FORT LAUDERDALE BUSINESS LITIGATION: INTERPRETING ARBITRATION CONTRACTS

Many business contracts contain arbitration provisions, which often creates a question as to whether the contracting parties must resolve their dispute in arbitration. Florida courts consider three elements when determining whether to enforce a contractual arbitration provision. They are (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). Peter Mavrick is a Fort Lauderdale business litigation attorney. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

The second element generally requires further analysis because courts must determine the scope of the arbitration provision to decide if the claims at issue are subject to mandatory arbitration. Airbnb, Inc. v. Doe, 336 So. 3d 698 (Fla. 2022). Arbitration provisions can be narrow or broad depending on the language of the provision. Jackson v. Shakespeare Foundation, Inc., 108 So. 3d 587 (Fla. 2013). Narrow provisions typically contain the phrase, “arising out of.” Id. An example is “all claims arising out of this contact shall be arbitrated.” This type of provision will only require the contracting parties to arbitrate claims bearing a direct relationship to the contract. Id.

Conversely, broad arbitration provisions require contracting parties to arbitrate claims that have a significant relationship to the contract. Id. There must be a contractual nexus between the contract and the claim asserted. Id. In other words, resolution of the claim “requires either reference to, or construction of, a portion of the contract.” Id. Broad arbitration provisions usually contain the phrase “relating to” and often join the narrow phrase “arising out of.” For example, a broad arbitration may be written to state “all claims arising out of or relating to this contact shall be arbitrated.”

Broad arbitration clauses can have far-reaching effect because a litigant may be forced to arbitrate a claim that does not have a direct relationship to the contract provision at issue. Florida courts have found a contractual nexus exists between a fraudulent inducement claim and a broad arbitration provision even though fraudulent inducement claims arise before the parties enter the contract. See id. (holding that a claim of fraudulent misrepresentation causing plaintiff to enter into real property contract was subject to arbitration provision in contract); Venn Therapeutics, LLC v. CAC Pharma Investments, LLC, 382 So. 3d 6 (Fla. 2d DCA 2024) (holding claim of fraud in the inducement to enter into contract subject to arbitration provision in contract). It has also been determined that a contractual nexus exists between a broad arbitration clause contained within an employment agreement and a claim for breach of fiduciary even through the fiduciary duty claim sounds in tort, not contract. Burke v. Windjammer Barefoot Cruises, 972 So. 2d 1108, 1109 (Fla. 3d DCA 2008). However, broad arbitration clauses are not without limitation. Florida courts refused to find the requisite nexus when a tort claim is based on breaching duties that are not imposed by the underlying contract. See Seifert, 750 So. 2d at 633 (holding that claims based on common law negligence for breaches of duties unrelated to contract were not subject to arbitration); Dewees v. Johnson, 329 So. 3d 765 (Fla. 4th DCA 2021) (same).

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.