and finding that "[i]n data breach cases where no misuse is alleged, [] there has been no injury"); Galaria v. Nationwide Mut. Ins. Co., 998 F.Supp.2d 646, 653-5 (S.D. Ohio 2014) (determining that injury from theft of personally identifiable information such as names and social security numbers was speculative at best); Strautins v. Trustwave Holdings, Inc., 27 F.Supp.3d 871, 876-77 (N.D. Ill. 2014) (finding that data breach did not satisfy injury-in-fact requirement and could not support a finding of "imminent" risk of harm). Of note is the Eleventh Circuit's reticence on the issue: the Eleventh Circuit has yet to address whether a plaintiff must specifically articulate an actual, past injury in order to satisfy standing in the context of data breaches or whether the potential for future harm meets this burden. See Resnick v. AvMed, Inc., 693 F.3d 1317, 1323 n.1 (11th Cir. 2012) (recognizing that the Ninth and Seventh Circuits have found that the threat of future identity theft is sufficient to confer standing but declining to address "the issue of whether speculative identity theft would be sufficient to confer standing"); Burton v. MAPCO Exp., Inc., 47 F.Supp.3d 1279, 1283 (N.D. Ala. 2014) (noting that "[t]o date, the Eleventh Circuit Court of Appeals has not weighed in on the extent of the injury that a consumer who is a purported victim of a data breach must allege to survive a motion to dismiss based on lack of standing"). Absent guidance from this Court's governing Circuit, it is unclear as to whether Eli Lilly
Tyco essentially attempts to have its cake and eat it too. In asserting that National Union's claims are barred pursuant to the Connecticut statute of limitations, Tyco has repeatedly argued throughout the course of this litigation that the basis of National Union's claims, to wit, the failure to safeguard information, must have occurred prior to the March 13, 2010 burglary. See, e.g., ECF No. [32] at 8; Tyco MSJ, ECF No. [176] at 8 ("[A]ny alleged failure to warn or the disclosure of confidential information necessarily would have had to occur before the burglary on March 14, 2010." (emphasis in original)). The dissonance between this assertion and the one advanced by Tyco's argument relating to the current inquiry is evident: if the cause of action arose prior to the burglary, then the fact that the burglary occurred in Connecticut is of little consequence; the event giving rise to the claims asserted against Tyco does not stem from the incident occurring in Connecticut but, rather, events, errors and omissions occurring prior to the burglary. Admittedly, it was not until the burglary took place that National Union, as subrogee for Eli Lilly, became aware of the potential breach. The burglary was the catalyst for National Union to investigate the alleged security breaches.
Given the fact that the Villas' criminal activity and Tyco's cybersecurity operations were based in Florida, and provided that the stolen information was likely obtained in Florida, more likely than not, Florida is the site of the injury alleged.
Even accepting that the injury occurred in Connecticut, the Restatement notes that "[w]hen the injury occurred in two or more states" or "with respect to the particular issue, bears little relation to the occurrence and the parties, the place where the defendant's conduct occurred will usually be given particular weight in determining the state of the applicable law." See Restatement (Second) of Conflict of Laws § 145 cmnt. f; see generally Pycsa, 625 F. Supp. 2d at 1220-21 (noting the Eleventh Circuit's emphasis on the commentary to § 145 in Telemundo, 485 F.3d at 1240). None of the purported conduct alleged by National Union occurred in Connecticut. While Tyco may ultimately dispute the accusations made and conclusions reached by National Union in both its Amended Complaint and present Motion,
The third factor does not assist the Court in its analysis as the locations of the respective parties are diverse and neither is incorporated in either Florida or Connecticut. See Digioia v. H. Koch & Sons, Div. of Wickes Mfg. Co., 944 F.2d 809, 813 (11th Cir. 1991) ("[T]he domicil of the parties is inconclusive because both states have interest in the litigation."). However, Florida maintains an interest in the efficient and just administration of claims against its residents. Tyco maintains its headquarters and a significant portion of its relevant operations in Florida. Accordingly, this factor favors the application of Florida law, but only slightly.
Unquestionably, the fourth and final factor favors the application of Connecticut law. This factor requires the Court to factor in the location of the parties' relationship. National Union incorrectly assumes that the central location of the relationship between the parties is Boca Raton, Florida, simply by virtue of the fact that Tyco's relevant business operations are headquartered there. Under the current record, it is apparent that no negotiations between Tyco and Eli Lilly transpired in Florida. The Contract was executed by a Connecticut affiliate of Tyco with Eli Lilly in Connecticut, see ECF No. [245-2], and National Union has introduced no evidence indicating that negotiations for said contract took place in Florida. Moreover, the installation and maintenance of the security equipment, including the survey of the Enfield Facility leading to the creation of the 2010 Confidential System Proposal, was conducted in Connecticut. Nevertheless, this single factor is insufficient to overcome the aforementioned contacts with Florida.
As previously noted, consideration of the § 145 contacts must be assessed in light of the competing policy considerations set forth in § 6 of the Restatement. See Telemundo, 485 F.3d at 1240-43. These "factors are not listed in order of relative importance." Id. at 1243. Although the robbery occurred in Connecticut, it has no interest in protecting the Plaintiff in this matter as both Eli Lilly and National Union are not citizens of Connecticut. Florida maintains an interest in claims pursued against its corporate residents stemming from injuries sustained by others within the state. Yet Connecticut has little to no interest in the administration of claims against non-residents arising out of conduct not occurring in the state. Tortfeasors are subjected to the laws of the state in which the tort was committed, which, in the present case, is Florida. Accordingly, the policy considerations underlying the choice of law analysis do not favor the application of Connecticut law. See Restatement (Second) of Conflict of Laws § 145 cmnt. b (1971) (noting that "the needs of the interstate and international systems, the relevant policies of the forum, the relevant policies of other interested states and particularly of the state with the dominant interest in the determination of the particular issue, and ease in the determination and application of the law to be applied" are the relevant factors for tort cases).
In sum, analysis of the § 145 contacts indicates that Florida law, not Connecticut law, should be applied to National Union's claims. After evaluating the four contacts set forth in § 145(2), allocating proper weight to "their relative importance with respect to the particular issue," and in consideration of the factors under § 6(2), the Court finds that Florida bears the most substantial relationship to the issues presented in this case. See Restatement (Second) of Conflict of Laws § 145; see also Bishop, 389 So. 2d at 1001 ("In contrast to the inflexible place of injury rule, however, the Restatement rule recognizes that the state where the injury occurred may have little actual significance for the cause of action."). Because the Court has determined that the substantial relationship test does not favor the application of Connecticut law, Fla. Stat. § 95.10 does not preclude this litigation. See Celotex Corp. v. Meehan, 523 So.2d 141, 143-44 (Fla. 1988) (finding that due regard must be given to the significant relationship test under Restatement (Second) of Conflict of Laws § 145).
An insurer may pursue recovery from third persons legally responsible to the insured for a loss which the insurer has both insured and paid. See St. Paul Fire & Marine Ins. Co. v. Lexington Ins. Co., No. 05-80230-CIV, 2006 WL 1295408, at *6 (S.D. Fla. Apr. 4, 2006) (citing Phoenix Ins. Co. v Fla. Farm Bureau Mut. Ins. Co., 558 So.2d 1048 (Fla. 2d DCA 1990); Ranger Ins. Co. v. Travelers Indem. Co., 389 So.2d 272 (Fla. 1st DCA 1980)). However, an insured may waive its right of subrogation through contract, and the scope and application of such waivers, if unambiguous, is properly determined on summary judgment. See Fairchild for Use & Benefit of State Farm Fire & Cas. Co. v. W. O. Taylor Commercial Refrigeration & Elec. Co., 403 So.2d 1119, 1120 (Fla. 5th DCA 1981) ("It is well established that parties to a contract may mutually agree that one party will obtain insurance as part of the bargain, to shift the risk of loss from both of them to the insurance carrier."); see also Ben-Yishay v. Mastercraft Dev. LLC, 553 F.Supp.2d 1360, 1373 (S.D. Fla. 2008) ("Interpretation of a clear and unambiguous contractual provision is a question of law properly decided on summary judgment."). Here, Tyco contends that: "[b]ecause there are no claims that would negate the formation of the [2004] Contract, or evidence supporting a claim that would invalidate the [2004] Contract, and because the [2004] Contract's waiver of subrogation provision is broad enough to include extra-contractual claims, the subrogation waiver applies and precludes National Union from pursuing this lawsuit." Tyco MSJ, ECF No. [176] at 10-11.
The 2004 Contract's Subrogation Waiver is exceedingly broad, stating that Eli Lilly has agreed to waive all recovery rights for injuries or loss by way of subrogation. See 2004 Contract, ECF No. [245-2] at 3, 6, 10. In its pertinent part, the Subrogation Waiver reads as follows:
Id. This Waiver, Tyco contends, bars National Union's claims because the 2004 Contract is valid
On March 4, 2014, the Honorable Kenneth A. Marra, United States District Judge, issued an Opinion and Order ("Opinion") on Tyco's Motion to Dismiss, ECF No. [32] ("Tyco MTD").
Tyco puts forth the unpersuasive assertion that Judge Marra's holding was limited as he was required to accept National Union's allegations as true and was otherwise unable to address the evidentiary merit of National Union's claims. See id. Thus, Tyco contends, because National Union's claims which would potentially invalidate the 2004 Contract, specifically those sounding in fraud, have been dismissed, the Subrogation Waiver is valid and enforceable. Id. This contention misses the mark. The holding regarding Tyco's Motion to Dismiss was explicit, and while Judge Marra was required to accept all well-pled allegations as true, that acceptance does not negate the fact that his decision found the Subrogation Waiver to be inapplicable to National Union's extra-contractual claims:
Eli Lilly, 2014 WL 835766 at *5 (emphasis added). Therefore, Judge Marra's decision was not predicated on the 2004 Contract's validity and the decision to dismiss National Union's fraud-based claims was immaterial to the determination regarding the applicability of the Subrogation Waiver. See id. at *5, 7. Rather, Judge Marra ascertained that National Union's claims pursued under a theory of negligence existed independent of the 2004 Contract. See id.
Nothing in Judge Marra's Opinion indicates that the decision was bound by the fact that National Union's fraud claims may have affected the validity of the 2004 Contract. The decision expresses that National Union's claims sounding in negligence exist independent of the 2004 Contract. See id. at *5. Indeed, Judge Marra noted that in light of the fact that National Union's negligence claims were separate and distinct from the 2004 Contract, he declined to address whether the 2004 Contract was in effect at the time of the burglary. Id. at *5 n.6. This finding conforms to Florida law, which recognizes that tort claims may exist independently from contractual claims.
Irrespective of Judge Marra's persuasion, the Court nonetheless finds that the current action exists independent of the 2004 Contract. See Carroll v. TheStreet.com, Inc., No. 11-CV-81173, 2014 WL 5474048, at *5 (S.D. Fla. Apr. 10, 2014) (noting that a court, "at its discretion, [] [] has the power to revisit prior decisions of its own" and that the Supreme Court "has described the law of the case doctrine as one that `applies as much to the decisions of a coordinate court in the same case as to a court's own decisions.'" (quoting Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 817 (1988)); Compania de Elaborados de Cafe v. Cardinal Capital Mgmt., Inc., 401 F.Supp.2d 1270, 1285 (S.D. Fla. 2003) (stating that a district court need not strictly adhere to its earlier rulings). The 2004 Contract provides for the installation, maintenance, and monitoring of a variety of security measures, including but not limited to, motion sensors, cameras, intercom systems, and other equipment. The 2004 Contract does not contemplate, however, any obligation on the part of Tyco to provide security updates as contained in the 2010 Confidential System Proposal, nor does it provide for Tyco's obligation or duty to maintain the confidentiality of the information obtained in relation to the 2010 Confidential System Proposal or other related surveys. "[I]t is [] well established that a limitation of liability for one's negligent acts will not be inferred unless the intention is expressed in unequivocal terms." Fairchild, 403 So. 2d at 1120 (citation omitted).
Furthermore, it is unclear as to whether the 2010 Confidential System Proposal was intended to be an amendment or rider to the parties' 2004 Contract or an entirely new agreement. If the 2010 Confidential System Proposal was to be a new agreement between the parties, it cannot reasonably be said that the Subrogation Waiver, found within the 2004 Contract, was intended to cover claims arising from a failure related to an entirely separate contract. This issue of fact presents yet another reason why the Subrogation Waiver must be found inapplicable.
In continued support of its proposition that the Subrogation Waiver applies to National Union's negligence claims, Tyco cites to a variety of out of circuit precedent where subrogation waivers have been enforced against extra-contractual claims. See Tyco MSJ, ECF No. [176] at 11. While the Court has no indication as to whether the Eleventh Circuit would deviate from the cited precedent, these cases do not necessarily warrant the conclusion Tyco implores the Court to reach. For instance, the waiver in Travelers Indem. Co. v. Crown Corr, Inc., 589 Fed. App'x 828 (9th Cir. 2014), much like the one in this matter, was exceedingly broad and was, at first blush, applicable to all loss covered by any relevant insurance policy:
Id. at 830. Applying Arizona law, the Ninth Circuit held that a valid subrogation waiver will encompass related tort claims. See id. at 832-33. Not only was the Travelers Court applying the law of a distinct state, but Tyco has not presented precedent that Florida shares Arizona's view with respect to the breadth and applicability of subrogation clauses. Similarly, Reliance Nat'l Indem. v. Knowles Indus. Servs., Corp., 868 A.2d 220 (Me. 2005), involves a Maine court, applying Maine law. No indication is provided as to whether Florida or the Eleventh Circuit would follow Reliance in finding that "public policy favors enforcement of waivers of subrogation even in the face of claims of gross negligence or willful and wanton misconduct." Id. at 227. Indeed, the Reliance court acknowledged that courts are divided as to whether waivers of subrogation can bar negligence claims, specifically, gross negligence. Id. at 226 (citing St. Paul Fire & Marine Ins. Co. v. Universal Builders Supply, 317 F.Supp.2d 336, 341 (S.D.N.Y. 2004) aff'd as modified sub nom. St. Paul Fire & Marine Ins. Co. v. Universal Builders Supply, 409 F.3d 73 (2d Cir. 2005) (subrogation waiver applies to claims of gross negligence); Behr v. Hook, 787 A.2d 499, 504 (2001) (same); Am. Motorist Ins. Co. v. Morris Goldman Real Estate Corp., 277 F.Supp.2d 304, 308 (S.D.N.Y. 2003) (subrogation waiver does not bar claim of gross negligence); Colonial Properties Realty Ltd. P'ship v. Lowder Const. Co., 567 S.E.2d 389, 394 (2002) ("First, [plaintiff] argues that the subrogation clause cannot exculpate [defendant] for acts of gross negligence. That is correct.") (further citations omitted)).
Next, akin to the Ninth Circuit's decision in Travelers, the Fourth Circuit in American Home Ins. Co. v. Monsanto Enviro-Chem Sys., Inc., 16 Fed. App'x 172 (4th Cir. 2001), found a subrogation waiver to be widely applicable to tort claims stemming from an existing contract. In American Home, the Court noted "that waivers of subrogation should not be enforced outside of their context," and that "remoteness from the subject matter of the contract will prevent even an extremely broad subrogation waiver from operating." Id. at 176. The Fourth Circuit determined that the plaintiff's negligent failure to warn claim was not outside the context of the contract at issue where the waiver between the insured and the defendant covered loss or damage to the subject matter of the contract "however caused." Id. at 175-76. The Court specifically acknowledged that the failure to warn claim concerned the operation of a system that was the subject of the contract. Id. at 176. Here, in contrast, the operation of the security system at the Enfield Facility is not at issue. National Union does not claim that the security equipment installed by Tyco did not perform properly but, rather, that the alleged negligence allowed for the simple evasion of the installed security devices. Thus, the cause of action neither relates to any failure on the part of Tyco with respect to its obligations under the 2004 Contract nor to the operation of any of the related security measures. Accordingly, American Home is inapposite.
The Court is cognizant of the fact that under binding, precedent subrogation waivers are not true exculpatory clauses
Tyco next tests the evidentiary virtues of National Union's negligence claims, contending that National Union, despite having conducted copious amounts of discovery, has failed to locate one iota of evidence indicating that Tyco's conduct allowed criminals to obtain confidential information about the Enfield Facility. Tyco MSJ, ECF No. [176] at 13-17. An action for negligence requires a plaintiff to prove: "(1) that the defendant owed a duty of reasonable care to the plaintiff; (2) that the defendant breached that duty; (3) that the breach was the proximate cause of the injury to the plaintiff; and (4) that the plaintiff suffered damages." Hasenfus v. Secord, 962 F.2d 1556, 1559-60 (11th Cir. 1992) (citing Rupp v. Bryant, 417 So.2d 658, 668 n.27 (Fla. 1982)) (further citations omitted). "Failure to establish any one of these elements is fatal to the plaintiff's case." Id. at 1560 (citation omitted); see also John Morrell & Co. v. Royal Caribbean Cruises, Ltd., 534 F.Supp.2d 1345, 1353 (S.D. Fla. 2008) (granting summary judgment where plaintiff had not proffered any evidence that defendant's failure was the proximate cause of the injuries sustained).
National Union's attempts to demonstrate causation, Tyco asserts, are inadequate and fail as a matter of law because any evidence submitted on behalf of National Union is utterly contradicted by the record evidence, notably, testimony from Eli Lilly's 30(b)(6) representative and documents filed by Amaury Villa in the Connecticut Criminal Proceedings. According to Tyco, any possible evidence of causation is a product of National Union's impermissible stacking of inferences, and, accordingly, insufficient to withstand summary judgment under Florida law. Id. The Court addresses these arguments in turn and ultimately finds National Union's evidence on the element of causation to be adequate.
In October 2013, Defendant Amaury Villa sought to dismiss the criminal indictment filed against him in the Connecticut Criminal Proceedings pursuant to Fed. R. Crim. Pro. 12(b)(2) and 12(b)(3)(B). United States v. Villa, Case No. 3:12-cr-00040, ECF No. [76] (Dist. Conn. Oct. 2, 2013) ("Motion to Dismiss Indictment"). By way of counsel, Amaury Villa represented the following to the District of Connecticut:
United States v. Villa, Case No. 3:12-cr-00040, ECF No. [76] (Dist. Conn. Oct. 2, 2013) (Mr. Amaury Villa's First Motion to Dismiss Indictment) (emphasis in original).
While the Motion to Dismiss Indictment states that Amaury Villa was not in possession of inside information, this averment does not unequivocally indicate that no individual connected to the burglary was able to access the same. See United States v. Villa, Case No. 3:12-cr-00040, ECF No. [76] (Dist. Conn. Oct. 2, 2013) ("It is not known why [the co-conspirator] targeted the Enfield warehouse, but it later became apparent to Mr. VILLA that [the co-conspirator] did not randomly select the Enfield warehouse as a target for the heist."). Amaury Villa's own testimony appears to conjure up additional unanswered questions regarding whether someone had inside information. See Amaury Villa Depo., ECF No. [307-1] at Id. at 34:14-20, 35:1-12 ("Q: Did [Nunez] ever tell you that there was an insider who was going to help make this an easy burglary? A: Supposedly, because the records of my brother's said that there was a person that was going to give him information from the inside."). Furthermore, to give such great credence to the statements of the Defendant in this matter, whether made in these proceedings or related ones, would not only be contrary to the rules governing summary judgment which require the court to view the record in the light most favorable to the non-moving party, but would ultimately invade the province of the fact-finder. Credibility is not to be assessed by the district court on a motion for summary judgment. See Mize, 93 F.3d at 742 ("It is not the court's role to weigh conflicting evidence or to make credibility determinations; the non-movant's evidence is to be accepted for purposes of summary judgment."); see also Strickland, 692 F.3d at 1154; Hairston, 9 F.3d at 919; Gary, 2006 WL 3741364, at *16. Accordingly, these representations do not negate the otherwise hotly disputed issues of fact concerning the confidential information at issue. More troubling, however, are Eli Lilly's 30(b)(6) representative's statements regarding the break in.
At deposition, Eli Lilly's corporate representative, Fred Larsen ("Larsen"), was questioned regarding Eli Lilly's position on Tyco's ability to maintain the confidentiality of relevant information. Larsen's testimony clearly indicates that Eli Lilly does not share National Union's belief that the Villa Defendants utilized confidential information in order to gain access to the Enfield Facility:
See Larsen Deposition, ECF No. [185-2] at 150:5-151:11. Much like Amaury Villa's averments in the Motion to Dismiss Indictment, however, Larsen's testimony does not eliminate the plethora of disputed facts surrounding Tyco's ability to maintain the confidentiality of the information it possessed. While this evidence may be harmful to National Union at trial, this Court is not in a position to weigh evidence and draw conclusions. Where genuine issues of material fact persist, judgment as a matter of law is inappropriate. Here, National Union has presented, at a minimum, circumstantial evidence in support of its claims. For instance, National Union's expert, William Morales, attests to the fact that, more likely than not, information from Tyco was utilized in evading the Enfield Facility's security systems. Morales Dpo., ECF No. [181-24] at 46:3-47:6, 57:18-58:5. This conclusion was supported by National Union's physical security expert, Dr. Roger Johnston. Johnston Depo., ECF No. [177-11] at 24:1-26:5, 26:24-29:24. Given the conflicting testimony and unresolved issues of fact, summary judgment is inappropriate.
According to Tyco, the aforementioned evidence, as well as any other evidence National Union has been able to produce with respect to the element of causation, is entirely circumstantial. Because there is an absence of direct evidence, National Union must necessarily rely on a "stacking of inferences" in order to demonstrate causation, a method which Florida courts have deemed improper under certain circumstances. Specifically, Tyco claims that a jury would be obligated to first infer that Tyco leaked confidential information, and then, upon that initial inference, infer that the leaked confidential information was the proximate cause of the successful burglary. Because National Union fails to establish the initial inference to the exclusion of all others, Tyco contends that it cannot rely on the stacking of inferences to demonstrate causation. The Court disagrees.
In general, "a fact may be established by circumstantial evidence as effectively and as conclusively as it may be proved by direct positive evidence." Cohen v. Arvin, 878 So.2d 403, 405 (Fla. 4th DCA 2004) (quoting Nielsen v. City of Sarasota, 117 So.2d 731, 733 (Fla. 1960)). This general proclamation is not without limitation. Florida courts have found that where no direct evidence is presented, a party may not "stack inferences" to establish an essential element of its claim: "if a party to a civil action depends upon the inferences to be drawn from circumstantial evidence as proof of one fact, it cannot construct a further inference upon the initial inference in order to establish a further fact unless it can be found that the original, basic inference was established to the exclusion of all other reasonable inferences." Id. (citing Nielsen, 117 So. 2d at 733); Collins v. Marriott Int'l, Inc., 749 F.3d 951, 959 (11th Cir. 2014) (citing McCormick Shipping Corp. v. Warner, 129 So.2d 448, 449 (Fla. 3d DCA 1961)). This rule "is designed to protect litigants from verdicts based upon conjecture and speculation." Stanley v. Marceaux, 991 So.2d 938, 940 (Fla. 4th DCA 2008) (citing Voelker v. Combined Ins. Co. of Am., 73 So.2d 403, 407 (Fla. 1954)). However, "pyramiding" inferences is permissible when "the initial inference is established to the exclusion of any other reasonable theory." Id. (citing Hurst v. Astudillo, 631 So.2d 380 (Fla. 3d DCA 1994)). A plaintiff is not required to directly establish the initial inference where it would be illogical to do so. Rather, "[w]hen [the] predicate inference is the only reasonable inference that can be made from the evidence, it is no longer an inference but is deemed an established fact." O'Malley v. Ranger Const. Indus., Inc., 133 So.3d 1053, 1056 (Fla. 4th DCA 2014), reh'g denied (Mar. 10, 2014) (citing Voelker v. Combined Ins. Co. of Am., 73 So.2d 403, 407 (Fla. 1954)). As logic would dictate, where there is only one inference and the party does not seek to stack inferences, the party propounding the inference does not have to establish the reasonability of the initial inference to the exclusion of all others. Id. (citing Petruska v. Smartparks-Silver Springs, Inc., 914 So.2d 502, 505-06 (Fla. 5th DCA 2005)).
Notwithstanding the aforementioned standards, under Florida law "summary judgment should not be granted based on a non-movant's failure to meet its trial burden of proof on the issue of causation." Id. (citing Le v. Lighthouse Assocs., Inc., 57 So.3d 283, 286-87 (Fla. 4th DCA 2011)). Furthermore, although this Court sits in diversity
National Union admits that there were, in essence, two repositories for the information allegedly utilized in the burglary: (1) Tyco, and (2) Eli Lilly itself. See Handy Deposition, ECF No. [177-15] at 63:12-64:24, 112:21-113:20. Tyco asserts that National Union has failed to unequivocally demonstrate that it was not Eli Lilly itself who leaked the information and, as a result of this deficiency, cannot rest its theory of causation on the assertion that Tyco was responsible for the leak. This argument is unpersuasive.
First and foremost, as previously noted, the sufficiency of evidence is governed by federal, not state law. Even assuming that National Union has not established a base inference to the exclusion of all other theories—to wit, that the criminal defendants did not obtain confidential information from Eli Lilly itself—that determination is irrelevant at this stage, especially in the context of summary judgment where material fact disputes remain. Raiford v. Nat'l Hills Exch., LLC, No. CV 111-152, 2013 WL 1286204, at *25 n.46 (S.D. Ga. Mar. 27, 2013) (rejecting the argument that "too many inferences must be stacked" to reach plaintiff's conclusion and noting that under Daniels v. Twin Oaks Nursing Home, 692 F.2d 1321 (11th Cir. 1982), "there is no prohibition against pyramiding inferences"); Prickett v. United States, 111 F.Supp.2d 1191, 1197 (M.D. Ala. 2000) aff'd, 268 F.3d 1066 (11th Cir. 2001) ("[State's] rule against pyramiding inferences concerns the sufficiency of the evidence, is procedural and not substantive, and, therefore, is supplanted by federal law under Erie."). So long as the inferences National Union relies on are reasonable, they may be used as evidence in opposition to Tyco's Motion; indeed, the Court is obligated to draw all inferences in National Union's favor. Although Tyco does not explicitly attempt to portray National Union's inferences as unreasonable, given the nature of this litigation, such a position may be assumed. Notwithstanding Amaury Villa's testimony and Tyco's obvious protest, National Union's inference that confidential information was utilized to gain entry to the Enfield Facility is not unreasonable in light of the facts and circumstances surrounding the break in. Specifically, National Union's security experts corroborate the assertion that inside knowledge must have been employed in executing the burglary. Although Amaury Villa, a criminal with a rather lengthy criminal history, has testified that neither he nor his brother made use of confidential information, the conflict between this testimony and National Union's experts is to be resolved by the finder of fact, not by the Court.
Second, National Union's presentation of expert testimony concerning the most critical facts in this matter, whether confidential information was obtained and how it was obtained, constitutes direct evidence. Where a plaintiff presents direct evidence on an essential element of his or her claim, the rule against stacking of inferences is not implicated. See generally Collins, 749 F.3d at 959. While Tyco continues to dispute the admissibility of National Union's security experts for purposes of trial pursuant to Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), it remains a valid consideration at this stage. Furthermore, in light of the prior paragraph's discussion regarding the appropriate standard to be applied, whether or not National Union's experts have appropriately considered the other possible repositories is not a valid basis for finding a total lack of proper evidence on the element of causation.
Finally, the Court takes issue with Tyco's framing of the matter. The initial inference, as stated by Tyco, is that Tyco, not Eli Lilly was the cause of the alleged leak. This inference relates to the element of breach, not the element of causation. There is only one inference required of the jury to find causation, namely that the information was utilized to successfully gain entry into the Enfield Facility. "Where there is only one inference relating to causation, the non-movant to the motion for summary judgment does not have to establish that the sole inference is the only reasonable inference." See O'Malley, 133 So. 3d at 1056 (emphasis added). Accordingly, there is no "stacking of inferences" relating to the issue of causation.
For the aforementioned reasons, summary judgment is not warranted on the issue of causation under the theory that National Union has improperly relied on a pyramid of inferences.
Having found that the National Union's negligence claims escape summary judgment, the Court now addresses the issue of damages as presented in the parties' respective Motions. National Union's Amended Complaint seeks damages in the amount of $42,118,354.00 for Counts I (negligence), Count II (failure to safeguard), and Count II (failure to disclose/warn). See Amend. Compl., ECF No. [27] at ¶¶ 111-12, 118-19, 125-26. It is indisputable that the damages claimed in National Union's Amended Complaint correspond directly with the amount National Union was required to pay Eli Lilly pursuant to the policy of insurance between the two. See id. at ¶ 111 ("Pursuant to National Union's policy of insurance, National Union paid Eli Lilly an amount in excess of $42,118,354.00 for the damage to real property, loss of inventory and other expenses associated with the harm suffered."). National Union's damages expert, Daniel Cambal, reaches a different amount. Utilizing the "transfer-in price," Cambal concludes that value of the stolen and damaged pharmaceuticals should equal $44,383,190. See Cambal Report, ECF No. [183-2] at 4-6, 8. Tyco challenges Cambal's appraisal on two distinct grounds, first asserting that he improperly conducted an analysis with respect to the wrong entity and second, that the measure of damages employed is malapropos. See Tyco MSJ, ECF No. [176] at 17-23.
Relying on Cambal's deposition testimony, Tyco's first argues that Dr. Cambal incorrectly calculated damages for a different company, specifically, Eli Lilly's subsidiary, Eli Lilly USA. See Tyco MSJ, ECF No. [176] at 17-18. Because, according to Tyco, Cambal's valuation is based on the loss to Eli Lilly USA, his estimation bears no relation to the damages suffered in this litigation, if any. Id. Although Cambal repeatedly states that he communicated with "Eli Lilly USA" representatives and calculated damages incurred by "Eli Lilly USA," see Cambal Depo. Excerpts, ECF No. [175-1] at 66:1-13, his testimony also reveals that Cambal harbored slight confusion regarding Eli Lilly's corporate structure:
Cambal Depo. Excerpts, ECF No. [241-2] at 14:4-10. Later, Cambal's testimony confirms his confusion:
Id. at 38:1-25 (objections omitted).
It is well-settled that "[a] parent corporation and its wholly-owned subsidiary are separate and distinct legal entities." Am. Int'l Grp., Inc. v. Cornerstone Businesses, Inc., 872 So.2d 333, 336 (Fla. 2d DCA 2004) (citing Gladding Corp. v. Register, 293 So.2d 729, 732 (Fla. 3d DCA 1974)) (discussing this rule in the context of contract law). Cambal's Report, nevertheless, clearly indicates that any valuation was conducted with respect to Eli Lilly and the Enfield Facility. See Cambal Report, ECF No. [183-2] at 6 (stating that the report addresses the "costs incurred by Eli Lilly and Company" as a result of the theft and noting that the opinion is based on "certain accounting records and other information of Eli Lilly and Company"). Cambal's disorientation at deposition does not belie this fact.
A proper damages calculation will "place the plaintiff in the same financial position [] that [it] occupied before the property was damaged." Ocean Elec. Co. v. Hughes Labs., Inc., 636 So.2d 112, 114 (Fla. 3d DCA 1994) (citing Argonaut Ins. Co. v. May Plumbing Co., 474 So.2d 212 (Fla. 1985)). In the context of lost property, this generally requires damages to be measured "based upon the market value of the property on the date of the loss." Id. (citing Jacksonville, T. & K.W. Ry. Co. v. Peninsular Land, Transp. & Mfg. Co., 9 So. 661, 679 (1891) (further citations omitted)). Defining a property's "market value" alone is insufficient to properly compensate the plaintiff: "[t]he proper measure of market value `is dependent upon the choice of the appropriate economic market which will achieve the objective of making the injured party whole, while avoiding any unjust enrichment.'" Nat'l R.R. Passenger Corp. v. Rountree Transp. & Rigging, Inc., 286 F.3d 1233, 1245-46 (11th Cir. 2002) (citing Ocean Elec., 636 So. 2d at 114). Stated simply, a proper estimation of damages will compensate plaintiff for the market value as set by the appropriate market while avoiding unjust enrichment. See id.
According to Tyco, the transfer-in price, as calculated by Cambal, runs afoul of the unjust enrichment condition because it wrongly includes a profit component. See Tyco MSJ, ECF No. [176] at 19-20. National Union responds, asserting that the transfer-in price reflects the market value of the inventory "at the time it arrived at the Enfield [F]acility in the Eli Lilly distribution chain." Nat'l Union Resp., ECF No. [242] at 10-11. Although Cambal's Report is terse and unclear in this respect, Cambal's testimony is not; the transfer-in price does not include a profit component that would be realized after the inventory was sold down the supply chain.
As an aside, Tyco's contention that the exclusion of National Union's damages theory would necessitate judgment as a matter of law is without merit. Even if the Court were to exclude Cambal's assessment and utilization of the transfer-in price as fundamentally improper under controlling precedent, summary judgment on National Union's claims would still not be warranted. The controversy here surrounds theory of damages and whether the transfer-in price is a fitting calculation. Whether damages were sustained at all cannot be disputed.
Eli Lilly's transfer price system ("TPS") "details a margin for Eli Lilly's products based on the net effective price." See Cambal Report, ECF No. [183-2] at 15. In his Report, Cambal states that "[t]he transfer price system utilizes advance pricing agreements with each affiliate, local taxing authority and an acceptable profit margin." Id. (emphasis added). Reading this language in a vacuum, it appears that the transfer-in price does, in fact, account for profit. However, Cambal's deposition testimony clarifies that this is not the case; Cambal repeatedly and explicitly notes that the transfer-in price does not take into account lost profits, noting that if it did, the valuation would be considerably higher:
Cambal Depo. Excerpts, ECF No. [245-13] at 134:16-135:14 (objections omitted); see also Cambal Depo. Excerpts, ECF No. [245-11] at 55:5-24. In fact, Cambal discounted the transfer-in calculation by 4.5% to account for profit, as well as 24.9% for to account for Eli Lilly's overhead expenses. Cambal Depo. Excerpts, ECF No. [245-13] at 124:10-12, 124:23-125:25 ("The 29.4 is the impact of the profit and the cost not associated with the product."), 126:1-15 (transfer-in price does not include profit). Thus, Tyco's contention that the transfer-in price accounts for lost profits is contravened by Cambal's testimony.
The proper measure of damages "place[s] the plaintiff in the same financial position [] that [it] occupied before the property was damaged." Ocean Elec., 636 So. 2d at 114 (citation omitted). Cambal's assessment fits the bill:
Cambal Depo. Excerpts, ECF No. [245-12] at 120:24-121:12 (objections removed). The analysis was conducted in a "but-for" fashion, that is, it is designed "to determine what would be necessary to bring Eli Lilly's Enfield, Connecticut facility back to the condition it was in, but for the burglary that took place." See id. at 116:3-25. After having myriad meetings with Eli Lilly's representatives, Cambal determined that the transfer-in price "was the true cost" of the inventory. Id. at 105:6-11. According to Cambal, he employed a trust-but-verify analysis, relying on Eli Lilly's representations, but independently confirming that the transfer-in measurement was correct and otherwise appropriate. Id. at 107:19-109:1. In so doing, Cambal concluded that a transfer-in price percentage of 70.6 was appropriate, where the remaining 29.4 represented both the profit margin and operating expenses. Id. at 110:3-14. In Air Express, a Court in this District determined that a similar method was an appropriate measure of damages because it "encompasse[d] all the costs incurred throughout the [Eli] Lilly supply chain up to a given point and all the profit that [] earned in each step of the supply chain up to that point." See Eli Lilly & Co. v. Air Exp. Int'l USA, Inc., 602 F.Supp.2d 1260, 1278-79 (S.D. Fla. 2009) aff'd in part, vacated in part, rev'd in part, 615 F.3d 1305 (11th Cir. 2010) (concluding that transfer price "represents the real `economic value'").
Tyco requests that this Court ignore Air Express and instead adhere to the binding precedent of Ocean Electric and National Railroad. The Court agrees that Ocean Electric and National Railroad must be followed; however, these cases do not dictate the result Tyco seeks.
Concern regarding Air Express is expected in light of the Eleventh Circuit's reversal.
Ocean Electric establishes the rule that the proper measure of damages for damage to a stock of goods is the replacement cost and any other associated expenses, not the retail selling price. See 636 So. 2d at 115-16 ("The owner of a stock of goods held for sale, which has been damaged or destroyed, is entitled to recover, as damages, the reasonable cost of replacing such goods, which includes the wholesale cost at the time of the loss, plus any other reasonable expenses incurred in the replacement."). Cambal's analysis conforms to this decree. See Cambal Depo. Excerpts, ECF No. [245-12] at 120:24-121:12 (stating that the transfer-in price was the cost to bring the inventory that was stolen from the Enfield Facility back to the Enfield Facility). Further, while National Railroad provides this Court with instruction on the rule of law governing damages, it is factually dissimilar.
In National Railroad, the Eleventh Circuit determined that a subrogee's damages theory was "fundamentally flawed" because it was predicated on the "declared value" of the property under the insurance policy with its insured. See 286 F.3d at 1245. Because the insurance valuation included a profit component, the damages calculation unjustly enriched the subrogee, permitting it to recover profits "that were never lost in the first place." Id. at 1245-46 (citation omitted and emphasis removed). Even after removing the profit component, the damages calculation still resulted in unjust enrichment where the price dictated by the insurance policy was not reflective of the actual cash value of the damaged product. Id. at 1246-47. In fact, the policy included an arbitrary markup that was not reflective of any loss actually sustained by the insured. Id. Thus, the Eleventh Circuit explicitly held that "an insured party whose property has been damaged cannot force a third-party tortfeasor to pay out in damages a negotiated figure between insurer and insured that reflects contract terms that inflate the value of the property." Id. at 1247 (affirming district court's exclusion of the damages evidence).
Unlike the attempted calculation in National Railroad, Cambal's assessment appears to be independent of any formula required by the contract between National Union and Eli Lilly:
See Cambal Depo. Excerpts, ECF No. [245-11] at 77:21-78:9 (objections omitted); see also ECF No. [245-12] at 113:15-25 ("[A]t the time of the loss, right, that it was valued at cost for purposes of insurance, but that was done in error."). However, Cambal also testified to the contrary:
Cambal Depo. Excerpts, ECF No. [177-20] at 42:12-16 (objections omitted). Thus, it remains unclear as to whether the calculated transfer-in price is simply the value National Union owed Eli Lilly pursuant to the contract between the two.
This matter is further plagued by Richard Manning's grossly disparate damages estimate. In his report, Manning concludes that damages in this case should be limited to $4,366,561.00, which represents the pure manufacturing costs of the stolen and damaged pharmaceuticals. Manning Report, ECF No. [158-4] at 12. Cambal's testimony reveals that the transfer-in price values the lost inventory at the proper point in the supply chain, accounting for certain intangible costs, but excluding other factors such as profit potentially realized post-sale. Manning, on the other hand, is in strong disagreement with the use of transfer-in price. Thus, while Cambal's deposition testimony seems to belie Tyco's contention that the transfer-in price improperly includes down-the-line profits, the Court is once again presented with a battle of the experts.
The Court finds that Cambal's testimony supports the conclusion that the transfer-in price represents the cost to replace the inventory stolen and damaged as a consequence of the March 14th burglary. The transfer-in price values the lost inventory at the proper point in the supply chain, the Enfield Facility, and while it accounts for certain intangible costs, it excludes other factors such as profit which would not be realized after the sale of the inventory. In sum, the transfer in price is the replacement cost or the price Eli Lilly would be required to pay to place the same inventory back in the Enfield Facility. The mere fact that the insurance contract between Eli Lilly and National Union sets a replacement value in accord with the transfer-in price does not preclude the use of this valuation. While the Eleventh Circuit's decision in National Railroad precludes a subrogee from forcing the terms of the contract onto the tortfeasor, it did not foreclose the possibility that the insurance contract contains a correct approximation of damages. Situations may arise where the insurance contract properly sets a "reasonable cost of replacing the goods" including "wholesale cost at the time of the loss, plus any other reasonable expenses incurred in the replacement." Ocean Electric, 636 So. 2d at 115-16. Accordingly, the Court finds that the transfer-in price is the appropriate measure of damages. To the extent that Cambal's testimony includes some element of profit or other manner of speculative or unrealized costs, such testimony would, undoubtedly, be inappropriate at trial.
The gravamen of National Union's FDUTPA claim is that Tyco held itself out to Eli Lilly as being "capable of safeguarding the confidentiality of Eli Lilly's security infrastructure and existing [security] system." See Amend. Compl., ECF No. [27] at ¶ 165. First, Tyco contends that National Union's insured, Eli Lilly, admits that Tyco did not engage in any deceptive or unfair practices. Id. at 23-25. Second, according to Tyco, National Union fails to demonstrate actual damages. Id. at 25-26. It is the third element of National Union's FDUTPA claim, actual damages, that supports the grant of summary judgment as this element fails as a matter of law.
FDUTPA was enacted "[t]o 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). "In order to succeed in a claim under the FDUTPA, a plaintiff must prove: `(1) a deceptive act or unfair practice; (2) causation; and (3) actual damages.'" Double AA Int'l Inv. Grp., Inc. v. Swire Pac. Holdings, Inc., 674 F.Supp.2d 1344, 1353 (S.D. Fla. 2009) (quoting Rollins, Inc. v. Butland, 951 So.2d 860, 869 (Fla. 2d DCA 2006)). Although FDUTPA does not explicitly define the term "deception," the provisions of the Act are to be "construed liberally." Fla. Stat. § 501.202. Nevertheless, courts have determined that a deception under under FDUTPA occurs when there is "a representation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer's detriment." Zlotnick v. Premier Sales Group, 480 F.3d 1281, 1284 (11th Cir. 2007) (citation and quotation omitted); see also Rollins, 951 So. 2d at 869 ("A deceptive practice is one that is `likely to mislead' consumers."). "This standard requires a showing of `probable, not possible, deception' that is `likely to cause injury to a reasonable relying consumer.'" Zlotnick, 480 F.3d at 1284 (quoting Millennium Commc'ns & Fulfillment, Inc. v. Office of the Att'y Gen., 761 So.2d 1256, 1263 (Fla. 3d DCA 2000)).
While some courts have hinted that the causation requirement requires a plaintiff to prove that the consumer actually relied on the deceptive practice, see, e.g., Kais v. Mansiana Ocean Residences, LLC, 08-CV-21492-FAM, 2009 WL 825763, at *2 (S.D. Fla. Mar. 25, 2009) (dismissing claim because Plaintiff failed to state that the alleged deceptive act "caused him to enter into the contract . . . or caused him to act differently in any way"), the Eleventh Circuit has plainly resolved this issue, stating that "FDUTPA does not require a plaintiff to prove actual reliance on the alleged conduct." Cold Stone Creamery, Inc. v. Lenora Foods I, LLC, 332 F. App'x 565, 567 (11th Cir. 2009) (quotation omitted); see also Davis v. Powertel, Inc., 776 So.2d 971, 973 (Fla. 1st DCA 2000) ("A party asserting a deceptive trade practice claim need not show actual reliance on the representation or omission at issue."); State, Office of Attorney Gen., Dep't of Legal Affairs v. Commerce Commercial Leasing, LLC, 946 So.2d 1253, 1258 (Fla. 1st DCA 2007) ("A deceptive or unfair trade practice constitutes a somewhat unique tortious act because, although it is similar to a claim of fraud, it is different in that, unlike fraud, a party asserting a deceptive trade practice claim need not show actual reliance on the representation or omission at issue." (internal quotation omitted)). Instead of actual reliance, a plaintiff must simply prove that "the alleged practice was likely to deceive a consumer acting reasonably in the same circumstances." Cold Stone, 332 F. App'x at 567.
On March 2, 2015, Fred Larsen was produced as Eli Lilly's 30(b)(6) representative. See Larsen Deposition, ECF No. [185-2] at 1. Among other things, Larsen was questioned regarding Eli Lilly's position on various facts critical to this litigation, including ultimate issues:
Id. at 151:5-11. Most notably, Larsen openly admits that he was not aware of any false statements made by Tyco regarding its fidelity:
Id. at 156:6-11. Tyco asserts that National Union is subject to these concessions as if they were its own because "a subrogee `stands in the shoes' of the subrogor and is entitled to all of the rights of its subrogor, but also suffers all of the liabilities to which the subrogor would be subject." Progressive Am. Ins. Co. v. United States, 913 F.Supp.2d 1318, 1322 (M.D. Fla. 2012) (quoting Allstate Insurance Co. v. Metropolitan Dade County, 436 So.2d 976, 978 (Fla. 3d DCA 1983)); see also St. Paul Guardian Ins. Co. v. United States, 117 F.Supp.2d 1349, 1356 (S.D. Fla. 2000) ("[The subrogee of the insured] stands in the shoes of its insured and can have no greater rights. . . ." (quoting High v. General American Life Ins. Co., 619 So.2d 459 (Fla. 4th DCA 1993) (alteration in original)).
Larsen's statement is not unequivocal, he merely states that he is unaware of any falsities. While this statement is probative of whether Tyco was engaged in a deceptive practice, it is not dispositive. As noted, "FDUTPA does not require a plaintiff to prove actual reliance on the alleged conduct." Cold Stone, 332 F. App'x at 567 (citation omitted). All that is required of the plaintiff is to prove that the alleged unfair or deceptive practice "was likely to deceive a consumer acting reasonably in the same circumstances." Id.; Davis, 776 So. 2d at 974 (noting that the standard "does not require subjective evidence of reliance"). Because the standard is an objective one, the fact that Eli Lilly itself may not have been deceived is not conclusive, although it is indicative of the strength of National Union's claim. An issue remains as to whether a reasonable consumer is likely to be deceived by Tyco's alleged misrepresentations and, therefore, this element is satisfied for FDUTPA purposes.
Next, Tyco argues that National Union's FDUTPA claim fails as National Union has presented no evidence of actual damages. See Tyco MSJ, ECF No. [176] at 26-26. At this point, National Union's FDUTPA claim fails to pass muster.
FDUTPA permits recovery for "actual damages." Rollins, 951 So. 2d at 869. "Actual damages" does not include consequential damages. Id.; Eclipse Med., Inc. v. Am. Hydro-Surgical Instruments, Inc., 262 F.Supp.2d 1334, 1357 (S.D. Fla. 1999) aff'd sub nom. Eclipse Med., Inc. v. Am. Hydro-Surgical, 235 F.3d 1344 (11th Cir. 2000) ("Florida courts specifically reject the recovery of consequential damages under FDUTPA."); Dorestin v. Hollywood Imports, Inc., 45 So.3d 819, 824-25 (Fla. 4th DCA 2010) ("[FDUTPA] does not allow the recovery of other damages, such as consequential damages."); Rodriguez v. Recovery Performance & Marine, LLC, 38 So.3d 178, 180 (Fla. 3d DCA 2010) ("[U]nder FDUTPA, the term `actual damages' does not include special or consequential damages."). Generally, the standard measurement for actual damages "is the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties." Rollins, 951 So. 2d at 869 (quoting Rollins, Inc. v. Heller, 454 So.2d 580, 585 (Fla. 3d DCA 1984)) (describing this measurement as being "well-defined in the case law").
As a result of Tyco's alleged FDUTPA violation, National Union contends that it has "suffered loss and damages in excess of $60,000,000.00 for the damage to real property, inventory and other expenses associated with their loss." See Amend. Compl., ECF No. [27] at ¶ 171. These are consequential damages. Indeed, at no point does National Union's damages expert attest to a difference between the service as provided and the service as it should have been provided. See Rollins, 951 So. 2d at 869. After citing the correct legal standard garnered from Rollins, Inc. v. Heller, 454 So.2d 580 (Fla. 3d DCA 1984), National Union states that "the purchase price for the Lilly pharmaceuticals were [sic] impacted by [Tyco's] failure to protect the information entrusted to it." Nat'l Union Resp., ECF No. [242] at 21. National Union reaches this conclusion without any substantive analysis whatsoever. See id. More critically, this statement reflects National Union's admission that the damages sought are some manner of lost profits or inventory, not, as it would have the Court believe, the difference between the market value of the security services as provided as compared with the security services as they should have been provided. See Nyquist v. Randall, 819 F.2d 1014, 1017 (11th Cir. 1987) (noting that "lost profits may indeed be the quintessential example of `consequential damages'" under FDUTPA).
Because National Union has failed to provide any evidence of actual damages despite a protracted and ample discovery period, National Union cannot maintain an action under FDUTPA and summary judgment on Count VIII of the Amended Complaint, ECF No. [27], is granted. See, e.g., Lustig v. Bear Stearns Residential Mortgage Corp., 411 F. App'x 224, 225 (11th Cir. 2011) (affirming grant of summary judgment where plaintiff "failed to present any evidence to establish" an element of his FDUTPA claim).
Litigation in this matter is undoubtedly complex, involving a variety of issues, clashes between experts, and disagreement on the facts. Despite the astronomical summary judgment record presented, only one claim is susceptible to resolution in light of the guiding principles of Fed. R. Civ. P. 56 and associated precedent. For the foregoing reasons, it is hereby
