FORT LAUDERDALE BUSINESS LITIGATION: CONTRACTS AND TRIGGERING ARBITRATION

“Arbitration is a preferred method of dispute resolution.” Obolensky v. Chatsworth as Wellington Green, 240 So. 3d 6 (quoting BallenIsles Country Club, Inc. v. Dexter Realty, 24 So. 3d 649, 652 (Fla. 4th DCA 2009)). Therefore, “[c]ourts generally favor [arbitration] provisions, and [ ] try to resolve ambiguity… in favor of arbitration.” Jackson v. Shakespeare Found., Inc., 108 So. 3d 587 (Fla. 2013). But this favorability does not always force unwilling participants to arbitrate. Courts can, and do, refuse to mandate arbitration despite the existence of an arbitration provision seemingly requiring arbitration. See, e.g., Apartment Inv. & Mgmt. Co. v. Flamingo/S. Beach 1 Condo. Ass’n, Inc., 84 So. 3d 1090 (Fla. 3d DCA 2012) (upholding the denial of movant’s motion to compel arbitration because the parties amended their contract to exclude certain legal issues from arbitration). This article explores the circumstances obligating contracting parties to arbitrate and when they can avoid arbitration. Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. 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.

Florida courts must consider three elements when faced with a motion to compel arbitration: “(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). The first two steps rest on contract interpretation, thereby requiring courts to construe the contracting parties’ intent.

The first factor requires a careful framing of the issue for consideration because it will dictate the presiding tribunal. Challenges to contract validity are resolved by arbitrators, while challenges to contract formation or the existence of a contract are resolved by courts. HHH Motors, LLP v. Holt, 152 So. 3d 745, 747 (Fla. 1st DCA 2014) (citing Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287 (2010)). Sometimes, it is easy to determine when a party challenges validity rather than contract formation. See, e.g., Airbnb, Inc. v. Doe, 336 So. 3d 698 (Fla. 2022) (explaining that “because Airbnb’s Terms of Service incorporate by reference the AAA Rules that expressly delegate arbitrability determinations to an arbitrator, the agreement clearly and unmistakably evidences the parties’ intent to empower an arbitrator, rather than a court, to resolve questions of arbitrability.”). Other times it is less obvious. See, e.g., Duval Motors Co. v. Rogers, 73 So. 3d 261 (Fla. 1st DCA 2011) (the court considered the issue of arbitrability because it had to determine whether a contract containing an arbitration provision was superseded by another contract entered contemporaneously that contained a merger clause negating all prior writings).

The question of whether an arbitrable issue exists requires the court to examine the breadth of the arbitration provision. Provisions can be narrow and limited in scope to subject maters “arising out of” the contract at issue. Jackson v. Shakespeare Found., Inc., 108 So. 3d 587 (Fla. 2013). Arbitration provisions can also be broad and require arbitration for claims or controversies “arising out of or relating to” the subject contract. The “relating to” language expands arbitrability to all claims having a “significant relationship” to the contract regardless of whether the claim is premised on contact liability or tort liability. However, inclusion of the “relating to” language does not automatically trigger arbitration for any claim because the claim must have a contractual nexus to the contract.

For example, a landscaper and homeowner enter a contract concerning the provision of landscaping services that contains a provision requiring arbitration for all claims arising from or relating to the contract. The landscaper subsequently causes a traffic collision with the homeowner’s car on a highway, in a chance encounter. The arbitration provisions probably will not apply in this case because the car accident has no nexus to the provision of landscaping services. Conversely, the arbitration provision will likely apply if the landscaper collides with the homeowner’s car in the homeowner’s driveway while performing landscaping services, because a nexus to the contract exists.

The existence of a valid contract and an arbitrable issue does not always trigger arbitration because a party may forfeit his/her right to arbitrate by actively participating in litigation. Raymond James Fin. Services, Inc. v. Saldukas, 896 So. 2d 707, 711 (Fla. 2005) (“We have long held that a party’s contract rights may be waived by actually participating in a lawsuit or taking action inconsistent with that right.”). Waiver occurs when a person intentionally relinquishes a known right or conducts himself/herself in a manner that implies a voluntary and intentional relinquishment of a known right. Major League Baseball v. Morsani, 790 So.2d 1071 (Fla. 2001) (defining waiver). Litigants satisfy the waiver definition by attacking the merits of the claim or propounding discovery. Sitarik v. JFK Med. Ctr. Ltd. Partnerships, 11 So. 3d 973, 974 (Fla. 4th DCA 2009) (finding waiver when the defendants filed an answer, affirmative defenses, and two motions to dismiss); Maryland Cas. Co. v. Dep’t of Gen. Servs., 489 So.2d 54, 57 (Fla. 1st DCA 1986) (finding waiver when the litigant propounded discovery). Therefore, litigants desiring to enforce arbitration rights should move to compel arbitration as their initial act and take no further action thereafter.

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.