Petition for Writ of Certiorari — Prudential-Bache Securities, Inc. v. Finn

& 3 = y's 4 v4 Supreme Court, U.S.

FILED

AUG 10 998

JOSEPH & SPANIOL, JR.

NO. CLERK

in the

Supreme Court

of the

United States

Octo Term 1988

ce

.S)

PBUDENDIAL- BACHE SECURITIES INC.,

eye” . Petitioner,

US.

J. RICHARD FINN and REGINA R. FINN,

Respondents.

PETITION FCR WRIT OF CERTIORARI

TO THE FOURTH DISTRICT COURT OF APPEAL

FOR THE STATE OF FLORIDA

Curtis Carlson

Counsel of Record

and

Lloyd R. Schwed

City National Bank Building

25 West Flagler Street

Miami, Florida 33130

Telephone (305) 358-6550

QUESTION PRESENTED

Whether the state appellate court erred by creating a

substantive rule of law under the Federal Arbitration Act

that is in direct conflict with federal law, where this Court

has held that the FAA creates a body of federal substantive

law of arbitrability, which is applicable in both state and

federal courts and which preempts state law to the contrary.

Southland Corp. v. Keating, 465 U.S. 1 (1984); Moses H. Cone

Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1 (1983).

TABLE OF CONTENTS

PAGE

QUESTION PRESENTED 2.2... ccc cnc cecsices i

TABLE OF CATERERS 6c ene ccc evncscassans ii

TABLE OF AUTHORITIES. .........2cccceeees iv

OPTIONS TRAP occ cc cre ccunaccesasnenas 2

ETRE bocce ctascasnenpagaseskas eee 2

STATUTORY PROVISIONS INVOLVED ........ 2

STATEMENT OF CASE 2 wn ccccdscacccccvesees 2

REASONS FOR GRANTING WRIT ............. 5

THE STATE COURT’S DECISION REGARD-

ING WAIVER UNDER THE FEDERAL AR-

BITRATION ACT IS IN DIRECT CONFLICT

WITH SUPREME COURT PRECEDENT AND

THE MANDATE OF CONGRESS, AND

PRESENTS A QUESTION OF GREAT NA-

TIONAL IMPORTANCE

CORSCEA snk ceccavdnusvasceneusueaweens 10

CERTIFICATE OF SERVICE .........2.000080. 11

il

TABLE OF CONTENTS—(Continued)

APPENDICES

APPENDIX A— Order Staying Action and

Compelling Arbitration

APPENDIX B— Finn v. Prudential-Bache

Securities, Inc., 523 So.2d

617 (Fla. 4th DCA 1988)

APPENDIX C— Order Denying Petition for

Rehearing

APPENDIX D— Federal Arbitration Act 9

U.S.C. §2, 3 and 4.

lil

PAGE

a,

TABLE OF AUTHORITIES

Case Page

ATSA of California, Inc. v. Continental Ins. Co.,

$e Ff Fo & -pererrrrry 6

Benoay v. Prudential-Bache Securities, Inc.,

805 F.2d 1437 (11th Cir. 1986)....... ewes 6

Dean Witter Reynolds, Inc. v. Byrd,

470 US. 213, 105 S.Ct. 1238 (1985).......... 5

E.C. Ernst, Inc. v. Manhattan Construction

Co. of Texas,

599 F.2d 268, 269 (5th Cir. 1977) cert. denied,

434 U.S. 1067, 98 S.Ct. 1246 (1978).......... 7

Finn v. Prudential-Bache Securities, Inc.,

523 So.2d 617 (Fla. 4th DCA 1988) .......... passim

Fisher v. A.G. Becker Paribas, Inc.,

iO, { 5G. Ye SS . eee 6

Florida v. Meyers,

466 U.S. 380, 104 S.Ct. 1852 (1984).......... 8

Hobbie v. Unemployment Appeals Com’n of

Florida,

480 U.S. 136, 107 S.Ct. 1046 (1987).......... 8

In re Emergency Amendments To Rules, Etc.,

ee ec eee en

Co

Local 174, Teamsters, etc. v. Lucas Flour Co.,

369 U.S. 101, 82 S.Ct. 571 (1962)............ 8

Miller Brewing Co. v. Fort Worth Distributing Co.,

Tek Be GOO Geek Ge. FR oc bce csccscciae 6

iv

TABLE OF AUTHORITIES—(Continued)

Case Page

Mitsubishi Motors Corp. v. Soler Chrysler-

Plymouth,

473 U.S. 614, 105 S.Ct. 3346 (1985).......... 5

Moses H. Cone Memorial Hosp. v.

Mercury Constr. Corp.,

460 US. 1, 103 S.Ct. 927 (1983)............. 5,6

Ohio-Sealy Mattress Mfg. Co. v. Kaplan,

712 F.2d 270, 272 (7th Cir. 1983), cert. denied,

Ge We EE h0 0c kb 2 bab eaK cde nesacs 6

Perry v. Thomas,

eee) ee Pe eee 5, 8

Price v. Drexel Burnham Lambert, Inc.,

iB A Bi y Fo Fee 6

Prima Paint Corp. v. Flood & Conklin Mfg. Co.,

388 U.S. 395, 87 S.Ct. 1801 (1967)........... 5, 6

Shearson/American Express, Inc. v. McMahon,

US.__, 107 S.Ct. 2332 (1987).......... 5

Southland Corp. v. Keating,

465 U.S. 1, 104 S.Ct. 852 (1984)............. passim

Williams v. Florida,

399 U.S. 78, 90 S.Ct. 1893 (1970)............ 8

TABLE OF AUTHORITIES—(Continued)

OTHER AUTHORITIES Page

Article V, Section 3(b),

Florida Constitution (1980)... ..... 2... 6665665. 3

Federal Arbitration Act 9 U.S.C. §2, et seq....... passim

3B UBL. GIBBSITE 2c cccccccccccccsscscseccess 2,9

Fla.R.App.P. Rule 9.030(a) ....... 2... e eee nues 3

NO.

in the

Supreme Court

of the

United States

October Term 1988

PRUDENTIAL-BACHE SECURITIES INC.,

Petitioner,

US.

J. RICHARD FINN and REGINA R. FINN,

Respondents.

PETITION FOR WRIT OF CERTIORARI

TO THE FOURTH DISTRICT COURT OF APPEAL

FOR THE STATE OF FLORIDA

Prudential-Bache Securities Inc. (“Prudential-Bache’’)

petitions for a Writ of Certiorari to review the judgment of

the Fourth District Court of Appeal for the State of Florida.

*The parent company of Prudential-Bache Securities Inc. is the Prudential

Insurance Company of America.

OPINIONS BELOW

The order of the circuit court of Palm Beach County

staying action and compelling arbitration (App. A) is

unreported; the opinion of the court of appeal (App. B) is

reported at 523 So.2d 617; the order of the court of appeal

denying Prudential-Bache’s petition for rehearing (App. C)

is unreported.

JURISDICTION

Petitioner seeks review of the judgment of the state court

of appeal rendered on May 12, 1988. The opinion of the state

court of appeal was entered on February 24, 1988. The

petition for rehearing was denied on May 12, 1988. This court

has jurisdiction to issue the requested writ under 28 U.S.C.

§1257(3).

STATUTORY PROVISIONS INVOLVED

The relevant »rovisions of the Federal Arbitration Act

(“FAA”), 9 U.S. §2, 3 and 4 are reproduced at App. D.

STATEMENT OF CASE

A. Course of Proceedings and Disposition.

Prudential-Bache filed a motion to compel arbitration in

the Florida circuit court pursuant to the Federal Arbitration

Act. The trial court granted the motion, and the Finns

appealed to Florida’s Fourth District Court of Appeal.

The Fourth District Court reversed the order compelling

arbitration, ruling that Prudential-Bache waived its right

to arbitration under the FAA by taking inconsistent acts.

Finn v. Prudential-Bache Securities, Inc., 523 So.2d 617 (Fla.

4th DCA 1988) (“Finn”). The holding of the court is that

inconsistent acts, standing alone, constitute waiver under the

FAA and that no showing of prejudice is necessary.

Because the Finn decision directly conflicts with binding

precedent of the United States Supreme Court, Prudential-

Bache has filed a petition to invoke the discretionary

jurisdiction of the Florida Supreme Court in order to exhaust

its state-court remedies. However, Florida law does not

provide for discretionary jurisdiction in the state Supreme

Court on the basis of a conflict with federal law. Fla.R.App.P.

9.030(a). Accordingly, it is quite possible that the Fourth

District Court constitutes the “court of last resort” in Florida

for Prudential-Bache.'

Meanwhile, on remand, the state trial court has specially

set the case for jury trial in January 1989.

B. Statement of Facts.

The Finns signed four separate agreements to arbitrate

“any controversy” relating to their investment account at

Prudential-Bache. Nevertheless, when a controversy arose,

the Finns filed parallel lawsuits in state and federal court

against Prudential-Bache.

‘In 1980, Florida voters approved constitutional modifications to the

state Supreme Court's jurisdiction. See Article V, Section 3(b), Florida

Constitution (1980). The impetus for these modifications was a burgeoning

caseload and the attendant need to make more efficient use of limited

appellate resources. Consistent with this purpose, revised Fla.R.App.P.

9.030(a) limits the Supreme Court’s appellate, discretionary, and original

jurisdiction to cases that substantially affect the law of the state. Thus,

Florida district courts of appeal constitute the courts of last resort for the

vast majority of litigants under amended Article V. In re Emergency

Amendments to Rules, Etc., 381 So.d 1370 (Fla. 1980).

Prudential-Bache filed a motion to compel arbitration of

the Finns’ claims pursuant to the FAA in the state court.’

The trial court granted the motion and compelled arbitration

and the Finns appealed to the Fourth District Court.

The Fourth District held that Prudential-Bache had

waived its right to arbitration by taking “inconsistent acts.’

The court stated that the Finns did not have to show prejudice

because inconsistent acts, standing alone, constitute waiver

under the FAA.

Prudential-Bache filed a motion for rehearing en banc

on the ground that the court’s holding directly conflicts with

federal law, which requires a showing of inconsistent acts

and prejudice to constitute waiver. The Fourth District denied

the petition for rehearing.

Prudential-Bache has filed an appeal to the Florida

Supreme Court, but the court has not yet ruled on the petition

to invoke discretionary jurisdiction. This Petition for Writ

of Certiorari followed.

?Prudential-Bache also filed a motion to compel arbitration of the

claims in federal court. The motion has been pending before the Honorable

Judge Alcee Hastings since September of 1987.

3It is important to note the nature of the “inconsistent acts’ which

prompted the Fourth District to find waiver. Because of dramatic changes

regarding arbitration in Florida and federal law during 1984 and 1985,

the Finns’ claims were non-arbitrable at the beginning of the case and

then arbitrable for only 35 days before they became non-arbitrable by virtue

of a Florida Supreme Court decision. The Fourth District held that

Prudential-Bache waived its right to arbitration during the 35-day window

of arbitrability. However, Prudential-Bache took absolutely no action in

the case during those 35 days. Only two activities occurred in the litigation

when the Finn claims were arbitrable, and Prudential-Bache did not

participate in either activity. First, the court entered an Order denying

an earlier filed motion for summary judgment, denying an earlier motion

for protective order, and granting the Finns’ motion to compel discovery.

Second, the Finns filed a motion to set the case for trial. Obviously, these

activities did not prejudice the Finns.

REASONS FOR GRANTING WRIT

THE STATE COURT’S DECISION REGARDING

WAIVER UNDER THE FEDERAL

ARBITRATION ACT IS IN DIRECT CONFLICT

WITH SUPREME COURT PRECEDENT AND

THE MANDATE OF CONGRESS, AND

PRESENTS A QUESTION OF GREAT

NATIONAL IMPORTANCE.

A. Introduction.

The state appellate court has rejected 20 years of Supreme

Court precedent and the national policy favoring arbitration.‘

Congress enacted the FAA to guarantee the enforcement of

arbitration agreements across the land “unencumbered by

state-law constraints.” Southland Corp. v. Keating, 465 U.S.

1, 13 (1984). The FAA creates a body of federal substantive

law endowed “with pre-emptive force under the Supremacy

Clause.” Perry v. Thomas, 107 S.Ct. 2520, 2526 (1987);

Southland, 465 U.S. 1. Incredibly, Florida’s Fourth District

Court of Appeal has taken the position that state law

preempts federal law on the issue of whether Prudential-

Bache waived its right to arbitrate under 9 U.S.C. §3.

‘Since 1967, the Supreme Court has consistently held that federal

law—not state law—governs the enforceability of arbitration agreements

involving interstate commerce. Shearson/American Express, Inc. v.

McMahon, 107.8.Ct. 2332 (1987); Perry v. Thomas, 107 S.Ct. 2520 (1987);

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985);

Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985); Southland Corp.

v. Keating, 465 U.S. 1 (1984); Moses H. Cone Memorial Hosp. v. Mercury

Constr. Corp., 460 U.S. 1 (1983); and Prima Paint Corp. v. Flood & Conklin

Mfg. Co., 388 U.S. 395 (1967).

a

B. Preemption of State Law Under the FAA.

In Finn, the Fourth District held that inconsistent acts,

standing alone, constitute waiver under the Federal

Arbitration Act and that no showing of prejudice is required.

523 So.2d at 619-620. This holding was based solely on two

Florida appellate court decisions. The Fourth District relied

on Florida law even though Prudential-Bache forcefully

argued that federal law preempted conflicting state law.

It is firmly established that federal law is controlling on

the issue of whether Prudential-Bache waived its right to

arbitrate under the FAA, notwithstanding any contrary state

rule. Prima Paint, 388 U.S. 395 (1967); Moses H. Cone, 460

U.S. 1; Miller Brewing Company v. Fort Worth Distrib. Co.,

781 F.2d 494 (5th Cir. 1986). Indeed, the concept of waiver

expressly arises under the default provision of the FAA, 9

U.S.C. §3. Ohio-Sealy Mattress Mfg. Co. v. Kaplan, 712 F.2d

270, 272 (7th Cir. 1983), cert. denied, 464 U.S. 1002 (1983).

Federal law expressly requires a showing of both

inconsistent acts and actual prejudice to support a finding

of waiver. ATSA of California, Inc. v. Continental Ins. Co.,

702 F.2d 172 (9th Cir. 1983); Fisher v. A.G. Becker Paribas,

Inc., 791 F.2d 691 (9th Cir. 1986); Price v. Drexel Burnham

Lambert, Inc., 741 F.2d 115 (5th Cir. 1986); Benoay uv.

Prudential-Bache Securities, Inc., 805 F.2d 1437 (11th Cir.

1986).5

‘The Supreme Court has repeatedly stated the “Arbitration Act

establishes that, as a matter of federal law, any doubts concerning the

scope of arbitrable issues should he resolved in favor of arbitration, whether

the problem at hand is the construction of the contract language itself,

or an allegation of waiver, delay, or a like defense to arbitrability.” Moses

H. Cone, 460 U.S. at 24-25 [emphasis supplied].

Under federal law, “prejudice is the essence of waiver.”

E.C. Ernst, Inc. v. Manhattan Constr. Co. of Texas, 599 F.2d

268, 269 (5th Cir. 1977) cert. denied, 434 U.S. 1067 (1978).

“Inconsistent behavior -lone is not sufficient; the party

opposing the motion to compel arbitration must have suffered

prejudice.” ATSA of California, 702 F.2d at 175. Despite this

well-established federal law, the Fourth District ignored

Supreme Court precedent and the Supremacy Clause to deny

Prudential-Bache’s right to arbitration, holding that “a

showing of prejudice is not required if waiver is based upon

inconsistent acts.” Finn, 523 So.2d at 619-620.

The fact is that the Finns could not show prejudice

resulting from any inconsistent acts taken by Prudential-

Bache. Under the unprecedented rule of law created by Finn,

the arbitration agreements signed by the Finns would be

enforceable in federal court, but not in state court. The

Florida court has ignored and rejected Supreme Court

precedent and congressional intent embodied in the FAA.

In Southland, this Court recognized that Congress

enacted the FAA because of “‘the widespread unwillingness

of state courts to enforce arbitration agreements.” Jd., 465

U.S. at 13. In acknowledging the judicial hostility to

arbitration, this Court held that federal law is paramount

on the issue of arbitration in state courts, as well as federal

courts:

To confine the scope of the Act to arbitrations

sought to be enforced in federal courts would

frustrate what we believe Congress intended to be

a broad enactment appropriate in scope to meet the

large problems Congress was addressing.

* * *

And since the overwhelming proportion of all civil

litigation in this country is in the state courts, we

cannot believe that Congress intended to limit the

Arbitration Act to disputes subject only to federal-

court jurisdiction.

Southland, 465 U.S. at 14-16.

In Finn, the Florida appellate court ignored the mandate

of Congress and this Court. Under federal law, a litigant must

show both inconsistent acts and prejudice to prove waiver.

In Florida, a litigant need only show inconsistent acts—no

matter how insignificant.

Thus, there is an unmistakable conflict between federal

and Florida law and, by virtue of the Supremacy Clause,

Florida law “must give way.” Perry, 107 S.Ct. at 2526.

C.° A Word About Jurisdiction

Because of previously-mentioned modifications to the

Florida Constitution, the state Supreme Court may decline

to invoke its discretionary jurisdiction to review this conflict

with federal law. See supra note 1 and accompanying text.

Accordingly, the U.S. Supreme Court is probably the only

court that can quash Finn and prevent an erosion of the

national policy favoring arbitration.

On previous occasions, this Court has invoked its

certiorari jurisdiction to review judgments from intermediate

appellate courts where the structure of the state judicial

system prohibited a party from presenting a federal question

for review in the state Supreme Court. Florida v. Meyers, 466

U.S. 380 (1984); Local 174, Teamsters, etc. v. Lucas Flour Co.,

369 U.S. 101 (1962); Williams v. Florida, 399 U.S. 78 (1970);

Hobbie v. Unemployment Appeals Com’n of Florida, 480 U.S.

136 (1987). In such circumstances, this Court has consistently

held that “the decision below constitute[s] a final judgment

under 28 U.S.C. §1257(3).” Meyers, 466 U.S. at 381.

Such immediate review by this Court is particularly

important in the context of the FAA:

For us to delay review of a state judicial decision

denying enforcement of the contract to arbitrate

until the state-court litigation has run its course

would defeat the core purpose of a contract to

arbitrate.

Southland, 465 U.S. at 8.

The state trial court has specially set the case for jury

trial in January, 1989. Unless this Court invokes its

certiorari jurisdiction and reverses Finn, Prudential-Bache

will be deprived of its federal right to arbitration and any

subsequent appeal will be rendered moot.

; ; ST SS sees > =

CONCLUSION

This case presents a matter of great national importance.

There is a litigation crisis in this country. Congress has

responded by establishing a federal right to enforcement of

arbitration agreements under the FAA. If litigants are

permitted to circumvent the FAA through forum-shopping

in state courts, the federal policy favoring arbitration will

be eviscerated.

Congress and this Court have attempted to avoid such

a result by requiring states to follow federal law on

arbitration. The Florida appellate court has rejected this

mandate and instead chosen to adopt its own set of rules in

direct violation of the Supremacy Clause. For the foregoing |

reasons, Supreme Court review is warranted and this Petition

for Writ of Certiorari should be granted.

Respectfully submitted,

CURTIS CARLSON

Counsel of Record

LLOYD R. SCHWED

FOWLER, WHITE, BURNETT, HURLEY,

BANICK & STRICKROOT, P.A.

Attorneys for Petitioner

501 City National Bank Bldg.

25 West Flagler Street

Miami, Florida 33130

Telephone: (305) 358-6550

16

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the

foregoing was served by mail this 9th day of August, 1988

to: Gloria O. North, Esq., Mattlin, McClosky & North, 5355

Town Center Road, Suite 901, Boca Raton, Florida 33486.

CURTIS CARLSON

LLOYD R. SCHWED

11

Appendix

APPENDIX A

IN THE CIRCUIT COURT OF THE 15TH

JUDICIAL CIRCUIT, IN AND FOR,

PALM BEACH COUNTY, FLORIDA

CASE NO. 84-3156 CA (L) N

J. RICHARD FINN and REGINA R. FINN,

Plaintiffs,

Us.

PRUDENTIAL-BACHE SECURITIES INC.., et. al,

Defendants.

ORDER STAYING ACTION AND

COMPELLING ARBITRATION

THIS CAUSE came on for hearing on April 11, 1985, upon

the motion of the Defendant, Prudential-Bache Securities,

Inc., for entry of an order staying this action and compelling

the Plaintiffs to arbitrate their claims, and the Court having

considered said motion along with argument and the

applicable case law submitted by counsel for both parties,

and being otherwise fully advised in the premises, it is

ORDERED and ADJUDGED that said motion to stay this

action and compel arbitration be and the same is hereby

granted, and this cause is hereby stayed pending arbitration;

it is

App. A-l

FURTHER ORDERED and ADJUDGED that this Court

shall retain jurisdiction over this matter in order to confirm

any award that is obtained in arbitration.**

DONE and ORDERED in chambers at West Palm Beach,

Florida, on this 11th day of April, 1985.

/s/

Circuit Court Judge

Copies to:

Fred W. Mattline, Esquire

Richard Levenstein, Esquire

Curtis Carlson, Esquire

**Due to the extensive pre-trial preparation and late date (trial

was scheduled to begin Aprii 15, 1985) of the entry of this

order, this Court encouraged a speedy setting and disposition

of this cause in arbitration and suggests this matter be

concluded within 90 days.

App. A-2

APPENDIX B

[DOCKETED 3/7/88]

IN THE DISTRICT COURT OF APPEAL OF THE

STATE OF FLORIDA FOURTH DISTRICT

JANUARY TERM 1988

NOT FINAL UNTIL TIME EXPIRES TO FILE

REHEARING MOTION AND, IF FILED, DISPOSED OF.

CASE NO. 85-1118.

J. RICHARD FINN and REGINA R. FINN,

Petitioners,

Vv.

PRUDENTIAL-BACHE SECURITIES, INC.,

a Delaware corporation,

Respondent.

Opinion filed February 24, 1988

Petition for writ of common law certiorari to the Circuit Court

for Palm Beach County; Harold J. Cohen, Judge.

Gloria Ohsman North of Siemon, Larsen, Mattlin & Purdy,

Boca Raton, for petitioners.

Curtis Carlson of Fowler, White, Burnett, Hurley, Banick

& Strickroot, P.A., Miami, for respondent.

HERSEY, C.J.

App. B-1

Petitioners seek review by way of certiorari of an order

granting a motion to compel arbitration.

On June 1, 1984, the petitioners filed a complaint against

the respondent and one of its former employees, alleging

various counts for negligent misrepresentation, fraud, and

violation of sections 517.301 and 895.03(3), Florida Statutes.

Respondent answered and filed a counterclaim against the

petitioners. On July 17, 1984, respondent filed a motion for

summary judgment which was denied. A considerable

number of discovery requests and pretrial motions were

thereafter filed by both parties and the case was set for trial.

On April 8, 1985, respondent filed its motion to compel

arbitration, which resulted in the order now before us for

review.

The issue is whether respondent waived its contractual

right to arbitration by participating in litigation, an act

inconsistent with its right to compel arbitration.

A party’s contractual right to arbitration may be waived

by active participation in a lawsuit or by taking action

inconsistent with that right. Klosters Roderi A/S v. Arison

Shipping Co., 280 So.2d 678 (Fla. 1973), cert. denied, 414 U.S.

1131, 94 S.Ct. 896, 38 L.Ed.2d 755 (1974); Lapidus v. Arlen

Beach Condominium Association, 394 So.2d 1102 (Fla. 3d

DCA 1981); King v. Thomson & McKinnon, Auchincloss

Kohlmeyer, Inc., 352 So.2d 1235 (Fla. 4th DCA 1977); Gettles

uv. Commercial Bank at Winter Park, 276 So.2d 837 (Fla. 4th

DCA 1973); Ojus Industries, Inc. v. Mann, 221 So.2d 780 (Fla.

3d DCA 1969). The issue in the present case is clouded,

however, by the fact that during much of the pertinent time

frame, June of 1984 to August of 1985, the law in Florida

with regard to the enforceability of agreements to arbitrate

claims under Florida securities laws was in a state of flux.

App. B-2

At the time petitioners filed their complaint in state court

on June 1, 1984, the most recent pronouncement from this

district on the issue of enforceability of arbitration

agreements was in Merrill Lynch Pierce Fenner & Smith, Inc.

v. Melamed, 405 So.2d 790 (Fla. 4th DCA 1981), rev. denied,

433 So.2d 519 (Fla. 1983) (Melamed J), where this court held

that tate courts must recognize and apply the Federal

Arbiti ation Act, and that arbitration agreements which are

valid and enforceable under the federal law are also valid

and enforceable in Florida courts.

In 1983 the third district decided Young v. Oppenheimer

& Co., 434 So.2d 369 (Fla. 3d DCA 1983), which held that

arbitration of alleged fraud, misrepresentation and breach

of fiduciary duties is not consistent with the policy and

language of the Florida Securities Act, and agreements to

arbitrate controversies cannot oust courts of jurisdiction

conferred upon them by organic law. See also Merrill Lynch

Pierce Fenner & Smith, Inc. v. Westwind Transportation, Inc.,

442 So.2d 414 (Fla. 2d DCA 1983) (denial of motion to compel

arbitration of state securities claims held to be error).

The conflict between the districts became more

pronounced when Merrill Lynch Pierce Fenner & Smith, Inc.

v. Melamed, 453 So.2d 858 (Fla. 4th DCA 1984) (Melamed

ID, was decided on July 13, 1984, in which this court held

that as to claims arising under the Florida securities law

arbitration agreements are binding and enforceable.

The conflict was temporarily resolved when the Florida

Supreme Court, on September 27, 1984, ruled that an

arbitration agreement-concerning disputes in securities is

unenforceable. Oppenheimer & Co. v. Young, 456 So.2d 1175

(Fla. 1984). Subsequently, however, the United States

Supreme Court decided Byrd v. Dean Witter Reynolds, Inc.,

470 US. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). The issue

in that case was whether, when a complaint raises both

App. B-3

federal securities claims and pendent state claims, a federal

district court may deny a motion to compel arbitration of the

state law claims despite the parties’ agreement to arbitrate

their disputes. The court held that the Arbitration Act

requires the district courts to compel arbitration of pendent

arbitrable claims when one of the parties files a motion to

compel, even where the result would be the possibly

inefficient maintenance of separate proceedings in different

forums.

Thereafter, in Oppenheimer & Co. v. Young, 470 US.

1078, 105 S.Ct. 1830, 85 L.td.2d 131 (1985), on the authority

of Byrd, the U.S. Supreme Court vacated and remanded the

Florida Supreme Court’s decision in Oppenheimer, and on

remand the Florida Supreme Court quashed the district

court’s decision and rejected the respondent’s request that

the court reverse its earlier ruling that the petitioner did not

waive its right to compel arbitration by failing to invoke the

right to compel arbitration when it appeared in federal court.

Oppenheimer & Co., Inc. v. Young, 475 So.2d 221 (Fla. 1985).

The court reasoned that there was a split of authority on the

issue, and it would have been pointless to invoke the

arbitration agreement.

It could be argued that the same reasoning should be

applied here; however, respondent agrees that petitioner’s

claims were arbitrable during that period of time between

this court’s decision on July 13, 1984, in Melamed II, holding

that arbitration agreements are binding and enforceable as

to claims arising under the Florida securities laws, and the

Florida Supreme Court’s decision on September 27, 1984, in

Oppenheimer & Co. v. Young, 456 So.2d 1175 (Fla. 1984),

holding arbitration agreements unenforceable. Respondent,

during that period of time, filed a motion for protective order,

a motion for summary judgment, objections to interrogatories,

and objections to petitioners’ request for admissions and

production of documents. We therefore conclude that the

App. B-4

respondent actively pursued this litigation in the lower court

without raising the agreement providing for arbitration,

thereby waiving its right to compel arbitration.

Respondent argues that the party opposing arbitration

must make a strong showing of both inconsistent acts and

actual prejudice. However, the cases cited by respondent

make it clear that actual prejudice must be shown only where

there is a finding of waiver based on delay in assertion of

one’s right. A showing of prejudice is not required if waiver

is based upon inconsistent acts. Melamed II; Graham

Contracting, Inc. v. Flagler County, 444 So.2d 971 (Fla. 5th

DCA 1983), rev. denied, 451 So.2d 848 (Fla. 1984). Respondent

here waived not by inaction, but rather by inconsistent acts.

Our determination of this issue renders it unnecessary

to consider other issues argued by the parties. We grant the

petition for writ of certiorari and quash the lower court’s

ruling which granted respondent’s motion to compel

arbitration.

CERTIORARI GRANTED; ORDER QUASHED.

LETTS and GLICKSTEIN, JJ., concur.

App. B-5

APPENDIX C

IN THE DISTRICT COURT OF APPEAL

OF THE STATE OF FLORIDA

FOURTH DISTRICT

CASE NO. 85-1118.

J. RICHARD FINN and REGINA R. FINN,

Petitioner(s),

Vv.

PRUDENTIAL-BACHE SECURITIES, INC.,

a Delaware corporation,

Respondent(s).

May 12, 1988

BY ORDER OF THE COURT:

ORDERED that the Respondent’s March 10, 1988, Motion

for Rehearing and Motion for Rehearing En Banc is hereby

denied.

FURTHER ORDERED that the Respondent’s April 6,

1988, Motion for Leave to file Reply is granted.

App. C-1

I hereby certify the foregoing is a true copy of the original

court order.

/s) Clyde L. Heath

CLYDE L. HEATH,

CLERK.

ce: Curtis Carlson, Esq.

Gloria O. North, Esq.

Richard Levenstein, Esq.

pab

App. C-2

APPENDIX D

[374] * * *

§ 2. Validity, irrevocability, and enforcement of

agreements to arbitrate

A written provision in any maritime transaction or a

contract evidencing a transaction involving commerce to

settle by arbitration a controversy thereafter arising out of

such contract or transaction, or the refusal to perform the

whole or any part thereof, or an agreement in writing to

submit to arbitration an existing controversy arising out of

such a contract, transaction, or refusal, shall be valid,

irrevocable, and enforceable, save upon such grounds as exist

at law or in equity for the revocation of any contract.

§ 3. Stay of proceedings where issue therein referable to

arbitration

If any suit or proceeding be brought in any of the courts

of the United States upon any issue referable to arbitration

under an agreement in writing for such arbitration, the court

in which such suit is pending, upon being satisfied that the

issue involved in such suit or proceeding is referable to

arbitration under such an agreement, shall on application

of one of the parties stay the trial of the action until such

arbitration has been had in accordance with the terms of the

agreement, providing the applicant for the stay is not in

default in proceeding with such arbitration.

§ 4. Failure to arbitrate under agreement; petition to

United States court having jurisdiction for order

to compel arbitration; notice and service thereof;

hearing and determination

A party aggrieved by the alleged failure, neglect, or

refusal of another to arbitrate under a written agreement

App. D-1

for arbitration may petition any United States district court

which, save for such agreement, would have jurisdiction

under Title 28, in a civil action or in admiralty of the subject

matter of a suit arising out of the controversy between the

parties, for an order directing that such arbitration proceed

in the manner provided for in such agreement. Five days’

notice in writing of such application shall be served upon the

party in default. Service thereof shall be made in the manner

provided by the Federal Rules of Civil Procedure. The court

shall hear the parties, and upon being satisfied that the

making of the agreement for arbitration or the failure to

comply therewith is not in issue, the court shall make an

order directing the parties to proceed to arbitration in

accordance with the terms of the agreement. The hearing and

proceedings, under such agreement, shall be within the

district in which the petition for an order directing such

arbitration is filed. If the making of the arbitration

agreement or the failure, neglect, or refusal to perform the

same be in issue, the court shall proceed summarily to the

trial thereof. If no jury trial be demanded by the party alleged

to be in default, or if the matter in dispute is within admiralty

jurisdiction, the court shall hear and determine such issue.

Where such an issue is raised, the party alleged to be in

default may, except in cases of admiralty, on or before the

return day of the notice of application, demand a jury trial

of such issue, and upon such demand the court shall make

an order referring the issue or issues to a jury in the manner

provided by the Federal Rules of Civil Procedure, or may

specially call a jury for that purpose. If the jury find that no

agreement in writing for arbitration was made or that there

is no default in proceeding thereunder, the proceeding shall

be dismissed. If the jury find that an agreement for

arbitration was made in writing and that there is a default

in proceeding thereunder, the court shall make an order

summarily directing the parties to proceed with the

arbitration in accordance with the terms thereof.

App. D-2