Second District Reversed Order Denying Motion to Compel Arbitration

Pulte Home Corp. v. Bay at Cypress Creek Homeowners’ Assoc. Inc., 2D13-316 (Fla. 2d DCA 2013):

Pulte Home Corp. sought review of an order denying its renewed motion to compel arbitration of an action brought by Bay at Cypress Creek Homeowners’ Association (“HOA”) for alleged building code violations under Florida Statute §553.84. The Second District reversed the order under review on the authority of Pulte Home Corp. v. Vermillion Homeowners Ass’n, 109 So. 3d 233 (Fla. 2d DCA 2013).

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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.

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Marcus v. Florida Bagels, LLC, 4D12-2971 (Fla. 4th DCA 2013):

This is a case where a non-party to an arbitration agreement, also known as a non-signatory, seeks to compel a party to an agreement to arbitrate. An obligation to arbitrate is based on consent, and for this reason a non-signatory to a contract containing an arbitration agreement ordinarily cannot compel a signatory to submit to arbitration. Roman v. Atl. Coast Constr. & Dev., Inc., 44 So. 3d 222, 224 (Fla. 4th DCA 2010). However, courts have been willing to estop a signatory from avoiding arbitration with a non-signatory when the issues the non-signatory is seeking to resolve in arbitration are intertwined with the agreement that the estopped party has signed. Thomson-CSF, S.A. v. Am. Arbitration Ass’n, 64 F. 3d 773, 779 (2d Cir. 1995). (more…)

Heller v. Blue Aerospace, LLC, 4D12-992 (Fla. 4th DCA 2013):

Zell Global (“Zell”) and Blue Aerospace (“Team Blue”) entered into a contract where Zell would render financial consulting services in connection with the potential sale of Team Blue’s assets or equity. Team Blue sold the majority of its assets but refused to pay Zell fees under the contract. The contract contained a narrow arbitration provision where the parties agreed to submit all disputes, controversies and claims arising under the agreement to binding arbitration.

Zell commenced an arbitration seeking damages against Team Blue. Team Blue defended arbitration by alleging that Heller wrongfully induced Team Blue to enter into the contract by misrepresenting, inter alia, himself and his company as licensed business brokers. Team Blue also counterclaimed against Zell in arbitration for fraud in the inducement, negligent misrepresentation, unjust enrichment, and declaratory relief based on allegations that Zell misrepresented itself as a business broker. Subsequently, Team Blue filed an action in the circuit court against Heller individually. (more…)

The Florida Supreme Court ruled that an action for fraud was within the scope of an arbitration provision in a contract for the purchase and sale of real property.  George Jackson, et al. v. The Shakespeare Foundation, Inc., et al., No. SC11-1196 (Fla. Jan. 31, 2013). 

The underlying facts of the case are summarized as follows:  In 2006, George Jackson, Kerry Jackson, and the Jackson Realty Team, Inc. decided to sell the real property that was the subject of the contract forming the basis of the dispute.  An advertisement was posted on the Bay County Multiple Listing Service making certain representations regarding the use of the land; however, at the time that the advertisement was posted, the Jacksons had in their possession a land use analysis that was contrary to the advertisement, and which indicated that 25% of the property constituted wetlands.  Subsequently, the Jacksons and the respondents entered into contract negotiations, and during the negotiations, the Shakespeare Foundation told the Jacksons of their intention to develop the property into a 27-unit low income housing development. The Shakespeare Foundation relied upon the Jacksons’ representations and entered into a contract to purchase the property. After closing, the Shakespeare Foundation discovered that wetlands constituted 26% of the entire tract which was equal to 9 of the 27 units that were going to be developed.  The Shakespeare Foundation filed an action against the Jacksons for fraudulent misrepresentation.  The Jacksons moved to dismiss the action asserting that the matter fell within the arbitration provision of the contract, which provided for arbitration of “all controversies, claims, and other matters in question arising out of or relating to” the transaction or the contract.  The trial court granted the motion to dismiss, and the Shakespeare Foundation appealed.  On appeal, the First District Court of Appeal, determined that while the subject arbitration provision was broad in scope, the specific fraud claim did not come within that scope, because the fraud claim arose from a general duty established under the common law, and not from an obligation arising under the contract.  The First District Court of Appeal reversed the trial court’s order, and then certified conflict with the decision of the Fifth District Court of Appeal in Maguire v. King, 917 So. 2d 263 (Fla. 5th DCA 2005). 

On appeal, the Florida Supreme Court determined that the action based on fraud was within the scope of the arbitration provision.  In so ruling, the Florida Supreme Court relied on what is known as the “significant relationship” test.  Generally, there are two types of arbitration provisions: those that are narrow in scope and application, and those that are broad.  A narrow arbitration provision is one that typically requires arbitration of claims “arising out of” the contract, whereas a broad provision is one that requires arbitration of claims “arising out of or relating to” the contract; the addition of the words “relating to” broadens the scope, thereby including those claims that are described as having a “significant relationship” to the contract, regardless of whether the claim sounds in contract or tort.  A “significant relationship” exists between the arbitration provision and a claim if there is a “contractual nexus” between the claim and the contract.  Such a contractual nexus exists if the claim presents circumstances that would require either reference to, or construction of, a portion of the contract.

Applying these principles to the case before it, the Florida Supreme Court held that the arbitration provision passed the “significant relationship” test because the fraud claim was inextricably intertwined with both the circumstances surrounding the contact and the contract itself, and the resolution of the fraud claim required consideration and construction of the duties arising under the contract.  The decision below was quashed, and remanded for further consideration, and the decision in Maguire was approved to the extent that it was consistent with the court’s opinion.

Baldwin v. Regions Financial Corp., — So.3d —-, 2012 WL 4094147 (Fla. 3d DCA 2012)

On September 19, 2012, the District Court of Appeal of the Third District of Florida held that an arbitration clause of a loan agreement containing a class action waiver was not void as being against public policy despite the argument that the clause defeated the remedial provisions of the Florida Consumer Collection Practices Act (FCCPA), Florida Statute section 559.77(2).  Baldwin v. Regions Financial Corp., — So.3d —-, 2012 WL 4094147 (Fla. 3d DCA 2012).

In this case, Bruce Baldwin (“Baldwin”) appealed a non-final order granting Regions Financial Corporation’s (“Regions”) amended motion to compel arbitration, which the Court ultimately affirmed.  Baldwin had obtained a vehicle loan from Regions containing an arbitration clause which provided that either party could choose to arbitrate any dispute between them, and if a dispute is arbitrated, Baldwin waived his class action rights.  In the initial action, Baldwin filed a putative class action suit alleging that Regions violated Florida Statutes section 559.72(16) by sending him and other debtors of Regions envelopes with the words “Consumer Collections” printed on the outside. Baldwin asserted that the envelopes were meant to embarrass the debtors. Florida Statute section 559.72(16) states that a person attempting to collect a consumer debt cannot mail communications to a debtor in an envelope with any words on the outside calculated to embarrass the debtor. Fla. Stat. § 559.72(16) (2010).  Pursuant to the vehicle loan, Regions made a motion to compel arbitration.

At the hearing on the motion, Baldwin alleged that the arbitration clause waiving the right to a class action was in violation of the remedial provisions of the FCCPA, Florida Statute section 559.77(2), not that the clause was unconscionable. Baldwin argued that this section of the FCCPA allowed for twice the amount ($2,000 cap) of statutory damages if a claim was brought as a class action as opposed to an individual action ($1,000 cap). Baldwin also argued that the allowance for punitive damages and other equitable relief under the same section was greater for a class action claim than for an individual claim.

The Court disagreed with both arguments.  Florida Statute section 559.77(2) provides that, if an action is filed on an individual basis, a prevailing plaintiff may recover “additional statutory damages” not exceeding $1,000. § 559.72(2). Similarly, if an action is filed as a class action, and the class prevails, the named plaintiff can receive “additional statutory damages of up to $1,000” and all remaining class members may receive “an aggregate award of additional statutory damages up to the lesser of $500,000 or 1 percent of the defendant’s net worth,” but “the aggregate award may not provide an individual class member with additional damages in excess of $1,000.”  Baldwin’s argument failed due to this final statement.  The Court held that the statute applies uniformly to actions brought either as a class action or as an individual action.

 To read the entire opinion, click here.

A choice-of-law clause in a contract is a provision that designates the law that will govern any disputes between the contracting parties.  Including a choice-of-law clause in a contract where parties are located in different states, or even different countries, can minimize the uncertainty associated with any potential litigation with respect to the contract, and the substantive law governing the parties.

In Florida, a choice-of-law provision in a contract selecting the substantive law of another jurisdiction is presumed valid until it is proved invalid; the party who seeks to prove such a provision invalid bears the burden of proof.   Generally, Florida courts will enforce choice-of-law provisions unless the law of the chosen forum contravenes strong public policy. This rule is premised on the presumption that choice-of-law provisions are valid unless the party seeking to avoid enforcement of them sufficiently carries the burden of showing that the foreign law contravenes strong public policy of the forum jurisdiction.  The term “strong public policy” means that the public policy must be sufficiently important that it outweighs the policy protecting freedom of contract.  Thus, routine policy considerations are insufficient to invalidate choice-of-law provisions in a contract.  The countervailing public policy must be fundamental and strong enough to outweigh the policy protecting the expectations of contracting parties. 

Choice-of-law clauses can often be deemed applicable to tort claims; when determining whether or not a choice-of-law provision in a contract also governs such tort claims between the contracting parties, a court must examine the scope of the provision itself.  A choice-of-law provision that is narrow relates only to the agreement and will not encompass tort related claims.  For example, a provision providing that an agreement shall be governed and construed in accordance with the laws of a certain jurisdiction will be construed narrowly as it purports to govern only that agreement.  On the other hand, a choice-of-law provision that is broad in its wording can encompass certain tort claims.  For example, a clause indicating that all disputes arising out of or in connection with the agreement are to be construed in accordance with the laws of a certain jurisdiction would be deemed sufficiently broad to encompass tort claims between the contracting parties. 

Finally, it is important to note that a choice-of-law provision will not apply to actions that arose prior to the date of the agreement containing the choice-of-law provision. 

Choice-of-law analysis is crucial to any case where the contract contains a provision selecting the substantive law of another state, and such a clause can have a great effect on the substantive aspects of the case.   Choice-of-law analysis is burdened with several nuances and intricacies that require the skill and expertise akin to those of one of our experienced attorneys at Schecter Law.