MIAMI BUSINESS LITIGATION: IMPLIED AUTHORITY AND ARBITRATION AGREEMENTS

Arbitration can provide Florida businesses with a swift and less costly resolution to a dispute in comparison to litigation. Arbitration generally benefits the party accused of wrongdoing more than the plaintiff. Accordingly, a plaintiff will usually have the incentive to try to find a way to avoid the application of an arbitration clause while a defendant will have the incentive to enforce the arbitration clause. A plaintiff attempting to avoid arbitration may claim that the party entering into the contract with the arbitration clause did not have the authority to enter into an arbitration agreement. Savvy defendants can Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale 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.

Normally, “[t]he 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). “Where an agreement to arbitrate has been formed, the court must treat the agreement as ‘valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.’” Larsen v. Citibank FSB, 871 F.3d 1295 (11th Cir. 2017), quoting 9 U.S.C. § 2. However, a party in business litigation may challenge the enforceability of an arbitration clause by claiming that the party who executed the agreement with the arbitration clause did not have authority to enter into the arbitration agreement.

Generally, a party in business litigation cannot be compelled to arbitrate a dispute without actually agreeing to a contract containing an arbitration clause. “However, an exception to this general rule exists when the signatory of the arbitration agreement is authorized to act as the agent of the person sought to be bound […].” Stalley v. Transitional Hosps. Corp. of Tampa, Inc., 44 So. 3d 627 (Fla. 2d DCA 2010). “Non-signatories may be bound by an arbitration agreement if dictated by ordinary principles of contract law and agency.” Martha A. Gottfried, Inc. v. Paulette Koch Real Estate, Inc., 778 So.2d 1089 (Fla. 4th DCA 2001).

One of these principles of agency law is “implied authority.” The authorization to agree to arbitrate can be implied when a principal authorizes an agent to do an act of which the agreement to arbitrate would be a natural consequence of that authority. Certain types of agreements are more prone to this conclusion than others. For example, a federal appellate court decision in business litigation involving authorization of an agent to purchase bonds and trade commodities determined that “the authority to execute an arbitration clause contained in those agreements that will bind the principal” to arbitration. Bd. of Trustees of City of Delray Beach Police & Firefighters Ret. Sys. v. Citigroup Glob. Markets, Inc., 622 F.3d 1335 (11th Cir. 2010). On the other hand, a court is less likely to find that there is implied authority to enter into an arbitration agreement when the authorization given the agent was simply to facilitate the principal’s admission to a hospital or a nursing home. Stalley v. Transitional Hosps. Corp. of Tampa, 44 So.3d 627, 630 (Fla. 2d DCA 2010) (holding that the resident was not bound by the arbitration agreement signed by the resident’s wife because the resident’s wife had authority to sign only papers for his admission and for medical treatment, which did not include the optional arbitration agreement); Blankfeld v. Richmond Health Care, Inc., 902 So.2d 296, 300–01 (Fla. 4th DCA 2005) (holding that resident’s estate was not bound by arbitration clause within admissions agreement because the agreement was signed by resident’s son; even though resident was incompetent due to senile dementia, resident’s son was at best a health care proxy who could make only decisions related to healthcare and was not authorized to waive his mother’s “right to trial by jury, to waive common law remedies, or to agree to modify statutory duties”).

“Implied authority” is one of several arguments which a party seeking to compel arbitration may bring when the suing party did not physically sign an agreement to arbitrate. Other bases for compelling arbitration may be proper, depending on the circumstances. Peter Mavrick is a Miami-Dade business litigation attorney who also practices business litigation in Fort Lauderdale and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.