Oppenheimer & Co., Inc. v. Young

• Decision Date: 27 September 1984
• Docket Number: No. 64140,64140
• Citation: 456 So.2d 1175
• Court: Florida Supreme Court
• Parties: Blue Sky L. Rep. P 72,108 OPPENHEIMER & CO., INC., Petitioner, v. Marcia YOUNG, Respondent.

Page 1175

456 So.2d 1175

Blue Sky L. Rep. P 72,108

OPPENHEIMER & CO., INC., Petitioner, v. Marcia YOUNG, Respondent.

No. 64140.

Supreme Court of Florida.

Sept. 27, 1984.

Stanley A. Beiley, Richard E. Brodsky and David S. Garbett of Paul, Landy, Beiley, & Harper, P.A., Miami, for petitioner.

Mercedes C. Busto of Bailey & Dawes, Miami, for respondent.

SHAW, Justice.

This is a petition to review Young v. Oppenheimer & Co., 434 So.2d 369 (Fla. 3d DCA 1983), on the ground it conflicts with Raymond, James & Associates v. Maves, 384 So.2d 716 (Fla. 2d DCA 1980), and Merrill Lynch Pierce Fenner & Smith, Inc. v. Melamed, 405 So.2d 790 (Fla. 4th DCA 1981). We have jurisdiction. Art. V, § 3(b)(3), Fla. Const.

Respondent Young sued petitioner Oppenheimer claiming Oppenheimer violated the Florida Securities Act, chapter 517, Florida Statutes (1981), and committed common law fraud, negligence, and breach of fiduciary duty in handling Young's brokerage account. The trial court granted Oppenheimer's motion to compel arbitration on the basis of an agreement between the parties requiring arbitration of disputes. In doing so, the trial court relied on Melamed for the proposition that the Federal Arbitration Act compelled arbitration. The district court granted a writ of certiorari and quashed the trial court's order on the basis that the Florida Securities Act extends the same civil remedies as the laws of the United States for the purchasers of securities in interstate commerce and that United States law precludes the enforcement of an arbitration agreement when a dispute concerns securities in interstate commerce. Shearson, Hammill & Co. v. Vouis, 247 So.2d 733 (Fla. 3d DCA 1971).

Petitioner first urges that section 517.241, Florida Statutes (1981) does not contain an express prohibition against arbitration of disputes arising under the Florida Securities Act and that our decision is controlled by section 682.03, Florida Statutes (1981), which provides that arbitration agreements are valid, irrevocable, and enforceable. In support, petitioner points out that there is a strong public policy favoring arbitration as an alternative to judicial litigation of disputes. Petitioner concedes that the arbitration agreement would not be enforceable under federal securities laws but nevertheless urges that it should be enforced under state law. ¹ We agree with much of petitioner's argument but not its conclusion. Arbitration agreements are valid, irrevocable, and enforceable and public policy favors arbitration as an alternative to litigation. Nevertheless, we are persuaded that it was the intent of the legislature, in enacting the Florida Securities Act, to rely on federal laws and enforcement efforts in the securities field and to cooperate with those efforts in formulating Florida law. Prior to the enactment by Congress in May 1933 of the Securities Act of 1933, regulation of securities was the responsibility of the states and all states, except Nevada, had laws governing securities transactions. ² Section 18 of the Securities Act preserved the role of the states in regulating securities transactions. The Florida Legislature reacted almost immediately to the entry of the federal government into the securities field by enacting chapter 16174, Laws of Florida (1933). Sections 4, 5, and 6 of chapter 16174 are pertinent to our inquiry. Section 4 ³ provided not only for cooperation with federal authorities regulating securities transactions but, to the degree possible under state law, provided for the actual application of federal laws and regulations to the sale of securities intrastate. Section 5 ⁴ granted to purchasers of securities the same civil remedies provided by laws of the United States for purchasers of securities under such federal laws. Section 6 ⁵ granted jurisdiction to the courts of this state to hear civil suits concerning securities violations of federal laws to the degree the courts had jurisdiction to hear civil suits concerning securities violations of the laws of Florida. It is clear from the above that the legislature intended that Florida securities laws be hand-in-glove with federal securities laws and that Florida purchasers of securities be granted the full range of civil remedies offered by both Florida and federal securities laws. It is a well established rule of statutory construction that statutes or parts of statutes borrowed from other jurisdictions will normally be given the same construction in Florida courts as the prototype statute is given by courts in other jurisdictions. Flammer v. Patton, 245 So.2d 854 (Fla.1971). This rule is, of course, not binding and is subordinate to the cardinal principle that legislative intent is the polestar of statutory construction. Tyson v. Lanier, 156 So.2d 833 (Fla.1963). Here, however, the rule is particularly apt because we have a clear statement from the legislative text that the legislature intended to maintain close consonance with federal legislation. To our mind, this specific legislative intent in a particular field of law carries more weight than the general declaration in section 682.03 that arbitration agreements are valid, irrevocable, and enforceable. Thus, we agree with the district court that we should follow Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953) in holding that an arbitration agreement concerning disputes in securities is unenforceable. We are also influenced by the very practical consideration that holding otherwise would waste judicial resources. Normally, both federal and state causes of action based on security violations in interstate commerce may be heard in either federal or state courts. This is the most economical disposition available and serves both federal and state interests. The adoption of a rule that the state cause of action is subject to arbitration, while the federal cause of action is not, would lead to an uneconomical bifurcation of proceedings. ⁶

Petitioner next urges that the Federal Arbitration Act (FAA) preempts the question of arbitration of disputes concerning interstate commerce and that the supremacy clause mandates that we enforce the arbitration agreement. In support, petitioner relies most heavily on Southland Corp. v. Keating, 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984), but also cites Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974), Kroog v. Mait, 712 F.2d 1148 (7th Cir.1983), cert. denied, 465 U.S. 1007, 104 S.Ct. 1001, 79 L.Ed.2d 233 (1984), Melamed, and Maves, for the same proposition. In Keating v. Superior Court of Alameda County, 31 Cal.3d 584, 183 Cal.Rptr. 360, 645 P.2d 1192 (1982), the California Supreme Court held that claims asserted under the state's Franchise Investment Law were not arbitrable and that the state law did not contravene the provisions of the FAA calling for the enforcement of arbitration agreements when the dispute involved interstate commerce. In so holding, the court noted that "California's policy of protecting judicial remedies ... was patterned after, and consistent with, federal policy in the analogous area of securities investment." Id. at 1202-03. In reversing the California Supreme Court, the Southland Court held that the California law was contrary to the FAA and thus violated the supremacy clause. By footnote, the Court rejected the analogy drawn with the federal securities law and the reliance on Wilko:

The question in Wilko was not whether a state legislature could create an exception to § 2 of the Arbitration Act, but rather whether Congress, in subsequently enacting the Securities Act, had in fact created such an exception.

Southland, 104 S.Ct. at 864 n. 11. Petitioner urges that Southland is directly on point and dispositive of the issue before us because, in petitioner's view, Southland holds that a state may not contravene the provisions of the FAA. Although it is substance and not form which controls the question of what constitutes a "security," typically, a franchise is not considered to be a security within the meaning of federal securities law. Nash & Associates, Inc. v. Lum's, Inc., 484 F.2d 392 (6th Cir.1973). In our view, the Southland court simply recognized that a franchise is not typically a security and rejected the attempted analogy between franchise regulation and securities regulation. The court did not reject, or even address, the question of whether the Wilko exemption from the FAA extended to state securities laws. It is hazardous to draw conclusions from nondispositive footnotes, but the rejection of the analogy at least suggests that had the analogy been accepted or had the California law concerned securities regulations, the Wilko exemption would have extended to the state law. For our purposes, it is enough to say that Southland is off point.

Petitioner also relies on Scherk, which dealt with an agreement between United States and foreign citizens to resolve any disputes in an international forum. On its facts, Scherk offers no guidance here. Scherk appears to rest on the pragmatic consideration that there is no international supremacy clause to resolve disputes about forum selection.

Petitioner also relies on Kroog. We agree that Kroog is on point but, for the reasons set forth herein, do not agree with the Kroog court.

Petitioner also relies on two Florida cases, Melamed and Maves. The issue in Melamed was whether the FAA superseded inconsistent provisions of the Florida arbitration code, sections 682.01 to 682.22, Florida Statutes (1979), which provided that an arbitration agreement was not enforceable if it incorporated the laws of another state. Although the facts of the case indicate that an interstate securities transaction was involved, the court did not address the issue of whether Wilko and Florida securities law controlled. We agree...