4D07-2-BDO Seidman, LLP v. Bee

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State: Florida

Court: Florida Fourth District Court

Docket No: 4D07-2

Case Date: 12/05/2007

Preview:DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
July Term 2007

BDO SEIDMAN, LLP, Appellant, v. CHARLES W. BEE, Appellee. No. 4D07-2 [December 5, 2007] WARNER, J. In a suit over retirement benefits under a partnership agreement, the trial court refused to enforce an arbitration agreement, finding that the appellee did not sign the agreement. Because the appellee relied on the agreement in filing his claim and had signed previous agreements with identical arbitration provisions, we hold that the appellee was bound by the provisions. In accordance with controlling New York law, we also hold that the composition of the arbitration panel did not make the arbitration provision unconscionable as alleged by the appellee. We reverse. This action arises out of Charles Bee's complaint filed against his former employer, BDO Seidman, LLP ("BDO"), a national accounting firm, in which Bee claimed entitlement to retirement compensation under the firm's Amended Partnership Agreement. Bee had been a partner with the firm for over twenty years. As a partner, Bee was a party to various partnership agreements. Bee alleged that the 2000 Partnership Agreement was the last agreement he personally signed. In 2003, as a result of a major leadership change in the firm, several top partners resigned. Several partners associated with the old regime, including Bee, entered into a separate employment agreement with BDO, referred to as the Understanding, in which the terms of compensation for Bee's remaining years with the partnership were set. The Understanding included an arbitration provision.

Thereafter, the Partnership adopted an Amended Partnership Agreement in March 2004. The provisions of this agreement and previous agreements dictated compensation paid to a partner upon retirement or termination. Its provisions applied to any partner who had not terminated his or her relationship with the partnership prior to the adoption of the agreement and superseded prior partnership agreements. Section 14.8 of the Amended Partnership Agreement, as well as the 2000 Partnership Agreement, provided for arbitration of all disputes under the agreement. It established an arbitration panel consisting exclusively of other BDO partners. However, the parties were to agree on the members: Any dispute or controversy shall be considered and decided by an arbitration panel consisting of two (2) members of the Board of Directors (other than the Chief Executive Officer) selected by the Board of Directors and three (3) Partners from the Partnership's practice offices who are not members of the Board of Directors. The members of the arbitration panel shall be mutually agreed to by the Board of Directors and the parties to the controversy or dispute, provided that no member of the panel shall be from an office in which any complaining Partner was located at the time of the filing of the complaint, nor be otherwise involved in the controversy or dispute. The agreement further provided that "its validity, construction, administration and effect, shall be governed by and construed in accordance with the laws of the State of New York." Six months later the chairman of the board and chief legal counsel demanded that Bee resign and told him that BDO would not indemnify him for prior tax work performed by Bee which was being challenged by the government as illegal tax planning. If he resigned, BDO would provide him the retirement benefits under the partnership. Bee, however, thought this was an attempt to deprive him of compensation under the Understanding, and he refused to resign. BDO sent Bee a letter stating that the board of directors voted to rescind the Understanding and to terminate his partnership interest for cause. He sought arbitration of his dispute with BDO under the Understanding and recovered a sizeable award from the arbitration panel. However, the arbitration panel determined that it did not have jurisdiction of matters involving the Amended Partnership Agreement, as the two were separate agreements with different arbitration provisions.

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Bee then filed the instant action against BDO seeking retirement compensation, attaching a copy of the Amended Partnership Agreement to the complaint. Bee alleged that BDO breached the Amended Partnership Agreement by expelling him without any contractuallypermitted cause and in violation of the implied covenant of good faith and fair dealing. He further alleged that if BDO had not wrongfully expelled him, he would have retired no earlier than his sixtieth birthday and would have been entitled to receive retirement benefits for the rest of his life, as calculated in accordance with the terms of the Amended Partnership Agreement. He alleged that he was not bound by the arbitration agreement in the Amended Partnership Agreement, because it was unconscionable as the panel was comprised solely of BDO partners. When BDO moved to compel arbitration, Bee claimed that he had not signed the agreement. The benefits he claimed were available under prior versions of the partnership agreement. At the hearing, however, BDO's attorney noted that the same arbitration provision was included in prior partnership agreements which Bee admits he signed. His lawyer admitted as much and told the court that "the real issue goes simply to the identity of the panel. That's the problem." Bee stipulated that he was willing to submit his claim to arbitration if neutral and disinterested arbitrators were to preside. The trial court denied the motion to compel. The court found that Bee had not signed the Amended Partnership Agreement, and it would not require him to arbitrate under that agreement. The court did not find that the agreement was unconscionable because of panel bias based upon the agreement alone. The court would require further evidence of actual bias. Because Bee agreed to arbitrate, the court ordered arbitration before a neutral panel of arbitrators to be agreed upon by the parties or, if they could not agree, to be appointed by the court. BDO appeals this order as a non-final appealable order. Florida Rule of Appellate Procedure 9.130(a)(3)(C)(iv) permits appeals of non-final orders determining "the entitlement of a party to arbitration." Here, the court's non-final order did not exactly determine the entitlement of a party to arbitration, as Bee agreed that he would submit to arbitration. However, the court did not enforce the arbitration clause but permitted an arbitration proceeding outside of the agreement. As the essence of the court's ruling is to deny BDO's motion to compel arbitration under the agreement, we conclude that the order is appealable under the rule. In reviewing the denial of a motion to compel arbitration, the trial court's factual findings are reviewed under a competent, substantial
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evidence standard. See Fonte v. AT&T Wireless Servs., Inc., 903 So. 2d 1019, 1023 (Fla. 4th DCA 2005). "However, the standard of review applicable to the trial court's construction of an arbitration provision, and to its application of the law to the facts found, is de novo." Id. See also Chapman v. King Motor Co. of S. Fla., 833 So. 2d 820, 821 (Fla. 4th DCA 2002) (a trial court's decision on the validity of an arbitration agreement is a matter of contract interpretation subject to de novo review). As the trial court determined that the arbitration agreement was not enforceable because Bee failed to sign the Amended Partnership Agreement, we review de novo whether this prevents the arbitration clause from being enforced. The court must consider three elements to determine a party's entitlement to arbitration: "(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitral issue exists; and (3) whether the right to arbitration was waived." Marine Envtl. Partners, Inc. v. Johnson, 863 So. 2d 423, 426 (Fla. 4th DCA 2003). The trial court's ruling that Bee did not agree to arbitration goes to the first element, i.e., whether there is a "valid written agreement" to arbitrate. In this case the parties both rely on and maintain that the Federal Arbitration Act (FAA) provides the standards for determining the arbitrability of this dispute. We will therefore apply federal law in determining whether a valid arbitration agreement exists.1 The FAA provides: A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save

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When deciding whether the parties agreed to arbitrate a certain matter, courts generally should apply ordinary state-law principals that govern the formation of contracts. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). In Global Travel Marketing, Inc. v. Shea, 908 So. 2d 392, 397 (Fla. 2005), the Florida Supreme Court approvingly quoted from Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987), for the proposition that in interpreting arbitration provisions state law should apply if that law arose to determine the validity of contracts generally.
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upon such grounds as exist at law or in equity for the revocation of any contract. 9 U.S.C.

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