State Bd. of Admin. v. Burns

• Citation: 70 So.3d 678
• Decision Date: 05 October 2011
• Docket Number: No. 1D10–6572.,1D10–6572.
• Court: Florida District Court of Appeals
• Parties: STATE BOARD OF ADMINISTRATION, Appellant,v.Guy M. BURNS; Johnson, Pope, Bokor, Ruppel & Burns, LLP fka Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P. A.; Thomas R. Grady; and Thomas R. Grady, P.A., Grady & Associates, L.P.A., Appellees.

70 So.3d 678

STATE BOARD OF ADMINISTRATION, Appellant,

v.Guy M. BURNS; Johnson, Pope, Bokor, Ruppel & Burns, LLP fka Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P. A.; Thomas R. Grady; and Thomas R. Grady, P.A., Grady & Associates, L.P.A., Appellees.

No. 1D10–6572.

District Court of Appeal of Florida, First District.

Aug. 23, 2011.Rehearing Denied Oct. 5, 2011.

Pamela Jo Bondi, Attorney General, and James A. Peters, Special Counsel, Office of Attorney General, Tallahassee; and E. Lamar Taylor, Deputy General Counsel, State Board of Administration, Tallahassee, for Appellant.Richard Doran and Jason Gonzalez of Ausley & McMullen, Tallahassee, and Jonathan S. Coleman of Johnson, Pope, Bokor, Ruppel & Burns, LLP, Tampa, for Appellees.PER CURIAM.

The State Board of Administration (SBA) challenges an order compelling arbitration pursuant to a contingency fee agreement it entered into with Appellees (hereafter “the law firms”). SBA contends that the parties did not agree to arbitrate the law firms' entitlement to compensation under the agreement. We agree and reverse.

SBA employed Alliance Capital Management (Alliance) as an investment manager to invest the assets of the Florida Retirement System Trust Fund. After Alliance purchased Enron securities which resulted in losses to the Trust Fund, SBA retained the services of the law firms to prosecute its legal claims against Alliance. The parties entered into a contingency fee agreement which provided that the law firms' compensation was “contingent upon a successful result against Alliance through either settlement or judgment.” The law firms' compensation—which was defined in the agreement to include “fees, costs and expenses”—was to be paid “from the proceeds of a settlement or judgment in the Action in favor of [SBA],” with the costs and expenses paid from the gross proceeds and the attorney's fees paid from the net proceeds after costs and expenses.

The jury in the Alliance action found in favor of Alliance, and against SBA, on all claims, including Alliance's counterclaim for unpaid management fees. A final judgment was entered against SBA awarding Alliance $1,113,445 on its counterclaim. After the jury returned its verdict, the law firms presented an invoice to SBA for their costs in the Alliance litigation. The law firms' claim was premised on SBA having obtained a benefit from Alliance through an agreement that SBA negotiated with Alliance during trial without the knowledge of the law firms. The law firms claimed that, as a result of this agreement, ¹ SBA recovered $1,113,445 plus statutory interest (for a total of $1,381,465) in “settlement proceeds” from which they were entitled to compensation under their agreement with SBA. SBA denied the law firms' demand for payment, explaining that “[t]here is nothing in ... our agreement that substantiates your entitlement to reimbursement of costs, expenses or time in light of the verdict reached in the case.” (emphasis added).

Approximately five years later, the law firms initiated this action by filing a petition with the trial court to compel SBA to participate in arbitration or, alternatively, to pay damages for breach of contract based on SBA's failure to pay the compensation owed to the law firms for the Alliance matter. The law firms also filed a separate motion to compel arbitration. SBA countered with a motion for summary judgment, arguing that arbitration was not required because the arbitration provision in the parties' contingency fee agreement was binding only on the law firms and because the arbitration provision applied only to disputes over the amount of fee, not the law firms' entitlement to a fee. SBA further argued that because it did not prevail in the underlying Alliance litigation, the law firms were not entitled to any compensation under the parties' agreement.

The trial court granted the law firms' motion to compel arbitration. The court reasoned that, under the parties' agreement, “any dispute over the amount of compensation due under the contract constitutes an arbitrable issue” and that an arbitrable issue exists between the parties because “SBA disputes that it owes any fee to [the law firms].” ² The trial court rejected SBA's argument that the arbitration provision was binding only on the law firms and that it could “opt out” of arbitration even if an arbitrable issue exists. ³ SBA timely appealed the trial court's order to this court, as allowed by Florida Rule of Appellate Procedure 9.130(a)(3)(C)(iv).

In ruling on a motion to compel arbitration, the trial court must consider “(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitrate was waived.” Seifert v. U.S. Home Corp., 750 So.2d 633, 636 (Fla.1999). The parties agree that only the second element is at issue in this case.

The determination of whether a particular dispute is subject to arbitration is a matter of contract interpretation that is reviewed de novo. See O'Keefe Architects, Inc. v. CED Constr. Partners, Ltd., 944 So.2d 181, 185 (Fla.2006).

Although public policy favors arbitration and all doubts as to the scope of...