FORT LAUDERDALE BUSINESS LITIGATION: CONTRACTUAL INTENT AFFECTS ARBITRABILITY

Trial of a business dispute through the court system or through arbitration can have significant consequences. As discussed in 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. Arbitration of a dispute may be more beneficial for one party than for the other. Accordingly, parties in business litigation often contest whether the dispute is covered by an arbitration clause. Courts typically determine these disputes based on the issue of whether the terms of the arbitration agreement contemplate the dispute being arbitrated. Peter Mavrick is a Fort Lauderdale business litigation lawyer, and also advocates for clients in Palm Beach, Boca Raton, and Miami, Florida. The Mavrick Law Firm represents clients in breach of contract litigation, trade secret litigation, non-compete agreement litigation, employment litigation, trademark litigation, and other legal disputes in federal and state courts and in arbitration.

In disputes about arbitrability, courts analyze three elements. “[T]here are three elements for courts to consider in ruling on a motion to compel arbitration of a given dispute: (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 existence of an arbitration agreement between the parties does not necessarily mean that a particular dispute is arbitrable. Courts analyze the intent of the parties as to whether a particular business litigation dispute is arbitrable. “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), citing to Pacemaker Corp. v. Euster, 357 So.2d 208 (Fla. 3d DCA 1978).

While courts generally favor arbitration as a form of dispute resolution, “arbitration is favored only as to those disputes which the parties actually agreed to arbitrate.” Medanic v. Citicorp Inv. Services, 954 So. 2d 1210 (Fla. 3d DCA 2007); Episcopal Diocese of Cent. Florida v. Prudential Sec., Inc., 925 So. 2d 1112 (Fla. 5th DCA 2006) (“Federal law favors arbitration only as to issues the parties have actually agreed to arbitrate”). When evaluating whether a dispute is arbitrable, courts generally compare the language of the arbitration provision with the allegations made in the complaint. “The determination [of] whether a dispute must be arbitrated ‘turns on the parties’ intent,’ which is manifested in the plain language of the contract itself.” Vanacore Constr., Inc. v. Osborn, 260 So. 3d 527 (Fla. 5th DCA 2018), quoting Maguire v. King, 917 So.2d 263 (Fla. 5th DCA 2005). “Because arbitration provisions are contractual in nature, they are subject to the rules of contract interpretation.” Vanacore Constr., Inc. v. Osborn, 260 So. 3d 527 (Fla. 5th DCA 2018), citing to Jackson v. Shakespeare Found., Inc., 108 So.3d 587 (Fla. 2013). “Whether a claim falls within the scope of an arbitration agreement turns on the factual allegations in the complaint rather than the legal causes of action asserted.” Gregory v. Electro-Mech. Corp., 83 F.3d 382 (11th Cir.1996).

When the wording of the arbitration agreement is broad, courts will typically evaluate the factual allegations made in the complaint and evaluate whether the there is a “significant relationship” between the allegations and the contract containing the arbitration agreement.

A “significant relationship” between a claim and an arbitration provision does not necessarily exist merely because the parties in the dispute have a contractual relationship. Rather, a significant relationship is described to exist between an arbitration provision and a claim if there is a “contractual nexus” between the claim and the contract. A contractual nexus exists between a claim and a contract if the claim presents circumstances in which the resolution of the disputed issue requires either reference to, or construction of, a portion of the contract. More specifically, a claim has a nexus to a contract and arises from the terms of the contract if it emanates from an inimitable duty created by the parties’ unique contractual relationship. In contrast, a claim does not have a nexus to a contract if it pertains to the breach of a duty otherwise imposed by law or in recognition of public policy, such as a duty under the general common law owed not only to the contracting parties but also to third parties and the public.

Jackson v. Shakespeare Found., Inc., 108 So.3d 587 (Fla. 2013).

Plaintiffs should consider the potential arbitration-related repercussions when preparing their business litigation pleadings. 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.