Goodman-Gable-Gould Co. v. Tiara Condominium Ass'n

Citations: 595 F.3d 1203; 2010 U.S. App. LEXIS 1835Docket: 07-13536, 07-15164

Court: Court of Appeals for the Eleventh Circuit; January 27, 2010; Federal Appellate Court

Original Court Document: View Document

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The legal dispute involves a contract between Goodman-Gable-Gould Company (GGG), an insurance adjuster, and Tiara Condominium Association, Inc., stemming from significant damage to the Tiara Condominium on Singer Island, Florida, caused by Hurricanes Frances and Jeanne in September 2004. Following the hurricanes, Tiara hired GGG to assess the damages and present claims to their insurance provider, Citizens Property Insurance Corporation, under a contract that entailed GGG receiving a percentage of the recovery amount. The damage from the hurricanes exceeded the policy limit of approximately $50 million, which was doubled to $100 million due to the separate occurrences of the two hurricanes.

Tiara later accused GGG of negligence for failing to properly supervise the restoration work, resulting in additional expenses. Although Tiara initially counterclaimed for these expenses, it later shifted its argument to fraudulent misrepresentation and delay in performance related to the costs incurred during the drying out of the building. The district court struck evidence supporting Tiara's counterclaim and ruled in favor of GGG, which was awarded its fees by the jury. Tiara's appeal challenges the district court’s evidentiary rulings and seeks a new trial, which the appellate court affirmed. During the dry-out process, Tiara incurred substantial costs, totaling $30 million for services rendered by Southern Services, Inc., from October 2004 to August 2005.

Tiara halted the dry-out process after Citizens announced it would treat the hurricanes as a single occurrence, limiting coverage to $50 million. Tiara sought a declaratory judgment in Florida state court, arguing the hurricanes were separate occurrences, leading to a potential $100 million claim, which would not cover its losses. The matter was resolved via mediation in March 2006, resulting in Tiara receiving approximately $89 million. Following the settlement, GGG issued a final statement indicating $1,439,259 owed for services rendered, which Tiara refused to pay. On May 2, 2006, GGG filed a complaint alleging breach of contract due to Tiara's non-payment.

Tiara responded with a general denial and counterclaims for breach of contract and professional negligence, asserting GGG was responsible for Southern's performance under the Services Agreement. Tiara accused GGG of allowing Southern to overcharge (price gouging). GGG denied the claims and moved for judgment on the pleadings regarding the negligence claim, which the district court granted, striking the negligence claim from the counterclaim. The case proceeded to trial on GGG's complaint and Tiara's breach of contract counterclaim, starting May 14, 2007.

During the trial, after GGG presented its case, Tiara shifted its counterclaim to two new theories. The first, the 'delay theory,' alleged GGG failed to timely submit a Proof of Loss to Citizens, which could have expedited the claims process and informed Tiara of the single occurrence limitation sooner. The second theory, termed the 'misrepresentation theory,' posited that GGG improperly advised Tiara on the necessity of drying out the building. This theory had three variations: GGG incorrectly stated Citizens required the dry-out, failed to inform Tiara about a potentially less expensive alternative (gutting the building), and did not advise that the drying process might waste resources.

Tiara sought to recover dry-out expenses based on two breach of contract theories: delay and misrepresentation. When Tiara introduced evidence for the misrepresentation theory, GGG objected under Federal Rule of Civil Procedure 37(c), claiming Tiara failed to disclose relevant facts during interrogatories. The district court agreed, excluding the misrepresentation evidence, stating that the theory had not been properly pled or disclosed and that allowing it would cause extraordinary prejudice to GGG. Consequently, Tiara proceeded with its delay theory, presenting dry-out expense evidence. After Tiara rested its case, GGG moved to strike this evidence and for judgment as a matter of law on Tiara's counterclaim. The court granted both motions, determining that the dry-out expenses had never been pled and that allowing such evidence would violate due process and disclosure rules. The court concluded Tiara failed to establish a critical element of its counterclaim, leading to the dismissal of the counterclaim. Subsequently, a jury awarded GGG $1,446,849.96, and a final judgment was entered. Tiara appealed, raising four arguments, two of which were significant. The court denied Tiara's motion to amend its counterclaim, citing potential prejudice to GGG. Tiara then sought relief from the judgment, alleging the jury's award exceeded permissible limits based on the court's instructions. Following GGG's actions, Tiara placed $1,439,259 in escrow, the amount GGG claimed was due.

During jury deliberations, the jury inquired whether it could reference the escrow amount, to which the court clarified that the escrow figure was the maximum award possible, but the jury should determine the total amount the party was entitled to receive. The court subsequently denied Tiara's motion under Rule 60(b)(6) for relief from judgment, a decision Tiara does not contest. The district court also denied Tiara’s motion to dismiss GGG’s complaint, which Tiara claims was based on the unenforceability of the Services Agreement due to non-compliance with Florida consumer protection laws regarding public adjusting contracts. The court ruled that Tiara’s discovery violations justified the exclusion of certain evidence under Rule 37(c). Tiara contends this ruling was an abuse of discretion, as it failed to disclose evidence related to misrepresentation and dry-out expenses. The evidentiary rulings are subject to review for abuse of discretion, defined as misapplying the law or relying on clearly erroneous facts. Tiara’s failure to comply with disclosure rules, specifically Rule 26(e)(2), led to the exclusion of evidence unless the failure was harmless or justified. Sanctions for such violations under Rule 37(c) may include barring the use of undisclosed evidence and may require the payment of reasonable expenses resulting from the failure.

The court granted GGG’s motion to exclude Tiara's evidence related to its misrepresentation theory due to Tiara's failure to disclose this theory in its counterclaim and initial interrogatory responses. Tiara did not list witnesses or articulate how GGG allegedly failed in their contractual obligations until the last day of discovery, and even then, did not mention any misrepresentation by GGG regarding the dry-out of the building. The court noted that Tiara had a duty to supplement its answers if it intended to introduce this evidence at trial, but it only disclosed a price gouging theory initially. Tiara argued that its corporate representative's deposition and supplemental interrogatory responses put GGG on notice of its misrepresentation theory; however, the court disagreed, finding that the responses did not adequately indicate a shift from the price gouging theory to misrepresentation or delay theories. The court upheld that Tiara's assertions were insufficient to inform GGG of any abandonment of the original claim and thus did not constitute a valid basis for the introduction of the misrepresentation evidence or dry-out expenses at trial.

Tiara argued that its disclosures about potential testimonies from Norm Adams and Louis Brandisi were adequate to support claims regarding GGG’s failures. However, the disclosures did not clarify Tiara's intent to pursue misrepresentation or delay theories, nor did they indicate an abandonment of the price gouging theory. Tiara claimed damages exceeding $20 million due to excessive costs from a failed dry-out process, which should have been completed in 14-28 days for $2.5 million, instead lasting over six months at a cost of over $29 million. Despite referencing dry-out expenses, Tiara's context implied a complaint about pricing rather than a substantive claim under misrepresentation or delay theories. The district court granted GGG's motions to exclude evidence related to these theories, finding Tiara had not supplemented its disclosures adequately. Consequently, the court ruled that Tiara's counterclaim for breach of contract lacked essential evidence of damages, leading to a judgment as a matter of law in favor of GGG. Tiara's appeal was rejected, affirming the district court's dismissal of its counterclaim due to the lack of proven damages.