Florida’s absolute litigation privilege is a powerful shield, protecting against misdeeds including slander and lies in courtrooms or during formal discovery.
But a state appellate court Wednesday found a Broward County law firm and its principal went well past those very broad boundaries when they gained unauthorized access to the opposing side’s computer network, rifled around, then used that information to question witnesses.
“Absolute privilege cannot be stretched that far,” Third District Court of Appeal Judge Robert J. Luck wrote in a unanimous decision with Chief Judge Leslie B. Rothenberg and Judge Edwin A. Scales concurring.
The decision went against insurance defense attorney Michael P. Rudd and his Hollywood civil ligation firm, Rudd & Diamond, which were accused of accessing a litigant’s proprietary business records to help defeat claims against a client.
Rudd & Diamond in 2013 defended Citizens Property Insurance Corp. in a lawsuit over a homeowner’s plumbing claim. Court records suggest the state-backed insurance carrier suspected Miami-based Arko Plumbing Corp. fraudulently pushed homeowners to file claims to replace cast-iron drain pipes that allegedly eroded over decades.
During litigation against one of the owners, Rudd and his firm had help from John Collucci, a former Arko employee who used his password, which remained active after he left, to access the company’s global positioning system account.
This GPS access allowed them to track the plumbing company’s service vans and identify addresses and other information for 18 clients. The law firm then subpoenaed the GPS records and used them to suggest a link between Arko’s visit and subsequent insurance claims by their clients. Court records suggest the insurers suspected Arko of helping policyholders stage water damage and other losses.
“You never met with Joe or anybody associated with Arko at any time in advance of this loss to discuss committing insurance fraud?” Rudd asked one homeowner under oath, according to the Third DCA ruling.
“Oh, my God, no,” the witness responded.
Rudd and insurers did not respond to requests for comment by deadline, but they argued in court that the witness examination and discovery fell under the umbrella of absolute litigation privilege.
Arko filed suit, alleging the attorney, Citizens and State Farm Florida Insurance Co., which was involved in a similar case, sought to systemically destroy the plumbing business after its principal, Joe Jaremko, uncovered a pattern of deteriorating pipes in homes built in the 1970s. The lawsuit alleged the insurers flagged Arko for fraud and then moved to discredit Jaremko as homeowners filed claims to replace their iron pipes.
“We believe this case is about attempting to destroy an economic challenge to State Farm, and we intend to prove that to a jury,” said Arko’s attorney, Ronald Peter Weil of Weil Snyder Schweikert & Ravindran in Miami. “The attorneys were working for the insurance companies, but when they took the steps that they took to gain unauthorized access to the computer service … their actions are not shielded. They’re not simply permitted to hide behind their retention by the insurance companies.”
The appellate court agreed, ruling Rudd and his firm based their questions during the examination on information from Collucci without paying attention to his credibility and his apparent gripes with his former employer.
“Because the surrounding circumstances of the examination under oath lead to competing inferences about Rudd’s motive … the question of express malice was a genuine disputed fact for the jury,” Luck wrote.
The appellate panel also found the firm accessed protected trade secrets when it logged into Arko’s network.
“Just as sneaking into an old friend’s house to look at the books in his library doesn’t communicate anything to the friend, accessing the account using Collucci’s password did not communicate information to another person,” Luck wrote.
Without this communication, “Rudd and his firm’s actions fall outside what the Florida Supreme Court has held as protected by the litigation privilege,” the Third DCA ruled. ”We conclude that Rudd’s sitting at his computer and accessing Arko’s (GPS) account was not a communication subject to the privilege.”
The ruling clears the way for Arko to pursue compensatory and punitive damages against Rudd. Parallel suits are pending against the insurance companies, but Citizens is an arm of the state with sovereign immunity against punitive damages.
Weil teamed with John Quaranta and Marguerite Snyder to represent Arko.
Stephen Smith and Michael Holt of Rumberger Kirk & Caldwell in Miami represented Rudd and his firm.