FORT LAUDERALE BUSINESS LITIGATION: PARTIAL WAIVER OF CONTRACTUAL RIGHT TO ARBITRATION

Florida businesses often prefer that their disputes be arbitrated and place arbitration provisions in their contracts. That right can easily be waived through conduct in litigation, however, such a waiver will likely be limited to the dispute at issue when the waiver occurred. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts as well as in arbitration.

Because arbitration can provide an apparent strategic advantage to one side in a dispute, conflicts concerning whether a dispute is arbitrable or whether a litigant waived the right to arbitration are frequent. Florida courts evaluate whether a case is arbitrable by analyzing three elements: “(1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived.” Seifert v. U.S. Home Corp., 750 So.2d 633 (Fla.1999). “Whether or not an arbitrable issue exists is determined by the scope of the particular arbitration provision, and determination of the scope ‘requires consideration of the relationship between the contract and the claim at issue.’” Olson v. Florida Living Options, Inc., 210 So. 3d 107 (Fla. 2d DCA 2016).

If the Florida court finds that an agreement to arbitrate exists and the issues are arbitrable, the remaining question is whether there has been a waiver of the right to arbitration. “Determining whether a party has waived an arbitration clause involves the same fact sensitive analysis as finding waiver of any other contractual provision.” Bland v. Green Acres Group, L.L.C., 12 So. 3d 822 (Fla. 4th DCA 2009). “The elements of waiver are: (1) the existence of a right which may be waived; (2) actual or constructive knowledge of the right; and (3) the intent to relinquish the right.” Progressive Exp. Ins. Co. v. Camillo, 80 So. 3d 394 (Fla. 4th DCA 2012).

Even parties experienced in business litigation can inadvertently waive their right to arbitration. Fundamentally, waiver is the “‘voluntary and intentional relinquishment of a known right.’” Black Knight Servicing Techs., LLC v. PennyMac Loan Services, LLC, 310 So. 3d 1116 (Fla. 1st DCA 2021). However, a litigant can waive the right to arbitrate a dispute by implication, through conduct which appears to the court to be inconsistent with the right to arbitrate. “[A] party acts inconsistently with the right to arbitration when the party actively participates in the lawsuit by either prosecuting or defending issues that are subject to arbitration.” Gen. Elec. Capital Corp. v. Bio–Mass Tech, Inc., 136 So.3d 698 (Fla. 2d DCA 2014). It is not the filing in court of a pleading concerning an arbitrable claim itself that triggers waiver, but instead, it is an event that weighs in favor of arbitration when considering the totality of the circumstances. Avid Eng’g, Inc. v. Orlando Marketplace Ltd., 809 So. 2d 1 (Fla. 5th DCA 2001) (“the mere filing of the counterclaim was not sufficient to trigger waiver”). Because this legal standard is complex and requires the court to weigh and consider many different factors, reasonable judges can come to different conclusions as to whether any particular conduct should result in a waiver of arbitration rights.

The risk of accidental waiver is multiplied in circumstances when there is a dispute between parties and only some of the issues are arbitrable. Business litigation which is partly litigated in court and partly addressed in arbitration results in further opportunities for conduct to qualify as a waiver. As explained by the United States Supreme Court, “the Arbitration Act requires 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.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213 (1985); KPMG LLP v. Cocchi, 88 So. 3d 327 (Fla. 4th DCA 2012) (quoting Dean Witter Reynolds). The judicial economy of a single forum trying all disputes is not a factor which the court may even consider. The Hillier Group, Inc. v. Topcon, Inc., 932 So. 2d 449 (Fla. 2d DCA 2006) (“Under the circumstances of this case, considerations of judicial economy have no role to play in determining whether the parties’ dispute is subject to arbitration”).

Litigants can both waive their right to compel arbitration as well as waive the right to compel a dispute to be heard in court. “[U]nlike a court’s subject matter jurisdiction which cannot be conferred by the parties, an arbitrator’s jurisdiction derives from the parties’ agreement and can broaden during the course of arbitration ‘by waiver, failure to object and consent.’” LeNeve v. Via S. Florida, L.L.C., 908 So. 2d 530 (Fla. 4th DCA 2005).

Even if a court finds that a litigant waived the right to arbitrate, that waiver is typically limited to categories of claims which are at issue in court at the time of the waiver. This is because “[t]here can be no waiver without knowledge express or implied of that which is to be waived.” Gulf Life Ins. Co. v. Green, 80 So. 2d 321 (Fla. 1955). Accordingly, the arbitrability of a claim that has not yet been raised in court generally cannot be waived. In Collado v. J. & G. Transp., Inc., 820 F.3d 1256 (11th Cir. 2016), the plaintiff brought an arbitrable FLSA claim in federal court. The defendant litigated those claims, resulting in a waiver of its right to compel arbitration. The plaintiff then amended his complaint and included additional claims of breach of contract and quantum meruit. The defendant sought to compel arbitration of the new claims brought in the amended complaint, however, the trial court found that there had been a waiver of the right to arbitrate and defendant appealed. The Eleventh Circuit Court of Appeals held that the defendant’s earlier participation in litigation could waive only the right to compel arbitration of those claims brought by the plaintiff in litigation. Id. (“[Defendant] did not waive the right to arbitrate the state law claims raised in the second amended complaint because those claims were not in the case when it waived by litigation the right to arbitrate the FLSA claim”).

The law concerning arbitration and waiver is complex and can result in litigants inadvertently waiving their right to compel arbitration. That waiver is likely limited to the issues brought in the case which found that there had been a waiver. Peter Mavrick is a Fort Lauderdale business litigation attorney who also practices business litigation in Palm Beach, Boca Raton, and Miami-Dade. This article does not serve as a substitute for legal advice tailored to a particular situation.