FORT LAUDERDALE BUSINESS LITIGATION: COMPELLING ARBITRATION AND DISCOVERY ON MERITS

Arbitration is an alternate method of dispute resolution that can help parties avoid some of the expense and consequences of litigation. Commercial contracts will often contain provisions requiring that any claims that arise between the parties be arbitrated. When a dispute arises, the plaintiff will often reconsider its election to arbitrate and pursue matters in the courts to take strategic advantage of some of the traits favorable to plaintiffs in litigation, such as more liberal discovery practices. Provided defendant timely moves to compel arbitration, the matter should be transferred to arbitration. Sometimes, however, a plaintiff remains undeterred by a motion to compel arbitration and will issue discovery before the court can hear the motion. Defendants need not kowtow before such a plaintiff’s gamesmanship and can request that the court stay discovery on the merits of a case while the motion to compel arbitration is pending. Not only is such a motion to stay important to avoid discovery, but it ensures that the right to arbitrate is not waived. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also represents clients in business litigation in Miami 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.

Generally, the Court’s discovery rules are more permissive than in arbitration. “[A] party’s ability to take depositions and to propound discovery requests is generally much more limited in arbitration than it is under the Florida or the federal civil rules.” Green Tree Servicing, LLC v. McLeod, 15 So. 3d 682 (Fla. 2d DCA 2009); Florida Holdings III, LLC v. Duerst ex rel. Duerst, 198 So.3d 834 (Fla. 2d DCA 2016) (“Our court has recognized that discovery ‘is generally much more limited in arbitration’ and that ‘arbitrators have broad discretion as to grant or deny the ability to obtain discovery”). As a result, plaintiffs may believe it to be in their strategic advantage to attempt to seek discovery on the merits of the case prior to a case being transferred to arbitration.

Section 682.03(6), Florida Statutes, specifically provides that once a Motion to Compel Arbitration has been filed, the court must stay “any judicial proceeding that involves a claim alleged to be subject to the arbitration until the court renders a final decision [on arbitrability of the dispute].” Particularly:

(1) On motion of a person showing an agreement to arbitrate and alleging another person’s refusal to arbitrate pursuant to the agreement: […]

(b) If the refusing party opposes the motion, the court shall proceed summarily to decide the issue and order the parties to arbitrate unless it finds that there is no enforceable agreement to arbitrate […]

(6) If a party makes a motion to the court to order arbitration, the court on just terms shall stay any judicial proceeding that involves a claim alleged to be subject to the arbitration until the court renders a final decision under this section.

Section 682.03 (1)(b), (6), Florida Statutes.

Courts will typically not permit this sort of gamesmanship by plaintiffs when the matter is brought to their attention. “An agreement to arbitrate is an agreement to proceed under arbitration and not under court rules.” Suarez–Valdez v. Shearson/American Express, Inc., 845 F.2d 950 (11th Cir. 1988). Where parties enter a binding arbitration agreement that encompasses the scope of the disputed allegations raised in a complaint, “proceeding with the dispute in the courts instead of submitting the matter to arbitration constitutes a departure from the essential requirements of law.” Grillo v. Raymond James & Assocs., Inc., 524 So. 2d 1121 (Fla. 2d DCA 1988). “Indeed, where a valid right of arbitration exists, other courts have held that permitting the parties to litigate the dispute in court instead of proceeding to arbitration constitutes a departure from the essential requirements of law.” Riverfront Properties, Ltd. v. Max Factor III, 460 So. 2d 948 (Fla. 2d DCA 1984) (recognizing that courts should not permit litigation when arbitration is proper); Paine, Webber, Jackson & Curtis, Inc. v. Lucas, 411 So. 2d 1369 (Fla. 5th DCA 1982) (same); Merrill Lynch Pierce Fenner & Smith, Inc. v. Melamed, 425 So.2d 127 (Fla. 4th DCA 1982) (observing that the “[s]peedy resolution of disputes is the raison d’être of arbitration. Once parties agree to arbitrate, it is essential that they have an easy and quick means enforce their agreement to arbitrate”). “[T]he courtroom may not be used as a convenient vestibule to the arbitration hall so as to allow a party to create his own unique structure combining litigation and arbitration.” Green Tree Servicing, LLC v. McLeod, 15 So. 3d 682 (Fla. 2d DCA 2009).

A party that does not take action to prevent a plaintiff exploiting court procedures can inadvertently waive the right to arbitrate. The Florida Supreme Court warned that the right to arbitrate “must be safeguarded by a party who seeks to rely upon that right and the party must not act inconsistently with the right.” Raymond James Fin. Servs., Inc. v. Saldukas, 896 So.2d 707 (Fla.2005). “The law in Florida is clear that a party’s participation in merits discovery constitutes a waiver of arbitration.” Lion Gables Realty Ltd. v. Randall Mech., Inc., 65 So. 3d 1098 (Fla. 5th DCA 2011). “[P]arties may waive the contractual right to arbitration either by taking an active part in the litigation or by undertaking an action inconsistent with that right.” Coral 97 Associates, Ltd. v. Chino Elec., Inc., 501 So. 2d 69 (Fla. 3d DCA 1987).

Defendants who have agreed to arbitration of a dispute can avoid seek stay of proceedings until the adjudication of a motion to compel arbitration to avoid aggressive plaintiffs’ abuse of court process. Peter Mavrick is a Fort Lauderdale business litigation attorney who also practices business litigation in Miami and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.