Bank Waived Right to Arbitration by Initiating Lawsuit

Posted on: September 12, 2013

Pearson v. Peoples National Bank,1D13-0685 (Fla. 1st DCA 2013):

This was an appeal of a non-final order that stayed a declaratory action and directed the parties to arbitration. Appellant and Appellee entered into a real estate sales contract. The vacant lot purchased by Appellant was described as having beach access in the contract. The Appellee was unable to convey that beach access and has argued that the contract is null and void. Appellee filed a complaint for a declaratory judgment as to the respective rights of the parties under the contract and other supplementary relief.

Appellant raised breach of contract as an affirmative defense and counter-claimed for specific performance and damages for breach of contract. Upon motion of the Appellee, the cause was submitted to mediation, but an impasse was declared. Thereafter, upon motion of the Appellee, the trial court ordered arbitration, ruling that the contract required it.

On appeal, Pearson argued that the Appellee forfeited its right to demand arbitration pursuant to the contract because it filed a complaint in the circuit court and a notice of lis pendens without simultaneously seeking the right to arbitrate the controversy. Although Florida law generally favors arbitration, the First District agreed with Appellant because there is a long line of authority holding that arbitration can be waived.

In the instant case, the Appellee did more than participate in a lawsuit; it initiated the lawsuit. Initiating a lawsuit, or on the part of a defendant, participating in a lawsuit without first seeking arbitration, constitutes an affirmative selection of a course of action which runs counter to the purpose of arbitration. Beverly Hills Dev. Corp. v. George Wimpey of Florida, Inc., 661 So. 2d 969 (Fla. 5th DCA 1995) citing Rosen v. Shearson Lehman Bros., 534 So. 2d 1185 (Fla. 3d DCA 1988), rev. denied, 544 So. 2d 200 (Fla. 1989). Because the Bank waived its right to compel arbitration, the non-final order under review was erroneous and had to be reversed.

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