KPMG LLP v. Cocchi
2010 Fla. App. LEXIS 19466
Fla. Dist. Ct. App.2010Background
- KPMG appeals two non-final orders denying arbitration and forum non conveniens, consolidated for decision.
- Plaintiffs, nineteen individuals/entities (Florida residents largely), invested in Rye Funds that lost money in Bernard Madoff’s Ponzi scheme.
- Rye Funds were managed by Tremont Group Holding, Inc. and Tremont Partners, Inc.; KPMG audited the funds’ financial statements.
- Plaintiffs alleged direct claims for negligent misrepresentation, FDUTPA, professional malpractice, and aiding and abetting a fiduciary breach, all based on KPMG’s audits.
- KPMG moved to compel arbitration under an audit services agreement with Tremont, claiming the arbitration clause covers plaintiffs’ claims, though none assented to the clause.
- KPMG moved to dismiss on forum non conveniens; the trial court denied both motions and the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitration enforceability of direct claims | Plaintiffs’ claims are direct, not derivative, and not bound by Tremont’s arbitration clause. | Arbitration clause covers disputes arising from KPMG’s services for Tremont and benefits plaintiffs, despite lack of assent. | Arbitration not required for direct claims; upheld the denial. |
| Forum non conveniens dismissal standard | Residents’ forum should be retained; strong private/public factors weigh against dismissal. | New York is a convenient forum given where work occurred and witnesses are located. | Motion insufficient; strong presumption favors Florida forum; affirmed denial. |
Key Cases Cited
- Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (Del. 2004) (direct vs. derivative test for stockholder/limited partner claims)
- Anglo American Sec. Fund, L.P. v. S.R. Global Int'l Fund, L.P., 829 A.2d 143 (Del. Ch. 2003) (direct vs. derivative analysis for claims by limited partners)
- Stephenson v. Citco Group, Ltd., 700 F. Supp. 2d 599 (S.D.N.Y. 2010) (negligent misrepresentation may be a direct claim)
- Kinney System, Inc. v. Continental Insurance Co., 674 So.2d 86 (Fla. 1996) (strong presumption in favor of plaintiff’s forum choice in forum non conveniens)
- Ciba-Geigy Ltd. v. Fish Peddler, Inc., 691 So.2d 1111 (Fla. 4th DCA 1997) (strong presumption favoring resident forum in Florida)
- Bridgestone/Firestone N. Am. Tire, LLC v. Garcia, 991 So.2d 912 (Fla. 4th DCA 2008) (burden on movant to persuade private/public factors)
- Deluca v. Hislop, 868 So.2d 1254 (Fla. 4th DCA 2004) (analysis of forum non conveniens factors in Florida)