Hot Streak

Hot Streak

By Sean Roth

Real Estate Editor

The month of June got off to a good start for Morgan Bentley, a 38-year-old litigation attorney with the Sarasota law firm of Williams Parker Harrison Dietz & Getzen. On June 1 and 2, he was on the winning end of two legal precedent-setting judgments.

The first came when Sarasota-based FCCI Insurance Co. was awarded a $16 million verdict against officials from S&H Drywall Inc. and Premier Enterprises Unlimited Inc. in a premium/fraud dispute involving worker's compensation insurance. The next day, Bentley, who was assisted by fellow Williams Parker attorney David Wallace, successfully represented Stephen Spotte in a lawsuit over the Manatee County property appraiser's denial of a homestead exemption for Spotte's Longboat Key home while it was under construction.

Bentley is one of the first people to attribute the timing of the verdicts to chance. "I probably shouldn't be saying this, but the other side of the equation is I have lost big cases as well - even a $10 million case," Bentley says. "That is why I don't get too excited. As with every big case, you start out from scratch."

Even so, both of the judgments are likely to have implications statewide.

In the first case, FCCI sued two of its former clients, charging they had underrepresented their revenue, number of employees and the scope of their work.

"It keeps premiums low, which is fine, as long as nobody gets hurt and needs coverage," Bentley says.

To discourage abuse, the Legislature set up significant penalties for misleading workers' comp insurers. Those penalties promise 10 times damages and three times the unpaid portion of the premium bill.

"The first fraud case was a criminal case brought by the state, and the defendant in that case was ordered to pay $1.5 million," Bentley says. "So FCCI went around to its various lawyers, including us, and told us all: 'This is pretty much uncharted water so you may or may not make money on this. Even if you win, it will likely be tied up in appeals for a while.'"

Williams Parker and two other law firms decided to take a chance on their respective regions with different cases. Bentley filed FCCI's complaint back in February 2002.

"We had to depose at least 82 third-party contractors," Bentley says. "It was pretty easy once we had their statements to show that these companies had misrepresented themselves. It wasn't exactly a hard case to prove, but it was just very time consuming."

Including both attorney and private investigator time, Bentley estimates that the lawsuit required about 1,000 hours - the equivalent of nearly 42 full days. FCCI had made its own investment, too, compiling additional information through its special investigation unit.

The time was well spent. Circuit Court Judge Deno Economou awarded FCCI one of the largest judgments of its kind in the state. Bentley thinks it's the largest. His firm and FCCI plan to ask for attorney fees on top of the $16 million judgment.

As for actually collecting $16 million, Bentley says he suspects that one of the companies will declare bankruptcy.

"Morgan did a good job for us in this case." says Thomas A. Koval, senior vice president and general counsel for FCCI. "It is certainly a large judgment in and of itself in litigation of any type, but even more important it gives credence to the statutory framework that the Legislature put in place. It is also precedent-setting industry wide. I am aware of only one other case.

"There is no doubt that this judgment is going to create a reality for anyone thinking about or engaging in irregularities in the need to avoid premiums," Koval says. "People can suffer consequences."

Charles J. Bartlett, a shareholder with the Sarasota-based law firm of Icard, Merrill, Cullis, Timm, Furen & Ginsburg, PA, sees another meaning in the large verdict.

"It really reflects the larger transaction size and sophistication of business being done in Sarasota," Bartlett says. "Firms operating here are obviously involved in bigger and bigger business deals, which will lead to even larger judgments in the coming years."

As of publication, the lawsuit has not been appealed, but the judgment is still in its 30-day open period.

Bentley's second victory did not carry the dollar value of the FCCI suit, but long term it could have more widespread applicability. The focal point of the suit was a rule that required homeowners, whose homes have been demolished and rebuilt, to be living on the property by Jan. 1 to keep their homestead exemption and property tax cap.

"I get calls every year in August when the TRIM notices (Truth-in-Millage) are mailed out," Bentley says. "I get at least a dozen calls every year, but we end up turning most of them down, because the case is not right, or it will cost too much money to fight it. This is really something that has been bubbling under the surface for a while."

When the Spotte case came to Williams Parker, Bentley felt that it might have the best chance of overturning the rule.

"The facts were really perfect," Bentley says. "The Spottes made absolutely every effort they could to stay on the property."

According to the lawsuit, Stephen and Lucia Spotte had planned to stay in a guesthouse on their property in the 6200 block of Gulf of Mexico Drive on Longboat Key while their main home was constructed. By living in the guesthouse on their property, the Spottes figured they would continue to qualify for the homestead exemption.

But the town of Longboat Key denied them permission to stay in the guesthouse.

Instead, the couple demolished the guesthouse and moved into a rental home nearby. It took until May 27, 2003, before the Spottes could move back into the new home. Because of the timing (construction began after Jan. 1, 2003), Manatee County Property Appraiser Charles Hackney denied the family a homestead exemption for the 2003 tax year. The new base-year land value assessment for 2003 was $1.73 million or $500,000 higher than the 2002 assessment. Bentley says the initial one-year increase in tax was more than $10,000.

"Over time that figure just keeps extrapolating," Bentley says.

After going through denials from both the Special Master and the Value Adjustment Board, Bentley filed suit in circuit court on May 5, 2004.

A little more than a year later, Judge Marc Gilner found that according to case law "...it is not essential for the occupancy to be continuous, as long as there is intent to return to the homestead and the absence is reasonably shown to be for the temporary benefit of the family." He ordered that the denial of the homestead tax exemption be set aside.

While Spottes can recover their over-paid tax bill for 2003, most litigants will have trouble recovering any previous tax payments.

"For the finality of the tax roles, the Legislature says if you don't file suit within 60 days of final certification you lose your right to contest the amount," Bentley says. "This means that most people can't go back in time and get money that they have already paid in taxes, but they can get the cap put back to where it was."

As for the future of homestead litigation, neither Hackney nor Bentley expect a true groundswell of claimants particularly because of the limits on tax recovery.

"Class action lawyers live and die on cash payouts," Bentley says. "So with no prospective upfront benefit, they are not going to touch it. We will really see next August just how many potential plaintiffs there are. We have received some e-mails already from clients asking about the case. We'll see if the facts support their cases. This decision does make (future cases) easier to try."

Hackney says he disagrees with the judge's decision but does not plan to appeal the decision. "We are looking at this as an isolated incident," he says. "There were a whole unique set of circumstances in that case. The law specifically says that in order for property owners to obtain a homestead exemption a property primary resident must reside on the property as of Jan. 1. If there is no home there; they can't reside there, but obviously the judge saw it differently."

Further if Hackney appealed the case and lost, the Second District Court of Appeal opinion would be binding on all five of the circuits (6th, 10th, 12th, 13th and 20th) and their respective 14 counties.

"Sometimes you have to choose your battles," Hackney says. "We aren't expecting that there will be many new cases although there is an increase in the frequency of people tearing down waterfront homes. Save Our Homes was sold under the premise of keeping little old ladies from being taxed out of their homes, but now it is being used so that a millionaire can save $20,000 a year that someone else is going to have to make up. I don't think this was ever the intention. But we will follow the judge's ruling."

With those two successes behind him, Bentley has moved on to other cases (see box). Meantime, he's still savoring his two June victories. They have brought on a lot of good-natured ribbing from fellow trial lawyers.

"A lot of them have asked me what I'm planning to do for an encore," he says. "A few have asked if I plan to take the rest of the month off. Some of my law partners have even (jokingly) asked for a piece of it. We have a very collegial bar; there is a just a lot of mutual respect among the local trial attorney."

Bentley's next agenda: Siesta Key zoning

Morgan Bentley's attention these days is focused on the moratorium on resident multifamily development on Siesta Key.

A hearing is set for July 27 that will affect hundreds of Siesta property owners.

"We have just a handful of clients, and we are looking at about $10 million (in value), but I've heard there could by $50 million of Burt J. Harris Act (property-value taking) claims," Bentley says.

For years, the top Sarasota County zoning official had allowed duplex development on lots smaller than the density allowed by the RMF-1 zoning, which calls for six units per acre. Promissory letters were even issued to property owners and prospective property owners by the county department asserting that the developments would be allowable. After the error was discovered, the zoning department sent out letters rescinding their previous promissory letters.

"Just in this office we already have about three to four clients without even looking hard," Bentley says. "We are representing the contract purchaser for the Oasis motel deal that started all of this. I don't think they can (rescind the letters) procedurally. There is no provision I know of for them to take back zoning letters now. The proper procedure was during the appeal period to take it to the board of zoning appeals as an affected party. I think everyone is fine with the county commission making a change, but it's got to be going forward."

Bentley says that the dispute won't necessarily require litigation and is hopeful that it could be resolved at the administrative level.