Senate Bill 978, effective June 20, 2023, amends the UCC law to provide that a description only by type of collateral is an insufficient description of accounts and other entitlements set forth in Secs. 222.13 through 222.16, Sec. 222.18, and Secs. 222.201 through 222.22. (The assets included in those sections of Ch. 222 include life insurance policy proceeds or cash surrender value; annuity contract proceeds; wages or reemployment assistance or unemployment compensation payments due deceased employees; disability income benefits; certain payments protected by the federal Bankruptcy Reform Act of 1978; pension money and tax exempt retirement accounts; and assets in qualified tuition programs, medical savings accounts, Coverdell education savings accounts, and hurricane savings accounts.)
Senate Bill 7054, effective July 1, 2023, amends Florida’s UCC law to add a definition of the term “central bank deposit currency” and to revise the definition of money to state that it does not include a central bank deposit currency.
House Bill 1523, effective October 1, 2021, enacts the Combating Corporate Espionage in Florida Act.
Senate Bill 602, effective May 7, 2021, amends the corporation law regarding appraisal rights and the timeframe for eligible entities to be able to use the name of a dissolved corporation, amends the LLC law regarding inspection of records, and clarifies the applicability of the not-for-profit statutes to certain other associations.
Senate Bill 838, effective June 19, 2020, makes clarifying, conforming, and mostly non-substantive revisions to the Business Corporation Act and reinstates the Department of State’s ability to direct interrogatories to a corporation to determine its compliance with the Act.
House Bill 1009, effective January 1, 2020, revises provisions of the Business Corporation Act on topics including, but not limited to, names, bylaws, shareholder agreements, internal claims, committees, meetings, mergers, domestication, dissolution, and reinstatement.
Case summaries
Service of Process on Foreign LLC
Tuscan River Estate, LLC v. US Bank Trust N.A., No. 1D22-0054, decided November 30, 2022. The Florida Court of Appeal held that service of process on an unregistered foreign LLC that was not transacting business in Florida, by service on the Secretary of State, was improper. The plaintiff argued that service of process was proper under sections of the Florida LLC and civil procedure laws for serving LLCs transacting or conducting business in Florida that did not have a registered agent. However, there was no evidence that the LLC, which owned real property, was transacting business and thus required to register and appoint a registered agent. Instead, the proper section of law allowed service on the Secretary of State only if the plaintiff, after making a reasonable attempt, could not serve a managing member or manager. Here, even though the plaintiff knew the identity of the managing member it made no attempt to serve him.
Correct Debtor Name Required on Financing Statements
1944 Beach Boulevard, LLC v. Live Oak Banking Company, No. SC21-1717, decided August 25, 2022. The Florida Supreme Court addressed the following question regarding the filing of financing statements with the Florida Secured Transaction Registry (Registry) – “is the filing office’s use of a standard search logic necessary to trigger the safe harbor protection of Sec. 679.5061(3)”. The court held that it is necessary. The court also held that the Registry does not employ a standard search logic. Therefore, the safe harbor does not apply and any financing statement that fails to correctly name the debtor is misleading and therefore ineffective.
In this case, the debtor LLC’s correct name includes the word “Boulevard”. However, the bank’s financing statements used the abbreviation “Blvd.” instead. A search of the Registry did not bring up the bank’s financing statements on the initial page of 20 results generated by the Registry. However, it did appear on the preceding page, which could be accessed by navigating backward using the “Previous” tab. The Bankruptcy Court held that the financing statements fell within the safe harbor and were effective. The District Court affirmed. The Eleventh Circuit certified questions to the Florida Supreme Court concerning the proper scope of the search under the safe harbor provision. However, the court found it unnecessary to answer those questions because the safe harbor does not apply.
The court noted that Sec. 679.5061(3) provides for a safe harbor that applies when a financing statement that fails to correctly name the debtor is disclosed by a search of records under the debtor’s correct name “using the filing office’s standard search logic, if any”. The court noted that within the industry the filing office’s “standard search logic” means a procedure that identifies a set of financing statements on file that constitutes a hit for the search. It must identify which financing statements are a hit and which are not a hit. However, the Registry does not do that. It returns a list of the 20 names that most closely fit and also allows the user to navigate backward and forward, thereby giving the user access to every name in the Registry.
According to the court, the definition of standard search logic requires the search to identify specific hits. The search offered by the Registry, returning the entire index, is not standard search logic. Furthermore, Sec. 679.5061 conditions the safe harbor’s application on the ability to search using a standard search logic. Therefore, the filers are left with the zero-tolerance rule of 679.5061(2), which requires the filer to correctly name the debtor.
Shareholder Inspections; Attorneys Fees
Richman v. Calzaretta, No. 5D21-1307, decided May 13, 2022. The Florida Court of Appeal held that Sec. 607.1604 of the Florida corporation law, which provides that a court that orders a corporation to allow a shareholder to inspect records shall also order the corporation to pay the shareholder’s attorney fees, does not authorize the court to award attorney’s fees in a garnishment action brought by the shareholder to collect the attorney fee judgment.
UCC
1044 Beach Blvd., LLC v. Live Oak Banking Co. (In re NRP Lease Holdings, LLC), 2021 US App. LEXIS 36637, decided December 10, 2021. The U.S. Court of Appeals, Eleventh Circuit certified the following questions to the Florida Supreme Court: (1) Is the search of the records of the filing office under the debtor's correct name, using the filing office's standard search logic, limited to or otherwise satisfied by the initial page of 20 names displayed to the user of the Registry's search function, (2) If not, does that search consist of all names in the filing office's database, which the user can browse using the command tabs displayed on the initial page, (3) If the search consists of all names in the filing office's database, are there any limitations on a user's obligation to review the names and, if so, what factors should courts consider when determining whether a user has satisfied those obligations?
In this case, the financing statements identify the debtor as "1944 Beach Blvd., LLC," instead of its legal name, "1944 Beach Boulevard, LLC.” It was undisputed that the financing statements did not appear on the initial page of 20 names generated by a Registry search using the debtor’s correct legal name, but that they did appear on an immediately preceding page that the user can view by clicking the "PREVIOUS" command tab on the screen displaying the page listing the 20 names. Above the tab is the statement, "[u]se the Previous and Next buttons to display additional results." The debtor in possession contended that the initial page of 20 names is both the beginning and the end of the "seriously misleading" inquiry, while the creditor contended that it is just the beginning and that its financing statement appearing on the preceding page fell into the statutory safe harbor. The Court of Appeals noted that the existing case law contained two competing interpretations of what "search" means for purposes of the safe harbor. When faced with substantial doubt on a dispositive state law issue, “the better option is to certify the question to the state supreme court”. Thus the Court of Appeals deferred its decision in this case until the Florida Supreme Court has had the opportunity to consider the certified questions and determine whether to exercise its discretion in answering them.
Personal Jurisdiction
Abdo v. Abdo, No. 2D20-1229, decided March 19, 2021. The Florida Court of Appeal reversed a contempt order against the individual defendant for failing to turn over to the plaintiff certain assets belonging to two foreign entities over which the trial court lacked personal jurisdiction. The court rejected the trial court’s attempt to assert jurisdiction over the foreign entities through the defendant based on a theory of in rem jurisdiction over the assets at issue. The court also noted that it had previously been found that personal jurisdiction over the foreign entities was lacking based on a piercing the veil theory.
Piercing the Corporate Veil
BEO Management Corp. v. Horta, No. 3D19-1989, decided November 18, 2020. The Florida Court of Appeal reversed the trial court’s decision to pierce the veil of two corporations to hold their shareholder liable for a judgment against the corporations arising out of a dishonored post-dated check issued by one corporation to guarantee the debt of the other. The plaintiffs failed to establish as a matter of law that the corporations had no independent existence nor was there evidence that the shareholder used the corporations fraudulently or for an improper purpose in the disputed transaction. Both corporations were in good standing at the time and there was no evidence the shareholder knew, when he signed the post-dated check and guarantee, that a year later one corporation would default on the loan and the other would lack the funds to pay on the guarantee.
LLC Member Withdrawal
Palma v. South Florida Pulmonary & Critical Care LLC, No. 3D19-1347, decided September 16, 2020. The Florida Court of Appeals held that members of an LLC who were named as co-owners on a note but who were not beneficiaries of the loan proceeds were not required to pay a share of the outstanding balance on the notes after withdrawing from the LLC where the governing agreement did not authorize the collection of the outstanding balance upon withdrawal.
Discovery of Records
UBS Financial Services, Inc. v. Efron, Nos. 3D19-1410 & 3D18-2612, decided August 5, 2020. The Florida Court of Appeal ruled that relying on the fact that domestic and foreign affiliated corporations were part of the same extended corporate family and shared a brand fell short of meeting the burden to establish the domestic corporation’s control of and legal right to obtain the foreign affiliate’s records.
Administrative Dissolution
Hock v. Triad Guaranty Insurance Corp., Case No. 16-4008, decided March 4, 2020. The Florida Court of Appeal held that an administratively dissolved corporation can commence a lawsuit if it is appropriate to wind up and liquidate.
Other notices
There are no new notices at this time.