KPMG LLP v. Cocchi
| Decision Date | 15 February 2011 |
| Docket Number | Nos. 4D09-4867, 4D10-988.,s. 4D09-4867, 4D10-988. |
| Parties | KPMG LLP, Appellant, v. Robert COCCHI, Penny Ellen Fromm, Pef Associates, Inc., Brian Gaines, John Johnson, Dr. David Schwartzwald, Rand Schwartzwald, Dr. Herbert Silverberg, John Silverberg, Dr. Jerry Weiss, Donna Weiss, The Norman Shulevitz Foundation, Inc., RM Management, LLC, Sande Wische, Carol Wische, Paula Zitrin, Dr. Jaron Zitrin, Rachel Zitrin, Dr. Roger Zitrin, Tremont Group Holdings, Inc., Tremont Partners, Inc., Rye Select Broad Market Fund, LP, Rye Select Broad Market Prime Fund, LP, Rye Select Broad Market XL Fund, LP, Appellees. KPMG LLP, Appellant, v. Robert Cocchi, Penny Ellen Fromm, Pef Associates, Inc., Brian Gaines, John Johnson, Dr. David Schwartzwald, Dr. Herbert Silverberg, Dr. Jerry Weiss, Donna Weiss, The Norman Shulevitz Foundation, Inc., RM Management, LLC, Sande Wische, Carol Wische, Paula Zitrin, Dr. Jaron Zitrin, Rachel Zitrin, Dr. Roger Zitrin, Tremont Group Holdings, Inc., Tremont Partners, Inc., Rye Select Broad Market Fund, LP, Rye Select Broad Market Prime Fund, LP, Rye Select Broad Market XL Fund, LP, Appellees. |
| Court | Florida District Court of Appeals |
Edward A. Marod of Edward A. Marod, P.A., West Palm Beach, Gregory G. Ballard of Howrey LLP, New York, NY, and Williams & Connolly LLP, Washington, D.C., for appellant.
Marshall A. Adams and Richard A. Serafini of Adams, Cassidy & Phillippi, Fort Lauderdale, Jeff I. Ross of Ross & Orenstein LLC, James L. Volling, Michael F. Cockson and Liz Shields Keating of Faegre & Benson LLP, Minneapolis, Minnesota, and Gerald F. Richman and John R. Whittles of Richman Greer, P.A., West Palm Beach, for appellees Robert Cocchi, Penni Ellen Fromm, PEF Associates, Inc., Brian Gaines, John Johnson, Dr. Davis Schwartzwald, Rand Schwartzwald, Dr. Herbert Silverberg, John Silverberg, Dr. Jerry Weiss, Donna Weiss, The Norman Shulevitz Foundation, Inc., RM Management, LLC, Sande Wische, Carol Wische, Paula Zitrin, Dr. Jaron Zitron, Rachel Zitrin, and Dr. Roger Zitrin.
KPMG appeals two non-final appealable orders. Although filed as separate appeals, we consolidate them for purposes of this opinion. The plaintiffs have filed suit against KPMG and others for damages as a result of losses of their investment in several partnerships. KPMG audited financial statements of partnerships in which the plaintiffs invested. Although the plaintiffs assert multiple causes of action against KPMG, the plaintiffs essentially claim that KPMG failed to use proper auditing standards, and that they relied on KPMG's auditing statements to their detriment. In the first order, the trial court denied KPMG's motion to compel arbitration of the dispute. In the second, the trial court denied KPMG's motion to dismiss on forum non conveniens grounds. We affirm the order denying the motion to compel arbitration, because the arbitral agreement upon which KPMG relied would not apply to the direct claims made by the individual plaintiffs. We affirm the order denying the motion to dismiss for forum non conveniens, because neither the motion nor its attached affidavit, nor the argument at hearing, was legally sufficient to overcome the strong presumption in favor of the resident plaintiffs' choice of forum.
The plaintiffs are nineteen individuals and entities, most of whom are Florida residents, who bought a limited partnership interest in one of three limited partnerships—referred to collectively here as the "Rye Funds." 1 The limited partnerships invested with Bernard Madoff in his infamous Ponzi scheme and lost millions of dollars. The limited partnerships were managed by Tremont Group Holding, Inc., and Tremont Partners, Inc. The plaintiffs sued the limited partnerships and the Tremont defendants, together with its auditing firm KPMG. As to KPMG, the plaintiffs alleged causes of action for negligent misrepresentation, violation of the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"), professional malpractice, and aiding and abetting a breach of fiduciary duty. Each cause of action is grounded in the alleged failure of KPMG to use proper auditing standards on the financial statements on which the plaintiffs relied in making and maintaining their investments in the partnerships. These resultedin substantial misrepresentations of the financial health of the partnerships, causing the plaintiffs to lose all of their investments.
KPMG first moved to compel arbitration, basing its claim on its audit services agreement with the Tremont Group Holding, Inc., which contained an arbitration clause. That clause purports to require arbitration and/or mediation of all disputes arising from the services performed by KPMG for the Tremont defendants under the agreement, "including any dispute or claim involving any person or entity for whose benefit the services in question are or were provided." None of the plaintiffs, however, expressly assented in any fashion to this agreement or the arbitration provision. Instead, KPMG claimed that the plaintiffs' claims were derivative and arose from the audit services that KPMG performed under the contract. Therefore, according to KPMG, the arbitration clause should be enforced as to the plaintiffs' claims.
Both parties agree that Delaware law applies to the resolution of this issue, as the Rye Funds and the Tremont defendants were all Delaware partnerships. In Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1033 (Del.2004), the Delaware Supreme Court established a test when analyzing whether an action by stockholders (or limited partners) was direct or derivative of the corporation/general partnership's cause of action. The questions which must be asked are: 1) who suffered the harm, the corporation or the stockholders individually, and 2) who received the benefit of the recovery or remedy? Because the claims of negligent misrepresentation and violation of FDUTPA...
To continue reading
Request your trial
- Askenazy v. KPMG LLP
- KPMG LLP v. Cocchi
- Newman v. Ernst & Young, LLP
- KPMG LLP v. Cocchi