Appeals During and After ArbitrationâState and Federal Issues
Arbitration has become very common in courts around the country, including those in Florida. For even the experienced lawyer who is faced with deciding where to pursue a case that could potentially find its way into arbitration, some thought should be given to the appellate ramifications of choosing a state or federal forum initially. The rules compelling arbitration are different in both courts, and the appellate outcome can be dissimilar, depending on which route the lawyer selects.
Florida’s Arbitration Provisions
In Florida, arbitration is a favored method of dispute resolution.1 Florida’s Arbitration Code, found in Ch. 682 of the Florida Statutes, reveals the legislature’s position favoring arbitration. statute, if a party moves to compel arbitration and arbitration is denied, an automatic, interlocutory appeal is authorized.2 Similarly, if a stay of arbitration is granted, an immediate appeal is allowed.3 Jurisdiction for the appellate courts to hear these appeals is found in Fla. R. App. P. 9.130. Rule 9.130 states that an order determining entitlement to arbitration is a nonfinal, appealable order. Florida courts have followed this jurisdictional grant.4
Interestingly, no statutory provisions exist allowing an appeal from an order granting a motion to compel arbitration or denying a stay of arbitration. This circumstance—one of the most important facets of Florida’s law relating to arbitrations and their subsequent appeals—differs from federal law. Unlike the appellate process in place in federal court for issues surrounding arbitration, the Florida judiciary has stepped in and allowed immediate appeal of an order denying a request to stay arbitration. Florida courts have held that an order denying a stay of arbitration effectively compels arbitration and, therefore, is also a nonfinal, appealable order under Rule 9.130.5
In reviewing issuance of a circuit court order denying a motion to compel arbitration, the appellate court generally reviews that determination de novo.6 Thus, little deference is given to the circuit court. This means that the appellate court will address the same questions as those considered by the lower court: 1) whether a valid written agreement to arbitrate exists; 2) whether an arbitrable issue exists; and 3) whether the right to arbitration was waived.7
F.S. §682.20 also provides for appeals arising from other arbitration issues, including appeals of orders confirming or denying confirmation of an arbitration award, orders modifying or correcting an award, and orders vacating an award without directing a rehearing.8 The ability to appeal immediately an order vacating an award when a rehearing before the arbitrators has not been directed is unique to Florida.
Florida’s Arbitration Code deals with vacating an award in F.S. §682.13. There are specific circumstances that allow for vacatur, and those enumerated in the statute are the only acceptable grounds.9 According to §682.13(3), there are certain situations in which, when vacating an award, a court may order a rehearing before new arbitrators. Despite the statute’s permissive language, Florida courts have held that a court must order a rehearing; if an order vacating an arbitration award is entered without directing a rehearing, it is error.10 One court has ruled, however, that if the parties never contractually agreed to arbitration and the dispute is outside of the arbitrator’s statutory authority, rehearing is not required.11 If an award is vacated, but the circuit court directed rehearing, the order vacating the award is nonfinal and nonappealable.12
Judicial review of a challenged arbitration award is very narrow because once such an award has been ordered, a high degree of conclusiveness attaches to it.13 The rationale behind this limited review stems from the parties’ decision to choose arbitration over the expense and delay of litigation.14 When an appellate court reviews orders confirming or vacating an arbitration award, findings of fact are reviewed for competent and substantial evidence, while legal questions are reviewed de novo.15
Arbitration Provisions in Federal Court
Appellate remedies in the federal arena can be very different from those offered in the state forum. While both favor arbitration, the federal procedure is often even more deferential.16 In fact, when there is any doubt, all questions of arbitrability arising in a federal forum typically are resolved in favor of arbitration.17
In federal court, claims involving interstate commerce, including many employment agreements, are governed by the Federal Arbitration Act (FAA).18 The FAA’s strong preference for arbitration should be enforced where possible.19 Remember, though, that the FAA alone does not provide subject matter jurisdiction in federal court. There must be an independent jurisdictional basis, such as a federal question or diversity of citizenship, to proceed in federal court.20 Assuming subject matter jurisdiction exists, once in federal court, if interstate commerce is not involved and there is not a specific choice of law provision in the arbitration agreement, the Florida Arbitration Code applies.
The available federal appellate remedies relating to arbitration are much more complicated than Florida state remedies. The FAA provides for specific circumstances that allow an immediate, interlocutory appeal.21 Notably, an order compelling arbitration cannot be appealed immediately.22 Rather, only an order denying arbitration can be appealed.23 Such an order is reviewed de novo.24 Unlike in Florida state courts, a federal court order denying a stay of arbitration is not a nonfinal, appealable order.
An interlocutory appeal can be taken from an order compelling arbitration only when the determination is a final decision with respect to an arbitration.25 A “final decision” is one that disposes of an entire case on the merits, leaving no part of it pending before the court.26 Often, there is a debate whether there can be a “final decision” in an embedded, as opposed to an independent, proceeding. An “embedded” proceeding is an action involving a request for arbitration and other claims for relief.27 An “independent” proceeding is an action where a request to enter arbitration is the sole issue before the court.28 However, if the embedded proceeding disposes of all other claims for relief, for example, through dismissal, then there can be a “final decision” that renders a decision on arbitration immediately appealable.29 This provision often causes controversy, raising jurisdictional issues in the appellate court.
These issues come before a federal court frequently when, after one party files a demand for arbitration with the American Arbitration Association (AAA), the party seeking to avoid arbitration will file a lawsuit in federal court seeking declaratory and injunctive relief to stay and/or enjoin the arbitration. The party requesting arbitration might then file a motion to compel arbitration.30 If arbitration is compelled and the court disposes of any other claims for relief, the issue arises whether a “final decision” exists under 9 U.S.C. §16(a)(3).31 The standard of review applicable to this type of order is de novo.32
If a case goes forward and proceeds to arbitration and an award is entered, judicial review is narrowly limited.33 Under the FAA, it is presumed that an arbitration award will be confirmed.34 However, the FAA provides very specific grounds for vacating an award.35 Unlike Florida state courts, a federal court may direct a rehearing before the arbitrators, but is not required to do so before entering vacatur.36 When reviewing a denial of a motion to vacate or an award confirmation, the federal appellate court reviews findings of fact under a clearly erroneous standard.37 Any questions of law are reviewed de novo.38 However, assuming the parties agreed to arbitrate, be forewarned that arbitration awards are not reversed simply because of an erroneous interpretation of the law by the arbitrator.39 The arbitrator must have acted with manifest disregard of the law.40
In sum, when arbitration is involved, the selection of a state as opposed to a federal forum is a significant, up-front decision that can have appellate consequences both during and after the case. Weighing the relative risks and benefits of each is essential in evaluating how best to address your client’s goals. Consider, first, whether you are in favor of the arbitration; and, if not, determine whether you can immediately appeal if arbitration is compelled. These types of questions are crucial to consider, and answer, before the litigation begins.
1 Miele v. Prudential-Bache Sec., Inc., 656 So. 2d 470, 473 (Fla. 1995).
2 Fla. Stat. §682.20(1)(a).
3 Fla. Stat. §682.20(1)(b).
4 See Alphagraphics Franchising, Inc. v. Stebbins, 617 So. 2d 463, 464 (Fla. 4th D.C.A. 1993) (finding an order staying arbitration is an order determining entitlement of party to arbitration); Thomson, Bohrer, Werth & Razook v. Multi Restaurant Concepts, Inc., 561 So. 2d 1192, 1193 (Fla. 3d D.C.A. 1990) (stating that order denying motion for arbitration is a nonfinal, appealable order under Rule 9.130).
5 See Curtis v. Olson, 837 So. 2d 1155, 1156 (Fla. 1st D.C.A. 2003).
6 Stacy David, Inc. v. Consuegra, 845 So. 2d 303, 306 (Fla. 2d D.C.A. 2003); Hirshenson v. Spaccio, 800 So. 2d 670, 674 (Fla. 5th D.C.A. 2001).
7 See Seifert v. U.S. Home Corp., 750 So. 2d 633, 636 (Fla. 1999); Stacy David, Inc., 845 So. 2d at 306.
8 Fla. Stat. §682.20(1)(c)-(e).
9 Fla. Stat. §682.13(1)(a)-(e); Davenport v. Dimitrijevic, 857 So. 2d 957, 961 (Fla. 4th D.C.A. 2003).
10 See Fridman v. Citicorp Real Estate, Inc., 596 So. 2d 1128, 1129 (Fla. 2d D.C.A. 1992) (disapproved of on other grounds by Turnberry Assocs. v. Service Station Aid, Inc., 651 So. 2d 1173, 1175-76 (Fla. 1995)); Ripple v. Packard, 471 So. 2d 1293, 1294 (Fla. 3d D.C.A. 1985).
11 See Ruffin v. Kingswood E. Condo. Ass’n, 719 So. 2d 951, 953 n.2 (Fla. 4th D.C.A. 1998).
12 See Central Fla. Police Benevolent Ass’n v. City of Orlando, 614 So. 2d 1203, 1204 (Fla. 5th D.C.A. 1993).
13 Miele, 656 So. 2d at 473; Eaton Vance Distribs., Inc. v. Ulrich, 692 So. 2d 915, 916 (Fla. 2d D.C.A. 1997); Applewhite v. Sheen Fin. Res., Inc., 608 So. 2d 80, 83 (Fla. 4th D.C.A. 1992).
14 Davenport, 857 So. 2d at 961; Applewhite, 608 So. 2d at 83.
15 Boyhan v. Maguire, 693 So. 2d 659, 662 (Fla. 4th D.C.A. 1997).
16 See, e.g., Brandon, Jones, Sandall, Zeide, Kohn, Chalal & Musso, P.A. v. MedPartners, Inc., 312 F.3d 1349, 1357-58 (11th Cir. 2002).
17 Employers Ins. of Wausau v. Bright Metal Specialties, Inc., 251 F.3d 1316, 1322 (11th Cir. 2001).
18 See, e.g., Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121-22 (2001); Musnick v. King Motor Co. of Fort Lauderdale, 325 F.3d 1255, 1258 n.2 (11th Cir. 2003); Richardson v. Palm Harbor Homes, Inc., 254 F.3d 1321, 1324 (11th Cir. 2001).
19 Musnick, 325 F.3d at 1258.
20 See Baltin v. Alaron Trading Corp.,128 F.3d 1466, 1469 (11th Cir. 1997).
21 See 9 U.S.C. §16.
22 9 U.S.C. §16(b)(3).
23 9 U.S.C. §16(a)(1)(C).
24 Musnick, 325 F.3d at 1257; Montes v. Shearson Lehman Bros., Inc.,128 F.3d 1456, 1458 n.2 (11th Cir. 1997).
25 See 9 U.S.C. §16(a)(3).
26 Green Tree Fin. Corp. v. Randolph – Ala., 531 U.S. 79, 86 (2000).
27 Green Tree, 531 U.S. at 87; Bright Metal, 251 F.3d at 1321 n.4.
29 Green Tree, 531 U.S. at 89 (concluding that where district court ordered parties to proceed to arbitration and dismissed all other claims before it, decision was “final” under 9 U.S.C. §16(a)(3) and thus immediately appealable).
30 E.g., Bright Metal, 251 F.3d at 1320.
31 See, e.g., id. at 1321–22.
32 Id. at 1321; Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217, 1221 (11th Cir. 2000).
33 See Gianelli Money Purchase Plan and Trust v. ADM Investor Servs., Inc., 146 F.3d 1309, 1312 (11th Cir. 1998).
35 See 9 U.S.C. §10.
36 See id.
37 First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 948 (1995); Brown, 211 F.3d at 1221.
39 First Options, 514 U.S. at 943; Brown, 211 F.3d at 1223.
40 Brown, 211 F.3d at 1223; Montes, 128 F.3d at 1461–62; but cf. First Options, 514 U.S. at 944–45 (party who never agreed to arbitrate may have more of a right to court’s decision regarding merits of dispute as opposed to when parties do agree to arbitrate).
Ceci Culpepper Berman is an associate in the firm of Fowler White Boggs Banker in Tampa. An honors graduate of the University of Florida, she received her J.D. from Georgetown University Law Center. Ms. Berman’s practice includes all aspects of federal and state appellate litigation, with a focus on commercial litigation appeals.
This column is submitted on behalf of the Appellate Practice Section, John G. Crabtree, chair, and Jacqueline E. Shapiro, editor.