MIAMI BUSINESS LITIGATION: A PARTY MAY NOT BE COMPELLED TO ARBITRATE A DISPUTE WITHOUT CONSENT

Parties to a contract with an arbitration agreement will often litigate the issue of whether the arbitration provision covers the parties’ dispute. Because arbitration is a different method of dispute resolution than court litigation, the distinguishing traits of arbitration can tactically benefit one party more than the other. Parties will often have the incentive to challenge whether arbitration is proper. Whether a dispute should be arbitrated is generally governed by the particular wording of the arbitration agreement. Accordingly, the scope of the arbitration agreement can have a significant impact on the ultimate resolution of the case. Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, 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.

Parties involved in business litigation often challenge whether the dispute is properly arbitrable. While federal and state law governs the interpretation and enforcement of arbitration agreements, arbitration is fundamentally a creature of contract. Which disputes are arbitrable is ultimately controlled by the provisions found in the parties’ contract. “The intent of the parties to a contract, as manifested in the plain language of the arbitration provision and contract itself, determines whether a dispute is subject to arbitration. Courts generally favor such provisions, and will try to resolve an ambiguity in an arbitration provision in favor of arbitration.” Jackson v. Shakespeare Found., Inc., 108 So. 3d 587 (Fla. 2013). A previous article explored how courts will evaluate contract provisions that agree to arbitrate disputes “arising out of” or “related to” the agreement. Another article described how third-party beneficiaries to a contract may seek to compel arbitration of a dispute.

“Disputes arise in many and varied contexts and the mere coincidence that the parties in dispute have a contractual relationship will ordinarily not be enough to mandate arbitration of the dispute.” Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999). “An agreement to arbitrate, arising out of a contractual obligation, is essentially a question of law regarding the construction of that contract.” Steritech Group, Inc. v. MacKenzie, 970 So. 2d 895 (Fla. 5th DCA 2007). “[T]he determination of whether an arbitration clause requires arbitration of a particular dispute necessarily ‘rests on the intent of the parties.’” Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999). “The general rule is that where an arbitration agreement exists between the parties, arbitration is required only of those controversies or disputes which the parties have agreed to submit to arbitration.” Miller v. Roberts, 682 So.2d 691 (Fla. 5th DCA 1996). “Only those claims which the parties have agreed are arbitrable may be subject to arbitration.” Regency Group, Inc. v. McDaniels, 647 So. 2d 192 (Fla. 1st DCA 1994).

“[T]he determination of whether a particular claim must be submitted to arbitration necessarily depends on the existence of some nexus between the dispute and the contract containing the arbitration clause.” Seifert v. U.S. Home Corp., 750 So. 2d 633 (Fla. 1999). When a business litigation cause of action does not arise from the contractual terms, it is not an arbitrable dispute. Jackson v. Shakespeare Found., Inc., 108 So. 3d 587 (Fla. 2013) (explaining the contractual nexus requirement).

The case Kroma Makeup EU, LLC v. Boldface Licensing + Branding, Inc., 845 F.3d 1351 (11th Cir. 2017), explained how the terms of the arbitration agreement can affect whether a dispute is arbitrable. In Kroma, the defendants (Kimberly, Kourtney, and Khloe Kardashian) sought to compel arbitration in a contract which they were not a party of pursuant to the doctrine of equitable estoppel. Kroma rejected that argument and found that the defendants could not compel arbitration. Kroma explained, “[i]f the parties had consented in the arbitration clause to arbitrate any disputes concerning the validity, interpretation, etc., of the contract, instead of consenting to arbitrate only ‘disputes arising between them’ concerning the validity, interpretation, etc., of the contract, the [defendants] may have been able to use equitable estoppel to require [plaintiff] to arbitrate the dispute between it and them. But, as the ‘between them’ language shows, that is not what the parties to the agreement consented to do in the arbitration provision.”

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