Cassedy v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

• Decision Date: 27 January 2000
• Docket Number: No. 1D98-2606.,1D98-2606.
• Citation: 751 So.2d 143
• Parties: Marshall R. CASSEDY, Jr., Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Appellee.
• Court: Florida District Court of Appeals

751 So.2d 143

Marshall R. CASSEDY, Jr., Appellant, v. MERRILL LYNCH, PIERCE, FENNER & SMITH, INC., Appellee.

No. 1D98-2606.

District Court of Appeal of Florida, First District.

January 27, 2000.

Ben H. Wilkinson and Cynthia S. Tunnicliff, of Pennington, Moore, Wilkinson, Bell & Dunbar, P.A., Tallahassee, and Thomas D. Birge and Cathryn B. Mayers, of Birge & Mayers, P.C., Denver, Colorado, for Appellant.

Nicholas V. Pulignano, Jr., of Marks, Gray, Conroy & Gibbs, P.A., Jacksonville, for Appellee.

KAHN, J.

This case involves an appeal and cross-appeal following the circuit court's review of an arbitration award entered in favor of appellant, Marshall R. Cassedy, Jr. We affirm, without discussion, the points raised on cross-appeal concerning the circuit court's denial of a complaint to vacate the arbitration award filed by appellee and cross-appellant, Merrill Lynch, Pierce, Fenner & Smith, Incorporated (Merrill Lynch). For the reasons discussed below, we reverse the circuit court's order setting aside the arbitration panel's award of attorney's fees to Cassedy.

PROCEDURAL HISTORY

Merrill Lynch terminated Cassedy in February 1993. The parties agreed to submit the controversy surrounding Cassedy's termination to arbitration because of Merrill Lynch's membership in the National Association of Securities Dealers, Incorporated (NASD), a voluntary self-regulatory organization. Accordingly, in January 1995, Cassedy filed a Statement of Claim against Merrill Lynch with the NASD. In his Statement of Claim, Cassedy sought compensatory and consequential damages, payment of compensation benefits, and punitive damages. Cassedy included a separate claim for attorney's fees pursuant to Florida law. At the same time, Cassedy also filed a Uniform Submission Agreement, in which he agreed to submit "the attached statement of claim, answers, cross claims and all related counterclaims and/or third party claims which may be asserted, to arbitration...."

Merrill Lynch filed a Statement of Answer with the NASD. This answer did not specifically address Cassedy's claim for attorney's fees, although Merrill Lynch indicated that it "denies each and every allegation of the Statement of Claim...." Merrill Lynch also filed a Uniform Submission Agreement which it agreed to submit "the present matter in controversy, as set forth in the attached statement of claim, answers and all related counterclaims and/or third party claims which may be asserted, to arbitration...."

On March 6, 1996, Cassedy filed an Amended Statement of Claim, which deleted one sentence concerning damages. Merrill Lynch then filed a Motion to Dismiss Amended Statement of Claim and Memorandum of Law. In this motion, among other things, Merrill Lynch objected to arbitration of Cassedy's attorney's fee claim under section 448.08. Specifically, Merrill Lynch asserted that "when `unpaid wages' are sought in an arbitration, § 448.08 does not apply." In support of this assertion, Merrill Lynch cited Buena Vista Construction Co. v. Carpenters Local Union, 472 So.2d 1356 (Fla. 5th DCA 1985), and McDaniel v. Berhalter, 405 So.2d 1027 (Fla. 4th DCA 1981). Merrill Lynch's motion was apparently denied in its entirety. During the arbitration proceedings, Merrill Lynch repeatedly argued that the panel should deny Cassedy's claim for attorney's fees under section 448.08 because that statute did not apply to this arbitration. Merrill Lynch also requested that the panel award it attorney's fees.

In a decision issued July 7, 1997, a panel of three arbitrators found Merrill Lynch liable and awarded Cassedy over $300,000 in compensatory damages and over $160,000 in attorney's fees pursuant to section 448.08, Florida Statutes. The panel denied Cassedy's requests for punitive and consequential damages. The panel also denied Merrill Lynch's request for attorney's fees.

Cassedy subsequently filed a motion to confirm the arbitration award in the Circuit Court for Leon County. Merrill Lynch then filed a motion to vacate the arbitration award in the circuit court, arguing, among other things, that an award of attorney's fees for arbitration is a matter for judicial determination under section 682.11, Florida Statutes, unless waived. Section 682.11, Florida Statutes (1993), is part of the Florida Arbitration Code and provides that "[u]nless otherwise provided in the agreement or provision for arbitration, the arbitrators' and umpire's expenses and fees, together with other expenses, not including counsel fees, incurred in the conduct of the arbitration, shall be paid as provided in the award."

In its complaint and during the hearings before the circuit court, Merrill Lynch argued that it had asserted throughout the arbitration proceedings that section 448.08 did not apply to arbitration and, as set forth in the brief to this court, "consistently took the position that the issue of attorney fees was not properly before the arbitration panel and specifically cited to the arbitration panel § 682.11, Fla. Stat., which expressly removes attorney fees from the range of arbitrable issues." Merrill Lynch maintained that the arbitration panel lacked jurisdiction to award attorney's fees absent a voluntary agreement by the parties. See Turnberry Assocs. v. Service Station Aid, Inc., 651 So.2d 1173 (Fla.1995)

.

On June 10, 1998, the circuit court entered an Order on Attorney Fees. In this order, the court cited Turnberry and explained that the arbitration panel "has no authority to award fees absent an express waiver...." The court then made the following findings:

In reviewing the pleadings filed by the Plaintiff and the transcript of the arbitration proceeding, this Court can only find there may have been an implied waiver as to the attorney's fee issue and not an express waiver, and further the Plaintiff specifically objected, on the record, as to the issue of attorney's fees....

The court therefore concluded that Merrill Lynch did not expressly waive its right to have the attorney's fee issue decided in court pursuant to section 682.11 and, thus, the arbitration panel had no authority to consider that issue. Accordingly, the court set aside the panel's award of attorney's fees and directed that the issue of entitlement to and amount of attorney's fees be determined by the circuit court.

Cassedy has appealed the order on attorney's fees and raises two points. First, Cassedy argues that the Federal Arbitration Act (FAA) preempts section 682.11. Second, Cassedy argues that the circuit court erred in finding no express waiver occurred regarding the right to have a court determine the attorney's fee issue under section 682.11. We disagree with the first point, but reverse on the second point.

PREEMPTION OF SECTION 682.11

Another district court of appeal has rejected the preemption argument Cassedy raises as his first point. See Lee v. Smith Barney, Harris Upham & Co., 626 So.2d 969 (Fla. 2d DCA 1993)

. "The Federal Arbitration Act was enacted pursuant to the commerce clause of the United States Constitution and supersedes inconsistent state law." Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Melamed, 405 So.2d 790, 792 (Fla. 4th DCA 1981),

approved, 476 So.2d 140 (Fla.1985). In Melamed, the Fourth District explained that, where the Federal Arbitration Act conflicts with Florida law, the federal law controls:

The supremacy clause requires us to resolve any inconsistency between the two laws in favor of the federally created right, and to subordinate Florida law to the supreme law of the land. We therefore hold that Florida courts must recognize and apply the Federal Arbitration Act and that arbitration agreements which are valid and enforceable under the federal law are also valid and enforceable in Florida courts.

Melamed, 405 So.2d at 792. See Powertel, Inc. v. Bexley, 743 So.2d 570, 573 (Fla. 1st DCA 1999)

(explaining that "[a]n arbitration clause in a contract involving interstate commerce is subject to the Federal Arbitration Act" and noting that the Florida Arbitration Code "applies in such cases only to the extent that it is not in conflict with federal law").

In Lee, the Second District considered and rejected the argument that the FAA preempted section 682.11, Florida Statutes. 626 So.2d at 970-71. A panel of arbitrators denied all of the Lees' claims and ordered that the parties "bear their own costs and expenses, including attorney's fees." Id. at 970. Smith Barney then sought a modification of the arbitration order in the circuit court, arguing that the arbitrators had no power under Florida law to decide entitlement to attorney's fees, and filed a motion requesting fees. Id. The circuit court agreed and granted fees to Smith Barney. Id. On appeal, the Lees argued that "the Federal Arbitration Act (FAA) grants authority to arbitrators to determine entitlement to attorney fees and that the FAA's provisions supersede or preempt the provisions of the Florida Arbitration Code, which removes attorney's fee questions from the range of arbitrable issues." Id. The Second District recognized "the FAA's arguable preeminence over Florida's arbitration code in circumstances where, as here, interstate commerce is involved," but explained that "`the proper approach is to reconcile `the operation of both statutory schemes with one another rather than holding one completely ousted.''" Id. (quoting Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Ware, 414 U.S. 117, 128, 94 S.Ct. 383, 38 L.Ed.2d 348 (1973) (quoting Silver v. New York Stock Exchange, 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389 (1963))). The court rejected the preemption argument because Florida's provision concerning attorney's fees in arbitration could be reconciled with the FAA and the parties in the case had not agreed to submit the fee issue to arbitration:

The Florida Legislature has expressly provided that attorney's fees for time spent in arbitration are recoverable but only in the trial court upon a motion for confirmation

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