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The Fourth District Court of Appeal Reversed a Non-Final Order Denying Defendant’s Motion to Compel Arbitration

Posted on: May 31, 2013

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.

In its sole count for fraud, Team Blue alleged Heller willfully and knowingly misrepresented his contacts with potential investors to induce Team Blue to retain Heller and his company, Zell Global, as a licensed business broker. Heller moved to compel arbitration of the fraudulent inducement claim based on the arbitration provision in the contract between Zell and Team Blue. The trial court denied the motion, stating that the fraudulent inducement claim was not an arbitrable issue because the express language of the arbitration clause clearly indicates that arbitration is limited to contractual claims.

There are three elements for courts to consider in ruling on a motion to compel arbitration of a given dispute: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived. Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999). Here, the issue boiled down to whether Team Blue’s sole count for fraud is subject to arbitration.

Generally, the courts have recognized that a non-signatory may compel a signatory to arbitration under the theory of equitable estoppel or upon principles of agency. A non-signatory such as Heller may compel arbitration under the doctrine of equitable estoppel when the signatory to the contract containing the arbitration clause raises allegations of concerted conducted by both the non-signatory and one or more of the signatories to the contract. Shetty v. Palm Beach Radiation Oncology Assocs.-Sunderam K. Shetty, M.D., P.A., 915 So. 2d 1233, 1235 (Fla. 4th DCA 2005).

The court found that Team Blue’s conduct in arbitration rendered its fraud claim against Heller subject to arbitration by both equitable estoppel and principles of agency. Team Blue alleged the same core facts in its fraud claim and fraudulent inducement arbitration counterclaim that it does in its complaint. Team Blue was equitably estopped by its own conduct from denying Heller the opportunity to have the fraud cause of action against him individually considered in the arbitration proceeding involving Zell.