FORT LAUDERDALE BUSINESS LITIGATION: CLAIMS DECIDED IN ARBITRATION VERSUS COURT PROCEEDINGS

Parties to a contract can agree to arbitrate certain disputes within a contract. As discussed in many of our previous articles, resolving a dispute through arbitration can affect the scope and amount of discovery, the speed of resolution, as well as the ultimate result of the case. Whether a particular dispute between parties is arbitrable is defined by the terms of the parties’ agreement. Arbitration clauses often narrow the scope of arbitrable issues to particular types of disputes. As a result, parties involved in a dispute may have both arbitrable and non-arbitrable claims between them. When this happens, parties are required to address their arbitrable claims in arbitration and their non-arbitrable claims in court. To the extent that the non-arbitrable claims are inextricably intertwined with claims in arbitration, those non-arbitrable claims are stayed. 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, and other legal disputes in federal and state courts and in arbitration.

Court and arbitration are two alternate methods of dispute resolution. Because most business litigation disputes are addressed in either court or arbitration, there is a common misconception that all of a parties’ claims must be addressed in only one forum. However, neither the Federal Arbitration Act (FAA) nor the Revised Florida Arbitration Code (RFAC) require that parties’ disputes be brought in a single forum.

In fact, both the FAA and RFAC require that parties’ arbitrable disputes be addressed in arbitration and non-arbitrable disputes be addressed in court, even when those claims are related. To the extent that arbitrable and non-arbitrable claims are so intertwined that it would be impossible independently resolve the parties’ disputes in both forums simultaneously, the court proceedings should be stayed pending arbitration. RFAC states this explicitly at § 682.03(7), Florida Statutes, which provides, “[i]f the court orders arbitration, the court on just terms shall stay any judicial proceeding that involves a claim subject to the arbitration. If a claim subject to the arbitration is severable, the court may limit the stay to that claim.”

The FAA does not explicitly state this rule, however, United States Supreme Court precedent has made it clear that “piecemeal” dispute resolution is necessary when parties have both arbitrable and non-arbitrable claims in business litigation. The Supreme Court interpreted the FAA to require “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); see also KPMG LLP v. Cocchi, 88 So. 3d 327 (Fla. 4th DCA 2012) (quoting Dean Witter Reynolds).

Florida cases routinely require piecemeal dispute resolution when parties have both arbitrable and non-arbitrable claims. “If the trial court finds that the remaining [non-arbitral claims] are ‘inextricably intertwined’ with the arbitrable claims, it should stay all judicial proceedings pending resolution of the claims in arbitration.” Avid Eng’g, Inc. v. Orlando Marketplace Ltd., 809 So. 2d 1 (Fla. 5th DCA 2001); Sabates v. Int’l Med. Centers, Inc., 450 So. 2d 514 (Fla. 3d DCA 1984) (“If the resolution of the arbitrable claims against [the defendant] will obviate the need for further litigation of the claims pending in court, then it is clear that these latter claims involve an issue subject to arbitration; but if the resolution of the arbitrable claims will have no effect upon the claims pending in court, then the issue in arbitration is severable, and a stay of the claims pending in court is not required”); Sabates v. Int’l Med. Centers, Inc., 450 So. 2d 514 (Fla. 3d DCA 1984) (holding that the parties’ arbitrable claims may be heard by an arbitrator at the same time that the parties’ non-arbitrable claims are heard by a court, as long as the non-arbitrable claims “are not dependent upon [the arbitrable claims] so as to require [the non-arbitrable claims] to be stayed”); Timber Pines Plaza, LLC v. Zabrzyski, 211 So. 3d 1147 (Fla. 5th DCA 2017) (severing dispute with both arbitrable and non-arbitrable claims); Rittman v. Allstate Ins. Co., 727 So. 2d 391 (Fla. 1st DCA 1999) (“The allegations of the complaint and the court’s stay rather than dismissal of the complaint suggest the existence of issues that will not be resolved by arbitration. If, indeed, that is the case, the arbitrable issue should be severed and the stay made applicable only to the issue subject to arbitration”); Gale Group, Inc. v. Westinghouse Elec. Corp., 683 So. 2d 661 (Fla. 5th DCA 1996) (“The trial court is instructed to determine whether the arbitrable issues are severable from the claims to be litigated in court. If the issues cannot be severed from the nonarbitrable issues, litigation should be stayed pending arbitration of the arbitrable issues”); Woodlake Redevelopment Corp. v. Woodlake Condo. Ass’n of Marco Shores, Inc., 671 So. 2d 253 (Fla. 2d DCA 1996) (“Accordingly, we reverse the order of the trial court dismissing the appellant’s complaint and remand with directions that the court order arbitration only with respect to Counts IV and V and that the order direct that proceedings with respect to these claims be stayed pending arbitration. The order should provide that the remaining counts of the complaint may go forward”); 425 Florida, Inc. v. George V. Behan Const., Inc., 497 So. 2d 1340 (Fla. 5th DCA 1986) (“However, the other matters and counts in the lawsuit do not involve any of the other issues which may be arbitrated since they are separate and severable, and involve different parties and different contracts. We approve the trial court’s ruling not to stay the trial of those counts”).

The judicial economy of a single forum trying all of the parties’ claims is not a factor which the court may even consider when evaluating whether parties should proceed with dispute resolution in both court and arbitration. The Hillier Group, Inc. v. Torcon, 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”).

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.