FORT LAUDERDALE BUSINESS LITIGATION: ENFORCING ARBITRATION CLAUSES THAT ARE INCORPORATED BY REFERENCE

A common issue in contractual disputes is whether the claims can be compelled to arbitration. Arbitration is an alternative method of dispute resolution that parties sometimes agree to through a pre-dispute contract. Many Florida businesses operating online websites often include arbitration provisions in their website’s terms and conditions. These arbitration provisions are enforceable if they are lawfully incorporated by reference in the business’ contracts and consumers are provided actual notice of their existence. 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 litigation, and other legal disputes in federal and state courts and in arbitration.

Arbitration agreements are governed by and enforceable under the Federal Arbitration Act, 9 U.S.C. § 1, et. seq. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991). Under the FAA and the strong federal policy favoring arbitration, courts are required to “rigorously enforce agreements to arbitrate.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). “Federal law establishes the enforceability of arbitration agreements, while state law governs the interpretation and formation of arbitration agreements.” Employers Ins. of Wausau v. Bright Metal Specialties, Inc., 251 F.3d 1316 (11th Cir. 2009). The party seeking to compel arbitration has “the burden of producing the Arbitration Agreement and establishing the contractual relationship necessary to implicate the FAA and its provisions granting this Court authority to dismiss or stay Plaintiff’s cause of action and to compel arbitration.” Newman v. Hooters of Am., Inc., 2006 WL 1793541 (M.D. Fla. June 28, 2006). “The threshold question of whether an arbitration agreement exists at all is ‘simply a matter of contract.’” Hicks v. Comcast Cable Commc’n. LLC, 2018 WL 6573121 (S.D. Fla. Dec. 13, 2018).

Businesses can enforce arbitration agreements that are properly incorporated by reference into the underlying contract and all parties are provided notice of and access to the incorporated documents. The doctrine of incorporation by reference “requires that there must be some expression in the incorporating document . . . of an intention to be bound by the collateral document. A mere reference to another document is not sufficient to incorporate that other document into a contract, particularly where the incorporating document makes no reference that it is ‘subject to’ the collateral document.” Kantner v. Boutin, 624 So. 2d 779 (Fla. 4th DCA 1993). A contract “need not state that it is ‘subject to’ the provisions of the collateral document to incorporate its terms,” but “must contain more than a mere reference to the collateral document.” Mgmt. Comput. Controls, Inc. v. Charles Perry Constr., Inc., 743 So. 2d 627 (Fla. 1st DCA 1999). Moreover, “[w]hen a contract refers to another document, it must not only refer to the document, but it must also sufficiently describe the document.” Affinity Internet, Inc. v. Consol. Credit Counseling Services, Inc., 920 So. 2d 1286 (Fla. 4th DCA 2006).

Florida courts regularly refuse to compel arbitration based on arbitration provisions in contracts that are not sufficiently incorporated by reference because they either: (1) fail to expressly indicate the parties’ intention to be bound by the document containing the arbitration provision or (2) fail to sufficiently describe it. Here, Flywheel’s arbitration provision is neither referenced nor sufficiently described during the ClassPass registration process, and therefore cannot be enforced. In Temple Emanu-El of Greater Fort Lauderdale v. Tremarco Indus., Inc., 705 So. 2d 983 (Fla. 4th DCA 1998), the Fourth District Court of Appeals refused to compel arbitration based on an arbitration provision embedded in a warranty where the only reference to the warranty in the parties’ other agreement stated “11.) Provide Firestone 12 year performance warranty.” Other Florida courts have also refused to compel arbitration where “the contract contain[ed] no clear language evidencing an intention of the parties to incorporate the terms of the collateral document.” Affinity Internet, Inc. v. Consol. Credit Counseling Services, Inc., 920 So. 2d 1286 (Fla. 4th DCA 2006).

Indeed, agreements to resolve the dispute by arbitration instead of court proceedings have been enforced “only when the purchaser has actual knowledge of the terms and conditions, or when the hyperlink to the terms and conditions is conspicuous enough to put a reasonably prudent person on inquiry notice.” Vitacost.com, Inc. v. Mccants, 210 So. 3d 761 (Fla. 4th DCA 2017). Likewise, in Gustavsson v. Washington Mutual Bank, F.A., Florida’s Fourth District Court of Appeals concluded that the parties’ signed contract “neither identifie[d] or describe[d], nor in any way expresse[d] an intention that [the plaintiff] should be bound by a twice removed collateral document referring to arbitration.” 850 So. 2d 570 (Fla. 4th DCA 2003). Even if the the parties’ agreement “expressly referred to a place to find additional terms,” the agreement still must “describe the type of terms or conditions that [the plaintiff] may find” or “even describe another document, at all.” Gustavsson v. Washington Mutual Bank, F.A., 850 So. 2d 570 (Fla. 4th DCA 2003).

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.