COMMERCIAL ARBITRATION: UNDER FLORIDA LAW, ACTIVE PARTICIPATION IN LAWSUITS WAIVES A PARTY’S RIGHT TO ARBITRATION

Today, many businesses are including arbitration provisions for the resolution of any disputes or controversies that may arise from the contract. This is because arbitration provides a more efficient and less costly alternative to litigation. Despite the existence of such arbitration provisions within business contracts, often times, when a dispute arises, a plaintiff will still file a lawsuit in state or federal court. The Miami arbitration attorneys at the Mavrick Law Firm have extensive commercial arbitration experience and can help businesses dismiss such lawsuits and enforce valid arbitration agreements.

When faced with the scenario supra, it is critical that the first thing the defendant-business does is assert its right to arbitration, most often via a motion to compel arbitration. This is because a party’s right to arbitrate, like any other contractual right, can be waived. Under Florida law, it is well settled that active participation in a lawsuit can waive your right to arbitrate. This was demonstrated by the Fifth District Court of Appeal’s decision Morrell v. Wayne Frier Manufactured Home Ctr., 834 So. 2d 395 (Fla. 5th DCA 2003).

In Morrell, purchasers of a mobile home brought suit against a mobile home sales company. After the purchasers filed their complaint in October 2000, the company answered and asserted affirmative defenses against the purchasers and filed a motion to dismiss the lawsuit, asserting that some of the plaintiff’s did not have standing to bring the lawsuit. The parties thereafter participated in a settlement conference, exchanged discovery, and trial was scheduled to occur during December 10, 2001 docket. However, in September 2001, the company submitted a motion to stay the proceedings and refer the matter to arbitration. On the eve of trial in December 2001, the trial court granted the company’s motion and referred the matter to arbitration. On appeal, the Fifth DCA reversed, explaining that “a party waives its right to arbitration by: (1) actively participating in the lawsuit; or (2) taking action which is inconsistent with the right to arbitrate.” The court found that because the company had already participated in the subject lawsuit, it had waived its right to arbitrate.

Although Morrell involves substantial participation, prior Florida cases demonstrate that a party’s right to arbitrate can be waived for much less. In Bared and Co., Inc. v. Specialty Maintenance and Construction, Inc., 610 So.2d 1 (Fla. 2d DCA 1992), the Second DCA held that the defendant waived its right to arbitration when it filed an answer and a cross-claim without raising the arbitration issue. Similarly, in Breckenridge v. Farber, 640 So.2d 208 (Fla. 4th DCA 1994), the Fourth DCA found waiver where the defendant answered without demanding arbitration. Thus, it is clear under Florida law that even minor participation, such as simply answering a complaint, can lead to waiver of your right to arbitrate a dispute. That is why it is critical to assert your right to arbitration before you do anything else when faced with a lawsuit that should be referred to arbitration. If you want to learn more about the right to arbitrate, enforcement of arbitration provisions, or commercial arbitration in general, please contact the Miami arbitration attorneys at the Mavrick Law Firm.

The Miami arbitration attorneys at the Mavrick Law Firm have extensive experience with commercial arbitration cases and the enforcement of arbitration provisions. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.