The Importance of Ensuring Your Company is Authorized to Transact Business in Florida
Help at Home, Inc. v. CAM Enters., LLC,
2015 U.S. Dist. LEXIS 28131 (S.D. Fla. Mar. 9, 2015).
While it need not be said, the State of Florida is dedicated to improving the lives of its citizens. One of the ways it accomplishes this is by establishing laws in order to best protect its citizens when disputes arise. Under Florida’s Long-Arm Statute, a Floridian can bring a claim against a non-resident of Florida if the non-resident committed a tortious act within the state. Fla. Stat. § 48.193(1)(b). On the other hand, Florida’s door-closing provision prevents non-residents from bringing a case in Florida, regardless of the tortious act having occurred in Florida. Fla. Stat. § 607.1502. So what’s the issue in the Sunshine State? In 2010, Florida became the fourth largest exporter of trade goods with a Gross Domestic Product (GDP) of $748 billion, with tourism, agriculture and fishing being its largest industries. https://en.wikipedia.org/wiki/Florida. This means that businesses from all over the world are doing business in Florida both legally and illegally. What’s worth noting is that Florida laws do not protect businesses that conduct business in Florida illegally. This is extremely significant because many groups attempt to do business within our state “under the table.”
The door-closing provision does however provide some protection for businesses unauthorized to conduct business in our state – the validity of any contracts, deeds, mortgages, security interests, or corporate acts are not affected by not registering as a foreign corporation. Fla. Stat. § 607.1502(5). This may have an adverse effect and encourage businesses not to register, since technically they could still conduct their business without registering.
Another loophole in the provision is that is does not apply to federal questions – meaning that a nonresident can seek adjudication of its federally created rights in a federal forum, including Florida. Help at Home, Inc. v. CAM Enters., LLC, 2015 U.S. Dist. LEXIS 28131 (S.D. Fla. Mar. 9, 2015). In Help at Home, Inc., Help at Home Inc. (“HAH”), an Illinois corporation who is not registered in Florida, brought a trademark and copyright infringement claim in the United States District Court for the Southern District of Florida against CAM Enterprises, Silvertree Home Healthcare Inc., PCC Universal Inc., and their respective principals (collectively “Defendants”). HAH brought the suit to Florida because the Defendants are all registered in Florida and that is where the infringement took place. Being that HAH is not registered in Florida, Defendants filed a motion to dismiss alleging that a Florida court did not have subject matter jurisdiction citing the door-closing provision – an unauthorized foreign corporation could not bring a suit in Florida. However, District Judge Kenneth A. Marra disagreed with Defendants concluding that because this was a federal question claim (trademark and copyright are regulated by Federal law), and not a diversity claim, a Florida court did in fact have jurisdiction.
This case highlights a key distinction from Florida’s long-arm statute, that although unauthorized foreign corporations can defend a claim brought against them in Florida by a Florida resident, unauthorized foreign corporations cannot bring a claim in Florida against a Florida resident. However, for those foreign corporations who aren’t aware of the door-closing statute and file a claim in Florida anyway, the statute provides a provision allowing the court to “hold” a claim until the foreign corporation obtains a certificate of authority. Fla. Stat. § 607.1502(3). In addition to the “hold,” there are some fines that the foreign corporation would have to pay if they conducted business in Florida illegally, such as: 1) the fees and taxes the foreign corporation would have paid if it had registered in Florida; and 2) a civil penalty ranging from $500-$1,000.
The takeaway is, sure you may be able to get away with doing business in Florida without a license, but if you want to be able to protect your business when it gets into legal trouble, which businesses often do, it’s best to register your business and have that protection without having to pay the additional fees and back taxes.