Court Opinion

ID: 3161080
Source: CourtListenerOpinion
Date Created: 2015-12-09 16:04:25.662802+00
Date Added: 2024-06-11T10:59:44.579521
License: Public Domain

Third District Court of Appeal
                               State of Florida

                         Opinion filed December 9, 2015.
         Not final until disposition of timely filed motion for rehearing.

                               ________________

                               No. 3D14-2671
                         Lower Tribunal No. 12-13342
                             ________________

                        Akin Bay Company, LLC,
                                    Appellant,

                                        vs.

                            Philip J. Von Kahle,
                                    Appellee.

     An Appeal from a non-final order the Circuit Court for Miami-Dade County,
John W. Thornton, Jr., Judge.

      Kozyak Tropin & Throckmorton and Corali Lopez-Castro and Mindy Y.
Kubs; Lilly Ann Sanchez, for appellant.

     Markowitz Ringel Trusty & Hartog and Adrian C. Delancy; Kula &
Associates and Elliot B. Kula and W. Aaron Daniel, for appellee.

Before SUAREZ, C.J., and SHEPHERD and LOGUE, JJ.

      SHEPHERD, J.
       The issue in this non-final appeal is whether an assignee for the benefit of

creditors, appointed pursuant to section 727.104 of the Florida Statutes (2012), is

bound by a mediation and arbitration clause in an assignor’s agreement with a

third-party.1   We answer the question in the affirmative and reverse the contrary

ruling of the trial court.

       On April 3, 2012, Italkitchen International, Inc., Eurokitchen, Inc., Euro

Group International Corp., JTN Holdings, Inc., Eurogroup Canada, Inc., Design

District Holdings of Miami, LLC, and EK Holdings LLC (collectively “Assignors”

or “Italkitchen”) executed assignments for the benefit of creditors pursuant to

Chapter 727.104 in favor of Philip J. Von Kahle as assignee. Pursuant to the

assignment, Von Kahle took possession of all the assets of the assignors, including

all claims and demands which may exist against third parties. See §§ 727.104,

727.108, Fla. Stat. (2012). On July 11, 2014, Von Kahle filed an action against

Italkitchen’s investment banker and financial services advisor, Akin Bay

Company, LLC, alleging that Akin Bay had breached its fiduciary duty to

Italkitchen and had been the recipient of fraudulent transfers by Italkitchen prior to

the date of the assignment. Akin Bay responded with a motion to dismiss or stay

the proceedings on the ground that the agreement by which it supplied its services

1  We have jurisdiction under Florida Rule of Appellate Procedure
9.130(a)(3)(C)(iv), which authorizes district courts of appeal to review non-final
orders adjudicating “the entitlement of a party to arbitration or appraisal under an
insurance policy.”

                                          2
to Akin Bay stipulated that any dispute between Akin Bay and Italkitchen was to

be resolved by compulsory mediation, followed, if necessary, by mandatory

arbitration. The contractual provision reads as follows:

      Any disputes between the parties hereto arising out of or relating to
      this Agreement or the breach thereof shall first be referred for
      compulsory mediation by JAMS in a proceeding in New York, New
      York...In the event that, after the lapse of time provided in Schedule
      II, mediation has not resolved the dispute, the parties agree that
      neither party may or will commence a civil action concerning such
      dispute, and such dispute will thereafter be exclusively settled by
      mandatory arbitration in an arbitration proceeding conducted in the
      County of New York, State of New York in accordance with the
      Commercial Rules and Mediation Procedures.

(Emphasis added). Von Kahle contended, below and now on appeal, that the

clause is not enforceable against him in his position as assignee for the benefit of

creditors because (1) he was not a party to the agreement, and (2) the claims

alleged in the complaint do not “arise out of or relate to” the agreement executed

by Akin Bay and Italkitchen. We disagree with both of these assertions.

      Under Florida’s Assignment for the Benefit of Creditors statute, §§ 727.101

et seq., Fla. Stat. (2014), the assignor conveys all of its assets, except those exempt

from levy and sale under an execution, to an assignee chosen by the assignor. §

727.103(1). Collectively, these assets create an “estate.” § 727.103. The assignee

is then charged with the obligation to “[c]ollect and reduce to money the assets of

the estate, whether by suit in any court of competent jurisdiction, or by public or

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private sale, including but not limited to, prosecuting any tort claims or causes of

action which were previously held by the assignor.” § 727.108(1).2

      The assignee stands in the shoes of the assignor for this purpose. See

§727.104; Naples Awning & Glass, Inc. v. Cirou, 424 So. 2d 207, 209 (Fla. 2d

DCA 1983). For this reason, with minor exceptions prescribed by the statute,3 the

assignee cannot stand in any better position than his assignor. Under both New

York law, which application is stipulated to apply by the agreement in this case,

and Florida law, an assignee “is subject to all the equities and burdens which attach

to the property.” Int’l Ribbon Mills, Ltd. v. Arjan Ribbons, Inc., 325 N.E.2d 137,

139 (N.Y. 1975); see also Cone Constructors, Inc. v. Drummond Cmty. Bank, 754
So. 2d 779, 780 (Fla. 1st DCA 1989) (recognizing that assignee was bound by the

terms of assigned contract, including arbitration provision). “An assignee is in no

better or worse position than his assignor.” Bronx Entm’t LLC v. St. Paul’s

Mercury Ins. Co., 265 F. Supp. 359, 361 (S.D.N.Y. 2003). While it could have

done so, see supra note 3, the Legislature did not limit the ability of third parties to

2 See generally, Moffatt & Nichol, Inc. v. B.E.A. Int’l Corp., 48 So. 3d 896, 899
(Fla. 3d DCA 2010).
3 See, e.g., § 727.105 (prohibiting levy, execution, attachment, or the like against

assets of the assignment estate, except in the case of a consensual lienholder); §
727.108(1) (authorizing an assignee to prosecute tort claims or causes of action
previously held by the assignor “regardless of any generally applicable law
concerning nonassignability”); § 727.108(1)(b) (prohibiting third-parties from
asserting any “defense based on the assignor’s acquiescence, cooperation or
participation in the wrongful act” in any action brought by the assignee against the
third-party).

                                           4
assert their contractual right to enforce arbitration clauses during the assignment

for benefit of creditors’ liquidation process.     Accordingly, the mediation and

arbitration clause in the agreement in this case is enforceable against Von Kahle

despite the fact that he was not a signatory to the agreement.

      We also hold that the claims alleged in the complaint “arise out of or relate

to” the agreement executed by the assignor and Akin Bay. A claim “arises out of

or relates to” an agreement if it “at a minimum, raise[s] some issue the resolution

of which requires reference to or construction of some portion of the contract

itself.” Seifert v. U.S. Home Corp., 750 So. 2d 633, 638 (Fla. 1999). The Seifert

court articulated the test as follows:

      If the contract places the parties in a unique relationship that creates
      new duties not otherwise imposed by law, then a dispute regarding a
      breach of a contractually-imposed duty is one that arises from the
      contract. Analogously, such a claim would be one arising from the
      contract terms and therefore subject to arbitration where the contract
      required it. If, on the other hand, the duty alleged to be breached is
      one imposed by law in recognition of public policy and is generally
      owed to others besides the contracting parties, then a dispute
      regarding such a breach is not one arising from the contract, but
      sounds in tort.      Therefore, a contractually-imposed arbitration
      requirement . . . would not apply to such a claim.

Id. at 640.

      The factual allegations of the complaint filed in the instant case show a

significant relationship exists between the claims and the parties’ agreement. The

fiduciary duty count of the complaint alleges, in substance, that Akin Bay failed to

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scrutinize Italkitchen’s financial condition before securing loans for the company,

thereby causing harm to the business. Akin Bay’s due diligence obligation as to

Italkitchen’s financial solvency is expressly outlined in the first section of the

agreement. The assignee’s breach of fiduciary duty claim is grounded on this

section of the agreement.

      The fraudulent transfer claims also arise out of the agreement. Von Kahle

argues that because these claims are statutory in nature, i.e. created under Chapter

726 of the Florida Statutes, they cannot “arise out of or relate to” the agreement as

a matter of law. He supports this contention by analogizing the relationship of a

trustee in a bankruptcy proceeding to an assignee under Florida’s assignment for

the benefit of creditors law and citing to the bankruptcy cases of Hays and

Company v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149 (3d Cir.

1989) and In re: Oakwood Homes Corporation, 2005 WL 670310 (Bankr. D. Del.

2005). However, the Third Circuit Court of Appeals has recently clarified these

cases to explain that there is no per se rule prohibiting arbitration of statutory

claims in bankruptcy proceedings. In In Re Mintze, 434 F.3d 222, 229 (3d Cir.

2006), the Third Circuit held that “the FAA [Federal Arbitration Act] mandates

enforcement of applicable arbitration agreements even for federal statutory

claims.”   The court indicated however, “If a party opposing arbitration can

demonstrate that ‘Congress intended to preclude a waiver of judicial remedies for

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the statutory rights at issue,’ the FAA will not compel courts to enforce an

otherwise applicable arbitration agreement.” Id. (citing Shearson/Am. Exp., Inc.

v. McMahon, 482 U.S. 220, 227 (1987)). Applying the standard enunciated by

McMahon, we find nothing in the Florida assignment for the benefit of creditors

law to suggest the Florida Legislature intended to prohibit the enforcement of

arbitration agreements in assignment for the benefit of creditors proceedings under

Chapter 727.4 We also find that the fraudulent transfer claims brought by the

assignee fall within the scope of the arbitration agreement in this case. The crux of

the fraudulent transfer claims is that Akin Bay was paid fees by Italkitchen

pursuant to the compensation provisions of the agreement, and the assignee now

contends those fees were paid without Italkitchen receiving reasonably equivalent

value in return. Again, the agreement lies at the heart of this controversy.

      For these reasons, we reverse the order denying the Motion to Dismiss

Complaint or Motion for Stay Pending Arbitration in this case, and remand the

case for further proceedings in compliance with this opinion.

      Reversed and remanded.

4 Florida’s assignment for benefit of creditors statute is intended as an economical
and efficient alternative to the Federal Bankruptcy Act. Accordingly, we permit
ourselves the liberty of looking to federal bankruptcy law for guidance in
interpreting our own statute when it is appropriate to do so. See, e.g., Moffat &
Nichols, 48 So. 3d at 899, n. 5.

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