Parochialism in Arbitration? How Some Arbitration Decisions by Florida Courts Are at Variance with Federal Arbitration Precedent
Courts are often called on to decide issues related to the enforcement of arbitration clauses, and the Florida Supreme Court is no exception. In the last few years, the court has issued some decisions involving arbitration, including one that later was reversed by the U.S. Supreme Court, that appear to be at variance with how federal courts have dealt with the same arbitration issues, and more generally, with the federal policy of favoring arbitration that is embodied by the Federal Arbitration Act. This article will begin with a brief glimpse into the purpose of the Federal Arbitration Act, after which the Florida Arbitration Code is patterned, and will then analyze how some of the court’s decisions are at odds with its federal counterparts and arguably, by extension, at odds with the federal policy of favoring arbitration.
The Federal Arbitration Act
Borrowing from the English common law tradition, American courts were once known to be notoriously hostile toward arbitration. As explained by the U.S. Supreme Court:
The need for the [Federal Arbitration Act] law arises from an anachronism of our American law. Some centuries ago, because of the jealousy of the English courts for their own jurisdiction, they refused to enforce specific agreements to arbitrate upon the ground that the courts were thereby ousted from their jurisdiction. This jealousy survived for so long a period that the principle became firmly embedded in the English common law and was adopted with it by the American courts. The courts have felt that the precedent was too strongly fixed to be overturned without legislative enactment, although they have frequently criticised the rule and recognized its illogical nature and the injustice which results from it. This bill declares simply that such agreements for arbitration shall be enforced, and provides a procedure in the [f]ederal courts for their enforcement.
In response to this, Congress, pursuant to its Commerce Clause power, enacted the Federal Arbitration Act (FAA) in 19252 with the goal of “revers[ing] the longstanding judicial hostility to arbitration agreements that had existed at English common law and had been adopted by American courts, and to place arbitration agreements on the same footing as other contracts.”3 As a result, rather than hostility, there is presently a “liberal federal policy favoring arbitration agreements.”4
Even after the passage of the FAA, some states continued their efforts to restrict the availability of arbitration. After all, Congress was principally concerned with judicial hostility toward arbitration in federal, not state, courts.5 Such efforts were dealt a serious blow in the form of the 1984 U.S. Supreme Court decision in Southland Corporation v. Keating, 465 U.S. 1 (1984), where the court struck down as unconstitutional a California law whose effect was to nullify certain arbitration agreements.6 In its decision, the court held that the FAA preempted state law and that any “state legislative attempts to undercut the enforceability of arbitration agreements”7 were void under the Supremacy Clause.
The result of Keating was that “[s]tates can no longer harbor their historical hostility toward arbitration.”8 Indeed, “[m]any state legislatures also have enacted statutes that encourage the use of arbitration and ensure that agreements to arbitrate will be enforced according to their terms and conditions.”9 Florida is one such state. As early as 1953, the Florida Supreme Court wrote of arbitration: “Agreements to arbitrate disputes between parties are generally looked upon with approval by the courts when the subject matter of such agreements is confined within legally permissible limits.”10 Four years later, the Florida Legislature enacted the Florida Arbitration Code, F.S. Ch. 682.11 Under F.S. §682.02, “arbitration agreements are valid, irrevocable and enforceable.”12 As a result of the Florida Arbitration Code, “Florida law strongly favors the resolution of disputes by way of arbitration,”13 and “courts are encouraged to resolve all doubts in favor of arbitration.”14
Cardegna v. Buckeye Check Cashing, Inc.
With opinions like Keating and statutes such as the Florida Arbitration Code, one might think that courts are more amenable to arbitration than ever before. Certainly, no one could rightfully say that Florida courts are hostile to arbitration. Nevertheless, certain decisions from the Florida Supreme Court do seem to be at odds with their federal counterparts and, thus, at odds with the federal policy of favoring arbitration.
One of those decisions is Cardegna v. Buckeye Check Cashing, Inc., 894 So. 2d 860 (Fla. 2005), which was later reversed by the U.S. Supreme Court. In Cardegna, the Florida Supreme Court held that a plaintiff may not be compelled to arbitrate his or her claims based on an arbitration clause if at the time there is a claim pending before a Florida trial court that the contract containing the arbitration clause is itself illegal and void ab initio. Over a strong dissent by Justice Cantero, who argued that the majority decision was contrary to U.S. Supreme Court precedent, the court ruled that it is up to the trial court and not an arbitrator to initially decide the validity of the underlying contract.
The facts and procedural history of Cardegna are not overly complex. A class action lawsuit was brought against the appellant, Buckeye Check Cashing, in which appellees alleged that Buckeye had made illegal usurious loans in the guise of check cashing transactions, thus, violating a number of Florida statutes. Buckeye, pointing to the arbitration clause contained in the agreements signed by appellees, responded by filing a motion to compel arbitration and to stay the proceedings. In part, the broad arbitral clause provided, “This arbitration Agreement is made pursuant to a transaction involving interstate commerce, and shall be governed by the Federal Arbitration Act (FAA), 9 U.S.C. Sections 1-16.”
In opposition to Buckeye’s motion, appellees argued that the arbitration clause should not be given effect because the agreement that contained the clause was itself void ab initio due to its being an illegal usurious contract; thus, the clause, too, was void. The trial court denied Buckeye’s motion, citing the cases of Party Yards, Inc. v. Templeton, 751 So. 2d 121 (Fla. 5th DCA 2000), and FastFunding v. Betts, 758 So. 2d 1143 (Fla. 5th DCA 2000), where in both instances the Fifth District had ruled that arbitration cannot be compelled where the underlying validity of the agreement containing the clause is brought into question. The trial court’s decision was reversed by the Fourth District, however, which held that the validity of the underlying contract was a task better suited for an arbitrator to decide.
On review of the Fourth District’s ruling, the Florida Supreme Court began its analysis by noting the conflict between the Fourth District’s holding in Cardegna and the Fifth District opinions, including FastFunding, which had affirmed the trial court’s denial of a motion to compel arbitration of the plaintiff’s claim where the plaintiff had alleged in her complaint that the contract was void because it violated usury laws: “If [the plaintiff] is correct in her complaint that the contract violates the usury laws, then the contract is illegal and an arbitrator could not require [her] to perform under the contract.”
The Florida Supreme Court, after noting that it agreed with the Fifth District’s reasoning in FastFunding, turned its attention to Prima Paint Corporation v. Flood & Conklin Manufacturing Company, 388 U.S. 395 (1967), which Buckeye contended to be controlling on the present case because the agreement signed by appellees had specified the contract was to be governed by the Federal Arbitration Act and the cases applying the act.
In Prima Paint, the Supreme Court had to resolve the issue of “whether a claim of fraud in the inducement of the entire contract is to be resolved by the federal court, or whether the matter is to be referred to the arbitrators.” The court ruled that where the arbitration clause contained in a contract is severable from the contract itself, and where the alleged fraud was not directed to the arbitration clause itself, the “arbitration clause will be held to encompass arbitration of the claim that the contract itself was induced by fraud.” In other words, even if the underlying agreement was reached through fraudulent means, the parties’ dispute would still be sent to an arbitrator, who would then decide the validity of the underlying contract. The court reasoned that this approach reflected the intent of Congress to provide a speedy remedy for parties who elected to resolve disputes via arbitration.
The Florida Supreme Court declined to apply Prima Paint. In the court’s view, Prima Paint was distinguishable because there, the allegations pertaining to the validity of the contract, i.e., that the contract had been fraudulently induced, would merely have rendered the underlying contract voidable, whereas the allegations in Cardegna, that the contract terms violated Florida’s usury laws, would have voided the underlying contract altogether. Based on this logic, the Florida Supreme Court noted that if the underlying contract as a whole were declared void as a matter of law, all of its provisions, including the arbitration clause, would be nullified as well. The court then summarized its holding as follows: “[W]here a party sufficiently alleges that a contract is void for violation of Florida’s usury laws, the Florida courts, and not an arbitrator, must first determine the contract’s legality before a party may be required to submit to arbitration under a provision of the contract.”
Justice Cantero dissented from the majority decision. He quoted §4 of the Federal Arbitration Act, 9 U.S.C. §4 (2000), which provides in part: “The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” Based on this language, Justice Cantero stated that where a plaintiff seeks to avoid arbitration of his or her claims, the only issue a court should (and can) decide is whether there is a dispute as to the making of the arbitration agreement or the underlying contract. Framing the issue in this manner, Justice Cantero viewed Prima Paint and other decisions by federal courts, including the 11th Circuit opinion in Bess, as dispositive. Justice Cantero also strongly disagreed with the manner in which the majority distinguished Prima Paint, noting that “[n]othing in that opinion makes that distinction” and that “[s]uch a distinction is arbitrary and totally disconnected from the statutory language.”
Perhaps not surprisingly, in February of 2006 the U.S. Supreme Court reversed the Florida Supreme Court’s decision in Cardegna after granting a writ of certiorari on the case. In a terse opinion, the U.S. Supreme Court basically agreed with Justice Cantero’s dissenting opinion in the original decision and reiterated that under Prima Paint, “unless the challenge is to the arbitration clause itself, the issue of the contract’s validity is [to be] considered by the arbitrator in the first instance.”15
The court quickly disposed of the Florida Supreme Court’s attempt at distinguishing Prima Paint’s applicability on the ground that under Florida law a court cannot give effect to any part of a void contract, reasoning that the laws and public policies of the various states is “irrelevant” to Prima Paint’s central holding that a challenge to the overall validity of a contract containing an arbitration clause is to be decided by an arbitrator, and not a court.
The court also rejected the contention that the “severability” rule of Prima Paint was merely procedural and, thus, did not apply to arbitration cases brought in state court, holding that Prima Paint’s teachings were substantive and fell within §2 of the FAA, 9 U.S.C. §2, “the FAA’s substantive command that arbitration agreements be treated like all other contracts.”
Ultimately, the court “reaffirm[ed] today that, regardless of whether the challenge is brought in federal or state court, a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator.”
Obviously, the impact of the Florida Supreme Court’s holding in Cardegna was defused with the U.S. Supreme Court’s reversal. Still, that the Florida Supreme Court reached this decision in the first place is somewhat troubling. The decision was not only vague (one has to ask when a party “sufficiently alleges” that the contract is void), but was somewhat circular in nature as well. After all, unless a contract is plainly illegal on its face, the trial court would have no way of knowing whether it is void ab initio without delving at least marginally into the facts and merits of the case, and that seems contrary to the spirit, if not the purpose, of arbitration.
Perhaps more importantly, however, the Cardegna decision is an example of the Florida Supreme Court’s taking a position involving arbitration that is controversial, in the sense that it is at odds with federal precedent and, more generally, with federal policy favoring arbitration.
Raymond James Financial Services, Inc. v. Saldukas
Another Florida Supreme Court case in which an arbitration issue was decided in a way contrary to federal precedent, or at least federal policy, is Raymond James Financial Services, Inc. v. Saldukas, 896 So. 2d 707 (Fla. 2005). There, the court held that a party can waive his or her right to compel another party to arbitrate by taking actions inconsistent with arbitration, even if the other party cannot make a showing that it was prejudiced by these actions. In doing so, the court resolved a conflict between the intermediate appellate courts in Florida as to whether a showing of prejudice was a prerequisite to a finding of waiver and disagreed with a clear majority of federal appellate courts holding that prejudice is required for waiver.
In Saldukas, an individual investor, Steven Saldukas, along with a corporation named Stesal Investments, LLC, filed an arbitration claim with the New York Stock Exchange against their investment broker, Raymond James. Exactly what the reason was behind this claim is not made clear, except that it “arose out of allegedly improper investment transactions.” At any rate, upon learning of the NYSE arbitration filing, James’ counsel sent a letter to Saldukas’ counsel disputing Saldukas’ and Stesal’s right to arbitration, stating in part that no agreement to arbitrate this or similar claims had ever been executed. James then filed a motion with the NYSE to dismiss the arbitration with prejudice, claiming that neither Saldukas nor Stesal had standing to seek arbitration and maintaining that “the claim or controversy is not proper subject matter for arbitration.” James also sent a copy of the motion to Saldukas’ counsel, along with a letter that stated in part, “[Raymond James] feels strongly that it has no obligation to arbitrate this case. If the New York Stock Exchange does not grant the motion to dismiss, [Raymond James] will file a lawsuit to enjoin the arbitration.”
Upon receipt of this letter, Saldukas and Stesal filed suit in Florida state court on various grounds. James responded with a motion to dismiss, arguing that Stesal lacked standing to bring the suit, but the trial court denied the motion and ordered James to file a response within 10 days. James then filed a motion with the trial court to stay litigation and compel arbitration. Despite its earlier assertions that the present claim was not properly suitable to arbitration, James now argued that the parties should be ordered to arbitration. They also argued, for the first time, that the issue of whether Stesal was a property party to the arbitration agreement was an issue that should be decided by an arbitration and not the trial court. In response, Saldukas and Stesal argued that James had waived the right to arbitrate by its actions, including its initial refusal to arbitrate, its repeated assertions that the parties had no right to arbitrate, and its threat to file a lawsuit enjoining the NYSE arbitration proceeding. The trial court agreed, finding that James had waived its right to arbitrate.
James filed an interlocutory appeal of the trial court’s denial of the motion to compel arbitration, raising two issues. In addressing the first of these, whether James had waived its right to arbitrate the claims, the Second District Court of Appeal held that there was sufficient evidence to support a finding that Raymond James waived its right to arbitrate these claims. The second issue, whether Saldukas and Stesal should nevertheless be compelled to arbitrate because of their failure to prove they were prejudiced by James’ actions, was answered in the negative. In so holding, the Second District recognized a conflict between its decision and that of the First and Third district courts of appeal, which had held that a showing of prejudice was required in order for a party to waive its right to arbitrate.
On appeal, the Florida Supreme Court first noted that only the second issue, whether a showing of prejudice was required for waiver of arbitration, was up for consideration. Then, the court stated that because the U.S. Supreme Court had not yet ruled on this issue vis-à-vis the Federal Arbitration Act and because decisions of other federal courts were not binding, the court was free to decide the issue as if it had arisen under the Florida Arbitration Code.
The court then turned to the requirements needed for a motion to compel arbitration under both the Federal Arbitration Act and the Florida Arbitration Code. First, there must be a valid written agreement to arbitrate. Second, there must be an arbitrable issue. Third, the party seeking to compel arbitration must not have waived his or her right to arbitrate.
After noting that “[w]e have long held that a party’s contract rights may be waived by actually participating in a lawsuit or taking action inconsistent with that right,” the court stated that it had never held proof of prejudice to be a prerequisite to a waiver of arbitration. Then, it turned to the definition of waiver, that being “the voluntary and intentional relinquishment of a known right or conduct which implies the voluntary and intentional relinquishment of a known right.” Then, after likening the right to arbitrate to “any [other] contract right,” the court found that this “general definition” of waiver should apply to the right to arbitrate.
The court concluded by stating “[t]he essential question is whether, under the totality of the circumstances, the defaulting party has acted inconsistently with the arbitration right.” In the court’s view, “[a]rbitration is a valuable right that is inserted into contracts for the purpose of enhancing the effective and efficient resolution of disputes,” and this right “must be safeguarded by a party who seeks to rely upon that right and the party must not act inconsistently with the right.” Due to its actions, James had waived its right to arbitrate.
While it would be unfair to categorize the decision reached in Saldukas as illogical, one cannot help but think that it is an example of “bad facts making bad law.” The actions taken by Raymond James, the party arguing against waiver, were so utterly inconsistent with the right to arbitrate that one has to wonder how the court could have reached any other decision. Still, the wisdom of adopting as broad a rule as this is questionable, as the circumstances intimating waiver in most other cases would probably not be nearly as strong as those in Saldukas, thus, potentially leading to some arbitration clauses denied effect on an unwarranted finding of waiver by a trial court.
Although it is true that the Florida Supreme Court is not bound by lower federal courts, it is nonetheless telling that virtually every federal circuit court addressing the issue, including the 11th Circuit, has held that a showing of prejudice is required before a party is found to have waived its right to arbitrate.16 If and when this issue goes before the U.S. Supreme Court, such uniformity among the federal courts likely will be an important factor to the court in making its ruling, and one certainly could imagine the court disapproving of the position taken in Saldukas.
Seifert v. U.S. Home Corporation
Yet another important Florida Supreme Court opinion that is seemingly at odds with federal arbitration precedent, or at least the federal policy of favoring arbitration, is Seifert v. U.S. Home Corporation, 750 So. 2d 633 (Fla. 1999). There, the court held that tort claims were not subject to an arbitration clause despite the clause being of broad scope.
In Seifert, Ernest and Patricia Seifert contracted with U.S. Home to build a custom home. After the house was constructed and the Seiferts moved in, their car was accidentally left running in the garage, and Ernest perished due to carbon monoxide poisoning that wafted throughout the house via the air conditioning system. Patricia Seifert brought a wrongful death action against U.S. Home on behalf of her husband, Ernest, on various tort theories, including strict liability, negligence, and breach of express and implied warranties. The strict liability and warranty claims were dismissed, and U.S. Home sought to arbitrate the remaining negligence claim based on an arbitration provision in the parties’ contract. The lengthy provision read in part:
Arbitration. Any controversy or claim arising under or related to this Agreement or to the Property. .. or with respect to any claim arising by virtue of any representations alleged to have been made by the Seller or Seller’s representative, shall be settled and finally determined by mediation or binding arbitration as provided by the Federal Arbitration Act (9 U.S.C. Section 1-14) and similar state statutes and not by a court of law.
Despite the seemingly broad scope of the arbitral clause, the trial court denied U.S. Home’s request for arbitration. On appeal, the Fifth District Court of Appeal reversed, holding that the wrongful death action had to be arbitrated “in accord with the arbitration provision of the contract.”
The Florida Supreme Court initially recognized that courts around the country had adopted different interpretations of similar “arising out of” language. In one line of cases, courts interpreted “arising out of” narrowly, holding that only those claims having a “direct relation” to the terms or performance of the contract could be arbitrated. In contrast, several other courts had viewed the phrase as broadening the scope of the arbitration clause enough to support any claims having a “significant relationship” to the contract, regardless of what label is given to the claim, i.e., tort versus breach of contract.
After surveying this law and concluding that “it is fair to presume that not every dispute that arises between contracting parties should be subject to arbitration,” the court fashioned a test for determining when a tort claim “arises out of or relates to” an arbitration agreement such that the claim can be arbitrated: The trial court or arbitrator (depending which is to decide questions of arbitrability) should “determine whether the tort claim, as alleged in the complaint, arises from and bears such a significant relationship to the contract between the parties as to mandate application of the arbitration clause.” Applying this test to the facts before it, the court concluded that the arbitration provision contained in the parties’ agreement did not apply to Seifert’s wrongful death claim. Because the wrongful death claim was based on a tort theory of common law negligence, it was unrelated to the rights and obligations of the contract. Thus, the court found the action was not the sort that was contemplated by the parties when the contract was made; therefore, the claim was not subject to arbitration. The decision in Seifert arguably is at odds with federal precedent, or at least with federal policy favoring arbitration.
Initially, federal courts have noted the expansive reach of arbitral clauses virtually identical to the one in Seifert. An example is Collins & Aikman Products Company v. Building Systems, Inc., 58 F.3d 16, 20 (2d Cir.1995), where it was stated, “The clause in this case, submitting to arbitration ‘[a]ny claim or controversy arising out of or relating to th[e] agreement,’ is the paradigm of a broad clause.”17 Moreover, federal courts have held that when a broad arbitral clause is at issue, a “presumption of arbitrability” arises and doubts should be resolved in favor of arbitration.18
Such an approach is entirely consistent with the U.S. Supreme Court’s directive in Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1 (1983), where it was held that pursuant to the Federal Arbitration Act, “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”19 Indeed, Florida courts have made similar statements about doubts being resolved in favor of arbitration, including under the Florida Arbitration Code.20
In light of the above, perhaps it would be fair to question whether the approach taken in Seifert was the best one. Undoubtedly the arbitral clause in the parties’ agreements was broad. Yet, the court found that the claims were not subject to arbitration, despite the scope of the clause and the presumption in favor of arbitrability that most likely would have been applied by federal courts under similar circumstances.21
Conclusion
The Florida Supreme Court has issued some decisions involving arbitration that appear to be at odds with federal precedent, or at least with federal policy of resolving doubts in favor of arbitration. In one such decision, Cardegna, the court deviated from the usual course of allowing arbitrators, and not courts, to decide in the first instance the validity of an arbitration agreement. This decision was reversed by the U.S. Supreme Court. In another, Saldukas, the court broke from a clear majority of federal circuit courts by holding that a party need not have caused prejudice to another in order to waive its right to arbitrate claims. And in Seifert, the court took an arguably unnecessarily restrictive approach in interpreting the scope of an arbitration clause, holding that the plaintiff’s claims were not subject to arbitration despite the broad clause at issue and the federal policy of resolving doubts in favor of arbitration. Were the Florida Supreme Court to rule on arbitration questions in a manner more consistent with federal courts, not only might this lead to more predictability for arbitration practitioners, it also would help further one of the principal mandates of the Federal Arbitration Act, that of resolving doubts in favor of arbitration.
1 Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213 (1985) ( quoting H.R. Rep. No. 96, 68th Cong., 1st Sess., 1-2 (1924)).
2 EEOC v. Waffle House, Inc., 534 U.S. 279, 300 (2002) (“The FAA was enacted in 1925, 43 Stat. 883, and then reenacted and codified in 1947 as Title 9 of the United States Code.”).
3 Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991).
4 Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983).
5 Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 297 (1995) (O’Connor, J., concurring) (“Congress designed the Federal Arbitration Act to apply only in federal courts.”).
6 In Keating, various 7-Eleven franchisees brought suit in California state court against franchisor Southland Corporation, alleging fraud, misrepresentation, breach of contract, breach of fiduciary duty, and violation of disclosure requirements under California franchise investment law. Southland Corporation moved to compel arbitration based on an arbitration clause found in all of the franchise agreements that required any controversy or claim arising out of or relating to the agreement or breach thereof to be arbitrated. The trial court refused to compel arbitration, and on appeal, the California Court of Appeal reversed, construing the arbitration clauses to require arbitration of the franchisees’ claims and finding that California’s franchise investment law did not invalidate the arbitration agreements. The franchisees appealed, and the California Supreme Court reversed, holding a California statute that provided “[a]ny condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this law or any rule or order hereunder is void” required the franchisees’ claims to be decided by a court, and not through arbitration.
7 Id. at 16.
8 Stephen L. Hayford & Alan R. Palmiter, Arbitration Federalism: A State Role in Commercial Arbitration, 54 Fla. L. Rev. 175, 175 (2002).
9 Michael A. Hanzman, Pre-Arbitration “Status Quo” Injunctions: Do They Protect The Arbitration Process or Impair Agreements to Arbitrate?, 72 Fla. B.J. 20, 22 (1988).
10 Fenster v. Makovsky, 67 So. 2d 427, 430 (Fla. 1953).
11 Hartford Acci. & Indem. Co. v. Holton, 190 So. 2d 801, 802 (Fla. 1st D.C.A. 1966).
12 Coggin Auto. Corp. v. Reed, 750 So. 2d 744, 746 (Fla. 5th D.C.A. 2000). See also Fla. Stat. §682.02: “Two or more parties may agree in writing to submit to arbitration any controversy existing between them at the time of the agreement, or they may include in a written contract a provision for the settlement by arbitration of any controversy thereafter arising between them relating to such contract or the failure or refusal to perform the whole or any part thereof. This section also applies to written interlocal agreements under ss. 163.01 and 373.1962 in which two or more parties agree to submit to arbitration any controversy between them concerning water use permit applications and other matters, regardless of whether or not the water management district with jurisdiction over the subject application is a party to the interlocal agreement or a participant in the arbitration. Such agreement or provision shall be valid, enforceable, and irrevocable without regard to the justiciable character of the controversy; provided that this act shall not apply to any such agreement or provision to arbitrate in which it is stipulated that this law shall not apply or to any arbitration or award thereunder.”
13 Boston Bank of Commerce v. Morejon, 786 So. 2d 1245, 1247 (Fla. 3d D.C.A. 2001).
14 Id. at 1247; see also Regency Group, Inc. v. McDaniels, 647 So. 2d 192, 193 (Fla. 1st D.C.A. 1994) (“[D]oubts about the scope of the agreement should be resolved in favor of arbitration.”).
15 Buckeye Check Cashing, Inc. v. Cardegna, 126 S.Ct. 1204 (2006).
16 In re Citigroup, Inc., 376 F.3d 23, 26 (1st Cir. 2004) (“We have emphasized that, to succeed on a claim of waiver, plaintiffs must show prejudice.”); Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 105 (2d Cir 2002) (“The key to a waiver analysis is prejudice.”); Wood v. Prudential Ins. Co. of America, 207 F.3d 674, 680 (3d Cir. 2000) (“In order to obtain a finding that arbitration is waived, a party seeking to avoid arbitration must demonstrate prejudice.”); Fraser v. Merrill Lynch Pierce, Fenner & Smith, Inc., 817 F.2d 250, 252 (4th Cir.1987) (“The dispositive question is whether the party objecting to arbitration has suffered actual prejudice.”); Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 326 (5th Cir.1999) (“Waiver will be found when the party seeking arbitration substantially invokes the judicial process to the detriment or prejudice of the other party.”); General Star Nat. Ins. Co. v. Administratia Asigurarilor de Stat, 289 F.3d 434, 438 (6th Cir. 2002) (“[A] party may waive the right by delaying its assertion to such an extent that the opposing party incurs actual prejudice.”); Cabinetree of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 391 (7th Cir. 1995) (Noting that “prejudice to the. . . party resisting arbitration should weigh heavily in the decision whether to send the case to arbitration, as should the diligence or lack thereof of the party seeking arbitration.”); Stifel, Nicolaus & Co. Inc. v. Freeman, 924 F.2d 157, 158 (8th Cir. 1991) (“To prove Stifel waived its right to arbitration, Freeman and Weyhmueller must show: (1) Stifel knew of an existing right to arbitration; (2) Stifel acted inconsistently with that right; and (3) Stifel’s inconsistent acts prejudiced them.”); Shinto Shipping Co., Ltd. v. Fibrex & Shipping Co., Inc., 572 F.2d 1328, 1330 (9th Cir. 1978) (“Thus, this court must be convinced not only that the appellee acted inconsistently with that arbitration right, but that the appellant was prejudiced by this action before we can find a waiver.”); Hart v. Orion Ins. Co., 453 F.2d 1358, 1361 (10th Cir. 1971) (“We find no prejudice to the insured and no waiver of arbitration.”); Stone v. E.F. Hutton & Co., 898 F.2d 1542, 1544 (11th Cir. 1990) (“A party may be deemed to have waived its right to arbitrate a dispute when a party seeking arbitration substantially invokes the judicial process to the detriment or prejudice of the other party.”) (internal quotations omitted).
17 See also Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1374 (Fed. Cir. 2006) (same); Solvay Pharmaceuticals, Inc. v. Duramed Pharmaceuticals, Inc., 442 F.3d 471, 473 (6th Cir. 2006) (same); United Steelworkers of America, AFL-CIO-CLC v. Duluth Clinic, Ltd., 413 F.3d 786, 789 8th Cir. 2005) (same); Spahr v. Secco, 330 F.3d 1266, 1270 (10th Cir. 2003) (same).
It is worth noting that although the clause in Seifert contained the phrase “arising under” instead of “arising out of,” many courts make no distinction between the two. E.g., Gregory v. Electro-Mechanical Corp., 83 F.3d 382, 386 (11th Cir. 1996) (“This Court has not drawn a distinction between the words ‘arising under’ and ‘arising out of.’”); see also Battaglia v. McKendry, 233 F.3d 720 (3d Cir. 2000) (using both phrases interchangeably); Oldroyd v. Elmira Sav. Bank, FSB, 134 F.3d 72 (2d Cir. 1998) (same).
18 AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650 (1986) (“[W]here the contract contains an arbitration clause, there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.”) (internal quotations omitted); see also Solvay Pharmaceuticals, Inc. v. Duramed Pharmaceuticals, Inc., 442 F.3d 471, 482 n.10 (6th Cir. 2006) (“When faced with a broad arbitration clause, such as one covering any dispute arising out of an agreement, a court should follow the presumption of arbitration and resolve doubts in favor of arbitration.”); Bank Julius Baer & Co., Ltd. v. Waxfield Ltd., 424 F.3d 278, 284 (2d Cir. 2005) (“The existence of a broad agreement to arbitrate creates a presumption of arbitrability which is only overcome if it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.”) (internal quotations omitted).
19 Moses H. Cone Memorial Hospital v. Mercury Construction Co., 460 U.S. at 24-25 (1983) (emphasis added).
20 See, e.g., Gainesville Health Care Ctr., Inc. v. Weston, 857 So. 2d 278, 289 (Fla. 1st D.C.A. 2003) (“Arbitration agreements are a favored means of dispute resolution, and doubts concerning their scope should generally be resolved in favor of arbitration.”); see also Grektorp v. City Towers of Fla., Inc., 644 So. 2d 613, 614 (Fla. 2d D.C.A. 1994) (same).
21 The Florida Supreme Court has since issued a seemingly inconsistent opinion with Seifert. In Sears Authorized Termite & Pest Control, Inc. v. Sullivan, 816 So. 2d 603 (Fla. 2002), the court held that a tort claim for personal injury caused by spider bites in a home allegedly caused by the pest control company’s failure to adequately treat the home was arbitrable pursuant to an arbitration clause in the contract the parties signed. That clause stated in part, “The purchaser and All American Termite & Pest Control, Inc. d/b/a Sears Authorized Termite & Pest Control agree that any controversy or claim between them arising out of or related to the interpretation, performance or breach of any provision of this agreement shall be settled exclusively by arbitration.”
Based on this language, the court concluded that the claim fell within the arbitration clause because it “rests upon the failure to perform the agreement.” The court stated that the facts in Sullivan were “clearly distinct” from Seifert because in Seifert, “[t]he tort claim … neither relie[d] on the agreement nor refer[red] to any provision within the agreement.” This rationale seems a bit circular, however, for one could question whether the tort claims in Seifert truly could have been considered to be distinct from the parties’ agreement. This is because if the defendant in that case, U.S. Home Corporation, had fulfilled its agreement by constructing the Seifert’s home in a safe manner, the claims never would have existed.
Douglas Giuliano , an associate at Astigarraga Davis Mullins & Grossman, P.A., focuses his practice on commercial litigation and international arbitration. He graduated with honors as part of the inaugural class of Florida International University College of Law, where he served as managing editor of the FIU Law Review. Mr. Giuliano currently serves as an assistant editor of the ABA’s International Litigation Quarterly .
