MIAMI BUSINESS LITIGATION: STATUTE OF LIMITATIONS OF NON-COMPETE CLAIMS IN ARBITRATION

Florida Statutes Section 95.11(2)(b) states in pertinent part that, “[a] legal action on an action on a contract, obligation, or liability founded on a written instrument” is five years. This statute of limitations governs breach of written contracts in business litigation. Florida law imposes a type of “statute of frauds” in cases involving non-compete contracts, because Florida Statutes Section 542.335(1)(a) states that “[a] court shall not enforce a restrictive covenant unless it is set forth in a writing signed by the person against whom enforcement is sought.” Issues concerning statutes of limitations sometimes arise in arbitration proceedings, which are legally sanctioned proceedings involving private judges with the consent of the parties. In such proceedings, arbitrators sometimes do not follow the law. Unlike the decisions made by state and federal trial courts, decisions made in arbitration often are not reviewable in appellate courts. Indeed, some arbitration companies have expanded “private” statutes of limitation that exceed the limits of Florida law. The question arises, when Florida law governs the parties’ contract, can an arbitrator lawfully refuse to abide by the statute of limitations concerning cases of breach of a written contract, including a non-compete contract? Peter Mavrick is a Miami business litigation attorney, and represents clients in Fort Lauderdale, 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.

Precedent from the Supreme Court of Florida, in Raymond James Financial Services, Inc. v. Phillips, 126 So.3d 186 (Fla. 2013), has addressed this question in the context of a tort claim before the National Association of Securities Dealers. In Raymond James, an investment firm required its clients (the investors) to sign an agreement to arbitrate all disputes arising out of the handling of their investments. The issue in the case was not the validity of the arbitration agreement, but rather whether Florida’s statute of limitations that is applicable to a “civil action or proceeding” applies to arbitration proceedings. The investors asserted that the statute of limitations applied only to judicial actions and thus did not limit the time in which to assert their arbitration claims. The Supreme Court of Florida held that the term “proceeding” as used in the statutory provision that barred any proceeding unless begun within the applicable statute of limitations, was a broad term that encompassed arbitration proceedings.

The Supreme Court’s Raymond James decision imposed an important check on arbitration proceedings, which are usually given leeway to make decisions without significant judicial review. The Raymond James decision relied on Black’s Law Dictionary, which defines a “tribunal” as a “[c]ourt or other adjudicatory body.” The Supreme Court explained in pertinent part: “The term adjudicatory refers back to adjudication, which is defined as both ‘[t]he legal process of resolving a dispute,’ as well as ‘the process of judicially deciding a case’…In addition, an arbitrator would fall under the definition of an adjudicator, which Black’s Law Dictionary defines as ‘[a] person whose job is to render binding decisions’…Arbitration is clearly within the meaning of the term adjudication since the parties to an arbitration are engaging ‘[t]he legal process of resolving a dispute’ by seeking redress from an ‘adjudicatory body.’ Moreover, an arbitrator is an adjudicator who has the authority and obligation to render a binding decision and resolve the parties’ dispute. Accordingly, a review of the common usage of the terms uses…supports our conclusion that the term ‘proceeding’ as used in section 95.011 [Florida Statutes], is a broad term that includes arbitration.”

Non-compete cases are sometimes asserted arbitration covenants contained in employment or business sale contracts. When the contract is governed by Florida law, the arbitration must be initiated before the expiration of Florida’s statute of limitations.

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