Whenever you are negotiating a commercial contract, it is important to make sure that you are focused on all of the details of the agreement, both great and small. It is important because a contract provision that might seem merely perfunctory now may, at some later point, make the difference between a successful outcome and an unsuccessful one in a commercial litigation matter. An experienced Florida business attorney can help as you negotiate your contract and, later, as you litigate your dispute.
One contract that ended in litigation recently was a “Custody Services Agreement” between a Swiss trust and a U.S. bank headquartered in Ohio. That 2011 contract called for the bank to take custody of $428 million in Luxor bonds that belonged to the trust. The bank would hold the bonds for safekeeping and provide certain additional services. In exchange, the trust paid the bank a fee of $90,000 annually.
Two years later, in the summer of 2013, the bank sent the bonds to a third party: specifically, the original issuer of the bonds. The trust sued the bank for breach of contract in December 2015. The bank, the trust argued, breached the agreement in two ways: it did not keep custody of the bonds as it had promised to do, and it did not properly safeguard the bonds.
The bank asked the federal court in Tampa to throw out the case. The trust made one critical error in its lawsuit, according to the bank: it waited too long to file. The custody agreement included a clause that imposed a one-year maximum for filing lawsuits like the one the trust filed in December 2015. Since the trust did not file for more than two years after the bank notified the trust that it had surrendered custody of the bonds, the case was barred by the terms of the contract, according to the bank.
In many cases, Florida law will declare one-year limitations periods to be unconscionable and unenforceable, but the bank still prevailed in the courts. Again, it came down to the terms the parties had agreed to include in the contract document. The agreement explicitly stated that Ohio law would govern contractual disputes between the parties. Ohio law, unlike Florida law, does not consider one-year limitations periods to be generally unconscionable and unenforceable. Additionally, the 11th Circuit Court of Appeals has previously stated that one-year limitations periods are enforceable in Florida if the parties have a choice-of-law clause, and the law of that other state permits one-year limitations periods.
As a result, even though the trust brought its lawsuit in Florida, it was still bound by Ohio law and the contract’s one-year limitations period that Ohio law allows. That meant that the lawsuit was too late, and the bank was entitled to the dismissal that the District Court ordered.
The trust’s unsuccessful outcome teaches two important lessons. One, be very clear about every term that is in your commercial contracts, even the ones that may seem like mere formalities. All terms are potentially important. Two, do not wait to act. If you feel that the other side is in breach of the agreement, contact counsel right away. The skilled South Florida commercial litigation attorneys at Stok Folk + Kon have been helping business clients protect their interests for many years and are ready to go to work for you.
Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you protect your interests.
More blog posts:
‘Continuing’ Torts and the Statute of Limitations in Florida Tortious Interference Cases, Florida Business Lawyers Blog, Nov. 29, 2016
Limitations Period Trips Up Florida Creditor in Fraudulent Transfer Case, Florida Business Lawyers Blog, Aug. 26, 2016