In Gessa v. Manor Care of Florida, Inc. (SC09-768), the Florida Supreme Court held "that the district court below erred in the following respects: (i) in ruling that the limitation of liability provisions in this case, which place a $250,000 cap on noneconomic damages and waive punitive damages, are severable; (ii) in failing to rule that the court, not the arbitrator, must decide whether the arbitration agreement violates public policy; and (iii) in failing to rule that the above limitation of liability provisions violate public policy. As in Shotts, we also conclude that the United States Supreme Court's decision in Jackson is inapplicable here." The Shotts opinion was also released today and is discussed HERE. Gessa was previously discussed HERE.
In Gessa, Justice Perry wrote the majority opinion which was joined by Justice Pariente, Justice Lewis, Justice Quince and Justice Labarga. Justice Polston wrote a dissenting opinion which was joined by Chief Justice Canady.
The majority described the facts as follows: "Angela Gessa was admitted as a resident to Manor Care of Florida, Inc., a nursing home. Upon admission, her daughter, acting as her attorney-in-fact, signed admissions documents that included an arbitration agreement. During her stay, Gessa filed suit against Manor Care, alleging negligence, violation of resident's rights, and breach of fiduciary duty. Manor Care moved to compel arbitration. At the hearing on the motion, Gessa argued that the arbitration agreement was unconscionable and contrary to public policy due to the limitation of liability provisions in the agreement that capped noneconomic damages at $250,000 and waived punitive damages. The trial court, however, granted the motion to compel, ruling that, because any offensive clauses can be severed, the agreement was not unconscionable. The court declined to rule on the public policy issue, leaving it for the arbitrator. Gessa appealed, arguing that the limitation of liability provisions violated public policy and were not severable. The district court affirmed, agreeing with the trial court that the provisions were severable. Also, the district court did not rule on the public policy issue, leaving it for the arbitrator."
"As in Shotts, we conclude that the limitation of liability provisions in the present case, which place a $250,000 cap on noneconomic damages and waive punitive damages, are not severable from the remainder of the agreement."
Court or Arbitrator
"This issue has already been decided in Gessa's favor in Shotts. There, we held that the court, not the arbitrator, must decide whether an arbitration agreement violates public policy"
Limitation of Liability Provision
"As in Shotts, we conclude that the limitation of liability provisions in the present case violate public policy. As noted above, the nursing home statute provides for the award of 'punitive damages for gross or flagrant conduct or conscious indifference to the rights of the resident. Moreover, there was no cap on pain and suffering damages in the statute.' In contrast, the limitation of liability provisions in the present case eliminate punitive damages altogether and severely restrict damages for pain and suffering. These provisions directly frustrate the remedies created by the statute. The provisions eviscerate the remedial purpose of the statute, or, in the language of Shotts, they 'substantially diminish or circumvent these remedies.' Shotts, No. SC08-1774, slip op. at 31. Thus, these limitation of liability provisions, which place a $250,000 cap on noneconomic damages and waive punitive damages, violate the public policy of the State of Florida and are unenforceable."
Rent-A-Center v. Jackson
The Court's analysis was nearly identical to that in Shotts and the court concluded the Supreme Court's decision did not control the outcome of this case.
The dissent began:
The majority errs by holding that the arbitration agreement is not enforceable because challenged limitations of remedies within the agreement violate public policy. Contrary to the majority's ruling, the challenged limitations may be severed from the arbitration provisions so that the arbitration should go forward as agreed by the parties. Moreover, the Florida Legislature, not this Court, should decide whether Florida's public policy has been violated. Because the Florida Legislature has addressed the enforceability of other limitations but not these, the Court should not void the contract. The Court should not be a policy maker.
"Severability of the contract is a matter of state law, therefore is controlled by Florida law....Severability has long been recognized in Florida‟s law of contracts and is determined by the intent of the parties. Who decides whether severance is permissible in this contract—the court or arbitrator? As earlier stated, the enforceability of the arbitration agreement, not the whole admissions agreement, is challenged and there is no delegation clause for the matter to be decided by arbitration. Accordingly, the court, rather than the arbitration panel, must decide severability here."
"Contrary to the majority's ruling, the issue of severability cannot be decided in Petitioner's favor. The majority mistakenly considers the $250,000 limitation on noneconomic damages and the preclusion of punitive damages in the contract as 'the financial heart of the agreement.'....Contrary to the majority's ruling, the limitations of noneconomic damages and elimination of punitive damages are divisible and do not eliminate the essence of the agreement to arbitrate the parties' claims."
Because of the severability of the challenged provisions, the matter should be arbitrated, and the arbitration panel should decide whether the challenged provisions may be enforced, if they ever arise. The speculative nature of these challenged limitations is an additional reason to enforce the arbitration provision. Petitioners may not be able to prove entitlement to noneconomic damages exceeding $250,000 or punitive damages so that the limitations would never be triggered. If that were the case, then the arbitration agreement, which otherwise should be enforced according to the facts of the case, would be improperly rendered unenforceable by the speculation that such limitations might be invoked.
Public Policy - Enforceability
Because the arbitration panel should decide whether the challenged provisions may be enforced as a matter of Florida law, as described earlier, the majority erred by reaching the issue and then again by erroneously deciding the challenged limitation provisions are unenforceable as void against public policy. The Florida Legislature, not this Court, should decide Florida's public policy. It is well-settled that contractual waivers are enforceable under Florida law for any type of rights......The public policy of the State of Florida was expressed by the vote of the people of Florida by enacting this 2004 Florida constitutional amendment to provide rights relating to contingency attorney's fees. In spite of the remedial provisions in favor of claimants, this Court held that these Florida constitutional rights could be waived by contract and that attorneys could recover more than permitted by this amendment. See In re Amendment to the Rules Regulating the Fla. Bar—Rule 4-1.5(f)(4)(B) of the Rules of Prof'l Conduct, 939 So. 2d 1032 (Fla. 2006) (adopting an amendment to the Rules Regulating the Florida Bar to permit a contractual waiver of section 26, imposing a specified legal fee structure for contingency fees). It is difficult to understand how, as a matter of public policy, the expressly declared rights of this constitutional provision may be waived, but the damages provided by statute may not be limited by contract....Unlike other statutory remedies, the Florida Legislature has not prohibited a waiver of the remedies provided in chapter 400, Florida Statutes (2004). The Florida Legislature has specifically prohibited waiver of rights under chapter 443, Florida Statues (2004), Florida's unemployment compensation law, and voided any agreement that attempts to waive those rights....
"Similarly, if waiver of the remedies of chapter 400 violates public policy, it should be the Florida Legislature's decision to specify that such waivers are prohibited and void, rather than the judiciary's." [emphasis is mine].