R. Consolidation of Arbitration Proceedings

1.     Except as otherwise prohibited in the arbitration agreement,  a party may move the Court to order consolidation of separate arbitration proceedings as to all or some of the claims, where:

       a.     There are separate arbitration agreements or separate arbitration proceedings between the same parties, or one is a party to a separate arbitration agreement or a separate arbitration proceeding with a third person; and

       b.     The arbitrable claims arise in “substantial part from the same transaction or series of related transactions”; and

      c.      An existing “common issue of law or fact creates the possibility of conflicting decisions” in the arbitration proceedings; and

     d.     “Prejudice resulting from a failure to consolidate is not outweighed by the risk of undue delay or prejudice to the rights of or hardship to parties opposing consolidation.”

Fla. Stat. § 682.033 (1)(a) – (d).

2.     Where an arbitration proceeding is subject to consolidation, the Court may order “consolidation of separate arbitration proceedings as to some claims and allow other claims to be resolved in separate arbitration proceedings.” Fla. Stat. § 682.033(2).

3.     However, the Court may not order consolidation of any claims where the arbitration agreement prohibits consolidation and Fla. Stat. § 682.033 may not be construed to affect commencing, maintaining, or certifying a class action claim or defense. Fla. Stat. § 682.033(3).

S. Class Arbitration

1.     Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010).

      a.     The parties stipulated that their agreement was silent on any agreement for class arbitration. Id. at 1768. 

     b.     Since the parties so stipulated, there was no agreement to class arbitration and a party may not be compelled to “submit to class arbitration unless there is a contractual basis for concluding that the parties agreed to do so.”  Id. at 1775. 

      c.      Where the agreement is silent on the subject of class arbitration, the arbitrator exceeds his or her authority by permitting class arbitration where the parties never agreed to class arbitration. Id.

2.     Sutter v. Oxford Health Plans, LLC, 675 F.3d 215 (3d Cir. 2012). 

      a.     The parties contractually agreed that “[n]o civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration … .”  Id. at 217. 

         b.     As a result, the arbitrator ruled that the first phrase of the clause encompassed all possible court actions, including class actions, and thus the second phrase permitted class actions to be arbitrated.  Id. at 218. 

      c.      Oxford attempted to have the arbitrator’s ruling vacated based upon Stolt-Nielsen’s holding that an arbitrator panel exceeds its authority to allow class arbitration where the parties never agreed to do so.  Id.

       d.     The Sutter court affirmed the arbitrator’s decision and expressly noted that the FAA sets forth the exclusive grounds upon which an arbitration award may be vacated, including where the arbitrators exceed their powers.  Id. at 219 (citing 9 U.S.C. § 10(a)). 

       e.     An arbitrator exceeds such authority when he or she decides an issue not submitted to arbitration by the parties, “grants relief in a form that cannot be rationally derived from the parties’ agreement and submissions, or issues an award that is so completely irrational that it lacks support altogether.”  Id. at 219-20 (citations omitted).

     f.       Thus, the court held that an arbitrator may determine that the scope of the arbitration clause reflects the parties’ intent to permit class arbitration. Id. at 223-24.

      g.     Sutter also discussed at length Stolt-Nielsen, but determined that it was distinguishable because the parties in that case had stipulated that the agreement was silent on any agreement for class arbitration.  Id. at 220-24. 

        h.     In contrast, the parties’ intent as to class arbitration in Sutter was in question, so the scope of the arbitration agreement was relevant for the arbitrator to resolve the issue.  Id. at 224.  “[T]he arbitrator construed the text of the arbitration agreement to authorize and require class arbitration.”  Id.  By doing so, the arbitrator did not exceed his powers to authorize class arbitration.  Id. at 225.

Arbiration - Part VI

Q. Arbitrators’ Jurisdiction, Scope of Authority and Enforcement Issues

1.       The following categories of actions may not be referred to arbitration by the Court:

 a.     Bond estreatures.

b.     Habeas corpus or other extraordinary writs.

c.      Bond validations.

d.     Civil or criminal contempt.

e.     Any other matter specified by the chief judge in the circuit.

Fla. R. Civ. P. 1.800.

2.     Statutory and intentional tort employment claims are arbitrable, such as hostile work environment, defamation, tortious interference with business relationships and intentional infliction of emotional distress, where the parties are subject to a written arbitration contract that provides for binding arbitration of "any and all claims and disputes that are related in any way to my employment or the termination of my employment."  Henderson v. Idowu, 828 So. 2d 451 (Fla. 4th DCA 2002).

3.     An arbitrator exceeds his or her power when he or she goes beyond the authority granted by the parties’ agreement and decides an issue not within the scope of the arbitration clause or not pertinent to the resolution of the issues submitted to arbitration.  Chandra v. Bradstreet, 727 So. 2d 372 (Fla. 5th DCA 1999), rev. den., 741 So. 2d 1134 (Fla. 1999); Applewhite v. Sheen Fin. Res., Inc., 608 So. 2d 80 (Fla. 4th DCA 1992).

4.     The Federal Arbitration Act (“FAA”) controls where an arbitration agreement expressly provides that the agreement was made pursuant to a transaction involving interstate commerce and is governed by the FAA.  Checksmart v. Cardegna, 824 So. 2d 228 (Fla. 4th DCA  2002).^[1] 

5.     An arbitration agreement with out-of-state parties seeking to acquire the assets of a Florida corporation involved interstate commerce and was thereby governed by the FAA.  Mintz & Fraade, P.C., et al. v. Beta Drywall Acquisition, LLC, et al., 59 So. 3d 1173, 1175-76 (Fla. 4th DCA 2011).

6.     The FAA established federal public policy favoring arbitration, requiring Courts to rigorously enforce agreements to arbitrate involving interstate commerce.  Davis v. Prudential Sec., Inc., 59 F.3d 1186, 1192 (11th Cir.1995). “[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.”  Creative Tile Mktg., Inc. v. SICIS Int'l. S.r.L., 922 F.Supp. 1534, 1538-39 (S.D. Fla.1996) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 626 (1985)).

7.     The FAA prohibits states from conditioning the enforceability of arbitration agreements involving interstate commerce on the availability of class arbitration procedures.  The FAA also prohibits such arbitration agreements from being invalidated by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.  Indeed, the FAA was held to preempt a California ruling which invalided an arbitration agreement in a consumer contract as unconscionable because it disallowed class procedures as “an obstacle to the accomplishment and execution of the full purposes and objectives of Congress."  AT&T Mobility, LLC v. Vincent Concepcion, 131 S. Ct. 1740, 1753 (2011).

8.     Although the FAA governs the applicability of interstate arbitration agreements, state law governs issues “concerning the validity, revocability, and enforceability of contracts generally.” Perry v. Thomas, 482 U.S. 483, 492 n. 9 (1987).  Therefore, defenses such as fraud, unconscionability, and duress are governed by state law. Dale v. Comcast, 498 F.3d 1216, 1219 (11th Cir. 2007).

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^[1] A detailed discussion of the FAA is outside the scope of these materials.

Arbitration - Part V

Note: Florida's arbitration code was recently amended.  For a discussion regarding those amendments, please go to http://www.gray-robinson.com/attorneys/detail/1262/GaryS-SalzmanBCS

Arbitrator Disclosures under the Revised Florida Arbitration Act

1.     Before accepting any appointment, the potential arbitrator must make a “reasonable inquiry” and “disclose to all parties … and to any other arbitrators any known facts that a reasonable person would consider likely to affect the person’s impartiality as an arbitrator in the arbitration proceeding.” Fla. Stat. § 682.041(1).  Such facts include:

• Any “financial or personal interest in the outcome” of the proceeding.
• An “existing or past relationship with any of the parties …,  their counsel or representative, a witness, or another arbitrator.”

Fla. Stat. § 682.041(1) (a)&(b). 

2.     An arbitrator has a continuing obligation to disclose to all parties and the other arbitrators “any facts that the arbitrator learns after accepting appointment that a reasonable person would consider likely to affect the impartiality of the arbitrator.”  Fla. Stat. § 682.041(2). 

3.     If an arbitrator discloses a fact required by Fla. Stat. § 682.041(1) or (2) and a party “timely objects to the appointment or continued service of the arbitrator based upon the fact disclosed, the objection may be a ground” under Fla. Stat. § 682.13(1)(b) for vacating an award of the arbitrator.  Fla. Stat. § 682.041(3). 

4.     If the arbitrator did not disclose a fact required by Fla. Stat. § 682.041(1) or (2), the Court may vacate an award under Fla. Stat. § 682.13(1)(b) upon “timely objection by a party.”  Fla. Stat. § 682.041(4).

5.     An arbitrator appointed as a neutral who does not disclose a “known, direct, and material interest in the outcome of the arbitration proceeding or a known, existing, and substantial relationship with a party is presumed to act with evident partiality” under Fla. Stat. § 682.13(1)(b).  Fla. Stat. § 682.041(5).

6.     “If the parties to an arbitration proceeding agree to the procedures of an arbitration organization or any other procedures for challenges to arbitrators before an award is made, substantial compliance with those procedures is a condition precedent to a motion to vacate an award on that ground” under Fla. Stat. § 682.13(1)(b).  Fla. Stat. § 682.041(6).