AMERICAN INTERN. GROUP v. SIEMENS BUILDING, 3D04-112.

• Decision Date: 02 June 2004
• Docket Number: No. 3D04-112.,3D04-112.
• Citation: 881 So.2d 7
• Parties: AMERICAN INTERNATIONAL GROUP, INC., Illinois National Insurance Co., and National Union Fire Insurance Co. of Pittsburgh, PA, Appellants, v. SIEMENS BUILDING TECHNOLOGIES, INC., as corporate successor to Security Technologies Group, Inc., Appellee.
• Court: Florida District Court of Appeals

881 So.2d 7

AMERICAN INTERNATIONAL GROUP, INC., Illinois National Insurance Co., and National Union Fire Insurance Co. of Pittsburgh, PA, Appellants, v. SIEMENS BUILDING TECHNOLOGIES, INC., as corporate successor to Security Technologies Group, Inc., Appellee.

No. 3D04-112.

District Court of Appeal of Florida, Third District.

June 2, 2004.

Rehearing and Rehearing Denied September 10, 2004.

Steel Hector & Davis and Lewis F. Murphy and Wendy S. Leavitt and Carlotta J. Roos, Miami, for appellants.

Julian H. Kreeger; Podhurst Orseck and Joel D. Eaton, Miami, for appellee.

Before SCHWARTZ, C.J., and SHEVIN and WELLS, JJ.

Rehearing and Rehearing En Banc Denied September 10, 2004.

SCHWARTZ, Chief Judge.

The trial judge denied the appellant-insurers' application for arbitration of a coverage dispute in accordance with a provision¹ of their pertinent insurance polices. We reverse.

I.

The trial court's ruling was based on its determination that, under the so called reverse-preemption doctrine, the McCarran-Ferguson Act, which prevents a federal statute from "invalidat[ing], impair[ing], or supersed[ing] any law enacted by any State for the purpose of regulating the business of insurance," 15 U.S.C. § 1012, precluded the applicability of the Federal Arbitration Act, which would have otherwise validated the arbitration clause. The court so held on the ground that clause was in conflict with section 627.428(1) of the Florida Insurance Code,² that a successful insured in an action like this one on an insurance policy must be awarded attorney's fees. See § 627.428(1), Fla. Stat. (2003); Moore v. Liberty Nat'l Life Ins. Co., 267 F.3d 1209 (11th Cir.2001), cert. denied, 535 U.S. 1018, 122 S.Ct. 1608, 152 L.Ed.2d 622 (2002); Mayard-Paul v. The Mega Life & Health Ins. Co., No. 01CV3488, 2001 WL 1711519 (S.D.Fla. Dec.21, 2001). This conclusion — that the arbitration clause was in validated by section 627.428(1) — was, in turn, based on the fact that the clause in question³ unlike the statute, does not require, but merely permits an award of attorney's fees in such a situation. ("The arbitrators' award shall not include... unless otherwise decided by the arbitrators, costs or attorneys' fees."[e.s.]). Because the controlling law is that such a provision does not, within the meaning of the McCarran-Ferguson Act "invalidate, impair, or supersede" section 627.428(1), we must disagree.

In PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401, 123 S.Ct. 1531, 155 L.Ed.2d 578 (2003), the Supreme Court squarely held that the mere fact that arbitrators may, even though not required to do so by the arbitration clause, reach a decision in accordance with the allegedly conflicting law, does not preclude arbitration. That PacifiCare requires reversal in this case is demonstrated by Fernandez v. Clear Channel Broadcasting, Inc., 268 F.Supp.2d 1365 (S.D.Fla.2003). That case concerned a conceptually identical situation in which McCarran-Ferguson preclusion was asserted because of an alleged conflict between a permissive attorney fees provision of the arbitration clause and a mandatory attorney's fees requirement of the Fair Labor Standards Act. The court held:

Plaintiff further argues that the Arbitration Agreement is unenforceable because "the Agreement only provides for attorneys fees in the `discretion' of the arbitrators" in contravention of the "FLSA [which] provides for a mandatory award of attorney's fees...." Response at 5. As stated above, the Arbitration Agreement provides that "if a party is entitled to attorneys' fees under any federal, state or local statute or law, the arbitrator will award those fees, pursuant to the governing law, at his/her discretion." Arbitration Agreement at 5. Plaintiff argues that the language "at his/her discretion" renders the Arbitration Agreement unenforceable because it deprives Plaintiff a type of relief that would otherwise be available in court. See Response at 5.

Plaintiff's claim that the Arbitration Agreement will deprive him of the mandatory attorney's fees if he succeeds at mediation is premature. In In re Humana Inc. Managed Care Litigation, 285 F.3d 971 (11th Cir.2002), the Eleventh Circuit had affirmed the district court's finding that the defendant managed-health-care organizations' arbitration clauses, which specifically prohibited punitive damages, were unenforceable because they precluded the recovery of treble damages under the Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. See In re Humana, 285 F.3d at 973. On appeal, the Supreme Court disagreed and found that the terms of the agreements were ambiguous as to whether they actually prevented the arbitrator from awarding treble damages. See PacifiCare Health Systems, Inc. v. Book, 538 U.S. 401, 406-07, 123 S.Ct. 1531, 1535-36, 155 L.Ed.2d 578 (2003). The Supreme Court compelled arbitration, stating that

we should not, on the basis of "mere speculation" that an arbitrator might interpret these ambiguous agreements in a manner that casts their enforceability into doubt, take upon ourselves the authority to decide the antecedent question of how the ambiguity is to be resolved. In short, since we do not know how the arbitrator will construe the remedial limitations, the questions whether they render the parties' agreements unenforceable and whether it is for courts or arbitrators to decide enforceability in the first instance are unusually abstract [and, therefore,] the proper course is to compel arbitration. Id.

Fernandez, 268 F.Supp.2d at 1368-69. See also Curry v. MidAmerica Care Foundation, No. TH02-0053-CT/H, 2002 WL 1821808 (S.D.Ind. June 4, 2002) (compelling arbitration and construing arbitration agreement as allowing the arbitrator to award fees where allowed by statute); Large v. Conseco Finance Servicing Corp., 292 F.3d 49 (1st Cir.2002)(compelling arbitration where arbitration clause gave arbitrators the discretion to award costs and fees); DeGroff v. MascoTech Forming Technologies, Inc., 179 F.Supp.2d 896 (N.D.Ind.2001)(recognizing strong policy favoring enforcement of arbitration agreements and holding that discretionary fee provision did not preclude fees or void agreement). See also Royal Caribbean Cruises, Ltd. v. Universal Employment Agency, 664 So.2d 1107, 1108 (Fla. 3d DCA 1995)(recognizing "that arbitration clauses... are to be given the broadest possible interpretation to accomplish the salutary purpose of resolving controversies out of court.").

On the other hand, neither of the appellee's contrary arguments are well taken. Specifically, Mayard-Paul is not controlling because the arbitration clause in that case specifically forbade an award of attorney's fees, thus rendering the conflict between the clause and the Federal Arbitration Act on the one hand and section 627.428(1), direct and inescapable. Secondly, the claim that PacifiCare applies only to the arbitrator's resolution of ambiguous provisions in the agreement is belied by the authorities, which squarely hold otherwise. See Discount Trophy & Co.v. Plastic Dress-Up Co., No. Civ. 3:03CV2167(MRK), 2004 WL 350477, at *6 n. 10, (D.Conn. Feb.19, 2004) ("[Ambiguity or lack of clarity in the arbitration clause] is not the point of [PacifiCare and Vimar]. Instead, each decision recognizes that when it is unclear whether the arbitrator will rule in a way that (in those cases) would be contrary to federal law, the FAA requires the Court to enforce the arbitration clause, and leave that decision in the first instance to the arbitrator."); Bailey v. Ameriquest Mortgage Co., 346 F.3d 821, 823-24 (8th Cir.2003)("In PacifiCare ... where plaintiffs alleged that the limited remedies in the agreement to arbitrate were inconsistent with their federal statutory rights, the Court held that it was proper to compel arbitration because `we do not know how the arbitrator will construe the remedial limitations.' ... When an agreement to arbitrate encompasses statutory claims, the arbitrator has the authority to enforce substantive statutory rights, even if those rights are in conflict with contractual limitations in the agreement that would otherwise apply.... [T]he extent of an arbitrator's procedural and remedial authority are issues for the arbitrator to resolve in the first instance."); Ciago v. Ameriquest Mtg. Co., 295 F.Supp.2d 324, 333 (S.D.N.Y.2003)("`[A]rbitrators are perfectly capable of protecting statutory rights when the parties have conferred the authority to decide statutory claims.'")(quoting Bailey, 346 F.3d at 823).⁴

II.

In a fall-back, right-for-the-wrong-reason argument, the appellee also claims that the arbitration clause is unenforceable because of its preclusion of an award of punitive damages. The McCarran-Ferguson Act limits reverse preemption, however, only to laws "enacted by any State." 15 U.S.C. § 1012. In this case, as in American Pioneer Life Insurance Co. v. Gorin, 829 So.2d 238, 238 (Fla. 3d DCA 2002), the plaintiff has ...