DANIEL S. NEWMAN, etc. v. ERNST & YOUNG, LLP, 16-2162

Receiver Daniel Newman, appointed in SEC action as receiver for Founding Partners funds, sued auditor Ernst & Young (E&Y) alleging malpractice, negligent misrepresentation, fraud, breach of fiduciary duty, and related aiding-and-abetting claims based on audits for 2000–2007.
The complaint asserts investors assigned their claims to the receiver; any recovery would benefit the funds/receivership.
E&Y moved to compel arbitration under engagement agreements between E&Y and the funds that contained arbitration and delegation clauses.
E&Y argued the delegation clause requires arbitrators (not courts) to decide arbitrability and that assigned investor claims are derivative of the funds’ claims and thus subject to arbitration.
The trial court granted E&Y’s revised motion to compel arbitration; Newman appealed the non-final order.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the delegation clause is enforceable and who decides arbitrability	Newman did not challenge the delegation clause’s validity but argued claims should not be arbitrated	E&Y argued the delegation clause delegates arbitrability to arbitrators and is controlling	Court held delegation clause controls; arbitrator decides arbitrability (court only reviews direct challenge to delegation clause)
Whether the investors’ assigned claims are subject to arbitration	Newman contended assigned investor claims are not arbitrable as individual/direct investor claims	E&Y contended investor claims were derivative of the funds’ injuries and thus covered by arbitration agreements between E&Y and the funds	Court held the investor claims are derivative (damages flowed to funds) and affirmed arbitration of those assigned claims

Angels Senior Living at Connerton Ct., LLC v. Gundry, 210 So. 3d 257 (Fla. 2d DCA 2017) (delegation clauses require courts to treat arbitrability as delegated absent a direct challenge)
Parnell v. CashCall, Inc., 804 F.3d 1142 (11th Cir. 2015) (courts should enforce delegation clauses and defer arbitrability questions to arbitrators)
Salit v. Ruden, McClosky, Smith, Schuster & Russell, P.A., 742 So. 2d 381 (Fla. 4th DCA 1999) (distinguishing direct individual claims from derivative claims)
Fort Pierce Corp. v. Ivey, 671 So. 2d 206 (Fla. 4th DCA 1996) (definition and characteristics of derivative suits)
Strazzulla v. Riverside Banking Co., 175 So. 3d 879 (Fla. 4th DCA 2015) (derivative vs. direct claim analysis)
KPMG, LLP v. Cocchi, 88 So. 3d 327 (Fla. 4th DCA 2012) (analysis that some investor claims may be direct while others are derivative)
Tooley v. Davidson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (two-part test for direct vs. derivative claims)