IN THE SUPREME COURT OF FLORIDA CASE NO. SC ALEXANDER L. KAPLAN, et al., Petitioners, vs. KIMBALL HILL HOMES FLORIDA, INC.,

Transcription

1 IN THE SUPREME COURT OF FLORIDA CASE NO. SC06-74 ALEXANDER L. KAPLAN, et al., Petitioners, vs. KIMBALL HILL HOMES FLORIDA, INC., Respondent ON REVIEW FROM THE SECOND DISTRICT COURT OF APPEAL LAKELAND, FLORIDA Case Nos. 2D and 2D JURISDICTIONAL BRIEF OF RESPONDENT KIMBALL HILL HOMES FLORIDA, INC. HOLLAND & KNIGHT LLP Stacy D. Blank P.O. Box 1288 Tampa, FL (813)

2 TABLE OF CONTENTS TABLE OF CONTENTS... i TABLE OF CITATIONS... ii STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF THE ARGUMENT... 4 ARGUMENT... 5 CONCLUSION... 9 CERTIFICATE OF SERVICE... 9 CERTIFICATE OF TYPEFACE COMPLIANCE i

3 TABLE OF CITATIONS Page Beaver Coaches, Inc. v. Revels Nationwide R.V. Sales, Inc., 543 So. 2d 359 (Fla. 1st DCA 1989)... 7 Cardegna v. Buckeye Check Cashing, Inc., 894 So. 2d 860 (Fla. 2005)...4, 5, 6, 7, 8 Chastain v. Robinson-Humphrey Co., 957 F.2d 851 (11th Cir. 1992)... 7 Jenkins v. First American Cash Advance of Georgia, LLC, 400 F.3d 868 (11th Cir. 2005)... 7 Medident Constr., Inc. v. Chappell, 632 So. 2d 194 (Fla. 3d DCA 1995)... 6 R.A.M. of South Florida, Inc. v. WCI Communities, Inc., 869 So. 2d 1210 (Fla. 2d DCA 2004)... 6 Simpson v. Cohen, 812 So. 2d 588 (Fla. 4th DCA 2002)... 6 Stacy David, Inc. v. Consuegra, 845 So. 2d 303 (Fla. 2d DCA 2003)... 6 Vacation Beach, Inc. v. Charles Boyd Constr., Inc., 906 So. 2d 374 (Fla. 5th DCA 2005)... 6, 7 ii

4 STATEMENT OF THE CASE AND FACTS In February, 2004, the petitioners Alexander L. Kaplan and Denise A. Kaplan (collectively, "Kaplans") entered into a "Homebuyers Purchase Agreement" ("Agreement") with Kimball Hill Homes Florida, Inc. ("Kimball Hill") for the purchase of a home in Collier County, Florida. The Agreement includes a broad arbitration provision that requires the Kaplans to arbitrate any claims they have against Kimball Hill relating to the Agreement, the home, the project, or the community in which the home is located. (Opinion, at 3). Despite the existence of the arbitration provision, the Kaplans filed a complaint against Kimball Hill in October, 2004, in the Circuit Court of the Twentieth Judicial Circuit, in and for Collier County. The Kaplans asserted claims against Kimball Hill for fraud, fraudulent inducement, and intentional infliction of emotional distress. In support of their claims, the Kaplans alleged that Kimball Hill i) failed to complete construction of the home by the contractual deadline, ii) promised in the Agreement that the lot on which the Kaplans' home was to be constructed had a golf course view when it does not, and iii) failed to alleviate drainage problems on the lot. Kimball Hill filed a motion to compel arbitration. Following a hearing on the motion, the circuit court ordered arbitration of the Kaplans' fraud and fraudulent inducement counts. The court, however, denied Kimball Hill's motion to compel 1

5 arbitration of the intentional infliction of emotional distress claim. The Kaplans appealed the order compelling arbitration of the fraud and fraudulent inducement counts. Kimball Hill filed its own notice of appeal challenging the portion of the order denying arbitration of the claim for intentional infliction of emotional distress. The Second District Court of Appeal consolidated the two appeals. (Opinion, at 2). On appeal, the Kaplans first argued that their claims were all independent torts and were therefore beyond the scope of the arbitration provision. The Kaplans also argued that there were so many alleged errors, ambiguities, and omissions in the Agreement that there was no "mutuality of contract." None of those alleged errors, ambiguities, or omissions, however, related to the arbitration provision. Instead, they involved other terms such as the final price of the home after adjustment for change orders. The Kaplans further argued that the trial court erred in failing to hold an evidentiary hearing on the mutuality of contract issue. Finally, the Kaplans argued that the order compelling arbitration denied them their constitutional rights to due process, access to courts, and trial by jury. (Opinion, at 3). Kimball Hill argued that the claim for intentional infliction of emotional distress, like the fraud and fraudulent inducement claims, depends on the Agreement and thus is subject to the parties' agreement to arbitrate. (Opinion, at 4). 2

6 The Second District affirmed the trial court's order compelling arbitration of the fraud and fraudulent inducement counts and reversed the portion of the order denying arbitration of the claim for intentional infliction of emotional distress. Because all of the issues underlying the Kaplans' tort claims were specifically addressed in the Agreement, the Second District determined that the Kaplans' claims arose out of duties dependent on the contractual relationship between the parties. Resolution of the Kaplans' claims requires reference to, and construction of, the Agreement. As a result, the Second District held that all of the Kaplans' claims fall within the scope of the parties' agreement to arbitrate. (Opinion, at 7). The Second District also rejected the Kaplans' mutuality of contract argument. The Kaplans did not suggest that the Agreement was illegal. Moreover, although they challenged the enforceability of the Agreement as a whole, the Kaplans did not raise any challenge specific to the arbitration provision. As a result, the Second District explained that the Kaplans' argument regarding the enforceability of the Agreement was to be decided by the arbitrators. (Opinion, at 7-8). The Second District noted that the trial court did not err in failing to hold an evidentiary hearing on an issue to be decided by the arbitrators. (Opinion, at 8). Finally, the Second District found that the Kaplans had specifically waived their rights to proceed in court and to a trial by jury. As a result, the appellate court found no constitutional violations. (Opinion, at 8-9). 3

7 SUMMARY OF THE ARGUMENT The Kaplans have demonstrated no basis for review of the Second District Court of Appeal's decision by this Court. Specifically, the Kaplans have failed to identify an express and direct conflict supporting this Court's exercise of its discretionary jurisdiction. The Kaplans contend that the Second District's decision conflicts with this Court's decision in Cardegna v. Buckeye Check Cashing, Inc., 894 So. 2d 860 (Fla. 2005), cert. granted, 125 S.Ct (2005). Contrary to the Kaplans' contention, there is no conflict between Cardegna and the Second District's decision in this case. In Cardegna, the Court concluded that a court, and not an arbitrator, must resolve any claim that the underlying contract is illegal under Florida law. The Kaplans, however, have not made that claim in this case. As a result, Cardegna does not apply to the facts of this case and no conflict exists. 4

8 ARGUMENT The Kaplans rely solely on this Court's decision in Cardegna to demonstrate the existence of a conflict in this case. The Kaplans' effort, however, falls short of the mark. There is no conflict between this case and Cardegna. Cardegna holds that, in cases in which a party claims an agreement containing an arbitration provision is illegal under Florida law, a Florida court, and not an arbitrator, must resolve the issue of the legality of the contract. Cardegna applies only to those cases in which a claim is made that the agreement is void from its inception because it is illegal under Florida law. The Court determined that there can be no severable, and enforceable, parts of an illegal contract. Thus, in Cardegna, the Court held that an arbitration provision in a potentially illegal contract cannot be excised and enforced separately in advance of a determination that the contract is, in fact, legal. This Court offered the following explanation of its holding: "[w]e conclude that Florida public policy and contract law prohibit breathing life into a potentially illegal contract by enforcing the included arbitration clause of the void contract." Cardegna, 894 So. 2d at 864. There is no such risk in this case because the Kaplans have not claimed that the Agreement is illegal. As a result, Cardegna simply does not apply to the facts of this case. Instead, the Kaplans attempt to shoehorn this case into Cardegna by suggesting that the Agreement was void ab initio because there was no mutuality of 5

9 contract. In their jurisdictional brief, the Kaplans acknowledge that they signed the Agreement, but contend that it had so many changes, deletions, errors, change orders, corrections, incorrect prices, and options that they are not quite sure what they signed. The Kaplans' argument does not remotely suggest that the Agreement is illegal. Thus, as the Second District recognized, Cardegna does not apply and the Kaplans' claims should be submitted to arbitration. 1 Moreover, because none of the errors, omissions, or ambiguities identified by the Kaplans relate to the arbitration clause, the arbitrator, and not the court, must decide any issues relating to the validity and enforceability of the Agreement. The Second District correctly held that, when a party challenges an entire agreement, rather than the specific arbitration clause, for reasons other than the illegality of the contract, that challenge is properly considered and decided by the arbitrator. In fact, every district court of appeal in Florida has reached that identical conclusion. See, e.g., Vacation Beach, Inc. v. Charles Boyd Constr., Inc., 906 So. 2d 374, (Fla. 5 th DCA 2005); Stacy David, Inc. v. Consuegra, 845 So. 2d 303, 307 (Fla. 2d DCA 2003); Simpson v. Cohen, 812 So. 2d 588, 590 (Fla. 4 th DCA 2002); Medident 1 As this Court is well aware, Cardegna did not articulate new law in Florida. Moreover, the Second District clearly understood the Florida law regarding illegal contracts, but did not believe it applied to this case. In fact, the Second District included in its opinion a comparison cite to R.A.M. of South Florida, Inc. v. WCI Communities, Inc., 869 So. 2d 1210 (Fla. 2d DCA 2004), rev. denied, 895 So. 2d 406 (Fla. 2005), for the proposition that the court and not the arbitrator must decide any claim relating to the illegality of the underlying contract. 6

10 Constr., Inc. v. Chappell, 632 So. 2d 194, 195 (Fla. 3d DCA 1995); Beaver Coaches, Inc. v. Revels Nationwide R.V. Sales, Inc., 543 So. 2d 359, (Fla. 1 st DCA 1989). The Cardegna decision did not alter that long-standing law. See Vacation Beach, 906 So. 2d at (confirming that, even after Cardegna, challenge to validity of entire contract based on fraud in the inducement would not preclude submission of issue to arbitration; no question presented that contract was illegal). The Kaplans seek to extend Cardegna beyond its intended reach. The Kaplans' interpretation is beyond anything this Court intended in Cardegna and would turn the law governing arbitration agreements on its head. If the Court were to accept jurisdiction of this case, and further accept the Kaplans' interpretation of Cardegna, Florida courts will be required, as a predicate legal matter, to determine the enforceability of virtually every contract containing an arbitration provision before any part of the dispute may be sent to arbitration. Indeed, every party seeking to avoid arbitration will argue that the contract is void because there was no meeting of the minds as to its terms. Thus, the argument will follow, the court and not the arbitrator must determine the validity of the agreement. Nothing in the Cardegna decision supports that extreme result. 2 The Court has imposed that 2 The Kaplans point out that the Court in Cardegna cites other cases which support their argument, including the decision of the United States Court of Appeals for the Eleventh Circuit in Chastain v. Robinson-Humphrey Co., 957 F.2d 851 (11 th Cir. 7

11 requirement only in cases in which there is a claim that the contract is not merely invalid, but rather is illegal. Because there is no such claim in this case, there is no conflict between the Second District's decision and Cardegna. As a result, this Court should refuse to exercise its jurisdiction over this case. The Court should decline to exercise jurisdiction over this case because no conflict exists. If, however, the Court is inclined to hear the case, the Court should await the outcome of the United States Supreme Court's review of the Cardegna decision before proceeding further. The Court's decision in Cardegna is on certiorari review before the United States Supreme Court. The United States Supreme Court heard oral argument on November 29, All that remains is the issuance of the decision, which will likely occur during the spring. If the United States Supreme Court overturns the Cardegna decision, there may well be no basis for further review of this case. 1992). The Eleventh Circuit, however, has cast doubt on the propriety of this Court's and the Kaplans' reliance on the Chastain decision. In Jenkins v. First American Cash Advance of Georgia, LLC, 400 F. 3d 868, 881 (11 th Cir. 2005), the Eleventh Circuit concluded that, even when the underlying agreement is purportedly illegal, the issue of the legality the agreement is for the arbitrators to decide. The Eleventh Circuit distinguished Chastain by pointing out that case involved an argument challenging specifically the arbitration clause and not just the validity of the entire agreement. 8

12 CONCLUSION For all the foregoing reasons, this Court should decline to accept jurisdiction over this case. Respectfully submitted, Stacy D. Blank Florida Bar No HOLLAND & KNIGHT LLP P.O. Box 1288 Tampa, Florida (813) (813) fax Attorneys for Kimball Hill Homes Florida, Inc. CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Jurisdictional Brief has been furnished via U.S. Mail to Alexander L. Kaplan, Esq., Alexander L. Kaplan, P.A., 9835 N. Tamiami Trial, Naples, Florida 34108, on this day of February, Attorney 9

13 CERTIFICATE OF TYPEFACE COMPLIANCE Counsel for respondent, Kimball Hill Homes Florida, Inc., certifies that this Jurisdictional Brief is typed in 14 point (proportionately spaced) Times New Roman. Attorney # _v1 10