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  • KPMG LLP v. Cocchi, 132 S. Ct. 23 (2011)

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    Filed: 2011-11-07 Precedential Status: Precedential Citations: 132 S. Ct. 23, 181 L. Ed. 2d 323, 181 L. Ed. 2d 323, 2011 U.S. LEXIS 7924 Docket: 10-1521 Supreme Court Database id: 2011-004

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    Kpmg LLP v. Cocchi, 132 S. Ct. 23 (2011)

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    Filed: 2011-11-07 Precedential Status: Precedential Citations: 132 S. Ct. 23, 181 L. Ed. 2d 323, 181 L. Ed. 2d 323, 2011 U.S. LEXIS 7924 Docket: 10-1521 Supreme Court Database id: 2011-004

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    KPMG LLP v. Cocchi, 132 S. Ct. 23 (2011)

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    Filed: 2011-11-07 Precedential Status: Precedential Citations: 132 S. Ct. 23, 181 L. Ed. 2d 323, 181 L. Ed. 2d 323, 2011 U.S. LEXIS 7924 Docket: 10-1521 Supreme Court Database id: 2011-004

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    of 5

    Cite as: 565 U. S.

    ____ (2011)

    Per Curiam

    SUPREME COURT OF THE UNITED STATES


    KPMG LLP v. ROBERT COCCHI ET AL.
    ON PETITION FOR WRIT OF CERTIORARI TO THE DISTRICT

    COURT OF APPEAL OF FLORIDA, FOURTH DISTRICT

    No. 101521. Decided November 7, 2011

    PER CURIAM.
    Agreements to arbitrate that fall within the scope and
    coverage of the Federal Arbitration Act (Act), 9 U. S. C. 1
    et seq., must be enforced in state and federal courts. State
    courts, then, have a prominent role to play as enforcers
    of agreements to arbitrate. Vaden v. Discover Bank, 556
    U. S. 49, 59 (2009).
    The Act has been interpreted to require that if a dispute
    presents multiple claims, some arbitrable and some not,
    the former must be sent to arbitration even if this will
    lead to piecemeal litigation. See Dean Witter Reynolds
    Inc. v. Byrd, 470 U. S. 213, 217 (1985). From this it follows that state and federal courts must examine with care
    the complaints seeking to invoke their jurisdiction in order
    to separate arbitrable from nonarbitrable claims. A court
    may not issue a blanket refusal to compel arbitration
    merely on the grounds that some of the claims could be
    resolved by the court without arbitration. See ibid.
    In this case the Fourth District Court of Appeal of the
    State of Florida upheld a trial courts refusal to compel
    arbitration of respondents claims after determining that
    two of the four claims in a complaint were nonarbitrable.
    Though the matter is not altogether free from doubt, a fair
    reading of the opinion indicates a likelihood that the Court
    of Appeal failed to determine whether the other two claims
    in the complaint were arbitrable. For this reason, the
    judgment of the Court of Appeal is vacated, and the case
    remanded for further proceedings.

    KPMG LLP v. COCCHI


    Per Curiam

    *
    *
    *

    Respondents are 19 individuals and entities who bought


    limited partnership interests in one of three limited partnerships, all known as the Rye Funds. The Rye Funds
    were managed by Tremont Group Holding, Inc., and
    Tremont Partners, Inc., both of which were audited by
    KPMG. The Rye Funds were invested with financier
    Bernard Madoff and allegedly lost millions of dollars as a
    result of a scheme to defraud. Respondents sued the Rye
    Funds, the Tremont defendants, and Tremonts auditing
    firm, KPMG.
    Only the claims against KPMG are at issue in this case.
    Against KPMG, respondents alleged four causes of action:
    negligent misrepresentation; violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), Fla.
    Stat. 501.201 et seq. (2010); professional malpractice; and
    aiding and abetting a breach of fiduciary duty. Respondents basic theory was that KPMG failed to use proper
    auditing standards with respect to the financial statements of the partnerships. These improper audits, respondents contend, led to substantial misrepresentations
    about the health of the funds and resulted in respondents
    investment losses. 51 So. 3d 1165, 1168 (Fla. App. 2010).
    KPMG moved to compel arbitration based on the audit
    services agreement that existed between it and the Tremont defendants. That agreement provided that [a]ny
    dispute or claim arising out of or relating to . . . the services provided [by KPMG] . . . (including any dispute or
    claim involving any person or entity for whose benefit the
    services in question are or were provided) shall be resolved either by mediation or arbitration. App. to Pet. for
    Cert. 63a. The Florida Circuit Court of the Fifteenth
    Judicial Circuit Palm Beach County denied the motion.
    The Court of Appeal affirmed, noting that [n]one of the
    plaintiffs . . . expressly assented in any fashion to [the
    audit services agreement] or the arbitration provision. 51

    Cite as: 565 U. S. ____ (2011)

    Per Curiam

    So. 3d, at 1168. Thus, the court found, the arbitration


    clause could only be enforced if respondents claims were
    derivative in that they arose from the services KPMG
    performed for the Tremont defendants pursuant to the
    audit services agreement. Applying Delaware law, which
    both parties agreed was applicable, the Court of Appeal
    concluded that the negligent misrepresentation and the
    violation of FDUTPA claims were direct rather than derivative. A fair reading of the opinion reveals nothing to
    suggest that the court came to the same conclusion about
    the professional malpractice and breach of fiduciary duty
    claims. Indeed, the court said nothing about those claims
    at all. Finding the arbitral agreement upon which KPMG
    relied would not apply to the direct claims made by the
    individual plaintiffs, id., at 1167, the Court of Appeal
    affirmed the trial courts denial of the motion to arbitrate.
    Respondents have since amended their complaint to
    add a fifth claim. Citing the Court of Appeals decision,
    the trial court again denied KPMGs motion to compel
    arbitration.
    The Federal Arbitration Act reflects an emphatic federal policy in favor of arbitral dispute resolution.
    Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,
    473 U. S. 614, 631 (1985); Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U. S. 1, 2425 (1983)
    (noting that questions of arbitrability [must]. . . be addressed with a healthy regard for the federal policy favoring arbitration). This policy, as contained within the Act,
    requires courts to enforce the bargain of the parties to
    arbitrate, Dean Witter, supra, at 217, and cannot possibly require the disregard of state law permitting arbitration by or against nonparties to the written arbitration
    agreement, Arthur Andersen LLP v. Carlisle, 556 U. S.
    624, 630, n. 5 (2009) (emphasis deleted). Both parties
    agree that whether the claims in the complaint are arbitrable turns on the question whether they must be deemed

    KPMG LLP v. COCCHI


    Per Curiam

    direct or derivative under Delaware law. That question of


    state law is not at issue here. What is at issue is the
    Court of Appeals apparent refusal to compel arbitration
    on any of the four claims based solely on a finding that two
    of them, the claim of negligent misrepresentation and the
    alleged violation of the FDUTPA, were nonarbitrable.
    In Dean Witter, the Court noted that the Act provides
    that written agreements to arbitrate controversies arising
    out of an existing contract shall be valid, irrevocable, and
    enforceable, save upon such grounds as exist at law or in
    equity for the revocation of any contract. 470 U. S., at
    218 (quoting 9 U. S. C. 2). The Court found that by its
    terms, the Act leaves no place for the exercise of discretion by a district court, but instead mandates that district
    courts shall direct the parties to proceed to arbitration on
    issues as to which an arbitration agreement has been
    signed. 470 U. S., at 218 (emphasis in original). Thus,
    when a complaint contains both arbitrable and nonarbitrable claims, the Act requires courts to compel arbitration of pendent arbitrable claims when one of the parties
    files a motion to compel, even where the result would be
    the possibly inefficient maintenance of separate proceedings in different forums. Id., at 217. To implement this
    holding, courts must examine a complaint with care to
    assess whether any individual claim must be arbitrated.
    The failure to do so is subject to immediate review. See
    Southland Corp. v. Keating, 465 U. S. 1, 67 (1984).
    The Court of Appeal listed all four claims, found that
    two were direct, and then refused to compel arbitration on
    the complaint as a whole because the arbitral agreement
    would not apply to the direct claims. 51 So. 3d, at 1167.
    By not addressing the other two claims in the complaint,
    the Court of Appeal failed to give effect to the plain meaning of the Act and to the holding of Dean Witter. The
    petition for certiorari is granted. The judgment of the
    Court of Appeal is vacated, and the case is remanded. On

    Cite as: 565 U. S. ____ (2011)

    Per Curiam

    remand, the Court of Appeal should examine the remaining two claims to determine whether either requires
    arbitration.
    It is so ordered.

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