IN THE SUPREME COURT OF FLORIDA PRUDENTIAL SECURITIES INC., n/k/a PRUDENTIAL EQUITY GROUP, LLC, and WILLIAM J. BREWSTER, JR., Defendants/Petitioners, v. CASE NO.: SC06-935 DCA CASE NO.: 5D05-248 EPISCOPAL DIOCESE OF CENTRAL FLORIDA, v. Plaintiff/Respondent, JOHN B. TRUMBO, Defendant/Respondent. / PETITIONERS JURISDICTIONAL BRIEF On Review From The Fifth District Court of Appeal Richard L. Martens Florida Bar No. 219908 Charles L. Pickett Florida Bar No. 0051217 BOOSE CASEY CIKLIN LUBITZ MARTENS McBANE & O CONNELL 515 North Flagler Drive 19th Floor West Palm Beach, Florida 33401 Telephone: (561) 832-5900 Facsimile: (561) 833-4209 Sylvia H. Walbolt Florida Bar No. 033604 Joseph H. Lang, Jr. Florida Bar No. 059404 Christine R. Davis Florida Bar No. 569372 CARLTON FIELDS, P.A. Corporate Center Three at International Plaza 4221 W. Boy Scout Boulevard Suite 1000 Tampa, Florida 33607-5736 Telephone: (813) 223-7000 Facsimile: (813) 229-4133 ATTORNEYS FOR PETITIONERS
TABLE OF CONTENTS TABLE OF AUTHORITIES...iii STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF ARGUMENT... 2 ARGUMENT... 2 CONCLUSION... 5 CERTIFICATE OF SERVICE AND COMPLIANCE... 6 APPENDIX Episcopal Diocese of Central Florida v. Prudential Securities, --- So. 2d ----, 2006 WL 888096, 31 Fla. L. Weekly D1004 (Fla. 5th DCA April 07, 2006)...A1 ii
TABLE OF AUTHORITIES Case Under Review Episcopal Diocese of Central Florida v. Prudential Securities, --- So. 2d ----, 2006 WL 888096, 31 Fla. L. Weekly D1004 (Fla. 5th DCA April 07, 2006)... passim Conflict Cases Prudential Securities, Inc. v. Katz, 870 So. 2d 173 (Fla. 3d DCA 2002)... 3 The Regency Group v. McDaniels, 648 So. 2d 192 (Fla. 1st DCA 1994)... 2, 3 Other Cases Buckeye Check Cashing, Inc. v. Cardegna, 126 S. Ct. 1204 (2006)... 4 First Options of Chicago, Inc. v. Kaplan, 115 S. Ct. 1920 (1995)... 3 Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 126 S. Ct. 1503 (2006)... 4 Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc, 105 S. Ct. 3346 (1985)... 3 Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999)... 2 iii
STATEMENT OF THE CASE AND FACTS In 1992, Prudential Securities ( Prudential ) hired John Trumbo ( Trumbo ) as a broker. In May 1999, the Diocese established investment accounts with Prudential, agreeing to arbitration provisions with respect to those accounts. Thereafter, Trumbo was permitted to resign from Prudential on July 21, 2000. Trumbo obtained consent from the Diocese to move its accounts with him to another brokerage house, where the Diocese sustained investment losses. The Diocese filed a tort action against Prudential, alleging Prudential failed to warn the Diocese, before transferring its accounts, that Trumbo's trading at Prudential was inconsistent with the Diocese's investment objectives and that Trumbo had a significant regulatory history. Prudential filed a motion to compel arbitration, which was granted. Following a five-day arbitration hearing, the panel entered an award in Prudential s favor. The Diocese then sought to vacate the award, asserting that the arbitration contracts did not apply to the Diocese s tort action. The trial court confirmed the arbitration award. The Fifth District reversed, holding that the fiduciary duty claim, based on Prudential s alleged failure to warn the Diocese, was not arbitrable. 1
SUMMARY OF ARGUMENT This Court has jurisdiction to review the decision of the Fifth District. It is important for this Court to do so because this decision adversely affects the enforceability of agreements to arbitrate, which are favored in the law. ARGUMENT The decision of the district court expressly and directly conflicts with a decision from the First District on whether to apply the federal presumption in favor of arbitration in interpreting the arbitration provisions of securities brokerage agreements involving interstate commerce. The decision also necessarily misconstrues the Supremacy Clause of the United States Constitution in avoiding the controlling import of the federal presumption in favor of arbitration. This Court has jurisdiction to review the case pursuant to article V, section 3(b)(3) of the Florida Constitution. The Fifth District s decision conflicts with the First District s decision in The Regency Group v. McDaniels, 647 So. 2d 192 (Fla. 1st DCA 1994). In The Regency Group, the First District held that, any time a contract contains an arbitration clause, a presumption favoring arbitrability must be applied. 1 When 1 The continuing validity of The Regency Group cannot be questioned. Indeed, this Court expressly cited and relied upon the case in its analysis in Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999), and did not overturn the federal presumption of arbitration, nor could it in light of the decisions from the U.S. Supreme Court. 2
doubts exist regarding the scope of the agreement, they should be resolved in favor of arbitration. Id. at 193-94; see also Prudential Securities, Inc. v. Katz, 807 So. 2d 173, 174 (Fla. 3d DCA 2002) ( courts indulge every reasonable presumption to uphold proceedings resulting in an [arbitration] award ). In conflict with these cases, the Fifth District did not apply the Florida presumption favoring arbitration even though the issue before it was the interpretation of the scope of the arbitration provisions of the parties indisputably valid and enforceable securities brokerage agreements. Episcopal, 2006 WL 888096, at *2. Moreover, by failing to apply the federal presumption in interpreting the parties arbitration agreements, the Fifth District necessarily construed the Supremacy Clause. Episcopal, 2006 WL 888096, at *2. Federal law compels Florida state courts to apply the presumption favoring arbitration in interpreting the scope of arbitration contracts evidencing transactions in interstate commerce, such as securities brokerage agreements between the parties here. The United States Supreme Court has twice set forth that presumption as follows: Any doubts regarding the scope of an arbitration clause should be resolved in favor of arbitration. First Options of Chicago, Inc. v. Kaplan, 115 S. Ct. 1920 (1995); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 105 S. Ct. 3346 (1985). As the Supreme Court has recently reiterated, the Supremacy Clause of the United 3
States Constitution imposes an obligation upon the states to adhere to federal arbitration policy. Buckeye Check Cashing, Inc. v. Cardegna, 126 S. Ct. 1204 (2006). Thus, where, as here, an arbitration contract involving interstate commerce can fairly be construed to encompass the parties dispute within its scope, that interpretation must be enforced by the state courts, even though another, narrower interpretation might have been selected under the state s local law. In violation of its obligation to conform to federal law under the Supremacy Clause, the Fifth District failed to apply this rule of construction in interpreting the scope of the parties' arbitration agreements. The Fifth District s decision is particularly at odds with policies underlying the extensive national regulation of the securities industry. Uncertainty among states as to the scope of favored arbitration provisions threatens to disrupt the efficient operation of the national market for securities. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 126 S. Ct. 1503, 1509 (2006) ("The magnitude of the federal interest in protecting the integrity and efficient operation of the market for nationally traded securities cannot be overstated."). If jurisdiction is granted, there will be amicus support available to the Court to explain the wide-ranging impact the decision will have on the securities industry. 4
CONCLUSION The Court has jurisdiction to and should review this case. Respectfully submitted, Richard L. Martens Florida Bar No. 219908 Charles L. Pickett Florida Bar No. 0051217 BOOSE CASEY CIKLIN LUBITZ MARTENS McBANE & O CONNELL 515 North Flagler Drive 19th Floor West Palm Beach, Florida 33401 Telephone: (561) 832-5900 Facsimile: (561) 833-4209 Sylvia H. Walbolt Florida Bar No. 033604 Joseph H. Lang, Jr. Florida Bar No. 059404 Christine R. Davis Florida Bar No. 569372 CARLTON FIELDS, P.A. Corporate Center Three at International Plaza 4221 W. Boy Scout Boulevard Suite 1000 Tampa, Florida 33607-5736 Telephone: (813) 223-7000 Facsimile: (813) 229-4133 5
CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of the foregoing Petitioner s Jurisdictional Brief was furnished by United States Mail on this 15th day of May, 2006, to ROBERT DYER, ESQ., Allen, Dryer, Doppelt, Milbrath & Gilchrist, 255 South Orange Avenue, Suite 1401, Orlando, Florida 32801, counsel for Plaintiff/Respondent Episcopal Diocese of Central Florida, and to JOHN BOWMAN TRUMBO, Trumbo Capital Management, 1220 Edgewater Drive, Unit 6, Orlando, Florida 32804, Defendant/Respondent. Christine R. Davis CERTIFICATE OF COMPLIANCE I HEREBY CERTIFY that the jurisdictional brief has been prepared using Times New Roman 14-point type, proportionally spaced. Christine R. Davis 6
APPENDIX Episcopal Diocese of Central Florida v. Prudential Securities, --- So. 2d ----, 2006 WL 888096, 31 Fla. L. Weekly D1004 (Fla. 5th DCA April 07, 2006)...A1 7