Sometimes, it’s not an unfavorable judgment but rather the litigation process itself that can be dangerous for a business. Potentially ambiguous rent terms in a mediation settlement agreement relating to a commercial sublease spawned its own litigation, with the subtenant using that process to attempt to acquire information about the tenant’s lease terms with the landlord in a case recently decided by the 4th District Court of Appeal. The court rejected the subtenant’s broad discovery request, deciding that the trial court should adjudicate the validity of the settlement agreement before deciding how broad discovery in the case should be.
The dispute arose over a property that tenant Jilco, Inc. leased in Broward County. The tenant and its subtenant, MRG of South Florida, Inc., encountered a dispute over the terms of the commercial sublease agreement. The trial court in the case ordered the parties to mediation. The mediation yielded a settlement, which the parties put in writing in a document entitled “Memorandum of Mediation Results.”
Unfortunately, the memorandum contained two seemingly conflicting paragraphs. One set MRG’s rent at $31,000 per month, while another set the rent at $14,000 more than whatever the landlord charged Jilco. After a property tax hike led the landlord to raise Jilco’s rent to $19,995, it upped MRG’s rent to $33,995. MRG went back to court, seeking the enforcement of the settlement term that fixed its rent at $31,000, or that the court void the memorandum for a lack of a true agreement between the sides.
MRG subpoenaed several documents regarding the lease, the sublease, and the rent payments. Jilco complained about the size of the request, which it claimed would include nearly two decades of payment history, and it asked the court to narrow discovery to the issue of the agreement reached in mediation. The trial court rejected Jilco’s request, concluding that no settlement agreement existed until the court signed off on it, and that the parties were free to conduct full and open discovery.
Jilco took the discovery issue to the appeals court, which disagreed with the trial court’s assessment. The trial court should have resolved the question of the settlement agreement’s validity before deciding how broad the discovery in the case should be. Another factor weighing against MRG’s proposed request was the potential harm to Jilco. MRG desired to sign a lease for the property directly with the landlord and cut Jilco out of the equation, and it had long sought the information about Jilco’s lease and rent payments with the landlord as part of its efforts to negotiate directly with the landlord. Florida courts are clear that “disclosure of a party’s financial or confidential business information may cause irreparable harm where the information is irrelevant to any pending matter.”
Having a dispute evolve into commercial litigation can have complex ramifications. Your opponent may try to use the legal process to lay hands upon information otherwise unavailable to them and potentially harmful to your business. For legal representation that will fully protect your business interests, talk to the commercial litigation and real estate attorneys at Stok Folk + Kon. Our attorneys have the experience and knowledge to give you the complete and reliable representation your business needs.
Contact us online or by calling (954) 237-1777 to schedule your consultation.
More blog posts:
Commercial Landlord Unable to Enjoin Tenant from Publishing Disparaging Blog Posts, Florida Business Lawyers Blog, Dec. 15, 2014
Contract Addendum Establishes Agreement as Unambiguous, Defeats Need for Extrinsic Evidence in Real Estate Dispute, Florida Business Lawyers Blog, Dec. 5, 2014