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).

---

^[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). 

Update to Florida's Mediation Rules

Mediation - Part V

Appearance at the Mediation Conference

1. Unless permitted by court order or the parties’ written agreement, a party is deemed to appear at a mediation if the following persons are physically present:

a. The party or the party’s representative having full authority to settle without further consultation; and

b. The party’s counsel of record, if any; and

c. A representative of the insurance carrier for any insured party who is not such carrier’s outside counsel and who has full authority to settle up to the amount of the plaintiff’s last demand or policy limits, which ever is less, without further consultation.

Fla. R. Civ. P. 1.720(b)(2012). Thus, the mediator does not have the authority to excuse any attorney, party or insurance carrier representative from attending the mediation in person, unless the parties are have agreed in writing.

2. Full authority to settle means that the person attending the mediation is the final decision maker with respect to all issues presented by the case and who has the legal ability to execute a binding settlement agreement. Fla. R. Civ. P. 1.720(c)(2012). As a result, it may be extremely difficult for most insurance carriers and large corporations to strictly comply with this rule. However, this rule does not require any party to actually enter in a settlement agreement. Id.

3. Appearance by a public entity under Chapter 286, Florida Statutes, only requires the party’s representative to physically appear at mediation with full authority to negotiate on behalf of the entity and recommend settlement to the decision-making body of the entity. Fla. R. Civ. P. 1.720(d)(2012).

4. Unless otherwise agreed upon by the parties, each party must, 10 days prior to the mediation, file and serve a written notice identifying the persons who will be attending the mediation as a party representative or as an insurance carrier representative and confirm that those persons have full authority as required under the rule. Fla. R. Civ. P. 1.720(e)(2012).

5. If a party fails to appear at a “duly noticed mediation without good cause,” the court upon motion shall impose sanctions against the party failing to appear, including the mediator’s fees, attorney’s fees and costs. The failure to file a certification confirming the representative’s authority or the failure of the person identified in the certification to actually appear at the mediation creates a rebuttable presumption of the party’s failure to appear. Fla. R. Civ. P. 1.720(f) (2012).

Arbitration - Part IV

B. Selection of Arbitrators for Non-AAA Arbitrations

1. If an agreement for arbitration provides a method for the appointment of arbitrators, that method must be followed as long as it is fundamentally fair. Fla. Stat. § 682.04.

2. If there is no agreement or if the agreement fails, the court, on application of a party, shall appoint one or a panel of three arbitrators. Fla. Stat. § 682.04; Fla. R. Civ. P. 1.810(a). Each of the arbitrators must either: (a) be a member of The Florida Bar, with the chief arbitrator being a member of The Florida Bar for at least five years; or (b) serve on the arbitration panel with the written consent of all parties.

C. Arbitrators’ Jurisdiction and Scope of Submission

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. An arbitrator exceeds his or her power when he or she goes beyond the authority granted by the parties through the operative document 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).

3. The Federal Arbitration Act controls where an arbitration agreement expressly provides that the agreement was made pursuant to a transaction involving interstate commerce and would be governed by the Federal Arbitration Act. Checksmart v. Cardegna, 824 So. 2d 228 (Fla. 4th DCA 2002). The Federal Arbitration Act, however, is outside the scope of these materials.

4. Statutory and intentional tort employment claims are also arbitrable, such as hostile work environment, malicious 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, 898 So. 2d 451 (Fla. 4th DCA 2002).

Arbitration - Part III.

B. Waiver of Right to Arbitrate

1. The right to arbitration under an agreement may be waived by taking actions inconsistent with the arbitration provision. The court (not the arbitrator) determines whether a party to an arbitration agreement has waived its contractual right to arbitration by its subsequent conduct. Florida Educ. Assoc. v. Sachs, 650 So. 2d 29 (Fla. 1995).

2. Where one party actively participates in litigation which is the subject of an arbitration agreement before moving to compel arbitration, that party is deemed to have waived any right to compel arbitration. Hansen v. Dean Witter Reynolds, Inc., 408 So. 2d 658 (Fla. 3d DCA 1982), rev. den., 417 So. 2d 328 (Fla. 1982); Ojus Indus., Inc. v. Mann., 221 So. 2d 780 (Fla. 3d DCA 1969).

3. Such a waiver will be found where the party files an answer or affirmative defenses, takes discovery or files any claim for affirmative relief in a lawsuit, including a counterclaim before moving to compel arbitration. Coral 97 Assocs., Ltd. v. Chino Elec., Inc., 501 So. 2d 69 (Fla. 3d DCA 1987); Winter v. Arvida Corp., 404 So. 2d 829 (Fla. 3d DCA 1981); but see Avid Engineering, Inc. v. Orlando Marketplace Ltd., 809 So. 2d 1 (Fla. 5th DCA 2001) (motion for arbitration and counterclaim at same time does not waive right).

4. “All questions concerning the scope or waiver of the right to arbitrate under contracts should be resolved in favor of arbitration rather than against it.” GBR3 v. Largo Dev. Corp., 807 So. 2d 723 (Fla. 3d DCA 2002), quoting Beverly Hills Dev. Corp. v. George Wimpey of Fla., Inc., 661 So. 2d 969, 971 (Fla. 5th DCA 1995).

Arbitration - Part II

B. Commencement and Submission to Arbitration to AAA

1. A party to an existing dispute may commence an arbitration under the AAA’s rules by filing two copies of a demand for arbitration, signed by the party or its attorney with AAA’s regional office. (See www.adr.org for various forms and rules). The demand must contain a statement of the nature of the dispute, the names and addresses of all parties, the amount of the claim, if known, the remedy sought, the hearing locale requested and the name and address of the respondent. The demand must also attach a copy of the arbitration clause in question.

2. Under AAA’s Commercial Arbitration Rules, the respondent to the arbitration is not required (but is encouraged) to file an answer to the claims, in which case they will be deemed denied. If the respondent desires to assert a counterclaim, then it must comply with substantially all requirements as those for a demand for arbitration.

C. Compelling Arbitration and Stays

1. After a dispute arises, the threshold issue is whether there is a right to arbitration of the dispute. If such a right is present, a motion to compel arbitration is appropriate where a party files a legal action and refuses to participate in the arbitration. When a party to an agreement refuses to arbitrate, application may be made to the court for an order directing the party to proceed with arbitration. Fla. Stat. § 682.03(1). Upon application, the court must decide the following:

a. Whether a valid written agreement exists containing an arbitration clause;

b. Whether an arbitrable issue exists that is encompassed within the scope of the arbitration clause; and

c. Whether the right to arbitration has been waived.
Orkin Exterminating Co. v. Petsch, 872 So. 2d 259 (Fla. 2d DCA 2004); Flyer Printing Company, Inc. v. Robbin Hill, 805 So. 2d 829 (Fla. 5th DCA 2001); Stinson-Head, Inc. v. City of Sanibel, 661 So. 2d 119 (Fla. 2d DCA 1995), rev. dism., 671 So. 2d 788 (Fla. 1996); North American Van Lines v. Collyer, 616 So. 2d 177 (Fla. 5th DCA 1993); Piercy v. School Bd. of Washington County, 576 So. 2d 806 (Fla. 1st DCA 1991).

2. If the court decides that there is an arbitrable issue, it must compel arbitration. If the court determines that there is an issue concerning the making of the agreement or waiver, it must summarily hear and resolve the issue. Fla. Stat. § 682.03 (1). See also Bill Heard Chevrolet v. Wilson, 877 So. 2d 15 (Fla. 5th DCA 2004).

3. Where an arbitration clause is valid and not interdependent with the remaining clauses of an agreement, any offending or unlawful provision contained therein could be severed without affecting the intent of the parties or the agreement to arbitrate. Healthcomp Evaluation Serv. Corp. v. O’Donnell, 817 So. 2d 1095 (Fla. 2d DCA 2002).

4. If an underlying contract containing an arbitration clause is challenged as void ab initio, it is submitted to arbitration, unless the challenged is to the specific arbitration clause. Buckeye Check Cashing, Inc. v. Cardegna, 126 S.Ct. 1204 (U.S. Feb. 21, 2006).

5. Whether a demand for arbitration was timely served is a question of fact to be decided by the arbitrator, not the trial court. CED Construction, Inc. v. Kaiser-Taulbee Assoc., Inc., 816 So. 2d 813 (Fla. 5th DCA 2002).

6. An action to rescind a contract in its entirety may be subject to arbitration where the contract contained an arbitration clause and the validity of that clause was not specifically attached, as opposed to the whole contract. Sanchez v. Criden, 899 So.2d 326 (Fla. 3d DCA 2005).

7. When a dispute within the scope of an arbitration provision is pending before a state court, a stay of the court action may be obtained pending the outcome of the arbitration. If the issue subject to the arbitration is severable from the remainder of that action, the stay should apply only to the dispute that is subject to arbitration. Fla. Stat. § 682.03(3).

8. When an arbitration has begun or is about to begin, a party challenging the right to arbitrate may obtain a stay by applying to the court. The court must summarily hear and determine the issue and grant or deny the application for the stay of the arbitration proceedings. Fla. Stat. § 682.03(4).

9. A party may be bound to arbitrate a dispute even though the party did not physically sign a written contract to arbitrate. See, e.g., Fleetwood Enters., Inc. v. Gaskamp, 280 F.3d 1069, 1074 (5th Cir. 2002) (agency required non-signatory to arbitrate); Qubty v. Nagda, 817 So. 2d 952 (Fla. 5th DCA 2002) (investors suing stockbrokers compelled to arbitrate under thirty-party beneficiary theory); Employers Ins. of Wausau v. Bright Metal Spec., Inc., 251 F.3d 1316 (11th Cir. 2001); Thomson-CSF, S.A. v. American Arbitration Ass’n, 64 F.3d 773, 776 (2d Cir. 1995); Gottfried, Inc. v. Paulette Koch Real Estate, Inc., 778 So. 2d 1089 (Fla. 4th DCA 2001). See also Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110 (3d Cir. 1993).

10. On the other hand, courts have refused to require non-signatories to arbitrate in various circumstances. See, e.g., Benasra v. Marciano, 112 Cal. Rptr. 2d 358 (2001) (president of corporation who signed contract in corporate capacity could not be compelled to arbitrate individually); Thomson-CSF, S.A. v. Am. Arbitration Ass'n, 64 F.3d 773 (2d Circ. 1995) (corporate parent not required to arbitrate on claim relating to subsidiary's arbitration agreement).

11. The Pritzker Case -

a. The trustees of a profit sharing plan brought suit against a brokerage company and one of its brokers alleging, among other claims, breach of fiduciary duty arising from alleged mismanagement of pension funds. Pritzker, 7 F.3d at 1113.

b. In response to the defendants’ motion to compel arbitration under an arbitration provision located in the contract governing the relationship between the trustees and the brokerage firm, the trustees argued that their claims against the individual broker were not subject to the arbitration agreement because the broker was not a signatory to the underlying contract. Id. at 1121.

c. The Third Circuit Court of Appeals rejected this argument finding that the broker, as an agent and representative of the brokerage firm, was bound by the brokerage firm’s arbitration agreement under traditional agency principles. Id. See also Drulcrest Pty. Ltd v. Jamar Prods., Inc., No. 85 Civ. 2174 (PNL), 1986 WL 4547, at *2-3 (S.D. N.Y. April 11, 1986).

12. The Drulcrest Case -

a. A promoter brought suit against a theatrical producer alleging that the producer failed to perform its obligations under the parties’ touring agreement. Drulcrest Pty. Ltd., 1986 WL 4547, at *1. The promoter also brought suit against the escrow agent named in the Touring Agreement alleging that the escrow agent breached its fiduciary duties with respect to the funds placed in escrow under the Touring Agreement. Id.

b. The Touring Agreement contained an agreement to arbitrate and was not signed by the escrow agent. Id. In response to a motion to compel arbitration, the promoter argued that the claim against the escrow agent was not subject to arbitration because the escrow agent was not a signatory to the underlying agreement containing the arbitration clause. Id. at *2. In rejecting this argument as “irrelevant,” the district court found that the escrow agent was bound by the agreement to arbitrate under ordinary contract and agency principals. Id.

c. The district court found that by agreeing to act as the escrow agent under the Touring Agreement and by accepting the escrow funds, the escrow agent signified its intent to be bound by the arbitration provisions under the Touring Agreement. Id. at *3.

13. A party who personally guaranteed the obligations of another under a written agreement containing an arbitration clause was bound as a matter of law to arbitrate the dispute regarding the guarantee. Berti v. Cedars Healthcare Group, Ltd., 812 So. 2d 580 (Fla. 3d DCA 2002).

14. Where a party was appointed as the agent for a principal who was bound to a contract containing an arbitration clause, agent must arbitrate all disputes relating to the contract. URS Koechli v. BIP Int'l, 870 So. 2d 940 (Fla. 1st DCA 2004).

15. Arbitration provisions are binding on third-party beneficiaries of a contract that contains an arbitration provision, provided that the contract clearly expresses an intent to primarily and directly benefit the third party. Technical Aid Corp. v. Tomaso, 814 So. 2d 1259 (Fla. 5th DCA 2002).

16. In the absence of a signature, a party may still be bound by an arbitration clause contained in a contract, if the party’s conduct indicates that the party agreed to be bound by the contract in question. Thomson-CSF, S.A., 64 F.3d at 776. One’s intention to be bound by a contract containing an arbitration clause may be evidenced by one’s performance under other provisions of the contract. Chanchani v. Salomon/Smith Barney, Inc., No. 99 CIV 9219 RCC, 2001 WL 204214, at *3 (S.D. N.Y. March 1, 2001); Frynetics (Hong Kong) Ltd. v. Quantum Group, Inc., No. 99 C 4704, 2001 WL 40900, at *4 (N.D. Ill. Jan. 11, 2001) (party’s attempts to comply with other terms of the contract bound the party by the arbitration provision in the same contract); In the Matter of the Arbitration Between John Thallon & Co., Inc. and M&N Meat Co., 396 F.Supp. 1239 (E.D. N.Y. 1975) (party’s participation in performance under other provisions of a contract evinced such party’s intention to be bound by the contract’s arbitration provision).

17. Even if not joined in the arbitration, a surety on a construction bond can be bound by the results of an arbitration. Fewox v. McMerit Constr. Co., 556 So. 2d 419, 425 (Fla. 2d DCA 1990).