FORT LAUDERDALE BUSINESS LITIGATION: WAIVER OF A CONTRACTUAL RIGHT TO ARBITRATION

Commercial contracts often have dispute resolution provisions requiring the parties to the contract to have their claims decided in arbitration. Arbitration is legal proceeding decided by a private decisionmaker, i.e., a judge. Parties sometimes choose arbitration due to its more private approach and because the right to appeal is very limited. Courts consider at least three issues to determine whether a dispute is subject to arbitration: (1) whether a valid written agreement to arbitrate exists; (2) whether arbitrable issue exists; and (3) whether the right to arbitration was waived. Stacy David, Inc. v. Consuegra, 845 So.2d 303 (Fla. 2d DCA 2003). As with many legal rights, the contractual right to proceed to arbitration can be waived. 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.

Precedent from the Supreme Court of Florida in Raymond James Fin. Servs., Inv. v. Saldukas, 896 So.2d 707 (Fla. 2005), defined the legal term “waiver” as “the voluntary and intentional relinquishment of a known right or conduct which implies the voluntary and intentional relinquishment of a known right.” The general definition of waiver is applicable to the right to arbitrate. The Raymond James considered the issue of waiver in the context of an arbitration agreement, and found persuasive the federal appellate case of National Foundation for Cancer Research v. A.G. Edwards & Sons, Inc., 821 F.2d 772 (D.C. Circ. 1987), stating in pertinent part: “The right to arbitration, like any contract right, can be waived…The Supreme Court made clear that the ‘strong federal policy in favor of enforcing arbitration agreements’ is based upon the enforcement of contract rather than a preference for arbitration as an alternative dispute resolution mechanism. Thus, whether there has been a waiver in the arbitration agreement context should be analyzed in much the same way as in any other contractual context. The essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right.” For these reasons, the National Foundation decision explained, “there is no requirement for proof of prejudice in order for there to be an effective waiver of the right to arbitrate…[A]n arbitration right must be safeguarded by a party who seeks to rely upon that right and the party must not act inconsistently with the right.”

One way to waive the contractual right to arbitrate is by a party’s active participation in a lawsuit. Seville Condo. #1 v. Clearwater Dev. Corp., 340 So.2d 1243 (Fla. 2d DCA 1976), explained that “[t]he prosecution or defense of a lawsuit on issues subject to arbitration may constitute a waiver.” For example, the Seville Condo. appellate decision indicated a party may waive his right to arbitration by filing a lawsuit without seeking arbitration. Similarly, Bared & o. v. Specialty Maint. & Constr., Inc., 610 So.2d 1 (Fla. 2d DCA 1992), suggested waiver of arbitration can occur when a party files an answer to a pleading seeking affirmative relief without raising the right to arbitration. In addition, Lapidus v. Arlen Beach Condo. & Constr., Inc., 394 So.2d 1102 (Fla. 3d DCA 1981), explained that arbitration can be waived by moving for summary judgment in the trial court.

Moreover, the Supreme Court of Florida, in Klosters Rederi A/S v. Arison Shipping Co., 280 So.2d 678 (Fla. 1973), indicated that a party who timely asserts the right to arbitration may still waive the right by later conduct that is inconsistent with the arbitration request. Once a party has waived the right to arbitration by active participation in a lawsuit, the party may not reclaim the arbitration right without the consent of his adversary.

Peter Mavrick is a Fort Lauderdale business litigation attorney, 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.