KPMG LLP v. Robert Cocchi et al.
November 7, 2011
Case #: 10-1521
Full Text Opinion: http://www.supremecourt.gov/opinions/11pdf/10-1521.pdf
Alternative Dispute Resolution: When a complaint contains both arbitrable and nonarbitrable claims, the Federal Arbitration Act requires courts to compel arbitration of the arbitrable claims.The respondents invested in limited partnerships known as the Rye Funds. The Rye Funds were managed by Tremont Partners, Inc. These funds were invested with Bernard Madoff and allegedly lost millions of dollars as a result of fraud. The Rye Funds were audited by KPMG. The respondents sued KPMG alleging four causes of action: negligent misrepresentation, violation of Florida Deceptive and Unfair Trade Practices Act, professional malpractice, and aiding and abetting a breach of fiduciary duty. KPMG moved to compel arbitration based on an audit services agreement between KPMG and Tremont.
The Circuit Court denied the motion. The Court of Appeal affirmed, because none of the plaintiffs expressly assented to the arbitration provision. The court found that arbitration could only be enforced if the claims arose from the services that KPMG performed for Tremont. The court found that two of the claims did not meet this requirement and therefore affirmed the lower court's decision without looking at the other two claims.
The Supreme Court held that the Federal Arbitration Act ("Act") requires courts to compel arbitration of any arbitrable claims even if the result would be that some of the claims would have to be argued in different forums. The Court based this holding on Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213. The Court further stated that to implement this holding courts must carefully examine each claim. Since the Court of Appeal only expressly considered two of the four alleged claims, the Supreme Court vacated and remanded the case.